Independent members of the Board of Directors and its committees meet in executive session, outside the presence of management or the CEO at several times during each Board meeting as well as at the end of each Board and committee meeting. The Chair of the Board (or the applicable committee chair) presides over these sessions.
Navient maintains stock ownership and retention guidelines for directors and executive officers and has a policy prohibiting the hedging or pledging of its stock.
The Board of Directors and each committee conduct performance reviews annually through a combination of online questionnaires and individual director interviews.
The Board of Directors and its committees may engage their own advisors.
| · | Independent members of the Board of Directors and its committees meet in executive session, outside the presence of management or the CEO during each scheduled Board or committee meeting. The Chair of the Board (or the applicable committee chair) presides over these sessions. |
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| · | Navient maintains stock ownership and retention guidelines for directors and executive officers and has a policy prohibiting the hedging or pledging of its stock. |
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| · | The Board of Directors and each committee conduct performance reviews annually through a combination of online questionnaires and individual director interviews. |
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| · | The Board of Directors and its committees may engage their own advisors. |
The Nominations and Governance Committee routinely conducts an assessment of director skillsets in light of the Company’s present and future businesses to ensure Board effectiveness.
The Chair of the Board Leadership Structure
and the Chair of the Nominations and Governance Committee also meet with each director on an annual basis to assess Board effectiveness and engage in discussions regarding Board succession planning and director recruiting.Board Leadership Structure |
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The Board of Directors has separated the roles of Chair of the Board of Directors and Chief Executive Officer, and the Board continues to believe that this structure properly balances the Board’s management and governance responsibilities. The Board of Directors also believes that its leadership structure has created an environment of open, transparent communication between the Board and management, enabling the Board to maintain an active, informed role in oversight by being able to monitor those matters that may present significant risks to Navient.
While it is the opinion of the Board of Directors that its leadership structure is appropriately balanced between promoting Navient’s strategic development with the Board’s management oversight function, in the future, when the Board contemplates either CEO succession or Board Chair succession, it may choose to change this governance structure at any time.
Board Succession Planning
structure.Board Succession Planning |
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Our Board Governance Guidelines provide that no individual is eligible for nomination to the Board after the earlier to occur of (i) their 75th birthday or, (ii) after they have served more than 2015 years on the Board.1During 2019, in connection with the approval of the Company’s slate of nominees for the 2019 Annual Meeting and the Canyon Agreement, William M. Diefenderfer, III notified the Board that he would not to stand for re-election at the 2019 Annual Meeting. Additionally, pursuant to the Canyon Agreement, Barry L. Williams retired from the Board effective August 9, 2019. For additional information pertaining to the Canyon Agreement, please refer to “Shareholder Engagement and Communications with the Board” below.
The Board continues to actively engageengages in succession planning and director recruiting to ensure that the size of the Board and the skills of the directors continue to align with our business strategy and the environmentenvironments in which we operate.
Management Succession Planning
Each year, the Chair of the Board and the Chair of the Nominations and Governance Committee meet with each director to engage in discussions regarding Board succession planning and director recruiting. In recruiting new directors, the Board seeks to achieve a diversity of gender, age, race, ethnicity, perspectives and experience. The Nominations and Governance Committee, in consultation with the Board, has developed an informal succession plan to address Board vacancies as they arise.We have succession plans and talent management programs in place for our Chief Executive Officer and for our team of senior executives. Our senior management succession planning process is an organization-wide practice designed to proactively identify, develop and retain the leadership talent that is critical for future business success.
We also look to promote diversity within our management team—in terms of gender, race, ethnicity, perspectives and other factors—as part of the management succession planning process._______________________________
1 Our Board Governance Guidelines state: “The Board has determined that non-employee directors will not be nominated for election to the Board after the earlier to occur of (i) their 75th birthday, or (ii) the 15th anniversary of their appointment to the Board. Notwithstanding the preceding sentence, the Board may nominate non-employee directors who have served past their term limit or whose age exceeds the age limit in special circumstances, such as to avoid the simultaneous departure of multiple non-employee directors.”
1
| Our Board Governance Guidelines state: “…individuals will not be nominated for election to the Board after the earlier to occur of (i) their 75th birthday or, (ii) after they have served more than 20 years on the Board.”2022 Proxy Statement | 
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2020 Proxy Statement |
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21 |
The succession plan for our Chief Executive Officer is reviewed regularly by the Compensation and PersonnelHuman Resources Committee and the other independent directors. The plan identifies a “readiness” level for each internal candidate and also incorporates the flexibility to define an external hire as a succession option. Formal succession planning for the rest of our senior leaders is also an ongoing process, which includes identifying a readiness level for each potential internal candidate and strategically planning for external hires for positions where gaps, if any, are identified.
Our emergency CEO succession plan is intended to respond to an immediate and unexpected position vacancy, including resulting from a major catastrophe. The plan allows the Company to continue safe and sound operation and minimizes potential disruption or loss of continuity to business and operations.
For a director to be considered independent, the Board of Directors must determine that the director does not have any direct or indirect material relationship with Navient that would interfere with the director’s exercise of independent judgment or that would render the director incapable of making a decision with only the best interests of the Company in mind. The Board of Directors has adopted the Guidelines, which include the standards for determining director independence. In addition to Delaware law requirements, the Guidelines conform to the independence requirements of Rule 10A-3 of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Nasdaq listing standards. The Guidelines can be found at www.navient.com under “Investors, Corporate Governance” and a written copy may be obtained by contacting the Corporate Secretary at corporatesecretary@navient.com.
At the end of 2019,2021, the Board of Directors was comprised of 10 members, 9 of whom were affirmatively determined to be independent. The independent members of the Board of Directors at the end of fiscal 20192021 were: Frederick Arnold; Marjorie
L. Bowen; Anna Escobedo Cabral; Larry A. Klane; Michael A. Lawson; Katherine A. Lehman;Lehman2; Linda A. Mills; Jane J. Thompson; Laura S. Unger; and David L. Yowan. During 2019,2021, and again in 2020,2022, the Board of Directors determined that each of these individuals met the Nasdaq listing standards and Navient’s own director independence standards. In addition during 2021 and again in 2022, the Board of Directors considered transactions and relationships between each director and any member of his or her immediate family on one hand, and Navient, on the other, to confirm that there were no transactions or relationships that would impair such director’s independence. Only Mr. Remondi was determined not to be independent.
independent among Navient’s current Board of Directors.Each member of the Board of Directors’ Audit, Compensation and Personnel,Human Resources, and Nominations and Governance Committees, with the exception of Mr. Bramson, is independent within the meaning of the Nasdaq listing standards, Rule 10A-3 of the Exchange Act and Navient’s own director independence standards.
The Company has made no independence determination with regard to Mr. Bramson’s role on the Board,
but has determined that he does not satisfy the audit committee independence criteria of
Directors Meetings and Attendance at Annual Meeting
Rule 10A-3 of the Exchange Act.Board of Directors Meetings and Attendance at Annual Meeting |
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The full Board of Directors met 3214 times in 2019.2021. Each of our incumbent directors attended at least 79 percent92.8% of the total number of Board and committee meetings during his or her tenure on the Board and applicable committees, with the average attendance across all our incumbent directors being 94.8%98.5% in 2019.2021. All directors attended the Company’s 2021 annual meeting of shareholders, other than Mr. Diefenderfer,Michael A. Lawson, who notifiedjoined the Board in August 2021.
_______________________________
2 In April 2022, Ms. Lehman informed the Board that heshe would not be standing for reelection to standthe Board for re-election, attended2022. Ms. Lehman will remain on the Company’s 2019 annual meeting of shareholders.
Board until June 1, 2022.
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The Board of Directors has established the following standing committees to assist in its oversight responsibilities: an Audit Committee, a Compensation and PersonnelHuman Resources Committee, a Nominations and Governance Committee, a Finance and OperationsRisk Committee, and an Executive Committee. The Board has directed the Nominations and Governance Committee to establish a Risk Committee in 2020 to replace the Finance and Operations Committee. The Risk Committee will focus primarily on oversight of the Company’s enterprise risk management infrastructure. In the coming months, the Nominations and Governance Committee will work with the Board’s other standing committees to shift certain risk oversight responsibilities to this new committee, with other oversight responsibilities moving to the full Board.
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Each standing committee is governed by a Board-approved written charter, which is evaluated annually, and which sets forth the respective committee’s functions and responsibilities. Membership of each of the committees is also changed as part of a regular rotation. Investors may find the current membership of the Board’s standing committees at http:https://www.navient.com/about/investors/corp_governance/corporate-governance/.
For 2019,In 2021, as part of the Board’s regular governance practice, an 18-month work-plan was created fromfor each of the charters of the Audit, Compensation and Personnel,Human Resources, Nominations and Governance, and Finance and OperationsRisk Committees so that the responsibilities of each committee would be addressed at appropriate times throughout the year. These work-plans will be reviewed and revised as a matter of course in 2020.2022. Agendas for committee meetings are developed based on each committee’s work-plan together with other current matters the Board chair, the committee chair or management believes should be addressed at the meeting. The chair of each committee provides regular reports to the Board of Directors regarding the subject of the committee’s meetings and any committee actions.
In addition to the Board’s five standing committees, in 2019 the Board also formed a Special Committee of independent directors to facilitate communications and recommend strategic considerations to the Board in connection with the Company’s engagement with Canyon Capital Advisors LLC (“Canyon”). For additional information pertaining to Canyon, please refer to “Shareholder Engagement and Communications with the Board” below. The Special Committee is comprised of Katherine A. Lehman, David L. Yowan and Laura S. Unger. William M. Diefenderfer, III served as an ex officio member until he departed the Board, at which time Linda A. Mills joined the committee as an ex officio member.
The following table sets forth the membership and number of meetings held for each committee of the Board of Directors during 2019.2021. This table reflects the membership of each committee as of December 31, 2019.2 2021. It is the practice of the Board to hold its regular committee meetings in conjunction with the regular meetings of the Board. Given the Audit Committee’s responsibilities relating to our financial statements and financial reporting, it is expected that the Audit Committee will meet more often than the other committees.
| | Audit Committee | Compensation and Personnel Committee | Executive Committee | Finance and | Nominations
and Governance Committee | Special Committee |
| Frederick Arnold | X | | | X | | |
Marjorie L. Bowen (1) | X | | | | X | |
| Anna Escobedo Cabral | CHAIR | | X | | X | |
Larry A. Klane (2) | | X | | X | | |
| Katherine A. Lehman | | X | X | CHAIR | | X |
Linda A. Mills (3) | | | CHAIR | | | X |
| John F. Remondi | | | X | | | |
Jane J. Thompson (4) | | CHAIR | X | | X | |
| Laura S. Unger | X | | X | | CHAIR | X |
David L. Yowan (5) | | X | | X | | X |
| Number of Meetings in 2019 | 10 | 7 | 4 | 10 | 13 | 15 |
| Audit Committee | Compensation and Human Resources Committee | Executive Committee | Risk Committee | Nominations and Governance Committee |
Frederick Arnold | X | | | X | |
Anna Escobedo Cabral (1) | X | X | | | |
Larry A. Klane | | X | | X | |
Michael A. Lawson | X | X | | | |
Katherine A. Lehman (2) | | | X | CHAIR | X |
Linda A. Mills | | | CHAIR | | |
John F. Remondi | | | X | | |
Jane J. Thompson | | CHAIR | X | | X |
Laura S. Unger (3) | | | X | X | CHAIR |
David L. Yowan | CHAIR | | X | X | |
Number of Meetings in 2021 | 9 | 8 | 9 | 4 | 4 |
Chair = Committee Chair
(1) | Ms. Bowen was appointed toCabral served on the Board on May 1, 2019. Ms. Bowen is not being nominated by the Board for reelection,Nominations and her tenure as a director will endGovernance Committee until August 2, 2021, when her current term expires at our 2020 Annual Meeting. |
(2) | Mr. Klane was appointed to the Board on May 1, 2019. |
(3) | Ms. Mills served asshe became a member of the FinanceCompensation and Operations Committee andHuman Resources Committee. |
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(2) | Ms. Lehman served on the Compensation and PersonnelHuman Resources Committee until her appointment as Chair of the Board on June 6, 2019. For the remainder 2019, she served as Chair of the Executive Committee and as an ex officio member of the Special Committee. |
(4) | Ms. Thompson served on the Finance and Operations Committee until June 6, 2019,August 2, 2021, when she became a member of the Nominations and Governance Committee. Ms. Lehman is not standing for re-election to the Board in 2022. |
(5) | Mr. Yowan |
(3) | Ms. Unger served on the Audit Committee until June 6, 2019,August 12, 2021, when heshe became a member of the Compensation and PersonnelRisk Committee. |
2
| In connection with the Canyon Agreement, the terms of which are discussed on page 30 of this proxy statement, William M. Diefenderfer, III elected not to stand for re-election to the Board at the 2019 Annual Meeting. Before his departure, Mr. Diefenderfer served as Chairman of the Board and Chair of the Executive Committee. Barry L. Williams agreed to retire from the Board of Directors in connection with the Canyon Agreement. Mr. Williams served as a member of the Compensation and Personnel Committee, the Nomination and Governance Committee, and the Finance and Operations Committee at various times during 2019 until his retirement from the Board effective August 9, 2019. |
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The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Exchange Act. During 2019,2021, the Audit Committee, as set forth in its charter, assisted the Board of Directors in fulfilling its responsibilities by providing oversight relating to: (1) the integrity of Navient’s financial statements; (2) the Company’s system of internal controls; (3) the qualifications, performance and independence of Navient’s independent registered accounting firm; (4) the performance of the Company’s internal audit function; (5) risks related to Navient’s compliance, legal and regulatory matters; and (6) the review of related party transactions. In addition, the Audit Committee reviews the Company’s procedures for the receipt, retention and handling of confidential, anonymous complaints pertaining to accounting, internal accounting controls and auditing matters, including procedures for the periodic review of violations or waivers of compliance with the Company’s Code of Business Conduct, and prepares the report of the Audit Committee for Navient’s annual proxy statement, as required by the SEC. The Board of Directors has determined that one membertwo members of the Audit Committee—Frederick Arnold— qualifiesCommittee, Mr. Yowan, the Committee Chair, and Mr. Arnold, qualify as audit committee financial experts, as that term is defined under the rules promulgated by the SEC. During 2019,2021, no member of the Audit Committee served on the audit committee of more than three public companies.
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Compensation and PersonnelHuman Resources Committee
Pursuant to the provisions of its charter, which can be found on our website in full, the primary responsibilities of the Compensation and PersonnelHuman Resources Committee (also referred to herein as the “Compensation Committee”) during 20192021 were to:
(1) approve or recommend, as appropriate, compensation, benefits and employment arrangements for Navient’s Chief Executive Officer and certain other executive officers who report to the CEO (collectively “Executive Management”), and the independent members of the Board of Directors; (2) review and approve compensation plans, incentive plans and benefit plans applicable to Executive Management; (3) review, approve and administer all equity-based plans of the Company;
(4) supervise the administration of employee benefit plans of Navient as required by law or the plan terms or as otherwise appropriate; (5) receive periodic reports regarding the Company’s compensation programs as they relate to all employees;
(6) review Navient’s management development and recommend to the Board of Directors succession plans applicable to Executive Management; (7) review and consider current and developing compensation and personnelhuman resources related topics as appropriate, including performance management, leadership development, turnover and retention, diversity, and employee engagement; (8) review Navient’s strategy for promoting diversity, equity and (8)inclusion in the workplace; and (9) prepare the report of the Compensation Committee for inclusion in this proxy statement, as required. The Compensation Committee, in coordination with the Audit Committee also reviews the report of management on the potential risks arising from Navient’s compensation policies and practices to determine whether such policies and practices are reasonably likely to have a material adverse effect on the Company.
The Compensation Committee considers executive officer and director compensation on an annual basis. In January or February of each year, after consultation with the independent chair and other independent directors, as well as its independent consultant, if one has been retained, the Compensation Committee approves the compensation of the Chief Executive Officer and Executive Management. At that time, the Compensation Committee also makes a recommendation to the Board of Directors regarding director compensation. The Compensation Committee reviews executive compensation as described in the “Compensation Discussion and Analysis” section of this proxy statement. In addition, throughout the year, the Compensation Committee considers executive compensation consistent with its responsibilities, as warranted by any personnel changes.
Risk Committee
During 2021, the Risk Committee assisted the Board of Directors, as required by its charter, by providing oversight with respect to: (1) the Company’s Enterprise Risk Management policy, standards and program; (2) material corporate finance matters, including investments, mergers and acquisitions, capital management, financing and funding strategy; (3) technology operations and business continuity; (4) marketing and product development; (5) asset quality and other components of the Company’s lending programs; and (6) the Company’s information security program and cybersecurity. The Risk Committee also reviewed the financial risk profile of Navient, including capital market access, credit, interest rate, currency and programmatic/contractual risks and reviewed with management steps to manage those risks.
Nominations and Governance Committee
In accordance with its charter, the Nominations and Governance Committee assists the Board of Directors in establishing appropriate standards for the governance of Navient, the operations of the Board of Directors generally and the qualifications of directors. It recommends to the Board of Directors the director nominees for the annual meeting of shareholders; oversees the orientation of new directors and the ongoing education of the Board; recommends director assignments to the Board’s standing committees; oversees the Company’s reputational and political risks, including environment, social and governance (“ESG”) risks; supervises the Board’s self-evaluation and succession process; and reviews and recommends changes to the Board’s Governance Guidelines. Additionally, the Nominations and Governance Committee routinely benchmarks the Company’s governance practices against industry best practices and makes appropriate changes when necessary.
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Each of the Committees’ charters is available at www.navient.com under “Investors, Corporate Governance.” Shareholders may obtain a written copy of a committee charter by contacting the Corporate Secretary at corporatesecretary@navient.com or Navient Corporation, 123 Justison Street, Wilmington, Delaware 19801.
Executive Committee
Since its creation, membership of the Executive Committee has included the committee chairs, the Chief Executive Officer and the Board chair. Under its charter, the Executive Committee has authority to act on behalf of the Board of Directors when the full Board of Directors is not available, and oversees the allocation of risk oversight responsibilities among Board committees. In conjunction with the Audit Committee, it also reviews with management the Company’s quarterly earnings and press releases.
Finance and Operations Committee
During 2019, the Finance and Operations Committee assisted the Board of Directors, as required by its charter, by providing oversight with respect to: (1) material corporate finance matters, including investments, mergers and acquisitions, capital management, financing and funding strategy; (2) technology and operations; (3) marketing and product development; (4) the Company’s lending programs; and (5) the Company’s information security program and cybersecurity. The Finance and Operations Committee also reviewed the financial risk profile of Navient, including capital market access, credit, interest rate, currency and programmatic/contractual risks and reviewed with management steps to manage those risks.
Compensation Consultant and Independence |
2020 Proxy Statement | | 24 |
Nominations and Governance Committee
In accordance with its charter, the Nominations and Governance Committee assists the Board of Directors in establishing appropriate standards for the governance of Navient, the operations of the Board of Directors generally and the qualifications of directors. It recommends to the Board of Directors the director nominees for the annual meeting of shareholders, oversees the orientation of new directors and the ongoing education of the Board, recommends director assignments to the Board’s standing committees, oversees the Company’s reputational and political risks, supervises the Board’s self-evaluation and succession process and reviews and recommends changes to the Board’s Governance Guidelines. Additionally, the Nominations and Governance Committee routinely benchmarks the Company’s governance practices against industry best practices and makes appropriate changes when necessary.
Each of the Committees’ charters is available at www.navient.com under “Investors, Corporate Governance.” Shareholders may obtain a written copy of a committee charter by contacting the Corporate Secretary at corporatesecretary@navient.com or Navient Corporation, 123 Justison Street, Wilmington, Delaware 19801.
Compensation Consultant and Independence
During 2019,2021, the Compensation Committee retained Pearl Meyer as its independent compensation consultant (the “Compensation Consultant”).
The Compensation Consultant reported directly to the Compensation Committee, and the Compensation Committee retained authority to replace the Compensation Consultant or hire additional consultants at any time. A representative from the Compensation Consultant participated in meetings of the Compensation Committee and met with the committee without the presence of management, as requested, and directly communicated with the Chair of the Compensation Committee between meetings. However, the Compensation Committee made all decisions regarding the compensation paid to Navient’s named executive officers.
The Compensation Consultant provided various executive compensation services to the Compensation Committee pursuant to a written consulting agreement with the Compensation Committee. Generally, these services included advising the Compensation Committee on the principal aspects of Navient’s executive and director compensation programs, assisting in the selection of the compensation peer group, providing market information and analysis regarding the competitiveness of our compensation, program design, reviewing Navient’s executive compensation disclosures, and informing the Committee about emerging compensation-related regulatory and industry issues.
During 2019,2021, and again in 2020,2022, the Compensation Committee considered the independence of the Compensation Consultant in light ofunder SEC rules and Nasdaq listing standards. The Compensation Committee received a written statement of independence from the Compensation Consultant, which addressed the following factors: (1) other services provided to Navientthe Committee by the Compensation Consultant; (2) fees paid by the Company as a percentage of the Compensation Consultant’s total revenues; (3) policies or procedures maintained by the Compensation Consultant that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and any member of the Compensation Committee; (5) any Navient Common Stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and the Compensation Consultant or the individual consultants involved in the engagement. The Compensation Committee discussedreviewed these considerations and concluded that the work of the Compensation Consultant did not raise any conflicts of interest. For more information on the Compensation Committee and the Compensation Consultant, please see the “Compensation Discussion and Analysis” section in this proxy statement.
Compensation Committee Interlocks and Insider Participation
Ms. Thompson, Ms. Cabral, Mr. Klane, Mr. Lawson, and Ms. Lehman and Mr. Yowan were members of the Compensation Committee during fiscal year 2019.2021.3All members of the Compensation Committee were independent directors, and no member was an employee or
3
| Mr. Williams served on the Compensation Committee until his retirement in August 2019. Ms. Mills also served on the Compensation Committee until her appointment to Chair of the Board on June 6, 2019. |
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former employee of Navient or its affiliates. During fiscal year 2019,2021, none of Navient’s executive officers served on a compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on the Compensation Committee.
The Board3 Ms. Cabral and Mr. Lawson joined the Committee on August 2, 2021. Ms. Lehman served on the Compensation and Human Resources Committee until August 2, 2021, when she became a member of Directors’ Role in Risk Oversight
the Nominations and Governance Committee.
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The Board of Directors’ Role in Risk Oversight |
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Our Board of Directors has the ultimate responsibility for risk oversight forunder Navient’s Enterprise Risk Management (“ERM”) philosophy and framework. In carrying out this critical responsibility, the Board has designated the AuditRisk Committee as having primary responsibility to assist the Board in the development, maintenance and governance of the company’s ERM policy, standards and program. Other standing committees of the Board are charged with overseeing specific enterprise risks, as described below. The Board and its standing committees are responsible for ensuring we adhere to established risk tolerances and parameters that form a cornerstone of the company’sour ERM framework.
The Board has delegated day-to-day responsibility for risk oversight to our Chief Executive Officer and senior management team, who in turn have established the following management committees to implement this directive: Enterprise Risk and Compliance Committee, Credit and Loan Loss Committee, Asset and Liability Committee, and Incentive Compensation Plan Committee. These internal management committees, described in more detail below, provide regular reports to the Board and its standing committees—either directly or through one or more senior executives. The overall risk governance structure is illustrated below:
The Nominations and Governance Committee regularly reviews the composition and membership of each standing committee of the Board and makes recommendations to the Board. Outside of the SEC and Nasdaq requirements for eligibility to serve on certain committees, such as the Audit Committee and the Compensation and PersonnelHuman Resources Committee, the Nominations and Governance Committee actively considers each committee’s responsibilities, as outlined in its charter, as well as individual director skillsets when deciding which directors will serve on specific standing committees.
The Board has directed the Nominations and Governance Committee to establish a Risk Committee in 2020 to replace the Finance and Operations Committee. The Risk Committee will focus primarily on oversight of the Company’s enterprise risk management infrastructure. In the coming months, the Nominations and Governance Committee will work with the Board’s other standing committees to shift certain risk oversight responsibilities to this new committee, with other oversight responsibilities moving to the full Board.
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Navient employs a Risk Appetite Framework to identify the most significant risks that could impact our business and provides the process for evaluating and quantifying those risks. The Risk Appetite Framework defines the type and degree of risk Navient is able and willing to assume, given its business objectives, contractual and other legal requirements, and obligations to stakeholders. As noted below, our Risk Appetite Framework segments enterprise risk into nine enterprise risk domains.
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Enterprise Risk Domains
Our Risk Appetite Framework segments Navient’s enterprise risks across nine enterprise risk domains: (1) Credit; (2) Market; (3) Funding and Liquidity; (4) Compliance; (5) Legal; (6) Operational; (7) Reputational and Political; (8) Governance; and (9) Strategy. These risk domains are disclosed in our Form 10-K and proxy statements filed with the SEC. As noted above, our Board of Directors has the ultimate responsibility for risk oversight for Navient’s ERM framework.
The Board has assigned oversight responsibility for each risk domain to one or more of its standing committees. These risk oversight responsibilities are spelled out in each standing committee’s charter. Investors can find the charter of each committee on our website at https://www.navient.com/investors/corporate-governance/www.navient.com/about/investors/corp_governance/board_charters/.
Each of the enterprise risk domains is described below, along with the standing committee(s) responsible for risk oversight.
Enterprise Risk Domain | Board Committee | | Risk Description |
Credit | Finance and OperationsRisk Committee | | Risk resulting from an obligor's failure to meet the terms of any contract with the Company or otherwise fail to perform as agreed. |
Market | Finance and OperationsRisk Committee | | Risk resulting from changes in market conditions, such as interest rates, spreads, commodity prices or volatilities. |
Funding and Liquidity | Finance and Operations
| | Risk arising from the Company's inability to meet its obligations when they come due without incurring unacceptable losses. |
Compliance | Audit Committee Finance and Operations Committee | | Risk arising from violations of, or non-conformance with, laws, rules, regulations, prescribed practices, internal policies, and procedures, or ethical standards. |
Legal | Finance and Operations Committee
| | Risk manifested by claims made through the legal system, including litigation brought against the Company. Legal risk may arise from a product, a transaction, a business relationship, property (real, personal, or intellectual), employee conduct, or a change in law or regulation. |
Operational | Finance and OperationsRisk Committee Compensation and PersonnelHuman Resources l Committee | | Risk resulting from inadequate or failed internal processes, personnel and systems, inadequate product design and testing, or from external events.events, including cybersecurity risk. |
Reputational and Political | Governance Committee | | Risk from stakeholder perceptions regarding actual or alleged violations of law,on legal matters, environmental, social and governance matters, our internal code of conduct or other employee misconduct. |
Governance | Nominations and Governance Committee | | Risk of not establishing and maintaining a control environment that aligns with stakeholder and regulatory expectations, including tone at the top and board performance. |
Strategic | Executive Committee | | Risk from adverse business decisions or improper implementation of business strategies. |
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Cybersecurity Risk Oversight
The Board of Directors, through the Finance and OperationsRisk Committee, plays an important role in overseeing the Company’s cybersecurity risk management. The Finance and OperationsRisk Committee receives regular briefings from the Company’s Chief Information Security Officer relating to the most recent developments in cybersecurity prevention, detection, response and recovery as well as updates on breaches and exploitations, both successful and unsuccessful, at other companies.
In 2021, the entire Board received these briefings.Additional Risk Oversight Information
Additional information about how we actively managingmanage risk for our stakeholders, including our customers, clients, employees, and shareholders, can be found on the Governance Documents & Reports section of our website at https://navient.com/assets/about/www.navient.com/investors/corp-corporate-governance/governance/Navient-Board-Risk-Oversight.pdf.
Risk Assessment of Compensation Policies
in a report titled “Meeting Our Commitment: A Report on How Navient Manages Risk.”
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Risk Assessment of Compensation Policies |
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Navient maintains an internal Incentive Compensation Plan Committee (the “ICP Committee”) that conducts an annual risk review and assessment of the various incentive compensation plans covering our employees—including plans that cover our named executive officers—to ensure that our employees are not incentedincentivized to take inappropriate risks which could impact our financial position and controls, reputation and operations. Our Chief Risk and Compliance Officer, Chief Legal Officer, Chief Audit Officer and Chief Human Resources Officer serve on the ICP Committee, along with other senior business leaders. The ICP Committee presented its annual findings to the Compensation Committee and the Audit Committee in early 2020,2022, and the Compensation Committee determined that the Company’s incentive compensation programs do not encourage or create unnecessary risk-taking, and that the risks arising from the programs are not reasonably likely to have a material adverse effect on the Company. The ICP Committee will continue to monitor our incentive compensation plans, as well as the plan governance structure put in place to mitigate risks associated with the plans, to ensure that our incentive compensation practices properly incentincentivize our employees and reflect industry best practices.
As described earlier in this proxy statement, the Board actively engages in succession planning and director recruiting to ensure that the size of the Board and the skills of the directors continue to align with our business strategy and the environment in which we operate. The Nominations and Governance Committee considers director candidates recommended by shareholders and also receives suggestions for candidates from Board members or third parties. The Nominations and Governance Committee has, from time to time, engaged and may continue, in the future, to engage third-party search firms to assist in identifying director candidates.
Candidates are evaluated based on the needs of the Board of Directors and Navient at that time, given the then-current mix of Board members, their individual skills and experiences relative to the Company’s business strategy, and the Nominations and Governance Committee’s desire to bring additional skills or experiences to the Board. While Navient does not have a formal Board diversity policy, the Board of Directors actively seeks representation that reflects gender, race, ethnic, age and geographic diversity, as reflected in the Guidelines.well as a diversity of perspectives and experience. The Nominations and Governance Committee, through its charter, is charged with reviewing the composition, skills and diversity of the Board of Directors, and as part of the process, the Nominations and Governance Committee incorporates into the Board of Directors’ annual evaluation process, the opportunity for each Board member to provide input regarding the current and desired composition of the Board of Directors and desired attributes of Board members. The minimum qualifications and attributes that the Nominations and Governance Committee believes a director nominee must possess include:
Knowledge of Navient’s business;
Proven record of accomplishment;
Willingness to commit the time necessary for Board of Director service;
Integrity and sound judgment;
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| · | Proven record of accomplishment; |
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| · | Integrity and sound judgment; |
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| · | Ability to challenge and stimulate management; and |
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| · | Independence. |
Willingness to represent the best interests of all shareholders and effectively oversee management performance;
Ability to challenge and stimulate management; and
In addition, the Nominations and Governance Committee believes the Board of Directors collectively should encompass a mix of skills and expertise in the following areas:
Finance, including capital allocation;
| · | Finance, including capital allocation; |
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| · | Accounting/audit; |
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| · | Corporate governance; |
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| · | Executive leadership; |
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| · | Information security and cybersecurity; |
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| · | Financial services, including financial technology and innovation; |
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| · | Capital markets; |
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| · | Business operations and operating efficiency; |
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| · | Mergers and acquisitions; |
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| · | Higher education; |
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| · | Consumer credit; |
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| · | Business processing solutions and outsourcing; |
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| · | Consumer marketing and product development, including customer experience; |
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| · | Government/Regulatory; and |
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| · | Legal. |
In April 2022, following a rigorous diligence process, the Nominations and Governance Committee recommended to the Board that Mr. Edward J. Bramson be nominated to serve on the Board. Mr. Bramson is a Partner in Sherborne Investors Management LP, a beneficial holder of 19.7% of the Company’s outstanding shares. Mr. Bramson brings an extensive background to the Board having served as the Chief Executive leadership;
Information securityOfficer and cybersecurity;
Financial services, including financial technologyExecutive Chairman of numerous public and innovation;
Business operationsprivate companies. Mr. Bramson and operating efficiency;
Mergersthe Company have entered into a Nomination and acquisitions;
Business processing solutions and outsourcing;
Consumer marketing and product development, including customer experience;
Government/Regulatory; and
Cooperation Agreement dated April 14, 2022. For additional information regarding Mr. Bramson’s nomination to the Board, please refer to page 23 of this proxy statement.The Nominations and Governance Committee considers and evaluates candidates recommended by shareholders in the same manner that it considers and evaluates all other director candidates. To recommend a candidate, shareholders should send, in writing, the candidate’s name, credentials, contact information, and his or her consent to be considered as a candidate to the Chair of the Nominations and Governance Committee at corporatesecretary@navient.com or c/o Corporate Secretary, Navient Corporation, 123 Justison Street, Wilmington, Delaware 19801. The shareholder should also include his or her contact information and a statement of his or her share ownership. A shareholder wishing to nominate a candidate must comply with the notice and other requirements described under “Shareholder Proposals for the 20212023 Annual Meeting” in this proxy statement.
The Company will include in its proxy statement and on its form of proxy card, the name of a director nominee submitted by an “Eligible Holder” who provides the information and satisfies the other provisions of the Company’s bylaws. To qualify as an “Eligible Holder,” a shareholder or a group of no more than 20 shareholders must have continuously owned at least three percent (3%) of the outstanding shares of the Company’s Common Stock entitled to vote in the election of directors for a period of at least three years and thereafter continue to own the shares through the Company’s annual meeting. There are no proxy access board nominees for the 2020 annual meeting.2022 Annual Meeting. A complete version of the Company’s Second Amended and Restated Bylaws can be found on the Corporate Governance page of our website at the following location: https://navient.com/about/www.navient.com/investors/corp_governance/corporate-governance/.
Director Orientation and Continuing |
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Director Orientation and Continuing Education
The Nominations and Governance Committee oversees the orientation of new directors and the ongoing education of the Board. As part of Navient’s director orientation program, new directors participate in one-on-one introductory meetings with Navient business and functional leaders and are given presentations by members of senior management on Navient’s businesses, operations, strategic plans, financial statements, and key issues, policies and practices. In addition, directors receive education on governance and director fiduciary duties and expectations. Directors may enroll in director continuing education programs on corporate governance and critical issues associated with a director’s service on a public company board. Navient makes an annual stipend available to each director towards the expenses of these programs. Our senior management meets regularly with the Board and meets annually to review with the Board the operating plan of the Company and each of our strategic business groups. The Board also regularly participates in full Board educational programs and visits to Navient operation centers.
Shareholder Engagement
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Our Commitment to Environment, Social and Governance (“ESG”) Matters |
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We recognize the importance of Environmental, Social and CommunicationsGovernance consideration to our investors. We have a long-standing commitment to the communities where we live and work, the environment, our employees, our customers and other stakeholders. Highlights of our commitment and approach to ESG matters are described below. Additional information appears on the About Us section of our website at https://about.navient.com and in our Corporate Social Responsibility Report found on our website.
Environment
Navient recognizes the importance of responsible environmental management and conservation of resources. In our facilities, we incorporate energy-efficient building support systems and corporate-sponsored recycling programs. Navient also is proactive in reducing travel-related emissions by providing video teleconferencing in its facilities, conference and training spaces. We make it easy for our millions of clients and customers to “go paperless” with us, reducing the Board
natural resources needed to print and mail hardcopy communications. Finally, as our employees begin returning to the office, we are taking into consideration the utilization of remote and hybrid work environments and are adapting our real estate footprint in an effort to optimize building management systems. Our CEO, Chief Financial Officer,Employees, Our Customers and Vice PresidentOur Communities
We are committed to creating a workplace where employees are welcomed and respected for who they are as individuals. We believe that our employees and workplace thrive when we are authentically inclusive. We grow and innovate the best when we embrace a rich diversity that reflects the customers and communities we serve.
Through our inclusion, diversity and equity strategy, our employees lead and participate in initiatives such as our Inclusion, Diversity & Equity Council and inclusion, diversity and equity education and awareness campaigns. Our voluntary, staff-led employee resource groups enable individuals to join together in the workplace based on their common interests, shared life experiences, backgrounds, and demographic factors such as gender, race and ethnicity. To attract a diverse population of Investor Relations, together with other memberspotential employees, Navient markets all open positions through over 100 diversity job boards, extensive national, state, and community-based alliances, and job banks in all 50 states and U.S. territories. Further, our Compensation Committee reviews the report of management meet periodicallyon our inclusion, diversity and equity efforts as well as the resulting actions and progress made on such efforts at a minimum of once each year and considers such efforts in approving the final compensation of our executive officers as further described in the “Compensation Discussion and Analysis” section of this proxy statement.
We provide education finance solutions to help people pursue higher education and successfully manage their finances. We have aided millions of households on their path toward success. As a student loan servicer, we support people to successfully manage their student loan payments and build good credit. We also help student loan borrowers understand their repayment options so they can make informed choices that align with investorstheir financial circumstances and goals.
| · | We helped more than 4.6 million student loan borrowers pay off their student loans over the past decade. |
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| · | We have helped millions of borrowers enroll in federal income-driven repayment plans. |
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| · | Since 2014, we have refinanced more than $18 billion in student loans, helping borrowers save thousands through lower interest rates and accelerate their journey to successful repayment. |
We support the communities where we live and work. Building on our focus to discuss Navient’s strategyhelp people along the path to financial success, the Navient Community Fund supports organizations that address the root causes that limit financial success for all Americans. Our employees get involved in a variety of community activities such as distributing and reading books to kids, participating in blood drives, and collecting food and school supplies for families in need. We offer up to four hours of paid time off per month to empower employees to volunteer for a Navient-supported nonprofit organization in their community.
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Navient has partnered with Boys & Girls Clubs of America (BGCA) to bring career and college planning resources for youth, including those from under-resourced communities. Through this partnership, we have helped develop digital tools and curriculum to help youth learn about college and financial aid and business performance, andexplore careers relevant to update investors on key developments. During 2019 and into 2020,their unique interests. Navient participated inemployees also volunteer at least 100 meetings with investors and potential investors. In addition, we routinely seek our shareholders’ views on governance and compensation matters.
At various times prior to December of 2017, representatives of the Company met with representatives of Canyon Capital Advisors LLC (“Canyon”) as a part of the Company’s engagement strategy that focuses on regularly meeting with its shareholders, bond holders and investorsBGCA clubs in the
asset-backed securities it sponsors. In May 2019,communities where we live and work, including hosting college fairs, speaking at career days, painting club buildings and organizing back-to-school supply drives.Governance
We are proud of our best-in-class governance practices—described in this proxy statement—and our leadership in board diversity. We have been recognized for board diversity by the Company became aware that Canyon had accumulated a beneficial interest in approximately 9.6%Forum of the Company’s outstanding common stock.4 In August 2018, at the requestExecutive Women, Women’s Forum of Canyon, the Board agreed to appoint Frederick Arnold to the Board. On May 2, 2019, we entered into a cooperation agreement with Canyon (the “Canyon Agreement”) whereby the Board agreed, among other things, to appoint Marjorie BowenNew York, and Larry Klane as directors of the Company, subject to the satisfaction of certain customary conditions, and to nominate and recommend Ms. Bowen and Mr. Klane for election to the Board at the Company’s 2019 Annual Meeting of Shareholders. The appointments of Mr. Arnold, Ms. Bowen and Mr. Klane were approved by our shareholders in June 2019. On January 27, 2020, the Company entered into a Stock Repurchase Agreement with Canyon to repurchase its remaining interest in the Company’s common stock. During this time, various representatives of Canyon met or held discussions with various members of management, the Special Committee and other members of the Board.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Canyon Agreement, included as Exhibit 10.01 to the Company’s Form 8-K that was filed with the SEC50/50 Women on May 3, 20195, the Company’s Definitive Proxy Statement filed with the SEC on Form DEF 14A on April 30, 20196, and its Amended Definitive Proxy Statement on Form DEF 14A filed with the SEC on May 8, 20197, all of which are furnished herewith.
Shareholders and other interested parties may submit communications to the Board of Directors, the non-management directors as a group, the Chair or any other individual member of the Board of Directors by contacting the Chair of the Board in writing at corporatesecretary@navient.com or c/o Corporate Secretary, Navient Corporation, 123 Justison Street, Wilmington, Delaware 19801.
Except as discussed below or otherwise directed, the Corporate Secretary forwards all such communications to the Board Chair. The Chair in turn determines whether the communications should be forwarded to other members of the Board and, if so, forwards them accordingly. However, for communications addressed to a particular member of the Board, the Chair
Boards. | On May 4, 2019, Canyon reportedPolicy on Form 13D/A filed with the SEC that it beneficially owned 25,435,480 or 9.6% of the Company’s outstanding shares.Political Contributions, Disclosure and Oversight |
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of a particular Board committee or the non-employee directors as a group, the Corporate Secretary forwards those communications directly to those individuals.
The directors have requested that communications that do not directly relate to their duties and responsibilities as our directors be excluded from distribution. Such excluded items include “spam,” advertisements, mass mailings, form letters and email campaigns that involve unduly large numbers of similar communications, solicitations for goods, services, employment or contributions, surveys and individual product inquiries or complaints. Additionally, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will be screened for omission. Any omitted or deleted communications will be made available to any director upon request.
Policy on Political Contributions, Disclosure and Oversight
We did not make any political contributions using corporate funds in 2019,2021, and we have no intention of making such political contributions in 2020.2022. The Company's Government Relations personnel are responsible for the development and implementation of policies pertaining to the Company’s political activities. They report annuallysemi-annually to the Nominations and Governance Committee of the Board on major lobbying priorities and principles.principles as well as the political risk environment in which the Company operates. Government Relations also provides the Committee with a report on any payments made to trade associations, political expenditures, contributions made to other tax-exempt political organizations, as well as contributions by the Company's Political Action Committee. Navient also maintains numerous compliance processes structured to ensure that the Company and its employees conduct all their activities in accordance with our Code of Business Conduct and with all relevant laws governing political contributions and lobbying activities.
Since 2016, we have disclosed our political activity and contributions through the publication ofpublished our Transparency in Policy Engagement and Political Participation Report. In 2018, the Company was recognized as a “Trendsetter” in the CPA-Zicklin Index for political transparency. The Report provides an overview of the Company’s legislative and political priorities and also provides details pertaining to Navient’s contributions to members of Congress, trade associations, 527 political organizations and other political organizations. The Nominations and Governance Committee has instructed the Company to update the report on a semi-annual basis. The current Report is available on the Company’s website at https://www.navient.com/about/who-we-are/transparency/.
CodeSummary of Right to Purchase Preferred Shares |
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In December 2021, our Board declared a dividend of Business Conduct
one preferred share purchase right (a “Right”) for each outstanding share of common stock, par value $0.01 per share (“Company Common Stock”). The dividend became payable on December 30, 2021, to the shareholders of record as of the close of business on December 30, 2021. These rights will expire on December 19, 2022 (or earlier to the extent provided in the Rights Agreement (as defined below)).Our Board has adopted the Rights Agreement (as defined below) in response to recent stock activity and the accumulation of a substantial economic position in the Company by entities associated with Sherborne Investors Management LP. The Rights Agreement is designed to protect shareholder interests by reducing the likelihood that any person or group would gain control of Navient through the open-market accumulation of the Company Common Stock without appropriately compensating the Company’s shareholders for control. In general terms, it works by imposing a significant penalty upon any person or group that acquires 20% or more of outstanding Company Common Stock without the approval of our Board. If a shareholder’s beneficial ownership of Company Common Stock as of the time of the public announcement of the rights plan and associated dividend declaration is at or above the applicable threshold (including through entry into certain derivative positions), that shareholder’s then existing ownership percentage would be grandfathered, but the rights would become exercisable if at any time after such announcement, the shareholder increases its ownership percentage by 0.001% or more. The Rights Agreement would not interfere with any merger or other business combination approved by our Board. It also does not apply to a fully financed cash offer for all of the Company’s shares meeting the requirements described below.
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The Rights Agreement includes a qualifying offer exception for offers that meet the following conditions: the offer is (1) a fully financed all-cash tender offer for any and all of the outstanding shares of Company Common Stock, (2) open for at least 60 business days, (3) conditioned on a minimum number of shares of the Company Common Stock being tendered and not withdrawn as of the expiration date as would provide the bidder, upon consummation of the offer, with beneficial ownership of at least a majority of the Company Common Stock, which condition shall not be waivable, (4) accompanied by an irrevocable and legally binding written commitment of the offeror to consummate, as promptly as practicable upon successful completion of the offer, a second step transaction whereby all outstanding shares of Company Common Stock not purchased in the offer will be acquired for the same per-share consideration actually paid pursuant to the offer, subject to shareholders’ statutory appraisal rights, if any, and (5) accompanied by an irrevocable and legally binding written commitment to provide a “subsequent offering period” in accordance with Rule 14d-11 of the Exchange Act of 20 business days following the consummation of the offer.
For those interested in the specific terms of the Rights Agreement as made between our Company and Computershare Trust Company, N.A., as the Rights Agent, on December 20, 2021 (the “Rights Agreement”), we provide the following summary description.
Shares held by Affiliates and Associates of an Acquiring Person, and Notional Common Shares held by counterparties to a Derivatives Contract (as such capitalized terms are defined in the Rights Agreement) with an Acquiring Person, will be deemed to be beneficially owned by the Acquiring Person.
Expiration. The Rights will expire on December 19, 2022, though the Board intends to consider whether to terminate the rights plan earlier if circumstances warrant.
Redemption. Our Board may redeem the Rights for $0.01 per Right at any time before any person or group becomes an Acquiring Person. If our Board redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price of $0.01 per Right. The redemption price will be adjusted if we have a stock split or stock dividends of Company Common Stock.
Qualifying Offer Provision. The Rights would also not interfere with all-cash, fully financed tender offers for all shares of Company Common Stock that remain open for a minimum of 60 business days, are subject to a minimum condition of a majority of the outstanding shares and provide for a 20-business day “subsequent offering period” after consummation (such offers are referred to as “Qualifying Offers”). In the event the Company receives a Qualifying Offer and the Board has not redeemed the Rights prior to the consummation of such offer, the consummation of the Qualifying Offer shall not cause the offeror or its affiliates or associates to become an Acquiring Person, and the Rights will immediately expire upon consummation of the Qualifying Offer.
Anti-Dilution Provisions. Our Board may adjust the purchase price of the Preferred Shares, the number of Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split or a reclassification of the Preferred Shares or Company Common Stock. No adjustments to the Exercise Price of less than 1% will be made.
Amendments. The terms of the Rights Agreement may be amended by our Board without the consent of the holders of the Rights. After a person or group becomes an Acquiring Person, our Board may not amend the Rights Agreement in a way that adversely affects holders of the Rights.
Consequences of a Person or Group Becoming an Acquiring Person.
| · | Flip In. If a person or group becomes an Acquiring Person, all holders of Rights except the Acquiring Person may, for the Exercise Price, purchase shares of Company Common Stock with a market value of $200, based on the market price of Company Common Stock prior to such acquisition. |
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| · | Exchange. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of the outstanding shares of Company Common Stock, our Board may extinguish the Rights by exchanging one share of Company Common Stock or equivalent security for each Right, other than Rights held by the Acquiring Person. |
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| · | Flip Over. If our Company is later acquired in a merger or similar transaction after the Rights Distribution Date, all holders of Rights except the Acquiring Person may, for the Exercise Price, purchase shares of the acquiring corporation with a market value of $200 based on the market price of the acquiring corporation’s stock, prior to such transaction. |
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Preferred Share Provisions. Each one one-hundredth of a Preferred Share, if issued:
| · | will not be redeemable. |
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| · | will entitle holders to quarterly dividend payments of $0.01 per share, or an amount equal to the dividend paid on one share of Company Common Stock, whichever is greater. |
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| · | will entitle holders upon liquidation either to receive $1.00 per share, or an amount equal to the payment made on one share of Company Common Stock, whichever is greater. |
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| · | will have the same voting power as one share of Company Common Stock. |
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| · | if shares of Company Common Stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to a per share payment equal to the payment made on one share of Company Common Stock. |
The value of one one-hundredth interest in a Preferred Share should approximate the value of one share of Company Common Stock.
The Company has a Code of Business Conduct that applies to Board members and all employees, including the chief executive officer, the chief financial officer and the chiefprincipal accounting officer. The Code of Business Conduct is available on the Company’s corporate governance website at https://navient.com/about/www.navient.com/investors/corp_governance/corporate-governance/ and a written copyprinted version is available from the Corporate Secretary. The Company intends to post amendments to or waivers of the Code of Business Conduct (to the extent applicable to the Company’s chief executive officer, chief financial officer or chiefprincipal accounting officer or any director) at this location on its website. There were no waivers of the Code of Business Conduct during 2019.
Policy on Review and Approval of Transactions with Related Parties
2021.Policy on Review and Approval of Transactions with Related Parties |
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The Company has adopted a Policy on Related Party Transactions to ensure that all Interested Transactions with Related Parties, as those terms are defined in the policy, will be at arm’s length and on terms generally available to an unaffiliated third-party under the same or similar circumstances. The policy states that, except for the limited exceptions specifically stated in the policy, Interested Transactions with Related Parties that will exceed $120,000 in any calendar year must be reviewed by the Audit Committee and receive approval of the Board of Directors prior to the Corporation entering into the Interested Transaction. A copy of the policy can be found on the Company’s Corporate Governance website at https://www.navient.com/about/investors/corp_governance/corporate-governance/. For additional information pertaining to Related Party Transactions, please refer to “Certain Relationships and Related Transactions” below.
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Our director compensation program is designed to reasonably compensate our non-employee directors for work required for a company of our size, complexity and risk, and to align the interests of our directors with those of our shareholders. The Compensation Committee reviews the compensation of our non-employee directors on an annual basis and makes recommendations to the Board.
In late 2018, theThe Compensation Committee, reviewed our director compensation with the assistance of the Compensation Consultant, and concludeddetermined that theour existing director compensation program should remain unchanged for 2019.2021. The Committee revisited the director compensation program in early 2022. Based on review of the Company’s 2022 Peer Group’s pay practices and median pay levels, the Compensation Committee again revieweddetermined that the program should be revised for 2022. The 2021 director compensation in 2019 and will keep the existing program, unchanged for 2020, with the exception ofas well as changes to the form of annual equity awardsprogram for 2022, are described below.
Our 2019 director compensation program is detailed below.
The following table highlights the material elements of our 20192021 director compensation program:
2019 Compensation Elements | Compensation Value
|
Annual Cash Retainer | $100,000 |
Additional Cash Retainer for Independent Board Chair | 50,000 |
Additional Cash Retainer for Audit Committee Chair | 30,000 |
Additional Cash Retainer for Compensation and Personnel Committee Chair | 25,000 |
Additional Cash Retainer for Other Committee Chairs | 20,000 |
Annual Equity Award | 130,000 |
Additional Equity Award for Independent Board Chair | 65,000 |
| | | |
2021 Compensation Elements | | Compensation Value | |
Annual Cash Retainer | | $ | 100,000 | |
Additional Cash Retainer for Independent Board Chair | | | 50,000 | |
Additional Cash Retainer for Audit Committee Chair | | | 30,000 | |
Additional Cash Retainer for Compensation and Human Resources Committee Chair | | | 25,000 | |
Additional Cash Retainer for Other Committee Chairs | | | 20,000 | |
Annual Equity Award | | | 130,000 | |
Additional Equity Award for Independent Board Chair | | | 65,000 | |
Annual cash retainers are paid in quarterly installments inon or around June, September, DecemberFebruary 1st, May 1st, August 1st and March.November 1st. Annual equity awards typically are granted in early February each year in the form of restricted stock.
Restricted stock granted to our non-employee directors in February 2019 wasare structured to vest only upon the recipient’s election to the Board at the Company’s next following annual meeting of shareholders (or, if earlier, upon death, disability, or a change in control). Beginning in 2020, the Board modified the vesting provisions incorporated in these equity awards to address the potential for partial-year Board service. Restricted stock granted to our non-employee directors in February 2020 will vest in quarterly increments beginning on the grant date, and thereafter on May 1st, August 1st and November 1st, provided the director remains on the Board through each vesting date (with immediate vesting, if earlier, upon death, disability, or a change in control).
The quarterly vesting dates generally align with the quarterly payment dates for cash retainers.We also reimburse each non-employee director for any out-of-pocket expenses incurred in connection with their service as a director. As described below, our non-employee directors may elect to defer all or a portion of their annual compensation under the Navient Corporation Deferred Compensation Plan for Directors.
Share Ownership Guidelines
For 2022, the Board revised our director compensation program at the recommendation of the Compensation Committee. Following an extensive review of market benchmarking data, the Committee determined that compensation levels for our non-employee directors—which had remained unchanged since 2017—had fallen well below the peer group median. The material elements of the new director compensation program for 2022 are described in the following table:
| | | |
2022 Compensation Elements | | Compensation Value | |
Annual Cash Retainer | | $ | 100,000 | |
Additional Cash Retainer for Independent Board Chair | | | 70,000 | |
Additional Cash Retainer for Audit Committee Chair | | | 35,000 | |
Additional Cash Retainer for Compensation and Human Resources Committee Chair | | | 30,000 | |
Additional Cash Retainer for Risk Committee Chair | | | 30,000 | |
Additional Cash Retainer for Nominations and Governance Committee Chair | | | 25,000 | |
Additional Cash Retainer for Each Non-Chair Committee Member | | | 10,000 | |
Annual Equity Award | | | 140,000 | |
Additional Equity Award for Independent Board Chair | | | 100,000 | |
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Committee chairs and members of the Board’s Executive Committee are not eligible for the additional cash retainer payable to non-chair committee members. Non-employee directors who serve on more than one standing committee in a non-chair capacity will receive the additional cash retainer for service on each such committee.
Share Ownership Guidelines |
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We maintain share ownership guidelines for our non-employee directors. Under these share ownership guidelines, each director is expected, within five years of his or her initial election to the Board of Directors, to own Navient Common Stock with a value equivalent to at least four times his or her annual cash retainer. Currently, thatIn November 2021, the Board of Directors increased the minimum ownership amount is
$400,000.from $400,000 to $500,000 to better align with industry-leading practices. The following shares and share units count towards the ownership guidelines: shares held in brokerage accounts; notional shares credited to deferred compensation accounts; and restricted stock and restricted stock units (“RSUs”) that vest solely upon the passage of time; and vested stock options, to the extent that they are “in-the-money.”
time. All non-employee directors are in compliance with the share ownership guidelines as of the date of this proxy statement due to their share ownership amount or because the five-year period from their initial election has not ended.
Anti-Hedging and Pledging Policy |
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Anti-Hedging and Pledging Policy
Navient’s Securities Trading Policy prohibits directors and officers (as defined by Rule 16a-1(f) of the Exchange Act and referred to as “Section 16 Officers”) from selling(i) participating in short sales and derivative or speculative transactions involving Navient stock short,securities, (ii) holding Navient securities in a margin account, or (iii) pledging Navient securities as collateral for a loan or otherwise. Additionally, no director, Section 16 Officer or any other officer of the Company who is subject to the Company’s Stock Ownership Guidelines is permitted to enter into derivative or speculative transactions involving Navient securities (including prepaid variable forward contracts, equity swaps, collars, credit default swaps and exchange funds) that are designed to hedge or offset any decrease in the market value of Navient securities. All directors and named executive officers were in compliance with this policy throughout 20192021 and remain in compliance as of the date of this proxy statement.
Policy on Rule 10b5-1 Trading Plans
Policy on Rule 10b5-1 Trading Plans |
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The Company’s Securities Trading Policy governs the circumstances under which Navient directors and Section 16 Officers may enter into trading plans pursuant to SEC Rule 10b5-1. Rule 10b5-1 trading plans are pre-established trading plans for sales of our Common Stock. We believe our Rule 10b5-1 policy is effective in ensuring compliance with legal requirements. Under the policy:
| · | All Rule 10b5-1 trading plans must be pre-cleared by the Company’s Securities Trading Compliance Officer. |
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| · | A trading plan may be entered into, modified or terminated only during an open trading window and while not in possession of material non-public information. |
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| · | Once adopted, the person must not exercise any influence over the number of securities to be traded, the price at which they are to be traded or the date of the trade. |
The Company reviews the Securities Trading Compliance Officer.
A trading plan may be entered into, modified or terminated only during an open trading windowPolicy and while not in possession of material non-public information.
Once adopted,related disclosures regularly to ensure ongoing compliance with SEC regulations and to update the person must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade.
policy, as needed.
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We provide non-employee directors with company-paid group life insurance, accidental death and disability and business travel accident insurance. We also provide current non-employee directors the opportunity to participate in the Company’s medical and dental plans. If a director elects to participate in these plans, the director pays the full cost of medical and dental coverage (which for an employee is shared by the Company and the employee). After retirement from the Board, a former non-employee director may continue medical coverage for up to 18 months under the Consolidated Omnibus Budget Reconciliation Act (COBRA) at his/her own expense.
Deferred Compensation Plan for Directors
Deferred Compensation Plan for Directors |
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Navient sponsors a deferred compensation plan for its non-employee directors. Under the Navient Corporation Deferred Compensation Plan for Directors (“Director Deferred Compensation Plan”), our non-employee directors may elect annually to defer receipt of all or a percentage of their annual cash retainer. In addition, directors may elect to receive a credit under the Director Deferred Compensation Plan in lieu of their annual equity retainer. Provided this election is made before the beginning of the year, the director’s plan account will be credited with a dollar amount equivalent to the annual equity retainer and automatically invested in a notional Company stock fund. Notional stock units remain subject to the same vesting schedule applicable to the annual equity retainer.
Deferrals of the annual cash retainer are credited with earnings based on the performance of certain investment funds selected by the participant. The plan does not pay above-market or preferential earnings on amounts deferred. Deferrals invested inof the notional Company stock fundannual equity retainer are payable in shares of Navient Common Stock. All other deferrals are payable in cash (in a single lump sum or in installments at the election of the director) upon termination of the director’s service on the Board or after a minimum
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number of years (except for hardship withdrawals in limited circumstances). As noted below, Ms. Bowen, Mr. Diefenderfer,Klane, Ms. Thompson and Ms. Unger each elected to defer all or a portion of his/her 20192021 compensation under the Director Deferred Compensation Plan.
Director Compensation Table
The tables below present information regarding the compensation and stock awards that we have paid or granted to the non-employee directors for the year ended December 31, 2019.
| | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total |
| Name | ($) | ($) | ($) | ($) |
| Frederick Arnold | 100,000 | 129,992 | 58 | 230,050 |
Marjorie L. Bowen(4) | 81,666 | 100,082 | 34 | 181,782 |
| Anna Escobedo Cabral | 130,000 | 129,992 | 58 | 260,050 |
William M. Diefenderfer, III(5) | 37,500 | 195,000 | 29 | 232,529 |
Larry A. Klane(6) | 81,666 | 100,071 | 34 | 181,771 |
| Katherine A. Lehman | 120,000 | 129,992 | 58 | 250,050 |
Linda A. Mills(7) | 137,500 | 173,618 | 58 | 311,176 |
Jane J. Thompson(8) | 125,000 | 130,000 | 58 | 255,058 |
Laura S. Unger(9) | 120,000 | 130,000 | 58 | 250,058 |
Barry L. Williams(10) | 50,000 | 129,992 | 39 | 180,031 |
| David L. Yowan | 100,000 | 129,992 | 58 | 230,050 |
2021.Name | | Fees Earned or Paid in Cash(1) ($) | | | Stock Awards(2) ($) | | | All Other Compensation(3) ($) | | | Total ($) | |
Frederick Arnold | | | 100,000 | | | | 129,998 | | | | 91 | | | | 230,089 | |
Anna Escobedo Cabral | | | 100,000 | | | | 129,998 | | | | 91 | | | | 230,089 | |
Larry A. Klane(4) | | | 100,000 | | | | 130,000 | | | | 91 | | | | 230,091 | |
Michael A. Lawson(5) | | | 50,000 | | | | 64,987 | | | | 38 | | | | 115,025 | |
Katherine A. Lehman(6) | | | 120,000 | | | | 129,998 | | | | 91 | | | | 250,089 | |
Linda A. Mills | | | 150,000 | | | | 194,991 | | | | 91 | | | | 345,082 | |
Jane J. Thompson(7) | | | 125,000 | | | | 130,000 | | | | 91 | | | | 255,091 | |
Laura S. Unger(8) | | | 120,000 | | | | 130,000 | | | | 91 | | | | 250,091 | |
David L. Yowan | | | 130,000 | | | | 129,998 | | | | 91 | | | | 260,089 | |
(1) | This table includes all fees earned or paid in fiscal year 2019.2021. Unless timely deferred under the Director Deferred Compensation Plan, annual cash retainers are paid in quarterly installments beginning shortly after the Company’s annual meeting of shareholders inon or around February 1st, May each year. Thus, the amounts paid (or deferred) in 2019 include the fourth1st, August 1st and final quarterly payment for the period from May 2018 to May 2019, and three quarterly payments for the period from May 2019 to May 2020.November 1st. |
(2) | |
(2) | The grant date fair market value for each share of restricted stock granted in 20192021 to directors is based on the closing market price of the Company’s Common Stock on the grant date. Additional details on accounting for stock-based compensation can be found in “Note 2–Significant Accounting Policies” and “Note 11–Stock-Based Compensation Plans and Arrangements” to the audited consolidated financial statements included in the 20192021 Annual Report on Form 10-K. Stock awards are rounded down to the nearest whole share to avoid the issuance of fractional shares. As noted in the footnotes below, certain directors timely elected to receive a credit under the Director Deferred Compensation Plan in lieu of their 20192021 annual equity retainer. Plan credits in lieu of the annual equity retainer are automatically invested in a notional Company stock fund and are not subject to rounding for fractional shares. |
| 2022 Proxy Statement |
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(3) | All Other Compensation is detailed in a table on the following page. |
(4) | Ms. Bowen joined the Board on May 1, 2019, and her compensation for 2019 was pro-rated accordingly. Ms. Bowen timely |
(4) | If elected to receive a credit under the Director Deferred Compensation Plan in lieu of her 2019 annual equity retainer, with the credit being automatically invested in a notional Company stock fund. |
(5) | Mr. Diefenderfer elected not to stand for reelection to the Board, in June 2019, and his cashMr. Bramson has elected to waive all director compensation for 2019 was pro-rated accordingly. through the 2023 Annual Meeting. |
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(5) | Mr. DiefenderferKlane timely elected to receive a credit under the Director Deferred Compensation Plan in lieu of his 20192021 annual equity retainer, with the credit being automatically invested in a notional Company stock fund. Because |
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(5) | Mr. Diefenderfer electedLawson joined the Board on August 1, 2021, and his compensation for 2021 was pro-rated accordingly |
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(6) | Ms. Lehman is not to standstanding for reelection to the Boardboard in June 2019, he forfeited this credit when he departed the Board.2022. |
(6) | Mr. Klane joined the Board on May 1, 2019, and his compensation for 2019 was pro-rated accordingly. |
(7) | Ms. Mills was elected as Chair of the Board effective June 6, 2019, and her annual cash retainer was adjusted accordingly. She also received an additional stock award at the time she became Chair of the Board. |
(8) | Ms. Thompson timely elected to receive a credit under the Director Deferred Compensation Plan in lieu of her 20192021 annual equity retainer, with the credit being automatically invested in a notional Company stock fund. |
(9) | |
(8) | Ms. Unger timely elected to receive a credit under the Director Deferred Compensation Plan in lieu of her 20192021 annual equity retainer, with the credit being automatically invested in a notional Company stock fund. Ms. Unger also elected to defer her annual cash retainer under the Director Deferred Compensation Plan. |
(10) | Mr. Williams retired from the Board effective August 9, 2019, and his cash compensation for 2019 was pro-rated accordingly. |
| 2020 Proxy Statement | | 34
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All Other Director Compensation:
| | Life Insurance Premiums(A) | Total |
| Name | ($) | ($) |
| Frederick Arnold | 58 | 58 |
| Marjorie L. Bowen | 34 | 34 |
| Anna Escobedo Cabral | 58 | 58 |
| William M. Diefenderfer III | 29 | 29 |
| Larry A. Klane | 34 | 34 |
| Katherine A. Lehman | 58 | 58 |
| Linda A. Mills | 58 | 58 |
| Jane J. Thompson | 58 | 58 |
| Laura S. Unger | 58 | 58 |
| Barry L. Williams | 39 | 39 |
| David L. Yowan | 58 | 58 |
Name | | Life Insurance Premiums(A) ($) | | | Total ($) | |
Frederick Arnold | | | 91 | | | | 91 | |
Anna Escobedo Cabral | | | 91 | | | | 91 | |
Larry A. Klane | | | 91 | | | | 91 | |
Michael A. Lawson | | | 38 | | | | 38 | |
Katherine A. Lehman | | | 91 | | | | 91 | |
Linda A. Mills | | | 91 | | | | 91 | |
Jane J. Thompson | | | 91 | | | | 91 | |
Laura S. Unger | | | 91 | | | | 91 | |
David L. Yowan | | | 91 | | | | 91 | |
(A) The amount reported is the annual premium paid by Navient to provide a life insurance benefit of up to $100,000.
| (A)2022 Proxy Statement | The amount reported is the annual premium paid by Navient to provide a life insurance benefit of up to $100,000.
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2020 Proxy Statement |
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35
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Proposal 2 — Ratification of the Appointment of the Independent Registered Public Accounting Firm
Navient’s independent registered public accounting firm, KPMG LLP (“KPMG”), is selected by the Audit Committee. On February 21, 2020,March 2, 2022, the Audit Committee engaged KPMG as Navient’s independent registered public accounting firm for the fiscal year ending December 31, 2020.2022. Representatives of KPMG are expected to be present at the Annual Meeting and they will have the opportunity to respond to appropriate questions from shareholders and to make a statement if they desire to do so.
This proposal is put before the shareholders because the Board of Directors believes it is a good corporate governance practice to ask shareholders to ratify the selection of the independent registered public accounting firm.
For ratification, this proposal requires the affirmative vote of the holders of a majority of the Common Stock present, represented and entitled to vote, and voting affirmatively or negatively at the Annual Meeting. Accordingly, shares that are not voted affirmatively or negatively with respect to this proposal, including abstentions and broker non-votes, will not be relevant to the outcome. If the appointment of KPMG is not ratified, the Audit Committee will evaluate the basis for the shareholders’ vote when determining whether to continue the firm’s engagement. Even if the selection of Navient’s independent registered public accounting firm is ratified, the Audit Committee may direct the appointment of a different independent registered public accounting firm at any time during 20202022 if, in its discretion, it determines that such a change would be in the Company’s best interests.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF KPMG AS NAVIENT’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2020.
2022.
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Fees Paid to Independent Registered Public Accounting Firms for 2019 and 2018
Fees Paid to Independent Registered Public Accounting Firms for 2021 and 2020 |
|
Aggregate fees billed for services performed for Navient by its independent accountant, KPMG, for the fiscal years ended December 31, 2019,2021, and 2018,2020, are set forth below.
| | 2019 | 2018 |
| Audit Fees | $4,132,351 | $3,353,617 |
| Audit-Related Fees | $1,021,909 | $1,017,232 |
| Tax Fees | $378,881 | $822,374 |
| All Other Fees | - | - |
| Total | $5,533,141 | $5,193,223 |
| | 2021 | | | 2020 | |
Audit Fees | | $ | 3,743,541 | | | $ | 4,482,366 | |
Audit-Related Fees | | $ | 1,387,848 | | | $ | 1,131,113 | |
Tax Fees | | $ | 378,751 | | | $ | 441,321 | |
All Other Fees | | | - | | | | - | |
Total | | $ | 5,510,140 | | | $ | 6,054,800 | |
Audit Fees.
Audit fees include fees for professional services rendered for the audits of the consolidated financial statements of Navient and statutory and subsidiary audits, issuance of comfort letters, consents, income tax provision procedures, and assistance with review of documents filed with the SEC.
Audit-Related Fees.
Audit-related fees include fees for assurance and other services related to service provider compliance reports, trust servicing and administration reports, internal control reviews, and attest services that are not required by statute or regulation.
Tax Fees.
Tax fees include fees for federal and state tax compliance, and tax consultation services.
Pre-approval Policies and Procedures
Pre-approval Policies and Procedures |
|
The Audit Committee has a policy that addresses the approval of audit and non-audit services to be provided by the independent registered public accounting firm to the Company. The policy requires that all services to be provided by the Company’s independent registered public accounting firm be pre-approved by the Audit Committee or its Chair. Each approval of the Audit Committee or the Chair of the Audit Committee must describe the services provided and set a dollar limit for the services. The Audit Committee, or its Chair, pre-approved all audit and non-audit services provided by KPMG during 2019.2020. Reporting is provided to the Audit Committee regarding services that the Chair of the Audit Committee pre- approvedpre-approved between committee meetings. The Audit Committee receives regular reports from management regarding the actual provision of all services by KPMG. No services provided by our independent registered public accounting firm were approved by the Audit Committee pursuant to the “de minimis” exception to the pre-approval requirement set forth in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
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The following report shall not be deemed incorporated by reference in any filing under the federal securities laws by virtue of any general incorporation of this proxy statement by reference and shall not otherwise be treated as filed under the federal securities laws.
The Audit Committee is responsible for monitoring our financial reporting processes and system of internal controls, supervising our internal auditors and overseeing the independence and performance of the independent auditors. In carrying out these responsibilities, the Audit Committee meets, on a regular basis, with our internal auditors and our independent auditors to review the overall scope and plans for their respective audits of our financial statements. The Audit Committee also meets privately (and in separate meetings) with members of management, our independent auditors and our internal auditors as may otherwise be needed. The Audit Committee meets with management and with the independent auditors each quarter to review and discuss the Company’s quarterly reports on Form 10-Q prior to their being filed with the SEC and annually to review and discuss the Company’s Annual Report on Form 10-K. The Committee also meets with management and our independent auditors to review and discuss the Company’s quarterly earnings prior to review by the Executive Committee and public release.
The Audit Committee’s responsibility is to monitor and oversee the audit and financial reporting processes. However, the members of the Audit Committee are not practicing certified public accountants or professional auditors and rely, without independent verification, on the information provided to them and on the representations made by management, and the report issued by the independent registered public accounting firm. While the Audit Committee and the Board monitor the Company’s financial record-keeping and controls, management is ultimately responsible for the Company’s financial reporting process, including its system of internal controls, disclosure control procedures and the preparation of the financial statements. The independent auditors support the financial reporting process by performing an audit of the Company’s financial statements and issuing a report thereon.
The Audit Committee has reviewed and discussed with management and Navient’s independent registered accounting firm, KPMG LLP, the Company’s audited financial statements as of and for the year ended December 31, 2019.2021. The Audit Committee also discussed with KPMG LLP the matters under Public Company Accounting Oversight Board (“PCAOB”) standards, including among other things, those relating to the audit of our financial statements.
The Audit Committee received, reviewed and discussed with KPMG LLP the written disclosures and letter (as required by applicable requirements of the PCAOB) regarding the independent accountant’s communications with the Audit Committee about the firm’s independence.
Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the financial statements referred to above be included in the 20192021 Annual Report on Form 10-K for the year ended December 31, 2019,2021, for filing with the Securities and Exchange Commission.
David L. Yowan, Chair
Frederick Arnold
Anna Escobedo Cabral Chair
Frederick Arnold
Marjorie L. Bowen
Laura S. Unger
Michael A. Lawson
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The following table provides information, as of March 10, 2020,January 31, 2022, about each shareholder known to Navient to beneficially own more than five percent of the outstanding shares of our Common Stock, based solely on the information filed by each such shareholder on Schedules 13D or 13G with the SEC on the dates indicated in the footnotes to this table (percentages are calculated assuming continuous beneficial ownership at March 23, 2020)through April 14, 2022).
| Name and Address of Beneficial Owner | Shares | Percent |
The Vanguard Group, Inc. (1) | 27,510,806 | 12.44% |
| 100 Vanguard Blvd. | | |
| Malvern, PA 19355 | | |
| | | |
BlackRock Inc. (2) | 19,358,945 | 10% |
| 40 East 52nd Street | | |
| New York, NY 10022 | | |
| | | |
Dimensional Fund Advisors LP (3) | 14,752,125 | 6.67% |
| Building One | | |
| 6300 Bee Cave Road | | |
| Austin, Texas 78746 | | |
| | | |
Name and Address of Beneficial Owner | | Shares | | | Percent | |
Sherborne Investors Management LP (1) 135 East 57th Street New York, New York 10022 | | | 29,449,997 | | | | 19.9 | % |
BlackRock Inc. (2) 40 East 52nd Street New York, NY 10022 | | | 18,647,901 | | | | 12.5 | % |
The Vanguard Group, Inc. (3) 100 Vanguard Blvd. Malvern, PA 1935 | | | 16,016,730 | | | | 10.7 | % |
Dimensional Fund Advisors LP (4) Building One 6300 Bee Cave Road Austin, TX 78746 | | | 12,183,481 | | | | 8.2 | % |
(1) | This information is based on Amendment No. 3 to the Schedule 13D filed with the SEC on April 4, 2022. The statement was filed by Newbury Investors LLC, a Delaware limited liability company (“Newbury Investors”), with respect to the Shares directly and beneficially owned by it; Sherborne Investors LP, a Delaware limited partnership (“Sherborne Investors LP”), as the managing member of Newbury Investors; Sherborne Investors Management LP, a Delaware limited partnership (“Sherborne Investors Management”), as the investment manager of Newbury Investors; Sherborne Investors GP, LLC, a Delaware limited liability company (“Sherborne GP”), as the general partner of Sherborne Investors LP; Sherborne Investors Management GP, LLC, a Delaware limited liability company (“Sherborne Management GP”), as the general partner of Sherborne Investors Management; Edward Bramson, as a managing director of each of Sherborne GP and Sherborne Management GP; and Stephen Welker, as a managing director of each of Sherborne GP and Sherborne Management GP, (collectively the “Sherborne Entities”). The Sherborne Entities have shared power to vote or direct the vote of 29,449,997 and shared power to dispose or direct the disposition of 29,449,997 shares of common stock. |
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(2) | This information is based on the Schedule 13G/A filed with the SEC by BlackRock, Inc. on January 27, 2022. BlackRock, Inc. has sole power to vote or direct the voting of 17,872,409 shares of Common Stock and has sole power to dispose of or direct the disposition of 18,647,901 shares of Common Stock. |
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(3) | This information is based on the Schedule 13G/A filed with the SEC by The Vanguard Group, Inc., on February 11, 2020.10, 2022. The Vanguard Group, Inc., directly and through its subsidiaries, has sole power to vote or direct the voting of 101,258 shares of Common Stock, shared voting power of 40,510143,522 shares, sole power to dispose of or direct the disposition of 27,396,16615,734,812 shares of Common Stock, and shared power to dispose of or direct the disposition of 114,640281,918 shares of Common Stock. According to this Schedule 13G/A, Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc., beneficially owns 74,130 shares of Common Stock; and Vanguard Investments Australia, Ltd., a wholly owned subsidiary of The Vanguard Group, Inc., beneficially owns 67,638 shares of Common Stock. |
(2) | This information is based on the Schedule 13G/A filed with the SEC by BlackRock, Inc. on March 9, 2020. BlackRock, Inc. has sole power to vote or direct the voting of 18,451,823 shares of Common Stock and has sole power to dispose of or direct the disposition of for 19,358,945 shares of Common Stock. |
(3)(4) | This information is based on the Schedule 13G filed with the SEC by Dimensional Fund Advisors LP on February 12, 2020.8, 2022. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). The Funds directly have sole power to vote or direct the voting of 14,374,10711,958,351 shares of Common Stock, and sole power to dispose of or direct the disposition of 14,752,12512,183,481 shares of Common Stock. |
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Ownership of Common Stock by Directors and Executive Officers
The following table sets forth information concerning the beneficial ownership of Navient’s Common Stock by: (i) our current directors and director nominees; (ii) the named executive officers listed in the Summary Compensation Table; and (iii) all of the Company’s current directors and executive officers as a group. Under SEC rules, beneficial ownership for purposes of this table takes into account stock as to which the individual has or shares voting and/or investment power as well as stock that may be acquired within 60 days (such as by exercising vested stock options). InformationExcept as otherwise noted in the footnotes below, information is provided as of March 3, 2020.2022 assuming continuous beneficial ownership through April 14, 2022. The beneficial owners listed have sole voting and investment power with respect to stock beneficially owned, except as to the interests of spouses or as otherwise indicated. As of March 3, 2020,April 14, 2022, there were 194,143,990147,890,491 shares of our Common Stock issued, outstanding and entitled to vote.
Director Nominees | Shares (1) | Vested Options (2) | Total Beneficial Ownership (3) | Percent of Class |
| Frederick Arnold | 28,551 | - | 28,551 | * |
Marjorie L. Bowen(4) | 12,218 | - | 12,218 | * |
Anna Escobedo Cabral(5) | 56,348 | - | 56,348 | * |
Larry A. Klane(6) | 11,952 | - | 11,952 | * |
| Katherine A. Lehman | 59,565 | - | 59,565 | * |
| Linda A. Mills | 76,002 | - | 76,002 | * |
Jane J. Thompson(7) | 62,162 | - | 62,162 | * |
Laura S. Unger(8) | 58,909 | - | 58,909 | * |
David L. Yowan(9) | 40,039 | - | 40,039 | * |
| | | | | |
| Named Executive Officers | | | | |
Jack Remondi(10) | 2,590,375 | 111,358 | 2,701,733 | 1.38% |
Christian Lown(11) | 316,849 | - | 316,849 | * |
John Kane(12) | 464,527 | 36,553 | 501,080 | * |
Mark Heleen(13) | 286,085 | - | 286,085 | * |
Steve Hauber(14) | 144,510 | 19,529 | 164,039 | * |
| | | | | |
| Directors and Current Officers as a Group | 4,208,092 | 167,440 | 4,375,532 | 2.24% |
| (14 Persons) | | | | |
| | | | | |
Director Nominees | Shares (1) | Vested Options (2) | Total Beneficial Ownership (3) | Percent of Class |
Frederick Arnold | 53,961 | - | 53,961 | * |
Edward Bramson(4) | 29,449,997 | - | 29,449,997 | 19.9% |
Anna Escobedo Cabral(5) | 86,428 | - | 86,428 | * |
Larry A. Klane(6) | 32,578 | - | 32,578 | * |
Michael A. Lawson | 11,004 | | 11,004 | |
Katherine A. Lehman | 78,475 | - | 78,475 | * |
Linda A. Mills | 115,461 | - | 115,461 | * |
Jane J. Thompson(7) | 89,176 | - | 89,176 | * |
Laura S. Unger(8) | 83,277 | - | 83,277 | * |
David L. Yowan(9) | 60,265 | - | 60,265 | * |
| | | | |
Named Executive Officers | | | | |
Jack Remondi(10) | 3,276,678 | 95,524 | 3,372,202 | 2.23% |
Joe Fisher(11) | 140,833 | - | 140,833 | * |
John Kane(12) | 607,861 | 31,045 | 638,906 | * |
Mark Heleen(13) | 384,159 | 17,910 | 402,069 | * |
Steve Hauber(14) | 212,620 | 11,940 | 224,560 | * |
| | | | |
Directors and Current Officers as a Group (15 Persons) | 19,309,102 | 156,419 | 19,465,521 | 22.1% |
(1) | |
(1) | Shares of Common Stock and stock units held directly or indirectly, including vested deferred stock units and unvested deferred stock units that may vest within 60 days of March 3, 2020,2022, credited to Company-sponsored retirement and deferred compensation plans. Totals for named executive officers include (i) restricted stock units (“RSUs”) that vest and are converted into shares only upon the passage of time, (ii) performance stock units (“PSUs”) that vest and are converted into shares upon the satisfaction of pre-established performance conditions, and (iii) associated dividend equivalent units (“DEUs”) issued on outstanding RSUs and PSUs. The individuals holding such RSUs, PSUs and DEUs have no voting or investment power over these units. |
(2) | |
(2) | Shares that may be acquired within 60 days of March 3, 2020,2022, through the exercise of stock options. The stock options held by our officers are net- settlednet-settled pursuant to their terms (i.e., shares are withheld upon exercise to cover the aggregate exercise price, and the net resulting shares are delivered to the option holder). Net-settled stock options therefore are shown on a “spread basis,” with out-of-the-money options shown as 0. |
(3) | |
(3) | Total of columns 1 and 2. Except as otherwise indicated and subject to community property laws, each owner has sole voting and sole investment power with respect to the shares listed. |
(4) | |
(4) | Mr. Bramson is a Partner in Sherborne Investors Management LP. |
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(5) | For Ms. Bowen, 12,218Cabral, 37,110 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account. Ms. Bowen is not being nominated by the Board for reelection, and her tenure as a director will end when her current term expires at our 2020 Annual Meeting. |
(5) | |
(6) | For Ms. Cabral, 38,122Mr. Klane, 25,236 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account. |
(6) | |
(7) | For Mr. Klane, 4,610Ms. Thompson, 82,915 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account. |
(7) | |
(8) | For Ms. Thompson, 55,901Unger,31,195 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account. |
(8) | |
(9) | For Ms. Unger, 18,011Mr. Yowan, 11,880 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account. |
| 2020 Proxy Statement |
(10) | | 40
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(9) | For Mr. Yowan, 10,564 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account. |
(10) | Mr. Remondi’s share ownership includes 250 shares held as custodian for his child. 930,530987,162 of the shares reported in this column are RSUs, PSUs or DEUs over which Mr. Remondi has no voting or dispositive control. |
(11) | 259,418 |
(11) | 109,177 of the shares reported in this column are RSUs, PSUs, or DEUs over which Mr. LownFisher has no voting or dispositive control. |
(12) | 207,265 |
(12) | 197,878 of the shares reported in this column are RSUs, PSUs or DEUs over which Mr. Kane has no voting or dispositive control. 1,2501,406 shares are deferred stock units credited to a Company-sponsored deferred compensation plan account. |
(13) | 144,125 |
(13) | 149,545 of the shares reported in this column are RSUs, PSUs or DEUs over which Mr. Heleen has no voting or dispositive control. |
(14) | 96,724 |
(14) | 104,006 of the shares reported in this column are RSUs, PSUs or DEUs over which Mr. Hauber has no voting or dispositive control. |
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Our executive officers are appointed annually by the Board of Directors. The following sets forth biographical information concerning Navient’s executive officers who are not directors. Biographical information for Mr. Remondi is included in Proposal 1 — Election of Directors.
Name and Age | Position and Business Experience |
Joe Fisher 42 | |
Christian Lown
50
| • Chief Financial Officer and Principal Accounting Officer, Navient — March 2017October 2020 to present • Managing Director and Co-Head, Global Financial Technology Group, North America Banks and Diversified Finance, Morgan Stanley — 2006 to March 2017
• Vice President Financial Institutions Groupof Investor Relations and Corporate Development, Navient — UBS AGApril 2018 to October 2020 • Vice President of Investor Relations, Navient — 2003May 2014 to 2006 • Associate, Financial Institutions Group, Credit Suisse First Boston — 2001 to 2003
|
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51
53 | • Group President, Business Processing Solutions, Navient — June 2015 to present • Chief Operating Officer, Navient — April 2014 to June 2015 • Senior Vice President — Enterprise Project Management, SLM Corporation — March 2013 to April 2014 • Senior Vice President — Credit, SLM Corporation — August 2011 to March 2013 • Senior Vice President — Collections, SLM Corporation — 2008 to 2011 • Senior Vice President — Consumer Credit Operations, MBNA/Bank of America — 1990 to 2008 |
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57
59 | • Chief Legal Officer and Secretary, Navient — February 2015 to present • Senior Vice President and Senior Deputy General Counsel, Navient — June 2014 to February 2015 • Senior Attorney, Cadwalader Wickersham & Taft LLP — August 2013 to June 2014 • Independent Consultant — January 2011 to August 2013 • Executive Vice President and General Counsel, SLM Corporation — February 2009 to December 2010 • Various roles in the Office of the General Counsel, SLM Corporation — July 1998 to February 2009 |
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45
48 | • Chief Risk and Compliance Officer, Navient — June 2017 to present • Chief Audit Officer, Navient — April 2014 to June 2017 • Chief Audit Officer, SLM Corporation — January 2011 to April 2014 |
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Proposal 3 — Advisory Vote on Executive Compensation
Navient is asking shareholders to approve an advisory resolution (commonly referred to as a “say-on-pay” resolution) on the Company’s executive compensation as reported in this proxy statement. Navient urges shareholders to read the “Compensation Discussion and Analysis” section of this proxy statement, which describes how the Company’s executive compensation policies and procedures operate and are designed, as well as the Summary Compensation Table and other related compensation tables and narrative, which provide detailed information on the compensation paid to our named executive officers (“NEOs”).
This proposal gives you, as a shareholder, the opportunity to express your views on our NEOs’ compensation. Your vote is not intended to address any specific item of our compensation program, but rather to address our overall approach to and objectives of the compensation paid to our NEOs as described in this proxy statement. In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Navient is asking shareholders to approve the following advisory resolution at the Annual Meeting:
“Resolved, that Navient’s shareholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in the Compensation Discussion and Analysis and the related compensation tables and narrative disclosure in this proxy statement.”
| “Resolved, that Navient’s shareholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in the Compensation Discussion and Analysis and the related compensation tables and narrative disclosure in this proxy statement.” | |
The Company conducted a similarconducts its advisory vote on executive compensation at our lasteach annual meeting of its shareholders. At that time,each of our last five annual meetings, beginning in 2017, our shareholders have expressed their overwhelming support for the 2018our executive compensation of our NEOs, with approximately 94% of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter approving the 2018 compensation of our NEOs.
programs:
The Board of Directors believes that the Company’s 20192021 executive compensation program strongly aligned pay to actual performance. Shareholders are encouraged to read the “Compensation Discussion and Analysis” section, which describes Navient’s executive compensation program in detail, including how it is designed to achieve the Company’s compensation objectives and how the Company’s performance in 20192021 was reflected in the compensation of our NEOs.
This proposal to approve the resolution regarding the compensation paid to Navient’s NEOs requires the affirmative vote of the holders of a majority of the Common Stock present, represented and entitled to vote, and voting affirmatively or negatively at the Annual Meeting. Accordingly, shares that are not voted affirmatively or negatively with respect to this proposal, including abstentions and broker non-votes, will not be relevant to the outcome.
As an advisory vote, the “say-on-pay” resolution is not binding on Navient. The Board of Directors, however, values the opinions of our shareholders as expressed through their votes. Accordingly, the Board of Directors as well as the Compensation Committee will review and consider the results of the “say-on-pay” vote, the opinions of our shareholders, and other relevant factors in making future decisions regarding our executive compensation program.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS AND THE RELATED COMPENSATION TABLES AND NARRATIVE DISCLOSURE IN THIS PROXY STATEMENT.
| 2020THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS AND THE RELATED COMPENSATION TABLES AND NARRATIVE DISCLOSURE IN THIS PROXY STATEMENT. | |
Proposal 4 — Advisory Vote on Say-on-Pay Frequency
Section 14A of the Exchange Act requires that we provide our shareholders with the opportunity to vote, on a non- binding advisory basis, regarding whether the non-binding advisory shareholder vote on compensation paid to our named executive officers should occur every one, two, or three years. This non-binding advisory vote is commonly referred to as “Say-on-Frequency.” In 2015, the Company conducted an advisory vote on Say-on-Frequency. At that time, our shareholders indicated their preference for future advisory votes to be held annually, and consistent with the shareholders’ vote, the Board adopted a policy providing for annual advisory votes to approve the Company’s executive compensation. This year, we are again conducting an advisory vote on Say-on-Frequency.
After careful consideration of the various arguments supporting each frequency level, the Board of Directors has determined that holding a non-binding advisory vote on executive compensation annually remains the most appropriate frequency for Navient. Although our executive compensation programs are designed to promote a long-term correlation between pay and performance, the Board of Directors recognizes that executive compensation decisions are an ongoing process. We believe that holding an annual advisory vote on executive compensation will provide us with shareholder feedback on our compensation practices and policies on a regular, frequent basis and is consistent with our objective of further engaging with our shareholders on executive compensation and corporate governance matters. Accordingly, the Board recommends that you vote for ONE YEAR (i.e., once every year) as the frequency of future advisory votes on executive compensation. Because this proposal is advisory, it will not be binding on Navient. However, the Board of Directors values our shareholders’ opinions, and will consider the outcome of the result of the vote on this proposal when determining the frequency of future non-binding advisory votes on compensation paid to our named executive officers.
With respect to this proposal, the frequency of the non-binding advisory vote on compensation paid to our named executive officers (namely, every one, two or three years) receiving the greatest number of votes will be considered the frequency recommended by our shareholders. Accordingly, shares that are not voted for a specific frequency with respect to this proposal, including abstentions and broker non-votes, will not be relevant to the outcome.
Board Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU SELECT ONE YEAR AS THE FREQUENCY OF NON- BINDING ADVISORY VOTES ON COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS
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2020 Proxy Statement |
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44
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Compensation and Personnel Committee Report
The following report shall not be deemed incorporated by reference in any filing under the federal securities laws by virtue of any general incorporation of this proxy statement by reference and shall not otherwise be treated as filed under the federal securities laws.
The Compensation and PersonnelHuman Resources Committee of the Board of Directors has reviewed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and discussed it with the Company’s management, and based on its review and discussions with management, the Compensation and PersonnelHuman Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2021, and this proxy statement.
Compensation and PersonnelHuman Resources Committee
Anna Escobedo Cabral
Larry A. Klane
KatherineMichael A. Lehman
David L. Yowan
Lawson
| 20202022 Proxy Statement |
| 45
49 |
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) provides information regarding our executive compensation guiding principles, the elements of our executive compensation program, the factors that were considered in making compensation decisions for our “named executive officers” or “NEOs” in 2019,2021, and how we have modified our programs to meet Navient’s needs in the future.
Navient’s Compensation and PersonnelHuman Resources Committee (the “Compensation Committee” or simply the “Committee”) is responsible for establishing and overseeing our executive compensation program, including the program’s underlying philosophy, objectives and related policies. The Committee is composed of Ms. Thompson (Chair), Ms. Cabral, Mr. Klane Ms. Lehman and Mr. Yowan.
Lawson.This CD&A presents information for the following Navient NEOs:
Jack Remondi, President and Chief Executive Officer
Christian Lown, Chief Financial Officer
John Kane, Group President, Business Processing Solutions
Mark Heleen, Chief Legal Officer and Secretary
Steve Hauber, Chief Risk and Compliance Officer
| · | Jack Remondi, President and Chief Executive Officer |
| | |
| · | Joe Fisher, Executive Vice President and Chief Financial Officer |
| | |
| · | John Kane, Group President, Business Processing Solutions |
| | |
| · | Mark Heleen, Executive Vice President, Chief Legal Officer and Secretary |
| | |
| · | Steve Hauber, Executive Vice President and Chief Risk and Compliance Officer |
| 2022 Proxy Statement |
| 50 |
Executive Summary
Navient’s executive compensation program emphasizes the link between pay and performance, aligning the compensation of our executives with the interests of our shareholders. Our executive compensation program balances annual and long- termlong-term performance measures, including a mix of financial, operational and strategic goals that promote effective management of our legacy loan portfolio, improvements and growth in our private education loan portfolio and non-education fee revenues,consumer lending business, profitable growth in our business services segment and expense control. Individual performance goals also are established for each of our NEOs.NEOs in support of our business strategy. This section summarizes Navient’s performance in 20192021 and the impact of that performance on the compensation paid to our NEOs.
Navient’s 20192021 Performance
Navient’s 2019 results reflect successful and disciplined managementIn 2021, Navient demonstrated remarkable agility across our businesses. business and delivered outstanding results for our customers, clients, investors and teammates in light of the prolonged impacts of the global pandemic. The Company is well positioned to continue to deliver attractive returns and sustainable growth in 2022 and beyond.
Our 2019 results included key successes2021 performance highlights include the following:
| · | We Continued to Deliver Strong EPS Performance: Adjusted Diluted “Core Earnings” Per Share4 grew 31% from the prior year. |
| | |
| · | We Continued to Grow Our Consumer Lending Business: We originated $6.0 billion in private education refinance and in-school loans, a 30% increase from the prior year, despite the prolonged uncertain economic environment related to COVID-19, and we continued to carefully manage the credit risk of our portfolio through rigorous underwriting, high-quality servicing and risk mitigation practices. |
| | |
| · | We Experienced Record Revenue and Profitability in Our Business Processing Segment: Business Processing EBITDA increased to $136 million in 2021, a 139% increase from the prior year, largely as a result our ability to transition our technology-enabled solutions and team members to support state clients working to help residents access various benefits implemented in connection with the CARES Act. |
| | |
| · | We Continued to Implement Innovative Financing Strategies to Reduce Our Interest Expense and Maintain Strong Levels of Liquidity: We called $2.6 billion of our future unsecured notes and issued $1.3 billion of unsecured debt. |
| | |
| · | We Successfully Exited the U.S. Department of Education Student Loan Servicing Program:In October 2021, we transferred our servicing contract for U.S. Department of Education-owned student loan accounts to a third party while ensuring a smooth transition for borrowers and Navient employees impacted by the transfer. |
| | |
| · | We Prioritized Inclusion, Diversity and Equity in Our Workplace: Through our inclusion, diversity and equity strategy, our employees lead and participate in initiatives such as our Inclusion, Diversity & Equity Council, inclusion and diversity awareness campaigns and staff-led employee resource groups. We remain committed to promoting diversity within our management team—in terms of gender, race, ethnicity, perspective and other factors—as part of the management succession planning process and in recruitment, promotion and retention opportunities at all levels of the Company. |
| | |
| · | We Made a Positive Impact in our Communities: We partnered with the Boys & Girls Clubs of America to provide career and college planning resources to youth, including those from under-resourced communities. As a key element of the partnership, Navient employees volunteered at Boys & Girls Clubs in the communities where they live and work and Navient offered paid time off per month to empower employees to volunteer for a Navient-supported nonprofit organization in their community. |
___________________________
4 Adjusted Diluted “Core Earnings” Per Share excludes net restructuring and regulatory-related charges, as well as certain extraordinary items such as strong EPS performance, continued growthstrategic corporate transactions or other unusual or unplanned events. Adjusted Diluted “Core Earnings” Per Share is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For a reconciliation of our non-GAAP financial measures with GAAP results, please refer to the section titled “Non-GAAP Financial Measures” on pages 37-45 of our 2021 Annual Report filed on Form 10-K on February 25, 2022 (“2021 Annual Report”), or refer to the Investor Relations section of our website located at https://www.navient.com/investors/.
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| 51 |
Navient’s 2021 Compensation Decisions
Highlights of our 2021 compensation decisions are discussed below, with additional details in our consumer lending business, improved loan portfolio performance, continued financing actionsthis CD&A.
| · | 2021 Base Salaries: Base salaries remained unchanged from 2020 for our CEO, Mr. Remondi, and Messrs. Fisher, Kane and Hauber, while Mr. Heleen received a small increase. Base salaries for each of our NEOs are described on page 60. |
| | |
| · | 2021 Management Incentive Plan (“MIP”) Design: The design of our 2021 MIP was the same as our 2020 MIP, with four goals—Adjusted Diluted “Core Earnings” Per Share, Business Processing EBITDA, Private Education Loan Gross Defaults and Adjusted “Core Earnings” Operating Expenses—weighted 50%, 15%, 15% and 20%, respectively. These goals and weightings align with Navient’s business strategy and are directly responsive to feedback we have received from our shareholders. Our 2021 MIP is described in greater detail beginning on page 60. |
| | |
| · | 2021 MIP Results: Above-target performance on Adjusted Diluted “Core Earnings” Per Share, Business Processing EBITDA, and Private Education Loan Gross Defaults contributed to an overall performance score of 120% under the 2021 MIP. Because we successfully achieved a number of pre-established strategic priorities included in the Company’s 2021 business plan, effectively simplifying, streamlining and de-risking the Company while creating shareholder value, the Committee increased payments to our NEOs by establishing a final payout percentage of 125% under the 2021 MIP. Incentive award amounts for our NEOs under the 2021 MIP are described on page 62. |
| | |
| · | 2019-21 Performance Share Units (“PSUs”): Above-target performance on the targets established in 2019 for Cumulative Net Student Loan Cash Flows and “Core Earnings” Return on Equity (“ROE”) resulted in an earned payout of 119%. Performance results for the 2019-21 PSUs are described on page 65. |
| | |
| · | 2021-23 PSU Design: A new performance “multiplier” based on the Company’s relative total shareholder return compared to other companies in the S&P 400 Financials Index (“rTSR”) and a one-year, post-vesting holding requirement were introduced for the 2021-23 PSU design. These new features are intended to emphasize the Company’s keen focus on delivering superior overall returns to shareholders and aligning our executives’ long-term interests with those of our shareholders. The design of the 2021-2023 PSUs (further described on page 63 is otherwise the same as the design for the 2020-22 PSUs, with 70% weight on Cumulative Net Student Loan Cash Flows and 30% weight on “Core Earnings” ROE achieved over a 3-year period. |
| 2022 Proxy Statement |
| 52 |
Linking Navient’s 2021 Performance to maximize the net interest margin for our loan portfolios and minimize interest expense and improved EBITDA in our business processing segment. Our strong performance in 2019 results from using our expertise, systems and data-driven strategies to create shareholder value by maximizing cash flows, originating high-quality loans at attractive risk-adjusted returns, growing our fee revenue, and improving operating efficiency.
Executive PayThe chart on the following page illustratesshows our key performance achievements in 20192021 and the link between those achievements and our executive compensation program:
program.Linking Navient’s 2021 Performance to Executive Pay
| 2020 Proxy Statement | | 46
|
Navient’s 2019 Performance
|
| Provide Consistent Return to | | Pursue Loan Portfolio
Acquisitions
Increase Business Processing EBITDA |
2019
| •· Returned $587$707 million to our shareholders through dividends and share repurchases representing a 97% payout ratio
· • Increased Adjusted Diluted “Core Earnings” Per Share of $2.64, beating the target in our 2019 annual incentive plan5 by 36%
31% from 2020 to $4.45 | •· Issued $2.7 billion$9.5 billions in FFELP loan asset-backed securities (“ABS”) and
$4.1 billion in private education loan ABS
•· Retired $2$2.6 billion of senior unsecured debt, including all of our 2021 debt maturities
| · Increased Business Processing EBITDA6 by 139% from 2020, far exceeding the target in our 2021annual incentive plan•· Increased Business Processing revenue by 61% from 2020
|
Annual Incentive Measures | · Adjusted Diluted “Core Earnings” Per Share · Adjusted “Core Earnings” Operating Expenses7 | · Adjusted Diluted “Core Earnings” Per Share · Adjusted “Core Earnings” Operating Expenses | · Business Processing EBITDA |
Long-term Incentive Measures | · Cumulative Net Student Loan Cash Flows8 · ROE · rTSR | · Cumulative Net Student Loan Cash Flows · ROE · rTSR | · ROE · rTSR |
| Successfully Manage Our Federal Education Loans Segment | Grow Our Consumer Lending Business | Improve Performance of Our Private Education Loan Portfolio |
2021 Performance Highlights | · Transferred Navient’s servicing contract for U.S. Department of Education owned student loan accounts to a third party in October 2021. · Reduced the interest expense we otherwise would have incurredsegment operating expenses by $64 million, or 22%, year-over-year · Acquired $111 million of FFELP loans in 2019 by over $90 million
| • Acquired $20 billion in education loans during 2017-19, which added2021, adding to our consistent and predictable cash flows
|
Annual
Incentive
Measures
| •· Adjusted Diluted “Core Earnings” Per Share8
• Adjusted “Core Earnings” Operating Expenses9
| • Adjusted Diluted “Core Earnings” Per Share
• Adjusted “Core Earnings” Operating Expenses
| • Adjusted Diluted “Core Earnings” Per Share
• Adjusted “Core Earnings” Operating Expenses
|
Long-term
Incentive
Measures
| • Grow Intrinsic Value of Company
• Cumulative Net Student Loan Cash Flows10
| • Grow Intrinsic Value of Company
• Cumulative Net Student Loan Cash Flows
| • Pursue Opportunistic Loan Portfolio Acquisitions
• Cumulative Net Student Loan Cash Flows
|
| Increase Business Processing EBITDA | Grow Our Consumer Lending Business | Improve Performance of Our Private Eduation Loan Portfolio |
2019
Performance
Highlights
| • Increased Business Processing EBITDA by 11% from 2018 but fell below the target in our 2019 annual incentive plan
| • Originated $4.9$6.0 billion in private education refinance and in-school loans, significantly abovean increase of 23% from 2020, despite the $3.65 billion target in our 2019 annual incentive plan
prolonged uncertain economic environment related to COVID-19 | •· Reduced private education loan delinquency rate 22% from 2018
• Due to improved laon performance, we were able to reduce our private education loan provision by $73$203 million from 2018
2020 due in part to improved loan performance |
| •· Business Processing EBITDA11
| • Consumer Lending New Loan Volume
•Adjusted Diluted “Core Earnings” Per Share· | •· Private Education Loan Gross Defaults
•Adjusted Diluted “Core Earnings” Per Share
|
Long-term
Incentive
Measures
| •· Revenue from Growth Businesses
• Improve Margins in Fee Businesses
| • Grow Intrinsic Value of Company
• Cumulative Net StudentPrivate Education Loan Cash FlowsGross Defaults· | • Grow Intrinsic Value of Company
|
8
| Adjusted Diluted “Core Earnings” Per Share excludes net restructuring and regulatory-related charges, as well as certain extraordinary items such as strategic corporate transactions or other unusual or unplanned events. Adjusted Diluted “Core Earnings” Per Share is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of Adjusted Diluted “Core Earnings” Per Share please refer to page 30 of our 2019 Annual Report filed on Form 10-K on February 27, 2020. For a reconciliation of our non-GAAP financial measures with GAAP results, please refer to the discussion on pages 37–52 of our 2019 Annual Report, or refer to the Investor Relations section of our website located at http://www.navient.com/about/investors/. |
9
| Adjusted “Core Earnings” Operating Expenses excludes net restructuring and regulatory-related charges, as well as certain extraordinary items such as strategic corporate transactions or other unusual or unplanned events. Adjusted “Core Earnings” Operating Expenses is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of Adjusted “Core Earnings” Operating Expenses and for a reconciliation of non-GAAP financial measures with GAAP results, please refer to our Investor Presentation for Fourth Quarter and Full Year 2019 on the Investor Relations section of our website located at http://www.navient.com/about/investors/. |
10
| “Cumulative Net Student Loan Cash Flows” is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of cumulative net student loan cash flows, please refer to the definition at footnote 16. |
11
| Earnings Before Interest, Taxes, Depreciation and Amortization Expense (“EBITDA”) is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of EBITDA and for a reconciliation of non-GAAP financial measures with GAAP results, please refer to the discussion on page 45 of our 2019 Annual Report filed on Form 10-K on February 27, 2020, or refer to the Investor Relations section of our website located at http://www.navient.com/about/investors/. |
| 2020 Proxy Statement | | 47
|
Pay for Performance in 2019
Because our executive compensation program directly links pay to performance, the Company’s strong performance in 2019 is reflected in the 2019 incentive compensation earned by our executives, which is summarized in the sections below.
Annual Incentives. Our annual incentive plan—known as the Management Incentive Plan (“MIP”)—is designed to drive short-term performance and shareholder value by focusing on key performance measures tied to our annual operating plan. The 2019 MIP incorporated the following performance metrics designed to drive critical pieces of our 2019 operating plan:
2019 MIP Performance Metric | Weight | Rationale |
Adjusted Diluted “Core Earnings” Per Share12
Long-term Incentive Measures | 35% | • Measures overall management effectiveness·
|
| | • Promotes shareholder value
|
| | • Key financial metric for investors
|
Consumer Lending New Loan Volume | 20% | • Emphasizes growth in strategic businesses
|
| | • Offers refinance opportunities to our existing customers, which helps retain and grow our customer base
|
| | • Loan volume is a key focus in order to scale this growing business
|
| | • All loan volume is subject to the Company’s Board-approved risk and return guidelines (e.g., regarding consumer credit quality, cost-to-acquire, net interest margin)
|
Business Processing EBITDA13
| 20% | • Emphasizes profitable growth in strategic businesses
|
| | • Growth helps to offset company-wide expenses as our legacy loan portfolio amortizes
|
Adjusted “Core Earnings” Operating Expenses14
| 15% | • Focuses management attention on expense reduction as our legacy loan portfolio amortizes
|
| | • Key financial metric for investors, which is also critical to the achievement of our Adjusted Diluted “Core Earnings” Per Share goal
|
Private Education Loan Gross Defaults | 10% | • Enhances the profitability of our private education loan portfolio
|
| | • Aids our private education student loan customers
|
| | • Key financial metric for investors
|
Performance against three of the five MIP goals in 2019 was notably strong, with each resulting in a payout factor at or near the maximum of 150%. Performance against the remaining two MIP goals was below target thereby reducing the overall performance score. The following chart summarizes Navient’s performance in 2019 relative to goals established for these performance metrics, which resulted in above-target payments under the 2019 MIP.
| 2019 Management Incentive Plan |
| 2019 Performance Metric | Performance Target | | 2019 Actual Performance | Payout Factor | Weighting | Performance Score |
| Adjusted Diluted “Core Earnings” Per Share | $
| 1.94 | | $
| 2.64 | 150.0% | 35% | 52.5% |
| Consumer Lending New Loan Volume (millions) | $
| 3,651 | | $
| 4,903 | 150.0% | 20% | 30.0% |
| Business Processing EBITDA (millions) | $
| 60 | | $
| 49 | 55.0% | 20% | 11.0% |
Adjusted “Core Earnings” Operating Expenses15 (millions) | $
| 949 | | $ | 965 | 82.7% | 15% | 12.4% |
| Private Education Loan Gross Defaults (millions) | $
| 459 | | $
| 428 | 130.5% | 10% | 13.1% |
| Overall Performance Score: | 119.0% |
Our 2019 Management Incentive Plan is described in greater detail beginning on page 57.
15
| Excludes $6 million in regulatory-related expenses, $6 million in restructuring expenses and $12.5 million in expenses relating to the Canyon Agreement. For additional information pertaining to the Canyon Agreement, please refer to “Shareholder Engagement and Communications with the Board” above. |
| |  | 48 |
Long-term Incentives. Our long-term incentive program is designed to drive longer-term performance and shareholder value by delivering a significant portion of NEO compensation through equity awards, including performance stock units (“PSUs”). Fiscal year 2019 marked the final year of a three-year performance period associated with PSUs granted to our executive team in early 2017 as part of our long-term incentive program.
These 2017-19 PSUs were designed to vest in early 2020 based on performance through the end of 2019, with a potential payout ranging from 0% to 150% of the target number of units, determined by cumulative performance over the 2017-19 performance period. The following performance metrics were selected in early 2017 to focus management on specific long- term business objectives:
2017-19 PSU Performance Metric | Weight | Rationale |
Cumulative Net Student Loan Cash Flows | 50% | • Promotes successful management of our loan portfolios
|
| | • Critical driver of shareholder value, supporting dividends, share repurchases and debt payments
|
| | • Supports growth of strategic businesses, including consumer lending
|
Cumulative Revenue from Growth Businesses | 30% | • Emphasizes strategic growth as our legacy loan portfolio amortizes
|
| | • Offsets Company-wide expenses as our legacy loan portfolio amortizes
|
Strategic Objectives | 20% | • Focuses management on critical, long-term strategic goals
|
The following chart summarizes the Company’s cumulative performance over the 2017-19 performance period relative to the targets established for each of these metrics. Our continued strong performance during this three-year period resulted in the 2017-19 PSUs vesting at 109% of the target number of units.
| 2017-19 Performance Stock Units |
| 2017-19 Performance Metric | Performance Target | | 2017-19 Actual Performance | Payout Factor | Weight | Performance Score |
Cumulative Net Student Loan Cash Flows16 (millions) | $
| 7,850 | | $
| 8,818 | 135% | 50% | 67% |
Cumulative Revenue from Growth Businesses17 (millions) | $
| 995 | | $
| 839 | 65% | 30% | 20% |
| Strategic Objectives | | | | 110% | 20% | 22% |
• Pursue Opportunistic Loan Portfolio Acquisitions • Capture Operating Efficiencies in Asset Servicing • Improve Margins in Fee Businesses • Build Strong Relationships with State and Federal Regulators • Grow Intrinsic Value of Company |
| Overall Performance Score: | 109% |
The Committee considered management’s key achievements during the 2017-19 performance period when assessing the Company’s performance relative to the strategic goals established at the beginning of that period. These key achievements are set forth in the table on the following page.
16
| Cumulative Net Student Loan Cash Flows is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. · ROE · rTSR | · Cumulative Net Student Loan Cash Flows include aggregate cash flows net of secured borrowings from student loans realized for the fiscal years 2017, 2018 and 2019, including student loan cash flows realized from new acquisitions, but excluding the impact of cash flows for fiscal years beyond 2019 that are accelerated through securitizing or pledging unencumbered student loans or through loan sales. · ROE · rTSR | · Cumulative Net Student Loan Cash Flows · ROE · rTSR |
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5 See footnote 4 above for more information regarding Adjusted Diluted “Core Earnings” Per Share.
6 Earnings Before Interest, Taxes, Depreciation and Amortization Expense (“EBITDA”) is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of EBITDA and for a reconciliation of non-GAAP financial measures with GAAP results, please refer to the section titled “Non-GAAP Financial Measures” on pages 37-45 of our 2021 Annual Report, or refer to the Investor Relations section of our website located at http://www.navient.com/investors/.
7 Adjusted “Core Earnings” Operating Expenses excludes net restructuring and regulatory-related charges, as well as certain extraordinary items such as strategic corporate transactions or other unusual or unplanned events. Adjusted “Core Earnings” Operating Expenses is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of Adjusted “Core Earnings” Operating Expenses and for a reconciliation of non-GAAP financial measures with GAAP results, please refer to our Investor Presentation for Fourth Quarter and Full Year 2021 on the Investor Relations section of our website located at http://www.navient.com/investors/, or refer to the section titled “Non-GAAP Financial Measures” on pages 37-45 of our 2021 Annual Report.
8 “Cumulative Net Student Loan Cash Flows” is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of cumulative net student loan cash flows, please refer to the definition at footnote 19.
17
| Cumulative Revenue from Growth Businesses includes that portion of the Company’s aggregate revenue for fiscal years 2017-19 from non-federal-loan-related businesses.2022 Proxy Statement |
| 53 |
| | | 49 |
2017-19 Performance Stock Units |
2017-19 Strategic Objectives | Achievements |
Pursue Opportunistic Loan Portfolio Acquisitions | • Acquired $20 billion in student loans between 2017-19, significantly enhancing
cash flows from our amortizing loan portfolio
|
| | • Exceeded acquisition targets by 100%
|
Capture Operating Efficiencies in Asset Servicing | • Reduced direct servicing unit cost between 2017-19 while improving customer satisfaction
|
| • Continued to implement automation and system enhancements, as well as program and procedural improvements, that have driven down expenses and improved efficiency
|
Improve Margins in Fee Businesses | • Business Processing EBITDA margins significantly improved over three-year period.
|
| • Implemented operational improvements to improve efficiency and increase revenue, including robotic process automations and call optimization efforts |
| • Secured several large-scale healthcare revenue cycle management engagements |
Build Strong Relationships with State and Federal Regulators | • Established or reestablished dialogue with various regulatory bodies
|
| • Received positive examinations from key federal and state regulators
|
| • Continued to execute on strategy to provide fact-based responses to ongoing litigation |
Grow Intrinsic Value of Company | • Private education loan delinquencies reached historic lows
|
| • Reduced the interest expense we otherwise would have incurred through a variety of financing initiatives |
| • Value delivered to shareholders through dividends and share repurchases
|
| • Maintained stable ratings with all three credit rating agencies |
These strategic goals were established at the beginning of the three-year period to be challenging but achievable. In evaluating management’s performance over the entire performance period, the Committee considered the business environment during the performance period and its impact on the difficulty of achieving the strategic goals. Based on its evaluation of the strategic goal achievements individually and overall, the Committee determined that management’s accomplishments relative to these strategic goals warranted a payout factor of 110% out of a maximum payout factor of 150%.
| | | 50 |
Our pay-for-performance approach over the past five years is highlighted in the chart below, which shows the alignment between the Company’s performance (as measured by cumulative total shareholder return (“TSR”)) and the annual Realizable Pay (as defined below) of our CEO over the past five fiscal years.
The Committee believes that analysis of Realizable Pay allows a more complete understanding of the pay-for-performance relationship than sole reliance on amounts shown in the Summary Compensation Table, which reflects the grant date value of various equity awards. The table below compares the components of Mr. Remondi’s Realizable Pay for 2021, 2020, 2019, 2018 2017, 2016 and 2015.
| Year | Base Salary ($) | Annual Incentive Compensation ($) | | PSUs ($) | RSUs ($) | Stock Options ($) | Total ($) |
| | 2019 | 1,000,000 | 1,785,000 | | 1,926,497 | 2,391,606 | 0 | 7,103,103 |
| | 2018 | 1,000,000 | 1,896,000 | | 2,309,255 | 517,094 | 0 | 5,722,349 |
| CEO Realizable Pay | 2017 | 1,000,000 | 1,444,500 | | 0 | 1,032,553 | 0 | 3,477,053 |
| | 2016 | 1,000,000 | 1,666,500 | | - | 2,067,157 | 5,527,226 | 10,260,883 |
| | 2015 | 1,000,000 | 735,000 | | - | 370,201 | 0 | 2,105,201 |
2017. | Year | Base Salary ($) | Annual Incentive Compensation ($) | PSUs ($) | RSUs ($) | Total ($) |
| 2021 | 1,000,000 | 1,875,000 | 6,621,956 | 3,450,393 | 12,947,349 |
| 2020 | 1,000,000 | 2,055,000 | 1,195,978 | 1,392,898 | 5,643,876 |
CEO Realizable Pay | 2019 | 1,000,000 | 1,785,000 | 1,926,497 | 2,391,606 | 7,103,103 |
2018 | 1,000,000 | 1,896,000 | 2,309,255 | 517,094 | 5,722,349 |
2017 | 1,000,000 | 1,444,500 | 0 | 1,032,553 | 3,477,053 |
Realizable Pay for each of the applicable fiscal years is the sum of base salary paid, annual incentive award earned, the year-end value of RSUs and stock options granted under the Company’s long-term incentive program in that year, and the value of any PSUs with a performance period ending in that fiscal year. Stock awards are valued as of the end of each fiscal year and include the “in-the-money” value of stock options,18RSUs and PSUs (excluding accrued dividend equivalent units on RSUs and PSUs).
Because the Company typically grants equity awards in February each year, the year-end value of these equity awards may be significantly greater or less than the grant-date value depending on whether the price of our common stock has increased or decreased by the end of the year. For example, the year-end value of stock options and RSUs granted in early
18
| For 2019, the Committee decided to discontinue the prior practice of granting stock options as part of the Company’s long-term incentive program. Our 2019 long-term incentive program is described in greater detail beginning on page 60. |
| | | 51 |
2016 2021 was substantially greater than the value of these awards upon grant, as the price of our common stock increased between the February 2016applicable grant date and December 31, 2016, while the oppositeend of 2021. Additionally, the year-end value of PSUs with a performance period ending in 2021 was truesignificantly higher than the year-end value of PSUs with a performance period ending in 2020, as the price of our common stock increased by 90% between the end of 2020 and 2021 and our performance during the 2019-21 performance period resulted in the 2019-21 PSUs vesting at 119% of the target number of units versus 83% for RSUs granted in early 2019.
the 2018-21 PSUs.
| 2022 Proxy Statement |
| 54 |
PSUs typically vest based on cumulative performance over three fiscal years. For example, PSUs granted in early 2015 were designed to vest at the end of 2017 based on cumulative performance over the 2015-17 fiscal years. Due to the Company’s performance during that three-year period, the value at the end of the fiscal 2017 was zero as none of the PSUs were earned. PSUs granted in early 2016 vested at 125% of the target number of units based on the Company’s performance over the applicable 2016-18 performance period, while PSUs granted in early 2017 vested at 109% of the target number of units based on the Company’s performance over the applicable 2017-19 performance period, PSUs granted in early 2018 vested at 83% of the target number of units based on the Company’s performance over the 2018-20 performance period, and PSUs granted in early 2019 vested at 119% of the target number of units based on the Company’s performance over the 2019-2021 performance period.
Cumulative TSR assumes a base investment of $100 at December 31, 20142016, and reinvestment of dividends through December 31, 2019.
2021.Changes to Our Executive Compensation Program for 2022
The Committee made changes to our annual incentive plan for 2022, as well as our long-term incentive program for 2022. These changes emphasize the evolving nature of our businesses as our legacy loan portfolio continues to amortize, while providing ongoing alignment of executive compensation with value for shareholders.
Because investors continue to focus on Navient’s ability to drive operating efficiency, the Committee replaced Adjusted “Core Earnings” Operating Expenses with Adjusted “Core Earnings” Efficiency Ratio as a performance metric in our 2022 Management Incentive Plan.
To emphasize the evolving nature of our business over a multi-year period, the Committee made changes to performance share units granted in 2022, which are designed to vest at the end of a three-year performance period. The Committee decreased the weighting assigned to Net Cumulative Student Loan Cash Flows from 70% to 55% and increased the weighting assigned to “Core Earnings” ROE from 30% to 45%. As our legacy loan portfolio continues to amortize, “Core Earnings” ROE is becoming more relevant for Navient as a standard financial metric that permits comparability across peer groups and industry-wide benchmarks. These changes are described on page 68.
| 2022 Proxy Statement |
| 55 |
Navient’s Compensation Philosophy and Objectives
We provide each of our NEOs with a compensation package that is tied to performance and aligned with the interests of our shareholders. The Compensation Committee utilizes the following guiding principles to design, implement, and monitor our executive compensation program:
Align Compensation with Shareholder Interests. For 2019, 87% of the total direct compensation opportunity provided to our CEO was at-risk and aligned with shareholder value, including incentive awards that depend upon the attainment of specific performance objectives, the value of Navient’s Common Stock or both. This feature of our executive compensation program is highlighted in the charts below.
 | · |  |
For 2019, the Compensation Committee decided to discontinue the prior practice of granting stock options as part of our long-term incentive program, which is described in greater detail beginning on page 60.
Pay for Performance. As illustrated above, more than 50% of the full-year total compensation at target for our NEOs is delivered through annual incentives and PSUs that are earned based on achievement of enterprise-wide goals that impact shareholder value.
Reward Annual Performance. The annual incentive award component of our NEOs’ total compensation is designed to reward achievement of key annual goals that are aligned with the Company’s annual business plan, and conversely to be lower or zero in periods in which those key annual goals are only partially achieved or not achieved at all.
Reward Long-term Growth. The total compensation paid to our NEOs is weighted toward long-term equity-based incentives. These awards align pay with sustained performance and shareholder value creation.
| · | |
| 52 | |
| · | Reward Annual Performance. The annual incentive award component of our NEOs’ total compensation is designed to reward achievement of key annual goals that are aligned with the Company’s annual business plan, and conversely to be lower or zero in periods in which those key annual goals are only partially achieved or not achieved at all. |
| | |
| · | Reward Long-term Growth. The total compensation paid to our NEOs is weighted toward long-term equity-based incentives. These awards align pay with sustained performance and shareholder value creation. |
| | |
| · | Retention of Top Executives. Our NEOs have base salaries and benefits that are competitive and not excessive, therefore permitting Navient to attract, motivate and retain executives who can drive and lead our success. |
Retention of Top Executives. Our NEOs have base salaries and benefits that are competitive and not excessive, therefore permitting Navient to attract, motivate and retain executives who can drive and lead our success.
The compensation packages we provide to our NEOs are designed to be competitive when compared to companies that compete with us for executive talent. In setting the compensation opportunity for our NEOs, we generally target the median total direct compensation provided to similarly situatedsimilar executives by our peer group companies.
We also believe that strong governance practices and policies are aligned with shareholder interests. Our policies prohibit hedging, pledging or short-sales of any Company stock held by our NEOs and provide for the clawback of compensation in certain situations. See “Other Arrangements, Policies and Practices Related to Our Executive Compensation Programs” below.
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| 56 |
How Compensation Decisions Are Made
In establishing competitive total compensation packages for our NEOs, the Compensation Committee relies on, among other factors, an analysis of market data on the executive compensation packages offered by Navient’s peer group companies, which are described below. While the Committee generally targets the median total compensation opportunity provided by our peer group companies to similarly-situatedsimilar executives, market data is only one of several factors considered in establishing the compensation opportunity levels of our NEOs. Navient’s annual strategic business plan also factors heavily in determining certain elements of total compensation, such as our Annual Incentive and Long-term Incentive Programs, which are described in more detail below. Past pay practices and internal employee pay equity, as well as the skills and experience that each NEO brings to Navient, are all important factors considered by the Committee. The Committee also considers an assessment of each NEO’s success in achieving pre-determined business as well as individual objectives, an assessment that is prepared by the CEO and presented to the Committee at a minimum of once each year.
Finally, the Committee meets with the other independent members of the Board in reviewing the CEO’s performance and consults with those members in setting the CEO’s compensation.Role of the Compensation Consultant
The Compensation Committee is advised by its Compensation Consultant. See “Compensation Consultant and Independence” earlier in this proxy statement for more information on the Compensation Consultant’s role as an independent advisor to the Compensation Committee.
Navient seeks to provide its NEOs with competitive compensation relative to a peer group of companies. The Compensation Committee reviews the composition of the peer group annually with the assistance of the Compensation Consultant, making adjustments as needed to address changes in Navient’s business and/or changes in the peer group companies due to mergers or other transactions.
| In May 2020, Proxy Statement | | 53 |
Based on its review, the Compensation Committee decidedreviewed the 2019 peer group should remain unchanged from 2018.for 2021 to ensure the peer group continued to reflect the Company’s current mix of businesses, including the continued growth and evolution of the Company’s consumer lending and business processing businesses. The Compensation Committee believescontinues to believe that line of business and asset size isare the most relevant comparatorparameters when identifying other companies of similar size and complexity.complexity, although it also took into account factors such as market capitalization when selecting the 2021 peer group. The Committee did not make any changes to the prior 2020 peer group as a result of the review. Our 20192021 peer group, which the Committee used as context when settingto set target pay levels at the start of 2019,2021, consists of the following companies:
| 2019 Navient Peer Group |
| Company | Total Assets(1) | | Net Income(2) | | Market Cap(1) |
| Customer Account Management | | | | | |
| Alliance Data Systems Corporation | $26,495 | | $278 | | $5,168 |
Automatic Data Processing, Inc. (3) | 49,059 | | 2,463 | | 73,775 |
DST Systems, Inc. (4) | 3,079 | | 267 | | 4,982 |
Total System Services, Inc. (5) | 7,707 | | 617 | | 23,586 |
| The Western Union Company | 8,759 | | 1,058 | | 11,228 |
| | | | | | |
| Asset and Risk Management | | | | | |
| The Charles Schwab Corporation | 294,005 | | 3,704 | | 61,095 |
| Comerica Incorporated | 73,402 | | 1,198 | | 10,343 |
| Fifth Third Bancorp | 169,369 | | 2,512 | | 21,815 |
| Lincoln National Corporation | 334,761 | | 886 | | 11,703 |
| Voya Financial, Inc. | 169,051 | | -351 | | 8,220 |
| | | | | | |
| High Volume Operations | | | | | |
| Discover Financial Services | 113,996 | | 2,957 | | 26,588 |
| Fiserv, Inc. | 77,539 | | 893 | | 78,616 |
| Global Payments Inc. | 44,480 | | 431 | | 54,868 |
Paychex, Inc. (6) | 8,702 | | 1,078 | | 30,484 |
Worldpay, Inc. (7) | 27,097 | | 293 | | 41,981 |
| | | | | | |
25th Percentile | $17,627 | | $362 | | $10,785 |
| Median | 49,059 | | 893 | | 23,586 |
75th Percentile | 141,524 | | 1m831 | | 48,425 |
| | | | | | |
| Navient Corporation | $94,903 | | $597 | | $3,024 |
| Rank | 6 of 16 | | 11 of 16 | | 16 of 16 |
| Percentile | 67 | | 34 | | 0 |
2021 Navient Peer Group
| | | |
Company | Total Assets(1) | Net Income(2) | Market Cap(1) |
Alliance Data Systems Corporation | $21,746 | $801 | $3,314 |
Ally Financial Inc. | 182,114 | 3,060 | 16,494 |
Comerica Incorporated | 94,616 | 1,168 | 11,410 |
Conduent Incorporated | 4,036 | (28) | 1,136 |
Discover Financial Services, Inc. | 110,242 | 5,449 | 33,868 |
Fifth Third Bancorp | 211,116 | 2,770 | 29,778 |
KeyCorp | 186,346 | 2,625 | 21,535 |
MAXIMUS, Inc. (3) | 4,182 | 280 | 4,936 |
Paychex, Inc. (4) | 9,688 | 1,279 | 49,249 |
Regions Financial Corporation | 162,938 | 2,521 | 20,782 |
Santander Consumer USA Holdings, Inc. | 47,733 | 3,252 | 12,863 |
SLM Corporation | 29,222 | 1,161 | 5,767 |
Synchrony Financial | 95,748 | 4,221 | 25,387 |
The Western Union Company | 8,824 | 806 | 7,172 |
| | | |
25th Percentile | $12,703 | $894 | $6,118 |
Median | 71,175 | 1,900 | 14,678 |
75th Percentile | 149,764 | 2,988 | 24,424 |
| | | |
Navient Corporation | $80,605 | $717 | $3,420 |
Rank | 8 of 15 | 13 of 15 | 13 of 15 |
Percentile | 51 | 14 | 8 |
| (1)2022 Proxy Statement |
| 57 |
| (1) | Total assets and market capitalization (in millions) reflect each company’s most recent fiscal year end except for Automatic Data Processing, Inc., DST Systems, Inc., Total System Services, Inc., Paychex,MAXIMUS, Inc. and Worldpay,Paychex Inc. Please see footnotes (3), and (4), (5), (6) and (7) for more information. |
| (2) | |
| (2) | Net income (in millions in accordance with GAAP) for each company’s most-recently-ended fiscal year, as reflected in each company’s Annual Report on Form 10-K filed with the SEC. Except as otherwise noted below, each company’s most recent fiscal year ended December 31, 2019.2021. |
| (3) | Automatic Data Processing's |
| (3) | MAXIMUS' most recent fiscal year end is JuneSeptember 30, 2019.2021. Total assets reflect the most-recent fiscal quarter end and net income reflects 12-month trailing as of December 31, 2019.2021. Market capitalization reflects common shares outstanding at December 31, 2019,2021, multiplied by the per share closing price of the company’s common stock on December 31, 2019,2021, the last trading date of the year. |
| (4) | DST Systems, Inc. was acquired by SS&C Technologies Holdings, Inc. on April 16, 2018. Market capitalization reflects common shares outstanding at April 16, 2018, multiplied by the per share closing price of the company’s common stock on April 16, 2018, the company's last day of trading. All other metrics are as of March 31, 2018, the most recent quarter end with publicly disclosed financial data. |
| (5)(4) | Total System Services, Inc. was acquired by Global Payments Inc. on September 17, 2019. Market capitalization reflects common shares outstanding at September 17, 2019, multiplied by the per share closing price of the company’s common stock on September 17, 2019, the company's last day of trading. All other metrics are as of June 30, 2019, the most recent quarter end with publicly disclosed financial data. |
| (6) | Paychex's most recent fiscal year end is May 31, 2019.2021. Total assets reflect the most-recent fiscal quarter end and net income reflects 12-month trailing as of November 30, 2019.2021. Market capitalization reflects common shares outstanding at December 31, 2019,2021, multiplied by the per share closing price of the company’s common stock on December 31, 2019,2021, the last trading date of the year. |
| (7) | Worldpay, |
| (5) | Santander Consumer USA Holdings Inc. was acquired by Fidelity National Information Services,entered into a definitive agreement whereby Santander Holdings USA, Inc. on July 31, 2019. Market capitalization reflects common shares outstanding at July 31, 2019, multiplied by the per share closing price("SHUSA") agreed to acquire all of the company’soutstanding shares of the common stock of the Company not already owned by SHUSA. The transaction closed on JulyJanuary 31, 2019, the company's last day of trading. All other metrics are as of June 30, 2019, the most recent quarter end with publicly disclosed financial data. |
| | | 54 |
In August 2019, the Compensation Committee adopted a new peer group for 2020 to better reflect the Company’s current mix of businesses, including the continued growth and evolution of the Company’s business processing and consumer lending businesses. The Committee continues to believe that asset size is the most relevant comparator when identifying other companies of similar size and complexity, although it also took into account factors such as market capitalization when selecting the 2020 peer group. Our 2020 peer group, which the Committee used to set target pay levels at the start of 2020, consists of the following companies:
| 2020 Navient Peer Group |
| Company | Total Assets(1) | | Net Income(2) | | Market Cap(1) |
| Alliance Data Systems Corporation | $26.495 | | $278 | | $5,168 |
| Ally Financial Inc. | 180,644 | | 1,715 | | 11,615 |
| Comerica Incorporated | 73,402 | | 1,198 | | 10,343 |
| Conduent Incorporated | 4,514 | | -1,934 | | 1,311 |
| Discover Financial Services, Inc. | 113,996 | | 2,957 | | 26,588 |
| Fifth Third Bancorp | 169,369 | | 2,512 | | 21,815 |
| KeyCorp | 144,988 | | 1,717 | | 19,936 |
MAXIMUS, Inc. (3) | 1,990 | | 244 | | 4,759 |
Paychex, Inc. (4) | 8,702 | | 1,078 | | 30,484 |
| Regions Financial Corporation | 126,240 | | 1,582 | | 16,553 |
| Santander Consumer USA Holdings, Inc. | 48,934 | | 994 | | 7,944 |
| SLM Corporation | 32,686 | | 578 | | 3,762 |
| Synchrony Financial | 104,826 | | 3,747 | | 23,269 |
| The Western Union Company | 8,759 | | 1,058 | | 11,228 |
25th Percentile | $13,193 | | $682 | | $5,862 |
| Median | 61,168 | | 1,138 | | 11,421 |
75th Percentile | 123,179 | | 1,717 | | 21,345 |
| | | | | | |
| Navient Corporation | $94,9903 | | $597 | | $3,024 |
| Rank | 7 of 15 | | 11 of 15 | | 14 of 15 |
| Percentile | 59 | | 23 | | 5 |
| (1) | 2022. Total assets and market capitalization reflect each company’s most recent fiscal year end except for MAXIMUS, Inc. and Paychex Inc. Please see footnotes (3) and (4) for more information. |
| (2) | Netnet income (in millions in accordance with GAAP) for each company’s most-recently-ended fiscal year, as reflected in each company’s Annual Report on Form 10-K filed withreflects the SEC. Except as otherwise noted below, each company’s most recent fiscal year ended December 31, 2019.2021, per the consolidating statements for SHUSA. |
| (3) | MAXIMUS' most recent fiscal year end is September 30, 2019. Total assets reflect the most-recent fiscal quarter end and net income reflects 12-month trailing as of December 31, 2019. Market capitalization reflects common shares outstanding at December 31, 2019, multiplied by the per share closing price of the company’s common stock on December 31, 2019, the last trading date of the year. |
| (4) | Paychex's most recent fiscal year end is May 31, 2019. Total assets reflect the most-recent fiscal quarter end and net income reflects 12- month trailing as of November 30, 2019. Market capitalization reflects common shares outstanding at December 31, 2019, multiplied by the per share closing price of the company’s common stock on December 31, 2019, the last trading date of the year. |
Consideration of Say-on-Pay Vote Results
At our most recent annual meeting of shareholders, held on June 6, 2019,May 20, 2021, the Company conducted an advisory vote to approve its executive compensation for the fiscal year ended December 31, 2018.2020. As in prior years, shareholders expressed overwhelming support for the compensation of our NEOs, with approximately 94.1%96.4% of the votes present in person (or represented by proxy at the meeting) and entitled to vote on the matter cast to approve our 20182020 executive compensation. The Committee took into account the results of this advisory vote when making compensation decisions for 2019.
2021. In 2015,2019, the Company conducted an advisory vote on the frequency of future advisory votes to approve its executive compensation, commonly known as “Say-on-Frequency.” Our shareholders indicated their preference for future advisory votes to be held annually. Consistent with the shareholders’ vote on this matter, the Board adopted a policy providing for annual advisory votes to approve the Company’s executive compensation. This year we are again conducting an advisory vote on Say-on-Frequency. See “Proposal 4 — Advisory Vote on Say-on-Pay Frequency” in this proxy statement.
| | | 55 |
20192021 Executive Compensation Program
Primary Elements of Compensation
The compensation program for our NEOs consists of three primary elements:
| | | | |
Compensation Element | Objective | Objective | | Type of Compensation |
Base Salary | | To provide a base level of cash compensation consistent with the executive’s level of responsibility. | | Fixed cash compensation. Reviewed annually and adjusted as appropriate. |
| | | | |
Annual Incentives | | To encourage and reward our NEOs for achieving annual corporate and individual performance goals. | | Performance-based. Payable in cash. |
| | | | |
Long-term Incentives | | To motivate and retain senior executives by aligning their interests with those of shareholders through sustained performance and growth. | | Multi-year variable compensation. Generally payable in performance stock units (“PSUs”) and/or restricted stock units (“RSUs”). PSUs are subject to performance vesting based on cumulative three-year performance, with each award being settled in stock at the end of the performance period to the degree that goals are met. RSUs are subject to time-based vesting, with each award vesting in 1/3 increments over a three-year period. For 2019,2021, total long-term incentive value was provided 60% in PSUs and 40% in RSUs for our CEO and split equally between PSUs and RSUs for our other NEOs.NEOs (see page 65 below). |
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| 58 |
The Compensation Committee makes decisions regarding each primary element of compensation described above.
In addition to the three primary compensation elements discussed above, our NEOs have an opportunity to participate in the Navient Deferred Compensation Plan. The Deferred Compensation Plan offers a variety of investment choices, none of which represents an “above-market return.” We also provide our NEOs with the same standard health, welfare and retirement benefits provided to our employees, as well as limited perquisites. Each of our NEOs also participates in severance plans for our senior executives.
| | | 56 |
Total Direct Compensation Mix
These primary compensation elements—Base Salary, Annual Incentives and Long-term Incentives—together form Total Direct Compensation for each of our NEOs. Consistent with Navient’s pay-for-performance culture, 87% of the 20192021 Total Direct Compensation of our CEO was at-risk and dependent upon the attainment of specific performance objectives, as well as the value of Navient’s Common Stock. The charts belowon page 57 provide the at-risk percentages of the 20192021 Total Direct Compensation of our NEOs and the percentage of their compensation that is at-risk, with Annual Incentives and PSUs shown at target levels of performance for the full year.
The Compensation Committee reviews base salary levels for the NEOs on an annual basis but may make changes less frequently. Based on a market analysis of the 20192021 Navient peer group, the Compensation Committee (in consultation with the other independent members of the Board) determined that Mr. Remondi’s 20192021 base salary should remain unchanged at $1,000,000, consistent with peer group benchmarking.
The 20192021 base salaries of Messrs. Lown, Kane, Heleen and Hauberthe other NEOs were established by the Compensation Committee, taking into account recommendations made by Mr. Remondi, as well as a review of benchmarking data from the 20192021 Navient peer group. The Committee concluded that the base salary for each of our NEOsMessrs. Fisher, Kane, and Hauber should remain unchanged for 2019, with the exception2021, and approved an increase of approximately 3.9% for Mr. Hauber, who received a market-based adjustment for 2019.Heleen. In the case of each NEO, including the CEO, the Committee reached its final determinations in consultation with the Compensation Consultant. In 2020, the Committee again determined to keep the base salary unchanged for each NEO. The following chart lists the base salary for each of our NEOs as of December 31, 2019,2021, December 31, 2018,2020, and December 31, 20172019, respectively.
Navient NEOs | 2019 Base Salary | | 2018 Base Salary | | 2017 Base Salary |
| Mr. Remondi | $ | 1,000,000 | | $
| 1,000,000 | | $
| 1,000,000 |
| Mr. Lown | $ | 400,000 | | $
| 400,000 | | $
| 400,000 |
| Mr. Kane | $
| 460,000 | | $ | 460,000 | | $
| 460,000 |
| Mr. Heleen | $ | 385,000 | | $
| 385,000 | | $
| 385,000 |
| Mr. Hauber* | $ | 350,000 | | $ | 310,000 | | $ | - |
| | | | | | | | | |
Navient NEOs | | 2021 Base Salary | | | 2020 Base Salary | | | 2019 Base Salary | |
Mr. Remondi | | $ | 1,000,000 | | | $ | 1,000,000 | | | $ | 1,000,000 | |
Mr. Fisher* | | $ | 350,000 | | | $ | 350,000 | | | $ | - | |
Mr. Kane | | $ | 460,000 | | | $ | 460,000 | | | $ | 460,000 | |
Mr. Heleen | | $ | 400,000 | | | $ | 385,000 | | | $ | 385,000 | |
Mr. Hauber | | $ | 350,000 | | | $ | 350,000 | | | $ | 350,000 | |
* Mr. Fisher was not a named executive officer of the Company prior to 2020. Mr. Fisher’s 2020 base salary, as reflected in the chart, became effective when he assumed the role of CFO on October 7, 2020.
*
| Mr. Hauber was not a named executive officer of the Company in 2017.2022 Proxy Statement |
| 59 |
Annual Incentive Awards: The 20192021 Management Incentive Plan
As part of Navient’s annual strategic planning process, management developed an operatinga business plan for the Company’s 20192021 fiscal year. The Compensation Committee and management then discussed specific corporate performance metrics and goals for Navient to be set forth in a 20192021 annual incentive program—known as the Management Incentive Plan (“MIP”)—with the express purpose of focusing executives on achieving the operating and strategic plan.
| | | 57 |
The following table details the specific performance metrics utilized in our 2021 MIP, as well as the weight assigned to each metric: | | | |
2021 MIP Performance Metric | 2021 Weight | 2020 Weight | Rationale |
Adjusted Diluted “Core Earnings” Per Share9 | 50% | 50% | • Measures overall management effectiveness • Promotes shareholder value • Key financial metric for investors |
Adjusted “Core Earnings” Operating Expenses10 | 20% | 20% | • Focuses management attention on expense reduction as our legacy loan portfolio amortizes • Key financial metric for investors, which is also critical to the achievement of Core Earnings Per Share goal |
Business Processing EBITDA11 | 15% | 15% | • Emphasizes profitable growth in certain businesses • EBITDA growth helps to offset company-wide expenses as our legacy loan portfolio amortizes |
Private Education Loan Gross Defaults | 15% | 15% | • Enhances the profitability of our private education loan portfolio • Aids our private education student loan customers • Key financial metric for investors to gauge the performance of our private education loan portfolio |
For the 20192021 MIP, the Committee continued its focus on Adjusted Diluted “Core Earnings” Per Share as the plan’s key financial metric. Three other financial metrics were carried forward from the 2018 plan—Consumer Lending New Loan Volume, Private Education Loan Gross Defaults, and Adjusted “Core Earnings” Operating Expenses—although the weight placed on operating expenses was increased becauseAll of the importance of aggressively managing expenses. As in prior years, all Consumer Lending New Loan Volume is subject to the Company’s Board-approved risk and return guidelines (e.g., regarding consumer credit quality, cost-to-acquire, net interest margin). The Committee also substituted EBITDA for revenue in measuring the performance of our business processing solutions group to focus management on ensuring profitable growth as those business lines continue to scale up.
The following table details the specific2021 MIP performance metrics utilized in our 2019 Management Incentive Plan, as welland weightings were the same as the weight assigned to each metric:
2019 MIP Performance Metric | Weight | Rationale |
Adjusted Diluted “Core Earnings” Per Share19
| 35% | • Measures overall management effectiveness
|
| | • Promotes shareholder value
|
| | • Key financial metric for investors
|
| | |
Consumer Lending New Loan Volume | 20% | • Emphasizes growth in strategic businesses
|
| | • Offers refinance opportunities to our existing customers, which helps retain and grow our customer base
|
| | • Loan volume is a key focus in order to scale this growing business
|
| | • All loan volume is subject to the Company’s Board-approved risk and return guidelines (e.g., regarding consumer credit quality, cost-to-acquire, net interest margin)
|
| | |
Business Processing EBITDA20
| 20% | • Emphasizes profitable growth in strategic businesses
|
| | • Growth helps to offset company-wide expenses as our legacy loan portfolio amortizes
|
| | |
Adjusted “Core Earnings” Operating Expenses21
| 15% | • Focuses management attention on expense reduction as our legacy loan portfolio amortizes
|
| | • Key financial metric for investors, which is also critical to the achievement of our Core Earnings Per Share goal
|
| | |
Private Education Loan Gross Defaults | 10% | • Enhances the profitability of our private education loan portfolio
|
| | • Aids our private education student loan customers
|
| | • Key financial metric for investors
|
2020 MIP.The Committee established a scale of “payout factors” to assess the Company’s performance relative to the target established for each of these performance metrics. These payout factors range from 50% based on a threshold level of performance, to 150% based on a maximum level of performance, with performanceperformance. Performance below threshold resultingresults in a payout factor of 0%. For each metric, the Committee also established a payout curve for performance between threshold-target and target-maximum.
| Adjusted “Core Earnings” Operating Expenses excludes net restructuring and regulatory-related charges, as well as certain extraordinary items such as strategic corporate transactions or other unusual or unplanned events. Adjusted “Core Earnings” Operating Expenses is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of Adjusted “Core Earnings” Operating Expenses and for a reconciliation of non-GAAP financial measures with GAAP results, please refer to our Investor Presentation for Fourth Quarter and Full Year 2019 on the Investor Relations section of our website located at http://www.navient.com/about/investors/. |
 | 2020 Proxy Statement |  | 58
|
The chart below sets forth the performance threshold, target, and maximum, and the payout factors for each performance metric:
2019 MIP Payout Factors
|
2019 Performance Metric | Below Performance Threshold (Payout Factor = 0%) | | (Payout Factor = 100%) | (Payout Factor= 150%) |
| Adjusted Diluted “Core Earnings” Per Share | <$1.73 | $1.73 | $1.94 | >= $2.14 |
| Consumer Lending New Loan Volume (millions) | <$2,860 | $2,860 | $3,651 | >=$4,650 |
| Business Processing EBITDA (millions) | <$48 | $48 | $60 | >= $71 |
| Adjusted “Core Earnings” Operating Expenses (millions) | >$994 | $994 | $949 | <=$915 |
| Private Education Loan Gross Defaults (millions) | >$508 | $508 | $459 | <= $408 |
Performance | | | | |
2021 MIP Payout Factors |
2021 Performance Metric | Below Performance Threshold (Payout Factor = 0%) | Performance Threshold (Payout Factor = 50%) | Performance Target (Payout Factor = 100%) | Performance Maximum (Payout Factor= 150%) |
Adjusted Diluted “Core Earnings” Per Share | <$2.78 | $2.78 | $3.27 | >= $3.88 |
Adjusted “Core Earnings” Operating Expenses (millions) | >$953 | $953 | $910 | <=$867 |
Business Processing EBITDA (millions) | <$47 | $47 | $56 | >= $64 |
Private Education Loan Gross Defaults (millions) | >$620 | $620 | $520 | <= $420 |
In addition to these financial metrics, the Committee also considers the Company’s annual progress towards achieving certain pre-established strategic priorities and may adjust MIP payouts positively or negatively to reflect the achievement of these priorities. These priorities are communicated to the NEOs as part of the Company’s annual business plan but are not assigned any particular MIP weighting.
_________________________________
9 See footnote 4 above for additional information regarding Adjusted Diluted “Core Earnings” Per Share.
10 See footnote 7 above for additional information regarding Adjusted “Core Earnings” Operating Expenses.
11 See footnote 6 above for additional information regarding EBITDA.
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Our performance in 2021 yielded an overall performance score of 120%, driven by notably strong performance against three of the fivefour 2021 MIP goals in 2019 was notably strong. The Executive Summarygoals. In addition, the Committee considered the successful achievement of this Compensation Discussion and Analysis, beginning on page 46, details a number of our key achievementsthe pre-established strategic priorities included in 2019. The chart below sets forth (i) each performance metric, (ii) the performance target approved by the Compensation Committee for each metric, (iii) the 2019 actual performance of the Company for each metric, (iv) the payout factor for each metric based on the Company’s level2021 business plan, including the transfer of achievement relativeour servicing contract for U.S. Department of Education-owned student loan accounts to target, (v) the relative weighting of each performance metric, and (vi) the performance score attributable to each metric,a third party, as well as the overall performance score.
2019 MIP Performance Results
|
2019 Performance Metric (i) | | Performance Target (ii) | | 2019 Actual Performance (iii) | Payout Factor (iv) | Weighting (v) | Performance Score (vi) |
Adjusted Diluted “Core Earnings” Per Share22 | $
| 1.94 | $
| 2.64 | 150.0% | 35% | 52.5% |
| Consumer Lending New Loan Volume (millions) | $ | 3,651 | $
| 4,903 | 150.0% | 20% | 30.0% |
Business Processing EBITDA23 (millions) | $ | 60 | $
| 49 | 55.0% | 20% | 11.0% |
Adjusted “Core Earnings” Operating Expenses24 (millions) | $ | 949 | $
| 965 | 82.7% | 15% | 12.4% |
| Private Education Loan Gross Defaults (millions) | $ | 459 | $
| 428 | 130.5% | 10% | 13.1% |
| | | | | Overall Performance Score: | 119.0% |
origination of $6.0 billion in private education refinance and in-school loans. The Committee also considered ESG priorities, including a shared goal for our NEOs to promote inclusion and diversity and an equitable work environment. These achievements effectively simplified, streamlined and de-risked the Company while creating shareholder value. As a result, the Committee approved a 5% increase in the payments to our NEOs, resulting in a final payout percentage of 125% under the 2021 MIP. These results are detailed in chart below. | | | | | | | | | | | | | | | |
2021 MIP Performance Results |
2021 Performance Metric (i) | | Performance Target (ii) | | | 2021 Actual Performance (iii) | | | Payout Factor (iv) | | | Weighting (v) | | | Performance Score (vi) | |
Adjusted Diluted “Core Earnings” Per Share12 | | $ | 3.27 | | | $ | 4.65 | | | | 150.0 | % | | | 50 | % | | | 75.0 | % |
Adjusted “Core Earnings” Operating Expenses13 (millions) | | $ | 910 | | | $ | 973 | | | | 0.0 | % | | | 20 | % | | | 0.0 | % |
Business Processing EBITDA14 (millions) | | $ | 56 | | | $ | 136 | | | | 150.0 | % | | | 15 | % | | | 22.5 | % |
Private Education Loan Gross Defaults (millions) | | $ | 520 | | | $ | 163 | | | | 150.0 | % | | | 15 | % | | | 22.5 | % |
| | | | | | Overall Performance Score: | | | | 120.0 | % | | |
| | | | | | Payout Adjustment for Successfully Achieving 2021 Strategic Priorities: | | | | 5.0 | % | | |
| | | | | | Final Payout Percentage: | | | | 125.0 | % | | |
These performance results were reviewed and certified by the Compensation Committee in January 2020.2022. In determining the incentive award amounts to be paid to each of our NEOs under the 20192021 MIP, the Committee also considered the individual performance of each NEO, as reflected in an annual performance assessmentassessments prepared by our CEO and presented to the Committee. As in previous years, the Committee consulted with the other independent members of the Board in reviewing the CEO’s performance and setting his incentive payout.
The incentive award amounts for our NEOs under the 20192021 MIP, which were paid in cash in February 2020,2022 with a final payout percentage of 125%, are set forth in the following table.
| 2019 MIP Payouts |
| Navient NEOs | Target % of Base Salary | 2019 Target Incentive Amount ($) | 2019 MIP Incentive Award Amount ($) |
| Mr. Remondi | 150% | 1,500,000 | 1,785,000 |
| M. Lown | 150% | 600,000 | 714,000 |
| Mr. Kane | 150% | 690,000 | 821,100 |
| Mr. Heleen | 150% | 577,500 | 687,225 |
| Mr. Hauber | 150% | 525,000 | 624,750 |
22
| See footnote 19 above for additional information regarding Adjusted Diluted “Core Earnings” Per Share. |
23
| See footnote 20 above for additional information regarding EBITDA. |
24
| See footnote 21 above for additional information regarding Adjusted “Core Earnings” Operating Expenses, which for 2019 excludes $6 million in regulatory-related expenses, $6 million in restructuring expenses and $12.5 million in expenses relating to the Canyon Agreement. For additional information pertaining to the Canyon Agreement, please refer to “Shareholder Engagement and Communications with the Board” above. |
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2019 | | | | | | | | | |
2021 MIP Payouts |
Navient NEOs | | 2021 Base Salary ($) | | | Target % of Base Salary | | | 2021 Target Incentive Award at 100% Achievement Amount ($) | | | 2021 MIP Incentive Award at 125% Achievement Amount ($) | |
Mr. Remondi | | | 1,000,000 | | | | 150 | % | | | 1,500,000 | | | | 1,875,000 | |
Mr. Fisher | | | 350,000 | | | | 150 | % | | | 525,000 | | | | 656,250 | |
Mr. Kane | | | 460,000 | | | | 150 | % | | | 690,000 | | | | 862.500 | |
Mr. Heleen | | | 400,000 | | | | 150 | % | | | 600,000 | | | | 750.000 | |
Mr. Hauber | | | 350,000 | | | | 150 | % | | | 525,000 | | | | 656,250 | |
2021 Long-term Incentive Program
Our long-term incentive program is designed to drive long-term performance and shareholder value by delivering a significant portion of NEO compensation through a mix of equity awards. For 2019, the Committee decided to discontinue the prior practice of granting stock options as part of the Company’s long-term incentive program. The Committee made this determination to update the mix of equity awards based on its review of equity grant practices among peer companies, general industry market trends and the Company’s historical grant practices. Each of our NEOs (other than Mr. Remondi) received long-term incentive awards split equally between restricted stock units (“RSUs”) and performance stock units (“PSUs”) in terms of grant date value.
Recognizing. Similar to the mix for 2020, Mr. Remondi’s
significant contributions to the Company, the Committee increased the grant date value of his 20192021 long-term incentive award
by 25% from the prior year, with this increase beingwas delivered
entirely in PSUs. Sixty percent of the grant date value of Mr. Remondi’s 2019 long-term incentive awards were delivered60% in the form of PSUs
with the remaining forty percent deliveredand 40% in the form of
RSUs. This increase brings Mr. Remondi’s 2019RSUs (in terms of grant date value). Each of our other NEOs received long-term incentive
award valueawards split equally between RSUs and PSUs._____________________________
12 See footnote 4 above for additional information regarding Adjusted Diluted “Core Earnings” Per Share.
13 See footnote 7 above for additional information regarding Adjusted “Core Earnings” Operating Expenses which for 2021 excludes $233 million in line with peer group median levels.
Based uponnet regulatory-related expenses and $26 million in restructuring expenses. 14 See footnote 6 above for additional information regarding EBITDA.
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The chart below details the recommendation of our CEO and on a market analysis of the 2019 Navient peer group performed by the Committee’s independent consultant, the Compensation Committee approved 20192021 long-term incentive awards for our other NEOs in early 2019 in the following amounts: Mr. Lown ($1,200,000); Mr. Kane ($1,000,000); Mr. Heleen ($750,000); and Mr. Hauber ($500,000).
The chart below details the 2019 long-term incentive awards for our NEOs:
| Navient NEOs | Performance Stock Units(1) (#) | Restricted Stock Units(2) (#) | Total Award
Value(3) ($) |
| Mr. Remondi | 262,237 | 174,825 | 5,000,000 |
| Mr. Lown | 52,447 | 52,447 | 1,200,000 |
| Mr. Kane | 43,706 | 43,706 | 1,000,000 |
| Mr. Heleen | 32,779 | 32,779 | 750,000 |
| Mr. Hauber | 21,853 | 21,853 | 500,000 |
| | | |
Navient NEOs | Performance Stock Units(1) (#) | Restricted Stock Units(2) (#) | Total Award Value(3) ($) |
Mr. Remondi | 253,378 | 162,601 | 5,000,000 |
Mr. Fisher | 21,114 | 20,325 | 500,000 |
Mr. Kane | 42,229 | 40.650 | 1,000,000 |
Mr. Heleen | 31,672 | 30,487 | 750,000 |
Mr. Hauber | 21,114 | 20,325 | 500,000 |
(1) | This column represents the target PSUs granted to each of the NEOs on February 5, 2019,4, 2021, with the target number of PSUs equal to 50% (60% for Mr. Remondi) of the 2019approved 2021 long-term incentive award amount approved by the Compensation Committee divided by the closing price of Navient Common Stock on the grant date.grant-date fair value per PSU share determined in accordance with FASB ASC Topic 718 ($11.84). Each PSU is subject to performance-based vesting over a three-year performance period beginning on January 1, 20192021, and ending on December 31, 2021.2023. The vesting provisions of these PSUs are described below. |
(2) | |
(2) | This column represents the RSUs granted to each of the NEOs on February 5, 2019,4, 2021, with the number of RSUs equal to 50% (40% for Mr. Remondi) of the 2019approved 2021 long-term incentive award amount approved by the Compensation Committee divided by the closing price of Navient Common Stock on the grant date.date ($12.30). These RSUs are scheduled to vest in one-third increments on each of the first, second and third anniversaries of the grant date, subject to certain terms and conditions. |
(3) | |
(3) | Total award value differs slightly from the grant date fair value, as reflected in the “Summary Compensation Table” and “Grants of Plan-Based Awards” table, as the number of units/optionsunits is rounded down to the nearest whole unit or option to avoid the issuance of fractional units or shares. |
2019-212021-23 Performance Stock Units
PSUs granted in 20192021 as part of our 20192021 long-term incentive program are designed to vest at the end of 2021,2023, with a potential payout ranging from 0% to 150% of the target number of units, based on cumulative performance over the 2019- 212021-23 performance period.
The Committee approved newly designed PSUs for each of our NEOs in 2019. RecognizingOur 2021 PSU design was similar to 2020, with 70% weight assigned to net student loan cash flows as a primary driver of the Company’s value, the Committee increased theand 30% weight assigned to this three-year cumulative performance measure from 50% to 70%. Additionally, the Committee added return on equity (“ROE”) as, a new measure of company-wide success with a weight of 30%.
Maintaining (or improving) ROE requiresstandard financial metric that incents a disciplined approach to managing, allocating and investing capital to achieve the best return for shareholders. As a “standard” financial metric, it also permits comparability across peer groups and industry- wide benchmarks. Given the impact of accounting rules on certain businesses—as well as general uncertainty regarding the impact of the new accounting standard governing current expected credit losses (“CECL”)—businesses, separate annual ROE targets will be established by the Committee for each year in the 2019-212021-23 PSU performance cycle, with targets set at the beginning of each year. Each annual ROE target will have 10% weight and earned awards will not be paid until after the end of the 2019-212021-23 performance period.
The 2021 PSUs, like the 2020 PSUs, utilize “Core Earnings” ROE calculated using average stockholder’s equity on a “Core Earnings” basis, which eliminates volatility associated with derivative related mark-to-market adjustments that are out of management’s control.15We also introduced two new features this year for the 2021-23 PSUs designed to further align our executives’ interests with those of our shareholders: a relative total shareholder return (“rTSR”) performance multiplier and a one-year, post-vesting holding requirement for any shares delivered in settlement of earned and vested PSUs. The addition of both features is intended to emphasize the Company’s keen focus on delivering superior overall returns to shareholders.
The rTSR multiplier works as follows. Vesting of the 2021-23 PSUs—as determined solely by net student loan cash flows and ROE—will be multiplied by +/- 20% based on the Company’s rTSR performance over the three-year performance period, raising the overall maximum potential payout to 180% of the target number of units and introducing additional “down-side” risk. The Company’s rTSR performance depends on where its total shareholder return for the 2021-23 performance period ranks in comparison to the total shareholder returns of a group of peer companies for the same period. The peer group consists of the companies in the S&P 400 Financials Index at the start of the performance period, adjusted for certain merger and acquisition, spinoff or bankruptcy events impacting the companies in the peer group during the performance period.
Total shareholder return for both the Company and the members of the peer group is the change in price of a share of a company’s stock from the start to the end of the performance period, including reinvested dividends, divided by the share price at the start of the performance period. Starting and ending share prices are averaged over a 30-day period to smooth the results. If our total shareholder return for the performance period is in the 75th or higher percentile of the peer group companies, the rTSR multiplier will be 120%; if our total shareholder return for the performance period is in the 25th or lower percentile of the peer group companies, the rTSR multiplier will be 80%; and if our total shareholder return for the performance period is between the 25th and 75th percentiles of the peer group companies, the rTSR multiplier will be interpolated on a straight line basis between 80% and 120%.
_______________________________
15 For purposes of these PSUs, “Core Earnings” Return on Equity is calculated as a percentage equal to the Company’s “Core Earnings” net income for each of fiscal years 2021, 2022 and 2023 (as shown in the segment reporting footnote in the Company’s audited financial statements as published in the Company’s annual report on Form 10-K, excluding the impact of any regulatory and restructuring costs), divided by average stockholder’s equity for each such year (determined using the average balance of stockholder’s equity on a “Core Earnings” basis for each quarter in a given year).
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The post-vesting holding period requirement means that, for one year after the date the shares are issued, executives will not be able to sell or otherwise transfer any shares received upon settlement of any earned and vested 2021-23 PSUs, other than shares issued upon an executive’s death or disability or as needed to pay required tax withholding obligations.
These performance metrics for the 2019-212021-23 PSUs are summarized below:
2019-212021-23 Performance Stock Units |
2019-212021-23 PSU Performance Metric | Weight | Rationale |
Cumulative Net Student Loan Cash Flows2516 | 70% | | Promotes successful management of our loan portfolios |
| | | Critical driver of shareholder value, supporting dividends, share repurchases and debt payments |
| | | Supports growth of strategic businesses, including consumer lending |
“Core Earnings” Return on Equity2617 | 10% / 10% / 10% | | Requires focus on managing, allocating and investing capital to achieve the best return for shareholders |
| | | Standard financial metric that permits comparability across peer groups and industry-wide benchmarks. |
16 Cumulative Net Student Loan Cash Flows is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. Cumulative Net Student Loan Cash Flows are the aggregate cash flows net of secured borrowings from all student loans (including private credit refinance loans) realized for the fiscal years 2021, 2022 and 2023, including student loan cash flows realized from new acquisitions, but excluding the impact of cash flows for fiscal years beyond 2023 that are accelerated through securitizing or pledging unencumbered student loans or through loan sales.
17 Annual “Core Earnings” Return on Equity targets and range are established by the Committee at the beginning of each respective year, with each year’s performance counting 1/3 towards the total 30% weight. “Core Earnings” Return on Equity is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of “Core Earnings” Return on Equity, see footnote 15 above. For a reconciliation of our non-GAAP financial measures with GAAP results, please refer to the section titled “Non-GAAP Financial Measures” on pages 37-45 of our 2021 Annual Report, as well as the section titled “Non-GAAP Financial Measures” in each of our quarterly reports filed on Forms 10-Q.
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The chart below shows the potential for vesting as a percentage of the target number of PSUs:
| | 2019-21 Performance Stock Units |
| | Performance Metric | Weight | Percentage of 2019-21 PSUs Vesting* |
| 0% | 50% | 100% | 150% |
| | Cumulative Net Student Loan Cash Flows | 70% | Less than $8.20 billion | $8.20 billion | $9.10 billion | $9.90 billion or greater |
| | 2019 “Core Earnings” Return on Equity | 10% | Less than 11.2% | 11.2% | 12.7% | 14.2% |
| | 2020 “Core Earnings” Return on Equity | 10% | Less than 18.6% | 18.6% | 20.6% | 22.6% |
| | 2021 “Core Earnings” Return on Equity27 | 10% | - | - | - | - |
2021-23 Performance Stock Units |
Performance Metric | Weight | Percentage of 2021-23 PSUs Vesting* |
0% | 50% | 100% | 150% |
Cumulative Net Student Loan Cash Flows | 70% | Less than $7.079 billion | $7.079 billion | $8.014 billion | $9.016 billion or greater |
2021 “Core Earnings” Return on Equity | 10% | Less than 16% | 16% | 18% | 20% or greater |
2022 “Core Earnings” Return on Equity | 10% | Less than 14.3% | 14.3% | 15.7% | 17.7% or greater |
2023 “Core Earnings” Return on Equity18 | 10% | - | - | - | - |
*For points between each performance level, the vesting percentages will be interpolated. That is, vesting will be interpolated between threshold performance (50% vesting) and target performance (100% vesting), as well as between target performance and maximum performance (150% vesting).
Regarding the performance targets established for each metric, theThe Compensation Committee believes that thesethe performance targets set for each metric are set atachievable but challenging but achievable levels in light of the uncertain regulatory, rating agency and financial environment the Company faces.overall economic environment. The Committee considers these environmental factors, prevailing market-competitive return ratios, and the resulting degree of difficulty that management faces in achieving the Company’s long-term growth and performance goals when establishing appropriate levels for threshold, target and maximum performance levels and payout curves.
The Committee established threshold, target and maximum levels of performance for 2022 “Core Earnings” Return on Equity at the beginning of calendar year 2022. These levels reflect our general market expectations for 2022, as well as our expectation that average stockholder’s equity for 2022 (determined using the average balance of stockholder’s equity on a “Core Earnings” basis for each quarter in 2022) will remain stable in 2022 while our legacy loan portfolio continues to amortize, resulting in a lower expected “Core Earnings” Return on Equity for 2022 relative to 2021.The Company achieved a “Core Earnings” ROE of 24.6% for fiscal year 2021, which equates to maximum achievement (150%) of the 2021 goal for that performance metric.
2020-22 Performance Stock Units
The achievement of the 2021 ROE performance goal at the maximum level (150%) described above applies to the 2021 “Core Earnings” ROE performance metric for the 2020-22 PSU awards granted in early 2020 (weighted at 10% of the 2020-22 PSUs). The Company achieved a 2020 “Core Earnings” ROE of 23.2%, which equated to maximum achievement (150%) of the 2020 goal for that metric under the 2020-22 PSUs (also at weighted 10% of the 2020-22 PSUs). These results were driven by Navient’s strong earnings results in both 2020 and 2021.
2019-21 Performance Stock Units
Fiscal year 2021 also marked the final year of a three-year performance period associated with PSUs granted to our executive team in early 2019 as part of our long-term incentive program. These 2019-21 PSUs were designed to vest in early 2022 based on performance through the end of 2021, with a potential payout ranging from 0% to 150% of the target number of units, determined by cumulative performance over the 2019-21 performance period. The following performance metrics were selected in early 2019 to focus management on specific long-term business objectives:
18 The Committee will establish the “Core Earnings” Return on Equity target and range for 2023 at the beginning of calendar year 2023.
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2019-21 PSU Performance Metric | Weight | Rationale |
Cumulative Net Student Loan Cash Flows | 70% | · | Promotes successful management of our loan portfolios |
| | · | Critical driver of shareholder value, supporting dividends, share repurchases and debt payments |
| | · | Supports growth of strategic businesses, including consumer lending |
”Core Earnings” Return on Equity | 10% / 10% | · | Requires focus on managing, allocating and investing capital to achieve the best return for shareholders |
| /10% | · | Standard financial metric that permits comparability across peer groups and industry-wide benchmarks |
The following chart summarizes the Company’s cumulative performance over the 2019-21 performance period relative to the targets established for each of these metrics. Our performance during this three-year period resulted in the 2019-21 PSUs vesting at 119% of the target number of units.
2019-21 Performance Stock Units |
2019-21 Performance Metric | | Performance Target | | 2019-21 Actual Performance | | | Payout Factor | | | Weight | | | Performance Score | |
Cumulative Net Student Loan Cash Flows5 (millions) | | $ | 9,100 | | | $ | 9,180 | | | | 105% | | | | 70% | | | | 74 | % |
2019 “Core Earnings” Return on Equity6 (millions) | | | 12.7% | | | | 17.4% | | | | 150% | | | | 10% | | | | 15 | % |
2020 “Core Earnings” Return on Equity18 (millions) | | | 20.6% | | | | 23.2% | | | | 150% | | | | 10% | | | | 15 | % |
2021 “Core Earnings” Return on Equity18 (millions) | | | 18.0% | | | | 24.6% | | | | 150% | | | | 10% | | | | 15 | % |
| | | | | | Overall Performance Score: 119 | % |
Deferred Compensation
We provide our NEOs with the opportunity to defer a portion of their compensation under the Navient Deferred Compensation Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan is designed to provide all of our senior employees, including our NEOs, with the opportunity to save for retirement and other personal expenses on a tax-
25
| Cumulative Net Student Loan Cash Flows is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. Cumulative Net Student Loan Cash Flows are the aggregate cash flows net of secured borrowings from all student loans (including private credit refinance loans) realized for the fiscal years 2019, 2020 and 2021, including student loan cash flows realized from new acquisitions, but excluding the impact of cash flows for fiscal years beyond 2021 that are accelerated through securitizing or pledging unencumbered student loans or through loan sales. |
26
| Annual “Core Earnings” Return on Equity targets and range are established by the Committee at the beginning of each respective year, with each year’s performance counting 1/3 towards the total 30% weight. “Core Earnings” Return on Equity is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. “Core Earnings” Return on Equity is a percentage equal to the Company’s “core earnings” net income for each of fiscal years 2019, 2020 and 2021, divided by average stockholder’s equity for each such year (determined using the average balance of stockholder’s equity on a “core earnings” basis for each quarter in a given year), using yearly “core earnings” net income as shown in the segment reporting footnote in the Company’s audited financial statements as published in the Company’s annual report on Form 10-K, excluding the impact of any regulatory and restructuring costs. |
27
| “Core Earnings” Return on Equity targets and range for 2021 will be established by the Committee at the beginning of calendar year 2021. |
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advantagedtax-advantaged basis. Each participating employee may elect to defer a portion of his or her eligible compensation under the Deferred Compensation Plan, and amounts deferred are credited to bookkeeping accounts. The Company amendeddoes not make any contributions to the Deferred Compensation Plan in 2018 to eliminate Company contributions effectivefor periods on or after January 1, 2019. Amounts in each participant’s account are indexed to one or more investment alternatives chosen by each participant from a range of market- basedmarket-based alternatives. The Deferred Compensation Plan does not pay above-market or preferential earnings on compensation deferred under or contributed to the plan. Additional details for our NEOs who participate can be found below under the “Non-Qualified Deferred Compensation” table.
Health, Welfare and Retirement Benefits
Our NEOs are eligible to participate in the same broad-based employee benefit programs that we offer to our other employees, such as group health benefits and tax-qualified retirement benefits.
Perquisites are limited and are not a significant portion of our compensation program. In 2019,2021, we did not provide relocation allowances to any NEO.NEO other than to Mr. Fisher, who, at the time of his promotion to CFO in October 2020, was based at the Company’s Herndon, Virginia office and was made eligible for up to $150,000 in relocation benefits to facilitate his relocation to the Wilmington, Delaware area. No amounts were drawn by Mr. Fisher in 2020 or 2021. We provided transportation allowances to our CEO as described in the Summary Compensation Table below.
_________________________________
19 Cumulative Net Student Loan Cash Flows is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. Cumulative Net Student Loan Cash Flows include aggregate cash flows net of secured borrowings from student loans realized for the fiscal years 2019, 2020 and 2021, including student loan cash flows realized from new acquisitions, but excluding the impact of cash flows for fiscal years beyond 2021 that are accelerated through securitizing or pledging unencumbered student loans or through loan sales.
20 “Core Earnings” Return on Equity is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. For more information on the definition of “Core Earnings” Return on Equity, see footnote 15 above. For a reconciliation of our non-GAAP financial measures with GAAP results, please refer to the section titled “Non-GAAP Financial Measures” on pages 37-45 of our 2021 Annual Report, as well as the section titled “Non-GAAP Financial Measures” in each of our quarterly reports filed on Forms 10-Q.
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Severance Benefits
Navient has adopted an executive severance plan and a change in control severance plan, which are described in greater detail under the heading “Arrangements with Named Executive Officers” below. We generally utilize plans (as opposed to individual agreements) to provide severance and change in control payments and benefits for several reasons. First, a “plan” approach provides us with the flexibility to change the terms of severance benefits from time to time. In addition, this approach is more transparent, both internally and externally, which eliminates the need to negotiate severance or other employment separation benefits on a case-by-case basis and assures each of the executives that his or her severance benefits are comparable to those of other executives with similar levels of responsibility and tenure.
Under the executive severance plan, our NEOs are eligible for severance payments in the event of an involuntary termination of employment without “cause.” In addition, they are eligible for “double trigger” severance payments under the change in control severance plan in the event of an involuntary termination of employment without “cause” or a termination of employment with “good reason” in connection with a change in control of Navient. All plan participants, including our NEOs, are entitled to certain limited “single trigger” benefits upon a change in control, including equity acceleration, only when equity awards are not honored, assumed, or replaced by a successor employer of Navient. Such equity acceleration provides NEOs with the benefit of these outstanding awards granted in prior years. They also may be able to exercise the awards and possibly participate in the change in control transaction for the consideration received.
Other Arrangements, Policies and Practices Related to Our Executive Compensation Program
Share Ownership Guidelines
Navient has adopted share ownership guidelines applicable to its senior executives, including our NEOs. These ownership guidelines, which are required to be achieved over a five-year period, are as follows:
Chief Executive Officer — Lesser of 1 million shares or $5 million in value
Executive Vice President — Lesser of 200,000 shares or $1 million in value
Senior Vice President — Lesser of 70,000 shares or $350,000 in value
| · | Chief Executive Officer — Lesser of 1 million shares or $5 million in value |
| · | Executive Vice President — Lesser of 200,000 shares or $1 million in value |
| · | Senior Vice President — Lesser of 70,000 shares or $350,000 in value |
Each of our NEOs other than Mr. Remondi holds the title of Executive Vice President.
The guidelines encourage continued ownership of a significant amount of Navient’s Common stock acquired through equity awards and help align the interests of our senior executives with the interests of our shareholders. A senior executive must hold Navient Common Stock acquired through equity grants until the applicable thresholds are met, and a senior executive will not be eligible to receive equity grants during the following year if he or she sells this stock (whether before or after such guidelines are met), if such sale resultedresults in a decrease below the thresholds established by the guidelines.
The following shares and share units count towards the ownership guidelines: shares held in brokerage accounts; vested shares credited to deferred compensation accounts; shares credited to qualified retirement plan accounts; vested
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performance stock; and restricted stock and RSUs that vest solely upon the passage of time, on an after-tax basis, and vested stock options, to the extent that they are “in-the-money” on an after-tax basis.
All of Navient’s NEOs are in compliance with the share ownership guidelines as of the date of this proxy statement either through their stock ownership levels or due to the five-year initial period not being finished.
Hedging/Pledging Prohibition
Navient policy prohibits directors and senior management from engaging in hedging, pledging and certain other transactions involving Navient Common Stock. See “Director Compensation” above for additional details.
Policy on Rule 10b5-1 Trading Plans
The Company has a policy governing the use by directors and executive officers of pre-established trading plans for sales of our Common Stock. See “Director Compensation” above for additional details.
AwardsAll types of cash and equity-based awards made to senior officers, including our NEOs, under the Navient Corporation 2014 Omnibus Incentive Plan (as amended and restated) are subject to clawback in the event of a material misstatement of Navient’s financial results and other qualifying events. Navient enhanced its clawback policy in 2017 following an extensive review and consideration of the Company’s then-existing clawback policy by the Compensation Committee. The enhanced clawback policy grants the Board discretion to recoup incentive compensation both in the event of a financial restatement and in the case of the executive’s misconduct involving a material violation of Navient policy or commission of fraud or other misconduct involving Navient. Following engagement with its shareholders, the Board further enhanced the clawback policy in March 2018 to add a clawback trigger in the event of misconduct committed by persons under a senior officer’s supervision.
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Navient Compensation Committee Process for Approving Long-term Awards
The Compensation Committee approves long-term awards on an annual basis at a regularly scheduled committee meeting. The Committee has delegated authority to a sub-committee consisting of the Compensation Committee Chair and the CEO (the “Sub-Committee”) to approve long-term awards for new employees and promotions below the executive officer level. These awards generally are effective on the day on which the Sub-Committee approves the awards.awards (or, if later, the employee’s hire or promotion date). The Compensation Committee approves any awards to newly hired or promoted executive officers. The grant date for these awards generally is the applicable meeting date of the Committee at which the awards are approved.approved (or, if later, the officer’s hire or promotion date). Under the terms of the Navient Corporation 2014 Omnibus Incentive Plan, as amended and restated, stock options are required to be priced at the closing market price of Navient’s Common Stock on the Nasdaq on the date of grant.
Tax Deductibility of Compensation Over $1 Million
Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally disallows a federal income tax deduction for annual compensation over $1 million paid to our chief executive officer, chief financial officer, three other most highly compensated officers and anyone who has served as one of our covered officers after 2016, other than pursuant to certain grandfathered compensation arrangements described below.arrangements. The Compensation Committee retains the flexibility to award compensation to the NEOs that is not deductible for U.S. federal income tax purposes.
Prior to 2018, the Section 162(m) limitations applied to the chief executive officer and the three other highest-paid NEOs (excluding the chief financial officer) who were serving as of the last day of Navient’s fiscal year (“covered employees”), subject to a “performance-based compensation” exception for compensation paid pursuant to shareholder-approved plans. Certain plans and arrangements in effect as of November 2, 2017 (“Grandfathered Plans”) remain eligible for the performance-based compensation exception, provided that those plans are not materially modified. For PSUs granted in connection with our 2017 long-term incentive program, which cover the three-year performance period from 2017 to 2019, the Committee established a separate 162(m) performance target which requires that the Company achieve positive Cumulative Core Net Income for the applicable three-year performance period. If this target is achieved, each executive subject to Section 162(m) becomes eligible for the maximum level of vesting available (i.e., 150%). However, the Committee retained (and exercised, with respect to the 2017 PSUs) “negative discretion” to reduce the level of vesting using the same criteria established for all other PSU recipients who are not subject to Section 162(m).
Under guidance from the U.S. Department of the Treasury regarding the scope of these rules, our ability to deduct executive compensation payments made under Grandfathered Plans to certain of our NEOs in 2019 and beyond may be limited under Section 162(m).
| 2020 Proxy Statement | | 63
|
Certain Executive Compensation Payments in 2019
Deferred Signing Bonus
In March 2017, the Company agreed to pay Mr. Lown a deferred signing bonus of $1,400,000, less applicable withholding taxes (“Deferred Signing Bonus”), to compensate him for a portion of the long-term equity and deferred compensation with his former employer that he forfeited by joining Navient. This Deferred Signing Bonus was paid in cash in two equal installments on March 17, 2018 and March 17, 2019.
2017-19 Performance Stock Units
Fiscal year 2019 marked the final year of a three-year performance period associated with PSUs granted to our executive team in early 2017. These long-term equity awards were designed to vest at the end of 2019, with a potential payout ranging from 0% to 150% of the target number of units. The following chart summarizes the performance results under these PSUs:
| 2017-19 Performance Metric | Performance Target | 2017-19 Actual Performance | Payout Factor | Weight | Performance Score |
Cumulative Net Student Loan Cash Flows28 (millions) | $ 7,850 | $ 8,818 | 135% | 50% | 67% |
Cumulative Revenue from Growth Businesses29 (millions) | $ 995 | $ 839 | 65% | 30% | 20% |
Strategic Objectives | | | 110% | 20% | 22% |
• Pursue Opportunistic Loan Portfolio Acquisitions • Capture Operating Efficiencies in Asset Servicing • Improve Margins in Fee Businesses • Build Strong Relationships with State and Federal Regulators • Grow Intrinsic Value of Company |
| Overall Performance Score: | 109%
|
The Executive Summary of this Compensation Discussion and Analysis, beginning on page 46, provides additional details regarding our key achievements during the 2017-19 performance period, which the Committee considered when assessing the Company’s performance relative to the strategic goals established at the beginning that period.
28
| Cumulative Net Student Loan Cash Flows is a non-GAAP financial measure that does not represent a comprehensive basis of accounting. Cumulative Net Student Loan Cash Flows include aggregate cash flows net of secured borrowings from student loans realized for the fiscal years 2017, 2018 and 2019, including student loan cash flows realized from new acquisitions, but excluding the impact of cash flows for fiscal years beyond 2019 that are accelerated through securitizing or pledging unencumbered student loans or through loan sales. |
29
| Cumulative Revenue from Growth Businesses includes that portion of the Company’s aggregate revenue for fiscal years 2017-19 from non-federal-loan-related businesses. |
| 2020 Proxy Statement | | 64
|
Changes to Our Executive Compensation Program for 2020
2022The Compensation Committee made changes to our annual Management Incentive Program (“MIP”)incentive plan for 2020. The resulting refinements are structured2022, as well as our long-term incentive program for 2022. These changes emphasize the evolving nature of our businesses as our legacy loan portfolio continues to drive the growthamortize and profitability in 2020.continues to align executive compensation with value for shareholders. These changes are described below. The target salaries and bonuses of our NEOs will remain unchanged for 2020, as will the structure of our long-term incentive program.
20202022 Annual Incentive Program
The Committee continued its focus on Adjusted Diluted “Core Earnings” Per Share as the key financial metric in the annual Management Incentive Plan (“MIP”) for 2020. Three2022, with an unchanged weighting of 50%. Two other financial metrics are carried forward from the 20192021 MIP— Adjusted “Core Earnings” Operating Expenses, Business Processing EBITDA and Private Education Loan Gross Defaults. BasedDefaults—each with an unchanged weighting of 15%. Because investors continue to focus on feedback from our shareholders,Navient’s ability to drive operating efficiency, the Committee decided to eliminate the financial metric for Consumer Lending New Volume. Although all Consumer Lending New Loan Volume is subject to the Company’s Board-approved risk and return guidelines (e.g., regarding consumer credit quality, cost-to-acquire, net interest margin), some shareholders expressed the view that this financial metric was not sufficiently tied to profitability. The Committee reallocated the weighting assigned to each of the remaining financial metrics for 2020 as follows: Adjusted Diluted “Core Earnings” Per Share (50%);replaced Adjusted “Core Earnings” Operating Expenses (20%); Business Processing EBITDA (15%);with Adjusted “Core Earnings” Efficiency Ratio. This commonly used performance metric, which will be weighed at 20%, will allow us to provide a comparative metric against our peers.
Long-term Incentive Program for 2022
As in prior years, the PSUs granted in 2022 are designed to vest at the end of a three-year performance period, with a potential payout based on cumulative performance over the 2022-24 performance period. The design of the 2022 PSUs is similar to PSUs granted in 2021 in that net student loan cash flows and Private Education Loan Gross Defaults (15%return on equity (“ROE”). The remain as the two key performance metrics, with an additional performance “multiplier” based on the Company’s total shareholder return relative to a performance peer group consisting of all companies in the Consumer Lending marketS&P 400 Financials Index (“rTSR”).
To emphasize the evolving nature our businesses, the weighting assigned to net student loan cash flows has decreased from 70% to 55% and the weighting assigned to ROE has increased from 30% to 45%. As our legacy loan portfolio continues to amortize, ROE is becoming a more relevant for Navient as a standard financial metric that permits comparability across peer groups and industry-wide benchmarks. As in prior years, separate annual ROE targets will continuebe established by the Committee for each year in the 2022-24 PSU performance cycle, with targets set at the beginning of each year, and each annual ROE target will have 15% weight. Potential payouts based on performance relative to be included as partthese two performance metrics will range from 0% to 150% of the calculation for threetarget number of these measures (Business Processing EBITDA does not includeunits. Vesting of the 2022 PSUs—as determined solely by net student loan cash flows and ROE—will be multiplied by +/- 20% based on the Company’s rTSR performance in this market as partover the three-year performance period, raising the overall maximum potential payout to 180% of its calculation).
the target number of units and introducing additional “down-side” risk.
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The table below summarizes compensation paid, awarded to or earned by each of our named executive officers (“NEOs”) for the fiscal years ended December 31, 2019,2021, December 31, 2018,2020, and December 31, 2017.
NAME AND PRINCIPAL POSITION(1) | YEAR | | | | | | NONQUALIFIED DEFERRED COMPENSATION EARNINGS(5) ($) | | TOTAL ($) |
| Jack Remondi | 2019 | 1,000,000 | 0 | 4,999,989 | 0 | 1,785,000 | - | 8,332 | 7,793,321 |
| President and Chief | 2018 | 1,000,000 | 0 | 2,799,997 | 1,199,998 | 1,896,000 | - | 8,110 | 6,904,105 |
| Executive Officer | 2017 | 1,000,000 | 0 | 3,199,979 | 799,997 | 1,444,500 | - | 12,260 | 6,456,736 |
| | | | | | | | | | |
| Christian Lown | 2019 | 400,004 | 700,000 | 1,199,987 | 0 | 714,000 | - | 14,000 | 3,027,991 |
| Chief Financial | 2018 | 400,004 | 700,000 | 839,989 | 359,999 | 758,400 | - | 38,750 | 3,097,142 |
| Officer | 2017 | 292,310 | 0 | 999,992 | 0 | 577,800 | - | 3,000 | 1,873,102 |
| | | | | | | | | | |
| John Kane | 2019 | 460,000 | 0 | 999,993 | 0 | 821,100 | - | 14,000 | 2,295,093 |
| Group President, Business | 2018 | 460,000 | 0 | 909,979 | 389,999 | 690,000 | - | 38,750 | 2,488,728 |
| Processing Solutions | 2017 | 458,461 | 0 | 1,159,978 | 289,998 | 664,470 | - | 40,327 | 2,613,234 |
| | | | | | | | | | |
| Mark Heleen | 2019 | 384,999 | 0 | 749,983 | 0 | 687,225 | - | 14,000 | 1,836,207 |
| Chief Legal Officer | 2018 | 384,999 | 0 | 524,986 | 224,998 | 729,960 | - | 13,750 | 1,878,693 |
| and Secretary | 2017 | 382,692 | 0 | 599,973 | 149,999 | 556,133 | - | 19,498 | 1,708,295 |
| | | | | | | | | | |
| Steve Hauber | 2019 | 345,384 | 0 | 499,996 | 0 | 624,750 | - | 14,000 | 1,484,130 |
| Chief Risk and | 2018 | 310,000 | 0 | 349,977 | 149,999 | 489,800 | - | 34,158 | 1,333,934 |
| Compliance Officer | | | | | | | | | |
2019.NAME AND PRINCIPAL POSITION(1) | YEAR | SALARY(2) ($) | BONUS ($) | STOCK AWARDS(3) ($) | OPTION AWARDS(3) ($) | NON-EQUITY INCENTIVE PLAN COMPENSATION(4) ($) | CHANGE IN PENSION VALUE AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS(5) ($) | ALL OTHER COMPENSATION(6) ($) | TOTAL ($) |
Jack Remondi | 2021 | 1,000,000 | 0 | 4,999,987 | 0 | 1,875,000 | - | 8,979 | 7,883,966 |
President and Chief | 2020 | 1,038,461 | 0 | 4,999,972 | 0 | 2,055,000 | - | 8,274 | 8,101,707 |
Executive Officer | 2019 | 1,000,000 | 0 | 4,999,989 | 0 | 1,785,000 | - | 8,332 | 7,793,321 |
| | | | | | | | | |
Joe Fisher | 2021 | 350,000 | 0 | 499,987 | 0 | 656,250 | - | 14,500 | 1,520,737 |
Chief Financial | 2020 | 257,860 | 0 | 239,984 | 0 | 305,105 | - | 8,137 | 811,086 |
Officer | | | | | | | | | |
| | | | | | | | | |
John Kane | 2021 | 460,000 | 0 | 999,986 | 0 | 862,500 | - | 14,500 | 2,336,986 |
Group President, Business | 2020 | 477,692 | 0 | 999,972 | 0 | 945,300 | - | 14,250 | 2,437,214 |
Processing Solutions | 2019 | 460,000 | 0 | 999,993 | 0 | 821,100 | - | 14,000 | 2,295,093 |
| | | | | | | | | |
Mark Heleen | 2021 | 400,000 | 0 | 749,986 | 0 | 750,000 | - | 14,500 | 1,912,755 |
Chief Legal Officer | 2020 | 399,807 | 0 | 749,979 | 0 | 791,175 | - | 14,250 | 1,955,211 |
and Secretary | 2019 | 384,999 | 0 | 749,983 | 0 | 687,225 | - | 14,000 | 1,836,207 |
| | | | | | | | | |
Steve Hauber | 2021 | 350,000 | 0 | 499,987 | 0 | 656,250 | - | 14,500 | 1,520,737 |
Chief Risk and | 2020 | 363,461 | 0 | 499,986 | 0 | 719,250 | - | 14,250 | 1,596,947 |
Compliance Officer | 2019 | 345,384 | 0 | 499,996 | 0 | 624,750 | - | 14,000 | 1,484,130 |
| | | | | | | | | |
(1) | Reflects the position held by each NEO as of December 31, 2019. Mr. Hauber was not a2021. |
| |
(2) | Navient pays employee salaries in bi-weekly installments throughout the calendar year. In 2020, the Company’s standard payroll schedule for all salaried employees, including each NEO, in 2017.included 27 bi-weekly pay periods. |
(2) | Mr. Lown became eligible to receive a one-time deferred signing bonus of $1,400,000, less applicable withholding taxes, to compensate him for a portion of the long-term equity and deferred compensation with his former employer that he forfeited by joining Navient in March 2017. This Deferred Signing Bonus was payable in cash in two equal installments on March 17, 2018 and March 17, 2019. |
(3) | Amounts shown are the grant date fair values of the various stock-based awards granted during 2017, 20182019, 2021 and 20192022 computed in accordance with the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) Topic 718. Additional details on accounting for stock-based compensation can be found in “Note 2—Significant Accounting Policies” and “Note 11—Stock-Based Compensation Plans and Arrangements” to the audited consolidated financial statements included in the 20192021 Annual Report on Form 10-K. Performance |
| |
| The grant-date fair value of performance stock units (“PSUs”) granted in 2017, 2018 and 2019 areawarded during each fiscal year is shown based on the probable performance (target) value of the awards. The maximum grant-date fair value of the PSU awards for 2021 assuming all performance goals—including relative total shareholder return—were achieved at their grant date fair valuesmaximum levels would be as follows: for each of these years.Mr. Remondi, $5,399,987; for Mr. Fisher, $449,979; for Mr. Kane, $899,982; for Mr. Heleen, $674,986; and for Mr. Hauber, $449,979. |
The grant-date fair value of PSUs awarded during each fiscal year is shown based on the probable performance (target) value of the awards. The maximum grant-date fair value of the PSU awards for 2019 assuming all performance goals were achieved at their maximum levels would be as follows: for Mr. Remondi, $4,499,981; for Mr. Lown, $899,984; for Mr. Kane, $749,994; for Mr. Heleen, $562,481; and for Mr. Hauber, $374,991.
(4) | |
(4) | Annual incentive awards were paid to NEOs under the Management Incentive Plan in cash. |
(5) | |
(5) | Navient’s non-qualified deferred compensation plan does not provide for above-market or preferential earnings on compensation deferred under the plan. |
(6) | |
(6) | For 2019,2021, the components of “All Other Compensation” were as follows: |
| NAME | | TRANSPORTATION ALLOWANCE (B)($) | TOTAL ($) |
| Remondi | 7,692 | 640 | 8,332 |
| Lown | 14,000 | 0 | 14,000 |
| Kane | 14,000 | 0 | 14,000 |
| Heleen | 14,000 | 0 | 14,000 |
| Hauber | 14,000 | 0 | 14,000 |
Name | Employer Contributions To Defined Contribution Plan (A) ($) | Transportation Allowance(B) ($) | Total ($) |
Remondi | 8,692 | 287 | 8,979 |
Fisher | 14,500 | 0 | 14,500 |
Kane | 14,500 | 0 | 14,500 |
Heleen | 14,500 | 0 | 14,500 |
Hauber | 14,500 | 0 | 14,500 |
(A) | (A) | Amounts credited to Navient’s tax-qualified defined contribution plan. |
| |
(B) | Automobile allowance benefit calculated based on the annual lease method. |
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NAME | GRANT DATE | ESTIMATED POSSIBLE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS(1) | | ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS(2) | ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF STOCK OR UNITS(3) (#) | ALL OTHER OPTION AWARDS: NUMBER OF SECURITIES UNDERLYING OPTIONS(4) (#) | EXERCISE OR BASE PRICE OF OPTION AWARDS ($/SHARE) | GRANT DATE FAIR VALUE OF STOCK AND OPTION AWARDS(5) ($) |
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
| Remondi | Management Incentive Plan | - | 1,500,000 | 2,250,000 |
|
|
|
| | | |
| | 2/5/2019 | | | | 131,118 | | |
| | | 2,999,991 |
| | 2/5/2019 | | | | | | | 174,825 |
| | 1,999,998 |
| Lown | Management Incentive Plan | - | 600,000 | 900,000 |
| | | | | | |
| | 2/5/2019 | | | | 26,223 | | |
| | | 599,993 |
| | 2/5/2019 | | | | | | | 52,447 |
| | 599,993 |
| Kane | Management Incentive Plan | - | 690,000 | 1,035,000 | | | | | | |
|
| | 2/5/2019 | | | | 21,853 | | |
| | | 499,996 |
| 2/5/2019 |
| | |
|
| | 43,706 |
|
| 499,996 |
| Heleen | Management Incentive Plan | - | 577,500 | 866,250 | | | | | | | |
| | 2/5/2019 | | | | 16,389 | | 49,168 |
| | | 374,991 |
| | 2/5/2019 |
|
|
|
|
|
| 32,779 |
|
| 374,991 |
| Hauber | Management Incentive Plan | - | 525,000 | 787,500 |
|
|
|
|
|
|
|
| | 2/5/2019 | | | | 10,926 | | |
| | | 249,998 |
| | 2/5/2019 |
|
|
|
|
|
| 21,853 |
|
| 249,998 |
| | ESTIMATED POSSIBLE PAYOUTS UNDER
NON-EQUITY INCENTIVE PLAN
AWARDS(1) | | ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS(2) | ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF STOCK OR UNITS(3) (#) | GRANT DATE FAIR VALUE OF STOCK AWARDS(4) ($) |
NAME | GRANT DATE | Threshold ($) | Target ($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) |
Remondi | Management Incentive Plan | - | 1,500,000 | 2,250,000 | | | | | | |
| 2/4/2021 | | | | | 126,689 | 253,378 | 456,080 | | 2,999,995 |
| 2/4/2021 | | | | | | | | 162,601 | 1,999,992 |
Fisher | Management Incentive Plan | - | 525,000 | 787,500 | | | | | | |
| 2/4/2021 | | | | | 10.557 | 21,114 | 38,005 | | 249,989 |
| 2/4/2021 | | | | | | | | 20,325 | 249,997 |
Kane | Management Incentive Plan | - | 690,000 | 1,035,000 | | | | | | |
| 2/4/2021 | | | | | 21,114 | 42,229 | 76,012 | | 499,991 |
| 2/4/2021 | | | | | | | | 40,650 | 499,995 |
Heleen | Management Incentive Plan | - | 600,000 | 900,000 | | | | | | |
| 2/4/2021 | | | | | 15,836 | 31,672 | 57,009 | | 374,996 |
| 2/4/2021 | | | | | | | | 30,487 | 374,990 |
Hauber | Management Incentive Plan | - | 525,000 | 787,500 | | | | | | |
| 2/4/2021 | | | | | 10,557 | 21,114 | 38,005 | | 249,989 |
| 2/4/2021 | | | | | | | | 20,325 | 249,997 |
(1) | Represents the possible total payouts for each Navient Named Executive Officer (“NEO”) under the Navient 20192021 Management Incentive Plan (“MIP”). The actual amounts earned under the 20192021 MIP and paid in February 20202022 are set forth below: |
| | Target 2019 MIP Payout ($) | Actual 2019 MIP Payout ($) |
| Mr. Remondi | 1,500,000 | 1,785,000 |
| Mr. Lown | 600,000 | 714,000 |
| Mr. Kane | 690,000 | 821,100 |
| Mr. Heleen | 577,500 | 687,225 |
| Mr. Hauber | 525,000 | 624,750 |
| Target 2021 MIP Payout ($) | Actual 2021 MIP Payout ($) |
Mr. Remondi | 1,500,000 | $1,875,000 |
Mr. Fisher | 525,000 | $656,250 |
Mr. Kane | 690,000 | $862,500 |
Mr. Heleen | 600,000 | $750,000 |
Mr. Hauber | 525,000 | $656,250 |
(2) | Represents the range of performance stock units (“PSUs”),PSUs granted on February 5, 2019,4, 2021, that may vest based on various performance metrics for the three-year performance period from January 1, 2019,2021, through December 31, 2021.2023. See “Long-term Incentive Program” in the Compensation Discussion and Analysis above for additional details regarding the performance metrics associated with these PSUs. |
(3) | |
(3) | Stock awards granted on February 5, 2019,4, 2021, to Messrs. Remondi, Lown,Fisher, Kane, Heleen and Hauber represent restricted stock units (“RSUs”)RSUs that have vested or will vest and convert into shares of Common Stock in one-third increments on February 5, 2020,4, 2022, February 5, 20214, 2023, and February 5, 2022.4, 2024. |
(4) | Navient discontinued the practice of granting stock options as part of the Company’s long-term incentive program in 2019. |
(5)(4) | Amounts disclosed for awards granted in 20192021 represent the grant date fair value computed in accordance with FASB ASC Topic 718. Additional details on accounting for stock-based compensation can be found in “Note 2—Significant Accounting Policies” and “Note 11—Stock-Based Compensation Plans and Arrangements” to the audited consolidated financial statements included in the 20192021 Annual Report on Form 10-K. |
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The table below sets forth information regarding Navient equity awards that were outstanding as of December 31, 2019.
| | OPTION AWARDS
| STOCK AWARDS
| |
| | | | | | |
| |
|
| |
| NAME | | | | | | | | | | |
| | | | | | | | | | | |
| Remondi | 1/27/2011 | 80,000 | - | 9.3771 | 1/27/2021 | - | - | - | - | |
| | 2/18/2015 | 468,750 | - | 21.6500 | 2/18/2020 | - | - | - | - | |
| | 2/3/2016 | 762,376 | - | 9.1800 | 2/3/2021 | - | - | - | - | |
| | 2/6/2017 | 198,265 | 99,132 | 15.4800 | 2/6/2022 | - | - | - | - | |
| | 2/5/2018 | 154,440 | 308,880 | 13.6300 | 2/5/2023 | - | - | - | - | |
| | 2/6/2017 | - | - | - | - | 28,660 | 392,068 | - | - | |
| | 2/6/2017 | - | - | - | - | 163,057 | 2,230,619 | | | |
| | 2/5/2018 | - | - | - | - | 41,518 | 567,966 | - | - | |
| | 2/5/2018 | - | - | - | - | - | - | 162,531 | 2,223,424 | |
| | 2/5/2019 | - | - | - | - | 175,920 | 2,406,585 | - | - | |
| | 2/5/2019 | - | - | - | - | - | - | 275,324 | 3,766,432 | |
| Lown | 2/5/2018 | 46,332 | 92,664 | 13.6300 | 2/5/2023 | - | - | - | - | |
| | 3/27/2017 | - | - | - | - | 27,277 | 373,149 | - | - | |
| | 2/5/2018 | - | - | - | - | 13,003 | 177,881 | - | - | |
| | 2/5/2018 | - | - | - | - | - | - | 48,759 | 667,023 | |
| | 2/5/2019 | - | - | - | - | 55,064 | 753,275 | - | - | |
| | 2/5/2019 | - | - | - | - | - | - | 55,064 | 753,275 | |
| Kane | 1/27/2011 | 13,333 | - | 9.3771 | 1/27/2021 | - | - | - | - | |
| | 2/18/2015 | 157,366 | - | 21.6500 | 2/18/2020 | - | - | - | - | |
| | 2/3/2016 | 261,386 | - | 9.1800 | 2/3/2021 | - | - | - | - | |
| | 2/6/2017 | 71,871 | 35,935 | 15.4800 | 2/6/2022 | - | - | - | - | |
| | 2/5/2018 | 50,193 | 100,386 | 13.6300 | 2/5/2023 | - | - | - | - | |
| | 2/6/2017 | - | - | - | - | 10,846 | 148,373 | - | - | |
| | 2/6/2017 | - | - | - | - | 59,107 | 808,583 | | | |
| | 2/5/2018 | - | - | - | - | 14,086 | 192,696 | - | - | |
| | 2/5/2018 | - | - | - | - | - | - | 52,821 | 722,591 | |
| | 2/5/2019 | - | - | - | - | 45,887 | 627,734 | - | - | |
| | 2/5/2019 | - | - | - | - | - | - | 45,887 | 627,734 | |
| Heleen | 2/18/2015 | 73,660 | - | 21.6500 | 2/18/2020 | - | - | - | - | |
| | 2/3/2016 | 79,868 | - | 9.1800 | 2/3/2021 | - | - | - | - | |
| | 2/6/2017 | 37,175 | 18,587 | 15.4800 | 2/6/2022 | - | - | - | - | |
| | 2/5/2018 | 28,957 | 57,915 | 13.6300 | 2/5/2023 | - | - | - | - | |
| | 2/6/2017 | - | - | - | - | 5,610 | 76,744 | - | - | |
| | 2/6/2017 | - | - | - | - | 30,572 | 418,224 | | | |
| | 2/5/2018 | - | - | - | - | 8,127 | 111,177 | - | - | |
| | 2/5/2018 | - | - | - | - | - | - | 30,473 | 416,870 | |
| | 2/5/2019 | - | - | - | - | 32,972 | 451,056 | - | - | |
| | 2/5/2019 | - | - | - | - | - | - | 34,414 | 470,783 | |
2021. | OPTION AWARDS | STOCK AWARDS |
NAME | GRANT DATE | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS EXERCISABLE (#) | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS UNEXERCISABLE (#) | OPTION EXERCISE PRICE ($) | OPTION EXPIRATION DATE | NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED (1) (#) | MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED(2) ($) | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED(3) (#) | EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS, OR OTHER RIGHTS THAT HAVE NOT VESTED(2) ($) |
Remondi | 2/6/2017 | 297,397 | - | 15.4800 | 2/6/2022 | - | - | - | - |
| 2/5/2018 | 463,320 | - | 13.6300 | 2/5/2023 | - | - | - | - |
| 2/5/2019 | - | - | - | - | 65,943 | 1,399,310 | - | - |
| 2/5/2019 | - | - | - | - | 368,435 | 7,818,190 | - | - |
| 2/6/2020 | | - | - | - | 101,870 | 2,161,681 | - | - |
| 2/6/2020 | - | - | - | - | - | - | 358,890 | 7,615,645 |
| 2/4/2021 | - | - | - | - | 161,293 | 3,422,637 | - | - |
| 2/4/2021 | - | - | - | - | - | - | 472,098 | 10,017,919 |
Fisher | 2/5/2019 | - | - | - | - | 3,303 | 70,089 | - | - |
| 2/6/2020 | - | - | - | - | 4785 | 101,537 | - | - |
| 10/7/2020 | - | - | - | - | 11,686 | 247,976 | - | - |
| 2/4/2021 | - | - | - | - | 21,038 | 446,426 | - | - |
| 2/4/2021 | - | - | - | - | - | - | 39,339 | 834,773 |
Kane | 2/6/2017 | 107,806 | - | 15.4800 | 2/6/2022 | - | - | - | - |
| 2/5/2018 | 150,579 | - | 13.6300 | 2/5/2023 | - | - | - | - |
| 2/5/2019 | - | - | - | - | 17,201 | 365,005 | - | - |
| 2/5/2019 | - | - | - | - | 61,405 | 1,303,014 | - | - |
| 2/6/2020 | - | - | - | - | 26,584 | 564,112 | - | - |
| 2/6/2020 | - | - | - | - | - | - | 59,812 | 1,269,210 |
| 2/4/2021 | - | - | - | - | 42,077 | 892,873 | - | - |
| 2/4/2021 | - | - | - | - | - | - | 78,681 | 1,669,610 |
Heleen | 2/5/2018 | 86,872 | - | 13.6300 | 2/5/2023 | - | - | - | - |
| 2/5/2019 | - | - | - | - | 12,359 | 262,257 | - | - |
| 2/5/2019 | - | - | - | - | 46,053 | 977,244 | - | - |
| 2/6/2020 | - | - | - | - | 19,092 | 405,132 | - | - |
| 2/6/2020 | - | - | - | - | - | - | 44,859 | 951,907 |
| 2/4/2021 | - | - | - | - | 30,229 | 641,459 | - | - |
| 2/4/2021 | - | - | - | - | - | - | 59,011 | 1,252,213 |
Hauber | 2/6/2017 | 39,033 | - | 15.4800 | 2/6/2022 | - | - | - | - |
| 2/5/2018 | 57,915 | - | 13.6300 | 2/5/2023 | - | - | - | - |
| 2/5/2019 | - | - | - | - | 8,600 | 182,492 | - | - |
| 2/5/2019 | - | - | - | - | 30,702 | 651,496 | - | - |
| 2/6/2020 | - | - | - | - | 13,292 | 282,056 | - | - |
| 2/6/2020 | - | - | - | - | - | - | 29,905 | 634,584 |
| 2/4/2021 | - | - | - | - | 21,038 | 446,426 | - | - |
| 2/4/2021 | - | - | - | - | - | - | 39,339 | 834,773 |
(1) | 2020 Proxy Statement | | 68
|
50%
50 - 60 years - 1
0 - 5 Years - 4
60 - 70 years - 6
5 - 10 Years - 6
> 70 years - 3
