DEF 14A of Establishment Labs Holdings Inc.
Filed Apr 12, 2024 · FY20230001688757-24-000049
PROPOSAL 1: ELECTION OF DIRECTORS
PROPOSAL 1: ELECTION OF DIRECTORS Our business and affairs are managed under the direction of our Board. The number of directors is fixed by our Board, subject to the terms of our Memorandum and Articles of Association. Our Board currently consists of seven directors, five of whom qualify as “independent” under the listing standards of The Nasdaq Stock Market LLC (“Nasdaq”). Our Board has historically been divided into three classes with staggered three-year terms. In accordance with our Amended and Restated Memorandum and Articles of Association, as approved by our shareholders at our annual meeting of shareholders held in 2023, our shareholders have approved declassification of the Board to be phased-in over a period of three years and three annual meetings of shareholders beginning with the Annual Meeting and concluding at the annual meeting of shareholders in 2026. As the terms of the two Class III directors expire at the Annual Meeting, Class III will be declassified and directors previously in this class will be elected at the Annual Meeting to serve until our 2025 annual meeting of shareholders and until their respective successors are duly elected and qualified and, going forward, shall then be elected annually. The other classes will continue the remainder of their respective three-year terms and will be declassified upon the expiration of their terms. Until the Annual Meeting, our directors are divided among the three classes as follows: • The Class I directors are Juan José Chacón Quirós, Nicholas Lewin and Edward Schutter, and each of their terms will expire at the annual meeting of shareholders to be held in 2025; •The Class II directors are Dennis Condon and Leslie Gillin, and each of their terms will expire at the annual meeting of shareholders to be held in 2026; and •The Class III directors are Ann Custin and Bryan Slotkin, and each of their terms will expire at the Annual Meeting. Our Board has nominated each of Ann Custin and Bryan Slotkin as director nominees for election at the Annual Meeting for a term expiring at the annual meeting of shareholders to be held in 2025 and until their respective successors are duly elected and qualified. Each director nominee has agreed to serve as a director if elected. If the nominee is unable for any reason or unwilling for good cause to serve at the time of the Annual Meeting, the remaining members of the Board will, in their sole discretion and pursuant to authority granted by our Memorandum and Articles of Association, nominate and vote for a replacement director or reduce the size. Each director named below is currently a director of Establishment Labs. The ages shown are as of the date of this proxy statement.
PROPOSAL 1: ELECTION OF DIRECTORS
| Name | Age | Class | Position | Term Expiring | | Juan José Chacón Quirós | 52 | I | Chief Executive Officer and Director | 2025 | | Dennis Condon | 75 | II | Director | 2026 | | Ann Custin | 64 | III - To be declassified | Director | 2024 - Director nominee | | Leslie Gillin | 54 | II | Director | 2026 | | Nicholas Lewin | 46 | I | Chairman | 2025 | | Edward Schutter | 72 | I | Director | 2025 | | Bryan Slotkin | 51 | III - To be declassified | Director | 2024 - Director nominee |
Director Skills and Experience
Director Skills and Experience Our Board believes the mix and breadth of experience, qualifications and skills of the members of our Board, as demonstrated by the table below, strengthen the Board’s independent leadership and effective oversight of management.
Director Skills and Experience
| Skills | Juan José Chacón Quirós | Dennis Condon | Ann Custin | Leslie Gillin | Nicholas Lewin | Edward Schutter | Bryan Slotkin | Total | | Senior Leadership | √ | √ | √ | √ | | √ | √ | 6 | | Public Company Board | | √ | √ | √ | √ | √ | | 5 | | Medtech/Healthcare/Life Sciences Industry | √ | √ | √ | | √ | √ | √ | 6 | | Operations | √ | √ | √ | √ | | √ | | 5 | | Manufacturing/Supply Chain | √ | √ | √ | | | √ | | 4 | | Research and Development | √ | √ | √ | | | √ | | 4 | | Marketing and Sales | √ | √ | √ | √ | √ | √ | √ | 7 | | Finance and Accounting | √ | √ | √ | | √ | √ | √ | 6 | | Investor Relations/Communications | √ | √ | √ | √ | √ | √ | √ | 7 | | M&A | √ | √ | √ | | √ | √ | √ | 6 | | Risk Management | √ | √ | √ | | | √ | | 4 | | Regulatory and Compliance | √ | √ | √ | | | √ | | 4 | | Environmental, Social and Governance | √ | √ | √ | √ | | √ | √ | 6 | | Human Capital Management | √ | √ | √ | | | √ | | 4 | | Innovation and Technology | √ | √ | | | √ | √ | | 4 | | Information Technology and Cybersecurity | √ | √ | √ | | | √ | | 4 |
Nasdaq Diversity Matrix (as of April 12, 2024)
Nasdaq Diversity Matrix (as of April 12, 2024) The table below reflects certain diversity information for our current Board based on self-identification by each director. Our Board believes the diverse composition of our Board brings unique and complementary perspectives to our Board’s decision-making and the exercise of its oversight responsibilities.
Nasdaq Diversity Matrix (as of April 12, 2024)
| Total Number of Directors | 7 | | | | Female | Male | | Part I: Gender Identity | | | | Directors | 2 | 5 | | Part II: Demographic Background | | | | Hispanic or Latinx | 0 | 1 | | White | 2 | 4 |
Nominees for Election at the 2024 Annual Meeting - Declassified Directors
Nominees for Election at the 2024 Annual Meeting - Declassified Directors
Ann Custin Director Since 2020
Ann Custin Director Since 2020 Ms. Custin has served on our Board since July 2020. She served as Chief Financial Officer and on the board of directors of Siemens Medical Solutions Inc. from February 2012 to December 2019. Ms. Custin previously served as Chief Operating and Financial Officer of Scient’x and President and CEO USA of Draeger Medical Systems from 2004 to 2008. She has served on the board of directors of Mayne Pharma Group since March 2022 and Volpara Health Tech since September 2021. Ms. Custin holds a B.A. in Accounting from Queens College, CUNY. We believe Ms. Custin is qualified to serve on our Board due to her extensive career in healthcare across Europe, the Americas, and Asia.
Bryan Slotkin Director Since 2020
Bryan Slotkin Director Since 2020 Mr. Slotkin has served on our Board since July 2020. He is a partner with PJT Partners, a global advisory-focused investment bank, a position he has held since June 2018. Mr. Slotkin was a Partner with Discovery Land Company from July 2017 to June 2018 and a Managing Director with Goldman Sachs from May 2007 to June 2017. Mr. Slotkin holds a B.S. in Finance from Rutgers College, and a J.D. and M.B.A. from George Washington University. We believe Mr. Slotkin is qualified to serve on our Board due to his experience in the financial industry.
Continuing Directors
Continuing Directors
Juan José Chacón Quirós CEO and Director Since 2013
Juan José Chacón Quirós CEO and Director Since 2013 Mr. Chacón Quirós founded Establishment Labs, S.A. in 2004 and has been a director and the Chief Executive Officer of Establishment Labs since its inception in 2013. Mr. Chacón Quirós has been involved in several sectors of the aesthetics industry, including serving for almost a decade as General Manager of an aesthetic medical device distribution business in Latin America, and prior to that as Business Development Manager of a plastic and reconstructive surgery clinic in Costa Rica. He also served as President of the Rugby Federation of Costa Rica from 2009 to 2015. Mr. Chacón Quirós received his Baccalaureate at the Academie de Poitiers (Economics) and attended the University of Massachusetts at Amherst. He holds the MIT Sloan Advanced Certificate for Executives (ACE) in Management, Innovation and Technology and Board Director Diploma from IMD business school in Switzerland. We believe Mr. Chacón Quirós is qualified to serve on our Board due to his service as an executive officer of our Company, extensive knowledge of aesthetic medical device company operations, and extensive experience working with companies, regulators and other stakeholders in the aesthetic medical device industry.
Dennis Condon Director Since 2017
Dennis Condon Director Since 2017 Mr. Condon has served on our Board since December 2017. He was President and Chief Executive Officer of Merz Aesthetics (formerly BioForm Medical) from July 2007 to January 2013. From March 2006 to May 2007, Mr. Condon was President and Chief Executive Officer of Aspara Medical, and was President and Chief Executive Officer of Reliant Technology from January 2005 to February 2006. Prior to joining Reliant Technology, Mr. Condon held various roles at Spa Medicus, The Plastic Surgery Company and Mentor Corporation. Mr. Condon has served on the board of directors of Suneva Medical since September 2016 and AirXpanders Inc from 2012 to July 2019. Mr. Condon holds a bachelor’s degree in Biological Science from University of California, Davis. We believe Mr. Condon is qualified to serve on our Board due to his years of operational and executive leadership experience, and his experience at large, growing companies.
Leslie Gillin Director Since 2020
Leslie Gillin Director Since 2020 Ms. Gillin has served on our Board since December 2020. Ms. Gillin is the Chief Growth Officer of Pagaya Technologies LTD, a position she has held since October 2021, where she oversees business development, partnerships, marketing, and leads growth for the company and its partners. Ms. Gillin has also served on the board of directors of ComScore, Inc. since January 2023. Previously, Ms. Gillin served as Chief Marketing Officer of JPMorgan Chase & Co. from January 2020 to April 2021 and as President, Co-Brand Cards from February 2017 to January 2020. Ms. Gillin has over 25 years of experience in senior executive leadership roles at Bank of America, Citi, and JP Morgan Chase. Ms. Gillin holds a B.A. in International Relations and Affairs from University of Delaware. We believe Ms. Gillin is qualified to serve on our Board due to her extensive experience in marketing and product and business development in large corporations.
Nicholas Lewin Director Since 2015
Nicholas Lewin Director Since 2015 Mr. Lewin has served on our Board since September 2015, and as Chairman since December 2017. He has been a Managing Partner at Crown Predator Holdings since 2000 and has been a private investor since 2000. He has invested across multiple industries, with a particular focus on companies with innovative technologies and strong intellectual property, including activist situations that require working with management. He has been a director of Allurion Technologies, Inc., since October 2023, Cutera Inc. since May 2023, and GameSquare Holdings, Inc. since March 2024. Mr. Lewin has also been a director of Halo Maritime Defense Systems, a privately held provider of maritime security product and solutions, since 2007. Mr. Lewin previously served as a director of FaZe Holdings Inc., a lifestyle and medial platform rooted in gaming and youth culture, from July 2022 until its merger with GameSquare in March 2024, and Dura Medic, LLC a durable medical equipment provider, from 2006 to 2018. Mr. Lewin holds a bachelor’s degree in Political Science from Johns Hopkins University. We believe Mr. Lewin is qualified to serve on our Board due to his experience as an investor in, and director of, innovative companies, including healthcare companies.
Edward Schutter Director Since 2015
Edward Schutter Director Since 2015 Mr. Schutter has served on our Board since September 2015. He was Chief Executive Officer of Arbor Pharmaceuticals from 2010 to 2021. Prior to Arbor, Mr. Schutter served as President of Sciele (Shionogi U.S.) Pharmaceuticals. Prior to Sciele, he served as Vice President of Global Business development at Solvay Pharmaceuticals based in Basel, Switzerland. He has also held several senior management roles at the U.S. subsidiary of Solvay during his twenty years with the organization. He began his pharmaceutical career with Reid-Provident Labs, a small entrepreneurial pharmaceutical company based in Atlanta, GA. Mr. Schutter is a registered pharmacist with a B.S. in Pharmaceutical Sciences from Mercer University, an M.B.A. from Kennesaw State University and has completed graduate studies in International Business at Nyenrode University, Amsterdam, Netherlands. He is currently a board member of TerrAscend Corp., Vitruvias Therapeutics, and Intrance Medical and has been a previous board member of several other public, private and non-profit organizations. We believe Mr. Schutter is qualified to serve on our Board due to his experience as a chief executive officer and director in the healthcare industry.
Identifying and Evaluating Director Nominees
Identifying and Evaluating Director Nominees The Board has delegated the director selection and nomination process to the Nominating and Corporate Governance Committee, with the expectation that other members of the Board, and of management, will be requested to take part in the process as appropriate. Generally, the Nominating and Corporate Governance Committee is responsible for identifying candidates for director nominees in consultation with management, through the use of search firms or other advisors, through recommendations submitted by shareholders or through such other methods as the Nominating and Corporate Governance Committee deems to be helpful to identify candidates. Once candidates have been identified, it is our policy that the Nominating and Corporate Governance Committee confirm that the candidates meet all of the desired qualifications, expertise and characteristics sought of Board members and established by the Nominating and Corporate Governance Committee and the Board from time to time as discussed below. The Nominating and Corporate Governance Committee may gather information about the candidates through interviews, detailed questionnaires, comprehensive background checks or any other means that the Nominating and Corporate Governance Committee deems to be appropriate in the evaluation process. The Nominating and Corporate Governance Committee would then meet as a group to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the Board. Based on the results of the evaluation process, the Nominating and Corporate Governance Committee would recommend candidates for the Board's approval as director nominees for election to the Board at an annual meeting of shareholders or to fill any vacancy on the Board occurring between annual meetings of shareholders.
NON-EMPLOYEE DIRECTOR COMPENSATION
NON-EMPLOYEE DIRECTOR COMPENSATION We believe that granting equity and cash compensation to members of the Board represents an effective tool to attract, retain, and reward directors who are not Establishment Labs’ employees. Our policy has been and will continue to be to reimburse our directors for their travel, lodging and other reasonable expenses incurred in attending meetings of our Board and committees of the Board. We have adopted a formal policy pursuant to which our non-employee directors will be eligible to receive compensation for service on our Board and committees of our Board. Each non-employee director may elect to receive the quarterly portion of their annual retainer in equity in lieu of cash.
2023 Non-Employee Director Compensation
2023 Non-Employee Director Compensation The following table presents the total compensation for each person who served as a non-employee member of our Board during 2023:
2023 Non-Employee Director Compensation
| Name | Fees Earned or Paid in Cash | Stock Awards (1) (2) | Option Awards (1) (2) | Total | | Lisa Colleran (3) | $21,847 | $— | $— | $21,847 | | Dennis Condon | $60,000 | $154,988 | $— | $214,988 | | Ann Custin | $77,500 | $154,988 | $— | $232,488 | | Leslie Gillin | $62,500 | $154,988 | $— | $217,488 | | Nicholas Lewin (4) | $100,000 | $1,954,988 | $— | $2,054,988 | | Edward J. Schutter | $75,000 | $154,988 | $— | $229,988 | | Bryan Slotkin | $65,000 | $154,988 | $— | $219,988 |
2023 Non-Employee Director Compensation
(1) The aggregate grant date fair value of these awards was computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 and excludes the effects of estimated forfeitures. The reported award values have been determined using the assumptions described in Note 9 to the Consolidated Financial Statements included in our 2023 Annual Report. (2) The following chart sets forth the number of outstanding awarded restricted stock units and stock options held by each non-employee director as of December 31, 2023.
2023 Non-Employee Director Compensation
| Name | Outstanding Restricted Stock Units | Outstanding Stock Options | | Lisa Colleran (3) | — | — | | Dennis Condon | 2,324 | 39,780 | | Ann Custin | 2,324 | 12,000 | | Leslie Gillin | 2,324 | 12,000 | | Nicholas Lewin (4) | 30,180 | 57,829 | | Edward J. Schutter | 2,324 | 66,780 | | Bryan Slotkin | 2,324 | 12,000 |
2023 Non-Employee Director Compensation
(3) Ms. Colleran did not stand for reelection to the Board at the 2023 annual meeting of shareholders and left the Board effective May 24, 2023. (4) For Mr. Lewin, the amounts reported in the Stock Awards column include a performance-based grant for 27,856 restricted stock units with a grant date value of $1.8 million that was granted to him on May 24, 2023 in consideration for consulting services he performs for the Company in addition to his services as a non-employee director. This grant is set to vest annually over four years if the performance milestones are achieved. As of December 31, 2023, this award was fully outstanding.
Summary of 2023 Compensation Decisions
Summary of 2023 Compensation Decisions The Compensation Committee believes that the executive compensation program objective is to reward our executives for successfully creating long-term shareholder value. The Compensation Committee utilizes a mix of stock options and restricted stock unit awards in order to link the NEOs’ interests to those of our shareholders. The Compensation Committee has also created an annual incentive plan design that utilizes a carefully calibrated set of performance objectives focused on revenue growth, operating expenses, product development, the expansion of our geographic footprint and other strategic objectives that we believe will lead to long-term value creation.
Summary of 2023 Compensation Decisions
| Primary objective of 2023 compensation decisions ➢ | | Motivate Named Executive Officers to create long-term shareholder value |
Summary of 2023 Compensation Decisions
The Compensation Committee’s actions to incentivize the NEOs to create long-term value included the following highlights: ➢Annual Equity Awards Consist of 60% Stock Options and 40% RSUs. Each of our NEOs who was employed in March 2023 received an annual equity award consisting of a combination of stock options and restricted stock unit awards. The grant date value of the awards was allocated 60% to stock options and 40% to restricted stock units. The Compensation Committee believes this weighting, with the majority of the grant date value awarded in stock options that will only have value if the price of our common shares appreciates after the grant date, incentivizes our NEOs to achieve long-term share growth. The restricted stock units are included as part of the annual equity award to complement the stock options and provide a “full value” equity incentive that provides a retention benefit. ➢Calibrated Annual Incentive Plan Design. The Compensation Committee designed our 2023 annual incentive plan to include multiple different performance goals with assigned weightings to focus the NEOs on the achievement of objectives that we believe will lead to long-term value creation. 40% of the target bonus opportunity was tied to our achievement of revenue targets, 20% was tied to the achievement of OPEX targets, 15% was tied to product development objectives, 15% was tied to goals related to expanding our product offerings and geographic footprint, and the remaining 10% of the target bonus opportunity was at the discretion of the board of directors. The remainder of this section describes our executive compensation program and the material elements of compensation awarded to, earned by or paid to the NEOs during 2023.
Role of the Compensation Consultant
Role of the Compensation Consultant In late 2022 and 2023, the Compensation Committee retained Semler Brossy as its independent compensation consultant. Semler Brossy assisted the Compensation Committee with the construction of the group of peer companies described below that was used by the Compensation Committee to inform compensation decisions for 2023. Semler Brossy was also engaged to conduct an independent review of our executive compensation program to provide a competitive reference on pay levels and performance alignment, and analyzed the salaries, target bonus opportunities, target cash compensation opportunities, equity award opportunities and targeted total direct compensation paid by our 2023 peer group of companies described below. The Compensation Committee is directly responsible for the appointment, compensation and oversight of Semler Brossy’s work and does not believe it has raised any conflict of interest. Semler Brossy reports only to the Compensation Committee, and does not perform services for us, except for executive and director compensation-related services on behalf of, and as instructed by, the Compensation Committee.
Peer Companies
Peer Companies When determining the amount of each NEO’s 2023 compensation, the Compensation Committee, with the assistance of Semler Brossy, considered the compensation paid by the following peer companies:
Peer Companies
| Artivion | Inspire Medical Systems | | AtriCure | OrthoPediatrics Corp. | | Atrion Corporation | Paragon 28 | | AxoGen | Revance Therapeutics | | Axonics | Sientra, Inc. | | BioLife Solutions | Silk Road Medical | | Cutera | STAAR Surgical Company | | Evolus | The Beauty Health Company | | Inari Medical | Treace Medical Concepts |
Peer Companies
In selecting the peer groups, we evaluated publicly traded companies that are aesthetic and implantable device companies while rounding out the peer group with broader medical device companies within the healthcare equipment and supplies, life science tools and services and healthcare technology industries for potential inclusion. From this group, our objective was to position our total revenues, market capitalization and operating income at approximately the median relative to our peer group companies. After applying these screens, we selected the 18 companies listed above. When determining the amount of each NEO’s 2023 base salary, target bonus opportunity and long-term equity award grants, the Compensation Committee considered the compensation paid by the 2023 peer group companies. The Compensation Committee believes it is important to understand and reference what similarly-situated companies are paying their executives, and it intends to use this information as one of the data points it considers when making compensation decisions for the NEO using its business judgment. In general, the Compensation Committee’s philosophy is that each executive’s targeted total direct compensation (base salary plus target bonus plus grant date value of long-term equity awards) should be at or below the 50th percentile of the targeted total direct compensation provided by our peer companies to similarly situated executives. The Compensation Committee believes that each NEO’s targeted total direct compensation for 2023 approximated the 35th percentile of the targeted total direct compensation provided by our peer companies to similarly situated executives.
2023 Annual Incentive Compensation Opportunity
2023 Annual Incentive Compensation Opportunity The Compensation Committee designed our 2023 annual incentive plan to include multiple different performance goals with assigned weightings to focus the NEOs on the achievement of objectives that we believe will lead to long-term value creation. Each NEO was awarded the following target bonus opportunity for 2023:
2023 Annual Incentive Compensation Opportunity
| NEO | 2023 Target Bonus | | Juan Jose Chacón Quirós | $750,000 | | Rajbir S. Denhoy | $187,500 | | S. Ross Mansbach | $177,500 | | Paul D. Rodio | $187,500 |
2023 Annual Incentive Compensation Opportunity
The target bonus opportunity for Mr. Chacón Quirós was weighted 100% based on corporate performance. The target bonus opportunity for Messrs. Denhoy, Mansbach and Rodio was weighted 80% based on corporate performance and 20% based on individual performance.
Corporate Performance
Corporate Performance For each participating NEO, 40% of the target bonus opportunity was tied to our achievement of a revenue target to incentivize top-line growth. In order to achieve the revenue target, the Company was required to generate total revenues of $205 million, which is approximately a $43.3 million or 26.7% increase above our 2022 total revenues. For each participating NEO, 20% of the target bonus opportunity was tied to our achievement of an operating expense management target to incentivize increased profitability. In order to achieve the operating expense target, the Company was required to maintain certain qualified operating expenses below $158 million. For each participating NEO, 15% of the target bonus opportunity was tied to goals related to expanding our product offerings and geographic footprint. In order to achieve these goals, the Company was required to launch in four countries and generate $10 million in revenue in each of the newly entered markets. For each participating NEO, 15% of the target bonus opportunity was tied to expanding our manufacturing capabilities. In order to achieve these goals, the Company was required to increase manufacturing capacity to one million units and manufacture its first sellable product from our newly constructed Sulàyöm Innovation Campus. For each participating NEO, the remaining 10% of the target bonus opportunity was tied to our achievement of strategic organizational objectives at the discretion of the board of directors. These objectives included performance milestones related to employee retention initiatives, cash management, enhancements to our information technology infrastructure, and progress on the construction of a new manufacturing facility. Our 2023 annual incentive plan performance goals and weightings can be summarized as follows:
Individual Performance
| NEO | 2023 Bonus Earned | | Juan Jose Chacón Quirós | $375,000 | | Rajbir S. Denhoy | $93,750 | | S. Ross Mansbach | $106,500 | | Paul D. Rodio (1) | $— |
Long-Term Incentives
Long-Term Incentives
Structure of 2023 Annual Equity Awards
Structure of 2023 Annual Equity Awards All NEOs employed as of March 2023 received an annual equity award consisting of a combination of stock options and restricted stock unit awards. The grant date value of the awards was allocated 60% to stock options and 40% to restricted stock units. The Compensation Committee believes this weighting, with the majority of the grant date value awarded in stock options that will only have value if the price of our common shares appreciate after the grant date, incentivizes our NEOs to achieve long-term share price growth. The restricted stock units are included as part of the annual equity award to complement the stock options and provide a “full value” equity incentive that provides a retention benefit. The stock options and restricted stock unit awards both vest over a four-year period, with 25% of the shares subject to each award vesting on each of the first four annual anniversaries of the grant date. Each executive must generally remain employed on each vesting date in order to vest in the applicable installment of the award.
Severance Benefits
Severance Benefits We believe that severance protections, particularly in the context of the uncertainty surrounding any potential change in control transaction, play a valuable role in attracting and retaining quality executive officers. We provide severance protections to each of the currently employed NEOs under their employment agreements. As described in more detail below under the heading “Potential Payments Upon Termination or Change in Control,” each of the currently employed NEOs would be entitled to severance benefits in the event of a termination of employment by us without “cause” or by the executive for “good reason” (as those terms are defined in each executive’s employment agreement). The severance benefits for a qualifying termination not in connection with a change in control include a payment equal to a number of months of the executive’s base salary, a pro-rata portion of any bonus actually earned for the year of termination and, for certain executives, reimbursement of the costs to continue medical benefits under COBRA for a number of months after termination of employment. We do not believe that the NEOs should be entitled to receive their cash severance benefits merely because a change in control transaction occurs, and a change in control does not, in and of itself, entitle any NEO to receive severance benefits (i.e., these severance benefits are “double-trigger” benefits). The amount of severance benefits for the currently employed NEOs is enhanced for qualifying terminations in connection with a change in control, with the number of months of salary severance increased, the bonus severance component based on 100% of the executive’s target bonus instead of being pro-rated, the COBRA continuation period (if applicable) extended for additional months and the executives being entitled to 100% accelerated vesting of their outstanding equity awards. No NEO is entitled to receive a “gross-up” or similar payment for any excise taxes that may become payable in connection with a change in control pursuant to Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and, depending on what results in the best after-tax benefit for the executive, benefits may be “cut back” instead in such circumstances.
Summary Compensation Table for Fiscal Year 2023
Summary Compensation Table for Fiscal Year 2023 The following table provides information regarding the total compensation for services rendered in all capacities for our named executive officers ("NEOs") for the years ended December 31, 2023, 2022, and 2021, as applicable.
Summary Compensation Table for Fiscal Year 2023
| Name and Principal Position | Year | Salary | Non-equity Incentive Plan (2) | Stock Awards (1) | Option Awards (1) | All Other Compensation (3) | Total | | Juan José Chacón Quirós Chief Executive Officer | 2023 | $667,996 | $375,000 | $532,676 | $797,261 | $49,374 | $2,422,307 | | | 2022 | 487,720 | 376,272 | 664,778 | 998,964 | 49,373 | 2,577,107 | | | 2021 | 435,000 | 362,250 | — | 1,441,771 | 44,070 | 2,283,091 | | Rajbir S. Denhoy Chief Financial Officer | 2023 | 364,583 | 93,750 | 222,367 | 332,515 | 74,869 | 1,088,084 | | | 2022 | 337,500 | 166,040 | 203,804 | 306,288 | 66,754 | 1,080,386 | | | 2021 | 253,462 | 127,397 | — | 3,871,150 | 17,500 | 4,269,509 | | S. Ross Mansbach General Counsel, Chief Compliance Officer and Chief Human Resources Officer | 2023 | 352,917 | 106,500 | 212,984 | 318,503 | 50,341 | 1,041,245 | | | 2022 | 127,436 | 59,592 | — | 1,292,243 | 14,096 | 1,493,367 | | Paul D. Rodio Former Chief Operating Officer | 2023 | 375,000 | — | — | — | 443,622 | 818,622 | | | 2022 | 31,250 | — | — | 2,038,045 | 4,053 | 2,073,348 |
Summary Compensation Table for Fiscal Year 2023
(1)Amounts reported represent the aggregate grant date fair value of the stock option and stock awards granted to the NEOs in 2023. The aggregate grant date fair value of these awards was computed in accordance with FASB ASC Topic 718 and excludes the effects of estimated forfeitures. The reported award values have been determined using the assumptions described in Note 9 to the Consolidated Financial Statements included in our 2023 Annual Report. The options and restricted stock units granted vest in four substantially equal annual installments, subject to the NEOs’ continued employment through the vesting date. (2)Consists solely of an incentive bonus earned upon the achievement of Company performance objectives. Please see the discussion of our 2023 incentive program in the Compensation Discussion and Analysis section above. (3)The components of the column entitled “All Other Compensation” are set forth in the following table:
Summary Compensation Table for Fiscal Year 2023
| Name and Principal Position | Year | Vehicle Allowance | Life Insurance Premiums | Health Insurance Premiums | Vacation Payout | Severance (1) | | Other | Total | | Juan José Chacón Quirós Chief Executive Officer | 2023 | $24,000 | $11,070 | $5,304 | $— | $— | | $9,000 | $49,374 | | | 2022 | 24,000 | 11,070 | 5,303 | — | — | | 9,000 | 49,373 | | | 2021 | 24,000 | 11,070 | — | — | — | | 9,000 | 44,070 | | Rajbir S. Denhoy Chief Financial Officer | 2023 | 21,000 | 1,962 | 51,907 | — | — | | — | 74,869 | | | 2022 | 21,000 | — | 45,754 | — | — | | — | 66,754 | | | 2021 | 17,500 | — | — | — | — | | — | 17,500 | | S. Ross Mansbach General Counsel, Chief Compliance Officer and Chief Human Resources Officer | 2023 | — | 1,977 | 48,364 | — | — | | — | 50,341 | | | 2022 | — | — | 14,096 | — | — | | — | 14,096 | | Paul Rodio Former Chief Operating Officer | 2023 | — | 2,056 | 49,609 | — | 391,957 | 0 | — | 443,622 | | | 2022 | — | — | 4,053 | — | — | | — | 4,053 |
Summary Compensation Table for Fiscal Year 2023
(1)Amounts reported for Mr. Paul Rodio consist of nine months of salary and health insurance payments as well as prorated bonus amounts in accordance with terms agreed upon the end of his employment (the “Separation Agreement”).
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table summarizes all plan-based awards granted to each of the NEOs in 2023:
Grants of Plan-Based Awards
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | | | | | | | Name | Threshold ($) (1) | Target ($) | Maximum ($) (2) | Grant Date | Number of Shares of Stock or Units (#) | Number of Securities Underlying Options | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards (3) | | Juan José Chacón Quirós | $— | $750,000 | $— | 3/8/2023 | 7,512 | — | $— | $532,676 | | | | | | 3/8/2023 | — | 18,207 | $70.91 | $797,261 | | Rajbir S. Denhoy | $— | $187,500 | $— | 3/6/2023 | 2,986 | — | $— | $222,367 | | | | | | 3/6/2023 | — | 7,238 | $74.47 | $332,515 | | S. Ross Mansbach | $— | $177,500 | $— | 3/6/2023 | 2,860 | — | $— | $212,984 | | | | | | 3/6/2023 | — | 6,933 | $74.47 | $318,503 | | Paul D. Rodio | $— | $187,500 | $— | — | — | — | $— | $— |
Grants of Plan-Based Awards
(1)No minimum amount was set. (2)No maximum amount was set. (3)Amounts reported represent the grant date fair value of each stock option and restricted stock unit award granted to the NEOs in 2023. The grant date fair value of these awards was computed in accordance with FASB ASC Topic 718 and excludes the effects of estimated forfeitures. The reported award values have been determined using the assumptions described in Note 9 to the Consolidated Financial Statements included in our 2023 Annual Report. The options and restricted stock units granted vest in four substantially equal annual installments, subject to the NEOs’ continued employment through the vesting date.
Outstanding Equity Awards at 2023 Year-End
Outstanding Equity Awards at 2023 Year-End The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2023:
Outstanding Equity Awards at 2023 Year-End
| Name | Grant Date | Option Awards - Number of Securities Underlying Unexercised Options Exercisable | Option Awards - Number of Securities Underlying Unexercised Options Unexercisable | Option Awards - Option Exercise Price | Option Awards - Option Expiration Date | Stock Awards - Number of Shares or Units That Have Not Vested | Stock Awards - Market Value of Shares or Units of Stock That Have Not Vested | | Juan José Chacón Quirós | 3/8/2023 | — | — | $— | — | 7,512 | $194,486 | | | 3/8/2023 | — | 18,207 | $70.91 | 3/8/2033 | — | $— | | | 4/10/2022 | — | — | $— | — | 7,848 | $203,185 | | | 4/10/2022 | 6,881 | 20,643 | $63.53 | 4/10/2032 | — | $— | | | 2/15/2021 | 18,628 | 18,629 | $69.49 | 2/15/2031 | — | $— | | | 4/25/2019 | 60,000 | 20,000 | $25.25 | 4/25/2029 | — | $— | | Rajbir S. Denhoy | 3/6/2023 | — | — | $— | — | 2,986 | $77,308 | | | 3/6/2023 | — | 7,238 | $74.47 | 3/6/2033 | — | $— | | | 4/10/2022 | — | — | $— | — | 2,406 | $62,291 | | | 4/10/2022 | 2,109 | 6,330 | $63.53 | 4/10/2032 | — | $— | | | 2/28/2021 | 50,000 | 50,000 | $69.03 | 2/28/2031 | — | $— | | S. Ross Mansbach | 3/6/2023 | — | — | $— | — | 2,860 | $74,045 | | | 3/6/2023 | — | 6,933 | $74.47 | 3/6/2033 | — | $— | | | 8/29/2022 | 8,699 | 26,097 | $63.55 | 8/29/2032 | — | $— | | Paul D. Rodio (1) | 12/1/2022 | 12,500 | — | $67.57 | 12/1/2032 | — | $— |
Outstanding Equity Awards at 2023 Year-End
(1)Of Mr. Rodio's award of 50,000 options, the 37,500 options that were unvested as of the end of his employment on December 8, 2023 were cancelled in accordance with the terms of such award. Upon separation, Mr. Rodio had 90 days to exercise any vested options. The options and stock awards granted vest in four substantially equal annual installments, subject to the NEOs’ continued employment through the vesting date.
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table presents information on stock options that were exercised by the NEOs in 2023, as well as any stock awards that vested in 2023:
Option Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | Juan José Chacón Quirós | — | $— | 2,616 | $184,480 | | Rajbir S. Denhoy | — | $— | 802 | $56,557 | | S. Ross Mansbach | — | $— | — | $— | | Paul D. Rodio | — | $— | — | $— |
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control The following section describes the benefits that may become payable to Messrs. Chacón Quirós, Denhoy, and Mansbach in connection with a termination of their employment with the Company and/or a change in control of the Company (as defined in the 2018 Equity Incentive Plan) as of December 31, 2023. These benefits are payable pursuant to the terms of the executive employment agreements described above. As required by applicable SEC rules, the estimated values in this section assume that the triggering event took place on December 31, 2023 (except in the case of Mr. Rodio, for whom the values are actual values paid in connection with his Separation Agreement). The value of the accelerated equity vesting in the tables below is based on the closing price of our common shares of $25.89 on December 29, 2023, which was the last trading day of 2023. We have assumed that no executive’s severance benefits would be “cut back” under his employment agreement in order to obtain the greatest after tax-benefit after giving effect to the excise tax imposed under Section 4999 of the Code. The actual severance benefits payable to the executives may be less than the amounts reported above as a result of the application of this “cut-back”.
CEO Pay Ratio Disclosure
CEO Pay Ratio Disclosure Pursuant to the Exchange Act, we are required to disclose in this proxy statement the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of all of our employees (excluding our Chief Executive Officer). Based on SEC rules for this disclosure and applying the methodology described below, we have determined that our Chief Executive Officer’s total compensation for 2023 was $2,422,307, and the median of the total 2023 compensation of all of our employees (excluding our Chief Executive Officer) was $27,913. Accordingly, we estimate the ratio of our Chief Executive Officer’s total compensation for 2023 to the median of the total 2023 compensation of all of our employees (excluding our Chief Executive Officer) to be 87 to 1. To identify the median employee, we compared annual pay, as of December 31, 2023, for all of our employees excluding the Chief Executive Officer, wherever they reside in the world. Employee pay rates in foreign currencies were converted to U.S. Dollars using exchange rates on December 31, 2023. We included all global employees, whether employed on a full-time or part-time basis, who were employed by us on December 31, 2023. Once the median employee was identified as described above, the employee’s annual total compensation for 2023 was determined using the same rules that apply to reporting the compensation of our NEOs (including our Chief Executive Officer) in the “Total” column of the “Summary Compensation Table for Fiscal Year 2023” above. The total compensation amounts included in the first paragraph of this pay ratio disclosure were determined based on that methodology. We believe that the pay ratio disclosure presented above is a reasonable estimate. Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions, the pay ratio disclosure may not be comparable to the pay ratio reported by our peers or other public companies.
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure Pursuant to the Exchange Act, we are required to disclose in this proxy statement certain information comparing the total compensation of our Chief Executive Officer (whom we also refer to below as our “PEO”), and the average total compensation of our other named executive officers (whom we also refer to below as our “Non-PEO NEOs”), in each case both as reported in the Summary Compensation Table presented in this Proxy Statement and as “actually paid” to such named executive officers as determined pursuant to applicable SEC rules, to the Company’s performance as presented in the table below.
2023 Pay-Versus-Performance Table
| | | | | | Value of Initial Fixed $100 Investment Based on: | | | | | Year | Summary Compensation Table Total for PEO (1) | Compensation Actually Paid to PEO (2) | Summary Compensation Table Total for Non-PEO NEOs (1) | Average Compensation Actually Paid to Non-PEO NEOs (1) (2) | Total Shareholder Return (3) | Peer Group Total Shareholder Return (3) | Net Loss (thousands) | Revenue (9) (thousands) | | 2023 | $2,422,307 | $304,116 | $982,650 | $(1,099,089) | $94 | $106 | $(78,502) | $165,151 | | 2022 | $2,577,107 | $5,598,317 | $1,431,876 | $1,804,293 | $237 | $100 | $(75,209) | $161,700 | | 2021 | $2,283,091 | $5,862,847 | $3,377,966 | $4,191,258 | $244 | $125 | $(41,139) | $126,682 | | 2020 | $598,158 | $2,725,698 | $474,503 | $1,794,592 | $136 | $130 | $(38,121) | $84,676 |