UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
the Securities Exchange Act of 1934
(Amendment (Amendment No. )
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KELLY SERVICES, INC.Kelly Services, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than The Registrant)
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2016 PROXY STATEMENT
Notice of 2016 Annual Meeting of
Stockholders and Proxy Statement
May 11, 2016
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April 11, 20169, 2018
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of Kelly Services, Inc., which will be held at 11:00 a.m., Eastern Daylight Time, on Wednesday, May 11, 2016,9, 2018, in the Auditorium located on the first floor of our headquarters building at 999 West Big Beaver Road, Troy, Michigan 48084-4716.
Matters scheduled for considerationAs explained in the enclosed Proxy Statement, at this Meeting areyear’s meeting you will be asked to vote on the election of Directors, ana non-binding advisory vote on executive compensation, the amendment and restatement of the Company’s Certificate of Incorporation, an amendment to the Company’s amended and restated Bylaws, and the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2016.2018.
Whether you plan to attend or not, please date, sign and return the proxy card in the accompanying envelope. envelope, or vote by telephone or via the Internet as soon as possible so that your shares can be voted at the meeting in accordance with your instructions.Your vote is important to us. If you do attendus. You may, of course, withdraw your proxy and change your vote prior to or at the Annual Meeting and desire to voteby following the steps described in person, you may do so even though you have previously submitted your proxy.the Proxy Statement.
We appreciate the strong support of our stockholders over the years and look forward to seeing you at the Meeting.meeting.
Sincerely, |
TERENCE E. ADDERLEY
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Chairman of the Board |
GEORGE S. C |
President and Chief Executive Officer |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held May 9, 2018. The following materials, also included with the Notice of Annual Meeting of Stockholders, are available for view on the Internet:
Proxy Statement for the Annual Meeting of Stockholders Annual Report to Stockholders, including Form 10-K, for the year ended December 31, 2017 To view the Proxy Statement or Annual Report visit: www.envisionreports.com/kelyb. |
Please refer to the enclosed Proxy Card and Proxy Statement for information on voting options:
Internet – Scan QR Code – Telephone – Mail
KELLY SERVICES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
Kelly Services, Inc.:
Notice is hereby given that the Annual Meeting of StockholdersWe are pleased to invite you to join our Board, senior leadership and other associates of Kelly Services, Inc., a Delaware corporation (the “Company”), willfor the Annual Meeting of Stockholders, to be held at the offices of the Company, 999 West Big Beaver Road, Troy, Michigan 48084-4716, on Wednesday, May 11, 20169, 2018 at 11:00 a.m., Eastern Daylight Time, forTime. The purposes of the following purposes:Annual Meeting are:
1. | To elect Directors as set forth in the accompanying Proxy Statement; |
2. | To approve, by advisory vote, the Company’s executive compensation; |
3. | To approve the amendment and restatement of the Company’s Restated Certificate of Incorporation to eliminate certain obsolete provisions, to eliminate a “stakeholder provision” that could conflict with Delaware law, and to make additional revisions in the interest of modernization; |
4. | To approve an amendment to the Company’s Amended and Restated Bylaws to designate the Delaware Chancery Court as the exclusive forum for certain legal actions; |
5. | To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the |
To transact any other business as may properly come before the Meeting or any postponement or adjournment thereof. |
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFOR EACH DIRECTOR NOMINEE AS SET FORTH IN PROPOSAL 1,FOR THE APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION AS SET FORTH IN PROPOSAL 2,FOR THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY’S CERTIFICATE OF INCORPORATION AS SET FORTH IN PROPOSAL 3,FOR THE APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED BYLAWS AS SET FORTH IN PROPOSAL 4, ANDFOR RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AS SET FORTH IN PROPOSAL 3.5.
Only holders of record of the Company’s Class B common stock at the close of business on the Record Date, March 21, 201619, 2018, are entitled to notice of and to vote at the Meeting.
To ensure a quorum, it is important thatPlease vote your proxy be mailed promptly inshares by Internet, telephone, or by mail using the enclosed envelope, which requires no postage. We encourage you to vote promptly.
April | By Order of the Board of Directors | |||
999 West Big Beaver Road | JAMES M. POLEHNA | |||
Troy, Michigan 48084-4716 |
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Proxy Summary
We provide below highlights of certain information in this Proxy Statement. As it is only a summary, please refer to the complete Proxy Statement and Kelly’s 20152017 Annual Report before you vote.
2018 ANNUAL MEETING OF STOCKHOLDERS
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Under the listing standards of the Nasdaq Global Market, we are deemed a controlled company by virtue of the fact that“controlled company” because Terence E. Adderley, the Executive Chairman and Chairman of the Board of Directors, and certain trusts of which he acts as trustee or co-trustee, have voting power with respect to more than fifty percent of our outstanding voting stock. AAs such, the Company may avail itself of exemptions relating to the independence of the Board, the Compensation Committee, and the nominating process.
Although we are a controlled company, the Company’s approach to leadership is not requiredintended to haveserve the interests of all stockholders, and the Company has historically recognized the importance of having a majorityBoard composed of its Board of Directors comprised of independent Directors. Director nominees are not required to be selected or recommended for the Board’s consideration by a majority of independent Directors or a Nominating Committee comprised solelyDirectors. Despite the availability of independent Directors, nor do the Nasdaq Global Market listing standards require a controlled company to certify adoption of a formal written charter or Board resolution, as applicable, addressing the nominations process. A controlled company is also exempt from Nasdaq Global Market requirements regarding the determination of Officer compensation byexemptions, a majority of our Board is independent and we maintain an independent Audit Committee and Compensation Committee. In addition, our Corporate Governance and Nominating Committee is majority independent.
In the fall of 2017, the Board formed a special committee consisting of the independent Directors or a Compensation Committee comprised solely of independent Directors. A controlled company is required to have an Audit Committee composed of at least three Directors who are independent as defined underreview and make recommendations to the rules of bothBoard about governance matters, including the Securities and Exchange Commission (“SEC”) and the Nasdaq Global Market. The Nasdaq Global Market further requires that all membersresponsibilities of the Audit Committee have the ability to readindependent Directors, Board leadership, and understand fundamental financial statements and that at least one membergovernance best practices. In March 2018, upon recommendation of the Audit Committee possesses financial sophistication. The independent Directors must also meet at least twice a year in meetings at which only they are present.
special committee, and with the support of Mr. Adderley, the Board adopted amendments to the Company’s Corporate Governance Structure
The Company’sPrinciples to, among other things, reallocate certain leadership is vested inresponsibilities from the Executive Chairman and Chairman of the Board (a position held by Mr. Adderley, the Company’s controlling stockholder) to the Lead Director and the Chief Executive Officer. Commensurate changes were made to the title and compensation of that position. Upon recommendation of the special committee, the Board also adopted Amended and Restated Bylaws effective March 7, 2018 (as disclosed in the Company’s Current Report on Form 8-K filed with the SEC on March 9, 2018), and, subject to stockholder approval, an Amended and Restated Certificate of Incorporation (Proposal 3) and a further amendment to the Bylaws to designate the Delaware Chancery Court as the exclusive forum for certain legal actions involving the Company in the event they were to arise (Proposal 4).
Board Leadership and Governance Structure
The Company’s leadership is now vested in a Chairman of the Board of Directors (the(a position held by Mr. Adderley, the Company’s controlling stockholder), a Lead Independent Director to provide independent leadership, and the Chief Executive Officer, subject to the overall authority of the Board of Directors. The Executive Chairman andBoard.
Our Chairman of the Board is a member of Directors’the Company’s founding family and has given, to date, 60 years of dedicated service to the Company, including many years as its Chief Executive Officer. In his role as Chairman of the Board, Mr. Adderley contributes his deep knowledge of the Company and the staffing industry, and champions the values that have been integral to the Company’s culture since its founding: a commitment to the people of the Company – both our employees and the workers we place throughout the world; ethical business practices; and strong corporate governance.
The Chairman of the Board’s duties include establishingconsulting with our Chief Executive Officer, reviewing the schedule of Board meetings; establishing the agendaagendas for Board meetings;meetings, presiding over meetings of the Board and, together with our Chief Executive Officer, presiding over meetings of Directors and stockholders; and leadingstockholders. As long as the Directors in the exercise of their stewardship and oversight obligations. The Executive Chairman and Chairman of the Board of Directors is also charged with facilitating communication between the Board of Directors and management, both inside and outside of meetings of the Board. As long as the Executive Chairman and Chairman of the Board of Directors is not an independent Director, as is currently the case, the independent Directors are required under the Board’sour Corporate Governance Principles to elect one of the independent Directors as Lead Director.
The Lead Director’s principal duties are to ensure the Board functions independent of management, to serve as liaison among the Chairman of the Board, the Chief Executive Officer and the independent Directors, to establish the schedule for Board meetings (in consultation with our Chairman of the Board and Chief Executive Officer), to assist in the development of and to approve the agendas for Board meetings, to approve the information sent to the Board for meetings, to preside at meetings of the Board of Directors in the absence of the Executive Chairman and Chairman of the Board, of Directors, to assist inestablish the development of theschedule and agendas for meetings of the Board,and to preside over meetings of the independent Directors in executive session and to provide feedback to the Executive Chairman and Chairman of the Board of Directors and the Chief Executive Officer on those sessions. The principal responsibilitiesexecutive sessions, to facilitate discussions among independent Directors on key issues outside Board meetings, and to be available for consultation with the Chairman of the Board and Chief Executive Officer.
The Chief Executive Officer areis responsible for managing the business and affairs of the Company, subject to develop and lead the Company’soversight of the Board. The Chief Executive Officer’s duties include leading the management team, to effectively and efficiently produce results that are in keepingrepresenting the Company externally, consulting with the strategic initiatives and corporate policies established byChairman of the Board about developments in the Company, and communicating with all Directors about key issues outside of Directors.Board meetings.
This leadership approach is intended to serve the interests of all stockholders of this controlled Company, which has historically recognized the importance of an independent majority of its Board of Directors.
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We comply voluntarily with the listing standards of the Nasdaq Global Market that otherwise do not apply to controlled companies, except that our
Corporate Governance and Nominating Committee is not composed entirely of independent Directors.
Board of Directors
Chairman of the Board: Terence E. Adderley Lead Director: Donald R. Parfet
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Audit Committee | Compensation Committee | Governance and | ||||
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Majority Independent | |||
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The full text of our Board’s Corporate Governance Principles and the charters of the Board’s three standing committees, which are anthe Audit Committee, a Compensation Committee, and a Corporate Governance and Nominating Committee, are available on the Company’s website atkellyservices.com.The following table sets forth the Board committees and the current members of each.
Audit
| Compensation
| Governance and
| Audit | Compensation | Governance and Nominating | |||||||
Terence E. Adderley
| ü | ✓ | ||||||||||
Carol M. Adderley
| Vice Chair
| Vice Chair | ||||||||||
Carl T. Camden
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Gerald S. Adolph * | ||||||||||||
George S. Corona | ||||||||||||
Robert S. Cubbin *
| ü
| ü
| ✓ | Chair | ✓ | |||||||
Jane E. Dutton *
| ü
| Chair
| ✓ | Chair | ||||||||
Terrence B. Larkin *
| ü
| ü
| Vice Chair | ✓ | ||||||||
Conrad L. Mallett, Jr. *
| ü
| ü
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Leslie A. Murphy *
| Chair
| ü
| Chair | Vice Chair | ||||||||
Donald R. Parfet * (Lead Director)
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| ü
| ü
| ✓ | ✓ | ✓ | ||||||
Hirotoshi Takahashi*
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B. Joseph White *
| Chair
| ü
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Number of Meetings Held in Fiscal Year 2015
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| 6
| 3
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Hirotoshi Takahashi | ||||||||||||
Number of Meetings Held in Fiscal Year 2017 | 5 | 6 | 6 |
* | Independent Director |
Directors are expected to attend the Annual Meeting of the Stockholders, all Board meetings, and all meetings of the committees on which they individually serve. The Board held eightnine meetings during 2015. All2017. Seven of the nine Directors then in office attended the 20152017 Annual Meeting of Stockholders on May 6, 2015, with the exception of Mr. Takahashi who was named as a Director on August 1, 2015.Stockholders. Director attendance averaged ninety-sixninety-two percent of the aggregate number of meetings of the Board of Directors and the committees on which they served during 2015.2017. Only Mr. Takahashi, who resides in Japan, attended twofewer than seventy-five percent of the threeaggregate number of meetings of the Board meetings that occurred after he was named as a Director in 2015. Mr. Takahashi isof Directors. He does not a member ofserve on any committees.committee. The independent Directors are required to, and did, meetmet in meetingsexecutive sessions at which only they were present at least twiceeight times during 2015.2017 as well as met as part of the special committee at least four times during 2017.
The Audit Committee is composed of R.S. Cubbin, T.B. Larkin C.L. Mallett, Jr.(Vice Chair), L.A. Murphy (Chair), and D.R. Parfet, all of whom are independent Directors. The Audit Committee held five meetings in 2015.2017. The Audit Committee’s purpose is to oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. The Audit Committee’s responsibilities are detailed in its charter which is posted on the Company’s website atkellyservices.com,and includeinclude: monitoring the integrity of the Company’s financial statements, the Company’s system of internal controls overaccounting and financial reporting processes, and financial statement audits; the qualifications, independence, and performance of the Company’s independent registered public accounting firm,firm; the qualifications and performance of the Company’s internal auditors, the Company’s risk assessment and risk management processes, andInternal Audit group; the Company’s compliance with legal and regulatory requirements.requirements; and the Company’s Enterprise Risk Management program that includes systems of disclosure controls and procedures, internal controls over financial reporting, and compliance with ethical standards adopted by the Company.
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Corporate Governance
The Audit Committee approves (or ratifies iffee adjustments on pre-approved services approved under authority delegated to the Chief Financial Officer (“CFO”)) all audit, audit related, internal control related, tax, and permitted non-audit services of the independent registered public accounting firm prior to engagement. The Audit Committee also serves as the Company’s Qualified Legal Compliance Committee.
The Board has unanimously determined that R.S. Cubbin, T.B. Larkin, L.A. Murphy qualifiesand D.R. Parfet each have the financial education and experience to qualify as an “Audit Committee financial expert” within the meaning of SEC regulations and as such meetsmeet the “financial sophistication” requirements under current Nasdaq Global Market listing standards. Each of the other members of the Audit Committee has the requisite understanding of financial statements to serve as a member of the Audit Committee. At least one member of the Audit Committee has financial management expertise.
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Compensation CommitteeCompensationCommittee
The Compensation Committee’s current members are R.S. Cubbin (Chair), J.E. Dutton, T.B. Larkin, L.A. Murphy (Vice Chair), and D.R. Parfet, and B.J. White (Chair), all of whom are independent Directors. The Compensation Committee is charged with developing the Company’s compensation philosophy and establishing and monitoring compensation programs for all employees. The Compensation Committee held six meetings in 2015.2017.
The Compensation Committee reviewsdetermines the compensation of the CEO and, approves all adjustments intaking into account the CEO’s recommendations, determines the compensation for all Senior Officers, (definedwhich includes all officers as Senior Vice President (“SVP”defined in Section 16a-1(f) of the Securities Exchange Act of 1934 (the “Exchange Act”) and above levels) including. The Compensation Committee is responsible for the administration of base salaries, short-term incentive awards under the Company’s Short-Term Incentive Plan (“STIP”), and long-term incentive awards under the Company’s Equity Incentive Plan (“EIP”). The for Senior Officer group includes our Executive Officers, from which the Named ExecutiveOfficers. Our thirteen current Senior Officers are derived.listed under Kelly Leadership on the Company’s website atkellyservices.com. The authority of the Compensation Committee is detailed in its charter, which is posted on the Company’s website atkellyservices.com.charter.
To assist the Compensation Committee in making compensation recommendations for Senior Officers, the Company’s Human ResourcesExecutive Compensation group provides the Compensation Committee with historical, survey, and benchmark compensation data. The Compensation Committee also relies on the CEO and the other Named Executive Officers to provide performance evaluations and compensation recommendations to assist in its decisions regarding the total compensation of Senior Officers. The Compensation Committee has delegated to the CEO the authority to approve salary recommendations and incentive awards to the Company’s Officers below the levelSenior Officer group who are not subject to Section 16 of SVP.the Exchange Act.
The Compensation Committee has the authority to retain independent consultants. Retained consultants report directly to the Compensation Committee, which determines the consultants’ scope of work and fees. In 2015,2017, the Compensation Committee retained Pay Governance LLC (the “Consultant”(“Pay Governance”) to provide assistance with the review of Executive and Director compensation. The Compensation Committee conducted an assessment of the Consultant’sPay Governance’s independence using factors established by the SEC and Nasdaq Global Market, and affirmed the independence of Pay Governance, LLC.Governance.
Compensation Committee Interlocks and Insider Participation
During 2015,2017, none of the Company’s Executive Officers served on the Board of Directors of any entities whose Directors or Officers served on the Company’s Compensation Committee. No current or past Executive Officers of the Company or its subsidiaries serve on the Compensation Committee.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee, whose current members are C.M. Adderley (Vice Chair), T.E. Adderley, R.S. Cubbin, J.E. Dutton (Chair), C.L. Mallett, Jr.,and D.R. Parfet, and B.J. White, held threesix meetings during 2015.2017. The Corporate Governance and Nominating Committee’s responsibilities include: assisting the Board of Directors in identifying individuals qualified to become Directors; recommending to the Board the nominees for the next Annual Meeting of Stockholders or to otherwise fill vacancies and newly created directorships; overseeing the composition, organization, and governance of the Board and its committees; monitoring and evaluatingoverseeing an annual evaluation of Board and committee effectiveness; and developing and overseeing compliance with the Board’s Corporate Governance Principles.Principles; and advising and making recommendations to the Board with respect to corporate governance matters.
Risk Governance Riskand Oversight
The Board’s oversight responsibilities include consideration of strategic issues and risks to the Company as well as management’s actions to address and mitigate those risks. Through its charter, the Audit Committee is charged by the Board with overseeing the Company’s risk assessment and enterprise risk management processes. The Audit Committee and Board focus on risk management strategy and risks of greatest significance, and seeksseek to ensure that risks assumed by the Company are consistent with the Board’sCompany’s risk tolerance and risk appetite.
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Corporate Governance
While the Audit Committee has responsibility for the oversight of the Company’s risk assessment and risk management process,processes, it is the duty of the Company’s management to assess and manage critical risks, including the execution of its Enterprise Risk Management program (“ERM”) program.. The Company’s risk-related departments and functions are under the direction of the Senior Vice President General Counsel, and Chief Administrative Officer.Risk, Compliance, and Privacy Officer (“Chief Risk Officer”) who reports directly to the CEO.
The Company continues to support and expand upon its formalCompany’s ERM program established in 2007, which is a criticalserves as the primary means of identifying and managing the Company’s key risks. Since its inception, theThe Company’s ERM team has, among other activities, performed assessments of risks to the Company, participated in the development and execution of mitigation programs for critical risks, facilitated the establishment of a corporate risk appetite and tolerance statement, inclusive of an oversight and monitoring mechanism, established a privacy governance function, and assisted in the integration of risk concepts within the Company’s strategic planning process.
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The ERM team reports its findings to the Audit Committee on a quarterly basis.basis, providing both written reports and periodic in-person presentations. Its current activities remain focused on mitigation and oversight of specific risk exposures, analysis of the breadth and effectiveness of existing risk management practices, and maturation of measurement and monitoring practices concerning high-priority strategic and operational risks, includingrisks. Current areas of particular emphasis include cyber security, data privacy, wage-hour risk management, and improvements to the Company’s compliance governance practices. The Company’s Information Technology and Internal Audit groups provide regular quarterly updates to the Audit Committee with respect to the Company’s proactive approach to cyber security. Controls are reviewed for operational effectiveness and to provide reasonable assurance that: business risk is managed and assets are safeguarded; security of information, processing infrastructure and applications are maintained; and all risks are mitigated to the extent practicable.
In addition to the reports submitted quarterly by the Company’s Vice President and Chief Risk Compliance, and Privacy Officer, the Vice President of Internal Audit independently assesses the Company’s risk management process and separately reports to the Audit Committee concerningthe effectiveness of the Company’s risk identification, prioritization, and mitigation processes.
Risk Assessment of Employee Compensation Programs
As set forth in its charter, the Compensation Committee is charged with reviewing the Company’s compensation program risk assessment for all employee compensation programs and to reportreporting to the Board any compensation program that is reasonably likely to have a material adverse effect on the Company.
At its February 20162018 meeting, the Compensation Committee reviewed management’s Compensation Program Risk Assessment Report. The report was prepared by the Company’s Executive Compensation and Human Resources groupgroups in collaboration with the Company’s Internal Audit Department and Risk Management group.Department. The Company’s Executive Compensation Program Risk Assessment Framework is reviewed and updated as needed to ensure a robust and comprehensive assessment process. In addition, the Consultant reviewed the assessment prepared for the executive compensation section of the report.
The Company’s Executive Compensation Program Risk Assessment
Framework takes into consideration the following guiding factors:
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Corporate Governance
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To assess the risk of employee compensation programs below the executive level, the Company utilizedCompany’s Human Resources group utilizes its Global Incentive Plan Design and Risk Mitigation Framework to consider links to strategy and any risks associated with the design of each incentive plan. The risks associated with each of the following elements of the design and implementation of an incentive plan wereare considered, as well as the steps in place to mitigate risk and ensure alignment with the Company’s strategic plan:
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After due consideration of management’s 20162018 Compensation Program Risk Assessment Report, the Compensation Committee concluded that the Company’s compensation programs do not create a reasonable likelihood of a material adverse effect on the Company.
Board and Committee Evaluation
Annually, the Corporate Governance and Nominating Committee oversees the Board’s and Committees’ evaluation processprocesses and reports results to the Board. The Board and each Committee conduct an evaluation of their respective performance, the purpose of which is to increase the effectiveness of the committees and the Board as a whole. The process includes an assessment of the Board and each Committee’s effectiveness and independence, access to and review of information from management, responsiveness to shareholderstockholder concerns, maintenance of standards of business conduct and ethics, and relationship with management. The evaluation is intended to facilitate an examination and discussion by the entire Board and each Committee of its effectiveness as a group in fulfilling its charter requirements and other responsibilities. Some of the areas reviewed as part of the evaluation includeinclude: Director obligations, roles and responsibilities, Board member qualifications, Committee member qualifications, Board structure, Committee structure, corporate governance, organization performance, culture and ethics, and educational opportunities. Past evaluation outcomesevaluations have included definingresulted in the skills necessaryCommittee revising its criteria for future Director candidates, extending the length of various meetings to ensure sufficient discussion time, and discussion of potential future Committee participation, establishment of the roles of Committee Vice Chairs, and Committee Chair succession.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) that applies to all Directors, Officers, and employees to help them recognize and deal with ethical issues, deter wrongdoing, provide mechanisms to report dishonest or unethical conduct, and help foster a culture of honesty and accountability. The Code of Conduct was updated in 2017 and addresses conflicts of interest, anti-bribery/anti-corruption, insider trading, corporate opportunities, confidentiality and privacy, protection and proper use of assets, fair dealing, behavior in the workplace, compliance with laws, rules and regulations, and Company policies, risk tolerance, anti-human trafficking, reporting dishonest or unethical behavior and public company reporting requirements, and providesrequirements. The Code of Conduct includes an enforcement mechanism.
The full text of the Code of Conduct is posted on the Company’s website atkellyservices.com. This information is available in print to any stockholder who requests it from the Company’s Investor Relations Department. The Company will disclose future amendments to or waivers from, the Code of Conduct for its Directors and Executive Officers on its website or by filing a current report on Form 8-K within four business days following the date of amendment, or waiver, or such earlier period as may be prescribed by Nasdaq or the SEC.
Related Person Transactions and Certain Relationships
Pursuant to the Company’s Code of Conduct, any situation that involves, or may reasonably be expected to involve, a conflict of interest with the Company must be disclosed immediately to the Vice President of Internal Audit or to the General Counsel. In addition, Directors and Executive Officers are required to complete an annual questionnaire that solicits information regarding any transactions or relationships between themselves or their immediate family members and the Company of the types described in Item 404(a) of SEC Regulation S-K (“Related Party Transactions”). Directors and Executive Officers must seek a determination and obtain prior authorization or approval of any potential conflict of interest (including any Related Party Transaction) from the independent Audit Committee. The Audit Committee, pursuant to its charter, is tasked, among other things, with the responsibility to review Related Party Transactions and other conflicts of interest involving Directors and Executive Officers. The Company does not have a formal written policy regarding such reviews.
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Corporate Governance
Mr. Adderley, the Chairman of the Board and our controlling stockholder, receives compensation from the Company, as described below under “Director Compensation,” which is approved by the independent Compensation Committee. Mr. Takahashi, a Director of the Company, serves as the designated representative of Persol Holdings Co., LTD., which owns 4.5% of the Company’s Class A Common Stock, and with which the Company has a strategic alliance, as described in the Company’s Annual Report on Form 10-K for the period ended December 31, 2017. Mr. Takahashi receives no compensation for his service as a Director.
Corporate Social ResponsibilitySocialResponsibility
The Company believes that corporate social responsibility (“CSR”) is a cornerstone of the organization. The Company focuses its CSR efforts in four crucial areas: employees and people, ethics, engagement, and the environment. The Company’s CSR report is posted on the Company’s website atkellyservices.com.kellyservices.com.
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Director Compensation
A Director’sIn 2017, the Compensation Committee engaged its independent compensation consultant, Pay Governance, to evaluate its non-employee Director compensation, which was last increased in 2009. At its meeting following the 2017 Annual Meeting of Stockholders, the Compensation Committee approved increases in the retainers paid to the non-employee Directors, effective beginning May 11, 2017. The base retainer is $150,000.for non-employee Directors (other than Mr. Takahashi, who receives no compensation for his service as a Director) was increased from $150,000 to $180,000. The additional retainers associated with Board leadership positions were also increased: for the Lead Director, receives an additional retainer of $20,000. Thefrom $20,000 to $40,000; for the Chair of the Audit Committee, receives an additional retainer offrom $12,500 andto $20,000; for the ChairsChair of the Compensation Committee, from $7,500 to $15,000; and for the Chair of the Corporate Governance and Nominating Committee, each receive an additional retainer of $7,500. from $7,500 to $10,000.
Under the Non-Employee Directors StockCompany’s amended and restated Equity Incentive Plan (“EIP”), which was approved at the May 6, 20082017 Annual Meeting of Stockholders, the Board of Directors is required to determine annuallyfrom time to time the percentage of theirthe base retainer that will be usedissued to acquirenon-employee Directors in shares of Class A common stock and thus meet their stock ownership requirements.stock. At the meeting of the Board of Directors following the 20152017 Annual Meeting of Stockholders, the Board agreeddetermined that one-third$80,000 of their adjustedthe base retainer would be appliedissued in shares. Directors are subject to a stock ownership requirement that is a minimum fair market value of two times the purchasevalue of shares.the annual retainer (which currently equates to $360,000). At their August 2017 meeting, the Compensation Committee and Board of Directors approved fixing the portion of the annual retainer that is paid in cash at $100,000, and the portion paid in equity at $80,000.
The Directors were not awarded options pursuant to the 1999 Non-Employee Directors Stock Option Plan during 2015.
The following table sets forth the compensation paid to Mr. Adderley in his capacity as Executive Chairman and Chairman of the Board is a non-officer employee position. In 2018, in connection with the review of governance matters described above, and with the advice of Pay Governance LLC, the special committee of independent Directors recommended, and to eachthe Board approved, effective May 1, 2018, annual compensation for the redesigned role of Chairman of the non-officer Directors.
Name | Fees Earned or Paid in Cash | Stock Awards(1) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||
T.E. Adderley | — | – | – | – | – | $1,005,916 | $1,005,916 | (2) | ||||||||||||||||||||
C.M. Adderley | $99,993 | $50,007 | – | – | – | – | $150,000 | |||||||||||||||||||||
R.S. Cubbin | $99,993 | $50,007 | – | – | – | – | $150,000 | |||||||||||||||||||||
J.E. Dutton | $107,493 | $50,007 | – | – | – | – | $157,500 | |||||||||||||||||||||
T.B. Larkin | $99,993 | $50,007 | – | – | – | – | $150,000 | |||||||||||||||||||||
C.L. Mallett, Jr. | $99,993 | $50,007 | – | – | – | – | $150,000 | |||||||||||||||||||||
L.A. Murphy | $112,493 | $50,007 | – | – | – | – | $162,500 | |||||||||||||||||||||
D.R. Parfet | $119,993 | $50,007 | – | – | – | – | $170,000 | |||||||||||||||||||||
H. Takahashi(3) | – | – | – | – | – | – | – | |||||||||||||||||||||
B.J. White | $107,493 | $50,007 | – | – | – | – | $157,500 |
(1) Represents the aggregate fair market value of grants of 2,966 sharesBoard equal to 150% of the Company’s Class A common stock having a fair market valueannual base retainer payable to non-employee directors, inclusive of $16.86 per share on the award datecost of May 7, 2015.
(2) Mr. Adderley is eligible to participatebenefits-in-kind disclosed in footnote (3) below, with the Company’s benefit plans and Management Retirement Plan. Other compensation includes base salary of $958,100, employer provided life insuranceremaining amount payable in the amount of $17,304, the incremental cost to the Company for personal use of airplane totaling $28,410, and a Medicare tax gross-up on the Company’s contributions to the Management Retirement Plan in the amount of $2,102. Mr. Adderley is not eligible to participate in the Company’s Short-Term Incentive Plan or Equity Incentive Plan.cash. The Company also furnisheswill continue to furnish administrative staff support to Mr. Adderley related to his duties as Executive Chairman and Chairman of the BoardBoard.
During 2017, the Company established the Non-Employee Directors Deferred Compensation Plan (“DDCP”), which provides non-employee Directors with the opportunity to defer all or a portion of Directors.
(3) Mr. Takahashi serves asall fees payable to them, pursuant to a designated representative onvalid deferral election. The DDCP is a non-qualified plan that allows for the Boarddeferral of all or a portion of annual cash payments to a notional account with investment fund choices that mirror those provided to participants in the Company’s Management Retirement Plan (“MRP”); in addition to those fund choices the Plan also includes the option to defer annual cash payments into Company common stock units. Non-employee Directors may also elect to defer all or a portion of their annual stock retainer into Company common stock units. Participants may elect to receive distributions from their DDCP account at the time they cease to be a Director of the Company without compensation. He was electedor at a future date that is between one and ten years following the date they cease to be a Director of the Company. Non-employee Directors can elect to have distributions from the DDCP made in either a lump sum or in annual installment payments made over a two to ten year period.
The following table sets forth the compensation paid during 2017 to the Board effective August 1, 2015.Directors other than Mr. Corona, our President and Chief Executive Officer, whose compensation is disclosed in the Compensation Discussion & Analysis section of this Proxy Statement.
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||
T.E. Adderley | — | — | — | — | — | 1,007,544 | $ | 1,007,544 | (3) | |||||||||||||||||||
C.M. Adderley | $ | 100,010 | $ | 79,990 | — | — | — | — | $ | 180,000 | ||||||||||||||||||
G.S. Adolph | $ | 16,667 | $ | 13,333 | — | — | — | — | $ | 30,000 | ||||||||||||||||||
R.S. Cubbin | $ | 115,010 | $ | 79,990 | — | — | $ | 15,752 | — | $ | 210,752 | |||||||||||||||||
J.E. Dutton | $ | 110,010 | $ | 79,990 | — | — | $ | 30,354 | — | $ | 220,354 | |||||||||||||||||
T.B. Larkin | $ | 100,010 | $ | 79,990 | — | — | — | — | $ | 180,000 | ||||||||||||||||||
L.A. Murphy | $ | 120,010 | $ | 79,990 | — | — | — | — | $ | 200,000 | ||||||||||||||||||
D.R. Parfet | $ | 140,010 | $ | 79,990 | — | — | — | — | $ | 220,000 | ||||||||||||||||||
H. Takahashi(4) | — | — | — | — | — | — | — |
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Director Compensation
(1) | Two of our directors deferred the following amounts from their 2017 cash retainer fee: Mr. Cubbin - $46,004; and Ms. Dutton - $110,010. Mr. Adolph was appointed as a Director effective March 7, 2018 and received a pro rata amount of the annual cash retainer fee for non-employee Directors. |
(2) | Represents the aggregate fair market value of grants awarded on May 11, 2017. Each Director received a grant of 3,493 shares of the Company’s Class A common stock having a fair market value of $22.90 per share. Mr. Cubbin deferred 40% of his 2017 annual stock grant into deferred common stock units; and Ms. Dutton deferred 100% of her 2017 annual stock grant into deferred common stock units. Mr. Adolph received a pro rata grant of 450 shares of the Company’s Class A common stock having a fair market value of $29.63 per share on the award date of March 7, 2018. |
(3) | As an employee, Mr. Adderley is eligible to participate in the Company’s benefit plans and Management Retirement Plan. Other compensation includes base salary of $958,100, employer provided life insurance in the amount of $17,304, the incremental cost to the Company for personal use of airplane totaling $29,902, and a Medicare tax gross-up on the Company’s contributions to the Management Retirement Plan in the amount of $2,238. Mr. Adderley is not eligible to participate in the Company’s Short-Term Incentive Plan or Equity Incentive Plan. As discussed above, Mr. Adderley’s annual compensation for services as Chairman of the Board has been revised effective May 1, 2018. |
(4) | Mr. Takahashi serves on the Board as the designated representative of our joint venture partner, Persol Holdings Co. LTD., and receives no compensation for his service as Director. |
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Beneficial Ownership of Shares
SECURITIES BENEFICIALLY OWNED BY PRINCIPAL STOCKHOLDERS AND MANAGEMENTBENEFICIAL OWNERSHIP OF SHARES
Under regulations of the Securities and Exchange Commission, persons who have power to vote or dispose of common stock of the Company, either alone or jointly with others, are deemed to be beneficial owners of the common stock.
Set forth in the following table areis the beneficial holdings asownership of the close of businessCompany’s Class A and Class B common stock on March 21, 2016, on the basis described above,19, 2018 of (i) each person known by the Company to own beneficially more than five percent of the Class B common stock:Common stock, (ii) each Director (each of whom is a nominee for election as a Director at the Annual Meeting of Stockholders), (iii) each of the Named Executive Officers, and (iv) all Directors and Executive Officers as a group.
Class A Common Stock | Class B Common Stock | |||||||||||||||
Directors and Named Executive Officers(1) | Number of Shares and Nature of Beneficial Ownership | Percent of Class | Number of Shares and Nature of Beneficial Ownership | Percent of Class | ||||||||||||
T. E. Adderley, Chairman of the Board | 1,514,686 | (2) | 4.2 | 3,213,265 | (3) | 93.6 | ||||||||||
C. M. Adderley, Director | 340,398 | (4) | 1.0 | 425 | (4) | * | ||||||||||
G. S. Adolph, Director(5) | 450 | * | — | * | ||||||||||||
C. T. Camden, Former Director and Executive Officer | 252,751 | * | 100 | * | ||||||||||||
G. S. Corona, Director and Executive Officer | 211,767 | * | 100 | * | ||||||||||||
R. S. Cubbin, Director | 14,276 | (6) | * | 100 | * | |||||||||||
J. E. Dutton, Director | 27,714 | (6) | * | 100 | * | |||||||||||
T. B. Larkin, Director | 23,249 | * | 100 | * | ||||||||||||
L. A. Murphy, Director | 22,695 | * | 100 | * | ||||||||||||
D. R. Parfet, Lead Director | 23,520 | * | 100 | * | ||||||||||||
H. Takahashi, Director | 1,576,169 | (7) | 4.4 | 1,475 | * | |||||||||||
S. S. Armstrong, Executive Officer | 40,900 | * | — | * | ||||||||||||
T. S. Carroll, Executive Officer | 102,957 | * | 100 | * | ||||||||||||
P. W. Quigley, Executive Officer | 100,577 | * | 100 | * | ||||||||||||
O. G. Thirot, Executive Officer | 61,569 | * | 10 | * | ||||||||||||
All Directors and Executive Officers as a Group (16 persons) | 4,320,478 | 12.1 | 3,216,075 | 93.7 |
* | Less than 1% |
(1) | Mr. Camden retired as President and CEO of the Company effective May 10, 2017. |
(2) | Includes 1,345,202 shares held directly; 30,000 shares in a charitable trust of which Mr. Adderley is a co-trustee with Comerica Bank & Trust, N.A.; 100,000 shares in an irrevocable trust, of which he is a beneficiary; 38,484 shares in five separate trusts of which Mr. Adderley is a co-trustee with Comerica Bank & Trust, N.A.; and 1,000 shares held by his spouse. |
(3) | Includes 3,139,940 shares held by the Terence E. Adderley Revocable Trust K of which Mr. Adderley is sole trustee and has sole investment and voting power; 71,825 shares in an irrevocable trust, of which he is beneficiary and has no voting and investment power; 1,000 shares held by his spouse of which he has shared voting and investment power; and 500 shares held in five separate trusts of which he is a co-trustee with shared voting and investment power, in which he has no equity interest. |
(4) | Includes 190,306 shares of Class A stock and 200 shares of Class B stock held in two separate trusts of which Ms. Adderley is one of two individual trustees with Comerica Bank & Trust, N.A. as Corporate Trustee. |
(5) | Mr. Adolph was appointed to the Company’s Board of Directors on March 7, 2018. |
(6) | Includes 3,446 shares for Mr. Cubbin and 3,534 shares for Ms. Dutton indirectly held in the Company’s Non-Employee Directors Deferred Compensation Plan. |
(7) | Mr. Takahashi is the Director, Deputy Vice President and COO, Persol Holdings Co., LTD (formerly Temp Holdings Co., Ltd.) which entered into a strategic alliance with the Company in 2010. Mr. Takahashi is the designated representative of Persol Holdings Co., LTD, which owns the reported shares. Mr. Takahashi disclaims beneficial ownership of the shares held by Persol Holdings Co., LTD. |
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Beneficial Ownership of (1) Includes 3,139,940 shares held by the Terence E. Adderley Revocable Trust Kwhich Mr. Adderley is sole trustee and has sole investment and voting power; 71,825 shares in an irrevocable trust, of which he is beneficiary and has no voting and investment power; 1,000 shares held by his spouse of which he has shared voting and investment power; and 500 shares held in five separate trusts of which he is a co-trustee with shared voting and investment power, in which he has no equity interest.
(2) Mr. Adderley is deemed a “control person” of the Company under applicable regulations of the SEC and the listing standards of the Nasdaq Global Market.
Set forth in the following table are the beneficial holdings of the Company’s Class A and Class B common stock on March 21, 2016, on the basis described above, of each Director and nominee, each of the Named Executive Officers as of such date, and all Directors and Executive Officers as a group as of such date.
Class A Common Stock | Class B Common Stock | |||||||||||
Directors and Named Executive Officers(1) | Number of Shares and Nature of Beneficial Ownership(2) | Percent of Class | Number of Shares and Nature of Beneficial Ownership | Percent of Class | ||||||||
T. E. Adderley, Executive Chairman and Chairman of the Board | 1,514,672(3) | 4.4 | 3,213,265 | (4) | 93.5 | |||||||
C. M. Adderley, Director | 1,102,999(5) | 3.2 | 1,125 | (5) | * | |||||||
C. T. Camden, Director and Executive Officer | 563,767 | 1.6 | 100 | * | ||||||||
R.S. Cubbin, Director | 6,089 | * | 100 | * | ||||||||
J. E. Dutton, Director | 31,435 | * | 100 | * | ||||||||
T. B. Larkin, Director | 17,111 | * | 100 | * | ||||||||
C. L. Mallett, Jr., Director | 13,498 | * | 100 | * | ||||||||
L. A. Murphy, Director | 24,057 | * | 100 | * | ||||||||
D. R. Parfet, Lead Director | 42,411 | * | 100 | * | ||||||||
H. Takahashi, Director | 1,576,169(6) | 4.6 | 1,475 | * | ||||||||
B. J. White, Director | 30,344 | * | 100 | * | ||||||||
T.S. Carroll, Executive Officer | 104,754 | * | – | * | ||||||||
G. S. Corona, Executive Officer | 247,387 | * | 100 | * | ||||||||
P.W. Quigley, Executive Officer | 113,589 | * | 100 | * | ||||||||
O.G. Thirot, Executive Officer | 53,445 | * | – | * | ||||||||
All Directors and Executive Officers as a Group (17 persons) | 5,563,218 | 16.1 | 3,216,865 | 93.6 |
* Less than 1%
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(1) Each of the named Directors is a nominee for election.
(2) Includes shares which the individuals have a right to acquire through the exercise of stock options within 60 days. Such exercisable options include: 3,000 for J.E. Dutton; 3,000 for D.R. Parfet; and 3,000 for B.J. White.
(3) Includes 1,345,202 shares held directly; 30,000 shares in a charitable trust of which Mr. Adderley is a co-trustee with JPMorgan Chase Bank, N.A.; 100,000 shares in an irrevocable trust, of which he is a beneficiary; 38,470 shares in five separate trusts of which Mr. Adderley is a co-trustee with JPMorgan Chase Bank, N.A.; and 1,000 shares held by his spouse.
(4) Includes 3,139,940 shares held by the Terence E. Adderley Revocable Trust K of which Mr. Adderley is sole trustee and has sole investment and voting power; 71,825 shares in an irrevocable trust, of which he is beneficiary and has no voting and investment power; 1,000 shares held by his spouse of which he has shared voting and investment power; and 500 shares held in five separate trusts of which he is a co-trustee with shared voting and investment power, in which he has no equity interest.
(5) Includes 959,045 shares of Class A stock and 900 shares of Class B stock held in nine separate trusts of which Ms. Adderley is one of two individual trustees with J.P. Morgan Trust Company of Delaware as Corporate Trustee.
(6) Mr. Takahashi is the Executive Director of Temp Holdings Co., Ltd (“THD”) which entered into a strategic alliance with the Company in 2010. Mr. Takahashi is the designated representative of THD, which owns the reported shares. Mr. Takahashi disclaims beneficial ownership of the shares held by THD.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, the Company’s Directors, Executive Officers, and any person who beneficially owns more than 10% of the common stock (collectively, the “Reporting Persons”), are required to report their ownership of the common stock and any changes in that ownership to the SEC. Specific due dates for these reports have been established and pursuant to applicable rules, the Company is required to report in its Proxy Statement any failure to file by these due dates. Based on certifications received from the Reporting Persons, and on copies of the reports that such persons have filed with the SEC, all required reports of Reporting Persons were filed timely with the SEC for 2015, except for two Form 4s that were not filed timely for Ms. Natalia Shuman-Fabbri, Senior Vice President and General Manager, EMEA and APAC. Both Form 4s for Ms. Shuman-Fabbri, were for the automatic sale of shares to cover taxes for shares vesting on September 1, 2015 and October 1, 2015. The sale of these shares were reported with Ms. Shuman-Fabbri’s Form 4 filing on February 11, 2016.2017.
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Proposal 2: Advisory Vote to Approve the Company’s Executive Compensation
PROPOSAL 2 - ADVISORY VOTE TO APPROVE THE COMPANY’S EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our stockholders to vote to approve, on an advisory (nonbinding) basis, the compensation of our Executive Officers, named in this Proxy Statement (the “Named Executive Officers”) as disclosed in accordance with the SEC’s rules.
As described in the following Compensation Discussion and Analysis, our executive compensation programs are designed to align the interests of our Executive Officers with those of our shareholders by tying a significant portion of the compensation they receive to Company performance, and by providing a competitive level of compensation in order to attract, retain, and reward Executive Officers, who are critical to the long-term success of our business. Under these programs, our Named Executive Officers are rewarded for the Company’s financial performance, individual performance, and long-term potential, and critical retention, as well as to facilitate retention, and reflect market realities. Please read the Compensation Discussion and Analysis for additional details about our executive compensation programs, including information about the fiscal year 20152017 compensation of our Named Executive Officers.
We are asking our stockholdersAs required by Section 14A of the Exchange Act, this proposal, commonly referred to indicate their support foras a “say on pay” proposal, seeks a stockholder advisory vote, on our Named Executive Officers’ compensation, as describeddisclosed in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholdersStatement pursuant to Item 402 of Regulation S-K and in the opportunity to express their views on our Named Executive Officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive OfficersCompensation Discussion and the philosophy, policies, and practices described in this Proxy Statement. Accordingly, we ask our stockholders to vote “FOR”Analysis, through the following resolution:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s Proxy Statement for the 20162018 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the 20152017 Summary Compensation Table, and the other related tables and disclosure.”
The say-on-pay vote is advisory; and, therefore, not binding on the Company, the Compensation Committee, or our Board of Directors.Company. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and toconsiders the extent there is any significantresult of the advisory vote against the Named Executive Officerin designing and evaluating our executive compensation as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.programs.
The Board of Directors recommends a vote “FOR” the approval of the compensation of our Named Executive Officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC.
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Compensation Discussion and Analysis
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Discussion and Analysis section of thethis Proxy Statement provides an overview of our executive compensation philosophy and objectives, and describes the objectives and material elements of our executive compensation programs, the compensation decisions the Compensation Committee (the “Committee”) has made under those programs, key factors that were considered, and provides details of the compensation paid to our Named Executive Officers.
The Compensation Discussion and Analysis is organized in the following sections:
1. 2017 Named Executive Officers
2. Executive Summary
3. Executive Compensation Philosophy, Objectives and Design
4. Process for Determining Executive Compensation
5. Compensation Programs: Decisions and Actions in 2017
6. Governance of Executive Compensation Programs
7. Tax and Accounting Considerations
Our Named Executive Officers for 2015,2017, as defined by the SEC, were as follows:
Name | Title | |
| President and Chief Executive Officer | |
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Olivier G. Thirot | Senior Vice President and Chief Financial Officer | |
Teresa S. Carroll | Executive Vice President, President, Global Talent Solutions and General Manager, Sales, Marketing and Human Resources | |
Peter W. Quigley | Executive Vice President, President, Global Staffing, and General Manager, Global Information Technology, Global Business Services and Global Service | |
Steven S. Armstrong | Senior Vice President and General Manager, | |
| Former President and Chief Executive Officer |
(1) | Mr. Corona was appointed President and Chief Executive Officer effective May 10, 2017. |
(2) | Mr. Thirot was appointed Executive Vice President and Chief Financial Officer effective March 1, 2018. |
(3) | Mr. Camden retired from the Company effective May 10, 2017. |
(1) Mr. Thirot became Acting Chief Financial Officer effective March 16, 2015 and was appointed Chief Financial Officer effective January 1, 2016.
(2) Ms. Little’s employment with the Company terminated effective March 13, 2015.
We are a leader in providing workforce solutions. The Company offersWe connect people with work in ways that enrich their lives and enable companies to access skilled talent that can move their businesses forward. As work has evolved, so has our range of solutions, growing over the years to reflect the changing needs of our customers and the changing nature of work itself. As workforce management has become more complex, we have developed a comprehensive arraytalent supply chain management approach to help many of the world’s largest companies plan for and manage their workforces. Innovative solutions supporting this approach span outsourcing, consulting, recruitment, talent advisory, career transition, and consulting services, as well as, world-classvendor management services.
In early 2017, we restructured components of our previous Americas Commercial, Americas PT, and OCG segments under a single delivery organization, triggering a change in our operating structure. We now provide staffing on a temporary, temporary-to-hire,through our branch networks in our Americas and direct hire basis. Serving clients aroundInternational operations, with commercial and specialized professional/technical staffing businesses in the globe,Americas and Europe, respectively. In July 2016, we provide employmentmoved our APAC staffing operations into our expanded joint venture with Persol Holdings (formerly Temp Holdings), Persol Kelly Asia Pacific (the “JV”), enabling us to more than halfefficiently provide staffing solutions to customers throughout the APAC region via the JV. We also provide a million people annually.suite of innovative talent fulfillment and outcome-based solutions through our Global Talent Solutions (“GTS”) segment, which delivers integrated talent management solutions to meet customer needs across the entire spectrum of talent categories. Using talent supply chain strategies, GTS helps customers plan for, manage and execute their acquisition of contingent labor, full-time labor and free agents, and gain access to service providers and quality talent at competitive rates with minimized risk.
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Compensation Discussion and Analysis
Our long-term strategic objective is to create shareholderstockholder value by delivering a competitive profit from providing the best workforce solutions and talent in the industry. We develop workforce solutions, delivered by talented people, who help companiesTo achieve their short- and long-term business goals. Our focus isthis, we are focused on the following areas: maintain
20152017 was a year of focused execution for the Companystrategic and a test ofoperational progress that demonstrated our abilitycommitment to deliver on our strategy of targetedprofitable growth. We delivered solid top-line growth and continued improvementincreased earnings, even as we invested in operating efficiencies. The targeted investmentsour future. Early in the higher-margin PTyear, we reorganized our operating segments and OCG businessesrestructured to create a more efficient and improvementsfocused delivery organization. We invested in our Americas Staffing and International Staffing operations by adding additional sales and recruiting talent. In GTS, we are exercising price discipline and are continuing to invest in higher margin outcome-based and outsourcing solutions that align with market demands. In September 2017, we madecompleted our acquisition of Teachers On Call, which exemplifies our commitment to focus and grow in 2014 begansolutions where we see outsized market potential. And finally, we are accelerating investment in initiatives to yield results in 2015. We entered 2015 with our new operating models in placeenhance technology and we gained traction throughout the year as we began to deliver against our investments and accelerated earnings growth.process automation.
Key performance highlights for 20152017 include:
Earnings from operations for the full year 2015 totaled $66.7 million compared to $21.9 million in 2014. Included in the results from operations for 2014 are restructuring charges of $12.0 million. Excluding this item, earnings from operations were $33.9 million in 2014.
Our OCG segment earned a full-year operating profit of $28.5 million, a 76% increase compared to last year. OCG delivered good bottom-line leverage as top-line revenue growth continues to confirm the increased market demand for outsourced solutions. Growth was particularly strong in Business Process Outsourcing (“BPO”) and Contingent Workforce Outsourcing (“CWO”), which continue to be key drivers of our strategic and financial progress.
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Earnings from operations for the full year 2017 | or nearly 9% when excluding our APAC staffing | |
totaled $83.3 million, compared to $63.2 million in | operation from the first half of 2016, and our gross | |
2016 | profit rate increased 60 basis points to 17.8% | |
Conversion rate, or return on gross profit, continues to be a key metric to measure our drive for profitable | Cash from operating activities and free cash flow | |
growth. Our 2017 conversion rate was 8.7% | generation increased year over year | |
compared to 7.0% in 2016 |
Overall Americas PT revenue grew 2% year-over-year in both reported and constant currency, and accounts serviced through our U.S. branch network delivered strong growth of 16% in our PT specialties. Our expanded salesforce is pursuing and winning new business, while our PT recruiting centers are efficiently connecting U.S. clients with specialized talent. We will needKelly continues to continue to accelerate PT growth, particularly within accounts serviced through our centralized delivery model, to fully realizefocus on accelerating the expected benefitexecution of our investments. The success of thesestrategy and making the necessary investments is impacted by the shifting of some ofand adjustments to advance that strategy. We have set our large account customers from single-sourced arrangements to asights on becoming an even more competitively sourced model. While this places additional pressure on growth in these PT accounts, competitively sourced arrangements create additional opportunities in our OCG business.
Foreign currency exchange rates negatively impacted the total year-over-year change in gross profit; however, on a constant currency basis, the Company delivered strong operating leverage. For the full year, growth in constant currency earnings from operations excluding the 2014 restructuring charges represented nearly 70% of our constant currency gross profit growth.
2015 was a year of solid earnings growth for the Company. Wecompetitive, consultative and profitable company, and we are reshaping our business to make that vision a reality. We will measure our progress against both revenue and working to rebalance our resources to align with ourgross profit growth, as well as earnings and conversion rate. The goals for growth. Wewe have established are deliveringbased on a plan that not only aligns with critical market trends, but continues to position the Companycurrent economic and business environment, and may change as a leader in the workforce solutions market worldwide. We are operating as a more agile organization, committed to delivering sustained, profitable growth, and continued strategic progress.conditions warrant.
Key Executive Compensation Program Highlights for Fiscal 20152017
We continue to evaluate our executive compensation program and make changes to further align it with our strategic priorities and to reward both short and long-term business success. We believe we have designed a program that aligns with stockholder interests, incentivizes growth and operational excellence, and demonstrates a clear linkage between compensation and performance. The program continues to seek to minimize incentives for management to take excessive risks. The Committee worked with management and its independent compensation consultant, as described later in this document, to review current compensation programs, including the incentive plans, and made the decisions described below in 2017.
Reflecting the Company’s commitment to driving a high-performance culture our executive compensation program emphasizes at-risk incentive awards that can be earned over one and three-year periods. As our business evolves and we strive for performance that is better than the prior year, the design of our incentive plans has changed to ensure continued alignment to our business strategy for driving long-term stockholder value. The executive compensation program, particularly the annual and long-term incentive plans, are designed to directly support the Company’s strategic transformation to a more efficient, profitable, growth-focused, and performance-driven organization. Incentive payouts earned for performance cycles ending in 2017 are commensurate with the earnings, gross profit, expense management and total stockholder return results that were achieved. Annual incentive awards for corporate performance were earned at approximately target, commensurate with our performance on earnings, gross profit and expense goals. Long-term incentive
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Compensation Discussion and Analysis
awards for the performance share periods ending in 2017 were earned at 115% of target for gross profit results and 200% of target for our total shareholder return relative to the market. The 2018 incentive designs, which are briefly summarized below and will be discussed in further detail in next year’s proxy filing, are similar to the 2017 incentive designs discussed below, with the requirement for performance set meaningfully above 2017 actual results to earn the target award.
The Board has adopted two plans that provide the framework for all incentive compensation opportunities for our Executive Officers.
The amended and restated STIP was approved by shareholders at the Company’s Annual Meeting on May 6, 2015. STIPShort Term Incentive Plan (“STIP”) provides for annual cash-based incentive opportunities that are based upon the achievement of one or more performance measures, as selectedestablished by the Committee.
The amended and restated EIP was approved by shareholders at the Company’s Annual Meeting on May 6, 2015. The EIPEquity Incentive Plan (“EIP”) provides the Committee the ability to grant long-term incentive (“LTI”) opportunities, in various award types, that focus on the longer termlong-term performance of the Company and align the interests of Executive Officers with those of shareholders.stockholders. The Committee amended the EIP at their meeting on February 15, 2017 approving the following key changes to the EIP, which was approved by stockholders at the Company’s 2017 Annual Meeting:
NOTE: The “Earnings Before Taxes plus Joint Venture (“JV”) Income” measure includes a “bottom-line” earnings measure to capture Joint Venture earnings and in support of our business strategy.
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Compensation Discussion and Analysis
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The Committee believes these actions support the strategic direction of the Company and help position it for long-term success in achieving its goals. All of theseThese compensation decisions and actions are discussed in more detail below.
CEOExecutive Compensation Philosophy, Objectives, and Other Named Executive Officers Pay MixDesign
The following charts illustrateOur executive compensation philosophy is to provide market-based pay opportunities with incentive payouts aligned with the impactachievement of the changeCompany’s overall short and long-term business strategies. The design of our executive compensation programs allocates total compensation to fixed and variable pay elements resulting in long-term incentives, to a more performance-based design in 2015, on the pay mix of our Presidentshort-term and CEO and the other Named Executive Officers combined (CFO compensation was excluded due to the change in incumbents during the year). The percentage of target total direct compensation (sum of salary, target STIP and LTI award opportunities) that is performance-based for our CEO in 2015 has increased to 65.6% (for STIP and Performance Shares) from 40.6% in 2014. The percentage of target total direct compensation that is performance-based for our other Named Executive Officers in 2015 has increased to 57.3% on average from 34.9% in 2014. The Company’s historically conservative approach to granting equity to Executive Officers has been modified to ensure that a significant portion of compensation for our CEO and other Executive Officers is performance-based “pay at risk”. This change in design directly supports the Company’s strategic transformation to a more efficient, profitable, growth-focused, and performance-driven organization.
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long-term pay elements. The Committee establishes and administerscontinually evaluates our executive compensation programs to ensure that the Company provides market-competitive opportunities that enable us to attract and retain highly qualified individuals to lead the organization and drive business success.success in the competitive and ever-changing business environment in which we operate. Our executive compensation programs are designed to achieve the following objectives:
Align paya significant portion of compensation with short- and long-term performance results that directly influence shareholder value;
Motivate executives to achievethe achievement of multiple performance goals that over time, lead to increasedmotivate and sustainable long-term shareholder value;
Directly link the interests of management to those of shareholders;
Attract keyreward executives critical to the organization’s long-term success;
Retain executives necessary to successfully lead and manage the organization; and
Reward executives fairly based on Company, business unit, and individual performance results.
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The Committee believes that a majority of an Executive Officer’s compensation should be “at risk” and based upon the achievement of corporate and business unit results, as well as individual performance. As a result, Executive Officers participate in incentive programs that provide them with the opportunity to earn awards that are directly tied to the Company’s performance and that drive sustainable long-term stockholder value. The Company’s compensation programs provide an incentive for Executive Officers to meet and exceed performance goals. Executives are held accountable for results and rewarded with above target payout amounts for performance that exceeds target goals. When target goals are not met, award payouts are designed to deliver below target payouts or no payouts. We believe the combination of our annual short-term incentive awards and long-term equity incentive awards align the interests of our Executive Officers with the interests of our stockholders.
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Compensation Discussion and Analysis
CEO and Other Named Executive Officers Pay Mix
While we believe that a majority of an Executive Officer’s target compensation opportunity should be performance-based, we do not have a specified formula that defines the overall weighting of each element. We believe that the higher a role is positioned within the organizational structure, the greater the emphasis on performance-based compensation should be. As such, the CEO has a greater percentage of his compensation that is performance-based through higher target opportunities for STIP and LTI, as compared to the compensation of the other Named Executive Officers. At risk compensation consists of annual cash incentive awards and long-term equity awards (restricted shares and performance shares) that are contingent upon the achievement of pre-established performance goals. The following charts illustrate the 2017 Target Total Direct Compensation mix for our President and CEO and the other Named Executive Officers combined and includes the pay elements of base salary, STIP (at target), restricted shares and performance shares (at target):
Compensation Mix | Compensation Mix | |
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Compensation Discussion and Analysis
Elements of Compensation for Named Executive Officers
The following table listsCommittee determines the elements of total direct compensation that we provide to our Executive Officers:Officers. The elements of our fiscal 2017 executive compensation program and the objectives for each, are as follows:
COMPENSATION | TYPE | FORM | CONSIDERATIONS | OBJECTIVES | ||||
Base Salary | ||||||||
Compensation | • Reviewed annually and adjusted when appropriate • Determined based on role and scope of responsibilities, skills, experience, sustained individual |
• Attract and retain qualified Executive Officers and balance risk-taking | ||||||
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Short Term Incentive Plan (STIP) | VariableAt-RiskPerformance-Based Compensation | Cash | ||||||
• Performance measures selected to align with our business strategy
• Payout based on achievement of predetermined goals • “Gatekeeper” goal must be achieved for any award to be earned |
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| Restricted Stock | |||||||
VariableAt-Risk Compensation |
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• Support retention
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Performance Shares | ||||||||
Long Term Incentives (LTI) | ||||||||
Variable At-Risk Performance-Based Compensation | Stock- Settled |
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• Relative TSR measure is for a three- year period
| • Drive long-term value creation for stockholders • Motivate and reward Executive Officers for achievement of strategic business objectives over a
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36 |
Compensation Discussion and Analysis
20162018 Executive Incentive Plans – Overview of Changes
For the 20162018 incentive plan designs, the Company continues to focus on pay-for-performance alignment by using severalmultiple financial measures and Relative TSR to strongly drive our key business objectives and shareholderstockholder value. For 2016,In support of this strategy, the CompanyCommittee has decided to again use aapproved the following:
Details regarding the 20162018 incentive plan designs will be presented in our 20172019 proxy filing.
Process for Determining Executive Compensation
Role of the Compensation Committee
The Committee designs and administers the Company’s executive compensation programs and policies, and regularly reviews these programs and policies againstrelative to its objectives, applicable new legal and regulatory practices, evolving best practices, and corporate governance trends. The Committee and members of the Board of Directors determine the compensation of the CEO. The CEO’s total compensation is comprised of base salary, STIP, and LTI award opportunities, and is the same design as the other Named Executive Officers. The CEO does not participate in recommendations or discussions related to his own compensation. As part of its responsibility for executive compensation, the Committee annually reviews and determines the compensation of each of our Senior Officers, including the Named Executive Officers listed in the Summary Compensation Table of this Proxy Statement, based on each individual’s performance including consideration of ethical behavior, relevant market comparisons, and the recommendations of the CEO. The Committee is responsible for reviewing and fully understandingreviews the costs and short- and long-term benefits of the compensation arrangements they considerit considers and approveapproves for Senior Officers.
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The Committee and members of the Board of Directors determine the compensation of the CEO. The CEO’s total compensation is comprised of the same elements as the other Named Executive Officers. The CEO does not participate in recommendations or discussions related to his own compensation.
All of the Committee responsibilities are defined in its charter, which can be found on the Company’s website at kellyservices.com.
Role of the Independent Compensation Consultant
Since October 2014, the Committee has engaged Pay Governance LLC as its independent compensation consultant (the “Consultant”). The Committee considers analysis and guidance from the Consultant when making compensation decisions on plan design; the merits of various incentive plan performance measures; Executive Officer pay levels, including that of the CEO, relative to peer group and other market data; composition of peer group companies; stock ownership requirements; and other pay practices. In addition, the Consultant updates the Committee on market trends and best practices in executive compensation and, as requested, provides data and guidance on other items such as non-employee directorDirector compensation. The Committee uses its own independent judgment to make all final decisions related to the compensation of the Company’s Executive Officers.
TheDuring 2017, the Consultant attendsregularly attended Committee meetings and regularly communicatescommunicated with both the Executive Chairman and Chairman of the Board, the Committee Chairman, and the Committee Vice Chairman outside of Committee meetings. On occasion, asAs directed by the Compensation Committee, the Consultant will also meetmet with the SVPCorporate Secretary and Chief Human ResourceInvestor Relations, Executive Compensation and Communications Officer (“CHRO”Corporate Secretary”) and members of the compensationExecutive Compensation, Finance, and financeCorporate Governance teams of the Company. The Consultant reportsmaintains a direct reporting relationship to the Committee on all compensation matters.
AnThe Committee conducts an annual assessment of the Consultant’s independence, using factors established by Nasdaq Global Market and approved by the SEC is conducted to ensure independence has been maintained.Market. The Consultant provided no services to the Company in 20152017 other than services to the Compensation Committee. The Committee reviewed and affirmed the independence of the Consultant as the Compensation Consultant to the Committee and concluded the work performed by the Consultant did not raise a conflict of interest.
The Committee consults with the CEO and Corporate Secretary to obtain feedback with respect to the strategic direction of our executive compensation programs.
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Compensation Discussion and Analysis
The CEO and Executive Vice President (“EVP”) and Chief Operating Officer (“COO”) makemakes recommendations for each of their direct reports who arethe Executive Officers with regard to elements of their total compensation. They base theseHe bases his recommendations on theirthe assessment of each Executive Officer’s performance, as well as, the performance of their respective business or function. The Committee takes into consideration the recommendations of the CEO and COO when determining the compensation of the other Executive Officers.
In addition, the SVP and CFO provides periodic financial updates and information to the Committee, to aid in establishing incentive plan goals and determining payout amounts.
The Committee understands the significance of its responsibilities and considers a substantial amount of information and input from both internal and external resources as a reference in support of its decision making. The Committee uses third-party survey data for comparably sized general industry companies and available data from a select group of peer companies, in determining the competitive positioning of our compensation programs, and the individual compensation of each of our Named Executive Officers.
Each Executive Officer’s performance is reviewed (see Executive Officer Performance Reviews and Succession Planning below) and compensation decisions are made on an annual basis (or as an Executive Officer’s duties and responsibilities change). Base salaries, target STIP, and target long-term incentive opportunities are benchmarked against a group of comparable executive positions in general industry companies of similar revenue size as reflected in multiple third-party surveys. The Committee generally managesWe seek to establish target total direct compensation opportunities (defined as base salary, target STIP, and target long-term incentive opportunities)incentive) for itsour Named Executive Officers at levels, on average, that approximateare within a competitive range of the median of the competitive market data. Compensation ultimately earned from these opportunities can vary from the’ median based on the company, business unit and individual performance. Various other factors are taken into consideration and in certain circumstances, we may target pay above or below the competitive median. Individual target total direct compensation may be above or below
36
the median depending on Company performance, cost considerations, the role’s scope of responsibilities, individual experience and performance, and any succession, retention or internal equity considerations. Prior to 2015, the Company had taken a conservative approach to target long-term incentive opportunities for Senior Officers that were generally well below market median. As explained further in the Long-Term Incentive section, theThe 2015 LTI design brought target total direct compensation opportunities, on average, closer to near market median levels.levels for our Senior Officers. In support of the Company’s efforts to reduce costs in connection with its investment strategy, management voluntarily requested and the Committee agreed, that the 2016 and 2017 LTI levels for Senior Officers would be reduced from the 2015 levels, as explained further in the Long-Term Incentive section of this Proxy Statement.
In 2015,2017, a competitive executive compensation analysis was performed which included both an analysis of third-party survey data prepared internally by the Company’s Human ResourcesExecutive Compensation group, and a peer group review of CEO pay prepared by the Consultant. Third-party general industry survey data from Aon Hewitt, Equilar, Mercer, and Towers Watson was used to prepare the survey analysis. Specific companies that participated in the third-party surveys were unknown and not a factor in the Committee’s deliberations. The survey analysis was reviewed by the Consultant for the Committee.
Late in 2014,The Company considers the officer pay practices of a comparator peer group prepared by the Consultant, helped prepare an updated peer group for the Company. The new comparator groupwhich was preparedselected using the following criteria: industry;industry, annual revenues;revenues, and non-staffing companies considered by shareholder advisory groups as peers;peers. The majority are multi-national/global companies headquartered in U.S.; multi-national/global companies; and market capitalization. The resulting group of fifteen comparator companies includes direct peers supplemented by other people-intensive businesses with similar margins. This group of companies includes sixnine companies used by Institutional Shareholder Services (“ISS”) in their 20152017 report, and an additional twowhich means 60% of companies that were used by ISS in their 2014 reportour peer group are shared with ISS. The Company’s 2016 revenue of $5.28 billion was on par with the median peer group revenue of $5.25 billion for the Company.same period. The following comparator group of fifteen companies was unchanged from last year and used by the Committee as another reference point when reviewing 20152017 officer pay practices and CEO pay levels:
2017 Peer Group
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• Adecco SA | • ManpowerGroup Inc. | • R.R. Donnelley & Sons Company | ||
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The Committee considers peer group and general industry survey data as a point of reference, not the sole factor in determining executive officers’ compensation. The third-party survey data and peer group analysis represent “Market Data” when referenced throughout this Compensation Discussion and Analysis. The Human Resources group provides the Committee historical and prospective compensation components for each Executive Officer. The Committee considers all of the resultsresources provided as part of this analysisa holistic process that also includes officer performance and the recommendations of the Company’s CEO and COO regarding total compensation for those executives reporting directlySenior Officers.
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Compensation Discussion and Analysis
In addition to Market Data and for use as background information, the Executive Compensation group provides the Committee with comprehensive tally sheets for each Executive Officer, summarizing up to four years of them.historical target and actual total compensation data and long-term incentive grant detail that includes grant date fair value as well as the intrinsic value of outstanding shares. The Committee reviews tally sheets for all of the Executive Officers and believes they are a useful reference tool when considering whether compensation decisions reflect the Company’s executive compensation philosophy and performance. Tally sheets are not a determining factor for the Committee when making compensation decisions.
Executive Officer Performance Reviews and Succession Planning
Annually, the Committee conducts a comprehensive Executive Officer performance review that includes identification of succession planning and identification of officer developmentdevelopmental opportunities. Detailed executive performance review information for each of the Senior Officers, including the Named Executive Officers, is prepared by the CHRO.Chief Human Resources Officer (“CHRO”). The performance review information for each of the Executive Officers includes key annual initiatives, performance results, strengths, and development opportunities. The CEO reviews the performance of the other Executive Officers who report to him and presents their individual performance assessments, development plans, and succession strategies to the Committee. Similarly, the COO presents to the Committee the individual performance assessments for his direct reports. During the individual performance assessments, the Committee asks questions, renders advice, and makes recommendations on matters that include individual development needs, succession planning, and retention. The Company’s Executive Chairman and Chairman of the Board and the Committee Chair present the performance review for the CEO to the other Committee members. None of the Executive Officers are present when their performance is being discussed by the Committee. Each Executive’s individual performance assessment is used by the Committee, together with the compensation analysis discussed in the previous section and the recommendations of the CEO, and COO, to determine compensation for the Executive Officers.
The Company’s succession plan is updated annually in connection with the performance assessments and is approved by the Board. The plan documentation includes all executives at the SVPSenior Officer level, and above, as well as their potential successors from within the Company in case of an unexpected disability or departure of a Senior Officer. Documentation includes detailed executive performance review information as discussed above, readiness assessments, and at least one potential successor for each role. Any changes to the plan during the year also require the approval of the Board. The CHRO is leading the implementation of a new succession planning approach and process for 2018, details of which will be disclosed in the Company’s 2019 Proxy Statement.
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Compensation Programs: Decisions and Actions in 20152017
George S. Corona - Promotion
Following notification by Mr. Camden in April 2017 of his intent to retire as an Executive Officer and Director of the Company effective with the annual meeting in May, the Company’s Board of Directors, at a meeting held on April 13, 2017, appointed Mr. Corona to the role of President and Chief Executive Officer, effective May 10, 2017. As a result of this promotion, Mr. Corona received an increase to his base salary, and prorated STIP target and LTI opportunity for 2017, pursuant to the terms of the STIP and EIP as they pertain to Named Executive Officers. These changes were in recognition of his appointment and took into account market competitive compensation opportunities for the role as summarized below:
Teresa S. Carroll and Peter W. Quigley - Promotions
On May 10, 2017, and upon the recommendation of the Committee, the Company’s Board of Directors elected Teresa Carroll to the role of Executive Vice President and President, Global Talent Solutions and General Manager, Sales, Marketing and Human Resources, and Peter Quigley to the role of Executive Vice President and President, Global Staffing
39 |
Compensation Discussion and Analysis
and General Manager, Global Information Technology, Global Business Services and Global Services. As a result of their promotions, Ms. Carroll and Mr. Quigley each received base salary increases, and prorated STIP targets and LTI opportunities for 2017 pursuant to the terms of the STIP and EIP as they pertain to Named Executive Officers. These changes were in recognition of their appointments and to more closely reflect market competitive compensation opportunities for their new roles as summarized below:
Base salaries for the Named Executive Officers are intended to be competitive with Market Data to ensure that the Company can attract and retain the executives necessary to successfully lead and manage the organization. Base salaries generally fall within a range (+/- 15%) around the median of salaries in the Market Data, as individual base salaries will vary based upon the factors described below. Based on Market Data available in December 2016, we determined that the base salaries of our Named Executive Officers were within this competitive range of the 20152017 market medians for comparable roles. Base salary is only one component of target total direct compensation and may be affected by other components to ensure that target total direct compensation meets compensation objectives.
The Committee reviews the base salaries of Executive Officers, including the Named Executive Officers, on an annual basis (or as an Executive Officer’s duties and responsibilities change). Base salaries are determined by the Committee for each of the Executive Officers based on various factors, including the scope and responsibilities of the role, an individual’s experience and performance in the role, their current level of pay compared to Market Data, internal pay equity, the recommendationrecommendations of the CEO, and COO, and consideration of the Company’s salary adjustment budget.
Olivier G. Thirot - Interim Role and Promotion
FollowingManagement elected to move the resignationtiming of our CFOthe Company’s annual total compensation review process for all employees, including the Executive Officers, from October 2016 to March 2017 in March 2015, the Committee appointed our SVP, Chief Accounting Officer and Controller, Mr. Thirot, as Acting CFO. In order to recognize his new responsibilities, Mr. Thirotcoincide with the timing of any potential incentive award payouts. The timing alignment of compensation elements was provided with interim pay equalintended to an additional 10% of his base salary and an interim increase in his STIP target opportunity from 40% to 65% of base salary, effective March 16, 2015.
On December 2, 2015, the Committee appointed Mr. Thirot to Senior Vice President and Chief Financial Officer, effective January 1, 2016. As a result of this promotion, Mr. Thirot received an increase to his base salary, STIP target and LTI opportunity for 2016. Mr. Thirot did not benefit from these changes during 2015 and as such, details are not reported here, but will be included in the Compensation Discussion and Analysis of our 2017 Proxy disclosure.
Teresa S. Carroll and Peter W. Quigley - Promotions
In April 2015, management recommended and the Committee approved the promotion of Ms. Carroll from SVP, Global Centers of Excellence and General Manager, Global OCG to SVP and General Manager, Global Talent Solutions. In addition to her previous responsibilities, Ms. Carroll added responsibility for the Americas Strategic Accounts and Operations (“SAO”) and Global Solutions businesses. In recognition of her broader role, the Committee approved a base salary increase of 15.7% and an increase in STIP target opportunity from 65% to 70% of base salary for Ms. Carroll.
In April 2015, management recommended and the Committee approved the promotion of Mr. Quigley from SVP and General Counsel to SVP, General Counsel, and Chief Administrative Officer. With this promotion, Mr. Quigley added responsibility forreinforce the Company’s Human Resources, Information Technology, Global Services, Facilities,pay for performance philosophy and Corporate Communications functions.provide each employee with their “total compensation” overview. In recognition of this broader role, the Committee approved a base salary increase of 15.7% and an increase in STIP target opportunity from 65% to 70% of base salary for Mr. Quigley.
The compensation changes for Ms. Carroll and Mr. Quigley were effective April 6, 2015.
In August 2015,December 2016, the Committee conducted its annual review of base salaries of the Senior Officers, including Named Executive Officers, and considered the recommendation of management that the Senior Officers not receive regular base salary increases at this time.in March 2017. The Committee supported this recommendation and did not provide the Senior Officers with salary increases during the annual total compensation review process in 2015.
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early 2017. This decision reflected a conservative approach that both management and the Committee believed was in support of the Company’s investment strategy.
In consideration of the factors noted above, the following base salaries for the Named Executive Officers were approved by the Committee in 2015:2017:
Named Executive Officer |
2014 Base | 2015 Base Salary | Adjustment % | 2016 Base Salary | 2017 Base Salary | Adjustment % | ||||||||||||||||
Carl T . Camden | $ | 1,000,000 | $ | 1,000,000 | 0.0% | |||||||||||||||||
George S. Corona | $ | 655,000 | $ | 655,000 | 0.0% | $ | 655,000 | $ | 1,000,000 | 52.7 | % | |||||||||||
Peter W. Quigley | $ | 432,000 | $ | 500,000 | 15.7% | |||||||||||||||||
Olivier G. Thirot | $ | 445,629 | $ | 490,192 | 10.0% | $ | 515,000 | $ | 533,500 | 3.6 | % | |||||||||||
Teresa S. Carroll | $ | 432,000 | $ | 500,000 | 15.7% | $ | 500,000 | $ | 575,000 | 15.0 | % | |||||||||||
Peter W. Quigley | $ | 500,000 | $ | 575,000 | 15.0 | % | ||||||||||||||||
Steven S. Armstrong | $ | 332,000 | $ | 332,000 | 0.0 | % |
Note:Notes:
Effective January 1, 2017 Mr. Thirot’s compensation has been convertedThirot moved from Swiss Francs (CHF)payroll and benefits to U.S. Dollars (USD) usingpayroll and benefits. The allowances he had been receiving in Switzerland were discontinued at that time and a portion of the Company’s budgeted currency exchange rate of 1.0869 in effect for 2015.
For Messrs. Thirot and Quigley, and Ms. Carroll, the actual salary received, as shown in the 2015 Summary Compensation table of this Proxy Statement, reflects the base salary rates in effect during each of the periods of time before and after the effective date of changes made to their salaries in 2015.
The Committee believes that the Named Executive Officers should have a meaningful percentage of their total compensation earned through annual “at risk” performance-based incentives. The percentage of target total compensation at risk under the terms of the STIP increases significantly as the individual executive’s responsibilities and influence on overall corporate performance results increase. The STIP is designed to encourage executives to meet and exceed the Company’s short-term goals that align with overall corporate strategy and improve shareholderstockholder value.
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Compensation Discussion and Analysis
The STIP target opportunity is established as a percentage of each individual’s actual base salary earnings and is targeted near the median Market Data, but may vary based upon individual factors, internal equity and other considerations. STIP payments for all participants are capped at 200% of the target incentive award opportunity. In August 2015,December 2016, the Committee reviewed the target incentive opportunity for each of the Named Executive Officers and found that all were appropriately positioned relative to the Market Data.
The following table shows the 20142016 and 20152017 STIP target opportunities, as a percent of base salary, for our Named Executive Officers:
2016 STIP | 2017 STIP | |||||||||||||||||
Named Executive Officer | 2014 STIP Target % | 2015 STIP Target % | Target % | Target % | ||||||||||||||
Carl T. Camden | 130% | 130% | ||||||||||||||||
George S. Corona | 90% | 90% | 90 | % | 130 | % | ||||||||||||
Peter W. Quigley | 65% | 70% | ||||||||||||||||
Olivier G. Thirot | 40% | 65% | 75 | % | 75 | % | ||||||||||||
Teresa S. Carroll | 65% | 70% | 70 | % | 85 | % | ||||||||||||
Peter W. Quigley | 70 | % | 85 | % | ||||||||||||||
Steven S. Armstrong | 60 | % | 60 | % |
Notes:Note:
Mr. Thirot’s incentive target was increased on an interim basis due to his appointment to acting CFO effective March 16, 2015.
The incentive targets for Mr.Messrs. Corona and Quigley and Ms. CarrollCarroll’s incentive targets were increased effective April 6, 2015 as a result of the additional responsibilities each took on with their promotions.
In the months leading up to year end, the Committee reviews and determines the objectives, performance measures, and other terms and conditions of the STIP for the following plan year. For 2015, and as part of2017, similar to the prior year’s incentive plan redesign, the Committee approved the use of multiple performance measures to comprise the corporate component of the
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STIP. The Committee selected multiple financial measures in the STIP that aligned to the business objectives and value creation, provided balance, ensured a strongerstrong pay-performance linkage, and improved line of sight for Senior Officers, including the Named Executive Officers. Measures selected for 2017 STIP were: earnings
Payout for threshold performance under the corporate component of STIP is 50%25% of an Executive Officer’s target payout, with zero payout earned for performance below threshold. An intermediate performance level that is halfway between threshold and target performance levels was added in 2017. Achievement of intermediate level of performance results in payouts that are 75% of target. Achievement of target performance results in target payouts for the Executive Officers. Each additional performance incrementPerformance above target earns prorated incentive payouts above target and up to the maximum of 200% of target. The 2015As in prior years, the 2017 STIP design includes a ‘gatekeeper’ goal which must be achieved in order to earn a payout under any measure. The gatekeeper goal is earnings from operations with a required level of achievement of at least 60% of target.
Performance measures used for purposes of STIP are the same as defined in the Company’s GAAP financial statements, excluding special items such as: changes in accounting principles, gains or losses on acquisitions or divestitures, changes in budget due to acquisitions or divestitures, restructuring charges,expenses, and other unusual items, which are defined as such and quantified in the financial statements and/or footnotes to the Company’s Annual Report on Form 10-K. Adjustments would apply only to unbudgeted items. For the two strategic measures,total gross profit measure, constant currency (using the Company’s 20152017 budgeted currency exchange rate) was used to determine values in establishing achievement of the incentive plan goals for 2015.2017.
In February 2015,2017, the Committee determined and approved management’s recommendation for threshold, intermediate, target, and maximum performance goal levels for the 20152017 STIP. The threshold goals were set at levels for which the Committee believed it was appropriate to start earning incentives; intermediate goals were set halfway between threshold and target amounts; target goals were set at the budgeted levels, which the Committee considered were “challenging but achievable”; maximum goals were set at significant stretch levels for which the Committee believed the earning of two times target payouts was warranted. For the Corporate measures, straight line interpolation occurs for achievement of performance between threshold and intermediate, intermediate and target, and between target and maximum. For the business unit measures, there is no straight line interpolation between payout levels of the payout schedule. The goals at threshold, target, intermediate and maximum for the 20152017 STIP, as well as resulting performance for each measure of the corporate component were as follows:
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Compensation Discussion and Analysis
2017 Performance Goals | Weighted | |||||||||||||||||||||||||||
Corporate Component Performance Measures | Weighting | Threshold | Intermediate | Target | Maximum | 2017 Actual Results | 2017 Payout (% of Target) | |||||||||||||||||||||
Earnings from Operations | 50.0 | % | $ | 68.800 | $ | 77.400 | $ | 86.000 | $ | 111.800 | $ | 85.529 | 49.32 | % | ||||||||||||||
Return on Gross Profit | 25.0 | % | 7.100 | % | 8.107 | % | 9.114 | % | 10.614 | % | 8.994 | % | 24.25 | % | ||||||||||||||
Total Gross Profit | 25.0 | % | $ | 876.000 | $ | 909.800 | $ | 943.600 | $ | 1,037.960 | $ | 948.945 | 26.42 | % | ||||||||||||||
100 | % | 99.98 | % |
$ in millions
2015 Performance Goals | Weighted | |||||||||||
Corporate Component Performance Measures | Weighting | Threshold | Target | Maximum | 2015 Actual Results | 2015 Payout (% of Target) | ||||||
Earnings from Operations | 33.3% | $53.136 | $66.420 | $92.988 | $70.759 (1) | 38.7% | ||||||
Return on Sales | 33.3% | 0.900% | 1.100% | 1.500% | 1.280% | 48.3% | ||||||
Gross Profit $ - Americas Staffing - Commercial | 16.7% | $366.273 | $406.970 | $488.364 | $408.543 | 17.0% | ||||||
Gross Profit $ - Global Professional & Technical (PT) | 16.7% | $205.170 | $227.966 | $273.559 | $221.660 | 14.4% | ||||||
100% | 118.4% |
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Messrs. Camden, Corona Quigley, and Thirot’s STIP opportunity wasopportunities were based 100% upon the performance measures of the corporate component, as shown above.
Ms. Carroll’s STIP opportunity was based 30% on the corporate component measures and 70% on the business unit measures for which she is accountable.accountable for the first four months of the year prior to her promotion in May 2017. At that time, the Committee determined to increase the weighting of the corporate measure to 50% to better reflect her new responsibilities for several functional areas of the organization: Sales, Marketing and Human Resources. Her STIP business unit measures were changed to be weighted 50%. Payout results for the business unit measures for Ms. Carroll reflect lower than anticipated gross profit results, due largely to volume contractionwere positively impacted by revenue and margin declineGross Profit growth in the RecruitmentContingent Workforce Outsourcing (“CWO”), KellyConnect and Business Process Outsourcing (“RPO”BPO”) business, which was due in part to customersbusinesses, and were negatively impacted by shifting customer demands in the oilcentrally delivered staffing and gas industry who were significantly impacted bypayroll business, as well as increased SG&A expenses due to the falling price of oil. costs associated with the headcount added for new and expanding programs. The measure, “Contribution” that appears below for Ms. Carroll and Messrs. Quigley and Armstrong is defined as income from operations.
Performance results for each of Ms. Carroll’s business unit measures are as follows:
Teresa Carroll: In effect January 1, 2017 - April 30, 2017
2017 Performance Goals | ||||||||||||||||||||||||
Corporate Component and Business Unit Performance Measures | Weighting | Threshold | Target | Maximum | 2017 Actual Results | Weighted 2017 Payout (% of Target) | ||||||||||||||||||
Corporate Component Performance Measures | 30.0 | % | see details above | 29.99 | % | |||||||||||||||||||
Americas SAO Gross Profit | 17.5 | % | $ | 144.419 | $ | 160.465 | $ | 200.581 | $ | 163.702 | 17.50 | % | ||||||||||||
Global OCG Gross Profit | 17.5 | % | $ | 197.628 | $ | 219.587 | $ | 263.504 | $ | 210.055 | 13.13 | % | ||||||||||||
Global Talent Solutions (GTS) Contribution | 35.0 | % | $ | 58.463 | $ | 73.079 | $ | 109.619 | $ | 79.910 | 38.50 | % | ||||||||||||
100 | % | 99.12 | % |
$ in millions
2015 Performance Goals | Weighted | |||||||||||
Corporate Component and Business Unit Performance Measures | Weighting | Threshold | Target | Maximum | 2015 Actual Results | 2015 Payout (% of Target) | ||||||
Corporate Component Performance Measures | 30.0% | see details above | 35.5% | |||||||||
Americas SAO + Global OCG Gross Profit $ | 35.0% | $327.724 | $364.138 | $455.173 | $336.200 | 7.0% | ||||||
Americas SAO + Global OCG Contribution | 35.0% | $56.494 | $70.617 | $105.926 | $67.678 | 26.3% | ||||||
100% | 68.8% |
Teresa Carroll: In effect May 1, 2017 - December 31, 2017
2017 Performance Goals | ||||||||||||||||||||||||
Corporate Component and Business Unit Performance Measures | Weighting | Threshold | Target | Maximum | 2017 Actual Results | Weighted 2017 Payout (% of Target) | ||||||||||||||||||
Corporate Component Performance Measures | 50.0 | % | see details above | 49.99 | % | |||||||||||||||||||
Americas SAO Gross Profit | 12.5 | % | $ | 144.419 | $ | 160.465 | $ | 200.581 | $ | 163.702 | 12.50 | % | ||||||||||||
Global OCG Gross Profit | 12.5 | % | $ | 197.628 | $ | 219.587 | $ | 263.504 | $ | 210.055 | 9.38 | % | ||||||||||||
Global Talent Solutions (GTS) Contribution | 25.0 | % | $ | 58.463 | $ | 73.079 | $ | 109.619 | $ | 79.910 | 27.50 | % | ||||||||||||
100 | % | 99.37 | % |
40$ in millions
Performance results for each of Mr. Quigley’s business unit measures are as follows:
Compensation Discussion and Analysis
Peter Quigley: In effect May 1, 2017 - December 31, 2017
2017 Performance Goals | ||||||||||||||||||||||||
Corporate Component and Business Unit Performance Measures | Weighting | Threshold | Target | Maximum | 2017 Actual Results | Weighted 2017 Payout (% of Target) | ||||||||||||||||||
Corporate Component Performance Measures | 50.0 | % | see details above | 49.99 | % | |||||||||||||||||||
Americas Staffing Gross Profit | 20.0 | % | $ | 377.782 | $ | 419.758 | $ | 524.697 | $ | 425.985 | 20.00 | % | ||||||||||||
Americas Staffing Contribution | 20.0 | % | $ | 69.518 | $ | 86.897 | $ | 130.346 | $ | 81.706 | 10.00 | % | ||||||||||||
EMEA Staffing Gross Profit | 5.0 | % | $ | 132.712 | $ | 147.458 | $ | 184.322 | $ | 151.379 | 5.50 | % | ||||||||||||
EMEA Staffiing Contribution | 5.0 | % | $ | 14.324 | $ | 17.906 | $ | 26.858 | $ | 21.538 | 7.00 | % | ||||||||||||
100 | % | 92.49 | % |
$ in millions
Mr. Armstrong’s STIP opportunity was based 30% on the corporate component measures and 70% on the business unit measures for which he is accountable. Although the result for U.S. Operations PT Gross Profit measure was above threshold, the design requires achievement of threshold level of performance for the U.S. Operations PT Contribution measure before payout can be earned on the corresponding Gross Profit measure. Threshold performance was not achieved for the U.S. Operations PT Contribution measure, so no payout was earned for the U.S. Operations PT Gross Profit measure. Payout results for the business unit measures for Mr. Armstrong were positively impacted by the reduction of worker’s compensation expenses in 2017 and were negatively impacted by the increased SG&A expenses linked to higher performance based compensation and additional sales and recruiting resources added to capture growing demand in the last half of the year.
Performance results for each of Mr. Armstrong’s business unit measures are as follows:
Steven Armstrong: In effect January 1, 2017 - December 31, 2017
2017 Performance Goals | ||||||||||||||||||||||||
Corporate Component and Business Unit Performance Measures | Weighting | Threshold | Target | Maximum | 2017 Actual Results | Weighted 2017 Payout (% of Target) | ||||||||||||||||||
Corporate Component Performance Measures | 30.0 | % | see details above | 29.99 | % | |||||||||||||||||||
US Operations Gross Profit | 17.5 | % | $ | 282.205 | $ | 313.561 | $ | 391.951 | $ | 320.225 | 17.50 | % | ||||||||||||
US Operations PT Gross Profit | 17.5 | % | $ | 64.855 | $ | 72.061 | $ | 86.473 | $ | 70.068 | 0.00 | % | ||||||||||||
US Operations Contribution | 35.0 | % | $ | 65.429 | $ | 81.786 | $ | 122.679 | $ | 75.546 | 17.50 | % | ||||||||||||
100 | % | 64.99 | % |
$ in millions
Under the terms of the STIP, the Committee retains the right in its discretion to reduce a STIP award based on Company, business unit, or individual performance. The Committee has no discretion to increase a STIP award for Named Executive Officers (though the Committee may approve a special bonus for Named Executives Officers on a discretionary basis to recognize exceptional performance or actions not related to objectives set forth in the STIP)STIP; in 2017, no discretionary bonus awards were made to Named Executive Officers). AnySTIP awards made in 2017 were designed to comply with the requirements of Section 162(m) of the Code and any awards made under the STIP are subject to the Company’s Incentive Compensation Recovery (“Clawback”)Clawback Policy.
Based on these performance results, at its February 17, 201614, 2018 meeting, the Committee reviewed and approved payments to the Named Executive Officers in accordance with the STIP provisions as follows:
Named Executive Officer | 2015 Base Salary Earnings |
2015 | 2015 Payout as a Percentage of Target | 2015 STIP Payout | ||||
Carl T. Camden | $1,000,000 | 130% | 118.4% | $1,539,200 | ||||
George S. Corona | $655,000 | 90% | 118.4% | $697,968 | ||||
Peter W. Quigley | $482,227 | 65%/70% | 118.4% | $392,921 | ||||
Olivier G. Thirot | $481,034 | 40%/65% | 118.4% | $342,722 | ||||
Teresa S. Carroll | $482,227 | 65%/70% | 68.8% | $228,220 |
43 |
Notes:
Compensation Discussion and Analysis
Mr. Thirot’s compensation has been converted from Swiss Francs (CHF) to U.S. Dollars (USD) using the Company’s budgeted currency exchange rate of 1.0869 in effect for 2015.
2017 | 2017 STIP | 2017 Payout | ||||||||||||||||||
Base | Target as | 2017 STIP | as a | |||||||||||||||||
Salary | % of | Payout at | Percentage | 2017 STIP | ||||||||||||||||
Named Executive Officer | Earnings | Salary | Target | of Target | Payout | |||||||||||||||
George S. Corona(1/1 - 04/30) | $ | 218,333 | 90 | % | $ | 196,500 | 99.98 | % | $ | 196,461 | ||||||||||
George S. Corona(5/1 - 12/31) | $ | 657,519 | 130 | % | $ | 854,775 | 99.98 | % | $ | 854,604 | ||||||||||
|
|
|
| |||||||||||||||||
$ | 1,051,275 | $ | 1,051,064 | |||||||||||||||||
Olivier G. Thirot | $ | 533,500 | 75 | % | $ | 400,125 | 99.98 | % | $ | 400,045 | ||||||||||
Teresa S. Carroll(1/1 - 04/30) | $ | 166,667 | 70 | % | $ | 116,667 | 99.12 | % | $ | 115,639 | ||||||||||
Teresa S. Carroll(5/1 - 12/31) | $ | 381,345 | 85 | % | $ | 324,143 | 99.37 | % | $ | 322,085 | ||||||||||
|
|
|
| |||||||||||||||||
$ | 440,810 | $ | 437,723 | |||||||||||||||||
Peter W. Quigley(1/1 - 04/30) | $ | 166,667 | 70 | % | $ | 116,667 | 99.98 | % | $ | 116,643 | ||||||||||
Peter W. Quigley(5/1 - 12/31) | $ | 381,345 | 85 | % | $ | 324,143 | 92.49 | % | $ | 299,800 | ||||||||||
|
|
|
| |||||||||||||||||
$ | 440,810 | $ | 416,443 | |||||||||||||||||
Steven S. Armstrong | $ | 332,000 | 60 | % | $ | 199,200 | 64.99 | % | $ | 129,468 |
The EIP provides for long-term incentives that reward executives for achieving the Company’s long-term growth and profitability goals. SuchLong-term incentive compensation is also intended to help the Company retain key employees, and it givesprovide those employees shared financial interests with the Company’s shareholders that are believed tostockholders and positively influence their job performance and longer-term strategic focus. The EIP allows for grants of equity and non-equity awards to key employees. As described in the Executive Summary, theThe Committee approved a redesign of the Company’s long-term incentives forin 2015 that included updated performance measures, a greater portion of variable at-risk performance-based compensation, and target opportunities for the Named Executive Officers that were set, on average, to be near market competitive levels.
The Committee believes that compensation programs for the Company’s Senior Officers should include strong alignment between pay and performance, with a significant portion of “at risk” pay. As a result, the design of 2015the 2017 long-term incentives for Senior Officers, including the Named Executive Officers, was developedmirrored the 2016 grants, with grant levels based 75% on performance shares (at target) and 25% on restricted stock in order to create award opportunities that heavily emphasize performance. This was a significant design change from the prior long-term incentive awards that were weighted primarily on grants of restricted stock and, to a lesser extent, on a cash-based performance-based plan. The updatedcurrent incentive mix emphasizes performance-contingent awards that are delivered through performance shares and places a reduced weighting on restricted shares.
41
In prior years,2015 we implemented a significant design change from the Company’s pre-2015 long-term incentive awards. Prior to 2015, target long-term incentive opportunities for Senior Officers were generally below market median.median and provided primarily in time vesting restricted stock. The overall target number of shares granted to Senior Officers under the 2015 long-term incentive awards brought target total direct compensation opportunities, on average, to be near market median levels. The target number of shares granted to each Senior Officer in 2015, including the Named Executive Officers, were based on an established value for each officer level. Target LTI grant levels, in terms of the number of shares, for nearly all Senior Officers were reduced for the 2016 grant by approximately 15% from the 2015 target share grant levels. This change was made at the request of management and with the approval of the Committee, as both believed it was an approach that supported the Company’s investment strategy and efforts to reduce cost. This reduced grant value was maintained for the 2017 LTI grants, with grant values approximately the same in 2017 as they were in 2016 (for those executives in the same position each year). The number of target shares granted to each Named Executive Officer can be found in the “Grants of
Plan-Based Awards” table, later in this document. The actual value realized for the grant will be based upon achievement of the performance measures of the performance share awards and the price of the Company’s stock.
44 |
Compensation Discussion and Analysis
Under the terms of the EIP, the Committee retains the right in its discretion to reduce an LTI award based on individual performance. The Committee has no discretion to increase an LTI award for Named Executive Officers. LTI grants made in 2017 and prior years were designed to comply with the requirements of Section 162(m) of the Code and any performance-based awards made under the EIP are subject to the Company’s Clawback Policy.
Performance shares provide Senior Officers with the opportunity to earn shares, from zero to 200% of their target opportunity, based on achievement of pre-established measures and goals. For 2015,2017, the Committee selected the following equally weighted performance measures for the performance shares: return on gross profitsales, in order to maximize margins from revenues; earnings before taxes plus joint venture (JV) Income, to include an operating earnings measure and drive expense efficiency; gross profit for the combined Outsourcing and Consulting Group (OCG) and PT businesses to maximize top-line profits (net of the cost of services) for these strategic focus businesses;that also captures JV earnings; and TSR relative to the S&P Small CapSmallCap 600 Index, to drivereward relative TSR performance. The Committee believed that these performance measures were aligned with the business strategy and shareholderstockholder interests, and also provided balance with STIP measures across the strategic business objectives of the Company.
For the first2017 grant of performance shares, the two financial measures, return on gross profitsales and gross profit for the OCG and PT businesses,earnings before taxes plus JV Income, were established withto have three-year goals, which would be developed by aggregating one-year performance goals for 2015. The Committee approved one-year measures for 2015each of the years in the performance period 2017 - 2019. This design was selected due to the desire to have multi-year accountability for performance results, while recognizing the challenges, at this time, of establishing traditional three-year measuresgoals in an uncertain environment, withenvironment. In February 2017, the expectation that the Company would set three-yearCommittee approved goals in the future. Upon achievement of at least a threshold, levelintermediate, target, and maximum levels of performance for either financial measure, shares would be contingently earned but would require an additional twoeach of the measures for 2017. Goals for the measures in subsequent years of continued employment before vestingthe performance period will be established within the first ninety days of each of the years, 2018 and 2019. At the end of the performance period 2017-2019 (i.e., in early 2018.2020), goals and results will be aggregated and/or averaged as appropriate, for each of the two financial measures, to determine achievement and earning, if any, of shares. The relativeRelative TSR measure of the performance shares is a three-year goal with vesting at the end of the 2015-20172017-2019 performance period, provided that a threshold level of performance for this measure is achieved. Performance awards were granted in 2015, contingent upon receiving shareholder approval of the updated EIP at the May 6, 2015 annual meeting, and such approval was received. The following table illustrates performance and vesting periods for each of the measures for the 20152017-2019 performance shares:
Measures | 2015 | 2016 | 2017 | |||
• Return on Gross Profit • Gross Profit $: OCG + PT | One fiscal year Performance | Two additional years of vesting | ||||
• Relative TSR | Three-calendar year Performance Period |
Measures | 2017 | 2018 | 2019 | |||
• Return on Sales (ROS) | Three-year performance is assessed based on the | |||||
• Earnings Before Taxes plus Joint Venture (JV) | average (for the ROS measure) or sum (for the | |||||
earnings measure) of the annual goals set at the | ||||||
start of each year, relative to three years’ of results | ||||||
• Relative TSR | Three-calendar year Performance Period |
The following target number of performance shares were awarded for each performance measure to the Named Executive Officers in 2015:2017:
Target Number of 2017-2019 Performance Shares Awarded
Target Number of Performance Shares Awarded | ||||||||||||||||||||||||
Financial Measures | Total Number | |||||||||||||||||||||||
Earnings | of | |||||||||||||||||||||||
Before Taxes | Relative | Performance | ||||||||||||||||||||||
Financial Measures | Return on | plus JV | TSR | Shares @ | ||||||||||||||||||||
Name | Return on | Gross Profit $: OCG + PT | Relative TSR | Total Number of Performance Shares @ Target | Sales | Income | Measure | Target | ||||||||||||||||
Carl T. Camden | 40,000 | 40,000 | 40,000 | 120,000 | ||||||||||||||||||||
George S. Corona | 17,500 | 17,500 | 17,500 | 52,500 | 23,297 | 23,297 | 23,297 | 69,891 | ||||||||||||||||
Peter W. Quigley | 10,000 | 10,000 | 10,000 | 30,000 | ||||||||||||||||||||
Olivier G. Thirot | 5,000 | 5,000 | 5,000 | 15,000 | 8,325 | 8,325 | 8,325 | 24,975 | ||||||||||||||||
Teresa S. Carroll | 10,000 | 10,000 | 10,000 | 30,000 | 9,317 | 9,317 | 9,316 | 27,950 | ||||||||||||||||
Peter W. Quigley | 9,317 | 9,317 | 9,316 | 27,950 | ||||||||||||||||||||
Steven S. Armstrong | 3,100 | 3,100 | 3,100 | 9,300 |
For achievement of threshold performance, 50%25% of target performance shares would be earned,earned; for achievement of intermediate performance, 75% of target performance shares would be earned; for achievement of target performance, 100% of target performance shares would be earnedearned; and for achievement of maximum performance or higher, 200% of target performance shares would be earned under the 2015 long term2017 long-term incentive design. The threshold goals were set at levels for which the Committee believed it was appropriate to start earning incentives; Intermediate goals were set halfway between threshold and target levels of performance; target goals were set at the budgeted levels, which the Committee considered were “challenging but achievable”; maximum goals were set at significant stretch levels for which the Committee believed the earning of two times target payoutspayout was warranted. Straight line interpolation occurs for achievement of performance between threshold and intermediate, intermediate and target, and between target and maximum.
42
Compensation Discussion and Analysis
Performance results for the two one-year financial measures of the 2015 performance shares were as follows:
2015 Performance Goals | ||||||||||
Financial Performance Measures | Threshold 50% | Target 100% | Maximum 200% | 2015 Actual Results | Funding Level (as % of Target) | |||||
Return on Gross Profit | 6.033% | 6.733% | 8.133% | 7.703% | 169.27% | |||||
Gross Profit $: OCG + PT | $363.799 | $404.221 | $485.066 | $372.728 | 61.04% |
As a result of the above level of achievement for the two 2015 financial goals, the Committee approved the following earned shares for each Named Executive Officer, contingent upon meeting the additional two-year vesting requirement. Illustrated below are the target number of shares and the number of shares contingently earned for each of the two financial measures:
Financial Measure: Return on Gross Profit | Financial Measure: Gross Profit $: OCG + PT | |||||||||
Payout as % of Target: | 169.27% | Payout as % of Target: | 61.04% | Total # of Shares Earned from | ||||||
Name | Target # of Shares | # of Shares Earned | Target # of Shares | # of Shares Earned | Financial Measures | |||||
Carl T. Camden | 40,000 | 67,709 | 40,000 | 24,418 | 92,127 | |||||
George S. Corona | 17,500 | 29,622 | 17,500 | 10,683 | 40,305 | |||||
Peter W. Quigley | 10,000 | 16,927 | 10,000 | 6,105 | 23,032 | |||||
Olivier G. Thirot | 5,000 | 8,464 | 5,000 | 3,052 | 11,516 | |||||
Teresa S. Carroll | 10,000 | 16,927 | 10,000 | 6,105 | 23,032 |
Shares that are subject to the relativeRelative TSR measure have a three-year performance period, 2015 – 2017.2017–2019. TSR combines share price appreciation plus the value of reinvested ex-date dividends and is expressed as a percentage. For the 20152017 performance shares, TSR will be calculated based on the average adjusted closing stock price for the twenty consecutive trading days immediately prior to the beginning and end of the three-year measurement period, January 1, 20152017 to December 31, 2017.2019. Shares are earned based on the Company’s TSR at the end of the three-year performance period relative to that of the S&P Small CapSmallCap 600 Index. In order to encourage appreciation of the Company’s share price, the calculated award will be reduced by 50% if at the end of the performance period the Company’s TSR is negative, indicating it has droppeddeclined over the three-year period.
Performance awards are granted in the form of Performance Share Units (“PSUs”).Units. Performance shares are not eligible for dividends or dividend equivalents. Any performance shares earned under any measure will vest in early 2020, following approval by the Committee.
In the event of a Senior Officer’s termination of employment due to death, disability, normal retirement, or termination not for cause, they will receive a prorated award of performance shares based on actual results achieved, if any. Normal retirement is defined as age 62 with at least five years of service. In order to be eligible for a prorated award due to termination by the Company not for cause, a Senior Officer must have been employed for at least one year after the date the grants were approved by the Committee. The prorated amount is based on the number of whole months in the performance period that were worked by the Senior Officer prior to termination divided by 36. AnyIn the case of termination not for cause in connection with a change in control, performance shares earned under any measure will vest in early 2018, following approval by the Committee.immediately at target amounts.
43
Restricted stock is considered by the Committee to be an effective vehicle to support the Company’s long-term compensation objectives:
Alignment with shareholderstockholder interests;
Facilitate retention through an extended pro-ratapro rata vesting structure; and
Support meaningful stock ownership.
At its February 11, 201515, 2017 meeting, the Committee approved restricted stock grants for Senior Officers, including the Named Executive Officers, which vest ratably over four years, as detailed in the Summary Compensation Table and the Grants of Plan Based Awards Table. This grant of restricted shares represents 25% of each Senior Officer’s target long-term incentive grant. For 2017 grants of restricted stock to our Executive Officers, a performance hurdle of “Positive Net Income” was added to qualify awards for tax deductibility. Dividend equivalents are not paid to Executive Officers until the performance hurdle is achieved and shares vest. The Company believes that restricted stock awards areis an important component of total compensation for our Named Executive Officers and the four-year, pro-ratapro rata vesting feature supports the Company’s retention objective. Restricted stock awards are forfeited upon voluntary termination, normal retirement, and involuntary termination withoutfor cause and vestingor not for cause, unless termination not for cause is not accelerated in the case ofconnection with a change in control. In the case of termination not for cause in connection with a change in control, all restricted stock shares or units vest immediately. Restricted stock awards areis prorated in the event of termination due to death or disability.
On an exception basis,All of the Committee has the authority to grant a restricted stock award with a vesting period of no less than twelve months. No special grants, outside of theSenior Officers’ 2017 long-term incentive awards were granted to all Senior Officers,in a mix of 75% performance shares and 25% restricted stock and there were made to any of the Named Executive Officers during 2015.no other special grants.
Long-Term Incentive for 2013-2015 and 2014-20162015-2017 Performance Results
The first grant of performance shares under the redesigned long-term incentiveincentives was awarded in 2015. As outlined in the Company’s 2016 Proxy Statement, performance shares become earned based on two financial measures and a Relative TSR measure. As part of the transition to the new plan design, that was used to grant awards in 2012, 2013, and 2014, was a performance-based long-term cash incentive plan for Senior Officers, including the Named Executive Officers, except for Mr. Thirot who was not a Senior Officer at the time these grants were made. The design provided for grants of cash-based performance awards that vested based upon achievement of specific Companytwo financial performance measures over a three-year period. Specificfor the 2015 award, return on gross profit and gross profit for the OCG and PT businesses, were established with one-year performance goals for each grant were established by the Committee for each three-year performance period. During 2015, there were still two outstanding grants under this LTI design, the performance period covering fiscal years 2013 through 2015 and the performance period covering fiscal years 2014 through 2016. The measures for both performance periods included2015. Upon achievement of at least a balance of performance as measured by Cumulative After-Tax Earnings and Return on Sales (ROS) in the final year of the performance period, each weighted equally at 50%. A threshold level of performance mustfor either measure, shares would be attainedcontingently earned but would require an additional two years of continued employment before vesting in early 2018. Performance results achieved for the awards that were based on at least one2015 financial measures were 169.27% of target for the return on gross profit measure in orderand 61.04% of target for the gross profit for the OCG and PT businesses. The additional two years of vesting for the performance awards that were earned based on the two 2015 financial measures have now been satisfied. For performance awards based on the Relative TSR performance measure for the period 2015-2017, results were based on the Company’s stock price appreciation and dividend reinvestment over the three-year period as compared to earnthe performance of the S&P SmallCap 600 Index for the same period. The beginning stock price was the average dividend-adjusted closing stock price for the twenty consecutive trading days ending December 31, 2014. The ending stock price was the average dividend-adjusted closing stock price for the twenty consecutive trading days ending December 29, 2017. The Company’s
46 |
Compensation Discussion and Analysis
2015-2017 TSR of 79% is 36.4% higher than the 2015-2017 TSR for the S&P SmallCap 600 Index, which was 42.6%, resulting in a payout under the plan.of 200% of target. Award amounts earned are based on the level of achievement for each of the performance measures, as indicatedmeasures. These levels and final performance results for the 2015-2017 performance period are provided in the following chart:
Results as % of Target | Opportunity Per Participant by Performance Level (Cash Value) | |||||||||||||
Cumulative | Return on (weighted | Payout as % of Target | CEO | COO | EVP | SVP | ||||||||
Threshold | 60% | 50% | $112,500 | $87,500 | $62,500 | $37,500 | ||||||||
Target | 100% | 100% | $225,000 | $175,000 | $125,000 | $75,000 | ||||||||
Maximum | 120% | 150% | $337,500 | $262,500 | $187,500 | $112,500 |
Performance Goals | ||||||||||||||||||||
Financial Performance Measures | Threshold 50% | Target 100% | Maximum 200% | Actual Results | Payout as % of Target | |||||||||||||||
Return on Gross Profit | 6.033 | % | 6.733 | % | 8.133 | % | 7.703 | % | 169.27 | % | ||||||||||
Gross Profit $: OCG + PT | $ | 363.799 | $ | 404.221 | $ | 485.066 | $ | 372.728 | 61.04 | % | ||||||||||
Relative TSR | -15 | % | 0 | % | +30 | % | +36.4 | % | 200.00 | % |
Under the terms$ in millions
As a result of the EIP,above level of achievement for each of the performance measures of the 2015-2017 LTI, the Committee retainsapproved the right in its discretion to reduce an LTI awardvesting of the following number of earned performance shares for each Named Executive Officer:
Financial Measure: | Financial Measure: | |||||||||||||||||||||||||||
Return on Gross Profit | Gross Profit $: OCG + PT | Relative TSR | ||||||||||||||||||||||||||
Payout as | 169.27% | Payout as | 61.04% | Payout as | 200.00% | |||||||||||||||||||||||
% of Target: |
| % of Target: |
| % of Target: |
| Total # of | ||||||||||||||||||||||
Target # of | # of Shares | Target # of | # of Shares | Target # of | # of Shares | Shares | ||||||||||||||||||||||
Name | Shares | Earned | Shares | Earned | Shares | Earned | Earned | |||||||||||||||||||||
George Corona | 17,500 | 29,622 | 17,500 | 10,683 | 17,500 | 35,000 | 75,305 | |||||||||||||||||||||
Olivier Thirot | 5,000 | 8,464 | 5,000 | 3,052 | 5,000 | 10,000 | 21,516 | |||||||||||||||||||||
Teresa Carroll | 10,000 | 16,927 | 10,000 | 6,105 | 10,000 | 20,000 | 43,032 | |||||||||||||||||||||
Peter Quigley | 10,000 | 16,927 | 10,000 | 6,105 | 10,000 | 20,000 | 43,032 | |||||||||||||||||||||
Steven Armstrong | 5,000 | 8,464 | 5,000 | 3,052 | 5,000 | 10,000 | 21,516 | |||||||||||||||||||||
Carl Camden | 32,222 | 54,543 | 32,222 | 19,670 | 32,222 | 64,444 | 138,657 |
Note:
After consideration of Company performance for 2015, the final fiscal year of the three-year 2013-2015 LTI performance period, and consistent with our pay for performance philosophy, the Committee determined that there would be no payout for this performance period as threshold performance was not achieved for either measure. Based on Company performance for the first two fiscal years of the three-year 2014-2016 LTI performance period, it is possible that a threshold level of performance could be achieved iftime he left the Company performs well on the LTI measures in 2016.
44
Highly compensated employees in the U.S. are not eligible to participate in the Company’s qualified 401(k) plan. In order to provide a competitive total compensation package, the Company has established the Management Retirement Plan (the “MRP”), a nonqualified retirement plan. The Named Executive Officers based in the U.S., other than those who are here on an international assignment, are eligible to participate in the MRP.. The MRP is a U.S. nonqualified defined contribution/deferred compensation plan available to all highly compensated employees, including the Named Executive Officers, as outlined by Section 414(q)(1)(B)(i) of the Code. Employees who are working in the U.S. while on an international assignment are not eligible to participate in the MRP. All participants in the MRP can elect to defer from 2% to 25% of their annual base earnings and 2% to 50% of their annual cash incentive earnings. Matching contributions by the Company equal 50% of the first 10% of base salary and annual cash incentives deferred by a participant. Other than the MRP, there are no other retirement income plans available to the Company’s highly compensated employees in the U.S. The MRP provides all participants, including the Named Executive Officers, with a tax gross-up of Medicare taxes incurred on contributions to the plan. The Medicare tax gross-up provides for parity with other employees who are eligible to participate in the Company’s tax-qualified 401(k) plan and therefore do not pay Medicare tax on Company contributions.
Mr. Thirot’s Retirement Benefits
As a residentresult of Switzerland,his move from Swiss payroll and benefits to U.S. payroll and benefits effective January 1, 2017, Mr. Thirot participatesis now a participant in the MRP. He retains a Swiss Social Insurance System (“Swiss System”) that provides retirement, disability, and death benefits. His retirement benefit from his employment in Switzerland that includes contributions that he makesmade to the fund, as well as company contributions that arewere made to the fund on his behalf. Company contributions to Mr. Thirot does not participateThirot’s Swiss retirement account stopped at the end of 2016 and no company contributions were made to his Swiss retirement account in any U.S.-based retirement plans.2017.
47 |
Compensation Discussion and Analysis
The health and welfare plans, including Company-provided life insurance, provided to the U.S. Named Executive Officers are the same plans available to all regular staff employees.
Mr. Thirot’s Health and Welfare Benefits
Mr. Thirot receives a health care allowance as part of his Swiss compensation that is intended to help defray the cost of obtaining health care coverage for himself and his family in Switzerland. Residents in Switzerland are required to carry health care coverage, however it is not common for Swiss companies to provide this benefit to their employees. The Company’s Swiss entity does not provide health care coverage to its employees. While on assignment in the U.S., Mr. Thirot pays employee premiums for health care coverage for himself and his dependents under an international plan established for employees who are on or have recently been on international assignments. Under theMr. Thirot and his dependents are no longer eligible for Swiss System, Mr. Thirot’s spouse is eligible to receive benefits in the event of his death from sickness or accident.health and welfare benefits. He is notbecame a participant in the U.S. life insurance program.program for 2017.
A modest level of perquisites is available to Named Executive Officers:
Perquisite | Benefit | Usage in 2017 | ||
Company Aircraft | To facilitate conducting the Company’s business and provide a competitive advantage, a private aircraft service is available. Senior | No personal use of private aircraft by Named Executive Officers in | ||
Executive Physical | To ensure Senior Officers monitor their health and general well-being, an annual physical examination is provided at the Company’s expense. Senior Officers also have the ability to use their own physician to perform the required tests and evaluations, in lieu of using the selected facilities. For those Senior Officers, expenses were processed through their employee health care coverage and not through the executive physical program. | |||
Vacation Facility | Two Company-owned condominiums are available on a limited basis to employees at the Vice President level and above. | Two Named Executive Officers used the vacation facility in |
45
The aggregate amount of perquisites provided in 20152017 for each of the Named Executive Officers, with the exception of Mr. Thirot, was less than $10,000.$10,000 and therefore only Mr. Thirot’s usage is reported in the Summary Compensation Table.
Mr. Thirot’s International Assignment
In light of his transition to being a U.S.-based employee, the initial international assignment benefits provided to Mr. Thirot is provided with certainwere reduced for 2016, and then were eliminated when he moved to U.S. payroll and benefits at the beginning of 2017. The Company continues to provide tax support to Mr. Thirot as a result ofit relates to carryover costs related to his international assignment. Theseassignment and these amounts are included in the “All Other Compensation” column of the Summary Compensation Table of this Proxy Statement and are explained in detail in the footnotes of that table.
Senior Executive Severance Plan
In order to provide a mechanism to ensureTo encourage the retention of the Named Executive Officers, the Board of Directors, upon the recommendationcertain key executives of the Committee, adopted anCompany and thereby promote the stability and continuity of management, the Senior Executive Severance Plan (the “Severance(“Severance Plan”) was established by the Company and approved by the Committee effective March 31, 2017. Participation in April 2006 for athe plan is limited number of Executive Officers. Of this original group ofto certain Executive Officers, only Mr. Camdennamely Messrs. Corona, Thirot and Mr. Corona remain as participants in the Severance Plan.Quigley, and Ms. Carroll. The Severance Plan provides severance benefits in the event a participant’s employment is terminated under certain circumstances as explained and illustrated in the section Potential Payments Upon Termination. The Company does not provide other special benefitsCompany’s EIP provides for the immediate vesting of restricted stock and performance awards upon a qualified termination in connection with a change in control or upon termination following a changeand is also explained in control.Potential Payments Upon Termination.
Under the terms of the Severance Plan covering the two eligible Named Executive Officers, each would be entitled to severance payments and benefits in the event that he or she experiences a “qualifying termination” (i.e., any termination without causeof the participant by the Company other than for cause, disability or death: or for good reason by the Named Executive Officer, eacha participant in connection with a change in control as is defined in the Severance Plan). A change in control will not automatically entitle an eligible Named Executive Officer to severance benefits or equity acceleration; instead, the executive must also lose his or her job, or suffer a significant adverse change to employment terms or conditions in order to be eligible for benefits under the Severance Plan. In the event of a termination for any reason, eligible Named Executive Officers would be entitled to any earned compensation owed but not yet paid as of the date of termination. The eligibleEligible Named Executive OfficerOfficers would also be entitled to payment of vested benefits, if any. Details of the Severance Plan are provided in the Potential Payments Upon Termination section of this Proxy Statement.
48 |
Compensation Discussion and Analysis
Mr. Thirot’sGeneral Severance BenefitPlan
UnderThe General Severance Plan was amended and restated effective March 27, 2017 to include the terms of Mr. Thirot’s Swiss employment agreement, if he is terminatedSenior Officers not covered by the Company, other thanSenior Executive Severance Plan. The General Severance Plan is designed to provide severance benefits in the event of an involuntary termination of employment as a result of general separation of employment or general reduction in force, as provided for willful misconduct, he will be provided with either three months’ notice or three monthsunder the plan. Mr. Armstrong is covered by the General Severance Plan and benefits under this plan are explained and illustrated in Potential Payments Upon Termination.
Governance of salaryExecutive Compensation Programs
The frequency of the Company’s Say on Pay vote is annual and, as such, the Committee considers the shareholder advisory vote on executive compensation as disclosed in lieuthe Company’s proxy statement each year. In 2017, 98.7% of notice,the shares represented at the meeting approved the Say on Pay proposal. The Committee considered this result as a factor in its decision to maintain the general design of the Company’s discretion.compensation programs.
Executive Compensation Governance
Stock Ownership and Retention Requirements
The Committee seeks to encourage meaningful stock ownership by the Company’s executives so as to align their interests more closely with shareholders’stockholders’ interests. In 2005, theThe Committee approvedperiodically reviews the Executive Stock Ownership Requirements Plan (the “Stock Ownership Plan”) for Senior Officers. “Stock Ownership” is defined to include stock owned by the Senior Officer and immediate family members directly, the “net value” of any restricted stock awards not vested, and shares held in trust. Net value is defined as 60% of the restricted stock award. The minimum share ownership requirement for Senior Officers by title is as follows:
2015 Minimum Stock Ownership Requirements | ||||||
Number of Shares | ||||||
CEO | COO | EVP | SVP | |||
70,000 | 50,000 | 30,000 | 10,000 |
The Stock Ownership Plan allows six years for Senior Officers to meet their stock ownership requirements. Upon achievement of the minimum share ownership requirement, all executives are required to retain ownership of 50% of the net value of all restricted stock awards granted in the future, in order to build stock ownership over time. Stock ownership levels must be maintained as long as the executive is employed by the Company and is a participant in the Stock Ownership Plan. The Committee reviews each executive’s progress towards and compliance with the share ownership
46
requirements on an annual basis. If the required level of ownership is not achieved within the specified time period, the Committee can eliminate or adjust the amount of any future equity awards. The Committee periodically reviews the Stock Ownership Plan requirements to ensure the design is consistent with market practice.
As of January 3, 2016, all Named Executive Officers met their stock ownership requirement under the current requirements.
In consideration of the Company’s new LTI design that provides Senior Officers with the opportunity to earn a greater number of shares through the addition of performance share awards and to ensure guidelines are in line with current market practice and those of our peers, the Committee approved newthe current executive stock ownership and retention requirements at its February 17, 2016 meeting.requirements. The new requirements are expressed as a multiple of base salary for each level of Senior Officer and more closely reflect current market practices, as determined by research performed by the Consultant.
2017 Minimum Stock Ownership Requirements | ||||
Multiple of Base Salary | ||||
CEO | ||||
6x | 3x | 1.5x |
Under the 2016 ownership requirements, Senior Officers will beare required to hold all (100%) of the after-tax shares acquired upon equity award vesting until compliance with the requirements is achieved. Shares counted toward achievement of ownership requirements include: directly owned shares (including those held in retirement plans), shares held by family or trusts, and 60% of unvested restricted stock awards, restricted stock units, and earned unvested performance shares, and earned and vested performance shares. Compliance with guidelines will continue to be assessed annually at the Committee’s February meeting. Although there is not a fixed compliance period, it is anticipatedexpected that new Senior Officers will likely reach the guidelines within five years from their start date. The Committee reviews each executive’s progress towards and compliance with the share ownership requirements on an annual basis. If the required level of ownership is not achieved within a reasonable period of time or an executive falls out of compliance with the requirements, the Committee can eliminate or adjust the amount of any future equity awards. Stock ownership levels must be maintained as long as the executive is employed by the Company as a Senior Officer and is subject to the terms of the Executive Stock Ownership Requirements.
As of March 19, 2018, all Named Executive Officers were in compliance with their stock ownership requirement, other than two who had been in compliance until their requirements substantially increased as a result of being promoted during 2017.
Incentive Compensation Recovery (“Clawback”) Policy
To support theThe Company’s focus on compensation program governance, the Committee approved implementation of a Clawback Policy at its February 17, 2011 meeting. This policy applies to awards granted under STIP and EIP on or after January 1, 2011 to officers of the Company who are subject to Section 16(b)16 of the Securities Exchange Act of 1934. These officers are required to repay or forfeit, to the fullest extent permitted by law and as directed by the Committee, any performance-based annual or long-term incentive compensation, based on the achievement of financial results that were subsequently restated due to the Company’s material non-compliance with the financial disclosure requirements of the federal securities laws, provided the amount of incentive compensation that would have been received or earned would have been lower had the financial results been properly reported. If necessary, we plan to modify our policy to comply with the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, (“Dodd-Frank”), when the SEC or Nasdaq implements rules and regulations. The Clawback policy was included as part of the Company’s updated Insider Trading Policy and Section 16 Compliance Procedures in 2017.
49 |
Compensation Discussion and Analysis
Hedging and Pledging of Shares
The Company’s Insider Trading Policy and Section 16 Compliance Procedures as updated in July 2013,strictly prohibit the Company’s Directors and reaffirmed in August 2015, provide that no Director or Officer ofall employees, including the Company shall engageExecutive Officers, from engaging in hedging, monetization, or other derivativederivatives or speculative transactions in securities of the Company without prior approval of the Corporate Secretary.Company. This includes short sales, failing to deliver Company securities sold, put or call options, equity swaps, collars, forward sale contracts, exchange funds, holding Company securities in a margin account, or pledging Company securities as collateral for a loan. The EIP does not allow the pledging, sale, assignment or transfer of shares in any manner, except if the Committee determines that a transfer will not violate any requirements of the SEC or IRS. The Committee may permit an inter vivos transfer by gift to, or for the benefit of, a family member of the grantee.
Tax and Accounting ImplicationsConsiderations
Deductibility of Executive Compensation
Prior to 2018, Section 162(m) of the Code placesplaced a limit of $1 million on the amount of nonperformance-based compensation that cancould be deducted for tax purposes for the CEO and the other three highest paid executives (excluding the CFO) listed in the Summary Compensation Table. However,The Company’s compensation programs were generally designed to qualify for the performance-based exception to this limit. Beginning in 2018, effective with the Tax Cuts and Jobs Act (‘the Act”) that was enacted in December 2017, the corporate tax deductibilitydeduction previously available for performance-based compensation above $1 million for Named Executive Officers has been eliminated. This means that pay to each Named Executive Officer in excess of $1 million will no longer be tax deductible. Transitional relief is only one factor consideredavailable under the new tax rules where a written, binding contract was in any decision regarding
47
executive compensation. In ordereffect on November 2, 2017 and is not materially modified after that date. We will continue to best servecomply with the requirements of Section 162(m) to the extent to which our outstanding LTI awards are determined to be tax deductible under the transitional relief. Now that the performance-based exception is no longer available, the Company will no longer include reference to Section 162(m) related limitations or provisions or stockholder approval for this purpose. However, management and the interestsCommittee have decided to retain as good governance, certain practices that had been in place previously for Section 162(m) purposes. These practices include: specification of its shareholders,guidelines for the Company may determine that paymentadjustment of non-deductible compensation is necessaryspecial items, establishing performance goals within the first ninety days of a performance period, and appropriaterequiring the Committee’s certification of results prior to provide rewards consistent with the overall philosophy and objectivespayout of the compensation program.any award.
Prior to and at itsthe Board of Directors meeting held on March 22, 2016,20, 2018, the Compensation Committee members reviewed and discussed the Compensation Discussion and Analysis presented in this Proxy Statement. Based on its review and subsequent discussions with management, the Committee and Board approved the Compensation Discussion and Analysis and directed management to include it in this Proxy Statement.
This report is submitted by the Compensation Committee of the Board of Directors.
ROBERT S. CUBBIN, CHAIR |
JANE E. DUTTON |
TERRENCE B. LARKIN |
LESLIE A. MURPHY, VICE CHAIR |
DONALD R. PARFET |
50 |
2017 Executive Compensation Tables
Summary Compensation Table 2017
Name and Principal Position | Year | Salary(1) ($) | Bonus ($) | Stock Awards (2)(3)(4) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation(5) ($) | Total ($) | |||||||||||||||||||||||||||
George S. Corona | | 2017 2016 2015 |
| | 875,852 655,000 655,000 |
| | — — — |
| | 1,893,664 995,138 1,159,900 |
| | — — — |
| | 1,051,064 — 697,968 |
| | — — — |
| | 38,438 58,260 55,697 |
| | 3,859,019 1,708,397 2,568,565 |
| |||||||||
Olivier G. Thirot | | 2017 2016 2015 |
| | 533,500 515,000 481,032 |
| | — — | | | 701,381 568,650 331,400 |
| | — — |
| | 400,045 — 342,722 |
| | — — |
| | 45,867 729,947 291,355 |
| | 1,680,793 1,813,597 1,446,509 |
| |||||||||
Teresa S. Carroll | | 2017 2016 2015 |
| | 548,011 500,000 482,227 |
| | — — |
| | 784,666 568,650 662,800 |
| | — — |
| | 437,723 104,125 228,220 |
| | — — |
| | 35,542 39,439 35,174 |
| | 1,805,942 1,212,214 1,408,421 — |
| |||||||||
Peter W. Quigley | | 2017 2016 2015 | | | 548,011 500,000 482,227 | | | — — | | | 784,666 568,650 662,800 | | | — — | | | 416,443 — 392,921 | | | — — | | | 30,077 48,032 41,672 | | | 1,779,197 1,116,682 1,579,621 | | |||||||||
Steven S. Armstrong | 2017 | 332,000 | — | 261,175 | 129,468 | — | 18,309 | 740,952 | ||||||||||||||||||||||||||||
Carl T. Camden | | 2017 2016 2015 | | | 398,252 1,000,000 1,000,000 | | | — — — | | | 2,093,613 2,274,600 2,651,200 | | | — — — | | | — — | | | — — — | | | 22,949 102,614 98,112 | | | 2,514,813 3,377,214 5,288,512 | |
(1) | Represents 2015, 2016, and 2017 actual base salary earnings. 2017 amount for Mr. Camden also includes a lump sum payout for all unused vacation upon his termination from the company. |
(2) | Grant date fair value is determined by multiplying the number of shares granted by the Market Value (MV) on the grant date. MV is determined by the closing price on the date of grant. The MV for the Restricted Stock Units granted to all named officers on February 15, 2017 is $21.95, on February 17, 2016 is $16.44, and on February 11, 2015 is $17.65. The target Performance Share awards that are based on financial measures are valued using the closing stock price on the date of grant, discounted because these shares are not eligible for dividends. The resulting value for the 2017 grant on February 15, 2017 is $21.07, the 2016 grant on February 17, 2016 is $15.85, and the 2015 grant on May 6, 2015 is $16.31. The target Performance Share awards that are based on the Relative TSR measure are valued using a Monte Carlo valuation method, based on the MV at the date of grant. The value for the 2017 grant on February 15, 2017 is $20.16, the 2016 grant on February 17, 2016 is $19.73, and the 2015 grant on May 6, 2015 is $16.01. The MV for the May 10, 2017 grants of Restricted Stock Units to Messrs. Corona and Quigley, as well as Ms. Carroll, is $21.93. The MV for the Performance Shares granted on May 10, 2017 to Messrs. Corona and Quigley, as well as Ms. Carroll, is $21.05 for shares based on financial measures, and $20.14 for the shares based on the Relative TSR measure. Please reference the Company’s 2017 10-K filing for details of the assumptions used in the Monte Carlo valuation. |
(3) | The maximum number of shares and award value for Performance Share awards for the 2017-2019 performance period is 200% of target shares granted. The table below shows the maximum number of shares and value for Performance Share awards based on achievement of financial measures using the values of $21.07 for shares granted February 15, 2017 and $21.05 for shares granted May 10, 2017, and for Performance Share awards based on achievement of the Relative TSR measure using the values of $20.16 for shares granted February 15, 2017 and $20.14 for shares granted May 10, 2017, as explained in the previous footnote. |
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2017 Executive Compensation Tables
Name | Maximum Number of Performance Shares | Maximum Value of Performance Shares | ||||||
George S. Corona | 139,782 | $ | 2,901,316 | |||||
Olivier G. Thirot | 49,950 | $ | 1,037,295 | |||||
Teresa S. Carroll | 55,900 | $ | 1,160,484 | |||||
Peter W. Quigley | 55,900 | $ | 1,160,484 | |||||
Steven S. Armstrong | 18,600 | $ | 386,260 | |||||
Carl T. Camden | 149,100 | $ | 3,096,310 |
(4) | Stock Awards granted to Mr. Camden include the market values of both restricted shares and performance shares. Mr. Camden forfeited all unvested restricted shares upon his retirement, however, he is eligible to receive prorated performance shares, if they become earned, as he was “Normal Retirement eligible” under the terms of the EIP for the outstanding 2015, 2016 and 2017 grants. |
Name | Group Term Life Premiums | Company Matching MRP Contributions | MRP Medicare Gross-ups | Use of Vacation Property | International Assignment Carryover Cost | Total All Other Compensation | ||||||||||||||||||
George S. Corona | $ | 1,808 | $ | 35,034 | $ | 1,596 | — | — | $ | 38,438 | ||||||||||||||
Olivier G. Thirot | $ | 1,472 | $ | 26,675 | $ | 1,259 | $ | 506 | $ | 15,955 | $ | 45,867 | ||||||||||||
Teresa S. Carroll | $ | 1,380 | $ | 32,607 | $ | 1,555 | — | — | $ | 35,542 | ||||||||||||||
Peter W. Quigley | $ | 1,380 | $ | 27,401 | $ | 1,296 | — | — | $ | 30,077 | ||||||||||||||
Steven S. Armstrong | $ | 916 | $ | 16,600 | $ | 793 | — | — | $ | 18,309 | ||||||||||||||
Carl T. Camden | $ | 2,070 | $ | 19,913 | $ | 966 | — | — | $ | 22,949 |
(5) | Amounts for named executive officers include premiums paid for life insurance, company matching contributions to the Management Retirement Plan (MRP), and Medicare tax gross-ups on those MRP contributions. (See table above.) The MRP is a non-qualified defined contribution deferred compensation plan available to all highly compensated employees, including the named executive officers. No highly compensated employees as outlined by Section 414(q)(1)(B)(i) of the Internal Revenue Code, including the Named Executive Officers, are eligible to participate in the Company’s tax-qualified retirement plan. Company contributions to the MRP include the Company match on participant deferrals as explained in the Retirement Plan section of this document. The amount reported for Mr. Thirot includes the following 2017 carryover costs associated with his international assignment from Switzerland to the U.S. during 2014 to 2016: tax preparation fee of $14,501, professional services of $15,042, visa support expense of $6,216, tax recoveries (for 2016) of U.S. federal and Michigan state taxes made by the Company on Mr. Thirot’s behalf under the Company’s tax equalization policy totaling $19,804. The total value of perquisites provided to each Named Executive Officer (other than Mr. Thirot) in 2017 was less than $10,000 and, in accordance with reporting regulations, were not required to be included in this table. Amounts reported in this column for 2016 and 2015 have been restated to remove dividends and dividend equivalents earned on outstanding RSA and RSU awards, as dividends are included in the grant date fair value of the award. |
52 |
2017 Executive Compensation Tables
Grants of Plan-Based Awards 2017(1)
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(3) | Estimated Future Payouts Under Equity Incentive Plan Awards(4) | All Other Stock Awards: Number of Shares of Stock | Grant Date Fair and Option | |||||||||||||||||||||||||||||||
Name | Grant Date(2) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (5) (#) | Awards(6) ($) | |||||||||||||||||||||||||
George S. Corona | STIP | 262,819 |
| 1,051,275 |
| 2,102,549 | ||||||||||||||||||||||||||||
2/15/2017 | 8,156 | 32,625 | 65,250 | 677,513 | ||||||||||||||||||||||||||||||
2/15/2017 | 10,875 | 238,706 | ||||||||||||||||||||||||||||||||
5/10/2017 | 9,317 | 37,266 | 74,532 | 773,145 | ||||||||||||||||||||||||||||||
5/10/2017 | 9,316 | 204,300 | ||||||||||||||||||||||||||||||||
Olivier G. Thirot | STIP | 100,031 | 400,125 | 800,250 | ||||||||||||||||||||||||||||||
2/15/2017 | 6,244 | 24,975 | 49,950 | 518,648 | ||||||||||||||||||||||||||||||
2/15/2017 | 8,325 | 182,734 | ||||||||||||||||||||||||||||||||
Teresa S. Carroll | STIP | 116,296 | 440,810 | 881,619 | ||||||||||||||||||||||||||||||
2/15/2017 | 4,650 | 18,600 | 37,200 | 386,260 | ||||||||||||||||||||||||||||||
2/15/2017 | 6,200 | 136,090 | ||||||||||||||||||||||||||||||||
5/10/2017 | 2,338 | 9,350 | 18,700 | 193,982 | ||||||||||||||||||||||||||||||
5/10/2017 | 3,116 | 68,334 | ||||||||||||||||||||||||||||||||
Peter W. Quigley | STIP | 102,099 | 440,810 | 881,619 | ||||||||||||||||||||||||||||||
2/15/2017 | 4,650 | 18,600 | 37,200 | 386,260 | ||||||||||||||||||||||||||||||
2/15/2017 | 6,200 | 136,090 | ||||||||||||||||||||||||||||||||
5/10/2017 | 2,338 | 9,350 | 18,700 | 193,982 | ||||||||||||||||||||||||||||||
5/10/2017 | 3,116 | 68,334 | ||||||||||||||||||||||||||||||||
Steven S. Armstrong | STIP | 42,828 | 199,200 | 398,400 | ||||||||||||||||||||||||||||||
2/15/2017 | 2,325 | 9,300 | 18,600 | 193,130 | ||||||||||||||||||||||||||||||
2/15/2017 | 3,100 | 68,045 | ||||||||||||||||||||||||||||||||
Carl T. Camden | STIP | 325,000 | 1,300,000 | 2,600,000 | ||||||||||||||||||||||||||||||
2/15/2017 | 18,638 | 74,550 | 149,100 | 1,548,155 | ||||||||||||||||||||||||||||||
2/15/2017 | 24,850 | 545,458 |
(1) | The Company has not granted stock options since 2004, including 2017. Accordingly, this column has been eliminated from the table. |
(2) | Long-term incentive grants to named executive officers, consisting of Restricted Share Units and Performance Shares, were approved by the Committee at its February 15, 2017 meeting. Additional grants were provided to Messrs. Corona and Quigley and Ms. Carroll effective with their promotions on May 10, 2017. |
(3) | Payout for threshold performance under the STIP for Messrs. Corona and Thirot was 25% of each named executive officer’s target payout amount, as payouts were based 100% on corporate measures and goals. In addition to corporate measures, business unit measures are included in the STIP goals for Ms. Carroll and Messrs. Quigley and Armstrong, which have payouts for threshold performance ranging from 20% to 50% of each named executive officer’s target payout amount. The weighted average payout for all performance measures at a threshold level of performance is equal to approximately 26.4% of the target payout amount for Ms. Carroll, 23.2% of the target payout amount for Mr. Quigley, and 21.5% of the target payout amount for Mr. Armstrong. For the corporate measures, achievement between threshold and intermediate, intermediate and target, and target and maximum levels is interpolated on a straight-line basis. For Ms. Carroll’s and Messrs. Quigley and Armstrong’s business unit measures, there is no straight-line interpolation between payout levels of the payout schedule. The required level of performance for each payout level must be achieved in order to earn the corresponding payout amount. STIP maximum payout is 200% of target with an individual maximum payout of no more than $3,000,000 as required under the terms of the amended and restated STIP, effective February 12, 2015. |
(4) | Performance Shares granted in 2017 are earned based upon achievement of two financial measures and a Relative TSR measure. These three measures are equally weighted. Achievement of a threshold level of performance on any measure results in 25% of the target shares being earned. Achievement of an intermediate level of performance (halfway between threshold and target) results in 75% of the target shares being earned. Achievement of the maximum level of performance on any measure results in 200% of the target shares being earned by the named executive officer. Achievement between these levels is interpolated on a straight-line basis. Restricted Share Units, with a one-year performance hurdle, were granted to each of the Named Executive Officers in 2017. Achievement of the one-year performance hurdle will trigger the awards to vest ratably on each of the first four anniversaries of the date of grant (25% per year). If the one-year performance hurdle is not achieved, all shares will be forfeited. The performance hurdle was achieved for 2017. |
(5) | There were no Restricted Share awards granted to the Named Executive Officers during the 2017 plan year. |
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2017 Executive Compensation Tables
(6) | Grant date fair value is determined by multiplying the target number of shares granted by the MV on the grant date. MV is determined by the closing price on the date of grant. The MV for the Restricted Share Units granted to all named officers on February 15, 2017 is $21.95. The target Performance Share awards that are based on financial measures are valued using the closing stock price on the date of grant, discounted because these shares are not eligible for dividends. The resulting value for the 2017 grant on February 15, 2017 is $21.07. The target Performance Share awards that are based on the Relative TSR measure are valued using a Monte Carlo valuation method, effective the date of grant. The value for the 2017 grant of Performance Shares based on the Relative TSR measure on February 15, 2017 is $20.16. The MV for the Restricted Share Units granted on May 10, 2017 to Messrs. Corona and Quigley, as well as Ms. Carroll, is $21.93. The MV for the Performance Shares granted on May 10, 2017 to Messrs. Corona and Quigley, as well as Ms. Carroll, is $21.05 for shares based on financial measures, and $20.14 for the shares based on the Relative TSR measure. |
Outstanding Equity Awards at Fiscal Year End 2017(1)
Stock Awards | ||||||||||||||||||||
| Grant Year | Number of Shares or Units of Stock That Have Not Vested(2)(3) (#) | Market Value of Shares or Units of Stock That Have Not Vested(4) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(4) ($) | |||||||||||||||
| 2017 2016 2015 2014 | 20,191 11,157 84,055 12,500 | 550,609 304,251 2,292,180 340,875 | 116,485 61,360 |
| 3,176,546
|
| |||||||||||||
| 2017 2016 2015 2014 | 8,325 6,375 24,016 4,250 | 227,023 173,846 654,916 115,898 | 41,625 35,063 | 1,135,114 956,168 | |||||||||||||||
Teresa S. Carroll | 2017 2016 2015 2014 | 9,316 6,375 48,032 3,750 | 254,047 173,846 1,309,833 102,263 | 46,583 35,063 | 1,270,318 956,168 | |||||||||||||||
Peter W. Quigley | 2017 2016 2015 2014 | 9,316 6,375 48,032 3,750 | 254,047 173,846 1,309,833 102,263 | 46,583 35,063 | 1,270,318 956,168 | |||||||||||||||
Steven S. Armtrong | 2017 2016 2015 2014 | 3,100 3,188 24,016 3,000 | 84,537 86,937 654,916 81,810 | 15,500 17,532 | 422,685 478,098 | |||||||||||||||
Carl T. Camden | 2017 2016 2015 2014 | — — | — — | 17,255 66,226 | 470,544 1,805,983 |
(1) | The Company did not grant stock options during the 2017 fiscal year. All previously outstanding granted stock options for the Named Executive Officers expired during the 2014 fiscal year. As a result, there are no outstanding options to report and, accordingly, these columns have been eliminated from the table. |
(2) | All outstanding restricted stock awards/unit grants vest ratably over 4 years. The number of outstanding shares has been determined as of December 31, 2017. |
54 |
2017 Executive Compensation Tables
48
Summary Compensation Table 2015
As discussed previously, the “Stock Awards” amounts for 2015 reflect primarily performance-contingent award opportunities that are only earned if specific financial and relative TSR goals are achieved, whereas, the 2013 and 2014, “Stock Awards” were only subject to continued employment.
Name and Principal Position | Year | Salary(1) ($) | Bonus ($) | Stock ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in ($) | All Other ($) | Total ($) | |||||||||||||||||||||||||||
Carl T. Camden | 2015 | 1,000,000 | - | 2,651,200 | - | 1,539,200 | - | 139,237 | 5,329,637 | |||||||||||||||||||||||||||
President and Chief | 2014 | 1,000,000 | - | 1,229,600 | - | 1,404,000 | - | 120,732 | 3,754,332 | |||||||||||||||||||||||||||
Executive Officer | 2013 | 1,000,000 | - | 1,594,400 | - | 1,274,000 | - | 163,079 | 4,031,479 | |||||||||||||||||||||||||||
George S. Corona | 2015 | 655,000 | - | 1,159,900 | - | 697,968 | - | 80,072 | 2,592,940 | |||||||||||||||||||||||||||
Executive Vice President | 2014 | 655,000 | - | 768,500 | - | 636,700 | - | 75,782 | 2,135,982 | |||||||||||||||||||||||||||
and Chief Operating Officer | 2013 | 640,000 | - | 996,500 | - | 564,500 | - | 80,642 | 2,281,642 | |||||||||||||||||||||||||||
Peter W. Quigley | 2015 | 482,227 | - | 662,800 | - | 392,921 | - | 51,297 | 1,589,245 | |||||||||||||||||||||||||||
Senior Vice President, General | 2014 | 419,250 | - | 308,700 | - | 294,300 | - | 38,006 | 1,060,256 | |||||||||||||||||||||||||||
Counsel, and Chief Administrative Officer | 2013 | 403,750 | - | 378,600 | - | 257,200 | - | 39,500 | 1,079,050 | |||||||||||||||||||||||||||
Olivier G. Thirot (7) | 2015 | 481,032 | - | 331,400 | - | 342,722 | - | 295,811 | 1,450,965 | |||||||||||||||||||||||||||
Senior Vice President and Chief Financial Officer | ||||||||||||||||||||||||||||||||||||
Teresa S. Carroll | 2015 | 482,227 | - | 662,800 | - | 228,220 | - | 43,799 | 1,417,046 | |||||||||||||||||||||||||||
Senior Vice President and General Manager, Global Talent Solutions | - | |||||||||||||||||||||||||||||||||||
Patricia A. Little | 2015 | 120,625 | - | 828,500 | - | - | 30,297 | 979,422 | ||||||||||||||||||||||||||||
Former Executive Vice President | 2014 | 570,000 | - | 384,250 | - | 461,700 | - | 56,376 | 1,472,326 | |||||||||||||||||||||||||||
and Chief Financial Officer | 2013 | 554,250 | - | 498,250 | - | 407,400 | - | 63,132 | 1,523,032 | |||||||||||||||||||||||||||
(1) Represents 2013, 2014 and 2015 actual base salary earnings.
(2) Grant date fair value is determined by multiplying the number of shares granted by the Market Value (“MV”) on the grant date. MV is determined by the closing price on the date of grant. The MV for the Restricted Stock awards granted on February 11, 2015 is $17.65. The target Performance Share awards that are based on financial measures were valued using the closing stock price on the date of grant, May 6, 2015, discounted because these shares are not eligible for dividends, resulting in a value of $16.31. The target Performance Share awards that are based on the relative TSR measure were valued at $16.01 using a Monte Carlo valuation method, effective the date of grant, May 6, 2015. Please reference the Company’s 2015 10-K filing for details of the assumptions used in the Monte Carlo valuation. The MV for the Restricted Stock Awards granted to all named officers on October 1, 2014 is $15.37. The MV for the September 15, 2014 grant to Mr. Thirot is $17.03 and the grant to Mr. Quigley on November 10, 2014 is $15.63. The MV for the Restricted Stock Awards granted on January 4, 2013 to Mr. Quigley is $15.93 and to all Named Executive Officers on October 1, 2013 is $19.93.
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(3) | ||
(3) The maximum number of shares and award value for Performance Share awards for the 2015-2017 performance period is 200% of target shares granted. The table below shows the maximum number of shares and value based on the values of $16.31 for Performance Share awards based on financial measures, and $16.01 for Performance Share awards based on the relative TSR measure, as explained in the previous footnote.
Name | Maximum Number of Performance Shares | Maximum Value of Performance Shares | ||
Carl T. Camden | 240,000 | $3,890,400 | ||
George S. Corona | 105,000 | $1,702,050 | ||
Peter W. Quigley | 60,000 | $972,600 | ||
Olivier G. Thirot | 30,000 | $486,300 | ||
Teresa S. Carroll | 60,000 | $972,600 | ||
Patricia A. Little | 75,000 | $1,215,750 |
(4) 2015 Stock Awards granted to Ms. Little include the market values of both restricted shares and performance shares. Ms. Little forfeited these shares upon her termination.
(5) Amounts for Named Executive Officers (other than Mr. Thirot) include premiums paid for life insurance, dividends on unvested restricted shares, company matching contributions to the MRP, and Medicare tax gross-ups on those MRP contributions. (See table below.) No highly compensated employees as outlined by Section 414(q)(1)(B)(i) of the Internal Revenue Code, including the Named Executive Officers, are eligible to participate in the Company’s tax-qualified retirement plan. Company contributions to the MRP include the Company match on participant deferrals as explained in the Retirement Benefits section of this document. The total value of perquisites provided to each Named Executive Officer (other than Mr. Thirot) in 2015 was less than $10,000 and, in accordance with reporting regulations, were not required to be included here.
Name | Group Term Premiums | Dividends on Restricted Shares | Company Matching | MRP Medicare Gross-ups | Total All Other Compensation | |||||
Carl T. Camden | $1,980 | $41,125 | $92,120 | $4,012 | $139,237 | |||||
George S. Corona | $1,729 | $24,375 | $51,668 | $2,300 | $80,072 | |||||
Peter W. Quigley | $1,140 | $9,625 | $38,826 | $1,706 | $51,297 | |||||
Teresa S. Carroll | $1,140 | $8,625 | $32,607 | $1,427 | $43,799 | |||||
Patricia A. Little | $382 | $3,919 | $24,945 | $1,051 | $30,297 |
(6) The amount reported for Mr. Thirot includes a representation allowance, a supplemental health care allowance, a supplemental contribution to the government-mandated occupational pension benefit program paid through Swiss payroll, dividend equivalents paid to Mr. Thirot during 2015, the incremental cost of his personal use of the Company-owned vacation property in 2015, the cost of his executive physical, and the following costs associated with his international assignment from Switzerland to the U.S.: housing allowance of $25,200, utilities allowance of $2,400, relocation counseling expense of $7,500, tax preparation fee of $500, tax gross-ups of $214,746, and home leave expense for Mr. Thirot and his family of $4,018.
Name | Represen- tation Allowance | Supplemental Health Care | Supplemental Pension Contributions | Dividend Equivalents on Restricted | Use of Vacation Property | Executive Physical | International Assignment Costs | Total All Other | ||||||||
Olivier G. Thirot | $19,564 | $7,826 | $7,670 | $4,456 | $456 | $1,475 | $254,364 | $295,811 |
(7) Amounts reported for Mr.Thirot are converted from Swiss francs to U.S. dollars at an exchange rate of 1 CHF = 1.0869 USD. This is the rate used by the Company for budgeting purposes in 2015.
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(4) | ||
Grants of Plan-Based Awards 2015(1)
Name | Grant Date (2) | Approval Date | Estimated Future Payouts UnderNon-Equity Incentive Plan Awards(3) | Estimated Future Payouts Under Equity Incentive Plan Awards(4) | All Other (#) | Grant Date Fair ($) | ||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||
Carl T. Camden | STIP | 650,000 | 1,300,000 | 2,600,000 | ||||||||||||||||
5/6/2015 | 2/11/2015 | 60,000 | 120,000 | 240,000 | 1,945,200 | |||||||||||||||
2/11/2015 | 2/11/2015 | 40,000 | 706,000 | |||||||||||||||||
George S. Corona | STIP | 294,750 | 589,500 | 1,179,000 | ||||||||||||||||
5/6/2015 | 2/11/2015 | 26,250 | 52,500 | 105,000 | 851,025 | |||||||||||||||
2/11/2015 | 2/11/2015 | 17,500 | 308,875 | |||||||||||||||||
Peter W. Quigley | STIP | 165,929 | 331,859 | 663,718 | ||||||||||||||||
5/6/2015 | 2/11/2015 | 15,000 | 30,000 | 60,000 | 486,300 | |||||||||||||||
2/11/2015 | 2/11/2015 | 10,000 | 176,500 | |||||||||||||||||
Olivier G. Thirot | STIP | 144,731 | 289,462 | 578,924 | ||||||||||||||||
5/6/2015 | 2/11/2015 | 7,500 | 15,000 | 30,000 | 243,150 | |||||||||||||||
2/11/2015 | 2/11/2015 | 5,000 | 88,250 | |||||||||||||||||
Teresa S. Carroll | STIP | 96,239 | 331,859 | 663,718 | ||||||||||||||||
5/6/2015 | 2/11/2015 | 15,000 | 30,000 | 60,000 | 486,300 | |||||||||||||||
2/11/2015 | 2/11/2015 | 10,000 | 176,500 | |||||||||||||||||
Patricia A. Little(7) | STIP | 217,125 | 434,250 | 868,500 | ||||||||||||||||
5/6/2015 | 2/11/2015 | 18,750 | 37,500 | 75,000 | 607,875 | |||||||||||||||
2/11/2015 | 2/11/2015 | 12,500 | 220,625 |
(1) The Company did not grant stock options during the 2015 fiscal year. Accordingly, this column has been eliminated from the table.
(2) Long-Term incentive grants to Named Executive Officers, consisting of Restricted Shares and Performance Shares, were approved by the Committee at its February 11, 2015 meeting. The Performance Share awards were approved by the Committee, subject to shareholder approval of the EIP. Such approval was obtained at the Company’s Annual Meeting on May 6, 2015.
(3) Payout for threshold performance under the STIP is 50% of target opportunity for Messrs. Camden, Corona, Quigley, and Thirot. 2015 STIP payouts for each of these Named Executive Officers were based 100% on corporate measures and goals. Additional business unit measures are included in the 2015 STIP goals for Ms. Carroll, that have payouts for threshold performance equal to 20% of her target opportunity. Therefore, the weighted average payout for all measures at a threshold level of performance is equal to 29% of her target opportunity. For the corporate measures, each additional increment above the threshold earns prorated incentive payments up to the maximum as discussed in the Compensation Discussion and Analysis in the Annual Cash Incentive section. For Ms. Carroll’s business unit measures, there is no prorating between payout levels of the payout schedule. STIP maximum payout for all Named Executive Officers is 200% of target opportunity with an individual maximum payout of no more than $3,000,000 as required under the terms of the amended and restated STIP, effective February 12, 2015.
(4) Performance Shares granted in 2015 are earned based upon achievement of two financial measures and a relative TSR measure. These three measures are equally weighted. Achievement of a threshold level of performance on any measure results in 50% of the target shares being earned. Achievement of the maximum level of performance on any measure results in 200% of the target shares being earned by the Named Executive Officer.
(5) Restricted Stock Awards granted February 11, 2015 vest ratably on each of the first four anniversaries of the date of grant (25% per year).
(6) Grant date fair value is determined by multiplying the number of shares granted by the MV on the grant date. MV is determined by the closing price on the date of grant. The MV for the Restricted Stock awards granted on February 11, 2015 is $17.65. The target Performance Share awards that are based on financial measures were valued using the closing stock price on the date of grant, May 6, 2015, discounted because these shares are not eligible for dividends, resulting in a value of $16.31. The target Performance Share awards that are based on the relative TSR measure were valued at $16.01 using a Monte Carlo valuation method, effective the date of grant, May 6, 2015.
(7) Upon her termination of employment, Ms. Little forfeited all outstanding, unvested equity, including the grants of Restricted Shares and Performance shares made to her in 2015. In addition, no STIP payout was made to her for 2015, also due to her resignation.
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(5) | ||
Outstanding Equity Awards at Fiscal Year End 2015(1)
Stock Awards | ||||||||||
Name | Grant Year | Number of (#) | Market Value of Shares or Units of Stock That Have Not Vested(4) ($) | Equity Incentive Plan (#) | Equity Incentive Plan Payout Value of Unearned Shares, Units ($) | |||||
Carl T . Camden | 2015 | 132,127 | 2,133,851 | 20,000 | 323,000 | |||||
2014 | 60,000 | 969,000 | ||||||||
2013 | 40,000 | 646,000 | ||||||||
2012 | 18,750 | 302,813 | ||||||||
George S. Corona | 2015 | 57,805 | 933,551 | 8,750 | 141,313 | |||||
2014 | 37,500 | 605,625 | ||||||||
2013 | 25,000 | 403,750 | ||||||||
2012 | 12,500 | 201,875 | ||||||||
Peter W. Quigley | 2015 | 33,032 | 533,467 | 5,000 | 80,750 | |||||
2014 | 11,250 | 181,688 | ||||||||
2013 | 10,000 | 161,500 | ||||||||
2012 | 3,750 | 60,563 | ||||||||
Olivier G. Thirot | 2015 | 16,516 | 266,733 | 2,500 | 40,375 | |||||
2014 | 12,750 | 205,913 | ||||||||
2013 | 650 | 10,498 | ||||||||
2012 | 800 | 12,920 | ||||||||
Teresa S. Carroll | 2015 | 33,032 | 533,467 | 5,000 | 80,750 | |||||
2014 | 11,250 | 181,688 | ||||||||
2013 | 7,500 | 121,125 | ||||||||
2012 | 5,000 | 80,750 | ||||||||
(1) The Company did not grant stock options during the 2015 fiscal year. All previously outstanding granted stock options for the Named Executive Officers expired during the 2014 fiscal year. As a result, there are no outstanding options to report and, accordingly, these columns have been eliminated from the table.
(2) All outstanding restricted stock grants vest ratably over 4 years. The number of outstanding shares has been determined as of December 31, 2015.
(3) 2015 total includes performance shares earned based upon the level of achievement for both financial measures for 2015 as explained in the Long-Term Incentives section of this document.
(4) The market value is determined based on the closing market price of our common shares on the last trading day of the 2015 fiscal year, December 31, 2015 ($16.15).
(5) 2015 performance shares that are based upon achievement of the relative TSR measure, whose performance will not be known until early 2018 as explained in the Long-Term Incentives section of this Proxy Statement. Threshold levels are shown here.
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Option Exercises and Stock Vested 20152017
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||
Name | Number of (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value on Vesting(1) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (1) ($) | ||||||||||||||||
Carl T . Camden | - | - | 73,750 | 1,096,588 | ||||||||||||||||||||
George S. Corona | - | - | 46,250 | 687,813 | — | — | 33,093 | 804,034 | ||||||||||||||||
Peter W. Quigley | - | - | 21,250 | 329,725 | ||||||||||||||||||||
Olivier G. Thirot | - | - | 5,650 | 82,667 | — | — | 7,950 | 185,166 | ||||||||||||||||
Teresa S. Carroll | - | - | 16,250 | 244,875 | — | — | 12,125 | 289,204 | ||||||||||||||||
Peter W. Quigley | — | — | 13,375 | 318,454 | ||||||||||||||||||||
Steven S. Armstrong | — | — | 8,312 | 201,043 | ||||||||||||||||||||
Carl T. Camden | — | — | 18,500 | 404,115 |
(1) Value Realized on Vesting is calculated by multiplying the shares vested times the stock closing price on the day of vesting.
(1) | Value Realized on Vesting is calculated by multiplying the shares vested times the stock closing price on the day of vesting. |
Nonqualified Deferred Compensation 20152017
Name | Executive ($) | Registrant Contributions in Last Fiscal Year(2) ($) | Aggregate ($) | Aggregate Withdrawals/ Distributions(4) ($) | Aggregate Balance at Last Fiscal Year End(5) ($) | |||||
Carl T. Camden | 184,240 | 92,120 | (63,958) | 0 | 4,129,957 | |||||
George S. Corona | 103,336 | 51,668 | 26,072 | 0 | 1,584,392 | |||||
Peter W. Quigley | 77,653 | 38,826 | (1,823) | 0 | 834,872 | |||||
Teresa S. Carroll | 65,215 | 32,607 | (3,831) | 18,570 | 1,180,579 | |||||
Patricia A. Little | 49,889 | 24,945 | (22,054) | 837,720 | 0 |
(1) Executives may defer a percentage of their base salary (up to 25%) and annual incentive earnings (up to 50%) for retirement. These amounts, as applicable, are reported as a part of the salary or incentive earnings found in the Summary Compensation Table.
(2) Registrant Contributions in Last Fiscal Year above represent Company matching contributions (50% of the first 10% of salary and annual incentive deferrals), and they are also reported as All Other Compensation in the Summary Compensation Table.
(3) Represents actual earnings from the investment of the prior year aggregate balance plus the earnings on current year executive and Company contributions. The aggregate earnings are based on investment options that are also offered to employees who participate in the Company’s tax-qualified 401(k) plan and are not “above market”; therefore, they are not included in the Summary Compensation Table.
(4) Participants may elect to receive distributions after separation from service, the later of a specified age and separation of service or a scheduled in-service distribution. Amounts may be paid as a lump sum, monthly installments for up to 20 years, or a combination of the two as elected by the participant. Ms. Little received a lump sum distribution of her account balance following her separation of employment. Ms. Carroll received a scheduled in-service distribution from her account in 2015.
(5) Amounts reported in this column include the following amounts that have been reported in the Summary Compensation Table for fiscal years 2006-2015: Carl T. Camden ($2,140,867), George S. Corona ($929,481); named in the proxies for fiscal years 2013 - 2015: Peter W. Quigley ($298,280); reported for fiscal year 2015 only: Teresa S. Carroll ($97,822); named in the proxies for fiscal years 2008-2015, beginning with her hire in 2008: Patricia A. Little ($644,042).
Name | Executive Contributions in Last Fiscal Year(1) ($) | Registrant Contributions in Last Fiscal Year(2) ($) | Aggregate Earnings in Last Fiscal Year(3) ($) | Aggregate Withdrawals/ Distributions(4) ($) | Aggregate Balance at Last Fiscal Year End(5) ($) | |||||||||||||||
George S. Corona | 70,068 | 35,034 | 31,266 | — | 1,910,972 | |||||||||||||||
Olivier G. Thirot | 53,350 | 26,675 | 5,124 | — | 85,089 | |||||||||||||||
Teresa S. Carroll | 65,213 | 32,607 | 225,678 | (20,673 | ) | 1,685,411 | ||||||||||||||
Peter W. Quigley | 54,801 | 27,401 | 167,487 | — | 1,288,107 | |||||||||||||||
Steven S. Armstrong | 36,520 | 16,600 | 367,349 | — | 2,306,242 | |||||||||||||||
Carl T. Camden | 39,825 | 19,913 | 387,233 | (5,158,289 | ) | — |
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(1) | Executives may defer a percentage of their base salary (up to 25%) and annual incentive earnings (up to 50%) for retirement. These amounts, as applicable, are reported as a part of the salary or incentive earnings found in the Summary Compensation Table. |
(2) | Registrant Contributions in Last Fiscal Year above represent Company matching contributions (50% of the first 10% of salary and annual incentive deferrals), and they are also reported as All Other Compensation in the Summary Compensation Table. All Named Executive Officers have met the three-year vesting requirement for the Company match. |
(3) | Represents actual earnings from the investment of the prior year aggregate balance plus the earnings on current year executive and Company contributions. The aggregate earnings are based on investment options that are also offered to employees who participate in the Company’s tax-qualified 401(k) plan. As these earnings are not “above market” interest payments or preferential earnings, they are not included in the Summary Compensation Table. |
2017 Executive Compensation Tables
(4) | Participants may elect to receive distributions after separation from service, the later of a specified age and separation of service or a scheduled in-service distribution. Amounts may be paid as a lump sum, monthly installments for up to 20 years, or a combination of the two as elected by the participant. Ms. Carroll received a scheduled in-service distribution from her account in 2017. Mr. Camden received a lump sum distribution of his account balance following his separation from employment. |
(5) | Amounts reported in this column include the following amounts that have been reported in the Summary Compensation Table for fiscal years 2006-2017: George S. Corona ($1,196,939); Named in the proxies for fiscal years 2013—2017: Peter W. Quigley ($514,419); Named in the proxies for fiscal years 2015-2017: Olivier G. Thirot ($80,025) and Teresa S. Carroll ($470,531); Named in the proxy for fiscal year 2017: Steven S. Armstrong ($53,120). |
Potential Payments Upon Termination 20152017
Ms. Little terminated employment duringSummary of Potential Payments
This section describes the yearpotential additional payments and was not entitledbenefits under our compensation and benefit plans and arrangements to any additional benefits fromwhich the Company.
The following two tables include the eligible Named Executive Officers covered bywould be entitled upon termination of employment under certain circumstances. Named Executive Officers would also be entitled to vested benefits and generally available benefits under our various plans and arrangements, as discussed after the Potential Payments Upon Termination table. The Company does not maintain employment agreements with our Named Executive Officers. The table following the narrative discussion summarizes the amounts payable upon termination under certain circumstances to our Named Executive Officers, assuming that the executive’s employment terminated on December 31, 2017, the last day of our fiscal year.
Senior Executive Severance Plan
The Company implemented the Senior Executive Severance Plan (“Severance Plan”) for a limited number of Executive Officers in March 2017. Messrs. CamdenCorona, Thirot and Corona. The tables reflectQuigley, and Ms. Carroll are the only participants in the plan. Described below and illustrated in the table, Potential Payouts Upon Termination, are the different elements payable under the Severance Plan and their value if a Named Executive Officer who is a party to the Severance Plan would experience a qualifying termination on January 3, 2016, the last day of our fiscal year.termination. All continuation amounts would be paid over the salary continuation period in compliance with Section 409A. Messrs. Quigley and Thirot, and Ms. Carroll are not participants409A of the Code. Mr. Armstrong participates in the ExecutiveGeneral Severance Plan. Severance benefits for Mr. Quigley and Ms. Carroll, if any, would be determined at the discretion of the Compensation Committee based upon the individual facts and circumstances at the time of their separation from the Company. Separation benefits for Mr. Thirot are definedPlan as outlined in the terms of his Swiss employment agreement.next section.
If one of the eligible Named Executive Officer experiencesOfficers were to have experienced a qualifying termination under the Severance Plan in 2017, the Named Executive Officer would behave been entitled to a payment that isseverance benefits based on the target incentive amount established undertype of qualified termination and whether they were a Tier 1 or a Tier 2 participant. Mr. Corona is the Company’sonly Tier 1 participant in the Severance Plan. Messrs. Thirot and Quigley, and Ms. Carroll are Tier 2 participants in the Severance Plan. A “qualified termination” is any termination of a participant’s employment: by the Company other than for cause, disability or death; or for “good reason” by a participant in connection with a change in control.
For a qualified termination that occurs not in connection with a change in control, a Tier 1 participant would receive severance payments in the form of base salary continuation for a period of twenty-four months, and a Tier 2 participant would receive severance payments in the form of base salary continuation for a period of eighteen months. In addition, Tier 1 and Tier 2 participants would receive a prorated portion of their annual incentive plancompensation for the fiscal year in which the Named Executive Officer’s termination occurs. This payment wouldoccurred, based on the actual performance results for the year. The pro rata annual incentive payout will be adjusteddetermined based on a pro-rata basis according to the number of calendar days the eligible Named Executive Officer was actually employed during such plan year. The Named Executive Officer would not be eligibleProrated annual incentive awards are paid at the same time that incentive compensation for the same year are paid to receive a payment under the termsother Senior Officers of the STIP forCompany, following certification by the year in which his/her termination occurs, or for a recently completedCommittee that applicable performance year if termination occurs before incentive payments are made, since a participant must be employed on the date the STIP award is paid following the completion of the performance period.
The eligible Named Executive Officer would receive salarygoals have been attained. Salary continuation payments in an amount equal to such multiple as may be identified in the Severance Plan times the Named Executive Officer’s base salary. The table below indicates the applicable multiple for each Named Executive Officer. As identified in the table, certain Named Executive Officers would be eligible to receive incentive continuation payments. The combination of salary continuation (and incentive continuation if applicable) amounts would be paid by the Company in installments over the severance period and in accordance with the Company’s standard payroll practice, subject to the requirements of Section 409A. The
For a qualified termination that occurs in connection with a change in control, a Tier 1 participant would receive a single lump sum severance payment equal to two (2) times the sum of the participant’s annual base salary and target annual incentive compensation. A Tier 2 participant would receive a single lump sum severance payment equal to one and one-half (1.5) times the sum of the participant’s annual base salary and target annual incentive compensation. In addition, Tier 1 and Tier 2 participants would receive a prorated portion of their annual incentive compensation. If the qualifying termination occurred in the same year as the change in control, a prorated portion of the participant’s annual incentive compensation is paid based on achievement of a target level of performance. If the qualifying termination occurred in the two years following a change in control, a prorated portion of the participant’s annual incentive compensation is paid based on the actual performance results achieved for the year. Any pro rata annual incentive payout will be determined based on the number of calendar days the eligible Named Executive Officer was actually employed during such plan year. Prorated annual incentive awards are paid in a lump sum at the same time that incentive compensation for the same year are paid to the other Senior Officers of the Company, following certification by the Committee that applicable performance goals have been attained.
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2017 Executive Compensation Tables
Subject to the participant’s timely election of continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company would provide comparable medical (including prescription drug), dental, vision, and hospitalization benefits to the eligible Named Executive Officer and his or her eligible dependents for the severance period, provided the Named Executive Officer continues to pay the applicable employee rate for such coverage and the Named Executive Officer remains eligible for COBRA coverage. The severance period for a Tier 1 participant is 24 months and for a Tier 2 participant is 18 months.
The eligible Named Executive Officer will be entitled to receive reimbursement for professional outplacement services actually incurred during the initial 12-month period following termination, not to exceed $10,000.
The eligible Named Executive Officers, as a condition to receiving payments under the Severance Plan, are required to agree not to directly or indirectly, individually or in any capacity or relationship, engage in any business or employment, or aid or endeavor to assist any business or legal entity, that is in direct competition with the business of the Company for the 12 months following termination.
During this period,the 12 months following termination, the eligible Named Executive Officers must also agree to not induce any employee of the Company to terminate employment with the Company, nor knowingly offer employment to any person who is or who was employed by the Company unless such person has ceased to be employed by the Company for a period of at least six months.
Named Executive Officers covered under the Severance Plan may not disparage, slander, or injure the business reputation or goodwill of the Company.
Named Executive Officers must maintain as secret and confidential all protected information such as trade secrets, confidential and proprietary business information of the Company, and any other information of the Company, including but not limited to customer lists, sources of supply, processes, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its agents or employees, including the Named Executive Officer.
Noncompliance with any of the above may result in the loss of severance benefits.
As stated previously, other than theGeneral Severance Plan
The General Severance Plan was amended and restated effective March 27, 2017 to include the Senior Officers who are not covered by the Senior Executive Severance Plan. Mr. Armstrong is the only Named Executive Officer in 2017 who participates in this plan. Described below and illustrated in the table, Potential Payouts Upon Termination, are the different elements payable under the General Severance Plan if Mr. Armstrong would experience an involuntary termination of employment. All continuation amounts would be paid over the salary continuation period in compliance with Section 409A.
If Mr. Armstrong were to have experienced an “involuntary termination of employment” under the General Severance Plan in 2017, he would have been entitled to severance benefits. “Involuntary termination of employment” is defined in the General Severance Plan as the termination of employment of an eligible employee by the employer, other than: for cause; as a result of his or her failure to accept such additional or revised responsibilities as communicated by the employer; by reason of the sale of his employer or any portion of the employer’s assets (whether by asset or stock sale), provided he or she continues employment with the purchaser thereof; or a voluntary termination of employment of any kind.
For an involuntary termination, an eligible employee would receive severance payments in the form of base salary continuation for a period of weeks that is determined based on his or her job title/level and years of service. Mr. Armstrong would have been eligible for 48 weeks of severance as of December 31, 2017. Salary continuation amounts would be paid by the Company doesin installments and in accordance with the Company’s standard payroll practice, subject to the requirements of Section 409A.
Subject to the eligible employee’s timely election of continued coverage under COBRA and the Company’s receipt of the signed severance agreement, the Company would provide comparable medical (including prescription drug), dental, vision, and hospitalization benefits to the eligible Named Executive Officer and his or her eligible dependents for a period of time that is determined based on the number of weeks of severance that the employee is eligible for. The Company pays the full cost of COBRA during the severance period. Following completion of the severance period, the employee is responsible for the full cost of maintaining COBRA benefits. Based on the number of weeks of severance that Mr. Armstrong would have been eligible for, he would have received 12 months of company-paid COBRA premiums.
The eligible Named Executive Officer will be entitled to receive reimbursement for professional outplacement services actually incurred during the initial 6-month period following termination, not provide special protections or benefits upon a change in control or upon a termination following a change in control.
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Executive Severance Plan Elements and Valuesto exceed $7,500.
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2017 Executive Compensation Tables
Name | Value of Pro-rata Target Incentive with Respect to Year | Value of Salary Continuation(2) ($) | Value of Incentive Continuation(3) ($) | Value of ($) | Allowed ($) | Total Company ($) | ||||||
Carl T. Camden | 1,300,000 | 2,000,000 | 2,600,000 | 23,411 | 10,000 | 5,933,411 | ||||||
George S. Corona | 589,500 | 655,000 | 0 | 11,148 | 10,000 | 1,265,648 |
(1) The Value of Pro-rata Target Incentive with Respect to Year of Termination represents
Severance benefits under the calculated target incentive for the Named Executive Officers if they had terminated on January 3, 2016. If the termination date is other than the last day of the Company’s fiscal year, incentive earned would equal the target incentive prorated for the number of days worked in the year.
(2) The Value of Salary Continuation is calculated by taking the annual salary times the relevant severance plan multiple according to the Severance Plan.
(3) The Value of Incentive Continuation is calculated by taking the annual target incentive times the relevant severance plan multiple according to theGeneral Severance Plan for the Named Executive Officers to whom this element applies.
(4) The Value of Medical Plan Provided is calculated as the Company-paid portion of the Medical Plan cost, times the number of months eligible according to the Severance Plan. Costs include medical, dental and vision (assumes no change in Health Plan or coverage type) and assumes a 10% health care coverage cost increase in second year (as applicable). Executive continues to make normal employee contributions during the severance period.
(5) Total Company Severance Expense is the sum of the Value of Pro-rata Target Incentive with Respect to Year of Termination, Salary Continuation, Incentive Continuation, Medical Plan Provided, and Allowed Reimbursement of Outplacement Services.
Mr. Thirot’s Severance Benefit
Underare conditioned upon the terms of Mr. Thirot’s Swiss employmentthe severance agreement if he is terminated bythat include: non-competition; non-solicitation of employees or customers; maintaining confidentiality of information and trade secrets of the Company other than for willful misconduct, he will be provided with either three months’ notice or three monthsand all affiliates; and non-disparagement of salary in lieuthe Company and all officers and employees.
Treatment of notice, atLong-Term Incentive Awards
Each equity-based award is conditioned upon the grantee’s acceptance of the terms of the EIP and the grant agreement, which includes restrictive covenants such as post-employment conditions not to solicit the Company’s discretion. The table below shows the severance benefit ifemployees or customers and not to compete against the Company elects to provide threefor twelve months following any termination of salary in lieuemployment, and indefinite covenants covering non-disparagement and confidentiality terms. Each of notice:
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In the event of a U.S.our Named Executive Officer’s death while employed, the Named Executive Officer’s beneficiary would receive a group-term life insurance benefit equalperformance-based equity awards is subject to the lesserCompany’s Clawback Policy, which was described earlier in this document. Provisions for the treatment of two times current base salary or $1.5 million. The amounts shown in the following table would have been payable under the Company-paid group term life plan if the named individuals had died on the last business day of the fiscal year. Mr. Thirot’s beneficiary is eligible to receive death benefits under the Swiss System, similar to other Swiss employees.
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Treatment of Unvested Restricted Stock in the Event of Death or Disability
In the event of a Named Executive Officer’slong-term incentive awards upon various termination of employment due to disability or death, the Named Executive Officer (or the Named Executive Officer’s beneficiary) would receive a pro-rata settlement of unvested restricted stock outstanding at the time of termination. For each grant of restricted stock, the number of restricted shares settled would equal the total number of restricted shares originally granted times the ratio of days employed since the grant date divided by total number of days in the vesting period less the number of restricted shares already settled on the anniversary dates of the grant. The value of this pro-rata settlement (assuming the December 31, 2015 stock value of $16.15) is shownscenarios are outlined in the table below.
Termination |
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Prorated based on actual results (as determined at the end of the cycle), subject to employment for at least one year after the date grant was approved | ||||
Termination for Good Reason in connection with a Change-in-Control | Forfeit | Forfeit | ||
Termination for Cause | Forfeit | Forfeit | ||
Voluntarily Quit | Forfeit | Forfeit | ||
Retirement | Forfeit | Prorated based on actual results (as determined at the end of the cycle) for “Normal Retirement” defined as age 62 with 5 years of service | ||
Death or Disability | Prorated | Prorated based on actual results |
TreatmentBased on the terms of the severance plans and treatment of LTI Equity-Based Performance Awards in the Event of Death, Disability, Normal Retirement, or Termination Without Cause
In the event of a Named Executive Officer’sawards for each upon termination of employment due to disability, death, normal retirement (defined as age 62 with five years of service), or termination byoutlined above, the Company without Cause, attable below illustrates the end of the performance period and following approval by the Compensation Committee, theamounts that each Named Executive Officer (or the Named Executive Officer’s beneficiary) would receive a pro rata portionin each of the Performance Award that would have otherwise vested if employment had continued until the end of the performance period, based on the portion of the performance period that the officer was employed and based on the performance level achieved. Amounts shown below are prorated for 2015 performance shares based on financial measures that were earned but not yet vested and a target level of performance shares that are based on the relative TSR measure, (assuming the December 31, 2015 stock value of $16.15).potential termination scenarios.
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Treatment of LTI Cash-Based Performance Awards in the Event of Death, Disability, or Termination Without Cause
2017 Executive Compensation Tables
Event and Amounts | George S. Corona ($) | Olivier G. Thirot ($) | Teresa S. Carroll ($) | Peter W. Quigley ($) | Steven S. Armstrong ($) | |||||||||||||||
Involuntary Termination (For Cause) | ||||||||||||||||||||
No other payments due | ||||||||||||||||||||
Voluntary Termination | ||||||||||||||||||||
No other payments due | ||||||||||||||||||||
Death or Disability | ||||||||||||||||||||
Performance Shares (Equity-Based)(1) | 3,500,171 | 1,277,350 | 1,891,129 | 1,891,129 | 903,069 | |||||||||||||||
Restricted Shares(2) | 380,880 | 159,148 | 185,326 | 185,326 | 93,400 | |||||||||||||||
Total | 3,881,051 | 1,436,498 | 2,076,455 | 2,076,455 | 996,469 | |||||||||||||||
Normal Retirement (Age 62 and 5 Years of Service)(3) | ||||||||||||||||||||
No other payments due | n/a | n/a | n/a | n/a | n/a | |||||||||||||||
Involuntary Termination (Not For Cause) | ||||||||||||||||||||
Cash Severance(4) | 2,000,000 | 800,250 | 862,500 | 862,500 | 306,462 | |||||||||||||||
Pro-Rated Annual Incentive(5) | 1,051,064 | 400,045 | 437,723 | 416,443 | — | |||||||||||||||
Performance Shares (Equity-Based)(1) | 2,864,862 | 1,050,327 | 1,637,064 | 1,637,064 | 818,532 | |||||||||||||||
Restricted Shares(2) | — | — | — | — | — | |||||||||||||||
Benefits Continuation(6) | 24,772 | 21,743 | 21,539 | 18,284 | 23,244 | |||||||||||||||
Outplacement Services(7) | 10,000 | 10,000 | 10,000 | 10,000 | 7,500 | |||||||||||||||
Total | 5,950,698 | 2,282,365 | 2,968,826 | 2,944,291 | 1,155,737 | |||||||||||||||
Termination in Connection with a Change-in-Control - For Good Reason | ||||||||||||||||||||
Cash Severance(4) | 4,600,000 | 1,400,438 | 1,595,625 | 1,595,625 | — | |||||||||||||||
Pro-Rated Annual Incentive(5) | 1,300,000 | 400,125 | 488,750 | 488,750 | — | |||||||||||||||
Performance Shares (Equity-Based)(1) | — | — | — | — | — | |||||||||||||||
Restricted Shares(2) | — | — | — | — | — | |||||||||||||||
Benefits Continuation(6) | 24,772 | 21,743 | 21,539 | 18,284 | — | |||||||||||||||
Outplacement Services(7) | 10,000 | 10,000 | 10,000 | 10,000 | — | |||||||||||||||
Total | 5,934,772 | 1,832,306 | 2,115,914 | 2,112,659 | — | |||||||||||||||
Termination in Connection with a Change-in-Control - Not For Cause | ||||||||||||||||||||
Cash Severance(4) | 4,600,000 | 1,400,438 | 1,595,625 | 1,595,625 | 306,462 | |||||||||||||||
Pro-Rated Annual Incentive(5) | 1,300,000 | 400,125 | 488,750 | 488,750 | — | |||||||||||||||
Performance Shares (Equity-Based)(1) | 5,176,430 | 1,963,190 | 2,631,055 | 2,631,055 | 1,188,040 | |||||||||||||||
Restricted Shares(2) | 1,434,347 | 584,942 | 666,506 | 666,506 | 321,459 | |||||||||||||||
Benefits Continuation(6) | 24,772 | 21,743 | 21,539 | 18,284 | 23,244 | |||||||||||||||
Outplacement Services(7) | 10,000 | 10,000 | 10,000 | 10,000 | 7,500 | |||||||||||||||
Total | 12,545,549 | 4,380,438 | 5,413,475 | 5,410,220 | 1,846,705 |
(1) | In the event of a Named Executive Officer’s termination of employment due to disability, death, normal retirement (defined as age 62 with five years of service), or termination by the Company without Cause, at the end of the performance period and following approval by the Compensation Committee, the Named Executive Officer (or the Named Executive Officer’s beneficiary) would receive a pro rata portion of the equity-based Performance Award that would have otherwise vested if employment had continued until the end of the performance period, based on the portion of the performance period that the officer was employed and based on the performance level achieved. For termination by the Company without Cause, the Named Executive Officer must have been employed for at least one year following the date of each grant in order to be eligible to receive prorated |
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2017 Executive Compensation Tables
performance shares. As such, the values of the 2017 performance shares are not included in the totals for this termination event. Amounts shown in the table above include 2015 performance shares based on financial measures and the Relative TSR measure that were earned but not yet vested with certification by the Committee to occur in early 2018, and for the 2016 and 2017 performance shares a prorated target level of performance for all measures as performance is not yet known and will be determined at the end of the performance period in early 2019 and early 2020 respectively. Upon the event of a Change in Control, if awards are not assumed, converted, or replaced by the resulting entity, all vesting restrictions on outstanding Performance Awards shall lapse, with any applicable performance goals deemed to be satisfied as if “target” performance had been achieved and all such Awards become fully vested and exercisable, effective as of the date of such Change in Control. The value under the pro rata settlement, or Change in Control settlement (assuming the December 29, 2017 stock value of $27.27) is shown in the table. |
(2) | In the event of a Named Executive Officer’s termination of employment due to disability or death, the Named Executive Officer (or the Named Executive Officer’s beneficiary) would receive a pro rata settlement of unvested restricted shares outstanding at the time of termination. For each grant of restricted stock awards/units, the number of shares settled would equal the total number of restricted shares originally granted times the ratio of days employed since the grant date divided by total number of days in the vesting period less the number of restricted shares already settled on the anniversary dates of the grant. Upon the event of a Change in Control, if awards are not assumed, converted, or replaced by the resulting entity, all vesting restrictions on outstanding Restricted Share awards/units shall lapse, and all such Awards become fully vested and exercisable, effective as of the date of such Change in Control. The value under the prorated settlement, or Change in Control settlement (assuming the December 29, 2017 stock value of $27.27) is shown in the table. |
(3) | Mr. Camden retired from the Company in May 2017. Compensation received by Mr. Camden included amounts in the “Salary” and “All Other Compensation” columns of the Summary Compensation Table. He is also eligible for prorated performance shares as shown in the Outstanding Equity Awards at Fiscal Year End Table because he was Normal Retirement eligible under the terms of the EIP. Mr. Camden forfeited all unvested restricted stock at the time of his termination. Company-provided medical and dental benefits for Mr. Camden terminated at the end of the month in which he retired pursuant to the terms of the Summary Plan Description as applied to all employees. |
(4) | Per the Kelly Services Inc. Senior Executive Severance Plan, for involuntary termination without cause and for termination for good reason, the value of cash severance includes base salary continuation for Mr. Corona for 24 months, and Messrs. Quigley, Thirot and Ms. Carroll for 18 months. For payments under Change in Control, with qualifying termination, Mr. Corona would receive a lump sum payment equal to 2 times the sum of his annual base salary and target annual incentive; and Messrs. Quigley, Thirot and Ms. Carroll would receive a lump sum payment equal to 1.5 times the sum of base salary and target annual incentive. Mr. Armstrong is covered under the Kelly Services Inc. General Severance plan and is eligible to receive base salary continuation for 48 weeks, only for involuntary termination by the company without cause, with or without a change in control. |
(5) | In the event of an involuntary termination by the Company without cause, or termination by the Named Executive Officer for good reason in connection with a change in control, Messrs. Corona, Quigley, Thirot and Ms. Carroll are eligible to receive a pro rata portion of their annual Incentive Compensation for such fiscal year that would otherwise be paid if his or her employment or service had continued until the end of such performance period based on the actual results for such year. The value of pro rata target incentive with respect to year of termination represents the calculated target incentive for the Named Executive Officers if they had terminated on December 31, 2017. The severance plan covering Mr. Armstrong does not provide payment for annual Incentive compensation, regardless of termination reason. |
(6) | The value of the health care benefit provided is calculated as the Company-paid portion of the medical plan cost, times the number of months eligible according to the applicable severance plan. Coverage can include medical, dental, and vision (assumes no change in Health Plan or coverage type) and assumes a 10% health care coverage cost increase in second year (as applicable). Named Executive Officers participating in the Senior Executive Severance Plan continue to pay the employee rate for COBRA coverage during the severance period. Named Executive Officers participating in the General Severance Plan are not required to pay the employee portion of COBRA during the severance period as the Company covers the full COBRA cost. |
(7) | Represents the maximum allowed benefit for reimbursement of outplacement services for participants in the applicable Severance Plan. The severance plan that covers Mr. Armstrong does not provide outplacement benefits in any termination scenario outside of involuntary termination by the Company without cause. |
The Named Executive Officers would also be entitled to the vested benefits included in the Outstanding Equity Awards at Fiscal Year-End table and the Nonqualified Deferred Compensation table. In addition, the amounts shown in the table above do not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment due to disability, death, or certain types of termination by the Company without Cause, at the end of the performance period the Named Executive Officer (or the Named Executive Officer’s beneficiary) would receive a pro rata portion of the Performance Award that would have otherwise vested if employment had continued until the end of the performance period, based on the portion of the performance period that the officer was employedemployment. These include accrued salary and based on the performance level achieved. Based on Company performance for the three-year 2013-2015 LTI performance period, a threshold level of performance was not achieved for either measure. Based on the first two fiscal years of the three-year 2014-2016 LTI performance period, the Company believes there is a possibility that a threshold payout could be earned.vacation pay, and life insurance benefits.
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CEO Pay Ratio
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As required by Section 953(b) of Dodd-Frank and Item 402(u) of Regulation S-K, we are providing the required information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Corona, our President and Chief Executive Officer (the “CEO”), as follows:
For fiscal 2017, our last completed fiscal year:
The pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. The SEC rules for determining the employee population and identifying the median employee provide companies with flexibility surrounding the elements of compensation to be included and various methodologies for gathering the employee population for inclusion in the analysis. The pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices, and may utilize different methodologies, exclusions, estimates, samplings and assumptions in calculating their own pay ratios.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee, the methodology that we used and the material assumptions and adjustments that we used to identify the median and determine annual total compensation are outlined below:
Category | U.S. | Non U.S. | Total | |||||||||
Regular | 4,722 | 3,006 | 7,728 | |||||||||
Temporary | 74,294 | 59,459 | 133,753 | |||||||||
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79,016 | 62,465 | 141,481 | ||||||||||
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CEO Pay Ratio
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Proposal 3: Amendment and Restatement of the Company’s Certificate of Incorporation
PROPOSAL 3 - AMENDMENT AND RESTATEMENT OF THE COMPANY’S CERTIFICATE OF INCORPORATION TO ELIMINATE CERTAIN OBSOLETE PROVISIONS, TO ELIMINATE A “STAKEHOLDER PROVISION” THAT COULD CONFLICT WITH DELAWARE LAW, AND TO MAKE ADDITIONAL REVISIONS IN THE INTERESTS OF MODERNIZATION
As described in the “Corporate Governance” section of this Proxy Statement, the Board recently formed a special committee consisting of the independent Directors to review and make recommendations to the Board about governance matters. Upon recommendation of the special committee, the Board approved and adopted, and recommends for stockholder approval, amendments to the Company’s Restated Certificate of Incorporation. These amendments eliminate certain obsolete provisions, eliminate a “stakeholder provision” that could conflict with Delaware law, and make additional revisions in the interests of modernization. The amendments are as follows:
Article TENTH currently requires that the Board, when evaluating any offer of another party to make a tender or exchange offer for any equity security of the Company, to merge or consolidate the Company with another corporation or to acquire all or substantially all of the properties and assets of the Company, give “due consideration to such factors as the Board of Directors determines to be relevant, including without limitation, the social, legal and economic effects of the proposed transaction upon employees, customers, suppliers, and other affected persons, firms and corporations and on the communities in which this corporation and its subsidiaries operate or are located.” Article TENTH addresses circumstances in which the Board’s obligation under Delaware law is to act, in the exercise of its business judgment, in the best interests of the Company and its stockholders. The Board is proposing the elimination of Article TENTH because, in mandating consideration of certain effects upon constituencies other than stockholders, Article TENTH purports to require the Board to consider interests that may conflict with or detract from the best interests of the Company and its stockholders.
The full text of the Amended and Restated Certificate of Incorporation as proposed is set forth in Annex A, with additions indicated by underlining and deletions indicated by strikeout.
If this proposal is approved, the Company will file the Amended and Restated Certificate of Incorporation with the Delaware Secretary of State promptly after the Annual Meeting of Stockholders. The Amended and Restated Certificate of Incorporation will take effect upon filing.
This proposal must be approved by the affirmative vote of holders of a majority of the voting power of the Company’s outstanding Class B Common Stock. For purposes of this stockholder vote, abstentions and broker non-votes will have the effect of votes against the proposal.
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Proposal 4: Amendment to the Company’s Amended and Restated Bylaws
PROPOSAL 4 - AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED BYLAWS TO DESIGNATE THE DELAWARE CHANCERY COURT AS THE EXCLUSIVE FORUM FOR CERTAIN LEGAL ACTIONS
As described in the “Corporate Governance” section of this Proxy Statement, the Board recently formed a special committee consisting of the independent Directors to review and make recommendations to the Board about governance matters. Upon recommendation of the special committee, the Board approved and adopted Amended and Restated Bylaws effective March 7, 2018 (as disclosed in the Company’s Current Report on Form 8-K filed with the SEC on March 9, 2018). Also upon recommendation of the special committee, the Board approved and adopted, and recommends for stockholder approval, an amendment to the Company’s Amended and Restated Bylaws (the “Bylaw Amendment”) that, if adopted, would result in the Delaware Court of Chancery serving as the exclusive forum for certain legal actions involving the Company. Specifically, if this proposal is approved by our stockholders, the Company’s Amended and Restated Bylaws will be amended to insert a new Article XI as follows:
Unless the corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the corporation to the corporation or the corporation’s stockholders, (3) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, the Company’s certificate of incorporation or the Bylaws or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware, or (4) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to the provisions of this Article XI.
The Board believes that the Bylaw Amendment is in the best interests of the Company and its stockholders for the following reasons:
The Bylaw Amendment is not being proposed by our Board in anticipation of or in reaction to any specific litigation or transaction; rather, it is being proposed to prevent potential harm to the Company and its stockholders. Although some plaintiffs might prefer to litigate the intra-corporate disputes described above in a forum outside of Delaware because they perceive another court as more convenient or more favorable to their claims, the Board believes that the substantial benefits to the Company and to our stockholders as a whole from designating the Delaware Chancery Court as the exclusive forum for these specific matters outweighs such concerns. Furthermore, the Board retains the discretion to permit litigation to proceed in an alternative forum. In keeping with the views of certain proxy advisors, the Board is seeking the approval of stockholders prior to adopting the Bylaw Amendment. If the proposal is not approved, the Board will reconsider whether the Bylaw Amendment is in the best interests of the Company.
If this proposal is approved, the Bylaw Amendment will become effective immediately.
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This proposal must be approved by the affirmative vote of holders of a majority of the voting power the Company’s outstanding Class B Common Stock. For purposes of this stockholder vote, abstentions and broker non-votes will have the effect of votes against the proposal.
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Proposal 5: Ratification of the Appointment of PricewaterhouseCoopers LLP
PROPOSAL 5 - RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 20162018 FISCAL YEAR
At its February 17, 2016 meeting,On an annual basis, the Audit Committee approvedapproves and appoints the appointment ofindependent registered public accounting firm. During its February 14, 2018 meeting, PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firmwas appointed to audit the consolidated financial statements of the Company for the year ending January 1, 2017. The Board of Directors seeks ratification of the appointment.December 30, 2018. This firm has served as the Company’s independent registered public accounting firm for many years and is considered to be well qualified. As in prior years,The reappointment process for the independent registered public accounting firm includes an annual assessment that takes into consideration, but is not limited to, a review of the following:
1. | Quality of services and sufficiency of resources provided by the auditor |
2. | Communication and interaction during the engagements |
3. | Independence, objectivity, and professional skepticism |
The Board of Directors seeks ratification of the appointment of PwC. The representatives of thatthe firm are expected to be present at the Annual Meeting and will have the opportunitybe available to respond to all appropriate questions.
DutiesAudit and Non-Audit Fees
ManagementThe Audit Committee is responsible for the preparationcompensation (including negotiations) of the Company’s financial statements in accordance with generally accepted accounting principles and for the report on the effectiveness of the Company’s internal control over financial reporting. The Company’s independent registered public accounting firm is responsible for auditing those financial statements and expressing an opinion as to their conformity with generally accepted accounting principles and for attesting to the operating effectiveness of the Company’s internal controls over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”).
Service Fees Paid to PricewaterhouseCoopers LLP, the Company’s Independent Registered Public Accounting Firm
2015 ($) | 2014 ($) | |||||||
Audit Fees | 3,190,568 | 3,203,526 | ||||||
Audit Related Fees | 57,431 | — | ||||||
Tax Fees | 298,000 | — | ||||||
All Other Fees | 1,800 | 1,800 | ||||||
Total | 3,547,799 | 3,205,326 |
Audit Fees: Services rendered during the years ended January 3, 2016 and December 28, 2014 were for the audits and quarterly reviews of our consolidated financial statements, statutory audits, attestation of controls, issuance of consents, and assistance with review of documents filed with the SEC.
Audit Related Fees:For 2015, $57,431 represented services related to technical assistance with new accounting standards and services associated with international regulatory reporting.
Tax Fees:For 2015, $298,000 represented services related to tax and transfer pricing consulting.
All Other Fees: For 2015 and 2014, $1,800 (each year) represented services related to accounting research tools.
The Audit Committee has adopted a policy requiringrequires pre-approval of all audit and non-audit services of the independent registered public accounting firm prior to their engagement by the Company. In conjunction with the pre-approval, the Audit Committee considers whether non-audit services are consistent with the rules and regulations of the SEC on auditor independence. The authority of the Audit Committee is detailed in its charter, which is posted on the Company’s website atkellyservices.com.kellyservices.com.
The table below displays the fees incurred from the audit and non-audit services provided by PwC.
2016 ($) | 2017 ($) | |||||||
Audit Fees | 3,904,889 | 4,118,778 | ||||||
Audit Related Fees | 29,147 | 56,800 | ||||||
Tax Fees | 140,200 | 101,300 | ||||||
All Other Fees | 1,800 | 1,800 | ||||||
Total | 4,076,036 | 4,278,678 |
58Audit Fees: Audits and quarterly reviews of our consolidated financial statements, statutory audits, attestation of controls, issuance of consent, and assistance with review of documents filed with the SEC.
Tax Fees:Tax and transfer pricing consulting.
All Other Fees: Accounting research.
Proposal 5: Ratification of the Appointment of PricewaterhouseCoopers LLP
In connection with the financial statements for the fiscal year ended January 3, 2016,December 31, 2017, the Audit Committee has:
(1) reviewed and discussed the audited financial statements with management;
(2) discussed with PwC, the matters required to be discussed by the statement on PCAOBPublic Company Accounting Oversight Board AU Section 380 Communication With Audit Committees; and
(3) has received the written disclosures and the letter from PwC required by applicable requirements of the PCAOBPublic Company Accounting Oversight Board regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC its independence.
Based upon these reviews and discussions, the Audit Committee recommended to the Board at its February 17, 201614, 2018 meeting that the Company’s audited financial statements be included in the Annual Report on Form 10-K for the year ended January 3, 2016December 31, 2017 filed with the SEC. The Board approved this inclusion.
THE AUDIT COMMITTEE
Questions and Answers About the Proxy Statement and the Annual MeetingTHE AUDIT COMMITTEE LESLIE A. MURPHY, CHAIR ROBERT S. CUBBIN TERRENCE B. LARKIN, VICE CHAIR DONALD R. PARFET 67
KELLY SERVICES, INC.
999 West Big Beaver Road
Troy, Michigan 48084-4716
April 9, 2018
QUESTIONS AND ANSWERS ABOUT THE PROXY STATEMENT AND THE ANNUAL MEETING
Q) | WHO IS MAKING THE SOLICITATION IN THIS PROXY STATEMENT? |
A) | This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the “Board”) of Kelly Services, Inc. (the “Company”) for use at the Annual Meeting of Stockholders of the Company to be held at its corporate offices in Troy, Michigan on May 9, 2018 for the purposes set forth in the Notice of Annual Meeting of Stockholders. The approximate date on which this Proxy Statement and enclosed form of proxy are first being sent to stockholders of the Company is April 9, 2018. |
Q) | WHO WILL BEAR THE COST OF THE PROXY SOLICITATION? |
A) | The cost of soliciting proxies will be borne by the Company. The solicitation of proxies will be made primarily by mail. The Company may also make arrangements with brokerage houses, custodians, banks, nominees, and fiduciaries to forward solicitation material to beneficial owners of stock held of record by them and to obtain authorization to execute proxies. The Company may reimburse such institutional holders for reasonable expenses incurred by them in connection therewith. |
A copy of the Company’s Annual Report and Annual Report on Form 10-K as of December 31, 2017, the close of the Company’s latest fiscal year, has been mailed or otherwise made available to each stockholder of record. The expense of preparing, printing, assembling, and mailing the accompanying form of proxy and the material used in the solicitation of proxies will be paid by the Company. In addition, the Company may reimburse brokers or nominees for their expenses in transmitting proxies and proxy material to principals.
Q) | WHO IS ENTITLED TO VOTE? |
A) | Only stockholders of record of our Class B common stock, par value $1.00 per share, at the close of business on March 19, 2018, the record date for the Annual Meeting, are entitled to notice of and to vote at the Annual Meeting. Class B common stock is the only class of the Company’s securities with voting rights. |
At the close of business on March 19, 2018, the number of issued and outstanding voting securities (exclusive of treasury shares) was 3,431,972 shares of the Class B common stock. Class B stockholders on the record date will be entitled to one vote for each share held of record.
Q) | HOW DO I VOTE? |
A) | We encourage stockholders to return their proxies promptly via the enclosed form of proxy in the enclosed postage prepaid envelope or vote via the internet, QR code scan, or telephone. |
Q) | HOW IS MY VOTE COUNTED? |
A) | If a proxy in the accompanying form is properly executed, returned to the Company and not revoked, the shares represented by the proxy will be voted in accordance with the instructions set forth thereon. If no instructions are given with respect to the matters to be acted upon, the shares represented by the proxy will be voted in accordance with the recommendation of the Company’s Board of Directors on each of the proposals set forth in the accompanying Notice of Annual Meeting of Stockholders and on any other matters that properly come before the Annual Meeting in such manner as may be determined by the individuals named as proxies. |
Q) | CAN I REVOKE MY PROXY AFTER I HAVE SUBMITTED IT? |
A) | If the enclosed form of proxy is executed and returned by the stockholder, it may nevertheless be revoked by the person giving it by written notice of revocation to the Corporate Secretary of the Company or by submitting a later dated proxy, provided such notice or later dated proxy is received by 11:59 p.m., Central Time, on May 8, 2018, or by appearing in person at the Annual Meeting. |
Q) | WHAT CONSTITUTES A QUORUM? |
A) | Pursuant to the Company’s By-laws, the holders of 60% of the issued and outstanding shares of Class B common stock who are entitled to vote at a stockholders’ meeting, in person or represented by proxy, will constitute a quorum. Shares that are present and entitled to vote on any of the proposals to be considered at the Annual Meeting will be considered to be present at the Annual Meeting for purposes of establishing the presence or absence of a quorum for the transaction of business. |
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Questions and Answers About the Proxy Statement and the Annual Meeting
Q) | WHAT IS A BROKER NON-VOTE? |
A) | A “broker non-vote” occurs if a broker or other nominee indicates on the enclosed proxy that it does not have discretionary authority as to certain shares to vote on a particular proposal, but otherwise has authority to vote at the Annual Meeting. Abstentions and shares subject to broker non-votes will be considered as present for purposes of determining the presence or absence of a quorum at the Annual Meeting. For the purposes of Proposals 3 and 4, a broker non-vote will have the effect of a vote against the proposal. |
Q) | HOW IS IT DETERMINED IF A MATTER HAS BEEN APPROVED? |
A) | Under the Company’s Restated Certificate of Incorporation, Directors are elected by plurality vote and the nominees who receive the greatest number of votes at the Annual Meeting will be elected. Withheld votes and broker non-votes will not be taken into account for purposes of determining the outcome of the election of Directors. |
For Proposal 2 and Proposal 5, the affirmative vote of a majority of the shares present in person or by proxy at the Annual Meeting and entitled to vote on such proposal will be required to approve each of the other proposals to be considered at the Annual Meeting. Abstentions will have the effect of negative votes with respect to these proposals. Broker non-votes will not be taken into account for purposes of these proposals.
For Proposal 3 and Proposal 4, the affirmative vote of the outstanding shares entitled to vote on such proposal will be required to approve each of the other proposals to be considered at the Annual Meeting. Abstentions and broker non-votes will have the effect of votes against these proposals.
Q) | WHAT HAPPENS IF ADDITIONAL MATTERS (OTHER THAN THE PROPOSALS DESCRIBED IN THIS PROXY STATEMENT) ARE PRESENTED AT THE ANNUAL MEETING? |
A) | If any other matters do properly come before the Annual Meeting, all proxies signed and returned by holders of the Class B common stock, if not limited to the contrary, will be voted thereon in accordance with the best judgment of the persons voting the proxies. |
Q) | HOW CAN I COMMUNICATE WITH THE BOARD? |
A) | Stockholders may communicate with the Board in writing, addressed to the Board of Directors and mailed to the Corporate Secretary, Kelly Services, Inc., 999 West Big Beaver Road, Troy, Michigan 48084-4716. All written stockholder communications will be summarized and reported to the Board at its regularly scheduled meetings. |
Q) | WHAT IS THE DEADLINE TO SUBMIT STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE COMPANY’S 2019 ANNUAL MEETING OF STOCKHOLDERS? |
A) | If a stockholder intends to present a proposal for action at the Company’s 2019 Annual Meeting of Stockholders and wishes to have such proposal considered for inclusion in the Company’s Proxy Statement in reliance on Rule 14a-8 under the Exchange Act, the proposal must be submitted in writing and received by the Corporate Secretary, Kelly Services, Inc., 999 West Big Beaver Road, Troy, Michigan 48084-4716, no later than December 10, 2018. |
The Company’s Amended and Restated Bylaws provide advance notice procedures with regard to certain matters, including stockholder proposals and nominations of individuals for election to the Board of Directors, outside the process of Rule 14a-8, beginning in connection with the 2019 Annual Meeting of Stockholders. In general, notice of a stockholder proposal or director nomination must be received by the Company not less than 90 nor more than 120 days prior to the first anniversary of the previous year’s annual meeting, and must contain specified information to conform to the requirements set forth in the bylaws. To be timely for the 2019 Annual Meeting of Stockholders, the notice must be received by the Company no earlier than January 9, 2019 and no later than February 8, 2019. If the chair of the meeting of stockholders determines that a stockholder proposal or director nomination was not made in accordance with the bylaws, the Company may disregard such proposal or nomination. In addition, if a stockholder submits a proposal outside of Rule 14a-8 for the 2019 Annual Meeting of Stockholders and the proposal fails to comply with the advance notice procedures under the Amended and Restated Bylaws, then the Company’s proxy may confer discretionary authority on the persons being appointed as proxies on behalf of the Board to vote on the proposal.
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Annex A
ANNEX A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
KELLY SERVICES, INC.
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Kelly Services, Inc., a corporation organized and existing under the laws of Delaware, certifies as follows:
1. The name of the Corporation is KELLY SERVICES, INC.
2. The original certificate of incorporation was filed with the Secretary of State of Delaware on August 27, 1952 under the name of PERSONNEL SERVICE, INC.
3. ThisAmended and Restated Certificate of Incorporation amends and, restatesand integrates the certificate of incorporation of the corporation heretofore in effect. ThisAmended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware by the directors and stockholders of the corporation.
4. TheAmended and Restated Certificate of Incorporation so adopted reads in full as follows:
FIRST: The name of this corporation is Kelly Services, Inc.
SECOND:Its principalThe address of the corporation’s registered office in the State of Delaware islocated at 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The name of its resident agent at such address is The Corporation Trust Company.
THIRD: Thenature of the business, or objects or purposes to be transacted, promoted or carried on are:purpose of the corporation is to engage in any lawful act or activity for which corporations may be organizedunder the General Corporation Law of the State of Delaware.
ROBERT S. CUBBINTo furnish office, clerical, supervisory and consultant services.
TERRENCE B. LARKINTo manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description.
CONRAD L. MALLETTTo acquire, and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trade-marks and trade names, relating to or useful in connection with any business of this corporation.
To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interest issued or created by any corporations, joint stock companies, syndicates, associations, firms, trusts or persons, public or private, or by the government of the United States of America, or by any foreign government, or by any state, territory, province, municipality or other political subdivision or by any governmental agency, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof.
To enter into, make and perform contracts of every kind and description with any person, firm, association, corporation, municipality, county, state, body politic or government or colony or dependency thereof.
To borrow or raise moneys for any of the purposes of the corporation and, from time to time, without limit as to amount to draw, make, accept, endorse, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the corporation, whether at the time owned or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds or other obligations of the corporation for its corporate purposes.
To loan to any person, firm or corporation any of its surplus funds, either with or without security.
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To purchase, hold, sell and transfer the shares of its own capital stock; provided it shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital except as otherwise permitted by law, and provided further that shares of its own capital stock belonging to it shall not be voted upon directly or indirectly.
To operate a private trade school and business school in the State of Michigan after obtaining the necessary license for such operation for the instruction of students in various office skills, including, but not by way of limitation, instruction in the use of various office equipment and machines.
To have one or more offices, to carry on all or any of its operations and business and without restriction or limit as to amount to purchase or otherwise acquire, hold, own, mortgage, sell, convey, or otherwise dispose of real and personal property of every class and description in any of the States, Districts, Territories or Colonies of the United States, and in any and all foreign countries, subject to the laws of such State, District, Territory, Colony or Country.
In general, to carry on any other business in connection with the foregoing, and to have and exercise all the powers conferred by the laws of Delaware upon corporations formedunder the General Corporation Law of the State of Delaware, JRand to do any or all of the things hereinbefore set forth to the same extent as natural persons might or could do.
The objects and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in nowise limited or restricted by reference to, or inference from, the terms of any other clause in this certificate of incorporation, but the objects and purposes specified in each of the foregoing clauses of this article shall be regarded as independent objects and purposes.
FOURTH:
Division A
The total number of shares of stock which the corporation shall have authority to issue is 110,000,000 shares, the par value of each of the shares is $1.00,amounting in the aggregate to $110,000,000, and the shares are divided into two classes consisting of 100,000,000 shares of Class A Common Stock and 10,000,000 shares of Class B Common Stock.
Division B
The designations, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions in respect of the shares of each class are as follows:
(a)Dividends. Holders of the Class A Common Stock and the Class B Common Stock shall be entitled to receive dividends, out of funds legally available therefor, when and as declared by the Board of Directors, subject only to the limitations that (1) no cash dividend payable on the shares of the Class B Common Stock shall be declared unless the Board of Directors shall concurrently declare a cash dividend on the shares of the Class A Common Stock at a rate which is not less than the rate of the cash dividend payable on the shares of the Class B Common Stock (but a cash dividend may be declared on the Class A Common Stock without declaring a cash dividend on the Class B Common Stock), and (2) no dividend payable in shares of the Class B Common Stock shall be declared on the Class A Common Stock (but a dividend payable in shares of Class A Common Stock may be declared on the Class A Common Stock or the Class B Common Stock and a dividend payable in shares of Class B Common Stock may be declared on the Class B Common Stock).
(b)Voting Rights. Except on matters where their vote is required by Delaware law, the holders of the Class A Common Stock shall not be entitled to vote on any matter coming before any meeting of stockholders. The holders of the Class B Common Stock shall be entitled to one vote per share upon each matter coming before any meeting of stockholders.
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Annex A
(c)Conversion of Class B Common Stock.
1. Shares of Class B Common Stock shall be convertible, at the option of the respective holders thereof, at any time, into fully paid and non-assessable shares of Class A Common Stock on the basis of one share of Class A Common Stock for each share of Class B Common Stock.
2. No payment or adjustment with respect to dividends on shares of the Class A Common Stock or on the Class B Common Stock shall be made in connection with any conversion of shares of Class B Common Stock into shares of Class A Common Stock.
3. The holders of a certificate or certificates for Class B Common Stock, in order to effect the conversion of shares represented thereby, shall surrender the certificate or certificates to the corporation or to the Transfer Agent for the shares of the Class B Common Stock, with request for conversion. If the shares of the Class A Common Stock issuable upon conversion are to be issued in a name other than that in which the shares of the Class B Common Stock to be converted are registered, the certificate or certificates shall be duly endorsed for transfer or accompanied by a duly executed stock transfer power, and shall also be accompanied by the necessary stock transfer stamps or equivalent funds.
Upon surrender of the certificate or certificates, the corporation shall issue and deliver or cause to be issued and delivered to the person entitled thereto a certificate or certificates for the number of full shares of the Class A Common Stock issuable upon conversion. The corporation shall pay all original issue taxes, if any, payable upon the issue of shares of the Class A Common Stock issued upon any conversion.
The conversion shall be deemed to have been effected on the date of the surrender of the certificate or certificates of shares of the Class B Common Stock, and the person in whose name the certificate or certificates of the shares of the Class A Common Stock issuable upon conversion are to be issued shall be deemed to be the holder of record of the shares as of that date.
4. If there should be any capital reorganization or any reclassification of the Class A Common Stock, the shares of the Class B Common Stock shall thereafter have the right to be converted into the number of shares of stock or other securities or property of the corporation to which outstanding shares of the Class A Common Stock would have been entitled upon the effective date of the reorganization or reclassification. The Board of Directors shall make an appropriate adjustment in the application of the provisions of this paragraph (c) with respect to the conversion rights of the holders of the shares of the Class B Common Stock after the reorganization or reclassification, to the end that the provisions shall be applicable, as nearly as reasonably may be, in respect to any shares or other securities or property thereafter issuable or deliverable upon the conversion of shares of the Class B Common Stock. The provisions of this sub-paragraph shall not apply to a reorganization or reclassification involving merely a subdivision or combination of outstanding shares of the Class A Common Stock.
5. In case the corporation shall be consolidated with or merged into any other corporation or shall sell or transfer its property and business as or substantially as an entirety, then the stock or other securities or other property, including cash, issuable or deliverable in connection with such consolidation, merger or sale in respect of each share of the Class A Common Stock then outstanding, shall thereafter, for the purposes of the conversion rights of the Class B Common Stock, be deemed the equivalent of one share of Class A Common Stock. Upon the exercise of conversion rights, holders of Class B Common Stock shall be entitled to receive on an equivalent basis and at the same rate and on the other terms and conditions set forth in this paragraph (c), the stock or other securities or property, including cash, deemed to be the equivalent of Class A Common Stock. Lawful provisions to this effect shall be made a part of and condition to the consolidation, merger or sale.
6. In case the corporation shall propose (i) to effect any reclassification of the Class A Common Stock or any capital reorganization involving a change in the Class A Common Stock, other than a reclassification or reorganization involving merely a subdivision or combination of outstanding shares of the Class A Common Stock, or (ii) to consolidate with or merge into another corporation, or to sell or transfer its property and business as or substantially as an entirety, then, in each such case, the corporation shall file with each Transfer Agent for the shares of the Class B Common Stock and shall mail to the holders of record of the shares at their respective addresses then appearing on the records of the corporation a statement, signed by an officer of the corporation, with respect to the proposed action, the statement to be so filed and mailed at least 30 days prior to the record date for holders of the Class A Common Stock for the purposes thereof. The statement shall set forth such facts with respect to the proposed action as shall be reasonably necessary to inform each Transfer Agent for the shares of the Class B Common Stock and the holders of those shares as to the effect of the action upon the conversion rights of the holders.
7. The corporation shall at all times have authorized but unissued, or in its treasury, a number of shares of the Class A Common Stock sufficient for the conversion of all shares of the Class B Common Stock from time to time outstanding.
8. In case the shares of the Class A Common Stock or the Class B Common Stock at any time outstanding shall, by reclassification or otherwise, be subdivided into a greater number of shares or combined into a lesser number of shares, the shares of Class B Common Stock or Class A Common Stock, respectively, then outstanding shall, at the same time, be subdivided or combined, as the case may be, on the same basis.
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Annex A
(d)Preemptive Rights. Holders of the Class A Common Stock shall have no preemptive right to subscribe to any securities issued by the corporation. Holders of the Class B Common Stock shall have the preemptive right to subscribe to additional shares of Class B Common Stock, or any other voting stock or any security convertible into Class B Common Stock or other voting stock, hereafter issued by the corporation.
(e)Liquidation Preferences.
1. In the event of dissolution, liquidation or winding up of the corporation, whether voluntary or involuntary, holders of the Class A Common Stock and of the Class B Common Stock shall be entitled to payment out of the assets of the corporation ratably in accordance with the number of shares held by them respectively.
2. Neither a consolidation nor a merger of the corporation with or into any other corporation, nor a merger of any other corporation into the corporation, nor the purchase or other acquisition by the corporation of all or a part of the outstanding shares of any class or classes of its stock, nor the sale or transfer of the property and business of the corporation, as or substantially as an entirety, shall be considered a dissolution, liquidation or winding up of the corporation within the meaning of the foregoing provisions.
FIFTH: The business, property and affairs of this corporation shall be managed by a Board of Directors consisting of no fewer than five (5) and no more than eleven (11) members, the exact number to be determined from time to time by resolution of the Board of Directors.Effective atAt each annual meeting of the stockholders of the corporation from and after the annual meeting to be held in 2010, all director nominees shall stand for election to terms expiring at the next succeeding annual meeting, with each director to hold office until his successor is duly elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Theterm of each director serving as of and immediately prior to the annual meeting of the stockholders of the corporation to be held in 2010 shall expire as of the date of such annual meeting, notwithstanding that such director may have been elected for a term that extended beyond the date of such annual meeting. TheBoard of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by theCcertificate ofIincorporation or by the by-lawsof the corporation (the “Bylaws”) directed or required to be exercised or done by the stockholders.
Newly created directorships resulting from any increase in the authorized number of directors and vacancies in the Board of Directors from death, resignation, retirement, disqualification, removal from office or othercause, shallreason, may only be filled by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the next annual meeting of the stockholders of the corporation and until their successors are duly elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Any director, or the entire Board of Directors, may be removed at any time, with or without cause. The affirmative vote of the holders of a majority of the voting power of all of the stock of this corporation entitled to vote in elections of directors shall be required to remove a director from office. The stockholders of the corporation are expressly prohibited from cumulating their votes in any election of directors of the corporation.
SIXTH: The names and places of residence of the incorporators were as follows:
SIXTH: Unless and except to the extent that the Bylaws shall so require, the election of directors of the corporation need not be by written ballot.
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Annex A
SEVENTH: By-laws of the corporation may be adopted, amended or repealed by the affirmative vote of a majority of the total number of directors or by the affirmative vote of the holders of a majority of the voting power of all of the stock of this corporation entitled to vote in elections of directors. Theby-lawsBylaws may contain any provision for the regulation and management of the affairs of the corporation and the rights or powers of its stockholders, directors, officers, or employees not inconsistent with the laws of the State of Delaware or this certificate of incorporation.
DONALD R. PARFETEIGHTH:
In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized:
To fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed mortgages and liens upon the real and personal property of this corporation.
From time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of this corporation (other than the stock ledger), or any of them, shall be open to inspection of stockholders; and no stockholder shall have any right of inspecting any account, book or document of this corporation except as conferred by statute, unless authorized by a resolution of the stockholders or directors.
By resolution or resolutions, passed by a majority of the whole board to designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in said resolution or resolutions, or in the by-laws of this corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of this corporation, and may have power to authorize the seal of this corporation to be affixed to all papers which may require it. The committee or committees shall have the name or names as may be stated in the by-laws of this corporation or as may be determined from time to time by resolution adopted by the Board of Directors.
This corporation may in its by-laws confer powers upon its directors in addition to the foregoing, and in addition to the powers and authorities expressly conferred upon them by the statute.
Both stockholders and directors shall have power, if the by-laws so provide, to hold their meetings, and to have one or more offices within or without the State of Delaware, and to keep the books of this corporation (subject to the provisions of the statutes), outside of the State of Delaware at such places as may be from time to time designated by the Board of Directors.
NINTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said Court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the Court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation.
TENTH: The Board of Directors of this corporation, when evaluating any offer of another party to (a) make a tender or exchangeoffer for any equity security of this corporation; (b) merge or consolidate this corporation with another corporation; or (c) purchase or otherwise acquire all or substantially all of the properties and assets of this corporation, shall, in connection with the exercise of its judgment in determining what is in the best interest of this corporation and its stockholders, give due consideration to such factors as the Board of Directors determines to be relevant, including without limitation, the social, legal and economic effects of the proposed transaction upon employees, customers, suppliers, and other affected persons, firms and corporations and on the communities in which this corporation and its subsidiaries operate or are located.
ELEVENTHEIGHTH: No action required or permitted to be taken at any annual or special meeting of the stockholders of this corporation may be taken without a meeting and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied.
TWELFTHNINTH: No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty by such director as a director; provided, however, that this ArticleTWELFTHNINTH shall not eliminate or limit liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. No amendment or repeal of this ArticleTWELFTHNINTH shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.
THIRTEENTHTENTH: Special meetings of the stockholders of this corporation for any purpose or purposes may be called at any time by the Board of Directors or by a committee of the Board of Directors which has been duly designated by the Board of Directors and whose powers and authority, as provided in a resolution of the Board of Directors or in theby-laws of this corporationBylaws, include the power to call such meetings, but such special meetings may not be called by any other person or persons.
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Annex A
FOURTEENTHELEVENTH:This corporation reserves the right to amend, alter, change or repeal any provision contained in this Ccertificate of Iincorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
[Signature Page Follows]
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IN WITNESS WHEREOF, Kelly Services, Inc. has caused thisAmended and Restated Certificate of Incorporation to be signed byDaniel T. Lis, its Senior Vice President and Corporate Secretary this 5th , its this day of May, 20092018.
KELLY SERVICES, INC. | ||
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q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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2. | Non-binding advisory vote on executive compensation. | ¨ | ¨ | ¨ | 3. | Ratification of PricewaterhouseCoopers LLP as independent accountants for the 2016 fiscal year. | ¨ | ¨ | ¨ | |||||||||
4. | Transacting any other business as may properly come before the meeting or any postponement or adjournments thereof. |
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NOTE: Pleasesignasnameappearshereon.Jointownersshould eachsign.When signingasattorney,executor,administrator,trustee orguardian,pleasegivefulltitleassuch.
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029LFA
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders.
The Proxy Statement and the 2015 Annual Report to stockholders are available at:
www.edocumentview.com/kelyb
q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
Proxy — Kelly Services, Inc.
999 West Big Beaver Road
Annual Meeting of Stockholders - May 11, 2016
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby names, constitutes and appoints George S. Corona and Peter W. Quigley, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Kelly Services, Inc. Class B Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the Company to be held May 11, 2016 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE PROPOSALS.
(Continued to be marked, dated and signed, on the other side.)
Electronic Voting Instructions
Available 24 hours a day, 7 days a week.
Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. | ||||||||||
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. | ||||||||||
Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Central Time, on May | ||||||||||
Vote by Internet | ||||||||||
• Go to www.envisionreports.com/kelyb | ||||||||||
• Or scan the QR code with your smartphone | ||||||||||
• Follow the steps outlined on the secure website | ||||||||||
Vote by telephone | ||||||||||
• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
• Follow the instructions provided by the recorded message | ||||||||||
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. |
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
A | Proposals |
1. |
Election of directors of the Company, to serve for one-year terms expiring |
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For | Withhold | For | Withhold | For | Withhold | |||||||||||||||||||||||
01 - T.E. Adderley |
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| 02 - C.M. Adderley |
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| 03 - |
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04 - | 05 - | 06 - | ||||||||||||||||||||||||||
07 - | 08 - L.A. Murphy | 09 - D.R. Parfet | ||||||||||||||||||||||||||
10 - H. Takahashi |
For | Against | Abstain | For | Against | Abstain | |||||||||||||
2. | Non-binding advisory vote on executive compensation. | ¨ | ¨ | ¨ | 3. | Ratification of PricewaterhouseCoopers LLP as independent accountants for the 2016 fiscal year. | ¨ | ¨ | ¨ | |||||||||
4. |
Transacting any other business as may properly come before the meeting or any postponement or adjournments thereof. |
For | Against | Abstain | For | Against | Abstain | |||||||||||||||
2. | Non-binding advisory vote on executive compensation. | ☐ | ☐ | ☐ | 4. | Amending the Company’s Amended and Restated Bylaws to designate the Delaware Chancery Court as the exclusive forum for certain legal actions.
| ☐ | ☐ | ☐ | |||||||||||
3. | Amendment and restatement of the Company’s Restated Certificate of Incorporation to eliminate certain obsolete provisions, to eliminate a “Stakeholder provision” that could conflict with Delaware law, and to make additional revisions in the interest of modernization.
| ☐ | ☐ | ☐ | 5. | Ratification of PricewaterhouseCoopers LLP as independent accountants for the 2018 fiscal year. | ☐ | ☐ | ☐ | |||||||||||
6. | Transacting any other business as may properly come before the Meeting or any postponement or adjournments thereof. |
B | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. |
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IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
029LEA
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders.
The Proxy Statement and the 20152017 Annual Report to stockholders are available at:
www.envisionreports.com/kelyb
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Proxy — Kelly Services, Inc.
999 West Big Beaver Road
Annual Meeting of Stockholders - May 11, 20169, 2018
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby names, constitutes and appoints George S. Corona and Peter W. Quigley and Olivier G. Thirot, and each of them, with power to act without the other and with power of substitution, as proxies andattorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Kelly Services, Inc. Class B Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the Company to be held May 11, 20169, 2018 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE PROPOSALS.
(Continued to be marked, dated and signed, on the other side.)
C | Non-Voting Items |
Change of Address— Please print new address below. | Comments— Please print your comments below. | |||
IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. | + |