Notice of 20222024 Annual Meeting of Stockholders
and
Proxy Statement
April 19, 2022
[•], 2024
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 [_]
Check the appropriate box:
| [ | Preliminary Proxy Statement |
| [_] | CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (as permitted by Rule 14a-6(e)(2)) |
| [ | 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) |
Payment of Filing Fee (Check the appropriate box):
| [X] | No fee | |
| [_] | Fee paid previously with preliminary materials | |
| [_] | Fee computed on table | |
Notice of 20222024 Annual Meeting of Stockholders
and
Proxy Statement
April 19, 2022
[•], 2024
The Quest Way
Purpose | Working together to create a healthier world, one life at a time | |||
| We help people make the best decisions to improve health by providing high-quality, innovative, convenient and affordable diagnostic testing insights and services using our scale and extensive reach | ||||
Action from Insight
| How we grow | • | Collaborating with | |
|
| • | Offering an industry-leading menu of
|
|
|
| • | Leveraging our data assets and services to improve population health and enable value-based care |
HOW WE OPERATE
|
|
|
| • | Continuously improving our quality and efficiency by leveraging the Quest Management System and by embracing innovative technologies, such as automation and artificial intelligence (“AI”) | |||
| Who we serve: physicians, hospitals, patients and consumers, health plans, employers, emerging retail healthcare providers, government agencies, pharmaceutical companies and other commercial clinical laboratories | ||||
| Culture How we work | Customer first, Care, Collaboration, Continuous improvement, Curiosity | ||
Notice of
|
April 19, 2022[•], 2024
Dear Fellow Stockholder:
It is my pleasure to invite you to attend Quest Diagnostics’ 20222024 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 nine directors; | |
| • | 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 2024; | |
| • | to adopt an amendment to our Restated Certificate of Incorporation, the full text of which is attached to the proxy statement as Annex C and is incorporated herein by reference, to provide for the exculpation of officers as permitted by law; and | |
| • | a stockholder proposal, as described in the accompanying proxy statement, if properly presented at the Annual Meeting. |
• 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 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
• a stockholder proposal, as described in the accompanying proxy statement, if properly presented.
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.
Attendance at the Annual Meeting is limited to stockholders at the close of business on March 21, 2022,18, 2024, 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. [•], 2024. 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
Chairman of the Board,
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.
20222024 Annual Meeting of Stockholders
| Time and Date: | 10:30 a.m. Eastern Time, May | |
| Place: |
| One Insights Drive, Clifton, New Jersey |
| Record date: | March | |
| Voting: | Record date stockholders only: One vote per share |
| Meeting Agenda | Board Recommendation | |
| 1. | Elect nine directors | FOR EACH NOMINEE |
| 2. | To approve, on an advisory basis, the compensation of our named executive officers disclosed in our Proxy | FOR |
| 3. | To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for | FOR |
| 4. | To adopt an amendment to our Restated Certificate of Incorporation, the full text of which is attached to | FOR |
| 5. | ||
| AGAINST |
20232025 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.[•], 2024.
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, 202316, 2025 and no later than February 17, 2023.15, 2025 and must comply with the requirements set forth in our by-laws. In addition to the requirements set forth in our by-laws, stockholders who intend to solicit proxies for nominations for election to the Board other than the Company’s nominees in reliance on the universal proxy rules (Rule 14a-19 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) must also comply with the additional requirements of Rule 14a-19.
Notice of proxy access director nominations must be received by the Company no earlier than November 20, 2022[•], 2024 and no later than December 20, 2022.[•], 2024.
| i |  |  |
Board Nominees
Board Nominees
The following table provides summary information about our director nominees.*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 | 61 | 2022 | Chairman, Chief Executive Officer and President, Quest Diagnostics Incorporated | EX | • N/A | |||||
| Luis A. Diaz, Jr., M.D. | 53 | 2023 | Head of Solid Tumor Oncology Division, Memorial Sloan Kettering Cancer Center | CS QC | • N/A | |||||
| Tracey C. Doi | 63 | 2021 | Retired Chief Financial Officer and Group Vice President of Toyota Motor North America, Inc. | AC/FE CS | • Pentair plc | |||||
| Vicky B. Gregg | 69 | 2014 | Cofounder/Partner, Guidon Partners LLC and Retired CEO, Blue Cross and Blue Shield of Tennessee | CC GC QC (Chair) | • Acadia Healthcare Company | |||||
| Wright L. Lassiter III | 60 | 2020 | CEO, CommonSpirit Health | AC QC | • Fortive Corporation | |||||
| Timothy L. Main | 66 | 2014 | Non-Executive Chairman of WNS (Holdings) Limited | AC CS (Chair) GC | • WNS (Holdings) Limited | |||||
| Denise M. Morrison | 70 | 2019 | Founder, Denise Morrison & Associates and Retired President and CEO, Campbell Soup Company | CC(Chair) CS GC | • MetLife, Inc. • Visa, Inc. | |||||
| Gary M. Pfeiffer | 74 | 2004 | Retired Senior Vice President and Chief Financial Officer, E.I. du Pont de Nemours and Company | AC/FE (Chair) CC EX GC | • N/A | |||||
| Timothy M. Ring, Lead Independent Director | 66 | 2011 | Retired Chairman and CEO, C. R. Bard, Inc. | CC EX (Chair) GC (Chair) | • Becton, Dickinson and Company |
| AC | Audit and Finance Committee | CC | Compensation and Leadership Development Committee |
| CS | Cybersecurity Committee | EX | Executive Committee |
| GC | Governance Committee | QC | Quality and Compliance Committee |
| FE | Financial Expert |
|
| 2024 Proxy Statement | ii |
20212023 Executive Compensation Highlights
Type |
| Form | Percentage of Equity Award Named Executive Officers (%) | Terms | ||
| Equity | • Performance Shares |
| 50 | • Performance metrics for | ||
| • Vest after 3-year performance period | ||||||
| • Stock Options |
| 25 | • 3-year ratable vesting | |||
| • Restricted Share Units (“RSUs”) |
| 25 | • 3-year ratable vesting | |||
| Cash | • Salary
| • Reviewed and approved annually | ||||
| • Annual Incentive Compensation | • Based on financial and non-financial goals | |||||
| Retirement | • 401(k) Plan | • Company matching contributions | ||||
| • Supplemental Deferred Compensation Plan | • 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.The2023. In 2023, the Compensation and Leadership Development Committee, due to diminished demand for COVID-19 testing, implemented a change to no longer measure base business revenue and COVID-19 testing revenue separately, as was done for 2022, and to include COVID-19 revenues in the measure of base business revenue for purposes of performance shares granted in 2023 (except for determining base year revenues).
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, 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 awards granted in 2021 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 2022.2024.
The average 20212023 annual incentive payout for our named executive officers on our annual cash incentives under the Senior Management Incentive Plan (“SMIP”) was 145%78% of target. Payout on performance share awardsshares for the 3-year performance period ended December 31, 20212023 was 200%186% 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, 2023 | 78 (average) | 186 | ||
| Performance period ended December 31, 2022 | 131 (average) | 196 |
Our Compensation Discussion and Analysis, which includes a discussion of our program’s “Best Practices,” begins on page 28.23. The 20212023 compensation of our named executive officers is set forth in tables beginning at page 42.43.
| iii | | 2024 Proxy Statement |
20212023 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 generated diluted earnings per share (“EPS") of $7.49 and | |
| • | Our strong relationships with health plans were a key driver of growth in 2023, as we | |
| • | We continued to work with health systems to help them execute their lab strategy. We entered into an agreement to provide laboratory supply chain expertise with Tower Health, a regional integrated healthcare system in | |
| • | In Advanced Diagnostics, we invested in areas to further differentiate and grow our advanced diagnostics value proposition. We acquired Haystack Oncology, Inc. (“Haystack Oncology”), a cancer testing company that has developed a highly sensitive testing technology for detecting minimal-residual disease by circulating tumor DNA due to residual or recurring cancer. We also launched our QUEST AD-DETECT® test portfolio for assessing Alzheimer’s disease risk using blood specimens, as opposed to testing by more costly or invasive methods, such as testing of cerebral spinal fluid by lumbar puncture. | |
| • | Our Consumer-initiated testing service, QuestHealth.com, generated strong base business growth in 2023. We increased to | |
| • | We are taking advantage of opportunities to work with emerging retail healthcare providers, not only to offer new access partners (e.g., Rite-Aid retail locations) and new access points for our services (e.g., our collaboration with Safeway), but also to grow our business by expanding our service offerings (e.g., our collaborations with CVS and Walmart). | |
| • | We consummated important acquisitions, including Haystack Oncology, certain assets of the laboratory services business of New York-Presbyterian, one of the nation’s largest and most comprehensive academic medical centers, and select assets of the outreach laboratory services business of Northern Light Health, a large integrated healthcare system in Maine. |
Drive Operational Excellence
Continuous Improvement
We also continued to deliver disciplined capital deployment:
| • | We delivered our Invigorate cost excellence program goal of annual savings and productivity improvements of 3% of our costs. | |
| • | We continue to make progress in using front end automation to enhance specimen processing. In 2023, we completed front end automation upgrades in our Pittsburgh and Dallas laboratories, which is expected to improve quality and productivity. | |
| • | We expanded our use of AI in 2023 to improve quality, efficiency and workforce experience in several clinical areas, including in microbiology to help identify bacteria as well as in cytogenetics to identify chromosomal abnormalities. | |
| • | We are leveraging automation and AI to improve productivity and quality across our entire value chain, not just in the laboratory. Other areas of focus include reducing denials and patient concessions, enhancing the digital experience, and selecting and retaining talent. | |
| • | We created an initiative to deploy generative AI to improve several areas of our business, including software engineering, customer service, claims analysis, scheduling optimization, specimen processing and marketing. We expect to further develop these projects in 2024. | |
| • | We implemented several initiatives to improve talent retention, including capability-building programs. | |
| • | We improved retention of our frontline employees by 11%. |
Disciplined Capital Deployment
| In February 2024, we announced the thirteenth increase in our quarterly common stock cash dividend since the beginning of 2012, increasing the dividend by approximately 5.6%, from $0.71 per share of common stock to $0.75 per share of common stock. | |
| • | We repurchased approximately $276 million of our common stock in 2023. | |
| • | Through the end of 2023, since the beginning of 2012 we have returned approximately $10.5 billion to stockholders: $7.5 billion through common stock repurchases (including $1.8 billion associated with pre-tax proceeds from divestitures), and $3.0 billion through common stock dividends. |
| 2024 Proxy Statement | iv |
Management Transition
Management Transition
On February 3, 2022, we announced that the Board, as part of its ongoing leadership succession planning, has appointedApril 1, 2023, James E. Davis, currently Executive Vice President, General Diagnostics, to be the next Chief Executive Officer and President of the Company, effective November 1, 2022. On November 1, 2022, Mr. Davis will succeedwas appointed Chairman of the Board, succeeding Stephen H. Rusckowski, who will have served as our Chief Executive Officer and President for more than a decade and also serves 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, 2022, we also announced that Mark J. Guinan, our Executive Vice President and Chief Financial Officer, plans 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.
| v | | |
| PROXY STATEMENT | QUEST DIAGNOSTICS INCORPORATED | |
| Contents |
PROXY STATEMENT QUEST DIAGNOSTICS INCORPORATED
Contents
| |
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 ten 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. In September 2023, Dr. Helen I. Torley, one of our directors, decided toWilensky informed the Board that she would not stand forseek re-election and would be retiring from the Board at the Annual Meeting. The Board would like to thank Dr. Wilensky for her leadership and dedication to Quest Diagnostics’ foundational values during her more than 25 years of service on the Board. Upon the conclusionretirement of her term,Dr. Wilensky, 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 announced 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 next Chief Executive Officer and President of the Company, effective November 1, 2022. On November 1, 2022, Mr. Davis will succeed Stephen H. Rusckowski, who will have served as our Chief Executive Officer and President for more than a decade and also serves as the Chairman of our Board. Mr. Rusckowski will continue to serve 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, our Executive Vice President and Chief Financial Officer, plans 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.
After considering the recommendation of the Governance Committee, the Board nominated the nominees below to serve as directors of Quest Diagnostics. Each nominee currently is a director of the Company whose term expires at the Annual Meeting. 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.
| James E. Davis | ||
Chairman, Chief Executive Officer and President Quest Diagnostics Incorporated Age: 61 Director since: 2022 | 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. | |
| 1 | | |
| Luis A. Diaz, Jr., M.D. | ||
Head of the Division of Solid Tumor Oncology Memorial Sloan Kettering Cancer Center Age: 53 Director since: 2023 | 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 served on the board of Jounce Therapeutics, Inc. from 2017 until it was acquired in 2023. He is the recipient of numerous awards and honors. Dr. Diaz was elected to the National Academy of Medicine in 2023 and in 2021 he 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. | |
| Tracey C. Doi | ||
Retired Chief Financial Officer and Group Vice President Toyota Motor North America, Inc.
Age: Director since: 2021 | 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. Ms. Doi also has experience with cybersecurity and technology matters. | |
| 2024 Proxy Statement | 2 |
| Vicky B. Gregg | ||
Cofounder/Partner Guidon Partners LLC Retired Blue Cross and Blue Age: Director since: 2014 | 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. | |
|
| Wright L. Lassiter III |
Age: Director since: 2020 | 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. |
| 3 | | 2024 Proxy Statement |
| Timothy L. Main |
Non-Executive Chairman WNS (Holdings) Limited Age: Director since: 2014 | 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 |
| |
| Denise M. Morrison |
Founder, Denise Retired President Campbell Soup Company Age: Director since: 2019 | 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. Ms. Morrison also has experience with cybersecurity and technology matters. |
| 2024 Proxy Statement | 4 |
| Gary M. Pfeiffer |
Retired Senior E.I. du Pont de Age: Director since: 2004 | 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. Mr. Pfeiffer also has experience with cybersecurity and technology matters. |
|
| Timothy M. Ring |
Retired Chairman C. R. Bard, Inc. Age: Director since: 2011 | 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. |
|
|
| |
|
|
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH NOMINEE. PROXIES SOLICITED BY THE BOARD THAT HAVE BEEN SIGNED AND RETURNED WILL BE VOTED FOR EACH NOMINEE UNLESS OTHERWISE INSTRUCTED.
5 2024 Proxy Statement
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 |
| 2024 Proxy Statement | 6 |
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/ | ||
Corporate Responsibility Reports
Information about our corporate political contributions
ESG resources
Governance, ethics, and values |
Quest for Health Equity®
Quest Diagnostics Foundation
Sustainability
Community giving
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
| ||
| ||
| 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 2024 for the tenth consecutive year | ||
| Named a Best Place to Work for LGBTQ Equality, based on the Human Rights Campaign Foundation Corporate Equality Index 2023 | ||
| Named one of America’s Greatest Workspaces for Diversity in 2024 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
| 7 | | 2024 Proxy Statement |
requirements in the NYSE listing standards and include guidelines as to categories of relationships that are considered not material for purposes of director independence.
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 directorsdirector nominees 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. | Timothy L. Main | ||
| Tracey C. Doi | Denise M. Morrison | ||
| Vicky B. Gregg | Gary M. Pfeiffer | ||
| Wright L. Lassiter III | |||
| Timothy M. Ring |
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 three-quarters 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).
| 2024 Proxy Statement | 8 |
Our Corporate Governance Guidelines provide that directors are encouraged and expected to attend the Annual Meeting. All our directors then in office attended the 20212023 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 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:
o Chief Executive Officer or Chief Operating Officer (or similar responsibilities), current or past
o Demonstrated expertise in business function(s) such as sales, operations, finance, strategy, legal or human resources
o Medical practitioner and/or science and health thought leader |
| 9 | | 2024 Proxy Statement |
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 | |
|
| Davis | Diaz | Doi | Gregg | Lassiter | Main | Morrison | Pfeiffer | Ring | |
| Skills and Experience | |||||||||
| Accounting/Finance |  | | |||||||
| Advisory |  | ||||||||
| Capital Markets | | | |||||||
| Consumer Focus | | | |||||||
| Corporate Governance | | | | | |||||
| Cybersecurity/Technology | | | | | | ||||
| Executive Management | | | | | | | | | |
| 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 | 1 | 2 | 10 | 4 | 10 | 5 | 20 | 13 |
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
| 2024 Proxy Statement | 10 |
as well as the fresh perspectives of newer directors. The composition of the director nominee group 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.
| |
| 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
|
| 11 | | 2024 Proxy Statement |
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 6169 for information regarding the process and deadline for stockholders to submit director nominations for the 20222025 annual meeting of stockholders.
Board Committees
During 2021,2023, the Board held 11eight 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. In 2023, 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 2021,2023, 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.
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 2021.2023. Additional information about the committees can be found in their charters, which are available on our website at www.QuestDiagnostics.com.
| 2024 Proxy Statement | 12 |
| Audit and Finance Committee | |
Number of Gary M. Pfeiffer (Chair)
*Dr. Wilensky is retiring | This committee: • Monitors the quality and integrity of the Company’s financial statements and related disclosures, including the Company’s disclosure controls and procedures and internal control over financial • Oversees • Oversees the internal audit function and • 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. |
| 13 | | |
| Compensation and Leadership Development Committee | |
Number of Denise M. Morrison (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, • Reports to the Board with respect to, and reviews, approves and oversees the implementation of, the total compensation package for the Company’s
• Annually reviews the compensation arrangements for the Company’s • • Annually reviews and recommends to the Board the compensation of the Company’s non-employee directors. • • Supports the Board in the • • 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 23. |
| 14 |
| Cybersecurity Committee | ||
Number of Timothy L. Main (Chair)
| This committee: • Oversees the Company’s cybersecurity policies, plans, programs and • 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. | |
| 15 | | |
| Quality and Compliance Committee | |
Number of
Vicky B. Gregg *Dr. | This committee: • Reviews the adequacy • 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.
| 16 |
| Principal Responsibilities of the Lead Independent Director |
• Participates with the Chairman of the Board and • Serves as a member of the Board’s Executive Committee • Coordinates providing timely feedback from the directors to the Chairman of the Board • Presides over all executive sessions of the independent directors and all Board meetings in the absence of the Chairman of the Board | • Takes a leading role in the process of evaluating the Board, and leads the independent directors in the annual evaluation of the performance of the • Interviews candidates for the Board • Serves as the principal contact for stockholder communications with the independent directors • Monitors, and if appropriate discusses with the other independent directors, communications received from stockholders and others |
We also have other mechanisms in place to promote the appropriate level of independence and oversight in Board decisions. See “Corporate Governance Highlights” on page 6.
Board Oversight of Company Culture and Human Capital
The Board is committed to fostering a strong culture of compliance and ethical conduct and has structured its committees and their activities to support its commitment. The Board supports management’s promotion of a corporate culture of integrity, ethical behavior and compliance with laws and regulations and efforts to ensure that the Company’s culture and its strategy are aligned. The Board expects all directors, as well as officers and employees, to conduct themselves in a manner consistent with our Code of Ethics and our values. The Board believes that a strong culture of integrity, ethics and compliance is fundamental to the conduct of the Company’s business, and is necessary for effective risk management, maintaining investor trust, and successful corporate governance.
Creating
We have long strived to create an inspiring workplace, is one of our three corporate goals, and this goal driveshas driven our approach to human capital management. Effectively managing our human capital resources is a priority with key components that include culture, safety and well-being programs, employee engagement, and development and succession planning. Our Board actively engages in oversight of our human capital management, including by receiving management reports on key areas, strategies and initiatives. Additional information about our human capital management strategies and initiatives is available in our 20212023 Annual Report on Form 10-K and our 20202022 Corporate Responsibility Report, each of which is available on our website at www.QuestDiagnostics.com.www.QuestDiagnostics.com.
Board, Committee and CEO Evaluation Process
The Board annually conducts an annuala self-evaluation of its performance and effectiveness. EachThe charter of the sixeach standing committeescommittee of the Board, discussed under the heading “Board Committees” on beginning on page 12, pursuantcalls for the committee to its charter, also conductsconduct an annual self-evaluation of its performance, and effectiveness, and reportsreport to the Board the results of the self-evaluation. The Governance Committee is tasked with establishing criteria and processes for and overseeing the annual self-evaluation of the Board and the committees. Each year, the Governance Committee discusses the appropriate approach for that year’s Board and committee evaluations.
Prior to the meeting at which each annual self-evaluation occurs, each member of the Board and the committees receives a discussion outline, which encourages the directors to consider the Board’s or committee’s structure, processes, overall effectiveness, and improvement since the previous year’s assessment. In addition, our General Counsel discusses individually with each director, and with members of our senior management, the self-evaluation items and compiles feedback received for discussion with the Lead Independent Director.Director and the full Board. At the meeting, the Lead Independent Director or the committee chair, as applicable, leads a discussion guided by the outline provided, and the Board or committee, as applicable, identifies action items as well as items for further review.
| 17 | | |
Periodically (including in 2023), the Board engages an independent consultant to assist with the evaluation, including evaluating individual director performance. When the Board evaluates individual director performance, input from other directors and senior management is considered, in a process that protects anonymity to ensure honest feedback. In these situations, the independent consultant and the Lead Independent Director together review the results of the individual director evaluations with the individual directors. The Lead Independent Director reviews the remaining items with the Board and assists the Board in identifying action items as well as items for further review.
In addition, the Compensation and Leadership Development Committee, pursuant to its charter, conducts an annual review of the Chief Executive Officer’s performance, receives input on the review from the Board, and reports the results of its review to the Board. Pursuant to our Corporate Governance Guidelines, the Board, led by the Lead Independent Director, reviews the Compensation and Leadership Development Committee’s report in order to ensure that the Chief Executive Officer is providing the necessary leadership for the Company in light of the Company’s current and longer termlonger-term goals. The Board then provides feedback to the Chief Executive Officer regarding his performance.
Board Role in Risk Oversight
The Board and its committees play an active role in overseeing the Company’s key risks, as discussedrisks. As highlighted in the table below.below, the Board has delegated primary responsibility for overseeing our enterprise risk management program to the Audit and Finance Committee, and has assigned oversight of specific risks to the Board committee with the appropriate subject matter responsibility, as set forth in the committee charters. The Board has also considered its role in risk oversight in determining the current Board leadership structure. The Company’s management is responsible for risk management, which it does through a committee of senior managers that leads the Company’s enterprise risk management program;program. The program includes a formal continuous process that identifies, assesses, mitigates and manages the risks from both internal and external conditions that could significantly impact the Company and influence its business strategy and performance, including ESG-related matters. The program is designed to focus on the Company’s key risk types, which are: operational; financial; legal and compliance; and strategic. As part of our program, the Board and its committees receive updates and training from internal and external experts on topics that are relevant to overall risk management. The Company’s enterprise risk management program, including cybersecurity risk management and strategy, is discussed in the Company’s Annual Report on Form 10-K. The program is designed to identify and address the Company’s key risks from time to time; key risks currently include without limitation: medical quality, cybersecurity and business continuity.
| Roles of the Board and its Committees in Risk Oversight | ||
| Board of Directors | Cybersecurity Committee | |
• Annually reviews our enterprise risk management program. • Receives regular updates from management and the Board’s committees regarding their activities with respect to the program. | • Reviews risks and compliance with legal and regulatory requirements and industry standards related to our IT security systems and processes, including network security and data protection. • Reviews adequacy and effectiveness of our cybersecurity program and regularly receives reports from management on cybersecurity matters. | |
| Audit and Finance Committee | ||
• Has been delegated primary responsibility for overseeing our enterprise risk management program by the Board. • Receives regular updates from management regarding our enterprise risk management program, including with respect to business continuity. • Regularly oversees compliance with securities and accounting rules and regulations. | • Reviews policies, programs and reports related to environmental sustainability matters. • Reviews the Company’s overall ESG priories, goals and strategies. • Receives regular reports from management regarding these topics. |
| 2024 Proxy Statement | 18 |
| Compensation and Leadership Development Committee | Quality and Compliance Committee | |
• Annually reviews compensation arrangements for members of our executive leadership team. • Assesses whether such compensation arrangements encourage risk taking that is reasonably likely to have a material adverse effect on the Company. | • Reviews the adequacy and effectiveness of policies and programs to ensure compliance with laws and regulations applicable to our business (other than with respect to securities and accounting). • Oversees • Reviews the adequacy and effectiveness of our medical quality program. • Receives regular reports from management regarding these topics. |
|
|
|
Related Person Transactions
The Company has a written policy pursuant to which it evaluates proposed transactions involving a related person and the Company in which the amount involved exceeds $120,000. A related person is any director or executive officer of the Company, any immediate family member of a director or executive officer, or any person who owns 5% or more of the Company’s outstanding common stock. The office of the General Counsel is primarily responsible for the administration of the policy and for determining, based on the facts and circumstances, whether the Company or a related person has a direct or indirect material interest in the transaction. Certain transactions are defined not to be related person transactions under the policy.
The Governance Committee reviews any proposed transaction in which a related person has a direct or indirect material interest, except for any compensation arrangements involving an immediate family member of a director or an executive officer. In the event that the General Counsel becomes aware of a related person transaction not approved in advance, the General Counsel will arrange for the related person transaction to be reviewed at the next regularly scheduled meeting of the Governance Committee. Any member of the Governance Committee who is a related person with respect to a transaction under review may not participate in any review, consideration or approval of the transaction.
In considering any related person transaction, the Governance Committee determines whether the transaction is fair to the Company. In considering a proposed transaction involving a director or the immediate family member of a director, the Governance Committee also assesses whether the proposed transaction could reasonably be expected to impact the independence of the director under the Company’s Corporate Governance Guidelines, the NYSE listing standards or other applicable rules.
Compensation arrangements involving an immediate family member of an executive officer are reviewed and approved by the Chief Executive Officer and the Senior Vice President, Chief Human Resources Officer, unless such person is an immediate family member of the Chief Executive Officer, in which case the compensation arrangement is approved by the Compensation and Leadership Development Committee. Compensation arrangements involving an immediate family member of a director are reviewed and approved by the Compensation and Leadership Development Committee.
During 2021,2023, there were no related person transactions meeting the requirements for disclosure in this proxy statement.
Policies Regarding Hedging and Pledging our Common Stock; Window Periods
Our directors and executive officers are prohibited from pledging the Company’s common stock to secure a loan and from holding such stock in a margin account. Our directors and employees, including executive officers, are prohibited from entering into transactions or purchasing financial instruments that are expected to hedge or offset, or designed to hedge or offset, a decline in our common stock price, including, but not limited to, the use of financial derivatives (including, for example, prepaid forward contracts, equity swaps, collars, puts and calls or exchange funds). Our directors and employees, including executive officers, also are prohibited from entering into transactions (including, for example, short sales) that establish downside price protection for our common stock. In addition, our directors and executive officers, as well as certain other employees, generally may purchase or sell
| 19 | | 2024 Proxy Statement |
Company securities only during permitted window periods (generally beginning on the business day following the issuance of our quarterly earnings releases and continuing until the end of the second month of the fiscal quarter).
Director Compensation Program for 20212023.. After considering the recommendation of the Compensation Committee, which received input from its independent consultant, the Board determined to (i) increase the annual cash retainer fee paid to our non-employee directors to $100,000 (from $96,500), (ii) increase the value of the annual equity award to non-employee directors to $180,000 (from $168,000) and (iii) increase the annual retainer fee paid to members of the Quality and Compliance Committee to $7,500 (from $7,000).
The following table sets forth the 20212023 compensation of our non-employee directors then in office. No changes to our director compensation program were made in 2023. Mr. Rusckowski our onlyand Mr. Davis, each of whom served as an employee director during 2021,2023, received no additional compensation in 2023 for serving as director. None of our non-employee directors receives any consulting or other non-director fees from the Company.
| |
| Director | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) |
| Tracey C. Doi | 44,860 | 135,614 | 180, 474 |
| Vicky B. Gregg | 127,721 | 179,916 | 307,637 |
| Wright L. Lassiter III | 120,500 | 179,916 | 300,416 |
| Timothy L. Main | 135,500 | 179,916 | 315,416 |
| Denise M. Morrison | 117,000 | 179,916 | 296,916 |
| Gary M. Pfeiffer | 159,500 | 179,916 | 339,416 |
| Timothy M. Ring | 150,893 | 179,916 | 330,809 |
| Daniel C. Stanzione | 68,563 | - | 68,563 |
| Helen I. Torley | 117,000 | 179,916 | 296,916 |
| Gail R. Wilensky | 138,000 | 179,916 | 317,916 |
| Director | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) | |||||||||
| Luis A. Diaz, Jr. | 100,467 | 179,941 | 280,408 | |||||||||
| Tracey C. Doi | 120,500 | 179,941 | 300,441 | |||||||||
| Vicky B. Gregg | 135,791 | 179,941 | 315,732 | |||||||||
| Wright L. Lassiter III | 120,500 | 179,941 | 300,441 | |||||||||
| Timothy L. Main | 135,500 | 179,941 | 315,441 | |||||||||
| Denise M. Morrison | 132,385 | 179,941 | 312,326 | |||||||||
| Gary M. Pfeiffer | 162,174 | 179,941 | 342,115 | |||||||||
| Timothy M. Ring | 166,000 | 179,941 | 345,941 | |||||||||
| Gail R. Wilensky | 124,875 | 179,941 | 304,816 | |||||||||
| (1) | Represents the aggregate grant date fair values of the awards. Each of our non-employee directors then in office received a single award of |
| Ms. Doi | 909 | Mr. Pfeiffer | 23,471 |
| Ms. Gregg | 2,958 | Mr. Ring | 22,435 |
| Mr. Lassiter | 3,310 | Dr. Stanzione | 1,595 |
| Mr. Main | 2,958 | Dr. Torley | 2,958 |
| Ms. Morrison | 4,701 | Dr. Wilensky | 2,958 |
| Dr. Diaz | 1,369 | Ms. Morrison | 5,096 | |||
| Ms. Doi | 3,660 | Mr. Pfeiffer | 27,129 | |||
| Ms. Gregg | 2,686 | Mr. Ring | 26,051 | |||
| Mr. Lassiter | 6,158 | Dr. Wilensky | 2,686 | |||
| Mr. Main | 2,686 |
| (2) | No stock options were awarded to our non-employee directors during |
| Ms. Doi | - | Mr. Pfeiffer | - |
| Ms. Gregg | - | Mr. Ring | 12,025 |
| Mr. Lassiter | - | Dr. Stanzione | - |
| Mr. Main | 2,037 | Dr. Torley | 3,260 |
| Ms. Morrison | - | Dr. Wilensky | - |
Annual Cash Retainer Fees.During 2021,2023, our non-employee directors received an annual cash retainer fee. Directors serving on Board committees also received additional retainers for such service, and directors who served as Lead Independent DirectorsDirector and committee chairs each received an additional fee for such service. All such cash retainer fees were paid at annual rates as set forth in the table below.
| Members | Chair | |||
| Board of Directors | • | • | ||
| Audit and Finance Committee | • | • | ||
| Compensation and Leadership Development Committee | • | • | ||
| Governance Committee | • | • | ||
| Quality and Compliance Committee | • | • | ||
| Executive Committee | • | • N/A | ||
| Cybersecurity Committee | • | • |
Equity AwardsAwards.. Each non-employee director participates in the Company’s Long-Term Incentive Plan for Non-Employee Directors (the “Director Plan”). The Director Plan currently authorizes the grant to each non-employee director, on the date of the annual stockholders meeting, of stock options and stock awards covering shares of common stock having an aggregate value on the date of grant not exceeding $500,000. If a person is appointed or
| 2024 Proxy Statement | 20 |
elected as a director other than on the date of the annual stockholders meeting, the Board may grant to such director a prorated equity award, in such proportions as the Board may determine. Annual option grants become exercisable, and annual RSUs generally vest and convert to shares of our common stock, in three equal annual installments, beginning on the first anniversary of the grant date, regardless of whether the non-employee director remains a director. The Director Plan also permits the Board to grant to any non-employee director an equity award for any special service as a director (e.ge.g.., service on a special purpose committee). Special service equity awards shall not exceed the grant date value of the annual equity award granted to each non-employee director at the most recent annual meeting of stockholders. The exercise price of all stock options issued under the Director Plan is the fair market value of our common stock on the grant date. Options, once vested, will be exercisable through the tenth anniversary of the date of grant even if the director’s service on the Board terminates.
|
For 2021,2023, the Board fixed the value of the annual equity award to non-employee directors at $180,000 and determined that the award would be delivered entirely in the form of RSUs. The 20212023 award was granted effective May 21, 2021,17, 2023, with each non-employee director then in service receiving an award of 1,3631,369 RSUs.
A non-employee director may elect to receive annual retainer fees in stock awards in lieu of cash. The number of shares issued in lieu of cash for the retainer fees is based on the fair market value of the stock on the date that the cash payment would otherwise be made.
Opportunity to Defer CompensationCompensation.. Under the Company’s Deferred Compensation Plan for Non-Employee Directors, each non-employee director may elect to defer, until a date specified by the director or until the director’s termination of service as a director, the director’s cash compensation or any stock grants awarded pursuant to the Director Plan. If a director specifies a deferral date that is prior to the director’s termination of service, the payout will occur or commence, as applicable, upon termination of service as a director. Cash amounts deferred may be indexed to (i) a cash account under which amounts deferred earn interest, compounded quarterly, at a rate in effect on the first date of each calendar quarter or (ii) the Company’s common stock.
Changes in Director Compensation Program for 20222024.. No changes were made in the compensation program for directors for 2022.2024.
| Stock Ownership Information |
We encourage our directors, officers, and employees to own our common stock, which aligns their interests with the interests of our stockholders. The Company maintains stock ownership and retention guidelines for its directors and executive officers. The guidelines call for our directors to beneficially own not less than 6,000 shares of our common stock. Until a director satisfies the minimum shareholding requirement, directors are required to maintain 75% of net shares received from vesting of RSUs and from the exercise of options. For purposes of determining whether a director has met the minimum shareholding requirements, we count shares subject to unvested RSUs, but not shares subject to stock options. The guidelines for our executive officers are discussed in “Compensation Discussion and Analysis” beginning on page 23.
The following tables show the number of shares of the Company’s common stock beneficially owned by (1) each person who is known to the Company to own beneficially more than 5% of the Company’s common stock, (2) each director of the Company and each nominee, (3) each named executive officer, and (4) all directors, nominees and named executive officers as a group. Information in the table regarding the Company’s directors, nominees and executive officers is provided as of March 8, 2022.2024.
| Name | Number of Shares Beneficially Owned | Percentage of Class |
| The Vanguard Group (1) | 13,377,729 | 10.91 |
| BlackRock, Inc. (2) | 11,636,382 | 9.50 |
| State Street Corporation (3) | 6,268,789 | 5.11 |
| Name | Number of Shares Beneficially Owned | Percentage of Class | ||||||
| The Vanguard Group (1) | 13,575,974 | 12.07 | ||||||
| BlackRock, Inc. (2) | 10,578,025 | 9.4 | ||||||
| (1) | The business address of The Vanguard Group (“Vanguard”) is 100 Vanguard Blvd., Malvern, PA 19355. Vanguard has sole voting power with respect to 0 of these shares, sole dispositive power with respect to 13,101,247 of these shares, shared voting power with respect to 141,923 of these shares and shared dispositive power with respect to 474,727 of these shares. The ownership information is based on the information contained in the Schedule 13G/A filed by |
| 21 | | |
| (2) | The business address of BlackRock, Inc. (“Blackrock”) is |
| Name | Shares (1) | Shares Subject to Stock Options Exercisable within 60 days (2) | Total (3) | Shares Underlying RSUs (4) |
| Named Executive Officers | ||||
| Stephen H. Rusckowski | 290,525 | 521,972 | 812,497 | 44,308 |
| Mark J. Guinan | 90,904 | 208,966 | 299,870 | 8,079 |
| James E. Davis | 51,193 | 201,435 | 252,628 | 15,615 |
| Carrie Eglinton Manner | 31,578 | 157,857 | 189,435 | 16,813 |
| Catherine T. Doherty | 64,602 | 98,679 | 163,281 | 7,294 |
| Directors and Nominees | ||||
| Tracey C. Doi | - | - | - | 913 |
| Vicky B. Gregg | 12,611 | - | 12,611 | 2,958 |
| Wright L. Lassiter III | - | - | - | 3,325 |
| Timothy L. Main | 17,993 | 2,037 | 20,030 | 2,958 |
| Denise M. Morrison | 510 | - | 510 | 5,780 |
| Gary M. Pfeiffer | - | - | - | 27,674 |
| Timothy M. Ring | - | 12,025 | 12,025 | 34,228 |
| Helen I. Torley | 3,302 | 3,260 | 6,562 | 2,958 |
| Gail R. Wilensky | 28,262 | - | 28,262 | 2,958 |
| All directors, nominees and executive officers as a group (15 persons) | 629,976 | 1,374,326 | 2,004,302 | 181,896 |
| Name | Shares(1) | Shares Subject to Stock Options Exercisable within 60 days(2) | Total(3) | Shares Underlying RSUs(4) | ||||||||||||
| Named Executive Officers Currently Employed | ||||||||||||||||
| James E. Davis | 74,845 | 290,663 | 365,508 | 51,123 | ||||||||||||
| Sam A. Samad | 4,108 | 12,757 | 16,865 | 17,224 | ||||||||||||
| Catherine T. Doherty | 64,787 | 97,198 | 161,985 | 7,973 | ||||||||||||
| Michael E. Prevoznik | 38,543 | 149,106 | 187,649 | 5,477 | ||||||||||||
| Karthik Kuppusamy | 9,496 | 19,135 | 28,631 | 7,512 | ||||||||||||
| Directors and Nominees | ||||||||||||||||
| Luis A. Diaz, Jr. | - | - | - | 1,369 | ||||||||||||
| Tracey C. Doi | - | - | - | 3,681 | ||||||||||||
| Vicky B. Gregg | 13,643 | - | 13,643 | 2,686 | ||||||||||||
| Wright L. Lassiter III | - | - | - | 6,192 | ||||||||||||
| Timothy L. Main | 20,926 | - | 20,926 | 2,686 | ||||||||||||
| Denise M. Morrison | 2,869 | - | 2,869 | 6,222 | ||||||||||||
| Gary M. Pfeiffer | - | - | - | 31,541 | ||||||||||||
| Timothy M. Ring | - | - | - | 40,862 | ||||||||||||
| Gail R. Wilensky | 31,195 | - | 31,195 | 2,686 | ||||||||||||
| All directors, nominees and executive officers currently employed as a group (17 persons) | 273,268 | 602,464 | 875,732 | 200,869 | ||||||||||||
| (1) | Each person has sole voting power and sole dispositive power. |
| (2) | Includes shares of common stock which are subject to options issued under the Amended and Restated Employee Long-Term Incentive Plan (the “Employee Plan”) or the Director Plan, as applicable, that were exercisable as of, or would become exercisable within 60 days of, March 8, |
| (3) | Each named executive officer, director and nominee beneficially owned less than 1% of the shares of common stock outstanding. All directors, nominees and named executive officers as a group beneficially owned less than |
| (4) | Shares of common stock corresponding to RSUs reported in this column are not considered beneficially owned under SEC rules and are not included in the total column in this table. This column also includes phantom stock units held by directors under the Deferred Compensation Plan for Non-Employee Directors. |
| 22 |
INFORMATION REGARDING EXECUTIVE COMPENSATION
Proposal No. 2—2 — Advisory Resolution to Approve Executive Officer Compensation
| The Board of Directors recommends that you vote FOR approval of our |
Section 14A of the Securities Exchange Act entitles stockholders to vote to approve or not approve, on an advisory (non-binding) basis, our executive officer compensation as disclosed in the Compensation Discussion and Analysis and accompanying compensation tables and narrative. We are asking stockholders to approve the following resolution:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and related narrative disclosure, is hereby APPROVED.
Pay for Performance. As discussed in “Compensation Discussion and Analysis” below, our executive compensation program is designed to pay for performance, to align the interests of our executive officers with the interests of our stockholders and to support the Company’s long- and short-term business goals. Our program reflects many “best practices,” and our executive compensation structure and levels in 20212023 clearly demonstrate our commitment to aligning pay and performance.
Advisory Vote. This vote is advisory. We conduct an advisory vote to approve executive officer compensation annually; the next stockholder advisory vote to approve executive compensation will take place at the Company’s 20232025 annual meeting of stockholders. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the executive compensation policies and practices described in this proxy statement. The Board and the Compensation and Leadership Development Committee value the opinions of the Company’s stockholders and will take into account the outcome of the vote, in conjunction with such other factors as the Board and the Compensation and Leadership Development Committee consider appropriate, in connection with the Company’s executive compensation program.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD THAT HAVE BEEN SIGNED AND RETURNED WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE INSTRUCTED.
Compensation Discussion and Analysis
Executive Summary
Introduction
The Compensation and Leadership Development Committee (the “Committee”) determined 20212023 compensation for the Company’s named executive officers after considering, among other things, the Company’s performance, (including our response to the COVID-19 pandemic), the competitive market for executive talent, and the current environment in the healthcare industry, including in diagnostic information services. We believe that our executive compensation structure, compensation opportunity levels, and pay outcomes in 20212023 reflect our firm commitment to focus management’s attention on implementingthe core principles of our business strategyexecutive compensation philosophy, which is designed to motivate leaders, and to align pay with performance, the Company’s financial results and the interests of stockholders and stakeholders. Our named executive officers are listed below.
| Officer | Title |
| Chairman, Chief Executive Officer, and President | |
| Executive Vice President, | |
| Catherine T. Doherty | |
| Michael E. Prevoznik | Senior Vice President, General Counsel |
| Karthik Kuppusamy, Ph.D. | Senior Vice President, Clinical Solutions |
| 23 | | 2024 Proxy Statement |
2023 Company Performance
In 2023, we continued to make progress by executing on our business strategy and delivering on our earnings commitments to stockholders and stakeholders. The Company improved on financial and operating metrics and met several key financial targets, despite the nation’s diminishing demand for COVID-19 testing.
| 2023 Financial Highlights | ||||
| Reported: | | |||
| Net revenues | $9.3BB | |||
| Operating income as a percentage of net revenues | 13.6% | |||
| Diluted earnings per share (“EPS”) | $7.49 | |||
| Cash provided by operations | $1.3BB | |||
| Adjusted: | ||||
| Operating income as a percentage of net revenues | 15.8% | |||
| Diluted EPS | $8.71 |
2021 Company Performance
InAdjusted operating income as a second consecutive year dominated by the COVID-19 pandemic, we continued to bring critical COVID-19 testing to our countrypercentage of net revenues 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.
| Results | Change | |
| Reported: | ||
| Net revenues | $10.8BB | 14.3% |
| Operating income as a percentage of net revenues | 22.1% | 120 bps |
| Diluted earnings per share (“EPS”) | $15.55 | 48.5% |
| Cash provided by operations | $2.2BB | 11.4% |
| Adjusted: | ||
| Operating income as a percentage of net revenues | 23.8% | 40 bps |
| Diluted EPS | $14.24 | 27.4% |
Adjustedadjusted diluted EPS is aare non-GAAP financial measure.measures. See Annex A for a reconciliation to a financial measure reported under U.S. GAAP.
In 2021, we were once again at the forefront of the response to the COVID-19 pandemic, playing a pivotal role to broaden access to laboratory insights to help people lead healthier and safer lives. We provide both molecular diagnostic and antibody serology tests to aid in the diagnosis of COVID-19 and the detection of immune response to the virus, and have performed approximately 62 million of these tests as of December 31, 2021. We develop COVID-19 testing and implement innovative new testing models. We built up and maintain the testing capacity to handle surges in COVID-19 testing demands, including using our national courier, air fleet and logistics network to balance volume across approximately two dozen COVID-19 testing laboratories, and also through our laboratory referral partner program. We work closely with federal, state and local governments, healthcare organizations, payers, suppliers, retailers, trade associations and other laboratories in the effort to bring as much COVID-19 testing as possible to the American people. We also provide data on COVID-19 testing that we conduct to federal, state and local public health authorities, including the federal Centers for Disease Control and Prevention, and participate in studies with government and private institutions, aiding COVID-19 public health response and research. All of our employees, including our dedicated laboratory professionals, phlebotomists, air fleet team, and couriers take tremendous pride in the role we play and work tirelessly to help patients and communities access quality COVID-19 testing.
During 2020 and 2021, we also saw how underserved communities were disproportionately impacted by COVID-19 with tragic consequences. With the Quest Diagnostics Foundation, we launched Quest for Health Equity, an initiative to reduce health disparities in underserved communities. This initiative is providing a combination of testing services, education programs, alliances and financial support to efforts to address health disparities. Since its inception, we have launched over 25 programs across the U.S. and Puerto Rico, including supporting COVID-19 testing and vaccination events, educating young students on healthy nutrition choices and expanding research and mentorship opportunities for Black and Hispanic scholars.
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. The following table highlights additional 2021our progress on our two-point strategy.
|
during 2023.
| Summary Highlights of | ||
• We increased base business (excluding COVID-19 testing) revenues by • We • Our strong relationships with health plans were a key driver of growth in 2023, as we grew revenues from health plans by • We
• In Advanced Diagnostics, | •
| |
• We are taking advantage of • | ||
| 2024 Proxy Statement | 24 |
| Continuous Improvement | |
• We delivered our Invigorate cost excellence program goal of annual savings and productivity improvements of 3% of our costs. • We continue to make progress in using front end automation to enhance specimen processing. In 2023, we completed front end automation upgrades in our Pittsburgh and Dallas laboratories, which is expected to improve quality and productivity. • We expanded our use of AI in 2023 to improve quality, efficiency and workforce experience in several clinical areas, including in microbiology to help identify bacteria as well as in cytogenetics to identify chromosomal abnormalities. | • We are leveraging automation and AI to improve productivity and quality across our entire value chain, not just in the laboratory. Other areas of focus include reducing denials and patient concessions, enhancing the digital experience, and selecting and retaining talent. • We created an initiative to deploy generative AI to improve several areas of our business, including software engineering, customer service, claims analysis, scheduling optimization, specimen processing and marketing. We expect to further develop these projects in 2024. • We implemented several initiatives to improve talent retention, including capability-building programs. • We improved retention of our frontline employees by 11%. |
| Disciplined Capital Deployment | |
• In February 2024, we announced the thirteenth increase in our quarterly common stock cash dividend since the beginning of 2012, increasing the dividend by approximately 5.6%, from $0.71 per share of common stock to $0.75 per share of common stock. • We repurchased approximately $276 million of our common stock in 2023. | • Through the end of 2023, since the beginning of 2012 we have returned approximately $10.5 billion to stockholders: $7.5 billion through common stock repurchases (including $1.8 billion associated with pre-tax proceeds from divestitures), and $3.0 billion through common stock dividends. |
We also continued to deliver disciplined capital deployment:
Incentive Compensation Outcomes and Alignment with Performance
The Committee’s approach to annual incentive compensation generally has been to tie annual incentive compensation to key operating goals and to establish targets that are challenging, yet attainable. The 2021average 2023 annual incentive payout for our named executive officers on our annual cash incentives under the Senior Management Incentive Plan (“SMIP”) was 145%78% of target.
| |
Payout on performance share awards for the three-year performance period ended December 31, 20212023 was 200%186% of target. The following table summarizes annual incentive 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 |
*Excludes the annual incentive payment to a former executive officer who forfeited his 2020 annual incentive compensation upon his resignation.
| Annual Incentive Payout (% of target) | Performance Share Payout for 3-year performance period (% of target) | |||||||
| Performance period ended December 31, 2023 | 78 (average) | 186 | ||||||
| Performance period ended December 31, 2022 | 131 (average) | 196 | ||||||
| 25 | | 2024 Proxy Statement |
Our total stockholder return (“TSR”) for recent periods, relative to relevant publicly tradedpublicly-traded comparator groups, is set forth below.
| 1-year TSR (%) (2021) | 3-year TSR (%) (2019-21) | 5-year TSR (%) (2017-21) | |
| Quest Diagnostics Incorporated | 47.9% | 121.1% | 108.0% |
| Compensation Peer Group Median | 16.0% | 86.3% | 96.4% |
| S&P 500 Index | 28.7% | 100.4% | 133.4% |
| S&P 500 Health Care Industry Index | 26.1% | 72.9% | 124.7% |
| 1-year TSR (%) (2023) | 3-year TSR (%) (2021-23) | 5-year TSR (%) (2019-23) | ||||||||||
| Quest Diagnostics Incorporated | (10.1 | )% | 22.6 | % | 83.4 | % | ||||||
| Compensation Peer Group Median | (2.0 | )% | 8.8 | % | 68.7 | % | ||||||
| S&P 500 Index | 26.3 | % | 33.1 | % | 107.2 | % | ||||||
| S&P 500 Health Care Industry Index | 2.1 | % | 26.2 | % | 73.0 | % | ||||||
The TSR shown combines stock price appreciation and reinvestment of dividends paid during the relevant performance period, thereby taking into consideration the effect of divergent dividend policies.
Taken in the aggregate, the results of our annual and long-term incentive programs demonstrate that the Committee sets challenging performance goals and that our named executive officers receive compensation based on the achievement of those goals.has been sensitive to Company performance. Annex DB sets forth historical payouts for our annual incentive compensation and performance share awards for each year since 2005.
20212023 Compensation Program Changes
In furtherance of our executive compensation philosophy, in February 20212023, due to diminished demand for COVID-19 testing, the Committee considered the unusual challenges in setting financial goals for 2021 annual incentive compensation and 2021 performance share awards. Due to anticipated volatility in the Company’s COVID-19 testing revenues, the Company determined to measure base business revenues andremove the COVID-19 testing revenues separatelyresponse goal for purposes of 2023 annual incentive compensation and the COVID-19 revenue goal for the 2023-2025 performance share awards. The Committee approved 2021 performance share awards that include a performance measure focused on our cumulative COVID-19 testing revenue. Further, due toAdditionally, for the uncertain impact of the COVID-19 pandemic on the operating environment, including on the Company’s base business,SMIP, the Committee determined to split 2021 financial-based annual incentive targets into two half-years; performanceadd the Company’s long-term ESG goals forto the first half of 2021non-financial goals, which were set in February 2021 and performance goals for the second half of 2021 were set in mid-2021.weighted at 20%.
Executive Compensation Philosophy
Core Principles of stakeholders with performance measured against TSR and key financial metrics;Our Executive Compensation Philosophy
| ||
| • | Utilize performance-based metrics, with the majority of compensation at risk; |
| • | Motivate executives to achieve results that appropriately balance short-term operating goals and long-term stockholder value creation; |
| 2024 Proxy Statement | 26 |
The principal components of compensation for our named executive officers are discussed in the following table.
| Component | Form | Purpose |
| Base Salary | Cash (Fixed) | Provides a competitive level of pay that reflects the executive’s experience, role and responsibilities |
| Annual Cash Incentive | Cash (Variable) | Rewards achievement of overall corporate financial and, to a lesser extent, non-financial results for the most recently completed fiscal year; may also reward achievement of individual results |
| Long-Term | Equity |
Our program is designed to align executive compensation with the Company’s performance. The Committee has built a strong foundation for our executive compensation program and has taken numerous steps over time to structure the program to align pay with performance. Our long-term awards provide a strong link with stockholder interests and help attract and retain critical employee talent. We also focus on aligning the annual results of our executive compensation program with the compensation of our other employees eligible for annual incentive compensation. Our long-term awards provide a strong link with stockholder interests in performance against important long-term goals and help attract and retain critical employee talent. We believe that a balanced compensation program that encourages a long-term focus supports sustained long-term corporate performance.
| 27 | | 2024 Proxy Statement |
As shown in the chart below, the bulk of our senior executives’ compensation is performance based and variable in nature (91%(90% for our CEO and 81%an average of 80% for our other named executive officers in 2021)2023). The chart reflects 2021the target direct compensation for our named executive officers in effect at the end of 2023 and excludes the value of other benefits and perquisites.
The chart belowon the right shows the mix of our 20212023 long-term incentive equity awards for executive officers, consisting of performance shares, stock options, and restricted share units (“RSUs”).
| |
 |  |
RSUs. The Committee annually awardsgrants equity awards to a significant number of eligible employees under the Employee Plan. These equity awards may include performance shares, stock options and/or RSUs, and are designed to foster an alignment of stockholder interests with a broader group of employees, to incentivize these employees to continue to perform at a high level and to promote a culture of employee ownership. Components of these awards may include performance shares, stock options and RSUs. Additionally, a significant number of employees at all levels of the Company own our common stock through our Employee Stock Purchase Plan, under which employees may purchase our common stock at a discount, and our Quest Diagnostics Profit Sharing Plan (the “401(k) Plan”).
We make very limited use
None of employment agreements with executive officers. Of our named executive officers only Mr. Rusckowski, our Chairman, Chief Executive Officer and President, has an employment agreement (the employment agreement is discussed under the heading “Employment Agreement” on page 45). Our other named executive officers are “at will” employees.agreement.
| 2024 Proxy Statement | 28 |
Best Practices
Our program reflects many best practices.
| What We Do | What We Don’t Do | |
|
|
|
|
Independent Compensation Consultant
The Committee has retained Pearl Meyer & Partners, LLC (“Pearl Meyer”) as its independent compensation consultant to assist it in carrying out its responsibilities. The following table provides information regarding the Committee’s independent compensation consultant.Pearl Meyer.
Independent Compensation Consultant
| • | Reports directly to, and is directly accountable to, the Committee, which has sole authority to retain and terminate it, at Company expense. |
| • | February 2024: the Committee determined Pearl Meyer is independent in accordance with SEC and NYSE rules and that there are no conflicts of interest. |
| 29 | | 2024 Proxy Statement |
| What They Do | ||
Provide analyses and information regarding the three-year realizable pay of the Company’s executive officers and the three-year stockholder returns of the peer group
Advise on the design of our executive compensation programs to ensure the linkage between pay and performance
Provide related executive compensation advice and services to the Committee ( |
| Provide analyses and information regarding market practices and trends in executive and non-employee director compensation for companies in our peer group and more broadly
Periodically participate in private sessions of the Committee (without Company employees present)
Periodically meet with the Committee’s Chair to discuss compensation matters
Avoid ties to management that could jeopardize their fully independent status |
Say on Pay, Stockholder Outreach, and Feedback
At the Company’s 20212023 annual meeting of stockholders, approximately 90% of votes cast on the say-on-pay proposal voted in favor of the compensation of our named executive officers. We continued to monitor market practices and trends and to engage with our investors. As part of our program of ongoing dialogue with our investors (see “Stockholder Access and Outreach” beginning on page 9)8), during the past year we held discussions regarding our executive compensation program and investorsprogram. Investors generally shared positive feedback regarding the Company’s structuring of, and overall approach to, executive pay. The Committee also received advice from its independent compensation consultantPearl Meyer and considered management recommendations based on the Company’s strategic direction. Insights gained from these efforts, including the investor feedback, were taken into account by the Committee in taking action regarding the Company’s compensation programs.
Setting Executive Compensation
The Committee establishes the Company’s executive compensation philosophy, oversees our executive compensation program and regularly monitors our executive compensation programs to ensure adherence to our philosophy.philosophy and compliance with applicable guidelines and policies. The Committee is supported in its work by our Senior Vice President, Chief Human Resources Officer and her staff, and the Committee’s independent compensation consultant.
| |
as well as by Pearl Meyer.
Within the framework of the executive compensation programs approved by the Committee, the Chief Executive Officer recommends to the Committee individual compensation for the executive officers, other than himself. These recommendations are based on market data and an assessment of both Company and individual performance. The Chief Executive Officer also recommends incentive compensation performance measures to align compensation with our corporate objectives. At the Committee’s request, he is present during the portions of Committee meetings in which compensation decisions regarding the named executive officers other than the Chief Executive Officer areis reviewed and decided, but the Committee retains the final authority for all such decisions. The Chief Executive Officer does not make any recommendations to the Committee regarding his own compensation and does not participate in portions of Committee meetings when his compensation is reviewed and decided.
For each named executive officer, the Committee annually reviews performance and approves all elements of compensation, including base salary, annual incentive awards and long-term incentive awards, except for ourbut excluding broad-based employee benefit programs. After the Committee approves the compensation of our named executive officers, the Committee reports its compensation determinations to the full Board.
To assist the Committee with its review, our Human Resources department, in consultation with the Committee’s independent compensation consultant,Pearl Meyer, annually prepares analyses of each named executive officer’s compensation, including tally sheets. The review includes current and prior yearprior-year compensation information regarding base salary, target and paid annual incentive compensation, deferred compensation activity and balances, aggregate equity grant values, perquisites, and any other compensation, as well as estimates of the amounts payable to each named executive officer upon termination of employment under various circumstances, including in connection with a change in control.
| 2024 Proxy Statement | 30 |
Peer Group
The compensation targets for, and compensation earned by, each named executive officer are analyzed relative to market data for comparable positions in a peer group. In 2021,2023, the Committee reviewed the Company’s peer group. The Committee removed Varian Medical Systems, Inc., which was acquired in 2021 by Siemens Healthineers, from the peer group and, after considering input from the Committee’s independent compensation consultant, determined to make no other changes to the peer group during 2021.Pearl Meyer, added Illumina, Inc. The peer group currently consists of the following 1314 companies, which generally are in the healthcare services, equipment and distribution industries.
| • Agilent Technologies, Inc. | • Illumina, Inc. |
| • Baxter International Inc. | • Laboratory Corporation of America Holdings |
| • | • Owens & Minor, Inc. |
| • | • |
| • | • Stryker Corporation |
| • | • Tenet Healthcare Corporation |
| • | • Zimmer Biomet Holdings, Inc. |
| During 2023, PerkinElmer, Inc. | , which had been a member of the Company’s peer group, sold its Applied, Food and Enterprise Services business and renamed itself Revvity, Inc. Revvity, Inc. remains in the Company’s peer group. |
For the named executive officers, the Committee establishes target compensation consistent, to the extent possible, with comparable positions in the peer group. Our practice is to target total direct compensation (including base salary, annual cash incentive targets and long-term incentive awards) at market competitive levels, depending upon the named executive officer’s responsibilities, expertise and experience, along with consideration given to both individual and Company performance.
Specific consideration is given to the weighting of fixed and at-risk components of pay relative to the peer group. No single element of compensation is set without considering the total direct compensation of the named executive officers relative to the marketplace, as well as the impact of any change on the other components of our pay model. When setting each participant’s annual compensation package, the grant date values of prior equity awards are considered, but realized or unrealized gains from prior equity awards are not taken into account.
For 2021,2023, the target total direct compensation, on average, for Mr. Rusckowski, the Chief Executive Officer, and for the otherour named executive officers, was within thea competitive range of the peer group median.
|
Pay Components
We pay base salary to our executives to provide them a steady source of income for their services to the Company. The Committee annually reviews and approves base salaries for the named executive officers. Consistent with our executive compensation philosophy, base salaries are set at levels competitive with the peer group. Based on an assessment of each named executive officer’s position, performance, scope of responsibility, current salary level, and market comparables, the Committee did not increasedetermined the 20212023 base salary rate for Ms. Doherty and Ms. Eglinton Manner from the 2020 level, and increased the 2021 base salary rate for Mr. Davis, Mr. Guinan and Mr. Rusckowski to the rates, including adjustments, set forth in the following table. 2021 adjustments and base salary ratesThe increase for each named executive officer are set forthMr. Davis reflects the Committee’s decision to adjust his compensation over a period of a few years to be in alignment with the following table.compensation of similarly-situated CEOs.
| Increase in Base Salary Rate (%) | 2021 Base Salary Rate ($) | |
| Stephen H. Rusckowski | 4.2 | 1,250,000 |
| Mark J. Guinan | 4.8 | 650,000 |
| James E. Davis | 3.3 | 630,000 |
| Carrie Eglinton Manner | - | 600,000 |
| Catherine T. Doherty | - | 575,000 |
| Increase in Base Salary Rate (%) | 2023 Base Salary Rate ($) | |||||||
| James E. Davis | 13.6 | 1,250,000 | ||||||
| Sam A. Samad | - | 650,000 | ||||||
| Catherine T. Doherty | - | 600,000 | ||||||
| Michael E. Prevoznik | 2.8 | 550,000 | ||||||
| Karthik Kuppusamy | 5.0 | 525,000 | ||||||
| 31 | | 2024 Proxy Statement |
Introduction
Our annual cash incentives reward the achievement of annual performance, including operating and strategic goals (both financial and non-financial). We generally pay annual incentives to our executive officers in accordance with the SMIP. Annual cash incentive payments to our named executive officers generally are subject to the achievement of specific performance goals and, if achieved, are scheduled to be paid on or before March 15th of the year following the completion of the performance year. The Committee generally has set performance goals with targets based on the Company’s operating plan and aligned with our two-point business strategy; non-financial goals may be objective or subjective in nature.
The Committee’s approach to annual incentive compensation generally has been to:
| • | Tie annual incentive compensation to key operating goals; | |
| • | Establish targets that are challenging, yet attainable; and | |
| • | Provide for a maximum payout of 200% of target upon achievement of extraordinary performance. |
In recent years, the primary focus of the annual incentive planSMIP has been on revenue and profitability. Because the Committee believes that non-financial business objectives are also are important, it also has incorporated non-financial metrics in the annual plan.SMIP.
The following table sets forth, for each of the past five years, the aggregateaverage annual cash incentive payments as compared to target for the named executive officers for that year. The Committee believes that these results demonstrate the rigor of the targets adopted, that targets have been set at reasonable levels and that annual incentive compensation has been sensitive to Company performance. For additional information, Annex DB sets forth the annual cash incentive payments as compared to target for each year since 2005.
| Year | Incentive Payment as Compared to Target (%) |
| 2017 | 97 |
| 2018 | 48 |
| 2019 (average) * | 83 |
| 2020 (average) ** | 171 |
| 2021 | 145 |
*Excludes the annual incentive payment to one former named executive officer because it was paid at a guaranteed level in connection with his joining the Company.
**Excludes one former named executive officer, who forfeited his annual incentive payment upon resignation.
| Year | Average Incentive Payment as Compared to Target (%) | |
| 2019* | 83 | |
| 2020** | 171 | |
| 2021 | 145 | |
| 2022** | 131 | |
| 2023 | 78 |
| * | |
| ** | Excludes one former named executive officer who forfeited his/her annual incentive payment upon resignation. |
Annual Incentive Compensation Goals for 20212023
For 2021,2023, we paid annual incentive compensation under the SMIP to all the named executive officers. Early in 2021, theThe Committee determined the incentive target for annual incentive compensation for each named executive officer, after considering the factors discussed above.
For each named executive officer, the threshold, target and maximum performance criteria were established with payout opportunities set at one-quarter (25%), one-time (100%), and two-times (200%) the target incentive, respectively. For non-discretionary goals, rewards for performance levels between these levels were interpolated. Performance below threshold results in zero payout for that goal.
The Committee may adjust performance measures based on objective criteria to focus on the operating performance of the Company, to avoid unintended compensation results and to ensure that participants are not inadvertently given incentives to avoid taking actions that are in the long-term interest of the Company and its stockholders.
For 2021,2023, annual cash incentive payouts for the named executive officers were based on performance measured against both financial and non-financial goals;goals, the relative weightings for which were determined by the
| 2024 Proxy Statement | 32 |
Committee setbased upon their determination of the weights for each goal based on its relative importance forof each executive officer.measure. Each of the named executive officers hadwas aligned to the same goals. goals and the same weightings.
| Weight (%) | Measure/Objective | ||
| 40 | Adjusted diluted EPS | ||
| 30 | Base Business revenue | ||
| 10 | Acquired revenue | ||
| 15 | Non-financial goals: medical quality, customer experience and employee experience | ||
| 5 | Non-financial goals: qualitative ESG goals |
The principal financial goals related to achieving budget targets includingfor adjusted diluted EPS, and base business revenues and acquired revenues. The financial goals were weighted heavily, as compared to non-financial goals, in order to provide a meaningful incentive for management to generate profitable growth. DueIn light of the diminished demand for COVID-19 testing, the Committee determined to anticipated volatilityno longer utilize a COVID-19 response goal, as it had in 2020 through 2022 (as supplemental bonus opportunity in 2020, and as a standalone weighted metric in the Company’s COVID-19 testing revenues, the Company determined to measure base business revenues and COVID-19 testing revenues separately for purposes of annual incentive compensation. Due to the uncertain impactdesign of the COVID-19 pandemic on the operating environment, including on the Company’s base business, the Committee also determined to split 2021 annual financial incentive targets into two half-years; financial performance goals for the first half of 2021 were setSMIP in February 2021 and financial 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. The Committee did not change its process of setting target annual award levels and paying earned awards on an annual basis.2022).
Non-financial goals were set in February 2021 in conjunction with the setting of the first half financial goals and were assigned a 10% weighting.
The non-financial goals were assigned an overall weighting of 20%, which was a 5% increase from 2022. The non-financial goals included quantitative metrics related to key elementsmedical quality, customer experience and employee experience, as well as, new for 2023, a qualitative assessment of the Company’s progress in 2023 toward meeting long-term ESG goals. The ESG goals were developed based on the results of the Company’s ESG strategy and included medical quality and customer experience goals and an employee engagement goal; these were full year goals. materiality assessment performed in 2022.
The medical quality, customer experience and customeremployee experience goals were included to drive operational excellence, to improve the customer experience and to position the Company for the future. The medical quality goals included measures such as missed specimen pickups, electronic ordering,tests not performed and revised reports; the customer experience goals included service quality measures such as patient re-collections, first call resolutionservice center wait time, customer satisfaction survey results and testing turn-around times. EmployeeQuantitative employee experience goals included engagement survey and employee turnover metrics. These metrics were included because employee engagement levels, and the impact they have on employee turnover, are linked to our strategy to accelerate growth and drive operational excellence, and to our effort to deliver a superior customer experience. Employee
For 2023, the qualitative goals measured annual progress toward meeting long-term goals in equity and health access, employee and community engagement was assessed primarily based on information derived from employee survey questionnaires.
The Committee also considered the impact of the COVID-19 pandemic on the Company’s operations and the important role the Company has played in respondingenvironmental sustainability. These ESG goals were designed to the COVID-19 pandemic. The Committee concluded that responding to the COVID-19 pandemic was an integral part of the Company’s business plan and strategy for 2021. Consistent with the Committee’s historic approach of basing annual incentive compensation on key operating goals and in furtherance of ouralign executive compensation philosophy, the Committee determined it was in the best interests of the Company and stockholders to include a COVID-19 response goal in the annual incentive plan for 2021, and assigned it a 20% weighting. Due to anticipated volatility in the Company’s COVID-19 testing revenues, for 2021 the Committee determined that the COVID-19 response goal would, consistent with the Committee’s historical approach, be based on both financial and non-financial performance indicators for the full year, be aligned with the Company’s COVID-19 operating plan and the Company’sESG strategies, which are integral to our long-term business strategy, and that performance would be determined following the performance period based on the Committee’s assessment. The COVID-19 response goal included an assessment of multiple factors related to the Company’s response to the COVID-19 pandemic in 2021, including: COVID-19 revenues; COVID-19 testing capacity, volumes, and turn-around time; COVID-19 testing innovation; leadership (including partnership with federal, state and local interests; workforce management effectiveness; and visibility in media); and “return to life” testing and vaccines.
|
success.
The Committee also determined that, each of Mr. Davis, Ms. Doherty and Ms. Eglinton Manner would have, in addition to the financial and non-financial business objectives discussedfactors identified above, the annual incentive compensation of each executive officer was subject to a potential modification of up to 20% (positive or negative) of her or his annual incentive payout based on her or his individual performance (including the performance of the portions of the business for which the person had responsibility). The Committee determined that after the end of 2021,2023, it would determine forreview each of Mr. Davis, Ms. Doherty and Ms. Eglinton Manner, whether the person’sexecutive’s individual performance should result inand determine the modification of her or histo the annual incentive payout, basedif any.
The Committee further determined that, unless the Company achieved attainment of its base revenue growth target at a level exceeding 90% of target payout, payout on an individualized assessmentthe non-financial goals (medical quality/customer experience/employee engagement/ESG strategy) would be capped at 125% of target. For 2023, the achieved payout of the person’s 2021 performance, considering factors determined appropriate by the Committee.base business revenue goal exceeded 90% of target.
Annual Incentive Compensation Determinations for 20212023
After the conclusion of 2021,2023, and following deliberation on each of the items below, the Committee determined annual incentive compensation for 2021.2023.
| 33 | | 2024 Proxy Statement |
The following charttable shows the financial goals, the relative weight allocated to each, results and resulting payout factors for the first half of 2021.2023.
Weight (%) | Measure/Objective | Threshold ($) | Target Range ($) | Max ($) | Results ($) | Weighted Payout Factor % |
| 20 | Adjusted diluted EPS | 6.53 | 7.00 – 7.20 | 7.81 | 6.96 | 19 |
| 15 | Base business revenue attainment | 3,319 MM | 3,460MM-3,512MM | 3,694MM | 3,931MM | 30 |
| Weight (%) | Measure/Objective | Thresold ($) | Target ($) | Max ($) | Results ($) | Weighted Payout Factor % | ||||||
| 40 | Adjusted diluted EPS | 8.40 | 9.00 | 9.45 | 8.71 | 25.6 | ||||||
| 30 | Base business revenue attainment | 8,507MM | 8,681MM | 8,855MM | 8,983MM | 60.0 | ||||||
| 10 | Acquired revenue | 85MM | 170MM | 212MM | 46MM | 0.0 |
The following chart shows the financial goals, the relative weight allocated to each, results and resulting payout factors for the second half of 2021.
Weight (%) | Measure/Objective | Threshold ($) | Target Range ($) | Max ($) | Results ($) | Weighted Payout Factor % |
| 20 | Adjusted diluted EPS | 3.80 | 4.13* | 5.87 | 7.29 | 40 |
| 15 | Base business revenue attainment | 3,899 MM | 4,063MM–4,135MM | 4,299MM | 4,087 MM | 15 |
*Target for this metric was not set as a range for the second half of 2021.
The Committee made the following determinations regarding non-financialother goals.
| . Performance in respect of the |
| |
Taking into account the weighted payout factors for each of the financial measures and the overall non-financial goal, the calculated payout factor for the SMIP was 103.0%. Notwithstanding the calculated results, the Committee determined to apply a 25% reduction to the calculated results under the SMIP. This reduction was taken to further recognize the shortfall from target in profitability (adjusted diluted EPS) despite actions taken to lower costs. Drivers of the shortfall included sharply reduced COVID-19 revenue, and increased employee and other costs. After giving effect to the reduction, the SMIP calculated payout factor was 77.25% of target.
After assessing the individual performance of each named executive officer, the Committee determined not to modify their annual incentive payouts for 2023, except for Mr. Kuppusamy’s award. Based on its assessment, the Committee determined to apply a positive modifier of 5% to Mr. Kuppusamy’s incentive payout, which reflected the Committee’s evaluation of a number of factors, including the performance of the business areas for which Mr. Kuppusamy was responsible and his strong contributions in connection with leadership of our AI initiatives. After giving effect to the positive modifier for Mr. Kuppusamy, the average 2023 annual incentive payout for our named executive officers on our annual cash incentives under the SMIP was 78% of target.
The following table shows in one location the aggregated weighted payout factors for the financial goals for 2021, the resulting weighted payout factors for the non-financial goals and the total resulting payout factor for 2021.2023 for all the named executive officers except Mr. Kuppusamy.
Weight (%) | Measure/Objective | Weighted Payout Factor % | |||
| 40 | Adjusted diluted EPS | 59 | |||
| 30 | Base Revenue attainment | 45 | |||
| 20 | COVID-19 performance | 30 | |||
| 10 | Medical quality/customer experience/employee engagement | 11 | |||
| Total | 145 | ||||
| Weight (%) | Measure/Objective | Weighted Payout Factor % | |||||
| 40 | Adjusted diluted EPS | 25.6 | |||||
| 30 | Base Business revenue attainment | 60.0 | |||||
| 10 | Acquired revenue | 0.0 | |||||
| 20 | Non-financial goal | 17.4 | |||||
| Subtotal | 103.0 | ||||||
| Adjustment for profitability | (25.75 | ) | |||||
| Total | 77.25 | ||||||
The total payout factor for Mr. Kuppusamy was 81.11% (reflecting the 5% modifier awarded based on the results of the Committee’s assessment of his individual performance).
From time to time, the Committee makes adjustments to the Company’s financial results based on objective criteria for purposes of calculating performance under the SMIP. Set forth in the following table are items, identified by the Committee, for which it may make adjustments. As a matter of policy, the Committee seeks to apply these principles consistently from year to year.
| 2024 Proxy Statement | 34 |
| Quest Diagnostics Policy: Items for Which the Committee May Make Adjustments | ||
• Gains and losses from the sale of a business | • Material legal settlements | |
| • Charges related to the impairment of goodwill or intangible assets | • Cumulative or one-time effect from accounting changes | |
| • Charges related to reorganization and restructuring programs
|
| • Effects of changes in tax laws or the rate on deferred tax assets and liabilities |
| • Charges related to the acquisition or integration of a company or business | • Items included in or excluded from ordinary income (including significant unusual or infrequently occurring items) or described in Management’s Discussion and Analysis of Financial Performance included in the Company’s Annual Report on Form 10-K | |
The Committee may make adjustments based on these items because:
| • | These items may be outside the control of participants and could create “windfall” benefits or undue penalties (for example, changes in tax laws or accounting standards); and | |
| • | Impact from these items could distract management from focusing on operating performance by penalizing participants for taking actions in the long-term interest of the Company and its stockholders (for example, a restructuring of operations) that might in the short term negatively impact a performance measure. |
In accordance with this policy, the Committee made the adjustments set forth in the table below to the Company’s diluted EPS for fiscal year 20212023 for purposes of calculating performance under the SMIP.
Items Adjusted for in 20212023 Annual Incentive Calculations
First Half Diluted EPS ($) | Second Half Diluted EPS ($) | ||
| Diluted EPS, as reported | $8.38 | $7.14 | |
| Amortization expense | 0.31 | 0.31 | |
| Charges related to reorganization and restructuring programs | 0.22 | 0.14 | |
| Gains/losses on sale of strategic investments (including impairment charges) | 0.04 | (0.29) | |
| Gain on sale of 40% ownership interest in Q Squared Solutions | (1.98) | - | |
| Costs associated with Quest For Health Equity | 0.03 | 0.06 | |
| Excess tax benefit related to stock-based compensation | (0.07) | (0.07) | |
| Other | 0.03 | - | |
| Total adjustments | (1.42) | 0.15 | |
| Adjusted diluted EPS for incentive purposes | $6.96 | $7.29 |
| Diluted EPS ($) | ||||
| Diluted EPS, as reported | $ | 7.49 | ||
| Restructuring and integration charges | 0.29 | |||
| Impairment of long-lived assets | 0.19 | |||
| Losses on strategic investments | 0.02 | |||
| Amortization expense | 0.70 | |||
| Excess tax benefits related to stock-based compensation | (0.10 | ) | ||
| Other | 0.12 | |||
| Total adjustments | $ | 1.22 | ||
| Adjusted diluted EPS for incentive purposes | $ | 8.71 | ||
The adjustments made by the Committee are the same as those approved by the Audit and Finance Committee and disclosed when reporting our 20212023 financial performance.
|
performance in our quarterly earnings press releases.
For 2021,2023, the target incentives and payouts for the named executive officers are summarized in the following table. Under the SMIP, annual incentive compensation payments generally are calculated based on salary actually paid and accordingly reflect changes in salary rate during the year.
2021 Target Incentive as a % of Salary | 2021 Actual Payment as a % of Target | 2021 Actual Payment as a % of Salary | 2021 Actual Payment ($) | |
| Mr. Rusckowski | 150 | 145 | 217.6 | 2,695,511 |
| Mr. Guinan | 90 | 145 | 130.6 | 839,794 |
| Mr. Davis | 90 | 145 | 130.6 | 816,690 |
| Ms. Eglinton Manner | 80 | 145 | 116.1 | 696,480 |
| Ms. Doherty | 75 | 145 | 108.8 | 625,744 |
| 2023 Target Incentive as a % of Salary | 2023 Actual Payment as a % of Target | 2023 Actual Payment as a % of Salary | 2023 Actual Payment ($) | |||||||||||||
| James E. Davis | 150 | 77.25 | 115.9 | 1,361,531 | ||||||||||||
| Sam A. Samad | 90 | 77.25 | 69.5 | 451,913 | ||||||||||||
| Catherine T. Doherty | 80 | 77.25 | 61.8 | 370,800 | ||||||||||||
| Michael E. Prevoznik | 70 | 77.25 | 54.1 | 293,357 | ||||||||||||
| Karthik Kuppusamy | 70 | 81.11 | 56.8 | 290,991 | ||||||||||||
| 35 | | 2024 Proxy Statement |
Had the Committee not made the adjustments to the Company’s financial resultsdiluted EPS discussed above, the payouts set forth in the preceding table would have been higher (the weighted payout factor for first half adjusted diluted EPS would have been 40% rather than 19%, and the cumulative weighted payout factor for adjusted diluted EPS would have been 80% rather than 59%).been:
| 2023 Payment as a % of Target | 2023 Payment as a % of Salary | 2023 Payment ($) | ||||||||||
| James E. Davis | 58.05 | 87.1 | 1,023,131 | |||||||||
| Sam A. Samad | 58.05 | 52.2 | 339,593 | |||||||||
| Catherine T. Doherty | 58.05 | 46.4 | 278,640 | |||||||||
| Michael E. Prevoznik | 58.05 | 40.6 | 220,445 | |||||||||
| Karthik Kuppusamy | 60.95 | 42.7 | 218,667 | |||||||||
20212023 Conclusion
Overall, the Committee believes that the annual incentive payments made to our named executive officers for 20212023 were consistent with the objectives of our executive compensation program.
Introduction
We design our long-term incentive awards to:
| • | Align management’s compensation opportunities with the interests of our stockholders; | |
| • | Provide long-term compensation opportunities consistent with market practice; | |
| • | Incent and reward long-term value creation; and | |
| • | Incent management retention. |
To achieve these objectives, we award long-term incentives to our named executive officers annually in the form of equity awards. The following table shows the awards that we issued in 2021; in prior years, characteristics of the award (e.g., relative component mix, vesting) may have been different:2023:
| Component | Weight (% of Award Value) | Time Horizon for Value Creation | Vesting | Purpose | ||||
| Performance Shares | 50 | 3 years | Performance-based 3-year cliff vesting | • Align executives with stockholders • Provide strong links with strategy and operating metrics • Performance-based vesting | ||||
| RSUs | 25 | 3 years | In 1/3rd increments annually over 3 years | • Align executives with stockholders • Provide retention incentives • Provide incentives to preserve stock value • Balance long-term incentive package | ||||
| Stock Options | 25 | 10 years | In 1/3rd increments annually over 3 years | • Align executives with stockholders • Highlight stock price appreciation as a key indicator of success |
| Component |
Weight (% of Award Value) | All Other Executive Officers Weight (% of Award Value) | Time Horizon for Value Creation | Vesting | Purpose |
| Performance Shares | 50 | 40 | 3 years | Performance-based 3-year cliff vesting | • Align executives with stockholders • Provide strong links with strategy and operating metrics • Performance-based vesting |
| RSUs | 25 | 30 | 3 years | In 1/3rd increments annually over 3 years | • Align executives with stockholders • Provide retention incentives • Provide incentives to preserve stock value • Balance long-term incentive package |
| Stock Options | 25 | 30 | 10 years | In 1/3rd increments annually over 3 years | • Align executives with stockholders • Highlight stock price appreciation as a key indicator of success |
The time horizons shown operate in conjunction with, and in addition to, our stock ownership and retention requirements.
| |
In determining the value of the long-term incentive component of each named executive officer’s compensation, the Committee considers, among other factors:
| • | The value of similar incentive awards to executive officers in the peer group; | |
| • | The executive’s scope of responsibility and experience, as well as market opportunities that may be available to the executive; and | |
| • | The performance of the Company and the executive, and the executive’s contribution to meeting the Company’s objectives. |
| 2024 Proxy Statement | 36 |
The Committee is responsible in its use of equity as long-term incentive compensation and regularly monitors the use of equity compensation for executives and the Company as a whole from a competitive standpoint. The Committee believes that our equity awards, which in 2021 emphasizedemphasize performance shares for our most senior employees, including all ournamed executive officers, reflect a focus on pay for performance and competitive considerations in support of our business strategy. The program also fosters the ownership culture that the Committee seeks to encourage among our employees, including our senior management.employees.
Timing of Equity Awards; Awards Committee
It has been the Committee’s practice to make annual equity grants at a meeting held shortly after we announce our prior year’s earnings. It also has been the Committee’s practice to make equity grants to new hires and promoted employees, and other grants in special cases, from time to time as appropriate.
The Awards Committee, created by the Board, consists of one director, and has authority to grant certain equity awards under the Employee Plan and to make corrections to awards approved by the Compensation and Leadership Development Committee, to the extent the Awards Committee determines that corrections are necessary or appropriate to carry out the Compensation and Leadership Development Committee’s intentions. At this time, the Awards Committee consists of Mr. Rusckowski.James E. Davis.
The Awards Committee is authorized to grant the full range of awards that can be issued under the Employee Plan. There are, however, significant limits on awards that the Awards Committee may grant. These include: (i) a prohibition on awards to executive officers; (ii) a prohibition on awards to any individual whose base salary exceeds a threshold amount; (iii) an annual limit on awards granted to any individual; and (iv) an annual limit on aggregate awards granted. It is expected that the Awards Committee will approve awards from time to time as it determines appropriate, and that the awards will be issued for, among other purposes, new hires, promoted employees, employee retention and special recognition awards, including for high-performing employees who generally are not eligible for annual equity awards. The Awards Committee regularly reports to the Compensation and Leadership Development Committee awards granted by, and corrections made by, the Awards Committee. In 2021, 17,5772023, 8,862 stock options, 1,3524,070 performance shares, and 13,55036,179 RSUs were granted by the Awards Committee.
Approach to Performance Share Awards
For each year since 2005, the Committee has included an annual grant of performance shares in the long-term incentive awards to certain of our employees, including our executive officers. Performance shares encourage a long-term view and reinforce the link between financial results and rewards. Our performance shares have been generally based on a single three-year performance period and reward financial and operational performance during that period. The value that they provide depends on the level of achievement of predefined performance goals over the multi-year performance period. If minimum performance levels are not achieved, the performance shares are forfeited and provide no value. New performance share awards are made each year, and accordingly, participating named executive officers will participate in up to three overlapping performance periods during each year.
For each performance share award, the Committee establishes base yearbase-year performance levels, target performance levels and the measurement period. When the Committee is determining the payout under the performance measure, it may adjust items in the Company’s operating results and base yearbase-year performance levels using objective criteria (generally under the same categories identified above in the discussion of annual incentive compensation, and for the same reasons). No performance shares will be earned if a specified minimum performance level is not achieved. For performance above the threshold level, payment will vary with actual performance achieved, up to a maximum payment of 2two times the target level. Determination of the shares payable pursuant to each award is made after the end of the performance period.
|
The Committee’s approach to performance share awardsshares has been to establish targets that are challenging, yet attainable, and to provide that a maximum payout of 200% of target requires extraordinary performance. The Committee adopted the use of average return on invested capital (“ROIC”) and revenue compound annual growth rate (“CAGR”) as performance share metrics in 2012 and has continued to use these metrics, with relative TSR added as a metric in 2020. ROIC is defined for purposes of performance shares as (i) net operating profit after tax (“NOPAT”) divided by (ii) the sum of average total debt and stockholders’ equity (Invested Capital). In addition to being well supported by our stockholders, the use of ROIC holds management accountable for efficient use of capital and further links executive compensation to value creation.
| 37 | | 2024 Proxy Statement |
The following table sets forth the aggregate performance share award payouts over the past five years, as compared to target, for the named executive officers then in office. For additional information, Annex DB sets forth the payments as compared to target for performance share awardsshares for each year since 2005.
| Performance Period | Year Paid | Performance Share Payout as Compared to Target (%) |
| 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 (%) | ||||||
| 2017 – 19 | 2020 | 80 | ||||||
| 2018 – 20 | 2021 | 195 | ||||||
| 2019 – 21 | 2022 | 200 | ||||||
| 2020 – 22 | 2023 | 196 | ||||||
| 2021 – 23 | 2024 | 186 | ||||||
The Committee believes that these results demonstrate the rigor of the targets adopted, that targets have been set at reasonable levels and that performance share award payouts have been sensitive to Company performance.
Determination of February 20182020 Performance Share AwardsShares
In February 2021,2023, the Committee determined payment for performance share awards madeshares awarded in February 2018.2020. At the time of grant, the Committee established base yearbase-year performance levels, performance measures, target performance levels and the measurement period. The performance measures were the Company’s revenue compound annual growth rate (“CAGR”)CAGR (50% weight) and, the Company’s average return on invested capital (“ROIC”) (50%ROIC (30% weight) and relative TSR (20% weight) during the performance period (calculated in accordance with the plan, subject to adjustment as discussed above). The measurement period was January 1, 20182020 to December 31, 2020.2022.
The following table shows the targeted performance levels (awards for performance between these percentiles are interpolated on a straight-line basis).
Performance Shares Earned (as multiple of target number of shares) | Revenue CAGR (%) | Average Adjusted ROIC (%) |
| 0.25 | 1.8 | N/A |
| 0.5 | N/A | 10.6 |
| 0.75 | 2.3 | N/A |
| 1.00 | 3.6 | 11.3 |
| 2.00 | 5.0 | 12.0 |
| Performance Shares Earned (as multiple of target number of shares) | Revenue CAGR (%) | Average Adjusted ROIC (%) | Relative TSR (%) (2020-2022) | |||||
| 0.25 | 0.5 | 8.27 | N/A | |||||
| 0.50 | N/A | N/A | 25th | |||||
| 0.95 | N/A | 9.58 | N/A | |||||
| 1.00 | 3.0 | 9.73 | 50th | |||||
| 2.00 | 4.0 | 10.22 | 75th | |||||
The following table shows the actual performance levels for each of the performance measures during the measurement period, as determined by the Committee. As a result of these performance levels, the number of performance shares earned during the performance period was 195%196% of target.
| Results (%) | Weighted Payout Factor (%) | |
| Revenue CAGR | 8.43 | 100 |
| Average Adjusted ROIC | 11.93 | 95 |
| Results (%) | Weighted Payout Factor (%) | |||||||
| Revenue CAGR | 8.6 | 100.0 | ||||||
| Average Adjusted ROIC | 14.8 | 60.0 | ||||||
| Relative TSR | 70th | 35.9 | ||||||
| 2024 Proxy Statement | 38 |
The following table shows the 20182020 performance shares actually earned by each of the named executive officers.
| 2020 Performance Shares Earned | ||||
| |
| Sam A. Samad* | N/A | |||
| Catherine T. Doherty | 9,917 | |||
| Michael E. Prevoznik | 8,595 | |||
| Karthik Kuppusamy | 1,985 |
| * | Mr. Samad did not receive a grant of performance shares in 2020, as he was not an employee of the Company at that time. |
ROIC is defined for purposes of performance share awards as (i) net operating profit after tax (“NOPAT”) divided by (ii) the sum of average total debt and stockholders’ equity (Invested Capital).
The table below shows the Company’s adjusted ROIC results for each of the three years during the performance period.
| 2018 | 2019 | 2020 | 3 Year Average | |
| ROIC % | 10.33 | 10.12 | 15.34 | 11.93 |
| 2020 | 2021 | 2022 | 3 Year Average | |||||
| ROIC % | 14.8 | 17.7 | 11.7 | 14.8 |
In accordance with the Company’s policy, in determining the Company’s ROIC for purposes of performance share awards,shares, NOPAT (i.e.(i.e., net income attributable to the Company excluding interest expense) for each year in the performance period was adjusted to reflect the same adjustments used to calculate diluted EPS for purposes of the annual incentive planSMIP for the relevant year. Additionally, adjustments were made to remove the effects of significant transactions not contemplated or completed at the time performance measures were set, as follows: Invested Capital was adjusted to eliminate the impact of the 2019 refinancing of the Company’s Senior Notes due January 2020 and Senior Notes due March 2020. The Committee made these adjustments based on the same pre-determined objective criteria, and for the same reasons, as described above in connection with the SMIP.
The adjustments made by the Committee had the effect of increasingdecreasing ROIC for the performance period. The following table shows the performance levels for each of the performance measures during the period had the adjustments described above not been made.
| Results (%) | Weighted Payout Factor (%) | |
| Revenue CAGR | 8.43 | 100 |
| Average Adjusted ROIC (%) | 11.44 | 60 |
| Results (%) | Weighted Payout Factor (%) | |||||||
| Revenue CAGR | 8.6 | 100 | ||||||
| Average Adjusted ROIC (%) | 15.0 | 60 | ||||||
As a result of these performance levels, the number of performance shares earned during the performance period would have been 160%196% of target, and the shares earned by each executive officer would have been the same as set forth in the following table.those actually earned.
20212023 Equity Awards
In February 2021,2023, the Committee awarded long-term compensation for 20212023 to our Chief Executive Officer and the other named executive officers, resulting in the equity awards shown for them in the “2021“2023 Summary Compensation Table” and the “2021“2023 Grants of Plan-Based Awards Table” beginning on pages 4243 and 44, respectively. The Committee increased Mr. Rusckowski’s long-term incentive by 5% and Ms. Doherty’s long-term incentive by approximately 7%; our other named executive officers received awards having the same target value as the preceding year. In considering the size of the award for each of these named executive officers, the Committee considered the factors described above.
For 2021, the Committee granted the awards shown in the table on page 44 to our CEO and other named executive officers. The Committee also approved awards: (i) to our other more senior equity award recipients, consisting of the same mix of awards as those received by our named executive officers other than our CEO; and (ii) to less senior participants in the program, consisting solely of stock options and RSUs.
We continued to use stock options as a component of our equity awards because they align incentives with stockholder interests by rewarding appreciation in stock price. We believe that stock options are an appropriate incentive to motivate our employees. We also continued to use RSUs as a component of our equity awards because they provide retention incentives under diverse scenarios. RSUs also foster an ownership culture, help motivate employees to perform across business cycles and are aligned with stockholder value creation.
The Committee also approved awards: (i) to our other more senior equity award recipients, consisting of the same mix of awards as those received by our named executive officers; and (ii) to less senior participants in the program, consisting solely of RSUs or a mix of stock options and RSUs. In addition, to increase the reach of the Company’s equity awards program and its benefits, and to enhance the competitiveness of the Company’s compensation program, the Committee continues to include director-level employees in the pool of employees receiving equity awards.
|
| 39 | | 2024 Proxy Statement |
In February 2021,Due to the diminished impact of the COVID-19 pandemic on the operating environment, the Committee designedceased measuring base business revenues and COVID-19 testing revenues separately during the performance period for purposes of performance shares awarded in 2023, as it had for performance shares awarded in 2021 and 2022. As a result, the calculation of the CAGR for the Company’s base business revenue includes COVID-19 revenues earned during the performance share awardsperiod, in comparison to include a performance measure focused onthe Company’s revenue during the baseline year of 2022, excluding revenues associated with COVID-19 revenue.testing. The weighting of the revenue CAGR metric was increased to its pre-COVID-19 weighting of 50% from its 2022 weighting of 35%. The performance measures for the 20212023 performance share awards, and the relative weighting of the metrics, are:are as follows: the CAGR of the Company’s base business revenue, (35%including COVID-19 revenue (50% weight),; average ROIC (30% weight),; and relative TSR (measured relative to the companies included in the S&P 500 Healthcare Index) (20% weight), and cumulative COVID-19 revenue (15% weight). These metrics support key tenets of our 2-pointbusiness strategy. The target performance shares subject to the 20212023 performance share awards will be earned over a single three-year period ending December 31, 2023,2025, and will be paid out in shares of the Company’s common stock after the end of the performance period to the extent that the performance level is achieved. Determination of the shares payable pursuant to the 20212023 performance share awardawards will be made after the end of the performance period.
| |
Since 2012, when we began issuing performance share awardsshares with performance metrics based on the Company’s average ROIC and on revenue CAGR, over the performance period, it has been the Company’s practice to disclose the performance targets for these measures at the conclusion of the performance period, but not at the inception of the performance period. We believe that disclosure of average ROIC and revenue CAGR performance targets at the inception of a single three-year performance cycle could work to our competitive disadvantage. Our targets are linked to our budget and to forecasts and projections that we, like other companies with which we compete, do not routinely disclose publicly, or disclose only in general terms. If we were to disclose these targets, our competitors would gain an informational advantage that could enable competitors to anticipate our strategies and take steps to counter them. In this regard, we note that these performance metrics — metrics—average ROIC and revenue CAGR — CAGR—are absolute, not relative to performance of other companies, and different from other measures that may not be as competitively sensitive. Thus, the Company currently believes that it is in the best interest of its stockholders to continue its practice of disclosing the performance targets relating to average ROIC and revenue CAGR at the conclusion of the performance period, but not at the inception of the performance period. The Company believes that its performance metric based on cumulative COVID-19 revenues has characteristics similar to the performance metrics based on average ROIC and revenue CAGR and thus, it will disclose the performance target for this metric only at the conclusion of the performance period.
We believe that these concerns do not apply at this time to our relative TSR performance metric. Accordingly, we are disclosing here, beforedisclose in our annual proxy statement, in the conclusionyear of the three-year performance cycle,grant, the relative TSR performance metric for our 2021 performance share awards.
The relative TSR performance metric for our 2023 performance shares is set forth in the following table.
| Relative TSR* | ||
| Greater Than or Equal to 75thPercentile | 2 x 20% x Target Performance Shares | |
| Equal to 50thPercentile | 1 x 20% x Target Performance Shares | |
| Equal to 25thPercentile | 0.5 x 20% x Target Performance Shares | |
| Less Than 25thPercentile | 0 x 20% x Target Performance Shares |
*The Earnings Multiple for Relative TSR between the percentiles designated in the above table will be interpolated.
| |
| The Earnings Multiple for Relative TSR between the percentiles designated in the above table will be interpolated. |
| 2024 Actions |
February 20192021 Performance Share Payment Determination. In February 2022,2024, the Committee determined payment for performance share awards madeshares awarded in February 2019.2021. The performance period for those awards ended on December 31, 2021.2023. The performance measures were the Company’s base business revenue CAGR (50%(35% weight) and, the Company’s cumulative COVID-19 revenue (15% weight), the Company’s average ROIC (50%(30% weight), and relative TSR (20% weight) (in each case the results associated with each metric were calculated in accordance with the plan, subject to adjustment based on objective criteria as discussed above). The Committee determined that the earnings multiple applicable to these awards during the performance period was 200%186% of target. Determination of these awards will be discussed in the Compensation Discussion and Analysis included in our 20232025 proxy statement.
Changes to Compensation in 20222024. In February 2022, due to2024, the uncertain impact ofCommittee adopted performance measures for the COVID-19 pandemic on2024 performance shares. The performance measures for the operating environment, including on the Company’s base business2024 performance shares, and the Company’s COVID-19 testing revenues,relative weighting of the Company decided to continue to measure base business revenues and COVID-19 testing revenues separately for purposes of annual incentive compensation and performance share awards. In addition,
| 2024 Proxy Statement | 40 |
metrics, are: the Committee revised the mix of equity awards for our executive officers other than our CEO, to emphasize further awards subject to performance conditions. The Committee determined that the awards to our other executive officers, and to the remainder of our most senior employees, would consist of 50% performance shares, 25% options and 25% RSUs, mirroring the mix of awards to our CEO. In addition, to increase the reachCAGR of the Company’s equity award programrevenues, including COVID-19 revenues in both the baseline year of 2023 and its benefits, including aligningduring the interest of employees withperformance period (50% weight), average ROIC (30% weight), and relative TSR (measured relative to the interest of stockholders, and to enhancecompanies included in the competitiveness of the Company’s compensation program, the Committee expanded the pool of employees eligible to receive equity awards to include director level employees.S&P 500 Healthcare Index) (20% weight).
| Other |
Benefits
All eligible employees, including the named executive officers, are entitled to participate in the tax-qualified 401(k) Plan. All employees whose base salary exceeds a required threshold level, including the named executive officers, are entitled to participate in the non-qualified Supplemental Deferred Compensation Plan (“SDCP”). In the 401(k) Plan, participants may defer a portion of their eligible cash compensation up to limits established by law. The purposes of the 401(k) Plan and the SDCP are to provide eligible employees an opportunity to save for their retirement and, through Company matching contributions and credits, to provide supplemental retirement income to help us compete in the market for talented employees. For additional information regarding the SDCP, see “2021“2023 Nonqualified Deferred Compensation Table” on page 48.47.
As part of his or her total compensation package, each named executive officer is eligible to participate in our broad-based employee benefit plans, such as medical, dental, group life insurance and disability plans and the Employee Stock Purchase Plan. Each of these benefits is provided on the same basis as available to other exempt employees. Our benefits are designed to attract and retain talented employees and to provide them with competitive benefits.
Perquisites
Perquisites represent a minor component of executive compensation. We provide perquisites that we believe are reasonable and competitive. The Company has a security plan approved by the Committee forIn 2023, Mr. Rusckowski. Mr. RusckowskiDavis and his family useused Company aircraft for personal travel. Pursuant to an Aircraft Timesharing Agreementaircraft timesharing agreement approved by the Committee, Mr. RusckowskiDavis must reimburse the Company for its aggregate incremental cost arising out of Mr. Rusckowski’s personal use of Company aircraft after the aggregate incremental cost to the Company of Mr. Rusckowski’s personal use, in combination with the cost of Company-reimbursed driver and vehicle costs, exceeds $100,000a threshold amount in a year. Pursuant to his employment agreement, the Company reimbursed Mr. Rusckowski for driver and vehicle costs. Named executive officers also are eligible for executive health physical exams.exams and financial planning services. Named executive officers required to relocate upon hire or due to a change in work location are eligible for relocation benefits. Perquisites provided are disclosed in the “2021“2023 Summary Compensation Table” beginning on page 42.23.
Severance
The Company’s Executive Officer Severance Plan (“Severance Plan”) covers the named executive officers. No named executive officer will receive any severance benefits solely as a result of a change in control. For additional information, see “2021“2023 Potential Payments upon Termination or Change in Control” beginning on page 48. We believe that the severance benefits provided to our named executive officers are consistent with market practice and are appropriate recruiting and retention tools. The named executive officers have agreed to non-competition and non-solicitation covenants for a period following termination of employment.
Recoupment Policies
In November 2023, the Committee adopted a recoupment policy (commonly known as a “clawback” policy) that is compliant with the new SEC and NYSE requirements under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In addition, we maintain an Incentive Compensation Recoupment Policy (the “Policy”). The 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
|
| 41 | | 2024 Proxy Statement |
Compensation and Leadership Development Committee. Thus, for example, if supervisory personnel were to engage in gross negligence or intentional misconduct, the Policy would apply.
Risk Assessment
In November 2021,August 2023, the Committee reviewed the compensation arrangements for the Company’s employees, including the Company’s executive officers, to assess whether the arrangements, individually or in combination, encourage risk taking that is reasonably likely to have a material adverse effect on the Company. In assessing the risk, the Committee considered plan designs, plan operation, plan controls, oversight and review, and competitive norms. In assessing the risk of plans that apply to our executive officers, the Committee also considered the risk guidelines suggested by the Center on Executive Compensation. The Committee concluded that the compensation arrangements for the Company’s employees, including the arrangements for the Company’s executive officers, do not encourage risk taking that is reasonably likely to have a material adverse effect on the Company. Factors supporting this conclusion include the following: (i) by utilizing a variety of performance metrics in our incentive programs, we discourage excessive risk taking by removing the incentive to focus on a single performance goal to the detriment of the Company’s overall performance; (ii) under both the SMIP and our performance shares, payouts are capped at a maximum level, thereby reducing the risk that executives might be motivated to take excessive risk in order to attain excessively high performance in order to maximize payouts; (iii) we maintain a balance between short-term and long-term incentives; (iv) we maintain stock ownership and retention guidelines that are designed to incentivize our management team to focus on the Company’s long-term sustainable growth; and (v) we maintain a clawback policy,policies, discussed in “Clawback Policy” on page 45,above, designed to prevent misconduct relative to financial reporting.reporting; and (vi) the Committee discusses risk in connection with compensation for which it is responsible.
Share Ownership and Retention Guidelines
Since 2005 we have maintained senior management common stock ownership and retention andguidelines. Executives have five years from the time that they become executive officers to meet the ownership guidelines.requirements. Our current guidelines are set forth in the following table.
| Employee | Minimum Shareholding Requirement (X times base salary) | |
| CEO | 6X | |
| Other Executive Officers | 4X | |
| Other | 3X or 1X, depending upon position |
We determine the number of shares corresponding to these thresholds on April 1 of each year using the average annual price of our common stock during the preceding calendar year and the employee’s base salary as of the first business day in April. For purposes of determining whether an employee has met the minimum shareholding requirements, we count shares subject to unvested RSUs, but not shares subject to stock options or unvested performance share awards.shares.
Under the guidelines, an employee’s ability to sell shares associated with equity awards is limited until the officer satisfies a minimum ownership position. Our executive officers are required to retain 75%50% of net shares received from vesting of RSUs and performance shares and from the exercise of stock options, until they achieve their minimum shareholding requirement. As of April 1, 2022,2024, each of our currently employed named executive officers holds stock in excess of his or her minimum ownership requirement.is compliant with the guidelines.
The Committee periodically reviews these guidelines and may adjust them. Under our policy, if a named executive officer satisfies the minimum share ownership requirements in our guidelines, the Committee monitors future equity awards to that person to assure that the interests of the named executive officer and stockholders continue to be significantly aligned and, if warranted, adjusts the minimum share ownership requirements or adds retention requirements.
Policies Regarding Hedging or Pledging our Common Stock
Our directors and executive officers are prohibited from hedging the economic risk of owning our Common Stock. For information regarding our policies relating to directors, executive officers and other employees hedging or pledging the Company’s common stock, see “Policies Regarding Hedging and Pledging our Common Stock; Window Periods” on page 19.
| 2024 Proxy Statement | 42 | |
Compensation and Leadership Development Committee Report
The Compensation and Leadership Development Committee has reviewed and discussed with management the Compensation Discussion and Analysis. Based on its review and discussions with management, the Compensation and Leadership Development Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for 2021.2023.
Compensation and Leadership Development Committee
Vicky B. Gregg, Chair
Denise M. Morrison,
Chair
Vicky B. Gregg
Gary M. Pfeiffer
Timothy M. Ring
Helen I. Torley
This table summarizes the compensation for 20212023 for each of our named executive officers.
| Name and Principal Position | Year | Salary ($)(1, 2) | Bonus ($) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(2, 5) | All Other Compensation ($)(6) | Total ($) |
| Stephen H. Rusckowski | 2021 | 1,238,462 | - | 7,631,057 | 2,624,978 | 2,695,511 | 367,810 | 14,557,818 |
| Chairman, President and | 2020 | 1,107,692 | 7,279,883 | 2,500,020 | 3,000,000 | 194,013 | 14,081,608 | |
| Chief Executive Officer | 2019 | 1,100,000 | 4,348,074 | 3,039,982 | 1,373,790 | 256,693 | 10,118,539 | |
| Mark J. Guinan | 2021 | 643,077 | - | 1,567,373 | 689,871 | 839,794 | 77,448 | 3,817,563 |
| Executive Vice President and | 2020 | 591,385 | 1,569,547 | 690,012 | 905,883 | 46,597 | 3,803,424 | |
| Chief Financial Officer | 2019 | 620,000 | 1,287,373 | 899,872 | 464,563 | 44,187 | 3,315,995 | |
| James E. Davis | 2021 | 625,385 | - | 1,567,373 | 689,871 | 816,690 | 72,022 | 3,771,341 |
| Executive Vice President, | 2020 | 577,231 | 1,569,547 | 690,012 | 815,050 | 42,866 | 3,694,706 | |
| General Diagnostics and CEO-Elect | 2019 | 590,000 | 1,230,129 | 859,913 | 402,097 | 40,781 | 3,122,920 | |
| Carrie Eglinton Manner | 2021 | 600,000 | - | 1,362,859 | 599,962 | 696,480 | 65,375 | 3,324,676 |
| Senior Vice President, | 2020 | 566,538 | 1,364,907 | 600,011 | 707,493 | 40,032 | 3,278,981 | |
| Advanced and General Diagnostics and Clinical Solutions | 2019 | 575,000 | 1,001,320 | 699,880 | 354,099 | 47,258 | 2,677,557 | |
Catherine T. Doherty Senior Vice President, Regional Businesses | 2021 | 575,000 | - | 1,090,337 | 479,939 | 625,744 | 40,563 | 2,811,583 |
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||||||
| James E. Davis | 2023 | 1,175,000 | – | 7,290,745 | 2,499,848 | 1,361,531 | 346,710 | 12,673,834 | ||||||||||||||||||||||||
| Chairman, Chief Executive Officer and President | 2022 | 805,769 | – | 8,542,446 | 1,249,946 | 1,082,853 | 202,012 | 11,883,027 | ||||||||||||||||||||||||
| 2021 | 625,385 | – | 1,567,373 | 689,871 | 816,690 | 72,022 | 3,771,341 | |||||||||||||||||||||||||
| Sam A. Samad | 2023 | 650,000 | – | 1,968,594 | 674,882 | 451,913 | 229,725 | 3,975,114 | ||||||||||||||||||||||||
| Executive Vice President and Chief Financial Officer | 2022 | 300,000 | 1,200,000 | 3,330,906 | 624,865 | 725,693 | 87,518 | 6,268,982 | ||||||||||||||||||||||||
| Catherine T. Doherty | 2023 | 600,000 | – | 1,604,093 | 549,846 | 370,800 | 34,105 | 3,158,844 | ||||||||||||||||||||||||
| Executive Vice President, Regional Businesses | 2022 | 594,231 | – | 1,234,571 | 424,854 | 580,500 | 39,154 | 2,873,309 | ||||||||||||||||||||||||
| 2021 | 575,000 | – | 1,090,337 | 479,939 | 625,744 | 40,563 | 2,811,583 | |||||||||||||||||||||||||
| Michael E. Prevoznik | 2023 | 542,500 | – | 1,020,747 | 349,948 | 293,357 | 45,368 | 2,251,920 | ||||||||||||||||||||||||
| Senior Vice President and General Counsel | 2022 | 535,000 | – | 1,016,786 | 349,798 | 487,796 | 53,920 | 2,443,300 | ||||||||||||||||||||||||
| Karthik Kuppusamy | 2023 | 512,500 | – | 875,090 | 299,811 | 290,991 | 36,813 | 2,015,205 | ||||||||||||||||||||||||
| Senior Vice President, Clinical Solutions | ||||||||||||||||||||||||||||||||
| (1) | Includes amounts deferred by named executive officers into the 401(k) Plan and the SDCP (see |
(2) Salary and non-equity incentive plan compensation paid for 2020 reflect the program of shared sacrifice in effect in 2020, pursuant to which our CEO and our other named executive officers had reduced salaries for a 12-week period. 2020 annual incentive compensation for our CEO and our other named executive officers was determined and paid on the basis of their compensation as reduced by the temporary salary reductions.
| (2) | Represents the aggregate grant date fair value, based on the valuation methodology (including assumptions) set forth in footnote |
| 2019 ($) | 2020 ($) | 2021 ($) | ||
| Rusckowski | 7,176,138 | 12,059,720 | 12,637,093 | |
| Guinan | 2,124,703 | 2,449,023 | 2,444,721 | |
| Davis | 2,030,226 | 2,449,023 | 2,444,721 | |
| Eglinton Manner | 1,652,568 | 2,129,703 | 2,125,707 | |
| Doherty | - | - | 1,700,639 |
|
| Represents the aggregate grant date fair values of the awards, based on the valuation methodology (including assumptions) set forth in footnote |
| (4) | Represents payments of non-equity incentive plan compensation under the SMIP in respect of the year earned and includes amounts deferred under the SDCP. See the discussion regarding annual incentive compensation in “Compensation Discussion and Analysis” beginning on page 23 for further information regarding the performance measures. |
| 2024 Proxy Statement |
| (5) | All other compensation for |
Rusckowski ($) | Guinan | Davis ($) | Eglinton Manner ($) | Doherty | |
| Matching contributions under the 401(k) Plan | 14,500 | 14,500 | 14,500 | 14,500 | 12,436 |
| Matching credits under SDCP | 197,423 | 62,948 | 57,522 | 50,875 | 23,221 |
| Personal ground transportation | 55,887(a) | - | - | - | - |
| Use of company aircraft | 100,000(b) | - | - | - | - |
| Executive physical | - | - | - | - | 4,906 |
| Totals | 367,810 | 77,448 | 72,022 | 65,375 | 40,563 |
| Davis ($) | Samad ($) | Doherty ($) | Prevoznik ($) | Kuppusamy ($) | ||||||||||||||||
| Matching contributions under the 401(k) Plan | 16,500 | – | 16,500 | 16,500 | 16,500 | |||||||||||||||
| Matching credits under SDCP | 72,306 | 13,125 | 12,115 | 24,024 | 2,057 | |||||||||||||||
| Personal ground transportation | 117,890 | (a) | – | – | – | – | ||||||||||||||
| Personal use of company aircraft | 51,014 | (b) | – | – | – | – | ||||||||||||||
| Executive physical | – | – | 5,490 | – | 6,040 | |||||||||||||||
| Relocation | 76,000 | (c) | 212,786 | (c) | – | – | – | |||||||||||||
| Tax and Financial Planning | 13,000 | 3,814 | – | 4,844 | 12,216 | |||||||||||||||
| Legal costs | – | – | – | – | – | |||||||||||||||
| Totals | 346,710 | 229,725 | 34,105 | 45,368 | 36,813 | |||||||||||||||
| (a) | Includes |
| (b) | The |
| (c) | Includes relocation expenses associated with the terms of the Company Tier V Relocation Policy. |
| |
This table provides information about plan-based awards granted in 2021.2023.
Name | Grant Date |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | Exercise or Base Price of Option Awards ($/Sh)(5) | Closing Market Price on Grant Date ($/Sh) | Grant Fair Value of Stock and Option Awards ($)(6) | ||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||
($)(1) | ($)(1) | ($)(1) | (#)(2) | (#)(2) | (#)(2) | |||||||||
| Rusckowski | 2/17/2021 | 464,423 | 1,857,691 | 3,715,382 | 1,544 | 41,185 | 82,370 | 5,006,037 | ||||||
| 2/17/2021 | 120,901 | 121.81 | 121.85 | 2,624,978 | ||||||||||
| 2/17/2021 | 21,551 | 2,625,020 | ||||||||||||
| Guinan | 2/17/2021 | 144,693 | 578,769 | 1,157,539 | 271 | 7,218 | 14,436 | 877,348 | ||||||
| 2/17/2021 | 31,774 | 121.81 | 121.85 | 689,871 | ||||||||||
| 2/17/2021 | 5,665 | 690,025 | ||||||||||||
| Davis | 2/17/2021 2/17/2021 2/17/2021 | 140,712 | 562,846 | 1,125,692 | 271 | 7,218 | 14,436 | 877,348 | ||||||
| 31,774 | 121.81 | 121.85 | 689,871 | |||||||||||
| 5,665 | 690,025 | |||||||||||||
| Eglinton | 2/17/2021 | 120,000 | 480,000 | 960,000 | 235 | 6,276 | 12,552 | 762,848 | ||||||
| Manner | 2/17/2021 | 27,633 | 121.81 | 121.85 | 599,962 | |||||||||
| 2/17/2021 | 4,926 | 600,011 | ||||||||||||
| Doherty | 2/17/2021 | 107,813 | 431,250 | 862,500 | 188 | 5.021 | 10,042 | 3,941 | 22,105 | 121.81 |
121.85
| 610,303 479,939 480,034 | ||
| 2/17/2021 | ||||||||||||||
| 2/17/2021 | ||||||||||||||
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | Exercise or Base Price of Option Awards ($/Sh)(5) | Closing Market Price on Grant Date ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(6) | ||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($)(1) | Target ($)(1) | Maximum ($)(1) | Threshold (#)(2) | Target (#)(2) | Maximum (#)(2) | |||||||||||||||||||||||||||||||||||||||
| Davis | 2/23/2023 | 440,625 | 1,762,500 | 3,525,000 | 2,517 | 33,562 | 67,124 | 142.44 | 4,790,640 | |||||||||||||||||||||||||||||||||||||
| 2/23/2023 | 68,956 | 143.33 | 142.44 | 2,499,848 | ||||||||||||||||||||||||||||||||||||||||||
| 2/23/2023 | 17,443 | 142.44 | 2,500,105 | |||||||||||||||||||||||||||||||||||||||||||
| Samad | 2/23/2023 | 146,250 | 585,000 | 1,170,000 | 680 | 9,062 | 18,124 | 142.44 | 1,293,510 | |||||||||||||||||||||||||||||||||||||
| 2/23/2023 | 18,616 | 143.33 | 142.44 | 674,882 | ||||||||||||||||||||||||||||||||||||||||||
| 2/23/2023 | 4,710 | 142.44 | 675,084 | |||||||||||||||||||||||||||||||||||||||||||
| Doherty | 2/23/2023 | 120,000 | 480,000 | 960,000 | 554 | 7,384 | 14,768 | 142.44 | 1,053,992 | |||||||||||||||||||||||||||||||||||||
| 2/23/2023 | 15,167 | 143.33 | 142.44 | 549,846 | ||||||||||||||||||||||||||||||||||||||||||
| 2/23/2023 | 3,838 | 142.44 | 550,101 | |||||||||||||||||||||||||||||||||||||||||||
| Prevoznik | 2/23/2023 | 94,938 | 379,750 | 759,500 | 352 | 4,699 | 9,398 | 142.44 | 670,735 | |||||||||||||||||||||||||||||||||||||
| 2/23/2023 | 9,653 | 143.33 | 142.44 | 349,948 | ||||||||||||||||||||||||||||||||||||||||||
| 2/23/2023 | 2,442 | 142.44 | 350,012 | |||||||||||||||||||||||||||||||||||||||||||
| Kuppusamy | 2/23/2023 | 89,688 | 358,750 | 717,500 | 302 | 4,028 | 8,056 | 142.44 | 574,957 | |||||||||||||||||||||||||||||||||||||
| 2/23/2023 | 8,270 | 143.33 | 142.44 | 299,811 | ||||||||||||||||||||||||||||||||||||||||||
| 2/23/2023 | 2,094 | 142.44 | 300,133 | |||||||||||||||||||||||||||||||||||||||||||
| (1) |
| (2) |
| (3) |
| 2024 Proxy Statement | 44 |
| (4) |
| (5) | The exercise price is the average of the high and low sales price of the Company’s common stock on the date of grant. |
| (6) |
Additional Information Regarding 20212023 Summary Compensation and Grants of Plan-Based Awards Tables
Please see “Compensation Discussion and Analysis,” beginning on page 23, for additional information regardingregarding: (i) the material terms of targets noted in the 20212023 Summary Compensation Table, regardingTable; (ii) the amount of salary and bonus in proportion to total compensationcompensation; and regarding(iii) our share ownership and retention guidelines. No named executive officer participates in a Company-sponsored tax-qualified defined benefit plan or non-qualified supplemental defined benefit plan.
Key Terms of Equity Awards Granted in 20212023..
Annual Equity Awards. Performance shares, options and RSUs were awarded to the named executive officers in February 2021.2023. Each option generally has a term of ten years, subject to earlier expiration upon termination of employment. Options and RSUs generally vest ratably over a three-year period and performance shares generally vest on the third anniversary of the date of grant.February 23, 2026. Dividend equivalents are payable on the RSUs in the same amounts, if any, as dividends are paid on the Company’s outstanding shares of common stock. We do not pay dividend equivalents on performance shares. After RSUs and performance shares have vested and settled by the delivery of shares of common stock, those shares receive dividends on the same basis as all other outstanding shares of the Company’s common stock.
|
In general, any awards of options, RSUs or performance shares that have not vested as of the date of an employee’s termination of employment are cancelled. In the event of termination due to death, disability or retirement, however, awards vest in full; provided,full (provided that the retirement occurs after the one-year anniversary of the grant date.date). In the case of retirement, vested stock options remain exercisable for up to five years following retirement. In the event of involuntary termination without “cause” or as a result of a divestiture, the employee will vest in a pro rata number of performance shares based on the number of months in the performance period that have lapsed from the grant date to the termination date. Performance shares that vest in connection with termination of employment remain nevertheless subject to the earn-out requirements based on Company performance during the performance period ending December 31, 20232025, and are paid only at the end of the three-year performance period and only to the extent that the performance conditions have been satisfied. Retirement means the voluntary cessation of employment by the employee upon the attainment of age sixty (60) and the completion of not less than five (5) years of service with the Company; provided, however, that there is no basis for the Company to terminate the employment of the Employee for “cause” at the time of the employee’s voluntary cessation of employment. The definition of “cause” is provided under “2021“2023 Potential Payments upon Termination or Change in Control” beginning on page 48).
In addition, the awards vest on an accelerated basis following a “change in control” only if, within two years after the change in control, the named executive officer’s employment is terminated by the Company without “cause” or by the named executive officer for “good reason” (the definition of “good reason” is provided under “2021“2023 Potential Payments upon Termination or Change in Control” beginning on page 48), or if the surviving entity in the change in control does not agree to assume the awards or grant substitute awards that present similar economic opportunity. A “change in control” occurs if and when:
| (i) | any person becomes the beneficial owner of securities of the Company representing 40% or more of the combined voting power of the Company’s then outstanding securities; or |
| (ii) | a majority of the Company’s directors are not “continuing directors;” or |
(iii) the Company consummates any 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 all of the Company’s assets or (c) a plan of partial or complete liquidation of the Company.
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 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 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 provides that its term is 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 provides for:
| |
| 45 | | 2024 Proxy Statement |
Mr. Rusckowski’s employment agreement also provides that his performance-based and incentive-based compensation is 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 has 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, 2021.2023.
| 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 | 40,120 | - | $ | 112.17 | 2/18/2030 | - | - | - | - | |||||||||||||||||
| 2/17/2021 | 21,182 | 10,592 | $ | 121.81 | 2/17/2031 | 15,279 | 2,106,669 | - | - | |||||||||||||||||
| 2/24/2022 | 15,843 | 31,686 | $ | 127.73 | 2/24/2032 | 6,525 | 899,667 | 39,008 | (3) | 5,378,423 | ||||||||||||||||
| 11/1/2022 | (6) | - | - | - | - | 13,980 | 1,927,562 | 40,118 | (3) | 5,531,470 | ||||||||||||||||
| 2/23/2023 | - | 68,956 | $ | 143.33 | 2/23/2033 | 17,443 | 2,405,041 | 67,124 | (4) | 9,255,057 | ||||||||||||||||
| Samad | 7/11/2022 | 6,552 | 13,106 | $ | 135.59 | 7/11/2032 | 8,606 | 1,186,595 | 17,742 | (3) | 2,446,267 | |||||||||||||||
| 2/23/2023 | - | 18,616 | $ | 143.33 | 2/23/2033 | 4,710 | 649,415 | 18,124 | (4) | 2,498,937 | ||||||||||||||||
| Doherty | 2/19/2018 | 33,103 | - | $ | 103.57 | 2/19/2028 | - | - | - | - | ||||||||||||||||
| 2/18/2020 | 26,165 | - | $ | 112.17 | 2/18/2030 | - | - | - | - | |||||||||||||||||
| 2/17/2021 | 14,736 | 7,369 | $ | 121.81 | 2/17/2031 | 10,628 | 1,465,389 | - | - | |||||||||||||||||
| 2/24/2022 | 5,385 | 10,770 | $ | 127.73 | 2/24/2032 | 2,219 | 305,956 | 13,264 | (3) | 1,828,840 | ||||||||||||||||
| 2/23/2023 | - | 15,167 | $ | 143.33 | 2/23/2033 | 3,838 | 529,183 | 14,768 | (4) | 2,036,212 | ||||||||||||||||
| 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 | 22,677 | - | $ | 112.17 | 2/18/2030 | - | - | - | - | |||||||||||||||||
| 2/17/2021 | 11,972 | 5,986 | $ | 121.81 | 2/17/2031 | 8,637 | 1,190,870 | - | - | |||||||||||||||||
| 2/24/2022 | 4,433 | 8,868 | $ | 127.73 | 2/24/2032 | 1,828 | 252,045 | 10,924 | (3) | 1,506,201 | ||||||||||||||||
| 2/23/2023 | - | 9,653 | $ | 143.33 | 2/23/2033 | 2,442 | 336,703 | 9,398 | (4) | 1,295,796 | ||||||||||||||||
| Kuppusamy | 2/18/2019 | 3,045 | - | $ | 86.63 | 2/18/2029 | - | - | - | - | ||||||||||||||||
| 2/18/2020 | 5,224 | - | $ | 112.17 | 2/18/2030 | - | - | - | - | |||||||||||||||||
| 2/17/2021 | 3,218 | 1,609 | $ | 121.81 | 2/17/2031 | 2,327 | 320,847 | - | - | |||||||||||||||||
| 2/24/2022 | 1,106 | 2,214 | $ | 127.73 | 2/24/2032 | 458 | 63,149 | 2,732 | (3) | 376,688 | ||||||||||||||||
| 2/24/2022 | (6) | - | - | - | - | 2,741 | - | - | - | |||||||||||||||||
| 8/10/2022 | 1,070 | 2,142 | $ | 140.39 | 8/10/2032 | 505 | 69,629 | 2,934 | (3) | 404,540 | ||||||||||||||||
| 2/23/2023 | - | 8,270 | $ | 143.33 | 2/23/2033 | 2,094 | 288,721 | 8,056 | (4) | 1,110,761 | ||||||||||||||||
| (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. |
| (2) | Represents RSUs awarded in 2023, 2022 and 2021, |
|
The grant date February 18, 2019The grant date February 17, 2021, 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 performance shares awarded in 2022 if performance were at maximum. The performance period began on January 1, |
| (4) | Represents |
| (5) | Represents fair market value of shares using the closing price on December 31, $137.88. |
| 2024 Proxy Statement | 46 |
| (6) | Represents equity awards that do not include a vesting-upon-retirement feature. The RSUs awarded to Mr. Davis cliff vest on November 1, 2025. The RSUs awarded to Mr. Kuppusamy cliff vest on February 24, 2025. |
This table provides information regarding stock option exercises during 2021,2023, including the number of shares of common stock acquired upon exercise and the aggregate amount realized on each exercise. The table also provides information regarding RSUs that vested and were paid during 20212023 and performance share awards that were earned based on the performance period ending on December 31, 20202022, and were determined and paid during 2021,2023, including the number of shares awarded and the value realized as of February 28, 202118, 2023 (the vesting date).
| Option Awards | Stock Awards | |||||||||||||||
| Number of | Value | Number of | Value | |||||||||||||
| Shares | Realized | Shares | Realized | |||||||||||||
| Acquired | on Exercise | Acquired | on Vesting | |||||||||||||
| Name | on Exercise | ($) | on Vesting | ($) | ||||||||||||
| Rusckowski | 187,845 | 8,331,954 | 19,299 | (1) | 2,338,373 | (1) | ||||||||||
| 58,368 | (2) | 6,736,835 | (2) | |||||||||||||
| 77,667 | (3) | 9,075,208 | (3) | |||||||||||||
| Guinan | N/A | N/A | 5,570 | (1) | 674,894 | (1) | ||||||||||
| 17,322 | (2) | 1,999,305 | (2) | |||||||||||||
| 22,892 | (3) | 2,674,199 | (3) | |||||||||||||
| Davis | N/A | N/A | 5,416 | (1) | 656,233 | (1) | ||||||||||
| 16,570 | (2) | 1,912,509 | (2) | |||||||||||||
| 21,986 | (3) | 2,568,742 | (3) | |||||||||||||
| Eglinton Manner | N/A | N/A | 4,483 | (1) | 543,183 | (1) | ||||||||||
| 13,181 | (2) | 1,521,351 | (2) | |||||||||||||
| 17,664 | (3) | 2,064,534 | (3) | |||||||||||||
| Doherty | 37,565 | 2,292,040 | 3,623 | (1) | 438,984 | (1) | ||||||||||
| 11,299 | (2) | 1,304,131 | (2) | |||||||||||||
| 14,922 | (3) | 1,743,115 | (3) | |||||||||||||
| Option Awards | Stock Awards | |||||||||||
| Name | Number of Shares Acquired on Exercise | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting | Value Realized on Vesting ($) | ||||||||
| Davis | N/A | N/A | 7,201 | (1) | 1,041,351 | (1) | ||||||
| 15,204 | (2) | 2,248,063 | (2) | |||||||||
| 22,405 | (3) | 3,289,414 | (3) | |||||||||
| Samad | N/A | N/A | 7,068 | (1) | 990,792 | (1) | ||||||
| 7,068 | (3) | 990,792 | (3) | |||||||||
| Doherty | N/A | N/A | 3,761 | (1) | 548,150 | (1) | ||||||
| 9,917 | (2) | 1,466,328 | (2) | |||||||||
| 13,678 | (3) | 2,014,478 | (3) | |||||||||
| Prevoznik | N/A | N/A | 3,139 | (1) | 457,586 | (1) | ||||||
| 8,595 | (2) | 1,270,857 | (2) | |||||||||
| 11,734 | (3) | 1,728,443 | (3) | |||||||||
| Kuppusamy | N/A | N/A | 1,036 | (1) | 148,365 | (1) | ||||||
| 1,985 | (2) | 293,502 | (2) | |||||||||
| 3,021 | (3) | 441,867 | (3) | |||||||||
| (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
| 47 | | 2024 Proxy Statement |
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 2023 ($)(1) | Registrant Contributions in 2023 ($)(2) | Aggregate Earnings in 2023 ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/23 ($)(4) | ||||
| Davis | 1,397,903 | 72,306 | 409,303 | - | 4,678,780 | ||||
| Samad | 52,500 | 13,125 | 6,067 | - | 71,692 | ||||
| Doherty | 96,923 | 12,115 | 485,426 | - | 3,786,985 | ||||
| Prevoznik | 26,222 | 24,024 | 623,258 | - | 5,416,909 | ||||
| Kuppusamy | 2,057 | 2,057 | 8,570 | - | 47,779 |
| (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 |
| (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 2021,2023, 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, 2023, each of Mr. Rusckowski isDavis and Mr. Prevoznik was a Schedule A participant and, each of Mr. Guinan, Mr. Davis, Ms. Eglinton Manner andSamad, Ms. Doherty isand Mr. Kuppusamy was a Schedule B participant in the Severance Plan.
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 situatedsimilarly-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
| 2024 Proxy Statement | 48 |
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”2023” beginning on page 44.
The Severance Plan uses the following defined terms:45.
| 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”2023” beginning on page 44)45).
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 is 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.
ThisThe following table provides information regarding the potential payments that would become payable to each named executive officer that remained an employee on December 31, 2023, 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, 2021,29, 2023, which was $173.01.$137.88.
| Accelerated | |||
| Vesting of | |||
| Cash | Performance | ||
| Compensation | Shares | Total | |
| Name | ($)(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 | Accelerated | Total ($)(3) | |||
| Davis | 6,250,000 | 6,055,552 | 12,485,552 | |||
| Samad | 1,235,000 | 1,017,968 | 2,322,968 | |||
| Doherty | 1,080,000 | 2,054,688 | 3,224,688 | |||
| Prevoznik | 1,870,000 | 1,625,881 | 3,615,881 | |||
| Kuppusamy | 892,500 | 642,934 | 1,615,434 | |||
| |
| (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 | |
| (2) | Represents the value of performance shares that would have vested if the executive had terminated employment on December 31, 2023 (determined based on the number of months in the performance period). For awards granted in 2021, value is based upon actual performance for the performance period ended December 31, 2023. For awards granted in 2022 and 2023, value is based upon target performance. | |
| (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, |
| 49 | | 2024 Proxy Statement |
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. Davis, $180,000; Mr. Samad, $70,000; Ms. Doherty, $90,000; Mr. Prevoznik, $120,000; and Mr. Kuppusamy, $80,000.
This table provides information regarding the potential payments that would become payable to each named executive officer that remained an employee on December 31, 2023, 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, 2023 termination date and the closing price of the Company’s common stock as of December 29, 2023, which was $137.88.
| Name | Cash Compensation ($)(1) | Accelerated Vesting of Stock Options ($)(2) | Accelerated Vesting of Performance Shares ($)(3) | Accelerated Vesting of RSUs ($)(4) | Total ($)(5, 6) | ||||
| Davis | 9,375,000 | 492,038 | 16,887,478 | 5,492,726 | 32,227,242 | ||||
| Samad | 2,470,000 | 30,078 | 3,617,420 | 1,836,010 | 8,023,508 | ||||
| Doherty | 2,160,000 | 227,826 | 4,103,369 | 1,016,313 | 7,597,508 | ||||
| Prevoznik | 2,805,000 | 186,279 | 3,104,798 | 736,004 | 6,952,081 | ||||
| Kuppusamy | 1,785,000 | 48,348 | 1,650,042 | 839,138 | 4,402,528 |
| (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 2023 but unpaid as of December 31, 2023 (the amount of the annual incentive compensation for 2023 is set forth in the “2023 Summary Compensation Table” beginning on page 43). |
| (2) | Represents the value of accelerated “in the money” stock options. |
| (3) | Represents the value of performance shares that would have vested if the executive had terminated employment on December 31, 2023. For awards granted in 2021, |
| (4) | Represents the value of |
| (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 |
This table provides information regarding the potential payments that would become payable 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, 2021 termination date and the closing price of the Company’s common stock as of December 31, 2021, which was $173.01.
| Accelerated | Accelerated | |||||||||
| Vesting of | Vesting of | Accelerated | ||||||||
| Cash | Stock | Performance | Vesting of | |||||||
| Compensation | Options | Shares | RSUs | Total | ||||||
| Name | ($)(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 |
| (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, 2021,2023, 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
| 2024 Proxy Statement | 50 |
on Company performance through December 31, 20212023, 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)time, except as it relates to certain RSUs and PSUs awarded to Mr. Davis on November 1, 2022 that did not include a vesting-upon-retirement feature; see footnote 6 to the Outstanding Equity Awards at 2023 Fiscal Year-End table (see page 46)).
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”2023” beginning on page 44.45. 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“2023 Nonqualified Deferred Compensation Table” on page 48.47.
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 2021,2023, the annual total compensation of the individual identified as the median paid employee of all our employees (other than our CEO) was $67,206,$68,163, and the annual total compensation of our CEO was $14,574,109,$12,696,539, including, in each case, the cost of Company-paid broad-based benefits, including 401(k) and health, disability and life insurance. Therefore, our CEO to median identified employee to CEO pay ratio was estimated to be approximately 1186 to 217.1.
For 2021,2023, we used the same median employee that we identified in 2020,2022, since there hashave been no changechanges 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.
| 51 | | 2024 Proxy Statement |
Equity Compensation Plan Information
This table provides information as of December 31, 20212023 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) | 5,683,168 | (4) | 107.50 | 11,339,032 | (6)(7) | |||
| Long-Term Incentive Plan for Non-Employee Directors(2) | 83,274 | (5) | 87.48 | 115,699 | ||||
| Employee Stock Purchase Plan | - | N/A | 2,939,014 | (8) | ||||
| Equity compensation plans not approved by security holders(3) | - | N/A | - | |||||
| Total | 5,766,442 | 107.47 | 14,393,745 | |||||
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. |
| (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 |
| 2024 Proxy Statement | 52 |
Pay Versus Performance
Below is information about the relationship between executive compensation actually paid to our named executive officers and our financial performance. This information is prepared in accordance with SEC rules and may be different from the compensation information presented above and does not represent the actual amounts earned or realized by our named executive officers. 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 2023 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 | Compensation Actually Paid to Second PEO | Average Summary Compensation Table Total for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs | Total Shareholder Return | Peer Group Total Shareholder Return | Net Income (in millions) | Adjusted Diluted Earnings Per Share | ||||||||||||||||||||
| 2023 | $12,673,834 | N/A | $ | 9,436,647 | N/A | $2,850,271 | $ | 1,985,608 | $139.93 | $132.35 | $ | 908 | $ | 8.71 | ||||||||||||||||
| 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 43).
| 53 | | 2024 Proxy Statement |
| Year | PEO | Adjustments made to Summary Compensation Table Total to determine Compensation Actually Paid |
| 2023 | James E. Davis | $7,290,745 of stock awards and $2,499,848 of option awards was subtracted and replaced with: ● $9,387,056, representing year end fair value of stock and option awards granted in 2023 that remained unvested and outstanding at the end of 2023; ● $(2,419,477) representing the change in fair value as of the end of 2023 (from the end of the prior fiscal year) of stock and option awards granted prior to 2023 that remained unvested and outstanding at the end of 2023; ● $(518,557), 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 2023 that vested in 2023, and ● $104,386, 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. |
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; ● $(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 | |
| 2024 Proxy Statement | 54 |
| ● $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; ● $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 43).
| 55 | | 2024 Proxy Statement |
| Year | Other NEOs | Adjustments made to Summary Compensation Table Total to determineCompensation Actually Paid (amounts reported are averages for non- NEO PEOS together) |
| 2023 | Sam A. Samad Catherine T. Doherty Michael E. Prevoznik Karthik Kuppusamy | $5,468,524 of stock awards and $1,874,487 of option awards was subtracted and replaced with: ● $7,040,429, representing year end fair value of stock and option awards granted in 2023 that remained unvested and outstanding at the end of 2023; ● $(2,421,347), representing the change in fair value as of the end of 2023 (from the end of the prior fiscal year) of stock and option awards granted prior to 2023 that remained unvested and outstanding at the end of 2023; ● $(835,973), 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 2023 that vested in 2023; and ● $101,251, 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. |
| 2022 | Sam A. Samad Catherine T. Doherty Michael E. Prevoznik Patrick Plewman Mark J. Guinan Carrie Eglinton Manner | $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. |
| 2024 Proxy Statement | 56 |
| 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 ● $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 James E. Davis Carrie Eglinton Manner 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 2023 Annual Report on Form 10-K.
| 57 | | 2024 Proxy Statement |
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 2023 to Company performance. See Compensation Discussion and Analysis, beginning on page 23 for more information about these measures.
| Financial Performance Measures |
| Adjusted Diluted Earnings Per Share |
| Base Business Revenues |
| Non-Financial Performance Measures |
| ESG Goals |
| Medical Quality/Customer Experience/Employee Engagement |
Descriptions of Pay Versus Performance Relationships
The following graph shows, for each of the four 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).
| 2024 Proxy Statement | 58 |
The following graph shows, for each of the four 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 four 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. Adjusted Diluted EPS is a non-GAAP financial measure. See Annex A for a reconciliation to a financial measure reported under U.S. GAAP.
| 59 | | 2024 Proxy Statement |
The following graph shows, for each of the four 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).
| 2024 Proxy Statement | 60 |
AUDIT
Proposal No. 3—3 — 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 2022.2024. 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 2022.2024. 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:
| • | the historical and recent performance of PwC on the Company’s audit, including the results of an extensive internal survey of the service and quality of PwC; | |
| • | the capability and expertise of PwC in handling the breadth and complexity of our operations; | |
| • | external data on audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) reports on PwC and its peer firms; | |
| • | the appropriateness of the fees of PwC for audit and other services; | |
| • | the independence of PwC; and | |
| • | the advantages and disadvantages of retaining or replacing PwC as our independent auditor, including the benefits of having a long-tenured auditor and controls and processes that help ensure the independence of PwC. |
| Retention of PwC |
| Tenure Benefits |
| Higher audit |
| |
| Efficient fee |
| No onboarding or educating new |
| 61 | | 2024 Proxy Statement |
| Independence Controls |
| Thorough Audit and Finance Committee |
| Limits on non-audit |
| Strong internal PwC independence |
| Strong regulatory |
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 20222024 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, 20212023 and 20202022 were:
| 2021 ($) | 2020 ($) | ||
| Audit Fees | 3,447,587 | 3,889,300 | |
| Audit Related Fees | — | — | |
| Tax Fees | 315,227 | 88,742 | |
| All Other Fees | 4,739 | 4,500 | |
| Total Fees | 3,767,553 | 3,982,542 |
| 2023 ($) | 2022 ($) | |||||
| Audit Fees | 3,895,200 | 3,622,200 | ||||
| Audit Related Fees | – | – | ||||
| Tax Fees | 382,848 | 425,273 | ||||
| All Other Fees | 4,150 | 4,150 | ||||
| Total Fees | 4,282,198 | 4,051,623 | ||||
Audit Feeswere 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;statements; 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 FeesFees.. None were incurred in 20212023 or 2020.2022.
Tax Feeswere for services related to tax planning and tax advice,compliance, including assistance with tax technical analyses and representation before U.S. and certain non-U.S. authorities; and services related to tax compliance includingcalculations to support the preparation of the Company’s tax returns and claims for refunds, primarily for non-U.S.related tax matters.documentation. Tax Fees related to tax planningcompliance were $382,848 and tax advice were $315,227$425,273 in 2023 and $88,742 in 2021 and 2020,2022, respectively. None of these fees related to tax planningservices for any of the Company’s directors or executive officers.
| 2024 Proxy Statement | 62 |
All Other Feeswere 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, 20212023 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, 20212023 in the Company’s Annual Report on Form 10-K.
Audit and Finance Committee
Gary M. Pfeiffer, Chair
Tracey C. Doi
Wright L. Lassiter III
Timothy L. MainGary M. Pfeiffer, Chair
Gail R. Wilensky
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD THAT HAVE BEEN SIGNED AND RETURNED WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE INSTRUCTED.
| 63 | | |
ADDITIONAL ACTION ITEMS
Proposal No. 4—Amendment to4 — Amending our Restated Certificate of Incorporation to Allow Stockholders to ActProvide for the Exculpation of Officers as Permitted by Non-Unanimous ConsentLaw
| The Board of Directors recommends that you vote FOR this proposed |
The Board is submitting for stockholder approval a proposal to adopt an amendment to Paragraph 8 of our Restated Certificate of Incorporation to allow stockholders who comply with the requirements set forth in our Restated Certificate of Incorporation to take certain actions by written consent in lieu of a meeting of stockholders with not less than 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 “Written Consent Amendment”). Currently, our Restated Certificate of Incorporation permits stockholder action by consent in lieu of a meeting of stockholders only if such consent is unanimous. The Board recommends that stockholders vote in favor of adoption of the Written Consent Amendment.
The text of 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 outstanding shares of the Company’s common stock voted in favor of the stockholder proposal.
We value the perspectives of our stockholders, have a strong record of stockholder engagement, and are responsive to stockholder concerns. In light of the results of the vote on the stockholder proposal at the 2021 annual stockholders meeting, the Board considered the advantages and disadvantages of providing stockholders with the ability to act by non-unanimous written consent in lieu of a meeting of stockholders. Following this review, and after considering 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 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 Written Consent Amendment includes procedural and other safeguards that the Board believes are in the best interests of the Company and its stockholders to protect the Company and its stockholders against potential risks associated with permitting stockholders to act by non-unanimous written consent, including requirements intended to promote transparency and a deliberative process, as highlighted below.
|
This description of the proposed Written Consent Amendment is a summary and is qualified by and subject to the full text of such amendments, which are attached to this proxy statement as Annex B. 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 shares of our outstanding common stock is required to adopt the Written Consent Amendment. If adopted by the stockholders, the Written Consent Amendment amending our Restated Certificate of Incorporation will become effective upon filing of a Certificate of Amendment setting forth 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 lieu of a meeting 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.
| |
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
|
The Board is submitting for stockholder approval a proposal to amend Paragraph 711(a) of our Restated Certificate of Incorporation to lowerprovide for the share ownership threshold for stockholders to request thatexculpation of certain officers of the Company, call a special meeting to 15%the fullest extent permitted by law, from 20%,claims of monetary damages for breach of fiduciary duty, similar to provide for a record datethe protections currently available to determine stockholders entitled to request a special meeting and to make related amendmentsdirectors of the Company (the “Special Meeting“Proposed Amendment”). The Board recommends that stockholders vote in favor of the Special MeetingProposed Amendment.
The text of the proposed amendments to the Restated Certificate of Incorporation constituting the Special MeetingProposed Amendment is contained in Annex C. Stockholders should review Annex C, 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. Any special meeting request would continue to be
The Company is incorporated in the state of Delaware and is therefore subject to the procedural, informational and other requirements andDelaware General Corporation Law (the “DGCL”). The DGCL has long permitted Delaware corporations to limit or eliminate the directors’ personal liability to the corporation or its stockholders for monetary damages for breach of fiduciary duty, subject to limitations currently set forthprescribed by the DGCL, including that liability will not be eliminated for breaches of the directors’ fiduciary duty of loyalty, acts or omissions not in good faith, unlawful dividends or stock repurchases or redemptions, or acts or omissions that involve intentional misconduct or knowing violations of law. Paragraph 11(a) of the Restated Certificate of Incorporation and by-laws ofcurrently includes such a provision that eliminates the Company.
Our Board is committed to high standards of corporate governance, including transparency and accountability. As part of its regular and ongoing reviewliability of the Company’s corporate governance practicesdirectors for monetary damages to the Company and its stockholders for breach of fiduciary duty to the fullest extent permitted by law. Therefore, under Section 102(b)(7), the Restated Certificate of Incorporation eliminates the liability of our directors to the Company and its stockholders for monetary damages for breach of fiduciary duty, other than the liability of any director (i) for any breach of the director’s duty of loyalty, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL for the unlawful payment of dividends or unlawful stock repurchases or redemptions, or (iv) for any transaction from which the director derived an improper personal benefit.
Effective August 1, 2022, the Delaware legislature amended Section 102(b)(7) of the DGCL to permit Delaware corporations to provide similar exculpatory protections for certain officers. As with the corresponding protections for directors, the protections for certain officers set forth in amended Section 102(b)(7) of the DGCL do not apply automatically to Delaware corporations but must be set forth in the corporation’s certificate of incorporation to be effective. As adopted, amended Section 102(b)(7) of the DGCL permits corporations to adopt a provision in their certificate of incorporation that protects certain officers from personal monetary liability to the corporation and its stockholders for monetary damages for breach of fiduciary duty under limited circumstances:
| • | Exculpation is only available for breaches of the fiduciary duty of care. | |
| • | Exculpation is not available for breaches of the fiduciary duty of loyalty (which, in general, requires officers to act in good faith and in the best interests of the corporation and its stockholders and not in their own personal pecuniary interest). | |
| • | Exculpation is not available for acts or omissions not in good faith or that involve intentional misconduct or knowing violations of law. | |
| • | The protections of Section 102(b)(7) are limited to monetary damages only; it does not prevent or preclude claims against officers for equitable relief. | |
| • | Exculpation is not available for any transaction in which the officer obtained an improper benefit. | |
| • | Exculpation is not available in connection with claims against officers brought by or in the right of the corporation, including claims brought derivatively on behalf of the corporation by a stockholder. |
| 2024 Proxy Statement | 64 |
Pursuant to Section 102(b)(7), the officers covered by the Proposed Amendment are officers who are, at any time during the course of conduct as to which liability is alleged, our Chief Executive Officer and President, Chief Financial Officer, General Counsel, Corporate Controller and Chief Accounting Officer and Treasurer, any other officer identified as a named executive officer in our SEC filings, and any other officer who has, by written agreement with the Company, consented to be identified as an officer for purposes of accepting service of process.
The Board has determined it is advisable and in light 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 thebest interests of the Company and its stockholders as a whole, since a small minorityto provide such exculpatory protections to certain officers 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 andfullest extent permitted by law for the Board. Providing for a record date to determine stockholders to request a special meeting enhances and clarifies the process regarding special meetings.following reasons:
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.
| • | The nature of the role of officers often requires them to make difficult decisions on crucial matters, frequently in response to time-sensitive opportunities and challenges. These decisions can create substantial risk of investigations, claims, actions, suits, or proceedings seeking to impose personal monetary liability on officers for business decisions that are not successful in hindsight. The Board believes that limiting our officers’ concern about personal monetary risk will empower them to better exercise their business judgment in furtherance of stockholder interests. | |
| • | The Board believes that the Proposed Amendment will help reduce threatened litigation, costs of litigation, as well as diversion of management attention due to stockholder litigation. The Board believes that the Proposed Amendment will help limit litigation that names officers as defendants as a litigation strategy to compel settlement offers and that Delaware corporations that do not adopt officer exculpatory provisions may be faced with additional costs in the form of increased director and officer liability insurance premiums. | |
| • | The Board anticipates that similar officer exculpatory provisions are likely to be widely adopted by our peers and others with whom we compete for executive talent. As a result, failing to adopt the Proposed Amendment could negatively impact our ability to attract and retain experienced and qualified corporate officers. |
This description of the proposed Special MeetingProposed Amendment is a summary and is qualified by and subject to the full text of such amendments,the Proposed Amendment, which areis 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 shares of our outstanding common stock is required to adopt the Special MeetingProposed Amendment. If adopted by the stockholders, the Special MeetingProposed Amendment amending our Restated Certificate of Incorporation will become effective upon filing of a Certificate of Amendment setting forth the Special MeetingProposed Amendment with the Delaware Secretary of State (or such later time as may be set forth therein), which filing would be completed promptly after the Annual Meeting. If the Special Meeting Proposed Amendment is approved by the stockholders, thethe Board will also adopt certain conforming amendments to the Company’s by-laws, to provide for certain procedural and disclosure requirements in connection with the Special Meeting Amendment, towhich amendments will be effective upon the effectiveness of the Special MeetingProposed Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD THAT HAVE BEEN SIGNED AND RETURNED WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE INSTRUCTED.
|
| 65 | | 2024 Proxy Statement |
Proposal No. 6—5 — Stockholder Proposal Regarding the Right to Call Special Meetings of StockholdersManaging Climate Risk Through Science-Based Targets and Transition Planning
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 RightNo. 5 — Managing Climate Risk Through Science-Based Targets and Transition Planning
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 Calllimit global warming to 1.5°C. Every incremental increase in temperature above 1.5°C will entail increasingly severe physical, transition, and systemic risks for companies and investors alike.
In its 10-K, Quest Diagnostics Inc. (“Quest” or “the Company”) noted the physical risks of extreme weather events caused by climate change on its facilities, employees, consumers, and ability to conduct core business operations. Despite acknowledging these risks, the proponent believes the Company’s mitigation strategy falls short of what is needed to shield Quest and its investors from climate-related risks.
Quest does not have any specific GHG reduction targets. The Company lags peers, who have continued to make progress in managing climate-related risks since a Special Shareholder Meetingsimilar proposal received 48% support from investors at Quest’s 2023 annual meeting. Direct competitor Labcorp has now set a near-term sciencebased target with the Science Based Targets initiative (SBTi) that covers Scope 1-3 emissions. Industry peer Thermo Fisher Scientific has since updated its near-term target to 1.5°C alignment and set long-term and net zero targets through SBTi.
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 ownershipWith European operations, Quest may be subject to the fullest extent possible.
It currently takesCorporate Sustainability Reporting Directive requiring disclosure of “plans to ensure that its business model and strategy are compatible with limiting global warming to 1.5°C.”1 Additionally, as a theoretical 20% of sharesU.S. government contractor, Quest may be subject to callthe Federal Acquisition Regulation proposed rule mandating science-based targets for major suppliers.
Investors believe Quest should adopt 1.5°C-aligned science-based emissions reduction targets for its full carbon footprint and publish a special shareholder meeting. This can be deceiving because 100% of shares owned less than 365 days continuously are excluded. Thusclimate transition plan - detailing the shareholders who meetforward-looking, near-term, and quantitative actions the 20% stock ownership requirement could determineCompany will take to achieve its medium and long-term sustainability goals. By doing so, the Company may reap benefits from increased efficiency, lower energy costs, more resilient supply chains, and better preparation for climate-related regulations.
RESOLVED: Shareholders request that they own 33% of Quest Diagnostics stock when lengthInc. issue near and long-term science-based greenhouse gas reduction targets aligned with the Paris Agreement’s ambition of stock ownership is factored out. A potential 33% stock ownership requirementlimiting global temperature rise to call a special shareholder meeting is nothing for Quest management1.5°C and summarize plans to brag about.achieve them.
It is also important to vote for this proposal because
SUPPORTING STATEMENT: In assessing targets, we gave 51% support to a 2021 proposal for a shareholder right to act by written consent.recommend,
In response to 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 companies 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.
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
| • | Taking into consideration approaches used by advisory groups like SBTi; | |
| • | Developing a transition plan that shows how the Company plans to meet its goals, taking into consideration criteria used by advisory groups such as the Task Force for Climate-Related Financial Disclosures, CDP, Transition Plan Taskforce, and the We Mean Business Coalition; and | |
| • | Consideration of supporting targets for renewable energy, energy efficiency, and other measures deemed appropriate by management. |
1 https://www.efrag.org/Assets/Download?assetUrl=%2Fsites%2Fwebpublishing%2FSiteAssets%2FED_ESRS_E1.pdf&AspxAutoDetectCookieSupport=1
| 2024 Proxy Statement | 66 |
OUR BOARD RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL.
The Board of Directors recommends a vote “AGAINST” this proposal and in favor of Proposal No. 5 put forth by the Company for the following reasons.
 | The Board of Directors recommends you vote AGAINST this proposal. | |
The Board has carefully considered the proposal and does not believe that it is in the best interests of 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 committed to seeking out and developing ways to transition our business to a lower carbon footprint. We are actively making efforts to reduce our GHG emissions. We currently are seeking to understand, and prepare for, new and proposed changes in regulatory requirements and their impact on our Company as we continue to develop our sustainability plans. The scope and timing of these changes are unclear and may create inconsistent obligations. 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 superseded by changes in law, or may be unrealistic. We believe that a thoughtful approach to setting targets that takes into consideration the importance of continuing to provide patient care and increasing stockholder value, rather than setting targets without careful planning and consultation with our business partners, would be in the best interest of 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 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 organization, 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 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 2022 Corporate Responsibility Report includes disclosures under the Sustainability Accounting Standards Board standards and describes our efforts to improve our energy efficiency and emissions profile. Our report also provides details on our courier route optimization initiative that in 2022 reduced our fleet miles driven by approximately 2.7 million miles, reducing gasoline consumption by approximately 100,000 gallons and our CO2 emissions by approximately 870 metric tons. These are in addition to efforts to complete a laboratory and laboratory testing platform consolidations and our LED lighting retrofit.
During 2022, we also undertook additional actions in support of our sustainability program. We conducted ASHRAE Level 2 Energy Audits to identify energy conservation measures, and desktop energy and water audits to identify additional conservation opportunities. We conducted water audits at several of our major laboratories. We also engaged with our suppliers about their environmental profile and practices and we identity improvement opportunities for them.
We have also taken steps to strengthen our sustainability reporting by engaging an independent third party to review and assure our Scope 1 and Scope 2 GHG emissions data and assess the procedures we use to collect this data. This step demonstrates our commitment to strengthening our environmental sustainability reporting as we prepare for significant changes to our disclosure obligations. We plan to continue to increase the transparency and quality of our reporting as we develop our plan to be responsive to the coming requirements.
We currently are seeking to understand, and prepare for, new and proposed changes in regulatory requirements and their impact on our Company as we continue to develop our sustainability plans.
In October 2023, California enacted legislation that will require companies like ours operating in California to disclose their Scope 1 and Scope 2 GHG emissions data starting in 2026 and Scope 3 GHG emissions data by 2027, and annually thereafter. California has also enacted legislation requiring disclosures of climate-related financial risks that could potentially apply to us.
| 67 | | 2024 Proxy Statement |
In March 2024, the SEC adopted comprehensive and wide-ranging rules that will require the Company to provide 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 third-party attestation, along with complex financial statement disclosures and additional disclosures focused on climate governance and risk oversight.
The federal government has proposed a comprehensive new rule that would require large federal government contractors to disclose, on an annual basis, their Scopes 1, 2 and 3 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. A final rule has not been published. As a company that does business with federal agencies, Quest Diagnostics would be subject to the new rule.
The European Union (“EU”) 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, and the European Sustainability Reporting Standards implementing the CSRD were released in July 2023. The CSRD requirements for non-EU companies are being phased in starting January 1, 2028. The disclosure requirements include climate-related matters, such as risks, targets and emissions disclosures, but also extend to other social and governance matters. Our operations in the European Union could potentially subject us to these requirements.
The new SEC rules have only recently been adopted, and we are focused on understanding the scope of these new requirements and developing an implementation plan. These requirements mandate disclosures that we currently do not provide. Additionally, given the scope of proposed changes from other governmental bodies and jurisdictions, it is likely that any proposed legislation or yet to be effective requirements will create inconsistent obligations with the SEC requirements. We have committed resources to, and focused on, understanding the challenges that the SEC rules and other pending changes raise related to our compliance. We are focused on, among other things, the following:
| • | how we will 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. |
The Company’s historicalWe believe that a thoughtful approach would best assist the Company in determining the type and current corporate governance practicesscope 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 patients, employees, business partners, communities and stockholders. We have adopted plans and taken actions 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 patient care.
Our approach to sustainability includes learning from our past initiatives. We believe that to be responsible to our stockholders, 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. We believe that adopting targets at this time would not enable us adequately to reflect our continuing commitment to robust, balanced corporate governance. We maintain a strong record of responsivenessbest learnings and accountability to stockholder concerns through implementation of strong stockholder rights and extensive stockholder engagement. The Board believes that providing stockholders with the right to cause the Company to call a special meeting is an important corporate governance practice that enhances stockholder rights. Accordingly, in 2014, the Company amended our Certificate of Incorporation to permit stockholders owning at least 25% in the aggregatedemands of the Company’s outstanding common stock (subjectchanging laws.
As detailed above, we have been, and continue to certain requirements) to cause the Company to callbe, engaged in a special meetingrange 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, 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 consequencesefforts to both the Companyevaluate potential changes to our sustainability goals 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 determinedreduce our GHG emission profile. 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 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. 6.5.
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.
| 68 |
FREQUENTLY ASKED QUESTIONS
1. What is
| 1. | Who can vote at the Annual Meeting? |
Holders 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 18, 2024 is the record date.
| 2. | How many votes can be cast by all stockholders? |
On the record date, there were 111,056,065 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 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 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 eachthe 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.Company entitled to vote thereon.
12. Can I change or revoke my proxy?
| 2024 Proxy Statement | 69 |
| 7. | Can I change or revoke my proxy? |
Yes. You may revoke your proxy before your shares are voted by:
| • | submitting a later dated proxy, including by telephone or the Internet, that is received no later than the conclusion of voting at the Annual Meeting; |
| • | delivering a written revocation notice to Sean D. Mersten, Vice President and Corporate Secretary, Quest Diagnostics Incorporated, 500 Plaza Drive, Secaucus, New Jersey 07094 that is received no later than the conclusion of voting at the Annual Meeting; or | |
| • | voting in person at the Annual Meeting. |
| 8. | What if I vote to abstain? |
13. What if I vote to abstain?
Shares voting “abstain” on the ratification of the appointment of PwC, the proposed amendmentsamendment to the Restated Certificate of Incorporation and approval of each of the stockholder proposalproposals 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 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 amendmentsamendment to the Restated Certificate of Incorporation or approval of the stockholder proposal. If you do not provide instructions regarding how to vote on these matters, because your broker lacks discretionary authority to vote on these matters, no vote will be cast on your behalf.behalf and a broker non-vote will occur. Any such broker non-vote will have no effect on the election of directors, the advisory resolution to approve executive compensation or approval of the stockholder proposal, but will have the effect of a vote against the approval of the proposed amendment to the Restated Certificate of Incorporation. 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.shares as they see fit.
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?
| 70 | | 2024 Proxy Statement |
| 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.
18. Can I receive Annual Meeting material via electronic delivery?
| 14. | 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.
| 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? |
| |
19. 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 20212023 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 2025 annual meeting of stockholders? |
Stockholders intending to present a proposal at the 20232025 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.[•], 2024.
Stockholders intending to present a proposal at the 20232025 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 20232025 annual meeting of stockholders no earlier than January 18, 202316, 2025 and no later than February 17, 2023.15, 2025. 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. In addition to the requirements set forth in our by-laws, stockholders who intend to solicit proxies for nominations for election to the Board other than the Company’s nominees in reliance on the universal proxy rules must also comply with the additional requirements of Rule 14a-19.
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 20232025 annual meeting of stockholders must be submitted to the Corporate Secretary no earlier than November 20, 2022[•], 2024 and no later than December 20, 2022.[•], 2024. 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, 2022:16, 2024: Our proxystatement and Annual Report on Form 10-K for the year ended December 31, 20212023 are available on our website at www.QuestDiagnostics.com.
| 71 |
Annex A
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’s(the Company’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,communities), gains and losses associated with changes in the carrying value of our strategic investments, impairment charges, and other items.
The non-GAAP adjusted measures included in “Compensation Discussion and Analysis” beginning on page 23 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 | |||||||||
| 2023 | 2022 | (Decrease) | ||||||||
| (dollars in millions, except per share data) | ||||||||||
| Adjusted operating income: | ||||||||||
| Operating Income | $ | 1,262 | $ | 1,428 | ||||||
| Restructuring and integration charges(a) | 43 | 88 | ||||||||
| Quest for Health Equity costs(b) | - | 93 | ||||||||
| Other(c) | 44 | 13 | ||||||||
| Amortization expense | 108 | 120 | ||||||||
| Adjusted operating income | $ | 1,457 | $ | 1,742 | ||||||
| Adjusted operating income as a percentage of net revenues: | ||||||||||
| Operating income as a percentage of net revenues | 13.6% | 14.5% | (90) basis points | |||||||
| Restructuring and integration charges(a) | 0.5 | 0.9 | ||||||||
| Quest for Health Equity costs(b) | - | 0.9 | ||||||||
| Other(c) | 0.5 | 0.1 | ||||||||
| Amortization expense | 1.2 | 1.2 | ||||||||
| Adjusted operating income as a percentage of net revenues | 15.8% | 17.6% | (180) basis points | |||||||
|
| A-1 | | 2024 Proxy Statement |
| Twelve Months Ended December 31, | Increase | |||||||||||
| 2023 | 2022 | (Decrease) | ||||||||||
| (dollars in millions, except per share data) | ||||||||||||
| Adjusted net income attributable to Quest Diagnostics: | ||||||||||||
| Net income attributable to Quest Diagnostics | $ | 854 | $ | 946 | ||||||||
| Restructuring and integration charges(a)(e) | 33 | 66 | ||||||||||
| Gains and losses on investments(d)(e) | 2 | 31 | ||||||||||
| Quest for Health Equity costs(b)(e) | - | 69 | ||||||||||
| Other(c)(e) | 36 | (6) | ||||||||||
| Amortization expense(e) | 80 | 89 | ||||||||||
| ETB | (11) | (14) | ||||||||||
| Adjusted income attributable to Quest Diagnostics | $ | 994 | $ | 1,181 | ||||||||
| Adjusted diluted EPS: | ||||||||||||
| Diluted earnings per common share | $ | 7.49 | $ | 7.97 | (6.0%) | |||||||
| Restructuring and integration charges (a)(e) | 0.29 | 0.56 | ||||||||||
| Gains and losses on investments(d)(e) | 0.02 | 0.26 | ||||||||||
| Quest for Health Equity costs(b)(e) | - | 0.59 | ||||||||||
| Other(c)(e) | 0.31 | (0.05) | ||||||||||
| Amortization expense(e) | 0.70 | 0.74 | ||||||||||
| ETB | (0.10) | (0.12) | ||||||||||
| Adjusted diluted earnings per common share | $ | 8.71 | $ | 9.95 | (12.5%) | |||||||
| 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, 2023, represents costs primarily associated with workforce reductions and integration costs incurred in connection with further restructuring and integrating our business. For the twelve months ended December 31, 2022, represents costs primarily associated with workforce reductions, systems conversions and integration costs incurred in connection with further restructuring and integrating our business. The following table summarizes the pre-tax impact of restructuring and integration charges on the Company’s consolidated statements of operations: |
| Twelve Months Ended December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| (dollars in millions) | |||||||||||
| Cost of services | $ | 16 | $ | 32 | |||||||
| Selling, general and administrative | 27 | 56 | |||||||||
| Operating income | $ | 43 | $ | 88 | |||||||
| (b) | For the twelve months ended December 31, 2022, the pre-tax impact represents the costs associated with donations, contributions and other financial support through Quest for Health Equity, recorded in selling, general and administrative expenses. |
| 2024 Proxy Statement | A-2 |
| (c) | For the twelve months ended December 31, 2023, the pre-tax impact primarily represents a $29 million impairment charge on certain long-lived assets related to the shutdown of a business and, to a lesser extent, losses associated with the increase in the fair value of the contingent consideration accrual associated with previous acquisitions. 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, | |||||||||||
| 2023 | 2022 | ||||||||||
| (dollars in millions) | |||||||||||
| Cost of services | $ | - | $ | 2 | |||||||
| Selling, general and administrative | 5 | - | |||||||||
| Other operating expense, net | 39 | 11 | |||||||||
| Operating income | $ | 44 | $ | 13 | |||||||
| (d) | For both the twelve months ended December 31, 2023 and 2022, the pre-tax impact primarily represents gains and losses associated with changes in the carrying value of our strategic investments. The following table summarizes the pre-tax impact of gains and losses on investments on the Company’s consolidated statement of operations: |
| Twelve Months Ended December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| (dollars in millions) | |||||||||||
| Other income (expense), net | $ | - | $ | 30 | |||||||
| Equity in earnings of equity method investees, net of taxes | $ | 3 | $ | 12 | |||||||
| (e) | For restructuring and integration charges, gains and losses on investments, Quest for Health Equity costs, other items and amortization expense, income tax impacts, where recorded, were primarily calculated using combined statutory income tax rates of 25.5% for both 2023 and 2022. Additionally, the twelve months ended December 31, 2022 includes an $18 million benefit due to an adjustment to state deferred tax liabilities related to depreciation expense. |
| A-3 | | 2024 Proxy Statement |
| Twelve Months Ended December 31, | |||||||||||
| Adjusted diluted EPS: | 2021 | 2020 | |||||||||
| Diluted earnings per common share | $ | 15.55 | $ | 10.47 | |||||||
| 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(c)(f) | (2.02 | ) | - | ||||||||
| Other(d)(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 | |||||||
| (a) | For the twelve months ended December 31, 2021 and 2020, represents costs primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating |
| 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, | |||||||||||
| 2021 | 2020 | ||||||||||
| (dollars in millions) | |||||||||||
| Cost of services | $ | 30 | $ | 27 | |||||||
| Selling, general and administrative | 31 | 31 | |||||||||
| Operating income | $ | 61 | $ | 58 | |||||||
| (b) | For the twelve months ended December 31, 2021 and 2020, the pre-tax impact represents the impact of certain items resulting from the COVID-19 pandemic. For the twelve months ended December 31, 2021, includes incremental costs incurred to protect the health and safety of |
| 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 | |||||||
| 2024 Proxy Statement | A-4 |
| (c) | |
| 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 | |
| For the twelve months ended December 31, 2021, the pre-tax impact primarily represents changes in the carrying value of |
The following table summarizes the pre-tax impact of these other items on the company’sCompany’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, | |||||||||||
| 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 | ||||||
| (e) | For the twelve months ended December 31, 2020, the pre-tax impact represents a gain of $70 million recognized in other income, net based on the difference between the fair value and the carrying value of an equity interest. On August 1, 2020, |
| (f) | For restructuring and integration charges, COVID-19 impacts, other items and amortization expense, income tax impacts, where recorded, were primarily calculated using combined statutory income tax rates of 25.5% for both 2021 and 2020. For the gain on sale of ownership in joint venture in 2021, income tax expense on the transaction resulted in an effective income rate of 17.6%. For the gain on remeasurement of equity interest in 2020, income tax expense on the transaction resulted in an effective income tax rate of 11.8%. |
|
| A-5 | | 2024 Proxy Statement |
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
|
Annex B
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.
| |
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 2020.2023.
Performance Share Units
| 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 | ||||||
| 2019-21 | 2022 | 200 | ||||||
| 2020-22 | 2023 | 196 | ||||||
| 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 | |||
| 2022 | 131 | |||
| B-1 | | 2024 Proxy Statement |
Annex C
Proposed Amendment to Paragraph 11 of Restated Certificate of Incorporation
Set forth below is the proposed amendment to paragraph (a) of Paragraph 11 of the Restated Certificate of Incorporation of Quest Diagnostics Incorporated (with insertions shown in underlined text and deletions shown in strike-through text):
“NoTo the fullest extent permitted by law, no director or officer of the Corporation shall have any personal liability to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, provided that this provision shall not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit.”
| C-1 | | 2024 Proxy Statement |
CC 1278800
 | Corporate Election Services P. O. Box 1150 Pittsburgh, PA 15230 |
| |
MI11039
 |
| 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 Wednesday, May 17, 2022,15, 2024, 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,Monday, May 13, 2022,2024, to be counted in the final tabulation.
êThe Quest Diagnostics Board of Directors recommendsIf submitting a vote FORproxy by mail, please sign and date the nominees listed below.card below and fold and detach card at perforation before mailing.ê
The Quest Diagnostics Board of Directors recommends a vote FOR Proposals 2, 3, 4 and 5. the nominees listed below.
| Election of Directors | FOR | AGAINST | ABSTAIN | ||
| (01) | James E. Davis | ☐ | ☐ | ☐ | |
| (02) | Luis A. Diaz, Jr., M.D. | ☐ | ☐ | ☐ | |
| (03) | Tracey C. Doi | ☐ | ☐ | ☐ | |
| (04) | Vicky B. Gregg | ☐ | ☐ | ☐ | |
| (05) | Wright L. Lassiter, III | ☐ | ☐ | ☐ | |
| (06) | Timothy L. Main | ☐ | ☐ | ☐ | |
| (07) | Denise M. Morrison | ☐ | ☐ | ☐ | |
| (08) | Gary M. Pfeiffer | ☐ | ☐ | ☐ | |
| (09) | Timothy M. Ring | ☐ | ☐ | ☐ | |
The Quest Diagnostics Board of Directors recommends a vote FOR Proposals 2, 3 and 4.
| 2. | An advisory resolution to approve the executive officer compensation disclosed in the Company’s |
| 3. | Ratification of the appointment of our independent registered public accounting firm for |
| 4. |
The Quest Diagnostics Board of Directors recommends a vote AGAINST Proposal 6.5.
| Stockholder proposal regarding |
| Signature(s): | Date: | , 2024 |
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 20222024 Annual Meeting of Stockholders
QUEST DIAGNOSTICS INCORPORATED
One Insights Drive, Clifton, New Jersey
May 18, 2022,16, 2024, 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 nine directors; | ||
| ● | an advisory resolution to approve the executive officer compensation disclosed in the Company’s | |
| ● | ratification of the appointment of our independent registered public accounting firm for | |
| ● | approval of an amendment to | |
| ● | 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
êIf 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.,Sean D. Mersten, 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 20222024 Annual Meeting of Stockholders to be held on Wednesday,Thursday, May 18, 2022,16, 2024, 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.
