UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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| HEALTHCARE SERVICES GROUP, INC. |
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HEALTHCARE SERVICES GROUP, INC.
3220 Tillman Drive
Suite 300
Bensalem, Pennsylvania 19020
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 31, 2016
June 1, 2021
To the Shareholders of
HEALTHCARE SERVICES GROUP, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Annual Meeting"“Annual Meeting”) of Shareholders of Healthcare Services Group, Inc. (the "Company"“Company”) will be held at the Courtyard Philadelphia Bensalem, 3280 Tillman Drive, Bensalem, Pennsylvania 19020, on May 31, 2016,June 1, 2021, at 10:00 A.M. (EDT), for the following purposes:
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| (1) | | To elect nine directors; |
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1(2) |
| To elect ten directors; |
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2 |
| To approve and ratify the selection of Grant Thornton LLP as the independent registered public accounting firm of the Company for its current fiscal year ending December 31, 2016; |
| 2021; |
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3(3) |
| AnTo consider an advisory vote on a non-binding resolution to approve the compensation of certain of our executive officers disclosed in this proxy statement; and |
| Proxy Statement; |
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4(4) |
| To consider and act upon such other business as may properly come before the Annual Meeting and any adjournment or postponement. |
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Only shareholders of record at the close of business on April 1, 2016March 31, 2021 will be entitled to notice of and to vote at the Annual Meeting.
Important Notice Regarding the Availability of
Proxy Materials for the Shareholders
meetingMeeting to be held on May 31, 2016
June 1, 2021
The proxy statement and annual report to shareholders are available under "2016 Proxy Materials"“2021 Investor Materials” at www.proxydocs.com/hcsg.
Note Regarding Special Accommodation Due to Coronavirus (COVID-19)
Please noteIn light of the COVID-19 health risks associated with crowds of people in close proximity with one another, we are utilizing the Notice and Access method of providing proxy materials to all record and beneficial ownersrecognize that some of our common stock viashareholders who might normally attend the Internet. We believe this approach provides increased flexibility with respectmeeting in person might also be reluctant to do so because of the manner in which shareholders receive the information while lowering our costs of delivery and reducing the environmental impact of printing paper copies. The Notice of Internet Availability of Proxy Materials, which contains instructions on how to access the notice of annual meeting, proxy statement and the Annual Report to Shareholders on the Internet, is first being mailed to our shareholders on or about April 18, 2016. This notice will also contain instructions on how to receive a paper copy of your proxy materials. Whether orhealth risks. For anyone who elects not you plan to attend the annual meeting please vote in accordance withbut would still like to listen to the business portion of the annual meeting, and any other remarks made about the Company, we are making available an audio recording which we will post the following day on our website, investor.hcsgcorp.com, under the heading “Events & Presentations.” For those shareholders, we would remind you to cast your votes by proxy, following the instructions providedwithin this Proxy Statement.
In the event we determine it is not possible or advisable to hold our Annual Meeting in person, we will publicly announce alternative arrangements as promptly as practicable before the Notice of Internet Availability of Proxy Materials.meeting. Please monitor our website at investor.hcsgcorp.com for updated information.
If you request and receive paper copies of the proxy materials, please sign and promptly mail the proxy, whetherWhether or not you expect to attend the Annual Meeting, shareholders can sign and promptly mail the enclosed proxy in order that your shares may be voted for you. A return envelope is provided for your convenience.
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| By Order of the Board of Directors, |
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DJANIELUDE P. MVCCARTNEYISCONTO
Chairman |
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| Dated: | | April 18, 201623, 2021 |
| | Bensalem, Pennsylvania |
Table of Contents
HEALTHCARE SERVICES GROUP, INC.
3220 Tillman Drive
Suite 300
Bensalem, Pennsylvania 19020
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 31, 2016June 1, 2021
SUMMARY OF THIS PROXY STATEMENT
This proxy statementProxy Statement contains information related to the annual meeting of shareholders (the "Annual Meeting"“Annual Meeting”) of Healthcare Services Group, Inc. (the "Company," "we," "us"“Company,” “we,” “us” or "our"“our”), to be held on Tuesday, May 31, 2016,June 1, 2021, beginning at 10:00 a.m. (EDT), at the Courtyard Philadelphia Bensalem, 3280 Tillman Drive, Bensalem, Pennsylvania 19020, and at any postponements or adjournments thereof.
QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING
What is the Purpose of the Annual Meeting
At the Company’s Annual Meeting, shareholders will hear an update on the Company’s operations, have a chance to meet some of our directors and executives and will act on the following matters:
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| Proposal No. | | Proposal Description | | Recommendation of the Board |
| (1) | | To elect nine directors; | | FOR each of the nominees |
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1 |
| To elect ten directors to the Company's Board of Directors to serve for a one year term and until the directors' successors are elected and qualified ("Proposal No. 1"); |
| (2) | |
2 |
| To approve and ratify the selection of Grant Thornton LLP as the independent registered public accounting firm of the Company for its current fiscal year ending December 31, 2016 ("Proposal No. 2");2021; and | | FOR |
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3(3) |
| AnTo consider an advisory vote on a non-binding resolution to approve the compensation of certain of our executive officers disclosed in this proxy statement ("Proposal No. 3"); andProxy Statement. | | FOR |
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4 |
| To consider and act upon such other business as may properly come before the Annual Meeting and any adjournment or postponement. | |
Who May Vote; Date of Mailing
Only holders of record of our Common Stock, $.01 par value (the "Common Stock"“Common Stock”) at the close of business on April 1, 2016March 31, 2021 (the “Record Date”), are entitled to notice of and to vote at the Annual Meeting. On the Record Date, there were issued and outstanding approximately 72,406,69474,721,000 shares of our Common Stock.
Each share of Common Stock entitles the holder thereof to one vote. This Proxy Statement is being mailed to shareholders on or about April 18, 2016.23, 2021.
What constitutes a quorum?
In orderHealthcare Services Group, Inc. | 2021 Proxy Statement | 1
Our Company
Healthcare Services Group, HCSG, has over 40 years as an experienced partner in managing housekeeping, laundry, dining, and nutritional services in hospitals, nursing homes, rehabilitation centers, and retirement homes in communities across the United States. Our housekeeping and laundry departments support Infection Prevention and Control initiatives, our experienced and expertly trained Registered Dietitians work in close collaboration with Medical Directors, Administrators, Directors of Nursing, and Dining Managers to carrydeliver people-centered nutritional care, assisted by Dining Services programs that source premium food products – those produced locally as well as familiar, national brands, recognizing resident preferences and dietary restrictions.
This year saw increasing demands on our employees, under conditions related to the pandemic that were often challenging.We appreciate and are deeply grateful for the efforts of our over 42,000 employees, who provided consistent exemplary care, and recognize HCSG's frontline leaders for their extraordinary leadership, courage, and grit over the past year.
Our Employees
We support our employees by investing in education, opportunities for advancement and engagement and recognition.Some of our programs include:
•Proactive and ongoing training focused on the business of the Annual Meeting, we must have a quorum. The presence, in person or by proxy, of the holders of a majority of the outstanding sharessafety of our Common Stock is requiredworkforce, assessing developing risks, and providing appropriate personal protective equipment and instituting other measures to constitutesafeguard our employees
•Career development and promotional pathways for all employees, with a quorumstaunch commitment to promotion from within
•Access to a Manager-In-Training Program for all qualified and motivated employees, regardless of formal education level achieved
•Employee Engagement and Recognition Program, including Going Beyond Awards, recognition pins for company tenure and military service, and the implementation of retention and referral bonuses.
We celebrate diversity among our teams. Our workforce consists of 71% females and 64% minorities.
•Our field-based management positions are comprised of 74% women and 49% minorities
•Women and minorities are among our top quartile of compensation for employees at 62% and 57%, respectively
Environmental Commitment
We continue to seek ways to reduce our environmental footprint and utilize chemicals and supplies that are safer for employees and for those we serve:
•Using concentrated chemicals, which reduce water use and transportation loads (with the Annual Meeting.attendant reduction in fuel consumption and emissions)
How many votes are required to approve each proposal?
Election•Leveraging chemicals and supplies with an array of Directors
The affirmative vote of a plurality of the shares of Common Stock entitled to vote and present in person or by proxy at the Annual Meeting is required for the election to our Board of Directors of each of the nominees for director. Shareholders do not have the right to cumulate their votes in the election of directors.
Ratification of Independent Registered Public Accounting Firm and Approval of Executive Compensation
The affirmative vote of the holders of a majority of the votes cast at the Annual Meeting in person or by proxy and entitled to vote is required for approval of Proposal No. 2 and Proposal No. 3.
How are votes counted?
You may either vote 'FOR' or 'WITHHOLD' authority to vote for each nominee for election to the Board of Directors. You may vote 'FOR,' 'AGAINST' or 'ABSTAIN' on Proposal No. 2 and Proposal No. 3. Abstentions will be counted as present for purposes of determining the existence of a quorum, but will have no effect on the vote of the particular proposal. If you sign and submit a proxy card without voting instructions, your shares will be voted 'FOR' each director nominee ,'FOR' Proposal No. 2 and Proposal No. 3 and 'FOR' or 'AGAINST' any other proposal as recommended by the Board of Directors.
What is a broker non-vote?
If shareholders do not give their brokers instructions as to how to vote shares held in street name, the brokers have discretionary authority to vote those shares on ‘routine’ matters,environmental certifications, such as the ratification of independent registered public accounting firm, but not on 'non-routine' proposals,Green Seal, UL ECOLOGO, USDA Certified Biobased Products, and Green Guard Gold
•Utilizing paper products that are 99% ECOLOGO certified, 50% compostable, 90% EPA compliant, and Green Seal Certified
•Technology such as the electionElectrostatic Sprayers that offer eco-friendly touchless application for sufficient and even coverage of directorschemical, while reducing cross-contamination
•Locally sourced produce, bakery, and the advisory vote regarding executive compensation. As a result, if you hold your shares in street namedairy, as available and do not provide voting instructionsutilizing proprietary food production software and menu design to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote. Shares held by brokers who do not have discretionary authority to vote on a particular matter and who have not received voting instructions from their customers will be counted as present for the purpose of determining whether there is a quorum at the Annual Meeting, but will not be counted or deemed to be present in person or by proxy for the purpose of determining whether our shareholders have approved that matter.minimize food waste
How to Vote
You may vote in person at the Annual Meeting or by proxy. We recommend that you vote by proxy even if you plan to attend the Annual Meeting. You can always change your vote at the Annual Meeting.
How Proxies Work
Our Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the Annual Meeting in the manner you direct. You may vote for or against the proposals or abstain from voting.
Proxies submitted will be voted by the individuals named on the proxy card in the manner you indicate. If you give us your proxy but do not specify how you want your shares voted, they will be voted in accordance with the Board of Directors recommendations.
You may receive more than one proxy or voting card depending on how you hold your shares. If you hold shares through someone else, such as a stockbroker, you may get materials from them asking how you want to vote. The latest proxy card we receive from you will determine how we will vote your shares.
Revoking a Proxy
A proxy may be revoked by delivery of a written statement to the Secretary of the Company stating that the proxy is revoked, by a subsequent proxy executed by the person executing the prior proxy and presented to the Annual Meeting, or by voting in person at the Annual Meeting.
Attending in Person
Only shareholders, their proxy holders, and our invited guests may attend the Annual Meeting. For security purposes, all persons attending the Annual Meeting must bring identification with photo. If you wish to attend the Annual Meeting in person but you hold your shares through someone else, such as a stockbroker, you must bring proof of your ownership to the Annual Meeting. For example, you could bring an account statement showing that you owned shares of the Company as of the Record Date as acceptable proof of ownership.
Expenses;Healthcare Services Group, Inc. | 2021 Proxy Solicitation
All expenses in connection with this solicitation will be borne by the Company. It is expected that solicitation will be made primarily by mail, but regular employees or representatives of the Company may also solicit proxies by telephone, facsimile, email or in person, without additional compensation, except for reimbursement of out-of-pocket expenses.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Company operates within a comprehensive plan of corporate governance for the purpose of defining responsibilities, setting high standards of professional and personal conduct and assuring compliance with such responsibilities and standards. The Company regularly monitors developments in the area of corporate governance. These include corporate governance standards and disclosure requirements resulting from the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"(“Sarbanes-Oxley”). In addition, the NASDAQ Stock Market LLC ("NASDAQ"(“NASDAQ”) also has corporate governance and listing requirements. Our corporate governance policies are available on our website at http://investor.hcsgcorp.com/governance.cfm.governance.
Director Independence
In accordance with the listing requirements of NASDAQ, a majorityBOARD OF DIRECTORS. The business of the current members ofCompany is managed under the Company's Board of Directors are independent, namely: John M. Briggs, Diane S. Casey, Robert L. Frome, John J. McFadden, Robert J. Moss, Dino D. Ottaviano and Jude Visconto. Accordingly, if Messrs. Briggs, Frome, McFadden, Moss, Ottaviano and Visconto and Ms. Casey are re-elected as membersdirection of the Board of Directors (the “Board”). The Board meets on a majority ofregularly scheduled basis during the members of the Company's Board of Directors will continueCompany’s fiscal year to be independent.
Mr. Frome is a member of the law firm of Olshan Frome Wolosky, LLP, which has been retained byreview significant developments affecting the Company during the last fiscal year. Fees paidand to act on matters requiring Board approval. It also holds special meetings when an important matter requires Board action between scheduled meetings and also acts by the Company to such firmunanimous written consent when necessary and appropriate. The Board met four times during the fiscal year ended December 31, 2015 were less than $120,000.2020. During 2020, each member of the Board attended or participated in 75% or more of the aggregate of (i) the total number of meetings of the Board held during 2020, and (ii) the total number of meetings held by each committee of the Board on which such member served during 2020.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 3
The 2021 nominees to serve on the Board are as follows:
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| Name, Age and Principal Occupations and Public Directorships for the past five years | | Director Since |
| John M. Briggs, CPA, 70, serves as the Company's lead independent Director. Mr. Briggs is the retired founder and a former Partner of BBD, LLP, a registered public accounting firm. Mr. Briggs was a board member and audit chairman of Crossmark Steward Funds, a Regulated Investment Company, from 2006 to 2016. | | 1993 | 1,2 |
| Diane S. Casey, RN, 67, is a retired Clinical Nursing Coordinator (CNC) of Endoscopy at Huntingdon Valley Surgery Center, an AAAHC accredited healthcare facility, where Ms. Casey worked for the past five years before her retirement in 2019. Previously, Ms. Casey was employed at Holy Redeemer Health Systems in various surgical nursing and management positions. | | 2011 | 3,4 |
| Daniela Castagnino, 46, is an Information Specialist at United Spinal Association, a national 501(c)(3) non-profit membership organization dedicated to enhancing the quality of life of all people living with spinal cord injuries and disorders (SCI/D), for more than the past five years. Previously, Ms. Castagnino was an international consultant for Lazos Profesionales Asociación Civil and the Inter-American Development Bank. | | 2018 | |
| Robert L. Frome, Esq., 83, has been Counsel to the law firm of Olshan Frome Wolosky LLP since 2018 and prior thereto was a partner at such Firm for more than five years. | | 1983 | |
| Laura Grant, 41, is the Chief Operating Officer of Chatham Financial. Ms. Grant's previous roles at Chatham Financial include Managing Director in the Global Real Estate practice and co-head of Chatham's European business. Ms. Grant has concentrated on risk management strategies for Real Estate Investment Trusts (REITs), specializing in interest rate and foreign currency hedging. Prior to joining Chatham, Laura worked at Booz Allen Hamilton in the Capital Asset Management group. | | 2020 | 1 |
| John J. McFadden, 59, has been the Principal of Global Circulation Services, a provider of marketing and advertising services to Media and Publishing companies since 2008. Mr. McFadden previously worked at The McGraw-Hill Companies (parent company of Standard and Poor’s) where he held management positions within their global circulation, sales and outsourcing services departments for approximately 15 years. | | 2012 | 3 |
| Dino D. Ottaviano, 73, is the retired Principal of D2O Marketing, Inc., a provider of internet productivity tools founded in 2006. Previously, Mr. Ottaviano was employed for 23 years with Transcontinental Direct (successor to Communication Concepts, Inc.), a publicly held outsourcing printer, retiring in 2002 as Vice President of Business Development. | | 2007 | 1 |
| Jude Visconto, 47, has been a Principal of American Property Holdings, a real estate investment firm focused on the acquisition, development and management of multi-family/senior housing and commercial assets, for more than the past five years. Mr. Visconto is an active member of the real estate community and participates in a variety of industry-related associations including: The American Senior Housing Association, The Association of the National Investment Center for Senior Housing and Care and The National Association of Realtors. | | 2015 | 5 |
| Theodore Wahl, 47, has been the President and Chief Executive Officer of the Company, since May 2015. Mr. Wahl joined the Company in 2004. Prior to his appointment to President and Chief Executive Officer, Mr. Wahl served as President and Chief Operating Officer, Executive Vice President & Chief Operating Officer, Vice President of Finance, Regional Manager, Regional Sales Director, District Manager and Facility Manager. Prior to joining the Company, Mr. Wahl was a Senior Manager with Ernst & Young’s Transaction Advisory Group. | | 2011 | |
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1.Member of Audit Committee.
2.Chairman of the Audit Committee.
3.Member of Nominating, Compensation and Stock Option Committee.
4.Chairwoman of the Nominating, Compensation and Stock Option Committee.
5.Chairman of the Board of the Company.
If Messrs. Briggs and Ottaviano and Ms. Grant are re-elected, it is anticipated that such individuals will comprise the Audit Committee following the Annual Meeting with Mr. Briggs serving as the chairman of such committee.
If Ms. Casey and Mr. McFadden are re-elected, it is anticipated that such individuals will continue to comprise the Nominating, Compensation and Stock Option Committee (the “NCSO Committee”) following the Annual Meeting with Ms. Casey serving as the chairwoman of such committee.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 4
Board Leadership
Jude Visconto was appointed Chairman of the Board of Directors in 2017 and has served as an independent director since 2015. The Board believes that Mr. Visconto’s financial background and management experience are qualifications for the role of Chairman of the Board. In addition, Mr. Visconto’s experience brings additional perspective to the Board as the Company continues its growth and dedication to continued operational excellence in providing services to the post-acute, skilled nursing and senior living markets.
If Mr. Visconto is re-elected to the Board, it is the intention of the Board that he continue to serve as Chairman of the Board. As Chairman of the Board, Mr. Visconto’s duties include: (i) approving agendas, schedules and supporting information provided to the Board; (ii) ensuring the Board has full, timely and relevant information to support its decision-making requirements; (iii) performing the duties of the Chairman at Board meetings; (iv) consulting on the effectiveness of Board committees; (v) at his sole discretion, when necessary and appropriate, calling meetings of the Board’s non-employee directors; (vi) consulting as to the timeliness of the flow of information from the Company that is necessary for the directors to effectively perform their duties; (vii) serving as principal liaison between the non-employee, independent directors and the President and Chief Executive Officer; (viii) if requested by shareholders, being available for consultation and direct communication; and (ix) other duties requested by the Board. In addition, Mr. Visconto presides at executive sessions of the Board without the presence of management. We believe that including an independent chairman in our Board structure enhances the effectiveness of our Board. This structure strengthens our corporate governance by promoting active engagement, objectivity, independence and oversight of management.
The independent directors of the Board have also unanimously re-appointed John M. Briggs as the lead independent director. In the absence of the Chairman, the lead independent director will assume the responsibilities of the Chairman.
Our Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for the Company and our shareholders.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 5
Board Qualifications
We believe that the collective skills, experiences and qualifications of our directors provide our Board with the expertise and experience necessary to advance the interests of our shareholders. While the NCSO Committee has not established any specific, minimum qualifications that must be met by each of our directors, it uses a variety of criteria to evaluate the qualifications and skills necessary for each member of the Board. In addition to the individual attributes of each of our current directors described below, we believe that our directors should have the highest professional and personal ethics and values, consistent with our longstanding values and standards. They should have broad experience in the industry the Company serves at the policy-making level in business, exhibit commitment to enhancing shareholder value and have sufficient time to carry out their duties and to provide insight and practical wisdom based on their experience. The below matrix highlights each director nominees' individual strengths and focuses that they may contribute to the Board as a whole. The absence of a “check” for a particular expertise or experience also does not indicate the director in question is unable to contribute to the decision-making process in that area.
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| | Independent | | Executive Experience | | Financial
Expertise | | Industry Experience | | Operational Experience | | Real Estate Experience |
John M. Briggs1 | | P | | P | | P | | | | | | |
Diane S. Casey2 | | P | | | | | | P | | P | | |
| Daniela Castagnino | | P | | | | P | | P | | P | | |
| Robert L. Frome | | P | | P | | P | | | | | | |
| Laura Grant | | P | | P | | P | | | | P | | P |
| John J. McFadden | | P | | P | | | | | | P | | |
| Dino D. Ottaviano | | P | | P | | P | | | | P | | |
Jude Visconto3 | | P | | | | P | | P | | P | | P |
| Theodore Wahl | | | | P | | P | | P | | P | | |
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1.Chairman of the Audit Committee.
2.Chairwoman of the Nominating, Compensation and Stock Option Committee.
3.Chairman of the Board of Directors.
Mr. Wahl and Mmes. Casey and Castagnino have extensive experience in the healthcare services industry. Each of the aforementioned persons’ operational experience, in addition to Mr. Wahl’s financial expertise, enables them to provide guidance with respect to our operations. Also, since Mmes. Casey and Castagnino have not been employees of the Company and have served their careers in patient care and advocacy, respectively, we believe they bring a patient care perspective to the Company. For instance, Mmes. Casey and Castagnino may become aware of new developments related to the healthcare services industry before the Company’s management learns of such developments and their impact on patient-related issues. Additionally, Ms. Castagnino's experience with non-governmental and not-for-profit institutions provides valuable insight into a customer segment that supports the fees paidCompany's growth strategy.
Mr. Visconto and Ms. Grant have real estate experience as a Principal of American Property Holdings and Chief Operating Officer of Chatham Financial, respectively. Mr. Visconto has specific experience in the acquisition, development and management of multi-family, senior housing and commercial assets. Mr. Visconto also has extensive experience with licensed operators, management companies and property owners, all of which align with our customer base. Among other qualifications, Ms. Grant has extensive experience with risk management strategies specific to Real Estate Investment Trusts (REITs) and the REITs industry as well as financial expertise in the areas of capital and asset management.
Mr. Frome has extensive legal experience. In addition, Mr. Frome has also served as a member of the board of directors of other public companies and has extensive corporate finance experience, Securities and Exchange Commission (“SEC”) compliance experience and mergers and acquisitions experience, which aids his service to the Board. Furthermore, Mr. Frome also has extensive executive experience as he served as the managing partner of his law firm.
Mr. Briggs’ experience as a certified public accountant provides him with extensive financial and accounting expertise obtained from over thirty years in public accounting. Mr. Briggs qualifies as an audit committee financial expert under SEC guidelines. Mr. Briggs also brings executive experience to the Board as he served as a partner at his accounting firm.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 6
Mr. Ottaviano, through his experience as a top-level marketing and operations executive for many years for two different companies, one of which was a public company, has a comprehensive understanding of business operations, including business development, as well as the compliance obligations of public companies.
Mr. McFadden has sales and marketing experience both as a Principal of his consulting company and through his experience at The McGraw Hill Companies that provide him with an understanding of a large public company’s operations, as well as the compliance obligations of a public company.
Board Committees
The Board has established an Audit Committee and a NCSO Committee to devote attention to specific subjects and to assist in the discharge of its responsibilities. The functions of those committees, their current members and the number of meetings held during 2020 with respect to the Audit Committee and the NCSO Committee are described below:
AUDIT COMMITTEE. The Audit Committee’s primary responsibilities, as described in the Amended and Restated Audit Committee Charter (a copy of which is available on the Company’s website, www.hcsg.com) include:
a.appointment, compensation and oversight of the Company’s Independent Registered Public Accounting Firm, who report directly to the Audit Committee, including (i) prior review of the Independent Registered Public Accounting Firm’s plan for the annual audit, (ii) pre-approval of both audit and non-audit services to be provided by the Independent Registered Public Accounting Firm and (iii) annual assessment of the qualifications, performance and independence of the Independent Registered Public Accounting Firm;
b.overseeing and monitoring the Company’s accounting and financial reporting processes and internal control system, audits of the Company’s financial statements and the quality and integrity of the financial reports and other financial information issued by the Company;
c.providing an open avenue of communication among the Independent Registered Public Accounting Firm and financial and other senior management and the Board;
d.reviewing with management and, where applicable, the Independent Registered Public Accounting Firm, prior to release, required annual, quarterly and interim filings by the Company did not exceed 5%with the SEC and the type and presentation of information to be included in earnings press releases;
e.reviewing material issues, and any analysis by management or the Independent Registered Public Accounting Firm, concerning accounting principles, financial statement presentation, certain risk management issues, such firm’s total revenues.as the adequacy of the Company’s internal controls and significant financial reporting issues and judgments and the effect of regulatory and accounting initiatives on the Company’s financial statements;
Accordingly, Mr. Frome is anf.reviewing with the Company’s legal counsel any legal matters that could have a significant effect on the Company’s financial statements, compliance with applicable laws and regulations and inquiries from regulators or other governmental agencies;
g.reviewing and approving all related party transactions between the Company and any director, executive officer, other employee or family member;
h.reviewing and overseeing compliance with the Company’s Code of Ethics and Business Conduct;
i.establishing procedures regarding the receipt, retention and treatment of, and the anonymous submission by employees of the Company of, complaints regarding the Company’s accounting, internal controls or auditing matters; and
j.reporting Audit Committee activities to the full Board and issuing annual reports to be included in the Company’s Proxy Statement.
If elected, each of Messrs. Ottaviano and Briggs and Ms. Grant are independent directordirectors as such term is defined by Rule 5605(a)(2) of the NASDAQ listing standards.standards and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Briggs has been designated as an “audit committee financial expert” and he satisfies the attributes required of an audit committee financial expert pursuant to Section 407 of Sarbanes-Oxley.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 7
The Audit Committee met seven times during fiscal year 2020. The report of the Audit Committee for the fiscal year ended December 31, 2020 is included herein under “Audit Committee Report” below.
NOMINATING, COMPENSATION AND STOCK OPTION COMMITTEE. The NCSO Committee (currently composed of Ms. Casey and Mr. McFadden) assists the Board by:
a.developing and recommending to the Board a set of effective corporate governance policies and procedures applicable to the Company;
b.identifying, reviewing and evaluating individuals qualified to become Board members and recommending that the Board select director nominees for each annual meeting of the Company’s shareholders;
c.discharging the Board’s responsibilities relating to the compensation of Company executives; and
d.administering the Company’s equity-based compensation plans.
Each of Ms. Casey and Mr. McFadden are independent directors as such term is defined by Rule 5605(a)(2) of the NASDAQ listing standards. The NCSO Committee met once during fiscal year 2020 and also acts by unanimous written consent when necessary and appropriate.
The NCSO Committee has not adopted a policy or process by which shareholders may make recommendations to the NCSO Committee of candidates to be considered by this NCSO Committee for nomination for election as Directors. The NCSO Committee has determined that it is not appropriate to have such a policy because such recommendations may be informally submitted to and considered by the NCSO Committee under its Charter. Shareholders may make such recommendations by giving written notice to Healthcare Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020, Attention: Corporate Secretary either by personal delivery or by United States mail. The Charter of the NCSO Committee is provided on the Company’s website, www.hcsg.com. The NCSO Committee has not established a formal process for identifying and evaluating nominees for Director, although generally the NCSO Committee may use multiple sources for identifying and evaluating nominees for Director, including referrals from current Directors and shareholders. The NCSO Committee has identified certain qualifications it believes an individual should possess before it recommends such person as a nominee for election to the Board of Directors.
The NCSO Committee believes that nominees for Director should possess the highest personal and professional ethics, integrity, values and judgment and be committed to representing the long-term interests of the Company’s shareholders. The NCSO Committee does not have a formal policy with respect to considering diversity in identifying nominees for directors however believes that diversity is an important factor in assessing potential board members along with the particular qualifications and experience required to meet the needs of the Board. Furthermore, as part of the NCSO Committee’s review of board composition, the board also considers diversity of experience and background in an effort to ensure that the composition of directors ensures a strong and effective board. The NCSO Committee seeks to ensure that the composition of the Board at all times adheres to the independence requirements of the NASDAQ listing standards and reflects a range of talents, skills, and expertise, particularly in the areas of management, leadership, and experience in the Company’s and related industries, sufficient to provide sound and prudent guidance with respect to the operations and interests of the Company.
The report of the NCSO Committee regarding executive compensation for the fiscal year ended December 31, 2020 is included herein under the “Nominating, Compensation and Stock Option Committee Report” below.
Code of Ethics and Business Conduct
We have also adopted a Code of Ethics and Business Conduct for directors, officers and employees of the Company. It is intended to promote honest and ethical conduct, full and accurate reporting and compliance with laws as well as other matters. A copy of the Code of Ethics and Business Conduct is posted on our website at www.hcsg.com.
Board LeadershipHealthcare Services Group, Inc. | 2021 Proxy Statement | 8
Effective May 26, 2015, the Board of Directors ("the Board") separated the positions of Chairman of the Board and Chief Executive Officer by appointing Theodore Wahl as President and Chief Executive Officer. Daniel P. McCartney continued as Chairman of the Board.
The independent directors of the Board have unanimously re-appointed John M. Briggs as the lead independent director. Our lead director's responsibilities are similar to those typically performed by an independent board chair and include: (i) approving agendas, schedules and supporting information provided to the Board; (ii) ensuring the Board has full, timely and relevant information to support its decision-making requirements; (iii) in the absence of the Chairman, performing the duties of the Chairman at Board meetings; (iv) consulting with the Chairman and the Board on the effectiveness of Board committees; (v) at its sole discretion, when necessary and appropriate, calling meetings of the Board's non-employee directors; (vi) consulting with the Chairman as to the timeliness of the flow of information from the Company that is necessary for the directors to effectively perform their duties; (vii) serving as principal liaison between the non-employee, independent directors and the President and Chief Executive Officer; (viii) if requested by shareholders, being available for consultation and direct communication; and (ix) other duties requested by the Board. In addition, Mr. Briggs presides at executive sessions of the Board without the presence of management.
We believe that including a lead independent director in our Board structure, combined with the separation of the Chairman of the Board and Chief Executive Officer positions, enhances the effectiveness of our Board. This structure strengthens our corporate governance by promoting active engagement, objectivity, independence and oversight of management.
Our Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for the Company and our shareholders.
Board Role in Risk Oversight
Our Board is responsible for overseeing the Company'sCompany’s risk management process. The Board focuses on the Company'sCompany’s general risk management strategy, including the most significant risks facing the Company, and ensures that appropriate risk mitigation
strategies are implemented by management. The Board is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters.
The Board has delegated to the Audit Committee oversight of certain aspects of the Company’s risk management process. Among its duties, the Audit Committee oversees the Company’s compliance with legal and regulatory requirements and the Company'sCompany’s system of disclosure controls and system of internal financial, accounting and legal compliance controls. The Board receives a quarterly update from the Audit Committee, which includes a review of items addressed during prior quarters. Our other Board committeesNCSO Committee also considerconsiders and addressaddresses risk as they perform their respectiveit performs its committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to the level of a material risk.
The Company’s management is responsible for day-to-day risk management under the direction of Jason J. Bundick, the Company'sCompany’s Executive Vice President, Chief Compliance Officer, General Counsel and Secretary. Our internal audit department serves as the primary monitoring and testing function for Company-wide policies and procedures, and manages the day-to-day oversight of the risk management strategy for the ongoing business of the Company. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, andESG, compliance and reporting levels. The Company conducts an annual review of the Company'sCompany’s disclosure controls and procedures, code of ethics and billing and sales compliance. To the extent deemed necessary, the Company revises such procedures and policies.
We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing the Company and that our Board leadership structure supports this approach.
4Healthcare Services Group, Inc. | 2021 Proxy Statement | 9
PROPOSAL NO. 1Directors’ Compensation
ELECTION OF DIRECTORS
Directors who are also our employees are not separately compensated for their service as directors. Our non-employee directors received the following aggregate amounts of compensation for the year ended December 31, 2020:
At | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash | | Option Awards 1,2 | | Total |
John M. Briggs 3 | | $ | 58,000 | | | $ | 23,096 | | | $ | 81,096 | |
Diane S. Casey 4 | | $ | 11,500 | | | $ | 23,096 | | | $ | 34,596 | |
Daniela Castagnino 5 | | $ | 7,000 | | | $ | 23,096 | | | $ | 30,096 | |
Robert L. Frome 6 | | $ | 7,000 | | | $ | 23,096 | | | $ | 30,096 | |
Laura Grant7 | | $ | 15,000 | | | $ | 30,734 | | | $ | 45,734 | |
John J. McFadden 8 | | $ | 11,500 | | | $ | 23,096 | | | $ | 34,596 | |
Robert J. Moss 9 | | $ | 6,000 | | | $ | 23,096 | | | $ | 29,096 | |
Dino D. Ottaviano 10 | | $ | 21,000 | | | $ | 23,096 | | | $ | 44,096 | |
Jude Visconto 11 | | $ | 54,000 | | | $ | 23,096 | | | $ | 77,096 | |
1.The amounts in this column do not reflect compensation actually received by the Annual Meeting, ten directorsDirector, nor do they reflect the actual value that will be recognized by the Director. Instead, the amounts represent the expense to be recognized for financial statement reporting purposes with respect to the grant date fair value of the Company are2020 option awards made to be elected, each to hold office for a term of one year. All nominees currently serve as Director. Unless authority is specifically withheld, management proxies will be voted FORIn accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, the electionfair value of the nominees named belowoptions was estimated using the Black-Scholes option valuation model.
2.All option awards granted in 2020 become vested and exercisable ratably over a five-year period on each yearly anniversary date of the grant.
3.Mr. Briggs had vested options to servepurchase 30,008 shares of Common Stock outstanding as directors untilof December 31, 2020.
4.Ms. Casey had vested options to purchase 15,003 shares of Common Stock as of December 31, 2020
5.Ms. Castagnino had vested options to purchase 1,001 shares of Common Stock as of December 31, 2020.
6.Mr. Frome had vested options to purchase 30,008 shares of Common Stock outstanding as of December 31, 2020.
7.Ms. Grant had no vested options as of December 31, 2020.
8.Mr. McFadden had vested options to purchase 25,007 shares of Common Stock as of December 31, 2020.
9.On May 26, 2020, Mr. Moss retired from the next annual meeting of shareholdersBoard and until their successors have been chosen and qualify. Should any nominee not be a candidate at the time of his retirement had vested options to purchase 18,006 shares of Common Stock outstanding.
10.Mr. Ottaviano had vested options to purchase 25,659 shares of Common Stock as of December 31, 2020.
11.Mr. Visconto had vested options to purchase 10,004 shares of Common Stock as of December 31, 2020.
Directors’ Fees
During 2020, the Annual Meeting (a situation which is not now anticipated), proxies will be voted in favorCompany updated its board compensation structure from paying each non-employee director $1,000 for each regular or committee meeting of the remaining nomineesBoard attended, to a quarterly retainer structure. Under the Company's updated policy, the Chairman of the Board and may also be voted for substitute nominees. IfChairman of the Audit Committee each receive a quorum is present,quarterly retainer of $15,000. Non-chair members of the candidate or candidates receivingaudit committee receive a quarterly retainer of $7,500. Members of the highest numberNCSO Committee receive a quarterly retainer of votes will be elected. Brokers that$3,750. Directors who do not sit on a committee receive shareholder instructions are not entitled to vote for the electiona quarterly retainer of directors because an uncontested election is considered a “non-routine” matter. Hence, shareholders who hold their shares through brokerage accounts and who would like to vote in favor of the director nominees will need to instruct their brokerage firm to vote for the Company’s nominees.
The current directors and nominees are as follows:
|
| | | |
Name, Age and Principal Occupations and Public Directorships for the past five years | | Director
Since
|
Daniel P. McCartney, 64, Chairman of the Board of the Company for more than five years; Chief Executive Officer of the Company until May 2015 and more than five years prior thereto | | 1977 | |
Robert L. Frome, Esq., 78, Member of the law firm of Olshan Frome Wolosky LLP for more than five years. Mr. Frome currently serves as a member of the board of directors of Multi Soft II, Inc. | | 1983 | |
Robert J. Moss, Esq., 78, Retired for more than five years. Previously, Mr. Moss was the President of Moss Associates. Mr. Moss served as a Court Officer of First Judicial District of Pennsylvania from 2006 to 2007 | | 1992 | (1)
|
John M. Briggs, CPA, 65, serves as the Company’s lead independent director. Mr. Briggs was the Treasurer of the Philadelphia Affiliate of Susan G. Komen for the Cure from 2005 through 2011. Additionally, he is the founder and formerly a Partner of Briggs, Bunting & Dougherty, LLP, a registered public accounting firm. Mr. Briggs is currently a Board member of the Capstone Group of Regulated Investment Funds | | 1993 | (1)(2)
|
Dino D. Ottaviano, 68, Principal of D2O Marketing, Inc., a provider of internet productivity tools founded in 2006. Previously employed for 23 years with Transcontinental Direct (successor to Communication Concepts, Inc.), a publicly held outsourcing printer, retiring in 2002 as Vice President of Business Development | | 2007 | (1)(3)
|
Theodore Wahl, 42, President and Chief Executive Officer, since May 2015. Mr. Wahl joined the Company in 2004. Prior to his appointment to President and Chief Executive Officer, Mr. Wahl served as President and Chief Operating Officer, Executive Vice President & Chief Operating Officer, Vice President of Finance, Regional Manager, Regional Sales Director, District Manager, Facility Manager, as well as in a corporate financial management position. Prior to joining the Company, Mr. Wahl was a Senior Manager with Ernst & Young’s Transaction Advisory Group. Mr. Wahl is the son-in-law of Mr. Daniel P. McCartney. | | 2011 | |
Michael E. McBryan, 51, Executive Vice President, since April 2012. Mr. McBryan joined the Company in 1988. Prior to becoming Executive Vice President, Mr. McBryan served as Senior Vice President, Divisional Vice President, Regional Sales Director, District Manager and Facility Manager | | 2011 | |
Diane S. Casey, RN, 62, Clinical Nursing Coordinator (CNC) of Endoscopy at Huntingdon Valley Surgery Center, an AAAHC accredited health care facility, where she has worked for more than five years. Ms. Casey also was employed by Holy Redeemer Health Systems for many years in various surgical nursing and management positions | | 2011 | (3)
|
John J. McFadden, 54, Principal of Global Circulation Services, a provider of marketing and advertising services to Media and Publishing companies founded in 2008. Mr. McFadden previously worked at The McGraw-Hill Companies (parent company of Standard and Poor’s) where he held management positions within their global circulation, sales and outsourcing services departments for approximately 15 years | | 2012 | (3)
|
Jude Visconto, 42, Principal of American Property Holdings, a real estate investment firm focused on the acquisition, development and management of multi-family/senior housing and commercial assets, for more than five years. Mr. Visconto is an active member of the real estate community and participates in a variety of industry-related associations including The American Senior Housing Association, The Association of the National Investment Center for Senior Housing and Care, and The National Association of Realtors | | 2015 | |
| | | |
| |
(1)
| Member of Audit Committee. |
| |
(2)
| Lead Independent Director. |
| |
(3)
| Member of Nominating, Compensation and Stock Option Committee. |
Board Qualifications
We believe that the collective skills, experiences and qualifications of our directors provides our Board with the expertise and experience necessary to advance the interests of our shareholders. While the Nominating, Compensation and Stock Option Committee of our Board has not established any specific, minimum qualifications that must be met by each of our directors, it uses a variety of criteria to evaluate the qualifications and skills necessary for each member of the Board.$2,500. In addition to the individual attributes of each of our current directors described below, we believe thatquarterly retainers our directors should have the highest professional and personal ethics and values, consistent with our longstanding values and standards. They should have broad experience in the industry the Company serves at the policy-making level in business, exhibit commitmentalso receive equity awards.
Procedures for Contacting Directors
The Board has established a process for shareholders to enhancing shareholder value and have sufficient time to carry out their duties and to provide insight and practical wisdom based on their past experience.
Each of Messrs. McCartney, Wahl, and McBryan and Ms. Casey has extensive experience in the health care services industry. Each of the aforementioned persons’ operational experience, in addition to Mr. Wahl’s financial expertise, enables them to provide guidance with respect to our operations. Also, we believe since Ms. Casey has not been an employee of the Company and has served her entire career as a direct patient care provider, she brings a patient care perspective to the Company. For instance, Ms. Casey may become aware of new developments in the healthcare services industry before the Company’s management learns of such developments and their impact on patient-related issues.
Each of Messrs. Frome and Moss has extensive legal experience. In addition, Mr. Frome has also served as a member of the board of directors of other public companies and has extensive corporate finance, Securities and Exchange Commission (“SEC”) compliance and mergers and acquisitions experience, which experience aids his servicesend communications to the Board. Both Mr. Frome and Mr. Moss also have extensive executive experience as they both have served as managing partners of their respective law firms.
Mr. Briggs’ years of experience as a certified public accountant provide him with extensive financial and accounting expertise obtained from over thirty years in public accounting. Mr. Briggs qualifies as an audit committee financial expert under SEC guidelines. Mr. Briggs also brings executive experienceShareholders may send communications to the Board as he served as a partner at his accounting firm.
Mr. Ottaviano, through his experience as a top-level marketing and operations executive for many years for two different companies, one of which was a public company, has a comprehensive understanding of business operations, including business development, as well as the compliance obligations of public companies.
Mr. McFadden has sales and marketing experience both as a Principal of his consulting company and through his experience at The McGraw Hill Companies that provided him with an understanding of a large public company’s operations, as well as the compliance obligations of a public company.
Mr. Visconto has real estate experience as a Principal of American Property Holdings, withgenerally or to a specific focus ondirector at any time by writing to: Healthcare Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020, Attention: Corporate Secretary. The Company reviews all messages received, and forwards any message that reasonably appears to be a communication from a shareholder about a matter of shareholder interest that is intended for communication to the acquisition, development and management of multi-family, senior housing and commercial assets. Mr. Visconto also has extensive experience with licensed operators, management companies and property owners, all of which align with our customer base.
The Directors recommend a vote "FOR" all nominees.
If Messrs. Briggs, Moss and OttavianoBoard. Communications are re-electedsent as Directorssoon as practicable to the director to whom they are addressed, or if addressed to the Board generally, to the chairwoman of the Company it is anticipatedNCSO Committee. Because other appropriate avenues of communication exist for matters that are not of shareholder interest, such individuals will compriseas general business complaints or employee grievances, communications that do not relate to matters of shareholder interest are not forwarded to the Audit Committee followingBoard.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 10
Non-Director Executive Officers
Our non-director executive officers for the Annual Meeting with2020 fiscal year are listed below. For biographical information relating to Mr. Briggs serving asWahl, please refer to the chairmanCompany’s Board nominees under Proposal 1 and the Board Qualifications section of such committee.
If Messrs. Ottaviano and McFadden and Ms. Casey are re-elected as Directors of the Company it is anticipated that such individuals will comprise the Nominating, Compensation and Stock Option Committee following the Annual Meeting with Mr. Ottaviano serving as the chairman of such committee.
|
|
Other Executive Officers |
| Name, Age and Principal Occupations |
John C. Shea, MBA, CPA, 44,49, Executive Vice President and Chief Financial Officer since April 2012. Mr. Shea had previously served as Secretary, Vice President of Finance & Chief Accounting Officer. Mr. Shea joined the Company in 2009 as the Director of Regulatory Reporting. Prior to joining the Company, Mr. Shea was a Senior Manager with Ernst & Young’s Transaction Advisory Services. |
Bryan D. McCartney, 54,Michael E. McBryan, 56, was the Executive Vice President sinceand Chief Revenue Officer of the Company, from April 2012.2012 to December 2020. Mr. McCartneyMcBryan joined the Company in 1983.1988. Prior to becominghis appointment to Executive Vice President and Chief Revenue Officer, Mr. McCartneyMcBryan served as Senior Vice President, Divisional Vice President, Regional Manager,Sales Director, District Manager and Facility Manager. Mr. McCartney isMcBryan retired from his position as Executive Vice President and Chief Revenue Officer of the brotherCompany on December 31, 2020. Mr. McBryan has continued to serve in an advisory capacity and as a member of the Board since his retirement however Mr. Daniel P. McCartney.McBryan has decided not to stand for re-election at the Company's 2021 Annual Meeting. |
Jason J. Bundick, Esq., 39,44, Executive Vice President, Chief Compliance Officer, General Counsel & Secretary since December 2013. Mr. Bundick joined the Company in 2012 as the Company's Corporate Counsel. In April 2013, Mr. Bundick was appointed to serve as Chief Compliance Officer. Prior to joining the Company, Mr. Bundick was an attorney with the law firm of Drinker Biddle & Reath LLP for more than five years. |
|
BOARD OF DIRECTORS AND COMMITTEES
BOARD OF DIRECTORS. The business of the Company is managed under the direction of the Board. The Board meets on a regularly scheduled basis during the Company's fiscal year to review significant developments affecting the Company and to act on matters requiring Board approval. It also holds special meetings when an important matter requires Board action between scheduled meetings and also acts by unanimous written consent when necessary and appropriate. The Board met five times during the fiscal year ended December 31, 2015. During 2015, each member of the Board participated in at least 75% of all Board and applicable committee meetings held during the period for which he or she was a director or committee member. Directors are expected to attend all Board meetings and meetings of committees on which they serve, and each Annual Meeting of Shareholders. In 2015, all of the directors attended the Company's Annual Meeting of Shareholders.
The Board has established an Audit Committee, and a Nominating, Compensation and Stock Option Committee to devote attention to specific subjects and to assist it in the discharge of its responsibilities. The functions of those committees, their current members and the number of meetings held during 2015 with respect to the Audit Committee, and the Nominating, Compensation and Stock Option Committee are described below:
AUDIT COMMITTEE. The Audit Committee's primary responsibilities, as described in the Amended and Restated Audit Committee Charter (a copy of which is available on the Company’s website, www.hcsg.com) include:
(a) appointment, compensation and oversight of the Company's Independent Auditors, who report directly to the Audit Committee, including (i) prior review of the Independent Auditors' plan for the annual audit, (ii) pre-approval of both audit and non-audit services to be provided by the Independent Auditors and (iii) annual assessment of the qualifications, performance and independence of the Independent Auditors;
(b) overseeing and monitoring the Company's accounting and financial reporting processes and internal control system, audits of the Company's financial statements and the quality and integrity of the financial reports and other financial information issued by the Company;
(c) providing an open avenue of communication among the Independent Auditors and financial and other senior management and the Board;
(d) reviewing with management and, where applicable, the Independent Auditors, prior to release, required annual, quarterly and interim filings by the Company with the Securities and Exchange Commission and the type and presentation of information to be included in earnings press releases;
(e) reviewing material issues, and any analysis by management or the Independent Auditors, concerning accounting principles, financial statement presentation, certain risk management issues, such as the adequacy of the Company's internal controls and significant financial reporting issues and judgments and the effect of regulatory and accounting initiatives on the Company's financial statements;
(f) reviewing with the Company's legal counsel any legal matters that could have a significant effect on the Company's financial statements, compliance with applicable laws and regulations and inquiries from regulators or other governmental agencies;
(g) reviewing and approving all related party transactions between the Company and any director, executive officer, other employee or family member;
(h) reviewing and overseeing compliance with the Company's Code of Ethics and Business Conduct;
(i) establishing procedures regarding the receipt, retention and treatment of, and the anonymous submission by employees of the Company of, complaints regarding the Company's accounting, internal controls or auditing matters; and
(j) reporting Audit Committee activities to the full Board and issuing annual reports to be included in the Company's proxy statement. Each of Messrs. Moss, Ottaviano and Briggs are independent Directors as such term is defined by Rule 5605(a)(2) of the NASDAQ listing standards and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Mr. Briggs has been designated the "audit committee financial expert" and he satisfies the attributes required of audit committee financial experts pursuant to Section 407 of Sarbanes-Oxley. The Audit Committee met five times during fiscal year 2015. The report of the Audit Committee for the fiscal year ended December 31, 2015 is included herein under “Audit Committee Report” below.
NOMINATING, COMPENSATION AND STOCK OPTION COMMITTEE. The Nominating, Compensation and Stock Option Committee (currently composed of Messrs. Ottaviano and McFadden and Ms. Casey) assists the Board by:
(a) developing and recommending to the Board a set of effective corporate governance policies and procedures applicable to the Company;
(b) identifying, reviewing and evaluating individuals qualified to become Board members and recommending that the Board select director nominees for each annual meeting of the Company’s shareholders;
(c) discharging the Board’s responsibilities relating to the compensation of Company executives; and
(d) administering the Company’s stock option plan or other equity-based compensation plans.
Each of Messrs. Ottaviano and McFadden and Ms. Casey are Independent Directors as such term is defined by Rule 5605(a)(2) of the NASDAQ listing standards. The Nominating, Compensation and Stock Option Committee met once during fiscal year 2015 and also acts by unanimous written consent when necessary and appropriate.
The Nominating, Compensation and Stock Option Committee has not adopted a policy or process by which shareholders may make recommendations to the Nominating, Compensation and Stock Option Committee of candidates to be considered by this Nominating, Compensation and Stock Option Committee for nomination for election as Directors. The Nominating, Compensation and Stock Option Committee has determined that it is not appropriate to have such a policy because such recommendations may be informally submitted to and considered by the Nominating, Compensation and Stock Option Committee under its Charter. Shareholders may make such recommendations by giving written notice to Healthcare Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020, Attention: Corporate Secretary either by personal delivery or by United States mail, postage prepaid. The Charter of the Nominating, Compensation and Stock Option Committee is provided on the Company's website, www.hcsg.com. The Nominating, Compensation and Stock Option Committee has not established a formal process for identifying and evaluating nominees for Director, although generally the Nominating, Compensation and Stock Option Committee may use multiple sources for identifying and evaluating nominees for Director, including referrals from current Directors and shareholders. The Nominating, Compensation and Stock Option Committee has identified certain qualifications it believes an individual should possess before it recommends such person as a nominee for election to the Board of Directors.
The Nominating, Compensation and Stock Option Committee believes that nominees for Director should possess the highest personal and professional ethics, integrity, values and judgment and be committed to representing the long-term interests of the Company’s shareholders. The Nominating, Compensation and Stock Option Committee does not have a formal policy with respect to considering diversity in identifying nominees for directors. The Nominating, Compensation and Stock Option Committee believes that racial and gender diversity are important factors in assessing potential board members, but not at the expense of particular qualifications and experience required to meet the needs of the Board. Furthermore, as part of the Nominating, Compensation and Stock Option Committee's review of board composition, the board considers diversity of experience and background in an effort to ensure that the composition of directors ensures a strong and effective board. The Nominating, Compensation and Stock Option Committee seeks to ensure that the composition of the Board at all times adheres to the independence requirements of the NASDAQ and reflects a range of talents, skills, and expertise, particularly in the areas of management, leadership, and experience in the Company’s and related industries, sufficient to provide sound and prudent guidance with respect to the operations and interests of the Company.
See below for the Report of the Nominating, Compensation and Stock Option Committee regarding executive compensation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 1, 2016, regarding the beneficial ownership of Common Stock by each person or group known by the Company to own: (i) 5% or more of the outstanding shares of Common Stock, (ii) each director and director nominee of the Company, (iii) the Named Executive Officers as defined in Item 402(a)(3) of Regulation S-K and (iv) all current directors and executive officers of the Company as a group. The persons named in the table have sole voting and investment power with respect to all shares of Common Stock owned by them, unless otherwise noted.
|
| | | | | | | | |
Name and Beneficial Owner or Group (1) | | Amount and Nature of Beneficial Ownership | | Percent of Class (3) |
BlackRock, Inc. (2) | | 6,904,547 |
| (4) | | 9.5 | % | |
The Vanguard Group, Inc. (2) | | 5,805,647 |
| (5) | | 8.0 | % | |
Neuberger Berman Group LLC (2) | | 4,789,996 |
| (6) | | 6.6 | % | |
| Daniel P. McCartney | | 2,604,273 |
| (7) | | 3.6 | % | |
| Theodore Wahl | | 289,203 |
| (8) | | — |
| (19) |
| Bryan D. McCartney | | 239,719 |
| (9) | | — |
| (19) |
| Michael E. McBryan | | 146,481 |
| (10) | | — |
| (19) |
| Robert L. Frome | | 63,858 |
| (11) | | — |
| (19) |
| John M. Briggs | | 44,301 |
| (12) | | — |
| (19) |
| Robert J. Moss | | 29,992 |
| (13) | | — |
| (19) |
| John C. Shea | | 23,449 |
| (14) | | — |
| (19) |
| Dino D. Ottaviano | | 13,588 |
| (15) | | — |
| (19) |
| Jason J. Bundick | | 7,506 |
| (16) | | — |
| (19) |
| John J. McFadden | | 6,003 |
| (17) | | — |
| (19) |
| Diane S. Casey | | — |
|
| | — |
|
|
| Jude Visconto | | — |
| | | — |
|
|
| Directors and Executive Officers as a group (13 persons) | | 3,468,373 |
| (18) | | 4.8 | % |
|
| | | | | | | |
| |
(1)
| Unless otherwise indicated,Andrew W. Kush, 43, Executive Vice President and Chief Operating Officer since February 2020. Mr. Kush had previously served as Executive Vice President and Chief Administrative Officer since June 2017, and as Senior Vice President of Human Resources & Risk Management from 2013 to 2017. Mr. Kush joined the addressCompany in 2010 as the Vice President of all persons is c/o HealthcareHuman Resources. Prior to joining the Company, Mr. Kush was a Vice President of Risk Management with PNC Financial Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020. |
| |
(2)
| The address of Neuberger Berman Group LLC is 605 Third Avenue, New York, NY 10158. |
The address of Blackrock, Inc. is 55 East 52nd Street, New York, NY 10055.
The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355.
| |
(3)
| Based on 72,406,694 shares of Common Stock outstanding at April 1, 2016. |
| |
(4)
| According to Schedule 13G filed by BlackRock, Inc. on January 26, 2016, it has total beneficial ownership of 6,904,547 shares. Such beneficial ownership includes sole voting power with respect to 6,747,140 shares, and sole dispositive power with respect to 6,904,547 shares. |
| |
(5)
| According to Schedule 13G filed by The Vanguard Group, Inc. on February 11, 2016, it has total beneficial ownership of 5,805,647 shares. Such beneficial ownership includes sole voting power with respect to 158,026 shares, shared voting power with respect to 3,800 shares, sole dispositive power with respect to 5,648,868 shares and shared dispositive power with respect to 156,779 shares. |
| |
(6)
| According to Schedule 13G filed by Neuberger Berman Group LLC, Neuberger Berman LLC and Neuberger Berman Investment Advisors LLC on February 9, 2016, such entities have, in the aggregate, total beneficial ownership of 4,789,996 shares, which includes shared voting power with respect to 4,737,721 shares. |
| |
(7)
| Includes incentive stock options to purchase 58,754 shares and nonqualified stock options to purchase 116,747 shares all currently exercisable and 71,258 shares credited to Mr. McCartney's account (but unissued) in connection with the Company's Deferred Compensation Plan. |
| |
(8)
| Includes incentive stock options to purchase 37,483 shares, and nonqualified stock options to purchase 26,267 shares, all currently exercisable, and 8,738 shares credited to Mr. Wahl's account (but unissued) in connection with the Company's Deferred Compensation Plan. Additionally, includes 81,901 and 26,168 shares held by Mr. Wahl's wife and minor children, respectively. |
| |
(9)
| Includes incentive stock options to purchase 30,046 shares and nonqualified stock options to purchase 59,954 shares, all currently exercisable, and 20,696 shares credited to Mr. McCartney's account (but unissued) in connection with the Company's Deferred Compensation Plan. Additionally, includes 22,798 shares held by Mr. McCartney's children. |
| |
(10)
| Includes incentive stock options to purchase 30,046 shares and nonqualified stock options to purchase 59,954 shares, all currently exercisable, and 29,811 shares credited to Mr. McBryan's account (but unissued) in connection with the Company's Deferred Compensation Plan. |
| |
(11)
| Includes nonqualified stock options to purchase 33,357 shares, all currently exercisable. |
| |
(12)
| Includes nonqualified stock options to purchase 18,779 shares, all currently exercisable. |
| |
(13)
| Includes nonqualified stock options to purchase 29,992 shares, all currently exercisable. |
| |
(14)
| Includes incentive stock options to purchase 14,580 shares, all currently exercisable and 2,682 shares credited to Mr. Shea's account (but unissued) in connection with the Company's Deferred Compensation Plan. |
| |
(15)
| Includes nonqualified stock options to purchase 13,351 shares, all currently exercisable. |
| |
(16)
| Includes incentive stock options to purchase 5,100 shares, all currently exercisable and 431 shares credited to Mr. Bundick's account (but unissued) in connection with the Company's Deferred Compensation Plan. |
| |
(17)
| Includes nonqualified stock options to purchase 6,003 shares, all currently exercisable. |
| |
(18)
| Includes 551,417 shares underlying stock options granted to this group. All stock options reflected in the security ownership table are currently exercisable; also includes 133,886 shares credited to the accounts of certain executive officers (but unissued) in connection with the Company's Deferred Compensation Plan. |
| |
(19)
| Less than 1% of the outstanding shares. |
11
MANAGEMENTEXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation ObjectivesOur Company
Healthcare Services Group provides management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of healthcare facilities, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. We believe we are the largest provider of housekeeping and laundry management services to the long-term care industry in the United States, rendering such services to over 3,000 facilities throughout the continental United States as of December 31, 2020.
With more than 40 years of industry experience, HCSG aims to deliver improved operational, regulatory, and financial outcomes. We achieve this by designing and implementing the most efficient systems, holding our teams accountable, measuring and reporting our results, and designing quality assurance programs to continually assess and improve our programs. We pursue excellence via an ever-evolving and expanding focus on training and the development of team members at every level.
Our Named Executive Officers
We refer to our President and Chief Executive Officer, the Chief Financial Officer, our former Chief Executive Officer and each of our other three most highly compensated executive officers who were serving as executive officers at the end of our latest fiscal year as our Named Executive Officers ("NEOs"(“NEOs”). As more fully described below,In 2020, our NEOs were as follows:
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| Named Executive Officer | | Role |
| Theodore Wahl | | President, Chief Executive Officer & Director |
| John C. Shea | | Executive Vice President & Chief Financial Officer |
| Michael E. McBryan | | Executive Vice President, Chief Revenue Officer & Director |
| Andrew W. Kush | | Executive Vice President & Chief Operating Officer |
| Jason J. Bundick | | Executive Vice President, Chief Compliance Officer, General Counsel & Secretary |
Healthcare Services Group, Inc. | 2021 Proxy Statement | 11
2020 Business Highlights
In 2020, the long-term and post-acute care industry continued to work through a challenging cycle that negatively impacted overall industry fundamentals. On-going occupancy pressures, lease costs issues, reimbursement uncertainty, and the global COVID-19 pandemic led to an unprecedented level of ownership turnover within the industry. Notwithstanding the industry challenges, from an overall operational and financial stewardship point of view, the Board and NCSO Committee believed that in 2020, management performed well in a challenging environment involving high levels of industry stress and difficult market conditions. Management showed proactivity and innovation in identifying solutions, especially in innovating around the COVID-19 pandemic, while also setting the Company up for future success.
Key 2020 accomplishments included the following:
•COVID-19 Response:
◦Guided by our Company Purpose of Fostering Fulfillment in Communities our Managers and Associates led and served on the frontlines through one of the most trying periods for our industry and country, while tirelessly supporting our customers and helping to ensure the well-being of America’s most vulnerable.
◦Demonstrated remarkable business resilience, producing extraordinary operational outcomes and delivering strong financial results – underscoring our ability to thrive in even the most challenging environments.
◦Awarded tens of millions of dollars of “hero-pay” - including over $7.0 million of special leadership bonuses - for heroic efforts working through the challenges brought onto our business from the pandemic during 2020.
•Successfully transitioned a record number of over 700 facility ownership changes;
•Generated record operating cash flow of $217.2 million, an increase of over 232% from the prior year;
•Paid out record cash dividends of $60.7 million, with the fourth quarter of 2020 representing the 70th consecutive quarterly increase;
•Demonstrated continued financial discipline and efficiency with return on assets of 12.6%, return on equity of 20.5% and return on invested capital of 41.4%;
•Continued transition of customer payment terms from monthly to semimonthly or weekly, resulting in over 55% of customers on an increased payment frequency model; and
•Further reduced workers compensation claim scope and severity resulting in favorable loss development trends and decreased expense.
We did not make any adjustments to executive compensation in 2020 in response to the pandemic, as the metrics we utilized in determining incentive awards have proven to be resilient and relevant. The base salary of Mr. Daniel McCartney was primarilyour CEOs and most other NEOs remained flat outside of promotions or an adjustment of significantly below market compensation (Our CEO’s base salary has been unchanged for the past 5 years). We did, however, add PSUs to our long-term incentive awards which also include stock options and RSUs, as a direct result of shareholder feedback. The detail below more fully describes our structure and compensation paid in fiscal year 2020.
Compensation Objectives
NEO compensation is based on a minimum base salary plus an additional amount based on the Company’s income from operations before income taxescombination of Company and in 2015, 2014individual contributions to our performance, along with each NEO's level and 2013, the salaries and bonuses, where applicable, of Messrs. Wahl, Shea, Bryan McCartney, McBryan and Bundick were based on their performance and levelscope of responsibility. Our Nominating, Compensation and Stock OptionNCSO Committee believes that the compensation paid is consistent with theour overarching principle that compensation plans of senior operational officers should be closely aligned with our performance on both a short-term and long-term basis to create value for shareholders, and that such compensation should assist us in attracting and retaining key executives critical to our long-term success.
In establishing compensation for executive officers, the following are the objectives of the Company and the Nominating, Compensation and Stock OptionNCSO Committee:
•Attract and retain individuals of superior ability and managerial talent;
Ensure officer•Align executive compensation is aligned with our corporate strategies, business objectives and the long-term interests of our shareholders; and
•Enhance the officers'officers’ incentive to maximize shareholder value, as well as promote retention of key personnel, by providing a portion of total compensation for management in the form of direct ownership in the Company through stock options and other stock-basedequity compensation.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 12
To support these objectives, the Company’s executive compensation plans.program has the following characteristics:
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| What we do: | | What we don’t do: |
| þ | Significant share ownership requirements for senior executives | | o | No employment agreements containing special severance payments such as golden parachutes |
| þ | Double-trigger requirements for vesting of equity awards on a change in control | | o | No hedging or engaging in derivative transactions related to Company shares |
| þ | A cap on the annual incentive payout for the Chief Executive Officer | | o | No gross-up payments to cover income taxes related to executive compensation |
| þ | Majority of NEO compensation is “at-risk” | | o | No repricing or backdating of stock options |
| þ | Operate a clawback policy that applies to “at-risk” variable compensation | | o | No retirement programs that are specific to executive officers |
| þ | Balance “at-risk” compensation across short-term and long-term time horizons | | | |
| þ | Company engages an independent compensation consultant | | | |
Compensation Oversight
Among its duties, the NCSO Committee is accountable for discharging the Board’s responsibilities relating to the compensation of Company executives. Accordingly, the NCSO Committee conducts an annual review of the aggregate level of our executive compensation, as well as the mix of elements used to compensate our executive officers.
To achieve these objectives, our overall compensation program aims to pay our NEOs competitively, consistent with our success and their contribution to that success. To accomplish this we rely on programs that provide compensation in the form of both cash and equity. Although our Nominating, Compensation and Stock OptionNCSO Committee has not adopted any formal guidelines for allocating total compensation between cash and equity, the Nominating, Compensation and Stock OptionNCSO Committee considers the balance between providing short-term and long-term incentives which are designed to help align the interests of management with the interests of shareholders.
We have not retained a compensation consultant to review our policies and procedures with respect to executive compensation, although the Nominating, Compensation and Stock Option Committee may elect to retain such a consultant in the future if it determines that so doing would be helpful in developing, implementing or maintaining compensation plans.
The Nominating, Compensation and Stock Option Committee conducts an annual review of the aggregate level of our executive compensation, as well as the mix of elements used to compensate our executive officers. In addition, the Nominating, Compensation and Stock Option Committee has historically taken into account input from other independent members of our Board and, to the extent available, publicly available data relating to the compensation practices and policies of other companies within and outside our industry. As part of the review of the Company’s compensation, the compensation policies of the following companies have been examined: AMN Healthcare Services, Inc. (a healthcare staffing company), Crothall Services Group (a provider of hospital housekeeping, hospital facilities management, and hospital environmental services) and ARAMARK Corporation (a food, hospitality and facility service company). The Nominating, Compensation and Stock Option Committee believes that gathering information about the compensation practices of these companies is an important part of our compensation-related decision-making process. However, since none of these companies are specifically engaged in the Company's business and the Company is unaware of any other public company which provides housekeeping and food services solely to the health care industry and primarily to the long term care segment of the industry, the Company believes that compensation comparisons with the aforementioned companies are not apt. Accordingly, while the Nominating, Compensation and Stock Option Committee is aware of the compensation practices of the companies set forth above, the Nominating, Compensation and Stock Option Committee has not necessarily relied on comparisons with such entities for purposes of making compensation decisions for Company executive officers and the Company does not benchmark compensation against the compensation of such other companies.
The overwhelming majority of votes cast at the 2015 Annual Meeting of Shareholders approved, on an advisory basis, the compensation of the Company's NEOs ("say-on-pay"). The Nominating, Compensation and Stock Option Committee considered that support in its efforts to align the Company's executive compensation policies with long-term shareholder interests.
Determination of Compensation Awards
The compensation of the President and Chief Executive Officer of the Company is determined by the Nominating, Compensation and Stock Option Committee. The compensation of the former Chief Executive Officer was also determined by the Nominating, Compensation and Stock OptionNCSO Committee. Such determinations regarding compensation aredetermination is based on a number of factors including, in order of importance:
•Consideration of the operating and financial performance of the Company, primarily its income before income taxes during the preceding fiscal year, as compared with prior operating periods;taxes;
•Attainment of a level of compensation designed to retain a superior executive in a highly competitive environment; and
•Consideration of the individual’s overall contribution to the Company.
The NCSO Committee has also historically taken into account input from other independent members of our Board in determining the compensation of the President and Chief Executive Officer. Compensation for the other NEOs (referred to in the summary compensation table) other thanis recommended by the President and Chief Executive Officer and reviewed by the former Chief Executive Officer,NCSO Committee, taking into account the same factors described above.
The Company engages an independent compensation consultant who provides advice as requested in areas such as peer group composition, market benchmarking and executive compensation policy design.
Review of Compensation
In conducting the annual review of compensation, publicly available data relating to the compensation practices and policies of other companies within and outside our industry is determinedcollected to the extent it is available. The NCSO Committee believes that gathering information about the compensation practices of other companies is an important part of our compensation-related decision-making process.
Given the challenge that there are no other U.S. publicly-traded companies specifically engaged in the Company’s business, which provides housekeeping and food services solely to the healthcare industry and primarily to the long-term care segment of the industry, our comparator group has been developed looking at a broader cross-section of service industry companies. The committee reviews the peer group annually to identify relevant companies for comparison. The following companies have been
Healthcare Services Group, Inc. | 2021 Proxy Statement | 13
selected as reasonable comparators for talent as they operate in similar industries, are of similar size and scope, and/or have similar employee bases. That group consists of the following:
| | | | | | | | | | | |
| l | ABM Industries Incorporated | l | J&J Snack Foods Corp. |
| l | Amedisys, Inc. | l | Terminix Global Holdings, Inc. |
| l | AMN Healthcare Services, Inc. | l | The Brink’s Company |
| l | Chemed Corporation | l | Modivcare, Inc. |
| l | Clean Harbors, Inc. | l | UniFirst Corporation |
| l | CoreCivic, Inc. | | |
Given the challenges noted above in identifying directly comparable companies, if and when collected, market data is just one factor that the NCSO Committee considers in reaching decisions. Such other factors considered include individual performance, the trends in Company performance relative to broader market indices, the industry in which we operate, tax implications, and achievements in the Company’s social and sustainability efforts.
Incorporating Shareholder Feedback
The NCSO Committee was pleased that approximately 96% of votes cast at the 2020 Annual Meeting of Shareholders approved, on an advisory basis, the compensation of the Company’s NEOs (“say-on-pay”). The NCSO Committee considered that support in its efforts to align the Company’s executive compensation policies with long-term shareholder interests.
Over the last three years the NCSO Committee has made a series of changes to the Company’s executive compensation programs in response to feedback. These changes have included:
•In 2018, we introduced formal share ownership guidelines and retention requirements, and updated all change in control provisions to be double trigger.
•In 2019, we approved a formal clawback policy applying to ‘at risk’ compensation.
•In 2020, formalizing the structure of performance stock equity awards which are a part of the Company's 2021 executive compensation program.
Long-term equity awards are currently made in a combination of stock options that generate value based on the performance of the Company’s share price and restricted stock units. Performance share units complement these vehicles by providing a formal multi-year performance requirement and augmenting our focus on long-term sustainable value creation and retention of critical talent. This change is further summarized below.
| | | | | | | | | | | | | | |
| Compensation Program Review | Highlights | Rationale |
Introduction of performance-based long-term equity award
(Effective FY 2021) | s | Introduce performance stock units (PSUs) to be granted alongside stock options and restricted stock units (RSUs).
| s | PSUs complement the existing long-term equity vehicles, which remain important tools for incentivizing sustainable stock price growth and retention. |
| |
| s | Vesting of PSUs will be assessed based on a three-year relative Total Shareholder Return (TSR) performance condition, with comparisons made to the S&P MidCap 400 Index given the absence of a sufficiently large enough group of directly relevant peers. | |
| s | Given the Company currently does not provide guidance or set targets externally, a relative TSR performance condition is believed to be the most appropriate measure of performance (no requirement for Company-based targets to be set). It also aligns with our compensation objectives with its direct alignment to shareholder interests. |
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Healthcare Services Group, Inc. | 2021 Proxy Statement | 14
Alignment of Pay and Performance
The NCSO Committee believes that including stock options and restricted stock units as a significant component of compensation has successfully aligned pay with performance. This is evidenced through the fact that during the tenure of our current CEO, the outcome under the annual incentive plan and value of equity awarded has generally trended in line with operating performance. This will be further enforced with the inclusion of PSUs as part of executive compensation in 2021.
The chart below shows the value of equity granted to the President and Chief Executive Officer in consultation with the Nominating, Compensationlast three years versus the change in our TSR and Stock Option Committee, taking into accountOperating Income (indexed to 100%) over the same factors considered in determiningperiod. When the President and Chief Executive Officer's compensationvalue of equity is calculated as described above. Section 162(m) of the U.S. Internal Revenue Codevesting date or as of 1986,March 15, 2021, there is a stronger correlation with performance than when Summary Compensation (grant date fair value) totals are used. This demonstrates the alignment of pay and performance as amended (the "Code") limits deductibilitythe value of compensationlong-term awards decreases as the stock price does.
Equity data collected from applicable proxy filings. Financial data are sourced from the S&P Capital IQ financial database. Summary Compensation Table “SCT” values represent the grant-date fair value of the awards as disclosed in excessthe applicable proxy filing. “Value (3/15/2021)” shows the realizable value, which reflects the intrinsic value of $1 million paidawards granted in each year using the closing stock price as of 3/15/2021. Note in 2018 and 2019, the realizable value is significantly below the SCT value due to the Company's NEOs unless this compensation qualifies as "performance-based." Based ondecrease in stock price. However, in 2020, realizable pay has surpassed the applicable tax regulations, any taxable compensation derived fromSCT value due to stock price appreciation in the exercisemost recent year.
This analysis reinforces the NCSO Committee’s view that pay and performance have been suitably aligned despite the historic absence of stock options by senior executives under the Company's stock option plans should qualify as performance-based. The Company's 2012 Equity Incentive Plan (the "2012 Plan") contains limits as to how many stock options may be granted to a recipient in any calendar year and was approved by the Company's shareholders. Therefore, compensation received as a result of stock options granted under the 2012 Plan qualify as "performance-based" for purposes of Section 162(m) of the Code. As described under "Grant of Plan-Based Awards," stock options and restricted stock were granted in fiscal year 2015 to the NEOs.long-term plan with formal performance requirements beyond share price appreciation.
The Company applies a consistent approach to compensation for all employees, including senior management. This approach is based on the belief that the achievements of the Company result from the coordinated efforts of all employees working toward common objectives.
Elements of Compensation
Base Salary. Base salaries for our executives are established based on the scope of their responsibilities and individual experience, taking into account competitive market compensation paid by companies in our industry. Base salaries are reviewed annually, and may be adjusted from time to time to realign salaries with market levels. With respect to certaintake account of changes in responsibilities, individual performance, experience, practices in our compensation comparator group, and the state of our executive officers, this adjustment takes into account individual responsibilities, performance and experience.industry more broadly.
In 2015,For our NEOs, salaries that were paid in 2020 were approved on December 17, 2019. Mr. Daniel McCartney's minimumWahl's base salary was approximately $19,000, with the balance of his base salary derived from the Performance-Based Compensation criteria described in the paragraph below. The annual salary for Mr. Wahl was approximately $1,000,000 and was reflective of his responsibilities as President and Chief OperatingExecutive Officer as determined beforewas unchanged from 2019 and he has not received an increase for the last five years. Messrs. Shea and McBryan salaries were also unchanged from 2019. Mr. Kush's salary increased to $600,000 reflecting his promotion to President and Chief Executive Officer. The annualOperating Officer in 2020. Mr. Bundick's increase in base salary for Mr. John Shea was approximately $450,000 and was reflectiveto better align compensation with that of his responsibilities as Chief Financial Officer. The annual salaries of Mr. Michael McBryan and Mr. Bryan McCartney are approximately $106,000 with Performance-Based Compensation that is based onother executive officers within the criteria noted below and are reflective of their responsibilities as Executive Vice Presidents. The annual salary for Mr. Jason Bundick was approximately $311,000 with Performance-Based Compensation that is based on the criteria noted below and was reflective of his responsibilities as Chief Compliance Officer, General Counsel and Secretary.Company's peer group.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 15
Performance-Based Compensation. We structure our annual incentive program to reward certain executive officers based on ourthe Company’s performance and our evaluation of the individual executive'sexecutive’s contribution to that performance. This allows executive officers to receive sucha significant portion of their compensation based on the results that they helped us to achieve in the previous year. The incentive payment, based upon the Company's prior year performance, becomes the major portionachieve.
Performance-based compensation for certain NEOs' salaries for the following year. Mr. Daniel P. McCartney's incentive payment for 2015 was based onour executive officers is defined as a rate of 1.58%percentage of the Company’s income from operationsbefore income taxes. This approach reflects the importance of income before income taxes in assessing our overall performance, providing line of sight to both top-line growth and the appropriate management of costs. This performance-based compensation structure aligns with our strategic focus and Company Vision - To Be THE Choice For Our Customers - resulting in retention of and growth in relationships through good customer service, expansion of our services, effective execution in all that we do, and cost management.
For NEOs other than the President and Chief Executive Officer, percentages can be modified up or down based on other aspects of quantifiable financial and operational performance for which the executive officers are accountable. Examples of the Company in accordance with generally accepted accounting principlesperformance taken into account include growth in the fiscal year immediately precedingnumber of facilities serviced, profitability, client retention and satisfaction, and overall management of their functional area. No discretion is applied in determining the year for which such annual salary is calculated. In the 2014 and 2013 periods, the Company used rates of 1.48% and 1.40%, respectively, for purposes of calculating Mr. Daniel McCartney's incentive payments. The Company used a 3% rate for more than 20 years. Prior to 2006, such rate was deemed to be representativetotal value of performance-based compensation for the ChairmanPresident and Chief Executive Officer as well as providinggiven his direct accountability to shareholders for aour overall financial performance.
For the President and Chief Executive Officer, performance-based compensation level which reflects the performance of the Company. In 2007, the Company reduced the rate to 2.3% as it believed that this reduced rate was a fair and appropriate measure by reason of the continued increase in the Company's income before income taxes. Based on the continued increase in the Company's income before income taxes, the Company believed that further rate reductions including from 1.70% to 1.40% in 2013 after the reduction
from 1.85% to 1.70% in 2012 was appropriate. Moreover, the Nominating, Compensation and Stock Option Committee historically established the rate to more align Daniel McCartney's compensation with the compensation of the Company's other managerial employees. The Nominating, Compensation and Stock Option Committee historically tied the compensation of Mr. Daniel McCartney into the Company's financial performance because he has had responsibility for all key strategic and policy decisions impacting the Company. Mr. Bryan McCartney and Mr. McBryan are also subject to incentive compensation payments which are based on certain financial and non-financial performance measurements including facility growth, profitability, client retention and satisfaction. Their incentive compensation is reflective of their overall responsibility of the management of our operations and the delivery of the expected financial and non-financial performance associated with our services. Mr. Bundick is subject to incentivean overall maximum of two times base salary. The total performance-based compensation earned by Mr. Wahl for 2020 was $968,895, equating to 96% of base salary. Mr. Wahl elected to receive one-half of this compensation ($484,431) in the form of shares of Company Common Stock in early 2021. The balance of Mr. Wahl's 2020 performance-based compensation ($484,464) was paid in cash.
Performance-based compensation outcomes for the other NEOs were validated against the operational performance achievements towards which they contributed. The NCSO Committee agreed with the President and Chief Executive Officer’s assessment that the outcome was an appropriate reflection of performance in the year, and so no upward or downward modification was applied. Accordingly the following payments which is based on certain financial and non-financial performance measurements including Company and personal performance.were approved for our NEOs with respect to 2020 performance:
| | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | 2020 Cash Performance-Based Compensation | | 2020 Equity Performance-Based Compensation | | 2020 Performance Based Compensation (% of salary) |
| Theodore Wahl | | $ | 484,464 | | | $ | 484,431 | | | 96% |
| John C. Shea | | $ | 161,483 | | | $ | — | | | 29% |
| Michael E. McBryan | | $ | 193,779 | | | $ | — | | | 23% |
| Andrew W. Kush | | $ | 258,372 | | | $ | — | | | 43% |
| Jason J. Bundick | | $ | 103,349 | | | $ | — | | | 24% |
Discretionary Long-Term Equity Incentive Awards. The Nominating, Compensation and Stock OptionNCSO Committee is responsible for determiningapproving the population of individuals who will be granted stock options,equity awards, the number of stock optionsequity awards each individual will receive, the option price per share (if applicable) and the exercise period (if applicable) and vesting of each stock option.award. Guidelines for the number of stock optionsequity awards granted to each executive officer are determined using a procedure approved by the Nominating, Compensation and Stock OptionNCSO Committee based upon several factors, including the executive officer'sofficer’s salary level, individual contributions to the Company’s performance and the value of the stock optionequity award at the time of grant. We grant stock optionsequity awards at the fair market value of the underlying stock on the date of grant. In January 2016, 2015
Long-term equity incentive awards are currently granted as a combination of stock options and 2014, the Nominating, Compensation and Stock Option Committee granted options to purchase an aggregate of approximately 103,000, 92,000 and 96,000 shares of Common Stock, respectively, to our current NEOs and directors. Additionally, in January 2016, 2015 and 2014, the Nominating, Compensation and Stock Option Committee granted restricted stock units. As noted previously, performance stock units will be introduced to the equity mix in 2021. The NCSO Committee believes that the use of stock options and restricted stock units provide a clear incentive to the NEOs to deliver long-term sustainable and profitable growth which translates into value creation for our shareholders, in a responsible way. The vesting of awards is phased over a period of an aggregate of 39,400, 22,275 and 12,225 shares, respectively,five years to our current NEOs. Such awards are detailed for the respective NEOs in the table reporting on Grant of Plan-Based Awards included inreinforce this proxy statement. long-term focus.
In making its decision to grant these awards, the Nominating, Compensation and Stock OptionNCSO Committee considered the competitive challenges to our business and the commitments of time, energyresulting focus, efforts and expertise our executive officers have expended to meet these challenges and foster the growth and financial position of the Company. In determining award values the NCSO Committee considers a range of factors including not just competitive market data, but also the performance of the Company more generally and the contributions of individuals to our performance accomplishments in the prior year.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 16
The Nominating, Compensationfollowing awards were approved and granted during 2020 to our NEOs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Stock Options (#) | | Stock Option
Grant Date Fair Value | | Restricted Stock Units (#) | | Restricted Stock Units
Grant Date Fair Value | | Total Grant Date Fair Value1 |
| Theodore Wahl | | 50,000 | | $ | 230,910 | | | 77,736 | | $ | 1,899,090 | | | $ | 2,130,000 | |
| John C. Shea | | 17,721 | | $ | 81,839 | | | 14,088 | | $ | 344,170 | | | $ | 426,009 | |
| Michael E. McBryan | | 17,721 | | $ | 81,839 | | | 14,088 | | $ | 344,170 | | | $ | 426,009 | |
| Andrew W. Kush | | 17,721 | | $ | 81,839 | | | 14,088 | | $ | 344,170 | | | $ | 426,009 | |
| Jason J. Bundick | | 17,721 | | $ | 81,839 | | | 14,088 | | $ | 344,170 | | | $ | 426,009 | |
1.All awards granted vest and are exercisable ratably over a five-year period on each yearly anniversary of the grant date of the award.
In January 2020, 2019 and 2018, the NCSO Committee granted options to purchase an aggregate of approximately 166,000, 140,000 and 135,000 shares of Common Stock, Optionrespectively, to our NEOs and directors. In January 2020, 2019 and 2018, the NCSO Committee granted restricted stock units of an aggregate of approximately 134,100, 85,000, and 60,000 shares, respectively, to our NEOs. See the table entitled Grant of Plan-Based Awards included in this Proxy Statement for more information on the 2020 grants. The NCSO Committee has also granted stock optionsawards to all other levels of Company management and key employees and believes that the grant of the stock options to the NEOs is aligned with the grants to such management and key employees and also aligns the interest of management with shareholders. As indicated under "Compensation Objectives" above, the Nominating, Compensation and Stock Option Committee has not adopted any formal guidelines for allocating total compensation between cash and equity.providing collective alignment.
Deferred Compensation Plan. We have a Supplemental Executive Retirement Plan (the "SERP"“SERP”) for certain executives and key employees. The SERP is not qualified under Section 401 of the Code. Effective 2010, theInternal Revenue Code of 1986, as amended. The SERP was amended to allowallows participants to defer up to 25% of their earned income on a pre-tax basis. As of the last day of each plan year, each participant will receive a 25% match of up to 15% of their deferral in the form of our Common Stock based on the then current market value. SERP participants fully vest in our matching contribution three years from the first day of the initial year of participation. The income deferred and our matching contributions are unsecured and subject to the claims of our general creditors.
Under the SERP, we are authorized to issue up to 1,013,000 shares of our Common Stock to our employees. Pursuant to such authorization, 421,000approximately 346,000 shares are available for future grant at December 31, 2015 (after deducting2020. As of December 31, 2020, and since the 2015 funding of 15,000 shares delivered in 2016). In the aggregate, since initiation of the SERP, the Company'sCompany’s 25% match has resulted in 591,000approximately 667,000 shares (including the 2015 funding of shares delivered in 2016) being issued to the trustee. At the time of issuance, such shares wereare accounted for at cost, as treasury stock. At December 31, 2015,2020, approximately 359,000298,000 of such shares are vested and remain in the respective active participants’ accounts.
Employee Stock Purchase Plan. We have an Employee Stock Purchase Plan ("ESPP"(“ESPP”) for all eligible employees. All full-time and certain part-time employees who have completed two years of continuous service with us are eligible to participate. On April 12, 2011,In August 2016, the Board of Directors extended the ESPP for an additional five offerings through 2016.2021. Annual offerings commence and terminate on the respective year'syear’s first and last calendar day. Under the ESPP, we are authorized to issue up to 4,050,000 shares of our Common Stock to our employees. Pursuant to such authorization, we have 2,362,0002,054,000 shares available for future grant at December 31, 2015.2020. Furthermore, under the terms of the ESPP, eligible employees may contribute through payroll deductions up to $21,250 (85% of IRS limitation) of their compensation toward the purchase of the Company'sCompany’s Common Stock. No employee may purchase Common Stock which exceeds $25,000 in fair market value (determined on the date of grant) for each calendar year. The price per share is equal to the lower of 85% of the fair market price on the first day of the offering period or 85% of the fair market price on the day of purchase.
Other Elements of Compensation and Perquisites.
Medical Insurance. We provide to each NEO and their respective spouses and children such health, dental and optical insurance as we may from time to time make available to our other executives of the same level of employment.management employees. This insurance requires an employee co-payment of the insurance premium.
Life and Disability Insurance.We provide to each NEO such disability and/or life insurance as we in our sole discretion may from time to time make available to our other executive employees of the same level of employment.management employees.
Automobile Allowance. We provide some NEOs with an automobile allowance during the term of their employment with us as we in our sole discretion may from time to time make available to our other executive employees of the same level of employment.management employees.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 17
Sporting Event Tickets. We obtain season tickets for several Philadelphia sports teams. Although these tickets are intended to be used for entertaining clients, unused tickets are made available to employees, including the NEOs, for personal use.
Compensation Risks
We believe that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company. In addition, the Nominating, Compensation and Stock OptionNCSO Committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive risks.
The Company has structured its compensation program so that certain employees are incentivized primarily on their ability to achieve revenue and profit objectives of the customer accounts under their supervision and generate new business. Additionally, incentive compensation is earned on the achievement of certain non-financial objectives at levels across the Company, such as recruiting and developing future management personnel, reviewing subordinate employees, maintaining good client relations and compliance with Company operational reporting requirements. The Company believes that elements of this incentive policy may be subject to abuse. Specifically, the Company recognizes that incentivizing employees for new business generation could result in employees entering into agreements without conducting proper due diligence or an appropriate analysis of the creditworthiness of the prospective client. Similarly, employees may be tempted to hire employees prior to their quarterly review in order to meet their recruitment goals. The Company recognizes that managers may be tempted to give better performance reviews of their subordinates in order to boost the appearance of their own performance. Also, the Company recognizes that in preparing budgets upon which an employee will be reviewed, an employee may seek to be too conservative in his or her estimates in order to more easily achieve performance targets. The Company has carefully designed its compensation policies and practices to diminish the potential abuses inherent in such programs to avoid unnecessary risks to the Company and its shareholders.
Stock Ownership Guidelines
Executive officers are expected to hold an amount of Company Common Stock with a value that is at least equal to a specified multiple of their base salary within five years of the adoption of the guidelines (January 1, 2018). Newly appointed executive officers must attain the guideline ownership within five years of the date that they become executive officers. In accordance with this policy, the President and Chief Executive Officer is required to hold stock with a value of at least six times his base salary, while the Company’s other executive officers are required to hold stock with a value of at least two times their base salary.
Stock ownership includes shares owned outright, unvested restricted stock and restricted stock units, and stock equivalents held under deferred compensation arrangements. Additionally, one-half of the guidelines may be met by vested, in-the-money stock options held by the executive. If an executive does not meet their ownership requirement on the applicable measurement date, the executive must retain all net shares from the exercise of stock options and the vesting of restricted stock and restricted stock units until compliance is achieved. The following table indicates our active NEOs and their compliance status with the stock ownership guidelines as of December 31, 2020.
| | | | | | | | | | | | | | |
| Named Executive Officer | | Ownership Requirement (% of salary) | | Current Ownership (% of salary) |
| Theodore Wahl | | 600% | | 1,472% |
| John C. Shea | | 200% | | 284% |
| Michael E. McBryan | | 200% | | 379% |
| Andrew W. Kush | | 200% | | 231% |
| Jason J. Bundick | | 200% | | 284% |
Change of Control
The Company's 2020 Omnibus Incentive Plan includes a “double-trigger” approach to vesting of stock awards upon a change in control, meaning vesting would occur if a change in control occurs and the outstanding equity awards are not fully assumed, or where the outstanding equity awards are fully assumed by the resulting entity and the participant is subsequently terminated or resigns for good reason. Such provisions were also included in the Company’s 2020 Omnibus Incentive Plan. We believe a double-trigger approach provides adequate employment protections and reduces, for the shareholders’ benefit, potential transaction costs associated with the awards.
15Healthcare Services Group, Inc. | 2021 Proxy Statement | 18
Clawback Policy
Since April 2019, the NCSO Committee has the discretion to clawback performance-based and equity compensation in the event of restatement of Company financial statements. The NCSO Committee will review all performance-based and equity compensation awarded to or earned by our officers subject to Section 16(b) of the Exchange Act during the three-year period prior to any restatement of the Company’s financial results. If the NCSO Committee determines such officer engaged in intentional or unlawful misconduct which materially contributed to the need for such restatement, the NCSO Committee may determine that a clawback is appropriate.
Stock Trading Black-Out Period and Anti-Hedging Policy
Under the Company’s insider trading policy, officers, non-employee directors and key personnel may purchase or sell our securities only during “non black-out periods”, which begin on the second business day following the date of each quarterly earnings announcement and ends at the close of trading on the Monday of the third week in the third month of the fiscal quarter. Additionally, the Company has adopted a policy which prohibits our officers, non-employee directors, and key personnel from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engage in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our Common Stock.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 19
Summary Compensation Table
The following table sets forth certain information regarding compensation paid or accrued during the Company’s prior three fiscal years, as applicable, for the Company’s NEOs.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Salary | | Stock Awards1 | | Option Awards1 | | Non-Equity Incentive Plan Compensation2 | | Nonqualified Deferred Compensation Earnings | | All Other Compensation3 | | Total |
| Name and Principal Position | | Year | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) |
| Theodore Wahl | | 2020 | | 1,005,108 | | | 2,385,792 | | | 233,000 | | | 484,464 | | | 65,810 | | | 8,100 | | | 4,182,274 | |
| President & Chief Executive Officer & Director | | 2019 | | 1,005,108 | | | 2,150,050 | | | 409,000 | | | 212,740 | | | 37,729 | | | 12,257 | | | 3,826,884 | |
| 2018 | | 1,005,108 | | | 2,073,709 | | | 524,000 | | | 249,793 | | | 37,692 | | | 10,796 | | | 3,901,098 | |
| | | | | | | | | | | | | | | |
| John C. Shea | | 2020 | | 564,375 | | | 344,170 | | | 82,580 | | | 161,483 | | | 25,171 | | | 11,274 | | | 1,189,053 | |
| Executive Vice President & Chief Financial Officer | | 2019 | | 564,375 | | | 344,165 | | | 81,800 | | | 106,370 | | | 22,822 | | | 13,924 | | | 1,133,456 | |
| 2018 | | 523,558 | | | 312,360 | | | 104,800 | | | 99,911 | | | 22,798 | | | 12,340 | | | 1,075,767 | |
| | | | | | | | | | | | | | | |
| Michael E. McBryan | | 2020 | | 850,000 | | | 346,440 | | | 82,580 | | | 193,779 | | | 37,064 | | | 21,474 | | | 1,531,337 | |
| Executive Vice President & Chief Revenue Officer & Director | | 2019 | | 850,000 | | | 347,916 | | | 81,800 | | | 127,644 | | | 37,006 | | | 21,054 | | | 1,465,420 | |
| 2018 | | 811,413 | | | 320,443 | | | 104,800 | | | 149,867 | | | 36,975 | | | 20,312 | | | 1,443,810 | |
| | | | | | | | | | | | | | | |
Andrew W. Kush4 | | 2020 | | 600,000 | | | 344,170 | | | 82,580 | | | 258,372 | | | 22,010 | | | 11,274 | | | 1,318,406 | |
| Executive Vice President & Chief Operating Officer | | 2019 | | 403,125 | | | 344,165 | | | 81,800 | | | 170,192 | | | 21,014 | | | 11,461 | | | 1,031,757 | |
| 2018 | | 374,038 | | | 312,360 | | | 104,800 | | | 199,822 | | | 21,007 | | | 10,112 | | | 1,022,139 | |
| | | | | | | | | | | | | | | |
| Jason J. Bundick | | 2020 | | 433,063 | | | 344,170 | | | 82,580 | | | 103,349 | | | 6,348 | | | 7,725 | | | 977,235 | |
| Executive Vice President & Chief Compliance Officer & General Counsel & Secretary | | 2019 | | 387,500 | | | 344,165 | | | 81,800 | | | 85,096 | | | 5,866 | | | 11,462 | | | 915,889 | |
| 2018 | | 367,500 | | | 312,360 | | | 104,800 | | | 99,911 | | | 5,866 | | | 9,001 | | | 899,438 | |
| | | | | | | | | | | | | | | |
1.The total amounts in these columns do not reflect compensation actually received by the NEO, nor do they reflect the actual value that will be recognized by the NEO. Instead, the amounts reflect the aggregate grant date fair value of restricted stock and restricted stock unit awards, incentive awards received in stock, ESPP awards and stock option awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. A more detailed discussion of the assumptions used in calculating these values may be found in Note 10 of the Notes to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020. Refer also to the Compensation Discussion and Analysis for further information.
2.Amounts shown in this column represent annual performance-based cash payments under the annual incentive program, as described in the Compensation Discussion and Analysis. No future pay-outs will be made with respect to any of the plan-based awards under the plan.
3.Includes automobile allowance and contributions paid by the Company towards employee’s health insurance premiums.
4.Mr. Kush was appointed Executive Vice President and Chief Operating Officer on February 11, 2020. Prior thereto, he was Executive Vice President and Chief Administrative Officer, Chief Financial Officer, former Chief Executive Officer and the three highest paid executive officers serving at the end of 2015 (the NEOs).a position he has held since 2017.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 20
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Salary | | Bonus | | Stock Awards (5) | | Option Awards (5) | | Nonqualified Deferred Compensation Earnings | | All Other Compensation (6) | | Total |
| Name and Principal Position | | Year | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) |
| Theodore Wahl | | 2015 | | 1,005,376 |
| | — |
| | 227,250 |
| | 99,600 |
| | 37,702 |
| | 8,616 |
| | 1,378,544 |
|
| President & Chief | | 2014 | | 998,142 |
| | — |
| | 105,075 |
| | 123,600 |
| | 38,150 |
| | 8,616 |
| | 1,273,583 |
|
| Executive Officer & Director | | 2013 | | 996,255 |
| | — |
| | 23,500 |
| | 102,150 |
| | 37,360 |
| | 8,616 |
| | 1,167,881 |
|
| John C. Shea | | 2015 | | 450,000 |
| | — |
| | 49,995 |
| | 10,956 |
| | 16,875 |
| | 3,776 |
| | 531,602 |
|
| Chief Financial Officer | | 2014 | | 447,736 |
| | — |
| | 17,513 |
| | 51,500 |
| | 17,113 |
| | 3,776 |
| | 537,638 |
|
| | | 2013 | | 389,039 |
| | — |
| | 8,225 |
| | 34,050 |
| | 14,589 |
| | 976 |
| | 446,879 |
|
| Bryan D. McCartney | | 2015 | | 106,434 |
| | 868,406 |
| | 75,750 |
| | 99,600 |
| | 36,557 |
| | 13,000 |
| | 1,199,747 |
|
| Executive Vice President | | 2014 | | 102,492 |
| | 705,766 |
| | 58,546 |
| | 123,600 |
| | 30,310 |
| | 13,000 |
| | 1,033,714 |
|
| | 2013 | | 102,492 |
| | 723,267 |
| | 32,767 |
| | 102,150 |
| | 30,966 |
| | 13,000 |
| | 1,004,642 |
|
| Michael E. McBryan | | 2015 | | 106,434 |
| | 868,406 |
| | 75,750 |
| | 99,600 |
| | 36,553 |
| | 13,000 |
| | 1,199,743 |
|
| Executive Vice President & | | 2014 | | 102,492 |
| | 708,766 |
| | 58,171 |
| | 123,600 |
| | 30,422 |
| | 13,000 |
| | 1,036,451 |
|
| Director | | 2013 | | 102,492 |
| | 723,267 |
| | 30,043 |
| | 102,150 |
| | 30,966 |
| | 13,000 |
| | 1,001,918 |
|
| Daniel P. McCartney | | 2015 | | 520,526 |
| (1) | — |
| | 227,250 |
| | 99,600 |
| | 19,520 |
| | 17,804 |
| | 884,700 |
|
| Chairman of the Board & | | 2014 | | 1,005,108 |
| (2) | — |
| | 105,075 |
| | 123,600 |
| | 38,416 |
| | 18,705 |
| | 1,290,904 |
|
| former Chief Executive Officer | | 2013 | | 1,005,108 |
| (3) | — |
| | 23,500 |
| | 102,150 |
| | 37,692 |
| | 17,805 |
| | 1,186,255 |
|
| Jason J. Bundick | | 2015 | | 311,250 |
| (6) | 99,671 |
| | 18,938 |
| | 33,200 |
| | 10,273 |
| | 2,800 |
| | 476,132 |
|
| General Counsel & Secretary | | 2014 | | 262,205 |
| | 69,089 |
| | 9,807 |
| | 41,200 |
| | 4,204 |
| | 2,800 |
| | 389,305 |
|
| | | 2013 | | 249,423 |
| | — |
| | — |
| | 23,835 |
| | — |
| | — |
| | 273,258 |
|
| | | | | | | | | | | | | | | | | |
| |
(1)
| Represents a base salary of $19,000 and 1.58% of 2014 reported income before income taxes ($31,708,000), all of which was paid in 2015. |
| |
(2)
| Represents a base salary of $19,000 and 1.48% of 2013 reported income before income taxes ($66,489,000), all of which was paid in 2014. |
| |
(3)
| Represents a base salary of $19,000 and 1.40% of 2012 reported income before income taxes ($70,264,000), all of which was paid in 2013. |
| |
(4)
| The amounts in these columns do not reflect compensation actually received by the NEO, nor do they reflect the actual value that will be recognized by the NEO. Instead, the amounts reflect the aggregate grant date fair value of stock and option awards granted under either our ESPP or stock option plan computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. ESPP awards are valued at the difference between the fair market value of the Company's common stock at the award date and the respective ESPP purchase price. Restricted stock awards are valued utilizing the grant date fair value. Stock options are valued utilizing the Black-Scholes option valuation model on the date of grant. A more detailed discussion of the assumptions of our ESPP and stock option plan may be found in Note 9 of the Notes to the Financial Statements in our Form 10-K for the year ended December 31, 2015. |
| |
(5)
| Includes automobile allowance, contributions paid by the Company towards employee's health insurance premiums and personal use of tickets for sporting events. |
| |
(6)
| Mr. Bundick became a NEO in 2015. Prior thereto, he was an executive officer of the Company. |
Grant of Plan-Based Awards
The following table sets forth information concerning grants of plan-based awards made by us during the year ended December 31, 2015,2020, to each of the NEOs.
| | | | | Grant Date | | Date Award Approved | | All Other Stock Awards: Number of Shares of Stock or Units | | All Other Option Awards: Number of Securities Underlying Options | | Exercise or Base Price of Options Awards | | Grant Date Fair Value of Stock and Option Awards | | Grant Date | | Date Award Approved | | Estimated Future Payouts Under Equity Incentive Plan Awards1 | | All Other Stock Awards: Number of Shares of Stock or Units | | All Other Option Awards: Number of Securities Underlying Options | | Exercise or Base Price of Options Awards | | Grant Date Fair Value of Stock and Option Awards |
| Name | | (#) | | (#) | | ($/sh) | | ($) | Name | | Target (#) | | (#) | | (#) | | ($/sh) | | ($) |
| Theodore Wahl | | 1/5/2015 | | 12/16/2014 | | 7,500 |
| | 15,000 |
| | $ | 30.30 |
| | 326,850 |
| Theodore Wahl | | 1/3/2020 | | 12/17/2019 | | — | | | 77,736 | | | 50,000 | | | $ | 24.43 | | | $ | 2,130,000 | |
| | | 12/31/2020 | | 12/17/2019 | | 16,950 | | | — | | | — | | | $ | 28.58 | | | $ | 484,431 | |
| John C. Shea | | 1/5/2015 | | 12/16/2014 | | 1,650 |
| | 1,650 |
| | $ | 30.30 |
| | 60,951 |
| John C. Shea | | 1/3/2020 | | 12/17/2019 | | — | | | 14,088 | | | 17,721 | | | $ | 24.43 | | | $ | 426,009 | |
| Bryan D. McCartney | | 1/5/2015 | | 12/16/2014 | | 2,500 |
| | 15,000 |
| | $ | 30.30 |
| | 175,350 |
| |
| Michael E. McBryan | | 1/5/2015 | | 12/16/2014 | | 2,500 |
| | 15,000 |
| | $ | 30.30 |
| | 175,350 |
| Michael E. McBryan | | 1/3/2020 | | 12/17/2019 | | — | | | 14,088 | | | 17,721 | | | $ | 24.43 | | | $ | 426,009 | |
| Daniel P. McCartney | | 1/5/2015 | | 12/16/2014 | | 7,500 |
| | 15,000 |
| | $ | 30.30 |
| | 326,850 |
| |
| Jason Bundick | | 1/5/2015 | | 12/16/2014 | | 625 |
| | 5,000 |
| | 30.30 |
| | 52,138 |
| |
| | | | | | | | | | |
| Andrew W. Kush | | Andrew W. Kush | | 1/3/2020 | | 12/17/2019 | | — | | | 14,088 | | | 17,721 | | | $ | 24.43 | | | $ | 426,009 | |
| Jason J. Bundick | | Jason J. Bundick | | 1/3/2020 | | 12/17/2019 | | — | | | 14,088 | | | 17,721 | | | $ | 24.43 | | | $ | 426,009 | |
1.Represents the shares received during 2021 as a result of Mr. Wahl's election to receive a portion of his 2020 performance-based compensation in Company Common Stock. The grant date of such shares is reflected as the date in which the total amount of such performance-based compensation is earned by Mr. Wahl.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
The Company has not entered intono employment contractsagreements with any of the NEOs. No previously granted options or other equity-based awards were re-priced or otherwise materially modified during the fiscal year ended December 31, 2015.2020. As set forth above in the "Compensation“Compensation Discussion and Analysis,"” the Company believes that part of the compensation for the NEOs should be in the form of long-term equity grants so as to align the interests of the Named Executive OfficersNEOs with the Company'sCompany’s shareholders. In accordance with these objectives, Messrs.Mr. Wahl Shea, Bryan McCartney, McBryan, Daniel McCartney, and Bundick received stock options to purchase 50,000 shares of 15,000, 1,650, 15,000, 15,000, 15,000 and 5,000 shares, respectively,Common Stock and restricted stock awardsunits of 7,500, 1,650, 2,500, 2,500, 7,50077,736. Messrs. Shea, McBryan, Kush, and 625Bundick each received stock options to purchase 17,721 shares respectively.of Common Stock and 14,088 restricted stock units. These stock options and restricted stock awardsunits vest over five years, as an incentive to the NEOs to increase the long-term value of the Company and thereby increase the value of its Common Stock.
17Healthcare Services Group, Inc. | 2021 Proxy Statement | 21
Outstanding Equity Awards at December 31, 20152020
The following tables set forth information concerningtable summarizes the outstanding equity awards of each of the NEOs as of December 31, 2015:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Option Awards | | Stock Awards |
| Name | | Grant Date1 | | Vested, Exercisable | | Unvested | | Option Exercise
Price | | Option
Expiration Date | | Unvested2 | | Market Value of Unvested3 |
| Theodore Wahl | | 1/5/2012 | | 15,000 | | | — | | | $ | 17.50 | | | 1/5/2022 | | — | | | $ | — | |
| | 1/4/2013 | | 15,000 | | | — | | | $ | 23.50 | | | 1/4/2023 | | — | | | $ | — | |
| | 1/3/2014 | | 15,000 | | | — | | | $ | 28.02 | | | 1/3/2024 | | — | | | $ | — | |
| | 1/5/2015 | | 15,000 | | | — | | | $ | 30.30 | | | 1/5/2025 | | — | | | $ | — | |
| | 1/4/2016 | | 15,000 | | | 3,000 | | | $ | 34.14 | | | 1/4/2026 | | 3,000 | | | $ | 84,300 | |
| | 1/4/2017 | | 18,000 | | | 12,000 | | | $ | 39.38 | | | 1/4/2027 | | 12,000 | | | $ | 337,200 | |
| | 1/4/2018 | | 20,000 | | | 30,000 | | | $ | 52.06 | | | 1/4/2028 | | 18,000 | | | $ | 505,800 | |
| | 1/4/2019 | | 10,000 | | | 40,000 | | | $ | 40.49 | | | 1/4/2029 | | 34,000 | | | $ | 955,400 | |
| | 1/3/2020 | | — | | | 50,000 | | | $ | 24.43 | | | 1/3/2030 | | 77,736 | | | $ | 2,184,382 | |
| | | | | | | | | | | | | | |
| John C. Shea | | 1/5/2012 | | 5,000 | | | — | | | $ | 17.50 | | | 1/5/2022 | | — | | | $ | — | |
| | 1/4/2013 | | 5,000 | | | — | | | $ | 23.50 | | | 1/4/2023 | | — | | | $ | — | |
| | 1/3/2014 | | 6,250 | | | — | | | $ | 28.02 | | | 1/3/2024 | | — | | | $ | — | |
| | 1/5/2015 | | 1,650 | | | — | | | $ | 30.30 | | | 1/5/2025 | | — | | | $ | — | |
| | 1/4/2016 | | 1,320 | | | 330 | | | $ | 34.14 | | | 1/4/2026 | | 430 | | | $ | 12,083 | |
| | 1/4/2017 | | 990 | | | 660 | | | $ | 39.38 | | | 1/4/2027 | | 3,860 | | | $ | 108,466 | |
| | 1/4/2018 | | 4,000 | | | 6,000 | | | $ | 52.06 | | | 1/4/2028 | | 3,600 | | | $ | 101,160 | |
| | 1/4/2019 | | 2,000 | | | 8,000 | | | $ | 40.49 | | | 1/4/2029 | | 6,800 | | | $ | 191,080 | |
| | 1/3/2020 | | — | | | 17,721 | | | $ | 24.43 | | | 1/3/2030 | | 14,088 | | | $ | 395,873 | |
| | | | | | | | | | | | | | |
| Michael E. McBryan | | 1/5/2012 | | 15,000 | | | — | | | $ | 17.50 | | | 1/5/2022 | | — | | | $ | — | |
| | 1/4/2013 | | 15,000 | | | — | | | $ | 23.50 | | | 1/4/2023 | | — | | | $ | — | |
| | 1/3/2014 | | 15,000 | | | — | | | $ | 28.02 | | | 1/3/2024 | | — | | | $ | — | |
| | 1/5/2015 | | 15,000 | | | — | | | $ | 30.30 | | | 1/5/2025 | | — | | | $ | — | |
| | 1/4/2016 | | 12,000 | | | 3,000 | | | $ | 34.14 | | | 1/4/2026 | | 625 | | | $ | 17,563 | |
| | 1/4/2017 | | 9,000 | | | 6,000 | | | $ | 39.38 | | | 1/4/2027 | | 1,250 | | | $ | 35,125 | |
| | 1/4/2018 | | 4,000 | | | 6,000 | | | $ | 52.06 | | | 1/4/2028 | | 3,600 | | | $ | 101,160 | |
| | 1/4/2019 | | 2,000 | | | 8,000 | | | $ | 40.49 | | | 1/4/2029 | | 6,800 | | | $ | 191,080 | |
| | 1/3/2020 | | — | | | 17,721 | | | $ | 24.43 | | | 1/3/2030 | | 14,088 | | | $ | 395,873 | |
| | | | | | | | | | | | | | |
| Andrew W. Kush | | 1/5/2012 | | 5,000 | | | — | | | $ | 17.50 | | | 1/5/2022 | | — | | | $ | — | |
| | 1/4/2013 | | 5,000 | | | — | | | $ | 23.50 | | | 1/4/2023 | | — | | | $ | — | |
| | 1/3/2014 | | 5,000 | | | — | | | $ | 28.02 | | | 1/3/2024 | | — | | | $ | — | |
| | 1/5/2015 | | 5,000 | | | — | | | $ | 30.30 | | | 1/5/2025 | | — | | | $ | — | |
| | 1/4/2016 | | 4,800 | | | 1,200 | | | $ | 34.14 | | | 1/4/2026 | | 200 | | | $ | 5,620 | |
| | 1/4/2017 | | 3,600 | | | 2,400 | | | $ | 39.38 | | | 1/4/2027 | | 3,400 | | | $ | 95,540 | |
| | 1/4/2018 | | 4,000 | | | 6,000 | | | $ | 52.06 | | | 1/4/2028 | | 3,600 | | | $ | 101,160 | |
| | 1/4/2019 | | 2,000 | | | 8,000 | | | $ | 40.49 | | | 1/4/2029 | | 6,800 | | | $ | 191,080 | |
| | 1/3/2020 | | — | | | 17,721 | | | $ | 24.43 | | | 1/3/2030 | | 14,088 | | | $ | 395,873 | |
| | | | | | | | | | | | | | |
| Jason J. Bundick | | 1/4/2013 | | 700 | | | — | | | $ | 23.50 | | | 1/4/2023 | | — | | | $ | — | |
| | 1/3/2014 | | 3,000 | | | — | | | $ | 28.02 | | | 1/3/2024 | | — | | | $ | — | |
| | 1/5/2015 | | 5,000 | | | — | | | $ | 30.30 | | | 1/5/2025 | | — | | | $ | — | |
| | 1/4/2016 | | 4,800 | | | 1,200 | | | $ | 34.14 | | | 1/4/2026 | | 200 | | | $ | 5,620 | |
| | 1/4/2017 | | 3,600 | | | 2,400 | | | $ | 39.38 | | | 1/4/2027 | | 3,400 | | | $ | 95,540 | |
| | 1/4/2018 | | 4,000 | | | 6,000 | | | $ | 52.06 | | | 1/4/2028 | | 3,600 | | | $ | 101,160 | |
| | 1/4/2019 | | 2,000 | | | 8,000 | | | $ | 40.49 | | | 1/4/2029 | | 6,800 | | | $ | 191,080 | |
| | 1/3/2020 | | — | | | 17,721 | | | $ | 24.43 | | | 1/3/2030 | | 14,088 | | | $ | 395,873 | |
| | | | | | | | | | | | | | |
Healthcare Services Group, Inc. | 2021 Proxy Statement | 22
|
| | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| | | Number of Securities Underlying Unexercised Options Exercisable | | Number of Securities Underlying Unexercised Options Unexercisable | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (1) | | Market Value of Shares or Units of Stock That Have Not Vested (2) |
| Name | | (#) | | (#) | | ($) | | | (#) | | ($) |
| Theodore Wahl | | 7,500 |
| | — |
| | $ | 10.3867 |
| | 1/5/2019 |
| | — |
| | — |
|
| | | 11,250 |
| | — |
| | $ | 14.3067 |
| | 1/4/2020 |
| | — |
| | — |
|
| | | 15,000 |
| | — |
| | $ | 16.1100 |
| | 1/6/2021 |
| | — |
| | — |
|
| | | 12,000 |
| | 3,000 |
| | $ | 17.5000 |
| | 1/5/2022 |
| | — |
| | — |
|
| | | 9,000 |
| | 6,000 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | | 6,000 |
| | 9,000 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | | 3,000 |
| | 12,000 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | | — |
| | 15,000 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | | — |
| | — |
| | — |
| | — |
| | 600 |
| | 20,922 |
|
| | | — |
| | — |
| | — |
| | — |
| | 3,000 |
| | 104,610 |
|
| | | — |
| | — |
| | — |
| | — |
| | 7,500 |
| | 261,525 |
|
| John C. Shea | | 750 |
| | — |
| | $ | 14.3067 |
| | 1/4/2020 |
| | — |
| | — |
|
| | | 4,000 |
| | — |
| | $ | 16.1100 |
| | 1/6/2021 |
| | — |
| | — |
|
| | | 4,000 |
| | 1,000 |
| | $ | 17.5000 |
| | 1/5/2022 |
| | — |
| | — |
|
| | | 3,000 |
| | 2,000 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | | 2,500 |
| | 3,750 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | | 330 |
| | 1,320 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | | — |
| | 1,650 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | | — |
| | — |
| | — |
| | — |
| | 210 |
| | 7,323 |
|
| | | — |
| | — |
| | — |
| | — |
| | 500 |
| | 17,435 |
|
| | | — |
| | — |
| | — |
| | — |
| | 1,650 |
| | 57,536 |
|
| Bryan D. McCartney | | 22,500 |
| | — |
| | $ | 13.9267 |
| | 1/3/2018 |
| | — |
| | — |
|
| | | 22,500 |
| | — |
| | $ | 14.3067 |
| | 1/4/2020 |
| | — |
| | — |
|
| | | 15,000 |
| | — |
| | $ | 16.1100 |
| | 1/6/2021 |
| | — |
| | — |
|
| | | 12,000 |
| | 3,000 |
| | $ | 17.5000 |
| | 1/5/2022 |
| | — |
| | — |
|
| | | 9,000 |
| | 6,000 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | | 6,000 |
| | 9,000 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | | 3,000 |
| | 12,000 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | | — |
| | 15,000 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | | — |
| | — |
| | — |
| | — |
| | 600 |
| | 20,922 |
|
| | | — |
| | — |
| | — |
| | — |
| | 1,500 |
| | 52,305 |
|
| | | — |
| | — |
| | — |
| | — |
| | 2,500 |
| | 87,135 |
|
| Michael E. McBryan | | 22,500 |
| | — |
| | $ | 13.9267 |
| | 1/3/2018 |
| | — |
| | — |
|
| | | 22,500 |
| | — |
| | $ | 14.3067 |
| | 1/4/2020 |
| | — |
| | — |
|
| | | 15,000 |
| | — |
| | $ | 16.1100 |
| | 1/6/2021 |
| | — |
| | — |
|
| | | 12,000 |
| | 3,000 |
| | $ | 17.5000 |
| | 1/5/2022 |
| | — |
| | — |
|
| | | 9,000 |
| | 6,000 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | | 6,000 |
| | 9,000 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | | 3,000 |
| | 12,000 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | | — |
| | 15,000 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | | — |
| | — |
| | — |
| | — |
| | 600 |
| | 20,922 |
|
| | | — |
| | — |
| | — |
| | — |
| | 1,500 |
| | 52,305 |
|
| | | — |
| | — |
| | — |
| | — |
| | 2,500 |
| | 87,135 |
|
| | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| | | Number of Securities Underlying Unexercised Options Exercisable | | Number of Securities Underlying Unexercised Options Unexercisable | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (1) | | Market Value of Shares or Units of Stock That Have Not Vested (2) |
| Name | | (#) | | (#) | | ($) | | | (#) | | ($) |
| Daniel P. McCartney | | 37,500 |
| | — |
| | $ | 13.9267 |
| | 1/3/2018 |
| | — |
| | — |
|
| | | 37,500 |
| | — |
| | $ | 10.3867 |
| | 1/5/2019 |
| | — |
| | — |
|
| | | 37,501 |
| | — |
| | $ | 14.3067 |
| | 1/4/2020 |
| | — |
| | — |
|
| | | 25,000 |
| | — |
| | $ | 16.1100 |
| | 1/6/2021 |
| | — |
| | — |
|
| | | 20,000 |
| | 5,000 |
| | $ | 17.5000 |
| | 1/5/2022 |
| | — |
| | — |
|
| | | 9,600 |
| | 6,000 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | | 6,000 |
| | 9,000 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | | 3,000 |
| | 12,000 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | | — |
| | 15,000 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | | — |
| | — |
| | — |
| | — |
| | 600 |
| | 20,922 |
|
| | | — |
| | — |
| | — |
| | — |
| | 3,000 |
| | 104,610 |
|
| | | — |
| | — |
| | — |
| | — |
| | 7,500 |
| | 261,525 |
|
| Jason Bundick | | 2,100 |
| | 1,400 |
| | $ | 23.5000 |
| | 1/4/2023 |
| | — |
| | — |
|
| | | 2,000 |
| | 3,000 |
| | $ | 28.0200 |
| | 1/3/2024 |
| | — |
| | — |
|
| | | 1,000 |
| | 4,000 |
| | $ | 30.3000 |
| | 1/5/2025 |
| | — |
| | — |
|
| | | — |
| | 6,000 |
| | $ | 34.1400 |
| | 1/4/2026 |
| | — |
| | — |
|
| | | — |
| | — |
| | — |
| | — |
| | 280 |
| | 9,764 |
|
| | | — |
| | — |
| | — |
| | — |
| | 625 |
| | 21,794 |
|
| | | | | | | | | | | | | |
| |
(1)1.Options and stock awards vest 20% per year on the anniversary of the grant date for each of the five years subsequent to the grant date.
| Unless otherwise noted herein, restricted stock awards vest at the rate of 20% annually, commencing on the first anniversary from the grant date, subject to accelerated vesting upon certain terminations of employment following certain corporate transactions involving the Company. The shares of common stock underlying the restricted stock awards will be issued upon vesting. |
| |
(2)
| Valued based on the closing price of a share of the Company's Common Stock on December 31, 2015 as reported on the NASDAQ Global Select Market ($34.87). |
2.Unless otherwise noted herein, restricted stock awards and restricted stock units vest at the rate of 20% annually, commencing on the first anniversary from the grant date, subject to accelerated vesting upon certain terminations of employment following certain corporate transactions involving the Company. The shares of Common Stock underlying the restricted stock awards and restricted stock units will be issued upon vesting.
3.Valued based on the closing price of a share of the Company’s Common Stock on December 31, 2020 as reported on the NASDAQ Global Select Market ($28.10).
Option Exercises and Stock Vested during 2015During 2020
The following table sets forth information concerning the option exercises and stock awards vested of each of the NEOs during the year ended December 31, 2015:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Stock Option Awards | | Restricted Stock and Restricted Stock Units |
| | Number of Shares Acquired On Exercise | | Value Realized on Exercise | | Number of Shares Acquired On Vesting | | Value Realized on Vesting |
| Name | | (#) | | ($) | | (#) | | ($) |
| Theodore Wahl | | 15,000 | | | $ | 105,300 | | | 25,000 | | | $ | 610,750 | |
| John C. Shea | | — | | | $ | — | | | 5,590 | | | $ | 136,564 | |
| Michael E. McBryan | | 15,000 | | | $ | 112,300 | | | 4,650 | | | $ | 113,600 | |
| Andrew W. Kush | | 2,000 | | | $ | 14,860 | | | 4,925 | | | $ | 120,318 | |
| Jason J. Bundick | | — | | | $ | — | | | 4,925 | | | $ | 120,318 | |
|
| | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| | | Number of Shares Acquired On Exercise | | Value Realized on Exercise | | Number of Shares Acquired On Vesting | | Value Realized on Vesting |
| Name | | (#) | | ($) | | (#) | | ($) |
| Theodore Wahl | | — |
| | — |
| | 950 |
| | 29,289 |
|
| John C. Shea | | — |
| | — |
| | 195 |
| | 6,012 |
|
| Bryan D. McCartney | | 22,500 |
| | 836,325 |
| | 575 |
| | 17,727 |
|
| Michael E. McBryan | | 22,500 |
| | 836,325 |
| | 575 |
| | 17,727 |
|
| Daniel P. McCartney | | — |
| | — |
| | 950 |
| | 29,289 |
|
| Jason Bundick | | — |
| | — |
| | 70 |
| | 2,158 |
|
| | | | | | | | | |
NonqualifiedNon-Qualified Deferred Compensation
The following table sets forth information concerning the non-qualified deferred compensation of each of the NEOs during the year ended December 31, 2015,2020, as well as the aggregate balance of non-qualified deferred compensation as of December 31, 2015.2020.
|
| | | | | | | | | | | | |
| | | Executive Contributions in Last FY | | Registrant Contributions in Last FY | | Aggregate Earnings in Last FY | | Aggregate Balance at Last FYE |
| Name | | ($) | | ($) | | ($) | | ($) |
| Theodore Wahl | | 150,807 |
| | 37,702 |
| | (1,198 | ) | | 1,196,242 |
|
| John C. Shea | | 67,500 |
| | 16,875 |
| | 7,871 |
| | 394,571 |
|
| Bryan D. McCartney | | 243,710 |
| | 36,557 |
| | 132,778 |
| | 3,316,851 |
|
| Michael E. McBryan | | 243,684 |
| | 36,553 |
| | 135,877 |
| | 3,592,301 |
|
| Daniel P. McCartney | | 78,079 |
| | 19,520 |
| | 316,014 |
| | 6,055,029 |
|
| Jason Bundick | | 41,092 |
| | 10,273 |
| | (4,223 | ) | | 64,643 |
|
| | | | | | | | | |
Directors' Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Executive Contributions in Last FY | | Registrant Contributions in Last FY | | Aggregate Gains in Last FY | | Aggregate Balance at Last FYE |
| Theodore Wahl | | $ | 249,399 | | | $ | 62,350 | | | $ | 857,301 | | | $ | 3,823,397 | |
| John C. Shea | | $ | 108,821 | | | $ | 27,205 | | | $ | 189,014 | | | $ | 1,352,204 | |
| Michael E. McBryan | | $ | 257,574 | | | $ | 38,636 | | | $ | 1,436,467 | | | $ | 7,655,961 | |
| Andrew W. Kush | | $ | 127,790 | | | $ | 31,947 | | | $ | 21,284 | | | $ | 747,513 | |
| Jason J. Bundick | | $ | 28,105 | | | $ | 7,026 | | | $ | 88,638 | | | $ | 412,108 | |
Directors who are also our employees are not separately compensated for their service as directors. Our non-employee directors received
Pay Ratio Disclosure
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is providing the following aggregate amountsinformation about the relationship of the annual total compensation of the Company’s employees and the annual total compensation of the President and Chief Executive Officer. The CEO pay ratio figures below are a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Exchange Act.
At December 31, 2020, we had over 42,000 employees (full-time and part-time), all located in the United States.
We determined the total annual compensation for our employees for the year ended December 31, 2015:2020 using data from our payroll records for the month of December 2020, which we then extrapolated for the full year of 2020. The components of total annual compensation for our employees are the same as those used to determine the total compensation of our NEOs for the purposes of the SCT. We did not make any full-time equivalent adjustments for part-time employees. The results were then ranked, excluding the President and Chief Executive Officer, from lowest to highest, and the median employee was identified. We then compared the total annual compensation of the median employee to that of the President and Chief Executive Officer. The total annual compensation of the median employee for the year ended December 31, 2020 was $26,000. For the year ended December 31, 2020, the ratio of our President and Chief Executive Officer’s total annual compensation to that of our median employee was approximately 161:1.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 23
|
| | | | | | | | | |
| | | Fees Earned or Paid in Cash | | Option Awards (8)(9) | | Total |
| Name | | ($) | | ($) | | ($) |
John Briggs (1) | | 51,000 |
| | 33,207 |
| | 84,207 |
|
Robert L. Frome (2) | | 5,000 |
| | 33,207 |
| | 38,207 |
|
Robert J. Moss (3) | | 11,000 |
| | 33,207 |
| | 44,207 |
|
Dino D. Ottaviano (4) | | 14,000 |
| | 33,207 |
| | 47,207 |
|
Diane S. Casey (5) | | 8,000 |
| | 33,207 |
| | 41,207 |
|
John J. McFadden (6) | | 8,000 |
| | 33,207 |
| | 41,207 |
|
Jude Visconto (7) | | 2,000 |
| | — |
| | 2,000 |
|
| | | | | | | |
| |
(1)
| Mr. Briggs had vested options to purchase 13,778 shares of Common Stock outstanding as of December 31, 2015. |
| |
(2)
| Mr. Frome had vested options to purchase 28,356 shares of Common Stock outstanding as of December 31, 2015. |
| |
(3)
| Mr. Moss had vested options to purchase 24,991 shares of Common Stock outstanding as of December 31, 2015. |
| |
(4)
| Mr. Ottaviano had vested options to purchase 9,350 shares of Common Stock as of December 31, 2015. |
| |
(5)
| Ms. Casey had vested options to purchase 6,003 shares of Common Stock as of December 31, 2015. |
| |
(6)
| Mr. McFadden had vested options to purchase 3,002 shares of Common Stock as of December 31, 2015. |
| |
(7)
| Mr. Visconto was elected to the Board in May 2015. |
| |
(8)
| Represents the dollar amount recognized for financial statement reporting purposes with respect to the grant date fair value of option grants made to each director during the 2015 fiscal year. The fair value was estimated using the Black-Scholes option valuation model in accordance with FASB ASC Topic 718. |
| |
(9)
| All stock option awards granted in 2015 become vested and exercisable ratably over a five year period on each yearly anniversary date of the option grant. |
The SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s total annual compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Directors’ FeesHealthcare Services Group, Inc. | 2021 Proxy Statement | 24
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, nine directors of the Company are to be elected, each to hold office for a term of one year. All nominees currently serve as Directors. Unless authority is specifically withheld, management proxies will be voted FOR the election of the nominees named in Directors, Executive Officers and Corporate Governance above to serve as directors until the next annual meeting of shareholders and until their successors have been chosen and qualified. Should any nominee not be a candidate at the time of the Annual Meeting (a situation which is not now anticipated), proxies will be voted in favor of the remaining nominees and may also be voted for substitute nominees. If a quorum is present, the candidate or candidates receiving the highest number of votes will be elected. Brokers that do not receive shareholder instructions are not entitled to vote for the election of directors because an uncontested election is considered a “non-routine” matter. Hence, shareholders who hold their shares through brokerage accounts and who would like to vote in favor of the director nominees will need to instruct their brokerage firm to vote for the Company’s nominees.
The Board of Directors recommend a vote “FOR” all nominees.
Vote Required
The Company pays each director whohas implemented plurality voting in uncontested elections of directors. Accordingly, the Company's bylaws provide that in an uncontested election of directors the affirmative vote of (a) a plurality of the shares of Common Stock entitled to vote and present in person or by proxy at the Annual Meeting and (b) a majority of the shares required to constitute a quorum is not an employeerequired to elect a director.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 25
PROPOSAL NO. 2
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The accounting firm of Grant Thornton LLP was selected by the Audit Committee of the Board as the Independent Registered Public Accounting Firm of the Company $1,000 for each regular or committee meetingthe fiscal year ending December 31, 2021. Said firm has no other relationship to the Company. The Board recommends the ratification of the selection of the firm of Grant Thornton LLP to serve as the Independent Registered Public Accounting Firm of the Company for the year ending December 31, 2021. A representative of Grant Thornton LLP, which has served as the Company’s Independent Registered Public Accounting Firm since December 1992, will be present at the forthcoming shareholders’ meeting with the opportunity to make a statement if so desired and such representative will be available to respond to appropriate questions. The approval of the proposal to ratify the appointment of Grant Thornton LLP requires the affirmative vote of a majority of the votes cast by all shareholders represented and entitled to vote thereon. An abstention, therefore, will not have the same legal effect as an “against” vote and will not be counted in determining whether the proposal has received the required shareholder vote. However, brokers that do not receive instructions on this proposal are entitled to vote for the selection of the independent registered public accounting firm.
The Board of Directors attended. In addition, Mr. Briggs receivesrecommend a quarterly retainer of $10,000 with respect to his chairmanshipvote “FOR” the approval and ratification of the Audit Committee and serviceselection of Grant Thornton LLP as the independent registered public accounting firm of the Company for its current fiscal year ending December 31, 2021.
Vote Required
Approval of Proposal No. 2 requires the affirmative vote of (a) the holders of a majority of the votes cast at the Annual Meeting in person or by proxy and entitled to and (b) a majority of the shares required to constitute a quorum.
Fees Paid to Auditors
The following table sets forth the fees billed by the Company’s independent registered public accounting firm during fiscal years 2020 and 2019:
| | | | | | | | | | | |
| 2020 | | 2019 |
Audit fees 1 | $ | 1,164,000 | | | $ | 1,047,000 | |
| | | |
| Audit-related fees | — | | | — | |
| Tax fees | — | | | — | |
| All other fees | — | | | — | |
| $ | 1,164,000 | | | $ | 1,047,000 | |
| | | |
1.Audit Committee Financial Expert.fees billed by Grant Thornton LLP related to the audits of the Company’s annual financial statements and internal control over financial reporting; the review of the Company’s financial statements included in the Quarterly Reports on Form 10-Q; review of documents filed with the SEC; and reimbursement for direct out-of-pocket expenses.
20Healthcare Services Group, Inc. | 2021 Proxy Statement | 26
PROPOSAL NO. 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Board of Directors recognizes the significant interest of shareholders in executive compensation matters. Pursuant to amendments to Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a)14A of the Exchange Act requiresand the shareholder vote on the frequency of the advisory vote on executive compensation at our 2017 Annual Meeting of Shareholders, we are providing our shareholders with an annual opportunity to cast an advisory vote (commonly referred to as “say-on-pay”) to approve the compensation of our Named Executive Officers.
We are asking our shareholders to provide advisory approval of the compensation of our Named Executive Officers (which consist of our President and Chief Executive Officer, Chief Financial Officer and our other three highest paid executive officers in 2020), as such compensation is disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in this Proxy Statement. Our executive compensation programs are designed to enable us to attract, motivate and retain executive talent, who are critical to our success. Our compensation philosophy and framework have resulted in compensation for our Named Executive Officers that is tied to the Company’s financial results and the other performance factors described in the section of this Proxy Statement entitled Compensation Discussion and Analysis. These programs focus on rewarding the types of performance that increase shareholder value, link executive compensation to the Company’s long-term strategic objectives and align executive officers’ interests with those of our shareholders. The Company believes that its executive compensation programs, which emphasize long-term equity awards and variable compensation, satisfy these goals. A substantial portion of each executive’s total compensation is intended to be variable and delivered on a pay-for-performance basis.
Our Board of Directors believes that the information provided above and within the “Executive Compensation” section of this Proxy Statement demonstrates that our executive officerscompensation program was designed appropriately and 10%is working to ensure that management’s interests are aligned with our shareholders’ interests and support long-term value creation.
The Board of Directors recommend a vote “FOR” the adoption of the following non-binding resolution:
RESOLVED, that the shareholders to file withof the SEC and NASDAQ initial reports of ownership and reports of changes in ownershipCompany approve, on an advisory basis, the compensation of the Company’s Common Stock. DirectorsNamed Executive Officers, as disclosed in the Compensation Discussion and executive officers areAnalysis, compensation tables and narrative discussion set forth in this Proxy Statement.
This say-on-pay vote is advisory, and therefore not binding on the Company, the Nominating, Compensation and Stock Option Committee or our Board of Directors.
Vote Required
Approval of Proposal No. 3 requires the affirmative vote of (a) the holders of a majority of the votes cast at the Annual Meeting in person or by proxy and entitled to and (b) a majority of the shares required to furnish the Company with copies of all Section 16(a) reports which they file.constitute a quorum.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 27
To the Company’s knowledge, based solely on review of the copies of these reports furnished to the Company and written representations that no other reports were required, during 2015 all Section 16(a) filing requirements applicable to its directors and executive officers were complied with.
Audit Committee Report
Sarbanes-Oxley Act Compliance
Sarbanes-Oxley sets forth various requirements for public companies and directs the SEC to adopt additional rules and regulations.
Currently, the Company believes it is in compliance with all applicable laws, rules and regulations arising from Sarbanes-Oxley. The Company intends to comply with any additional rules and regulations adopted by the SEC pursuant to Sarbanes-Oxley no later than the time they become applicable to the Company.
AUDIT COMMITTEE REPORT
The members of the Audit Committee from January 1, 20152020 to December 31, 20152020 were Messrs. John M. Briggs, Robert J.Ottaviano and Moss and Dino Ottaviano.Ms. Grant. Mr. Moss served on the Audit Committee until his retirement on May 26, 2020 at which time Ms. Grant was elected by the shareholders at the Annual Meeting and appointed to the Audit Committee for the remainder of fiscal year 2020. The Audit Committee met fiveseven times during the fiscal year ended December 31, 2015.2020. The Audit Committee is responsible for the appointment of the Independent AuditorsRegistered Public Accounting Firm for each fiscal year, recommending the discharge of the Independent AuditorsRegistered Public Accounting Firm to the Board and confirming the independence of the Independent Auditors.Registered Public Accounting Firm. It is also responsible for: reviewing and approving the scope of the planned audit, the results of the audit and the Independent Auditors'Registered Public Accounting Firm’s compensation for performing such audit; reviewing the Company'sCompany’s audited financial statements; and reviewing and approving the Company'sCompany’s internal accounting controls and disclosure procedures, and discussing such controls and procedures with the Independent Auditors.Registered Public Accounting Firm.
The Audit Committee adopted anA copy of the Company's Amended and Restated Audit Committee Charter on February 12, 2004, a copy of which is available on the Company'sCompany’s website at www.hcsg.com.
The Company’s Independent Auditors areRegistered Public Accounting Firm is responsible for auditing the financial statements, as well as auditing the Company’s internal controls over financial reporting. The activities of the Audit Committee are in no way designed to supersede or to alter those traditional responsibilities. The Audit Committee’s role does not provide any special assurances with regard to the Company’s financial statements, nor does it involve a professional evaluation of the quality of the audits performed by the Independent Auditors.Registered Public Accounting Firm.
In connection with the audit of the Company’s financial statements for the year ended December 31, 2015,2020, the Audit Committee met with representatives from Grant Thornton LLP, the Company’s Independent Auditors,Registered Public Accounting Firm, and the Company’s internal auditor.auditors. The Audit Committee reviewed and discussed with Grant Thornton LLP and the Company’s internal auditor,auditors, the Company’s financial management and financial structure, as well as the matters relating to the audit required by the Public Company Accounting Oversight Board Auditing Standard.
The Audit Committee and Grant Thornton LLP also discussed Grant Thornton LLP’s independence. In November 2015,December 2020, the Audit Committee received from Grant Thornton LLP the written disclosures and the letter regarding Grant Thornton LLP’s independence required by Public Company Accounting Oversight Board Rule 3526.
In addition, the Audit Committee reviewed and discussed with management the Company’s audited financial statements for the fiscal year ended December 31, 2015,2020, as well as management’s assessment of internal controls over financial reporting.
Based upon the review and discussions described above, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, that the Company’s financial statements audited by Grant Thornton LLP, as well as the audit of the Company’s internal controls over financial reporting be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.2020.
AUDIT COMMITTEEINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
John M. Briggs, Chairman
Robert J. Moss
Dino D. Ottaviano
NOMINATING, COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The accounting firm of Grant Thornton LLP was selected by the Audit Committee of the Board as the Independent Registered Public Accounting Firm of the Company for the fiscal year ending December 31, 2021. Said firm has no other relationship to the Company. The Board recommends the ratification of the selection of the firm of Grant Thornton LLP to serve as the Independent Registered Public Accounting Firm of the Company for the year ending December 31, 2021. A representative of Grant Thornton LLP, which has served as the Company’s Independent Registered Public Accounting Firm since December 1992, will be present at the forthcoming shareholders’ meeting with the opportunity to make a statement if so desired and such representative will be available to respond to appropriate questions. The approval of the proposal to ratify the appointment of Grant Thornton LLP requires the affirmative vote of a majority of the votes cast by all shareholders represented and entitled to vote thereon. An abstention, therefore, will not have the same legal effect as an “against” vote and will not be counted in determining whether the proposal has received the required shareholder vote. However, brokers that do not receive instructions on this proposal are entitled to vote for the selection of the independent registered public accounting firm.
The Board of Directors recommend a vote “FOR” the approval and ratification of the selection of Grant Thornton LLP as the independent registered public accounting firm of the Company for its current fiscal year ending December 31, 2021.
Vote Required
Approval of Proposal No. 2 requires the affirmative vote of (a) the holders of a majority of the votes cast at the Annual Meeting in person or by proxy and entitled to and (b) a majority of the shares required to constitute a quorum.
Fees Paid to Auditors
The following table sets forth the fees billed by the Company’s independent registered public accounting firm during fiscal years 2020 and 2019:
| | | | | | | | | | | |
| 2020 | | 2019 |
Audit fees 1 | $ | 1,164,000 | | | $ | 1,047,000 | |
| | | |
| Audit-related fees | — | | | — | |
| Tax fees | — | | | — | |
| All other fees | — | | | — | |
| $ | 1,164,000 | | | $ | 1,047,000 | |
| | | |
1.Audit fees billed by Grant Thornton LLP related to the audits of the Company’s annual financial statements and internal control over financial reporting; the review of the Company’s financial statements included in the Quarterly Reports on Form 10-Q; review of documents filed with the SEC; and reimbursement for direct out-of-pocket expenses.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 26
PROPOSAL NO. 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Board of Directors recognizes the significant interest of shareholders in executive compensation matters. Pursuant to amendments to Section 14A of the Exchange Act and the shareholder vote on the frequency of the advisory vote on executive compensation at our 2017 Annual Meeting of Shareholders, we are providing our shareholders with an annual opportunity to cast an advisory vote (commonly referred to as “say-on-pay”) to approve the compensation of our Named Executive Officers.
We are asking our shareholders to provide advisory approval of the compensation of our Named Executive Officers (which consist of our President and Chief Executive Officer, Chief Financial Officer and our other three highest paid executive officers in 2020), as such compensation is disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in this Proxy Statement. Our executive compensation programs are designed to enable us to attract, motivate and retain executive talent, who are critical to our success. Our compensation philosophy and framework have resulted in compensation for our Named Executive Officers that is tied to the Company’s financial results and the other performance factors described in the section of this Proxy Statement entitled Compensation Discussion and Analysis. These programs focus on rewarding the types of performance that increase shareholder value, link executive compensation to the Company’s long-term strategic objectives and align executive officers’ interests with those of our shareholders. The Company believes that its executive compensation programs, which emphasize long-term equity awards and variable compensation, satisfy these goals. A substantial portion of each executive’s total compensation is intended to be variable and delivered on a pay-for-performance basis.
Our Board of Directors believes that the information provided above and within the “Executive Compensation” section of this Proxy Statement demonstrates that our executive compensation program was designed appropriately and is working to ensure that management’s interests are aligned with our shareholders’ interests and support long-term value creation.
The Board of Directors recommend a vote “FOR” the adoption of the following non-binding resolution:
RESOLVED, that the shareholders of the Company is determined byapprove, on an advisory basis, the Nominating, Compensation and Stock Option Committee. The compensation of the former ChiefCompany’s Named Executive Officer was also determined byOfficers, as disclosed in the Nominating, Compensation Discussion and Stock Option Committee, Such Committee’s determinations regarding suchAnalysis, compensation are basedtables and narrative discussion set forth in this Proxy Statement.
This say-on-pay vote is advisory, and therefore not binding on a number of factors including, in order of importance:
Consideration of the operating and financial performance of the Company, primarily its income before income taxes during the preceding fiscal year, as compared with prior operating periods;
Attainment of a level of compensation designed to retain a superior executive in a highly competitive environment; and
Consideration of the individual’s overall contribution to the Company.
In consultation with the President and Chief Executive Officer of the Company, the Nominating, Compensation and Stock Option Committee develops guidelines and reviewsor our Board of Directors.
Vote Required
Approval of Proposal No. 3 requires the compensation and performanceaffirmative vote of (a) the holders of a majority of the other executive officersvotes cast at the Annual Meeting in person or by proxy and entitled to and (b) a majority of the Company, as well as any management fees paidshares required to constitute a quorum.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 27
Audit Committee Report
The members of the Audit Committee from January 1, 2020 to December 31, 2020 were Messrs. Briggs, Ottaviano and Moss and Ms. Grant. Mr. Moss served on the Audit Committee until his retirement on May 26, 2020 at which time Ms. Grant was elected by the Company for executive services,shareholders at the Annual Meeting and sets the compensation of the executive officers of the Company and/or any management fees paid by the Company for executives services. In addition, the Nominating, Compensation and Stock Option Committee makes recommendationsappointed to the Board of Directors with respect to incentive-compensation plans and equity-based plans, and establishes criteriaAudit Committee for the grantingremainder of options in accordance with such criteria; and administers such plans.fiscal year 2020. The Nominating, Compensation and Stock OptionAudit Committee reviews major organizational and staffing matters. In consultation with the President and Chief Executive Officer of the Company, the Nominating, Compensation and Stock Option Committee oversees the development and growth of executive management personnel. With respect to director compensation, the Nominating, Compensation and Stock Option Committee designs a director compensation package of a reasonable total value based on comparisons with similar firms and aligned with long-term shareholder interests. Finally, the Nominating, Compensation and Stock Option Committee reviews director compensation levels and practices, and may recommend, from time to time, changes in such compensation levels and practices to the Board of Directors, with equity ownership in the Company encouraged. The Nominating, Compensation and Stock Option Committee’s charter provides that the Nominating, Compensation and Stock Option Committee shall have the authority to obtain advice and seek assistance from internal and external legal, accounting and other advisors.
The Nominating, Compensation and Stock Option Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
NOMINATING, COMPENSATION AND STOCK OPTION COMMITTEE
Dino D. Ottaviano, Chairman
Diane S. Casey
John J. McFadden
Compensation Committee Interlocks and Insider Participation
No member of the Nominating, Compensation and Stock Option Committee was an officer or employee of the Company or any subsidiary of the Companymet seven times during the fiscal year ended December 31, 2015. No member2020. The Audit Committee is responsible for the appointment of the Nominating, Compensation and Stock Option Committee was a memberIndependent Registered Public Accounting Firm for each fiscal year, recommending the discharge of the Independent Registered Public Accounting Firm to the Board and confirming the independence of the Independent Registered Public Accounting Firm. It is also responsible for: reviewing and approving the scope of the planned audit, the results of the audit and the Independent Registered Public Accounting Firm’s compensation committeesfor performing such audit; reviewing the Company’s audited financial statements; and reviewing and approving the Company’s internal accounting controls and disclosure procedures, and discussing such controls and procedures with the Independent Registered Public Accounting Firm.
A copy of another entity duringthe Company's Amended and Restated Audit Committee Charter is available on the Company’s website at www.hcsg.com.
The Company’s Independent Registered Public Accounting Firm is responsible for auditing the financial statements, as well as auditing the Company’s internal controls over financial reporting. The activities of the Audit Committee are in no way designed to supersede or to alter those traditional responsibilities. The Audit Committee’s role does not provide any special assurances with regard to the Company’s financial statements, nor does it involve a professional evaluation of the quality of the audits performed by the Independent Registered Public Accounting Firm.
In connection with the audit of the Company’s financial statements for the year ended December 31, 2020, the Audit Committee met with representatives from Grant Thornton LLP, the Company’s Independent Registered Public Accounting Firm, and the Company’s internal auditors. The Audit Committee reviewed and discussed with Grant Thornton LLP and the Company’s internal auditors, the Company’s financial management and financial structure, as well as the matters relating to the audit required by the Public Company Accounting Oversight Board Auditing Standard.
The Audit Committee and Grant Thornton LLP also discussed Grant Thornton LLP’s independence. In December 2020, the Audit Committee received from Grant Thornton LLP the written disclosures and the letter regarding Grant Thornton LLP’s independence required by Public Company Accounting Oversight Board Rule 3526.
In addition, the Audit Committee reviewed and discussed with management the Company’s audited financial statements for the fiscal year ended December 31, 2015. None2020, as well as management’s assessment of our executive officers was a memberinternal controls over financial reporting.
Based upon the review and discussions described above, the Audit Committee recommended to the Board of such Committee, or a director,Directors, and the Board of another entity duringDirectors approved, that the Company’s financial statements audited by Grant Thornton LLP, as well as the audit of the Company’s internal controls over financial reporting be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. There were no transactions between any member of the Nominating, Compensation and Stock Option Committee and the Company during the fiscal year ended December 31, 2015 requiring disclosure pursuant to Item 404 of Regulation S-K promulgated under the Exchange Act.2020.
Certain Relationships and Related Party Transactions
The Company's Audit Committee is responsible for reviewing and approving all related party transactions involving the Company and any director, executive officer, other employee or family member thereof. The Audit Committee does not have a formal written policy which sets forth its policies and procedures with respect to reviewing a related party transaction. The Audit Committee, however, will not approve any transaction unless the transaction is on terms comparable to those available to unaffiliated third parties and have terms reasonably expected to benefit the Company.
Kevin P. McCartney, the brother of Daniel McCartney and Bryan McCartney, joined the Company in 1998 and is currently employed by the Company as a Divisional Vice President. Kevin McCartney's compensation earned from the Company during fiscal year 2015 consisted of approximately $136,000 in base salary, $95,000 of incentive compensation and $10,000 in automobile allowance. Additionally, Kevin McCartney earned compensation of approximately $6,000 and $1,000, respectively, from the value realized on Deferred Compensation Plan contributions made on his behalf by the Company and his participation in the Company's Employee Stock Purchase Plan. All of such compensation earned by Kevin McCartney is in accordance with the Company's compensation plan for all management personnel in similar positions.
Stephen Newns, the brother-in-law of Daniel McCartney and Bryan McCartney, joined the Company in 1995 and is currently employed by the Company as a Divisional Vice President. Mr. Newns' compensation earned from the Company during fiscal year 2015 consisted of approximately $104,000 in base salary, $59,000 of incentive compensation and $10,000 in automobile allowance. All of such compensation earned by Mr. Newns is in accordance with the Company's compensation plan for all management personnel in similar positions.
Matthew J. McKee, MBA, the son-in-law of Daniel McCartney and the brother-in-law of Theodore Wahl joined the Company in 2004 and is currently employed by the Company as Vice President of Strategy. Mr. McKee's compensation earned from the Company during fiscal year 2015 consisted of approximately $180,000 in base salary, $50,000 of incentive compensation and $9,000 in automobile allowance. Additionally, Mr. McKee earned compensation of approximately $5,000 from the value realized on Deferred Compensation Plan contributions made on his behalf by the Company. Management believes that the compensation earned by Mr. McKee is comparable to the compensation the Company would pay to a non-relative employee in a similar position.
James R. Bleming, the brother-in-law of Bryan McCartney, joined the Company in 1992 and is currently employed by the Company as a Divisional Vice President. Mr. Bleming's compensation earned from the Company during fiscal year 2015 consisted of approximately $121,000 in base salary, $24,000 of incentive compensation and $10,000 in automobile allowance. Additionally, Mr. Bleming earned compensation of approximately $5,000 and $2,000, respectively, from the value realized on Deferred Compensation Plan contributions made on his behalf by the Company and his participation in the Company's Employee Stock Purchase Plan. All of such compensation earned by Mr. Bleming is in accordance with the Company's compensation plan for all management personnel in similar positions.
Procedures for Contacting Directors
The Board has established a process for shareholders to send communications to the Board. Shareholders may communicate with the Board generally or a specific director at any time by writing to: Healthcare Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020, Attention: Investor Relations. The Company reviews all messages received, and forwards any message that reasonably appears to be a communication from a shareholder about a matter of shareholder interest that is intended for communication to the Board of Directors. Communications are sent as soon as practicable to the director to whom they are addressed, or if addressed to the Board generally, to the chairman of the Nominating, Compensation and Stock Option Committee. Because other appropriate avenues of communication exist for matters that are not of shareholder interest, such as general business complaints or employee grievances, communications that do not relate to matters of shareholder interest are not forwarded to the Board.
PROPOSAL NO. 2
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The accounting firm of Grant Thornton LLP was selected by the Audit Committee of the Board as the Independent AuditorsRegistered Public Accounting Firm of the Company for the fiscal year ending December 31, 2016.2021. Said firm has no other relationship to the Company. The Board recommends the ratification of the selection of the firm of Grant Thornton LLP to serve as the Independent AuditorsRegistered Public Accounting Firm of the Company for the year ending December 31, 2016.2021. A representative of Grant Thornton LLP, which has served as the Company’s Independent AuditorsRegistered Public Accounting Firm since December 1992, will be present at the forthcoming shareholders’ meeting with the opportunity to make a statement if he so desiresdesired and such representative will be available to respond to appropriate questions. The approval of the proposal to ratify the appointment of Grant Thornton LLP requires the affirmative vote of a majority of the votes cast by all shareholders represented and entitled to vote thereon. An abstention, or withholding of authority to vote, therefore, will not have the same legal effect as an “against” vote and will not be counted in determining whether the proposal has received the required shareholder vote. However, brokers that do not receive instructions on this proposal are entitled to vote for the selection of the independent registered public accounting firm.
The Board of Directors recommend a vote “FOR” the approval and ratification of the selection of Grant Thornton LLP as the independent registered public accounting firm of the Company for its current fiscal year ending December 31, 2021.
Vote Required
Approval of Proposal No. 2 requires the affirmative vote of (a) the holders of a majority of the votes cast at the Annual Meeting in person or by proxy and entitled to and (b) a majority of the shares required to constitute a quorum.
Fees Paid to Auditors
The following table sets forth the fees billed toby the CompanyCompany’s independent registered public accounting firm during fiscal years 2020 and 2019:
| | | | | | | | | | | |
| 2020 | | 2019 |
Audit fees 1 | $ | 1,164,000 | | | $ | 1,047,000 | |
| | | |
| Audit-related fees | — | | | — | |
| Tax fees | — | | | — | |
| All other fees | — | | | — | |
| $ | 1,164,000 | | | $ | 1,047,000 | |
| | | |
1.Audit fees billed by Grant Thornton LLP during fiscal years 2015related to the audits of the Company’s annual financial statements and 2014:internal control over financial reporting; the review of the Company’s financial statements included in the Quarterly Reports on Form 10-Q; review of documents filed with the SEC; and reimbursement for direct out-of-pocket expenses.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 26
|
| | | | | | | |
| | 2015 | | 2014 |
Audit fees (1) | $ | 740,000 |
| | $ | 746,000 |
|
Tax fees (2) | 41,000 |
| | 25,000 |
|
| All other fees | — |
| | — |
|
| | $ | 781,000 |
| | $ | 771,000 |
|
| | | | |
| |
(1)
| Audit fees billed by Grant Thornton LLP related to the audits of the Company's annual financial statements and internal control over financial reporting; the review of the Company's financial statements included in the quarterly reports on Form 10-Q; review of documents filed with the SEC; and reimbursement for direct out-of-pocket expenses. |
| |
(2)
| Tax fees billed by Grant Thornton LLP for services relating to tax compliance, tax advice and tax planning. |
PROPOSAL NO. 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Background
The Board of Directors recognizes the significant interest of shareholders in executive compensation matters. Pursuant to amendments to Section 14A of the Exchange Act (which were added byand the Dodd-Frank Wall Street Reform and Consumer Protection Actshareholder vote on the frequency of 2010),the advisory vote on executive compensation at our 2017 Annual Meeting of Shareholders, we are providing our shareholders with an annual opportunity to cast an advisory vote (commonly referred to as "say-on-pay"“say-on-pay”) to approve the compensation of our Named Executive Officers.
Summary
We are asking our shareholders to provide advisory approval of the compensation of our Named Executive Officers (which consist of our President and Chief Executive Officer, former Chief Executive Officer, Chief Financial Officer and our other three highest paid executives)executive officers in 2020), as such compensation is disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in this Proxy Statement. Our executive compensation programs are designed to enable us to attract, motivate and retain executive talent, who are critical to our success. Our compensation philosophy and framework have resulted in compensation for our Named Executive Officers that is tied to the Company’s financial results and the other performance factors described in the section of this Proxy Statement entitled Compensation Discussion and Analysis. These programs focus on rewarding the types of performance that increase shareholder value, link executive compensation to the Company’s long-term strategic objectives and align executive officers’ interests with those of our shareholders. The Company believes that its executive compensation programs, which emphasize long-term equity awards and variable compensation, satisfy these goals. A substantial portion of each executive’s total compensation is intended to be variable and delivered on a pay-for-performance basis.
Recommendation
Our Board of Directors believes that the information provided above and within the "Management Compensation"“Executive Compensation” section of this Proxy Statement demonstrates that our executive compensation program was designed appropriately and is working to ensure that management’s interests are aligned with our shareholders’ interests and support long-term value creation.
The Board of Directors recommends that the shareholdersrecommend a vote "FOR"“FOR” the adoption of the following non-binding resolution:
RESOLVED, that the shareholders of the Company approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in this Proxy Statement.
This say-on-pay vote is advisory, and therefore not binding on the Company, the Nominating, Compensation and Stock Option Committee or our Board of Directors.
Vote Required
Approval of Proposal No. 3 requires the affirmative vote of (a) the holders of a majority of the votes cast at the Annual Meeting in person or by proxy and entitled to and (b) a majority of the shares required to constitute a quorum.
26Healthcare Services Group, Inc. | 2021 Proxy Statement | 27
OTHER MATTERSAudit Committee Report
So far as is now known, there is no business other than that described aboveThe members of the Audit Committee from January 1, 2020 to be presented for actionDecember 31, 2020 were Messrs. Briggs, Ottaviano and Moss and Ms. Grant. Mr. Moss served on the Audit Committee until his retirement on May 26, 2020 at which time Ms. Grant was elected by the shareholders at the Annual Meeting butand appointed to the Audit Committee for the remainder of fiscal year 2020. The Audit Committee met seven times during the fiscal year ended December 31, 2020. The Audit Committee is responsible for the appointment of the Independent Registered Public Accounting Firm for each fiscal year, recommending the discharge of the Independent Registered Public Accounting Firm to the Board and confirming the independence of the Independent Registered Public Accounting Firm. It is also responsible for: reviewing and approving the scope of the planned audit, the results of the audit and the Independent Registered Public Accounting Firm’s compensation for performing such audit; reviewing the Company’s audited financial statements; and reviewing and approving the Company’s internal accounting controls and disclosure procedures, and discussing such controls and procedures with the Independent Registered Public Accounting Firm.
A copy of the Company's Amended and Restated Audit Committee Charter is available on the Company’s website at www.hcsg.com.
The Company’s Independent Registered Public Accounting Firm is responsible for auditing the financial statements, as well as auditing the Company’s internal controls over financial reporting. The activities of the Audit Committee are in no way designed to supersede or to alter those traditional responsibilities. The Audit Committee’s role does not provide any special assurances with regard to the Company’s financial statements, nor does it is intendedinvolve a professional evaluation of the quality of the audits performed by the Independent Registered Public Accounting Firm.
In connection with the audit of the Company’s financial statements for the year ended December 31, 2020, the Audit Committee met with representatives from Grant Thornton LLP, the Company’s Independent Registered Public Accounting Firm, and the Company’s internal auditors. The Audit Committee reviewed and discussed with Grant Thornton LLP and the Company’s internal auditors, the Company’s financial management and financial structure, as well as the matters relating to the audit required by the Public Company Accounting Oversight Board Auditing Standard.
The Audit Committee and Grant Thornton LLP also discussed Grant Thornton LLP’s independence. In December 2020, the Audit Committee received from Grant Thornton LLP the written disclosures and the letter regarding Grant Thornton LLP’s independence required by Public Company Accounting Oversight Board Rule 3526.
In addition, the Audit Committee reviewed and discussed with management the Company’s audited financial statements for the fiscal year ended December 31, 2020, as well as management’s assessment of internal controls over financial reporting.
Based upon the review and discussions described above, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, that the proxiesCompany’s financial statements audited by Grant Thornton LLP, as well as the audit of the Company’s internal controls over financial reporting be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
AUDIT COMMITTEE
John M. Briggs, Chairman
Dino D. Ottaviano
Laura Grant
Healthcare Services Group, Inc. | 2021 Proxy Statement | 28
Nominating, Compensation and Stock Option Committee Report
The compensation of the President and Chief Executive Officer of the Company is determined by the Nominating, Compensation and Stock Option Committee. Such Committee’s determinations regarding such compensation are based on a number of factors including, in order of importance:
•Consideration of the operating and financial performance of the Company, primarily its income before income taxes;
•Attainment of a level of compensation designed to retain a superior executive in a highly competitive environment; and
•Consideration of the individual’s overall contribution to the Company.
In consultation with the President and Chief Executive Officer of the Company, the Nominating, Compensation and Stock Option Committee develops guidelines and reviews the compensation and performance of the other executive officers of the Company, and sets the compensation of the executive officers of the Company and/or any management fees paid by the Company for executive services when needed. In addition, the Nominating, Compensation and Stock Option Committee makes recommendations to the Board with respect to incentive-compensation plans and equity-based plans, establishes criteria for the granting of options in accordance with such criteria and administers such plans. The Nominating, Compensation and Stock Option Committee reviews major organizational and staffing matters. With respect to director compensation, the Nominating, Compensation and Stock Option Committee designs a director compensation package of a reasonable total value based on comparisons with similar firms and aligned with long-term shareholder interests. Finally, the Nominating, Compensation and Stock Option Committee reviews director compensation levels and practices, and may recommend, from time to time, changes in such compensation levels and practices to the Board, with equity ownership in the Company encouraged. The Nominating, Compensation and Stock Option Committee’s charter provides that the Nominating, Compensation and Stock Option Committee shall have the authority to obtain advice and seek assistance from internal and external legal, accounting and other advisors.
The Nominating, Compensation and Stock Option Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
NOMINATING, COMPENSATION AND STOCK OPTION COMMITTEE
Diane S. Casey, Chairwoman
John J. McFadden
Healthcare Services Group, Inc. | 2021 Proxy Statement | 29
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 2021, regarding the beneficial ownership of Common Stock by each person or group known by the Company to own: (i) 5% or more of the outstanding shares of Common Stock, (ii) each director and director nominees, (iii) the Named Executive Officers as defined in Item 402(a)(3) of Regulation S-K and (iv) all current directors and executive officers of the Company as a group. The persons named in the table have sole voting and investment power with respect to all shares of Common Stock owned by them, unless otherwise noted.
| | | | | | | | | | | | | | | | | | | | |
Name and Beneficial Owner or Group1 | | Amount and Nature of Beneficial Ownership | | Percent of Class2 |
BlackRock, Inc.3 | | 8,197,113 | | 4 | | 11.0 | % | |
The Vanguard Group, Inc.3 | | 7,003,918 | | 5 | | 9.4 | % | |
Riverbridge Partners, LLC3 | | 5,165,222 | | 6 | | 6.9 | % | |
Mackenzie Financial Corporation3 | | 4,522,875 | | 7 | | 6.1 | % | |
| Theodore Wahl | | 542,427 | | 8 | | - | 22 |
| Michael E. McBryan | | 170,757 | | 9 | | - | 22 |
| John M. Briggs | | 50,175 | | 10 | | - | 22 |
| Andrew W. Kush | | 61,932 | | 11 | | - | 22 |
| Robert L. Frome | | 39,915 | | 12 | | - | 22 |
| John C. Shea | | 58,225 | | 13 | | - | 22 |
| Jason J. Bundick | | 47,510 | | 14 | | - | 22 |
| Dino D. Ottaviano | | 26,093 | | 15 | | - | 22 |
| John J. McFadden | | 25,007 | | 16 | | - | 22 |
| Diane S. Casey | | 15,003 | | 17 | | - | 22 |
| Jude Visconto | | 10,004 | | 18 | | - | 22 |
| Daniela Castagnino | | 1,001 | | 19 | | - | 22 |
| Laura Grant | | — | | 20 | | - | 22 |
| Directors and Executive Officers as a group (13 persons) | | 1,048,049 | | 21 | | 1.4 | % | |
| | | | | | |
1.Unless otherwise indicated, the address of all persons is c/o Healthcare Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020.
2.Based on 74,721,000 shares of Common Stock outstanding at March 31, 2021.
3.The address of Blackrock, Inc. is 55 East 52nd Street, New York, NY 10055.
The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355.
The address of Riverbridge Partners, LLC. is 80 South Eighth St., Suite 1200, Minneapolis, MN 55402.
The address of Mackenzie Financial Corporation is 180 Queen Street West, Toronto, Ontario A6 M5V 3K1.
4.According to a Schedule 13G filed by BlackRock, Inc. on January 27, 2021, it has total beneficial ownership of 8,197,113 shares. Such beneficial ownership includes sole voting power with respect to 8,117,911 shares, and sole dispositive power with respect to 8,197,113 shares.
5.According to a Schedule 13G filed by The Vanguard Group, Inc. on February 10, 2021, it has total beneficial ownership of 7,003,918 shares. Such beneficial ownership includes shared voting power with respect to 172,144 shares, sole dispositive power with respect to 6,771,879 shares and shared dispositive power with respect to 232,039 shares.
6.According to a Schedule 13G filed by Riverbridge Partners, LLC on January 25, 2021, it has total beneficial ownership of 5,165,222 shares. Such beneficial ownership includes sole voting power with respect to 3,944,834 shares and sole dispositive power with respect to 5,165,222 shares.
7.According to a Schedule 13G filed by Mackenzie Financial Corporation on February 12, 2021, it has total beneficial ownership of 4,522,875 shares. Such beneficial ownership includes sole voting power with respect to 4,522,875 shares and sole dispositive power with respect to 4,522,875 shares.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 30
8.Theodore Wahl’s beneficial ownership includes incentive stock options to purchase 23,081 shares, and non-qualified stock options to purchase 135,919 shares, all currently exercisable, and 18,228 shares credited to Mr. Wahl’s account (but unissued) in connection with the Company’s SERP. Additionally, it includes 83,098 and 39,389 shares held by Mr. Wahl’s wife and minor children, respectively.
9.Michael E. McBryan’s beneficial ownership includes incentive stock options to purchase 22,798 shares and non-qualified stock options to purchase 77,747 shares, all currently exercisable, and 41,746 shares credited to Mr. McBryan’s account (but unissued) in connection with the Company’s SERP.
10.John M. Briggs’ beneficial ownership includes non-qualified stock options to purchase 30,008 shares, all currently exercisable.
11.Andrew W. Kush’s beneficial ownership includes incentive stock options to purchase 25,974 shares and non-qualified stock options to purchase 18,371 shares, all currently exercisable, and 4,889 shares credited to Mr. Kush’s account (but unissued) in connection with the Company’s SERP.
12.Robert L. Frome’s beneficial ownership includes non-qualified stock options to purchase 30,008 shares, all currently exercisable.
13.John C. Shea’s beneficial ownership includes incentive stock options to purchase 24,176 shares and non-qualified stock options to purchase 10,239 shares, all currently exercisable, and 6,659 shares credited to Mr. Shea’s account (but unissued) in connection with the Company’s SERP.
14.Jason J. Bundick’s beneficial ownership includes incentive stock options to purchase 15,951 shares and non-qualified stock options to purchase 17,094 shares, all currently exercisable, and 1,627 shares credited to Mr. Bundick’s account (but unissued) in connection with the Company’s SERP.
15.Dino D. Ottaviano’s beneficial ownership includes non-qualified stock options to purchase 25,659 shares, all currently exercisable.
16.John J. McFadden’s beneficial ownership includes non-qualified stock options to purchase 25,007 shares, all currently exercisable.
17.Diane S. Casey’s beneficial ownership includes non-qualified stock options to purchase 15,003 shares, all currently exercisable.
18.Jude Visconto’s beneficial ownership includes non-qualified stock options to purchase 10,004 shares, all currently exercisable.
19.Daniela Castagnino's beneficial ownership includes non-qualified stock options to purchase 1,001 shares, all currently exercisable.
20.Laura Grant's beneficial ownership includes unvested non-qualified stock options.
21.Includes 508,040 shares underlying stock options granted to this group. All stock options reflected in the security ownership table are currently exercisable; also includes 73,149 shares credited to the accounts of the executive officers (but unissued) in connection with the Company’s SERP.
22.Less than 1% of the outstanding shares.
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GENERAL INFORMATION
2021 Annual Meeting of Shareholders
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| Courtyard Philadelphia | | June 1, 2021 |
| Bensalem, Pennsylvania 19020 | | 10:00 a.m. Eastern Daylight Time |
The Record Date for the Annual Meeting is March 31, 2021. Only shareholders of record as of the close of business on this date are entitled to vote at the Annual Meeting. You are invited to vote on the proposals described in this Proxy Statement because you were a Healthcare Services Group, Inc. shareholder on the Record Date, March 31, 2021.
What constitutes a quorum?
In order to carry on the business of the Annual Meeting, we must have a quorum. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of our Common Stock is required to constitute a quorum at the Annual Meeting.
How many votes are required to approve each proposal?
Election of Directors
The affirmative vote of a plurality of the shares of Common Stock entitled to vote and present in person or by proxy at the Annual Meeting is required for the election to our Board of Directors of each of the nominees for director. Shareholders do not have the right to cumulate their votes in the election of directors.
Ratification of Independent Registered Public Accounting Firm and Approval of Executive Compensation
The affirmative vote of the holders of a majority of the votes cast at the Annual Meeting in person or by proxy and entitled to vote is required for approval of Proposal No. 2 and Proposal No. 3.
How are votes counted?
You may either vote ‘FOR’ or ‘WITHHOLD’ authority to vote for each nominee for election to the Board. You may vote ‘FOR,’ ‘AGAINST’ or ‘ABSTAIN’ on Proposal No. 2 and Proposal No. 3. Abstentions will be exercised uponcounted as present for purposes of determining the existence of a quorum, but will have no effect on the vote of the particular proposal. If you sign and submit a proxy card without voting instructions, your shares will be voted ‘FOR’ each director nominee, ‘FOR’ Proposal No. 2 and Proposal No. 3 and ‘FOR’ or ‘AGAINST’ any other proposal as recommended by the Board.
What is a broker non-vote?
If shareholders do not give their brokers instructions as to how to vote shares held in street name, the brokers have discretionary authority to vote those shares on ‘routine’ matters, such as the ratification of the independent registered public accounting firm, but not on ‘non-routine’ proposals, such as the election of directors and proposalsthe advisory vote regarding executive compensation. As a result, if you hold your shares in street name and do not provide voting instructions to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote. Shares held by brokers who do not have discretionary authority to vote on a particular matter and who have not received voting instructions from their customers will be counted as present for the purpose of determining whether there is a quorum at the Annual Meeting, but will not be counted or deemed to be present in person or by proxy for the purpose of determining whether our shareholders have approved that matter.
How to Vote
You may legally come beforevote in person at the Annual Meeting or any adjournment or postponement thereof,by proxy. We recommend that you vote by proxy even if you plan to attend the Annual Meeting. You can always change your vote at the Annual Meeting.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 32
How Proxies Work
Our Board is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the Annual Meeting in the manner you direct.
Proxies submitted will be voted by the individuals named on the proxy card in the manner you indicate. If you give us your proxy but do not specify how you want your shares voted, they will be voted in accordance with the discretionBoard’s recommendations.
You may receive more than one proxy or voting card depending on how you hold your shares. If you hold shares through someone else, such as a stockbroker, you may get materials from them asking how you want to vote. The latest proxy card we receive from you will determine how we will vote your shares.
Revoking a Proxy
A proxy may be revoked by delivery of a written statement to the Secretary of the Company stating that the proxy is revoked, by a subsequent proxy executed by the person executing the prior proxy and presented to the Annual Meeting or by voting in person at the Annual Meeting.
Attending in Person
Only shareholders, their proxy holders and our invited guests may attend the Annual Meeting. For security purposes, all persons named therein.attending the Annual Meeting must bring photo identification. If you wish to attend the Annual Meeting in person but you hold your shares through someone else, such as a stockbroker, you must bring proof of your ownership to the Annual Meeting. For example, you could bring an account statement showing that you owned shares of the Company’s Common Stock as of the Record Date as acceptable proof of ownership.
DEADLINE FOR SHAREHOLDER PROPOSALSExpenses; Proxy Solicitation
All expenses in connection with this solicitation will be borne by the Company. It is expected that solicitation will be made primarily by mail, but regular employees or representatives of the Company may also solicit proxies by telephone, facsimile, email or in person, without additional compensation, except for reimbursement of out-of-pocket expenses.
Deadline for Shareholder Proposals
Under our Second Amended and Restated By-laws, a shareholder who wishes to nominate an individual for election to the Board of Directors directly at an annual meeting, or to propose any business to be considered at an annual meeting, must deliver advance notice of such nomination or business to the Company. The shareholder must be a shareholder as of the date the notice is delivered and at the time of the annual meeting and must be entitled to vote at the meeting. The notice must be in writing and contain the information specified in our Second Amended and Restated By-laws for a director nomination or other business. With respect to the 20172022 annual meeting, such notice must be delivered to, or mailed and received by, the Secretary of the Company at the principal executive offices no later than the close of business on December 19, 201624, 2021 (the 120th day prior to the first anniversary of the mailing date of the proxy statement for the preceding year'syear’s annual meeting). Shareholders who desire to present a proposal to be included in our proxy statement for our 20172022 annual meeting must submit the proposal to us no later than December 19, 201624, 2021 and must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934.Act. Any such proposal must be sent in writing to the Secretary of the Company at the principal executive offices.
Director Independence
In accordance with the listing requirements of NASDAQ, a majority of the current members of the Company’s Board of Directors are independent, namely: John M. Briggs, Diane S. Casey, Robert L. Frome, Laura Grant, John J. McFadden, Dino D. Ottaviano, Daniela Castagnino and Jude Visconto. Accordingly, if Messrs. Briggs, Frome, McFadden, Ottaviano and Visconto and Mmes. Casey, Castagnino and Grant are re-elected as members of the Board of Directors, a majority of the members of the Company’s Board of Directors will continue to be independent.
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Compensation Committee Interlocks and Insider Participation
No member of the NCSO was an officer or employee of the Company or any subsidiary of the Company during the fiscal year ended December 31, 2020. No member of the NCSO Committee was a member of the compensation committee of another entity during the fiscal year ended December 31, 2020. None of our executive officers was a director or a member of the NCSO Committee of another entity during the fiscal year ended December 31, 2020. There were no transactions between any member of the NCSO Committee and the Company during the fiscal year ended December 31, 2020 requiring disclosure pursuant to Item 404 of Regulation S-K promulgated under the Exchange Act.
Certain relationships and transactions with related parties
The Company’s Audit Committee is responsible for reviewing and approving all related party transactions involving the Company and any director, executive officer, other employee or family member thereof. The Audit Committee does not have a formal written policy which sets forth its policies and procedures with respect to reviewing a related party transaction. The Audit Committee, however, will not approve any transaction unless the transaction is on terms comparable to those available to unaffiliated third parties and have terms reasonably expected to benefit the Company.
Matthew J. McKee, MBA, the brother-in-law of Theodore Wahl, joined the Company in 2004 and is currently employed by the Company as Chief Communications Officer. During 2020, Mr. McKee earned total compensation for such service of approximately $731,000, consisting of $364,000 in base salary, $97,000 of incentive compensation, $209,000 of stock awards, $52,000 in option awards, nothing in non-qualified deferred compensation earnings and $9,000 of other compensation. Management believes that the compensation earned by Mr. McKee is comparable to the compensation the Company would pay to a non-relative employee in a similar position.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s Directors, executive officers and 10% shareholders to file with the SEC and NASDAQ initial reports of ownership and reports of changes in ownership of the Company’s Common Stock. Directors and executive officers are required to furnish the Company with copies of all Section 16(a) reports which they file.
In accordance with Subsection 229.405 (Item 405) of Regulation S-K, the Company is aware of one delinquent Section 16(a) report which was filed on November 27, 2020. The delinquent filing was a Form 4 disclosing three November 23, 2020 transactions in which Theodore Wahl, President and Chief Executive Officer of the Company, and two of his family members cumulatively acquired 11,321 shares of the Company's Common Stock. The Company is not aware of any additional delinquent Section 16(a) reports nor is it aware of any known failures to file for the year ended December 31, 2020.
Other Matters
So far as is now known, there is no business other than that described above to be presented for action by the shareholders at the Annual Meeting, but it is intended that the proxies will be exercised upon any other matters and proposals that may legally come before the Annual Meeting, or any adjournment or postponement thereof, in accordance with the discretion of the persons named therein.
Healthcare Services Group, Inc. | 2021 Proxy Statement | 34
ANNUAL REPORT
The 20152020 Annual Report to Shareholders, including financial statements, is available under "2016“2020 Proxy Materials"Materials” at www.proxydocs.com/www.proxydocs.com/HCSG. Certain information contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2020, filed on February 19, 2016,25, 2021, is incorporated by reference to this proxy statement.Proxy Statement.
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| By Order of the Board of Directors, |
DANIEL P. MCCARTNEYJUDE VISCONTO
Chairman |
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| Dated: | | April 18, 201623, 2021 |
| | Bensalem, Pennsylvania |
A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2020, as filed with the Securities and Exchange Commission, may be obtained without charge by any shareholder of record on the record date upon written request addressed to: Secretary, Healthcare Services Group, Inc., 3220 Tillman Drive, Suite 300, Bensalem, PA 19020 or by visiting the Company’s website at www.hcsg.com.
28Healthcare Services Group, Inc. | 2021 Proxy Statement | 35
