UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)Proxy Statement Pursuant to Section 14(a) of the
INFORMATION REQUIRED IN PROXY STATEMENTSecurities Exchange Act of 1934
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
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¨ | Preliminary Proxy Statement | |||
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x | Definitive Proxy Statement | |||
¨ | Definitive Additional Materials | |||
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Corrections Corporation of America
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Corrections Corporation of America
No fee required. | ||||
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April 5, 2013March 30, 2016
To our stockholders:Stockholders:
You are invited to attend the 20132016 Annual Meeting of Stockholders of Corrections Corporation of America (the “Company”) to be held at 10:00 a.m., local time, on Thursday, May 16, 2013,12, 2016, at the Company’s corporate headquarters, 10 Burton Hills Boulevard, Nashville, Tennessee. The Notice of Annual Meeting and Proxy Statement, both of which accompany this letter, provide details regarding the business to be conducted at the meeting, as well as other important information about the Company.
Following the formal matters to be addressed at the meeting, stockholders will have the opportunity to ask questions about the Company.
If you wish to attend the meeting, you will need to request an admission ticket in advance. Instructions on how you can request an admission ticket are on page 2 of the Proxy Statement.
Along with the other members of the Board of Directors and management, we look forward to greeting you at the Annual Meeting if you are able to attend.
Sincerely, |
John D. Ferguson |
Chairman of the Board of Directors |
Damon T. Hininger |
President and Chief Executive Officer |
CORRECTIONS CORPORATION OF AMERICA
10 Burton Hills Boulevard
Nashville, Tennessee 37215
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 16, 201312, 2016
The Annual Meeting of Stockholders will be held at 10:00 a.m., local time, on Thursday, May 16, 2013,12, 2016, at our corporate headquarters, 10 Burton Hills Boulevard, Nashville, Tennessee. At the Annual Meeting, stockholders will consider and voteact on the following proposals:items of business:
(1) | The election of |
(2) | The ratification of the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
(3) | An advisory vote to approve the compensation of our |
(4) |
We are pleased to take advantage of Securities and Exchange Commission (“SEC”) rules that allow issuers to furnish proxy materials to their stockholders over the internet. We believe these rules allow us to provide our stockholders with the information they need in a timely and convenient manner, while lowering the costs of delivery and reducing the environmental impact of our annual meeting. Our Proxy Statement and Annual Report to Stockholders (including our 2012 Letter to Stockholders and 2015 Annual Report on Form 10-K) are available on our website at www.cca.com. Additionally, and in accordance with SEC rules, you may access our proxy materials athttp://materials.proxyvote.com/22025Y. You will not receive printed copies of the proxy materials in the mail unless you request them.22025Y. You can request copies of the proxy materials, without charge including our Proxy Statement, which includes a summary and a copy of the proposed amendments to our charter,without charge by sending a written request to CCA, Attention: Karin Demler,Cameron Hopewell, 10 Burton Hills Boulevard, Nashville, Tennessee 37215, or by calling Karin DemlerCameron Hopewell at (615) 263-3000.
Your vote is important. You may vote by internet or toll-free telephone or by the internet.telephone. If you elected to receive a copy of the proxy statement and card by mail, you may vote by completing, signing and returning the proxy card in the accompanying postage-paid envelope. Please refer to the proxy card and the accompanying Proxy Statement for additional information regarding your voting options. Even if you plan to attend the Annual Meeting, please take advantage of one of the advance voting options to ensure that your shares are represented at the Annual Meeting. You may revoke your proxy at any time before it is voted by following the procedures described in the accompanying Proxy Statement.
Stockholders of record at the close of business on Monday, March 18, 201314, 2016 are entitled to vote at the Annual Meeting and any adjournments or postponements thereof.
By Order of the Board of Directors, |
Steven E. Groom |
Executive Vice President, General Counsel and Secretary |
April 5, 2013March 30, 2016
Nashville, Tennessee
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CORRECTIONS CORPORATION OF AMERICA
PROXY STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 16, 201312, 2016
We are providing this Proxy Statement in connection with the solicitation by the Board of Directors, or the Board, of Corrections Corporation of America, a Maryland corporation (the “Company,” “CCA,” “we,”“we” or “us”), of proxies to be voted at our 20132016 Annual Meeting of Stockholders and any adjournment or postponement of the meeting (the “Annual Meeting”).
On or about April 5, 2013,March 30, 2016, a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed to our stockholders as of the record date containing instructions on how to access this Proxy Statement, and the Annual Report to Stockholders (including our 2012 Letter to Stockholders and 2015 Annual Report on Form 10-K) and other proxy materials online, and how to vote. If you prefer to receive the proxy materials in the mail and to vote by mail, the Notice also contains instructions on how to request a printed copy. You will not receive printed copies of the proxy materials in the mail unless you specifically request them.
The Annual Meeting will take place on Thursday, May 16, 2013,12, 2016, at 10:00 a.m., local time, at our corporate headquarters, 10 Burton Hills Boulevard, Nashville, Tennessee. All stockholders who are entitled to vote at the meeting are invited to attend. Seating at the Annual Meeting is limited and will be available on a first come, first served basis. All stockholders of record will need to present an admission ticket and a form of personal photo identification and proof of stock ownership in order to be admitted to the Annual Meeting. Instructions on how stockholders can request an admission ticket are provided on page 2 of the Proxy Statement under the heading “What do I need to attend the Annual Meeting?”. The Notice provides proof of ownership or, if your shares are held in the name of a bank, broker or other holder of record, you may bring a brokerage statement dated on or after March 18, 201314, 2016 as proof of ownership with you to the Annual Meeting. To obtain directions to attend the Annual Meeting and vote in person, please contact Karin Demler,Cameron Hopewell, our SeniorManaging Director, Investor Relations, at 10 Burton Hills Boulevard, Nashville, Tennessee 37215, (615) 263-3000.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON THURSDAY, MAY 16, 2013.12, 2016.
The Company’s Proxy Statement and Annual Report to Stockholders (including our 2012 Letter to Stockholders and 2015 Annual Report on Form 10-K) are available on our website at www.cca.com. Additionally, and in accordance with Securities and Exchange Commission (“SEC”)SEC rules, you may access our proxy materials athttp://materials.proxyvote.com/22025Y.22025Y.
What matters will be acted on at the Annual Meeting?
Stockholders willare asked to consider and vote on the following matters at the Annual Meeting:
Proposal 1. | The election of |
Proposal 2. | The ratification of the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
Proposal 3. | An advisory vote to approve the compensation paid to our |
Proposal 4. |
As of the date of this Proxy Statement, we are not aware of any other matters that will be presented for action at the Annual Meeting.
Who is entitled to vote at the Annual Meeting?
Stockholders of record of our common stock at the close of business on the “record date” are entitled to receive notice of and to vote at the Annual Meeting. The Board of Directors has fixed the close of business on March 14, 2016 as the record date.
As of the record date, there were 117,460,831 shares of common stock outstanding and entitled to vote. Holders of common stock are entitled to one vote for each share of common stock held as of the record date on each matter to be voted on at the Annual Meeting.
What do I need to attend the Annual Meeting?
If you wish to attend the Annual Meeting, you must be a stockholder as of the March 14, 2016 record date. You must request an admission ticket in advance by visitingwww.proxyvote.com and following the instructions provided (you will need the 12 digit control number included on your proxy card, voter instruction form or Notice). Tickets will be issued only to registered and beneficial owners. Stockholders who own shares as joint-tenants will be issued one ticket with both names on the ticket.
Requests for admission tickets will be processed in the order in which they are received and must be requested no later than May 11, 2016. Please note that seating is limited and requests for tickets will be accepted on a first-come, first-served basis. On the day of the Annual Meeting, each stockholder will be required to present valid picture identification such as a driver’s license or passport with their admission ticket. Seating will begin at 9:15 a.m. local time and the Annual Meeting will begin at 10:00 a.m. local time.
Please note that cameras (including cell phones with photographic or video capabilities), recording devices and other electronic devices will not be permitted at the meeting.
What are the Board of Directors’ recommendations?
Our Board of Directors recommends that you vote:
FOR the election of each of the 149 nominees to serve as directors on theour Board of Directors;
FOR the ratification of the appointment of Ernst & Young LLP;
FOR the approval, by a non-binding advisory vote, of the compensation paid to our Named Executive Officers; and
FORthe amendments and restatement of the Company’s charter.
If you complete and properly signsubmit a signed proxy card or submit your proxy by telephone or internet and return it to the Company but do not specify how you want your vote,shares voted, the proxy holder will be voted in accordancevote your shares with the recommendations of the Board of Directors set forth above. Further, if any other matter properly comes before the Annual Meeting or any adjournment or postponement thereof, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion.
Why did I receive a one-page Notice in the mail regarding the internet availability of proxy materials this year instead of a full set of printed proxy materials?
Pursuant to rules adopted by the SEC, we have elected to provide access to our proxy materials over the internet. Accordingly, we are sending a Notice regarding the internet availability of the proxy materials to most of our stockholders of record and beneficial
owners. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or to request to receive a printed set of proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice. In addition, stockholders may request receipt of proxy materials in printed form by mail or electronically by e-mail on an ongoing basis by following instructions set forth in the Notice.
Who is entitled to vote at the Annual Meeting?
Stockholders of record of our common stock at the close of business on the “record date” are entitled to receive notice of and to vote at the Annual Meeting. The Board of Directors has fixed the close of business on Monday, March 18, 2013 as the record date.
As of the record date, there were 100,856,884 shares of common stock outstanding and entitled to vote. Holders of common stock are entitled to one vote for each share of common stock held as of the record date on each matter to be voted on at the Annual Meeting.
You can vote either in person by attending the 2013 Annual Meeting or by proxy without attending the 2013 Annual Meeting. To
If you are a record holder, you can submit your vote by proxy you must either:in any of the following ways:
vote by telephone (instructions are on the proxy card);
vote by internet (instructions are in the Notice you received in the mail or are on the proxy card); or
YourIf a bank, broker or other nominee was the record holder of your stock on the record date, you will be able to instruct your bank, broker or other nominee on how to vote is important. Whetherby following the instructions on the voting instruction form or notNotice that you planreceive from your bank, broker or other nominee. If you wish to attend the meetingvote in person we urgeat the Annual Meeting, you will need to present a valid proxy from your broker, bank or other nominee authorizing you to submitvote your voting instructions toshares at the proxy holders as soon as possible. You may change your vote at any time before it is cast by filing with the Secretary of the Company eitherAnnual Meeting.
As a notice of revocation or a duly executed proxy bearing a later date. Ifrecord holder, if you submit voting instructions by telephone or by the internet, you may change your vote by following the same instructions used in originally voting your shares. If your shares are held in the name of a broker, bank, trust or other nominee, you may change your voting instructions by following the instructions of your broker, bank, trust or other nominee. Attendance at the meeting will not by itself revoke a previously granted proxy.
Your vote is important. Whether or not you plan to attend the Annual Meeting in person, we urge you to submit your voting instructions to the proxy holders as soon as possible.
A “broker non-vote” occurs when a broker or nominee holding shares for a beneficial owner has not received voting instructions from the beneficial owner and the nominee does not have discretionary authority to vote the shares. Brokers and other nominees do not have discretionary authority to vote on the election of directors to serve on our Board (Proposal 1) or the advisory vote to approve our executive compensation (Proposal 3). Thus, if you hold your shares in street name and do not provide voting instructions to your broker or other nominee on these proposals, your shares will be considered to be broker non-votes and will not be voted on such proposal. Shares that constitute broker non-votes will be counted as present at the Annual Meeting for the purpose of determining a quorum, but will not be considered entitled to vote on the proposal in question. Brokers and nominees generally have discretionary authority to vote on Proposal 2, the ratification of the selection of Ernst & Young LLP as our independent registered public accountants.
What vote is required to approve each item?proposal?
Quorum Requirement. The presence, in person or by proxy, of the Company’s stockholders entitled to cast a majority of the votes entitled to be cast at the Annual Meeting is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and “broker non-votes”broker non-votes will be treated as shares present and entitled to vote for purposes of determining the presence of a quorum. Failure of a quorum to be represented at the Annual Meeting will necessitate an adjournment or postponement and will subject the Company to additional expense.
Election of Directors. Under the Company’s SixthSeventh Amended and Restated Bylaws (the “Bylaws”), adopted by the Board in August 2012,January 2016, a majority of all of the votes cast at the Annual Meeting is required for the election of directorseach nominee in an uncontested election of directors. A majority of votes cast means the number of shares cast “for” a director’snominee’s election exceeds the number of votes cast “against” that director.nominee. Brokers do not have discretionary authority to vote on the election of directors. Abstentions and broker non-votes will have no effect on the outcome of the vote of the election of directors.directors as they are not considered votes cast.
Director nominees in contested elections will continue to be elected by plurality vote. An election will be considered contested if conducted at a meeting at which a stockholder has nominated an individual for election for director in compliance with the advance notice requirements set forth in the Bylaws, and
such stockholder nomination has not been withdrawn on or prior to the tenth day preceding the date the Company first mails its notice of such meeting to the stockholders.
If a director nominee is an incumbent director and does not receive a majority of the votes cast in an uncontested election, that director will continue to serve on the Board as a “holdover” director, but must tender his or her resignation to the Board promptly after certification of the election results of the stockholder vote. The Nominating and Governance Committee of the Board will then recommend to the Board whether to accept the resignation or whether other action should be taken. The Board will act on the tendered resignation, taking into account the recommendation of the Nominating and Governance Committee, and the Board’s decision will be publicly disclosed within 90 days after certification of the election results of the stockholder vote. A director who tenders his or her resignation after failing to receive a majority of the votes cast will not participate in the recommendation of the Nominating and Governance Committee or the decision of the Board with respect to his or her resignation. Ratification of Ernst & Young LLP. The affirmative vote of a majority of votes cast is required to approve the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2013.2016. If the Company’s stockholders do not ratify the appointment of Ernst & Young LLP, the Audit Committee will reconsider the appointment and may affirm the appointment or retain another independent accounting firm. If the appointment is ratified, the Audit Committee may in the future replace Ernst & Young LLP as our independent registered public accounting firm if it is in the Company’s best interest to do so. An “ABSTAIN” electionAbstentions and broker non-votes will not be counted as a vote “for” or “against” such matter.
Advisory Vote on Executive Compensation. The affirmative vote of a majority of votes cast is required to approve the non-binding advisory vote of compensation paid to our Named Executive Officers.named executive officers. Because your vote is advisory, it will not be binding on the Board of Directors or the Company. However, the Board of Directors will review the voting results and take them into consideration when making future decisions regarding executive compensation paid by the Company to its Named Executive Officers. An “ABSTAIN” electionnamed executive officers. Abstentions and broker non-votes will not be counted as a vote “for” or “against” such matter.
Charter Amendment. As set forth in the Company’s charter, the approval of the amendments to the Company’s charterour advisory vote on executive compensation and the restatement of the charter to give effect to the amendments requires the affirmative vote of holders of shares entitled to cast a majority of all votes entitled to be cast on such matter. As a result, “ABSTAIN” elections and “broker non-votes”thus will have the sameno effect as votes “against” such matter.on this proposal.
If you hold your shares in “street name” through a broker or other nominee, your broker or nominee will not be permitted to exercise voting discretion with respect to Proposals 1, 3 or 4. Thus, if you do not give your broker or nominee specific instructions, your shares will not be voted on those matters and will not be counted in determining the number of shares necessary for approval. However, shares represented by such “broker non-votes” will be counted in determining whether there is a quorum.
Where can I find the voting results?
We will announce the voting results at the Annual Meeting. We also will report the voting results on a Form 8-K, which we expect to file with the SEC within four business days after the Annual Meeting has been held.
How and when may I submit a stockholder proposal for the Company’s 20142017 Annual Meeting?
Our annual meeting of stockholders generally is held in May of each year. Consistent with applicable SEC rules, we will consider for inclusion in our proxy materials for next year’s annual meeting stockholder proposals that are received at our executive offices no later than December 1, 20132, 2016 and that comply with other SEC rules regarding form and content. Proposals must be sent to the following address: CCA, Attention: Secretary, 10 Burton Hills Boulevard, Nashville, Tennessee 37215.
Other stockholder proposals may be raised at next year’s annual meeting (but not considered for inclusion in our proxy materials) if timely received and otherwise in compliance with the advance notice provisions of our Bylaws. In order to be timely, notice must be received at our executive offices (the address listed above) between February 10, 201413, 2017 and March 12, 2014.
Can I communicate directly with members of the Company’s Board of Directors?
Yes. Stockholders, employees and other parties interested in communicating directly with members of the Company’s Board of Directors (including specific members of the Board or non-management directors as a group) may do so by writing to CCA, Attention: Secretary, 10 Burton Hills Boulevard, Nashville, Tennessee 37215. The Secretary of the Company compiles all substantive communications and periodically submits them to the Board, the group of directors or the individual directors to whom they are addressed. Concerns relating to accounting, internal controls or auditing matters are handled in accordance with procedures established by the Audit Committee.
How can I obtain the Company’s Annual Report on Form 10-K?
Any stockholder who desires a copy of our Annual Report on Form 10-K for the year ended December 31, 2012,2015, as filed with the SEC, may obtain a copy without charge by visiting our website,www.cca.com. www.cca.com. A copy of our Annual Report on Form 10-K can also be obtained, free of charge, upon written request to the SeniorManaging Director of Investor Relations, Corrections Corporation of America, 10 Burton Hills Boulevard, Nashville, Tennessee 37215.
Can I access the Company’s proxy materials and annual report electronically?
The Notice mailed to you in accordance with SEC’s rules contains instructions on how to access our proxy materials and vote over the internet. This Proxy Statement and Annual Report to Stockholders (including our 2012 Letter to Stockholders and Annual Report on Form 10-K) and other proxy materials are also available on our internet website atwww.cca.com (accessible through the “Investors” link). If you are a stockholder of record and would like to view future proxy statements, annual reports and other proxy materials over the internet instead of receiving paper copies in the mail, follow the instructions provided when you vote over the internet. If you hold your shares through a broker, check the information provided by that entity for instructions on how to elect to view future proxy statements, annual reports and other proxy materials and to vote your shares over the internet. Opting to receive your proxy materials online saves us the cost of producing and mailing the proxy materials to your home or office and gives you an automatic link to the proxy voting site.
Choosing to receive your future proxy materials by e-mail will allow us to provide our stockholders with the information you need in a timelier manner, will save us the cost of printing and mailing documents to you and will conserve natural resources. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.
What are the costs of soliciting these proxies?
The Company pays the cost of soliciting proxies. We have retained MacKenzie Partners to assist with the solicitation of proxies on our behalf. MacKenzie Partners will receive a fee of $10,000, plus reasonable expenses, for these and other services in connection with the Annual Meeting. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, custodians and other like parties to the beneficial owners of shares of our common stock, in which case we will reimburse these parties for their reasonable out-of-pocket expenses. Proxies may also be solicited personally or by telephone or fax by directors, officers and employees of the Company. No additional compensation will be paid for these services.
How many copies should I receive if I share an address with another stockholder?
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single Notice and, to the extent requested, single set of proxy materials addressed to those stockholders. This process, which is commonly referred to as “householding,
“householding,” potentially provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household proxy materials unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If at any time you no longer wish to participate in householding and would prefer to receive a separate Notice or, to the extent requested, set of proxy materials, or if you are receiving multiple copies of proxy materials and wish to receive only one, please notify your broker if your shares are held in a brokerage account or our transfer agent, identified below, if you hold registered shares. You can also notify us by sending a written request to CCA, Attention: Karin Demler,Cameron Hopewell, 10 Burton Hills Boulevard, Nashville, Tennessee 37215, or by calling Karin DemlerCameron Hopewell at (615) 263-3000.
Whom should I contact if I have any questions?
If you have any questions about the Annual Meeting or these proxy materials, please contact Karin Demler,Cameron Hopewell, our SeniorManaging Director of Investor Relations, at 10 Burton Hills Boulevard, Nashville, Tennessee 37215, (615) 263-3000. If you are a registered stockholder and have any questions about your ownership of our common stock, please contact our transfer agent, the American Stock Transfer and Trust Company, at 59 Maiden Lane,6201 15th Avenue, Brooklyn, New York New York 10038,11219, (800) 937-5449, or Karin DemlerCameron Hopewell at the address and phone number above. If your shares are held in a brokerage account, please contact your broker.
You can access our corporate charter, Bylaws, Corporate Governance Guidelines, current Board committee charters, Code of Ethics and Business Conduct and certain other corporate governance information on our website,www.cca.com (under the “Corporate Governance” section of the Investors page).
During the third quarter of 2012, the Bylaws were amended to (i) provide for a majority voting standard for the election of director nominees in an uncontested election, (ii) clarify the manner in which a director who fails to receive a majority of the votes cast shall tender his or her resignation to the Board of Directors, and (iii) provide that the Board of Directors may give general authorization to a committee to set the amount and other terms of a dividend so long as the committee acts in accordance with the terms of the general authorization provided by the Board of Directors. Additionally, during the third quarter of 2012, the Corporate Governance Guidelines were amended to include a director resignation policy which is applicable in the case of an uncontested election where a nominee receives a greater number of votes “against” his or her election than votes “for” such election. Finally, during the third quarter of 2012, the Nominating and Governance Committee Charter was amended to clarify the roles and responsibilities of the committee, including, among others, its role in evaluating the resignation of a director who receives a greater number of votes “against” than votes “for” his or her election, as well as other changes to further clarify the committee’s role in director qualification, selection, resignation and appointment to Board committees.
We believe that effective corporate governance is important to our long-term health and our ability to create value for our stockholders. With leadership from our Nominating and Governance Committee, our Board of Directors regularly evaluates regulatory developments and trends in corporate governance to determine whether our policies and practices in this area should be enhanced. The Nominating and Governance Committee also administers an annual self-evaluation process for the Board of Directors and its standing committees. In addition, our directors are encouraged to attend director education programs, which are reimbursed by the Company.
You can access our current corporate charter, Bylaws, Corporate Governance Guidelines, Board committee charters, Code of Ethics and Business Conduct and certain other corporate governance information on our website, www.cca.com (under the “Corporate Governance” section of the Investors page).
Mr. Ferguson and Mr. Hininger are the only members of the Board of Directors who currently are employed by the Company and are thus not independent, and as we announced in February 2015, Mr. Ferguson has announced his intention to retire from the Board and will not stand for re-election at the Annual Meeting. The Board has determined that all of our other directors are independent. Accordingly, 9 of our 11 current directors and 8 of our 9 director nominees are independent and our Audit, Risk, Compensation and Nominating and Governance Committees are composed entirely of independent directors. In making its independence determinations, the Board used the standards for director independence set forth in the New York Stock Exchange (“NYSE”) corporate governance listing standards (Section 303A) and, with respect to Audit Committee members, Section 10A(m)(3) of the Securities Exchange Act of 1934.
Separation of Chairman and Chief Executive Officer
We do not have a formal policy regarding the separation of our Chairman and Chief Executive Officer (“CEO”) positions. In general, the Board of Directors believes that the determination depends on the circumstances, including the Board of Directors’ evaluation of the person or persons available to serve in those positions and the needs of the Company at a particular time.
Pursuant to our Bylaws, the Chairman presides over meetings of the Board of Directors and meetings of the stockholders at which he is present and has general oversight responsibility for our business and affairs. The CEO has responsibility for implementation of the policies of the Company, as determined by the Board of Directors, and for the administration of our business affairs. The CEO also has responsibility for presiding over any meeting of the Board of Directors or of the stockholders at which the Chairman is not present.
The roleSince October 2009, the roles of Chairman and that of CEO currently arehave been held separately. John D. Ferguson currently serves as executive Chairman of the Board of Directors and is an employee of the Company.Company, while Damon T. Hininger serves as President and CEO. Previously,Prior to October 2009, Mr. Ferguson served as both Chairman and CEO from July 2008 to October 2009 andour CEO. Mr. Ferguson served as Vice-Chairmanhas previously announced his intention to retire from the Board and is not standing for re-election at the Annual Meeting. The Board reviewed and discussed the Board leadership structure and the specific role and responsibilities of the Chairman of the Board of Directors, President and Chief Executive Officer while William F. Andrews, a current Director, servedin February 2016 appointed Mr. Emkes to serve as Chairman from August 2000 to July 2008.of the Board, effective as of Mr. Ferguson’s retirement at the Annual Meeting.
The Board of Directors believes that the Company’s current leadership structure is appropriate. Having Mr. Hininger serve as President and CEO, while retaining Mr. FergusonEmkes will serve as independent Chairman, helps us achieve important objectives. Mr. Hininger is positioned to fully focus his energies on implementing our business strategy and administering our day-to-day affairs. Mr. Ferguson isEmkes will be positioned to draw on his relationships with existing Board members and his past experience as President and CEO to effectively discharge the duties of Chairman, while also serving as a resource to Mr. Hininger. The Board of Directors considers many factors when determining how to best select the Chairman, including: familiarity with the Company and its business, proximity in location to the Company’s headquarters, experience as a leader and consensus builder, willingness and availability to dedicate sufficient time to the Company and experience working with other public companies.
Executive sessions, or meetings of our non-management directors without management present, are held periodically in order to provide an opportunity for the outside directors to discuss openly any and all matters. During 2015, the outside directors met in executive session two (2) times. Our Corporate Governance Guidelines provide that Executive sessions are called and chaired by an independent director appointed from time to time by the Nominating and Governance Committee. Joseph V. Russell currently serves as the Executive session chair; Charles L. Overby served in such role until Mr. Russell’s appointment in May 2015.
Board of Directors Meetings and Committees
Our Board of Directors is responsible for establishing the Company’s broad corporate policies and strategic objectives, reviewing our overall performance and overseeing management’s performance. Among other things, the Board of Directors selects and evaluates our executive officers, establishes, reviews and approves our corporate objectives and strategies and evaluates and approves major acquisitions and capital commitments.
The Board of Directors currently consists of 1411 members, all9 of whom are standing for re-election and are identified, along with their biographical information, under “Proposal I - 1—Election of Directors.”
The Board of Directors met five (5) times in 2012.2015. Each director (other than Mr. Dennis who was appointed to the Board of Directors in February 2013) attended at least 75% of the total number of meetings of the Board of Directors and of the meetings held by all board committees on which such director served. The Board of Directors has adopted as its policy that directors are strongly encouraged to attend each annual meeting of stockholders. All of the directors attended last year’s annual meeting of stockholders, except for Mr. Dennis (who was not a director at the time) and Mr. Wedell (who is no longer a director).stockholders.
Our Board of Directors has fourfive regularly standing committees: the Audit, Compensation, Nominating and Governance, Risk and Executive Committees. The Risk Committee was first established in August 2015. Each committee has a written charter that has been approved by the committee and the Board of Directors and that is reviewed at least annually. The table on the following pagebelow shows the current composition of each of our regularly standing Board committees, together with a summary of each committee’s responsibilities and the number of meetings each committee held in 2012.
Committee | Members | Summary of Responsibilities | 2015 Meetings | |||||
| C. Michael Jacobi (Chair) Donna M. Alvarado
Anne L. Mariucci | |||||||
|
John R. Prann, Jr. | Responsibilities include oversight of the integrity of our financial statements; and the hiring, qualifications, independence and performance of our independent registered public accountants and our internal audit function. | 5 | |||||
Compensation |
John D. Correnti*** Mark A. Emkes John R. Prann, Jr. Robert J. Dennis | Responsibilities include setting executive officer compensation and
| 5 | |||||
Nominating and Governance | Charles L. Overby (Chair)
Mark A. Emkes Thurgood Marshall, Jr. Joseph V. |
| 4 | |||||
Risk |
Donna Alvarado Anne Mariucci Charles Overby |
| 1 | |||||
Executive | John D. Ferguson (Chair)** Robert J. Dennis Damon T. Hininger Joseph V. | When necessary, and subject to authority limitations with respect to significant corporate actions, responsible for acting on behalf of the full Board during intervals between Board meetings. | — |
* |
** | Will retire as of the Annual Meeting and will no longer be a member of the committee. |
*** | Former Director; deceased in August 2015 and no longer a member of the committee. |
Executive SessionsAudit Committee
Executive sessions, or meetingsOur Audit Committee is charged with:
Mr. Ferguson, Mr. Hininger and Mr. Andrews are the only members of the Board of Directors who currently are employed by the Company. The Board has determined that alleffectiveness of our other directors are independent. Accordingly, 11 ofinternal control over financial reporting;
Independence and Financial Literacy of Audit Committee Members
The Board has determined that each member of the Audit Committee is independent as defined by the standards of the NYSE and Rule 10A-3 under the Securities Exchange Act of 1934. The Board also has determined that each member is “financially literate” as defined by the rules of the NYSE and that Mr. Jacobi qualifiesand Mr. Prann each are qualified as an “audit committee financial expert” as defined in Item 407(d) of Regulation S-K under the Securities Exchange Act of 1934. The full text of the Audit Committee charter is available on the Company’s website at www.cca.com (under the “Corporate Governance” section of the Investors page). The Audit Committee was formerly known as the Audit and Risk Committee. In August 2015, as a result of its regular evaluation of the responsibilities of its committees, our Board amended the responsibilities of the committee in its charter to refine and confirm its leadership role in oversight of audit matters specifically, renamed the committee the Audit Committee to reflect these changes and created a new committee, the Risk Committee, to oversee the coordination of the Board’s oversight of risk assessment and management. The Risk Committee is further discussed below.
Director CandidatesCompensation Committee
The Compensation Committee approves the compensation of our CEO and other executive officers, including annually reviewing and approving corporate goals and objectives relevant to their compensation. The Compensation Committee is responsible for ensuring that our compensation programs are designed to encourage high performance, promote accountability and adherence to Company values and align with the interests of our stockholders. The Compensation Committee responsibilities include administration of cash and equity-based incentive compensation plans and stock ownership guidelines, evaluation of the performance of the executive officers and assessment of the material risks of our compensation programs. The Compensation Committee is also responsible for reviewing, and making recommendations to the Board regarding, the compensation of our Board of Directors.
The Board has determined that each member of the Compensation Committee is independent as defined by the standards of the NYSE. We intend that each member also qualifies as an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code and as “non-employee director” within the meaning of the SEC’s Rule 16b-3. The full text of the Compensation Committee charter is available on the Company’s website at www.cca.com (under the “Corporate Governance” section of the Investors page).
The Compensation Committee has retained PricewaterhouseCoopers LLP, or PwC, as its independent compensation consultant since 2000, to provide the committee with advice and guidance on the design and market competitiveness of the Company’s executive compensation programs. PwC works directly with the chair of the Compensation Committee and as directed by the chair of the Compensation Committee, with our Chief Executive Officer. In 2015, PwC was retained to provide certain valuation services, for an aggregate amount of fees paid for such services equal to approximately $176,000. PwC was also paid an aggregate amount of approximately $34,000 for consulting with the Compensation Committee on compensation matters. The valuation services were used in connection with the Company’s REIT qualification testing. PwC has annually performed valuation services in anticipation of, and since, our initial conversion to a REIT. The decision to hire PwC for these services was made by management, based on PwC’s experience and familiarity with the Company. Management reviews and obtains approval from the chair of the Compensation Committee prior to engaging PwC for these services. Each year the Compensation Committee reviews the independence of the compensation consultants and other advisors who provide advice to the Compensation Committee, employing the independence factors specified in the NYSE listing standards. In its annual review of the independence of PwC in 2015, the Compensation
Committee reviewed management’s retention of PwC for the other services. The Compensation Committee has determined that PwC is independent within the meaning of the NYSE listing standards, and the work of PwC does not raise any conflicts of interest. In 2015, PwC assisted the Compensation Committee providing the following compensation consulting services:
Nominating and Governance Committee
The Nominating and Governance Committee is responsible for developing and overseeing the Board’s Corporate Governance Guidelines and a code of conduct applicable to members of the Board and for monitoring the independence of the Board. The Nominating and Governance Committee also determines Board membership qualifications, selects, evaluates and recommends to the Board nominees to fill vacancies as they arise, reviews the performance of the Board and its committees and is responsible for director education. Other responsibilities include oversight of the Board’s self-evaluation process and leading the Board’s executive succession planning efforts. The Board has determined that each member of the Nominating and Governance Committee is independent as defined by the standards of the NYSE. The full text of the Nominating and Governance Committee charter is available on the Company’s website at www.cca.com (under the “Corporate Governance” section of the Investors page).
The Nominating and Governance Committee may utilize a variety of methods for identifying nominees for director. Candidates may come to the attention of the Nominating and Governance Committee through current Board members, stockholders, members of management, director search firms and other persons. A stockholder who wishes to recommend a prospective nominee for the Board should notify our Secretary in writing, along with any supporting material the stockholder considers appropriate, in accordance with the stockholder proposal provisions of our Bylaws. General information concerning the submission of stockholder proposals is provided above under the caption “How and when may I submit a stockholder proposal for the Company’s 20142017 Annual Meeting?”. Pursuant to Board policy, there are to be no differences in the manner in which the Committee evaluates candidates based on the source of the recommendation.
The Nominating and Governance Committee is authorized by the Board to identify director candidates, evaluate and consider candidates proposed by any director, member of management or stockholder, develop and implement screening processes it deems necessary and appropriate and recommend for selection by the Board director nominees for each annual meeting of stockholders and, when necessary, vacancies on the Board. The Committee is authorized by the Board to exercise sole authority in retaining any third-party search firm the Committee deems appropriate to identify and assist with the evaluation of director candidates and has utilized that authority in past director searches.
The Nominating and Governance Committee evaluates prospective nominees against the criteria in our Corporate Governance Guidelines, which include professional integrity and sound judgment, sufficient time available to devote to Board activities, a general understanding of marketing, finance and
other elements relevant to the success of a publicly-traded company in today’s business environment, an understanding of our business and factors such as diversity, age, skills and educational and professional background. With respect to diversity, the Committee considers diversity in terms of age, gender and ethnicity, as well as diversity of skills, expertise and experience, in its deliberations.
The Nominating and Governance Committee may also consider other factors it deems relevant, including the current composition of the Board in terms of independence, expertise, experience and special knowledge required for the effective discharge of Board responsibilities, whether there is a need to fill vacancies or expand or contract the size of the Board, the balance of management and independent directors, the structure, membership and need for expertise on our standing committees and the qualifications of other prospective nominees. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law.
With respect to determining whether current directors should stand for re-election, the Nominating and Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board and the Company. With respect to new candidates for Board service, a full evaluation may also include detailed background checks and in-person and telephonic interviews with the Nominating and Governance Committee and other Board members. The Committee evaluation process culminates with a decision as to whether or not to recommend the prospective nominee to the full Board for appointment and/or nomination.
Effective December 31, 2012, Henri L. Wedell resigned as a director
Risk Committee
The Risk Committee was created in August 2015 after the Board had previously combined the responsibilities of risk oversight with the formerly-named Audit and memberRisk Committee, now called the Audit Committee. The Risk Committee is charged with coordinating the Board’s oversight of the AuditCompany’s risk assessment and risk management practices and the Company’s legal, regulatory (including the special rules applicable to REITs) and contract compliance (particularly contracts with government entities). The Risk Committee ofis also responsible for monitoring and reviewing public policy developments and other trends facing the Company that could impact the Company’s operation and performance. The Risk Committee further assists the Board of Directors. On February 21, 2013, Robert J. Dennis was appointedDirectors in fulfilling its oversight responsibility with respect to organizational ethics and compliance and receives regular reports from the Company’s Corporate Ethics and Compliance Officer, who reports to the Board to fill the vacancy created by Mr. Wedell’s resignation. Mr. Dennis was initially recommended for consideration as a director nomineeChief Executive Officer and to the Nominatingchair of the Risk Committee. The full text of the Risk Committee charter is available on the Company’s website at www.cca.com (under the “Corporate Governance” section of the Investors page).
Executive Committee
The Executive Committee is charged with acting on behalf of the full Board when necessary and Governancesubject to authority limitations with respect to the transaction of routine, administrative matters that occur between regularly scheduled Board meetings. The full text of the Executive Committee by Damon T. Hininger, our President and Chief Executive Officer.charter is available on the Company’s website at www.cca.com (under the “Corporate Governance” section of the Investors page).
Limitations on Other Board Service
The Audit Committee charter provides that a member of the Audit Committee may not serve on the audit committee of more than two other public companies without Board approval. Otherwise, we do not believe that our directors should be categorically prohibited from serving on boards and/or board committees of other organizations. However, our Corporate Governance Guidelines instruct the Nominating and Governance Committee and the full Board to take into account the nature of and time involved with respect to a director’s service on other boards as well as other job responsibilities in evaluating the suitability of individual directors and in making its recommendations to our stockholders. Service on boards and/or committees of other organizations must also be consistent with our conflicts of interest policy, as set forth in our Code of Ethics and Business Conduct, which, among other things, requires a director to provide notice to the Board of his or her acceptance of a nomination to serve on the board of another public company.
Stockholders, employees and other interested parties may communicate with members of our Board of Directors (including specific members of the Board or non-management directors as a group) by writing to CCA, Attention: Secretary, 10 Burton Hills Boulevard, Nashville, Tennessee 37215. To the extent such communications are received, our Secretary compiles all substantive communications and periodically submits them to the Board, the group of directors or the individual directors to whom they are addressed. Communications that the Secretary would not consider “substantive,” and therefore may exercise discretion in submitting to the addressee, may include junk mail, mass mailings, resumes and job inquiries, surveys, business solicitations, advertisements, frivolous communications and other similarly unsuitable communications.
Communications expressing concerns or complaints relating to accounting, internal controls or auditing matters are handled in accordance with procedures established by the Audit Committee. Under those procedures, concerns that are improperly characterized as having to do with accounting, internal controls or auditing matters or that are frivolous or clearly inconsequential may be addressed by the Secretary without presentation to the Audit Committee. However, in all cases the Secretary maintains a log of correspondence addressed to directors that may be reviewed by any director at his or her request.
Certain Relationships and Related Party Transactions
Since the beginning of the last fiscal year, we are aware of no related party transactions between us and any of our directors, executive officers, 5% stockholders or their family members which require disclosure under Item 404 of Regulation S-K under the Securities Exchange Act of 1934.
Pursuant to its written charter, the Audit Committee has adopted a Related Party Transaction Policy that, subject to certain exceptions, requires the Audit Committee (or the chair of the Audit Committee in certain instances) to review and either ratify, approve or disapprove all “Interested Transactions,” which are generally defined to include any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which:
the aggregate amount involved exceeded, or will or may be expected to exceed, $120,000 in any calendar year;
the Company was, is or will be a participant; and
any Related Party had, has or will have a direct or indirect interest.
For purposes of the policy, a “Related Party” is any:
person who is or was (since the beginning of the last fiscal year for which the Company has filed a Form 10-K and proxy statement, even if they do not presently serve in that role) an executive officer, director or nominee for election as a director;
greater than 5% beneficial owner of the Company’s common stock;
immediate family member of any of the foregoing; or
firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner, managing member or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.
In determining whether to approve or ratify an Interested Transaction under the policy, the Audit Committee is to consider all relevant information and facts available to it regarding the Interested Transaction and take into account factors such as the Related Party’s relationship to the Company and interest (direct or indirect) in the transaction, the terms of the transaction and the benefits to the Company of the transaction. No director is to participate in the approval of an Interested Transaction for which he or she is a Related Party or otherwise has a direct or indirect interest.
In addition, the Audit Committee is to review and assess ongoing Interested Transactions, if any, on at least an annual basis to determine whether any such transactions remain appropriate or should be modified or terminated.
Compensation Committee Interlocks and Insider Participation
During 2012, Mr. Russell, Mr. Correnti, Mr. Horne and Mr. Prann served on our Compensation Committee for the full year, with Mr. Russell serving as the committee’s Chair. None of the current members of the Compensation Committee or any of their family members serve or have served as an officer or employee of the Company. None of our executive officers served during 2012 as a member of the board of directors or compensation committee (or other committee serving an equivalent function) of any entity that had one or more executive officers serving as a member of the Board or the Compensation Committee.
During the first quarter ofSince 2007, the Board adoptedwe have maintained stock ownership guidelines (the “Guidelines”) for the Company’sour executive officers and directors effective asbecause we believe it is important to align the interests of March 1, 2007 (the “Effective Date”). Theour management and Board with the interests of our stockholders. Under the Guidelines, which are administered and interpreted by the Compensation Committee, provide that the Company’sour executive officers are expected to own a fixed number of shares of Company common stock of the Company equal to three times such executive officer’s base salary in effect as of the Effective Datedate of their hiring or promotion, divided by the Company’s closing common stock price as reported by the NYSE, on the Effective Date. For any individual who becomes an executive officer after the Effective Date, base salary and closing common stock price are determined based on such executive officer’s date of hire or promotion, as applicable. Executive officers are required to achieve these ownership levels, subject to a limited hardship exemption, five years following their date of hire or promotion, as applicable. Individuals serving as executive officers at the time the Guidelines were adopted were required to achieve these ownership levels by March 1, 2012. The Guidelines were amended by the Board of Directors during the first quarter of 2012, effective as of February 23, 2012, to include for the purpose of calculating stock ownership under the Guidelines the beneficial ownership of securities held by executive officers and directors, directly or indirectly, through legal entities established for estate planning purposes (subject to approval by the Compensation Committee) and shares of restricted stock or restricted stock units which are held by executive officers and directors where the restrictions have lapsed (including shares where the restrictions have lapsed but for which an election to defer receipt of the shares has been made).
With respect to the Company’sdate. Our non-executive directors such individuals are each expected to own a fixed number of shares of Company common stock of the Company equal to four times thetheir annual Board retainer for non-executive directors (excluding any retainer for chairing or serving on a committee) in effect ason March 1, 2007 or on the date of their later initial election or appointment to the Effective DateBoard, divided by the Company’s closing common stock price as reported by the NYSE, on the Effective Date. For any individual who becomes a non-executive director after the Effective Date, annual retainersuch date. Executive officers and closing common stock price are determined based on the date of such non-executive director’s initial election to the Board. Non-executive directors are required to achieve these ownership levels, subject to a limited hardship exemption, five years following their initial election to the Board. Non-executive directors serving on the Board at the time these Guidelines were adopted were required to achieve these ownership levels by March 1, 2012.2012 and all others have until five years following their initial hiring or promotion as an executive officer, or election or appointment to the Board, as applicable, to satisfy the Guidelines. The Guidelines are further discussed under “Stock Ownership Guidelines” in the Compensation Discussion and Analysis and the Director Compensation sections of this proxy and are accessible on our website,www.cca.com (under the “Corporate Governance” section of the Investors page).
No Hedging andor Pledging Permitted
The Company’sOur insider trading guidelines includesinclude provisions that restrict and discourage itsprohibit members of theour Board, executive officers, and other officers and employees from engaging in hedging or pledging transactions involving Company securities. Any member of the Board or executive officer wishing to enter into a hedging or pledging arrangement must first pre-clear the transaction with the Company pursuant to such guidelines. Currently, noneNone of the members of theour Board or our executive officers of the Company are engaged in any hedging or pledging transactions involving Company securities.
Code of Ethics and Business Conduct
All of our directors and employees, including our Chief Executive Officer, Chief Financial Officer and principal accounting officer, are subject to our Code of Ethics and Business Conduct. Our Code of Ethics and Business Conduct and related compliance policies are designed to promote an environment in which integrity is valued, business is conducted in a legal and ethical manner and ethics and compliance issues are raised and addressed. Our Nominating and Governance Committee is responsible for reviewing the Code annually and our AuditRisk Committee is responsible for addressing any violations or waivers involving our executive officers and directors. We intend to post amendments to or waivers from our Code of Ethics and Business Conduct (to the extent applicable to our directors, chief executive officer, principal financial officer or principal accounting officer) on our website. Our Code of Ethics and Business Conduct is accessible on our website,www.cca.com (under the “Corporate Governance” section of the Investors page).
OurAs discussed above, in August 2015, as a result of its regular evaluation of the responsibilities of its committees, our Board created the “Risk Committee” which has a leadership role on behalf of Directors overseesthe Board in oversight of our risk assessment and risk management practices and assists the Board with oversight of our financial, legal, contractual and regulatory risks and organizational ethics and compliance. The Risk Committee is also charged with oversight of management’s enterprise risk management (“ERM”) program.
Management’s ERM program entails the identification, prioritization and assessment of a focus onbroad range of risks (e.g., financial, operational, business, reputational, governance and managerial), and the Company’s primary areasformulation of risk:plans to manage these risks or mitigate their effects in an integrated effort involving the Board, relevant Board committees, management and other personnel. The ERM program is led by our General Counsel and is a component of management’s strategic planning process and is overseen by the Risk Committee with periodic reports to the full Board.
The full Board maintains an ongoing, direct role in risk related tooversight through, among other things, regular reports from the Chair of the Risk Committee, regular reports from our business strategy, financial risk, legal/compliance risk and operational risk. The President and Chief Executive Officer on the ERM process and eachoversight of the Company’s Executive Vice Presidents are responsible for managing risk in their respective areas of authority and expertise, identifying key risks to the Board and explaining to the Board how those risks are being addressed.
The Board oversees management’s strategic planning process, which includes an evaluation of opportunities and risks presented by the Company’s current strategies and alternative strategies. The Board also receives regular reports from each of the executives with respect to their areas of managerial responsibility. These reports include information concerning risks and risk mitigation strategies. For example, the Board receives quarterly reports from our Chief Corrections Officer with respect to key areas of operational risk; monitors risks relating to our partnership development efforts through quarterly reports from our Chief Development Officer; and receives regular reports from our General Counsel with respect to legal and compliance risks. In addition, the Board evaluates risk in the context of particular business strategies and transactions. For example, the Board monitors significant capital expenditures through its annual budget review and quarterly capital expenditure reports from management and monitors risk relating to our acquisition and financing activities through in depth reviews of proposed acquisition and financing transactions.
TheIn addition to the Risk Committee, other standing committees of the Board also have responsibility for risk oversight within their areas of oversight. The Audit Committee focuses on financial risk, including fraud risk and risks relating to our internal controls over financial reporting. It receives an annual risk assessment report from the Company’s internal auditors, as well as financial risk assessment information in connection with particular events or transactions. The Nominating and Governance Committee assists theaddresses certain governance-related risks, such as risks related to Board of Directors in fulfilling its oversight responsibility with respect to regulatory compliance and receives regular reports from the Company’s General Counsel and its Ethics Officer.executive management succession planning. As discussed in detail below, the Compensation Committee addresses risks relating to our executive compensation strategies. The full Board receives regular reports
from the chairs of these activitiescommittees and receives reports and other meeting materials provided to each of the committees.
In order to streamline and enhance risk management on a company-wide basis and assist the Board’s oversight of the Company’s risk management processes, we have implemented an enterprise risk management (“ERM”) program. The ERM program entails the identification, prioritization and assessment of a broad range of risks (e.g., financial, operational, business, reputational, governance and managerial), and the formulation of plans to manage these risks or mitigate their effects in an integrated effort involving the Board, management and other personnel. Our General Counsel is responsible for the ERM program, which is a component of our strategic planning process and is overseen by the Audit Committee with periodic reports to the full Board.
In setting compensation, our Compensation Committee considers the achievement of CCA’s goals that may be inherent in the compensation program as well as the risks to CCA’s stockholders. Although a significant portion of our executives’ compensation is performance-based and “at-risk,” the Compensation Committee believes our executive compensation plans are appropriately structured and do not pose a material risk to CCA. The Compensation Committee considered the following elements of our executive compensation plans and policies when evaluating whether such plans and policies encourage our executives to take unreasonable risks:
We set performance goals that we believe are reasonable, but uncertain, in light of past performance and current market and economic conditions.
We use restricted stock units for equity awards because restricted stock units retain value even in a depressed market.
The time-basedperformance-based vesting over multiple years for our long-term incentive awards even after achievement of any performance criteria, promotes the alignment of our executives’ interests with those of our stockholders for the long-term performance of CCA.
Assuming achievement of at least a minimum level of performance, payouts under our performance-based plans result in some compensation at levels below full target achievement, rather than an “all-or-nothing” approach.
Our executive stock ownership policy requires our executives to hold certain levels of CCA stock, which aligns an appropriate portion of their personal wealth to the long-term performance of CCA.
PROPOSAL 1 - ELECTION OF DIRECTORS
The current term of office of each of our directors expires at the Annual Meeting. Mr. Correnti passed away in August 2015. We currently have 11 directors, with 9 current members of the Board of Directors standing for re-election at the Annual Meeting. Mr. Ferguson and Mr. Russell will be retiring as of the Annual Meeting and are not standing for re-election. The Board of Directors has reduced the authorized number of directors from 11 to 9 members effective as of the Annual Meeting.
Based on the recommendation of the Nominating and Governance Committee, the Board of Directors has nominated the following 9 nominees, all of whom are currently serving as directors, for re-election for a new term to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified. We expect each of the 9 nominees to serve if elected. If any of them becomes unavailable to serve as a director, the Board may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board.
The general criteria considered by the Nominating and Governance Committee with respect to director nominees are discussed on page 9 of this Proxy Statement under the heading “Nominating and Governance Committee.” Based on evaluation of those criteria, the Nominating and Governance Committee and the Board believe that each of the nominees contributes relevant skills, expertise and experience to the Board and that the group of nominees collectively has the skills, expertise, experience, independence and other attributes necessary to discharge effectively the Board’s oversight responsibilities on behalf of the Company’s stockholders.
Nominees Standing for Election
Information regarding each of the nominees for director, including particular qualifications considered for each nominee, is set forth below. Directors’ ages are given as of the date of this Proxy Statement.
DAMON T. HININGER | Director since 2009 |
Mr. Hininger, age 46, has served as a director and our President and Chief Executive Officer since October 2009. From July 2008 until October 2009, Mr. Hininger served as our President and Chief Operating Officer. From 2007 until July 2008, Mr. Hininger served as our Senior Vice President, Federal and Local Customer Relations. Mr. Hininger joined the Company in 1992 and held several positions, including Vice President, Business Analysis and Vice President, Federal Customer Relations before being promoted to Senior Vice President. Mr. Hininger earned a bachelor’s degree from Kansas State University and an M.B.A. from the Jack Massey School of Business at Belmont University. Mr. Hininger also serves on the board of directors with the United Way of Metropolitan Nashville.
In making the decision to nominate Mr. Hininger to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his current service as our President and Chief Executive Officer and his comprehensive knowledge of the Company, its business, operations and management team through his current position and past roles with the Company, including roles at the facility operations level and as Chief Operations Officer and Senior Vice President, Federal and Local Customer Relations.
DONNA M. ALVARADO | Director since 2003 |
Ms. Alvarado, age 67, has served as a director and member of our Audit Committee since December 2003, a member of our Risk Committee since its formation in August 2015, a member of the Nominating and Governance Committee since December 2014 and is appointed to serve as Chair of the Compensation Committee following the Annual Meeting. Ms. Alvarado is the founder and current president of Aguila International, an international business-consulting firm that specializes in human resources and leadership development. She serves as a director and member of the audit and compensation committees of CSX Corporation, a publicly-traded provider of rail and other transportation services, and as a director and chair of the nominating and corporate governance committee and a member of the audit and risk committee of Park National Corporation, a publicly-held bank holding company. Ms. Alvarado has served as a member and as chair of the Ohio Board of Regents and has held senior management positions in government, including Deputy Assistant Secretary of Defense with the U.S. Department of Defense and Director of ACTION, the federal domestic volunteer agency. Ms. Alvarado earned both a master’s and a bachelor’s degree in Spanish from Ohio State University, completed doctoral coursework in Latin American Literature at the University of Oklahoma and earned a postgraduate certificate in Financial Management from the Wharton School of Business at the University of Pennsylvania.
In making the decision to nominate Ms. Alvarado to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, her understanding of government through her public sector experience; her experience as a public company director and member of audit, compensation and nominating and corporate governance committees; her human resources and leadership development expertise; her civic and community involvement; and her contribution to the Board’s gender and cultural diversity.
ROBERT J. DENNIS | Director since 2013 |
Mr. Dennis, age 62, was appointed to the Board of Directors in February 2013 and is a member of our Compensation and Executive Committees. Mr. Dennis is the chairman, president and chief executive officer of Genesco Inc., a diversified retailer of footwear, headwear, sports apparel and accessories, where he has served in an executive capacity since 2004. A 27-year retail veteran, Mr. Dennis has held senior positions with Hat World Corporation and Asbury Automotive and was a partner and leader of the North American Retail Practice with McKinsey & Company, an international consulting firm. Mr. Dennis holds a master of business administration degree, with distinction, from the Harvard Business School, with a focus on consumer marketing, and bachelor’s and master’s degrees from Rensselaer Polytechnic Institute. Mr. Dennis is a member of the Board of Directors and a member of the Governance Committee of HCA Holdings, Inc., a leading health care services company that operates hospitals and surgery centers in the United States and London, England. Previously, he served as a member of the board of directors of Teavana Holdings, Inc., a publicly traded purveyor of high quality teas and tea products, until its acquisition by Starbucks in December 2012. He serves on the board of directors of the United Way of Metropolitan Nashville, the Nashville Symphony, and serves on the Board of Visitors at Vanderbilt University’s Owen School of Management.
In making the decision to nominate Mr. Dennis to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his leadership experience as chief executive officer of a large public company; his public company director experience; his demonstrated business acumen and his understanding of corporate finance and business development matters; and his civic and community involvement.
MARK A. EMKES | Director since 2014 |
Mr. Emkes, age 63, was appointed to the Board of Directors in August 2014 and is a member of our Compensation Committee and our Nominating and Governance Committee and has been appointed to serve as our independent Chairman of the Board effective as of the 2016 Annual Meeting. For more than five years and until his retirement effective on February 28, 2010, Mr. Emkes was the Chairman and Chief Executive Officer of Bridgestone Americas, Inc. and Bridgestone Americas Holdings, Inc., the world’s largest tire and rubber company. He was also President of Bridgestone Americas, Inc. from January 2009 until his retirement. Mr. Emkes served as a director of Bridgestone Corporation from April 1, 2004 through February 28, 2010. From 2011 until 2013, Mr. Emkes served as the State of Tennessee’s Commissioner of Finance and Administration, a state-level cabinet position. Mr. Emkes holds a Bachelor of Arts degree in economics from Indiana’s DePauw University and a master of business administration degree from the Thunderbird School of Global Management, located in Glendale, Arizona.
Mr. Emkes is on the Board of Directors of: (i) Greif, Inc. (since February 2008), where he is a member of the compensation committee, (ii) First Horizon National Corporation (since October 2008), where he is the chairman of the audit committee, and (iii) Clarcor, Inc. (since June 2010), where he is a member of the compensation and director affairs/corporate governance committees. Mr. Emkes has served for the following charitable organizations: as President of the Middle Tennessee Council of the Boy Scouts of America, on the Board of Directors of the Community Foundation of Middle Tennessee, on the Advisory Board of Habitat for Humanity, Nashville Chapter, as a member of CEO’s Against Cancer, Tennessee Chapter, and as Chairman of Nashville’s 2010 Heart Walk. Mr. Emkes was the 2011 recipient of the Jennings A. Jones Champion of Free Enterprise Award and in October 2012 was inducted into the Nashville Business Hall of Fame.
In making the decision to nominate Mr. Emkes to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his leadership experience in various management positions, including the chief executive officer and chairman, of an international company; his demonstrated business acumen and his understanding of corporate finance and business development matters; and his civic and community involvement.
C. MICHAEL JACOBI | Director since 2000 |
Mr. Jacobi, age 74, has served as a director and as Chair of the Audit Committee since December 2000. Mr. Jacobi is the owner and president of Stable House, LLC, a private company engaged in residential real estate development. From June 2001 through May 2005, Mr. Jacobi served as the president and chief executive officer and a director of Katy Industries, Inc., a publicly-traded diversified manufacturing company. He is chairman of the board of Sturm, Ruger and Company, Inc., a publicly-traded maker of firearms, a director of Webster Financial Corporation, a publicly-traded banking and financial services company, a director and member of the audit committee of Kohlberg Capital Corporation, a publicly-traded business development company specializing in term loans, mezzanine investments and selected equity positions in middle market companies and a director and member of the audit committee of Performance Sports Group Ltd., a publicly-traded sports equipment company. Mr. Jacobi is a certified public accountant and holds a B.S. degree from the University of Connecticut.
In making the decision to nominate Mr. Jacobi to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his leadership experience as chief executive officer and chief financial officer of a public company; his extensive experience as a public company director and audit committee member and chairman; and his financial and accounting experience and expertise.
ANNE L. MARIUCCI | Director since 2011 |
Ms. Mariucci, age 58, has served as a director since December 2011 and as a member of our Audit Committee since May 2012 and a member of our Risk Committee since its formation in August 2015. Ms. Mariucci is a private investor who, prior to 2003, served in a variety of senior management capacities with Del Webb Corporation and as Senior Vice President of Strategy for Pulte Homes, Inc., following its acquisition of Del Webb. Ms. Mariucci received her undergraduate degree in accounting and finance from the University of Arizona and completed the corporate finance program at the Stanford University Graduate School of Business. She serves as a director of Taylor Morrison Home Corp., where she serves on the Audit Committee, Southwest Gas Company, where she serves on the Nominating and Corporate Governance Committee and is the chair of the Pension Plan Investment Committee, Banner Health, where she serves as a member of the Audit and Compensation Committees, Arizona State University Foundation and the Fresh Start Women’s Foundation. She is a past director of the Arizona State Retirement System, Scottsdale Healthcare and Action Performance Companies, as well as a past Trustee of the Urban Land Institute. She also served on the Arizona Board of Regents.
In making the decision to nominate Ms. Mariucci to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, her public company executive leadership experience; her understanding of and experience with the State of Arizona, a state where a significant portion of our operations is located; her background in accounting and corporate finance; her experience and knowledge with real estate; her experience as a public company director and member of audit and compensation committees; her civic and community involvement; and her contribution to the Board’s gender diversity.
THURGOOD MARSHALL, JR. | Director since 2002 |
Mr. Marshall, age 59, has served as a director and member of the Nominating and Governance Committee since December 2002 and as the Chair of the Risk Committee since its formation in August 2015. Mr. Marshall is a partner in the law firm of Morgan, Lewis & Bockius LLP in Washington D.C., and a principal in Morgan Lewis Consulting Group LLC, a wholly owned subsidiary of Morgan, Lewis & Bockius LLP that assists business clients with communications, political and legal strategies. Mr. Marshall is a member of the board of directors of Genesco Inc., a diversified retailer of footwear, headwear, sports apparel and accessories. He also serves on the boards of the Ford Foundation and the Supreme Court Historical Society. He serves on the American Bar Association Election Law Committee and the American Bar Association Law and National Security Committee, and he served on the Ethics Oversight Committee of the United States Olympic Committee. Mr. Marshall, the son of the historic Supreme Court Justice Thurgood Marshall, has held appointments in each branch of the federal government, including Cabinet Secretary to President Clinton and Director of Legislative Affairs and Deputy Counsel to Vice President Al Gore. Mr. Marshall was confirmed by the United States Senate to serve on the Board of Governors of the United States Postal Service in 2006 and served as Chairman prior to completing his service in 2013. Mr. Marshall earned a B.A. in 1978 and a J.D. in 1981 from the University of Virginia, after which he clerked for United States District Judge Barrington D. Parker.
In making the decision to nominate Mr. Marshall to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his understanding of politics and the public sector through his varied government service and consulting work; his understanding of organizational governance and oversight through his service as a director in the public, non-profit and for-profit sectors; his understanding of legal, regulatory and compliance issues through his education and experience as a lawyer; and his contribution to the Board’s cultural diversity.
CHARLES L. OVERBY | Director since 2001 |
Mr. Overby, age 69, has served as a director since December 2001. Mr. Overby served as a member of the Audit Committee from February 2002 through November 2015, a member of our Risk Committee since its formation in August 2015 and as the Chair of the Nominating and Governance Committee since the committee was established in December 2002. From 1997 through 2011, Mr. Overby served as the chairman and chief executive officer of The Freedom Forum, an independent, non-partisan foundation dedicated to the First Amendment and media issues, as well as chief executive officer of its affiliates, The Diversity Institute and the Newseum, a museum about news and history in Washington, D.C. Mr. Overby is a former Pulitzer Prize-winning editor in Jackson, Mississippi. He worked 16 years for Gannett Co., the nation’s largest newspaper company, in various capacities, including as reporter, editor and corporate executive. He was vice president for news and communications for Gannett and served on the management committees of Gannett and USA TODAY. Mr. Overby currently serves on the board of the Andrew Jackson Foundation.
In making the decision to nominate Mr. Overby to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his executive leadership experience and understanding of corporate governance as chief executive of several non-profit organizations; his understanding of media and public relations through his career as a journalist, print media executive and executive with other media related organizations; his political experience; and his civic and community involvement and leadership.
JOHN R. PRANN, JR. | Director since 2000 |
Mr. Prann, age 65, has served as a director and member of the Compensation Committee since December 2000 and member of the Audit Committee since December 2014. Mr. Prann’s business experience includes service as the president and chief executive officer of Katy Industries, Inc., as a partner with the accounting firm of Deloitte & Touche and as a director of several private companies. Mr. Prann earned a B.A. in Biology from the University of California, Riverside and an M.B.A. from the University of Chicago.
In making the decision to nominate Mr. Prann to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his executive leadership experience as president and chief executive of a public company and his understanding of accounting and finance issues through his education and career.
The Board of Directors unanimously recommends a vote “FOR” each of the 9 nominees.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016. Services provided to the Company and its subsidiaries by Ernst & Young LLP in fiscal 2015 are described below under “Audit Matters.”
Representatives of Ernst & Young LLP will be present at the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and we expect that they will be available to respond to questions.
Ratification of the appointment of Ernst & Young LLP requires the affirmative vote of a majority of the votes cast by the holders of the shares of common stock voting in person or by proxy at the Annual Meeting. If the Company’s stockholders do not ratify the appointment of Ernst & Young LLP, the Audit Committee will reconsider the appointment and may affirm the appointment or retain another independent accounting firm. If the appointment is ratified, the Audit Committee may in the future replace Ernst & Young LLP as our independent registered public accounting firm if it is determined that it is in the Company’s best interest to do so.
The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2016.
The following table presents fees for audit, audit-related, tax and other services rendered by the Company’s principal independent registered public accounting firm, Ernst & Young LLP, for the years ended December 31, 2015 and 2014.
Fees | 2015 | 2014 | ||||||
Audit Fees(1) | $ | 1,303,442 | $ | 1,288,906 | ||||
Audit-Related Fees(2) | 589,154 | — | ||||||
Tax Fees(3) | 313,948 | 776,895 | ||||||
All Other Fees(4) | 1,995 | 1,715 | ||||||
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Total | $ | 2,208,539 | $ | 2,067,516 | ||||
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(1) | Audit fees for 2015 and 2014 include fees associated with the audit of our consolidated financial statements, the audit of our internal control over financial reporting, reviews of our quarterly financial statements and assistance with filing certain registration statements. |
(2) | Audit-Related Fees in 2015 include due diligence and accounting consultations related to our acquisition of Avalon Correctional Services, Inc. and analysis of other prospective acquisitions. |
(3) | Tax fees for 2015 and 2014 were for services consisting primarily of federal and state tax planning, including the Company’s activities relating to being taxed as a REIT. Tax fees for 2015 also include federal and state tax consulting in connection with our acquisition of Avalon Correctional Services, Inc. and analysis of other prospective acquisitions. |
(4) | All other fees for 2015 and 2014 consist of access fees to EY Online, an on-line information and communication tool available to Ernst & Young audit clients. |
Pre-Approval of Audit and Non-Audit Fees
Consistent with Section 202 of the Sarbanes-Oxley Act of 2002 and SEC rules regarding auditor independence, our Audit Committee pre-approves all audit and non-audit services provided by our independent registered public accounting firm. In 2015 and 2014, the Audit Committee approved all fees disclosed under “audit,” “tax,” “audit-related” and “all other” fees by Ernst & Young in accordance with applicable rules.
The Audit Committee’s Auditor Independence Policy prohibits our independent registered public accounting firm from performing certain non-audit services and any services that have not been approved by the Audit Committee in accordance with the policy and the Section 202 rules. The policy establishes procedures to ensure that proposed services are brought before the Audit Committee for consideration and, if determined by the Committee to be consistent with the auditor’s independence, approved prior to initiation, and to ensure that the Audit Committee has adequate information to assess the types of services being performed and fee amounts on an ongoing basis. The Audit Committee has delegated to its Chair, Mr. Jacobi, the authority to pre-approve services between meetings when necessary, provided that the full Committee is apprised of the services approved at its next regularly scheduled meeting.
The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
General Responsibilities
Our Audit Committee is charged with oversight of the integrity of our financial statements; the effectiveness of our internal control over financial reporting; our compliance with legal and regulatory requirements; the qualifications, independence and performance of our independent registered public accounting firm; and the performance of our internal audit function. Among other things, the Committee monitors preparation by our management of quarterly and annual financial reports and interim earnings releases; reviews Management’s Discussion and Analysis of Financial Condition and Results of Operations prior to the filing of our periodic reports with the SEC; supervises our relationship with our independent registered public accounting firm, including making decisions with respect to appointment or removal, reviewing the scope of audit services, approving audit and non-audit services and annually evaluating the audit firm’s independence; and oversees management’s implementation and maintenance of effective systems of internal accounting and disclosure controls, including review of our policies relating to legal and regulatory compliance and review of our internal auditing program. The full text of the Audit Committee charter is available on the Company’s website atwww.cca.com (under the “Corporate Governance” section of the Investors page).
2012 Meetings
The Audit Committee met five (5) times in 2012. Within those meetings, the Committee met in executive session with our independent registered public accounting firm three (3) times.
Oversight of Financial Reporting
As part of its oversight of our financial statements, the Committee reviews and discusses with both management and our independent registered public accounting firm all annual and quarterly financial statements prior to their issuance. With respect to the 20122015 fiscal year, management advised the Committee that each set of financial statements reviewed had been prepared in accordance with generally accepted accounting principles and reviewed significant accounting and disclosure issues with the Committee. These reviews included discussion with the independent registered public accounting firm of matters required to be discussed pursuant toStatement on Auditing StandardsStandard No. 61 (Communication16 (Communications with Audit Committees), as amended, including the quality of our accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Committee also received the written disclosures and a letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding its communications with the Committee concerning independence, and has discussed with Ernst & Young LLP its independence.
Also with respect to fiscal 2012,2015, the Audit Committee received periodic updates provided by management, the independent registered public accounting firm and the internal auditors at each regularly scheduled Audit Committee meeting and provided oversight during the process. At the conclusion of the process, management provided the Audit Committee with, and the Audit Committee reviewed a report on, the effectiveness of our internal control over financial reporting. The Audit Committee also reviewed Management’s Report on Internal Control over Financial Reporting and Ernst & Young LLP’s Reports of Independent Registered Public Accounting Firm included in our Annual Report on Form 10-K for the year ended December 31, 2012.2015.
Taking all of these reviews and discussions into account, the undersigned Committee members recommended to the Board of Directors that the Board approve the inclusion of our audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012,2015, for filing with the SEC.
Submitted |
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PROPOSAL 1 - ELECTION OF DIRECTORS
Directors Standing for Election
The current term of office of each of our directors expires at the Annual Meeting. The Board of Directors proposes that the following nominees, all of whom are currently serving as directors, be re-elected for a new term to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified. We expect each of the nominees to serve if elected. If any of them becomes unavailable to serve as a director, the Board may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board.
A majority of the votes cast is required to elect each director.
The general criteria considered by the Nominating and Governance Committee with respect to director nominees are discussed on page 10 under the heading “Director Candidates.” Based on evaluation of those criteria, the Board believes that each of the nominees contributes relevant skills, expertise and experience to the Board and that the group of nominees collectively has the skills, expertise, experience, independence and other attributes necessary to discharge effectively the Board’s oversight responsibilities on behalf of the Company’s stockholders.
Information regarding each of the nominees for director, including particular qualifications considered for each nominee, is set forth below. Directors’ ages are given as of the date of this Proxy Statement.
The Board of Directors unanimously recommends a vote FOR each of the 14 nominees listed below.
Mr. Ferguson, age 67, has served as a director since August 2000 and also serves as Chairman of our Board and member of our Executive Committee. Mr. Ferguson formerly served as our Chief Executive Officer from August 2000 to October 2009 and as our President from August 2000 until July 2008. Mr. Ferguson’s career in business and government includes service as the Commissioner of Finance for the State of Tennessee and as the chairman and chief executive officer of Community Bancshares, Inc., the parent corporation of The Community Bank of Germantown (Tennessee), as well as service on the State of Tennessee Board of Education and the Governor’s Commission on Practical Government for the State of Tennessee. Mr. Ferguson currently serves as a director of the Community Foundation of Middle Tennessee, the Boy Scouts of America - Middle Tennessee Council and the Nashville Public Education Foundation. Mr. Ferguson graduated from Mississippi State University in 1967.
In making the decision to nominate Mr. Ferguson to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, Mr. Ferguson’s knowledge of the Company and its business and management team by virtue of his past service as our President and Chief Executive Officer; his demonstrated business acumen and leadership skills; his understanding of government gained through his experience in state government; and his civic and community involvement.
Damon T. Hininger, age 43, has served as a director and our President and Chief Executive Officer since October 2009. From July 2008 until October 2009, Mr. Hininger served as our President and Chief Operating Officer. From 2007 until July 2008, Mr. Hininger served as our Senior Vice President, Federal and Local Customer Relations. Mr. Hininger joined the Company in 1992 and held several positions, including Vice President, Business Analysis and Vice President, Federal Customer Relations before being promoted to Senior Vice President. Mr. Hininger earned a bachelor’s degree from Kansas State University and an M.B.A. from the Jack Massey School of Business at Belmont University. Mr. Hininger also serves on the board of directors with the United Way of Metropolitan Nashville.
In making the decision to nominate Mr. Hininger to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his current service as our President and Chief Executive Officer and his comprehensive knowledge of the Company, its business, operations and management team through his current position and past roles with the Company, including roles at the facility operations level and as Chief Operations Officer and Senior Vice President, Federal and Local Customer Relations.
Ms. Alvarado, age 64, has served as a director and member of our Audit Committee since December 2003. Ms. Alvarado is the founder and current president of Aguila International, an international business-consulting firm that specializes in human resources and leadership development. She serves as a director and member of the audit and compensation committees of CSX Corporation, a publicly-traded provider of rail and other transportation services and as a member and the immediate past Chairwoman of the Ohio Board of Regents. Ms. Alvarado also serves as a director of Park National Bank and has been nominated for election to the board of directors of Park National Corporation, a publicly-held bank holding company, at its annual meeting scheduled for April 22, 2013. She has held senior management positions in government, including Deputy Assistant Secretary of Defense with the U.S. Department of Defense and Director of ACTION, the federal domestic volunteer agency. Ms. Alvarado earned both a master’s and a bachelor’s degree in Spanish from Ohio State University, completed doctoral coursework in Latin American Literature at the University of Oklahoma and earned a postgraduate certificate in Financial Management from the Wharton School of Business at the University of Pennsylvania.
In making the decision to nominate Ms. Alvarado to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, her understanding of government through her public sector experience; her experience as a public company director and audit committee member; her human resources and leadership development expertise; her civic and community involvement; and her contribution to the Board’s gender and cultural diversity.
Mr. Andrews, age 81, has served as a director since August 2000. Mr. Andrews also serves as Chair of our Executive Committee. From August 2000 until July 2008, Mr. Andrews served as Chairman of our Board. Mr. Andrews has been a principal of Kohlberg & Company, a private equity firm specializing in middle market investing, since 1995. He also currently serves as chairman of Katy Industries, Inc., a publicly-traded diversified manufacturing company with consumer and commercial product lines; a director of Black Box Corporation, a publicly-traded provider of information technology infrastructure solutions; and a director of Trex Corporation, a publicly-traded producer of decking and railing products. Mr. Andrews is a graduate of the University of Maryland and received an M.B.A. from Seton Hall University. Mr. Andrews was selected as an Outstanding Director of the Year in 2011 by ODX, a division of the Financial Times.
In making the decision to nominate Mr. Andrews to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, Mr. Andrews’ past or current experience as a director of several publicly-traded companies, including his experience as Chairman of our Board; his leadership and oversight experience across a diverse array of industries; and his knowledge and experience with respect to corporate finance and investing.
Mr. Correnti, age 66, has served as a director since December 2000 and is a member of our Compensation Committee. Mr. Correnti is the chairman and executive officer of Big River Steel, LLC, a steel development and operations company. Mr. Correnti previously served as chairman and chief executive officer of Steel Development Company, LLC from 2008 through 2012 and served as chief executive officer of SeverCorr, LLC from 2005 through 2008. Mr. Correnti also serves as a director of Navistar International Corporation, a publicly traded holding company of transportation related and other businesses, and as executive chairman of Silicor Materials, a private company formerly known as Calisolar. Mr. Correnti holds a B.S. degree in civil engineering from Clarkson University.
In making the decision to nominate Mr. Correnti to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his executive leadership experience gained through his service as a chief executive of established and start-up companies, both public and private, and his public company director experience.
Mr. DeConcini, age 75, was appointed as a director and member of our Nominating and Governance Committee in February 2008. Mr. DeConcini served as a member of the United States Senate as a Senator from Arizona for three terms (18 years). During his Senate tenure, he served on the Senate Select Committee on Intelligence (as Chairman from 1993 – 1994), the Judiciary Committee and the Appropriations Committee, and served as rotating Chairman to the Commission on Security and Cooperation in Europe (the Helsinki Commission). He currently is a partner in the law firm DeConcini McDonald Yetwin & Lacy, P.C. in Tucson, Arizona. He also is a member of the Arizona Board of Regents, the governing body for the Arizona State University system, and the boards of directors of both the National and International Centers for Missing and Exploited Children. He also served as county attorney for Pima County, Arizona from 1973 through 1976. Mr. DeConcini served in the United States Army and Reserve from 1959 to 1967. He received his B.A. from the University of Arizona in 1959 and his L.L.B. from the University of Arizona in 1963.
In making the decision to nominate Mr. DeConcini to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his understanding of government, politics and the public sector through his service as a United States Senator, a member of the Arizona Board of Regents and as a registered lobbyist; his understanding of and experience with the State of Arizona, a state where a significant portion of our operations is located; his understanding of corporate governance, legal and compliance matters through his education and background as a lawyer and former prosecutor; and his civic and community involvement.
Robert J. Dennis, 58, was appointed to the Board of Directors in February 2013. Mr. Dennis is the chairman, president and chief executive officer of Genesco Inc., a diversified retailer of footwear, headwear, sports apparel and accessories, where he has served in an executive capacity since 2004. A 27-year retail veteran, Mr. Dennis has held senior positions with Hat World Corporation and Asbury Automotive and was a partner and leader of the North American Retail Practice with McKinsey & Company, an international consulting firm. Mr. Dennis holds a master of business administration degree, with distinction, from the Harvard Business School, with a focus on consumer marketing, and bachelor’s and master’s degrees from Rensselaer Polytechnic Institute. Mr. Dennis served as a member of the board of directors of Teavana Holdings, Inc., a publicly traded purveyor of high quality teas and tea products, until its acquisition by Starbucks in December 2012. He serves on the board of directors with the United Way of Metropolitan Nashville, the Nashville Symphony, and serves on the Board of Visitors at Vanderbilt University’s Owen School of Management.
In making the decision to nominate Mr. Dennis to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his leadership experience as chief executive officer of a large public company; his public company director experience; his demonstrated business acumen and his understanding of corporate finance and business development matters; and his civic and community involvement.
Mr. Horne, age 75, has served as a director since December 2001 and is a member of our Compensation Committee. Mr. Horne served as chairman of Navistar International Corporation from April 1996 to February 2004 and prior to that as Navistar’s president and chief executive officer. Mr. Horne currently serves on the board of directors of Junior Achievement of Chicago. Mr. Horne received his M.S. degree
in mechanical engineering from Bradley University in 1964, a B.S. degree in mechanical engineering from Purdue University in 1960, which also awarded him an Honorary Doctor of Engineering degree in May 1998, and is a graduate of the management program at Harvard Graduate School of Business Administration.
In making the decision to nominate Mr. Horne to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his leadership experience as chairman and as chief executive officer of a large, publicly traded industrial company and his extensive educational and business achievements.
Mr. Jacobi, age 71, has served as a director and as Chair of the Audit Committee since December 2000. Mr. Jacobi is the owner and president of Stable House, LLC, a private company engaged in residential real estate development. From June 2001 through May 2005, Mr. Jacobi served as the president and chief executive officer and a director of Katy Industries, Inc., a publicly-traded diversified manufacturing company. He is chairman of the board of Sturm, Ruger and Company, Inc., a publicly-traded maker of firearms, a director and a member of the compensation and risk committees of Webster Financial Corporation, a publicly-traded banking and financial services company, a director and member of the audit committee of Kohlberg Capital Corporation, a publicly-traded business development company specializing in term loans, mezzanine investments and selected equity positions in middle market companies, and a director and member of the audit committee of Bauer Performance Sports Ltd., a publicly-traded sports equipment company. Mr. Jacobi is a certified public accountant and holds a B.S. degree from the University of Connecticut.
In making the decision to nominate Mr. Jacobi to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his leadership experience as chief executive officer and chief financial officer of a public company; his extensive experience as a public company director and audit committee member and chairman; and his financial and accounting experience and expertise.
Ms. Mariucci, age 55, has served as a director since December 2011 and as a member of our Audit Committee since May 2012. Ms. Mariucci is affiliated with the private equity firms Hawkeye Partners (Austin, Texas), Inlign Capital Partners (Phoenix, Arizona), and Glencoe Capital (Chicago, Illinois) since 2003. Prior to 2003, Ms. Mariucci was employed by Del Webb Corporation in a variety of senior management capacities involved in the large-scale community development and home building business, including serving as President following its merger with Pulte Homes, Inc. Ms. Mariucci received her undergraduate degree in accounting and finance from the University of Arizona and completed the corporate finance program at the Stanford University Graduate School of Business. She presently serves on the Arizona Board of Regents, and is its immediate past-chairman. She also serves as a director of Southwest Gas Company, the University of Arizona Health Network, Arizona State University Foundation, and the Fresh Start Women’s Foundation. She is a past director of the Arizona State Retirement System and Action Performance Companies, as well as a past Trustee of the Urban Land Institute.
In making the decision to nominate Ms. Mariucci to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, her public company executive leadership experience; her understanding of and experience with the State of Arizona, a state where a significant portion of our operations is located; her background in accounting and corporate finance; her
experience and knowledge with real estate; her experience as a public company director and member of audit and compensation committees; her civic and community involvement; and her contribution to the Board’s gender diversity.
Mr. Marshall, age 56, has served as a director and member of the Nominating and Governance Committee since December 2002. Mr. Marshall is a partner in the law firm of Bingham McCutchen LLP in Washington D.C., and a principal in Bingham Consulting Group LLC, a wholly owned subsidiary of Bingham McCutchen LLP that assists business clients with communications, political and legal strategies. Mr. Marshall is a member of the board of directors of Genesco Inc., a diversified retailer of footwear, headwear, sports apparel and accessories, where he serves on the finance and nominating and governance committees. He also serves on the boards of the Ford Foundation and the Supreme Court Historical Society. He serves on the American Bar Association Election Law Committee and the Ethics Oversight Committee of the United States Olympic Committee. Mr. Marshall, the son of the historic Supreme Court Justice Thurgood Marshall, has held appointments in each branch of the federal government, including Cabinet Secretary to President Clinton and Director of Legislative Affairs and Deputy Counsel to Vice President Al Gore. Mr. Marshall was confirmed by the United States Senate to serve on the Board of Governors of the United States Postal Service in 2006 and served as Chairman prior to completing his service in 2012. Mr. Marshall earned a B.A. in 1978 and a J.D. in 1981 from the University of Virginia, after which he clerked for United States District Judge Barrington D. Parker.
In making the decision to nominate Mr. Marshall to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his understanding of politics and the public sector through his varied government service and consulting work; his understanding of organizational governance and oversight through his service as a director in the public, non-profit and for-profit sectors; his understanding of legal, regulatory and compliance issues through his education and experience as a lawyer; and his contribution to the Board’s cultural diversity.
Mr. Overby, age 66, has served as a director since December 2001. Mr. Overby has served as a member of the Audit Committee since February 2002 and as the Chair of the Nominating and Governance Committee since the committee was established in December 2002. From 1997 through 2011, Mr. Overby served as the chairman and chief executive officer of The Freedom Forum, an independent, non-partisan foundation dedicated to the First Amendment and media issues, as well as chief executive officer of its affiliates, The Diversity Institute and the Newseum, a museum about news and history in Washington, D.C. Mr. Overby is a former Pulitzer Prize-winning editor in Jackson, Mississippi. He worked 16 years for Gannett Co., the nation’s largest newspaper company, in various capacities, including as reporter, editor, and corporate executive. He was vice president for news and communications for Gannett and served on the management committees of Gannett and USA TODAY. Mr. Overby currently serves on the board of the University of Mississippi Foundation.
In making the decision to nominate Mr. Overby to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his executive leadership experience and understanding of corporate governance as chief executive of several non-profit organizations; his understanding of media and public relations through his career as a journalist, print media executive and executive with other media related organizations; his political experience; and his civic and community involvement and leadership.
Mr. Prann, age 62, has served as a director and member of the Compensation Committee since December 2000. Mr. Prann’s business experience includes service as the president and chief executive officer of Katy Industries, Inc., as a partner with the accounting firm of Deloitte & Touche and as a director of several private companies. Mr. Prann earned a B.A. in Biology from the University of California, Riverside and an M.B.A. from the University of Chicago.
In making the decision to nominate Mr. Prann to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his executive leadership experience as president and chief executive of a public company and his understanding of accounting and finance issues through his education and career.
Mr. Russell, age 72, has served as a director since 1999. Mr. Russell is the Chair of the Compensation Committee and a member of the Executive and the Nominating and Governance Committees. Mr. Russell is the co-chairman and co-chief executive officer of Elan-Polo, Inc., a privately-held, world-wide producer and distributor of footwear. Mr. Russell graduated from the University of Tennessee in 1963 with a B.S. in Finance.
In making the decision to nominate Mr. Russell to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his experience as the owner and chief executive officer of a manufacturing company; his familiarity with the Company through his long tenure as a Director; his demonstrated leadership skills as a director and Chair of the Compensation Committee; and his knowledge, experience and judgment with respect to executive compensation issues.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013. Services provided to the Company and its subsidiaries by Ernst & Young LLP in fiscal 2012 are described below under “Audit and Non-Audit Fees.”
Representatives of Ernst & Young LLP will be present at the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and we expect that they will be available to respond to questions.
Ratification of the appointment of Ernst & Young LLP requires the affirmative vote of a majority of the votes cast by the holders of the shares of common stock voting in person or by proxy at the Annual Meeting. If the Company’s stockholders do not ratify the appointment of Ernst & Young LLP, the Audit Committee will reconsider the appointment and may affirm the appointment or retain another independent accounting firm. If the appointment is ratified, the Audit Committee may in the future replace Ernst & Young LLP as our independent registered public accounting firm if it is determined that it is in the Company’s best interest to do so.
The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2013.
The following table presents fees for audit, audit-related, tax and other services rendered by the Company’s principal independent registered public accounting firm, Ernst & Young LLP, for the years ended December 31, 2012 and 2011.
Fees | 2012 | 2011 | ||||||
Audit Fees(1) | $ | 1,054,339 | $ | 880,280 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees(2) | 587,228 | 123,044 | ||||||
All Other Fees(3) | 1,775 | 1,995 | ||||||
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Total | $ | 1,643,342 | $ | 1,005,319 | ||||
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Pre-Approval of Audit and Non-Audit Fees
Consistent with Section 202 of the Sarbanes-Oxley Act of 2002 and SEC rules regarding auditor independence, our Audit Committee pre-approves all audit and non-audit services provided by our independent registered public accounting firm. In 2011 and 2012, the Audit Committee approved all fees disclosed under “tax,” “audit-related” and “all other” fees by Ernst & Young in accordance with applicable rules.
The Audit Committee’s Auditor Independence Policy prohibits our independent registered public accounting firm from performing certain non-audit services and any services that have not been approved by the Audit Committee in accordance with the policy and the Section 202 rules. The policy establishes procedures to ensure that proposed services are brought before the Audit Committee for consideration and, if determined by the Committee to be consistent with the auditor’s independence, approved prior to initiation, and to ensure that the Audit Committee has adequate information to assess the types of services being performed and fee amounts on an ongoing basis. The Audit Committee has delegated to its Chair, Mr. Jacobi, the authority to pre-approve services between meetings when necessary, provided that the full Committee is apprised of the services approved at its next regularly scheduled meeting.Board of Directors:
C. Michael Jacobi, Chair
Donna M. Alvarado
Anne L. Mariucci
John R. Prann, Jr.
PROPOSAL 3 - ADVISORY VOTE TO APPROVE THE
COMPENSATION OF NAMED
EXECUTIVE OFFICERS
The Company seeks your non-binding advisory vote and asks that you support the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis section (“CD&A”) and the accompanying tables contained in this Proxy Statement. Our Board of Directors has determined to hold this advisory vote every year. Because your vote is advisory, it will not be binding on the BoardCompensation Committee or the Company. However, the BoardCompensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation for our Named Executive Officers. We urge you to read the CD&A, which begins on page 34,24 of this Proxy Statement, and any other sections of this Proxy Statement for additional details on our executive compensation, including our compensation philosophy and objectives and the 20122015 compensation of our Named Executive Officers.
As described in detail in the CD&A, our executive compensation programs are designed to ensure that our executive officers are rewarded appropriately for their contributions to the Companyus and that theour overall compensation strategy supports the objectives and values of our organization, as well as stockholder interests. Our programs are designed to attract and maintain executive leadership for the Company thatwho will execute our business strategy, uphold our Company values and deliver results and long-term value to our stockholders. Our goal is to have a substantial portion of executive compensation contingent upon our performance.
While we experienced a decline in our stock price in 2015 along with other companies in our industry, we continued to have strong operational results in 2015.
• | Ourstock price decreased from $36.34 to $26.49 in 2015 resulting in a one-year, three-year and five-year total stockholder return (“TSR”) of -21.9%, 2.0% and 8.9%, respectively, ranking in the 30th, 24th and 35th percentile, respectively, among our peer group for these periods. Our stock price was negatively impacted in part by decreased California inmate population due to regulatory changes and as well as the increased interest rate environment that negatively impacted many REIT stocks. |
Our compensation reflected our performance and reasonable market competitive practices:
• | We continuedperformance-based RSUs in 2015. Vesting of RSUs granted in 2015 is based on our achievement of a targeted normalized FFO per share, with 1/3rd of the granted shares vesting if we achieve the normalized FFO per share goal for that year. If the goal is not achieved for the year, vesting will not occur for that 1/3rd tranche and will be forfeited. The normalized FFO goals are based on pre-established compounded normalized FFO growth rates. |
The Compensation Committee continually reviews the compensation programs for our Named Executive Officers to ensure our programs achieve the desired goals of aligning our executive compensation structure with our stockholders’ interests and current market practices. The Compensation Committee also has engaged an independent compensation consultant, PricewaterhouseCoopers LLP, to assist it in reviewing the Company’s compensation strategies and plans.
We believe that our executive compensation programs are structured in the best manner possible to support our company and our business objectives.
Stockholders are being asked to vote on adoption of the following resolution:
RESOLVED: That the stockholders of Corrections Corporation of America approve the compensation of the Company’s Named Executive Officers, as described in the Compensation Discussion and Analysis section and related compensation tables, notes and narrative in the Proxy Statement for the Company’s 20132016 Annual Meeting of Stockholders.
The Board of Directors unanimously recommends on an advisory basis, a vote “FOR” the approval, on an advisory basis, of the Company’s compensation of our Named Executive Officers.
PROPOSAL 4 - AMENDMENTS TO AND RESTATEMENT OF THE COMPANY’S CHARTER
The Board of Directors has unanimously approved and directed that our stockholders consider amendments to our charter (the “Amendments”) and a restatement thereof to give effect to such Amendments to (i) impose certain ownership and transfer restrictions in connection with the Company’s Real Estate Investment Trust (“REIT”) election for the taxable year commencing January 1, 2013, (ii) delete provisions creating two series of preferred stock that are no longer outstanding and (iii) make other non-substantive or administrative amendments. The effects of the Amendments are summarized below. The full text of the amended and restated charter is attached to this Proxy Statement asAnnex A. The Amendments as summarized below are qualified by reference to the specific terms ofAnnex A. The Board of Directors believes the amendment and restatement of our charter, including the Amendments, is advisable because it will facilitate the Company’s compliance with requirements for taxation as a REIT. The Board of Directors further believes that the charters of substantially all publicly traded REITs contain similar stock ownership and transfer restrictions as those included in the Amendments.
REIT Qualification
In order to qualify as a REIT under the Code, for each taxable year beginning after December 31, 2013, the Company’s shares of capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Also, for the Company’s taxable years beginning after December 31, 2013, no more than 50% of the value of the outstanding shares of capital stock of the Company may be owned, directly or through certain constructive ownership rules, by five or fewer individuals (as defined in the Code to include certain entities such as private foundations) at any time during the second half of any calendar year. For additional information about the qualification requirements and the resulting tax treatment of the REIT and its stockholders, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
Ownership and Transfer Restrictions
The Amendments contain restrictions on the ownership and transfer of shares of the Company’s capital stock that are intended to assist the Company in complying with the requirements described above and continuing to qualify as a REIT. The Amendments provide that (subject to certain exceptions described below) no person or entity may actually or beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or in number of shares, whichever is more restrictive) of the outstanding shares of Company common stock or 9.8% in value of the aggregate of the outstanding shares of all classes and series of Company stock, in each case excluding any shares of the Company’s stock that would not be treated as outstanding for federal income tax purposes. We refer to each of these restrictions as an “ownership limit” and collectively as the “ownership limits.” A person or entity that would have acquired actual, beneficial or constructive ownership of Company stock but for the application of the ownership limits or any of the other restrictions on ownership and transfer of Company stock discussed below is referred to as a “prohibited owner.”
The constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity. As a result, the acquisition of less than 9.8% of our common stock (or the acquisition of an interest in an entity that owns, actually or constructively, our common stock) by an individual or entity, could, nevertheless cause that individual or entity, or another individual or entity, to own constructively in excess of 9.8% of our outstanding common stock and thereby violate the applicable ownership limit.
The Amendments provide that the Board of Directors, in its sole and absolute discretion, prospectively or retroactively, may exempt a person from either or both of the ownership limits (an “excepted holder”) if doing so would not result in the Company being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT and the Board of Directors determines that: (i) such exemption would not cause any individual to actually or beneficially own more than 9.8% in value of the aggregate of the outstanding shares of all classes and series of Company stock; and (ii) subject to certain exceptions, the person would not own, actually or constructively, an interest in a tenant (including a governmental entity) of the Company (or a tenant, including a governmental entity, of any entity owned in whole or in part by the Company) that would cause the Company to own, actually or constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant.
Additionally, the Amendments provide that as a condition of the exemption, the Board of Directors may require an opinion of counsel or Internal Revenue Service ruling, in either case in form and substance satisfactory to the Board of Directors, in its sole and absolute discretion, in order to determine or ensure the Company’s status as a REIT and representations and undertakings from the person seeking the exemption or excepted holder limit in order to make the determinations above. The Amendments further provide that the Board of Directors may impose such conditions or restrictions as it deems appropriate in connection with such an exemption.
The Amendments also provide that any person that owns shares of Company stock in excess of the ownership limits on the date on which the Amendments become effective (an “initial excepted holder”) will be permitted to own shares in an amount not to exceed the amount of shares owned as of such date, provided, that in no event will any individual (within the meaning of Section 542(a)(2) of the Code as modified by Section 856 of the Code) be permitted to beneficially own or constructively own shares in excess of the ownership limits (“initial date exception”). The Amendments provide that during the time the initial excepted holder owns shares of Company stock in excess of the ownership limits, any further acquisitions of shares of Company stock or increased beneficial or constructive ownership of shares of Company stock will be in violation of the ownership limits and subject to the remedies discussed below. In addition, the Amendments provide that the initial date exception will automatically terminate at such time the initial excepted holder owns shares of Company stock at or below the ownership limits.
The Amendments provide that the Board of Directors may, in its sole and absolute discretion, increase or decrease the ownership limits for one or more persons, except that a decreased stock ownership limit would not be effective for any person whose actual, beneficial or constructive ownership of Company stock exceeds the decreased ownership limit at the time of the decrease until the person’s actual, beneficial or constructive ownership of Company stock equals or falls below the decreased stock ownership limit, although any further acquisition of shares of Company stock or beneficial or constructive ownership of Company stock would violate the decreased ownership limit. The Amendments further provide that the Board of Directors may not increase or decrease any ownership limit if, among other limitations, the new ownership limit would allow five or fewer persons to actually or beneficially own more than 49% in value of Company outstanding stock or could cause the Company to be “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or could otherwise cause the Company to fail to qualify as a REIT.
The Amendments would further prohibit:
any person from actually, beneficially or constructively owning shares of Company stock that could result in the Company being “closely held” under Section 856(h) of the Code
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any person from transferring shares of Company stock if such transfer would result in shares of Company stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution).
Further, the Amendments would provide that any person who acquires or attempts or intends to acquire actual, beneficial or constructive ownership of shares of Company stock that would or may violate the ownership limits or any of the other restrictions on ownership and transfer of Corporate stock described above must give written notice immediately to the Company or, in the case of a proposed or attempted transaction, provide the Company at least 15 days prior written notice, and provide the Company with such other information as it may request in order to determine the effect of such transfer on its status as a REIT.
The Amendments provide that if any purported transfer of Company stock or any other event would otherwise result in any person violating the ownership limits or such other limit established by the Board of Directors, or could result in the Company being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT, then that number of shares causing the violation (rounded up to the nearest whole share) would be automatically transferred to, and held by, a trust for the exclusive benefit of one or more charitable organizations selected by the Company. The prohibited owner would have no rights in shares of Company stock held by the trustee. The automatic transfer would be effective as of the close of business on the business day prior to the date of the violative transfer or other event that results in the transfer to the trust. Any dividend or other distribution paid to the prohibited owner, prior to our discovery that the shares had been automatically transferred to a trust as described above, would be required to be repaid to the trustee upon demand. If the transfer to the trust as described above would not be automatically effective, for any reason, to prevent violation of the applicable restriction on ownership and transfer of Company stock, then that transfer of the number of shares that otherwise would cause any person to violate the above restrictions would be void. If any transfer of Company stock would result in shares of Company stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution), then any such purported transfer would be void and of no force or effect and the intended transferee would acquire no rights in the shares.
The Amendments provide that shares of Company stock transferred to the trustee would be deemed offered for sale to the Company, or the Company’s designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in the transfer of the shares to the trust (or, in the event of a gift, devise or other such transaction, the last reported sale price on the day of the transfer or other event that resulted in the transfer of such shares to the trust) and (ii) the last reported sale price on the date the Company accepts, or the Company’s designee accepts, such offer. The Amendments provide that the Company would also be required to reduce the amount payable to the prohibited owner by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited owner to the trustee and pay the amount of such reduction to the trustee for the benefit of the charitable beneficiary. The Amendments further provide that the Company will have the right to accept such offer until the trustee has sold the shares of Company stock held in the trust. The Amendments also provide that upon a sale to the Company, the interest of the charitable beneficiary in the shares sold would terminate and the
trustee would be required to distribute the net proceeds of the sale to the prohibited owner and any dividends or other distributions held by the trustee with respect to such stock would be paid to the charitable beneficiary.
The Amendments provide that if the Company does not buy the shares, within 20 days of receiving notice from the Company of the transfer of shares to the trust, the trustee will sell the shares to a person designated by the trustee, whose ownership of the shares will not violate the ownership limits or other restrictions on ownership and transfer of Company stock. The Amendments further provide that upon such sale, the trustee will distribute to the prohibited owner an amount equal to the lesser of (1) the price paid by the prohibited owner for the shares (or, if the proposed transferee did not give value for the shares in connection with the transfer or other event that resulted in the transfer to the trust (e.g., a gift, devise or other such transaction), the last reported sale price on the day of the transfer or other event that resulted in the transfer of such shares to the trust) and (2) the sales proceeds (net of commissions and other expenses of sale) received by the trustee for the shares. The Amendments provide that the trustee will reduce the amount payable to the prohibited owner by the amount of dividends and other distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. The Amendments go on to provide that any net sale proceeds in excess of the amount payable to the prohibited owner will be paid immediately to the charitable beneficiary, together with any dividends or other distributions thereon. Finally, the Amendments provide that if, prior to the Company’s discovery that shares of Company stock have been transferred to the trustee, such shares are sold by a prohibited owner, then such shares will be deemed to have been sold on behalf of the trust and, to the extent that the prohibited owner received an amount for or in respect of such shares that exceeds the amount that such prohibited owner was entitled to receive, such excess shall be paid to the trustee upon demand.
The Amendments provide that the trustee will be designated by the Company and will be unaffiliated with the Company and with any prohibited owner. The Amendments also provide that prior to the sale of any shares by the trust, the trustee will receive, in trust for the charitable beneficiary, all dividends and other distributions paid by the Company with respect to such shares, and may exercise all voting rights with respect to such shares for the exclusive benefit of the charitable beneficiary.
The Amendments provide that, subject to Maryland law, effective as of the date that the shares have been transferred to the trust, the trustee may, at the trustee’s sole discretion:
rescind as void any vote cast by a prohibited owner prior to the Company’s discovery that the shares have been transferred to the trust; and
recast the vote in accordance with the desires of the trustee acting for the benefit of the beneficiary of the trust.
However, the Amendments provide that if the Company has already taken irreversible corporate action, then the trustee may not rescind and recast the vote.
The Amendments also provide that if the Board of Directors or a committee thereof determines that a proposed transfer or other event has taken place that violates the restrictions on ownership and transfer of Corporate stock set forth in the Company’s charter, the Board of Directors or such committee may take such action as it deems advisable in its sole discretion to refuse to give effect to or to prevent such transfer, including, but not limited to, causing us to redeem shares of stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer.
The Amendments provide that every owner of 5% or more (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding shares of Company stock, within 30 days after the end of each taxable year, must give written notice to the Company stating
the name and address of such owner, the number of shares of each class and series of Company stock that the owner beneficially owns or constructively owns and a description of the manner in which the shares are held. The Amendments further provide that each owner shall provide to the Company such additional information as the Company may request to determine the effect, if any, of the person’s actual or beneficial ownership on the Company’s status as a REIT and to ensure compliance with the ownership limits. In addition, the Amendments provide that any person that is an actual owner, beneficial owner or constructive owner of shares of Company stock and any person (including the stockholder of record) who is holding shares of Company stock for an actual owner, beneficial owner or constructive owner must, upon demand, disclose to the Company such information as the Company may request, in good faith, to determine its status as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance and to ensure compliance with the ownership limits.
The Amendments provide that any certificates representing shares of Company stock issued after the effective date of the Amendments will bear a legend referring to the restrictions on ownership and transfer of Company stock described above.
These restrictions on ownership and transfer could have the effect of delaying, deferring or preventing a takeover or other transaction in which stockholders might receive a premium for their shares over the then prevailing market price or which stockholders might believe to be otherwise in their best interest.
The ownership limits and other restrictions on ownership and transfer of Company stock described above will not apply until the Amendments are approved by the Company’s stockholders and accepted for record by the State Department of Assessments and Taxation of the State of Maryland and will not apply if the Board of Directors determines that it is no longer in the Company’s best interests to attempt to qualify, or to continue to qualify, as a REIT or that compliance with the above-described charter provisions is no longer required in order for the Company to qualify as a REIT.
Removal of Preferred Stock Provisions and Other Non-Substantive and Administrative Changes
The Amendments contain restrictions on the ownership and transfer of shares of the Company’s capital stock as well as eliminate certain provisions governing two classes of preferred stock that are no longer outstanding. The Amendments also contain administrative revisions to the Company’s charter as follows:
makes certain punctuation and grammatical corrections;
adds a parenthetical statement noting that the Company’s purpose to engage in any lawful act or activity includes, without limitation or obligation, engaging in business as a REIT under Sections 856 through 860 of the Internal Revenue Code, as amended, or any successor statute;
updates the address of the Company’s principal office and registered agent in the state of Maryland;
removes a statement regarding the initial size of the Board of Directors and the initial members of the Board of Directors; and
adds a statement that dividends declared with respect to a class of stock are payable equally with respect to the shares in such class and that any such dividends are payable in accordance with the preferences established in the charter.
Restatement
The restatement of our charter will give effect to the Amendments described above.
Required Vote
Approval of the Amendments and the restatement of our charter requires the affirmative vote of holders of shares entitled to cast a majority of all shares entitled to be cast on the matter.
If approved by the Company’s stockholders, the Amendments and the restatement of our charter would become effective when it is accepted for record by the State Department of Assessments and Taxation of the State of Maryland.
The Board of Directors of the Company unanimously recommends a vote for the approval of the Amendments to and the Restatement of the Company’s charter.
Information Concerning Executive Officers Who Are Not DirectorsThe following table sets forth our executive officers as of March 14, 2016:
Damon T. Hininger | Chief Executive Officer and President, Director | |
David M. Garfinkle | Executive Vice President and Chief Financial Officer | |
Harley G. Lappin | Executive Vice President and Chief Corrections Officer | |
Anthony L. Grande | Executive Vice President and Chief Development Officer | |
Steven E. Groom | Executive Vice President and General Counsel | |
Lucibeth Mayberry | Executive Vice President, Real Estate | |
Kim White | Executive Vice President, Human Resources | |
John D. Ferguson | Executive Chairman of the Board, Director |
Set forth below are the biographies of each of our current executive officers, except for Mr. Hininger, whose biography is set forth under “Proposal 1 – Election of Directors.”
Todd J MullengerDavid M. Garfinkle, age 54,48, has served as anthe Company’s Executive Vice President and our Chief Financial Officer since March 2007. Mr. MullengerMay 1, 2014. He served as ourthe Company’s Vice President Treasurerof Finance and Controller from JanuaryFebruary 2001 to March 2007,May 1, 2014. From 1996 to 2001, Mr. Garfinkle served as Vice President Finance from August 2000and Controller for Bradley Real Estate, Inc., a publicly traded real estate investment trust. Prior to January 2001joining Bradley Real Estate, Inc., Mr. Garfinkle was a Senior Manager at KPMG Peat Marwick, LLP. Mr. Garfinkle is a Certified Public Accountant and prior to that as Vice President, Finance of our predecessor company. Mr. Mullenger graduated from the University of Iowa in 1981summa cum laude with a B.B.A. degree and later earned an M.B.A.bachelor of business administration from Middle Tennessee StateSt. Bonaventure University.
Harley G. Lappin, age 57,60, has served as an Executive Vice President and our Chief Corrections Officer since June 2011. Prior to joining the Company and since 2003, Mr. Lappin served as the Director of the Federal Bureau of Prisons (“BOP”), the nation’s largest correctional system, with oversight and management responsibility for 116 federal prisons, 14 large, private contract facilities and more than 250 contracts for community correctional facilities, in total comprising more than 215,000 inmates managed by 38,000 employees. Previously, Mr. Lappin served in a variety of other roles with the Bureau of Prisons beginning in 1985, including Regional Director, Warden of the United States Penitentiary in Indiana, and Warden of the Federal Correctional Institution in North Carolina, among other positions. Mr. Lappin has a master’s degree in criminal justice from Kent State University and an undergraduate degree from Indiana University. Mr. Lappin serves on the boards of Thistle Farms, Inc. and Court Appointed Special Advocates, both non-profit organizations.
Anthony L. Grande, age 46, has served as an Executive Vice President and our Chief Development Officer since July 2008. From September 2007 to July 2008, Mr. Grande served as our Senior Vice President, State Customer Relations. Mr. Grande joined CCA in leadership roles2003 to serve as Vice President of State Customer Relations. Prior to joining CCA, Mr. Grande served as the Commissioner of Economic and Community Development for numerous professional organizations.the State of Tennessee. Mr. Lappin served 12 years on the Standards CommitteeGrande earned his Masters of theEducation at Vanderbilt University in Nashville, Tennessee and his Bachelor of Arts from The American Correctional Association, 6 of which he chaired until he retiredUniversity in January 2013.Washington, D.C.
Steven E. Groom, age 61, was named64, has served as an Executive Vice President and General Counsel insince April 2010. PriorFrom March 2001 to this appointment,April 2010, Mr. Groom served as our Vice President &and Deputy General Counsel with responsibility for litigation and risk management. Previously, Mr. Groom was a partner in the law firm of Stites & Harbison, PLLC in Nashville and served in managing attorney and general counsel roles for SunTrust Bank, Inc. Mr. Groom earned a bachelor’s degree from Lipscomb University and his law degree from the University of Memphis, where he was a member of the Law Review. Mr. Groom serves on the Board of Visitors of Lipscomb University’s College of Business and the Board of Advisors of the University’s Institute for Conflict Management.
Anthony L. Grande, age 43, Mr. Groom has servedinformed the Company that he intends to retire from his position as an Executive Vice President and our Chief Development OfficerGeneral Counsel in 2016.
Lucibeth Mayberry, age 44, has served as Executive Vice President, Real Estate since July 2008.May 2015. From September 2007November 2013 to July 2008, Mr. GrandeMay 2015, Ms. Mayberry served as our Senior Vice President, State Customer Relations. Mr. GrandeReal Estate. From August 2008 to November 2013, Ms. Mayberry served as our Vice President, Deputy Chief Development Officer. From March 2006 to August 2008, Ms. Mayberry served as Vice President, Research, Contract and Proposals. Ms. Mayberry joined CCA in May 2003 as Senior Director, State Partnership Relations and was promoted to serveManaging Director, State Partnership Relations in 2004. Before joining CCA, Ms. Mayberry served as a Senior Associate of the Taxation and Estate Planning Practice Group at the Nashville-based law firm Stokes, Bartholomew, Evans and Petree. She holds a bachelor’s degree from the University of Tennessee, a juris doctor from Vanderbilt University, and a Master of Laws in Taxation from the University of Florida.
Kim White, age 55, has served as Executive Vice President, Human Resources since May 2015. From November 2013 to May 2015, Ms. White served as our Senior Vice President, Human Resources. From March 2013 to November 2013, Ms. White served as Vice President, of State Customer Relations.Correctional Programs and from August 2012 to March 2013, Ms. White served as Managing Director, Inmate Programs. Prior to joining CCA, Ms. White served 26 years with the Federal Bureau of Prisons (“BOP”) in a wide variety of operational roles in the areas of Institutional Operations, Staffing and Inmate Programs, and more recently as the Assistant Director, Human Resource
Management Division, where she had oversight for the hiring, training and retention of the Bureau’s 38,000 employees. In 2007, Ms. White received the Presidential Rank Award of Meritorious Executive for her leadership with the BOP. Ms. White holds a bachelor’s degree in corrections and criminal justice and a master’s degree in correctional criminology and juvenile justice, both from Kent State University. She has also completed Harvard University’s Executive Education Program for senior managers in government.
John Ferguson, age 70, has served as a director since August 2000 and also serves as executive Chairman of our Board and chairman of our Executive Committee. Mr. GrandeFerguson formerly served as our Chief Executive Officer from August 2000 to October 2009 and as our President from August 2000 until July 2008. Mr. Ferguson’s career in business and government includes service as the Commissioner of EconomicFinance for the State of Tennessee and as the chairman and chief executive officer of Community DevelopmentBancshares, Inc., the parent corporation of The Community Bank of Germantown (Tennessee), as well as service on the State of Tennessee Board of Education and the Governor’s Commission on Practical Government for the State of Tennessee. Mr. Grande earned his Masters of Education at Vanderbilt University in Nashville, Tennessee and his Bachelor of Arts from The American University in Washington, D.C.
Brian D. Collins, age 55,Ferguson has served as a director of various charitable and civic organizations, including the Boy Scouts of America - Middle Tennessee Council, the Nashville Public Education Foundation and the Tennessee Performing Arts Center. Mr. Ferguson graduated from Mississippi State University in 1967. Mr. Ferguson will be resigning his position as executive Chairman of our Executive Vice President and Chief Human Resources Officer since September 14, 2009. Prior to this appointment and since June 2006, Mr. Collins servedBoard, effective as a Vice President, Operations, with responsibility for oversight of all aspects of the operations of one of the Company’s three operational business units. Prior to joining the Company, Mr. Collins served for 25 years in a variety of roles with Wal-Mart Stores, Inc., including personnel training and development, field operations and support management. Mr. Collins holds a Bachelor of Business Administration from the University of Arkansas at Pine Bluff.Annual Meeting.
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
This section of the Proxy Statement discusses the objectives and elements of our compensation programs and the compensation awarded to our Named Executive Officers,named executive officers, or NEOs, consisting of our Chief Executive Officer, Chief Financial Officer and our next three highest paid executives in 2012.2015. This information should be read in conjunction with the Summary Compensation Table and the related tables and narratives that follow in this Proxy Statement. Based on SEC proxy disclosure rules, the following individuals were our Named Executive OfficersNEOs for the fiscal year ended December 31, 2012:2015:
Damon T. Hininger, President and Chief Executive Officer
Damon T. Hininger | Chief Executive Officer and President | |
David M. Garfinkle | Executive Vice President and Chief Financial Officer | |
Harley G. Lappin | Executive Vice President and Chief Corrections Officer | |
Anthony L. Grande | Executive Vice President and Chief Development Officer | |
Steven E. Groom | Executive Vice President and General Counsel |
Todd J Mullenger, Executive Vice President and Chief Financial Officer
Harley G. Lappin, Executive Vice President and Chief Corrections Officer
Anthony L. Grande, Executive Vice President and Chief Development Officer
Brian D. Collins, Executive Vice President and Chief Human Resources Officer
Corrections Corporation of America is the nation’s largest owner of privatized correctional and detention facilities and one of the largest prison operators in the United States. The fundamental objectives of our compensation policies are to attract and retain executive leadership that will execute our business strategy, uphold our values, deliver strong results and create long-term value for our stockholders. Increased Quarterly Dividends and Return to Our Stockholders.CCA began operating as a real estate investment trust, or a REIT, for federal income tax purposes effective January 1, 2013 and in our third full year as a REIT our regular aggregate quarterly dividends per share in 2015 increased 5.9% to $2.16 in 2015 from $2.04 in 2014. Solid Operational and Financial Results for 2015. Due to expansion of our community-based corrections capabilities through acquisitions and our ability to create unique solutions to our government partners’ challenges, we experienced meaningful growth in our net income, earnings per share (“EPS”) and dividends, while normalized Funds From Operations (“FFO”) per diluted share experienced a slight increase, as illustrated below ($ in millions, except per share amounts). Net Income Adjusted Net Income(1) Dividends per share Normalized FFO(2) EPS Adjusted EPS(3) Closing Stock Price at Fiscal Year-End Revenue Net Income Dividends per share Stock Price per Share at Fiscal Year-End Negative one-year TSR, ranking between the 25th and Median compared to our Peer Group. Despite our solid operational and financial results, our stock price decreased from a closing price of $36.34 at fiscal year-end 2014 to $26.49 for fiscal year end 2015. Our total stockholder return, or TSR, for 2015 and the three-year and five-year periods ended December 31, 2015 and ranking within our peer group are illustrated below. The decline in our stock price in 2015 was impacted in part by a decline in inmate population in California due to regulatory changes in California as well as the increased interest rate environment that negatively impacted many REIT stocks. As of March 14, 2016, our closing stock price was $31.22. One Year TSR Three Year TSR Five Year TSR Pay for Performance. Pay for performance is an important component of our longstanding executive compensation philosophy. Our compensation approach is designed to incentivize our executives to substantially contribute individually and collaboratively to our long-term, sustainable growth. We use normalized FFO performance metrics because we believe that with the Company’s REIT structure, normalized FFO reflects the value delivered to stockholders and reflects long term value creation as it measures our earnings and cash generating potential from our core business, and is comparable to performance metrics used by other REITs. Substantial Compensation Tied to Our Objective Performance. All of our equity is granted in the form of performance-based RSUs that vest only based upon our normalized FFO performance, and our annual cash incentives are earned based upon our objective financial performance against pre-established goals. As a result, a substantial portion of executive compensation is at risk, paid based on our objective performance and tied to the interests of our stockholders and long-term value creation. The following table illustrates the degree to which the total direct actual compensation of our CEO for 2015 was earned based on our performance.Executive Summary 2015 2014 Change $ 221.9 $ 195.0 13.8 % $ 227.1 $ 225.0 1.0 % $ 2.16 $ 2.04 5.9 % $ 2.69 $ 2.65 1.5 % $ 1.88 $ 1.66 13.3 % $ 1.93 $ 1.92 0.5 % $ 26.49 $ 36.34 -27.1 % Fiscal 2012 Performance Review. During fiscal 2012,(1) Adjusted Net Income represents GAAP net income, adjusted for the Company’s expenses incurred in connection with the debt refinancing activities, expenses associated with mergers and acquisition activity and certain impairments that the Company maintained its strong financial condition notwithstanding a continuing challenging economic environment. The following table illustratesbelieves are unusual or nonrecurring, and do not reflect the Company’s growth in fiscal 2012 in terms of revenue, net income, and stock price relative to performance in fiscal 2011: 2012
($ in millions, except
per share amounts) 2011
($ in millions, except
per share amounts) Change $ 1,760 $ 1,724 +2.1 % $ 156.8 $ 162.5 -3.5 %* $ 0.60 — — $ 35.47 $ 20.37 +74.1 % *Net income for fiscal 2012 was impacted by several non-routine items including, but not limited to, our debt refinancing activities and costs associated with the pursuit of a conversion of our corporate structure to a REIT.Pay for Performance Review and Analysis. Pay for performance is an important component of our longstanding executive compensation philosophy and one of the three primary elements of our compensation packages. Our compensation approach is designed to incentivize our executives, including our NEOs, to substantially contribute individually and collaboratively to the Company’s long-term, sustainable growth. To ensure that we are adhering to this approach, we evaluate the degree of alignment of our total incentive compensation to our earnings growth (EBIT, Pre-Tax Earnings, EPS and adjusted funds from operations) over the applicable period and between total realizable pay versus total shareholder return (“TSR”) relative to our peer group over the prior, three and five fiscal years. For purposes of this review, “financial performance of the Company” is defined as TSR. “Total realizable pay” for our NEOs is defined as the sum of the following components: (i) base salary; (ii) annual variable performance cash awards based on the financial performance of the Company; and (iii) equity awards consisting of stock options with time-based vesting and restricted stock units with time-based and performance-based vesting.2012 Compensation OverviewCompensation Objectives. The fundamental objectives of our compensation policies are to attract and retain executive leadership for the Company that will execute our business strategy, uphold our Company values and deliver results and long-term value to our stockholders. We seek to accomplish these goals in a manner that ties a substantial portion of each executive officer’s compensation to the Company’s performance by rewarding executive officers for significant growth in earnings per share (“EPS”). We use EPS as the measure because we believe there is a strong relationship between EPS growth and growth in stockholder value. Our 2012 EPS targets were established in consultation with our independent compensation consultant, PricewaterhouseCoopers LLP (“PwC”).PwC also conducts competitive analyses from time to time at the request of our Compensation Committee (the “Committee”) in order to analyze our performance and executive compensation against a peer group of companies. These analyses have assisted the Committee in determining if compensation strategies and plans are advisable based on the Company’s current financial position and strategic goals, as well as developments in corporate governance and compensation design. The primary components of our compensation program are cash compensation, consisting of a mix of base salary and cash incentive plan compensation, and equity incentives, consisting of stock options with time-based vesting and restricted stock units with time-based and performance-based vesting.Our balance of long- and short-term incentives is an important component of our compensation structure and philosophy. This balance is reflected in our use of different types of equity compensation awards that provide a balance of incentives, our stock ownership guidelines designed to align the incentives of our executives with our stockholders and discourage excessive risk taking, and other concepts of our compensation programs, including our executive compensation program, which are all designed to motivate our executives, including our NEOs, to substantially contribute individually and collaboratively to the Company’s long-term, sustainable growth.Results of 2012 Advisory Vote to Approve Executive Compensation. At the 2012 Annual Meeting of Shareholders, the Company’s stockholders overwhelmingly approved the Company’s compensation policies and practices for fiscal 2011 through an advisory “say on pay” vote. Over 93% of the votes cast were in favor of this advisory proposal. The Committee and the Company viewed these results as a strong indication that the Company’s stockholders support the executive compensation policies and practicesongoing operations of the Company. Taking into consideration this stockholder support, the Committee and the Company did not make any material changes to the Company’s compensation programs and policiesThese adjustments are specified in respect of fiscal 2012.Independent Review and Approval Process. The Committee consists solely of “non-employee directors” as defined by SEC rules, “outside directors”our Annual Report on Form 10-K for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, and “independent directors” as defined by NYSE listing standards, in each case as determined by our Board of Directors. In addition to a determination of independence, the Nominating and Governance Committee of our Board recommends Committee membership based on the knowledge, experience and skills that it deems appropriate in order to adequately perform the responsibilities of the Committee. Mr. Prann, Mr. Russell, Mr. Horne and Mr. Correnti are the current members of the Committee, with Mr. Russell serving as the Committee’s Chair.The Committee is responsible for setting the compensation of the Company’s executive officers, overseeing the Board’s evaluation of the performance of our executive officers and administering the Company’s equity-based incentive plans, among other things. The Committee undertakes these responsibilities pursuant to a written charter adopted by the Committee and the Board, which is reviewed at least annually by the Committee. During the fiscal year ended December 31, 2012, no changes were made2015 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Funds from Operations.”(2) Normalized FFO is FFO adjusted to exclude income and expenses deemed non-recurring, infrequent or unusual, even though such items may require cash settlement, because such items do not reflect a necessary component of our ongoing operations. Our reconciliation of FFO and Normalized FFO from net income are contained in our Annual Report on 10-K for the Committee’s charter. The charterfiscal year ended December 31, 2015 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Funds from Operations.”(3) Adjusted EPS represents earnings per share adjusted for the items described under “Compensation for 2015—Annual Cash Incentive Plan Compensation” below. TSR Percentile Ranking
within Peer Group-21.99 % 30th 2.03 % 24th 8.90 % 35th • Below Target Payout Under our Annual Cash Incentive Plan. For 2015, as in 2014, we used normalized funds from operations, or FFO, as the primary performance metric by which incentive compensation may be viewed in full onearned, once we achieved positive adjusted earnings per share, or Adjusted EPS. Under our annual cash incentive plan we target 75% of actual salary for the Company’s website,www.cca.com (under “Corporate Governance” on the Investors page).The Committee annually reviews executive compensation and the Company’s compensation policies to ensure that the Chief Executive Officer and the other executive officers are rewarded appropriatelyannual cash incentive award for their contributions to the Company and that the overall compensation strategy supports the objectives and valuesall of our organization, as well as stockholder interests. The Committee conducts this review and makes compensation decisions through a comprehensive process involving a series of meetings primarily occurring in the first and second quarters. Committee meetings typically are attended by the Committee members, the Committee’s compensation consultant and legal advisors, the Company’s Chairman and the Company’sNEOs, including our Chief Executive Officer. As with all Board committees, other Board members also haveFor 2015, we achieved positive Adjusted EPS of $1.93 and only a standing invitation to attend the Committee’s meetings. The Committee meetsslight increase in executive sessionnormalized FFO per share of $2.69 per share, which, pursuant to the extentpre-established formula, yielded an annual cash incentive payout of 51% of actual salary, which is meaningfully below 75% of base salary paid for target performance. The 2015 bonuses were paid consistent with this formula.• Performance Based RSUs Align the members deem necessary or appropriate to ensure independence. Additional information regarding Committee meetings is included above under “Corporate Governance – Board of Director Meetings and Committees.”Compensation Philosophy.The fundamental objectivesInterests of our executiveExecutives with our REIT Stockholders. In 2015, in order to continue to align management’s interests with those of our stockholders, to tie compensation policies are to attract and maintain executive leadership for the Company that will execute our business strategy, uphold our Company values and deliver results and long-term value to our stockholders. Accordingly, the Committee develops compensation strategiesperformance as a REIT and programs that will attract, retain and motivate highly qualified and high-performing executives through compensation that is:•Performance-based: A significant component of compensation should be determined based on whether or not the Company meets performance criteria that are aligned with growth in stockholder value and do not encourage unreasonable risk-taking.•Competitive: Pay for performance scales are established so the competitive positioning of an executive’s total compensation reflects the competitive positioning of the Company’s performance,i.e., high Company performance relative to peers results in high compensation relative to competitive benchmarks, andvice versa.•Balanced: Performance-oriented features and retention-oriented features should be balanced so the entire program accomplishes the Company’s pay-for-performance and executive retention objectives, while encouraging prudent risk-taking that is aligned with the Company’s overall strategy.•Fair: Compensation levels and plan design should reflect competitive practices, our performance relative to peer companies and the relationship of compensation levels from one executive to another.The Committee’s goal is to haveput a substantial portion of each executive officer’s compensation contingent upon the Company’sexecutive’s pay at risk based on our performance, the Compensation Committee granted performance-based RSUs in 2015 with the performance metric based on our normalized FFO growth rate. These performance-based RSUs vest over a three year period, with 1/3rd vesting per year if we achieve the pre-established normalized FFO performance goal for that year, which goal is based on pre-established compounded annual growth rates. Commencing with the performance awards made in 2015, if the pre-established performance goal for any one year is not met, the tranche for such year will be forfeited and not vest. In prior years, there was an ability to earn that year’s tranche based on cumulative as well as upon his or her individual performance.annual goals. The Committee’s compensation philosophy for an executive officer emphasizes an overall analysiscumulative feature was eliminated to more directly tie the interests of our executives with the real time interests of our stockholders. For 2015, FFO performance exceeded the minimum FFO goals and resulted in vesting of the executive’s2015 tranche for our outstanding performance-based RSUs. The performance forbased RSUs granted in 2015 had a grant date fair value of $40.24 but a realized value on the year, projected roledate they were earned and responsibilities, impact on executionvested (February 25, 2016) of Company strategy, external pay$29.38.
All values derive from the Summary Compensation Table for 2015 for Mr. Hininger. “Other” includes “Change in Nonqualified Deferred Compensation Earnings” and “All Other Compensation” as described in the Summary Compensation Table.
At or Below Market Median Compensation. Our independent compensation consultant, PricewaterhouseCoopers LLP, or PwC, conducts competitive analyses from time to time at the request of our Compensation Committee, in order to provide a comparison of our compensation practices against a peer group of companies. In February 2014 in connection with our conversion to a REIT, our Compensation Committee, with the assistance of PwC, performed an extensive competitive market analysis. Our peer group as established in 2014 was 29 companies, including 14 REIT companies. In determining our peer group for 2014, the Compensation Committee and PwC took into account our REIT status and our then current financial metrics.
• | At the time of the February 2014 PwC report, our total cash compensation in 2014 was generally below median market, and total direct compensation in 2014 was generally at or below median market, when compared to our peer group. The 2014 PwC report found that our EPS growth, return on equity and TSR were above the market median of our peer group, and we were positioned at the 50th percentile in terms of revenues and in between the 25th and 50th percentile in terms of market capitalization and fixed assets of the peer group. |
Compensation Best Practices and Governance. We believe in keeping the upmost integrity and serving as a responsible fiduciary to our stockholders. We are committed to managing the company for the benefit of the stockholders and are focused on maintaining good governance and establishing best practices that work within our objectives and which we deem advisable. Practices that illustrate that commitment include:
Favorable Results of 2015 Advisory Vote to Approve Executive Compensation. At our 2015 Annual Meeting of Stockholders, our stockholders overwhelmingly approved the compensation of our NEOs with more than 97% of the votes cast voting in favor of our advisory “say on pay” proposal. The Compensation Committee and the Company view these results as an indication that our stockholders support our executive compensation policies, and thus no changes were made to our compensation programs as a result of this vote. Nonetheless, the Compensation Committee continues to evaluate compensation best practices and consider additional performance metrics and means for tying pay to performance.
Compensation Philosophy and Objectives |
The fundamental objectives of our executive compensation policies are to attract and maintain executive leadership that will execute our business strategy, uphold our values, deliver positive results and create long-term value to our stockholders. Accordingly, the Committee develops compensation strategies and programs that will attract, retain and motivate highly qualified and high-performing executives through compensation that is:
• | Performance-based: A significant component of compensation should be determined based on whether or not we meet performance criteria that are aligned with growth in stockholder value and do not encourage unreasonable risk-taking. |
• | Competitive: Pay for performance scales are established so the competitive positioning of an executive’s total compensation reflects the competitive positioning of the Company’s performance, i.e., high Company performance relative to |
• | Balanced: Performance-oriented features and retention-oriented features should be balanced so the |
• | Fair: Compensation levels and plan design should reflect competitive practices, our performance relative to |
In making its determinations, the Compensation Committee performs an overall analysis of the executive’s performance for the year, projected role and responsibilities, impact on execution of Company strategy, external pay practices, total cash and total direct compensation positioning relative to other Company executives, the recommendations of our Chief Executive Officer and such other factors the Committee deems appropriate. Our Committee also considers employee retention, vulnerability to recruitment by other companies and the difficulty and costs associated with replacing executive talent. Based on these objectives, the Committee has determined that our Company should provide its executives with compensation packages comprised of three primary elements:
1) | base salary, which takes individual performance into account and is designed to be competitive with median salary levels in an appropriate peer group; |
2) | annual variable performance awards, payable in cash and based on the financial performance of the Company, in accordance with the goals established by the Committee; and |
3) | long-term stock-based incentive awards that vest based on the performance of the Company, which |
Benefits and perquisites play a limited role in our executives’ total compensation packages. The Committee believes that as a result of our balance of long- and short-term incentives, our use of performance-based RSUs with dividend equivalents that provide a tie to our stockholders interests and our stock ownership guidelines, our executive compensation program currently serves our objectives well.
Process – Independent Review and
Use of
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The Compensation Committee annually reviews executive compensation and our compensation policies to ensure that the Chief Executive Officer and the other executive officers are rewarded appropriately for their contributions to our success and that the overall compensation strategy supports the objectives and values of our organization, as well as stockholder interests. The Committee conducts this review and makes compensation decisions through a comprehensive process involving a series of meetings primarily occurring in the first and second quarters of each year. Committee meetings typically are attended by the Committee members, legal advisors, our Chairman of the Board, our Chief Executive Officer and, upon request, the Committee’s compensation consultant. As with all Board committees, other Board members also have a standing invitation to attend the Compensation Committee’s meetings. Our Chief Executive Officer generally makes recommendations to the Committee regarding equity awards for the executive officers other than himself. The Committee meets in executive session to the extent the members deem necessary or appropriate to ensure independent analysis and determinations. Additional information regarding the Compensation Committee and Committee meetings is included above under “Corporate Governance – Board of Director Meetings and Committees.”
Use of Independent Compensation Consultant. Since 2000, the Committee has engaged PwC from time to time to assist it in reviewing compensation strategies and plans and to provide market competitive data. When requested, PwC works directly with the chair of the Committee and, as directed by the chair of the Committee, with our Chief Executive Officer. PwC was selected due to its extensive experience in providing compensation consulting services. At the Committee’s request, PwC has from time to time performed several analyses, including peer and market comparisons, internal pay equity, updating of the executive salary structure and modeling of executive compensation levels at different levels of Company performance. Our Compensation Committee does not use the market data to benchmark our compensation; instead, these analyses and the input from PwC have assisted the Committee in determining if its strategies and plans were advisable based on the Company’s current financial position and strategic goals, as well as developments in corporate governance and compensation design.
Peer Group and Market Data. In 2015, the Compensation Committee continued to use the market data analysis provided by PwC in February 2014. This market data analysis employed a peer group recommended by PwC that reflected updates due to the then recent conversion of the Company to a REIT. In the 2014 updates, the Compensation Committee used a peer group of 23 companies
(including 14 REIT companies) and eliminated certain companies that were not dividend paying. Based on the recommendation of PwC, we employed the following as filters for determining our peer group:
The following companies were selected by PwC and approved by the Committee for inclusion in the 2014 peer group:
Owners and operators of multi-state facilities delivering services to third parties
Minimum employee base of 10,000
Market capitalization between $2 billion to $5 billion
Annual EBITDA between $200 million to $600 million
Investment in fixed assets of $1 billion to $5 billion
Future growth heavily dependent upon the acquisition or development of additional facilities
As a result of this analysis, the following companies were selected by PwC and approved by the Committee for inclusion in the peer group the Company used for executive compensation comparison purposes in 2012:
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The Committee has periodically requested PwC to conduct competitive analyses of CCA’s performance compared to the peer group companies, as well as of its senior management compensation levels as compared to compensation levels of senior management at the peer group companies. Based on its research, PwC has concluded that CCA’s performance was generally high relative to the peer companies over one-year, three-year and five-year time periods, and that CCA’s senior management compensation levels were on average consistent with the competitive 50th percentile. The Committee continues to evaluate the peer group criteria on an on-going basis.
Total Compensation Targets. Based on the most recent market analysis performed by PwC as described above, internal pay equity considerations and a consideration of our compensation objectives and philosophies, with a particular emphasis on performance and equity as key drivers for executive compensation, the executive compensation structure set forth in the table below was developed by the Committee in 2010 in consultation with PwC for purposes of analysis in 2011 and 2012. The structure was used as a guideline by the Committee in making its compensation decisions for 2012 and does not necessarily reflect actual compensation for the Named Executive Officers for 2012, which is discussed in detail below and presented in the Summary Compensation Table on page 48 of this Proxy Statement.• Brookdale Senior Living, Inc.
Base Salary Structure(1) | LTIP Fair Value | Total Comp. Midpoint(3) | ||||||||||||||||||||||||
Position Level | Position Titles | Minimum | Midpoint | Maximum | Bonus (2) | |||||||||||||||||||||
A | Chief Executive Officer | $ | 640,000 | $ | 800,000 | $ | 960,000 | 75 | % | $ | 2,500,000 | $ | 3,900,000 | |||||||||||||
B | Chief Financial Officer, Chief Corrections Officer and Chief Development Officer | $ | 296,000 | $ | 370,000 | $ | 444,000 | 75 | % | $ | 850,000 | $ | 1,497,500 | |||||||||||||
C | General Counsel and Chief Human Resources Officer | $ | 248,000 | $ | 310,000 | $ | 372,000 | 75 | % | $ | 430,000 | $ | 972,500 |
• CBL & Associates Properties, Inc.
• Cinemark Holdings, Inc.
• Duke Realty
• Federal Realty Investment Trust
• The Geo Group, Inc.
• HealthSouth Corporation
• Hospitality Properties Trust
• Hyatt Hotels Corporation
• Realty Income Corporation
• Weingarten Realty Investors
• Iron Mountain Incorporated
• LifePoint Hospitals, Inc.
• MeadwestVaco Corporation
• Packaging Corp. of America
• Penn National Gaming Inc.
• Piedmont Office Realty Trust
• Plum Creek Timber Co., Inc.
• Quanta Services, Inc.
• Rayonier, Inc.
• Regal Entertainment Group
• Senior Housing Properties Trust
None of our peer group companies met all of the filters, and generally the peer group companies met approximately two or more of the filters. In general, we were at the 50th percentile of revenues among our peers and between the 25th and 50th percentile of market capitalization and fixed assets of our peers.
Total Direct Target Compensation Guidelines. Based on the extensive market analysis performed by PwC in 2014 , and based on internal pay equity considerations and a consideration of our compensation objectives and philosophies, with a particular emphasis on performance and equity as key drivers for executive compensation, the executive compensation structure set forth in the table below was developed by the Committee in 2014 in consultation with PwC for purposes of providing a point of reference for comparing future compensation decisions, including as a guideline for 2015 compensation decisions. The midpoint amounts are aligned with the 50th percentile of peer group proxy data by rank. References in this Proxy to the Salary Midpoint or the LTIP Fair Value are to the following table valuations.
Position | Position Titles | Base Salary Structure | Bonus | LTIP Fair Value | Total Comp. Midpoint (1) | |||||||||||||||||||||
Minimum | Midpoint | Maximum | ||||||||||||||||||||||||
A | Chief Executive Officer | $ | 675,000 | $ | 840,000 | $ | 1,005,000 | 75 | % | $ | 2,500,000 | $ | 3,970,000 | |||||||||||||
B | Chief Financial Officer, Chief Corrections Officer and Chief Development Officer | $ | 335,000 | $ | 420,000 | $ | 505,000 | 75 | % | $ | 850,000 | $ | 1,585,000 | |||||||||||||
C | General Counsel | $ | 275,000 | $ | 345,000 | $ | 415,000 | 75 | % | $ | 735,000 | $ | 1,338,750 |
(1) |
Equals the sum |
A specific analysis regarding each component of total executive compensation for 2012, including our philosophy on how certain elements of total direct compensation should compare to the PwC market analysis, is provided below. The primary components of the 2012 program were cash compensation, consisting of a mix of base salary and cash incentive plan compensation, and equity incentives, consisting of stock options with time-based vesting and restricted stock units with performance-based vesting.midpoint plus target bonus plus LTIP fair value.
The primary components of our 2015 compensation program were cash compensation, consisting of a mix of base salary and our annual cash incentive plan compensation, and equity incentives, consisting solely of restricted stock units with performance-based vesting.Base Salary. We seek to provide base salariesCompensation for our executive officers that provide a secure level of guaranteed cash compensation in accordance with their experience, professional status and job responsibilities. Typically in the second quarter of each year, the Committee reviews and approves a revised annual salary plan for our executive officers, taking into account several factors, including prior year salary, responsibilities, tenure, performance, salaries paid by comparable companies for comparable positions, the Company’s overall pay scale and the Company’s recent and projected financial performance. As part of PwC’s most recent study discussed above, the Committee determined that base salary generally should be set at the 50th percentile of the benchmarks from the PwC market analysis, subject to adjustment to account for the individual factors referenced above. This market positioning was based on the Committee’s objective of providing competitive base salaries for recruiting and retention purposes.The Committee also solicits the views and recommendations of our Chief Executive Officer, in consultation with our Chairman, when setting the base salaries of the other executive officers, given their respective insight into internal pay equity and positioning issues, as well as executive performance. At a Committee meeting typically held in the first or second quarter of each year, the Chief Executive Officer summarizes his assessment of the performance during the previous year of each of the other executive officers. The Chief Executive Officer, in consultation with our Chairman, also provides his recommendations on any compensation adjustments. The Committee approves any base salary adjustments for these executives, based on such factors as the competitive compensation analysis, the Chief Executive Officer’s assessment of individual performance, the Company’s performance and the location in the salary range of the executive’s current salary, general market conditions and internal pay equity considerations.The process is similar for determining any base salary adjustments for the Chief Executive Officer, except that the Chief Executive Officer does not provide the Committee with a recommendation. The Chief Executive Officer presents a self-assessment of his performance during the year to the Committee, which then approves any base salary adjustment based on the factors described above with respect to the other executives. To the extent it deems necessary and appropriate, the Committee meets in executive session to discuss adjustments to the base salaries of the Company’s executive officers, including the Chief Executive Officer. Such adjustments typically take effect on or about July 1 of each year.During 2012, the Committee approved the base salaries for our Named Executive Officers in the following amounts:2015
Base Salary
We seek to provide base salaries for our executive officers that provide a secure level of guaranteed cash compensation in accordance with their experience, professional status and job responsibilities. Typically in the second quarter of each year, the Committee reviews and if applicable, approves a revised annual salary plan for our executive officers, taking into account several factors, including prior year’s salary, responsibilities, tenure, individual performance, salaries paid by comparable companies for comparable positions, the Company’s overall pay scale and the Company’s recent and projected financial performance. As part of PwC’s 2014 study, the Committee determined that base salary generally should be set at or below the 50th percentile of the benchmarks from the PwC market analysis, subject to adjustment to account for the individual factors referenced above. This market positioning was based on the Committee’s objective of providing competitive base salaries for recruiting and retention purposes.
The Committee also solicits the views and recommendations of our Chief Executive Officer, in consultation with our Chairman, when setting the base salaries of the other executive officers, given their respective insight into internal pay equity and positioning issues, as well as executive performance. At a Committee meeting typically held in the first or second quarter of each year, the Chief Executive Officer summarizes his assessment of the performance during the previous year of each of the other executive officers. The Chief Executive Officer, in consultation with our Chairman, also provides his recommendations on any compensation adjustments. The Committee approves any base salary adjustments for these executives, based on such factors as the competitive compensation analysis, the Chief Executive Officer’s assessment of individual performance, the Company’s performance and the location in the salary range of the executive’s current salary, general market conditions and internal pay equity considerations.
The process is similar for determining any base salary adjustments for the Chief Executive Officer, except that the Chief Executive Officer does not provide the Committee with a recommendation. The Chief Executive Officer presents a self-assessment of his performance during the year to the Committee, which then approves any base salary adjustment based on the factors described above with respect to the other executives. To the extent it deems necessary and appropriate, the Committee meets in executive session to discuss adjustments to the base salaries of the Company’s executive officers, including the Chief Executive Officer. Such adjustments typically take effect on or about July 1 of each year.
During 2015, after review of the 2014 PwC report and consultation with the CEO regarding the other NEOs’ performance and his recommendations, the Committee approved a 2.5% increase to the base salaries of our NEOs, other than Mr. Garfinkle, who received a 7.5% increase, with the salaries effective as of July 6, 2015. The Committee believed that the raises were appropriate given that, based on the 2014 PwC report, the existing salaries were at or below the Salary Midpoint of their peers. The larger increase for Mr. Garfinkle reflects the larger disparity between his base salary and the Salary Midpoint for his position of $420,000 and in recognition of the importance of his role.
Name | 2015 Base Salary $ | 2014 Base Salary $ | Percentage Increase | |||||||||
Damon T. Hininger | 861,000 | 840,000 | 2.5 | % | ||||||||
David M. Garfinkle | 387,000 | 360,000 | 7.5 | % | ||||||||
Harley G. Lappin | 412,089 | 402,038 | 2.5 | % | ||||||||
Anthony L. Grande | 412,089 | 402,038 | 2.5 | % | ||||||||
Steven E. Groom | 327,442 | 319,456 | 2.5 | % |
Annual Cash Incentive Plan Compensation
Our annual cash incentive plan compensation provides our executive officers with the potential for significantly enhanced cash compensation based on the extent to which financial performance targets set in advance by the Committee are met. Each of the named executive officers in the annual cash incentive plan can earn between 5% and 200% of his or her actual salary based on our performance against pre-established financial goals, with 75% of base salary payable to each of our NEOs based on target performance against these goals.
The financial goals for the 2015 cash incentive plan were Adjusted EPS and growth in normalized funds from operations, or normalized FFO per share. In order for cash incentives to be payable, we must first achieve positive Adjusted EPS. If positive Adjusted EPS is not achieved, then no amounts could be earned under the cash incentive plan. Presuming positive Adjusted EPS criteria is met, the actual bonus payable is determined through the Committee’s exercise of negative discretion, based on our normalized FFO per share against pre-established goals as set forth in the table below. As in 2014, the Committee chose normalized FFO per share as the performance metric for 2015 along with positive Adjusted EPS, because it believes that with the Company operating as a REIT, there is a strong relationship between positive Adjusted EPS coupled with normalized FFO per share growth and growth in stockholder value. Normalized FFO per share is a common metric used to evaluate REITs, as it takes into account earnings from existing properties excluding the impact of depreciation of real estate assets, and thus measures the cash-generating potential of the REIT’s holdings.
Since 2010, the Compensation Committee has employed a target bonus opportunity of 75% of actual salary paid during the year for each of the NEOs, including our Chief Executive Officer.
The initial guidance for 2015, as set forth in the Company’s earnings news release dated February 11, 2015, ranged from $1.94 to $2.02 for adjusted diluted EPS and from $2.67 to $2.75 for normalized FFO per share. The Compensation Committee establishes the performance goals based on a target bonus at 75% of base salary, which would be met for 2015 if we achieved positive Adjusted EPS and normalized FFO per share of $2.73 for 2015. The maximum bonus was set at 200% of base salary, which would be met if we achieved normalized FFO per share of $2.93. The Compensation Committee set the normalized FFO per share bonus range as set forth in the following table so that the target bonus would be met if we achieved positive Adjusted EPS and normalized FFO per share that fell between our initial guidance.
Normalized FFO per share | Bonus % of Actual Salary | |||
$2.60 | 5.00 | % | ||
$2.61 | 10.00 | % | ||
$2.62 | 15.00 | % | ||
$2.63 | 20.00 | % | ||
$2.64 | 25.00 | % | ||
$2.65 | 30.00 | % | ||
$2.66 | 35.00 | % | ||
$2.67 | 40.00 | % | ||
$2.68 | 45.00 | % | ||
$2.69 |
| 51.00 (Actual | % ) | |
$2.70 | 57.00 | % | ||
$2.71 | 63.00 | % | ||
$2.72 | 69.00 | % | ||
$2.73 |
| 75.00 (Target | % ) | |
$2.74 | 80.26 | % | ||
$2.75 | 85.55 | % |
Normalized FFO per share | Bonus % of Actual Salary | |||
$2.76 | 90.84 | % | ||
$2.77 | 96.13 | % | ||
$2.78 | 101.42 | % | ||
$2.79 | 106.71 | % | ||
$2.80 | 112.00 | % | ||
$2.81 | 119.00 | % | ||
$2.82 | 126.00 | % | ||
$2.83 | 133.00 | % | ||
$2.84 | 140.00 | % | ||
$2.85 | 147.00 | % | ||
$2.86 | 154.00 | % | ||
$2.87 | 160.58 | % | ||
$2.88 | 167.15 | % | ||
$2.89 | 173.72 | % | ||
$2.90 | 180.29 | % | ||
$2.91 | 186.86 | % | ||
$2.92 | 193.43 | % | ||
$2.93 | 200.00 | % |
Adjusted EPS and normalized FFO per share are adjusted for any of the items set forth in Section 11.2 of the Company’s Amended and Restated 2008 Stock Incentive Plan, or the 2008 Plan. For reconciliation of EPS and FFO figures, please refer to the reconciliation disclosure in the Company’s Annual Report on Form 10-K under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Funds from Operations.”
Based on our Adjusted EPS of $1.93 and normalized FFO per share of $2.69 for 2015, bonuses were earned at 51% of salary, below target, and the following cash incentive plan compensation was awarded to our NEOs in February 2016 consistent with such earned amount:
Name | 2015 Cash Incentive Compensation | |||
Damon T. Hininger | $ | 450,232 | ||
David M. Garfinkle | $ | 197,547 | ||
Harley G. Lappin | $ | 215,489 | ||
Anthony L. Grande | $ | 215,489 | ||
Steven E. Groom | $ | 171,225 |
For 2016, the Compensation Committee determined to continue the umbrella annual cash incentive plan on substantially the same terms as in 2015, requiring positive Adjusted EPS and updated performance goals for normalized FFO.
Performance-Based Equity Incentive Compensation
One of our key compensation philosophies is that long-term stock-based incentive compensation strengthens and aligns the interests of our executive officers with our stockholders. Equity incentive awards are generally granted to our executive officers on an annual basis. Our pay mix is shifted toward equity compensation, as we believe equity best ties the compensation of our executive officers with the interest of our stockholders. For 2015, consistent with 2014, we granted all of our equity in the form of performance-based RSUs. In 2013, the year of transition to REIT status, we granted only time-based RSUs. Prior to 2013, the Committee employed a compensation strategy utilizing a mix of stock options, with time-based vesting, and restricted stock units, with performance-based vesting based on our Adjusted EPS. In February 2015, in order to continue to align management’s interests with those of our stockholders, to tie compensation to our performance as a REIT and to put a substantial portion of the executive’s pay at risk based on our performance, the Compensation Committee determined to grant performance-based RSUs in 2015 that are substantially similar to the performance-based RSUs granted in 2014 except that rather than vesting permitted based on cumulative normalized FFO growth as in 2014, if the performance goals in any one year for normalized FFO is not met, the tranche for such year will not vest and be forfeited.
The value of the performance-based RSUs granted in 2015 was at the same levels awarded in 2014. In making its determinations, the Compensation Committee considered many factors, including a comparison to market practices as reflected by the LTIP Fair Value from the 2014 PwC report (discussed above), internal equity, and the focus on equity compensation in our pay mix to encourage long-term value creation, retention and alignment with stockholder interests.
Name | 2015 Performance-based RSUs Granted | Grant Date Fair Value | 2014 LTIP Fair Value of Peer Group | |||||||||
Damon T. Hininger | 48,371 | $ | 1,946,449 | $ | 2,500,000 | |||||||
David M. Garfinkle | 23,288 | $ | 937,109 | $ | 850,000 | |||||||
Harley G. Lappin | 23,288 | $ | 937,109 | $ | 850,000 | |||||||
Anthony L. Grande | 23,288 | $ | 937,109 | $ | 850,000 | |||||||
Steven E. Groom | 19,179 | $ | 771,763 | $ | 735,000 |
Terms of Performance-based RSUs Granted in 2015. The performance-based RSUs granted in 2015 vest based on our achievement of normalized FFO per share goals in each year of the three year vesting period. Accordingly, the performance-based RSUs are divided into three equal tranches of 33% of the granted amount that will vest over a three year period, with 1/3rd, or a tranche, vesting if we achieve the pre-established maximum normalized FFO per share performance goal for that year’s tranche. The yearly goals are based on pre-established annual growth rates. Commencing for 2015 performance-based RSUs, the annual FFO per share performance goals are noncumulative so to the extent the maximum normalized FFO per share performance goal for a particular year is missed, the tranche for such year will not vest and be forfeited. Normalized FFO per share for purposes of these awards is our normalized FFO per share as reported in our quarterly and annual reports. The normalized FFO per share performance goals were established based on our historical FFO per share and five-year compounding of the maximum growth rates. The table below sets forth the per share performance goals for each year in the three-year vesting period for the performance-based RSUs granted in 2015.
Period/Tranche | Normalized FFO Required for Vesting of Tranche Each Year | |||
2015 | $ | 2.36 | ||
2016 | $ | 2.44 | ||
2017 | $ | 2.51 |
Outstanding Performance-based RSUs Granted in 2014.In 2014, we granted performance-based RSUs that vest in accordance with the same principles as the performance-based RSUs granted in 2015, except that the annual FFO performance goals are cumulative, such that to the extent that the maximum normalized FFO performance goal for a particular year is missed, if in the subsequent year the cumulative maximum normalized FFO performance goal is achieved, the tranche for the year in which the maximum goal is achieved will vest, plus each prior unvested tranche for the prior years (where maximum normalized FFO was not achieved) will also vest. Based on our normalized FFO per share of $2.69 for 2015, the second tranche of the award vested, representing one third of the shares granted, as set forth in the table below. The table below sets forth the performance goals for each year in the three-year vesting period for the performance RSUs granted in 2014.
Maximum Normalized FFO Required for Vesting of Tranche During the Three-Year Period | Vesting of Tranche at End of Three-Year Period Based on Performance for the Year Specified | |||||||||||||||
Period/Tranche | 50% Vesting | 75% Vesting | 100% Vesting | |||||||||||||
2014 | $ | 2.44 | $ | 2.01 | $ | 2.21 | $ | 2.44 | ||||||||
2015 | $ | 2.56 | $ | 2.01 | $ | 2.24 | $ | 2.51 | ||||||||
2016 | $ | 2.69 | $ | 2.01 | $ | 2.26 | $ | 2.59 |
In 2013, given our transition to REIT status, we granted only time-based RSUs.
Vested Performance-based RSUs Based on 2015 Performance.Based on our normalized FFO per share of $2.69 for 2015, the tranche of the 2015 and 2014 performance-based RSUs that could vest based on 2015 performance, all vested, representing one third of the shares granted, as set forth in the table below. In accordance with the terms of the awards, the vesting occurs and shares are issued on the later of (i) delivery of the audited financial statements by the Company’s certified independent registered public accountants for the applicable fiscal year (in the Company’s filing of the Annual Report on Form 10-K) and (ii) the applicable anniversary of the grant date. Thus, the tranche of the 2014 and 2015 Performance- based RSUs that vested based on 2015 performance were deemed vested, and the shares were issued, on February 25, 2016.
Name | 2015 Performance-based RSUs that Vested based on 2015 Performance and Issued in 2016 | 2014 Performance-based RSUs that Vested based on 2015 Performance and Issued in 2016 | ||||||
Damon T. Hininger | 16,123 | 20,031 | ||||||
David M. Garfinkle | 7,762 | 9,632 | ||||||
Harley G. Lappin | 7,762 | 9,644 | ||||||
Anthony L. Grande | 7,762 | 9,644 | ||||||
Steven E. Groom | 6,393 | 7,942 |
Dividend Equivalent Rights. The performance-based RSUs and time-based RSUs have associated dividend equivalent rights that are earned based on cash dividends paid by the Company while the award is unvested and outstanding. The Dividend Equivalent Rights are paid in cash, and do not vest and are not paid until, and then only to the extent, the associated performance-based RSUs or time-based RSUs vest and the underlying shares are issued. This further aligns the executive officer’s interests with our stockholders, encourages dividend growth performance and does not result in any unearned compensation.
Name | Current Base Salary | Prior Year Base Salary | Percentage Increase (Decrease) | 2012 as % of Salary Midpoint | ||||||||||||
Damon T. Hininger | $ | 693,000 | $ | 660,000 | 5.0 | % | 86.6 | % | ||||||||
Todd J Mullenger | $ | 332,800 | $ | 320,000 | 4.0 | % | 90.0 | % | ||||||||
Harley G. Lappin | $ | 312,000 | $ | 300,000 | 4.0 | % | 84.3 | % | ||||||||
Anthony L. Grande | $ | 312,000 | $ | 300,000 | 4.0 | % | 84.3 | % | ||||||||
Brian D. Collins | $ | 278,100 | $ | 270,000 | 3.0 | % | 89.7 | % |
Severance and Change in Control Benefits We believe that reasonable severance and change in control benefits are necessary in order to recruit and retain effective senior managers. These severance benefits reflect the fact that it may be difficult for such executives to find comparable employment within a short period of time and are a product of a generally competitive recruiting environment within our industry. We also believe that a change in control arrangement will provide an executive security that will likely reduce any reluctance of an executive to pursue a change in control transaction that could be in the best interests of our stockholders. In addition, we have sought to maintain a high level of consistency in the contractual terms applicable to all members of the executive team. We maintain employment agreements with each of our executive officers that provide cash severance equal to their current base salary for terminations without cause, and double trigger payment of 2.99 times their base salary, plus certain other benefits in the event of termination of employment by the Company (other than for “cause”) or resignation for “good reason” in connection with a “change in control”. The executive employment agreements and the potential costs in the event of a change in control are reviewed periodically by the Compensation Committee and the Committee stays abreast of developments and suggested best practices in compensation structure and design. The executive employment agreements were set to expire in December 2014. In 2014, we undertook a comprehensive review of the provisions of the executive employment agreements (including protections provided in the event of a change in control and compliance with applicable law) and on December 30, 2014 entered into new or revised employment agreements with each of our executives on substantially similar economic terms, updating the minimum salary payable under the agreement to equal the salary levels in effect for 2014, and updating the provisions to ensure compliance with applicable law, including Section 409A of the Internal Revenue Code. Under our equity award agreements, all outstanding equity awards would accelerate upon a change in control. The Compensation Committee believes that the single trigger equity acceleration encourages management to stay committed towards any potential transaction that may be in the best interests of our stockholders. For a detailed discussion of potential severance and change in control benefits, see “Potential Payments Upon Termination or Change in Control,” beginning on page 40 of this Proxy Statement.Cash Incentive PlanNon-Direct Compensation
Perquisites and Other Benefits
The Company has previously paid relocation expenses, either in the form of reimbursement or a lump sum payment, to the NEOs who have relocated to Nashville, Tennessee in order to assume their positions with the Company. We permit limited tax gross up payments to our executives to cover the income tax associated with the taxable portions (if any) of such relocation reimbursement payments. No such relocation and tax gross up payments were made to the named executive officers during 2015.
The named executive officers are also eligible for benefits generally available to and on the same terms as the Company’s employees who are exempt for purposes of the Fair Labor Standards Act, including health insurance, disability insurance, dental insurance and group life insurance. Additionally, the Company pays supplemental life and long-term disability insurance premiums for the named executive officers. Pursuant to their employment agreements and in order to encourage community involvement, the named executive officers are also eligible for reimbursement for certain civic and professional memberships that are approved in advance. We also pay for physicals for executive officers up to $2,000 per individual on an annual basis.
Retirement Plans
The Company maintains a 401(k) plan. The Company matches a percentage of eligible employee contributions to our qualified 401(k) Plan. Employer matching contributions are made in cash on a dollar-for-dollar basis up to 5% of the employee’s base salary and are 100% vested immediately.
The Company also has a nonqualified deferred compensation plan covering our executive officers and certain key employees. Under the terms of the deferred compensation plan, participants are allowed to defer up to 50% of their annual base salary and 100% of their incentive cash bonus each plan year. The Company, in its discretion, may make matching contributions to the plan. Currently, the Company makes matching contributions equal to 100% of amounts deferred up to 5% of total cash compensation. The matching contribution is credited on a monthly basis, but is reduced at the end of the plan year for any matching amounts contributed to the participant’s 401(k) account. Any compensation deferred and matching contributions, if any, earn a return based on a fixed rate that is established by the Company based on the return received by the Company on certain investments designated as a funding mechanism for meeting its obligations under the plan. Participants are 100% vested in amounts deferred under the deferred compensation plan and earnings on those amounts, while the matching contributions vest 20% after two years of service, 40% after three years of service, 80% after four years of service and 100% after five years of service, subject to accelerated vesting in the event of a change in control, death, disability or retirement (age 62). In addition to base salary, cash incentive plan compensation provides our executive officers with the potential for significantly enhanced cash compensation based on the extent to which financial performance targets set in advance by the Committee are met. The Committee established performance objectives that would reward senior management for significant growth in EPS. The Committee chose EPS as the measure because it believes there is a strong relationship between EPS growth and growth in stockholder value. The Company’s 2012 Cash Incentive Plan was structured to provide incremental increases in bonus (as a percentage of base salary) based on EPS as follows:
EPS(1) | % of Base Salary | |||
$1.54 | 0.00 | % | ||
$1.70 | 75.00 | % | ||
$1.74 | 100.00 | % | ||
$1.79 | 150.00 | % | ||
$1.85 | 200.00 | % |
The initial EPS guidance for 2012 as set forth in the Company’s earnings news release dated February 8, 2012, ranged from $1.60 to $1.70. The target for bonuses remained at 75% of base salary, which would be met if the Company achieved EPS of $1.70 for 2012. The maximum bonus was set at 200% of base salary, which would be met if the Company achieved $1.85, or 20% or more EPS growth over the “bonus EPS” achieved in 2011. At the time the Committee established the Company’s 2012 Cash Incentive Plan in February 2012, it determined to adjust bonus EPS for any of the items set forth in Section 11.2 of the Company’s Amended and Restated 2008 Stock Incentive Plan, specifically including the write-off of deferred financing costs, asset impairment charges, costs associated with evaluating Company-wide strategic alternatives and costs associated with responding to shareholder proposals, to the extent they affected the Company’s 2012 EPS, to ensure that bonus EPS reflected an accurate comparison with the baseline EPS and that incentive cash bonuses accurately reflected the extent to which the Company achieved the performance objectives set by the Committee. Based on bonus EPS of $1.60 for 2012, which represented a 3.9% growth of bonus EPS during fiscal 2012, the following cash incentive plan compensation was awarded to our Named Executive Officers in February 2013: Damon T. Hininger ($189,942); Todd J Mullenger ($91,678); Harley G. Lappin ($85,948); Anthony L. Grande ($85,948); and Brian D. Collins ($77,003). Such amounts represented 28.13% of each Named Executive Officer’s base salary earned during 2012. The Committee understands that in some situations using a single metric (EPS in this case) might have the potential to encourage management to take excessive risks. However, the Committee believes that these potential concerns are mitigated by the Company’s share ownership guidelines and multi-year equity vesting schedules, which strongly discourage misguided attempts to maximize short-term EPS while risking long-term stability.
Long-Term Stock-Based Incentive Compensation. As described above, one of our key compensation philosophies is that long-term stock-based incentive compensation strengthens and aligns the interests of our executive officers with our stockholders. Based on the PwC market analysis discussed above and the Company’s compensation philosophies, the Committee has determined that a compensation strategy utilizing a mix of stock options with time-based vesting and restricted stock and/or restricted stock units with time-based or performance-based vesting is in the best interest of stockholders. The Committee believes this strategy allows it to set optimal combinations of time- and performance-based vesting and annual and long-term performance goals. The Committee also believes this approach will reduce the dilutive impact of equity grants to management compared to equity grants consisting solely of stock options.
Equity incentive awards are generally granted to our executive officers on an annual basis. Award levels in 2012 for the Company’s Named Executive Officers were consistent with the market-based 2012 compensation structure prepared with the advice of PwC and approved by the Committee. The Committee believed these awards were consistent with the Company’s retention, pay-for-performance and stockholder alignment objectives. In making this decision, the Committee also considered existing equity holdings for each executive officer as well as gross proceeds from option exercises over the prior three-year period.
During 2012, non-qualified options for the purchase of the Company’s common stock and restricted stock units were granted to our Named Executive Officers, pursuant to the Company’s Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”), as follows:
Name | Shares Subject to Time-Based Vesting Option Grant | Exercise Price(1) | Number of Performance- Based Vesting RSUs | |||||||||
Damon T. Hininger | 118,490 | $ | 26.26 | 33,616 | ||||||||
Todd J Mullenger | 57,047 | $ | 26.26 | 16,184 | ||||||||
Harley G. Lappin | 57,047 | $ | 26.26 | 16,184 | ||||||||
Anthony L. Grande | 57,047 | $ | 26.26 | 16,184 | ||||||||
Brian D. Collins | 46,980 | $ | 26.26 | 13,328 |
The nonqualified options are subject to the terms of the 2008 Plan and the individual award agreements. The options vest in equal one third increments as of the first, second and third anniversary dates of the grant date, subject to acceleration as contemplated by the 2008 Plan. Each of the options has an exercise price equal to the fair market value of our common stock at the time of the grant, as determined by the closing price of our common stock on the NYSE on the grant date.
The restricted stock units vest over time and are based upon achieving EPS performance objectives established by the Committee (achievable in increments or in the aggregate over a three-year period), with no vesting to occur below a base EPS performance level and incremental vesting from 50% to 100% of the award (target of 75% of the award) as established EPS targets are achieved. As with the EPS targets generally set for the annual incentive plan, the EPS levels for vesting of restricted stock units were based on research conducted by PwC on multi-year EPS growth rates among the peer companies as well as general industry information. The Committee will also adjust EPS targets for restricted stock unit vesting purposes in the same manner as it does when calculating bonus EPS (discussed above).
Restricted stock units vest over a three year period based on the extent to which the Company meets the annual and cumulative performance targets set by the Committee. Vesting may occur on an incremental or a cumulative basis, or a combination thereof. For example, for the 2012 restricted stock units:
Vesting will occur annually in one-third (1/3) increments if the Company achieves 8% compounded EPS growth for each of fiscal 2012 and 2013 and at least 6% compounded EPS growth over long term EPS growth targets previously established by the Committee for the full fiscal 2012-2014 vesting period.
If the Company does not achieve 8% compounded EPS growth in fiscal 2012 but does achieve 8% compounded EPS growth for fiscal 2012 and 2013, then two-thirds (2/3) will generally vest on the second anniversary of the grant date.
If compounded EPS is less than 8% as of the end of both fiscal 2012 and 2013, then generally on the third anniversary of the grant date: 50% of the shares will vest if compounded EPS growth for fiscal 2012-2014 is at least 2% but less than 4%, 75% will vest if compounded EPS growth for fiscal 2012-2014 is at least 4% but less than 6% and 100% will vest if compounded EPS growth for fiscal 2012-2014 is at least 6%.
The following chart sets forth the cumulative EPS vesting targets for the 2012 restricted stock units, with the incremental targets stated in the footnotes to the chart:
Three-Year Cumulative EPS(1) (2) | Compounded Growth | % of Restricted Shares Vested After 3 Years | ||||||
Less than $3.21 | < 2 | % | 0 | %(3) | ||||
$3.21 | 2 | % | 50 | %(3) | ||||
$3.69 | 4 | % | 75 | % | ||||
Greater than or equal to $4.18 | 6 | % | 100 | % |
Notwithstanding the foregoing, the restricted stock units will become fully vested upon the occurrence of death, Disability, or a Change in Control of the Company (each such condition as defined in the 2008 Plan). The recipient of the restricted stock may elect to defer receipt of all or a portion of the shares issuable upon vesting pursuant to the terms set forth in their respective award agreement and deferral election forms. The restricted stock units are further subject to the terms of the 2008 Plan and the individual award agreements.
The dollar values of the 2012 grants of restricted stock units, based on the fair market value of the Company’s common stock on the date of the grant, are as follows: Damon T. Hininger ($882,756); Todd J Mullenger ($424,992); Harley G. Lappin ($424,992); Anthony L. Grande ($424,992); and Brian D. Collins ($349,993). Based on bonus EPS of $1.60 for 2012, representing EPS growth of 3.9%, the first one-third of the restricted stock units awarded to Messrs. Hininger, Mullenger, Lappin, Grande and Collins in 2012 vested during the first quarter of 2013.
Retirement Plans. The Company matches a percentage of eligible employee contributions to our qualified 401(k) Plan. Employer matching contributions are made in cash. Discretionary matching contributions vest 20% after two years of service, 40% after three years of service, 80% after four years of service and 100% after five years of service. Effective January 1, 2012, the 401(k) Plan adopted a safe harbor match provision which provides that safe harbor matching contributions are 100% vested immediately. Of the Named Executive Officers, only Messrs. Hininger, Mullenger and Grande participated in the 401(k) Plan during 2012, with respect to whom the Company matched contributions in the amount of $12,500 for Mr. Hininger, $12,500 for Mr. Mullenger and $12,500 for Mr. Grande.
The Company also has a nonqualified deferred compensation plan covering our executive officers and certain key employees. Under the terms of the deferred compensation plan, participants are allowed to defer up to 50% of their annual base salary and 100% of their incentive cash bonus each plan year. The
Company, in its discretion, may make matching contributions to the plan. Currently, the Company makes matching contributions equal to 100% of amounts deferred up to 5% of total cash compensation. The matching contribution is credited on a monthly basis, but is reduced at the end of the plan year for any matching amounts contributed to the participant’s 401(k) account. Any compensation deferred and matching contributions, if any, earn a return determined based on the return received by the Company on certain investments designated as a funding mechanism for meeting its obligations under the plan. Participants are 100% vested in amounts deferred under the plan and earnings on those amounts, while the matching contributions vest in the same manner as discretionary matching contributions under the 401(k) Plan. Participants generally may make an up-front election to receive benefits accrued under the plan at any time after the end of the fifth year following the deferral or upon termination of employment, subject to certain restrictions (e.g., certain key employees, including the Named Executive Officers, are subject to a six month waiting period). Messrs. Hininger, Mullenger, Lappin, Grande, and Collins each participated in the Company’s executive nonqualified deferred compensation plan during 2012, with respect to whom the Company matched contributions in the amounts of $77,279, $34,180, $32,354, $31,162, and $27,374, respectively.
Severance and Change in Control Benefits.We believe that reasonable severance and change in control benefits are necessary in order to recruit and retain effective senior managers. These severance benefits reflect the fact that it may be difficult for such executives to find comparable employment within a short period of time and are a product of a generally competitive recruiting environment within our industry. We also believe that a change in control arrangement will provide an executive security that will likely reduce the reluctance of an executive to pursue a change in control transaction that could be in the best interests of our stockholders. In addition, we have sought to maintain a high level of consistency in the contractual terms applicable to all members of the executive team. The executive employment agreements and the potential costs in the event of a change in control are reviewed periodically by the Compensation Committee and the Committee stays abreast of developments and suggested best practices in compensation structure and design. In 2011, the Company undertook a comprehensive review of the provisions of the executive employment agreements (including protections provided in the event of a change in control) and entered into new or revised employment agreements with each of its executives. Based on the competitive analysis conducted by PwC in 2011 and described above, the Committee determined that the Company’s severance and change in control benefits were at the lower end of competitive norms within our peer group. For a detailed discussion of potential severance and change in control benefits, see “Potential Payments Upon Termination or Change in Control,” beginning on page 55 of this Proxy Statement.
Perquisites and Other Benefits. The Company has previously paid relocation expenses, either in the form of reimbursement or a lump sum payment, to the Named Executive Officers who have relocated to Nashville, Tennessee in order to assume their positions with the Company, and has made tax gross up payments to such officers to cover income tax associated with the taxable portions (if any) of such payments. No such relocation and tax gross up payments were made to the Named Executive Officers during 2012. The Named Executive Officers are also eligible for benefits generally available to and on the same terms as the Company’s employees who are exempt for purposes of the Fair Labor Standards Act, including health insurance, disability insurance, dental insurance and life insurance. Pursuant to their employment agreements and in order to encourage community involvement, the Named Executive Officers are also eligible for reimbursement for certain civic and professional memberships that are approved in advance by the Company. The Company also pays for physicals for executive officers up to $2,000 per individual on an annual basis.
Stock Ownership Guidelines and Equity Grant TimingPolicies
Stock Ownership Guidelines. The Company’s original stock ownership guidelines were adopted by the Board of Directors during the first quarter of 2007 for the Company’s executive officers and directors and became effective on March 1, 2007. The stock ownership guidelines were amended by the Board of Directors during the first quarter of 2012 to include for the purpose of calculating stock ownership under the Guidelines the beneficial ownership of securities held by executive officers and directors, directly or indirectly, through legal entities established for estate planning purposes (subject to approval by the Compensation Committee) and to confirm inclusion of shares of restricted stock or restricted stock units where the restrictions have lapsed, but for which an election to defer receipt of the shares has been made. These amendments became effective on February 23, 2012. Other than these amendments, the guidelines remain unchanged as originally adopted. The stock ownership guidelines are designed to align the economic interests of executive officers and directors with those of shareholders, and to discourage excessive risk-taking by management and directors.
The guidelines provide that the Company’s executive officers are expected to own a fixed number of shares of common stock of the Company equal
Stock Ownership Guidelines
Since March 1, 2007, we have maintained stock ownership guidelines applicable to our executive officers and directors. The stock ownership guidelines are designed to align the economic interests of executive officers and directors with those of stockholders, and to discourage excessive risk-taking by management and directors.
The original guidelines provided that our executive officers are expected to own a fixed number of shares of common stock of the Company, as set forth in the table below. This fixed number equals three times such executive officer’s base salary in effect as of the Effective Date divided by the Company’s closing common stock price, as reported on the NYSE, on the Effective Date. For any individual who became an executive officer after the Effective Date, base salary and closing common stock price are determined based on such executive officer’s base salary on their hire or promotion date divided by the Company’s closing common stock price, as reported on the NYSE, on such date. The original guidelines also provided that the Company’s non-executive directors are expected to own a fixed number of shares of common stock of the Company equal to four times such director’s annual retainer (excluding any retainer for chairing or serving as a member of a committee) in effect as of March 1, 2012 or their later date of hire or promotion, as applicable. Executive officers are required to achieve these ownership levels, subject to a limited hardship exemption, five years following their date of hire or promotion, as applicable, or, in the case of persons who were executive officers at the time these guidelines were adopted, by March 1, 2012.
The guidelines also provide that the Company’s non-executive directors are expected to own a fixed number of shares of common stock of the Company equal to four times such director’s annual retainer (excluding any retainer for chairing or serving as a member of a committee) in effect as of the Effective Date divided by the Company’s closing common stock price, as reported on the NYSE, on the Effective Date. For any individual who became a non-executive director after the Effective Date, annual retainer and closing common stock price are determined based on the date of such director’s initial election or appointment to the Board. Non-executive directors are required to achieve these ownership levels, subject to a limited hardship exemption, five years following their initial election or appointment to the Board, or (in the case of directors serving on the Board, divided by the Company’s closing common stock price, as reported on the NYSE, on such date.
The stock ownership guidelines applicable to our executive officers and our non-executive directors were amended by our Board in May 2013 to increase the number of shares the directors and officers of the Company are expected to own to give effect to the REIT conversion special dividend.
Executive officers and non-executive directors are required to achieve these ownership levels, subject to a limited hardship exemption, within five years following their date of hire or promotion, or initial appointment or election, as applicable, or (in the case of those serving at the time the guidelines were adopted) by March 1, 2012.
The following may be used in determining share ownership:
shares of common stock owned outright by the executive officer or non-executive director and his or her immediate family members who share the same household, whether held individually or jointly;
shares of restricted stock or restricted stock units where the restrictions have lapsed, even though such shares may be subject to an election made by the executive to defer receipt of the shares;
shares acquired upon stock option exercise;
shares purchased in the open market; and
shares held in trusts or other legal entities established for estate planning purposes with respect to which the executive officer or non-executive director retains beneficial ownership (due to complexities of these arrangements, requests to include shares held in such arrangements must be reviewed and approved by the Committee).
The guidelines were based, in part, on information provided by PwC that summarized the frequency of such programs at Fortune 500 companies and reported on the most common types of such programs. Based on such research, the Board of Directors determined that three times and four times were fair, yet challenging, multiples for share ownership and that five years was a reasonable time period during which executives and directors would be able to comply. The Committee believes that these ownership guidelines encourage executive officers and directors of the Company to act in the long-term interests of our shareholders, while discouraging excessive risk-taking.
Our guidelines and the compliance status of the Company’s Named Executive Officers as of March 18, 2013 are shown in the table below.
Name | Shares Needed to Comply with Guidelines | Current Number of Shares Held | Compliance Date | |||||||
Damon T. Hininger | 74,135 | 87,137 | October 15, 2014 | |||||||
Todd J Mullenger | 32,271 | 79,277 | March 16, 2012 | |||||||
Harley G. Lappin | 40,632 | 9,385 | June 1, 2016 | |||||||
Anthony L. Grande | 30,348 | 59,984 | August 21, 2013 | |||||||
Brian D. Collins | 33,035 | 25,034 | September 4, 2014 |
Grant Timing Policy. To ensure that our equity compensation awards are granted appropriately, we have the following practices regarding the timing of equity compensation grants and for stock option exercise price determinations:
Grants of stock options and restricted stock for executive officers are typically made on the date of the Company’s February Compensation Committee meeting, after the Committee has had the opportunity to review full year results for the prior year and consider the Company’s anticipated results for the current year.
Each stock option that was granted in fiscal 2012 had an exercise price equal to the fair market value of the Company’s common stock at the time of grant, as determined by the closing market price on the grant date.
The Committee occasionally approves additional equity incentive awards in certain special circumstances, such as upon an executive officer’s initial employment with the Company, the promotion of an executive officer to a new position or in recognition of special contributions made by an executive officer. For grants to executive officers, all such grants are approved by the Committee with an effective date of grant on or after the date of such approval. If the grant date is after the date of approval, it is on a date that is specified by the Committee at the time of approval.
The Company strives to ensure that equity grants are made following the public release of important information such as year-end results or anticipated results for the succeeding year.
Compensation Decisions for 2013
2013 Performance Criteria. In connection with the Company’s conversion to a REIT, the Committee is evaluating the appropriate metrics by which to measure individual and corporate performance for purposes of establishing performance targets for the Company’s 2013 Cash Incentive Plan. The Committee also intends that any incentive cash compensation paid for 2013 satisfy any applicable requirements as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. Accordingly, the Committee has approved performance targets for the 2013 Cash Incentive Plan based on the achievement of positive EPS for 2013, with a maximum target bonus for the named executive officers equal to 200% of base salary. Recognizing these maximum target payouts could result in the named executive officers receiving cash incentive amounts in excess of what the Committee believes are appropriate levels, the Committee indicated to management that it may use its discretion to reduce cash incentive compensation payable to the executives for 2013 to levels below maximum target bonus amounts based on such additional factors the Committee may deem relevant to the assessment of individual or corporate performance for the 2013 performance period. Such factors may include the achievement of performance objectives consistent with the Company’s conversion to a REIT, including, for example, targets based on the Company’s funds from operations (calculated as the Company’s net income computed in accordance with generally accepted accounting principles, excluding gains or losses from sales of property and extraordinary items, plus depreciation and amortization of real estate and impairment of depreciable real estate) and similar financial metrics.
2013 Equity Grants. During February 2013, the Committee made awards of time-based restricted stock units to certain of its executive officers. The table below summarizes the 2013 equity incentive grants to certain of the Company’s executive officers, including the Named Executive Officers, which reflects the Committee’s determination that LTIP values for these individuals should generally be aligned with a 50/50 blend of competitive 50th and 75th percentiles for position levels within the benchmarks from the PwC market analysis (except for the General Counsel and Chief Human Resources Officer, to whom the Committee has aligned LTIP values with the 75th percentile).
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Company Tax and Accounting Implications
The guidelines were based, in part, on information provided by PwC that summarized the frequency of such programs at Fortune 500 companies and reported on the most common types of such programs. Based on such research, the Board of Directors determined that ownership requirements were fair, yet challenging, ownership requirements and that five years was a reasonable time period during which executives and directors would be able to comply. The Committee believes that these ownership guidelines encourage executive officers and directors of the Company to act in the long-term interests of our stockholders, while discouraging excessive risk-taking.
Our guidelines and the compliance status of the Company’s named executive officers as of the last quarterly review date of February 2, 2016 are shown in the table below.
Name | Shares Required by Guidelines | Number of Shares Held | Compliance Date | |||||||||
Damon T. Hininger | 87,138 | 162,245 | 10/15/2014 | |||||||||
David M. Garfinkle | 32,777 | 48,927 | 5/1/2019 | |||||||||
Harley G. Lappin | 47,759 | 61,177 | 6/1/2016 | |||||||||
Anthony L. Grande | 35,671 | 39,856 | 8/21/2013 | |||||||||
Steven E. Groom | 39,751 | 61,967 | 4/22/2015 |
Grant Timing Policy
To ensure that our equity compensation awards are granted appropriately, we have the following practices regarding the timing of equity compensation grants and for stock option exercise price determinations:
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility on the Company’s tax return of compensation over $1.0 million to the Chief Executive Officer or any of the other four most highly compensated executive officers serving at the end of the fiscal year unless, in general, a significant portion of the compensation paid is pursuant to a plan which is performance-related, non-discretionary, and has been approved by our stockholders. The Compensation Committee’s actions with respect to
Section 162(m) in 2015 were to make reasonable efforts to ensure that compensation was deductible to the extent permitted while simultaneously providing appropriate rewards for performance. The Committee intends to structure performance-based compensation awarded in the future to executive officers who may be subject to Section 162(m) in a manner that satisfies the relevant requirements. The Committee, however, reserves the authority to award non-deductible compensation as deemed appropriate. Further, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and related regulations, no assurance can be given that compensation intended to satisfy the requirements for deductibility under Section 162(m) will in fact do so.
Report of the Compensation Committee
Deductibility of Executive Compensation. Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility on the Company’s tax return of compensation over $1.0 million to the Chief Executive Officer or any of the other four most highly compensated executive officers serving at the end of the fiscal year unless, in general, a significant portion of the compensation paid is pursuant to a plan which is performance-related, non-discretionary, and has been approved by our stockholders. The Compensation Committee’s actions with respect to Section 162(m) in 2012 were to make reasonable
efforts to ensure that compensation was deductible to the extent permitted while simultaneously providing appropriate rewards for performance. The Committee intends to structure time and performance based compensation awarded in the future to executive officers who may be subject to Section 162(m) in a manner that satisfies the relevant requirements. The Committee, however, reserves the authority to award non-deductible compensation as deemed appropriate. Further, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and related regulations, no assurance can be given that compensation intended to satisfy the requirements for deductibility under Section 162(m) will in fact do so.
Report of the Compensation Committee
The following Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with our management. Taking this review and discussion into account, the undersigned Committee members recommended to the Board of Directors that the Board approve the inclusion of the Compensation Discussion and Analysis in our Proxy Statement on Schedule 14A for filing with the SEC.
Submitted by the Compensation Committee of the Board of Directors:
Joseph V. Russell, Chair
Robert J. Dennis
Mark A. Emkes
John R. Prann, Jr.
The following table summarizes the compensation earned or paid to our named executive officers for service in the fiscal years ended December 31, 2015, 2014 and 2013, with the exception of Mr. Garfinkle, who first became a named executive officer in 2014.
Name and Principal Position | Year | Salary ($) | Stock Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||||||||
Damon T. Hininger | 2015 2014 2013 | $ $ $ | 882,807 811,231 737,231 | $ $ $ | 1,946,449 1,946,477 1,853,782 | $ $ $ | 450,232 822,750 344,066 | $ $ $ | 25,148 14,533 20,910 | $ $ $ | 100,681 71,126 326,471 | $ $ $ | 3,405,317 3,666,117 3,282,460 | |||||||||||||||
David M. Garfinkle (1) | 2015 2014 | $ $ | 387,347 323,013 | $ $ | 937,109 937,127 | $ $ | 197,547 287,070 | $ $ | 5,697 3,073 | $ $ | 41,738 26,124 | $ $ | 1,569,438 1,576,407 | |||||||||||||||
Harley G. Lappin | 2015 2014 2013 | $ $ $ | 422,527 377,434 332,673 | $ $ $ | 937,109 937,140 892,490 | $ $ $ | 215,489 382,793 155,258 | $ $ $ | 4,347 2,343 3,449 | $ $ $ | 55,789 39,727 130,836 | $ $ $ | 1,635,261 1,739,437 1,514,706 | |||||||||||||||
Anthony L. Grande | 2015 2014 2013 | $ $ $ | 422,527 377,434 332,673 | $ $ $ | 937,109 937,140 892,490 | $ $ $ | 215,489 382,793 155,258 | $ $ $ | 14,793 8,837 13,176 | $ $ $ | 49,941 33,911 161,264 | $ $ $ | 1,639,859 1,740,115 1,554,861 | |||||||||||||||
Steven E. Groom | 2015 2014 2013 | $ $ $ | 335,736 308,233 282,319 | $ $ $ | 771,763 771,757 735,009 | $ $ $ | 171,225 312,610 131,758 | — — — | $ $ $ | 29,102 28,852 138,599 | $ $ $ | 1,307,826 1,421,452 1,287,685 |
(1) | Mr. Garfinkle was appointed as Executive Vice President and Chief Financial Officer effective as of May 1, 2014. Compensation reported is for the full 2014 fiscal year. |
(2) | The amounts shown in this column represent the aggregate grant-date fair value of restricted stock units (“RSUs”) and performance-based RSUs granted during the given year calculated in accordance with FASB ASC Topic 718. Performance-based RSUs granted in 2014 and 2015 vest based upon achieving normalized FFO performance objectives that were pre-established by the Compensation Committee. Time-based RSUs granted in 2013 vest in 1/3rd increments per year commencing with the first anniversary of the grant date. The grant date values for the 2015 performance-based RSUs presented reflect the probable outcome that the performance conditions will be met as estimated on the date of grant. At the time of grant for the 2015 performance-based RSUs, it was determined that maximum performance under the performance condition was the probable outcome, and thus the grant date fair value was determined based on $40.24 per share (reflecting such probability) multiplied by the maximum number of shares that may vest, which equates to the number granted. All grants of equity awards were made under the Company’s 2008 Plan and are subject to individual award agreements. RSUs, including our performance-based RSUs, earn dividend equivalent rights, that accumulate and are paid in cash when and only to the extent the underlying award vests. |
(3) | The amounts shown in this column reflect cash incentive plan compensation earned pursuant to the Company’s Cash Incentive Plan, which is discussed in further detail on page 29 under the heading “Annual Cash Incentive Plan Compensation” in the Compensation Discussion and Analysis |
(4) | The amounts shown in this column represent above-market earnings on amounts that the
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(5) | The amounts shown as All Other Compensation for 2015 include the following: |
Name | 401(k) Plan Matching Contributions | DCP Matching Contributions | Life Insurance Premiums | Long Term Disability Premiums (a) | ||||||||||||
Damon T. Hininger | $ | 13,250 | $ | 72,028 | $ | 2,399 | $ | 13,004 | ||||||||
David M. Garfinkle | $ | 13,250 | $ | 20,471 | $ | 2,764 | $ | 5,253 | ||||||||
Harley G. Lappin | $ | 13,250 | $ | 25,876 | $ | 7,412 | $ | 9,251 | ||||||||
Anthony L. Grande | $ | 13,250 | $ | 27,016 | $ | 2,273 | $ | 7,402 | ||||||||
Steven E. Groom | $ | 13,250 | — | $ | 8,529 | $ | 7,323 |
Payment by
(a) | The Company pays the |
Grants of Plan-Based Awards in 2015
The following table sets forth the grants of plan-based awards that were made to the named executive officers during the fiscal year ended December 31, 2015. No options were granted to our named executive officers in 2015.
Name | Grant Date | Estimated Possible Payouts Under Non- Equity Incentive Plan Awards(1) | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | Grant Date Fair Value of Stock Awards ($)(3) | ||||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||||
Damon T. Hininger | 2/19/2015 | 16,124 | (2 | ) | 48,371 | $ | 1,946,449 | |||||||||||||||||||||||||
2/19/2015 | $ | 44,140 | $ | 662,105 | $ | 1,765,614 | ||||||||||||||||||||||||||
David M. Garfinkle | 2/19/2015 | 7,763 | (2 | ) | 23,288 | $ | 937,109 | |||||||||||||||||||||||||
2/19/2015 | $ | 19,367 | $ | 290,510 | $ | 774,694 | ||||||||||||||||||||||||||
Harley G. Lappin | 2/19/2015 | 7,763 | (2 | ) | 23,288 | $ | 937,109 | |||||||||||||||||||||||||
2/19/2015 | $ | 21,126 | $ | 316,895 | $ | 845,054 | ||||||||||||||||||||||||||
Anthony L. Grande | 2/19/2015 | 7,763 | (2 | ) | 23,288 | $ | 937,109 | |||||||||||||||||||||||||
2/19/2015 | $ | 21,126 | $ | 316,895 | $ | 845,054 | ||||||||||||||||||||||||||
Steven E. Groom | 2/19/2015 | 6,393 | (2 | ) | 19,179 | $ | 771,763 | |||||||||||||||||||||||||
2/19/2015 | $ | 16,787 | $ | 251,802 | $ | 671,472 |
(1) | The amounts shown in these columns reflect the threshold (5% of actual salary), target (75% of actual salary) and maximum (200% of actual salary) amounts that each of the
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(2) | The amounts shown in these columns reflect as threshold, the minimum number (or 1/3rd of the granted amount) of performance-based RSUs that could vest if only one tranche of the performance-based RSUs achieve the normalized FFO performance goals. Maximum reflects vesting in full of all of the performance-based RSUs granted, which occurs when maximum performance under the normalized FFO per share performance goals is achieved for each of 2015, 2016 and 2017, resulting in the vesting of each of the three tranches following each such year. Target is not established, as vesting may range from 1/3rd, 2/3rd or 100% of the number of performance-based RSUs granted. The performance-based RSUs were awarded pursuant to the Company’s 2008 Plan and have dividend equivalent rights payable in cash, but only to the extent and when the performance-based RSUs vest and the underlying shares are issued. The performance-based RSUs are discussed in further detail beginning on page 31 under the heading “Performance-Based Equity Incentive Compensation” in the Compensation Discussion and Analysis section of this Proxy Statement. |
(3) | The amounts shown in this column represent the aggregate grant-date fair value of the performance–based RSUs granted in 2015 calculated in accordance with FASB ASC Topic 718. These awards vest in 1/3rd increments based upon achieving normalized FFO per share performance objectives that were pre-established by the Compensation Committee. At the time of grant for the 2015 performance-based RSUs, it was determined that maximum performance under the performance condition was the probable outcome, and thus the grant date fair value was determined based on $40.24 per share for the February 19, 2015 grants (reflecting such probability) multiplied by the maximum number of shares that may vest, which equates to the number granted. |
On December 30, 2014, the Company entered into new employment agreements with each of our named executive officers, which replaced the existing employment agreements that were scheduled to expire on December 31, 2014. Each agreement is effective as of January 1, 2015 and has an initial term that expires on December 31, 2015, subject to two automatic one-year renewals unless either party provides notice of non-renewal at least 60 days in advance of the expiration of the then current term. Each of the employment agreements for our named executed officers has automatically renewed. Each of these agreements provides for a minimum annual salary that is consistent with the base salary in effect on December 30, 2014. In addition, during the term, the executives are eligible to participate in all compensation or employee benefit plans or programs maintained by the Company for the benefit of its salaried employees or senior executives from time to time. These plans and programs may include health and life insurance. In addition, during the term, these agreements provide for reimbursement for certain professional and civic memberships that are approved in advance by the Company. Each of the employment agreements continued the severance benefits and provisions that were in effect under the previous agreements and which are more fully discussed under “Potential Payments Upon Termination or Change in Control.”
Outstanding Equity Awards at 2015 Fiscal Year-End
The following table sets forth information concerning (1) options, (2) unvested time-based RSUs and (3) unearned performance-based RSUs for each of the named executive officers that were outstanding as of December 31, 2015. The following awards reflect (a) the equitable and proportionate adjustments made to our outstanding options as a result of the REIT conversion special dividend of $6.66 per share paid in May 2013, resulting in an increase in the outstanding number of options and a corresponding reduction in the exercise price, and (b) the dividend equivalents that were awarded as a result of the REIT conversion special dividend on the then outstanding RSUs.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares, Units or Other Rights That Have Not Vested(2) | Market Value of Shares, Units or Other Rights That Have Not Vested(2) | Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||
Time-based RSUs | Performance-based RSUs | |||||||||||||||||||||||||||||||
Damon T. Hininger | 13,409 | $ | 22.57 | 2/16/2017 | 19,588 | $ | 518,886 | 40,064 | (3) | $ | 1,061,295 | (3) | ||||||||||||||||||||
38,112 | $ | 22.72 | 2/20/2018 | 48,371 | (3) | $ | 1,281,348 | (3) | ||||||||||||||||||||||||
14,027 | $ | 24.00 | 8/14/2018 | |||||||||||||||||||||||||||||
35,324 | $ | 17.38 | 8/13/2019 | |||||||||||||||||||||||||||||
126,924 | $ | 17.57 | 2/18/2020 | |||||||||||||||||||||||||||||
107,298 | $ | 20.78 | 2/23/2021 | |||||||||||||||||||||||||||||
139,273 | $ | 22.34 | 3/16/2022 | |||||||||||||||||||||||||||||
David M. Garfinkle | 11,345 | $ | 12.14 | 2/15/2016 | 2,979 | $ | 78,914 | 19,264 | (3) | $ | 510,303 | (3) | ||||||||||||||||||||
13,409 | $ | 22.57 | 2/16/2017 | 23,288 | (3) | $ | 616,899 | (3) | ||||||||||||||||||||||||
16,008 | $ | 22.72 | 2/20/2018 | |||||||||||||||||||||||||||||
24,012 | $ | 9.13 | 2/18/2019 | |||||||||||||||||||||||||||||
19,385 | $ | 17.57 | 2/18/2020 | |||||||||||||||||||||||||||||
16,314 | $ | 20.78 | 2/23/2021 | |||||||||||||||||||||||||||||
15,881 | 5,294 | $ | 22.34 | 3/16/2022 | ||||||||||||||||||||||||||||
Harley G. Lappin | 9,432 | $ | 249,854 |
| 19,289 23,288 | (3) (3) | $ $ | 510,966 616,899 | (3) (3) | |||||||||||||||||||||||
Anthony L. Grande | 9,432 | $ | 249,854 |
| 19,289 23,288 | (3) (3) | $ $ | 510,966 616,899 | (3) (3) | |||||||||||||||||||||||
Steven E. Groom | 4,907 | $ | 22.34 | 3/16/2022 | 7,768 | $ | 205,774 |
| 15,885 19,179 | (3) (3) | $ $ | 420,794 508,052 | (3) (3) |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) (3) | Exercise or Base Price of Option Awards ($/sh)(4) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||
Damon T. Hininger | 3/16/2012 | 16,808 | 25,212 | 33,616 | $ | 882,756 | ||||||||||||||||||||||||||||||||||
3/16/2012 | 118,490 | $ | 26.26 | $ | 882,751 | |||||||||||||||||||||||||||||||||||
N/A | $ | 31,668 | $ | 506,423 | $ | 1,350,462 | ||||||||||||||||||||||||||||||||||
Todd J Mullenger | 3/16/2012 | 8,092 | 12,138 | 16,184 | $ | 424,992 | ||||||||||||||||||||||||||||||||||
3/16/2012 | 57,047 | $ | 26.26 | $ | 425,000 | |||||||||||||||||||||||||||||||||||
N/A | $ | 15,285 | $ | 244,431 | $ | 651,816 | ||||||||||||||||||||||||||||||||||
Harley G. Lappin | 3/16/2012 | 8,092 | 12,138 | 16,184 | $ | 424,992 | ||||||||||||||||||||||||||||||||||
3/16/2012 | 57,047 | $ | 26.26 | $ | 425,000 | |||||||||||||||||||||||||||||||||||
N/A | $ | 14,330 | $ | 229,154 | $ | 611,078 | ||||||||||||||||||||||||||||||||||
Anthony L. Grande | 3/16/2012 | 8,092 | 12,138 | 16,184 | $ | 424,992 | ||||||||||||||||||||||||||||||||||
3/16/2012 | 57,047 | $ | 26.26 | $ | 425,000 | |||||||||||||||||||||||||||||||||||
N/A | $ | 14,330 | $ | 229,154 | $ | 611,078 | ||||||||||||||||||||||||||||||||||
Brian D. Collins | 3/16/2012 | 6,664 | 9,996 | 13,328 | $ | 349,993 | ||||||||||||||||||||||||||||||||||
3/16/2012 | 46,980 | $ | 26.26 | $ | 350,001 | |||||||||||||||||||||||||||||||||||
N/A | $ | 12,838 | $ | 205,304 | $ | 547,478 |