UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No. )
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WASTE CONNECTIONS, INC.
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Management Information Circular and Proxy Statement for the 2022 Annual Meeting of Shareholders
other words or phrases of similar meaning. All of the forward-looking statements included in this proxy statementProxy Statement are made pursuant to the safe harbor provisions of the PSLRA and applicable Canadian securities laws in Canada.laws. Forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, risk factors detailed from time to time in our filings with the U.S. Securities and Exchange CommissionSEC and the securities commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements, which speak only as of the date of this proxy statement.Proxy Statement. We undertake no obligation to update the forward-looking statements set forth in this proxy statement,Proxy Statement, whether as a result of new information, future events, or otherwise, unless required by applicable securities laws.
Currency Exchange Rate Data
Unless otherwise indicated, all dollar amounts in this
proxy statementProxy Statement are expressed in U.S. dollars. The following table shows the average of the exchange rates for each period
indicated,indicated. The information is based upon the
buyingaverage daily exchange rates provided by the Bank of
Canada:Canada.| | | | | Average rate (Bank of Canada) | |
| | Year ended December 31, | | | CAD$ per
US$1.00 | | | US$ per
CAD$1.00 | |
| | 2017 | | | | $ | 1.2986 | | | | | $ | 0.7701 | | |
| | 2018 | | | | $ | 1.2957 | | | | | $ | 0.7718 | | |
| | 2019 | | | | $ | 1.3269 | | | | | $ | 0.7536 | | |
| | 2020 | | | | $ | 1.3415 | | | | | $ | 0.7454 | | |
| | 2021 | | | | $ | 1.2537 | | | | | $ | 0.7977 | | |
 | | | | |
| | Average rate
(Bank of Canada) |
| Year ended December 31, | | CAD$ per
US$1.00 | | US$ per
CAD$1.00 |
| 2013 | | $ | 1.0302 | | | $ | 0.9707 | |
| 2014 | | $ | 1.1047 | | | $ | 0.9052 | |
| 2015 | | $ | 1.2788 | | | $ | 0.7820 | |
| 2016 | | $ | 1.3248 | | | $ | 0.7548 | |
| 2017 | | $ | 1.2979 | | | $ | 0.7705 | |
Explanatory Note
On June 1, 2016, pursuant to the terms of the Agreement and Plan of Merger dated as of January 18, 2016 (the “Merger Agreement”), Water Merger Sub LLC, a Delaware limited liability company and a wholly-owned subsidiary of Progressive Waste Solutions Ltd., merged with and into Waste Connections US, Inc. (f/k/a Waste Connections, Inc.), a Delaware corporation (“Old Waste Connections”), with Old Waste Connections continuing as the surviving corporation and an indirect wholly-owned subsidiary of Waste Connections, Inc. (f/k/a Progressive Waste Solutions Ltd.), a corporation organized under the laws of Ontario, Canada (“New Waste Connections,” or the “Company”). The term “Progressive Waste acquisition” is used herein to refer to the transactions completed under the Merger Agreement, and the term “Progressive Waste” is used herein in the context of references to Progressive Waste Solutions Ltd. prior to the completion of the Progressive Waste acquisition on June 1, 2016.
On April 26, 2017, the Company announced that its Board of Directors approved a split of its common shares on a three-for-two basis, which was approved by its shareholders at the Company’s Annual and Special Meeting of Shareholders of Waste Connections on May 23, 2017. Shareholders of record on June 7, 2017 received from the Company’s transfer agent on June 16, 2017, one additional common share for every two common shares held. All share, per share amounts and share prices presented in this proxy statement have been adjusted to reflect the share split.
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Graphical Representations of Returns and Merger Accounting
This proxy statement contains several graphical representations of total shareholder return and dividend history, including shareholder returns compared to our Chief Executive Officer’s, or CEO’s, total direct compensation. For purposes of reading such graphical representations in this proxy statement, the Progressive Waste acquisition was accounted for as a reverse merger using the acquisition method of accounting and Old Waste Connections has been identified as the acquirer for accounting purposes. Accordingly, financial and certain other information of the Company in this proxy statement, and the words “we,” “our,” “ours,” and “us” used in the section titled “Company Highlights,” all refer to financial information of, or directly to, Old Waste Connections before completion of the Progressive Waste acquisition and the Company following completion of the Progressive Waste acquisition.
Information regarding shareholder and dividend returns refers to returns to shareholders of the Company after completion of the Progressive Waste acquisition on June 1, 2016, and to stockholders of Old Waste Connections prior to June 1, 2016. Note that all performance graphs included in this proxy statement are deemed to be “furnished” rather than “filed” (as such terms are used in the Securities Exchange Act of 1934, as amended) and are not to be deemed to be soliciting material under the proxy rules or incorporated by reference into any filing by the Company except to the extent that the Company specifically incorporates by reference such information or is otherwise required by applicable securities laws to incorporate by reference such information.
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PROXY SUMMARY
This summary highlights information described in more detail in this proxy statement pertaining to the Meeting. It does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
2018 Annual and Special Meeting of Shareholders
| | |
Date and Time: | | Thursday, May 24, 2018, at 10:00 a.m. (Central Time) |
Place: | | Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380 |
Mail Date: | | April 12, 2018 |
Record Date: | | March 28, 2018 |
Voting Matters, Board Recommendations and Vote Required
At the Meeting, shareholders will be asked to vote on the following four proposals. Our Board of Directors’ recommendation for each of these proposals is set forth below.
| | |
Proposal | | Board Recommendation |
Proposal 1 — Election of seven director nominees named in the proxy statement, each to hold office until the 2019 Annual Meeting of Shareholders of the Company, or until their respective successors are otherwise duly elected or appointed (Page 61). | | FOR
each director
nominee |
Proposal 2 — Appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm until the close of the 2019 Annual Meeting of Shareholders of the Company and the authorization of the Board of Directors to fix the remuneration of the Company’s independent registered public accounting firm (Page 70). | | FOR |
Proposal 3 — Approval, on a non-binding, advisory basis, of the compensation of the Company’s named executive officers, or NEOs, as disclosed in this proxy statement (the “Say on Pay Proposal”) (Page 73). | | FOR |
Proposal 4 — Shareholder proposal to urge the adoption of a senior executive equity compensation retention requirement until retirement (Page 75). | | AGAINST |
Proposal 1 — Election of Directors
The election of each director nominee may be approved by any one or more shareholders voting “FOR” each such director nominee (i.e., a plurality vote). You may either vote “FOR” or “WITHHOLD” your vote with respect to the election of each director nominee. If you vote “FOR” the election of a nominee, your vote will be cast accordingly. If you select “WITHHOLD” with respect to the election of a nominee, your vote will not be counted as a vote cast for the purposes of electing such nominee but will be considered in the application of the majority voting policy included in our Corporate Governance Guidelines and Board Charter. Pursuant to our majority voting policy, a “WITHHOLD” vote is considered a vote cast for purposes of the election of the director nominee and is equivalent to a vote against the nominee. See “Majority Voting for Directors” on page 11 of this proxy statement.
Proposal 2 — Appointment of Auditor
The appointment of the Company’s proposed independent registered public accounting firm may be approved by any one or more shareholders voting “FOR” the Company’s proposed independent registered public accounting firm (i.e., a plurality vote). For purposes of this proposal, votes cast at the Meeting include only those votes cast “FOR” the appointment of the proposed independent registered public accounting firm. You may either vote “FOR” or “WITHHOLD” your vote with respect to the appointment of the proposed independent registered public accounting firm. If you vote “FOR” the appointment of the proposed independent registered public accounting firm, your vote will be cast accordingly. If you select “WITHHOLD,” your vote will not be counted as a vote cast for purposes of appointing the proposed independent registered public accounting firm.
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Proposal 3 — Say on Pay Proposal
The Say on Pay Proposal may be approved by the affirmative vote of a simple majority (50 percent plus one) of the Common Shares present, either in person or by proxy, and entitled to vote (meaning that at least a simple majority of the votes cast must be “FOR” the Say on Pay Proposal in order for it to be approved). You may either vote “FOR” or “AGAINST,” or you may “WITHHOLD” from voting on, the Say on Pay Proposal.
Proposal 4 — Shareholder Proposal Seeking the Adoption of a Senior Executive Equity Compensation Retention Requirement until Retirement
The shareholder proposal seeking the adoption of a senior executive equity compensation retention requirement until retirement may be approved by the affirmative vote of a simple majority (50 percent plus one) of the Common Shares present, either in person or by proxy, and entitled to vote (meaning that at least a simple majority of the votes cast must be “FOR” the shareholder proposal in order for it to be approved). You may either vote “FOR” or “AGAINST,” or you may “WITHHOLD” from voting on, the shareholder proposal.
The Board of Directors is unanimously recommending that you voteAGAINST this shareholder proposal for the reasons set forth on pages 75 and 76 of this proxy statement.
Company Highlights(1)
Waste Connections, Inc. is the third largest solid waste services company in North America, providing waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the U.S. and Canada. Through our R360 Environmental Solutions subsidiary, we are also a leading provider of non-hazardous exploration and production, or E&P, waste treatment, recovery and disposal services in several of the most active natural resource producing areas in the U.S. We also provide intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities.
Waste Connections delivered another year of exceptional performance in 2017, as highlighted by the following:
Strong Operating Performance
Revenue increased 37.2% from the prior year to $4.630 billion.
Net income attributable to the Company and net income attributable to the Company per share were $576.8 million and $2.18, respectively; adjusted net income attributable to the Company grew 45.5% from the prior year to $570.7 million and adjusted net income attributable to the Company per share increased 26.3% to $2.16.
Adjusted EBITDA increased 36.4% from the prior year to $1.461 billion, or 31.5% of revenue.
Net cash provided by operating activities was $1.187 billion; adjusted free cash flow increased 38.7% from the prior year to $763.9 million, or 16.5% of revenue.
Our monthly safety-related incident rate decreased more than 20% compared to the prior year.
We deployed approximately $960.4 million for capital expenditures and acquisitions to reinvest in and expand our business.
| (1) | We present adjusted net income, a non-GAAP financial measure, supplementally because it is one of the principal measures we use to evaluate and monitor the ongoing financial performance of our operations. We also present adjusted EBITDA, a non-GAAP financial measure, supplementally because it is widely used by investors as a performance and valuation measure in the solid waste industry. We also present adjusted free cash flow, a non-GAAP financial measure, supplementally because it is widely used by investors as a valuation and liquidity measure in the solid waste industry. These measures are not a substitute for, and should be used in conjunction with, GAAP financial measures. This section should be read in conjunction with information presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, under the heading “Non-GAAP Measures”, which includes a reconciliation of the non-GAAP financial measures used in this proxy statement to GAAP financial measures. |
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We mostly completed the divestiture of markets acquired in the Progressive Waste acquisition that were strategically inconsistent with our strategy.
Our leverage ratio, as defined under our credit agreement, improved to 2.53x at year-end from 2.69x at the end of 2016 and our cash balance increased $279.4 million in the year, positioning the Company to fund future growth opportunities.
Increased Return to Shareholders
| • | 2017 was our 14th consecutive year of positive total shareholder return (“TSR”). As illustrated below, our TSR significantly outperformed the S&P 500 Index (the “S&P 500”), the S&P/TSX 60 Index (“TSX 60”) and the Dow Jones U.S. Waste & Disposal Services Index (“DJ Waste Index”) for the one-year and five-year periods ended December 31, 2017. |
![[GRAPHIC MISSING]](https://capedge.com/proxy/DEF 14A/0001144204-18-020279/tv489961_chrt-bar1.jpg)
We increased our regular quarterly cash dividend by 16.7% to $0.14 per share on October 24, 2017. Since initiating our cash dividend in October 2010 and as illustrated below, our annual cash dividend has increased at a 15.6% compound annual growth rate (“CAGR”) since our first full year of quarterly distributions in 2011.
![[GRAPHIC MISSING]](https://capedge.com/proxy/DEF 14A/0001144204-18-020279/tv489961_chrt-bar2.jpg)
Executive Compensation Program
The Company’s executive compensation program is designed to align the interests of senior management with shareholders by tying a significant portion of their compensation to the Company’s annual operating and financial performance, as well as longer-term shareholder returns. We believe that our pay-for-performance philosophy and the design of our executive compensation program strongly support, as shown above, an environment of continuous improvement and shareholder value creation. Best practices of our executive compensation program include the following:
Approximately 73% of the target total direct compensation of our named executive officers, or NEOs, is variable and linked to the Company’s performance;
Payouts under the Company’s performance-based plans remain at the discretion of the Board of Directors and may be reduced even if targeted performance levels are achieved;
NEOs receive annual cash incentive bonus awards only if cash incentive bonus awards payable to other, non-executive employees have been made;
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No guaranteed base salary increases, minimum bonuses or equity awards;
Conservative use of equity grants;
Inclusion of a relative TSR metric as a performance measure for Performance Share Units;
Stringent share ownership requirements;
Double-trigger change of control policy for our CEO;
No hedging or pledging of the Company’s securities in any derivative securities or transactions;
Compensation clawback policy;
Independent executive compensation consultant retained by Compensation Committee;
Annual “Say on Pay” vote; and
Adoption of position descriptions for the Chairman of the Board of Directors, the lead independent director and the Chairs of the committees of the Board of Directors, as well as a position description for our CEO.
For additional information, see the Executive Compensation and Compensation Risk Assessment sections of this proxy statement (starting at page 18 and page 34, respectively).
Corporate Governance Highlights
| • | Directors elected individually (page 61); |
| • | Majority voting policy for the election of our Directors (page 11); |
Policy to separate CEO and Chairman of the Board of Directors, or Board Chairman, positions should our current CEO no longer serve as both (page 7);
Having a strong, Lead Independent Director serve on the Board of Directors (page 7);
Annual Board of Directors and Committee evaluation processes (page 9);
Robust risk management program related to compensation (page 34);
Share ownership requirement for Directors, NEOs and other corporate officers (pages 14 and 30, respectively);
| • | Regular executive sessions of only independent directors (page 7); |
Director retirement policy (page 9); and
| • | Code of Conduct and Ethics (page 5). |
Financial Statements
A more detailed description of the Company’s fiscal year 20172021 operating and financial performance, including a reconciliation of non-GAAP financial measures and a graphical representation of the Total Shareholder Returns or TSRs for the Company, the S&P 500, the S&P/TSX 60 (“TSX 60”) and the Dow Jones U.S. Waste and Disposal Services (“DJ Waste Index,Waste”) Indices, can be found on pages 73 – 7549-75 and page 35,pages 47-48, respectively, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2021, filed with the SEC and the securities commissions or similar regulatory authorities in Canada on February 15, 2018,17 2022, and available on our website at www.wasteconnections.com, https://investors.wasteconnections.com, on SEDAR at https://www.sedar.com,, on EDGAR at https://www.sec.gov,, and in print, free of charge, to any shareholder who requests in writing a copy by contacting our Secretary or Investor Relations at our principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380.
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Vote Your Common Shares
Whether or not you plan to attend the Meeting, we urge you to vote and submit your proxy in order to ensure the presence of a quorum. You may do so pursuant to the instructions on your proxy card (including by returning your proxy card by mail or using the Internet or your telephone) if you are a registered shareholder or, pursuant to the instructions you receive from your bank or broker (including by using the Internet or your telephone if your bank or broker provides such instructions). Voting by using the Internet or telephone, or by returning your proxy card in advance of the Meeting, does not preclude you from attending the Meeting. Please refer to your proxy card or voting instruction form included inwith this packageProxy Statement or to the “Voting and Revocation” section on page 2pages ii and iii of this proxy statementProxy Statement for more information on the voting methods available to you.
If you plan to attend, please bring identification and, if you hold Common Shares in street name, you should bring your bank or broker statement showing your beneficial ownership of Common Shares to be admitted to the Meeting. In-person attendance at the Meeting will be granted on a first-come, first-served basis, and may be limited due to COVID-19-related restrictions.viii
Corporate Governance Committee. The Nominating and Corporate Governance Committee, whose chairman is Mr. Guillet and whose other members are Messrs. Robert H. Davis and Harlan, is responsible for, among other matters, recommending director nominees to the Board of Directors, overseeing an annual self-evaluation process to assess the effectiveness of the Board of Directors and its committees, and developing and implementing corporate governance principles. See “Board Renewal; Board Performance Evaluation” for more information regarding the committee’s annual self-evaluation process.Copies of the Audit Committee Charter, the Compensation Committee Charter and the Nominating and Corporate Governance Committee Charter, each of which our Board of Directors has adopted, are available on our website athttp://wasteconnections.investorroom.com/board-committees. A copy of each charter may also be obtained, free of charge, by writing to the Secretary of Waste Connections, Inc., at our principal administrative offices located at Waste Connections, Inc., 3 Waterway Square Place, Suite 110, The Woodlands, Texas 77380.
Board and Committee Meeting Attendance.
BOARD AND COMMITTEE MEETING ATTENDANCE
The Board of Directors held four meetings during
2017,2021, all of which were regularly scheduled.
None of theTwo meetings were held
telephonically. Thevia video conference, and two meetings were held in a hybrid manner with some Board members attending in-person and others attending via video conference. In 2021, the Executive Committee met two
times during 2017. Thetimes; the Audit Committee met four
times during 2017. Thetimes; the Compensation Committee met four times,
during 2017. Theand the Nominating and Corporate Governance Committee met
two times during 2017.three times. Each director
of Waste Connections attended
at least 75%100% of the meetings of the Board of Directors
andheld during 2021. Each director attended 100% of the meetings of the committees on which he or she served during
2017, except for Mr. Harlan who attended 50% of the meetings of the Executive Committee. The attendance record of2021. At each
director of Waste Connections for all Board of Directors and Committee meetings held during 2017 is set out below: | | | | | | | | | | |
Name | | Board | | Executive
Committee | | Audit
Committee | | Compensation
Committee | | Nominating
and Corporate
Governance
Committee |
Ronald J. Mittelstaedt | | | 4/4 | | | | 2/2 | | | | N/A | | | | N/A | | | | N/A | |
Robert H. Davis | | | 4/4 | | | | N/A | | | | N/A | | | | N/A | | | | 2/2 | |
Edward E. “Ned” Guillet | | | 4/4 | | | | N/A | | | | N/A | | | | 4/4 | | | | 2/2 | |
Michael W. Harlan | | | 4/4 | | | | 1/2 | | | | 4/4 | | | | N/A | | | | 2/2 | |
Larry S. Hughes | | | 4/4 | | | | 2/2 | | | | 4/4 | | | | N/A | | | | N/A | |
Susan “Sue” Lee | | | 4/4 | | | | N/A | | | | N/A | | | | 4/4 | | | | N/A | |
William J. Razzouk | | | 4/4 | | | | N/A | | | | 4/4 | | | | 4/4 | | | | N/A | |
The Board of Directors’ Role in Oversight of Risk
The Board of Directors and its committees have an active role in overseeing management of the Company’s risks. The Board of Directors regularly reviews information from members of senior management regarding the Company’s financial performance, balance sheet, credit profile and liquidity, as well as the risks associated with each. The Audit Committee receives reports from members of senior and regional management on areas of material risk to the Company, including market-specific, operational, legal, information technology, regulatory and strategic risks. The Audit Committee also oversees management of financial, financial reporting and internal controls risk. The Compensation Committee assesses and monitors risks relating to the Company’s corporate officer compensation policies and practices. The Nominating and Corporate Governance Committee is responsible for overseeing the management of risks associated with the independencescheduled meeting of the Board of Directors, the non-employee directors also meet separately, without management present. As such, in 2021, the independent directors met four times without non-independent directors and potential conflicts of interest.
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Director Independence; Lead Independent Director
The Board of Directors has determined that each of Ms.Mses. Jordan and Lee and Messrs. Davis, Guillet, Harlan, Hughes and Razzouk is “independent” within the meaning of the standards set forth in our Corporate Governance Guidelines and Board Charter, a copy of which is attached as Appendix A.A. Ronald J. Mittelstaedt isand Worthing F. Jackman are not “independent” within the meaning of the standards set forth in our Corporate Governance Guidelines and Board Charter because he isCharter. Mr. Mittelstaedt, as the Executive Chairman of the Board of Directors, and Mr. Jackman, as the CEO of the Company, are each employees of the Company.
As set forth in our Corporate Governance Guidelines and Board Charter, a majority of the members of our Board of Directors must be independent. For a director to be considered independent, the Board of Directors must determine that the director is “independent” within the meaning of (1) Section 1.4 of National Instrument 52-110 — Audit Committees of the Canadian Securities Administrators and (2) Section 303A.02 of the Listed Company Manual of the NYSE, in each case as such laws or rules, as applicable, may be amended or replaced. In addition, for a director to be considered independent, the Board of Directors must determine that the director has no material relationship with the Company, provided the direct or indirect ownership of any amount of the Company’s shares will not be deemed to constitute a material relationship.
No independent director is:
1)
a former employee of the Company;
2)
a former employee or affiliate of any current auditor of the Company or its subsidiaries;
3)
a part of an interlocking directorate in which any NEO or other corporate officer of the Company serves on the compensation committee of another company that concurrently employs such director; or
4)
an immediate family member in any of the foregoing categories.
A director cannot be classified as independent until three years after any such employment, affiliation or relationship has ceased.
The Board of Directors selects its chairmanreviews all relationships of each director to assess whether any material relationship exists so as to impair that director’s independence. A “material relationship” means a direct or indirect commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship that is reasonably likely to affect the independent and objective judgment of the director in question, provided the direct or indirect ownership of any amount of our shares is not deemed to constitute a material relationship.
The following commercial or charitable relationships are not considered to be material relationships that would impair a director’s independence:
1)
a director is an executive officer of another company that does business with the Company and the annual sales to, or purchases from, the Company are less than the greater of $1 million or two percent of the annual revenue of the other company;
2)
a director is an executive officer of another company that is indebted to the Company, or to which the Company is indebted, and the total amount of either company’s indebtedness to the other is less than one percent of the total consolidated assets of the other company; and
2022Notice of Annual Meeting & Proxy Statement11
Board of Directors, the Nominating and Corporate Governance Committee will consider candidates on merit using objective criteria and with due regard for the benefits of diversity on the Board of Directors, including the level of representation of women on the Board of Directors. The Board of Directors consists of seven directors, of which, one director is a woman, representing approximately 14.3% of the Board of Directors.In addition to the foregoing qualities, the Nominating and Corporate Governance Committee will take a number of other factors into account in considering candidates as nominees for the Board of Directors, including the following: (i) whether the candidate is independent within the meaning of our Corporate Governance Guidelines and Board Charter; (ii) relevant business, academic or other experience; (iii) willingness and ability to attend and participate actively in Board and Committee meetings and otherwise to devote the time necessary to serve, taking into consideration the number of other boards on which the candidate serves and the candidate’s other business and professional commitments; (iv) potential conflicts of interest; (v) whether the candidate is a party to any adverse legal proceeding; (vi) the candidate’s reputation; (vii) specific expertise and qualifications relevant to any Committee that the candidate is being considered for, such as whether a candidate for the Audit Committee meets the applicable financial literacy or audit committee financial expert criteria; (viii) willingness and ability to meet our director’s equity ownership guidelines; (ix) willingness to adhere to our Code of Conduct and Ethics; (x) ability to interact positively and constructively with other directors and management; (xi) willingness to participate in a one-day new director orientation session; (xii) willingness to attend educational forums or workshops to enhance understanding of new and evolving governance requirements; and (xiii) the size and composition of the Board.
When seeking director candidates, the Nominating and Corporate Governance Committee may solicit suggestions from incumbent directors, management, third party advisors, business and personal contacts, and shareholders. The Nominating and Corporate Governance Committee may also engage the services of a search firm. After conducting an initial evaluation, the Nominating and Corporate Governance Committee will make arrangements for candidates it considers suitable to be interviewed by one or more members of the committee. Each candidate will be required to complete a standard directors’ and officers’ questionnaire, completed by all of the directors annually. The Nominating and Corporate Governance Committee may also ask the candidate to meet with members of our management. If the Nominating and Corporate Governance Committee believes that the candidate would be a valuable addition to the Board of Directors, it will recommend the candidate for nomination to the Board. Before nominating a sitting director for re-election at an annual meeting of shareholders, the Nominating and Corporate Governance Committee will consider the director’s past performance and contribution to the Board of Directors.
The Nominating and Corporate Governance Committee will apply the criteria described above when considering candidates recommended by shareholders as nominees for the Board of Directors. Composition
| | 4 | | | RECOMMENDATION OF CANDIDATE TO THE BOARD | |
| | If the Nominating and Corporate Governance Committee believes that a candidate would be a valuable addition to the Board of Directors, it will recommend the candidate for nomination. | |
| | The Nominating and Corporate Governance Committee reviews a current Board member’s performance prior to nomination by: | |
| | •
evaluating the director’s past performance and contributions to the Board of Directors, as well as committee participation | |
| | 5 | | | RESULTS | |
| | The Nominating and Corporate Governance Committee has achieved the following results: | |
| | •
Added two new Directors to the Board in the last three years •
Increased the number of Board members with diverse backgrounds, perspectives and experiences at the policy-making levels of our business and other areas relevant to our activities | |
In addition, any of our shareholders may nominate one or more persons for election as a director of the Company at any meeting of shareholders called for the purpose of electing directors if the shareholder complies with the notice, information and consent provisions contained in our By-law No. 1. Pursuant to our By-law No. 1, to be considered for inclusion in our proxy materials, notice of a shareholder’s nomination of a person for election to the Board of Directors (the “Notice”) must be received by the Secretary of the Company in writing at the address listed on the first page of this proxy statementProxy Statement for the Meeting not later than the close of business on the 30th30th day before the date of the annual meeting of shareholders; except that, if the first public announcement made by the Company of the date of the annual meeting of shareholders (the “Notice Date”) is less than 50 days prior to the date of the annual meeting of shareholders, notice by the shareholder may be given not later than the close of business on the 10th10th day following the Notice Date. In the case of a special meeting that is not also an annual meeting, the notice must be given not later than the 15th15th day following the applicable Notice Date. The notice must contain and be accompanied by certain information as specified in our By-law No. 1 and set forth below, including information about the shareholder providing the notice and the proposed nominee(s) (the “Proposed Nominee”).
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Shareholders making nominations must provide, among other things, information regarding each such shareholder’s: (i)things:
•
Their name, business and residential address; (ii)
•
The number of securities of the Company beneficially owned, or controlled or directed, directly or indirectly, by the shareholder or any other person with whom the shareholder is acting jointly or in concert with respect to the Company or any of its securities as of the record date for the meeting and the date of the proxy notice; (iii) theirNotice Date;
•
Their interests in, or rights or obligations associated with, any agreements, arrangements or understandings, the purpose or effect of which is to alter, directly or indirectly, the person’s economic interest in a security of the Company or the person’s economic exposure to the Company; (iv) full
•
Full particulars of any proxy, contract, relationship, arrangement, agreement or understanding pursuant to which such person, or any of theirhis or her affiliates or associates, or any person acting jointly or in concert with such person, has any interests, rights or obligations relating to the voting of any securities of the Company or the nomination of directors to the Board of Directors; and (v) any
•
Any other information that would be required to be included in a dissident proxy circular or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to applicable law.
Additionally, shareholders nominating director candidates are required to disclose, among other things: (i) the
•
The name, age, business and residential address of the Proposed Nominee; (ii) the
•
The principal occupation, business or employment of the Proposed Nominee, both presently and within the past five years; (iii) whether
•
Whether the Proposed Nominee is a resident Canadian; (iv) the
2022Notice of Annual Meeting & Proxy Statement17
Non-employee directors
and the Executive Chairman held the following Common Shares, DSUs and unvested RSUs as of March
28, 2018,15, 2022, the Record
Date for the Meeting.Date.| | Name | | | Common
Shares | | | DSUs | | | Unvested
RSUs | | | Deferred
RSUs | | | Total | | | Equity Ownership
Guideline Met | |
| | Edward E. “Ned” Guillet | | | | | 32,843 | | | | | | 3,271 | | | | | | 485 | | | | | | — | | | | | | 36,599 | | | | | |
| | Michael W. Harlan | | | | | 8,495 | | | | | | 3,271 | | | | | | 485 | | | | | | — | | | | | | 12,251 | | | | | |
| | Larry S. Hughes | | | | | 10,627 | | | | | | 8,662 | | | | | | 485 | | | | | | — | | | | | | 19,774 | | | | | |
| | Elise L. Jordan | | | | | 1,896 | | | | | | 1,765 | | | | | | 485 | | | | | | — | | | | | | 4,146 | | | | | |
| | Susan “Sue” Lee | | | | | 10,876 | | | | | | 6,296 | | | | | | 485 | | | | | | — | | | | | | 17,657 | | | | | |
| | Ronald J. Mittelstaedt | | | | | 205,497 | | | | | | — | | | | | | 6,713 | | | | | | 38,300 | | | | | | 250,510 | | | | | |
| | William J. Razzouk | | | | | 15,589 | | | | | | 3,271 | | | | | | 485 | | | | | | — | | | | | | 19,345 | | | | | |
| | | | | | | | |
| Name | | Common
Shares | | DSUs | | Unvested
RSUs | | Total |
| Robert H. Davis | | | 13,480 | | | | 1,460 | | | | 841 | | | | 14,940 | |
| Edward E. “Ned” Guillet | | | 70,484 | | | | 1,460 | | | | 841 | | | | 71,944 | |
| Michael W. Harlan | | | 30,654 | | | | 1,460 | | | | 841 | | | | 32,114 | |
| Larry S. Hughes | | | 8,215 | | | | 6,851 | | | | 841 | | | | 15,066 | |
| Susan “Sue” Lee | | | 8,460 | | | | 4,485 | | | | 841 | | | | 12,945 | |
| William J. Razzouk | | | 19,210 | | | | 1,460 | | | | 841 | | | | 20,670 | |
Directors’ Deferred Share Unit Plan
DSUs are notional units that have the same value as Common Shares, and therefore have the same upside and downside risk as to value, but do not give the holder voting or other shareholder rights. Awarding DSUs to non-employee directors serves to align the interests of non-executivenon-employee directors with those of shareholders. DSUs are redeemed and settled for cash or shares at the discretion of the Company, only when the non-executivenon-employee director leaves the Board of Directors, and the redemption value of a DSU is equal to the market value of a Common Share at the date of redemption, less applicable withholdings.
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DirectorsNon-employee directors may elect, irrevocably and in advance, to receive all or part of their director and committee chair cash retainers either in cash or DSUs. They may also elect, irrevocably and in advance, to receive up to CAD$150,000 of their upcoming bonus entitlementsequity grants in RSUs that are settled in Common Shares, with the remainder of such bonuscompensation to be received in the form of DSUs. Each director has an account where notionalNotional DSUs are credited to an account for each non-employee director and held until the non-employee director leaves the Board of Directors. The number of DSUs credited to each director’s account is calculated by dividing the elected amount of the director and committee chair cash and DSU grant retainers plus the director bonus to be settled in DSUs by the Common Share closing price on the day the credit is made.
DSUs earn dividend equivalents at the same rate as dividends are paid on Common Shares. Upon redemption and settlement, DSU holders are credited with additional DSUs that are equivalent in value to the dividends declared on the Common Shares. Such additional DSUs are credited
Public Company Board Memberships
Under the terms of our Corporate Governance Guidelines and Board Charter, directors who also serve as chief executive officers or in equivalent positions at any company should not serve on more than two boards of public companies in addition to each non-executive director’s accountour Board of Directors, and other directors should not serve on each dividend payment date. The numbermore than four other boards of DSUs is calculated using the same rate as for the dividends paidpublic companies in addition to our Board of Directors.
Additionally, our Audit Committee Charter specifies that directors may not simultaneously serve on the Common Shares.audit committees of more than two other public companies unless our Board of Directors first determines such service will not impair the ability of the director to serve effectively on our Audit Committee. The director biographies list the other reporting issuers for which the Company’s directors serve as directors and the stock exchange on which those issuers are listed.
Share Ownership of the Board of Directors and Corporate Officers
The following table sets forth information known to the Company concerning Common Shares beneficially owned, as of March
28, 2018,15, 2022, the Record Date for the Meeting, by (i) each director of the Company; (ii) each
named executive officerNEO of the Company; and (iii) all corporate officers and directors of the Company as a group. These individuals, both individually and in the aggregate, own less than 1% of our outstanding Common Shares as of the Record Date for the Meeting.
| | Beneficial Owner(1) | | | Amount and
Nature of
Beneficial
Ownership(2) | | | Vested Restricted
Share Units
Held Under
Nonqualified
Deferred
Compensation
Plan(3) | | | Total | |
| | Ronald J. Mittelstaedt | | | | | 205,497(4) | | | | | | 38,300 | | | | | | 243,797 | | |
| | Worthing F. Jackman | | | | | 128,773 | | | | | | — | | | | | | 128,773 | | |
| | Darrell W. Chambliss | | | | | 99,311 | | | | | | — | | | | | | 99,311 | | |
| | Mary Anne Whitney | | | | | 50,036 | | | | | | — | | | | | | 50,036 | | |
| | James M. Little | | | | | 38,812(5) | | | | | | — | | | | | | 38,812 | | |
| | Edward E. “Ned” Guillet | | | | | 32,843 | | | | | | — | | | | | | 32,843 | | |
| | Patrick J. Shea | | | | | 19,923 | | | | | | — | | | | | | 19,923 | | |
| | William J. Razzouk | | | | | 15,589 | | | | | | — | | | | | | 15,589 | | |
| | Susan “Sue” Lee | | | | | 10,876 | | | | | | — | | | | | | 10,876 | | |
| | Larry S. Hughes | | | | | 10,627 | | | | | | — | | | | | | 10,627 | | |
| | Michael W. Harlan | | | | | 8,495 | | | | | | — | | | | | | 8,495 | | |
| | Elise L. Jordan | | | | | 1,896 | | | | | | — | | | | | | 1,896 | | |
| | ALL CORPORATE OFFICERS AND DIRECTORS AS A GROUP
(28 PERSONS) | | | | | 824,638 | | | | | | 45,015 | | | | | | 869,653 | | |
| | | | | | |
| Beneficial Owner(1) | | Amount and
Nature of
Beneficial
Ownership(2) | | Vested
Restricted
Share Units
Held Under
Nonqualified
Deferred
Compensation
Plan(3) | | Total |
| Ronald J. Mittelstaedt | | | 100,462 | (4) | | | 180,530 | | | | 280,992 | |
| Steven F. Bouck | | | 303,514 | | | | — | | | | 303,514 | |
| Darrell W. Chambliss | | | 111,485 | | | | 37,569 | | | | 149,054 | |
| Worthing F. Jackman | | | 109,698 | | | | — | | | | 109,698 | |
| Edward E. “Ned” Guillet | | | 70,484 | | | | — | | | | 70,484 | |
| Michael W. Harlan | | | 30,654 | | | | — | | | | 30,654 | |
| Patrick J. Shea | | | 41,863 | | | | — | | | | 41,863 | |
| William J. Razzouk | | | 19,210 | | | | — | | | | 19,210 | |
| Robert H. Davis | | | 13,480 | | | | — | | | | 13,480 | |
| Susan “Sue” Lee | | | 8,460 | | | | — | | | | 8,460 | |
| Larry S. Hughes | | | 8,215 | | | | — | | | | 8,215 | |
| All corporate officers and directors as a group (26 persons) | | | 1,066,131 | | | | 221,879 | | | | 1,288,010 | |
| (1) | Beneficial ownership is determined in accordance with the rules of the SEC. In general, a person who has voting power and/or investment power with respect to securities is treated as the beneficial owner of those securities. Except as otherwise indicated by footnote, and subject to applicable community property laws, the Company believes that the beneficial owners of the Common Shares, based on information furnished by such owners, have sole investment power and voting power with respect to such shares. |
| (2) | Common Shares subject to share options and/or warrants currently exercisable or exercisable within 60 days after March 28, 2018, Common Shares into which convertible securities are convertible within 60 days after March 28, 2018, and Common Shares which will become issuable within 60 days after March 28, 2018, pursuant to outstanding RSUs count as outstanding for computing the percentage beneficially owned by the person holding such share options, warrants, convertible securities and RSUs, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. |
| (3) | Executive officers of Old Waste Connections, in years prior to 2015, were able to voluntarily defer receipt of RSU grants under Old Waste Connections’ Nonqualified Deferred Compensation Plan, which plan was assumed by New Waste Connections on June 1, 2016 in connection with the Progressive Waste acquisition. The RSUs held under the Nonqualified Deferred Compensation Plan are not considered Common Shares that are beneficially owned for SEC disclosure purposes. The Company has included them in this table because they are similar to or track its Common Shares, they ultimately are settled in Common Shares, and they represent an investment risk in the performance of its Common Shares. |
| (4) | Includes 100,462 Common Shares held by Mittelstaedt Enterprises, L.P., of which Mr. Mittelstaedt is a limited partner. Excludes 5,286 Common Shares held by the Mittelstaedt Irrevocable Trust dated 6/18/97 and 45,002 Common Shares held by RDM Positive Impact Foundation as to which Mr. Mittelstaedt disclaims beneficial ownership. |
(1)
Beneficial ownership is determined in accordance with the rules of the SEC. In general, a person who has voting power and/or investment power with respect to securities is treated as the beneficial owner of those securities. Except as otherwise indicated by footnote, and subject to applicable community property laws, the Company believes that the beneficial owners of the Common Shares, based on information furnished by such owners, have sole investment power and voting power with respect to such Common Shares.
(2)
Common Shares subject to share options and/or warrants currently exercisable or exercisable within 60 days after March 15, 2022, Common Shares into which convertible securities are convertible within 60 days after March 15, 2022, and Common Shares which will become issuable within 60 days after March 15, 2022, pursuant to outstanding RSUs count as outstanding for computing the percentage beneficially owned by the person holding such share options, warrants, convertible securities and RSUs, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
(3)
Executive officers of the Company, in years prior to 2015, were able to voluntarily defer receipt of RSU grants under the Company’s Nonqualified Deferred Compensation Plan. The RSUs held under the Nonqualified Deferred Compensation Plan are not considered Common Shares that are beneficially owned for SEC disclosure purposes. The Company has included them in this table because they are similar to or track its Common Shares, they ultimately are settled in Common Shares, and they represent an investment risk in the performance of its Common Shares.
(4)
Includes 205,497 Common Shares held by Mittelstaedt Enterprises, L.P., of which Mr. Mittelstaedt is a limited partner. Excludes 5,286 Common Shares held by the Mittelstaedt Irrevocable Trust dated 6/18/97 and 44,002 Common Shares held by RDM Positive Impact Foundation as to which Mr. Mittelstaedt disclaims beneficial ownership.
(5)
Includes 12,602 Common Shares held by Mr. Little’s spouse.
Compensation Discussion & Analysis
A more detailed description of the Company’s fiscal year
20172021 operating and financial performance, including
a reconciliation of non-GAAP financial measures and a graphical representation of TSR performance for the S&P 500, TSX 60 and the DJ Waste Index, can be found on pages
73 – 7549-75 and page 35pages 47-48, respectively, of our Annual Report on Form 10-K for the fiscal year ended December 31,
2017,2021, filed with the SEC and the securities commissions or similar regulatory authorities in Canada on February
15, 2018.17, 2022.
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Executive Compensation Program Best Practices
Our executive compensation program includes features which we believe drive performance and excludes features we believe do not serve our shareholders’ long-term interests. The table below highlights some of the “Best Practices” featured in our compensation program as well as the “Problematic Pay Practices” that we have excluded.
| | |
Pay for Performance | | Our NEOs receive the majority (about 82% for the CEO and about 75% for other NEOs in 2017) of their total direct compensation in performance-based compensation, which is contingent on Company and individual performance. |
Recoupment Policy | | We maintain a clawback policy that permits our Board of Directors to seek the forfeiture or repayment of certain incentive compensation paid to an NEO or other corporate officer in certain circumstances. |
Annual Say on Pay | | We provide our shareholders with an annual opportunity to vote, on an advisory basis, on the compensation of our NEOs. |
Use of Peer Group Data and Tally Sheets | | We utilize tally sheets annually when making executive compensation decisions, and periodically review compensation data relative to our comparator group of companies (the “Comparator Group”). |
Share Ownership Guidelines | | Our NEOs and other corporate officers are expected to hold Common Shares with a value equal to a multiple of their base salaries. |
Conservatively Manage Use of Equity Grants | | Our annual equity grants have averaged less than 0.40% of outstanding shares over the last five fiscal years. |
Risk Assessment | | Our corporate officers’ compensation program has been designed, and is periodically reviewed, to ensure that it does not encourage inappropriate risk-taking. |
No guaranteed base salary increases, minimum bonuses or equity awards | | Our NEO employment agreements do not provide for guaranteed base salary increases, minimum bonuses or annual equity awards. |
No “single trigger” severance payments in employment agreements | | In February 2012, the Company eliminated provisions in the employment agreements of our CEO and other executive officers who were our NEOs at that time that provided severance payments solely upon the occurrence of a change in control event. In December 2015, the Company amended our CEO’s employment agreement so that unvested equity awards held by him have double-trigger change in control provisions (similar to the rest of his compensation) and accelerated vesting will only occur in the event of a change in control followed by the termination of his employment. |
No dividends or dividend equivalents on unvested equity awards | | We do not pay ordinary dividends on unvested time-based equity awards. For our performance-based restricted share units (“PSUs”), dividend equivalents are paid in cash, without interest, only when and to the extent the PSUs are earned. |
No discounting of share options or re-pricing or buyout of underwater options | | We expressly prohibit the discounting of share options and the re-pricing or cash buyouts of underwater share options. |
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| | |
No Hedging or Pledging of Securities | | NEOs, other corporate officers and directors are prohibited from engaging in transactions designed to hedge against the economic risks associated with an investment in Common Shares or pledging Common Shares in a margin account. |
Pay for Performance Compensation Mix
The Company’s executive compensation program is designed to reward the NEOs and other corporate officers for achieving strong operational performance and delivering on the Company’s strategic initiatives, both of which are important to the long-term success of the Company. The Compensation Committee believes that a significant portion of the compensation of our NEOs should be aligned with our shareholders’ interests and directly linked to measurable performance. To evaluate the proportion of performance-based compensation for our NEOs, the Compensation Committee looks at recurring compensation by examining total direct compensation, or TDC, earned by our NEOs. TDC is calculated by adding base salary, actual cash annual incentives paid and the grant date fair value of share awards, each as reported in our Summary Compensation Table. It excludes indirect compensation reported under the “All Other Compensation” column of our Summary Compensation Table.
As illustrated below, At-Risk Compensation, comprised of cash annual incentives and equity-based compensation, made up approximately 82% of the TDC of our CEO, and 75% of the combined TDC of our other NEOs in 2017.
![[GRAPHIC MISSING]](https://capedge.com/proxy/DEF 14A/0001144204-18-020279/tv489961_chrt-com.jpg)
As described in the section “Compensation Discussion and Analysis — Role of Independent Compensation Consultant; Comparison Group Compensation Data”, a review by the Compensation Committee’s independent compensation consultant concluded that, in aggregate, the Company’s targeted total direct compensation for the NEOs is aligned with the 25th percentile of the Comparator Group. It was also noted that the Company’s annualized TSR was above the 75th percentile for all measurement periods between one and ten years when compared to the Comparator Group.
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CEO Pay-at-a-Glance
The compensation of our CEO is based on the same design elements and performance metrics that are applicable to our other NEOs. The following graph shows the relationship of our CEO’s TDC to our cumulative shareholder return indexed over the last five fiscal years. As illustrated below, we delivered total shareholder return of 230.4% over this period while the Compensation Committee’s decisions and changes to our executive compensation program increased the TDC of our CEO approximately 88.3% over the period.
![[GRAPHIC MISSING]](https://capedge.com/proxy/DEF 14A/0001144204-18-020279/tv489961_chrt-barline.jpg)
On a year-over-year basis, the TDC of our CEO decreased 15.9% in 2017 as a higher payout under the Company’s annual incentive program was more than offset by a reduction associated with the approximately $1.5 million cash incentive payment unique to 2016 pursuant to the Synergy Bonus Program adopted by the Compensation Committee in conjunction with the Progressive Waste acquisition. In 2017, the Company exceeded its financial performance targets, resulting in an overall payment of 105.0% of the target opportunity for that fiscal year, as compared to 103.7% of the target opportunity in 2016. Excluding the impact of the Synergy Bonus Program in 2016, our CEO’s TDC in 2017 increased 9.3% over the prior year.
As described in the section “Compensation Discussion and Analysis — Role of Independent Compensation Consultant; Comparison Group Compensation Data”, a review by Pearl Meyer & Partners, LLC, an internationally known compensation consulting firm, concluded that, in aggregate, the Company’s targeted total direct compensation for the CEO is 18% below the 25th percentile and 35% below the 50th percentile against the Comparator Group. It was also noted that the Company’s annualized TSR was above the 75th percentile for all measurement periods between one and ten years when compared to the Comparator Group.
“Say on Pay” Proposal
The Company provides its shareholders with an opportunity to cast an annual advisory vote with respect to its NEO compensation as disclosed in the Company’s annual management information circular and proxy statement, or “Say on Pay” proposal (“Say on Pay”). At last year’s Annual and Special Meeting of Shareholders, more than 96% of the shares cast approved our NEO compensation program as described in last year’s management information circular and proxy statement. The Compensation Committee and the Company viewed these results as a strong indication that the Company’s shareholders support the executive compensation policies and practices of the Company.
Recent Changes to Further Align Pay with Performance
In light of our shareholders’ support and the significant shareholder value creation over the years, the Compensation Committee decided to retain the core design of our executive compensation program for fiscal 2017. The Company’s management and Compensation Committee, with the input of the full Board of Directors and the Compensation Committee’s independent compensation consultant, has periodically reviewed our executive compensation program and made certain revisions over the years to further align pay with performance.
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In early 2015, the Compensation Committee introduced a one-year performance-based condition to annual restricted share unit (“RSU”) grants to the Company’s NEOs and other corporate officers based on free cash flow generation — a different metric from those used for annual incentives and PSU grants. Only if the Company satisfies the performance target during the year in which the grant is made will the grants then continue to time-vest over a multi-year schedule. Accordingly, all equity grants awarded to our NEOs contain a performance-based threshold the Company must meet before the grants may vest.
In early 2017, the Compensation Committee implemented additional changes to our compensation program related to the equity awards issued in 2017, including:
Increased the percentage of each executive and other corporate officer’s long-term performance-based equity compensation (relative to annual performance-based RSU awards) so that PSUs now constitute at least 35% of total equity compensation, an increase from 20% for the most recent previous PSU grant in 2015;
Eliminated EBITA CAGR as a performance metric in our PSU program to address any potential concerns of proxy advisory firms that such a metric may be considered similar to the annual EBITDA target incorporated into our annual cash incentive bonus plan;
Introduced free cash flow/share CAGR as a performance metric in our PSU program to replace EBITA CAGR; and
Introduced relative TSR as an additional performance metric to our PSU program.
![[GRAPHIC MISSING]](https://capedge.com/proxy/DEF 14A/0001144204-18-020279/tv489961_chrt-pie.jpg)
Beginning in late 2017, the Compensation Committee engaged Pearl Meyer to review our CEO’s compensation package in light of: (i) the Company’s increased size and complexity following the Progressive Waste acquisition; (ii) the Company’s annualized TSR being above the 75th percentile for all measurement periods between one and ten years when compared to the Comparator Group; and (iii) the Company’s targeted total direct compensation for the CEO, in aggregate, being 35%, or $2.35 million, below the 50th percentile when compared to the Comparator Group.
As a result of this review, on February 13, 2018, the Compensation Committee approved entering into a second amendment (the “Second Amendment”) to Mr. Mittelstaedt’s Separation Benefits Plan and Employment Agreement, effective February 13, 2012, as amended by that certain Amendment to Separation Benefits Plan and Employment Agreement, effective December 17, 2015 (the “Employment Agreement”). Pursuant to the terms of the Second Amendment, Mr. Mittelstaedt’s initial term of employment was extended until February 13, 2023. During that period, he will continue to serve as the Chairman of the Company’s Board of Directors and the Chief Executive Officer of the Company or, at his election, in the role of Executive Chairman of the Company’s Board of Directors. The Second Amendment provided for a grant to Mr. Mittelstaedt of a retention equity award having a grant date value of $9 million, subject to a three-year vesting schedule and a claw back provision if he voluntarily terminates his employment without Good Reason (as defined in the Employment Agreement) prior to February 13, 2023.
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Given the claw back provision and the desire to otherwise maintain the CEO’s existing compensation program, the Compensation Committee views the initial $9 million equity award as additional compensation to the CEO spread over a five-year period, offsetting approximately 75% of the current shortfall in the CEO’s targeted total direct compensation against the 50th percentile of the Comparator Group. The Compensation Committee believes the equity award both further aligns the CEO’s compensation with shareholder interests and provides an additional incentive to retain the services of a CEO under whose leadership the Company has generated superior long-term shareholder returns. For 2018, the Compensation Committee maintained Mr. Mittelstaedt’s targeted total direct compensation similar to prior years and, for the fourth consecutive year, did not increase his base salary.
Our Compensation Philosophy and Objectives
The
Our Compensation Committee’s philosophy with respect to the compensation of the NEOs does not differ materially from its philosophy regarding other executive and corporate officers. The
Compensation Committee believes that compensation paid to NEOs should closely align with our performance on both a short-term and long-term basis, be linked to specific, measurable results intended to create value for shareholders, and assist us in attracting and retaining key officers critical to our long-term success.
In establishing compensation for NEOs, the Compensation Committee’s objectives are to:
•
Attract and Retain Talent.Attract and retain individuals with superior leadership ability and managerial talent by providing competitive compensation and rewarding outstanding performance;performance.
•
Align with Shareholder Interests.Ensure that NEO compensation is aligned with our corporate strategies, business objectives and the long-term interests of our shareholders;shareholders.
•
Award Performance.Provide an incentive to achieve key strategic and financial performance measures by linking incentive award opportunities to the achievement of performance measures in these areas;areas.
•
Sustain Growth.Create an incentive for sustained growth; andgrowth.
•
Achieve Balance.Provide a balanced approach to compensation policies and practices, which does not promote excessive risk-taking.
Our overall executive compensation program is structured to attract and retain highly qualified executive and corporate officers by paying them competitively and consistent with our success. We believe that the compensation structure should ensure that a significant portion of pay directly relates to the performance of our Common Shares and other factors that directly and indirectly influence shareholder value.
Accordingly, our approach to compensation is to provide base salary, an annual performance-based incentive opportunity tied to goals that link NEO compensation to our annual operating and financial performance, and long-term equity grants intended to align NEO compensation with shareholder returns and financial performance over a longer period and to aid in retention. Each year, the Compensation Committee allocates total compensation for the Company’s NEOs between cash and equity based on comparisons with other companies and the Compensation Committee’s judgment.
Approach
EXECUTIVE COMPENSATION PROGRAM BEST PRACTICES
Our executive compensation program includes features we believe drive performance and excludes features we believe do not serve our shareholders’ long-term interests. The table below highlights some of the “Best Practices” featured in our compensation program, as well as the “Problematic Pay Practices” that we have excluded.
Compensation Discussion & Analysis
Committee decided to increase the value of the long-term equity award grants in 2021 and 2022 for all participants in the Company’s PSU program. For all officers, including NEOs, the increase in grant values averaged approximately 30% above target in 2021.
ROLE OF THE COMPENSATION COMMITTEE
The Compensation Committee has the primary authority for the consideration and determination of the cash and equity compensation we pay to our executive and corporate officers. The Compensation Committee also makes recommendations to the Board of Directors concerning cash and equity-based compensation and benefits for non-managementnon-employee directors. To aid the Compensation Committee, the CEO meets with the Compensation Committee and provides recommendations annually to the Compensation Committee regarding the compensation of the other NEOs and other corporate officers, other than himself.officers. However, the Compensation Committee is not bound to follow the CEO’s recommendations. Pursuant to its charter, the Compensation Committee has the authority to engage its own independent advisors to assist it in carrying out its duties. The Compensation Committee holds executive sessions not attended by any members of management or non-independent directors.
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The Compensation Committee meets in the first quarter of each fiscal year to review and approve:
•
The achievement of financial performance goals for the prior fiscal year and, if applicable, a multi-year period;
•
Performance-based compensation, if earned, based on such achievement for the prior fiscal year and, if applicable, a multi-year period;
•
Annual equity-based compensation grants;
•
Financial goals for performance-based awards; and
•
The level and mix of NEO compensation for the current fiscal year.
In determining the base salary, performance-based compensation and long-term equity-based compensation levels for the NEOs, the Compensation Committee considers: (i)(1) the compensation structure and practices of a comparator group of companies that it believes are the Company’s leading competitors in the solid waste industry; (ii)(2) a comparator group of companies, most of which operate outside the solid waste industry, with comparable financial profiles; and (iii)(3) its own judgment as to an appropriate level of compensation for a company of our size and financial performance. From time to time, the Compensation Committee uses compensation consultants and comparator group analyses from third parties to assess our compensation components.
For 2021, the Compensation Committee maintained the percentage of PSU awards as a proportion of total equity compensation at 50%. The Compensation Committee believes that achieving a +/- 10% range, over time, of median market Comparator Group target TDC for our existing NEOs is appropriate given their extensive experience, knowledge and their impact on the long-term success of the Company.
For 2017,2021, the Compensation Committee considered a tally sheet that included, for each NEO and other corporate officer,officers, (1) current base salary,salary; (2) salary paid in 2016,2020; (3) bonus percentage,percentage; (4) cash bonus paid for 2016,2020; (5) RSUs and PSUs granted in 2016,2020; (6) the dollar amount of 401(k) and Nonqualified Deferred Compensation Plan matches in 2016, 2020; (7) payments and reimbursements for various expenses that could be considered perquisites,perquisites; and (8) the value of unvested RSUs and PSUs as of the end of the year. 2020.
In determining the amount of compensation for the NEOs, the Compensation Committee does not
take into accountconsider amounts realized from prior equity-based compensation grants because the Compensation Committee seeks to provide compensation that takes into account the cost of replacing the
NEOsNEO on a market competitive basis and what is equitable based on our performance. We believe that, to some extent, appreciation reflected in the amounts realized from prior equity-based compensation grants confirms the Compensation Committee’s success in aligning compensation with our shareholders’
interests, thus validating our compensation philosophy.We provide Mr. Mittelstaedt with greater compensation and benefits than the other NEOs to reflect his importance and value to us as well as the greater level of responsibility andinterests.
EXERCISE OF DISCRETION IN EXECUTIVE COMPENSATION DECISIONS
As a risk faced by him as our CEO and Board Chairman. Mr. Mittelstaedt’s compensation also differs as a direct result ofmitigation provision, the Compensation Committee’s reviewCommittee has complete discretion to withhold payment pursuant to any of our incentive compensation plans irrespective of whether we or the comparator compensation data, and reflectsNEOs have successfully met the competitive nature of compensation paid to chief executive officers of companies within the Comparator Group. The goals set under those plans.
Compensation Discussion & Analysis
Base Salary.
Our compensation program includes base salaries to compensate the NEOs and other corporate officers for services rendered each year. Base salaries provide a secure base of compensation that is not dependent on our performance and is an amount that recognizes the role and responsibility of each NEO and other corporate officer, as well as such officer’s experience, performance and contributions. We also believe this element is beneficial in attracting and retaining high-performing and experienced corporate officers.
The Compensation Committee considers base salary increases for certain NEOs and other corporate officers annually. Base salary decisions generally reflect the
Compensation Committee’s consideration of our Comparator Group data and subjective factors including an officer’s experience and past performance. For
2017,2021, the Compensation Committee approved the following
salary increasesannualized base salaries for our NEOs:
| | Name | | | 2020
Base Salary
($) | | | 2021
Base Salary
($) | | | %
Increase/
Decrease | |
| | Worthing F. Jackman | | | | | 900,000 | | | | | | 900,000 | | | | | | 0.0% | | |
| | Mary Anne Whitney | | | | | 500,000 | | | | | | 550,000 | | | | | | 10.0% | | |
| | Darrell W. Chambliss | | | | | 542,000 | | | | | | 555,000 | | | | | | 2.4% | | |
| | Patrick J. Shea | | | | | 442,000 | | | | | | 460,000 | | | | | | 4.1% | | |
| | James M. Little | | | | | 436,000 | | | | | | 447,000 | | | | | | 2.5% | | |
| | | | | | |
| Name | | 2016
Base Salary(1)
($) | | 2017
Base Salary
($) | | %
Increase |
| Ronald J. Mittelstaedt | | | 969,000 | | | | 969,000 | | | | — | |
| Worthing F. Jackman | | | 525,313 | | | | 575,000 | | | | 9.5 | % |
| Steven F. Bouck | | | 637,550 | | | | 660,000 | | | | 3.5 | % |
| Darrell W. Chambliss | | | 479,100 | | | | 500,000 | | | | 4.4 | % |
| Patrick J. Shea | | | 379,250 | | | | 405,000 | | | | 6.8 | % |
| (1) | Applicable for all of 2016, and reflects amounts paid to the NEO while an officer of Old Waste Connections through May 31, 2016, and an officer of New Waste Connections on and after June 1, 2016. |
In determining 20182022 base salaries for our NEOs, the Compensation Committee for the fourth year in a row, did not increase Mr. Mittelstaedt’s base salary, but did increase other NEOincreased Ms. Whitney’s and Messrs. Chambliss, Shea and Little’s base salaries betweenby approximately 3.0% and 4.3%, effective February 1, 2018.
2022. The base salary increase for Mr. Jackman was approximately 10%, part of a multi-year approach to increase his targeted direct compensation towards or within a +/- 10% range of the median market Comparator Group. Mr. Jackman’s base salary did not increase in 2021.
Annual Incentives. Incentives: Management Incentive Compensation Program
Our compensation program includes an annual cash incentive award to reward NEOs and other corporate officers based on our performance and the individual executive’s contribution to that performance. Under our Management Incentive Compensation Program (the “MICP”), which is administered pursuant to our 2016 Incentive Award Plan (the “2016 Plan”), a summary of which is attached as Appendix B, each participant has an opportunity to earn an annual incentive based on a targeted percentage of the participant’s annual base salary for the year. The objective of the annual incentive is to
provideencourage participants
an incentive to manage the Company to achieve financial performance targets based on budgeted revenue.
See “Management Incentive Compensation Program” section below for further discussion of the NEOs’ annual incentives.
Equity-Based Compensation. We believe that equity ownership in the Company ties executive compensation to the performance of Common Shares and creates an incentive for sustained growth, superior shareholder returns and employee retention. This investment provided to NEOs and other corporate officers
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coupled with multi-year vesting periods serves to enhance retention and corporate culture, both of which are instrumental to the future success of the Company and the long-term interests of our shareholders.
See “Equity-Based Compensation” section below for further discussion of the NEOs’ equity-based compensation.
Management Incentive Compensation Program
Under the MICP, the NEOs and other corporate officers of the Company are eligible to receive annual incentives. For 2021, the target annual incentives as a percentage of salary for the NEOs were as follows:
| | Name | | | Target Incentive
(as a % of Base Salary) | |
| | Worthing F. Jackman | | | 150% | |
| | Mary Anne Whitney | | | 90% | |
| | Darrell W. Chambliss | | | 90% | |
| | Patrick J. Shea | | | 90% | |
| | James M. Little | | | 90% | |
In
2017,2021, each
participantNEO had the opportunity to earn up to 200%
(Messrs. Mittelstaedt, Jackman, Bouck and Chambliss) or 150% (Mr. Shea) of such person’s target annual incentive based on our achievement of certain targeted levels of financial performance established by the Compensation Committee and (other than with respect to Mr.
Mittelstaedt)Jackman) based on the recommendations of the CEO.
The Compensation Committee adopted the performance targets for the fiscal year in February 2017.2021. Our performance was compared to target levels of: (1) EBITDA, weighted at 20%; (2) operating income, or EBIT, weighted at 20%; (3) operating income as a percentage of revenue, or EBIT Margin, weighted at 30%; and (4) net cash provided by operating activities as a percentage of revenue, or CFFO Margin, weighted at 30%. Payouts are determined based on our weighted average achievement relative to each metric (the “multiplier”). Because the
Payments under this program are contingent on continued employment at the time of payout, subject to the terms of any applicable employment agreements.
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