· | each executive officer's responsibilities, experience in their position and capabilities;
| − | Individual performance and company performance; |
· | individual performance and company performance;
| − | The relative role and contribution of each NEO in the company; |
· | the relative role and contribution of each executive officer in the company;
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· | competitive
| − | Competitive offers made to executive officers and the level of salary that may be required to recruit or retain executive officers; |
· | the recommendations of the Chief Executive Officer; and
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· | prior-year financial performance and current-year performance projections.
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Base salaries for executive officers are typically reviewed annually during our evaluation period in the first quarter. The Committee does not assign specific weights to the factors identified above, but emphasizes establishing base salaries that are competitive in order to attract and retain qualified and effective executive officers.
In the first quarter of 2016, the Committee reviewed the base salaries of each of the named executive officers and determinedthe level of salary that may be required to increaserecruit or retain executive officers; and
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| − | The recommendations of the salaries of Messrs. Hunt, Wood and Chang. This was the first salary increase for Mr. Hunt since 2012 and the first salary increase for Messrs. Wood and Chang since 2014. Mr. Dorny's salary was not increased and had not increased since 2014. The named executive officers' salaries, together with the prior salaries that were reviewed in the first quarter of 2016, are as follows:Named Executive Officer | | Prior Salary ($) | | Adjusted Salary ($) | | Increase ($) | | Increase (%) | M. Truman Hunt | | 1,000,000 | | 1,156,000 | | 156,000 | | 16% | Ritch N. Wood | | 535,000 | | 570,000 | | 35,000 | | 7% | Ryan S. Napierski | | 650,000(1) | | 650,000(1) | | — | | 0% | Joseph Y. Chang | | 575,000 | | 595,000 | | 20,000 | | 3% | D. Matthew Dorny | | 440,000 | | 440,000 | | — | | 0% |
CEO. |
Base salaries for executive officers are typically reviewed annually, in the first quarter of each year. The Committee does not assign specific weights to the factors identified above but generally endeavors to establish base salaries that are competitive in relation to the peer group median in order to attract and retain qualified and effective executive officers. In the first quarter of 2020, the Committee reviewed the base salaries of each of the NEOs in connection with the established annual review process and determined to increase the salaries by a range of 0% to 5%. The NEOs’ salaries, together with the prior salaries that were reviewed in the first quarter of 2020, are as follows: Name | | Prior Salary ($) | | Adjusted Salary ($) | | Increase ($) | | Increase (%) | Ritch N. Wood | | 1,000,000 | | 1,000,000 | | — | | — | Mark H. Lawrence | | 500,000 | | 525,000 | | 25,000 | | 5% | Ryan S. Napierski | | 700,000 | | 725,000 | | 25,000 | | 4% | Joseph Y. Chang | | 660,000 | | 675,000 | | 15,000 | | 2% | D. Matthew Dorny | | 510,000 | | 510,000 | | — | | — |
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Cash Incentive Bonus
Consistent with our objective to tie a significant portion of the executive officers' compensation to our financial performance, in 2016 we awarded performance-based cash incentive bonuses under our Amended and Restated 2010 Omnibus Incentive Plan. We believe these bonuses motivate executive officers and reward them for achieving short-term operating performance levels.Cash Incentive Bonus Metrics. Cash incentive bonuses are measured based on achievement of goals related to adjusted revenue and adjusted operating income. These two metrics are equally weighted because management is responsible for both growing the business and increasing profitability, including control of expenses. These bonuses are also structured to avoid rewarding our executive officers when performance does not meet expectations. Based on our performance during 2016, the bonus earned in our executive cash incentive program was 30.5% of the aggregate annual target bonus.
Our executive cash incentive bonuses are determined based on equally weightedMetric | Weighting | Purpose | How Calculated | Adjusted revenue and adjusted operating income performance levels. The company believes revenue measures management's effectiveness in growing the | 50% | Incentivizes business and that adjusted operating income measures their effectiveness in growing the business profitably. For purposes of the cash incentive bonus, revenue and adjusted operating incomegrowth | Both metrics are calculated on a constant currencyconstant-currency basis from the prior-year period and are adjusted operating income excludes certain predetermined items so thatto eliminate extraneous items not withinsuch as the impact of accounting changes, losses or gains on settlements of litigation that began prior to 2020 and other unusual impacts at the Committee’s discretion. | Adjusted operating income | 50% | Incentivizes profitability and control of management are excluded. Revenue and adjusted operating income are equally weighted because management is responsible for both growing the business and increasing profitability, including by controlling costs. Our executive incentive plan allocates 50% of the cash incentive bonus to annual performance levels and 50% to quarterly performance levels, with 12.5% allocated to each quarter. A portion of the cash incentive bonus is tied to quarterly performance levels to motivate focused performance in each quarter, while the annual portion recognizes that strong annual results are a critical benchmark for stockholders.expenses |
Target Bonus.Cash incentive bonuses are computed based on the degree to which pre-determined goal performance levels are met or exceeded. If goal performance levels are met for a particular incentive period, a participant will earn a bonus equal to a pre-established percentage of salary, the “target bonus.” We set the target bonus as a percentage of base salary based on an executive officer’s position and responsibility and on market practices. The following table provides the target bonus percentage (as a percentage of salary) for each of our NEOs in 2020. Named Executive Officer | | 2020 Target Bonus % | Ritch N. Wood | | 110% | Mark H. Lawrence | | 75% | Ryan S. Napierski | | 100% | Joseph Y. Chang | | 75% | D. Matthew Dorny | | 75% |
Calculation of Bonus: Achievement of Performance Goals and Adjustment for Individual Performance. The precise percentage of target bonus that a participant will earn is based on the degree to which pre-determined performance levels are met or exceeded. The 2020 cash incentive bonus program included a payout opportunity of 25% of target based on minimum level achievement of annual performance goals. Previously, this payout opportunity was 50%. No changes were made to the relationship between performance achievement and payout opportunity at the target and stretch levels. Note that:
| − | If actual results for a particular incentive period a participant will earn a cash incentive bonus equal to a pre-established percentage of salary, the "target bonus." If goalequal: |
| o | Goal performance levels are not met,– The bonus amount will be the bonus decreases linearly until reaching 50% of theparticipant’s target bonus atamount for the minimum performance levels. If minimum adjusted operating incomeincentive period. |
| o | Minimum performance levels are not met, as was the case in certain periods in 2016, no– The bonus is paid, except that the Committee has the discretion to pay a bonus based on achievement of individual performance objectives in an amount up to 10% of the executive's target bonus. The Committee did not exercise this discretion in 2016. If minimum adjusted operating income performance levels are met but minimum revenue performance levels are not,will be 25% of the participant’s target bonus is earned. Toamount for the extent actual revenue or adjusted operating income exceed goalincentive period. |
| o | Stretch performance levels the– The bonus increases linearly above the target bonus until reachingamount will be 200% of the participant’s target bonus at the "stretch" performance levels. For actual revenue or adjusted operating income above the stretch performance levels in a given quarter oramount for the year,incentive period. |
| − | Payouts are interpolated linearly if actual results fall between the bonus increases linearly above 200% ofminimum and goal measurement points or between the target bonus 1% for every 1% that actual performance exceeds the stretch performance level, until reaching 250% of the target bonus percentage. However, although an executive officer's bonus earned for revenue or adjusted operating income performance in a given quarter or for the year may separately exceed 200% of the associated target bonus, the aggregate quarterly and annual bonuses may not exceed 200% of the aggregate annual target bonus.We set the target bonus as a percentage of base salary based on an executive officer's position and responsibility and on market practices. The target bonus is intended to tie a significant portion of an executive officer's total cash compensation to our performance. We set the 2016 target bonus percentage at 150% of salary for Mr. Hunt and 75% of salary for our other named executive officers. For 2017, Mr. Wood's target bonus percentage as Chief Executive Officer is 100%, Mr. Napierski's target bonus percentage as President is 90%, and our other named executive officers' target bonus percentages will remain at 75%. For purposes of calculating Mr. Napierski's target bonus in 2016, his salary did not include the $150,000 adjustment for foreign service that is described in footnote 1 of the table in "Base Salary," above. To motivate and reward individual performance, the Committee may reduce an executive's cash incentive bonus by up to 20% if an executive does not achieve individual performance goals designed to support strategic business imperatives. The Committee may also reduce an executive's cash incentive bonus if the executive fails to achieve certain compliance-related objectives.
In establishing minimum revenue and operating performance levels (the level at which 50% of the target bonus is paid), goal revenue and operating performance levels (the level at which 100% of the target bonus is paid), and stretch revenue and adjusted operating income performance levels (the level at which 200% of the target bonus is paid), the Committee considered various factors, including our recent performance and current business plans, desired core growth rates, general business and economic conditions and business risks. The Committee also considered our company's strategic objectives, including growth in Mainland China and success in the continued rollout of two key products across many of our markets (the launch of which had begun in 2015 and was continuing in 2016): our ageLOC Youth nutritional supplement and our ageLOC Me customized skin care system. For example, for 2016, the Committee built a level of success with these strategic objectives into the revenue goals for our cash incentive awards. In addition, the performance targets were set at levels that benchmarked above-median revenue and adjusted operating income growth rates relative to our peer group at the time the goals were established.
To provide incentives that are earned for operating performance that is within the control of the executive officers, the performance levels are based on constant currency rates and exclude certain items as determined by the Committee at the time the performance levels were established, such as expenses resulting from litigation that was pending prior to 2016.
Stretch performance levels are set at a level that the Committee considers to be extraordinary performance. The following tables set forth the correlation between minimum, goal and stretch performance levels for 2016, measured as a percentage of goal performance levels, together with the percentage of target bonus that could be earned at such levels.measurement points.
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| Minimum | Goal | Stretch | Revenue | | | | Percentage of goal performance level | 95.3% | 100.0% | 105.7% | Percentage of target bonus paid | 50.0% | 100.0% | 200.0% |
The percentage of target bonus earned increases 10.6% for every 1% increase in achievement of the goal revenue performance level from the minimum revenue performance level to the goal revenue performance level, and 17.5% for every 1% increase in excess of the goal revenue performance level from the goal revenue performance level to the stretch revenue performance level.
| Minimum | Goal | Stretch | Adjusted Operating Income | | | | Percentage of goal performance level | 94.4% | 100.0% | 106.5% | Percentage of target bonus paid | 50.0% | 100.0% | 200.0% |
The percentage of target bonus earned increases 8.9% for every 1% increase in achievement of the goal adjusted operating income performance level from
| − | If the minimum adjusted operating income performance level tois not met, no bonus is paid regardless of the goaladjusted revenue performance for that period. |
| − | If the minimum adjusted operating income performance level and 15.4% for every 1% increase in excess ofis met but the goalminimum adjusted operating income performance level from the goal adjusted operating income performance level to the stretch adjusted operating income performance level.It is also important to note that the Committee considers the revenue and adjusted operating income performance levels within the context of desired core growth rates, determined on a constant currency basis and excluding certain predetermined items, to be achieved from the prior year in establishing the appropriate performance levels. For example, the goal revenue performance level for the annual period in 2016 represented a 6.0% constant currency growth rate over 2015 and the goal adjusted operating income performance level represented a 18.5% constant currency growth rate over 2015. The growth rates associated with the stretch performance levels for revenue and adjusted operating income were approximately 2.0 and 1.4 times the growth rates associated with the goal performance levels, respectively. Actual performance was approximately 5.7% and 11.4% below our revenue and adjusted operating income goal performance levels, respectively.
As established by the Committee, the percentage of target bonus paid for actual quarterly and annual revenue and adjusted operating income performance was calculated as follows:
· | For actual performance between the minimum performance levels and the goal performance levels, the percentage of target bonus paid is equal to 100% – [(100% – 50%) × (actual performance – goal performance level) / (minimum performance level – goal performance level)].
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· | For actual performance between the goal performance levels and the stretch performance levels, the percentage of target bonus paid is equal to 100% + [(200% – 100%) × (actual performance – goal performance level) / (high performance level – goal performance level)].
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· | For actual performance exceeding the stretch performance levels, the percentage of target bonus paid is equal to 100% + (actual performance / stretch performance level), subject to a ceiling of 250% of target bonus for the incentive period and an aggregate annual ceiling of 200% of target bonus.
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The table below sets forth the adjusted operating income and revenue performance levels for the incentive periods in 2016, the actual performance, the percentage of the goal performance levels achieved, and the percentageis not, 12.5% of the target bonus that was paid. We have includedfor the growth ratesincentive period is earned.
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Notwithstanding the above methodology, the Committee may adjust an executive’s bonus based on factors it considers relevant, including individual performance and certain compliance-related objectives. The Committee did not exercise this discretion with respect to 2020 bonuses. Establishment of 2020 Performance Goals. In establishing the performance levels, the Committee considered various factors, including industry, market and peer estimated growth rates; our recent performance and current business plans; general business and economic conditions; business risks; uncertainties due to COVID-19 and our company’s strategic objectives, which for 2020 included enhancing customer experiences across all our digital touch points, launch of our new ageLOC Boost beauty device system, and expanding our customer loyalty programs around the world to enhance retention and lifetime value. After considering the above factors, the Committee set the 2020 performance goals, as outlined in the table below. 2020 Goals, Performance and Payout. The table below sets forth the 2020 performance goals, the actual performance, the percentage of the goal performance levels achieved and the percentage of the target bonus that was paid. (dollar amounts in thousands) | | | | Metric | | 2019 Result | 2020 Targets | 2020 Result | % of Goal Level Achieved | % of Target Bonus Paid | Minimum | Goal | Stretch | Adjusted revenue (50% weighting) | | $2,420,416 | $2,175,000 | $2,420,000 | $2,662,000 | $2,594,120 | 107.2% | 172.0% | Adjusted operating income (50% weighting) | | $267,426 | $177,000 | $217,000 | $293,000 | $254,436 | 117.3% | 149.3% | Aggregate payout percentage, reflecting the weightings noted above: | | | 160.6% |
Our 2020 results, created in a year of extreme uncertainty, benefited from our strategic shift to become a more digital business, particularly in our Americas/Pacific and EMEA segments, as well as the current environment where consumers are spending more time online and working from home, together with the launch of ageLOC Boost. As a result, our adjusted revenue grew 7.2% over 2019 results. Adjusted operating income declined 4.9%. These results met and exceeded the performance goals established at the beginning of the year, and consistent with our commitment to pay for performance, the cash incentive awards were earned in 2020. The percentage of target bonus paid does not rise or fall 1% for every 1% increase or decrease in the percentage of goal performance level achieved. For example, in 2020, we achieved 107.2% of our goal adjusted revenue level and paid 172.0% of the portion of target bonus that was based on adjusted revenue. Similarly, if our actual performance had been 99% of our goal adjusted revenue level, we would have paid less than 99% of the portion of target bonus that was based on adjusted revenue. Calibration of Equity Awards Aligning the interests of our executive officers with those of our stockholders is an important objective of our compensation program. To accomplish this objective, we tie a significant portion of our executive officers’ total compensation to our long-term stock performance through the grant of equity awards and to our equity retention guidelines, which require our executive officers to retain a specified amount of their equity. We also believe that equity compensation helps motivate executive officers to drive earnings growth because they will be rewarded with increased equity value, and assists in the retention of executive officers who may have significant value tied up in unvested equity awards. We periodically review and adjust the level of our equity awards. We do not use a fixed formula or criteria in determining whether to adjust the level of equity awards, but subjectively evaluate a variety of factors, such as: − Practices of peer companies − Degree of responsibility for overall corporate performance − Overall compensation levels − Changes in position and/or responsibilities − Individual performance − Company performance − Total stockholder return | − Degree of performance risk in the prior-year period to help provide a clearer understandingequity grant program − Potential dilution of our overall equity grants − Accumulated realized and unrealized value of past equity awards − Associated expenses of equity awards − The recommendations of the performanceCEO − Data and context provided by our compensation consultant |
Historically, we have referenced peer company compensation data for context on pay levels and performance requirements compared to our peers. We generally have not given significant consideration to the value of existing equity award holdings because we want to ensure that our equity compensation is competitive for the position on an annualized basis and we want to provide an incentive from the date of grant. However, we periodically review and consider the in-the-money value of existing award holdings of our executive officers in connection with our review of equity compensation practices to determine if wealth creation is aligning with performance and the amount of unvested equity in place for retention. As reflected in the following table, the equity awards granted to the NEOs in 2020 were heavily weighted with performance-based awards, generally tracking the 60% weighting that the Committee adopted based on stockholder feedback. 2020 TARGET EQUITY AWARDS (1) | | | | Percentage Perf.-Based | Named Executive Officer | Perf.-Based Stock Options (2) | Time-Based RSUs | Number of Awards | Grant Date Fair Value | Ritch N. Wood | 244,471 | 45,978 | 84% | 56% | Mark H. Lawrence | 69,849 | 13,137 | 84% | 56% | Ryan S. Napierski | 105,821 | 19,902 | 84% | 56% | Joseph Y. Chang | 49,593 | 9,327 | 84% | 56% | D. Matthew Dorny | 49,593 | 9,327 | 84% | 56% |
| (1) | During 2020, the Board of Directors sought shareholder approval for an amendment to our 2010 Omnibus Incentive Plan to increase the authorized shares under the incentive plan. (dollar amounts expressedPlan, among other things. With limited shares available, performance-based stock options were granted as part of our annual grant cycle in thousands)
| Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | Annual | Revenue (50% weight) | | | | | | Goal performance level(1) | $546,000 | $643,000 | $580,000 | $610,000 | $2,379,000 | Constant currency growth rate over prior year | 0.5% | 14.8% | 1.5% | 7.0% | 6.0% | Actual performance | $496,000 | $616,104 | $596,642 | $535,104 | $2,243,850 | Constant currency growth rate over prior year | (8.7)% | 10.0% | 4.4% | (6.1)% | 0.0% | Percentage of goal performance level achieved | 90.8% | 95.8% | 102.9% | 87.7% | 94.3% | Percentage of target bonus paid | 0.0% | 66.4% | 155.5% | 0.0% | 0.0% | Adjusted Operating Income (50% weight) | | | | | | Goal performance level(2) | $66,612 | $89,377 | $71,340 | $78,690 | $306,019 | Constant currency growth rate over prior year | (3.0)% | 24.5% | (11.3)% | 21.1% | 7.0% | Actual performance | $46,974 | $84,660 | $78,635 | $60,978 | $271,247 | Constant currency growth rate over prior year | (31.6)% | 17.9% | (2.2)% | (6.2)% | (5.1)% | Percentage of goal performance level achieved | 70.5% | 94.7% | 110.2% | 77.5% | 88.6% | Percentage of target bonus paid | 0.0% | 61.7% | 204.8% | 0.0% | 0.0% |
| (1) | Minimum revenue performance levels for the four quarterly and annual periods were $530,000; $603,000; $560,000; $575,000 and $2,268,000, respectively. Stretch revenue performance levels were $565,000; $690,000; $610,000; $650,000 and $2,515,000, respectively. |
| (2) | Minimum adjusted operating income performance levels for the four quarterly and annual periods were $63,600; $83,214; $68,320; $73,600 and $288,734, respectively. Stretch adjusted operating income performance levels were $70,060; $96,255; $75,030; $84,500 and $325,845, respectively. |
For 2016, the aggregate annual bonus earned in our executive cash incentive program was 30.5%February, and time-based restricted stock units were granted after approval of the aggregate annual target bonus. Although bonuses were earnedamended Plan in the second and third quarters, actual performance for the first and fourth quarters and for the year fell below our pre-established minimum performance levels for revenue and adjusted operating income. The company did not provide any discretionary bonuses to the named executive officers (other than the holiday bonus, which was provided to all corporate employees) despite the low bonus funding that resulted from performance below our goals.
Due to the level at which 2016 cash incentive bonuses funded, total actual cash compensation was at or below the median for each of our named executive officers in relation to our peer group.
| | 2016 Total Actual Cash Compensation(1)
| Named
Executive Officer
| | ($) | | Approx. Percentile vs. Peers(2)
| M. Truman Hunt | | 1,710,715 | | 30P | Ritch N. Wood | | 719,109 | | 25P | Ryan S. Napierski | | 652,299 | | 50P | Joseph Y. Chang | | 753,424 | | 35P | D. Matthew Dorny | | 559,813 | | 20PJune. |
| (1) | Includes salary, bonus and non-equity incentives paid under annual cash incentive bonus plan. Does not include Mr. Napierski's $150,000 adjustment for his foreign service. |
| (2) | Percentiles are in relation to peers excluding founders. |
Equity Awards
The equity component of our 2016 compensation program was designed to emphasize performance-based equity awards.
Annual Equity Grants
Aligning the interests of our executive officers with those of our stockholders is an important objective of our compensation program. In order to accomplish this objective, we tie a significant portion of the total compensation of executive officers to our long-term stock performance through the grant of equity awards and our stock ownership guidelines that require our executive officers to hold stock. We also believe that equity compensation helps motivate executive officers to drive earnings growth because they will be rewarded with increased equity value, and assists in the retention of executive officers who may have significant value tied up in unvested equity awards.
We periodically review and adjust the level of our equity awards. We do not use a fixed formula or criteria in determining whether to adjust the level of equity awards, but subjectively evaluate a variety of factors consisting of:
· | practices of peer companies;
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· | degree of responsibility for overall corporate performance;
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· | overall compensation levels;
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· | changes in position and/or responsibilities;
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· | total stockholder return;
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· | degree of performance risk in the equity grant program;
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· | potential dilution of our overall equity grants;
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· | accumulated realized and unrealized value of past equity awards;
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· | associated expenses of equity awards;
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· | the recommendations of the Chief Executive Officer; and
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· | data and context provided by our compensation consultant.
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Historically, we have referenced peer company compensation data for context on pay levels and performance requirements compared to our peers. We generally have not given significant consideration to the value of existing equity award holdings because we want to ensure that our equity compensation is competitive for the position on an annualized basis and we want to provide an incentive from the date of grant. However, we periodically review and consider the in-the-money value of existing award holdings (inclusive of stock sales proceeds over the previous three years) of our executive officers in connection with our review of equity compensation practices to determine if wealth creation is aligning with performance and the amount of unvested equity in place for retention.
Use of Performance-Based Awards
Although we consider time-based stock options to be performance-based because the stock price must increase after the grant for value to be realized, we believe that the performance nature of our equity grants is further enhanced by making a meaningful portion of equity grants in the form of performance-contingent options or performance-contingent restricted stock units that are earned for achieving multi-year performance goals. Accordingly, as reflected in the following tables—and consistent with our 2016–2018 executive compensation program described above—each of the named executive officers was granted approximately 35% of their equity awards in the form of performance stock options and performance restricted stock units during 2016. This percentage will increase to more than 50% for 2017 based on both the number of awards and the grant date fair value.
| | | | Percentage Performance-Based | Named Executive Officer | Performance Stock Options (1) | Performance Restricted Stock Units (1) | Time-Based Stock Options | Number of Awards | Grant Date Fair Value | | | | | | | M. Truman Hunt | 263,400 | — | 486,600 | 35% | 35% | Ritch N. Wood | 63,400 | — | 136,600 | 32% | 32% | Ryan S. Napierski | 59,200 | 10,000 | 115,800 | 37% | 42% | Joseph Y. Chang | 49,400 | — | 90,600 | 35% | 35% | D. Matthew Dorny | 49,400 | — | 90,600 | 35% | 35% | | 484,800 | 10,000 | 920,200 | 35% | 36% |
(1) | Reflects the number of shares of stock that would have become eligible for vesting or exercisable if performance had been achieved at the goal performance level, the same number used for calculating grant date fair value for purposes of the Summary Compensation Table. |
Our performance-based equity awards generally become eligible for vesting based on the achievement of adjusted earnings per share performance levels, measured in terms of diluted earnings per share excluding certain predetermined items. The terms of the performance-based equity awards that were granted in March 2016 give named executive officers the opportunity to earn up to 150% of their target award if performance meets certain pre-defined, "stretch" levels. Consistent with our historical practice, named executive officers earn 100% of their target awardor exercisable if performance is at goal level, and they earn 50% of their target award if performance isachieved at the minimum level. In addition, as with 2014 and 2015,goal performance level, the 2016 performance-based equity awards are divided into three equal tranches. The tranches are contingent on performance over 2016, 2017 and 2018, respectively.
Performance Awards Contingent on 2016 Performance
For the tranche of our annual performance-based equity awards granted in March 2016 that was contingent on 2016 performance, the minimum, goal and stretch adjusted earnings per share levels were $2.79, $3.00 and $3.30, respectively. These levels were based on expectations as of the beginning of 2016. Our 2016 actual adjusted earnings per share as calculatedsame number used for calculating grant date fair value for purposes of the performance awards were $3.01, and as a result, 102% of the target award was earned. Summary Compensation Table.
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Use of Performance-Based Equity Awards Although we consider time-based stock options to be performance-based because the stock price must increase after the grant for value to be realized, we believe that the performance nature of our equity grants is further enhanced by making a meaningful portion of equity grants in the form of performance-contingent stock options that are earned for achieving multi-year performance goals. To align management with our stockholders’ interests, the performance goals are tied to adjusted EPS, measured as diluted EPS excluding extraneous items such as the impact of accounting changes, losses or gains on settlements of litigation that began prior to 2020 and other items that are unusual, non-recurring or outside of management’s control. The adjusted EPS metric also provides a balance to the top-line and operating-income metrics in the cash incentive bonus program. Consistent with our historical practice, NEOs earn 100% of their target award if performance is at goal level, and they earn 50% of their target award if performance is at the minimum level. The terms of the performance-based equity awards that were granted in 2019 and 2020 give NEOs the opportunity to earn up to 200% of their target award if performance meets certain pre-defined “super stretch” levels. This closely aligns the maximum payout opportunity with competitive practice and further strengthens our alignment with stockholders. The terms of the performance-based equity awards granted to the NEOs in 2018 limited the opportunity to earn up to 150% of their target award. Our performance-based equity awards are divided into three equal tranches. The three tranches are contingent on performance over the year of the grant and the two following years, respectively. Although the grants measure three one-year periods, the goals for all three years are established up front at the time of grant to ensure a longer-term orientation without the “reset” of goals each year. Performance-Based Equity Awards – Goals and Vesting Our performance-based equity awards granted in the past several years have generally required continuous improvement in adjusted EPS results. They have been structured with three tranches, with vesting contingent on the achievement of adjusted EPS goals in the year of grant and in each of the two following years. The goals for all three of these one-year periods are set at the time of grant. Awards Under 2018–2020 Compensation Programs. As illustrated in the table below, for performance-based equity awards granted in 2018 and 2019, the minimum goals for the year of grant required growth over the previous year’s actual adjusted EPS, and the minimum goals for the two subsequent years required adjusted EPS to be at or above the respective prior years’ target adjusted EPS. In light of the anticipated negative impacts from the COVID-19 pandemic, the Committee established adjusted EPS goals for the first year of the 2020 performance-contingent equity awards at a level that was below the previous year’s actual adjusted EPS. While the goals for the two subsequent years required adjusted EPS growth for an equivalent payout, the ranges around target (to minimum and to maximum) were increased to reflect the increased uncertainty in the operating environment, particularly due to COVID-19, and no longer required growth above the prior year’s target at the minimum level. | Minimum Goal ($) | Target Goal ($) | Maximum Goal ($) | Actual ($) | % Vested | | 2018 Award | | ➢ 2017 Adjusted EPS: 3.23(1) | | 2018 Adjusted EPS Tranche | 3.33 | 3.52 | 3.73 | 3.61(2) | 121% | 2019 Adjusted EPS Tranche | 3.52 | 3.70 | 3.92 | 3.10(3) | — | 2020 Adjusted EPS Tranche | 3.70 | 3.88 | 4.11 | 3.63(3) | — | | | | | | | 2019 Award | | ➢ 2018 Adjusted EPS: 3.61(2) | | 2019 Adjusted EPS Tranche | 3.68 | 3.98 | 4.38 | 3.10(3) | — | 2020 Adjusted EPS Tranche | 3.98 | 4.20 | 4.62 | 3.63(3) | — | 2021 Adjusted EPS Tranche | 4.20 | 4.45 | 4.97 | TBD | TBD | | | | | | | 2020 Award | | ➢ 2019 Adjusted EPS: 3.10(3) | | | | | | | 2020 Adjusted EPS Tranche | 2.00 | 2.50 | 3.60 | 3.63(3) | 200% | 2021 Adjusted EPS Tranche | 2.10 | 2.62 | 3.78 | TBD | TBD | 2022 Adjusted EPS Tranche | 2.21 | 2.75 | 3.97 | TBD | TBD |
| (1) | As compared to our 20162017 reported earnings per shareEPS of $2.55,$2.36, our adjusted earnings per shareEPS reflects an adjustment of $0.87 to reflect the net impact of the 2017 tax reform legislation in the United States. |
| (2) | As compared to our 2018 reported EPS of $2.16, our adjusted EPS reflects adjustments totaling $1.45 from a charge associated with the conversion of $0.36 per share from our Japan customs expenseconvertible notes in the first quarter of 20162018, adoption of the new revenue standard under U.S. GAAP, the impairment and $0.10 per share fromrestructuring charges incurred in the fourth quarter of 2018, and both a taxgain and a charge associated with the acquisitions in the first quarter of 2018. These adjustments were permitted by the terms of the awards granted in 2018. |
| (3) | No adjustments were made to our 2019 reported EPS of $3.10 or our 2020 reported EPS of $3.63. |
Time-Based Equity Awards Each NEO received an annual time-based RSU grant in 2020. These RSUs will vest one-fourth each year, beginning on February 15 of the year following the grant. The 2020 time-based RSU awards align management with stockholders’ interests and promote multi-year retention. Retirement and Other Post-Termination Benefits Our executive officers do not participate in any pension or defined benefit plan. We believe it is important for retention purposes to provide executive officers with a meaningful opportunity to accumulate savings for their retirement. To accomplish this objective, we maintain both a tax-qualified 401(k) plan and a nonqualified deferred compensation plan. We make a limited matching contribution for our employees, including NEOs, under the 401(k) plan. We also make contributions to each NEO’s deferred compensation plan account. Effective in 2021, our deferred compensation plan was modified to provide a matching contribution by the company for individual contributions up to a maximum of 5% of base salary. In addition, we generally make a discretionary contribution, expected to be reduced from the historical amount of 10% of salary to approximately 5% of salary. As more fully described and quantified below in “Executive Compensation Tables and Accompanying Narrative—Narrative to Summary Compensation Table and Grants of Plan Based Awards Table—Employment Agreement with Mr. Chang” and in the table titled “Potential Payments Upon Termination or Change in Control,” we have an executive employment agreement with Mr. Chang that provides for certain termination benefits. The Committee has also adopted an Executive Severance Policy that applies to all of our NEOs. We do not provide excise tax gross-up protection to any of our NEOs. Any cash severance payment under these arrangements or accelerated vesting of equity in connection with a change in control requires a qualifying termination of employment. We believe these double-trigger post-termination benefits provide reasonable protections to employees who may be terminated following a change in control. They also assist us in retaining their services in the event of a potential change in control. We believe such arrangements are in the best interests of our company and our stockholders if they are reasonable in amount and scope, because they can help to retain key employees during a change in control process. Perquisites and Other Benefits We provide our executive officers and other key employees with other limited benefits and perquisites. These consist of, among other things, payments for term life insurance, use of company-owned properties, sporting event tickets, company products and sales force event-related spouse travel. We do not reimburse executive officers for the income taxes associated with these perquisites except for limited business-related perquisites such as spouse travel to sales force events where the spouse is expected to attend and help entertain and participate in events with our sales force and their spouses. We have elected to pay the income taxes for these business-related perquisites because we believe they are business expenses. These benefits generally represent a very small portion of an executive officer’s overall compensation and provide a benefit to us and our stockholders. Mr. Napierski additionally received tax payments associated with income received as a result of his former expatriate assignment. The amount of these benefits is included in footnote 5 to the Summary Compensation Table. Process for Determining Compensation Role of Executive Compensation Committee and Chief Executive Officer The Committee is responsible for establishing and administering our executive compensation program. The Committee participates in the performance evaluation process of the Chairman and of the CEO, which process is led by the Nominating and Corporate Governance Committee. The Committee is then responsible for setting their compensation. The CEO, with oversight by the Nominating and Corporate Governance Committee, is responsible for evaluating the performance of the other executive officers and then making recommendations to the Committee with regard to the compensation packages for these officers. The Committee reviews any such recommendations and has the authority to approve, revise or reject such recommendations. Role of Compensation Consultant The Committee has retained the services of Semler Brossy Consulting Group LLC (“Semler Brossy”) as its independent compensation consultant to assist in the review of our executive compensation program, to provide compensation data and alternatives to the Committee, and to provide advice to the Committee as requested, including limited advice regarding employee equity grants and the compensation programs of our subsidiary companies when requested by the Committee. The Committee utilizes the compensation data and alternatives provided by the compensation consultant to analyze compensation decisions in light of current market rates and practices. During 2020, Semler Brossy did not perform any work for us outside of the services performed for the Committee and for the Nominating and Corporate Governance Committee with respect to director compensation. The Committee annually reviews the independence of its compensation consultant in light of SEC rules and NYSE Listed Company Rules regarding compensation consultant independence and has concluded that Semler Brossy is independent from the company and has no conflicts of interest related to its engagement by the Committee. Use of Competitive Data The Committee uses peer group information in making compensation decisions. The Committee compares compensation proposals to the compensation practices of a peer group of publicly-traded companies that compete with us broadly in the consumer products industry—with a preference for those with a direct selling business model—and are similar in size to us. The Committee reviews and updates the peer group from time to time to ensure it is utilizing an appropriate group in terms of size and relevance. Following such a review, in 2018 the Committee determined to update the peer group such that it would include fewer companies larger than 200% of our revenue and market capitalization, position Nu Skin closer to the peer median for revenue, and make the group represent our company’s most direct competitors from a business-model and product-focus perspective. At the time that the peers were approved in 2018, Nu Skin’s revenue was 7% below the peer median for revenue. Following a review of the peer group, in November 2019, the Committee determined to update the peer group to ensure it continued to reflect companies in our industry and approximate revenue size. As a result, the Committee removed GNC Holdings, Inc. from the peer group and added Spectrum Brands Holdings, Inc. Following this change in peers, Nu Skin’s revenue was 13% above the peer median for revenue. The newly constituted peer group was used in making compensation decisions for 2020, and it consists of the following companies: −Avon Products, Inc.(1) | − Primerica, Inc. | − Church & Dwight Co., Inc. | − Revlon, Inc. | − Edgewell Personal Care Company | − Sally Beauty Holdings, Inc. | −The Hain Celestial Group, Inc. | − Sensient Technologies Corporation | −Helen of Troy Limited | − Spectrum Brands Holdings, Inc. | −Herbalife Nutrition Ltd. | − Tupperware Brands Corporation | −International Flavors & Fragrances Inc. | − USANA Health Sciences, Inc. | − Prestige Consumer Healthcare Inc. | |
| (1) | Acquired by Natura &Co Holding S.A., a Brazilian corporation, in January 2020. |
In August 2020, the Committee removed Avon Products, Inc. from the peer group due to its acquisition by Natura &Co Holding S.A. Following this change in peers, Nu Skin’s revenue was 6% above the peer median for revenue. The newly constituted peer group was used in making compensation decisions for 2021. Mix of Compensation When the Committee reviews an executive officer’s compensation, it does not use a specific formula or allocation target to establish the level or mix of total compensation. Rather, it exercises judgment in determining a compensation package that is appropriate to accomplish our compensation objectives under the circumstances applicable to the executive officer. The Committee also reviews the relative mix of compensation provided by other companies in our peer group for context and tries to ensure each component is competitive. Historically, we have tied a substantial amount of compensation to corporate performance under our cash incentive plan and equity incentive plan. The Committee also reviews each executive officer’s total compensation as a market check against the total compensation of executive officers in our peer group. This total compensation review focuses on base salary, cash bonuses, and valuation of equity grants using grant date valuations. The Committee periodically reviews perquisites and retirement benefits to confirm that they remain relatively consistent with the value of perquisites and retirement benefits provided by our peer companies. Risks Arising From Compensation Policies and Practices In establishing and reviewing the components of compensation, the Committee considers potential risks associated with such components. In addition, our management conducted a review of our compensation policies and practices for employees and concluded that risks arising from our compensation policies and practices for employees are not reasonably likely to have a material adverse effect on us. In reaching this conclusion, our management considered the following factors:
| − | Our compensation programs are market driven and balance short-term incentives with significant long-term equity incentives. Performance-contingent equity awards provide additional long-term incentives to our key employees and executive officers. In addition, our equity retention guidelines help to ensure that a portion of our executives’ equity incentives remains tied to our long-term performance. |
| − | Our global cash incentive compensation is based on revenue and profitability, which are core measures of performance. In addition, substantially all of our revenue is received through cash or credit card payments, as opposed to other credit arrangements, which minimizes risk associated with our revenue-based incentives. Additionally, the Board of Directors and management regularly review the business plans and strategic initiatives, including related risks, proposed to achieve such performance metrics. |
| − | A substantial portion of compensation is provided in the enactmentform of a new U.S. tax regulationlong-term equity incentives with multi-year vesting. |
| − | We do not allow engagement in December 2016.Becausespeculative trading or hedging. Our policies prohibit all of our 2016 actual adjusted earnings per share were less than our pre-established 2016 minimum performance levels of $4.15 for the March 2015 awardsdirectors and of $7.60 for the March 2014 awards, our returning namedemployees, including executive officers, forfeited both of these performance-based equity awards that were based on 2016 performance. (Mr. Napierski became an executive officerfrom holding our stock in September 2015margin accounts and therefore did not receive these awards.)
The following table summarizes the performance-based equity awards thatfrom engaging in speculative transactions in our namedstock, including short sales, options or hedging transactions. Our directors and employees, including executive officers, forfeited as a result of 2016 performance. It also includes the grant date fair values for such awards, which values were includedare prohibited from pledging their securities in the Summary Compensation Table for the year in which the grants were made.
Named Executive Officer | Grant Date | Award Type | Underlying Shares Forfeited (#)(1) | Grant Date Fair Value Forfeited ($) | M. Truman Hunt | 3/31/2014 | Performance-Based Restricted Stock Units | 15,000 | 1,185,300 | | 3/10/2015 | Performance-Based Restricted Stock Units | 17,367 | 905,863 | | | | 32,367 | 2,091,163 | | | | | | Ritch N. Wood | 3/31/2014 | Performance-Based Stock Options | 2,867 | 88,189 | | 3/31/2014 | Performance-Based Restricted Stock Units | 1,700 | 134,334 | | 3/10/2015 | Performance-Based Stock Options | 2,867 | 56,595 | | 3/10/2015 | Performance-Based Restricted Stock Units | 1,700 | 88,672 | | | | 9,134 | 367,790 | | | | | | Ryan S. Napierski | — | — | — | — | | | | | | Joseph Y. Chang | 3/31/2014 | Performance-Based Stock Options | 2,867 | 88,189 | | 3/31/2014 | Performance-Based Restricted Stock Units | 1,700 | 134,334 | | 3/10/2015 | Performance-Based Stock Options | 2,867 | 56,595 | | 3/10/2015 | Performance-Based Restricted Stock Units | 1,700 | 88,672 | | | | 9,134 | 367,790 | | | | | | D. Matthew Dorny | 3/31/2014 | Performance-Based Stock Options | 2,167 | 66,657 | | 3/31/2014 | Performance-Based Restricted Stock Units | 1,167 | 92,216 | | 3/10/2015 | Performance-Based Stock Options | 2,167 | 42,777 | | 3/10/2015 | Performance-Based Restricted Stock Units | 1,167 | 60,871 | | | | 6,668 | 262,521 |
(1) | Reflects the number of shares of stock that would have become eligible for vesting or exercisable if performance had been achieved at the goal performance level, the same number used for calculating grant date fair value for purposes of the Summary Compensation Table in the respective year.our company. |
Other Compensation-Related Governance North Asia Region Special Incentive Award
In 2014, we granted a special incentive award to Mr. Napierski related to the future long-term performance of our North Asia region, where Mr. Napierski was serving as President. The award consists of performance cash and performance-based stock options, which vest based on achievement of the following objectives during the three-year period ending December 31, 2017:
· | Continuously maintaining the title of President of our North Asia region or a position overseeing that position; |
· | A viable successor replacing or being prepared to replace Mr. Napierski; and |
· | Goals for North Asia profitability and for the compound annual growth rate of North Asia revenue.
|
Since becoming an executive officer in September 2015, Mr. Napierski has continued to oversee the President of our North Asia region for purposes of the first objective listed above. If the first and second objectives listed above are achieved, then the incentive award will vest based on the degree to which the profitability and compound annual growth rate objectives are achieved over the three-year period. If these objectives are achieved at a minimum performance level, performance cash of $250,000 will vest. If these objectives are achieved at an intermediate performance level, 15,000 stock options and performance cash of $500,000 will vest. If these objectives are achieved at a high level, 30,000 stock options and performance cash of $750,000 will vest. For more information about this award, see footnote 3 to the Outstanding Equity Awards at Fiscal Year-End – 2015 table.
Clawback Policy Our equity incentive awards and our cash incentive awards contain clawback or recoupment provisions that allow the Committee to recover an executive's gains from the exercise or vesting of such awards in case of a financial restatement or if an executive materially breaches certain obligations or covenants, including non-competition and non-solicitation covenants, or willfully engages in or is convicted of certain illegal activity, fraud or other misconduct. In such event, we may terminate the outstanding awards of such executive and recover any gains from the exercise or vesting of cash and equity awards during the twelve months preceding the act or anytime thereafter.
Pursuant to the terms of our SecondThird Amended and Restated 2010 Omnibus Incentive Plan (the "Plan"), any and all awards granted thereunderunder the Plan will be cancelledcanceled if the participant violates a non-competition, non-solicitation or non-disclosure covenant or agreement or otherwise engages in activity or material misconduct that is in conflict with or adverse to our interests, including conduct contributing to any financial restatements or financial irregularities, as determined by the Committee. In addition, all compensation awarded under our current and prior incentive plans will be subject to recovery or other penalties pursuant to (i) any future clawback policy of the company, as may be adopted or amended from time to time,time; (ii) any clawback provision set forth in an award agreement; and (ii)(iii) any applicable law, rule or regulation or applicable stock exchange rule, including, without limitation, Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 10D of the Securities Exchange Act of 1934 and any applicable stock exchange listing rule adopted pursuant thereto. Further, if we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws, the Committee may terminate any awards granted under our current and prior plans and/or require any participant to reimburse us for the amount of any payment or benefit received with respect to such awards to the extent they would not have been earned or accrued after giving effect to the restatement. Stock Ownership
Consistent with the Plan, our equity incentive awards and our cash incentive awards contain cancellation, clawback and recoupment provisions that allow the Committee to recover an executive’s gains from such awards if the executive materially breaches certain obligations or covenants, including non-competition, non-solicitation and non-disclosure covenants, or willfully engages in or is convicted of certain illegal activity, fraud or other misconduct. In such event, we may terminate the outstanding awards of such executive and recover any gains from the awards during the twelve months preceding the act or anytime thereafter. Our cash incentive awards and performance-based equity awards additionally include similar cancellation, clawback and recoupment provisions that apply in the case of a financial restatement to the extent the award would not have been earned or accrued after giving effect to the restatement. Equity Retention Guidelines Our stock ownershipequity retention guidelines are designed to motivate our executive officers and directors to consider the long-term consequences of business strategies and to provide a level of long-term performance risk with respect to our compensation programs. These guidelines provide thatgenerally require executive officers mustand directors to retain 50% to 75% of the net shares (after payment of the exercise price and related taxes) with respect to any equity award unless the individual holds a number of shares having a value equal to the ownership levels set forth in the guidelines. a multiple of his or her base salary (for executives) or annual cash retainer (for non-management directors), as follows: Position | Multiple of Base Salary or Annual Retainer | CEO | 6.0 | Other Executives | 2.5 | Non-Employee Directors | 5.0 |
The ownership levels are phased in over five years from January 1 of the year following the date of appointment or election to one’s position as an executive officer. Unvested equity awards and vested options are not counted inofficer or director. In determining whether an executive officer holds shares equal to or greater thandirector satisfies the designated level. Atownership levels, we count shares owned outright or beneficially by the endindividual or an immediate family member residing in the same household, as well as a portion of the individual’s unvested time-based restricted stock units. We do not count vested or unvested options. As of March 31, 2021, all of our NEOs and directors were retaining equity awards consistent with the guidelines, and all of our NEOs and directors who had served in their positions for the five-year phase-in period owned the designated ownership levels are set at 100,000 shares for our Chief Executive Officer and 25,000 shares for our other executive officers. Asamount of March 1, 2017, based on the closing price of $49.69 for our Class A Common Stock on the NYSE, these levels of ownership were valued at $4,969,000 and $1,242,250, respectively. Based on these values, the ownership level required for our Chief Executive Officer represents approximately 4.3 times Mr. Hunt's base salary in effect as of the end of 2016, and the ownership level required for the other named executive officers represents approximately 2.2 times the average of the base salaries in effect as of the end of 2016 for Messrs. Wood, Napierski, Chang and Dorny. As of March 1, 2017, all of our named executive officers owned more than the number of sharesstock designated for the positions they held as of March 1, 2017.their job positions. As Mr. Wood was promoted to Chief Executive Officer on March 7, 2017, he will be subject to the retention guidelines discussed above until he owns 100,000 shares. Based on the closing price of $50.22 for our Class A Common Stock on the NYSE on March 7, 2017, this ownership level equates to $5,022,000, or 5.6 times Mr. Wood's $900,000 salary that he will receive as Chief Executive Officer.
Retirement and Other Post-Termination Benefits
Our executive officers do not participate in any pension or defined benefit plan. We believe it is important for retention purposes to provide executive officers with a meaningful opportunity to accumulate savings for their retirement. To accomplish this objective, we maintain both a tax-qualified 401(k) plan and a nonqualified deferred compensation plan. We do not make any matching contributions for named executive officers under the deferred compensation plan. We generally make a discretionary contribution (historically 10% of each executive officer's salary), which may be allocated between the executive officer's 401(k) and deferred compensation plan accounts. Discretionary contributions to an executive officer's 401(k) plan account vest 20% per year for the first five years of service. Discretionary contributions to an executive officer's deferred compensation plan account vest 50% at 10 years of service and 5% each year thereafter. Vested company contributions in the deferred compensation plan may be subject to forfeiture.
As more fully described and quantified below in "Narrative to Summary Compensation Table and Grants of Plan Based Awards Table—Employment Agreement" and in the table titled "Potential Payments Upon Termination or Change in Control," we have an executive employment agreement with Mr. Chang that provides for certain change in control and termination benefits. We do not provide excise tax gross-up protection to any of our named executive officers. Any cash severance payment under the employment agreements or accelerated vesting of equity in connection with a change in control requires a qualifying termination of employment. We believe these double-trigger post-termination benefits provide reasonable protections to employees who may be terminated following a change in control. They also assist us in retaining their services in the event of a potential change in control. We believe such arrangements are in the best interests of us and our stockholders if they are reasonable in amount and scope, because they can help to retain key employees during a change in control process.
Perquisites and Other Personal Benefits
We provide our executive officers and other key employees with other limited benefits and perquisites. These consist of, among other things, payments for term life insurance, use of company-provided vehicles, properties, sporting event tickets, company products and sales force event-related spouse travel. We do not reimburse executive officers for the income taxes associated with these perquisites except for limited business-related perquisites such as spouse travel to sales force events where the spouse is expected to attend and help entertain and participate in events with our sales force and their spouses. We have elected to pay the income taxes for these business-related perquisites because we believe they are business expenses. These benefits generally represent a very small portion of an executive officer's overall compensation and provide a benefit to us and our stockholders. During 2016, Mr. Napierski received additional expatriate-related perquisites and personal benefits, including an education and housing allowance, tax payments and other benefits, because he maintained a residence in Asia and his family had not yet relocated to the United States. The amount of these benefits is included in footnote 5 to the Summary Compensation Table.
Indemnification and Advancement of Expenses We have entered into indemnification agreements with each of our directors and executive officers, pursuant to which these individuals will be indemnified for certain liabilities and will be advanced certain expenses that have been incurred as a result of actions to which they were, are, or are threatened to be made a party, or actions otherwise involving them, in connection with their service to the company. The indemnification agreements also include related provisions outlining the procedures for obtaining such benefits, and they generally require us to obtain and maintain director and officer liability insurance. Tax Limitations on Deductibility We have taken into consideration
Section 162(m) of the limitation on deductibility for United StatesInternal Revenue Code precludes us from taking a federal income tax purposes ofdeduction for compensation paid in excess of $1 million paid to our Chief Executive Officer“covered employees” (which include the CEO, CFO and theour three other most highly compensatedhighly-compensated NEOs, as well as any other individuals who were covered employees in any prior tax year after 2016). While the Committee has generally taken into consideration the tax deductibility of executive officers employed atcompensation, the endCommittee believes that the primary purpose of our compensation program is to support our business strategy and the year (other thanlong-term interests of our Chief Financial Officer) by structuringstockholders. Therefore, the Committee has maintained the flexibility to award compensation that may not be tax deductible if doing so furthers the objectives of our executive compensation program. Under the U.S. tax reform legislation that was enacted in December 2017, the definition of “covered employee” was expanded to include the CFO and covered employees from previous tax years. In addition, the exception to the Section 162(m) deduction limit for performance-based compensation was repealed for tax years beginning after December 31, 2017, subject to certain transition rules. Despite these new limits on the deductibility of performance-based compensation, the Committee continues to believe that a significant portion of our NEOs’ compensation as performance-based. Our current cash incentive planshould be tied to performance, and equity incentive plan have been approved byit designed our stockholders,2018, 2019 and the awards under these plans can qualify as "performance-based" for purposes of the deductibility limitations. While we try2020 executive compensation programs accordingly. We currently expect that any compensation amounts over $1 million paid to structure compensation so that itany covered employee will no longer be deductible unless they qualify for income tax purposes, we also exercise judgment and may authorize compensation payments that do not comply with the exemptionstransition relief applicable to certain arrangements in Section 162(m) when we believe that such payments are appropriate and in the best interestsplace as of us and our stockholders.November 2017. Executive Compensation Committee Report We have reviewed and discussed with management the Compensation Discussion and Analysis that is included in this proxy statement. Based on such review and discussions, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. EXECUTIVE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Thomas R. Pisano, Chairman
Daniel W. Campbell
Andrew D. Lipman
Neil H. Offen | EXECUTIVE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS | | | | Thomas R. Pisano, Chairman | | Daniel W. Campbell | | Andrew D. Lipman | | Laura Nathanson |
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Executive Compensation Tables and Accompanying NarrativeEXECUTIVE COMPENSATION TABLES AND ACCOMPANYING NARRATIVE
Summary Compensation Table The following table summarizes the total compensation of each of the named executive officers (“NEOs”) for 2014, 20152018, 2019 and 2016,2020, as calculated in accordance with SEC rules. The amounts in the "Stock Awards"“Stock Awards” and "Option Awards"“Option Awards” columns do not necessarily reflect the amounts actually earned by the named executive officerNEOs because they include performance-based equity awards that were granted during the respective year regardless of whether and when they wereare ultimately earned, based on company performance. See the Adjusted Summary Compensation Table, below, for further information. Name and Principal Position | Year | | Salary ($)(1) | | | Bonus ($)(2) | | | Stock Awards ($)(3) | | | Option Awards ($)(3) | | | Non-Equity Incentive Plan Compensation ($)(4) | | | All Other Compensation ($)(5) | | | Total ($) | | | | | | | | | | | | | | | | | | | | | | | | | M. Truman Hunt President and Chief Executive Officer | 2016 | | | 1,130,006 | | | | 51,417 | | | | — | | | | 8,411,816 | | | | 529,292 | | | | 154,240 | | | | 10,276,771 | | 2015 | | | 1,000,000 | | | | 42,267 | | | | 2,717,882 | | | | 520,590 | | | | — | | | | 133,925 | | | | 4,414,663 | | 2014 | | | 1,000,000 | | | | 42,402 | | | | 3,613,800 | | | | — | | | | — | | | | 102,878 | | | | 4,759,080 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ritch N. Wood Chief Financial Officer | 2016 | | | 564,117 | | | | 24,500 | | | | — | | | | 2,242,650 | | | | 130,492 | | | | 93,955 | | | | 3,055,714 | | 2015 | | | 535,000 | | | | 25,392 | | | | 266,050 | | | | 399,925 | | | | — | | | | 105,892 | | | | 1,332,259 | | 2014 | | | 530,833 | | | | 23,027 | | | | 409,564 | | | | 552,573 | | | | — | | | | 74,786 | | | | 1,590,783 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ryan S. Napierski(6) President of Global Sales and Operations | 2016 | | | 660,000 | | | | 27,833 | | | | 277,899 | | | | 1,962,592 | | | | 114,466 | | | | 1,117,320 | | | | 4,160,109 | | 2015 | | | 538,077 | | | | 27,600 | | | | 398,085 | | | | 799,176 | | | | 102,570 | | | | 2,464,049 | | | | 4,329,556 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joseph Y. Chang Chief Scientific Officer and Executive Vice President of Product Development | 2016 | | | 591,667 | | | | 25,542 | | | | — | | | | 1,570,223 | | | | 136,215 | | | | 92,490 | | | | 2,416,137 | | 2015 | | | 575,000 | | | | 24,558 | | | | 558,435 | | | | 399,925 | | | | — | | | | 91,341 | | | | 1,649,259 | | 2014 | | | 570,833 | | | | 24,693 | | | | 409,564 | | | | 552,573 | | | | — | | | | 66,799 | | | | 1,624,462 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | D. Matthew Dorny General Counsel | 2016 | | | 440,000 | | | | 19,083 | | | | — | | | | 1,570,223 | | | | 100,730 | | | | 81,172 | | | | 2,211,207 | | 2015 | | | 440,000 | | | | 18,933 | | | | 182,582 | | | | 311,581 | | | | — | | | | 75,190 | | | | 1,028,286 | | 2014 | | | 436,667 | | | | 19,068 | | | | 281,072 | | | | 409,882 | | | | — | | | | 59,394 | | | | 1,206,083 | |
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | | | | | | | | | | Ritch N. Wood Chief Executive Officer | 2020 | 1,000,038 | 850 | 1,642,334 | 2,100,006 | 1,766,600 | 126,730 | 6,636,559 | 2019 | 991,667 | — | 1,322,140 | 2,111,047 | — | 145,526 | 4,570,379 | 2018 | 941,667 | 40,333 | 611,385 | 2,547,233 | 1,794,993 | 129,999 | 6,065,610 | | | | | | | | | | Mark H. Lawrence Executive VP and Chief Financial Officer | 2020 | 520,853 | 850 | 469,254 | 600,003 | 632,363 | 77,136 | 2,300,459 | 2019 | 491,667 | — | 1,992,713 | 542,844 | — | 98,170 | 3,125,393 | 2018 | 445,833 | 19,500 | 171,950 | 716,400 | 637,694 | 73,682 | 2,065,059 | | | | | | | | | | | | | | | | | | Ryan S. Napierski President | 2020 | 720,861 | 3,350 | 710,899 | 909,002 | 1,164,350 | 104,163 | 3,612,626 | 2019 | 687,500 | — | 572,325 | 913,788 | — | 122,658 | 2,296,272 | 2018 | 620,833 | 26,792 | 277,046 | 1,154,226 | 1,062,825 | 330,815 | 3,472,537 | | | | | | | | | | Joseph Y. Chang Executive VP of Product Dev. and Chief Scientific Officer | 2020 | 672,526 | 850 | 333,160 | 426,004 | 813,038 | 102,386 | 2,347,964 | 2019 | 653,333 | — | 268,229 | 428,239 | — | 124,299 | 1,474,100 | 2018 | 616,667 | 26,583 | 135,634 | 565,166 | 878,602 | 108,417 | 2,331,069 | | | | | | | | | | | | | | | | | | D. Matthew Dorny Executive VP and General Counsel | 2020 | 510,020 | 850 | 333,160 | 426,004 | 614,295 | 69,451 | 1,953,780 | 2019 | 504,167 | — | 268,229 | 428,239 | — | 77,063 | 1,277,698 | 2018 | 472,833 | 22,542 | 135,634 | 565,166 | 673,123 | 67,260 | 1,936,558 |
(1) | Messrs. Lawrence, Napierski, ChangDorny and, Dornythrough 2019, Chang deferred a portion of their salaries under our nonqualified deferred compensation plan,Deferred Compensation Plan, which is included in the Nonqualified Deferred Compensation – 20162020 table. Each of the named executive officersNEOs also contributed a portion of his salary to our 401(k) retirement savings plan. |
(2) | The amounts reported in this column includefor 2020 consist of (i) a gift payments that we have historicallypayment made to all corporate employees as year‑enda year-end holiday giftsgift; (ii) cash payments made to all corporate employees in lieu of summer and holiday company parties that were canceled due to the COVID-19 pandemic; and (iii) in the formcase of Mr. Napierski, a gift certificate or similar merchant credit arrangement, and cash in an amount equal to a percentage of each employee's base salary (approximately two weeks of salary). Mr. Hunt also received a$2,500 bonus for reaching a years-of-service milestone. |
(3) | The amounts reported in these columns reflect the aggregate grant date fair value of equity awards computed in accordance with FASB ASC Topic 718 and, for performance-based awards, are based on the probable outcome of the performance conditions as of the grant date. The amounts do not represent amounts actually received by the named executive officers.NEOs. For this purpose, the estimate of forfeitures is disregarded, and the value of the stock awards is discounted to reflect that no dividends are paid prior to vesting. For information on the valuation assumptions used in calculating these amounts, refer to Note 129 to our financial statements in the Form 10-K filed for the fiscal year ended December 31, 2016.2020. |
| The aggregate grant date fair value of the 2020 performance-based option awards, assuming achievement of the maximum performance level, would be: Mr. Wood – $4,200,012; Mr. Lawrence – $1,200,006; Mr. Napierski – $1,818,005; Mr. Chang – $852,008; and Mr. Dorny – $852,008. |
The aggregate grant date fair value of the 2016 performance-based stock and option awards, assuming achievement of the maximum performance level, would be respectively: Mr. Hunt – $0 and $4,450,143; Mr. Wood – $0 and $1,071,143; Mr. Napierski – $416,848 and $1,000,184; Mr. Chang – $0 and $834,613; and Mr. Dorny – $0 and $834,613. The foregoing amounts do not include the value of the time-based stock options that were granted during 2016, which are reflected in the Option Awards column.
(4) | TheSee “Executive Compensation: Compensation Discussion and Analysis—Cash Incentive Bonus” for information regarding the amounts reported in this column are cash awards to the named executive officers made pursuant to our Amended and Restated 2010 Omnibus Incentive Plan. See the "Compensation Discussion and Analysis—Cash Incentive Bonus" section for information regarding these awards.column. For years in which non-equity incentive bonuses were earned, Messrs. Lawrence, Napierski and ChangDorny deferred a portion of their incentivecertain of these bonuses under our nonqualified Deferred Compensation Plan, which is includeddeferrals are reflected in the Nonqualified Deferred Compensation – 20162020 table. |
(5) | The following table describes the components of the All Other Compensation column for 20162020 in the Summary Compensation Table. |
36
Name | Company Contributions to Deferred Compensation Plan ($) | Company Contributions to 401(k) Retirement Savings Plan ($) | Perquisites and Other Personal Benefits ($)(a) | Other ($)(b) | Total ($) | Ritch N. Wood | 100,000 | 11,400 | 13,952 | 1,378 | 126,730 | Mark H. Lawrence | 52,500 | 11,400 | 10,644 | 2,592 | 77,136 | Ryan S. Napierski | 72,500 | 11,400 | 9,686 | 10,577 | 104,163 | Joseph Y. Chang | 67,500 | 11,400 | 11,885 | 11,601 | 102,386 | D. Matthew Dorny | 51,000 | 11,400 | 5,494 | 1,556 | 69,451 |
Name | Company Contributions to Deferred Compensation Plan ($) | Tax Payments ($)(a) | Life Insurance Premiums Paid by Company ($)(b) | Company Contributions to 401(k) Retirement Savings Plan ($) | Perquisites and Other Personal Benefits ($)(c) | Total ($) | M. Truman Hunt | 115,600 | — | 1,571 | 10,600 | 26,468 | 154,240 | Ritch N. Wood | 57,000 | 3,538 | 838 | 10,600 | 21,978 | 93,955 | Ryan S. Napierski | 65,000 | 547,233(d) | 294 | 10,600 | 494,193(d) | 1,117,320 | Joseph Y. Chang | 59,500 | 3,538 | 3,270 | 10,600 | 15,582 | 92,490 | D. Matthew Dorny | 44,000 | 2,960 | 1,016 | 10,600 | 22,596 | 81,172 |
| (a) | This column reports amounts reimbursed by us for the payment of taxes with respect to travel of the named executive officers' spouses to sales force events where the spouse is expected to attend and help entertain and participate in events with our sales force and their spouses. We have elected not to pay the income taxes associated with non-business related perquisites. For Mr. Napierski, this column also includes tax payments associated with his income earned outside of the United States. For further discussion regarding tax payments, see "Compensation Discussion and Analysis—Perquisites and Other Personal Benefits."
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| (b) | This column reports premiums paid to obtain term life insurance policies with coverage, as of December 31, 2016, of $750,000 for Messrs. Hunt and Dorny and $500,000 for Messrs. Wood, Napierski and Chang. |
| (c) | This column reports our incremental cost for perquisites and personal benefits provided to the named executive officers.NEOs. In 2016,2020, these included the personal use of company‑provided vehicles andcompany-provided properties; AAA membership; tickets, travel and hospitality for sporting events; company products; security monitoring; and spouse travel to sales force events where the spouse is expected to attend and help entertain and participate in events with our sales force and their spouses. In addition, Mr. Napierski received expatriate benefits, including payments for a housing allowance of $212,163, a cost of living allowance of $133,969, and an education allowance of $78,625.tax-planning advice. |
| (d)(b) | This column includes premiums for long-term disability insurance, and premiums for term life insurance with coverage, as of December 31, 2020, of $750,000 for each NEO. The amount paid for Mr. Chang’s term life insurance policy was $11,061. This column also includes $9,265 in tax payments associated with Mr. Napierski’s income received as a result of his former expatriate assignment. For further discussion regarding tax payments, see “Executive Compensation: Compensation Discussion and Analysis—Perquisites and Other Benefits.” Portions of these amountsMr. Napierski’s tax payments were paid in Japanese yen. The amounts were converted to U.S. dollars using a weighted average exchange rate for the month in which the payment was made. During 2016,2020, these exchange rates ranged from 101.31103.8 to 118.19109.9 Japanese yen per U.S. dollar. |
(6) | Mr. Napierski's compensation is significantly higher than the compensation of our other non-CEO named executive officers primarily because he received the expatriate benefits that are summarized in footnotes (5)(a) and (c), above. |
Adjusted Summary Compensation Table
Performance-based equity awards granted by the company are earned, if at all, over multiple years. Performance-based equity awards granted in 2014, 2015 and 2016 were divided into three equal tranches, with the first tranche contingent on performance during the year of grant and the second and third tranches contingent on performance during the next two years, respectively.
Based on the company's performance during 2014 and 2015, all tranches of awards granted in 2014 and 2015 that were contingent on 2014, 2015 and 2016 performance were forfeited. Based on the company's performance during 2016, the tranche of the awards granted in 2016 that was contingent on 2016 performance vested slightly above target, at 102%. The following table shows each named executive officer's total compensation, with the grant date fair value of the forfeited awards deducted from, and of the awards that vested above target added to, the compensation of the year in which the grant was made.
| | | Adjustments for Forfeited or Above-Target Equity Awards | Name and Principal Position | Year | Total Compensation in Summary Compensation Table ($) | Above-Target (Forfeited) Stock Awards ($) | Above-Target (Forfeited) Option Awards ($) | Adjusted Total Compensation ($) | M. Truman Hunt President and Chief Executive Officer | 2016 | 10,276,771 | — | 19,404 | 10,296,175 | 2015 | 4,414,663 | (905,863) | — | 3,508,801 | 2014 | 4,759,080 | (1,185,300) | — | 3,573,780 | | | | | | | Ritch N. Wood Chief Financial Officer | 2016 | 3,055,714 | — | 4,674 | 3,060,388 | 2015 | 1,332,259 | (88,672) | (56,595) | 1,186,992 | 2014 | 1,590,783 | (134,334) | (88,189) | 1,368,260 | | | | | | | Ryan S. Napierski President of Global Sales and Operations | 2016 | 4,160,109 | 1,947 | 4,365 | 4,166,431 | 2015 | 4,329,556 | — | — | 4,329,556 | 2014 | — | — | — | — | | | | | | | Joseph Y. Chang Chief Scientific Officer and Executive Vice President of Product Development | 2016 | 2,416,137 | — | 3,647 | 2,419,784 | 2015 | 1,649,259 | (88,672) | (56,595) | 1,503,992 | 2014 | 1,624,462 | (134,334) | (88,189) | 1,401,939 | | | | | | | D. Matthew Dorny General Counsel | 2016 | 2,211,207 | — | 3,647 | 2,214,854 | 2015 | 1,028,286 | (60,871) | (42,777) | 924,639 | 2014 | 1,206,083 | (92,216) | (66,657) | 1,047,210 |
Grants of Plan‑BasedPlan-Based Awards – 20162020 The following table provides information about equity and non‑equitynon-equity incentive plan awards granted to the named executive officerseach NEO in 2016.2020. Name | Grant Date | Estimated Future Payouts under non-Equity Incentive Plan Awards | Estimated Future Payouts under Equity Incentive Plan Awards | All Other Option Awards: Number of Securities Underlying Options (#)(3) | Exercise or Base Price of Option Awards ($)(4) | Grant Date Fair Value of Stock and Option Awards ($)(5) | Threshold ($)(1) | Target ($)(1) | Max ($)(1) | Threshold (#)(2) | Target (#)(2) | Max (#)(2) | | | | | | | | | | | | M. Truman Hunt | 3/2/2016 | — | — | — | 131,700 | 263,400 | 395,100 | — | 30.63 | 2,966,762 | | 3/2/2016 | — | — | — | — | — | — | 486,600 | 30.63 | 5,445,054 | | N/A | 433,500 | 1,734,000 | 3,468,000 | — | — | — | — | — | — | | | | | | | | | | | | Ritch N. Wood | 3/2/2016 | — | — | — | 31,700 | 63,400 | 95,100 | — | 30.63 | 714,096 | | 3/2/2016 | — | — | — | — | — | — | — | — | — | | 3/2/2016 | — | — | — | — | — | — | 136,600 | 30.63 | 1,528,554 | | N/A | 106,875 | 427,500 | 855,000 | — | — | — | — | — | — | | | | | | | | | | | | Ryan S. Napierski | 3/2/2016 | — | — | — | 29,600 | 59,200 | 88,800 | — | 30.63 | 666,790 | | 3/2/2016 | — | — | — | 5,000 | 10,000 | 15,000 | — | — | 277,899 | | 3/2/2016 | — | — | — | — | — | — | 115,800 | 30.63 | 1,295,802 | | N/A | 121,875 | 487,500 | 975,000 | — | — | — | — | — | — | | | | | | | | | | | | Joseph Y. Chang | 3/2/2016 | — | — | — | 24,700 | 49,400 | 74,100 | — | 30.63 | 556,409 | | 3/2/2016 | — | — | — | — | — | — | — | — | — | | 3/2/2016 | — | — | — | — | — | — | 90,600 | 30.63 | 1,013,814 | | N/A | 111,563 | 446,250 | 892,500 | — | — | — | — | — | — | | | | | | | | | | | | D. Matthew Dorny | 3/2/2016 | — | — | — | 24,700 | 49,400 | 74,100 | — | 30.63 | 556,409 | | 3/2/2016 | — | — | — | — | — | — | — | — | — | | 3/2/2016 | — | — | — | — | — | — | 90,600 | 30.63 | 1,013,814 | | N/A | 82,500 | 330,000 | 660,000 | — | — | — | — | — | — |
| | | Estimated Possible Payouts under non-Equity Incentive Plan Awards | Estimated Future Payouts under Equity Incentive Plan Awards | | | | Name | Grant Date(1) | Date of Executive Compensation Committee Approval | Threshold ($)(2) | Target ($)(2) | Max ($)(2) | Threshold (#)(3) | Target (#)(3) | Max (#)(3) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Exercise or Base Price of Option Awards ($)(4) | Grant Date Fair Value of Stock and Option Awards ($)(5) | Ritch N. Wood | | | | | | | | | | | | 2/15/2020 | 2/7/2020 | | | | 122,236 | 244,471 | 488,942 | | 30.45 | 2,100,006 | | 6/3/2020 | 2/7/2020 | | | | | | | 45,978 | | 1,642,334 | | N/A | | 137,500 | 1,100,000 | 2,200,000 | | | | | | | | | | | | | | | | | | | Mark H. Lawrence | | | | | | | | | | | 2/15/2020 | 2/7/2020 | | | | 34,925 | 69,849 | 139,698 | | 30.45 | 600,003 | | 6/3/2020 | 2/7/2020 | | | | | | | 13,137 | | 469,254 | | N/A | | 49,219 | 393,750 | 787,500 | | | | | | | | | | | | | | | | | | | Ryan S. Napierski | | | | | | | | | | | 2/15/2020 | 2/7/2020 | | | | 52,911 | 105,821 | 211,642 | | 30.45 | 909,002 | | 6/3/2020 | 2/7/2020 | | | | | | | 19,902 | | 710,899 | | N/A | | 90,625 | 725,000 | 1,450,000 | | | | | | | | | | | | | | | | | | | Joseph Y. Chang | | | | | | | | | | | 2/15/2020 | 2/7/2020 | | | | 24,797 | 49,593 | 99,186 | | 30.45 | 426,004 | | 6/3/2020 | 2/7/2020 | | | | | | | 9,327 | | 333,160 | | N/A | | 63,281 | 506,250 | 1,012,500 | | | | | | | | | | | | | | | | | | | D. Matthew Dorny | | | | | | | | | | | 2/15/2020 | 2/7/2020 | | | | 24,797 | 49,593 | 99,186 | | 30.45 | 426,004 | | 6/3/2020 | 2/7/2020 | | | | | | | 9,327 | | 333,160 | | N/A | | 47,813 | 382,500 | 765,000 | | | | | | |
(1) | Equity awards having a grant date of 2/15/2020 and all non-equity incentive plan awards were granted pursuant to our Second Amended and Restated 2010 Omnibus Incentive Plan. Equity awards having a grant date of 6/3/2020 were pursuant to our Third Amended and Restated 2010 Omnibus Incentive Plan, with each grant contingent upon stockholder approval of that Plan. Stockholder approval occurred at our 2020 Annual Meeting of Stockholders on 6/3/2020. |
(2) | The amounts reported in these columns reflect potential payouts for 2016 under our 2020 executive cash incentive plan if the respective levels of performance were achieved for all quarters and for the year. The amounts reported in the Threshold column reflect the potential payout if any company performance metric was at the minimum level required to receive a bonus. The amounts reported in the Target columnand Max columns reflect the potential payout if all company performance metrics were at goal and maximum performance levels. The amounts reported in the Max column reflect the potential payout if all company performance metrics were at or above stretch performance levels.levels, respectively. |
(2)(3) | The awards reported in these columns are performance restricted stock units and performanceperformance-based stock options granted under our Second Amended and Restated 2010 Omnibus Incentive Plan. The amounts reported in thesethe Threshold, Target and Max columns reflect the potential number of shares of stock that become eligible for vesting or exercisable pursuant to these performance equity awards if certain financial metrics are achieved. The amount reported in the Threshold column for each award reflects the potential number of shares of stockoptions that become eligible for vesting or exercisable if performance iscertain financial metrics are achieved at the minimum, level required for any shares of stock to become eligible for vesting or exercisable. The amount reported in the Target column for each award reflects the potential number of shares of stock that become eligible for vesting or exercisable if performance is at the goal performance level. The amount reported in the Max column for each award reflects the potential number of shares of stock that become eligible for vesting or exercisable if performance is at the level required for 150% of the target-level shares of stock to become eligible for vesting or exercisable.and maximum levels, respectively. |
(3) | The awards reported in this column are stock options granted to the named executive officers under our Amended and Restated 2010 Omnibus Incentive Plan. These stock option awards vest and become exercisable in four equal annual installments beginning approximately one year from the date of the respective grant. |
(4) | This column shows the exercise price for the stock option awards, granted, which in each case is the closing price of our stock on the grant date ofor, if the respective grant.grant date was a weekend or holiday, the last preceding date on which a closing price was reported. |
(5) | The amounts reported in this column reflect the aggregate grant date fair value of equity awards computed in accordance with FASB ASC Topic 718 and, for performance-based awards, are based on the probable outcome of the performance conditions as of the grant date. For this purpose, the estimate of forfeitures is disregarded, and the value of the stock awards is discounted to reflect that no dividends are paid prior to vesting. For information on the valuation assumptions used in calculating these amounts, refer to Note 129 to our financial statements in the Form 10-K filed for the fiscal year ended December 31, 2016.2020. |
Narrative to Summary Compensation Table and Grants of Plan‑BasedPlan-Based Awards Table Employment Agreement with Mr. Chang We have an executive employment agreement with Mr. Chang. Among other things, this agreement provides that: ·
| − | Time-based equity awards granted to Mr. Chang will fully vest upon certain terminations of employment within six months prior to and in connection with, or within two years following, a change in control; |
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·
| No excise tax protections will be provided for termination payments;
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·− | Mr. Chang will be bound by certain covenants, including non-solicitation, non-competition and non-endorsement, that are in addition to, or supersede, previous key employee covenants; |
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·
| − | Mr. Chang will be entitled to the followingcertain termination payments, as described in addition to salary“Executive Compensation Tables and benefits earned prior to termination:Accompanying Narrative—Potential Payments Upon Termination or Change in Control” below. |
Termination Upon Death or Disability:
(a) | A lump sum equal to the pro-rata portion of the Mr. Chang's target bonus for any outstanding bonus cycle; and
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(b) | Salary continuation for up to 90 days in certain circumstances related to a disability.
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Resignation for Good Reason or Other Termination Without Cause:
(a) | A lump sum equal to the cost of twelve months of health care continuation coverage;
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(b) | A lump sum equal to the pro-rata portion of Mr. Chang's earned bonus, if any, for each outstanding bonus cycle; and
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(c) | Continuation of annual salary for a period of 15 months.
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Termination or Resignation for Good Reason in Connection with a Change in Control:
(a) | A lump sum equal to the cost of twelve months of health care continuation coverage;
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(b) | A lump sum equal to the pro-rata portion of Mr. Chang's target bonus for any outstanding bonus cycle; and
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(c) | A lump sum amount equal to 1.25 times annual salary and target bonus.
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Other Resignation:
(a) | Continuation of 75% of annual salary for a restricted period of up to one year, during which non-solicitation, non-competition and non-endorsement covenants remain in effect.Equity Awards and Non-Equity Incentive Plan Awards
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In addition, Mr. Chang's employment agreement provides that, if his employment terminates pursuant to any of the circumstances outlined above, other than for death or disability, Mr. Chang will be entitled to a four‑year consulting contract with us for $250,000 per year, less any severance payments that are paid to him during the year pursuant to his employment agreement.
Performance Awards
For information on the terms of the equity awards and non-equity performanceincentive plan awards that were granted to named executive officersNEOs during 2016,2020, see the "Compensation“Executive Compensation: Compensation Discussion and Analysis" section of this Proxy StatementAnalysis” and the footnotes to the Outstanding Equity Awards at Fiscal Year-End – 20162020 table. The NEOs received actual bonuses for fiscal year 2020 in the amounts shown in the "Non-Equity Incentive Plan Compensation" column of the 2020 Summary Compensation Table. Outstanding Equity Awards at Fiscal Year-End – 20162020 The following table provides information on theeach NEO’s holdings of equity awards by the named executive officers as of December 31, 2016. | | Option Awards | Stock Awards | Name and Award Type (1) | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#)(2)(3) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(3)(4) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(5) | Market Value of Shares or Units of Stock That Have Not Vested ($)(6) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4)(7) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(6) | M. Truman Hunt | | | | | | | | | | | SO | 6/28/2010 | 25,000 | — | — | 25.89 | 6/28/2017 | — | — | — | — | SO | 8/31/2010 | 25,000 | — | — | 25.57 | 8/31/2017 | — | — | — | — | PSO | 11/15/2010 | 50,000 | — | — | 30.43 | 11/15/2017 | — | — | — | — | SO | 2/28/2011 | 25,000 | — | — | 31.92 | 2/28/2018 | — | — | — | — | SO | 8/15/2011 | 25,000 | — | — | 39.35 | 8/15/2018 | — | — | — | — | SO | 2/9/2012 | 25,000 | — | — | 54.08 | 2/9/2019 | — | — | — | — | SO | 12/17/2012 | 25,000 | — | — | 44.83 | 12/17/2019 | — | — | — | — | PSO | 7/15/2013 | — | — | 18,750 | 77.65 | 7/15/2020 | — | — | — | — | SO | 12/9/2013 | 37,500 | 12,500 | — | 131.52 | 12/9/2020 | — | — | — | — | PRSU | 3/31/2014 | — | — | — | — | — | — | — | 7,500 | 358,350 | PRSU | 3/10/2015 | — | — | — | — | — | — | — | 17,367 | 829,795 | SO | 12/18/2015 | 9,250 | 27,750 | — | 37.58 | 12/18/2022 | — | — | — | — | SO | 3/2/2016 | — | 486,600 | — | 30.63 | 3/2/2023 | — | — | — | — | PSO | 3/2/2016 | — | — | 395,100 | 30.63 | 3/2/2023 | — | — | — | — | | | | | | | | | | | | Ritch N. Wood | | | | | | | | | | | PSO | 3/2/2010 | 17,500 | — | — | 28.09 | 3/2/2017 | — | — | — | — | SO | 6/28/2010 | 13,750 | — | — | 25.89 | 6/28/2017 | — | — | — | — | SO | 8/31/2010 | 13,750 | — | — | 25.57 | 8/31/2017 | — | — | — | — | PSO | 11/15/2010 | 50,000 | — | — | 30.43 | 11/15/2017 | — | — | — | — | SO | 2/28/2011 | 13,750 | — | — | 31.92 | 2/28/2018 | — | — | — | — | PSO | 2/28/2011 | 17,500 | — | — | 31.92 | 2/28/2018 | — | — | — | — | SO | 8/15/2011 | 13,750 | — | — | 39.35 | 8/15/2018 | — | — | — | — | PSO | 2/9/2012 | 17,500 | — | — | 54.08 | 2/9/2019 | — | — | — | — | SO | 2/9/2012 | 13,750 | — | — | 54.08 | 2/9/2019 | — | — | — | — | SO | 8/31/2012 | 13,750 | — | — | 41.49 | 8/31/2019 | — | — | — | — | PSO | 2/15/2013 | 8,750 | — | — | 41.27 | 2/15/2020 | — | — | — | — |
2020. | | Option Awards | Stock Awards | Name and
Award Type
(1) | Grant Date | Number of Securities Underlying Unexercised Options Exercisable
(#) | Number of Securities Underlying Unexercised Options Unexercisable
(#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(2)(3) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)(3)(4)Option
Exercise Price ($) | Option Exercise Price
($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested
(#)(5)(4) | Market Value of Shares or Units of Stock That Have Not Vested
($)(6) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)(4)(7)
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)(6)(5)
|
Ritch N. Wood | | | | | | | | SO | 3/31/2014 | 6,800 | | | 82.85 | 3/31/2021 | | | SO | 12/17/2014 | 6,800 | | | 39.51 | 12/17/2021 | | | SO | 3/10/2015 | 6,800 | | | 54.97 | 3/10/2022 | | | SO | 12/18/2015 | 6,800 | | | 37.58 | 12/18/2022 | | | SO | 3/2/2016 | 136,600 | | | 30.63 | 3/2/2023 | | | PSO | 3/2/2016 | 54,525 | | | 30.63 | 3/2/2023 | | | PSO | 3/4/2017 | 58,306 | | | 50.68 | 3/4/2024 | | | RSU | 3/4/2017 | | | | | | 6,300 | 344,169 | PSO | 3/8/2018 | 41,753 | | 17,253 | 71.99 | 3/8/2025 | | | RSU | 3/8/2018 | | | | | | 4,444 | 242,776 | PSO | 2/15/2019 | | | 35,571 | 63.09 | 2/15/2026 | | | RSU | 2/15/2019 | | | | | | 16,643 | 909,207 | PSO | 2/15/2020 | | | 488,942 | 30.45 | 2/15/2027 | | | RSU | 6/3/2020 | | | | | | 45,978 | 2,511,778 | | | | | | | | | | Mark H. Lawrence | | | | | | | PSO | 3/27/2017 | 14,422 | | | 54.23 | 3/27/2024 | | | RSU | 3/27/2017 | | | | | | 2,050 | 111,992 | PSO | 3/8/2018 | 11,742 | | 4,853 | 71.99 | 3/8/2025 | | | RSU | 3/8/2018 | | | | | | 1,250 | 68,288 | PSO | 2/15/2019 | | | 9,147 | 63.09 | 2/15/2026 | | | RSU | 2/15/2019 | | | | | | 4,280 | 233,816 | RSU | 2/15/2019 | | | | | | 18,493 | 1,010,273 | PSO | 2/15/2020 | | | 139,698 | 30.45 | 2/15/2027 | | | RSU | 6/3/2020 | | | | | | 13,137 | 717,674 | | | | | | | | | | Ryan S. Napierski | | | | | | | SO | 12/18/2015 | 6,800 | | | 37.58 | 12/18/2022 | | | SO | 12/18/2015 | 50,000 | | | 37.58 | 12/18/2022 | | | SO | 3/2/2016 | 77,800 | | | 30.63 | 3/2/2023 | | | PSO | 3/2/2016 | 30,913 | | | 30.63 | 3/2/2023 | | | PSO | 3/4/2017 | 32,224 | | | 50.68 | 3/4/2024 | | | RSU | 3/4/2017 | | | | | | 2,600 | 142,038 | PSO | 3/8/2018 | 18,919 | | 7,818 | 71.99 | 3/8/2025 | | | RSU | 3/8/2018 | | | | | | 2,014 | 110,025 | PSO | 2/15/2019 | | | 15,398 | 63.09 | 2/15/2026 | | | RSU | 2/15/2019 | | | | | | 7,204 | 393,555 | PSO | 2/15/2020 | | | 211,642 | 30.45 | 2/15/2027 | | | RSU | 6/3/2020 | | | | | | 19,902 | 1,087,246 |
Ritch N. Wood (cont.) | | | | | | | | | | | SO | 2/15/2013 | 10,313 | 3,437 | — | 41.27 | 2/15/2020 | — | — | — | — | PSO | 7/15/2013 | — | — | 18,750 | 77.65 | 7/15/2020 | — | — | — | — | SO | 12/9/2013 | 10,313 | 3,437 | — | 131.52 | 12/9/2020 | — | — | — | — | PSO | 3/31/2014 | — | — | 1,434 | 82.85 | 3/31/2021 | — | — | — | — | SO | 3/31/2014 | 3,400 | 3,400 | — | 82.85 | 3/31/2021 | — | — | — | — | PRSU | 3/31/2014 | — | — | — | — | — | — | — | 850 | 40,613 | SO | 12/17/2014 | 3,400 | 3,400 | — | 39.51 | 12/17/2021 | — | — | — | — | SO | 3/10/2015 | 1,700 | 5,100 | — | 54.97 | 3/10/2022 | — | — | — | — | PSO | 3/10/2015 | — | — | 2,867 | 54.97 | 3/10/2022 | — | — | — | — | PRSU | 3/10/2015 | — | — | — | — | — | — | — | 1,700 | 81,226 | SO | 12/18/2015 | 1,700 | 5,100 | — | 37.58 | 12/18/2022 | — | — | — | — | SO | 3/2/2016 | — | 136,600 | — | 30.63 | 3/2/2023 | — | — | — | — | PSO | 3/2/2016 | — | — | 95,100 | 30.63 | 3/2/2023 | — | — | — | — | | | | | | | | | | | | Ryan S. Napierski | | | | | | | | | | | PSO | 11/15/2010 | 35,000 | — | — | 30.43 | 11/15/2017 | — | — | — | — | PSO | 7/15/2013 | — | — | 12,500 | 77.65 | 7/15/2020 | — | — | — | — | RSU | 2/15/2013 | — | — | — | — | — | 1,250 | 59,725 | — | — | RSU | 3/31/2014 | — | — | — | — | — | 2,500 | 119,450 | — | — | PSO | 10/16/2014 | — | — | 15,000 | 43.53 | 10/16/2021 | — | — | — | — | RSU | 2/11/2015 | — | — | — | — | — | 4,500 | 215,010 | — | — | RSU | 12/18/2015 | — | — | — | — | — | 1,875 | 89,588 | — | — | SO | 12/18/2015 | 1,700 | 5,100 | — | 37.58 | 12/18/2022 | — | — | — | — | SO | 12/18/2015 | 12,500 | 37,500 | — | 37.58 | 12/18/2022 | — | — | — | — | SO | 3/2/2016 | — | 115,800 | — | 30.63 | 3/2/2023 | — | — | — | — | PSO | 3/2/2016 | — | ��� | 88,800 | 30.63 | 3/2/2023 | — | — | — | — | PRSU | 3/2/2016 | — | — | — | — | — | — | — | 15,000 | 238,900 | | | | | | | | | | | | Joseph Y. Chang | | | | | | | | | | | PSO | 3/2/2010 | 5,625 | — | — | 28.09 | 3/2/2017 | — | — | — | — | SO | 6/28/2010 | 3,125 | — | — | 25.89 | 6/28/2017 | — | — | — | — | SO | 8/31/2010 | 4,688 | — | — | 25.57 | 8/31/2017 | — | — | — | — | PSO | 11/15/2010 | 50,000 | — | — | 30.43 | 11/15/2017 | — | — | — | — | SO | 2/28/2011 | 6,250 | — | — | 31.92 | 2/28/2018 | — | — | — | — | PSO | 2/28/2011 | 7,500 | — | — | 31.92 | 2/28/2018 | — | — | — | — | SO | 8/15/2011 | 6,250 | — | — | 39.35 | 8/15/2018 | — | — | — | — | PSO | 2/9/2012 | 7,500 | — | — | 54.08 | 2/9/2019 | — | — | — | — | SO | 2/9/2012 | 6,250 | — | — | 54.08 | 2/9/2019 | — | — | — | — | SO | 8/31/2012 | 6,250 | — | — | 41.49 | 8/31/2019 | — | — | — | — | PSO | 2/15/2013 | 3,750 | — | — | 41.27 | 2/15/2020 | — | — | — | — | SO | 2/15/2013 | 4,688 | 1,562 | — | 41.27 | 2/15/2020 | — | — | — | — | PSO | 7/15/2013 | — | — | 12,500 | 77.65 | 7/15/2020 | — | — | — | — | SO | 12/9/2013 | 4,688 | 1,562 | — | 131.52 | 12/9/2020 | — | — | — | — | PRSU | 3/31/2014 | — | — | — | — | — | — | — | 850 | 40,613 | PSO | 3/31/2014 | — | — | 1,434 | 82.85 | 3/31/2021 | — | — | — | — | SO | 3/31/2014 | 3,400 | 3,400 | — | 82.85 | 3/31/2021 | — | — | — | — | SO | 12/17/2014 | 3,400 | 3,400 | — | 39.51 | 12/17/2021 | — | — | — | — | PSO | 3/10/2015 | — | — | 2,867 | 54.97 | 3/10/2022 | — | — | — | — | SO | 3/10/2015 | 1,700 | 5,100 | — | 54.97 | 3/10/2022 | — | — | — | — | PRSU | 3/10/2015 | — | — | — | — | — | — | — | 1,700 | 81,226 | SO | 12/18/2015 | 1,700 | 5,100 | — | 37.58 | 12/18/2022 | — | — | — | — | SO | 3/2/2016 | — | 90,600 | — | 30.63 | 3/2/2023 | — | — | — | — | PSO | 3/2/2016 | — | — | 74,100 | 30.63 | 3/2/2023 | — | — | — | — | | | | | | | | | | | |
| | Option Awards | Stock Awards | Name and
Award Type
(1) | Grant Date | Number of Securities Underlying Unexercised Options Exercisable
(#) | Number of Securities Underlying Unexercised Options Unexercisable
(#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(2)(3) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)(3)(4)Option
Exercise Price ($) | Option Exercise Price
($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested
(#)(5)(4) | Market Value of Shares or Units of Stock That Have Not Vested
($)(6) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)(4)(7)
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)(6)(5)
|
D. Matthew Dorny | | | | | | | | | | | PSO | 11/15/2010 | 42,000 | — | — | 30.43 | 11/15/2017 | — | — | — | — | SO | 2/28/2011 | 6,250 | — | — | 31.92 | 2/28/2018 | — | — | — | — | PSO | 2/28/2011 | 7,500 | — | — | 31.92 | 2/28/2018 | — | — | — | — | SO | 8/15/2011 | 6,250 | — | — | 39.35 | 8/15/2018 | — | — | — | — | PSO | 2/9/2012 | 7,500 | — | — | 54.08 | 2/9/2019 | — | — | — | — | SO | 2/9/2012 | 6,250 | — | — | 54.08 | 2/9/2019 | — | — | — | — | SO | 8/31/2012 | 6,250 | — | — | 41.49 | 8/31/2019 | — | — | — | — | PSO | 2/15/2013 | 3,750 | — | — | 41.27 | 2/15/2020 | — | — | — | — | SO | 2/15/2013 | 4,688 | 1,562 | — | 41.27 | 2/15/2020 | — | — | — | — | PSO | 7/15/2013 | — | — | 12,500 | 77.65 | 7/15/2020 | — | — | — | — | SO | 12/9/2013 | 4,688 | 1,562 | — | 131.52 | 12/9/2020 | — | — | — | — | PRSU | 3/31/2014 | — | — | — | — | — | — | — | 584 | 27,880 | PSO | 3/31/2014 | — | — | 1,084 | 82.85 | 3/31/2021 | — | — | — | — | SO | 3/31/2014 | 2,500 | 2,500 | — | 82.85 | 3/31/2021 | — | — | — | — | SO | 12/17/2014 | 2,450 | 2,450 | — | 39.51 | 12/17/2021 | — | — | — | — | PRSU | 3/10/2015 | — | — | — | — | — | — | — | 1,167 | 55,759 | PSO | 3/10/2015 | — | — | 2,167 | 54.97 | 3/10/2022 | — | — | — | — | SO | 3/10/2015 | 1,250 | 3,750 | — | 54.97 | 3/10/2022 | — | — | — | — | SO | 12/18/2015 | 1,500 | 4,500 | — | 37.58 | 12/18/2022 | — | — | — | — | SO | 3/2/2016 | — | 90,600 | — | 30.63 | 3/2/2023 | — | — | — | — | PSO | 3/2/2016 | — | — | 74,100 | 30.63 | 3/2/2023 | — | — | — | — |
Joseph Y. Chang | | | | | | | SO | 3/31/2014 | 6,800 | | | 82.85 | 3/31/2021 | | | SO | 3/10/2015 | 6,800 | | | 54.97 | 3/10/2022 | | | SO | 12/18/2015 | 6,800 | | | 37.58 | 12/18/2022 | | | SO | 3/2/2016 | 90,600 | | | 30.63 | 3/2/2023 | | | PSO | 3/2/2016 | 42,485 | | | 30.63 | 3/2/2023 | | | PSO | 3/4/2017 | 18,562 | | | 50.68 | 3/4/2024 | | | RSU | 3/4/2017 | | | | | | 1,125 | 61,459 | PSO | 3/8/2018 | 9,264 | | 3,828 | 71.99 | 3/8/2025 | | | RSU | 3/8/2018 | | | | | | 986 | 53,865 | PSO | 2/15/2019 | | | 7,216 | 63.09 | 2/15/2026 | | | RSU | 2/15/2019 | | | | | | 3,376 | 184,431 | PSO | 2/15/2020 | | | 99,186 | 30.45 | 2/15/2027 | | | RSU | 6/3/2020 | | | | | | 9,327 | 509,534 | | | | | | | | | | D. Matthew Dorny | | | | | | | SO | 3/31/2014 | 5,000 | | | 82.85 | 3/31/2021 | | | SO | 12/17/2014 | 4,900 | | | 39.51 | 12/17/2021 | | | SO | 3/10/2015 | 5,000 | | | 54.97 | 3/10/2022 | | | SO | 12/18/2015 | 6,000 | | | 37.58 | 12/18/2022 | | | SO | 3/2/2016 | 52,000 | | | 30.63 | 3/2/2023 | | | PSO | 3/2/2016 | 41,235 | | | 30.63 | 3/2/2023 | | | PSO | 3/4/2017 | 18,562 | | | 50.68 | 3/4/2024 | | | RSU | 3/4/2017 | | | | | | 1,125 | 61,459 | PSO | 3/8/2018 | 9,264 | | 3,828 | 71.99 | 3/8/2025 | | | RSU | 3/8/2018 | | | | | | 986 | 53,865 | PSO | 2/15/2019 | | | 7,216 | 63.09 | 2/15/2026 | | | RSU | 2/15/2019 | | | | | | 3,376 | 184,431 | PSO | 2/15/2020 | | | 99,186 | 30.45 | 2/15/2027 | | | RSU | 6/3/2020 | | | | | | 9,327 | 509,534 |
(1) | Award types are as follows: |
SO:
| SO: Time-Based Stock Options |
RSU:
| RSU: Time-Based Restricted Stock Units |
PSO:
| PSO: Performance-Based Stock Options | PRSU: | Performance-Based Restricted Stock Units |
(2) | Time-Based Stock Options
|
Grant Date | Vesting Schedule | | | 2/15/2013
3/31/2014
3/10/2015
3/2/2016
| Vest in four equal annual installments, the first of which vested on February 15 of the year following the grant. | | | 12/9/2013
12/17/2014
12/18/2015
| Vest in four equal annual installments, the first of which vested or will vest on August 15 of the year following the grant or, for Mr. Napierski's 50,000 stock options granted on 12/18/2015, September 8, 2016. |
(3) | Performance-Based Stock Options |
Grant Date | Vesting Schedule | 7/15/2013 | Vests in four equal tranches based on the achievement of adjusted earnings per share performance levels, measured in terms of diluted earnings per share excluding certain predetermined items. The first, second, third and fourth tranches are contingent on achievement of adjusted earnings per share of $6.00, $8.00, $10.00 and $12.00, respectively, over a rolling four-quarter period. Vesting occurs on the date the Compensation Committee approves the calculation of adjusted earnings per share for the respective tranche. Upon any change in control, the next unvested tranche shall be deemed to be vested immediately prior to such change in control, and any remaining unvested tranche shall be cancelled. The unvested portion of these performance stock options will be terminated if the adjusted earnings per share goals are not achieved based on performance through December 2019, or partially terminated earlier if annualized adjusted earnings per share fall below certain thresholds after December 2016. Based on our performance through December 2016, the tranche that was contingent on achievement of adjusted earnings per share of $12.00 will terminate as of March 30, 2017.
|
3/31/2014 | Vests vest in three equal tranches based on the achievement of adjusted earnings per shareEPS performance levels, measured in terms of diluted earnings per shareEPS excluding certain predetermined items. Vesting occurs on the date the Compensation Committee approves the calculationlater of adjusted earnings per share for the respective tranche. Vesting is accelerated upon the participant's termination (including constructive termination) in connection with a change in control. Any portions of the tranches that do not vest will immediately terminateone year following the Committee'sgrant date and the Committee’s approval of the calculation of adjusted earnings per share for such tranche. No portion of the three tranches vested based on adjusted earnings per share achieved in 2014, 2015 and 2016, and the first, second and third tranches therefore terminated as of March 10, 2015, February 25, 2016 and February 27, 2017, respectively.
| 10/16/2014 | Vests in one tranche based on the achievement of performance goals applicable to the North Asia region for the three years ended December 31, 2017. Vesting occurs on the date the Compensation Committee approves the calculation of the actual performance. Vesting is accelerated upon the participant's termination (including constructive termination) in connection with a change in control. For more information about this award, see "Compensation Discussion and Analysis—North Asia Region Special Incentive Award."
| 3/10/2015 | Vests in three equal tranches based on the achievement of adjusted earnings per share performance levels, measured in terms of diluted earnings per share excluding certain predetermined items. Vesting occurs on the date the Compensation Committee approves the calculation of adjusted earnings per shareEPS for the respective tranche. Vesting of the target amount of PSOs is accelerated upon the participant'sparticipant’s termination (including constructive termination) in connection with a change in control. Any portions of the tranches that do not become eligible for vesting will immediately terminate following the Committee'slater of one year following the grant date and the Committee’s approval of the calculation of adjusted earnings per shareEPS for such tranche.
|
Grant Date | Vesting Schedule | 3/8/2018 | A portion of the first tranche vested based on adjusted EPS achieved in 2018. No portion of the second or third tranche vested based on adjusted EPS achieved in 2020, and these tranches therefore terminated as of February 7, 2020 and February 10, 2021, respectively. | 2/15/2019 | No portion of the first or second tranche vested based on adjusted earnings per shareEPS achieved in 20152019 and 2016,2020, and the first and secondthese tranches therefore terminated as of February 25, 201615, 2020 and February 27, 2017, respectively.10, 2021. The portion of the third tranche that vests iswill be determined by adjusted earnings per shareEPS reaching pre-determined levels in 2017.2021. | 3/2/201615/2020 | Vests in three equal tranches based on the achievement of adjusted earnings per share performance levels, measured in terms of diluted earnings per share excluding certain predetermined items. Vesting occurs on the date the Compensation Committee approves the calculation of adjusted earnings per share for the respective tranche. Vesting is accelerated upon the participant's termination (including constructive termination) in connection with a change in control. Any portions of the tranches that do not become eligible for vesting will immediately terminate following the Committee's approval of the calculation of adjusted earnings per share for such tranche. A portion of theThe first tranche vested in full based on adjusted earnings per shareEPS achieved in 2016.2020. The portions of the second and third tranches that vest arewill be determined by adjusted earnings per shareEPS reaching pre-determined levels in 20172021 and 2018,2022, respectively. |
(4)(3) | In accordance with SEC rules, these columns report the potential number of shares of stockoptions that become eligible for vesting or exercisable if performance is at the minimum level required for any shares of stockoptions to become eligible for vesting or exercisable, except that, based on 2020 results, the PSOs and PRSUs granted on 3/2/201615/2020 are reported at the maximum level based on 2016 results.level. |
(5)(4) | Time-Based Restricted Stock Units |
Grant Date | Vesting Schedule | 3/4/2017 | Vest in four equal annual installments, the first of which vested on March 4, 2018. | 2/15/2013
3/31/2014 2/11/2015 27/2017 | Vest in four equal annual installments, the first of which vested on March 2, 2018. | 3/8/2018 | Vest in four equal annual installments, the first of which vested on February 15, of the year following the grant.2019. | 2/15/2019 | | 12/18/2015 | Vest in four equal annual installments, the first of which vested on September 8, 2016. February 15, 2020, except for Mr. Lawrence’s award of 18,493 RSUs, which vests in three equal annual installments, the first of which vested on February 15, 2020. | 6/3/2020 | Vest in four equal annual installments, the first of which vested on February 15, 2021. |
(6)(5) | The market value of the restricted stock units reported in these columns is based on the closing market price of our stock on December 30, 2016,31, 2020, which was $47.78. |
(7) | Performance-Based Restricted Stock Units
|
Grant Date | Vesting Schedule | 3/31/2014 | Vests in three equal tranches based on the achievement of adjusted earnings per share performance levels, measured in terms of diluted earnings per share excluding certain predetermined items. Vesting occurs on the date the Compensation Committee approves the calculation of adjusted earnings per share for the respective tranche. Vesting is accelerated upon the participant's termination (including constructive termination) in connection with a change in control. Any portions of the tranches that do not vest will immediately terminate following the Committee's approval of the calculation of adjusted earnings per share for such tranche. No portion of the three tranches vested based on adjusted earnings per share achieved in 2014, 2015 and 2016, and the first, second and third tranches therefore terminated as of March 10, 2015, February 25, 2016 and February 27, 2017, respectively.
| 3/10/2015 | Vests in three equal tranches based on the achievement of adjusted earnings per share performance levels, measured in terms of diluted earnings per share excluding certain predetermined items. Vesting occurs on the date the Compensation Committee approves the calculation of adjusted earnings per share for the respective tranche. Vesting is accelerated upon the participant's termination (including constructive termination) in connection with a change in control. Any portions of the tranches that do not become eligible for vesting will immediately terminate following the Committee's approval of the calculation of adjusted earnings per share for such tranche. No portion of the first or second tranche vested based on adjusted earnings per share achieved in 2015 and 2016, and the first and second tranches therefore terminated as of February 25, 2016 and February 27, 2017, respectively. The portion of the third tranche that vests is determined by adjusted earnings per share reaching pre-determined levels in 2017.
| 3/2/2016 | Vests in three equal tranches based on the achievement of adjusted earnings per share performance levels, measured in terms of diluted earnings per share excluding certain predetermined items. Vesting occurs on the date the Compensation Committee approves the calculation of adjusted earnings per share for the respective tranche. Vesting is accelerated upon the participant's termination (including constructive termination) in connection with a change in control. Any portions of the tranches that do not become eligible for vesting will immediately terminate following the Committee's approval of the calculation of adjusted earnings per share for such tranche. A portion of the first tranche vested based on adjusted earnings per share achieved in 2016. The portions of the second and third tranches that vest are determined by adjusted earnings per share reaching pre-determined levels in 2017 and 2018, respectively.$54.63. |
Option Exercises and Stock Vested – 20162020 The following table provides information on stock option exercises and vesting of stock awards for the named executive officerseach NEO during 2016.2020. | Option Awards | Stock Awards | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | M. Truman Hunt | 250,000 | 5,197,500 | — | — | Ritch N. Wood | — | — | — | — | Ryan S. Napierski | 15,000 | 321,900 | 5,875 | 190,441 | Joseph Y. Chang | 37,500 | 804,750 | 5,458 | 159,046 | D. Matthew Dorny | 49,750 | 1,108,073 | — | — |
| Option Awards | Stock Awards | Name | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(3) | Ritch N. Wood | — | — | 14,070 | 397,688 | Mark H. Lawrence | — | — | 13,348 | 394,762 | Ryan S. Napierski | 48,000 | 1,046,951 | 6,009 | 170,286 | Joseph Y. Chang | 6,800 | 72,478 | 2,744 | 78,065 | D. Matthew Dorny | 18,600 | 382,943 | 2,744 | 78,065 |
(1) | All option exercises were pursuant to Rule 10b5-1 trading plans adopted by the NEOs. |
(2) | Value realized on exercise of stock options is equal to the number of options exercised multiplied by the market value of our common stock at exercise less the exercise price, and is calculated before payment of any applicable withholding taxes and broker commissions. |
(2)(3) | Value realized on vesting of restricted stock units is equal to the number of restricted stock units vested multiplied by the market value of our common stock on the vesting date, and is calculated before payment of any applicable withholding taxes and broker commissions. |
Nonqualified Deferred Compensation Pursuant to our nonqualified Deferred Compensation Plan (the "DCP"), certain employees, including the named executive officers,NEOs, may elect to defer up to 80% of his or hertheir base salary up to 100% of bonus and up to 100% of restricted stock unitscash incentive bonus (minus applicable withholding requirements) that otherwise would be payable in a calendar year. Deferral elections are made prior to the calendar year in which the deferred salary bonus or restricted stock unitsbonus will be earned. Additionally, we mayIn addition, the company makes contributions to each NEO’s account. Effective in 2021, the DCP was modified to provide a matching contribution by the company for individual contributions up to a maximum of 5% of base salary. We also elect togenerally make a discretionary contribution, (historicallyexpected to be reduced from the historical amount of 10% of each executive officer's salary), which may be allocated between the executive officer's 401(k) and deferred compensation plan accounts.salary to approximately 5% of salary. Earnings and losses on deferred base salary and bonus are based on market rates, and on earnings and losses on participant-selected investment funds available under our Deferred Compensation Plan. Restricted stock unit deferrals are allocated to a fund that tracksmirroring the performance of investment funds that are available for participants to track under the company's stock.DCP. All amounts a participant elects to defer, adjusted for earnings and losses thereon, are 100% vested for purposes of the Deferred Compensation PlanDCP at all times. All amounts we elect to contribute, to a participant's account, adjusted for earnings and losses thereon, either vest as20% per year over five years (for contributions on or after January 1, 2021) or vest over a 20-year period that begins on the participant's hire date (for contributions prior to 50% upon 10 years of employment with us, and vest an additional 5% for each year of employment with us thereafter until such amounts are 100% vested upon 20 years of employment with us. In addition, all amounts become 100% vested2021). This vesting schedule is subject to acceleration upon the participant attainingoccurrence of certain events, including the attainment of 60 years of age, upon the participant's death or disability as defined in the plan,DCP, discretionary acceleration by the Committee, or, otherwisefor contributions on or after January 1, 2021, the completion of at the discretionleast 10 years of the Executive Compensation Committee.employment above a specified compensation level. For participants who received company contributions prior to January 1, 2015, our Deferred Compensation Planthe DCP also provides a death benefit that will pay, upon a participant'sparticipant’s death prior to the commencement of benefit payments, an amount equal to the participant'sparticipant’s deferrals, adjusted for earnings and losses thereon, plus the greater of (i) the vested portion of company contributions, adjusted for earnings and losses thereon, or (ii) five times such participant'sparticipant’s average base salary for the previous three years. All distributions under the Deferred Compensation PlanDCP are payable in cash (except for restricted stock units, which were previously permitted to be deferred and are payable in stock), and the participant may elect either a lump sum payment or monthly, quarterly, or annual installments over a maximum of 15 years. The following table shows the investment funds that are available for participants to track under our Deferred Compensation Planthe DCP and their annual rates of return for the fiscal year ended December 31, 2016,2020, as reported by the administrator of the plan.DCP. Name of Fund | Rate of Return | Name of Fund | Rate of Return | Great-West Money Market – Instl Shares | 0.25% | Vanguard VIF Growth | -1.08% | American Century VP Inflation Protection – Class I Shares | 4.71% | Neuberger Berman AMT Mid-Cap Intrinsic Value – I Class | 16.17% | Vanguard VIF Short-Term Investment-Grade | 2.72% | LVIP SSgA Mid-Cap Index – Standard Class | 20.31% | LVIP Delaware Bond – Standard Class | 2.74% | Great-West T. Rowe Price Mid Cap Growth | 6.18% | Putnam VT High Yield – Class IA | 15.66% | Delaware VIP Small Cap Value Series – Standard Class | 31.41% | Templeton Global Bond VIP – Class 1 | 3.21% | Deutsche Small Cap Index VIP – Class A | 21.02% | Great-West Conservative Profile (Series I) | 6.14% | Vanguard VIF Small Company Growth | 14.94% | Great-West Moderately Conservative Profile (Series I) | 7.18% | American Funds Global Growth – Class 2 | 0.62% | Great-West Moderate Profile (Series I) | 8.19% | American Funds Global Small Capitalization – Class 2 | 2.10% | Great-West Moderately Aggressive Profile (Series I) | 9.10% | American Funds IS Global Growth and Income – Class 2 | 7.35% | Great-West Aggressive Profile (Series I) | 10.76% | AllianceBernstein VPS International Value – Class A | -0.50% | Delaware VIP Value Series – Standard Class | 14.65% | American Funds International – Class 2 | 3.53% | MFS VIT Value – Initial Class | 14.09% | Van Eck VIP Emerging Markets – Initial Class | 0.10% | Vanguard VIF Equity Index | 11.81% | MFS VIT Utilities Series – Initial Class | 11.47% | Delaware VIP U.S. Growth Series – Standard Class | -5.16% | Vanguard VIF REIT Index | 8.36% |
Name of Fund | Rate of Return | Name of Fund | Rate of Return | Great-West Gov't Money Market - Instl Shares | 0.41% | Neuberger Berman AMT Mid-Cap Intrinsic Value - I Class | -2.62% | American Century VP Inflation Protection - Class I Shares | 9.81% | LVIP SSgA Mid-Cap Index - Standard Class | 13.19% | Vanguard VIF Short-Term Investment-Grade | 5.49% | Great-West T. Rowe Price Mid Cap Growth - Investor Class | 24.11% | LVIP Delaware Bond - Standard Class | 9.87% | Delaware VIP Small Cap Value Series - Standard Class | -1.90% | Putnam VT High Yield - Class IA | 5.50% | DWS VIT Small Cap Index VIP - Class A | 19.43% | Templeton Global Bond VIP - Class 1 | -5.07% | Vanguard VIF Small Company Growth | 23.18% | Great-West Conservative Profile - Investor Class | 8.21% | American Funds Global Growth - Class 2 | 30.47% | Great-West Moderately Conservative Profile - Investor Class | 9.57% | American Funds IS Global Growth and Income - Class 2 | 8.73% | Great-West Moderate Profile - Investor Class | 11.25% | American Funds Global Small Capitalization - Class 2 | 29.73% | Great-West Moderately Aggressive Profile - Investor Class | 11.75% | AB VPS International Value - Class A | 2.47% | Great-West Aggressive Profile - Investor Class | 11.99% | American Funds International - Class 2 | 13.98% | Delaware VIP Value Series - Standard Class | 0.41% | Van Eck VIP Emerging Markets - Initial Class | 17.25% | MFS VIT Value - Initial Class | 3.48% | Vanguard VIF Real Estate Index | -4.85% | Vanguard VIF Equity Index | 18.20% | MFS VIT Utilities Series - Initial Class | 5.90% | Vanguard VIF Growth | 43.09% | Nu Skin Enterprises Inc. Restricted Stock Units | 39.04% | Delaware VIP U.S. Growth Series - Standard Class | 44.13% | | |
Nonqualified Deferred Compensation – 20162020 The following table provides information on compensationeach NEO’s account under our nonqualified Deferred Compensation Plan for the year 2016.2020. Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(1) | Aggregate Withdrawals / Distributions | Aggregate Balance at Last FYE ($)(1) | M. Truman Hunt | — | 115,600 | 421,732 | — | 6,142,699 | Ritch N. Wood | — | 57,000 | 67,737 | — | 842,495 | Ryan S. Napierski | 260,818 | 65,000 | 91,983 | — | 1,810,093 | Joseph Y. Chang | 180,035 | 59,500 | 508,253 | — | 6,714,527 | D. Matthew Dorny | 15,352 | 44,000 | 76,175 | — | 971,183 |
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(1) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FYE ($)(1) | Ritch N. Wood | — | 100,000 | 214,246 | — | 1,744,394 | Mark H. Lawrence | 11,303 | 52,500 | 48,627 | — | 303,401 | Ryan S. Napierski | 301,830 | 72,500 | 1,052,084 | — | 5,612,008 | Joseph Y. Chang | — | 67,500 | 1,055,902 | — | 9,828,757 | D. Matthew Dorny | 450,898 | 51,000 | 112,667 | — | 2,619,790 |
(1) | Executive and registrant contribution amounts are and have been reflected in the 20162020 Summary Compensation Table and prior years'years’ summary compensation tables, as applicable. Aggregate earnings are not reflected in the 20162020 Summary Compensation Table and were not reflected in prior years' Summary Compensation Tables.years’ summary compensation tables. |
Potential Payments Upon Termination or Change in Control The information below describes the compensation that would become payable under existing plans and arrangements if the named executive officer'sNEO’s employment had terminated on December 31, 2016,2020, given the named executive officer'seach NEO’s compensation and service levelslevel as of such date and, if applicable, based on our closing stock price on that date. Except as noted below, all amounts would be payable as a lump sum upon termination, except deferred compensation, which may be payable as a lump sum or in installments at the election of the named executive officer.NEO. These benefits are in addition to benefits available generally to salaried employees, such as disability benefits and distributions under our 401(k) plan. In addition, certain non-competition and other obligations of the named executive officers relating to these payments are described above under the section titled "Narrative to Summary Compensation Table and Grants of Plan‑Based Awards Table—Employment Agreements." Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event, our stock price and the named executive officer'sNEO’s age.
Name | Voluntary Termination ($) | Involuntary Termination for cause ($) | Involuntary Termination Not for cause ($) | Termination (Including Constructive Termination) in Connection with Change of Control ($) | Death ($)(1) | Disability ($) | M. Truman Hunt | | | | | | | Severance(2) | — | — | — | — | — | — | Equity(3) | — | — | — | 15,521,841 | — | — | Deferred Compensation(4) | 6,142,699 | 6,142,699 | 6,142,699 | 6,142,699 | 9,833,567 | 6,142,699 | Health Benefits(5) | — | — | — | — | — | — | Total | 6,142,699 | 6,142,699 | 6,142,699 | 21,664,540 | 9,833,567 | 6,142,699 | | | | | | | | | | | | | | | Ritch N. Wood | | | | | | | Severance(2) | — | — | — | — | — | — | Equity(3) | — | — | — | 3,776,191 | — | — | Deferred Compensation(4) | 842,495 | 842,495 | 842,495 | 842,495 | 2,716,584 | 842,495 | Health Benefits(5) | — | — | — | — | — | — | Total | 842,495 | 842,495 | 842,495 | 4,618,686 | 2,716,584 | 842,495 | | | | | | | | | | | | | | | Ryan S. Napierski | | | | | | | Severance(2) | — | — | — | — | — | — | Equity(3) | — | — | — | 4,524,843 | — | — | Deferred Compensation(4) | 1,810,093 | 1,810,093 | 1,810,093 | 1,810,093 | 4,155,460 | 1,810,093 | Health Benefits(5) | — | — | — | — | — | — | Total | 1,810,093 | 1,810,093 | 1,810,093 | 6,334,936 | 4,460,897 | 1,810,093 | | | | | | | | | | | | | | | Joseph Y. Chang | | | | | | | Severance(2) | 1,196,250 | — | 1,493,750 | 2,330,469 | 278,906 | 427,656 | Equity(3) | — | — | — | 2,734,985 | — | — | Deferred Compensation(4) | 6,714,527 | 6,714,527 | 6,714,527 | 6,714,527 | 8,432,977 | 6,714,527 | Health Benefits(5) | — | — | 11,625 | 11,625 | — | — | Total | 7,910,777 | 6,714,527 | 8,219,902 | 11,791,606 | 8,711,883 | 7,142,183 | | | | | | | | | | | | | | | D. Matthew Dorny | | | | | | | Severance(2) | — | — | — | — | — | — | Equity(3) | — | — | — | 2,533,089 | — | — | Deferred Compensation(4) | 904,489 | 904,489 | 904,489 | 904,489 | 2,498,686 | 904,489 | Health Benefits(5) | — | — | — | — | — | — | Total | 904,489 | 904,489 | 904,489 | 3,437,578 | 2,498,686 | 904,489 |
Name | Voluntary Termination ($) | Involuntary Termination for Cause ($) | Involuntary Termination Not for Cause ($) | Termination (Including Constructive Termination) in Connection with Change of Control ($) | Death ($)(1) | Disability ($) | Ritch N. Wood | | | | | | | Severance(2) | 750,000 | — | 3,266,600 | 5,966,600 | 1,766,600 | 2,016,600 | Equity(3) | — | — | — | 9,919,239 | — | — | Deferred Compensation(4) | 1,744,394 | 1,744,394 | 1,744,394 | 1,744,394 | 4,888,953 | 1,744,394 | Health Benefits(5) | — | — | 26,246 | 26,246 | — | — | Total | 2,494,394 | 1,744,394 | 5,037,239 | 17,656,478 | 6,655,553 | 3,760,994 | | Mark H. Lawrence | | | | | | | Severance(2) | 393,750 | — | 1,288,613 | 2,010,488 | 632,363 | 763,613 | Equity(3) | — | — | — | 3,830,991 | — | — | Deferred Compensation(4) | 61,577 | 61,577 | 61,577 | 61,577 | 61,577 | 297,077 | Health Benefits(5) | — | — | 26,460 | 26,460 | — | — | Total | 455,327 | 61,577 | 1,376,650 | 5,929,516 | 693,940 | 1,060,690 | | Ryan S. Napierski | | | | | | | Severance(2) | 543,750 | — | 2,070,600 | 3,339,350 | 1,164,350 | 1,345,600 | Equity(3) | — | — | — | 2,585,781 | — | — | Deferred Compensation(4) | 5,379,138 | 5,379,138 | 5,379,138 | 5,379,138 | 7,754,399 | 5,379,138 | Health Benefits(5) | — | — | 25,879 | 25,879 | — | — | Total | 5,922,888 | 5,379,138 | 7,475,618 | 11,330,149 | 8,918,749 | 6,724,738 | | Joseph Y. Chang | | | | | | | Severance(2) | 1,368,750 | — | 2,519,288 | 3,447,413 | 813,038 | 981,788 | Equity(3) | — | — | — | 2,008,448 | — | — | Deferred Compensation(4) | 9,828,757 | 9,828,757 | 9,828,757 | 9,828,757 | 11,038,198 | 9,828,757 | Health Benefits(5) | — | — | 16,475 | 16,475 | — | — | Total | 11,197,507 | 9,828,757 | 12,364,520 | 15,301,092 | 11,851,236 | 10,810,545 | | D. Matthew Dorny | | | | | | | Severance(2) | 382,500 | — | 1,251,795 | 1,953,045 | 614,295 | 741,795 | Equity(3) | — | — | — | 2,008,448 | — | — | Deferred Compensation(4) | 2,312,642 | 2,312,642 | 2,312,642 | 2,312,642 | 3,670,572 | 2,312,642 | Health Benefits(5) | — | — | 26,460 | 26,460 | — | — | Total | 2,695,142 | 2,312,642 | 3,590,897 | 6,300,595 | 4,284,867 | 3,054,437 |
(1) | The amounts reported in this column do not include the proceeds payable on death from term life insurance policies for which we pay the premiums, with coverage, as of December 31, 2016,2020, of $750,000 for Messrs. Hunt and Dorny and $500,000 for Messrs. Wood, Napierski and Chang.each NEO. |
(2) | We have an employment agreement with Mr. Chang. Among other things, this agreementOur Executive Severance Policy applies to all of the NEOs. This policy provides for the following termination payments in addition to salary and benefits earned prior to termination:termination, provided that the NEO complies with certain non-competition and other obligations: |
(a) Voluntary termination: | (i) | Continuation of 75% of annual salary for a restricted period of up to one year to better enable the company to enforce the agreement's non‑solicitation, non-competition and non-endorsement covenants after termination. |
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(i) A lump sum equal to 75% of annual salary if the Company elects, in its sole discretion, to enforce the non-competition obligations in the NEO’s Key Employee Covenants Agreement.(b) Involuntary termination not for cause (including constructive termination): | (i) | A lump sum equal to the pro-rata portion of Mr. Chang's earned bonus, if any, for each outstanding bonus cycle; and |
| (ii) | Continuation of annual salary for a period of 15 months. |
(i) The pro-rata portion of the NEO’s earned bonus, if any, for any outstanding bonus cycle, payable at the same time as bonuses are paid to other executive officers; and (ii) A lump sum equal to a multiplier (of 1.5 for the CEO; 1.25 for other NEOs) times annual salary. (c) Termination (including constructive termination) in connection with a change in control: | (i) | A lump sum equal to the pro-rata portion of Mr. Chang's target bonus for any outstanding bonus cycle; and |
| (ii) | A lump sum amount equal to 1.25 times annual salary(i) The pro-rata portion of the NEO’s earned bonus, if any, for any outstanding bonus cycle, payable at the same time as bonuses are paid to other executive officers; and target bonus. |
(ii) A lump sum equal to a multiplier (of 2 for the CEO; 1.5 for other NEOs) times the sum of annual salary and target bonus. (d) Termination upon death or disability: | (i) | A lump sum equal to the pro-rata portion of Mr. Chang's target bonus for any outstanding bonus cycle; and |
| (ii) | Salary continuation for up to 90 days in certain circumstances related to a disability. |
(i) The pro-rata portion of the NEO’s earned bonus, if any, for any outstanding bonus cycle, payable on the date that bonuses are normally paid; and (ii) Salary continuation for up to 90 days in certain circumstances related to a disability. In addition, Mr. Chang'sChang’s employment agreement provides that, if his employment terminates pursuant to any of the circumstances outlined above in this footnote 2, other than for death or disability, Mr. Chang will be entitled to a four-year consulting contractagreement with us for $250,000$287,500 per year, less any severance payments that are paid to him during the year pursuant to his employment agreement.the Executive Severance Policy. (3) | TheOur equity award agreements generally provide that unvested awards will terminate upon the termination of employment. However, vesting (of the target amount, in the case of performance-based stock options) is accelerated upon the participant’s termination (including constructive termination) in connection with a change in control. Accordingly, the amounts payable under the equity category, in the case of performance-based stock option awards, are based on the difference between the $47.78$54.63 closing price of our stock on December 30, 201631, 2020 and the exercise price of the applicable award, multiplied by the target number of unvested sharesoptions subject to the award. The amounts payable under the equity category in the case of time-based restricted stock units are based on the $47.78same closing price of our stock on December 30, 2016 multiplied by the number of unvested sharesrestricted stock units subject to the applicable award. |
(4) | The amounts reported for deferred compensation, other than for death and disability, reflect only the amounts deferred by the named executive officers,NEOs, the vested portion of amounts contributed by us and earnings on such amounts. We may, at our discretion, accelerate vesting of the unvested amounts contributed by us in the event of a change in control. If we were to accelerate vesting, the total amounts of deferred compensation payable to the named executive officersour NEOs would be as follows: Mr. Hunt Wood – $6,142,699; $1,744,394; Mr. Wood Lawrence – $842,495; $297,077; Mr. Napierski – $1,810,093; $5,379,138; Mr. Chang – $6,714,527; $9,828,757; and Mr. Dorny – $971,183. $2,312,642. |
(5) | Pursuant to his employment agreement, Mr. Chang is entitledOur Executive Severance Policy entitles the NEOs to a lump sum equal to twelve months of health care continuation coverage upon involuntary termination not for cause (including constructive termination) and termination (including constructive termination) in connection with change in control. These payments are conditioned on the NEO’s compliance with certain non-competition and other obligations. |
OTHER COMPENSATION INFORMATION
Equity Compensation Plan Information The following table provides information as of December 31, 2016,2020, about our Class A Common Stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans (including individual arrangements): Plan Category | | 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 | | | 6,529,488 | (1) | | $ | 51.42 | (2) | | | 2,580,032 | (3) | | | | | | | | | | | | | | Equity compensation plans not approved by security holders | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 6,529,488 | | | $ | 51.42 | | | | 2,580,032 | |
Plan Category | 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 | 4,099,717(1) | $44.76(2) | 5,817,529(3) | Equity compensation plans not approved by security holders | — | — | — | Total | 4,099,717 | $44.76 | 5,817,529 |
(1) Consists of 5,933,0333,168,691 options (2,207,100(770,631 time-based and 3,725,9332,398,060 performance-based) and 596,455931,026 restricted stock units (519,519(931,026 time-based and 76,9360 performance-based). The performance-based awards are reported as the number of shares that become eligible for vesting or exercisable if performance is at the goaltarget level. The number of shares that are ultimately issued pursuant to the performance-based awards could vary from the amounts reported based on the degree to which the performance goals are achieved. (2) Excludes the impact of time-based and performance-based restricted stock units, which are exercised for no consideration. The weighted average remaining life of the options is 4.054.2 years. (3) Represents the number of shares available for future issuance under our SecondThird Amended and Restated 2010 Omnibus Incentive Plan.Plan, under which we may grant awards relating to shares of Class A Common Stock including options, stock appreciation rights, restricted stock awards, restricted stock unit awards, other share-based awards and performance awards. Options and stock appreciation rights are counted against the share reserve as one share for each option or stock appreciation right. Other awards are counted as 2.25 shares.
CEO Pay Ratio Information As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and SEC rules, we are disclosing the annual total compensation of the CEO, the median of the annual total compensation of all other employees, and the ratio of these two numbers (the “CEO pay ratio”), each as calculated pursuant to applicable rules and guidance. We also provide supplemental information and calculations to provide context regarding our global operations and unique features of our workforce. CEO Compensation Mr. Wood’s 2020 annual total compensation was $6,636,559. Median Employee Compensation and CEO Pay Ratio Disclosure As of December 31, 2020, our global employee population, including employees of our subsidiaries, consisted of 25,789 individuals. To identify the median employee, we used each employee’s annualized base pay plus target cash incentive as of December 31, 2020 (for Mainland China sales employees, described below, and employees of our manufacturing and packaging subsidiaries, this was calculated by annualizing their salary and bonus amounts for the last portion of the year, as those amounts are indicative of their recent activity), translated into U.S. dollars. With these amounts for all of our employees, we identified a median group of 101 employees. We then calculated the annual total compensation of each of these 101 employees using the same methodology that is required under SEC disclosure requirements for our NEOs’ compensation, and we identified the median employee from that population. Our median employee is a sales employee in Mainland China whose 2020 annual compensation was $1,339, which yields a CEO pay ratio of 4,956:1. However, as discussed below, due to a unique feature of our employee population, we do not believe this ratio appropriately represents our company’s compensation practices.
Supplemental Information – Global Employee Population and Structure The structure of our business model in Mainland China causes a unique and significant increasing impact on our CEO pay ratio. In all of our markets other than Mainland China, our sales force members are independent distributors rather than employees of our company. Because of restrictions on direct selling and multi-level commissions in Mainland China, we have implemented a business model for that market that is different from our business model in other markets. One of the differences is that our sales force in Mainland China includes not only independent sellers but also part-time sales employees. Our Mainland China sales employees constitute a large proportion of our total employee base, and as a result, these employees have a significant impact on our CEO pay ratio. As of December 31, 2020, 20,999, or 81%, of our employees were Mainland China sales employees, compared to 4,790 other full- and part-time employees worldwide. Like all members of our sales force globally, our Mainland China sales employees devote as much or as little time and effort to their sales efforts as they desire, and their compensation varies significantly as a result. Due to the impact of our Mainland China sales employees on our CEO pay ratio, we do not believe the required pay ratio disclosure, above, appropriately represents our company’s compensation practices. To better allow stakeholders to evaluate our CEO’s compensation within the context of our company, we also disclose a ratio that excludes our Mainland China sales employees. Based on our 4,790 employees who are not Mainland China sales employees, our median employee is a communication specialist in Hong Kong whose 2020 annual compensation was $36,226, resulting in a CEO pay ratio of 183:1. We believe the compensation amounts and ratios provided above represent reasonable estimates calculated in accordance with SEC regulations and guidance. The SEC rules allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio for our company, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATION
Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, we are requesting stockholder approval of a non-binding advisory resolution approving theour NEOs’ compensation of our named executive officers as disclosed in this Proxy Statement.proxy statement. Compensation Objectives and 2020 Pay for Performance The primaryfollowing objectives of our executive compensation program aresupport our recommendation to successfully recruit, motivate and retain experienced and talented executives, provide competitiveapprove the compensation arrangements that are tied to corporate and individual performance, align the financial interests of our executives with those of our stockholders, and drive superior stockholder value. NEOs:
| (1) | Our program enables us to successfully recruit, motivate and retain experienced and talented executives; |
| (2) | We implement a pay-for-performance philosophy through the use of incentives that: |
| a. | Are tied to corporate and individual performance; |
| b. | Align the financial interests of our executives with those of our stockholders; and |
| c. | Drive superior stockholder value. |
The program, which is administered by theour Executive Compensation Committee (the "Committee"“Committee”), is intended to align actual compensation payments to actual performance and to adjust upward during periods of strong performance and adjust downward when performance is short of expectations. We believe that
Amidst a challenging year, our executive compensation program is one of several key factors that drove our strong revenue andincreased 7% in 2020 to $2.58 billion, while earnings per share growth priorimproved 17% to 2014,$3.63. Both our customer and sincesales leader numbers improved during the disruption to our business in Mainland China in January 2014, we believe that our executive compensation program has helped to drive our recovery from that disruption by providing new performance incentives to recover. Our total stockholder return in 2016 was 30%year, increasing 34% and 29%, showing the turnaround taking effect after two years of decline. In addition, while our 2016 revenue of $2.21 billion was approximately $969 million lower than our 2013 revenue, approximately $380 million of this decline is due to the strengthening of the U.S. dollar since 2013, which we recognize is outside of management's control. The performance incentives in our executive compensation program have aligned compensation with actual performance; since the beginning of 2014, several performance equity award opportunities and cash bonus opportunities have been unearned and forfeitedrespectively. These improvements came as a result of falling shortfocusing on our growth strategy and capitalizing on opportunities available to us through our prior investments in product innovation, technology and manufacturing to build our customer base and empower our sales leaders. We experienced strong growth in our Americas/Pacific, EMEA and Manufacturing segments. Additionally, we strengthened our balance sheet, repurchased more than five million shares of pre-established performance goals. For example, Mr. Hunt has forfeited a total grant value of $6,884,335stock and increased our dividend for the 19th consecutive year.
We continue to believe we have the correct growth strategy in equity awards that were contingent on 2014, 2015 or 2016 performance,place to achieve revenue growth and Messrs. Wood, Chang and Dorny have each forfeited $1,042,719 on average. In addition, Mr. Hunt realized just $529,292 in cash incentive bonuses out of a total target amount of $4,234,000 during 2014 to 2016, and Messrs. Wood, Chang and Dorny realized an average of $122,479 out of an average total target amount of $1,072,917. This reflects the pay-for-performance philosophy in whichexpand our company provides a meaningful opportunity for compensation upon meeting rigorous performance expectations but does not provide a great deal of guaranteed compensation or pay incentives without performance. As discussed further in "Compensation Discussion and Analysis," our 2016 compensation decisions centered primarily around two principles: (1) a recognition that our business was improving from the levels that followed the 2014 Mainland China disruption but was not yet meeting our expectations; and (2) the need to retain, motivate and reward our executive team if the turnaround was successful, recognizing that that they had forfeited most of their performance-based incentive compensation in the previous two years as a result of falling short of the goals.
In 2016, we devised a three-yearcustomer base. Our executive compensation program to balance these two principles. This 2016–2018 program is summarized as follows:and the pay-for-performance incentives that are built into it are key drivers of management’s motivation.
·
| To provide an− | 2020 compensation was predominantly variable. Consistent with our commitment to pay for performance, our CEO’s 2020 target compensation consisted of 82% variable compensation (cash incentive bonus and equity awards) and 18% fixed compensation (salary and all other compensation). Our other NEOs’ target compensation was 71% variable and 29% fixed. |
| − | 2020 equity awards were predominantly performance-based. The equity awards that were granted to our NEOs in 2020 also reflect our pay-for-performance philosophy. These equity awards were approximately 60% performance-based (based on grant date fair value). Going forward, the Committee generally plans to continue improving our business performance, the three-year program uses a relatively small amountusing an equity mix of guaranteed value, focusing on cash incentive awards and on equity awards for which value is realized upon either stock price appreciation or the achievement of challenging performance goals. As discussed in more detail in "Compensation Discussion and Analysis," the Committee set these goals to help drive the achievement of certain strategic objectives of our company, including growth in Mainland China and success in the continued rollout of two key products.approximately 60% performance-based awards. |
Advisory Resolution · | To address our executive retention and motivation concerns, a portion of the future compensation program value for 2017 and 2018 was frontloaded into 2016, providing more equity awards and a higher proportion of time-based awards over performance-based awards in 2016, but then fewer equity awards and a higher proportion of performance-based awards in 2017 and 2018. Unlike our 2016 equity awards, we expect that the grant date fair values of our 2017 and 2018 equity awards will be at approximately the median of our peer group, causing the average over the three years to approximate the 75th percentile.
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Thus, our 2016 compensation program is not intended to be viewed as a single year of compensation but, rather, as the first year of a three-year program, with the last two years balancing out the higher compensation that is disclosed for 2016—and in fact, our 2017 compensation decisions to date have followed this strategy, with 2017 equity grants being considerably lower than the one-time incentive provided in 2016.
The 2016 compensation of our executive officers listed in the Summary Compensation Table (collectively, the "named executive officers") reflects our 2016–2018 compensation program. The 2016 increases in our named executive officers' total compensation over 2015 are primarily attributable to (1) equity awards granted in March 2016, none of which have guaranteed value, as they require either stock price appreciation or the achievement of challenging performance goals; and (2) cash incentive bonuses that were earned at 30.5% of target in 2016 based on the partial achievement of challenging goals related to revenue and adjusted operating income.
Our 2017 executive compensation decisions to date have continued to adhere to the principles of our 2016–2018 compensation program. Consistent with the retention and motivation objective of our 2016–2018 compensation program, under which equity awards were frontloaded into 2016, the Committee granted equity awards to our executive officers in March 2017 that have a grant value at approximately the median of our peer group, with 62% of these 2017 awards being performance-based based on grant value. Consistent with our objective of continuing to improve our business performance, our 2017 goals for both equity and non-equity incentive awards are challenging, requiring above-median adjusted earnings per share growth for our performance-based equity awards that are contingent on 2017 performance and, for our cash incentive bonus program, revenue growth that approaches the 75th percentile in relation to our peer group and 75th-percentile adjusted operating income growth.
In addition, as a result of our Chief Executive Officer transition that occurred in March 2017, our Chief Executive Officer target total direct compensation for 2017 will be 59% lower than in 2016, as both cash and equity compensation will decrease from 2016 levels.
See the "Compensation Discussion and Analysis" section of this Proxy Statement and the related tables and narrative disclosure for additional information regarding our compensation program for the named executive officers.
The Board of Directors recommends that stockholders approve the following advisory resolution: RESOLVED, that the stockholders hereby approve the compensation of the company'scompany’s named executive officers, as disclosed in this Proxy Statementproxy statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative disclosure. Although this advisory resolution is non-binding, the Board values input from stockholders. The Board will consider the voting results for this proposal in making future compensation decisions. For example, at our 2016 annual meeting of stockholders, approximately 99% of the votes cast were in favor of our executive compensation program. When designing our 2017 executive compensation program, the Committee considered, among other things, the 2016 voting results and other feedback we received from our stockholders, which were viewed as supporting our pay philosophy and incentive framework. We currently intend to include a stockholder advisory voteresolution on our executive compensation program at our annual meeting of stockholders each year. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE ADVISORY RESOLUTION APPROVING THE COMPANY'S EXECUTIVE COMPENSATION.
PROPOSAL 3:
ADVISORY VOTE ON THE FREQUENCY OF FUTURE STOCKHOLDER ADVISORY VOTES ON OUR EXECUTIVE COMPENSATIONPursuant to Section 14A of the Securities Exchange Act of 1934, as amended, we are requesting that stockholders provide an advisory vote as to whether future stockholder advisory votes on our executive compensation, such as Proposal 2 above, should be held every one, two or three years.
A majority of the votes cast at our 2011 Annual Meeting of Stockholders voted in favor of holding an annual advisory vote on executive compensation, and we have held an annual advisory vote on executive compensation each year since 2011.
The Board of Directors recommends that future advisory votes on executive compensation continue to occur every year as a means to provide us with timely and direct feedback from stockholders. As discussed in the "Compensation Discussion and Analysis" section of this Proxy Statement and the related tables and narrative disclosure, our executive compensation program emphasizes long-term incentives designed to reward sustainable performance. However, we believe that holding an annual advisory vote on executive compensation will best align with the information we provide annually regarding our executive compensation program. In addition, we are aware of the significant interest in executive compensation matters by investors and the general public, and we value and encourage constructive dialogue with our stockholders on these matters.
Please note that because advisory votes on executive compensation would occur well after the beginning of the year, and because the various elements of our executive compensation program are integrated and complement one another, it may not always be feasible or appropriate to change our executive compensation program by the time of the following year's annual meeting of stockholders.
Although this advisory vote is non-binding, the Board of Directors values input from stockholders. The Board of Directors will consider the voting results for this proposal in determining how frequently to conduct the vote on executive compensation.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR "1 YEAR" ON“FOR” THE FREQUENCYAPPROVAL OF FUTURE STOCKHOLDERTHE ADVISORY VOTES ON THE COMPANY'SRESOLUTION APPROVING OUR EXECUTIVE COMPENSATION.
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RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm. The Audit Committee is also involved in the selection of the lead audit engagement partner whenever a rotational change is required, normally every five years. PricewaterhouseCoopers LLP ("PwC"(“PwC”) served as our independent registered public accounting firm for the 20162020 fiscal year. PwC has served in this capacity since the 1994 fiscal year, and the Audit Committee has selected PwC to serve in this capacity for the 20172021 fiscal year. The Audit Committee believes that the continued retention of PwC as our independent registered public accounting firm for 20172021 is in the best interests of our company and our stockholders. Before determining to retain PwC for 2021, the Audit Committee evaluated PwC’s performance and qualifications, considering such factors as technical competence, independence, adequacy of staffing the audit, quality and efficiency of services, expertise with our company and industry, reasonableness of fees, and quality and candor of communications. The Audit Committee also considered the potential impact a change in our auditors could have on our company and audit. As a matter of good corporate governance, we are asking stockholders to ratify the selection of PwC as our independent registered public accounting firm for 2017.2021. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of us and our stockholdersstockholders. Representatives of PwC are expected to be present at the Annual Meeting. They will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions. Fees to Independent Registered Public Accountants The following table presents approximate fees for professional services rendered by PwC for the audit of our annual financial statements for the 20152019 and 20162020 fiscal years and approximate fees billed for other services rendered by PwC during those periods. | | Fiscal 2016 ($) | | Fiscal 2015 ($) | Audit Fees(1) | | 2,857,000 | | 2,788,000 | Audit-Related Fees(2) | | 142,000 | | 108,000 | Tax Fees(3) | | 2,469,000 | | 2,208,000 | All Other Fees(4) | | 4,000 | | 2,000 | Total | | 5,472,000 | | 5,106,000 |
| Fiscal 2020 ($) | Fiscal 2019 ($) | Audit Fees(1) | 3,070,000 | 3,132,000 | Audit-Related Fees(2) | 23,000 | 355,000 | Tax Fees(3) | 1,577,000 | 1,398,000 | All Other Fees(4) | 3,000 | 7,000 | Total | 4,673,000 | 4,892,000 |
| (1) | Audit Fees consist of fees billed or expected to be billed for the audit of annual financial statements, review of quarterly financial statements and services normally provided in connection with statutory and regulatory filings or engagements. |
| (2) | Audit-Related Fees for 20162020 consist primarily of fees related to testing for acquisitions and the preparation of certain documents. Audit-Related Fees for 2019 consist primarily of (1) reviews and evaluations of our system implementations and methodologies related to the adoption of new accounting standards and tax reform; and (2) services in connection with our issuance of convertible debt refinance and reimbursement of legal fees and expenses paid by PwC in connection with discovery in the class action matter brought against us, which we settled during 2016. Audit-Related Fees for 2015 consist primarily of reimbursement of legal fees and expenses related to the class action matter and translation services for a foreign securities filing.acquisitions. |
| (3) | Tax Fees for 2020 consist of approximately $1,142,000$1,206,000 in fees for tax compliance work and $1,327,000$371,000 in fees for tax planning work in 2016 and $570,000work. Tax Fees for 2019 consist of approximately $1,085,000 in fees for tax compliance work and $1,638,000$313,000 in fees for tax planning work in 2015.work. |
| (4) | All Other Fees consist of software fees.access fees to accounting, financial and disclosure resources. |
Audit and Non-Audit Services Pre-Approval Policy Under the Audit and Non‑AuditNon-Audit Services Pre‑ApprovalPre-Approval Policy, the Audit Committee must pre‑approvepre-approve all audit and non‑auditnon-audit services provided by the independent registered public accounting firm. The policy, as described below, sets forth the procedures and conditions for such pre‑approvalpre-approval of services to be performed by the independent registered public accounting firm. Under the policy, proposed services may be either pre‑approvedpre-approved categorically within specified budgets ("(“general pre‑approval"pre-approval”) or specifically pre‑approvedpre-approved on a case‑by‑casecase-by-case basis ("(“specific pre‑approval"pre-approval”). In approving any services by the independent registered public accounting firm, the Audit Committee will consider whether the performance of any such service would impair the independent registered public accounting firm'sfirm’s independence. The policy also authorizes the Audit Committee chair to provide pre-approval for services, provided that she or he reports the pre-approval to the Audit Committee at its next scheduled meeting. The Audit Committee must specifically pre‑approvepre-approve the terms and fees of each annual audit services engagement. All other Audit, Audit‑related,Audit-Related, Tax, and All Other Services (each defined in the policy) may be generally pre‑approvedpre-approved pursuant to projected categorical budgets. The Audit services subject to general pre‑approvalpre-approval include such services as statutory audits or financial audits for subsidiaries or affiliates and services associated with SEC registration statements, periodic reports, and other documents filed with the SEC or other documents issued in connection with securities offerings. Audit‑relatedAudit-related services are assurance and related services that are reasonably related to the performance of the audit or review of our financial statements or that are traditionally performed by the independent registered public accounting firm. Tax services include tax compliance, tax planning, and tax advice. All Other Services are those routine and recurring services that the Audit Committee believes will not impair the independence of our registered public accounting firm. The Securities and Exchange CommissionSEC prohibits our independent registered public accounting firm from performing certain non‑auditnon-audit services, and under no circumstances will the Audit Committee approve such services. The Audit Committee will review the generally pre‑approvedpre-approved services from time to time, at least annually. Any changes to budgeted amounts or proposed services will require specific pre‑approvalpre-approval by the Audit Committee. In 2016,
The Audit Committee approved the engagement of PwC to audit our 2020 consolidated financial statements before the engagement began, and in 2020, all of the Audit-Related, Tax and All Other services provided by PwC were approved by the Audit Committee in accordance with the Audit and Non‑AuditNon-Audit Services Pre‑ApprovalPre-Approval Policy. The Audit Committee is responsible for monitoring our financial auditing, accounting, and financial reporting processes and our system of internal controls on behalf of the Board. Our management has primary responsibility for our internal controls and reporting process. Our independent registered public accounting firm, PricewaterhouseCoopers LLP ("PwC"(“PwC”), is responsible for performing an independent audit of our consolidated financial statements and the effectiveness of our internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"(“PCAOB”) and issuing an opinion thereon. The Audit Committee'sCommittee’s responsibility is to monitor these processes. In this context, the Audit Committee met and held discussions with management, our internal auditors and PwC. Management represented to the Audit Committee that the consolidated financial statements for the fiscal year 20162020 were prepared in accordance with generally accepted accounting principles. The Audit Committee hereby reports as follows: ·
| − | The Audit Committee has reviewed and discussed the audited consolidated financial statements and accompanying management'smanagement’s discussion and analysis of financial condition and results of operations with our management and PwC. This discussion included PwC'sPwC’s judgments about the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. |
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| − | The Audit Committee alsohas discussed with PwC the matters required to be discussed by the applicable requirements of the PCAOB.PCAOB and the Securities and Exchange Commission. |
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