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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
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[_] | Preliminary Proxy Statement |
[_] | CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (as permitted by Rule 14a-6(e)(2)) |
[X] | Definitive Proxy Statement |
[_] | Definitive Additional Materials |
[_] | Soliciting Material Pursuant to Section 240.14a-12 |
Quest Diagnostics Incorporated
(Name of Registrant as Specified In Its Charter) |
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) |
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[X] | No fee | |
[_] | Fee paid previously with preliminary materials | |
[_] | Fee computed on table | |
Notice of 20222023 Annual Meeting of Stockholders
and
Proxy Statement
April 19, 2022
6, 2023
The Quest Way
Action from Insight
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•Collaborating with payers, providers and partners to leverage our broad access •Offering the most extensive menu of testing and services •Leveraging our data assets and services to improve population health and enable value-based care •Continuously improving our quality and efficiency by embracing AI, automation and other innovative technologies Who we serve: Patients, Consumers, Physicians, Hospitals, Life Sciences Companies, Employers, Insurers, Public Health Agencies, Communities. And Retailers | |
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HOW WE OPERATE
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Notice of
Quest Diagnostics Incorporated One Insights Drive Clifton, New Jersey May |
April 19, 20226, 2023
Dear Fellow Stockholder:
It is my pleasure to invite you to attend Quest Diagnostics’ 20222023 Annual Meeting of Stockholders (the “Annual Meeting”). At the Annual Meeting, stockholders will vote on the following, in addition to any other business as may properly come before the Annual Meeting or any adjournment or postponement thereof:
• to elect nine directors;
● | to elect ten directors; |
• to approve, on an advisory basis, the executive compensation disclosed in the accompanying proxy statement;
● | to approve, on an advisory basis, the executive compensation disclosed in the accompanying proxy statement; |
• to ratify the appointment of our independent registered public accounting firm for 2022;
● | to recommend, on an advisory basis, the frequency of the stockholder advisory vote to approve executive officer compensation; |
• to adopt amendments to our Restated Certificate of Incorporation to allow stockholders to act by non-unanimous written consent and to permit stockholders holding 15% or more of our outstanding common stock to request that the company call a special meeting of stockholders; and
● | to ratify the appointment of our independent registered public accounting firm for 2023; |
• a stockholder proposal, as described in the accompanying proxy statement, if properly presented.
● | to approve the Amended and Restated Employee Long-Term Incentive Plan; and |
Due to uncertainty regarding the COVID-19 pandemic, and to support the health and well-being of our employees and stockholders, the Annual Meeting will be virtual and will be held entirely online via live webcast at www.cesonlineservices.com/dgx22_vm. If you wish to attend the Annual Meeting, you must register to attend; please see the “Frequently Asked Questions” section of the proxy statement, beginning at page 61, for more information. We have designed the virtual Annual Meeting to provide our stockholders the opportunity to actively participate.
● | a stockholder proposal, as described in the accompanying proxy statement, if properly presented. |
Attendance at the Annual Meeting is limited to stockholders at the close of business on March 21, 2022,20, 2023, or their duly appointed proxy holder.
We enclose our proxy statement, our Annual Report and a proxy card; distribution of these materials is scheduled to begin on April 19, 2022. 6, 2023. Your vote is very important.important. We urge you to submit your proxy even if you plan to attend the Annual Meeting. Most stockholders may submit a proxy via mail, telephone or the Internet. Instructions on how to submit your proxy are included with your proxy card and these proxy materials. Please submit your proxy promptly.
Thank you for your continued support of Quest Diagnostics.
Sincerely,
James E. Davis Chief Executive Officer and President |
Proxy Summary
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
20222023 Annual Meeting of Stockholders
Time and Date: | 10:30 a.m. Eastern Time, May | ||
| One Insights Drive, Clifton, New Jersey | ||
Record date: | March | ||
Voting: | Record date stockholders only: One vote per share |
Meeting Agenda | Board Recommendation | |
1. | Elect | FOR EACH NOMINEE |
2. | To approve, on an advisory basis, the compensation of our named executive officers disclosed in our Proxy | FOR |
3. | To recommend, on an advisory basis, the frequency of the stockholder advisory vote to approve executive officer compensation | ANNUAL |
4. | To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for | |
FOR | ||
5. | To | FOR |
6. | To consider a stockholder proposal, if properly presented at the Annual Meeting | AGAINST |
20232024 Annual Meeting of Stockholders
Stockholder proposals submitted pursuant to SEC Rule 14a-8 must be received by Quest Diagnostics Incorporated (“Quest Diagnostics,” the “Company,” “we” or “our”) by December 20, 2022.8, 2023.
Notice of stockholder proposals outside of SEC Rule 14a-8, including nominations (other than proxy access nominations) for the Board of Directors (the “Board”), must be received by the Company no earlier than January 18, 20232024 and no later than February 17, 2023.2024 and must comply with the requirements set forth in our by-laws. Stockholders who intend to solicit proxies in reliance on the universal proxy rules (Rule 14a-19 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) for nominations for election to the Board must comply with the additional requirements of Rule 14a-19 and our by-laws.
Notice of proxy access director nominations must be received by the Company no earlier than November 20, 20228, 2023 and no later than December 20, 2022.
8, 2023.
i | 2023 Proxy Statement |
Board Nominees
Board Nominees
The following table provides summary information about our director nominees.*
Name | Age | Director Since | Occupation | Current Committee Memberships | Other Public Company Boards | |||||
Tracey C. Doi | 61 | 2021 | Chief Financial Officer and Group Vice President of Toyota Motor North America, Inc. | AFC/FE CS | • N/A | |||||
Vicky B. Gregg | 67 | 2014 | Cofounder/Partner, Guidon Partners LLC and Retired CEO, Blue Cross and Blue Shield of Tennessee | CC (Chair) GC QC | • Acadia Healthcare Company | |||||
Wright L. Lassiter III | 58 | 2020 | President and CEO, Henry Ford Health System | AFC QC | • DT Midstream, Inc. • Fortive Corporation | |||||
Timothy L. Main | 64 | 2014 | Non-Executive Chairman of WNS (Holdings) Limited
| AFC GC CS (Chair) | • SCP & Co Healthcare Acquisition Company • WNS (Holdings) Limited. | |||||
Denise M. Morrison | 68 | 2019 | Founder, Denise Morrison & Associates and Retired President and CEO, Campbell Soup Company | CC CS | • MetLife, Inc. • Visa, Inc. | |||||
Gary M. Pfeiffer | 72 | 2004 | Retired Senior Vice President and Chief Financial Officer, E.I. du Pont de Nemours and Company | AFC/FE (Chair) GC EX CS | • N/A | |||||
Timothy M. Ring | 64 | 2011 | Retired Chairman and CEO, C. R. Bard, Inc. | CC GC (Chair) EX (Chair) | • Becton, Dickinson and Company | |||||
Stephen H. Rusckowski | 64 | 2012 | Chairman, CEO and President, Quest Diagnostics Incorporated | EX | • N/A | |||||
Gail R. Wilensky, Ph.D. | 78 | 1997 | Senior Fellow, Project Hope | AFC GC QC (Chair) | • UnitedHealth Group • ViewRay, Inc. | |||||
* Dr. Helen I. Torley, one of our directors, decided to not stand for re-election. | ||||||||||
AFC | Audit & Finance Committee | FE | Financial Expert | |||||||
CC | Compensation Committee | GC | Governance Committee | |||||||
EX | Executive Committee | QC | Quality and Compliance Committee | |||||||
CS | Cybersecurity Committee | |||||||||
Name | Age | Director Since | Occupation | Current Committee Memberships | Other Public Company Boards |
James E. Davis | 60 | 2022 | Chairman, Chief Executive Officer and President, Quest Diagnostics Incorporated | EX | • N/A |
Luis A. Diaz, Jr., M.D. | 52 | Nominee | Head of Solid Tumor Oncology Division, Memorial Sloan Kettering Cancer Center | N/A | • Jounce Therapeutics, Inc. |
Tracey C. Doi | 62 | 2021 | Retired Chief Financial Officer and Group Vice President of Toyota Motor North America, Inc. | AC/FE CS | • N/A |
Vicky B. Gregg | 68 | 2014 | Cofounder/Partner, Guidon Partners LLC and Retired CEO, Blue Cross and Blue Shield of Tennessee | CC(Chair) GC QC | • Acadia Healthcare Company |
Wright L. Lassiter III | 59 | 2020 | CEO, CommonSpirit Health | AC QC | • Fortive Corporation
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Timothy L. Main | 65 | 2014 | Non-Executive Chairman of WNS (Holdings) Limited | AC GC CS (Chair) | • SCP & Co Healthcare Acquisition Company • WNS (Holdings) Limited
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Denise M. Morrison | 69 | 2019 | Founder, Denise Morrison & Associates and Retired President and CEO, Campbell Soup Company | CC CS | • MetLife, Inc. • Visa, Inc. |
Gary M. Pfeiffer | 73 | 2004 | Retired Senior Vice President and Chief Financial Officer, E.I. du Pont de Nemours and Company | AC/FE (Chair) GC EX CS | • N/A |
Timothy M. Ring, Lead Independent Director | 65 | 2011 | Retired Chairman and CEO, C. R. Bard, Inc. | CC GC (Chair) EX (Chair) | • Becton, Dickinson and Company |
Gail R. Wilensky, Ph.D. | 79 | 1997 | Senior Fellow, Project Hope | AC GC QC (Chair) | • ViewRay, Inc. |
Compensation & Leadership Development Committee | |||
CS | Cybersecurity Committee | GC | Governance Committee |
EX | Executive Committee | QC | Quality & Compliance Committee |
FE | Financial Expert |
Stephen H. Rusckowski, who served as our CEO and President until November 1, 2022, served as our Chairman through March 31, 2023.
2023 Proxy Statement | ii |
20212022 Executive Compensation Highlights
Type |
| Form | Percentage of Equity Award Named Executive Officers (%) | Terms |
Equity | •Performance Shares |
| •Performance metrics for •Vest after 3-year performance period | |
•Stock Options |
| •3-year ratable vesting | ||
•Restricted Share Units |
| •3-year ratable vesting | ||
Cash | •Salary •Annual Incentive Compensation | •Reviewed and approved annually •Based on financial and non-financial goals | ||
Retirement | •401(k) Plan •Supplemental Deferred Compensation Plan | •Company matching contributions •Company matching contributions |
Our Board is firmly committed to pay for performance. The table above outlines the main components of our compensation program for executive officers in 2021.The2022.The objectives of our program are to attract and retain talented executives who have the skills and experience required to help us achieve our strategic objectives, and to align the interests of our executives to those of our stockholders, in each case to advance the long-term interests of our stockholders. The compensation opportunity for our named executive officers is directly tied to corporate performance, including both financial and non-financial results, and individual performance. Due to anticipated volatility in the Company’s COVID-19 testing revenues in 2021,2022, the Committee determined to measure base business revenues and COVID-19 testing revenues separately for purposes of annual incentive awards and designed the performance share awardsshares granted in 20212022 to include a performance measure focused on COVID-19 revenue. Due to the uncertain impact of the COVID-19 pandemic on the operating environment, including the Company’s base business, the Committee also split financial-based annual incentive targets into two half-years; performance goals for first half of 2021 were set in February 2021 and performance goals for the second half of 2021 were set in mid-2021. In addition, the Committee established target ranges for both financial goals for the first half of 2021 and a target range for the base business revenue goal for the second half of 2021. We are making changes in the program, highlighted in the Compensation Discussion and Analysis, for 2022.2023.
The average 20212022 annual incentive payout for our named executive officers on our annual cash incentives under the Senior Management Incentive Plan (“SMIP”) was 145%131% of target. Payout on performance share awardsshares for the 3-year performance period ended December 31, 20212022 was 200%196% of target. The following table summarizes annual incentive plan and performance share payouts for the two most recent performance periods for our named executive officers.
Annual Incentive Payout (% of target) | Performance Share Payout for 3-year performance period (% of target) | |
Performance period ended December 31, 2021 | 145 | 200 |
Performance period ended December 31, 2020 | 171 (average) | 195 |
Annual Incentive Payout (% of target) | Performance Share Payout for 3-year performance period (% of target) | |
Performance period ended December 31, 2022 | 131 (average) | 196 |
Performance period ended December 31, 2021 | 145 | 200 |
Our Compensation Discussion and Analysis, which includes a discussion of our program’s “Best Practices,” begins on page 28.30. The 20212022 compensation of our named executive officers is set forth in tables beginning at page 42.45.
iii | 2023 Proxy Statement |
20212022 Business Performance Highlights
In a second consecutive year dominated by the COVID-19 pandemic, we continued to bring critical COVID-19 testing to
Leveraging our countryCapabilities and delivered record revenues, earnings and cash from operations. The Company’s business excluding its COVID-19 testing business (the “base business”) recovered throughout 2021 and by year-end returned to pre-pandemic levels. The recovery of our base business, combined with continued high demand for COVID-19 testing, drove our financial performance during 2021. Our approach to fighting the pandemic is rooted in our vision of empowering better health through diagnostic insights. We believe that the challenges we are facing from the COVID-19 pandemic have brought us together, made us a stronger Company and will help us capture the substantial opportunities in front of us. Our Compensation Discussion and Analysis, beginning on page 23, discusses our 2021 business performance. The following highlights additional 2021 progress on our two-point strategy.
Accelerate GrowthCollaborating
• | We continued to work with health systems to help them execute their lab strategy, started providing laboratory management services to Lee Health in Florida, and entered into an agreement to provide lab management services to Northern Light Health in Maine. We also were awarded a group purchasing agreement for our laboratory stewardship solution, including Quest Lab StewardshipTM Enterprise powered by hc1®, with Premier Inc., a leading healthcare improvement company uniting an alliance of hospitals, health systems and providers. |
• | Revenues |
Drive Operational Excellence
Continuous Improvement
Disciplined Capital Deployment
We also continued to deliver disciplined capital deployment:
Management Transition
On February 3,November 1, 2022, we announced that the Board, as part of its ongoing leadership succession planning, has appointed James E. Davis, currentlypreviously Executive Vice President, General Diagnostics, to be the nextwas appointed Chief Executive Officer and President of the Company, effective November 1, 2022. On November 1, 2022, Mr. Davis will succeedsucceeding Stephen H. Rusckowski, who will have served as our Chief Executive
2023 Proxy Statement | iv |
Officer and President for more than a decade and also servesdecade. Mr. Davis became Chairman of the Board on April 1, 2023, succeeding Mr. Rusckowski, who served as the Chairman of our Board. Mr. Rusckowski will continue to serve as Executive ChairmanBoard through March 2023. In addition, Mr. Davis was appointed Chief Executive Officer - Elect, effective February 3, 2022.
On February 3,July 11, 2022, we also announced that Mark J. Guinan,Sam A. Samad joined our Company as an Executive Vice President and, on July 25, 2022, became our Chief Financial Officer, plansOfficer. Mr. Samad succeeded Mark Guinan, who in February 2022 announced his intention to retire in 2022. We have begun a search to identify Mr. Guinan’s successor. Mr. Guinan will participate in the selection process and is expected to remain in his role through the transition.
retire.
v | 2023 Proxy Statement |
PROXY STATEMENT | QUEST DIAGNOSTICS INCORPORATED |
Contents
PROXY STATEMENT QUEST DIAGNOSTICS INCORPORATED
Contents
2023 Proxy Statement |
Information About Our Corporate Governance
Proposal No. 1—1 — Election of Directors
The Board of Directors recommends that you vote FOR each of the nominees described below |
Our Board currently has tennine directors. Directors are elected annually for a one-year term concluding on the date of the next subsequent annual meeting of stockholders. Each director holds office until his or her successor has been elected and qualified or the director’s earlier resignation, death or removal. Dr. Helen I. Torley, one of our directors, decided to not stand for re-election at the Annual Meeting. Upon the conclusion of her term, the size of the Board will be reduced to nine directors. The Board is grateful to Dr. Torley for her contributions to Quest Diagnostics during her service on the Board.
Our Company has announcedrecently completed a management transition. On February 3, 2022, we announced that the Board, as part of its ongoing leadership succession planning, has appointed James E. Davis currently Executive Vice President, General Diagnostics, to be the nextbecame Chief Executive Officer and President of the Company effective November 1, 2022. On November2022 and Chairman of the Board effective April 1, 2022,2023. Mr. Davis will succeedsucceeded Stephen H. Rusckowski, who will have served as our Chief Executive Officer and President for more than a decade, and also servesserved as the Chairman of our Board.Board until he retired on March 31, 2023. The Board is grateful to Mr. Rusckowski will continuefor his many contributions to serveour Company.
On July 11, 2022, Sam A. Samad joined our Company as Executive Chairman through March 2023. In addition, Mr. Davis was appointed Chief Executive Officer - Elect, effective February 3, 2022.
On February 3, 2022, we also announced that Mark J. Guinan, ouran Executive Vice President and, on July 25, 2022, became our Chief Financial Officer, plansOfficer. Mr. Samad succeeded Mark Guinan, who in February 2022 announced his intention to retire in 2022. We have begun a search to identify Mr. Guinan’s successor. Mr. Guinan will participate in the selection process and is expected to remain in his role through the transition.retire.
After considering the recommendation of the Governance Committee, the Board nominated the nominees below to serve as directors of Quest Diagnostics. Each nominee, other than Dr. Diaz, currently is a director of the Company whose term expires at the Annual Meeting. The Board nominated Dr. Diaz for election for the first time at the Annual Meeting. The Governance Committee evaluated several candidates as potential director nominees. After directors interviewed Dr. Diaz, the Governance Committee unanimously recommended to the Board that Dr. Diaz be nominated to be a director. The biography of each nominee contains information regarding the person’s service as a director of the Company, business experience, other public company director positions and the experience, qualifications, attributes and skills that led the Board to conclude that the person should serve as a director of the Company. The Board believes that each nominee possesses the qualities and experience that nominees should possess in accordance with the Company’s Corporate Governance Guidelines, which set forth the Company’s philosophy regarding Board composition and identify key qualifications and other considerations for the nomination of directors (the relevant portion of the Company’s Corporate Governance Guidelines is set forth below under the heading “Board Nomination Process” beginning on page 9). Each nominee has consented to serve if elected.
1 | 2023 Proxy Statement |
James E. Davis |
Chairman, Chief Executive Officer and President Age: 60 | Mr. Davis became Chairman of the Board on April 1, 2023 and Chief Executive Officer and President of the Company on November 1, 2022, having served as CEO-Elect since February 3, 2022. Mr. Davis joined Quest Diagnostics in April 2013 as Senior Vice President, Diagnostics Solutions. He initially managed a portfolio of businesses and was instrumental in refocusing the Company on diagnostic information services. Mr. Davis was given positions of increasing responsibility and was named Executive Vice President, General Diagnostics in January 2017. Prior to joining Quest Diagnostics, Mr. Davis served as Lead Director, and then as Chief Executive Officer, of InSightec, Inc., a medical device company that designs and develops ultrasound ablation devices that are guided by magnetic resonance imaging systems. Previously, he held a number of senior positions in General Electric’s healthcare business, held leadership positions in General Electric’s aviation business and led the development of strategic and operational improvement initiatives for clients of McKinsey & Company, Inc. Qualifications, Skills and Expertise Mr. Davis has extensive executive experience, including in operations, general management, science, strategic planning and international operations, with large, complex corporations operating in the healthcare industry. |
Luis A. Diaz, Jr., M.D. |
Head of the Division of Solid Tumor Oncology Age: 52 | Dr. Diaz has been the head of the division of solid tumor oncology at the Memorial Sloan Kettering Cancer Center since December 2016. Previously, he was a faculty member and physician at the Johns Hopkins University School of Medicine. He has founded several biotechnology companies, including Epitope, Inostics, PapGene (Thrive) and Personal Genome Diagnostics, Inc. Dr. Diaz’s early work provided the first definitive evidence for using circulating tumor DNA as cancer biomarker for screening, monitoring, and detection of occult disease. He discovered the therapeutic link between immunotherapy and cancer genetics in patients with mismatch repair deficient tumors, which led to the first tumor agnostic FDA approval for tumors with this genetic lesion and the first cancer study, published in 2022, that resulted in a 100% complete remission rate. Dr. Diaz has served on the board of Jounce Therapeutics, Inc. since 2017. He is the recipient of numerous awards and honors and in 2021 was appointed by President Biden to the National Cancer Advisory Board of the National Institutes of Health. Qualifications, Skills and Expertise Dr. Diaz has extensive experience in healthcare, medical and science and strong management and strategic planning experience with enterprises engaged in healthcare, medical and science. | |
2023 Proxy Statement | 2 |
Tracey C. Doi |
Retired Chief Financial Officer and Group Vice President Toyota Motor North America, Inc.
Age: | Ms. Doi Qualifications, Skills and Expertise Ms. Doi has extensive executive experience, including in corporate finance, general management, strategic planning, operations, risk, enterprise systems, consumer focus, business analytics and transformation, with a multinational corporation operating in a complex industry.
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Vicky B. Gregg |
Cofounder/Partner
Retired Age: | Ms. Gregg is a cofounder/partner of Guidon Partners LLC. She retired as Chief Executive Officer of Blue Cross Blue Shield of Tennessee in 2012. Prior to becoming Qualifications, Skills and Expertise Ms. Gregg has extensive executive and advisory experience, including in general management and strategic planning, with a range of health care organizations, and extensive experience with healthcare issues and the operation of the U.S. healthcare system, including as a practicing nurse. |
3 | 2023 Proxy Statement |
Wright L. Lassiter III |
Chief Executive Officer Age: | In August 2022, Mr. Lassiter Qualifications, Skills and Expertise Mr. Lassiter has extensive executive experience in the U.S. healthcare system, including in governance, strategic planning, market expansion, mergers and acquisitions, performance improvement and corporate turnaround. |
Timothy L. Main |
Non-Executive Chairman Age: | Mr. Main has been the Non-Executive Chairman of WNS (Holdings) Limited since September 2021. From 2000 until 2013 he was the Chief Executive Officer, and from 2013 until 2021 the non-executive Chairman of the Board, of Qualifications, Skills and Expertise Mr. Main has extensive executive experience, including in |
2023 Proxy Statement | 4 |
Denise M. Morrison |
Founder, Denise Retired President Age: | Ms. Morrison is the founder of Denise Morrison & Associates, LLC, a consulting firm. She retired in 2018 as the President and Chief Executive Officer of Campbell Soup Company. Ms. Morrison joined Campbell in 2003, where she held positions of increasing responsibility. Prior to joining Campbell, she held executive management positions at Kraft Foods, Inc. from 2001 to 2003. Ms. Morrison is a director of MetLife, Inc. and Visa, Inc. and served as a director of Campbell Soup Company from 2010 to 2018 and a director of The Goodyear Tire & Rubber Company from 2005 to 2010. She is a member of the Board of Trustees for Boston College, the Business Council and the Advisory Council for Just Capital. Ms. Morrison previously served on the Advisory Board for Tufts Friedman School of Nutrition Science and Policy; the New Jersey Restart and Recovery Commission; President Trump’s Manufacturing Jobs Initiative; and President Obama’s Export Council. Qualifications, Skills and Expertise Ms. Morrison has extensive executive experience, including in consumer focus, corporate governance, general management and strategic planning, operations and marketing, with multinational corporations operating in consumer-focused, regulated industries. |
Gary M. Pfeiffer |
Retired Senior Age: | Mr. Pfeiffer retired in 2006 as the Senior Vice President and Chief Financial Officer of E.I. du Pont de Nemours and Company. He joined DuPont in 1974, where he held positions of increasing responsibility in finance and international operations, as well as in various DuPont divisions. Mr. Pfeiffer served as Secretary of Finance for the state of Delaware from January through June 2009. Mr. Pfeiffer served as a director of Internap Corporation from 2007 to 2020, TerraVia Holdings, Inc. from 2014 to 2017 and Talbots, Inc. from 2005 to 2012. He served as the non-executive Chair of the Board of Directors of Christiana Care Health System, a regional hospital system located in Delaware, from 2012 to 2016. Qualifications, Skills and Expertise Mr. Pfeiffer has extensive executive experience, including in capital markets, corporate finance, accounting, international operations, general management, and strategic planning, with a multinational corporation operating in complex industries. |
5 | 2023 Proxy Statement |
Timothy M. Ring |
Retired Chairman Age: | Mr. Ring is our Lead Independent Director. He retired in 2017 as Chairman and Chief Executive Officer of C. R. Bard, Inc., positions in which he had served since 2003. Qualifications, Skills and Expertise Mr. Ring has extensive executive experience, including in corporate governance, strategic planning and international operations, with a multinational corporation operating in the healthcare industry. |
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Gail R. Wilensky, Ph.D. |
Senior Fellow Age: | Dr. Wilensky is a Senior Fellow at Project HOPE, an international non-profit health foundation, which she joined in 1993. From 2008 through 2009, Dr. Wilensky served as President of the Defense Health Board, an advisory board in the Department of Defense. From 1997 to 2001, she was the chair of the Medicare Payment Advisory Commission. From 1995 to 1997, she chaired the Physician Payment Review Commission. In 1992 and 1993, Dr. Wilensky served as a deputy assistant to the President of the United States for policy development relating to health and welfare issues. From 1990 to 1992, she was the administrator of the Health Care Financing Administration where she directed the Medicare and Medicaid programs. Dr. Wilensky is a director of Qualifications, Skills and Expertise Dr. Wilensky has extensive experience, including in strategic planning, as a senior advisor to the U.S. government and private enterprises regarding healthcare issues and the operation of the U.S. healthcare system. |
2023 Proxy Statement | 6 |
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH NOMINEE. PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR EACH NOMINEE UNLESS OTHERWISE INSTRUCTED.
Governance Practices
The Board believes that good corporate governance, designed to protect and enhance stockholder value, is important. The Company has strong corporate governance structures, processes, policies and practices. We engage with our stockholders and listen to their concerns. Our Board benefits from knowledgeable independent directors.
The Board has adopted Corporate Governance Guidelines to enhance its own effectiveness and to demonstrate its commitment to strong corporate governance for the Company. The Board reviews these Guidelines no less frequently than annually, including in response to changing regulatory requirements, evolving practices and the concerns of our stockholders. The Company also has adopted a Code of Ethics applicable to all directors, officers and employees. The Corporate Governance Guidelines and Code of Ethics are published on our website at www.QuestDiagnostics.com. The information on or accessible through our website is not incorporated by reference in this Proxy Statement.
Corporate Governance Highlights |
Board Practice |
Commitment to board refreshment – |
Cybersecurity Committee of the Board since 2019 |
Annual election of entire board |
Majority voting standard for director elections |
Annual assessment of Board and Committee structure and performance |
Lead Independent Director with clearly defined role and robust responsibilities |
Regular executive sessions for independent directors only, presided over by Lead Independent Director |
Independent directors receive a majority of their annual compensation in equity to further align their interests with our stockholders’ interests |
Committee assignments are regularly reviewed and selected with a view to continuity and diversity |
Annual reviews of succession planning and development of management personnel | ||
Stockholder Matters |
Proxy access right for stockholders |
No “poison pill” stockholders’ rights plan |
No supermajority voting requirements |
Annual say-on-pay vote |
Active stockholder engagement | ||
Procedural Best Practices |
Committees report on their activities to the Board at each Board meeting |
Director education programs conducted by third parties provided for our directors |
Public disclosure of corporate political contributions policy and information regarding corporate political expenditures |
Board materials provided to directors in advance of meetings to allow preparation for discussion of items |
Board portal enhances the Board’s efficiency, access to information, security and communication |
Independent directors have unlimited access to officers and employees of the Company |
Board and committees have access to and the authority to retain independent legal, financial or other advisors |
7 2023 Proxy Statement
Corporate Responsibility
The Company and the Board take seriously the responsibility of corporate stewardship, which includes promotingcreating a healthier world and building value for all stakeholders, and creating an inspiring and inclusive workplace.stakeholders. The Company has a deep commitment to its patients, employees, communities and the environment. The Company aims to do business in an environmentally sustainable, socially responsible manner and make a difference in the communities in which it operates. We maintain a Corporate Responsibility webpage, www.QuestDiagnostics.com/our-company/corporate-responsibility, that provides information about our corporate responsibility program, including our focus on environmental, social and governance (“ESG”) issues. The information on or accessible through our website is not incorporated by reference in this Proxy Statement.
Corporate Responsibility Highlights | |
Information Available on Our Corporate Responsibility Webpage www.QuestDiagnostics.com/our-company/ | |
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Global Diagnostic Network |
Approximately |
✔ Ten Employee Business Networks (including African-American Business Leaders, DiverseAbilities, Hispanic/Latino, Pan Asian Leaders and Women in Leadership) that work closely with our talent acquisition team to bring in diverse talent and support them through targeted mentoring and training programs
Initiatives to conserve resources and minimize the negative impact of our operations and facilities on the environment through pollution prevention, energy efficiency, fleet conservation, and strategic sourcing |
Environment, Health and Safety program reduces risk of employee injury |
Patient Assistance Program tailors solutions for uninsured or underinsured patients based on individual circumstances |
“Action with Integrity” Code of Ethics reflects the Company’s commitment to operate as a trustworthy, transparent and ethical organization |
Collaborations with nonprofit organizations improve access to care through donated services, charitable giving, and thought leadership |
Quest for Health Equity, a $100 million-plus initiative to help reduce health disparities in underserved American communities |
Employee volunteer program Quest Community Action Network, with chapters across the country, has raised millions of dollars for worthwhile causes |
Named as one of Fortune’s World’s Most Admired Companies in 2023 for the ninth consecutive year | ||
Named a Best Place to Work for LGBTQ Equality, based on the Human Rights Campaign Foundation Corporate Equality Index 2022 | ||
Ranked as one of Forbes America’s Best Large Employers in 2023 | ||
Named one of America’s Greatest Workspaces for Diversity in 2023 by Newsweek |
Director Independence
The Board assesses the independence of each director annually, and of each director nominee, in accordance with the Company’s Corporate Governance Guidelines and New York Stock Exchange (“NYSE”) listing standards. The independence guidelines in the Corporate Governance Guidelines are consistent with the independence requirements in the NYSE listing standards and include guidelines as to categories of relationships that are considered not material for purposes of director independence.
2023 Proxy Statement | 8 |
All members of the Audit and Finance Committee, the Governance Committee, and the Compensation and Leadership Development Committee must be independent under NYSE listing standards and the Company’s Corporate Governance Guidelines. Pursuant to the charters of the Audit and Finance Committee and the Compensation and Leadership Development Committee, respectively, members of these committees also must satisfy separate independence standards based on requirements of the Securities and Exchange Commission (“SEC”) and NYSE, respectively.
The Board has determined that a substantial majority (nine(eight of ten)nine) of our directors, as well as our new director nominee, Dr. Diaz, are independent. Each member, including the chair, of each of the Audit and Finance Committee, the Compensation and Leadership Development Committee, the Governance Committee, the Cybersecurity Committee and the Quality and Compliance Committee qualifies as independent, including under the committee-specific independence requirements discussed above. In making its determinations as to the independence of the directors, the Board reviewed relationships between the Company and each of them, includingthem. The Board considered the ordinary course commercial relationships in the last three years between the Company and the entitiesentity of which each of Mr. Lassiter and Dr. Torley is an executive officer;officer and determined that these relationships did not exceed a certain amount of that entity’s gross revenues in any year.
the thresholds under the NYSE listing standards and did not otherwise impair Mr. Lassiter’s independence.
The Board has determined the following directors and nominee to be independent:
Luis A. Diaz, Jr., M.D. | Denise M. Morrison | ||
Tracey C. Doi | Gary M. Pfeiffer | ||
Vicky B. Gregg | Timothy M. Ring | ||
Wright L. Lassiter III | |||
Timothy L. Main |
Mr. Rusckowski,Davis, who is the Company’s Chairman, Chief Executive Officer and President, is not independent. Dr. Torley is not standing for reelection at the Annual Meeting.
Stockholder Access and Outreach
Stockholders and any other person may communicate with the Board by sending comments to our Lead Independent Director through the web form available at www.questdiagnostics.com/home/contact/Lead-Independent-Director,contact-us/lead-independent-director, or by writing to the full Board or any individual director or any group or committee of directors, c/o Corporate Secretary, 500 Plaza Drive, Secaucus, New Jersey 07094. Communications received are automatically routed to our Lead Independent Director with a copy to our General Counsel and Corporate Secretary. The Lead Independent Director determines whether any such communication should be distributed to other members of the Board. Communications receivedreviewed by the Corporate Secretary addressed as set forth above, other than communications unrelated toand handled in accordance with protocols approved by the dutiesGovernance Committee and responsibilities of the Board, are forwarded to the intended directors.directors as appropriate.
We have a program of ongoing dialogue with our investors and regularly reach out to large stockholders to listen to their concerns and to inform them about the Company. Our Board receives reports regarding these discussions. During the past year, we reached out to stockholders holding nearly 78%approximately two-thirds of the Company’s outstanding common stock, and held discussions with those that accepted our invitation and others that reached out to us. These discussions addressed topics such as corporate governance, executive pay, company strategy and the Company’s approach to other ESG issues. During these discussions during the past year, investors generally shared positive feedback regarding the Company’s structuring of and overall approach to corporate governance and executive pay, as well as the other topics discussed. Further, our Corporate Governance Guidelines publicly affirm the Board’s long-standing approach of being available for discussions with stockholders in appropriate circumstances.
The Audit and Finance Committee maintains a procedure whereby complaints and concerns with respect to accounting, internal controls and audit matters may be submitted to the Audit and Finance Committee. All communications received by a director relating to the Company’s accounting, internal controls or audit matters are immediately forwarded to the Chair of the Audit and Finance Committee and are investigated and responded to in accordance with the procedures established by the Audit and Finance Committee. In addition, the Company has established a hotline (known as CHEQline) pursuant to which employees can anonymously report accounting, internal controls, and financial irregularities (as well as compliance concerns on other laws)laws, and other issues).
Our Corporate Governance Guidelines provide that directors are encouraged and expected to attend the Annual Meeting. All our directors then in office attended the 20212022 annual stockholders meeting.
Board Nomination Process
The Governance Committee is responsible for reviewing with the Board, on an annual basis, the composition of the Board as a whole and whether the Company is being well served by the directors, taking into account each director’s independence, skills, experience, tenure, availability for service to the Company and other factors the Governance Committee deems appropriate. The Governance Committee is responsible for recommending director nominees to the
9 | 2023 Proxy Statement |
Board, including re-nomination of persons who are already directors. The Governance Committee does not set specific, minimum qualifications that nominees must meet in order for the Governance Committee to recommend them to the Board, but rather believes that each nominee should be evaluated based on his or her own merits, taking into account the Company’s needs, Board succession planning considerations, and the overall composition of the Board, which includes an analysis of current directors’ skills and experience. Recommendations are made by the Governance Committee in accordance with the Company’s Corporate Governance Guidelines, which set forth the Company’s philosophy regarding Board composition and identify key qualifications and other considerations. The Governance Committee believes that the Board should be comprised of individuals whose backgrounds and experience complement those of other Board members, and considers whether a prospective nominee promotes a diversity of talent, skill, tenure, expertise, background, perspective and experience, as well as diversity with respect to age, gender identity, race, ethnicity, place of residence, sexual orientation and specialized experience. The Governance Committee does not assign specific weights to particular criteria and nominees are not required to possess any particular attribute.
The key qualifications and other considerations set forth in the Company’s Corporate Governance Guidelines are set forth below.
Key Qualifications and Other Considerations for Directors |
• Reputation for highest ethical standards and integrity consistent with Quest Diagnostics’ values of Quality, Integrity, Innovation, Accountability, Collaboration and Leadership • Independence • Prior experience as a director or executive officer of a public company • Number of current board positions and other time commitments • Overall range of skills, experience and seniority represented by the Board as a whole | • Relevant experience such as: ○ Chief Executive Officer or Chief Operating Officer (or similar responsibilities), current or past ○ Demonstrated expertise in business function(s) such as sales, operations, finance, strategy, legal or human resources ○ Medical practitioner and/or science and health thought leader |
In recruiting and selecting a Board candidate, as a supplement to the key qualifications and other considerations for director candidates outlined in the Corporate Governance Guidelines, the Governance Committee considers other important skills and professional experiences to determine whether a candidate has skills and experience well-suited for the expected needs of the Board, including whether the skills and experience complement those of the other Board members or nominees. The table below includes, for each director nominee, an illustrative, non-exhaustive listing of supplemental skills and experiences that the Board considered most relevant when nominating that nominee. Although a check mark indicates that the Board relied upon the specific skill or experience in making its decision, the absence of a check mark does not mean the nominee does not possess the specific skill or experience. The biographies beginning on page 12 provide more information on each nominee’s skills and experience. The table also provides self-identified demographic and tenure information regarding each nominee.
Doi | Gregg | Lassiter | Main | Morrison | Pfeiffer | Ring | Rusckowski | Wilensky | ||
Skills and Experience | ||||||||||
Accounting | ü | ü | ||||||||
Advisory | ü | |||||||||
Capital Markets | ü | ü | ||||||||
Consumer Focus | ü | ü | ||||||||
Corporate Governance | ü | ü | ü | ü | ||||||
Executive | ü | ü | ü | ü | ü | ü | ü | ü | ||
Finance | ü | ü | ||||||||
General Management | ü | ü | ü | ü | ü | ü | ü | ü | ||
Government | ü | |||||||||
Healthcare | ü | ü | ü | ü | ü | |||||
International | ü | ü | ü | ü | ü | ü | ||||
Operations | ü | ü | ü | ü | ü | ü | ||||
Strategic Planning | ü | ü | ü | ü | ü | ü | ü | ü | ü | |
Demographics | ||||||||||
Race/Ethnicity | ||||||||||
African American | ü | |||||||||
Asian/Pacific Islander | ü | |||||||||
White/Caucasian | ü | ü | ü | ü | ü | ü | ü | |||
Gender | ||||||||||
Male | ü | ü | ü | ü | ü | |||||
Female | ü | ü | ü | ü | ||||||
Board Tenure | ||||||||||
Years | <1 | 8 | 2 | 8 | 3 | 18 | 11 | 10 | 25 | |
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Davis | Diaz | Doi | Gregg | Lassiter | Main | Morrison | Pfeiffer | Ring | Wilensky | |
Skills and Experience | ||||||||||
Accounting/Finance | ✓ | ✓ | ||||||||
Advisory | ✓ | |||||||||
Capital Markets | ✓ | ✓ | ||||||||
Consumer Focus | ✓ | ✓ | ||||||||
Corporate Governance | ✓ | ✓ | ✓ | ✓ | ||||||
Executive Management | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |
Government | ✓ | |||||||||
Healthcare | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||
International | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||
Operations | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||
Medical/Science | ✓ | ✓ | ✓ | |||||||
Strategic Planning | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Demographics | ||||||||||
Race/Ethnicity | ||||||||||
African American | ✓ | |||||||||
Asian/Pacific Islander | ✓ | |||||||||
Hispanic/Latino | ✓ | |||||||||
White/Caucasian | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||
Gender | ||||||||||
Male | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||
Female | ✓ | ✓ | ✓ | ✓ | ||||||
Board Tenure | ||||||||||
Years | <1 | 0 | 1 | 9 | 3 | 9 | 4 | 19 | 12 | 26 |
The Governance Committee regularly reviews the Board’s composition to ensure that we continue to have the right mix of skills, diversity, background and tenure reflected on the Board. Our Board’s membership represents a balanced approach to director tenure, allowing the Board to benefit from the experience of longer-serving directors as well as the fresh perspectives of newer directors. The composition of the director nominee group (assuming Dr. Diaz’s election at the Annual Meeting) with respect to tenure and ethnic and gender diversity are shown below:
The Board is committed to fostering diversity of the Board. In addition to valuing diversity of talent, skill, tenure, expertise and experience, the Board seeks to include directors with diverse backgrounds, including with respect to race, ethnicity, age, gender identity and sexual orientation, in order to ensure that diverse perspectives are included on the Board. When conducting searches for new directors, it is the Board’s policy to actively and routinely seek a diverse candidate pool, including women and ethnically diverse candidates. The Board assesses the effectiveness of this process each time a new director is nominated to join the Board.
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Process for Nominating New Candidates for Director |
Board identifies the need to add a new Board member |
Governance Committee identifies, assesses, and ranks candidates • Seeks input from Board members • Considers recommendations submitted by other sources, including stockholders • Considers retaining third-party search firms to assist in identifying and evaluating candidates for nomination |
Interview of candidates by | |
•Chairman and Chief Executive Officer •Lead Independent Director | •Other Board members •Members of senior management may also interview candidates |
Governance Committee reassesses the candidates
|
Board determines whether candidate is elected to the Board or
|
The Governance Committee considers suggestions from many sources, including stockholders, regarding possible candidates for director. Stockholders may recommend candidates for consideration as director by sending comments to our Lead Independent Director through the web form available at www.questdiagnostics.com/home/contact/Lead-Independent-Directorcontact-us/lead-independent-director or writing to the full Board or any independent Board member, c/o Corporate Secretary, 500 Plaza Drive, Secaucus, New Jersey 07094. The recommendation should contain the proposed nominee’s name, biographical information and relationship to the stockholder. The Governance Committee evaluates stockholder recommendations for director candidates in the same manner as other director candidate recommendations. Stockholders may also nominate director candidates. See “Frequently Asked Questions” beginning on page 6177 for information regarding the process and deadline for stockholders to submit director nominations for the 20222024 annual meeting of stockholders.
Board Committees
During 2021,2022, the Board held 11nine meetings. In order to fulfil its responsibilities, the Board has delegated certain authority and responsibilities to its standing committees. There are six standing committees. The Board’s structure and operations reflect its alignment on ESG issues. The Board holds primary responsibility for oversight of human capital management issues, as reflected in the Corporate Governance Guidelines. The Board expects to continue to monitor developments related to ESG issues and whether its allocation of responsibilities remains appropriate. Recently the Board renamed the Compensation Committee the Compensation and Leadership Development Committee and revised the committee’s charter to include leadership development for senior management other than the Chief Executive Officer. As discussed under the heading “Board, Committee and CEO Evaluation Process” beginning on page 17, each committee reviews its own performance.
During 2021, the Board undertook a review of its structure and operations to ensure that it has appropriate focus on ESG issues. As a result of the review, the Board re-aligned responsibilities of the Board and several of its committees, amending the Corporate Governance Guidelines and relevant committee charters to reflect the re-alignment. In addition, annual activity calendars for the Board and its committees were revised for 2022 to reflect the revisions. As a result of the review, the Board retained primary responsibility for oversight of human capital management issues, as reflected in the Corporate Governance Guidelines. The re-aligned responsibilities of the committees are reflected in the committee descriptions below. The Board expects to continue to monitor developments related to ESG issues and whether its allocation of responsibilities remains appropriate.
In 2021,2022, each nominee attended at least 75% of the meetings of the Board and the Board committees on which he or she served held during the period such directornominee was in office. Any director may attend meetings of any committee of which the director is not a member.
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For each year, a schedule of Board meetings is established before the year begins. Committee meetings are generally scheduled for the dayshortly before, or the day of, meetings of the full Board, except that meetings of the Executive Committee are scheduled only when needed. The Board and each committee also hold such additional meetings as the Board or committee, respectively, determines necessary or appropriate. Set forth below is a brief description of each standing committee and its function, its membership and the number of meetings it held during 2021.2022. The Board will identify committee appointments for Dr. Diaz following his election to the Board. Additional information about the committees can be found in their charters, which are available on our website at www.QuestDiagnostics.com.
Audit and Finance Committee | |
Number of Gary M. Pfeiffer (Chair)
| This committee: • Monitors the quality and integrity of the financial statements and financial reporting procedures of the Company. • Oversees management’s accounting for the Company’s financial results and reviews the timeliness and adequacy of the reporting of those results and related judgments. • Oversees the internal audit function and makes inquiry into the audits of the Company’s books performed internally and by the outside independent registered public accounting firm. • Has primary oversight responsibility for the Company’s enterprise risk management program. • Appoints the independent registered public accounting firm, monitors its qualifications, independence and performance, approves its compensation and pre-approves the services it performs. • Reviews with the Company’s independent registered public accounting firm, and informs the Board of, any significant accounting and audit matters, including critical accounting policies and judgments. • Advises and makes recommendations with regard to certain financing transactions and other significant financial policies and actions. • Reviews the Company’s insurance programs, including regarding cybersecurity. • Establishes procedures for the receipt, retention and treatment of complaints relating to accounting and internal accounting controls, and for the confidential, anonymous submission by employees of concerns regarding accounting or audit • Reviews and reports to the Board on the Company’s management of its financial resources. The Board has determined that each of Ms. Doi and Mr. Pfeiffer qualifies as an “audit committee financial expert” as defined by the SEC. For a description of the experience of Ms. Doi and Mr. Pfeiffer, see “Proposal No. 1—Election of Directors” beginning on page 1. |
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Compensation and Leadership Development Committee | |
Number of Vicky B. Gregg (Chair)
| This committee: • In consultation with senior management of the Company, establishes the Company’s executive compensation philosophy. • Reports to the Board with respect to the performance of the Chief Executive Officer and reviews and approves the compensation of the Chief Executive Officer based on the directors’ evaluation of the Chief Executive Officer and the Company’s financial performance, competitive compensation data and other factors. • Oversees the performance of the Company’s other • Annually reviews the compensation arrangements for the Company’s • Annually reviews and, if appropriate, approves or recommends to the Board that it approve compensation related proposals to be voted upon by stockholders, and considers the results of stockholder advisory votes on executive compensation matters. • Annually reviews and recommends to the Board the compensation of the Company’s non-employee directors. • Administers, or makes recommendations to the Board regarding, the equity-based and incentive compensation plans, policies and programs of the Company. The committee may delegate the administration of plans, policies and programs as appropriate, including to executive officers of the Company and to the Company’s Human Resources department. • Supports the Board in the Board’s succession planning for the Company’s Chief Executive Officer. • Oversees talent management, leadership development and succession planning for senior management • Reviews and approves, for • Provides oversight and exercises the responsibility it has under the Company’s incentive compensation recoupment policy. For more information regarding the Company’s processes and procedures for executive compensation, including regarding the role of executive officers and compensation consultants in connection with determining or recommending executive and director compensation, see “Compensation Discussion and Analysis” beginning on page |
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Cybersecurity Committee | ||
Number of Timothy L. Main (Chair)
|
• Oversees the Company’s cybersecurity policies, plans and programs. • Reviews the Company’s management of risks and compliance with legal and regulatory requirements and industry standards related to its information technology security systems and processes. | |
Executive Committee | ||
Number of Timothy M. Ring (Chair)
| This committee: • May act for the Board, except with respect to certain major corporate matters such as mergers, the appointment of directors to fill vacancies, removal of the Chief Executive Officer, amendment of the Company’s certificate of incorporation or by-laws, declaration of dividends and matters delegated to other Board | |
Governance Committee | ||
Number of Timothy M. Ring (Chair)
| This committee: • Identifies individuals qualified to become Board members, and reviews and recommends possible candidates for Board • Reviews the structure of the Board, its committee structure and overall size. • Monitors developments in corporate governance. • Assists the Board in the oversight of ESG matters, including reviewing the Company’s overall ESG priorities, goals and strategies. • Reviews policies, programs and reports pertaining to environmental sustainability matters. • Reviews the Company’s Corporate Governance Guidelines and recommends to the Board such changes to the Guidelines, if any, as the committee may determine. • Recommends to the Board assignments of directors to Board committees. • Reviews relationships and transactions of directors, executive officers and senior financial officers for possible conflicts of interest. • Reviews and approves transactions or proposed transactions in which a related person is likely to have a direct or indirect material interest pursuant to the Company’s Statement of Policy and Procedures for the Review and Approval of Related Person Transactions. • Oversees the Board and each Board committee in their annual self-evaluation. • Oversees the Company’s engagement efforts with stockholders and other key stakeholders. |
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Quality and Compliance Committee | |
Number of Gail R. Wilensky (Chair)
| This committee: • Reviews the adequacy of and implementation status of the • Reviews the Company’s policies, programs and performance relating to medical quality assurance. • Reviews the responsibilities, plans, results, budget, staffing and performance of the Company’s Compliance Department, including its independence, authority and reporting obligations, the proposed audit plans and the summary of findings from compliance audits. • Reviews the Company’s policies, programs and performance relating to government affairs and corporate political contributions. • Reviews and concurs in the appointment, replacement, reassignment or dismissal of the Senior Vice President, Chief Compliance Officer and reviews any reports from • Reviews the significant reports to management or summaries thereof regarding the • Monitors significant external and internal investigations of the Company’s business as they relate to possible violations of law by the Company or its directors, officers, employees or agents and concerns and complaints regarding medical quality. • Monitors material legal matters and compliance with legal and regulatory requirements, and coordinates with the Audit and Finance Committee regarding the same. |
Board Leadership Structure
At Quest Diagnostics, we recognize the importance of good corporate governance and value the leadership and input of the independent members of our Board. Stephen H. Rusckowski, ourThe Board believes that its leadership structure should be determined by what is in the best interest of the Company. The Board does not have a policy that requires the combination or separation of the Chair and Chief Executive Officer and President, serves as Chairman of the Board of Directors, and Timothy M. Ring serves as Lead Independent Director. The Board currently believes that having our CEO and President serve as Chairman as well as having a Lead Independent Director helps the administration and organization of the Board and facilitates the effective performance of its duties, including the activities of the independent directors.roles. The Board has revised its leadership structure from time to time and retains the flexibility to revise its leadership structure if, in the exercise of its fiduciary duties, the Board believes that such revision is appropriate. OurCurrently, the roles of Board Chair and Chief Executive Officer are combined with James E. Davis. The Board believes that Mr. Davis’ long tenure with the Company in multiple roles and his extensive industry experience make him well-suited to facilitate the Board’s oversight of our operations, strategy and risk. In accordance with the Company’s Corporate Governance Guidelines, where the Board Chair is not an independent director, the independent directors designate a Lead Independent Director, who has a robust set of responsibilities set forth in our Corporate Governance Guidelines.
Guidelines and described below under the heading “Principal Responsibilities of the Lead Independent Director,” and who assists with the administration and organization of the Board and facilitates the effective performance of its duties, including the activities of the independent directors. The independent directors have selected Timothy M. Ring to serve as Lead Independent Director.
2023 Proxy Statement | 16 |
Principal Responsibilities of the Lead Independent Director |
Transition Awards.
2022 was a year of significant transition in the management of our Company. The Committee took numerous actions during 2022 to foster the success of that transition, including approving the equity awards discussed below. Except as noted below, these awards have generally the same terms and conditions as the annual awards issued to the named executive officers in 2022.
Mr. Davis. Mr. Davis received an award of performance shares and RSUs having a grant date value of $5.0 million effective November 1, 2022, when he became Chief Executive Officer and President. This award consisted of 60% performance shares and 40% RSUs, and does not include a vesting-upon-retirement feature. The RSUs cliff vest on November 1, 2025.
Mr. Samad. Mr. Samad received an award of RSUs having a grant date value of $1.5 million to compensate him for certain forfeitures incurred in connection with the termination of his employment from his immediately preceding employer
49 | 2023 Proxy Statement |
and as a sign-on inducement. 50% of these RSUs are scheduled to vest on each of the following transactions that are required to be approved by stockholders: (a) a transaction in which the Company ceases to be an independent publicly-owned corporation, (b) the sale or other disposition of all or substantially allfirst and second anniversaries of the Company’s assets or (c)grant date.
Mr. Plewman. Mr. Plewman received an additional equity award having a plangrant date value of partial or complete liquidation$550,000 in April 2022 in connection with his promotion to Senior Vice President, Diagnostic Services.
Mr. Guinan. Reflecting his expected retirement during 2022, Mr. Guinan’s 2022 award provided that it would vest upon his retirement, without regard to a need for one year of service after the Company.grant date, provided that he successfully transitioned the Chief Financial Officer responsibilities to his successor. Mr. Guinan also received retirement treatment with respect to his fully vested 2017 stock options.
Ms. Eglinton Manner. In addition to her annual award, Ms. Eglinton Manner received a retention award having a grant date value of $2.0 million. The retention award consisted of 50% RSUs and 50% performance shares, each cliff-vesting three years after the grant date. The performance shares had performance goals related to compound annual growth in revenues associated with the services offerings for which Ms. Eglinton Manner had management responsibility, other than revenues associated with (i) COVID-19 testing and (ii) business acquisitions completed subsequent to January 1, 2022. Ms. Eglinton Manner forfeited this award when she terminated employment in 2022.
Clawback Policy. We maintain an Incentive Compensation Recoupment Policy (commonly known as a “clawback” policy). The recoupment policy covers all of our current and former executive officers, our principal accounting officer and any other employee who receives an equity award under our Employee Plan. Under the policy, incentive compensation (including without limitation cash and equity awards (whether vested or unvested)) is subject to recoupment and recovery by the Company, including after an award has been settled or paid, if a performance measure considered by the Compensation and Leadership Development Committee in making the award is adjusted or restated in a manner that would have had the effect of reducing the size of the award when made. In addition, if a covered employee engaged in gross negligence or intentional misconduct that contributed to the award or payment of incentive compensation that is greater than would have been paid or awarded absent the misconduct, we may seek to recover the entire award or payment, or take other remedial and recovery action, as determined by the Compensation and Leadership Development Committee. Thus, for example, if supervisory personnel were to engage in gross negligence or intentional misconduct, the policy would apply.
Employment Agreement.
Mr. Rusckowski entered into an employment letter agreement with the Company on April 9, 2012 in connection with his appointment as CEO and President. As amended, at this time, the employment agreement providesprovided that its term iswas automatically extended for successive additional one-year periods unless at least six months prior to the end of any applicable one-year extended term, either party shall have notified the other in writing that the agreement will expire on the last day thereof. The employment agreement providesprovided for:
• | an annual base salary, subject to annual review by the Board (or a committee thereof); | |
• | eligibility for annual long-term incentive awards; | |
• | participation in the employee benefit programs generally available to senior executives of the Company, including health insurance, life and disability insurance, the Employee Stock Purchase Plan, a 401(k) plan and a flexible spending plan; | |
• | application of the Company’s share ownership and retention guidelines to Mr. Rusckowski; | |
• | reimbursement for the cost of a personal driver for business purposes (including transportation between Mr. Rusckowski’s personal residence and the Company’s offices); | |
• | Mr. Rusckowski’s participation in the Severance Plan as a Schedule A participant. In addition, pursuant to his employment agreement, Mr. Rusckowski was entitled to treat as a “qualifying termination” under the Severance Plan a termination by him for “good reason” prior to a “change in control,” and his severance in this case would include a pro rata bonus, based on actual performance, for his termination year. See “2022 Potential Payments upon Termination or Change in Control” beginning on page 54; and | |
• | Mr. Rusckowski’s nomination for election to the Board. |
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Mr. Rusckowski’s employment agreement also providesprovided that his performance-based and incentive-based compensation iswas subject to clawback by the Company pursuant to any Company corporate governance guidelines or policies, each as may be in effect from time to time. In addition, Mr. Rusckowski’s employment agreement terminated December 31, 2022.
Mr. Rusckowski hasalso entered into the Company’s standard restrictive covenant agreement, which includes a covenant not to compete with the Company and not to solicit the Company’s employees or customers for a period of one year following the termination of his employment.
Outstanding Equity Awards at |
This table provides information regarding stock option and unvested stock awards held at December 31, 2021.2022.
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | |||||||||||
Rusckowski
|
| 2/19/2018 2/18/2019 2/18/2020 2/17/2021 | 171,061 142,469 48,453 |
71,325 96,908 120,901 | 103.57 86.63 112.17 121.81 | 2/19/2028 2/18/2029 2/18/2030 2/17/2031 |
78,957 14,859 21,551 |
13,660,351 2,570,756 3,728,539 |
7,297,562 7,125,417 | |||||||||||
42,180(3)(3) | ||||||||||||||||||||
41,185(4)(4) | ||||||||||||||||||||
Guinan
|
| 2/21/2017 | 57,606 | 95.80 | 2/21/2027 | |||||||||||||||
2/19/2018 | 50,764 | 103.57 | 2/19/2028 | |||||||||||||||||
2/18/2019 | 42,172 | 21,087 | 86.63 | 2/18/2029 | 23,378 | 4,044,628 | ||||||||||||||
2/18/2020 | 13,373 | 26,747 | 112.17 | 2/18/2030 | 4,102 | 709,687 | 7,761(3) | 1,342,731 | ||||||||||||
2/17/2021 | 31,774 | 121.81 | 2/17/2031 | 5,665 | 980,102 | 7,218(4) | 1,248,786 | |||||||||||||
Davis | 2/21/2017 | 55,093 | 95.80 | 2/21/2027 | ||||||||||||||||
2/19/2018 | 48,555 | 103.57 | 2/19/2028 | |||||||||||||||||
2/18/2019 | 40,300 | 20,150 | 86.63 | 2/18/2029 | 22,338 | 3,864,697 | ||||||||||||||
2/18/2020 | 13,373 | 26,747 | 112.17 | 2/18/2030 | 4,102 | 709,687 | 7,761(3) | 1,342,731 | ||||||||||||
2/17/2021 | 31,774 | 121.81 | 2/17/2031 | 5,665 | 980,102 | 7,218(4) | 1,248,786 | |||||||||||||
Eglinton Manner
|
| 2/21/2017 | 37,565 | 95.80 | 2/21/2027 | |||||||||||||||
2/19/2018 | 38,623 | 103.57 | 2/19/2028 | |||||||||||||||||
2/18/2019 | 32,800 | 16,400 | 86.63 | 2/18/2029 | 18,183 | 3,145,841 | ||||||||||||||
2/18/2020 | 11,629 | 23,258 | 112.17 | 2/18/2030 | 3,567 | 617,127 | 6,749(3) | 1,167,644 | ||||||||||||
2/17/2021 | 27,633 | 121.81 | 2/17/2031 | 4,926 | 852,247 | 6,276(4) | 1,085,811 | |||||||||||||
Doherty
|
| 2/19/2018 | 33,103 | 103.57 | 2/19/2028 | |||||||||||||||
2/18/2019 | 27,176 | 13,589 | 86.63 | 2/18/2029 | 15,066 | 2,606,569 | ||||||||||||||
2/18/2020 | 8,721 | 17,444 | 112.17 | 2/18/2030 | 2,675 | 462,802 | 5,062(3) | 875,777 | ||||||||||||
2/17/2021 | 22,105 | 121.81 | 2/17/2031 | 3,941 | 681,832 | 5,021(4) | 868,683 |
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | ||
Davis | 2/21/2017 | 55,093 | - | $95.80 | 2/21/2027 | ||||||
2/19/2018 | 48,555 | - | $103.57 | 2/19/2028 | |||||||
2/18/2019 | 60,450 | - | $86.63 | 2/18/2029 | |||||||
2/18/2020 | 26,746 | 13,374 | $112.17 | 2/18/2030 | 17,255 | 2,699,372 | |||||
2/17/2021 | 10,591 | 21,183 | $121.81 | 2/17/2031 | 3,777 | 590,874 | 7,218 | (3) | 1,129,184 | ||
2/24/2022 | - | 47,529 | $127.73 | 2/24/2032 | 9,787 | 1,531,078 | 19,504 | (4) | 3,051,206 | ||
11/1/2022 | 13,980 | 2,187,031 | 20,059 | (4) | 3,138,030 | ||||||
Samad | 7/11/2022 | - | 19,658 | $135.59 | 7/11/2032 | 15,674 | 2,452,041 | 8,871 | (4) | 1,387,779 | |
Doherty | 2/19/2018 | 33,103 | - | $103.57 | 2/19/2028 | ||||||
2/18/2020 | 17,443 | 8,722 | $112.17 | 2/18/2030 | 11,255 | 1,760,732 | |||||
2/17/2021 | 7,368 | 14,737 | $121.81 | 2/17/2031 | 2,628 | 411,124 | 5,021 | (3) | 785,485 | ||
2/24/2022 | - | 16,155 | $127.73 | 2/24/2032 | 3,328 | 520,632 | 6,632 | (4) | 1,037,510 | ||
Prevoznik
| 2/21/2017 | 32,551 | - | $95.80 | 2/21/2027 | ||||||
2/19/2018 | 28,690 | - | $103.57 | 2/19/2028 | |||||||
2/18/2019 | 35,146 | - | $86.63 | 2/18/2029 | |||||||
2/18/2020 | 15,118 | 7,559 | $112.17 | 2/18/2030 | 9,754 | 1,525,916 | |||||
2/17/2021 | 5,986 | 11,972 | $121.81 | 2/17/2031 | 2,135 | 333,999 | 4,080 | (3) | 638,275 | ||
2/24/2022 | - | 13,301 | $127.73 | 2/24/2032 | 2,741 | 428,802 | 5,462 | (4) | 854,475 | ||
Plewman | 2/18/2019 | 3,560 | - | $86.63 | 2/18/2029 | ||||||
2/18/2020 | 2,266 | 2,266 | $112.17 | 2/18/2030 | 2,927 | 457,900 | |||||
2/17/2021 | 1,887 | 3,775 | $121.81 | 2/17/2031 | 674 | 105,441 | 1,287 | (3) | 201,338 | ||
2/24/2022 | - | 4,274 | $127.73 | 2/24/2032 | 881 | 137,824 | 1,756 | (4) | 274,709 | ||
3/21/2022 | - | 4,313 | $144.47 | 3/21/2032 | 952 | 148,931 | 1,869 | (4) | 292,386 | ||
Former Executive Officers (6) | |||||||||||
Rusckowski
| 2/18/2020 2/17/2021 2/24/2022 | 96,607 | 48,454 | $112.17 | 2/18/2030 | 90,601 | 14,089,143 | ||||
40,300 | 80,601 | $121.81 | 2/17/2031 | 14,638 | 2,247,730 | 41,185 | (3) | 6,442,981 | |||
- | 109,317 | $127.73 | 2/23/2032 | 22,510 | 3,521,464 | 44,859 | (4) | 7,017,742 | |||
Guinan
| 2/21/2017 | 57,606 | - | $95.80 | 2/21/2027 | ||||||
2/19/2018 | 50,764 | - | $103.57 | 7/29/2027 | |||||||
2/18/2019 | 63,259 | - | $86.63 | 7/29/2027 | |||||||
2/18/2020 | 40,120 | - | $112.17 | 7/29/2027 | 17,255 | 2,699,372 | |||||
2/17/2021 | 31,774 | - | $121.81 | 7/29/2027 | 3,777 | 590,874 | 7,218 | (3) | 1,129,184 | ||
2/24/2022 | 10,932 | - | $127.73 | 7/29/2027 | 2,251 | 352,146 | 4,486 | (4) | 701,790 |
51 | 2023 Proxy Statement |
(1) | Each option generally vests in three equal installments on the first three anniversaries of the grant date, subject to earlier expiration following termination of employment. The consequences for option awards issued beginning in 2020 |
(2) | Represents RSUs awarded in 2022, 2021 |
The grant date February 18, 2019 also includes performance shares awarded in 2019 and earned based on the performance period that began January 1, 2019 and ended on December 31, 2021. The number of shares issuable pursuant to the awards was determined in February 2022 and was subject to service-based vesting through February 18, 2022. The performance shares earned by each named executive officer were as follows: Mr. Rusckowski—70,184 shares; Mr. Guinan—20,780 shares; Mr. Davis—19,856 shares; Ms. Eglinton Manner—16,162 shares; and Ms. Doherty —13,392 shares.
(3) | Represents target performance shares awarded in 2021. The performance period began on January 1, 2021 and ends on December 31, 2023. If the performance goals are met, awards are made in stock in the first quarter following the end of the performance period. |
(4) | Represents target performance shares awarded in 2022. The performance period began on January 1, 2022 and ends on December 31, 2024. If the performance goals are met, awards are paid in stock in the first quarter following the end of the performance period. Performance goals and calculation of performance awards are described in “Compensation Discussion and Analysis” beginning on page |
(5) | Represents fair market value of shares using the closing price on December 30, 2022 of $156.44. |
(6) | Ms. Eglinton Manner had no equity awards outstanding at December 31, 2022. |
This table provides information regarding stock option exercises during 2021,2022, including the number of shares of common stock acquired upon exercise and the aggregate amount realized on each exercise. The table also provides information regarding RSUs that vested and were paid during 20212022 and performance share awards that were earned based on the performance period ending on December 31, 20202021 and were determined and paid during 2021,2022, including the number of shares awarded and the value realized as of February 28, 202118, 2022 (the vesting date).
Option Awards | Stock Awards | |||||||||||||||
Number of | Value | Number of | Value | |||||||||||||
Shares | Realized | Shares | Realized | |||||||||||||
Acquired | on Exercise | Acquired | on Vesting | |||||||||||||
Name | on Exercise | ($) | on Vesting | ($) | ||||||||||||
Rusckowski | 187,845 | 8,331,954 | 19,299 | (1) | 2,338,373 | (1) | ||||||||||
58,368 | (2) | 6,736,835 | (2) | |||||||||||||
77,667 | (3) | 9,075,208 | (3) | |||||||||||||
Guinan | N/A | N/A | 5,570 | (1) | 674,894 | (1) | ||||||||||
17,322 | (2) | 1,999,305 | (2) | |||||||||||||
22,892 | (3) | 2,674,199 | (3) | |||||||||||||
Davis | N/A | N/A | 5,416 | (1) | 656,233 | (1) | ||||||||||
16,570 | (2) | 1,912,509 | (2) | |||||||||||||
21,986 | (3) | 2,568,742 | (3) | |||||||||||||
Eglinton Manner | N/A | N/A | 4,483 | (1) | 543,183 | (1) | ||||||||||
13,181 | (2) | 1,521,351 | (2) | |||||||||||||
17,664 | (3) | 2,064,534 | (3) | |||||||||||||
Doherty | 37,565 | 2,292,040 | 3,623 | (1) | 438,984 | (1) | ||||||||||
11,299 | (2) | 1,304,131 | (2) | |||||||||||||
14,922 | (3) | 1,743,115 | (3) |
Name | Option Awards | Stock Awards | |||||
Number of Shares Acquired on Exercise | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting | Value Realized on Vesting ($) | ||||
Davis | N/A | N/A | 6,421 | (1) | 835,572 | (1) | |
19,856 | (2) | 2,583,067 | (2) | ||||
26,277 | (3) | 3,418,639 | (3) | ||||
Samad | N/A | N/A | N/A | N/A | |||
Doherty | 40,765 | 2,549,790 | 4,324 | (1) | 562,693 | (1) | |
13,392 | (2) | 1,742,165 | (2) | ||||
17,716 | (3) | 2,304,858 | (3) | ||||
Prevoznik | 50,604 | 3,717,304 | 3,669 | (1) | 477,450 | (1) | |
11,544 | (2) | 1,501,759 | (2) | ||||
15,213 | (3) | 1,979,209 | (3) | ||||
Plewman | N/A | N/A | 1,123 | (1) | 146,138 | (1) | |
3,510 | (2) | 456,616 | (2) | ||||
4,633 | (3) | 602,754 | (3) | ||||
Former Executive Officers | |||||||
Rusckowski | 384,765 | 17,706,468 | 23,385 | (1) | 3,043,160 | (1) | |
70,184 | (2) | 9,130,237 | (2) | ||||
93,569 | (3) | 12,173,397 | (3) | ||||
Guinan | N/A | N/A | 6,537 | (1) | 850,663 | (1) | |
20,780 | (2) | 2,703,270 | (2) | ||||
27,317 | (3) | 3,553,933 | (3) | ||||
Eglinton Manner | 157,857 | 5,161,153 | 5,446 | (1) | 708,700 | (1) | |
16,162 | (2) | 2,102,515 | (2) | ||||
21,608 | (3) | 2,811,215 | (3) |
2023 Proxy Statement | 52 |
(1) | RSUs that vested and were paid during |
(2) | Performance share awards that were earned based on the performance period ending on December 31, |
(3) | Total of (1) and (2). |
This table provides information regarding participation by the named executive officers in the SDCP, the Company’s plan that provides for the deferral of compensation on a basis that is not tax-qualified. All named executive officers are eligible to participate in the SDCP. Under the SDCP, participants may defer up to 50% of their regular salary in excess of the Internal Revenue Service limit on compensation eligible for the 401(k) Plan. In addition, participants may defer up to 95% of their annual incentive compensation in excess of the Internal Revenue Service limit on compensation eligible for the 401(k) Plan. The Company provides a 100% matching credit on amounts deferred up to a maximum of 5% of eligible cash compensation, and may, in its discretion, credit additional amounts to a participant’s account. The SDCP is a non-qualified plan under the Internal Revenue Code and does not provide for guaranteed returns on plan contributions. A participant’s deferrals, together with Company matching credits, are adjusted for earnings or losses measured by the rate of return on the notional investments available under the plan to which participants allocate their accounts. Distributions are made after termination of employment or on a date, selected by the participant, prior to the termination of employment.
Name | Executive Contributions in 2021 ($)(1) | Registrant Contributions in | Aggregate Earnings in 2021(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/21 ($)(4) |
Rusckowski | 2,844,115 | 197,423 | 1,461,886 | - | 18,490,608 |
Guinan | 62,948 | 62,948 | 79,195 | - | 915,027 |
Davis | 286,156 | 57,522 | (34,715) | - | 2,737,216 |
Eglinton Manner | 50,875 | 50,875 | 56,053 | (89,319) | 354,180 |
Doherty | 92,885 | 23,221 | 594,666 | - | 3,679,876 |
Name | Executive Contributions in 2022 ($)(1) | Registrant Contributions in 2022 ($)(2) | Aggregate Earnings in 2022(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/22 ($)(4) | |||||
Davis | 373,950 | 65,873 | (377,771) | - | 2,799,268 | |||||
Samad | - | - | - | - | - | |||||
Doherty | 96,731 | 24,183 | (608,269) | - | 3,192,521 | |||||
Prevoznik | 38,670 | 38,670 | (742,089) | - | 4,743,405 | |||||
Plewman | 28,658 | 28,658 | (65,952) | - | 343,209 | |||||
Former Executive Officers | ||||||||||
Rusckowski | 2,499,351 | 131,545 | (3,160,432) | - | 17,961,072 | |||||
Guinan | 46,663 | 46,663 | (158,128) | - | 850,225 | |||||
Eglinton Manner | 33,108 | 33,108 | (73,839) | (94,494) | 252,063 |
(1) | Amounts deferred at the election of the named executive officer. These amounts are included in the |
(2) | Company matching credits. These amounts may differ from those shown in the column “All Other Compensation” in the |
(3) | Earnings (losses) on SDCP accounts. These earnings (losses) are not required to be reported as compensation in the |
53 | 2023 Proxy Statement |
(4) | All amounts contributed by a named executive officer and by the Company in prior years have been reported in the summary compensation table in our previously filed proxy statements in the year earned, to the extent that the executive was named in such proxy statement and the amounts were so required to be reported in such tables. |
During 2021,2022, the Severance Plan covered all named executive officers. The Severance Plan provides severance benefits in connection with a “qualifying termination,” which is defined to mean a termination of employment: (1) prior to a “change in control” by the Company other than for “cause” and (2) after a “change in control” by the Company other than for “cause” or by the executive officer for “good reason.”
Unless the “qualifying termination” occurs in connection with a “change in control,” the severance benefit for Schedule A participants in the Severance Plan generally is a lump sum equal to two times the executive officer’s annual base salary at the annual rate in effect on the date of termination of employment plus two times the annual award of variable compensation at the most recent target level. For Schedule B participants, the severance benefit multiplier is one time, rather than two times, annual base salary plus the annual target award of variable compensation. As of December 31, 2022, each of Mr. Rusckowski, isMr. Davis and Mr. Prevoznik was a Schedule A participant and, each of Mr. Guinan, Mr. Davis, Ms. Eglinton Manner andSamad, Ms. Doherty isand Mr. Plewman was a Schedule B participant in the Severance Plan. Each of Mr. Guinan and Ms. Eglinton Manner was also a Schedule B participant in the Severance Plan; neither qualified for benefits under the Severance Plan in connection with their departures from the Company.
The executive officer and eligible dependents would also be entitled to coverage under the Company’s group medical and life insurance benefit programs on the same terms the Company provides to similarly situated executives for up to 18 months (in the case of Schedule A participants) or up to 12 months (in the case of Schedule B participants) following a
qualifying termination. In addition, the executive officer is entitled to receive outplacement assistance for one year and a lump sum payment equal to the amount of any matching contributions or credits made by the Company to the Company’s 401(k) Plan and the SDCP on behalf of the executive officer during the year preceding termination.
Executive officers are not entitled to cash severance benefits on a “change in control.” However, the cash payments due on an involuntary termination by the Company without “cause” or by the named executive officer for “good reason” are increased if the termination occurs in connection with a “change in control.” If the “qualifying termination” occurs during the 24-month period following a “change in control,” or under certain conditions during the 6-month period prior to a “change in control” in anticipation thereof, the severance benefit for Schedule A participants in the Severance Plan will be a lump sum equal to three times the executive officer’s annual base salary and three times the annual award of variable compensation at the most recent target level. For Schedule B participants, the multiplier is two times, rather than three times, the relevant amount. In addition, the executive officer would receive a prorated lump sum payment based on the target incentive award for the year of termination. There is no enhancement to the medical and life insurance coverage and 401(K) plan and SDCP benefits described above for terminations not in connection with a “change in control.” For the treatment of stock options, RSUs and performance share grants upon an executive officer’s termination of employment with rights to receive severance or on a change in control, see “Key Terms of Equity Awards Granted in 2021”2022” beginning on page 44.49.
The Severance Plan uses the following defined terms:
• | “Cause” means the executive officer’s (1) willful and continued failure to perform duties, (2) willfully engaging in illegal conduct or gross misconduct, (3) engaging in conduct or misconduct that materially harms the reputation or financial position of the Company, (4) obstruction or failure to cooperate with any investigations, (5) commission of a felony or (6) being found liable in any SEC or other civil or criminal securities law action. | |
• | “Good reason” generally includes (1) any material adverse changes in the duties, responsibilities or status of the executive officer, (2) a material reduction in base salary or annual performance incentive target or equity incentive compensation target opportunities, (3) a relocation more than 50 miles from the executive officer’s original location that increases the executive officer’s commute by more than 50 miles, (4) the Company’s failure to continue any significant compensation and benefit plans or (5) the Company’s failure to obtain the assumption of the Company’s obligations from any successor. |
“Change in control” is defined for purposes of the Severance Plan in a manner that is substantially identical to the definition used for purposes of our equity awards (see “Key Terms of Equity Awards Granted in 2021”2022” beginning on page 44)49).
2023 Proxy Statement | 54 |
Under the Severance Plan, the named executive officers are not entitled to any severance benefits on a voluntary termination unless the voluntary termination is in connection with a “change in control” and is for “good reason.” However, in addition to his benefits under the Severance Plan, Mr. Rusckowski iswas entitled, pursuant to his employment agreement, to treat as a “qualifying termination” under the Severance Plan a termination by him for “good reason” prior to a “change in control,” and his severance upon a “qualifying termination” will include a pro rata bonus, based on actual performance, for his termination year.
This
The following table provides information regarding the potential payments that would become payable to each named executive officer that remained an employee on December 31, 2022 on an involuntary termination not for “cause” and not in connection with a “change in control.” TheIn calculating the value of accelerated vesting of equity awards, the table assumes a December 31, 2021 termination date and the closing price of the Company’s common stock as of December 31, 2021,2022, which was $173.01.$156.44.
Accelerated | |||
Vesting of | |||
Cash | Performance | ||
Compensation | Shares | Total | |
Name | ($)(1) | ($)(2) | ($)(3) |
Rusckowski (4) | 6,250,000 | 18,581,620 | 25,121,620 |
Guinan | 1,235,000 | 4,762,619 | 6,127,619 |
Davis | 1,197,000 | 4,602,758 | 5,929,758 |
Eglinton Manner | 1,080,000 | 3,811,583 | 5,011,583 |
Doherty | 1,006,250 | 3,093,592 | 4,189,842 |
Name | Cash Compensation ($)(1) | Accelerated Vesting of Performance Shares ($)(2) | Total ($)(3) | |||||||||
Davis | 5,500,000 | 4,008,306 | 9,668,306 | |||||||||
Samad | 1,235,000 | 223,866 | 1,498,866 | |||||||||
Doherty | 1,050,000 | 2,233,650 | 3,383,650 | |||||||||
Prevoznik | 1,819,000 | 1,897,461 | 3,846,461 | |||||||||
Plewman | 892,500 | 655,640 | 1,648,140 | |||||||||
Former Executive Officers | ||||||||||||
Rusckowski (4) | 6,437,500 | 18,095,571 | 24,783,071 |
(1) | Represents two times or one time (depending on whether the executive is a Schedule A or Schedule B participant in the Severance Plan) the sum of base salary plus the target annual incentive, payable at the same time annual incentives are ordinarily paid to similarly situated executives. |
(2) | Represents the value of performance shares that would have vested if the executive had terminated employment on December 31, |
(3) | Includes, for each named executive officer, the value of the following benefits: (i) the cost of group medical and life insurance coverage to the participant to the same extent as the Company pays for such coverage for similarly situated executives; (ii) the estimated cost of outplacement services for one year; and (iii) an amount, payable in a lump sum, equal to any matching contributions or credits made by the Company on behalf of the participant to the 401(k) Plan and the SDCP during the year preceding the date of termination. The value was: Mr. |
(4) | Amounts shown also would |
Mr. Guinan vested in his 2022 equity award upon in his retirement in July 2022 and his vested 2017 stock option award received retirement treatment. Pursuant to the terms of the SMIP, Mr. Guinan received a prorated annual incentive award for 2022. Ms. Eglinton Manner was not entitled to any payments or other benefit upon departure from the Company in June 2022.
This table provides information regarding the potential payments that would become payable to each named executive officer that remained an employee on December 31, 2022 on a termination for “good reason” or an involuntary termination not for “cause” in connection with a “change in control.” The table assumes a December 31, 20212022 termination date and the closing price of the Company’s common stock as of December 31, 2021,30, 2022, which was $173.01.$156.44.
Accelerated | Accelerated | |||||||||
Vesting of | Vesting of | Accelerated | ||||||||
Cash | Stock | Performance | Vesting of | |||||||
Compensation | Options | Shares | RSUs | Total | ||||||
Name | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5, 6) | |||||
Rusckowski | 9,375,000 | 18,239,898 | 37,082,444 | 7,817,111 | 72,804,453 | |||||
Guinan | 2,470,000 | 5,075,770 | 8,087,871 | 2,139,269 | 17,902,910 | |||||
Davis | 2,394,000 | 4,994,832 | 7,928,010 | 2,119,199 | 17,556,041 | |||||
Eglinton Manner | 2,160,000 | 4,246,596 | 6,702,926 | 1,819,027 | 15,048,549 | |||||
Doherty | 2,012,500 | 3,366,997 | 5,331,130 | 1,434,253 | 12,234,880 |
55 | 2023 Proxy Statement |
Name | Cash Compensation ($)(1) | Accelerated Vesting of Stock Options ($)(2) | Accelerated Vesting of Performance Shares ($)(3) | Accelerated Vesting of RSUs ($)(4) | Total ($)(5, 6) | |||||
Davis | 8,250,000 | 2,690,535 | 12,907,082 | 4,629,842 | 28,637,459 | |||||
Samad | 2,470,000 | 409,968 | 1,880,565 | 2,452,041 | 7,252,573 | |||||
Doherty | 2,100,000 | 1,360,430 | 4,447,433 | 1,141,073 | 9,148,936 | |||||
Prevoznik | 2,728,500 | 1,131,225 | 3,713,416 | 944,115 | 8,647,257 | |||||
Plewman | 1,785,000 | 405,417 | 1,554,075 | 446,636 | 4,291,129 | |||||
Former Executive Officers | ||||||||||
Rusckowski | 9,656,250 | 8,075,712 | 34,658,187 | 6,931,544 | 59,571,692 |
(1) | Represents three times or two times (depending on whether the executive is a Schedule A or Schedule B participant in the Severance Plan) the sum of base salary and target annual incentive. Excludes annual incentive compensation payable in respect of |
(2) | Represents the value of accelerated “in the money” stock options. |
(3) | Represents the value of accelerated performance shares. Performance shares for the performance period ended December 31, |
(4) | Represents the value of accelerated RSUs. |
(5) | Includes, for each named executive officer, the value of the following benefits: (i) the cost of group medical and life insurance coverage to the participant to the same extent as the Company pays for such coverage for similarly situated executives; (ii) the estimated cost of outplacement services for one year; and (iii) an amount, payable in a lump sum, equal to any matching contributions or credits made by the Company on behalf of the participant to the 401(k) Plan and the SDCP during the year preceding the date of termination. The value was: The value was: Mr. Davis, $160,000; Mr. Samad, $40,000; Ms. Doherty, $100,000; Mr. Prevoznik, $130,000; Mr. Plewman, $100,000; and Mr. Rusckowski, |
(6) | Amounts payable under the Severance Plan upon termination of employment following a change in control are subject to reduction (“cutback”) to eliminate any loss of deduction for the Company, and any imposition of excise tax on the executive, pursuant to Sections 280G and 4999 of the Internal Revenue Code, respectively. The cutback would reduce severance and other benefits to the maximum amount that could be paid without exceeding the Section 280G |
threshold and will apply if the net after-tax amount received by the executive exceeds the net after-tax amount the executive would receive if the full benefits were paid and the excise tax imposed. Amounts shown in the table do not reflect the impact of the potential cutback. |
If the employment of a named executive officer had terminated by reason of death, disability or retirement on December 31, 2021,2022, the executive would have been entitled to accelerated vesting of stock options and RSUs in the same amounts (or in the case of retirement, a lesser amount than) shown in the foregoing table.table, and with respect to stock options, an extended exercise period of up to five years from the date of retirement. In addition, assuming that performance shares earned are the greater of (i) the number of shares that would be earned based on Company performance through December 31, 20212022 and (ii) the target number of performance shares, the executive would have been entitled to accelerated vesting of performance shares in the same amount (or in the case of retirement, a lesser amount) shown in the table. In the event of his retirement,Among our currently employed named executive officers, each of Mr. RusckowskiDavis, Ms. Doherty and Mr. GuinanPrevoznik would currently be eligible to receive retirement treatment in the event of her or his retirement (so long as there is no for “cause” basis for his termination at such time).
The named executive officers are not entitled to any benefits upon death or disability beyond what is available to other exempt employees. In the case of any termination (other than for termination for cause), named executive officers are entitled to exercise vested stock options and to receive vested and earned RSUs and performance shares. For the consequences of termination of employment on vesting of equity awards, see “Key Terms of Equity Awards Granted in 2021”2022” beginning on page 44.49. In addition, on any termination, each named executive officer is entitled to receive benefits available generally to exempt employees, such as distributions under the 401(k) Plan and SDCP. For the account balances of each named executive officer under the SDCP, see “2021“2022 Nonqualified Deferred Compensation Table” on page 48.53.
2023 Proxy Statement 56
Pay Ratio
Under SEC rules, we are required to disclose the annual total compensation of the individual identified as the median paid employee of all our employees (other than our CEO), as well as the ratio of this amount to the annual total compensation paid to our CEO. This ratio is an estimate calculated in accordance with SEC rules, which allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions based on their compensation practices. Therefore, the ratio reported by other companies may not be comparable to the ratio we report.
For 2021,2022, the annual total compensation of the individual identified as the median paid employee of all our employees (other than our CEO) was $67,206,$63,854, and the annual total compensation of our CEO was $14,574,109,$11,903,795, including, in each case, the cost of Company-paid broad-based benefits, including 401(k) and health, disability and life insurance. Therefore, our median identified employee to CEO pay ratio was estimated to be approximately 1 to 217.186.
For 2021, we used the same median employee that we identified in 2020, since there has been no change in our employee population or employee compensation arrangements that we believe would significantly impact our pay ratio disclosure.
In identifying the 20202022 median employee, we used December 31, 20202022 as our determination date and focused on our employee population as of that date. We considered the compensation of approximately 45,85246,942 individuals; this excluded approximately 700150 employees who worked at Mid America Clinical Laboratories, LLC,Pack Health, and approximately 44 employees of the outreach testing business of Summa Health, each of which we acquired in 2020.2022. Applying the 5% “De Minimis Exemption” permitted under SEC rules, we also excluded workers, representing approximately 2% of our 20202022 workforce, located in the following countries (with the number of excluded employees set forth in parentheses following the country): India (355)(273); Mexico (468)(570); Finland (153)(254); Canada (87)(60); Brazil (38)(7); Ireland (15)(19); and China (2). To identify our median employee, we used 20202022 wages reported to the Internal Revenue Service, annualized for employees who were employed on December 31, 20202022 but did not work for us for all of 2020.2022.
Equity Compensation Plan Information
This table provides information as of December 31, 20212022 about our common stock that may be issued upon the exercise of options, warrants and rights under the Company’s equity compensation plans.
Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted- average exercise price of outstanding options, warrants and rights ($) (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (c) | ||||||||||
Equity compensation plans approved by security holders | ||||||||||||
Employee Long-Term Incentive Plan (1) | 6,207,674(4) | 101.80 | 5,418,879 | (6)(7) | ||||||||
Long-Term Incentive Plan for Non-Employee Directors (2) | 76,765(5) | 87.48 | 127,972 | |||||||||
Employee Stock Purchase Plan | — | N/A | 3,148,220 | (8) | ||||||||
Equity compensation plans not approved by security holders (3) | — | N/A | — | |||||||||
Total | 6,284,439 | 101.78 | 8,695,071 |
Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted- average exercise price of outstanding options, warrants and rights ($) (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (c) | |||
Equity compensation plans approved by security holders | |||||
Employee Long-Term Incentive Plan (1) | 6,953,281(4) | 96.53 | 7,805,368 | (6)(7) | |
Long-Term Incentive Plan for Non-Employee Directors (2) | 85,575(5) | 68.31 | 140,679 | ||
Employee Stock Purchase Plan | — | N/A | 3,365,006 | (8) | |
Equity compensation plans not approved by security holders (3) | — | N/A | — | ||
Total | 7,038,856 | 96.44 | 11,311,053 |
(1) | Awards under this plan may consist of stock options, performance shares to be settled by the delivery of shares of common stock (or the value thereof), stock appreciation rights, restricted shares and RSUs to be settled by the delivery of shares of common stock (or the value thereof). |
(2) | Awards under this plan may consist of stock options or stock awards (which may consist of shares or the right to receive shares, or the value thereof, in the future). |
(3) | The table does not include 14,538 shares of common stock that were issued to the trust for the SDCP prior to May 2004 that may be distributed to participants under the SDCP. While the SDCP does not provide a stock fund as a current notional investment option, the plan includes a stock investment fund option that was frozen effective April 1, 2004. In addition, prior to January 1, 2003, Company matching credits under the SDCP were credited to participant accounts in the form of shares of common stock. Participants are no longer allowed to notionally invest in additional shares of common stock under the SDCP. |
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(4) | Includes |
(5) | Includes |
(6) | Assumes that performance shares for the performance period ended December 31, |
(7) | Awards of stock options and stock appreciation rights reduce the number of shares available for grant by one share for every share subject to the award. Awards of restricted shares, RSUs and performance shares reduce the number of shares available for grant by 2.65 shares for every one share or unit granted. Thus, if future awards under the Employee Long-Term Incentive Plan consisted exclusively of RSUs and performance shares, awards covering a maximum of |
(8) | After giving effect to shares issued in January |
Pay Versus Performance
Below is information about the relationship between executive compensation actually paid to our named executive officers and our financial performance, as prepared in accordance with SEC rules. For purposes of the Peer Group Total Shareholder Return column of the Pay Versus Performance Table, we have used the S&P 500 Health Care (Sector) Index, which we also use for purposes of the Stock Performance Graph in our 2022 Annual Report on Form 10-K.
Value of Initial Fixed $100 Investment Based On: | ||||||||||||||||||||
Year | Summary Compensation Table Total for First PEO | Summary Compensation Table Total for Second PEO | Compensation Actually Paid to First PEO (1) | Compensation Actually Paid to Second PEO (1) | Average Summary Compensation Table Total for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs (2) | Total Shareholder Return | Peer Group Total Shareholder Return (3) | Net Income (in millions) | Adjusted Earnings Per Share | ||||||||||
2022 | $15,678,164 | $11,883,027 | $9,817,267 | $12,708,474 | $3,386,412 | $291,674 | $155.48 | $140.30 | $1,015 | $9.95 | ||||||||||
2021 | $14,557,818 | N/A | $49,248,658 | N/A | $3,431,291 | $10,580,653 | $168.62 | $143.09 | $2,080 | $14.24 | ||||||||||
2020 | $14,081,608 | N/A | $30,970,593 | N/A | $3,577,382 | $7,199,065 | $114.04 | $113.45 | $1,499 | $11.18 |
The following table sets forth, for each year reported in the Pay Versus Performance Table, the principal executive officer or principal executive officers included in the Pay Versus Performance Table and the adjustments (i.e., amounts deducted and added) made to each principal executive officer’s Summary Compensation Table Total to determine the Compensation Actually Paid to each principal executive officer. The valuation methodology (including assumptions) used to the determine the fair value of equity awards for purposes of determining the Compensation Actually Paid to each principal executive officer is the same as set forth in footnote 3 to the Summary Compensation Table (see page 45).
PEO | Adjustments made to Summary Compensation Table Total to determine Compensation Actually Paid | ||||
2022 | Stephen H. Rusckowski | $8,350,579 of stock awards and $2,874,884 of option awards was subtracted and replaced with: ● $17,879,280, representing year end fair value of stock and option awards granted in 2022 | that remained unvested and outstanding at the end of 2022; ● $(3,439,186) representing the change in fair value as of the end of 2022 (from the end of the prior fiscal year) of stock and option awards granted prior to 2022 that remained unvested and outstanding at the end of 2022; |
2023 Proxy Statement | 58 |
● $(9,191,272), representing the change in fair value as of the vesting date (from the end of the prior fiscal year) of stock and option awards granted prior to 2022 that vested in 2022, and ● $115,743, representing the amount of dividend equivalents paid on equity awards in the fiscal year prior to the vesting date that is not otherwise reflected in the fair value of such award or included in total compensation for the covered fiscal year. | ||
James E. Davis | $8,542,446 of stock awards and $1,249,946 of option awards was subtracted and replaced with: ● $13,893,488, representing year end fair value of stock and option awards granted in 2022 that remained unvested and outstanding at the end of 2022; ● $(757,182), representing the change in fair value as of the end of 2022 (from the end of the prior fiscal year) of stock and option awards granted prior to 2022 that remained unvested and outstanding at the end of 2022; ● $(2,556,979), representing the change in fair value as of the vesting date (from the end of the prior fiscal year) of stock and option awards granted prior to 2022 that vested in 2022; and ● $38,512, representing the amount of dividend equivalents paid on equity awards in the fiscal year prior to the vesting date that is not otherwise reflected in the fair value of such award or included in total compensation for the covered fiscal year. | |
2021 | Stephen H. Rusckowski | $7,631,057 of stock awards and $2,624,978 of option awards was subtracted and replaced with: ● $23,985,936, representing year end fair value of stock and option awards granted in 2021 that remained unvested and outstanding at the end of 2021; ● $19,873,591, representing the change in fair value as of the end of 2021 (from the end of the prior fiscal year) of stock and option awards granted prior to 2021 that remained unvested and outstanding at the end of 2021; ● $979,266, representing the change in fair value as of the vesting date (from the end of the prior fiscal year) of stock and option awards granted prior to 2021 that vested in 2021; and ● $108,082, representing the amount of dividend equivalents paid on equity awards in the fiscal year prior to the vesting date that is not otherwise reflected in the fair value of such award or included in total compensation for the covered fiscal year. |
2020 | Stephen H. Rusckowski | $7,279,883 of stock awards and $2,500,020 of option awards was subtracted and replaced with: ● $12,461,465, representing year end fair value of stock and option awards granted in 2020 that remained unvested and outstanding at the end of 2020; ● $13,275,387, representing the change in fair value as of the end of 2020 (from the end of the prior fiscal year) of stock and option awards granted prior to 2020 that remained unvested and outstanding at the end of 2020; |
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● $840,514, representing the change in fair value as of the vesting date (from the end of the prior fiscal year) of stock and option awards granted prior to 2020 that vested in 2020; and ● $91,523, representing the amount of dividend equivalents paid on equity awards in the fiscal year prior to the vesting date that is not otherwise reflected in the fair value of such award or included in total compensation for the covered fiscal year. |
The following table sets forth, for each year reported in the Pay Versus Performance Table, the named executive officers (other than the principal executive officer) included in the calculation of the average Compensation Actually Paid to non-principal executive officer named executive officers and the adjustments (i.e., amounts deducted and added) made to the Summary Compensation Table Total of the relevant named executive officers to determine the average Compensation Actually Paid to the relevant named executive officers. The valuation methodology (including assumptions) used to the determine the fair value of equity awards for purposes of determining the average Compensation Actually Paid to the named executive officers is the same as set forth in footnote 3 to the Summary Compensation Table (see page 45).
Year | Other NEOs | Adjustments made to Summary Compensation Table Total to determine Compensation Actually Paid (amounts reported are averages for non-NEO PEOS together) |
2022 | Sam A. Samad Mark J. Guinan | $10,538,150 of stock awards and $2,950,287 of option awards was subtracted and replaced with: ● $11,363,039, representing year end fair value of stock and option awards granted in 2022 that remained unvested and outstanding at the end of 2022; ● $(1,070,571), representing the change in fair value as of the end of 2022 (from the end of the prior fiscal year) of stock and option awards granted prior to 2022 that remained unvested and outstanding at the end of 2022; ● $(10,363,713), representing the change in fair value as of the vesting date (from the end of the prior fiscal year) of stock and option awards granted prior to 2022 that vested in 2022; ● $1,801,440, representing the fair value as of the vesting date of stock and option awards granted in 2022 that vested in 2022; ● $(6,904,641), representing the fair value as of December 2021 of stock and option awards granted prior to 2022 that failed to vest in 2022; and ● $94,454, representing the amount of dividend equivalents paid on equity awards in the fiscal year prior to the vesting date that is not otherwise reflected in the fair value of such award or included in total compensation for the covered fiscal year. |
2021 | Mark J. Guinan James E. Davis Carrie Eglinton Manner Catherine T. Doherty | $5,587,942 of stock awards and $2,459,643 of option awards was subtracted and replaced with: ● $18,370,839, representing year end fair value of stock and option awards granted in 2021 that remained unvested and outstanding at the end of 2021; ● $17,193,322, representing the change in fair value as of the end of 2021 (from the end of the prior fiscal year) of stock and option awards granted prior to 2021 that remained unvested and outstanding at the end of 2021; ● $976,420, representing the change in fair value as of the vesting date (from the end of the prior fiscal year) of stock and option awards granted prior to 2021 that vested in 2021; and |
2023 Proxy Statement | 60 |
● $104,453, representing the amount of dividend equivalents paid on equity awards in the fiscal year prior to the vesting date that is not otherwise reflected in the fair value of such award or included in total compensation for the covered fiscal year. | ||
2020 | Mark J. Guinan Manuel O. Mendez | $5,868,908 of stock awards and $2,580,046 of option awards was subtracted and replaced with: ● $10,627,143, representing year end fair value of stock and option awards granted in 2020 that remained unvested and outstanding at the end of 2020; ● $11,331,221, representing the change in fair value as of the end of 2020 (from the end of the prior fiscal year) of stock and option awards granted prior to 2020 that remained unvested and outstanding at the end of 2020; ● $831,476, representing the change in fair value as of the vesting date (from the end of the prior fiscal year) of stock and option awards granted prior to 2020 that vested in 2020; and ● $145,844, representing the amount of dividend equivalents paid on equity awards in the fiscal year prior to the vesting date that is not otherwise reflected in the fair value of such award or included in total compensation for the covered fiscal year. |
For purposes of the Peer Group Total Shareholder Return column of the Pay Versus Performance Table, we have used the S&P 500 Health Care (Sector) Index, which we also use for purposes of the Stock Performance Graph in our 2022 Annual Report on Form 10-K.
Tabular List
The following tabular list sets forth those measures, which, in our assessment, represent the two financial performance measures and the two non-financial performance measures that we use to link the compensation paid to our named executive officers for fiscal year 2022 to Company performance. See Compensation Discussion and Analysis, beginning on page 24 for more information about these measures.
Financial Performance Measures |
Adjusted Earnings Per Share |
Base Business Revenues |
Non-Financial Performance Measures |
Covid-19 Response |
Medical Quality/Customer Experience/Employee Engagement/ESG Goals |
Descriptions of Pay Versus Performance Relationships
The following graph shows, for each of the three disclosed years: (i) the Compensation Actually Paid to the principal executive officers, (ii) the average Compensation Actually Paid to the other named executive officers and (iii) the Company’s cumulative total stockholder return (assuming an initial $100 investment).
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The following graph shows, for each of the three disclosed years (i) the Compensation Actually Paid to the principal executive officers, (ii) the average Compensation Actually Paid to the other named executive officers and (iii) the Company’s Net Income.
The following graph shows, for each of the three disclosed years: (i) the Compensation Actually Paid to the principal executive officers, (ii) the average Compensation Actually Paid to the other named executive officers; and (iii) the Company’s Adjusted Diluted Earnings per share.
2023 Proxy Statement | 62 |
The following graph shows, for each of the three disclosed years: (i) the Company’s Cumulative total stockholder return; and (ii) the Cumulative total stockholder return of the Company’s peer group (assuming an initial $100 investment).
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Audit
Proposal No. 3—4 — Ratification of Appointment of Independent Registered Public Accounting Firm
The Board of Directors recommends that you vote FOR ratification of the appointment of PwC as our independent registered public accounting firm for |
We recommend that stockholders ratify the selection of PricewaterhouseCoopers LLP (“PwC”) as the independent registered public accounting firm retained to audit the Company’s consolidated financial statements and internal control over financial reporting for 2022.2023. Although ratification is not required, the Audit and Finance Committee (the “Committee”) is submitting this proposal to stockholders as a matter of good corporate practice. If the appointment of PwC is not ratified, the Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if the selection is ratified, the Committee may select a different independent registered public accounting firm at any time during the year if it determines that a change would be in the best interest of the Company and its stockholders.
The Committee is directly responsible for the appointment, compensation (including approval of the audit fee), retention and oversight of the independent registered public accounting firm retained to audit the Company’s consolidated financial statements and internal control over financial reporting. In order to assure continuing auditor independence, the Committee periodically considers whether there should be regular rotation of the independent registered public accounting firm. Further, in conjunction with the mandated rotation of the independent registered public accounting firm’s lead engagement partner, the Committee and its chair are directly involved in the selection of the lead engagement partner. The Committee has selected PwC as our independent registered public accounting firm for 2022.2023. PwC, or one of its predecessor firms, has served as the Company’s independent registered public accounting firm continuously since 1995.
The Committee annually reviews the independence and performance of PwC in deciding whether to retain PwC or engage another firm as our independent registered public accounting firm. In the course of these reviews, the Committee considers, among other things:
Retention of PwC |
Tenure Benefits |
Higher audit quality. With over 25 years of experience with the Company, including numerous statutory audits in multiple jurisdictions, PwC has gained institutional knowledge of and deep expertise regarding our complex operations and business, accounting policies and practices, and internal control over financial reporting. |
Efficient fee structure. The aggregate fees of PwC are competitive with peer companies because of its familiarity with our business. |
No onboarding or educating new auditor. Bringing on a new auditor requires a significant time commitment that could distract from management’s focus on financial reporting, internal controls and other issues. |
2023 Proxy Statement | 64 |
Independence Controls |
Thorough Audit and Finance Committee oversight. The Committee’s oversight includes private meetings with PwC (multiple times per year), a comprehensive annual evaluation by the Committee in determining whether to engage PwC, and a Committee-directed process for selecting the lead engagement partner. |
Limits on non-audit services. The Company requires Committee preapproval of non-audit services and requires that PwC is engaged only when it is best suited for the job. When considering whether to preapprove non-audit services, the Committee considers the total non-audit fees to be paid to PwC relative to total audit fees. |
Strong internal PwC independence process. PwC conducts periodic internal quality reviews of its audit work and rotates the lead engagement partner every five years. At the conclusion of the 2018 audit, the lead engagement partner was rotated. |
Strong regulatory framework. Because it is an independent registered public accounting firm, PwC is subject to PCAOB inspections, “Big 4” peer reviews, and PCAOB and SEC oversight. |
Based on this evaluation, the Committee believes that PwC is independent and that the retention of PwC to serve as the Company’s independent registered public accounting firm for 20222023 is in the best interest of the Company and its stockholders. PwC representatives are expected to attend the Annual Meeting, will have the opportunity to make a statement if they wish and are expected to be available to respond to appropriate stockholder questions.
Pre-Approval of Audit and Permissible Non-Audit Services
The Committee has established policies and procedures to pre-approve all audit and permissible non-audit services provided by the Company’s independent registered public accounting firm. Prior to engagement of the independent registered public accounting firm for the annual audit, management submits to the Committee for approval a schedule of audit, audit-related, tax and all other services for the year. The Committee pre-approves services by category, with specific dollar value limits for each category. During the year, if it becomes desirable to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval, such services will be presented to the Committee for approval. The Committee also has delegated to its chair the authority to pre-approve services, subject to certain dollar limitations. Pre-approvals by the Committee chair are communicated to the Committee at its next scheduled meeting.
Fees and Services of PwC
Aggregate fees for professional services rendered for the Company by PwC for the years ended December 31, 2022 and 2021 and 2020 were:
2021 ($) | 2020 ($) | ||
Audit Fees | 3,447,587 | 3,889,300 | |
Audit Related Fees | — | — | |
Tax Fees | 315,227 | 88,742 | |
All Other Fees | 4,739 | 4,500 | |
Total Fees | 3,767,553 | 3,982,542 |
2022 ($) | 2021 ($) | |||||||
Audit Fees | 3,622,200 | 3,447,587 | ||||||
Audit Related Fees | -- | -- | ||||||
Tax Fees | 425,273 | 315,227 | ||||||
All Other Fees | 4,150 | 4,739 | ||||||
Total Fees | 4,051,623 | 3,767,553 |
Audit Fees were for services including professional services rendered for the audits of the Company’s consolidated financial statements and COVID-19 testing for uninsured program under the CARES Act; statutory audits and subsidiary audits; assistance with review of documents filed with the SEC; and professional services rendered for the audit of the Company’s internal control over financial reporting.
Audit Related Fees. None were incurred in 20212022 or 2020.2021.
Tax Fees were for services related to tax planning and tax advice, including assistance with and representation before U.S. and certain non-U.S. authorities; and services related to tax compliance, including preparation of tax returns and claims for refunds, primarily for non-U.S. tax matters. Tax Fees related to tax planning and tax advice were $315,227$425,273 and $88,742
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$ 315,227 in 20212022 and 2020,2021, respectively. None of these fees related to tax planning for any of the Company’s directors or executive officers.
All Other Fees were for software licenses related to access to on-line technical accounting and reporting resource materials.
Audit and Finance Committee Report
The primary purposes of the Audit and Finance Committee are: (1) to assist in the Board’s oversight of (a) the quality and integrity of the Company’s financial statements and related disclosures, (b) the independent registered public accounting firm’s qualifications and independence and (c) the performance of the Company’s internal audit function and independent registered public accounting firm; and (2) to provide advice to the Board on financing activities and other financial matters.
Management is responsible for establishing and maintaining adequate internal financial controls for the Company’s financial statements and public reporting process. Our independent registered public accounting firm, PwC, is responsible for expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles and on the Company’s internal control over financial reporting.
In the performance of its oversight role, the Committee reviews the Company’s internal financial controls, financial statements and public reporting process, and regularly meets with both management and PwC to discuss these matters. The Committee also regularly meets privately with PwC and internal auditors, both of which have unrestricted access to the Committee, to discuss these matters. In addition, the Committee reviews, acts on and makes recommendations regarding the Company’s financing plans and other significant financial policies and actions.
The Committee reviewed and discussed with management and PwC the audited financial statements for the year ended December 31, 20212022 and the evaluation by PwC of the Company’s internal control over financial reporting. The Committee also discussed with PwC the matters required to be discussed by applicable PCAOB standards. In addition, the Committee received from and discussed with PwC the written disclosures and the letter required by PCAOB rules regarding the communication of PwC with the Committee concerning independence, and discussed with PwC that firm’s independence. In addition, the Committee concluded that the provision by PwC of audit and non-audit services to the Company is compatible with PwC’s independence.
Based on these reviews and discussions, the Committee recommended to the Board the inclusion of Quest Diagnostics’ audited financial statements for the fiscal year ended December 31, 20212022 in the Company’s Annual Report on Form 10-K.
Audit and Finance Committee
Tracey C. Doi
Wright L. Lassiter III
Timothy L. Main
Gary M. Pfeiffer, Chair
Gail R. Wilensky
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE INSTRUCTED.
Proposal No. 4—Amendment to our Restated Certificate5 — Approval of Incorporation to Allow Stockholders to Act by Non-Unanimous Consentthe Employee Equity Plan
The Board of Directors recommends that you vote FOR this |
2023 Proxy Statement | 66 |
Upon the recommendation of its Compensation and Leadership Development Committee (the “Committee”), our Board has unanimously approved amendments to the Employee Plan. Our Board recommends that our stockholders approve the Employee Plan at the Annual Meeting. The Employee Plan was initially adopted in 2005 and amendments thereto were most recently approved by our stockholders in 2019. The Employee Plan allows for awards in the form of stock options, stock appreciation rights (“SARs”) and stock awards, including restricted shares, performance shares and RSUs.
The Board is submitting for stockholder approval a proposal to adoptAs discussed in the Compensation Discussion and Analysis, long-term equity compensation plays an amendment to Paragraph 8important part of our Restated Certificatepay-for-performance philosophy. Equity awards under the Employee Plan benefit our stockholders by providing a means to attract, retain and reward individuals upon whom the long-term financial success of Incorporationthe Company largely depends. Equity awards encourage the recipients to allowidentify their success with that of the Company’s stockholders who complyand to increase their proprietary interest in the Company.
We are asking our stockholders to approve the Employee Plan. The principal amendments to the Employee Plan:
● | Increase the number of shares available for awards made under the Employee Plan by 7.6 million shares. If approved, an aggregate of about 11.4 million shares will be available for awards made under the Employee Plan, inclusive of the approximately 3.8 million shares remaining under the Employee Plan after the February 23, 2023 awards; and |
● | Revise the termination of the Employee Plan to the date of the Company’s 2031 annual meeting of stockholders. |
The following table provides information regarding outstanding equity awards and shares available for future awards under the Employee Plan and the Director Plan on March 1, 2023.
Total shares underlying outstanding stock options | 4,763,789 | |
Weighted average exercise price of outstanding stock options | $105.14 | |
Weighted average remaining contractual life of outstanding stock options (years) | 6.26 | |
Total outstanding and unvested performance shares at target | 453,767 | |
Total outstanding and unvested restricted stock units | 646,911 | |
Shares available for future awards that could be issued under Employee Plan or Director Plan | 3,837,606 |
Of the shares remaining available for future awards shown in the table above, 3,708,605 shares remain available under the Employee Plan and 129,001 shares remain available under the Director Plan. We have no equity awards outstanding other than stock options, restricted stock units and performance awards (in the form of performance shares).
If stockholders fail to approve the Employee Plan, the amendments will not be given effect, and the Employee Plan will continue as in effect prior to amendment.
Increase in Shares Available for the Employee Plan
We are amending the Employee Plan so that an aggregate of 11,437,606 shares will be available for awards made under the Employee Plan after February 23, 2023. Based on historical granting practices and the recent trading price of the Company’s common stock, if the amendment is approved, we expect the shares available under the Employee Plan to be sufficient to provide for approximately 5 additional years of awards.
Our Board believes that this increase in shares available under the Employee Plan is in the best interests of our stockholders for the following reasons.
Equity awards foster an employee ownership culture and motivate employees to create stockholder value. The use of equity as part of our compensation program is critical to the historical and continued success of Quest Diagnostics. Our equity awards foster an ownership culture among employees by aligning their financial interests with those of stockholders. Our equity awards help motivate employees to perform at peak levels because the value of these awards is linked to the Company’s long-term performance. Currently, approximately 900
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employees have equity awards under the Employee Plan. The increase in the shares available for awards will enable the Company to continue offering competitive compensation opportunities that foster our ownership culture.
The terms of our annual equity awards are designed to align with stockholder interests. The Committee determines the vesting, payment and cancellation provisions of annual equity awards. Our stock options and RSUs generally vest in one-third increments on each of the first three anniversaries of the grant date and our performance shares generally vest after three years only to the extent that we have met performance targets over a three-year period. These terms are designed to encourage employees to focus on the long-term success of the Company.
Equity awards are an important recruitment and retention tool. The Company would be at a competitive disadvantage if it could not compensate its employees using equity awards. The Company operates in an intensely competitive environment and our success is closely correlated with recruiting and retaining talented employees and a strong management team. A competitive compensation program is essential to our long-term performance. Our Board believes that equity awards are useful and sometimes necessary to attract and retain highly talented employees, particularly employees at senior management levels.
The Employee Plan and our equity awards reflect best practices. The Employee Plan and the terms of our equity awards incorporate best practices that are designed to further align the interests of participants with the requirements set forth in our Restated Certificateinterests of Incorporation to take certain actions by written consent in lieustockholders.
● | No “evergreen” provision. The Employee Plan does not contain an “evergreen” or similar provision. Instead, the Employee Plan fixes the number of shares available for future grants and does not provide for any increase based on increases in the number of outstanding shares of common stock. | |
● | Sole vehicle for our employee equity awards. The Employee Plan is the only Company plan under which equity-based compensation currently may be awarded to our executives and other employees | |
● | Fungible Share Ratio. Awards of shares or the right to receive shares (or their cash equivalent or combination of both) in the future without exercise prices are counted against the share limits of the Employee Plan as 2.65 shares of common stock. | |
● | No repricing of stock options or SARs. The Employee Plan prohibits the repricing or cash buyout of stock options and SARs without stockholder approval. | |
● | No discounted stock options or SARs. All stock options and SARs must have an exercise price or base price equal to or greater than the fair market value of the underlying Common Stock on the date of grant. | |
● | No liberal share counting rules. The Employee Plan prohibits the reuse of shares withheld or delivered to satisfy the exercise price of an option or SAR or to satisfy tax withholding requirements. The Employee Plan also prohibits “net share counting” upon the exercise of options or SARs. | |
● | Minimum vesting. Awards may not have a vesting schedule that allows for vesting prior to the first anniversary of grant, subject to limited exceptions for substitute awards and for not more than 5% of the shares available for issuance. | |
● | “Double trigger” change in control vesting. The Employee Plan provides that equity awards have “double trigger” vesting upon a change in control. Under this approach, the award vests in connection with a change in control only if the executive’s employment is terminated within two years after a change in control. | |
● | Awards subject to forfeiture/clawback. Our annual awards generally are subject to cancellation for, among other things, engaging in competitive activity, soliciting clients or employees, violating confidentiality obligations to the Company, making any false attestation under our share ownership guidelines or causing the Company to suffer financial harm or damage to its reputation through dishonesty, violation of law or the Company’s Corporate Compliance Manual or other written policies, or material deviation from the duties a participant owes to the Company. In addition, equity awards are subject to the Incentive Compensation Recoupment Policy discussed under the heading “Clawback Policy” beginning on page 50. | |
● | Stockholder Approval Requirements. Stockholder approval is required prior to any amendment that would (i) |
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increase the total number of shares available for awards under the Employee Plan or the other number of share limitations described above (except for the anti-dilution adjustments described below), (ii) lower the exercise price of any stock option or SAR, or (iii) decrease the minimum exercise price at which stock options and SARs may be granted. |
Extension of athe Plan Term
We are amending the Employee Plan so that it terminates at the 2031 annual meeting of stockholders, with not less thaninstead of the minimum number of votes that would be necessary to take such action if the matter was presented at a2027 annual meeting of stockholders atstockholders.
Description of the Employee Plan
The following summary describes the principal features of the Employee Plan, as amended. The summary does not purport to be complete and is qualified in its entirety by reference to the terms of the amended Employee Plan, a copy of which allis attached to this proxy statement as Annex C.
Eligibility. Awards may be granted to any employee of the Company or of any corporation (or a partnership or other enterprise) in which the Company directly or indirectly either (i) owns or controls 50% or more of the outstanding shares of stock normally entitled to vote thereon were presentfor the election of directors (or comparable equity participation and voted (the “Written Consent Amendment”). Currently, our Restated Certificate of Incorporation permits stockholder action by consent in lieu ofvoting power) or (ii) has at least a meeting of stockholders20% equity or similar interest and whose employees are designated as eligible to receive awards under the Employee Plan. There are more than 1,050 persons who are eligible to receive awards under the Employee Plan; however, the Employee Plan only if such consent is unanimous. The Board recommends that stockholders vote in favor of adoption of the Written Consent Amendment.establishes eligibility and does not confer a right to receive an award.
Shares Underlying Awards. The text ofshares underlying awards granted under the proposed amendments to the Restated Certificate of Incorporation representing the Written Consent Amendment is contained in Annex B. Stockholders should review Annex B, together with the Company’s existing Restated Certificate of Incorporation, which is included as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC.
At our 2021 annual meeting, we received a stockholder proposal requesting that the Board take the necessary steps to permit stockholders to act by consent in lieu of a meeting of stockholders with the minimum number of votes that would be necessary to take such action if the matter was presented at a meeting of stockholders at which all shares entitled to vote thereon were present and voted. The holders of 50.6% of the voting power of the outstandingEmployee Plan are shares of the Company’s common stock, voted in favorpar value $0.01 per share. The closing price of the stockholder proposal.common stock on the New York Stock Exchange on March 15, 2023 was $132.85.
We valueStock Available for the perspectives of our stockholders, have a strong record of stockholder engagement, and are responsivePlan. The Employee Plan will permit up to stockholder concerns. In light11,437,606 shares to be delivered pursuant to awards made after February 23, 2023. This amount is inclusive of the resultsshares previously authorized by stockholders for the Employee Plan and that remain available for future awards.
The Employee Plan utilizes a “fungible pool” method of counting awards against the voteoverall limit on shares available under the Employee Plan. Shares subject to stock options and SARs count against the overall share limit on the stockholder proposal atbasis of one share for every share subject to the 2021 annual stockholders meeting,award, while shares subject to stock awards without exercise prices (which include restricted shares, performance shares and RSUs) count against the Board consideredoverall share limit on the advantages and disadvantagesbasis of providing stockholders with2.65 shares for every share subject to the ability to act by non-unanimous written consentaward. For example, if in lieuthe past we granted an award of a meeting of stockholders. Following this review, and after considering100 RSUs, we would reduce the recommendation of the Board’s Governance Committee, the Board determined that the Written Consent Amendment is advisable and to recommend that stockholders vote in favor of the adoption of the Written Consent Amendment.
The Board is proposing the Written Consent Amendment to permit stockholders who comply with certain procedural and other requirements to act by consent in lieu of a meeting of stockholders with not less than the minimum number of votes that would be necessaryshares available under the Employee Plan by 265 shares.
Share Counting Rules. Shares delivered under the Employee Plan which are forfeited back to take such action if the matter was presented at a meeting of stockholders at which all shares entitled to vote thereon were present and voted. The Written Consent Amendment includes procedural and other safeguards that the Board believes are in the best interests of the Company, and its stockholdersshares covered by an award granted under the Employee Plan which is forfeited, cancelled, expires or is settled in cash are added back to protect the Company and its stockholders against potential risks associated with permitting stockholdersnumber of shares available. However, the following shares will not be added back to act by non-unanimous written consent, including requirements intended to promote transparency and a deliberative process, as highlighted below.the number of shares available:
● | Shares that are tendered or withheld to satisfy the tax withholding obligations arising in connection with the vesting, exercise or settlement of an award; | |||
● | Shares covered by a net share-settled stock option or a stock-settled SAR; and | |||
● | Shares repurchased on the open market with cash the Company receives in payment of the exercise price of an award. |
Individual Limits. The number of shares subject to stock options and SARs that may be awarded to any individual during any fiscal year of the Company is limited to 2,000,000, and the number of shares subject to stock awards that may be awarded to any individual during any fiscal year of the Company is limited to 1,000,000.
Anti-dilution Adjustments. In the event of any change in the common stock by reason of any stock dividend or certain significant corporate transactions affecting the common stock, the number and kind of shares subject to outstanding awards under the Employee Plan, the exercise price of outstanding stock options and SARs, and the share limits referred
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to above (including the overall number of shares available for future awards) shall be appropriately adjusted to prevent substantial dilution or enlargement of the rights of participants in the Employee Plan.
Administration. The Committee administers the Employee Plan. Among other things, the Committee determines the recipients of awards, the number of shares covered by awards, and the other terms and conditions of awards (including the effects of a termination of employment), stockholders requesting action by written consent must provide the Company with certain information and representations including, but not limitedsubject to the requirements of the Employee Plan. Except with regard to awards to employees subject to Section 16 of the Exchange Act, the Committee may delegate certain responsibilities and powers to one or more officers, including executive officers. In addition, as discussed in the Compensation Discussion and Analysis, the Board has delegated to the Awards Committee, currently consisting of the Chief Executive Officer, the authority to grant, under limited circumstances, equity awards to employees other than executive officers, and to make corrections to awards. The Board may revoke any such delegation at any time.
Awards. The Employee Plan permits the grant of stock options, SARs and stock awards. An award may be granted separately or with another award. Awards may also be granted in tandem, so that the exercise or vesting of one award cancels another award held by the same participant.
Minimum Vesting. The applicable information and representations currently requiredvesting schedule of any Company stockholder seeking to bring business before a meeting of stockholders pursuantaward granted under the Employee Plan may not provide for vesting prior to the advance notice provisions containedfirst anniversary of grant. In practice, our vesting periods are generally longer than the required minimum. For example, our annual awards of stock options and RSUs vest ratably over three years (with the first tranche vesting on the one-year anniversary of grant), and our performance shares have a performance period of three years and a vesting period of approximately three years. The one-year minimum vesting requirement does not apply to awards we make in substitution for awards previously granted by an entity that we acquire and that were scheduled to vest less than one year from the grant of the substitute award. In addition, up to 5% of the shares available under the Employee Plan may be covered by awards that provide for vesting in less than one year following grant; we expect to use this limited exception, if at all, for awards to new hires and in other special circumstances.
Stock Options. The Employee Plan provides the following terms and conditions for stock options:
Exercise Price. The exercise price of stock options granted under the Employee Plan cannot be less than the fair market value of a share of the Company’s by-laws.
Vesting and Exercisability. The Committee has the written consent is in compliance with applicable lawauthority to determine vesting and is not duplicative, the written consent process would not be available in certain circumstances, including:
This description of the proposed Written Consent Amendment is a summary and is qualified by andexercisability conditions, subject to the full textEmployee Plan’s minimum vesting requirements.
Option Period. Each stock option will expire on the applicable date designated by the Committee but no later than ten years from the date the stock option is granted.
Stock options may be in the form of such amendments, which are attached to this proxy statement as Annex B. Additionsincentive stock options within the meaning of text are indicated by underlining and deletions of text are indicated by strike-outs.
The affirmative voteSection 422 of the holdersInternal Revenue Code or stock options which do not qualify as incentive stock options (“nonqualified stock options”). To date, all stock options granted under the Employee Plan have been nonqualified stock options.
Stock Appreciation Rights (SARs). A SAR is a right to receive a payment in cash, shares of the Company’s common stock or a combination thereof, equal to the excess of the aggregate market price at the time of exercise of a majorityspecified number of shares over the aggregate exercise price of the sharesSAR being exercised. The exercise price of our outstandingSARs granted under the Employee Plan cannot be less than the fair market value of a share of the common stock at the time of grant, subject to the same exception for substitute awards that applies to stock options. The longest term a SAR may be outstanding is required to adoptten years. SARs may be granted separately or in combination with stock options granted under the Written Consent Amendment. If adopted byEmployee Plan.
Prohibition on Repricing. The Company may not lower the stockholders,exercise price of outstanding stock options or SARs. In addition, a stock option or SAR may not be surrendered as consideration in exchange for cash or the Written Consent Amendment amending our Restated Certificate of Incorporation will become effective upon filinggrant of a Certificate of Amendment setting forthnew stock option or SAR with a lower per share exercise price or for the Written Consent Amendment with the Delaware Secretary of State (or such later time or date as may be set forth therein), which filing would be completed promptly after the Annual Meeting. If the Written Consent Amendment is approved by the stockholders, the Board will also adopt certain amendments to the Company’s by-laws to reflect the changes to the Restated Certificate of Incorporation effected by the Written Consent Amendment, which amendments will be effective upon the effectiveness of the Written Consent Amendment.
If the Written Consent Amendment is not approved and adopted by the stockholders, stockholders will not be permitted to act by non-unanimous written consent in lieugrant of a meetingstock award.
Stock Awards. A stock award is a grant of stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE INSTRUCTED.
shares or of a right to receive shares (or their cash equivalent or a combination thereof) in the future.
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Proposal No. 5—Amending our Restated Certificate of Incorporation to Permit Stockholders Holding 15% or More of our Common Stock to Cause the Company to Call Special Meetings of Stockholders
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Dividends and Dividend Equivalents. Stock awards may include the right to receive dividends or dividend equivalent payments, which either may be paid currently or credited to a participant’s account. The Board is submitting for stockholder approval a proposalCommittee may subject the payment or crediting of dividends or dividend equivalents to amend Paragraph 7 of our Restated Certificate of Incorporation to lower the share ownership threshold for stockholders to request that the Company call a special meeting to 15% from 20%, to provide for a record date to determine stockholders entitled to request a special meeting and to make related amendments (the “Special Meeting Amendment”). The Board recommends that stockholders vote in favorconditions or restrictions, including mandatory reinvestment of the Special Meeting Amendment.credited amounts in common stock equivalents. RSU awards we have made to date that are subject to vesting based upon continued service have provided for the payment of dividends or dividend equivalents on a current basis without conditions. Awards of performance shares, which vest only if performance targets are satisfied, have not provided for dividends or dividend equivalents to be paid or credited during the relevant performance period.
Performance Goals. The Committee may subject stock awards to various conditions, e.g., based on achieving certain financial or non-financial performance goals. Starting in respect of 2005, we have granted stock awards that are earned based on the attainment of a performance goal over a multi-year period. The performance measures that may be used by the Committee under the Employee Plan include the following:
• | operating profits (including EBITDA) | • | cash flow |
• | net profits | • | customer attrition |
• | earnings per share | • | productivity |
• | profit returns and margins | • | workforce diversity |
• | revenues | • | employee satisfaction |
• | cost/expense management | • | individual executive performance |
• | stockholder return and/or value | • | customer service |
• | stock price | • | quality metrics |
• | return on invested capital |
The textCommittee may establish performance goals based on other criteria as it deems appropriate.
The Employee Plan allows performance targets to be measured solely on a corporate, subsidiary or business unit basis or on a combination of these bases. Performance targets may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the proposed amendmentsselected performance criteria. Performance goals may be adjusted after their establishment in such manner as the administrator considers necessary or appropriate and, without limiting the generality of the foregoing, profits, earnings and revenues used for any performance measurement may exclude, without limitation: gains or losses on operating asset sales or dispositions, asset write-downs, litigation or claim judgments or settlements, accruals for historic environmental obligations, effect of changes in tax law or the rate on deferred tax assets and liabilities, accruals for reorganization and restructuring programs, uninsured catastrophic property losses, the effect of changes in accounting standards, the cumulative effect of changes in accounting principles, the effect of dispositions of companies or businesses (including impact to revenue and earnings), charges related to the Restated Certificateacquisition and integration of Incorporation constitutingcompanies or businesses and any items that are excluded from the Special Meeting Amendment is containedcalculation of ordinary income (or loss) as determined in Annex C. Stockholders should review Annex C, togetheraccordance with generally accepted accounting principles (which may include, without limitation, extraordinary items or significant unusual or infrequently occurring items) and/or described in management’s discussion and analysis of financial performance appearing in the Company’s existing Restated Certificateannual report to stockholders for the applicable year.
Change in Control. The Employee Plan provides that equity awards have “double trigger” vesting upon a change in control. Under this approach, the vesting, payment, purchase or distribution of Incorporation, whichan award may not be accelerated by reason of a change in control for any participant unless the participant’s employment is includedinvoluntarily terminated as an exhibit toa result of the Company’s Annual Report on Form 10-K filed withchange in control or awards are not assumed or replaced. For these purposes, a termination of employment as a result of a change in control means involuntary termination of employment other than for “cause” or by the SEC. Any special meeting request would continue to be subject to the procedural, informational and other requirements and limitations currently set forthparticipant for “good reason” (each as defined in the Restated Certificateapplicable award agreement) upon or within two years after the change in control.
The Employee Plan defines a “change in control” to mean (i) a person acquiring direct or indirect beneficial ownership of Incorporation and by-lawsCompany securities representing 40% or more of the Company.
Our Board is committed to high standardscombined voting power of corporate governance, including transparency and accountability. As part of its regular and ongoing reviewCompany’s outstanding securities; (ii) a change in the majority of the Company’s corporate governance practices and in lightBoard (not including the election of feedback from stockholders, the Board carefully considered the appropriate threshold for stockholders to be able to request a special meeting, and the process for requesting a special meeting. In its deliberations regarding this proposal, the Board balanced the benefits of permitting stockholders to call special meetings against the significant costs involved and disruption that can result in holding a special meeting of stockholders. The Board believes that allowing stockholders to request that the Company call a special meeting subject to an ownership threshold that is too low would be contrary to the interests of the Company and its stockholders as a whole, since a small minority of stockholders focused on special interests could request that the Company call a special meeting in order to address matters not of concern to other stockholders and thereby cause the Company to incur substantial expense and divert the attention of management and the Board. Providing for a record date to determine stockholders to request a special meeting enhances and clarifies the process regarding special meetings.
Following the Board’s review, and after considering the recommendation of the Board’s Governance Committee, the Board determined that the Special Meeting Amendment is advisable and to recommend that stockholders vote in favor of adopting the Special Meeting Amendment.
This description of the proposed Special Meeting Amendment is a summary and is qualifieddirectors whose election or nomination was approved by and subject to the full text of such amendments, which are attached to this proxy statement as Annex C. Additions of text are indicated by underlining and deletions of text are indicated by strike-outs.
The affirmative vote of the holders of a majority of the then incumbent Board); or (iii) consummation of a transaction in which the Company ceases to be an independent, publicly-owned corporation, the sale or other disposition of all or substantially all of the Company’s assets, or a plan of partial or complete liquidation of the Company.
Amendments. The Board may amend the Employee Plan as it deems necessary or appropriate, but must obtain the approval of the Company’s stockholders for any amendment (i) to increase the total number of shares available
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for awards under the Employee Plan or the other number of share limitations described above (except for the anti-dilution adjustments described above), (ii) to lower the exercise price of any stock option or SAR, or (iii) to decrease the minimum exercise price at which stock options and SARs may be granted.
Term. The Employee Plan shall terminate on the date of the 2031 annual meeting of stockholders. No awards may be granted after termination, but termination shall not affect any stock awards, stock options or SARs previously granted.
Plan Benefits. Future grants under the Employee Plan, if any, that will be made to eligible participants are subject to the discretion of the Committee or the Awards Committee and, therefore, are not determinable at this time.
Federal Income Tax Consequences
The following discussion is a summary of the material U.S. federal income tax consequences of awards granted under the Employee Plan under U.S. federal income tax laws as currently in effect.
Non-Qualified Stock Options. A non-qualified stock option results in no taxable income to the optionee or deduction to the Company at the time it is granted. The optionee generally will recognize ordinary taxable income upon exercise of the non-qualified stock option, in an amount equal to the excess of the fair market value of the shares received at the time of exercise (including any option shares withheld by the Company to satisfy tax withholding obligations) over the aggregate exercise price paid for the shares, and the Company will generally be allowed a deduction for the same amount (subject to Section 162(m) of the Internal Revenue Code). Upon disposition of the shares received upon exercise of the non-qualified stock option, the optionee will recognize long-term or short-term capital gain or loss, depending upon the length of time he or she held such shares. Special rules may apply if an optionee uses previously owned shares to pay the exercise price of a stock option.
Incentive Stock Options. An incentive stock option results in no taxable income to the optionee or deduction to the Company at the time it is granted or exercised. The optionee, however, may be required to recognize a preference item for alternative minimum tax purposes upon exercise of the ISO equal to the fair market value of the shares issued upon exercise over the exercise price. The optionee will recognize long-term capital gain or loss on a disposition of shares acquired upon exercise of an ISO, provided that the optionee does not dispose of the shares within two years from the date the ISO was granted and within one year after the shares were acquired by the optionee. If the optionee satisfies both of the holding periods described above, then the Company will not be allowed a deduction by reason of the exercise of the ISO. If the optionee disposes of the shares acquired upon exercise before satisfying the holding period requirements discussed above (a “disqualifying disposition”), his or her gain recognized on the disqualifying disposition will be taxed as ordinary income to the extent of the difference between the fair market value of the shares on the date of exercise and exercise price of the ISO, and the Company will be entitled to a deduction in this amount (subject to Section 162(m) of the Internal Revenue Code). The gain (if any) in excess of the amount recognized as ordinary income on a disqualifying disposition will be long-term or short-term capital gain, depending upon the length of time the optionee held the shares.
Stock Appreciation Rights. The grant of a SAR will not be a taxable event to the participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the fair market value of the shares or cash distributed to the participant. A corresponding deduction will be allowable to the Company (subject to Section 162(m) of the Internal Revenue Code).
Stock Awards. The U.S. federal income tax consequences of stock awards depend on the form of the award.
Restricted Shares. A participant who is awarded restricted shares will not be taxed at the time of grant unless the shares are either substantially vested at grant or the participant makes an election with the Internal Revenue Service pursuant to Section 83(b) of the Internal Revenue Code as discussed below. Upon lapse of the risk of forfeiture or restrictions on transferability applicable to the restricted shares, the participant will be taxed at ordinary income tax rates on the then fair market value of the shares. A deduction corresponding to the amount of income recognized generally will be allowable to the Company (subject to Section 162(m) of the Internal Revenue Code). The participant’s tax basis in the shares will be equal to the ordinary income recognized. Upon subsequent disposition of the shares, the participant will realize long-term or short-term capital gain or loss, depending on how long the participant holds the shares before disposing of them.
Pursuant to Section 83(b) of the Internal Revenue Code, a participant may elect within 30 days of receipt of an award of restricted shares to be taxed at ordinary income tax rates on the fair market value of the shares comprising such award at the time of award (determined without regard to any restrictions which may lapse) less any amount
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paid for the shares. In that case, a deduction corresponding to the amount of income recognized will be allowable to the Company (subject to Section 162(m) of the Internal Revenue Code). In addition, the participant will acquire a tax basis in the shares equal to the ordinary income that the participant recognizes at the time of grant. No tax will be payable upon the lapse or release of the restrictions or at the time the shares first become transferable, and any gain or loss upon subsequent disposition will be a capital gain or loss. In the event of a forfeiture of shares of our outstanding common stock is requiredwith respect to adoptwhich a participant previously made a Section 83(b) election, the Special Meeting Amendment. If adoptedparticipant will not be entitled to a loss deduction.
Performance Shares. Performance shares are earned based upon the attainment of performance goals specified at the time of grant. A participant who receives an award of performance shares will be taxed following the end of the performance period, when the number of shares that have been earned has been determined and the shares are transferred to the participant; the amount of income recognized will equal the then fair market value of the shares that have been earned. The Company will be entitled to a corresponding deduction at that time (subject to Section 162(m) of the Internal Revenue Code). The participant’s tax basis in the shares will equal the amount taxed as ordinary income, and on subsequent disposition the participant will realize long-term or short-term capital gain or loss, depending on how long the participant holds the shares before disposing of them.
RSUs. A participant who receives RSUs will be taxed at ordinary income tax rates on the then fair market value of the shares of common stock (or if the RSUs are settled by delivery of cash, on the stockholders,amount of cash) distributed at the Special Meeting Amendment amending our Restated Certificatetime of Incorporationsettlement of the RSUs. A corresponding deduction will become effective upon filingbe allowable to the Company at that time (subject to Section 162(m) of the Internal Revenue Code). The participant’s tax basis in the shares will equal the amount recognized as ordinary income, and on subsequent disposition the participant will realize long-term or short-term capital gain or loss, depending on how long the participant holds the shares before disposing of them.
Section 162(m). Section 162(m) of the Internal Revenue Code generally limits the federal income tax deduction for compensation paid to the Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers of a Certificate of Amendment setting forthpublicly held corporation to $1 million per fiscal year, as well as individuals who previously held these positions. The Company reserves the Special Meeting Amendment withright to pay its employees, including participants in the Delaware Secretary of State (or such later time asEmployee Plan, amounts which may not be set forth therein), which filing would be completed promptly after the Annual Meeting. If the Special Meeting Amendment is approved by the stockholders, the Board will also adopt amendments to the Company’s by-laws to provide for certain procedural and disclosure requirements in connection with the Special Meeting Amendment, to be effective upon the effectivenessdeductible under Section 162(m) or other provisions of the Special Meeting Amendment.Internal Revenue Code.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE INSTRUCTED.
Proposal No. 6—Stockholder Proposal Regarding the Right to Call Special Meetings of StockholdersGreenhouse Gas Reduction and Transition Plan
John Chevedden, 2215 Nelson Ave., No. 205, Redondo Beach, Calif. 90278, owner of 50 shares of the Company’s common stock, has notified us that he intends to present the following proposal and related supporting statement at the Annual Meeting.
Proposal 6 – Shareholder RightGreenhouse Gas Reduction and Transition Plan
WHEREAS: The Intergovernmental Panel on Climate Change has advised that greenhouse gas (GHG) emissions must be halved by 2030 and reach net zero by 2050 to Call a Special Shareholder Meetinglimit global warming to 1.5⁰C. Every incremental increase in temperature above the Paris Agreement’s goal of holding warming to 1.5⁰C will entail increasingly severe physical, transition, and systemic risks for companies and investors alike.
Shareholders ask our board to take the steps necessary to amend the appropriate company governing documents to give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting.
One of the main purposes of this proposal is to give shareholders the right to formally participate in calling for a special shareholder meeting regardless of their length of stock ownership to the fullest extent possible.
It currently takes a theoretical 20% of shares to call for a special shareholder meeting. This can be deceiving because 100% of shares owned less than 365 days continuously are excluded. Thus the shareholders who meet the 20% stock ownership requirement could determine that they own 33% ofIn its 2022 10-K, Quest Diagnostics stock when lengthnoted the physical risks of stock ownershipextreme weather events caused by climate change on its facilities, employees, consumers, and ability to conduct core business operations. Despite acknowledging these risks, the Company’s mitigation strategy falls short of what is factored out. A potential 33% stock ownership requirementneeded to callshield the Company and its investors from climate-related risks.
The Company does not have specific nor quantified GHG reduction targets, citing only further consideration of fleet electrification, analysis of risks and opportunities, and improved measurement of Scope 1 and 2 emissions.
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The company trails its competitors in setting GHG reduction targets and managing risks. Abbott Laboratories, Thermo Fisher Scientific, and Labcorp have all set, or committed to setting, near-term science-based targets with the Science Based Targets Initiative (SBTi) that cover scope 1-3 emissions. Thermo Fisher Scientific has also committed to setting a special shareholder meeting is nothinglong-term target through SBTi.
By setting science-based targets, the Company may reap benefits from increased efficiency, lower energy costs, more resilient supply chains, and better preparation for Quest managementclimate-related regulations. Investors increasingly seek disclosure of how companies are addressing climate risk and planning to brag about.
It is also importanttransition their business models to voteones that align with limiting warming to 1.5⁰C. To assist companies in developing viable transition plans, groups including We Mean Business, CDP, the Global Financial Alliance for this proposal because we gave 51% support to a 2021 proposal for a shareholder right to act by written consent.
In response toNet Zero, and the 2021 proposal with 51% support Quest management may be tempted, like a number of other managements, to give shareholders a useless right to act by written consent.
Some companiesTask Force on Climate-Related Disclosures have required that, to initiate written consent, 20% of shares must petition management for the ministerial baby step of obtaining a record date. The 2021 proposal, that received 51% support, did not call for a percentage of shares to be required to petition for a record date for written consent.provided guidance.
Once a record date is obtained then shareholders are on a tight schedule to obtain the consent of 51% of shares outstanding which is equal to 55% of the shares that vote at the annual meeting.
This turns into a classic Catch-22 dilemma for shareholders. In order to get a record date, 20% of shares must surrender their contact information to management. Thus it is easier than shooting fish in a barrel for management to go to the corporate war chest and hire professional proxy solicitors to pester the 20% of shares to change their mind and revoke their support for written consent.
Thus while the base of 20% of shares are easily venerable to management attack via deep pockets company money, shareholders must more than double their number to 51% of shares in a limited time period with money out of their own pockets.
We need a reasonable right to call for a special shareholder meeting to also make sure that management gives us a useful right toactby written consent.
Please vote yes:
Shareholder Right to Call a Special Shareholder Meeting- Proposal 6
RESOLVED: Shareholders request that Quest Diagnostics Inc., within a year, issue near and long-term science-based greenhouse gas reduction targets aligned with the Paris Agreement’s ambition of limiting global temperature rise to 1.5 ⁰C and summarize plans to achieve them. The targets should cover the Company’s full range of operational and supply chain emissions.
SUPPORTING STATEMENT: In assessing targets, we recommend:
Taking into consideration approaches used by advisory groups like the Science-Based Targets initiative;
Developing a transition plan that shows how the Company plans to meet its goals, taking into consideration criteria used by advisory groups; and
Consideration of supporting targets for renewable energy, energy efficiency, fleet electrification and other measures deemed appropriate by management.
OUR BOARD RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
The Board of Directors recommends you vote AGAINST this proposal. |
The Board of Directors recommends a vote “AGAINST” thishas carefully considered the proposal and does not believe that it is in favorthe best interests of Proposal No. 5 put forth by the Company and its stockholders at this time.
The Company supports the global effort to address climate change. We understand and recognize our responsibility to reduce our greenhouse gas emissions (“GHG emissions”) and are seeking and developing ways to transition our business to a lower carbon footprint. We are actively making efforts to reduce our GHG emissions, and we provide comprehensive and detailed annual sustainability disclosures to illustrate our progress. We currently are seeking to understand, and prepare for, proposed changes in regulatory requirements and their impact on our Company as we continue to develop our sustainability plans. We believe that taking a thoughtful approach, that takes into consideration the importance of continuing to provide patient care and providing stockholder value, rather than setting targets without careful planning and consultation with our business partners, would best assist the Company in determining the type and scope of targets or other methods by which we may further reduce our carbon footprint.
We continue to demonstrate our commitment to environmental sustainability for the following reasons.benefit of all stakeholders.
We believe that the protection of the environment is important. We are committed to reducing the negative impact our operations may have on the environment, and we are actively taking steps to improve the energy efficiency of our operations and reduce our GHG emissions. Each year, we publish a Corporate Responsibility Report that discusses our commitment to environmental sustainability and steps that we have taken in support of that commitment.
Our 2021 Corporate Responsibility Report includes disclosures under the Sustainability Accounting Standards Board (“SASB”) framework. Our report also disclosed our Scope 1 and Scope 2 GHG emissions, as well as six categories of Scope 3 emissions in North America and Latin America. We also reported on our water usage and waste. Our report discussed efforts to reduce GHG emissions, including energy efficiency measures at our facilities such as laboratory consolidation, laboratory testing platform consolidations, LED lighting retrofits, route optimization and our continuing qualification for the Environmental Protection Agency’s Green Power Partnership by exceeding 7% renewable energy use. Our report discussed our fleet conservation initiative, which we estimate resulted in a reduction of 1.8 billion pounds of CO2 and the elimination of more than 1,100 surplus vehicles in the last 15 years. Further, our report described our electric vehicle pilot project, including installing charging stations at laboratories, and how we actively work with our network of suppliers to develop products and processes that can reduce waste across our operations. Our report also provides examples of our efforts to reduce or eliminate waste and to reduce water usage.
2023 Proxy Statement | 74 |
The Company’s historicalWe have also taken steps to strengthen our sustainability reporting. For example, our Scope 1 and current corporate governance practices reflectScope 2 GHG emissions were assured by an independent third party. This step demonstrates our continuing commitment to robust, balanced corporate governance.strengthening our environmental sustainability reporting. We maintainplan to continue to increase the transparency and quality of our reporting as we develop our plan to be responsive to the coming requirements.
During 2022, we also undertook additional actions in support of our sustainability program. For example, we achieved ISO 14001 certification, an international standard for an environmental management system that is designed to improve our environmental performance through more efficient use of resources and reduction of waste, for our esoteric laboratory facility at San Juan Capistrano, California, and plan, by 2026, to achieve the certification for three additional laboratory facilities. We commenced ASHRAE Level 2 energy audits to identify energy conservation measures, and desktop energy and water audits to identify additional conservation opportunities. We also commenced work with an external provider on identifying water savings strategies.
During 2022, we also developed new sustainability initiatives. We plan to expand our electric vehicle pilot to include three additional lab locations by 2025. In addition, we plan to transition 50% of our vehicle fleet to electric or hybrid engines by 2026. By 2025, we plan to implement a strong recordwaste-to-energy strategy to divert from landfills waste from several of responsivenessour laboratory locations. We also plan by 2025 to reduce or eliminate shipped medical waste from at least four of our laboratory locations by installing on-site treatment technology.
We currently are seeking to understand, and accountabilityprepare for, proposed changes in law and their impact on our Company as we continue to stockholder concerns through implementation of strong stockholder rightsdevelop our sustainability plans.
In March 2022, the SEC proposed comprehensive and extensive stockholder engagement. The Board believeswide-ranging rules that providing stockholders with the right to causewould require the Company to callprovide extensive disclosures related to its climate risks and opportunities. These disclosures include disclosures related to targets and goals, Scope 1 and Scope 2 emissions supported by a special meeting isthird-party attestation, and possible disclosures of Scope 3 emissions, along with complex financial statement disclosures and additional disclosures focused on climate governance and risk oversight. Recently proposed legislation in California would require companies like ours operating in California to provide comprehensive GHG emission disclosures.
In November 2022, the federal government proposed a comprehensive new rule that would require large federal government contractors to disclose, on an important corporateannual basis, their GHG emissions and describe climate-related risks. The proposal also would require some contractors to adopt science-based targets for the reduction of GHG emissions. As a company that does business with federal agencies, Quest Diagnostics would be subject to these new rules.
Additionally in November 2022, the European Union adopted the Corporate Sustainability Reporting Directive (“CSRD”), which imposes new, comprehensive ESG-focused disclosure requirements on companies that are doing business in the European Union. The disclosure requirements include climate-related matters, including risks, targets and emissions disclosures, but also extend to other social and governance practicematters. Our operations in the European Union could potentially subject us to the CSRD requirements.
The scope and timing of the proposed changes are unclear. While these changes are not in effect, we have committed resources to, and focused on, understanding the challenges that enhances stockholder rights. Accordingly, in 2014,they raise related to our compliance with these comprehensive, and possibly conflicting, requirements. We are focused on, among other issues, our ability to collect the necessary data; the requisite disclosure and internal control procedures necessary to reliably report the required information; what assurance processes we may need to implement; and the necessary governance and oversight.
We believe that a thoughtful approach would best assist the Company amendedin determining the type and scope of targets or other methods by which it may further reduce GHG emissions.
We strive for meaningful, enduring change that will be impactful to our Certificatepatients, employees, business partners, communities and stockholders. We have adopted plans and taken actions, highlighted above, designed to reduce our GHG emissions, and we intend to continue to pursue a GHG emission reduction strategy in a manner consistent with the demands of Incorporationpatient care. There are, however, significant factors impacting our efforts to permit reduce emissions which we cannot control. For example, the COVID-19 pandemic has had a dramatic impact on our people, operations and priorities, altering the focus of our business by being placed on the frontlines of the healthcare emergency faced by the United States and the rest of the world.
Our approach to sustainability includes learning from our past initiatives. We believe that to be responsible to our
75 | 2023 Proxy Statement |
stockholders, owning at least 25%our experience should inform our future efforts. For example, we believe that decisions about resource allocation, changes in strategy and the timing of change should consider the demands and responsibility of patient care, available technology and developments around us. Given the potential magnitude of the changes to our organization and operations, we believe that rushing to finalize targets in the aggregatecondensed time frame the proponent suggests would not enable us adequately to reflect our best learnings and the demands of the Company’s outstanding common stock (subjectchanging laws.
As we transition to certain requirements)a post-pandemic period and operating structure, we are evaluating potential changes to cause the Company to call a special meeting of stockholders and, in 2018, the Company again amended our Restated Certificate of Incorporation to lower the ownership threshold from 25% to 20%.
In evaluating this proposal, the Board considered input from the Company’s stockholders regarding their views on the share ownership threshold for shareholders to request that the Company call a special meeting. After careful consideration of this proposal,sustainability goals, including whether the actual or perceived benefits of setting the threshold for stockholders to call a special meeting at a lower threshold outweigh the potentially negative consequences to both the Company and its stockholders associated with a lower threshold, the Board has concluded that permitting stockholders owning 10% in the aggregate of the Company’s outstanding common stock to cause the Company to call a special meeting would be detrimental to the Company and its stockholders.
The Board, as described in Proposal No. 5, is asking stockholders to approve amendments to the Company’s Restated Certificate of Incorporation to lower the share ownership threshold for shareholders to request that the Company call a special meeting to 15% from 20%. Following the Board’s deliberations, the Board determinedGHG emission reduction efforts. We believe that a 15% threshold strikes an acceptable balance between permitting stockholdersthoughtful approach to call special meetings and protecting the Company’s resources.
The calling of a special meeting of stockholders is an extraordinary event for any public company designed to address matters of such significance that cannot wait until the next annual meeting. Accordingly, the Board believes that a special meeting of stockholders should only be convened to discuss extraordinary events when fiduciary, strategic or similar considerations dictate the matter be addressed prior to the next annual meeting. The Board believes that the 10% ownership threshold to call a special meeting of stockholders is unduly low and could result in a relatively small minority of stockholders using the procedure to call a special meeting for their own special interests, which may be of little or no consequence to, and which may notsetting targets would be in the best interestsinterest of 90%all stakeholders. We believe that it would be imprudent, in this evolving and uncertain environment, to alter our present approach and hurriedly commit to targets that may be effectively superseded by changes in law, or may be unrealistic. We believe that pursuing our present path, including better understanding our ability to effect change in our operations and our organization, and the time frames it will take to achieve these changes consistent with the demands of patient care, as well as the Company’s stockholders. In fact, one of our stockholders currently holds more than 10% of our outstanding common stock; if the ownership threshold were lowered to 10% then this single stockholder – which has no fiduciary duty to the Company or its stockholders - would have the ability,attendant investments and costs, is in its sole discretion, to cause the Company to call a special meeting for any reason whatsoever, whether or not it was in the Company’s best interest or the best interest of any other stockholders.
Special meetings require substantial effortthe Company and expense, including, among other things, preparing and mailing proxy materials. Special meetings also cause significant disruptions to our normal business operations by requiring significant attention from the Board, our management teamstockholders and other employees, diverting their focus from overseeing and operating our business. As a result, providing the right to call a special meeting by stockholders with a such a small minority of stockholders would only come at the expense of all the other stockholders. The Board believes that our resources should only be used for the purposes of a special meeting of stockholders to address significant matters that are of interest to a broader portion of the stockholder base, and that a 15% threshold is more consistent with the threshold adopted by a strong majority of other companies that provide a right to call a special meeting. The Board believes that a 15% threshold establishes an acceptable balance between meaningful accountability and mitigation of risk that may be presented by a lower threshold, including significant costs, Board, management team and other employee distraction and waste of corporate resources.stakeholders.
In recommending a vote against this stockholder proposal, the Board believes it is also important to consider the other governance practices and stockholder protections that the Company has adopted, including annual director elections, majority voting in uncontested director elections, proxy access, no supermajority voting requirements and an annual say-on-pay vote, as well as the proposed adoption of the right of stockholders to act by written consent that is not unanimous, as set forth in Proposal No. 4.
In addition, stockholders have a number of ways to communicate with the Board and the management team. The Board values and regularly solicits stockholder input. As described under “Stockholder Access and Outreach” on page 9, stockholders can contact directly our Lead Independent Director, any individual Director or the Board as a whole, and we maintain open and regular lines of direct communication with our stockholders. The Board is responsive to stockholder feedback, as exhibited by the proposed adoption of the right of stockholders to act by written consent that is not unanimous, as set forth in Proposal No. 4, and the proposal to lower the share ownership threshold for shareholders to request that the Company call a special meeting to 15% from 20%, as set forth in Proposal No. 5.
For all the above reasons, the Board recommends that stockholders vote AGAINST Proposal No. 6.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE VOTED AGAINST THIS PROPOSAL UNLESS OTHERWISE INSTRUCTED.
2023 Proxy Statement | 76 |
FREQUENTLY ASKED QUESTIONS
1. | Who can vote at the Annual Meeting? |
1. What isHolders of our common stock as of the close of business on the record date timewill be entitled to vote at the Annual Meeting and placeat any adjournment or postponement of the Annual Meeting?Meeting. March 20, 2023 is the record date.
2. | How many votes can be cast by all stockholders? |
On the record date, there were 111,877,860 shares of our common stock outstanding, each of which is entitled to one vote for each matter to be voted on at the Annual Meeting.
3. | How many votes must be present to hold the Annual Meeting? |
We willneed the holders of shares representing a majority of the votes that may be cast at the Annual Meeting, present in person or represented by proxy, to hold the Annual Meeting on May 18, 2022 at 10:30 a.m. Eastern Time, exclusively by webcast at www.cesonlineservices.com/dgx22_vm. No physical meeting will be held.Meeting. We encourageurge you to access the meeting prior to the start time, leaving ample time for check-in. Access to the online meeting will begin at 10 a.m. Eastern Time. You will be ablesubmit a proxy even if you plan to attend the meeting, vote electronically, and submit questions during the meeting at www.cesonlineservices.com/dgx22_vm.
2. How do I virtually attendAnnual Meeting. That will help us to know as soon as possible that sufficient shares will be present to hold the Annual Meeting?Meeting.
The Annual Meeting will take place online at www.cesonlineservices.com/dgx22_vm.
4. | How do I vote? |
If you are a stockholderholder of record (meaning, if(that is, you hold your shares in your name throughwith the Company’s transfer agent), you may register to attend by visiting www.cesonlineservices.com/dgx22_vm no later than 24 hours before the Annual Meeting. Follow the directions to register for the Annual Meeting. Have available your proxy card or Important Notice Regarding the Availability of Proxy Materials; they contain the 11-digit control number needed to complete your registration.
If you are a beneficial stockholder (meaning, if you hold your shares through a broker, bank or other nominee), you may register to attend by visiting www.cesonlineservices.com/dgx22_vm no later than 24 hours before the Annual Meeting. Follow the directions to register for the Annual Meeting. Have available your voting instructions form or Important Notice Regarding the Availability of Proxy Materials or other communication; they contain your control number needed to complete your registration.
Stockholders that register to attend the Annual Meeting will receive an e-mail prior to the meeting with a link and instructions for attending the Annual Meeting.
3. How do I vote my shares?
If you are a stockholder of record, you may cause your shares to be voted by submitting your proxy byvia the Internet, mail or telephone or by attending the Internet.Annual Meeting and voting in person. The directions for internet, mailtelephone and telephoneInternet proxy submission are on your proxy card. If you choose to submit your proxy on the Internet, before the Annual Meeting, go to www.cesvote.com. If you choose to submit your proxy by mail, simply mark, sign and date your proxy card and return it in the enclosed postage pre-paid envelope. You can also submit your proxy by calling 1-888-693-8683. If you return a signed proxy card without indicating your vote, your shares will be voted according to the Board’s recommendations. To vote during the Annual Meeting, register to attend the Annual meeting (see Question 2 – “How do I virtually attend the Annual Meeting?”) and click on the ‘Stockholder Ballot’ link that will be available during the Annual Meeting under the ‘Meeting Links’ section of the virtual meeting website.
If you arehold your shares in street name (that is, through a beneficial stockholder,broker, bank or other holder of record), please follow the voting instructions forwarded to you by your bank, broker or other holder of record. ToIf you want to vote during the Annual Meeting, register to attend the Annual Meeting (see Question 2 – “How do I virtually attend the Annual Meeting?”) and click on the ‘Stockholder Ballot’ link that will be available during the Annual Meeting under the ‘Meeting Links’ section of the virtual meeting website. Please note that if you are a beneficial owner and wish to votein person at the Annual Meeting, you must obtain a legal proxy in pdf or image file format, from theyour broker, bank brokerage firm or other nominee holding your shares givingholder of record authorizing you the right to vote your shares, and present it with your online ballot duringbring the proxy to the Annual Meeting.
To reduce our administrative and postage costs, we ask that you submit a proxy through the Internet or by telephone, both of which are available 24 hours a day.
4. Will I be able to ask a question during the Annual Meeting?
Yes, all stockholders attending the Annual Meeting will be able to submit a question during the meeting. You must be logged in to the virtual meeting at www.cesonlineservices.com/dgx22_vm, type your question into the “Ask a Question” box and click ‘submit’. If your question is properly submitted during the meeting, your question may be answered in the meeting or we may hold your question and respond to it after the meeting. Questions on similar topics may be combined and answered together.
5. |
5. What if I encounter technical difficulties or have trouble accessing the Annual Meeting?
If you have difficulty accessing the Annual Meeting, please follow the instructions contained in the reminder email you will receive the evening before the Annual Meeting. We will have technicians available to assist you.
6. What if the Company encounters technical difficulties during the Annual Meeting?
If we experience technical difficulties during the Annual Meeting (e.g., a temporary or prolonged power outage), our Chairman will determine whether the Annual Meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the Annual Meeting will need to be reconvened at a later time or another day (if the technical difficulty is more prolonged). In any situation, we will promptly notify stockholders of the decision via www.cesonlineservices.com/dgx22_vm.
7. Who can vote at the Annual Meeting?
Holders of our common stock as of the close of business on March 21, 2022, the record date, will be entitled to vote at the Annual Meeting and at any adjournment or postponement of the Annual Meeting.
8. How many votes can be cast by all stockholders?
On the record date, there were 117,785,823 shares of our common stock outstanding, each of which is entitled to one vote for each matter to be voted on at the Annual Meeting.
9. How many votes must be present to hold the Annual Meeting?
We need the holders of shares representing a majority of the votes that may be cast at the Annual Meeting, present in person or represented by proxy, to hold the Annual Meeting. We urge you to submit your proxy even if you plan to attend the Annual Meeting.
10. How many votes will be required to elect directors?
Each director will be elected by a majority of votes cast with respect to such director. A “majority of votes cast” means that the number of votes cast “for” a director nominee exceeds the number of votes cast “against” that director nominee. Under Delaware law, if an incumbent director (or the directorsuccessor thereof) is not elected at the Annual Meeting, the director will continue to serve on the Board as a “holdover” director. As required by the Company’s by-laws, each incumbent director nominee has submitted an irrevocable letter of resignation as director that becomes effective if he or she is not elected by the stockholders and the Board accepts the resignation. If aan incumbent director is not elected, the Governance Committee will consider the director’s resignation and recommend to the Board whether to accept or reject the resignation or take other action. The Board will decide whether to accept or reject the resignation or take other action and publicly disclose its decision and, if it rejects the resignation, the rationale behind the decision, within 120 days after the election results are certified.
11. How many votes will be required to adopt the other proposals?
6. | How many votes will be required to adopt the other proposals? |
The ratification of the appointment of PwC, approval of the Employee Plan and approval of the stockholder proposal requireeach requires the affirmative vote of a majority of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon. The approval of the advisory resolution to approve executive compensation and the advisory vote to recommend the frequency of the executive compensation advisory vote each requires the affirmative vote of a majority of votes cast with respect to such proposal. A “majority of votes cast” means that the number of votes cast “for” a proposal exceeds the number of votes cast “against” that proposal. The approval of each proposed amendment of the Restated Certificate of Incorporation requires the affirmative vote of the holders of a majority of the outstanding common stock of the Company.
12. Can I change or revoke my proxy?
77 | 2023 Proxy Statement |
7. | Can I change or revoke my proxy? |
Yes. You may revoke your proxy before your shares are voted by:
13. What if I vote to abstain?
8. | What if I vote to abstain? |
Shares voting “abstain” on the ratification of the appointment of PwC, approval of the proposed amendments to the Restated Certificate of IncorporationEmployee Plan and approval of the stockholder proposal will be counted as present for purposes of that proposal and will have the effect of a vote against the proposal. Shares voting “abstain” for any nominee for director, and the advisory vote to approve executive compensation and the advisory vote to recommend the frequency of the executive compensation advisory vote will be excluded entirely from the applicable vote and will have no effect on the election of that nominee or matter, as the case may be.
14. What happens if I do not vote?
9. | What happens if I do not vote? |
If you are a record holder and do not vote your shares or submit a proxy with respect to your shares, your shares will not be voted.
If you hold your shares in street name (including in the Employee Stock Purchase Plan), you must instruct the record owner how to cast your vote if you want your shares to count for the election of directors, the advisory resolution to approve executive compensation, the proposed amendmentsadvisory vote to recommend the Restated Certificatefrequency of Incorporationthe executive compensation advisory vote, approval of the Employee Plan or approval of the stockholder proposal. If you do not provide instructions regarding how to vote on these matters, no vote will be cast on your behalf. Brokers, however, have discretion to vote uninstructed shares on the ratification of the appointment of PwC.
If you are a participant in the 401(k) Plan and you do not submit voting instructions in respect of shares held on your behalf in such plan, then, except as otherwise required by law, the plan trustee will vote your shares in the same proportion as the voting instructions that it receives from other participants.
15. What if there is voting on other matters?
10. | What if there is voting on other matters? |
We do not know of any other matters that may be presented for action at the meeting other than those described in this proxy statement. If any matter not described in the proxy statement properly is brought before the meeting, the proxy holders will have the discretion how to vote your shares.
16. What happens if
11. | How can I attend the Annual Meeting? |
Only stockholders as of the record date (or their proxy holders) may attend the Annual Meeting. All stockholders seeking admission to the meeting must present photo identification. If you hold your shares in street name (including in the Employee Stock Purchase Plan), to gain admission to the meeting you also must provide proof of ownership of your shares as of the record date. Proof of ownership may be a letter or account statement from your broker, bank or other holder of record. If you need directions to the Annual Meeting, is postponed or adjourned?please call Investor Relations at 973-520-2900.
12. | What happens if the Annual Meeting is postponed or adjourned? |
Your proxy will still be valid and may be voted at the postponed or adjourned annual meeting.Annual Meeting. You will still be able to change or revoke your proxy until it is voted.
17. Who is soliciting my vote and will pay the expenses incurred in connection with the solicitation?
13. | Who is soliciting my vote and will pay the expenses incurred in connection with the solicitation? |
The Board is soliciting your vote. The Company pays the cost of preparing proxy materials and soliciting your vote. Our directors, officers and employees, who will receive no additional compensation for soliciting, may solicit proxies on our behalf by telephone, mail, electronic or facsimile transmission, in person or by other means of communication. We also have hired D.F.D. F. King & Co., Inc. to solicit proxies and for these services we will pay an estimated fee of $13,500,$16,500, plus expenses.
2023 Proxy Statement | 78 |
14. | Can I receive Annual Meeting material via electronic delivery? |
18. Can I receive Annual Meeting material via electronic delivery?
We are furnishing this proxy statement and form of proxy and voting instructions in connection with our solicitation of proxies on behalf of the Board for the Annual Meeting. This proxy statement and the Annual Report are available on our Investor Relations website at www.QuestDiagnostics.com. You can save the Company postage and printing expense by consenting to access these documents over the Internet. If you consent, you will receive notice next year when these documents are available with instructions on how to view them and submit voting instructions. Your consent to electronic delivery of materials will remain in effect until you revoke it. If you choose electronic delivery, you may incur costs, such as cable, telephone and Internet access charges, for which you will be responsible.
19. 15.Whom should I call with other questions or to obtain a paper copy of this document or the Annual Report on Form 10-K?
If you have additional questions about this proxy statement or the Annual Meeting or would like additional copies of this document or our 20212022 Annual Report on Form 10-K at no charge, please contact Investor Relations, Quest Diagnostics Incorporated, 500 Plaza Drive, Secaucus, New Jersey 07094; email address: Investor@QuestDiagnostics.com; telephone 973-520-2900. The Company’s main telephone number is 973-520-2700. We will promptly deliver to you the documents that you request.
20. How do I submit a proposal for the 2023 annual meeting of stockholders?
16. | How do I submit a proposal for the 2024 annual meeting of stockholders? |
Stockholders intending to present a proposal at the 20232024 annual meeting and have it included in the Company’s proxy statement for that meeting must submit the proposal in writing to William J. O’Shaughnessy, Jr., Corporate Secretary, 500 Plaza Drive, Secaucus, New Jersey 07094. We must receive your proposal by the close of business on December 20, 2022.8, 2023.
Stockholders intending to present a proposal at the 20232024 annual meeting, but not to include the proposal in the Company’s proxy statement, or to nominate a person for director (other than proxy access nominations, which are discussed below), must comply with the requirements set forth in our by-laws. The by-laws require, among other things, that our Corporate Secretary (at the address noted above) receive written notice from the record stockholder of intent to present such proposal or nomination no more than 120 days and no less than 90 days prior to the anniversary of the preceding year’s annual meeting of stockholders. Therefore, the CompanyCompany’s Corporate Secretary must receive notice of such a proposal or nomination for the 20232024 annual meeting of stockholders no earlier than January 18, 20232024 and no later than February 17, 2023.2024. The notice must contain the information required by theour by-laws, a copy of which is available on our website at www.QuestDiagnostics.com or upon request from our Corporate Secretary.
If you intend to nominate a director outside of the proxy access process (described below) and solicit proxies in support of such director nominee(s) at the 2024 annual meeting, you must also provide the notice and additional information required by Rule 14a-19 under the Exchange Act and our by-laws to our Corporate Secretary (at the address noted above), no earlier than January 18, 2024 and no later than February 17, 2024.
Our by-laws provide a proxy access right to permit a stockholder, or a group of up to 20 stockholders, owning at least 3% of our outstanding common stock continuously for at least three years, to nominate and include in our proxy materials director nominees constituting up to 20% of the Board of Directors or two directors, whichever is greater, provided that the stockholder(s) and the nominee(s) satisfy the requirements in our by-laws. Under our by-laws, compliant notice of proxy access director nominations for the 20232024 annual meeting of stockholders must be submitted to the Corporate Secretary no earlier than November 20, 20228, 2023 and no later than December 20, 2022.8, 2023. The notice must contain the information required by the by-laws, a copy of which is available on our website at www.QuestDiagnostics.com or upon request from our Corporate Secretary.
Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be held on May 18, 2022:17, 2023: Our proxy statement and Annual Report on Form 10-K for the year ended December 31, 20212022 are available on our website at www.QuestDiagnostics.com.
79 | 2023 Proxy Statement |
Reconciliation of Non-GAAP and GAAP Information
As used in this proxy statement, the term “reported” refers to measures under the accounting principles generally accepted in the United States (“GAAP”). The term “adjusted” refers to non-GAAP operating performance measures that exclude special items such as restructuring and integration charges, certain financial impacts resulting from the COVID-19 pandemic, amortization expense, excess tax benefits (“ETB”) associated with stock-based compensation, a gain on remeasurement of an equity interest, costs associated with donations, contributions and other financial support through Quest for Health Equity, the company’sCompany’s initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities, a gain on sale of an ownership interest in a joint venture, gains associated with changes in the carrying value of our strategic investments, and other items.
The non-GAAP adjusted measures included in “Compensation Discussion and Analysis” beginning on page 2324 are presented because management believes those measures are useful adjuncts to GAAP results. Non-GAAP adjusted measures should not be considered as an alternative to the corresponding measures determined under GAAP. Management may use these non-GAAP measures to evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe that these non-GAAP measures are useful to investors and analysts to evaluate our performance period over period and relative to competitors, as well as to analyze the underlying trends in our business and to assess our performance. The tables below include reconciliations of non-GAAP adjusted measures to GAAP measures.
Twelve Months Ended December 31, | Increase | ||||||
2021 | 2020 | (Decrease) | |||||
(dollars in millions except per, share data) | |||||||
Adjusted operating income: | |||||||
Operating income | $ 2,381 | $ 1,971 | |||||
Restructuring and integration charges (a) | 61 | 58 | |||||
COVID-19 impact (b) | 4 | 76 | |||||
Other (c) | 16 | 2 | |||||
Amortization expense | 103 | 103 | |||||
Adjusted operating income | $ 2,565 | $ 2,210 | |||||
Adjusted operating income as a percentage of net revenues: | |||||||
Operating income as a percentage of net revenues | 22.1% | 20.9% | 120 basis points | ||||
Restructuring and integration charges (a) | 0.6 | 0.6 | |||||
COVID-19 impact (b) | - | 0.8 | |||||
Other (c) | 0.1 | - | |||||
Amortization expense | 1.0 | 1.1 | |||||
Adjusted operating income as a percentage of net revenues | 23.8% | 23.4% | 40 basis points | ||||
Twelve Months Ended December 31, | Increase | |||||||||||||
2022 | 2021 | (Decrease) | ||||||||||||
(dollars in millions except per, share data) | ||||||||||||||
Adjusted operating income: | ||||||||||||||
Operating Income | $ | 1,428 | $ | 2,381 | ||||||||||
Restructuring and integration charges (a) | 88 | 61 | ||||||||||||
Quest for Health Equity costs (b) | 93 | 16 | ||||||||||||
COVID-19 impact (c) | - | 4 | ||||||||||||
Other (d) | 13 | - | ||||||||||||
Amortization expense | 120 | 103 | ||||||||||||
Adjusted operating income | $ | 1,742 | $ | 2,565 | ||||||||||
Adjusted operating income as a percentage of net revenues: | ||||||||||||||
Operating income as a percentage of net revenues | 14.5% | 22.1% | (760) basis points | |||||||||||
Restructuring and integration charges (a) | 0.9 | 0.6 | ||||||||||||
Quest for Health Equity costs (b) | 0.9 | 0.1 | ||||||||||||
COVID-19 impact (c) | - | - | ||||||||||||
Other (d) | 0.1 | - | ||||||||||||
Amortization expense | 1.2 | 1.0 | ||||||||||||
Adjusted operating income as a percentage of net revenues | 17.6% | 23.8% | (620) basis points | |||||||||||
Adjusted net income attributable to Quest Diagnostics: |
2023 Proxy Statement | A-1 |
Net income attributable to Quest Diagnostics | $ | 946 | $ | 1,995 | ||||||||||
Restructuring and integration charges (a)(g) | 66 | 45 | ||||||||||||
Gains and losses on investments (e)(g) | 31 | (28) | ||||||||||||
Quest for Health Equity costs (b)(g) | 69 | 12 | ||||||||||||
Gain on sale of ownership in joint venture (f)(g) | - | (259) | ||||||||||||
COVID-19 impact (c)(g) | - | 3 | ||||||||||||
Other (d)(g) | (6) | - | ||||||||||||
Amortization expense(g) | 89 | 78 | ||||||||||||
ETB | (14) | (19) | ||||||||||||
Adjusted income attributable to Quest Diagnostics | $ | 1,181 | $ | 1,827 | ||||||||||
Adjusted diluted EPS: | ||||||||||||||
Diluted earnings per common share | $ | 7.97 | $ | 15.55 | (48.7%) | |||||||||
Restructuring and integration charges (a)(g) | 0.56 | 0.36 | ||||||||||||
Gains and losses on investments (e)(g) | 0.26 | (0.24) | ||||||||||||
Quest for Health Equity costs (b)(g) | 0.59 | 0.08 | ||||||||||||
Gain on sale of ownership in joint venture (f)(g) | - | (2.02) | ||||||||||||
COVID-19 impact (c)(g) | - | 0.03 | ||||||||||||
Other (d)(g) | (0.05) | - | ||||||||||||
Amortization expense(g) | 0.74 | 0.62 | ||||||||||||
ETB | (0.12) | (0.14) | ||||||||||||
Adjusted diluted earnings per common share | $ | 9.95 | $ | 14.24 | (30.1%) |
Adjusted net income attributable to Quest Diagnostics: | ||||||
Net income attributable to Quest Diagnostics | $ 1,995 | $ 1,431 | ||||
Restructuring and integration charges (a)(f) | 45 | 44 | ||||
COVID-19 impact (b)(f)) | 3 | 53 | ||||
Gain on sale of ownership in joint venture (d)(f) | (259) | - | ||||
Amortization expense(f) | 78 | 86 | ||||
Other (c)(f) | (16) | (1) | ||||
ETB | (19) | (23) | ||||
Gain on remeasurement of equity interest(e)(f) | - | (63) | ||||
Adjusted income from continuing operations attributable to Quest Diagnostics | $ 1,827 | $ 1,527 | ||||
Adjusted diluted EPS: | ||||||
Diluted earnings per common share | $ 15.55 | $ 10.47 | 48.5% | |||
Restructuring and integration charges (a)(f) | 0.36 | 0.32 | ||||
COVID-19 impact (b)(f) | 0.03 | 0.39 | ||||
Gain on sale of ownership in joint venture (d)(f) | (2.02) | - | ||||
Other (c)(f) | (0.16) | - | ||||
Amortization expense(f) | 0.62 | 0.63 | ||||
ETB | (0.14) | (0.17) | ||||
Gain on remeasurement of equity interest(e)(f) | - | (0.46) | ||||
Adjusted diluted EPS | $ 14.24 | $ 11.18 | 27.4% |
(a) | For the twelve months ended December 31, |
Twelve Months Ended December 31, | |||
2021 | 2020 | ||
(dollars in millions) | |||
Cost of services | $ 30 | $ 27 | |
Selling, general and administrative | 31 | 31 | |
Operating income | $ 61 | $ 58 |
Twelve Months Ended December 31, | ||||||||||
2022 | 2021 | |||||||||
(dollars in millions) | ||||||||||
Cost of services | $ | 32 | $ | 30 | ||||||
Selling, general and administrative | 56 | 31 | ||||||||
Operating income | $ | 88 | $ | 61 |
(b) | For both the twelve months ended December 31, |
Twelve Months Ended December 31, | |||
2021 | 2020 | ||
(dollars in millions) | |||
Cost of services | $ 4 | $ 57 | |
Selling, general and administrative | - | 10 | |
Other operating expense (income), net | - | 9 | |
Operating income | $ 4 | $ 76 | |
Equity in earnings of equity method investees, net of taxes | - | $ (4) | |
Net income attributable to noncontrolling interest | - | $ 4 |
A-2 | 2023 Proxy Statement |
(c) | For the twelve months ended December 31, 2021, the pre-tax impact represents the impact of certain items resulting from the COVID-19 pandemic including incremental costs incurred to protect the health and safety of our employees and customers, recorded in cost of services. |
(d) | For the twelve months ended December 31, 2022, the pre-tax impact primarily represents a $14 million impairment charge on certain property, plant and equipment and a $5 million loss associated with the increase in the fair value of the contingent consideration accrual associated with previous acquisitions, partially offset by a $10 million gain from a payroll tax credit under the Coronavirus Aid, Relief, and Economic Security Act associated with the retention of employees. Additionally, the twelve months ended December 31, 2022 includes an $18 million income tax benefit due to the adjustment to state deferred tax liabilities related to depreciation expense, recorded in income tax expense. The following table summarizes the pre-tax impact of these other items on the Company’s consolidated statement of operations: |
Twelve Months Ended December 31, | ||||||||||
2022 | 2021 | |||||||||
(dollars in millions) | ||||||||||
Cost of services | $ | 2 | $ | - | ||||||
Other operating expense (income), net | 11 | - | ||||||||
Operating income | $ | 13 | $ | - |
(e) | For both the twelve months ended December 31, 2022 and 2021, the pre-tax impact primarily represents gains and losses associated with changes in the carrying value of our strategic investments. For the twelve months ended December 31, 2021, the pre-tax impact also includes a non-cash impairment |
The following table summarizes the pre-tax impact of these other items on the company’s consolidated statement of operations:
Twelve Months Ended December 31, | |||
2021 | 2020 | ||
(dollars in millions) | |||
Selling, general and administrative | $ 16 | $ 2 | |
Equity in earnings of equity method investees, net of taxes | $ - | $ (14) | |
Other income, net | $ (39) | $ 10 |
Twelve Months Ended December 31, | ||||||||||
2022 | 2021 | |||||||||
(dollars in millions) | ||||||||||
Other (expense) income, net | $ | 30 | $ | (39) | ||||||
Equity in earnings of equity method investees, net of taxes | $ | 12- | $ | - |
For the twelve months ended December 31, 2021, the pre-tax impact represents a gain of $314 million recorded in other (expense) income, net following the sale of |
For restructuring and integration charges, gains and losses on investments, Quest for Health Equity costs, amortization expense, COVID-19 impacts, and other items, |
Proposed Amendments to Paragraph 8 of RestatedCertificate of Incorporation
Set forth below are the proposed amendments to Paragraph 8 of the Restated Certificate of Incorporation of Quest Diagnostics Incorporation to reflect the amendments described in Proposal No. 4.
8. Action by Unanimous Written Consent.From and after the Distribution Date, any action which may be taken(a) Any action that is required or permitted to be taken by stockholders at any annual or special meeting of stockholders may be taken without a meetingwithout prior noticeand without a vote, if consent in writing,if a Consent or Consents setting forth the action so taken, shall be signed, in person or by proxy, by the holders ofalloutstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereonand no action by non-unanimous written consent shall be permitted.were present and voted and shall be delivered to the Corporation in the manner required by Section 228 of the General Corporation Law of the State of Delaware and this Certificate of Incorporation (each such consent, a “Consent”); provided, however, that no such action of stockholders in lieu of a meeting may be taken or authorized except in accordance with this Certificate of Incorporation, the Bylaws, and applicable law.
(b) In order for stockholders to authorize or take corporate action by consent in lieu of a meeting, a stockholder of record seeking to have stockholders authorize or take such action (a “Written Consent Requesting Stockholder”) shall deliver to the Secretary of the Corporation at its principal executive offices a written request containing the information required by this Paragraph 8 and the Bylaws (such request, a “Written Consent Request”). Stockholders shall not be entitled to authorize or take corporate action in lieu of a meeting unless the Corporation shall have first received Written Consent Requests from a stockholder or group of stockholders of record of the Corporation who own, as of the close of business on the date the first Written Consent Request is delivered to the Corporation (the “Written Consent Request Record Date”), at least fifteen percent (15%) in the aggregate of Common Stock issued, outstanding and entitled to vote and who have owned that position in a net long position continuously for at least one year (the “Requisite Percent”) in accordance with this Paragraph 8 and all other conditions and requirements under this Paragraph 8 and the Bylaws shall have been fully satisfied or complied with. For purposes of this Paragraph 8, “net long position” shall be determined with respect to each Written Consent Requesting Stockholder (and each beneficial owner, if any, who is directing such stockholder to act on such owner’s behalf in accordance with the definition thereof set forth in Rule 14e-4 under the Exchange Act; provided that (x) for purposes of such definition, in determining such Written Consent Requesting Stockholder’s (or beneficial owner’s) “short position,” the reference in Rule 14e-4 to “the date that a tender offer is first publicly announced or otherwise made known by the bidder to holders of the security to be acquired” shall be deemed to be the Written Consent Request Record Date, and the reference to the “highest tender offer price or stated amount of the consideration offered for the subject security” shall be deemed to refer to the closing sales price of the Common Stock on the New York Stock Exchange (or such other securities exchange designated by the Board of Directors if the Common Stock is not listed for trading on the New York Stock Exchange) on such Written Consent Request Record Date (or, if such date is not a trading day, the next succeeding trading day) and (y) the net long position of such Written Consent Requesting Stockholder (or such beneficial owner) shall be reduced by the number of shares as to which the Board of Directors determines that such Written Consent Requesting Stockholder (or such beneficial owner) does not, or will not, have the right to vote or direct the vote as of the Written Consent Request Record Date or the Written Consent Record Date (as defined below), or as to which the Board of Directors determines that such Written Consent Requesting Stockholder (or such beneficial owner) has entered into any derivative or other agreement, arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares. Following the date on which
A-3 |
the Corporation shall have received Written Consent Request(s) representing the Requisite Percent in accordance herewith (the “Written Consent Request Effective Time”), the Board of Directors shall, by the later of (i) twenty (20) days after the Written Consent Request Effective Time and (ii) five (5) days after delivery to the Corporation by any Written Consent Requesting Stockholder of any information requested by the Corporation to determine the validity of such Written Consent Request(s) (the later of the dates in the immediately preceding clauses (i) and (ii), the “Determination Outside Date”), determine the validity of such Written Consent Request(s) (including whether such Written Consent Requests were delivered in accordance with this Certificate of Incorporation and whether the proposed action is a proper matter for stockholder action under this Certificate of Incorporation) and, if appropriate, adopt a resolution fixing the record date for determining stockholders entitled to consent to the action(s) set forth in such Written Consent Request(s) (the “Written Consent Record Date”) (unless the Board of Directors shall have previously fixed such a Written Consent Record Date). The Written Consent Record Date shall be no more than ten (10) days after the date upon which the resolution fixing such record date is adopted by the Board of Directors and shall not precede the date upon which such resolution is adopted. If the Board of Directors determines that Written Consent Requests from Written Consent Requesting Stockholders representing the Requisite Percent have been validly delivered in accordance with this Certificate of Incorporation and relate to an action that may be effected by consent in lieu of a meeting pursuant to this Certificate of Incorporation, or if no such determination shall have been made by the Determination Outside Date, and in either event no Written Consent Record Date has been fixed by the Board of Directors, the Written Consent Record Date shall be the first date following the Determination Outside Date on which a signed Consent relating to the action taken or proposed to be taken by consent of stockholders in lieu of a meeting pursuant to the Written Consent Request is delivered to the Corporation in accordance with paragraph (g) of this Paragraph 8 and applicable law.
(c) Each Written Consent Requesting Stockholder shall include with his, her or its Written Consent Request written evidence reasonably satisfactory to the Corporation of his, her or its ownership of shares of Common Stock as of the Written Consent Request Record Date and continuous net long position as required by paragraph (b) of this Paragraph 8 (provided, however, that if any Written Consent Requesting Stockholder is not the beneficial owner of the shares as to which any Written Consent Request is made, then such Written Consent Request must also include documentary evidence reasonably satisfactory to the Corporation as to such ownership by the beneficial owner on whose behalf such request is made). Each Written Consent Requesting Stockholder (or the beneficial owner, if any, on whose behalf a Written Consent Request is made) must include with his, her or its Written Consent Request an agreement by such Written Consent Requesting Stockholder (or the beneficial owner, if any, on whose behalf a Written Consent Request is made) to solicit Consents in accordance with paragraph (e) of this Paragraph 8; provided that an agreement by one such Written Consent Requesting Stockholder (or beneficial owner) shall be deemed to constitute such agreement on the part of all such Written Consent Requesting Stockholders. Each Written Consent Request must describe the action proposed to be taken by consent of stockholders in lieu of a meeting and contain all such information and representations, to the extent applicable, with respect to each Written Consent Requesting Stockholder (and each beneficial owner, if any, on whose behalf a Written Consent Request is made) and the proposed action of stockholders by consent in lieu of a meeting as would be required by the Bylaws to present any item of business (other than the election of directors) before a meeting of stockholders, as applicable, including, without limitation, a detailed summary of the proposed action to be taken (including the text of any resolutions to be adopted by written consent of stockholders and, if any resolution proposes to amend the Bylaws, the exact language of any such proposed amendment). The Corporation may require each Written Consent Requesting Stockholder to furnish such other information as may be requested by the Corporation to determine the validity of any Written Consent Request and whether any proposed action set forth in the Written Consent Request may be effected by consent of stockholders in lieu of a meeting under paragraph (d) of this Paragraph 8. In connection with an action or actions proposed to be taken by consent of stockholders in lieu of a meeting in accordance with this Paragraph 8 and applicable law, each Written Consent Requesting Stockholder shall further update and supplement the information previously provided to the Corporation in connection therewith so that it is true and correct (i) as of the Written Consent Record Date and (ii) as of each tenth day thereafter until the earlier of the date each action is duly adopted and the Consent Termination Date (as defined below), with such updated or supplemental information being delivered to the Secretary of the Corporation at its principal executive office in the manner required in this Paragraph 8 within five (5) business days after the date as of which the information is required to be updated or supplemented.
Annex B
Any Written Consent Requesting Stockholder may revoke his, her or its Written Consent Request at any time by written revocation delivered to the Secretary of the Corporation at the Corporation’s principal executive offices. Any disposition by a Written Consent Requesting Stockholder of any shares of capital stock of the Corporation entitled to consent to the action to which a Written Consent Request relates (or, in the case of a Written Consent Requesting Stockholder that has submitted a Written Consent Request on behalf of the beneficial owner of shares, a disposition by such beneficial owner of beneficial ownership of such shares) after the date of the Written Consent Request shall be deemed a revocation of his, her or its Written Consent Request with respect to such shares. If, at any time after the Written Consent Request Effective Time and before the Written Consent Certification Date (as defined below), the Written Consent Request(s) represent in the aggregate less than the Requisite Percent due to any revocation of a Written Consent Request or any deemed revocation of shares of Common Stock with respect to any such request, no Written Consent Record Date shall be fixed (and any Written Consent Record Date theretofore fixed shall be cancelled), and no action by consent of stockholders in lieu of a meeting as provided in such Written Consent Request(s) shall be taken pursuant thereto. In determining whether Written Consent Request(s) have been delivered by Written Consent Requesting Stockholders representing in the aggregate the Requisite Percent in accordance with this Paragraph 8, multiple Written Consent Requests delivered to the Secretary will be considered together only if each such Written Consent Request (x) identifies substantially the same purpose or purposes of the action proposed to be taken by consent of stockholders and substantially the same matters proposed to be taken by written consent of stockholders, as determined by the Board of Directors (which, if such purpose is the removal of one or more directors, will mean that each Written Consent Request includes an identical list of directors proposed to be removed by the action by consent of stockholders in lieu of a meeting that is the subject of the request), and (y) has been dated and delivered to the Secretary as provided herein on the Written Consent Request Record Date or within thirty (30) days thereafter.
(d) Stockholders shall not be entitled to act by consent in lieu of a meeting if (i) the action relates to an item of business that is not a proper subject for stockholder action under applicable law, (ii) the Written Consent Request Effective Time occurs during the period commencing one hundred twenty (120) days prior to the first anniversary of the annual meeting of stockholders for the immediately preceding annual meeting and ending on the thirtieth (30th) calendar day after the first anniversary of the date of the immediately preceding annual meeting, (iii) an identical or substantially similar item (as determined by the Board of Directors, a “Similar Item”) was presented at any meeting of stockholders of the Corporation held not more than twelve (12) months before the Written Consent Request Record Date in respect of any Written Consent Request (provided that, for purposes of this clause (iii), an election of directors at any such meeting shall not be deemed to be a Similar Item with respect to any proposal to remove one or more directors), (iv) the action relates to a removal of directors occurring at any time within ninety (90) days after any meeting of stockholders for the election of directors, (v) a Similar Item is included in the Corporation’s notice as an item of business to be brought before a meeting of stockholders that has been called by the Written Consent Request Record Date in respect of a Written Consent Request but has not yet been held or that is called for a date within ninety (90) days after the Written Consent Request Effective Time, (vi) the Board of Directors calls an annual or special meeting of stockholders for purposes of presenting a Similar Item or solicits action by written consent of stockholders of a Similar Item pursuant to paragraph (i) of this Paragraph 8 or (vii) the Written Consent Request(s) otherwise giving rise to a Written Consent Request Effective Time were made in a manner that either did not comply with this Certificate of Incorporation, the Bylaws or involved a violation of Regulation 14A under the Exchange Act or other applicable law.
(e) Stockholders of the Corporation may take action by consent in lieu of a meeting only if consents are solicited by (i) the Board of Directors or (ii) the Written Consent Requesting Stockholder or group (or the beneficial owner(s), if any, on whose behalf any such Written Consent Requesting Stockholder is acting) seeking to take action by written consent of stockholders in accordance with this Paragraph 8, Regulation 14A of the Exchange Act (without reliance upon any exemption in Regulation 14A, including the exemption contained in clause (iv) of Rule 14a-1(l)(2) or Rule 14a-2(b) thereunder) (or any subsequent provisions replacing such act or regulations) and any other applicable law, from all holders of shares of capital stock of the Corporation entitled to give consent the proposed action.
(f) No Consent shall be effective to take the corporate action referred to therein unless such Consent is dated and delivered to the Corporation in accordance with this Paragraph 8 and applicable law and, within sixty (60) days after the first date on which a Consent is validly delivered in the manner required by paragraph (g) of this Paragraph 8 and applicable law (and in any event not later than one hundred and twenty (120) days after the Written Consent Record Date), Consents signed by a sufficient number of stockholders to take such action are so delivered to the Corporation. A Consent shall not be valid if it purports to provide (or if the person signing such Consent provides, through instructions to an agent or otherwise) that it will be effective at a future time or at a time determined upon the happening of an event.
(g) No Consents may be delivered to the Corporation until (i) sixty (60) days after the Written Consent Request Effective Time, or (ii) such later date as may be determined in good faith by the Board of Directors, which determination shall be conclusive and binding, in the event it concludes, consistent with its fiduciary duties, that additional time is required for stockholders to make an informed decision in connection with such Consent. Consents must be delivered to the Secretary at the principal executive offices of the Corporation. In the event of the receipt by the Corporation of one or more Consents, the Secretary of the Corporation, or such other officer of the Corporation as the Board of Directors may designate, shall provide for the safe-keeping of such Consents and any related revocations and shall promptly conduct such ministerial review of the sufficiency of all Consents and any related revocations and of the validity of the action to be taken by consent of stockholders in lieu of a meeting as the Secretary of the Corporation or such other officer deems necessary or appropriate to determine whether the stockholders of a number of shares of capital stock having the requisite voting power to authorize or take the action specified in Consents have given consent. The Board of Directors may appoint an independent person to serve as inspector (“Inspector”) to conduct the ministerial review referenced in the immediately preceding sentence, and such Inspector shall provide a report with respect to such review to the Corporation promptly upon the completion thereof. Subject to paragraph (h) of this Paragraph 8, if, after completion of the review required by this paragraph (g), the Secretary of the Corporation or such other officer as the Board of Directors shall have designated shall determine that the action purported to have been taken is duly authorized by the Consents, the Secretary or such other officer shall certify that fact on the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders and the Consents shall be filed in such records. No action by consent of stockholders in lieu of a meeting shall be effective until such date as the Secretary or such other officer certifies to the Corporation that the Consents delivered to the Corporation in accordance with this paragraph (g) represent at least the minimum number of votes that would be necessary to take the corporate action at a meeting at which all shares entitled to vote thereon were present and voted, in accordance with the General Corporation Law, the Certificate of Incorporation and the Bylaws (the “Written Consent Certification Date”).
(h) If the Board of Directors shall determine, which determination shall be conclusive and binding, that any Written Consent Request or any proposed action by consent of stockholders in lieu of a meeting was not properly made or effected in accordance with this Certificate of Incorporation, the Bylaws or applicable law, including, without limitation, due to the fact that one or more Written Consent Requests or Consents were not delivered in compliance with the provisions of this Certificate of Incorporation, the Bylaws or applicable law regulating action by consent of stockholders in lieu of a meeting, then the Board of Directors shall not be required to fix a Written Consent Record Date and any such purported action by consent of stockholders in lieu of a meeting shall be null and void to the fullest extent permitted by applicable law. Nothing contained in this Paragraph 8 shall in any way be construed to suggest or imply that the Board of Directors of the Corporation or any stockholder shall not be entitled to contest the validity of any Consent or related revocations, whether before or after such certification by the Secretary of the Corporation, such other officer of the Corporation as the Board of Directors may designate or the Inspectors, as the case may be, or to take any other action (including, without limitation, the commencement or prosecution of any action, suit or proceeding, or the defense of any litigation, with respect thereto, and the seeking of a declaratory judgment, injunctive relief or other remedy at law or in equity).
(i) Notwithstanding anything to the contrary set forth above, (x) none of the foregoing provisions of this Paragraph 8 or any related provisions of the Bylaws shall apply to any solicitation of stockholder action by written consent by or at the direction of the Board of Directors and (y) the Board of Directors shall be entitled to solicit action by consent of stockholders in lieu of a meeting in accordance with applicable law.
Proposed Amendments to Paragraph 7 of RestatedCertificate of Incorporation
Set forth below are the proposed amendments to Paragraph 7 of the Restated Certificate of Incorporation of Quest Diagnostics Incorporation to reflect the amendments described in Proposal No. 5.
7. Special Stockholder Meetings. Except as otherwise required by law, special meetings of the stockholders shall be called only by (a) the Board of Directors or (b) the Secretary, but onlyifupon the written request of a stockholder or group of stockholdersowning at least twentyof record of the Corporation who own, as of the Stockholder Meeting Request Record Date (as defined below), at least fifteen percent (2015%) in the aggregate of the Common Stock issued, outstanding and entitled to vote,andwho haveheldowned that amount in a net long position continuously for at least one year,so request in writing in accordance with, and subject to, all applicable provisions of the Bylawsand who have complied in full with all of the requirements set forth in this Paragraph 7 and the Amended and Restated By-Laws of the Corporation (as amended and/or restated from time to time, the “Bylaws”) (such request, a “Stockholder Meeting Request”). The record date for determining stockholders entitled to make a Stockholder Meeting Request shall be requested pursuant to a notice given in writing by a stockholder of record by delivery to the Secretary at the Corporation’s principal executive offices (which notice shall comply in all respects with this Paragraph 7 and the Bylaws) and fixed by the Board of Directors as set forth in the Bylaws (the “Stockholder Meeting Request Record Date”). Any disposition by a requesting party (as defined below) after the date of the Stockholder Meeting Request or after a request to fix a Stockholder Meeting Request Record Date, as the case may be, of any shares of Common Stock (or, in the case of a stockholder making a Stockholder Meeting Request or a request to fix a Stockholder Meeting Request Record Date on behalf of the beneficial owner of shares, any disposition by such beneficial owner of beneficial ownership of such shares) shall be deemed a revocation of the Stockholder Meeting Request and any request to fix a Stockholder Meeting Request Record Date, as the case may be, with respect to such shares.
For the purposes of this Paragraph 7, “net long position” shall be determined with respect to each stockholderrequesting a special meetingmaking a Stockholder Meeting Request and each beneficial owner , if any, who is directingasuch stockholder to act on such owner’s behalf (each stockholder and owner, a “requesting party”) in accordance with the definition thereof set forth in Rule 14e-4 under the Securities Exchange Act of 1934, as amended from time to time (the “Exchange Act”), provided that (x) for purposes of such definition, in determining such requesting party’s “short position,” the reference in Rule 14e-4 to “the date that a tender offer is first publicly announced or otherwise made known by the bidder to holders of the security to be acquired” shall bethe record date fixed in accordance with the Bylaws to determine the stockholders entitled to deliver a written request for a special meetingdeemed to be the Stockholder Meeting Request Record Date, and the reference to the “highest tender offer price or stated amount of the consideration offered for the subject security” shall be deemed to refer to the closing sales price of the Common Stock on the New York Stock Exchange (or such other securities exchange designated by the Board of Directors if the Common Stock is not listed for trading on the New York Stock Exchange) on suchrecord dateStockholder Meeting Request Record Date (or, if such date is not a trading day, the next succeeding trading day) and (y) the net long position of such requesting party shall be reduced by the number of shares as to which the Board of Directors determines that such requesting party does not, or will not, have the right to vote or direct the vote as of the Stockholder Meeting Request Record Date or as of the record date for determining stockholders entitled to vote at the special meeting to be called pursuant to the Stockholder Meeting Request, or as to which the Board of Directors determines that such requesting party has entered into any derivative or other agreement, arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares.
Whenever this Paragraph 7 or Paragraph 8 of this Certificate of Incorporation or any provision of the Bylaws requires one or more persons (including a record or beneficial owner of capital stock of the Corporation) to give or deliver any notice, request, consent (including any Consent (as defined below)), revocation, or any other documents or materials (the “Documents”) to the Corporation or any of its officers, directors, employees or agents, unless the Corporation consents or requests otherwise, such Documents shall be in writing and shall be delivered exclusively by hand (including, without limitation, overnight courier service) or by certified or registered mail, return receipt requested, and not by electronic transmission or any other means. The Corporation shall not be required to accept delivery of any Document given by a stockholder or beneficial owner of capital stock of the Corporation pursuant to Paragraph 7 or Paragraph 8 or any provision of the Bylaws that is not (x) in written form and (y) delivered in accordance with the immediately preceding sentence. For the avoidance of doubt, with respect to any Document given by any such stockholder or beneficial owner to the Corporation pursuant to this Paragraph 7 or Paragraph 8 of this Certificate of Incorporation or any provision of the Bylaws, the Corporation expressly opts out of Section 116 of the General Corporation Law of the State of Delaware to the fullest extent permitted by law.
Performance Share Units and Annual Incentive Compensation Plan (SMIP) Payouts
Set forth below are the payouts for the Company’s performance share units and annual incentive compensation plan (SMIP)the SMIP for each year from 2005 to 2020.2021.
Performance Share Units
Performance Period | Year Paid | Performance as Compared | |||
2005-07 | 2008 | 23 | |||
2006-08 | 2009 | 37 | |||
2007-09 | 2010 | 127 | |||
2008-10 | 2011 | 141 | |||
2009-11 | 2012 | 117 | |||
2010-12 | 2013 | 33 | |||
2011-13 | 2014 | 0 | |||
2012-14 | 2015 | 2 | |||
2013-15 | 2016 | 19 | |||
2014-16 | 2017 | 93 | |||
2015-17 | 2018 | 111 | |||
2016-18 | 2019 | 85 | |||
2017-19 | 2020 | 80 | |||
2018-20 | 2021 | 195 | |||
2019-21 | 2022 | 200 |
Performance Period | Year Paid | Performance Share Payout as Compared to Target % |
2005-07 | 2008 | 23 |
2006-08 | 2009 | 37 |
2007-09 | 2010 | 127 |
2008-10 | 2011 | 141 |
2009-11 | 2012 | 117 |
2010-12 | 2013 | 33 |
2011-13 | 2014 | 0 |
2012-14 | 2015 | 2 |
2013-15 | 2016 | 19 |
2014-16 | 2017 | 93 |
2015-17 | 2018 | 111 |
2016-18 | 2019 | 85 |
2017-19 | 2020 | 80 |
2018-20 | 2021 | 195 |
Senior Management Incentive Plan
Year | Incentive Payment as Compared to Target % |
2005 | 82 |
2006 | 148 |
2007 | 103 |
2008 | 112 |
2009 | 129 |
2010 | 64 |
2011 | 88 |
2012 | 72 |
2013 | 10 |
2014 | 95 |
2015 | 89 |
2016 | 94 |
2017 | 97 |
2018 | 48 |
2019 | 83 |
2020 | 171 |
Year | Incentive Payment as Compared to Target % | ||
2005 | 82 | ||
2006 | 148 | ||
2007 | 103 | ||
2008 | 112 | ||
2009 | 129 | ||
2010 | 64 | ||
2011 | 88 | ||
2012 | 72 | ||
2013 | 10 | ||
2014 | 95 | ||
2015 | 89 | ||
2016 | 94 | ||
2017 | 97 | ||
2018 | 48 | ||
2019 | 83 | ||
2020 | 171 | ||
2021 | 145 |
B-1 | 2023 Proxy Statement |
ANNEX C
Amended and Restated Quest Diagnostics Incorporated Employee Long-Term Incentive Plan
(As amended March 31, 2023)
1. | THE PLAN |
(a) Purpose. This Amended and Restated Quest Diagnostics Incorporated Employee Long-Term Incentive Plan (the “Plan”) is intended to benefit the stockholders of Quest Diagnostics Incorporated (the “Company”) by providing a means to attract, retain and reward individuals who can and do contribute to the longer term financial success of the Company. Further, the recipients of stock-based awards under the Plan should identify their success with that of the Company’s stockholders and therefore will be encouraged to increase their proprietary interest in the Company.
(b) Effective Date. The original version of the Plan became effective upon its approval by the holders of stock entitled to vote at the Company’s 2005 Annual Meeting of Stockholders (the “Effective Date”).
2. | ADMINISTRATION |
(a) General. The Plan shall be administered by an administrator (the “Administrator”) which shall be: (i) in the case of employees that are not executive officers, either the Board of Directors of the Company (the “Board”) or a committee appointed by the Board; or (ii) in the case of employees that are executive officers, a committee appointed by the Board consisting of no less than two of its members, none of whom shall be (or formerly have been) an employee of the Company; provided, however, that, in the case of employees that are not executive officers, notwithstanding any such appointment, from time to time the Board may assume, at its sole discretion, full or partial responsibility for administration of the Plan. In addition, the Board may delegate to a committee consisting of one or more of its members (including any member who is a current or former officer or other employee of the Company) authority concurrent with that of the Administrator to take the actions described in Section 2(b) (any such committee being referred to, collectively with the Administrator, as the “Committee”). Except with regard to awards to employees subject to Section 16 of the Exchange Act, the Administrator may delegate such responsibilities and powers as it specifies to one or more of its members or to any officer or officers selected by it. Any action undertaken by any such delegee in accordance with the Administrator’s delegation of authority shall have the same force and effect as if undertaken directly by the Administrator. Any such delegation may be revoked by the Administrator at any time.
(b) Award granting authority. The Committee shall have power and authority to:
(i) select individuals (other than executive officers) to receive awards from among those persons eligible to receive awards pursuant to Section 2(d);
(ii) determine the types and terms and conditions of all awards granted, including performance and other earnout and/or vesting conditions and the consequences of termination of employment;
(iii) amend any outstanding award to the extent provided in Section 6(a); and
(iii) determine the extent to which awards may be transferred to eligible third parties to the extent provided in Section 8(a).
(c) Administrative authority. In addition to the powers and authorities described in Section 2(b), the Administrator’s power and authority shall include, but not be limited to, interpreting the provisions of the Plan and awards under the Plan and administering the Plan in a manner that is consistent with its purpose. The Administrator’s determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated). The Administrator’s decision in carrying out the Plan and its interpretation and construction of any provisions of the Plan or any award granted or agreement or other instrument executed under it shall be final and binding upon all persons. No members of the Board, the Committee, the Administrator or any individual to whom the Administrator has delegated any responsibilities or powers in accordance with Section 2(a) shall be liable for any action, omission or determination made in good faith in administering the Plan or in making, or refraining from making, awards hereunder.
MI11039
2023 Proxy Statement | C-1 |
(d) Eligible Persons. Awards may be granted to any employee of the Company or of (i) any corporation (or a partnership or other enterprise) in which the Company owns or controls, directly or indirectly, 50% or more of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power) or (ii) any other corporation (or partnership or other enterprise) in which the Company, directly or indirectly, has at least a 20% equity or similar interest and whose employees the Administrator designates as eligible to receive awards under the Plan. An individual’s status as an administrator of the Plan pursuant to authority delegated under Section 2(a) will not affect his or her eligibility to receive awards under the Plan.
(e) Award Prices. Except for awards made in connection with the assumption of, or in substitution for, outstanding awards previously granted by an acquired entity (“Substitute Awards”), all awards denominated or made in Shares shall use as the per Share price an amount equal to or greater than the Fair Market Value (as defined herein) of the Shares on the date of grant. For purposes of the Plan, “Fair Market Value” means, unless the Administrator determines otherwise, the mean of the high and low selling prices of a share of the Common Stock of the Company (“Share”) on the New York Stock Exchange Composite list (or such other stock exchange as shall be the principal public trading market for the Shares) on the date the award is granted, or if Shares are not traded on such date, the mean of the high and low selling prices on the New York Stock Exchange Composite list (or such other stock exchange as shall be the principal public trading market for the Shares) on the next preceding day on which such Shares were traded. With respect to Substitute Awards, the per Share price, if less than the Fair Market Value of the Shares on the date of the award, shall be determined so that the excess of the aggregate intrinsic value of the Substitute Award, determined immediately after the transaction giving rise to the substitution or assumption of the predecessor award, does not exceed the aggregate intrinsic value of such predecessor award, determined immediately before such transaction, and such substitution complies with applicable laws and regulations, including the listing requirements of the New York Stock Exchange or other principal stock exchange on which the Shares are then listed and Section 409A or Section 424 of the Internal Revenue Code (the “Code”), as applicable.
(f) No Repricing. Except as provided for in Section 3(f), the per Share exercise price of any stock option or stock appreciation right may not be decreased after the grant of the award, and a stock option or stock appreciation right may not be surrendered as consideration in exchange for cash, the grant of a new stock option or stock appreciation right with a lower per Share exercise price or the grant of a stock award, without stockholder approval.
(g) Minimum Vesting Requirement. Except in the case of a Substitute Award made in replacement of an award that is already vested or scheduled to vest in less than one year from the date of grant of such Substitute Award, no more than 5% of the shares of Common Stock authorized for issuance under the Plan pursuant to Section 3(a) (as it may be adjusted pursuant to Section 3(f)) may be granted pursuant to awards that vest in less than one year following the date of grant.
3. | SHARES SUBJECT TO THE PLAN AND ADJUSTMENTS |
(a) Maximum Shares Available for Delivery. Subject to adjustments under Section 3(f), the maximum number of Shares that may be delivered to participants and their beneficiaries in respect of awards made under the Plan after February 23, 2023 shall be equal to 11,437,606 Shares. For awards made on or after the date of the Company’s 2012 annual meeting of stockholders, any Shares covered by awards granted pursuant to Section 4(b) or Section 4(c) shall be counted against the foregoing limit on the basis of one Share for every Share subject to the award, and any Shares covered by awards granted pursuant to Section 4(d) shall be counted against such limit on the basis of 2.65 Shares for every Share subject to the award.
(b) Any Shares delivered under the Plan which are forfeited back to the Company because of the failure to meet an award contingency or condition shall again be available for delivery pursuant to new awards granted under the Plan. Any Shares covered by an award (or portion of an award) granted under the Plan which are forfeited or cancelled, expire or are settled in cash, shall be deemed not to have been delivered for purposes of determining the maximum number of Shares available for delivery under the Plan. Any Shares that become available for delivery under the Plan pursuant to the two preceding sentences and that were subject to awards made on or after the date of the Company’s 2012 annual meeting of stockholders shall be added back as one Share if such Shares were subject to an award granted pursuant to Section 4(b) or Section 4(c), and as 2.65 Shares if such Shares were subject to an award granted pursuant to Section 4(d). For purposes of determining the number of shares that remain available for issuance under the Plan, (i) any Shares that are tendered by a participant or withheld by the Company to pay the exercise price of an award or to satisfy the participant’s tax withholding obligations in connection with the exercise or settlement of an award and (ii) all of the Shares covered by a net share-settled stock option or a stock-settled stock appreciation right to the extent exercised, shall be deemed delivered pursuant to the Plan and shall not be available for delivery pursuant to new awards under the Plan. In
C-2 | 2023 Proxy Statement |
addition, Shares repurchased on the open market with the proceeds of the exercise price of an award shall not be added to the number of Shares available for delivery pursuant to new awards under the Plan. The Shares delivered under the Plan may be authorized and unissued shares or shares held in the treasury of the Company, including shares purchased by the Company (at such time or times and in such manner as it may determine).
(c) Substitute Awards. Shares issued under the Plan through the settlement, assumption or substitution of Substitute Awards or, to the extent permitted by the rules of the New York Stock Exchange (or other stock exchange as shall be the principal public trading market for the Shares), awards granted over Shares available as a result of the Company’s assumption of an acquired entity’s plans in corporate acquisitions and mergers shall not reduce the maximum number of Shares available for delivery under the Plan or the maximum number of Shares that may be delivered in conjunction with awards granted pursuant to Section 4(d).
(d) Other Plan Limits. Subject to adjustment under Section 3(f), the following additional maximums are imposed under the Plan. The maximum aggregate number of Shares that may be covered by awards granted to any one individual during any fiscal year of the Company pursuant to Sections 4(b) and 4(c) shall not exceed 2,000,000 Shares. The maximum aggregate number of Shares that may be covered by awards granted to any one individual during any fiscal year of the Company pursuant to Section 4(d) shall not exceed 1,000,000 Shares. The full number of Shares available for delivery under the Plan may be delivered pursuant to incentive stock options under Section 422 or any other similar provision of the Code, except that in calculating the number of Shares that remain available for awards of incentive stock options, the rules set forth in Section 3(a) shall not apply to the extent not permitted by Section 422 of the Code.
(e) Payment Shares. Subject to the overall limitation on the number of Shares that may be delivered under the Plan, available Shares may be used as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company.
(f) Adjustments for Corporate Transactions. In the event of any stock split, reverse stock split, stock dividend, recapitalization, reorganization, merger, demerger, consolidation, split-up, spin-off, combination or exchange of shares, or any similar change affecting the Shares, or in the event the Company pays an extraordinary cash dividend, (i) the number and kind of shares which may be delivered under the Plan pursuant to Sections 3(a) and 3(d); (ii) the number and kind of shares subject to outstanding awards; and (iii) the exercise price of outstanding stock options and stock appreciation rights shall be appropriately adjusted consistent with such change in such manner as the Administrator may deem equitable to prevent substantial dilution or enlargement of the right granted to, or available for, participants in the Plan; provided, however, that no such adjustment shall be required if the Administrator determines that such action could cause a stock option or stock appreciation right to fail to satisfy the conditions of an applicable exception from the requirements of Section 409A of the Code (“Section 409A”) or otherwise could subject a participant to any interest or additional tax imposed under Section 409A in respect of an outstanding award. Similar adjustments may be made in situations where the Company assumes or substitutes for outstanding awards held by employees and other persons of an entity acquired by the Company.
4. | TYPES OF AWARDS |
(a)General. An award may be granted singularly, in combination with another award(s) or in tandem whereby exercise or vesting of one award held by a participant cancels another award held by the participant. Subject to the limitations of Section 2(f), an award may be granted as an alternative or successor to or replacement of an existing award under the Plan or under any other compensation plan or arrangement of the Company, including the plan of any entity acquired by the Company. The types of awards that may be granted under the Plan include:
(b)Stock Option. A stock option represents a right to purchase a specified number of Shares during a specified period at a price per Share which is no less than one hundred percent (100%) of the Fair Market Value of a Share on the date of the award. A stock option may be intended to qualify as an incentive stock option under Section 422 or any other similar provision of the Code or may be intended not to so qualify. Each stock option granted on or after the Effective Date shall expire on the applicable date designated by the Committee but in no event may such date be more than ten years from the date the stock option is granted. The Shares covered by a stock option may be purchased by means of a cash payment or such other means as the Administrator may from time-to-time permit, including (i) tendering (either actually or by attestation) Shares valued using the market price on the date of exercise, (ii) authorizing a third party to sell Shares (or a sufficient portion thereof) acquired upon exercise of a stock option and to remit to the Company a sufficient portion of the sale proceeds to pay for all the Shares acquired through such exercise and any tax withholding obligations resulting from such exercise; (iii) a net share settlement procedure or through the withholding of Shares subject to the stock option valued using the market price on the date of exercise; or (iv) any combination of the above.
2023 Proxy Statement | C-3 |
(c)Stock Appreciation Right. A stock appreciation right is a right to receive a payment in cash, Shares or a combination thereof, equal to the excess of the aggregate market price on the date of exercise of a specified number of Shares over the aggregate exercise price of the stock appreciation right being exercised. The longest period during which a stock appreciation right granted on or after the Effective Date may be outstanding shall be ten years from the date the stock appreciation right is granted. The exercise price of a stock appreciation right shall be no less than one hundred percent (100%) of the Fair Market Value of a Share on the date of the award.
(d)Stock Award. A stock award is a grant of Shares or of a right to receive Shares (or their cash equivalent or a combination of both) in the future. Each stock award shall be earned and vest over such period and shall be governed by such conditions, restrictions and contingencies as the Committee shall determine. These may include continuous service and/or the achievement of performance goals. The performance goals that may be used by the Committee for stock awards may include, without limitation, one or more of the following: operating profits (including EBITDA), net profits, earnings per share, profit returns and margins, revenues, cost/expense management, shareholder return and/or value, stock price, return on invested capital, cash flow, customer attrition, productivity, workforce diversity, employee satisfaction, individual executive performance, customer service and quality metrics. Performance goals may be measured solely on a corporate, subsidiary or business unit basis, or a combination thereof. Further, performance criteria may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the selected performance criteria. Profit, earnings and revenues used for any performance goal measurement may exclude, without limitation,: gains or losses on operating asset sales or dispositions; asset write-downs; litigation or claim judgments or settlements; accruals for historic environmental obligations; effect of changes in tax law or rate on deferred tax assets and liabilities; accruals for reorganization and restructuring programs; uninsured catastrophic property losses; the effect of changes in accounting standards; the cumulative effect of changes in accounting principles; the effect of dispositions of companies or businesses; charges related to the acquisition and integration of companies or businesses; and any items excluded from the calculation of ordinary income (or loss) determined in accordance with generally accepted accounting principles (which may include, without limitation, extraordinary items or significant unusual or infrequently occurring items) and/or described in management’s discussion and analysis of financial performance appearing in the Company’s annual report to stockholders for the applicable year.
5. | AWARD SETTLEMENTS AND PAYMENTS |
(a)Dividends and Dividend Equivalents. Awards of stock options and stock appreciation rights shall not include any right to receive dividends or dividend equivalent payments in respect of Shares underlying the award; provided, however, that Shares delivered upon exercise of stock options and stock appreciation rights shall, from the date of delivery, have the same dividend rights as other outstanding Shares. A stock award pursuant to Section 4(d) may include the right to receive dividends or dividend equivalent payments which may be paid either currently or credited to a participant’s account. Any such crediting of dividends or dividend equivalents may be subject to such conditions, restrictions and contingencies as the Committee shall establish, including vesting conditions and the reinvestment of such credited amounts in Share equivalents, and, in the case of any award subject to the achievement of performance goals, such dividends or dividend equivalents shall be paid only if, and to the extent that, such performance goals are satisfied.
(b)Payments. Awards may be settled through cash payments, the delivery of Shares, the granting of awards or combination thereof as the Committee shall determine. Any award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may permit or require the deferral of any award payment, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including converting such credits into deferred Share equivalents. It is intended that any such settlement or deferral shall be implemented in a manner and this Plan shall be interpreted and administered so as to comply with Section 409A and any applicable guidance issued thereunder in order to avoid the imposition of any interest or additional tax on an employee under Section 409A in respect of any award.
(c) Effect of Termination of Employment. The applicable award agreement shall provide for the extent to which a participant shall vest in or forfeit an award following the participant’s termination of employment and, with respect to stock options and stock appreciation rights, the extent to which a participant shall have the right to exercise the stock option or stock appreciation right following termination of employment. Such provisions shall be determined by the Administrator in its sole discretion, need not be uniform among all award agreements, and may reflect distinctions based on the reasons for termination.
C-4 | 2023 Proxy Statement |
6. | PLAN AMENDMENT AND TERMINATION |
(a) Amendments. The Board may amend this Plan and the Committee may amend any outstanding award in such manner as it deems necessary and appropriate to better achieve the Plan’s purpose; provided, however, that (i) except as provided in Section 3(f), (a) the Share and other award limitations set forth in Sections 3(a) and 3(d) cannot be increased and (b) the minimum stock option and stock appreciation right exercise prices set forth in Sections 2(e), 4(b) and 4(c) cannot be changed unless such a plan amendment is properly approved by the Company’s stockholders, and (ii) no such amendment shall, without a participant’s consent, materially adversely affect a participant’s rights with respect to any outstanding award. Notwithstanding the foregoing, no action taken by the Committee (x) to settle or adjust an outstanding award pursuant to Section 3(f) or (y) to modify an outstanding award to avoid, in the reasonable, good faith judgment of the Company, the imposition on any participant of any tax, interest or penalty under Section 409A, shall require the consent of any participant.
(b) Plan Suspension and Termination. The Board may suspend or terminate this Plan at any time. However, in no event may any awards be granted under the Plan after the date of the 2031 Annual Meeting of Stockholders. Any such suspension or termination shall not of itself impair any outstanding award granted under the Plan or the applicable participant’s rights regarding such award.
7. | CHANGE IN CONTROL |
(a) Administrator Determinations. Notwithstanding any provisions of this Plan to the contrary, the Administrator may, in its sole discretion, at the time an award is made hereunder or at any time prior to, coincident with or after the time of a Change in Control (as hereinafter defined):
(i) provide for the adjustment of any performance conditions as the Administrator deems necessary or appropriate to reflect the Change in Control;
(ii) provide that upon termination of a participant’s employment as a result of the Change in Control, any time periods or other conditions relating to the vesting, exercise, payment or distribution of an award will be accelerated or waived;
(iii) provide for the purchase of any awards from a participant whose employment has been terminated as a result of a Change in Control for an amount of cash equal to the amount that could have been obtained upon the exercise, payment or distribution of such rights had such award been currently exercisable or payable; or
(iv) cause the awards outstanding at the time of a Change in Control to be assumed, or new rights substituted therefore, by the surviving entity or acquiring entity in the transaction (or the surviving or acquiring entity’s parent company) or, if the Company is not the surviving entity following the Change in Control and the surviving or acquiring entity (or its parent company) does not agree to assume the Company’s obligations with respect to any awards under the Plan or to replace those awards with new rights of substantially equivalent value (as determined by the Administrator), to cause such awards to vest immediately prior to the Change in Control in such a manner that will enable the participant to participate in the Change in Control with respect to the shares issuable upon vesting, exercise, payment or distribution of such awards on the same basis as other holders of the Company’s outstanding Common Stock.
For purposes of sub-paragraphs (ii) or (iii) above, any participant whose employment is terminated by the Company (including any surviving entity or successor to the Company following a Change in Control) other than for “cause,” or by the participant for “good reason” (each as defined in the applicable award agreement), upon or within two years following a Change in Control shall be deemed to have been terminated as a result of the Change in Control. Except as provided in this Section 7(a), and notwithstanding any other provisions of the Plan or an award agreement to the contrary, the vesting, payment, purchase or distribution of an award may not be accelerated by reason of a Change of Control for any participant unless the Participant’s employment terminates as a result of the Change of Control.
(b) Definition. A “Change in Control” shall be deemed to occur if and when:
(i) Any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company’s then outstanding securities; or
2023 Proxy Statement | C-5 |
(ii) The individuals who, as of the date of grant, constituted the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual (other than any individual whose initial assumption of office is in connection with an actual or threatened election contest (as such term is used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)) becoming a director subsequent to the date of grant of an award, whose election, or nomination for election by the stockholders of the Company, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board, shall be considered as though such individual was a member of the Incumbent Board; or
(iii) The Company consummates any of the following transactions that are required to be approved by shareholders: (a) a transaction in which the Company ceases to be an independent publicly owned corporation, or (b) the sale or other disposition of all or substantially all of the Company’s assets, or (c) a plan of partial or complete liquidation of the Company.
8. | MISCELLANEOUS |
(a) Assignability. No Award granted under the Plan shall be transferable, whether voluntarily or involuntarily, other than by will or by the laws of descent and distribution; provided, however, that the Committee may permit transfers as gifts to family members or to trusts or other entities for the benefit of one or more family members on such terms and conditions as it shall determine; and, provided, further, that unless permitted by applicable regulations under the Code or other Internal Revenue Service guidance, the Committee may not permit any such transfers of incentive stock options. During the lifetime of a participant to whom incentive stock options were awarded, such incentive stock options shall be exercisable only by the participant.
(b) No Individual Rights. The Plan does not confer on any person any claim or right to be granted an award under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any employee or other person any right to continue to be employed by or to perform services for the Company, any subsidiary or related entity. The right to terminate the employment of or performance of services by any Plan participant at any time and for any reason is specifically reserved to the employing entity.
(c) Unfunded Plan. The Plan shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. The Plan shall not establish any fiduciary relationship between the Company and any participant or beneficiary of a participant. To the extent any person holds any obligation of the Company by virtue of an award granted under the Plan, such obligation shall merely constitute a general unsecured liability of the Company and accordingly shall not confer upon such person any right, title or interest in any assets of the Company.
(d) Use of Proceeds. Any proceeds from the sale of shares under the Plan shall constitute general funds of the Company.
(e) Other Benefit and Compensation Plans. Unless otherwise specifically determined by the Administrator, settlements of awards received by participants under the Plan shall not be deemed a part of a participant’s regular, recurring compensation for purposes of calculating payments or benefits from any Company benefit plan or severance Plan. Further, the Company may adopt any other compensation plans or arrangements as it deems appropriate.
(f) No Fractional Shares. Unless otherwise determined by the Administrator, no fractional Shares shall be issued or delivered pursuant to the Plan or any award, and the Administrator shall determine whether any fractional Share shall be rounded up or rounded down to the nearest whole Share, whether cash shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be cancelled.
(g) Governing Law. The validity, construction and effect of the Plan and, except as otherwise determined by the Administrator, any award, agreement or other instrument issued under the Plan, shall be determined in accordance with the laws of the State of New Jersey applicable to contracts entered into and performed entirely within the State of New Jersey (without reference to its principles of conflicts of law).
C-6 | 2023 Proxy Statement |
MI 11989
Corporate Election Services P. O. Box 1150 Pittsburgh, PA 15230 |
PLEASE SUBMIT YOUR PROXY BY PHONE OR BY INTERNET, OR RETURN THIS CARD AFTER SIGNING AND DATING IT. |
Submit your proxy by Telephone | Submit your proxy by Internet | Submit your proxy by Mail | ||
Toll-free via touch-tone phone: | Go to | Return your proxy | ||
1-888-693-8683 | www.cesvote.com | in the postage-paid | ||
Have your proxy card and follow | Have your proxy card and follow | envelope provided. | ||
instructions. | instructions. |
IMPORTANT
Your proxy must be received by 11:59 p.m. EDT on May 17, 2022,16, 2023, to be counted in the final tabulation, except for participants in the Quest Diagnostics employee benefit plan. If you are a participant in the Quest Diagnostics employee benefit plan, your voting instructions must be received by 6:00 a.m. EDT on Friday, May 13, 2022,12, 2023, to be counted in the final tabulation.
è |
ê If submitting a proxy by mail, please sign and date the card below and fold and detach card at perforation before mailing. ê |
The Quest Diagnostics Board of Directors recommends a vote FOR the nominees listed below.
1. Election of Directors | FOR | AGAINST | ABSTAIN | |
James E. Davis | ☐ | ☐ | ☐ | |
(02) | Luis A. Diaz, Jr., M.D. | ☐ | ☐ | ☐ |
(03) | Tracey C. Doi | |||
Vicky B. Gregg | ||||
Wright L. Lassiter, III | ||||
Timothy L. Main | ||||
Denise M. Morrison | ||||
Gary M. Pfeiffer | ||||
Timothy M. Ring | ||||
Gail R. Wilensky, Ph.D. |
The Quest Diagnostics Board of Directors recommends a vote FOR Proposals 2, 3, 4 and 5.5 and 1 YEAR on Proposal 3.
2. | An advisory resolution to approve the executive officer compensation disclosed in the Company’s |
3. | An advisory vote to recommend the frequency of the stockholder advisory vote to approve executive officer compensation |
☐ 1 YEAR | ☐ 2 YEARS | ☐3 YEARS | ☐ABSTAIN |
4. | Ratification of the appointment of our independent registered public accounting firm for |
The Quest Diagnostics Board of Directors recommends a vote AGAINST Proposal 6.
6. | Stockholder proposal regarding a report on the |
Signature(s): | Date: | , |
IMPORTANT – Please sign exactly as imprinted (do not print). When signing on behalf of a corporation, partnership, estate or trust, indicate title or capacity of person signing. If shares are held jointly, each holder must sign.
Notice of 20222023 Annual Meeting of Stockholders
QUEST DIAGNOSTICS INCORPORATED
One Insights Drive, Clifton, New Jersey
May 18, 2022,17, 2023, 10:30 a.m. local time
After careful consideration, in light of the COVID-19 pandemic and in the best interests of the public health and the health and safety of our stockholders, Board of Directors and employees, our 2022 annual meeting of stockholders will be held solely by remote communication via the internet at www.cesonlineservices.com/dgx22_vm. You will not be able to attend the annual meeting in person.
Any stockholder wishing to participate in the annual meeting, including to ask questions, vote and examine our stocklist at the virtual annual meeting must register for the meeting by no later than 24 hours before the meeting. To register, go to www.cesonlineservices.com/dgx22_vm, have your proxy card, notice, or other communication containing your control number, and follow directions to register for the virtual meeting. After you register, you will receive an e-mail prior to the meeting with a link and instructions for attending the virtual meeting and examining the stocklist during the virtual meeting.
At the meeting we will act on the following proposals:
the election of | ||
an advisory resolution to approve the executive officer compensation disclosed in the Company’s | ||
an advisory vote to recommend the frequency of the stockholder advisory vote to approve executive officer compensation; | ||
● | ratification of the appointment of our independent registered public accounting firm for | |
such other business as may properly come before the meeting or any adjournment or postponement thereof. |
ELECTRONIC ACCESS TO FUTURE DOCUMENTS NOW AVAILABLE
If you are a record holder of shares, you have the option to access future stockholder communications (e.g., annual reports, proxy statements and related proxy materials) over the Internet instead of receiving those documents in print. There is no cost to you for this service other than any charges you may incur from your Internet provider, telephone or cable company. Once you give your consent, it will remain in effect until you inform us otherwise. To give your consent to access materials electronically, follow the prompts when you submit your proxy by telephone or over the Internet, or contact Computershare, our transfer agent and registrar, using the contact details below.
STOCKHOLDER INFORMATION
If you are a stockholder of record and have questions regarding your Quest Diagnostics Incorporated stock, you may contact our transfer agent and registrar as follows:
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
43078
Providence, RI 02940-3078
Toll free telephone 800-622-6757
Email address: web.queries@computershare.com
ê If submitting a proxy by mail, please sign and date the card below and fold and detach card at perforation before mailing. ê |
QUEST DIAGNOSTICS INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael E. Prevoznik and William J. O’Shaughnessy, Jr., and each of them, proxies with full power of substitution, to represent and to vote on behalf of the undersigned all the shares of common stock of Quest Diagnostics Incorporated that the undersigned is entitled in any capacity to vote if personally present at the 20222023 Annual Meeting of Stockholders to be held on Wednesday, May 18, 2022,17, 2023, and at any adjournments or postponements thereof, in accordance with the instructions set forth on the reverse side of this proxy card and with the same effect as though the undersigned were present in person and voting such shares. Each of the proxies is authorized in his discretion to vote for the election of any substitute nominee proposed by the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, upon all matters incident to the conduct of the meeting, and upon such other business as may come before the meeting or any adjournment or postponement thereof.
THIS PROXY WILL BE VOTED AS DIRECTED. IF THIS PROXY IS SIGNED, BUT NO DIRECTION IS MADE, IT WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS OF QUEST DIAGNOSTICS INCORPORATED WITH RESPECT TO EACH PROPOSAL.