•is responsible for assisting the Board with Chief Executive Officer and other management succession issues and planning;
•reviews, as appropriate, compensation and benefits plans affecting employees in addition to those applicable to the Company’s executive officers; and
•reviews the compensation of directors for service on the Board and its committees and recommendrecommends changes in compensation to the Board.
Board;•oversees the assessment of the risks related to the Company’s compensation policies and programs applicable to officers and employees, and reviews the results of this assessment;
•oversees the administration and enforcement of the Company’s compensation recovery policy;
•at least annually assesses whether the work of compensation consultants involved in determining or recommending executive or director compensation has raised any conflict of interest that is required to be disclosed in the Company’s annual report and proxy statement; and
•oversees or participates in the Company’s engagement efforts with shareholders on the subject of executive compensation.
In addition, the Compensation Committee annually evaluates the performance of the Compensation Committee and assesses the adequacy of its written charter. Additional information regarding the Compensation Committee’s responsibilities can be found under the section entitled “Executive Officer Compensation,” below.
Nominating and Corporate Governance Committee.The Nominating and Corporate Governance Committee: •identifies and recommends to the Board individuals who are qualified to serve on the Board and who should stand for election at each annual meeting of shareholders;
•develops and recommends to the Board standards to be used in assessing director independence;
•oversees the Company’s corporate governance matters and policies, including the Company’s Corporate Governance Guidelines;
•oversees the annual evaluation and assessment of the Board and its committees;
•reviews the leadership structure of the Board and recommends changes to the Board as appropriate;
•makes recommendations to the Board concerning the structure, composition and functioning of the Board and its committees; and
•recommends candidates to the Board for appointment to its committees.
committees; and•reviews related person transactions and adopts policies and procedures for the review, approval and ratification of related person transactions.
In addition, the Nominating and Corporate Governance Committee annually evaluates the performance of the Nominating and Corporate Governance Committee and assesses the adequacy of its written charter. Additional information regarding the Nominating and Corporate Governance Committee’s responsibilities can be found under the sections entitled “— Director Qualifications,” “— Identification of Potential Director Candidates,” “— Nomination Process” and “— Annual Board and Committee Assessment and Evaluation,” above.
Meetings and Director Attendance During
2017,2023, the Board met
ninefive times, and the independent directors met in executive session at four of those meetings and determined that there was no need to meet in executive session at the other
meetings;meeting; the Audit Committee met
nineseven times; the Compensation Committee met
sixfive times; and the Nominating and Corporate Governance Committee met
fourfive times. In addition to meetings, the members of the Board and its committees sometimes take action by written consent in lieu of a meeting
which is permitted under Delaware corporate law, or discuss Company business without calling a formal meeting.
During 2017,2023, all of the Company’s directors attended in excessexcess of 75% of the aggregate number of meetings of the Board and of its committees held during the time that such director served on which they served.the Board or such committee. All of the directors standing forre-election are expected to attend the annual meetings of shareholders, and all suchshareholders. All of the Company’s directors who were serving on the Board at such time attended the 20172023 annual meeting of shareholders.
Communications with the Board Shareholders and other interested parties may contact the Board ChairmanChairperson or thenon-management directors as a group bye-mail e-mail at:non-managementdirectors@callawaygolf.com,or by mailmail to: Board of Directors, Topgolf Callaway Golf Company,Brands Corp., 2180 Rutherford Road, Carlsbad, California 92008. The Company’s Corporate Secretary’s office reviews all incoming communications and filters out solicitations and junk mail. All legitimatenon-solicitation andnon-junk mail communications are distributed to thenon-management directors or handled as appropriate as directed by the Board Chairman.Chairperson.
The Board has adopted a Code of Conduct that applies to all of the Company’s employees, including its senior financial and executive officers, as well as the Company’s directors. The Code of Conduct covers the basic standards of conduct applicable to all directors, officers and employees of the Company, as well as the Company’s Conflicts of Interest and Ethics Policy and other specific compliance standards and related matters. The Company will promptly disclose any waivers of certain provisions of our Code of Conduct, or amendments to any provision of the Code of Conductsuch provisions, that apply to the Company’s directors and senior financial and executive officers on its website atwww.callawaygolf.com.www.topgolfcallawaybrands.com. The Code of Conduct is available on the Company’s website at www.callawaygolf.com www.topgolfcallawaybrands.com under Investor RelationsInvestors — Code of Conduct.Corporate Governance. Upon request, the Company will provide to any person without charge a copy of the Code of Conduct. Any such request may be made by contacting the Company’s Investor Relations
department by telephone at
(760) 931-1771 or by mail at
Topgolf Callaway
Golf Company,Brands Corp., Attention: Investor Relations, 2180 Rutherford Road, Carlsbad, California 92008.
Sustainability Program
In 2019, the Company, at the direction of its Chief Executive Officer with oversight from the Board of Directors, formally launched the Global Sustainability Program. The goal of this program is to bring increased awareness and structure to the Company’s existing social and environmental sustainability initiatives, while also enhancing the sustainability efforts across its global businesses. In connection with launching the Global Sustainability Program, the Company established an Executive Sustainability Committee comprised of its Chief Executive Officer, Chief Financial Officer, and all other executive officers. A Sustainability Core Team meets and then reports progress of the Global Sustainability Program quarterly to the Executive Sustainability Committee. Members of the Sustainability Core Team, known as Sustainability Champions, are employees who have been selected from throughout the organization to drive large-scale global projects that build upon the Company’s existing environmental and social sustainability efforts. Sustainability Champions also promote smaller-scale employee-driven initiatives at the local levels. These projects and initiatives are benchmarked against the sustainability frameworks published by the Global Reporting Initiative ("GRI") and the Sustainability Accounting Standards Board ("SASB") with respect to sustainability issues that are likely to affect the financial conditions or operating performances of companies in the consumer goods, apparel and entertainment sectors.
The Company’s entire Board of Directors oversees the Global Sustainability Program and receives a comprehensive report regarding the program’s initiatives and progress on an annual basis. Additionally, a quarterly update is provided to the Board’s Nominating and Corporate Governance Committee on the Company’s latest third-party performance scores on ESG topics to maintain a consistent pulse on the Company’s ESG performance.
The Global Sustainability Program has played an integral role in assessing the Company’s material ESG concerns and developing the Company’s sustainability strategy and goals. This strategy includes a sustainability strategy framework that categorizes the Company’s sustainability efforts into four pillars: People, Planet, Product, and Procurement. The Global Sustainability Program has also introduced a variety of new initiatives across the Company, including: establishing a quarterly internal sustainability newsletter; enhancing sustainability content on the Company’s website; and engaging employees globally to devise new sustainability action plans for the Company’s various brands and workspaces. In March 2022, the Company published its inaugural Sustainability Report for the year ended December 31, 2021, which is available on its website at www.topgolfcallawaybrands.com under Sustainability, and is committed to publishing a bi-annual report to continue promoting transparency regarding its future sustainability efforts, including a report covering data for the years ended December 31, 2022 and 2023 in 2024. The Company’s sustainability report references and aligns with reporting frameworks, including GRI and the Taskforce on Climate-Related Disclosures (“TCFD”). In addition, the Company intends to publish an updated ESG data table on its website each year.
Environmental Responsibility
The Company is committed to conducting its business in a sustainable manner and maintains policies and procedures that establish the foundation of its environmental responsibility program. The Company is committed to empowering employees and suppliers at all levels to promote safe and environmentally responsible practices. In this regard, the Company prioritizes two topics, product design and innovation and climate change, and focuses on initiatives such as a reduction of hazardous waste, sustainable packaging improvements, implementation of energy efficiency projects in collaboration with local utilities/landlords, increasing the use of renewable energy and ESG data collection processes to increase transparency and tracking of key environmental metrics. A few recent highlights in the Product and Planet pillars include:
Product:
•The Callaway Golf business continues to reduce the use of polybags in our packaging, including a reduction in packaging single custom clubs with polybags;
•Callaway Golf introduced the 2024 Chrome Series golf balls, featuring recyclable packaging;
•TravisMathew introduced 138 SKUs using sustainable fabrics in spring/summer 2023;
•Jack Wolfskin’s skitouring Alpspitze Tour 3L jacket, featuring sustainable fabric technologies and specific ski touring features, won an ISPO Award in 2023. The IPSO Award is the gold standard in the outdoor industry for technical and sustainably conscious product design; and
•Toptracer implemented plastic-free packaging for its cameras.
Planet:
•Callaway Golf Japan launched the “Forest for the future: Co-creation project” to promote diverse forest creation by involving and educating the younger generation in environmental conservation efforts;
•Callaway Golf increased the share of renewable energy in its Carlsbad headquarters to 60% in 2023 by purchasing utility renewable energy certificates; and
•Jack Wolfskin locations in Germany, Austria and Switzerland have converted to green electricity.
Social Responsibility
The Company seeks to focus on social issues important to its employees, shareholders and customers, which include raising awareness with employees and within the Company’s supply chain about how the Company and its employees can make the right decisions on issues like product safety and work environments affecting those who help the Company make its products. In alignment with this commitment, the Company prioritizes initiatives aimed at improving diversity, equity and inclusion, as well as employee attraction and retention. In addition, the Company focuses on initiatives such as implementing health and safety policies and procedures, maintaining product safety and quality and upholding responsible procurement practices. A few recent highlights in the social pillars of People and Procurement include:
People:
•The Board completed a pay equity analysis for the Callaway Golf (U.S.) business in 2023 as part of an annual review program to review pay equity in each of three areas of the Company every three years;
•In celebration of Pride Month, the Company hosted an "Exploring Pronouns" seminar. Additionally, Topgolf held a Topgolf-internal tournament across all its locations, displaying unity, diversity, and acceptance across the board;
•The Company continues to invest in its employees by providing leadership training opportunities, including an Operations Management Academy, Emerging Leaders Program and Six Critical Practices program; and
•The Company continues to give back to its communities through the Callaway Golf Company Foundation, Callaway Community Giving Program, Topgolf Driving for Good Platform, as well as a number of local community engagement initiatives led by its subsidiaries.
Procurement:
•Callaway Golf audited certain suppliers with respect to social compliance and environmental criteria; and
•The Company ensured restricted substance list compliance of supplier products through vigorous testing of products throughout the supply chain.
For more information regarding the Company’s efforts, see the Sustainability Report for the year ended December 31, 2021 and ESG Data Table for the year ended December 31, 2022 on its website at www.topgolfcallawaybrands.com under Sustainability.
Stock Ownership Guidelines In order to promote ownership of the Common Stock by the Company’s
non-management directors and executive officers and thereby more closely align their interests with the interests of the Company’s shareholders, the Board has adopted stock ownership guidelines requiring the Company’s
non-management non-employee directors and executive officers to own Common Stock interests with a value equal to at least the following minimum amounts:
| | | | | | | | | | | |
| Chief Executive Officer | | 3x5x Base Salary | |
| Other Executive Officers | | 1x2x Base Salary | |
| Non-Employee Directors | 5x Annual Retainer | | 3x Annual Base Cash Compensation
The minimum share ownership amounts are required to be achieved within five years of an individual first becoming subject to these guidelines. All shares for which a director or an executive officer is deemed to be the beneficial owner under Section 16 of the Exchange Act, including shares held in a living trust for the individual’s benefit of the individual or a member of the director or executive officer’s family, count toward this ownership requirement. Additionally, for those directors who are employed by or otherwise affiliated with a shareholder of the Company, shares owned by such affiliated entity count towards this ownership requirement in the discretion of the Compensation Committee. Restricted stock and service-based restricted stock unit awards held by the director or executive count toward the holding requirements. Performance-based restricted stock units do not count toward
this ownership requirement unless and until the performance criteria are satisfied. Stock options, stock appreciation rights, and phantom stock units do not count toward this ownership requirement unless and until any underlying shares are issued. Unless a
non-management non-employee director or executive officer is in compliance with these guidelines,
hethe director or
sheexecutive officer is required to retain and hold 50% of any “net shares” of Common Stock issued in connection with any equity-based awards granted under the Company’s compensation plans after such
non-management non-employee director or executive officer first becomes subject to these guidelines. “Net shares” are those shares that remain after shares are sold or withheld (i) to pay the exercise price and withholding taxes in the case of stock options or (ii) to pay withholding taxes in the case of other awards. Compliance with these guidelines is assessed on an annual
basis.basis by the Compensation Committee. At the time compliance was assessed in
2017,2023, all directors and executive officers attained the minimum ownership
levels.levels or were otherwise in compliance with the Company’s stock ownership guidelines.
Insider Trading Policy
The Company maintains an insider trading policy applicable to all of our directors, officers and employees, their family members and controlled entities, and specially designated outsiders who have access to the Company’s material non-public information. This policy includes restrictions on the timing of transactions involving shares of the Company’s common stock and requires pre-approval of transactions in the shares of the Company’s common stock for directors, executive officers and certain other employees. Additionally, transactions in the Company’s common stock are generally subject to Company trading windows and blackout windows.
Policy on Speculative Trading Activities — Anti-Hedging and Pledging Policy The Company’s insider trading policy provides, among other things, that directors, officers and other employees may not engage in certain types of speculative activities with respect to the Company’s securities, including short sales, transactions in put options, call options or other derivative securities, hedging transactions, pledging of Company stock as collateral for a loan, or holding shares of Company stock in a margin account.
Compensation Committee Interlocks and Insider Participation In 2017,2023, the Company’s executive officer compensation matters were handled by the Compensation Committee. The Company’s Compensation Committee which was during 2017 and is currently comprised of the following directors: Mses. Flanagan, Rao and Segre (Chair) and Messrs. Fleischer and Lundgren. Messrs. Armacost Beard, Cushman, Lundgren and Ms. Segre. Richard L. Rosenfield also served as a memberBaxter were members of the Compensation Committee during 2017 until his retirement from2023, but did not stand for re-election at the Board2023 annual meeting of shareholders and ceased to be members of the Compensation Committee at that time. Mr. Fleischer was appointed to the Compensation Committee in May 2017.June 2023. During the times of theirtheir committee service during 2017,2023, all of such members were determined to be independent and there were no compensation committee interlocks.
Shareholder Engagement
The Company believes regular, proactive communications with its shareholders to be in its long-term best interests. These investor communications and outreach have included, among other things, investor day meetings, quarterly conference calls, investor conferences and analyst meetings and calls throughout the year at the request of investors. These meetings provide a forum to engage with shareholders on topics including, among other things, strategy, financial performance, compensation, environmental, social and corporate governance matters and risk management.
At the Company’s annual meeting of shareholders in June 2023, more than 97% of the votes cast were in favor of the say-on-pay proposal. Notwithstanding the shareholders’ overwhelming support of the Company’s compensation programs in the 2023 say-on-pay proposal, throughout 2023 and early 2024, the Company undertook a shareholder outreach campaign with shareholders holding over 50% of the Company’s outstanding shares. Of this group, holders of nearly 35% of the outstanding shares elected to meet with the Company. The Chairman of our Board of Directors and the Company’s CEO and CFO participated in certain of these meetings, as well as representatives from the Company’s investor relations, finance and legal teams. In these meetings, the Company received valuable feedback on, among other things, shareholders’ views on its executive compensation program and suggestions for improved governance practices. During these meetings, we heard from shareholders that they were generally supportive of the design of our executive compensation program. In addition, shareholders encouraged us to adopt a right for shareholders to call a special meeting of shareholders. Accordingly, on June 6, 2023, the Board amended and restated the Company’s bylaws to, among other things, grant shareholders meeting certain criteria the right to call a special meeting of shareholders.
Directors who are not also Company employees are compensated for their service on the Board and its committees with a mix of cash and equity-based compensation. Directors are also reimbursed for their travel expenses incurred in connection with their duties, and receive other benefits,
such as
the right to use, and the right to purchase at a discount, the Company’s products. As discussed above, thedescribed below. The Compensation Committee periodically reviews the compensation and benefits the directors receive from the Company for service on the Board and on Board committees and recommends changes to the Board.
In 2016, the Compensation Committee, with the assistance and counsel of its outside compensation consultant, Mercer LLC, undertook a review of director compensation, which had not been materially changed since 2006. This review included consultation with its independent compensation consultant, Mercer, and a review of various benchmark data. Following such review, the Compensation Committee recommended, and the Board approved, changes to the Company’s compensation program for directors (which changes became effective January 1, 2017). The new director compensation program increased the annual base compensation fornon-employee directors from $45,000 to $75,000 and eliminated the additional daily cash compensation for attendance at Board and Board committee meetings. The Board also increased the equity portion of director compensation to $100,000 in 2017 as compared to the annual $50,000 level that had been in place since 2006.Mr. Brewer, as the Company’s President and Chief Executive Officer, does not receive any additional cash or equity-based compensation for serving on the Board.
In determining the reasonableness of the Company’s director compensation, the Compensation Committee periodically consults with, and reviews market data provided by, its independent compensation consultant. The primary source of the market data is the same group of companies that are used for executive compensation determination purposes (the “Compensation Comparison Group”). We do not target a specific level of director compensation relative to the market reference information, but rather use such information, along with information on broader trends and practices, to help guide our decisions related to our director compensation program. In 2023, the Compensation Committee elected not to change director compensation levels from 2022.
Cash Compensation. During 2017,non-employeeNon-employee directors were paid an annual base cash compensation of $75,000.$100,000 and the Board Chairman was paid an additional annual $50,000 cash retainer. Non-employee directors who serve as chairs of Board committees are paid an additional annual retainer fee. The Chair of the Audit Committee is paid $15,000; the Chair of the Compensation Committee is paid $12,500; the Chair of the Nominating and Corporate Governance Committee is paid $10,000; and$10,000.
Members of our Board may elect to receive their cash retainers in the Board Chairmanform of fully vested shares of our Common Stock, which shares are issued on the 15th day of the last calendar month of each calendar quarter.The number of shares issued is equal to (1) the cash retainers to be paid an additional annual $40,000 cash retainer.in the form of shares, divided by (2) the closing price per share on the 15
th day of the last calendar month of each calendar quarter (or if such day is not a trading day, on the immediately preceding trading day). These shares are issued under the Company’s 2022 Incentive Plan. Equity-Based Compensation. Upon the initial election or appointment of a new director and for each year of continuing service on the Board, anon-employee director is granted restricted stock units generally (but may be granted stock options, restricted stock, restricted stock units, phantom stock units or a combination thereof, as permitted under the Company’s 2022 Incentive Plan) with an aggregate grant date fair value of approximately $125,000 (which may be prorated as determined by the Board) as the long-term incentive portion of director compensation. Such equity-based awards are made as of the date of appointment orre-election in the form and amount as determined by the Board on the recommendation of the Compensation Committee.Committee and are based on the average closing price of the Common Stock for the 20-trading days immediately preceding the grant date. The awards generally vest on the first anniversary of the grant date. The value and the number of equity awards granted to the directors in 20172023 are reported in the table below.
Other Benefits. The Company has a policy that thenon-employee directors should promote the Company’s products by using the Company’s current products whenever they play golf. To assist them in complying with this policy,non-employee directors are entitled to receive a limited amount of the Company’s golf club and golf ball products, free of charge, for their own personal use and the use of immediate family members residing in their households.Non-employee directors also receive a limited amount of other products (e.g., apparel and other accessories) free of charge and the right to purchase a limited amount of additional golf clubs, balls and accessories at a discount that is not material in amount.discount. The aggregate value of this personal benefit did not exceed $10,000 for any director in 20172023 and is therefore not required to be reported in the table below.
Director Compensation in Fiscal Year
20172023
The following table summarizes the compensation of the Company’s
non-employee directors for fiscal year
2017: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Fees Earned
or Paid in
Cash
($)(1) | | | Stock
Awards
($)(2) | | | Option
Awards
($) | | | Non-Equity
Incentive Plan
Compensation
($) | | | Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($) | | | All Other
Compensation
($) | | | Total
($) | |
Samuel H. Armacost | | $ | 90,000 | | | $ | 100,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 190,000 | |
Ronald S. Beard | | $ | 115,000 | | | $ | 100,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 215,000 | |
John C. Cushman, III | | $ | 75,000 | | | $ | 100,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 175,000 | |
John F. Lundgren | | $ | 87,500 | | | $ | 100,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 187,500 | |
Adebayo O. Ogunlesi | | $ | 85,000 | | | $ | 100,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 185,000 | |
Richard L. Rosenfield(3) | | $ | 25,343 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 25,343 | |
Linda B. Segre | | $ | 75,000 | | | $ | 100,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 175,000 | |
Anthony S. Thornley | | $ | 75,000 | | | $ | 100,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 175,000 | |
2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| 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 ($) |
| Erik J Anderson | | $ | 100,000 | | | $ | 134,868 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 234,868 | |
Samuel H. Armacost (3) | | $ | 43,132 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 43,132 | |
Scott H. Baxter (3) | | $ | 43,132 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 43,132 | |
Thomas G. Dundon (3)(4) | | $ | 43,132 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 43,132 | |
| Laura J. Flanagan | | $ | 100,000 | | | $ | 134,868 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 234,868 | |
Russell L. Fleischer (5) | | $ | 115,000 | | | $ | 134,868 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 249,868 | |
| Bavan M. Holloway | | $ | 100,000 | | | $ | 134,868 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 234,868 | |
| John F. Lundgren | | $ | 150,000 | | | $ | 134,868 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 284,868 | |
| Scott M. Marimow | | $ | 100,000 | | | $ | 134,868 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 234,868 | |
Adebayo O. Ogunlesi (6) | | $ | 110,000 | | | $ | 134,868 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 244,868 | |
Varsha R. Rao (7) | | $ | 100,000 | | | $ | 134,868 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 234,868 | |
| Linda B. Segre | | $ | 112,500 | | | $ | 134,868 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 247,368 | |
| Anthony S. Thornley | | $ | 100,000 | | | $ | 134,868 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 234,868 | |
C. Matthew Turney(8) | | $ | 50,000 | | | $ | 134,868 | | | $ | — | | $ | — | | $ | — | | | $ | — | | | $ | — | | | $ | 184,868 | |
(1)In addition to the annual $100,000 cash retainer: Mr. BeardLundgren was paid an additional $40,000$50,000 for service as Board Chair.Chairperson; Mr. ArmacostFleischer was paid an additional $15,000 for service as Audit Committee Chair. Mr. LundgrenChair; Ms. Segre was paid an additional $12,500 for service as Compensation Committee Chair.Chair; and Mr. Ogunlesi was paid an additional $10,000 for service as Nominating and Corporate Governance Committee Chair. (2)Represents the aggregate grant date fair value of restricted stock units (“RSUs”) calculated for financial reporting purposes for the year2023 utilizing the provisions of Accounting Standards Codification Topic 718, “Compensation — Stock Compensation” (“ASC 718”). See Note 15, “Share-Based“Stock Plans and Share-Based Compensation,” to the Company’s Audited Consolidated Financial Statements set forth in the Company’s Form10-K for the year ended December 31, 20172023, filed with the SEC on February 29, 2024 (the “2023 Form 10-K”), for information concerning the ASC 718 values, which are based on the fair value of the Common Stock on the date of grant. In 2017,2023, eachnon-employee director who wasre-elected or elected to the Board on the date of our 2023 annual meeting was granted 8,6216,988 RSUs, with a grant date fair value of $100,000 as continuing service awards, which, subject to continued service, generally vest on theone-year anniversary of the grant date. The number of RSUs granted was based on the average closing price of the Common Stock for the 20-trading days immediately preceding the grant date. As of December 31, 2017, each2023, the non-employee director had 8,640 directors listed in the table above held the following RSUs outstanding, including(including accrued share dividend equivalents.(3)equivalents): Mr. Rosenfield retired fromAnderson, 6,988 RSUs; Mr. Armacost, no awards; Mr. Baxter, no awards; Mr. Dundon, no awards; Ms. Flanagan, 6,988 RSUs; Mr. Fleischer, 6,988 RSUs; Ms. Holloway, 6,988 RSUs; Mr. Lundgren, 6,988 RSUs; Mr. Marimow, 6,988 RSUs; Mr. Ogunlesi, 6,988 RSUs; Ms. Rao, 6,988 RSUs; Ms. Segre, 6,988 RSUs; Mr. Thornley, 6,988 RSUs; and Mr. Turney, 6,988 RSUs. As of December 31, 2023, Mr. Anderson also held 155,455 options to purchase shares of our Common Stock, which options the Company assumed in connection with our merger with Topgolf in March 2021.
(3)Mr. Armacost, Mr. Baxter and Mr. Dundon did not stand for re-election to the Board at the 2023 annual meeting.
(4)Mr. Dundon chose to receive $43,132 of retainers earned in May 2017.2023 in the form of fully vested shares of our Common Stock and received an aggregate of 2,085 shares. The amount of the cash retainers that Mr. Dundon elected to receive in the form of shares is reflected in the “Fees Earned or Paid in Cash” column. (5)Mr. Fleischer chose to receive $115,000 of fees earned in 2023 in the form of fully vested shares of our Common Stock and received an aggregate of 6,627 shares. The amount of the cash retainers that Mr. Fleischer elected to receive in the form of shares is reflected in the “Fees Earned or Paid in Cash” column.
(6)Mr. Ogunlesi chose to receive $110,000 of fees earned in 2023 in the form of fully vested shares of our Common Stock and received an aggregate of 6,340 shares. The amount of the cash retainers that Mr. Ogunlesi elected to receive in the form of shares is reflected in the “Fees Earned or Paid in Cash” column.
(7)Ms. Rao chose to receive $100,000 of fees earned in 2023 in the form of fully vested shares of our Common Stock and received an aggregate of 5,763 shares. The amount of the cash retainers that Ms. Rao elected to receive in the form of shares is reflected in the “Fees Earned or Paid in Cash” column.
(8)Mr. Turney was elected to the Board at the 2023 annual meeting.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The terms of all of the Company’s directors expire at the Annual Meeting. The current size of the Company’s Board is 12 members. Pursuant to a Stockholders Agreement, dated as of October 27, 2020 (the “Stockholders Agreement”) entered into in connection with the Company’s merger with Topgolf, each of PEP TG Investments LP (“Providence”), DDFS Partnership LP and Dundon 2009 Gift Trust (together, “Dundon”) and TGP Investors, LLC, TGP Investors II, LLC and TGP Advisors, LLC (together, “WestRiver”), have the right to designate one person (for a total of three persons) to be appointed or nominated, as the case may be, for election to the Board for so long as such shareholder maintains beneficial ownership of 50% or more of the shares of Common Stock owned by them on the closing date of the merger with Topgolf, which occurred on March 8, 2021. Only Providence and Dundon maintain the requisite shares to designate a director. As such, Scott M. Marimow and C. Matthew Turney were appointed to the Board by Providence and Dundon, respectively, pursuant to the terms of the Stockholders Agreement. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the eight current directorstwelve individuals identified in the table below to stand for election at the Annual Meeting to serve until the 20192025 annual meeting of shareholders and until their respective successors are elected and qualified. Each of the nominees currently serves as a director of the Company. | | | | | | | | |
Director Nominee | | Positions with the Company |
Oliver G. (Chip) Brewer III | | Director and President and Chief Executive Officer |
Ronald S. Beard
John F. Lundgren | | ChairmanChairperson of the Board |
Samuel H. Armacost
Erik J Anderson | | DirectorVice Chairperson of the Board |
John C. Cushman, III
Laura J. Flanagan | | Director |
John F. Lundgren
Russell L. Fleischer | | Director |
Bavan M. Holloway | | Director |
| Scott M. Marimow | | Director |
| Adebayo O. Ogunlesi | | Director |
Varsha R. Rao | | Director |
| Linda B. Segre | | Director |
Anthony S. Thornley | | Director |
| C. Matthew Turney | | Director |
Each director nominee has consented to being named in this Proxy Statement as a nominee and has agreed to serve as a director if elected. If any one or more of such nominees should for any reason become unavailable for election, the persons named in the accompanying form of proxy may vote for the election of such substitute nominees as the Board may propose. The accompanying form of proxy contains a discretionary grant of authority with respect to this matter. There is no family relationship between any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer.
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| Oliver G. (Chip) Brewer III | | Director and President and Chief Executive Officer |
Director Since: Since: 2012
Board Committees: Committees: None | | Since 2012, Mr. Brewer has served as the Company’s President and Chief Executive Officer and as a member of the Board. He hashad also, since 2012, served as a Director of Topgolf International, Inc., in whichuntil the Company has a minority ownership interest. Additionally, Mr. Brewer currently servescompletion of the Company’s merger with Topgolf on the National Golf Foundation’s Board.March 8, 2021. From January 2002 to February 2012, Mr. Brewer served as the President and Chief Executive Officer and as a member of the board of Adams Golf, Inc. He was President and Chief Operating Officer of Adams Golf from August 2000 to January 2002 and served as its Senior Vice President of Sales and Marketing from September 1998 to August 2000. Mr. Brewer is a graduate of William and Mary College and received his MBA from Harvard Business School in 1991. Specific Qualifications, Attributes, Skills & Experience Mr. Brewer is highly qualified, and was renominated, to serve on the Board, among other reasons, because the Board believes it is important to have the Company’s Chief Executive Officer serve on the Board as he is the one closest to the Company’s day-to-day operations. In addition, Mr. Brewer has extensive experience in the golf industry, public golf company board and executive officer experience, and has functional expertise in finance, human resources, and manufacturing, international business matters, research and development, strategic planning, consumer sales and marketing, selling to retailers, and mergers and acquisitions. |
acquisitions, entertainment and hospitality, cybersecurity and environmental, social and governance matters. | | |
Ronald S. BeardJohn F. Lundgren | Chairperson of the Board |
Age: 72 Director Since: 2009 Board Committees: Audit, Compensation and Nominating and Corporate Governance | Mr. Lundgren is the Chairman of the Board |
Age:79
Director Since: 2001
Board Committees:Audit, Compensation, Nominating and Corporate Governance
| | Mr. Beard has served as Board Chairman since 2005 and held of Directors at the position of Lead Independent Director from August 2002 until that position was merged into his position as Chairman. Mr. Beard is currently a partner in the Zeughauser Group, consultants to the legal industry. Mr. Beard is a retired former partner of the law firm of Gibson, Dunn & Crutcher LLP. He joined the firm in 1964, served as Chairman of the firm from April 1991 until December 2001, and was also its Managing Partner from April 1991 untilmid-1997. Mr. Beard served as the Company’s general outside counsel from 1998 until he joined the Board. Mr. Beard also served as a board member of Javo Beverage Company from 2004 until 2011 and as a board member of Document Sciences Corporation from 2004 until 2008 when it was sold. He received his law degree in 1964 from Yale Law School.
Specific Qualifications, Attributes, Skills & Experience
Mr. Beard is highly qualified, and was renominated, to serve on the Board, among other reasons, due to his extensive experience with the Company as a Board member and previously as its primary outside legal advisor. Mr. Beard, among other things, has other public company board experience, and experience with corporate governance, executive compensation, as well as executive officer experience as chairman of a leading global law firm. Mr. Beard also has functional expertise in finance, accounting, legal matters, international business, strategic planning, and mergers and acquisitions.
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Samuel H. Armacost | | Director |
Age:78
Director Since: 2003
Board Committees:Audit (Chair),
Compensation
| | From 1981 to 2010, Mr. Armacost served as a Director of SRI International (formerly Stanford Research Institute), an independent nonprofit research institute, and was its Chairman from 1998 to March 2010 and Chairman Emeritus from April 2010 through December 2016. He was Managing Director of Weiss, Peck & Greer LLC (an investment management and venture capital firm) from 1990 to 1998. He was Managing Director of Merrill Lynch Capital Markets from 1987 to 1990. He was President and Chief Executive Officer of BankAmerica Corporation from 1981 to 1986. He also served as Chief Financial Officer of BankAmerica Corporation from 1979 to 1981. Mr. Armacost also served as a board member of Chevron Corporation from 1982 to 2011, of Del Monte Foods, Inc. from 2002 to 2011, of Exponent, Inc. from 1989 to 2013 and of Franklin Resources, Inc. from 2004 to 2014. Mr. Armacost is a graduate of Denison University and received his MBA from Stanford University in 1964.
Specific Qualifications, Attributes, Skills & Experience
Mr. Armacost is highly qualified, and was renominated, to serve on the Board, among other reasons, due to his extensive experience with the Company as a Board member as well as his prior chief executive officer experience of a public company, his other public company board experience, and his experience with corporate governance and executive compensation. He also has functional expertise in finance, accounting, investment banking, human resources/compensation, technology, international business, research and development, strategic planning, and mergers and acquisitions.
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John C. Cushman, III | | Director |
Age:77
Director Since: 2003
Board Committees:Compensation, Nominating and Corporate Governance
| | Mr. Cushman is Chairman, Global Transactions of Cushman & Wakefield, Inc. He has served as its Chairman,Co-Chairman or Senior Advisor, Office of the CEO, since it merged with Cushman Realty Corporation in 2001. Mr. Cushmanco-founded Cushman Realty Corporation in 1978 and also served as its Chief Executive Officer. Mr. Cushman also serves as Director and Chief Executive Officer of Cushman Winery Corporation, which is the owner of Zaca Mesa Winery, and which heco-founded in 1972. Mr. Cushman is a 1963 graduate of Colgate University where he also earned an Honorary Doctorate in Humane Letters in 2008, and he completed the Advanced Management Program at Harvard University in 1977.
Specific Qualifications, Attributes, Skills & Experience
Mr. Cushman is highly qualified, and was renominated, to serve on the Board, among other reasons, due to his extensive experience with the Company as a Board member as well as his current executive position with Cushman & Wakefield, his prior chief executive officer experience, his other public company board experience, and his experience with corporate governance and executive compensation. Mr. Cushman also has functional expertise in finance, human resources/compensation, international business, strategic planning, the retail industry, and mergers and acquisitions.
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John F. Lundgren | | Director |
Age:66
Director Since: 2009
Board Committees:Audit, Compensation (Chair)
| | Company. Mr. Lundgren served as Chairman and Chief Executive Officer of Stanley Black & Decker, Inc., from 2004 through July 2016, after which time he served as Special Advisor to the company through April 2017. Stanley Black & Decker, Inc. is the successor entity following the merger of The Stanley Works and Black and Decker in March 2010. Prior to the merger, Mr. Lundgren served as Chairman and Chief Executive Officer of The Stanley Works, a worldwide supplier of consumer products, industrial tools and security solutions for professional, industrial and consumer use. Prior to joining The Stanley Works in 2004, Mr. Lundgren served as President — European Consumer Products, of Georgia Pacific Corporation and also held various positions in finance, manufacturing, corporate development and strategic planning with Georgia Pacific and its predecessor companies, namely James River Corporation from 1995 to 1997 and Fort James Corporation from 1997 to 2000. Mr. Lundgren began his business career in brand management at the Gillette Corporation. Mr. Lundgren is currently a member of the board of directorslead independent director of VISA Inc. Mr. Lundgren also served as a member of the board of directors of Staples, Inc. prior to its sale to a private equity fund in September 2017. Mr. Lundgren is a graduate of Dartmouth College and received his MBA from Stanford University. Specific Qualifications, Attributes, Skills & Experience Mr. Lundgren is highly qualified, and was renominated, to serve on the Board, among other reasons, due to his prior experience with the Company as a Board member as well as his recent experience as a chief executive officer of a public company, his prior operating experience, and his experience with corporate governance and executive compensation matters. Mr. Lundgren also has functional expertise in finance, human resources/compensation, manufacturing, international business matters, strategic planning, consumer sales and marketing, retail sell-through, and mergers and acquisitions.acquisitions, cybersecurity and environmental, social and governance matters. |
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| Erik J Anderson | | Vice Chairperson of the Board |
Age: 65 Director Since: 2021 Board Committees: None | Mr. Anderson is the Vice Chairman of the Board of Directors at the Company. From 2008 until the completion of the Company’s merger with Topgolf in March 2021, Mr. Anderson served as a director of Topgolf, including as chairman from October 2015 to January 2018. Mr. Anderson also served as Chief Executive Officer of Topgolf from October 2015 until January 2018, and as Topgolf’s Executive Chairman from January 2018 until the completion of the Company’s merger with Topgolf. While at Topgolf, he received numerous honors, including the Ernst & Young Entrepreneur of the Year Award. In 2018 and 2017 he was honored by Goldman Sachs as one of their Top 100 Most Intriguing Entrepreneurs. In 2019 and 2018 he was ranked by Golf Inc. as the No. 3 most powerful person in the golf industry after being ranked No. 8 in 2017. Mr. Anderson is Founder and CEO of WestRiver Group, which provides integrated capital solutions for the global innovation economy. He also serves as CEO of Singularity University, a global community using exponential technologies to tackle the world’s biggest challenges. From 1998 to 2002, Mr. Anderson was the Chief Executive Officer of Matthew G. Norton Co., a private investment company. In addition, he was a partner at the private equity firm of Frazier & Company, LP, and a Vice President at Goldman, Sachs & Co. Mr. Anderson is currently a member of the boards of directors of Hyzon Motors Inc., and Solid Power, Inc., and he served as a member of the board of directors of Decarbonization Plus Acquisition Corporation II until January 2022 and Decarbonization Plus Acquisition Corporation IV until February 2023. Mr. Anderson served on the board of directors of Avista Corporation, a publicly traded electric and natural gas provider, from May 2011 to May 2019. Mr. Anderson has also served, and continues to serve, on the board of directors of various private companies, including several companies in the sports industry. Mr. Anderson received an M.S. and B.S. in Industrial Engineering from Stanford University in 1982 and a B.A. in Economics and Management Engineering from Claremont McKenna College in 1979. Specific Qualifications, Attributes, Skills & Experience Mr. Anderson is highly qualified to serve on the Board, among other reasons, due to his prior service as Executive Chairman and Chief Executive Officer of Topgolf, his extensive experience as a board member of numerous private companies, his other public company board experience, and his experience with audit, corporate governance and executive compensation matters. He also has functional expertise in finance, accounting, investment banking, human resources/compensation, technology, international business matters, investor relations, strategic planning, mergers and acquisitions, entertainment and hospitality, cybersecurity and environmental, social and governance matters.
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| Laura J. Flanagan | Director |
Age: 56 Director Since: 2018 Board Committees: Compensation | Ms. Flanagan has served as the Chief Executive Officer and a member of the board of directors of Ripple Foods, a plant-based food and beverage company, since October 2019. Ms. Flanagan served as the Chief Executive Officer of Foster Farms, a leader in poultry products, headquartered in California from 2016 until February 2019. Prior to joining Foster Farms, she worked as a consultant to private equity firms from 2014 to 2016. Ms. Flanagan was previously the President of the Snacks Division of ConAgra Foods, Inc., a packaged foods company headquartered in Nebraska, from 2011 until 2014, and served as President of ConAgra’s Convenient Meals Division from 2008 until 2011. Prior to joining ConAgra in 2008, Ms. Flanagan was the Vice President of Marketing for Tropicana Shelf Stable Juices at PepsiCo Inc. from 2005 to 2008. Ms. Flanagan also held various marketing leadership positions at General Mills, Inc. and PepsiCo Inc. from 1996 to 2005. Ms. Flanagan has served since June 2016 on the board of directors of Core-Mark International, a publicly traded company and one of the largest wholesale distributors to the convenience store channel. She served as Chair of the Nominating and Governance Committee from 2020-2021. Core-Mark was acquired by Performance Food Group in 2021 and Ms. Flanagan now serves on the board of PFGC, a publicly traded company and one of the largest distributors of products to the foodservice and restaurant channel. Ms. Flanagan has been a member of the National Association of Corporate Directors since 2014. Ms. Flanagan earned a B.S. degree in Engineering from Case Western Reserve University in 1990 and an MBA from the Stanford Graduate School of Business in 1996. Specific Qualifications, Attributes, Skills & Experience Ms. Flanagan is highly qualified, and was renominated, to serve on the Board of the Company, among other reasons, due to her extensive experience as a Chief Executive Officer, her background in consumer products, and her experience on other public company boards. She also has functional expertise in finance, human resources/compensation, manufacturing research and development, strategic planning, consumer sales/marketing, sell-through retail, mergers and acquisitions, cybersecurity and environmental, social and governance matters. |
| Russell L. Fleischer | Director |
Age: 56 Director Since: 2018 Board Committees: Audit (Chair), Compensation | Mr. Fleischer has served as a general partner at Battery Ventures, a global investment firm providing venture capital and private equity, since 2015, after joining as a partner in 2014. Mr. Fleischer has experience serving as Chief Executive Officer of three privately held corporations: HighJump Software, a supply chain management software company, from 2010 to 2014; Healthvision Software, a healthcare information technology provider, and TriSyn Group, a core banking applications software provider. Mr. Fleischer has been both a public and private company Chief Financial Officer, including for Adams Golf from 2000 to 2002. Mr. Fleischer also served as a board member of Adams Golf from 2005 to 2012. Mr. Fleischer earned a B.A. in Economics from Johns Hopkins University and an MBA from Vanderbilt University. Specific Qualifications, Attributes, Skills & Experience Mr. Fleischer is highly qualified, and was renominated, to serve on the Board of the Company, among other reasons, due to his prior chief executive officer experience as well as his extensive financial executive experience with significant experience in the golf industry and experience in finance, accounting, human resources/compensation, technology, manufacturing, international business matters, strategic planning, mergers and acquisitions, cybersecurity and environmental, social and governance matters. |
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| Bavan M. Holloway | Director |
Age: 59 Director Since: 2021 Board Committees: Audit | Ms. Holloway has served as a Director of the Company since December 2021 and has over 30 years of broad finance and audit experience in complex and highly regulated business environments. She previously served as Vice President of Corporate Audit for The Boeing Company, among other senior finance roles, until her retirement in April 2020. Prior to joining Boeing in May 2002, Ms. Holloway spent 16 years at KPMG LLP primarily serving financial clients in Chicago and New York. She currently serves on the board of directors of TPI Composites Inc. and previously served on the board of directors of T-Mobile US, Inc. from June 2021 through June 2023. Ms. Holloway holds a bachelor’s degree in business administration from the University of Tulsa and a master’s degree in financial markets and trading from the Illinois Institute of Technology. In October 2021, Ms. Holloway also received her CERT Certificate in Cybersecurity Oversight from the Carnegie Mellon University Software Engineering Institute. Specific Qualifications, Attributes, Skills & Experience Ms. Holloway is highly qualified to serve on the Board, among other reasons, due to her extensive experience in the areas of finance, accounting and corporate audit as well as her experience serving as a board member at other public companies. She also has functional expertise in finance, accounting, technology, manufacturing, international business matters, and cybersecurity and is passionate about diversity matters. |
| Scott M. Marimow | Director |
Age: 44 Director Since: 2021 Board Committees: Nominating and Corporate Governance | From 2016 until the completion of the merger with Topgolf in March 2021, Mr. Marimow served as a director of Topgolf, where he was Chairman of the Real Estate Committee and a member of the Compensation Committee. Mr. Marimow is a Managing Director at Providence Equity Partners, a Providence, Rhode Island-based private equity firm, where he has led investments in the sports, entertainment and media sectors. Current and past portfolio companies include the Company, AutoTrader, EZLinks Golf, Hulu, Learfield Sports, Major League Soccer, Newport Television, RentPath, TAIT Towers and ZeniMax Media. Prior to joining Providence Equity Partners in 2004, Mr. Marimow was an analyst in the media investment banking group of Deutsche Bank. Mr. Marimow received a B.Sc. in Business Administration from the Wharton School of the University of Pennsylvania in 2002. Specific Qualifications, Attributes, Skills & Experience Mr. Marimow was designated for nomination to the Board under the terms of the Stockholders Agreement among the Company, Providence, Dundon and WestRiver (see “Transactions with Related Persons - Stockholders Agreement”). Mr. Marimow is highly qualified to serve on the Board, among other reasons, due to his prior service as a member of the Topgolf Board, his extensive experience as a board member of numerous private companies, and his knowledge of and executive and operational experience with sports, entertainment and media portfolio companies of Providence Equity Partners. He also has functional expertise in finance, accounting, investment banking, consumer sales/marketing, mergers and acquisitions, entertainment and hospitality and strategic planning. |
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| Adebayo O. Ogunlesi | | Director |
Director Since:Since: 2010
Board Committees:Audit, Nominating and Corporate Governance (Chair)
| | Mr. Ogunlesi is Chairman and Managing Partner of Global Infrastructure Management, LLC, a private equity firm with over $40.0 billion in assets under management and which invests worldwide in infrastructure assets in the energy, transport, and water and waste industry sectors. Prior to founding Global Infrastructure Management, Mr. Ogunlesi spent 23 years at Credit Suisse where he held senior positions, including Executive Vice Chairman and Chief Client Officer and prior to that Global Head of Investment Banking. Mr. Ogunlesi is currently a member of the board of directors of The Goldman Sachs Group, a position he has held since 2012, and Kosmos Energy Ltd., a position he has held since 2004. Mr. Ogunlesi holds a B.A. (First Class Honours) in Politics, Philosophy and Economics from Oxford University, a J.D. (magna cum laude) from Harvard Law School and an M.B.A. from Harvard Business School. Prior to joining Credit Suisse, he was an attorney with the New York law firm of Cravath, Swaine & Moore. From 1980 to 1981, he served as a Law Clerk to the Honorable Thurgood Marshall, Associate Justice of the United States Supreme Court. Specific Qualifications, Attributes, Skills & Experience Mr. Ogunlesi is highly qualified, and was renominated, to serve on the Board, among other reasons, due to his prior service on the Company’s Board, his current executive officer position, at Global Infrastructure Management, LLC, and his experience with investment banking, legal matters, corporate governance and executive compensation. Mr. Ogunlesi also has functional expertise in finance, law, investment banking, human resources/compensation, international business matters, strategic planning, and mergers and acquisitions.acquisitions, cybersecurity and environmental, social and governance matters. |
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| Varsha R. Rao | Director |
Age: 54 Director Since: 2022 Board Committees: Compensation | Ms. Rao served as the Chief Executive Officer of Nurx, a leading direct-to-consumer telehealth platform, from April 2019 to August 2022. Prior to her role at Nurx, Ms. Rao served as the Chief Operating Officer of Clover Health, a healthcare technology company, from September 2017 to January 2019. From November 2013 to December 2016, Ms. Rao served as the Head of Global Operations at Airbnb, Inc., a global travel marketplace. Ms. Rao previously served on the board of directors at Viasat, Inc., a global satellite telecommunications company, from 2017 to 2023, and on the board of directors at Social Capital Hedosophia Holdings Corp. VI from 2021 to 2022. Ms. Rao earned a B.A. degree in Mathematics and a B.S. degree in Economics from the University of Pennsylvania, and an M.B.A. degree from the Harvard Business School. Specific Qualifications, Attributes, Skills & Experience Ms. Rao is highly qualified, and was renominated, to serve on the Board, among other reasons, due to her experience as a Chief Executive Officer, her other public company board experience and her extensive knowledge of corporate operations and the e-commerce industry. Ms. Rao also has functional experience in finance, accounting, investment banking, human resources/compensation, technology, manufacturing, international business matters, strategic planning, consumer sales and marketing, retail,mergers and acquisitions, environmental, social and governance matters and cybersecurity.
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| Linda B. Segre | | Director |
Director Since:Since: 2015
Board Committees:Committees: Compensation (Chair), Nominating and Corporate Governance
| | Ms. Segre served as Executive Vice President, Chief Strategy and People Officer of Diamond Foods, Inc., a San Francisco-based, publicly-traded company that produced premium snack food and culinary nut products, from 2009 until its sale in February 2016. Ms. Segre first joined Diamond Foods in 2009 as Senior Vice President, Corporate Strategy. Before joining Diamond Foods, Ms. Segre served as Managing Director of Google.org and Vice President and Managing Director of The Boston Consulting Group’s San Francisco Office. From 1981 until 1985, Ms. Segre was a touring golf professional in the United States, Europe and Asia having won five tournaments including the Irish Open and the Reno Open. Ms. Segre holdsis also a director and chairperson of the compensation committee of the board of directors of Mission Produce, Inc., a publicly traded company. Ms. Segre earned a B.A. degree with Academic Distinction in economicsEconomics and an MBA from Stanford University. Specific Qualifications, Attributes, Skills & Experience Ms. Segre is highly qualified, and was nominated,renominated, to serve on the Board, among other reasons, due to her extensive public company executive officer experience, her prior service on the Company’s Board, her extensive knowledge of corporate strategy and the consumer products industry and the unique perspective regarding the golf business that she brings as a former professional golfer. Ms. Segre also has functional expertise in finance, investor relations, human resources, executive compensation, manufacturing, international business matters, strategic planning, andconsumer sales/marketing, sell-through retail, mergers and acquisitions. |
acquisitions, entertainment and hospitality and environmental, social and governance matters. | | |
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| Anthony S. Thornley | | Director |
Director Since:Since: 2004
Board Committees:Audit, Nominating and Corporate Governance
| | Mr. Thornley served as interim President and Chief Executive Officer of the Company from June 2011 to March 2012. From 2002 to 2005, he served as President and Chief Operating Officer of QUALCOMM Incorporated, the San Diego-based company that pioneered and developed technologies used in wireless networks throughout much of the world. He previously served as QUALCOMM’s Chief Financial Officer beginning in 1994, while also holding titles of Vice President, Senior Vice President and Executive Vice President. Prior to joining QUALCOMM, Mr. Thornley worked for Nortel Networks for 16 years, serving in various financial and information systems management positions including Vice President of Public Networks, Vice President of Finance NT World Trade, and Corporate Controller Northern Telecom Limited. Before Nortel, Mr. Thornley worked for Coopers & Lybrand. Mr. Thornley also served as a board member of Transdel Pharmaceuticals, Inc. from 2007 to 2011 and Peregrine Semiconductor Corp. from 2010 to 2014. Mr. Thornley currently servespreviously served as a board member of Cavium, Inc., a position he has held since 2006.from 2006 to 2018. Mr. Thornley received his degree in chemistry from Manchester University, England, and qualified as a chartered accountant. Specific Qualifications, Attributes, Skills & Experience Mr. Thornley is highly qualified, and was renominated, to serve on the Board, among other reasons, due to his prior service as interim President and Chief Executive Officer of the Company, extensive experience with the Company as a Board member as well as his prior executive and operational experience, his other public company board experience, and his experience with audit, corporate governance and executive compensation matters. He also has functional expertise in finance, accounting, human resources/compensation, technology, manufacturing, international business matters, research and development, strategic planning, consumer sales and marketing, mergers and acquisitions and environmental, cybersecurity and social and governance matters. |
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| C. Matthew Turney | Director Nominee |
Age: 30 Director Since: Not applicable Board Committees: Not applicable | Mr. Turney is the Chief Financial Officer of Dundon Capital Partners, a Dallas-based private investment firm founded by Thomas Dundon. Mr. Turney has served as Chief Financial Officer of Dundon Capital Partners since May 2021 and is responsible for transaction execution, operations, financial reporting and monitoring portfolio companies. Since June 2021, Mr. Turney has also served as the Chief Strategy Officer of the Carolina Hurricanes, a team in the National Hockey League. Prior to joining Dundon Capital Partners, from June 2016 through February 2021, Mr. Turney worked as an investment banker for Citi, where he focused on mergers and acquisitions in the aerospace and defense and automotive sectors. Mr. Turney holds a B.B.A. in finance with a specialization in alternative asset management from Southern Methodist University. In addition to his roles with Dundon Capital Partners and the Carolina Hurricanes, Mr. Turney sits on the advisory board of the SMU Alternative Asset Management Center. Specific Qualifications, Attributes, Skills & Experience Mr. Turney was designated for nomination to the Board under the terms of the Stockholders Agreement among the Company, Providence, Dundon and WestRiver (see “Transactions with Related Persons - Stockholders Agreement”). Mr. Turney was renominated to serve on the Board due to his experience with the Company as a Board member, as well as his executive experience and functional experience in finance, investment banking and mergers and acquisitions. |
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| | Vote Required. Assuming a quorum is present, the eightaffirmative vote of holders of a majority of the votes cast is required for the election of each of the twelve nominees receiving the highest number of votes at the Annual Meeting willto be elected as directors. You may vote “for” or “withhold”“against” with respect to the election of any or all of the nominees. Your cumulative voting rights entitle you to cast as many votes as are equal to the number of directors to be elected (eight) multiplied by the number of shares you own, which votes may be cast for one candidate or distributed among two or more candidates.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES LISTED ABOVE. | | |
Management has the responsibility for the preparation, presentation and integrity of the Company’s financial statements and for its financial reporting process and
theinternal controls over financial reporting. The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformance of the Company’s financial statements to accounting principles generally accepted in the United
States.States and on the effectiveness of the Company’s internal controls over financial reporting. The Audit Committee is responsible for reviewing and discussing with management and the Company’s independent registered public accounting firm the Company’s annual and quarterly financial statements,
and financial reporting process
and internal controls over financial reporting and for providing advice, counsel and direction on such matters based upon the information it receives, its discussions with management and the independent registered public accounting firm and the experience of the Audit Committee members in business, financial and accounting matters.
Consistent with and in furtherance of its chartered duties, the Audit Committee has adopted: (i) a written policy restricting the hiring of candidates for accounting or financial reporting positions if such candidates have certain current or former relationships with the Company’s independent registered public accounting firm; (ii) procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, auditing and federal securities laws matters and the confidential, anonymous submission by employees of any concerns regarding any of the foregoing; and (iii) a written policy governing the preapproval of audit and
non-audit services to be provided by the Company’s independent registered public accounting firm and of the fees therefor. See “Information Concerning Independent Registered Public Accounting Firm—Policy for Preapproval of Auditor Fees and Services,” below.
The Company has an internal audit department that, among other things, is responsible for objectively reviewing and evaluating the adequacy and effectiveness of the Company’s system of internal controls, including controls relating to financial reporting reliability. The internal audit department reports directly to the Audit Committee and, for administrative purposes, to the Company’s Chief Financial Officer.
2017
2023 Audit Committee Activities
Following a formal evaluation by the Audit Committee and by the Company’s management of the performance of Deloitte & Touche LLP (“Deloitte”), the Audit Committee appointed Deloitte to serve as the Company’s independent registered public accounting firm for
2017.the fiscal year ended December 31, 2023. The Audit Committee reviewed and discussed with management and Deloitte the Company’s quarterly and audited annual financial statements for the year ended December 31,
2017.2023. The Audit Committee also reviewed the report of management contained in the Company’s Annual Report on Form
10-K for the fiscal year ended December 31,
20172023 (the
“2017“2023 Form
10-K”), as well as Deloitte’s Report of Independent Registered Public Accounting Firm included in the
20172023 Form
10-K related to its audit of the consolidated financial statements. The Audit Committee met privately with Deloitte and discussed issues deemed significant by
Deloitte.Deloitte and the Audit Committee. The Audit Committee also discussed with Deloitte the matters required to be discussed by Auditing Standard
No. 161301 (Communications with Audit Committees), as adopted by the Public Company Accounting Oversight Board (“PCAOB”).
During the course of 2017,2023, the Audit Committee also oversaw management’s evaluation of the Company’s internal control over financial reporting. The principal internal auditor and management documented, tested and evaluated the Company’s internal control over financial reporting system in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice during the process. In connection with this oversight, the Audit Committee received periodic updates provided by the principal internal auditor, management and Deloitte at least quarterly at an Audit Committee meeting. Upon completion of the evaluation, the principal internal
auditor and management reported to the Audit Committee regardingconfirming the effectiveness of the Company’s internal control over financial reporting and the Audit Committee reviewed and discussed with Deloitte its Report of Independent Registered Public Accounting Firm included in the 20172023 Form10-K related to its audit of the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee the Company’s efforts related to its internal control over financial reporting.
In addition, the Audit Committee has received from Deloitte the written disclosures and the letter required by PCAOB Rule 3526 (Communications with Audit Committees Concerning Independence) and has discussed with Deloitte its independence. The Audit Committee actively engaged in a dialogue with Deloitte with respect to any disclosed relationships or services that might affect Deloitte’s objectivity and independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the
20172023 Form
10-K for filing with the SEC.
MEMBERSOFTHE AUDIT COMMITTEESamuel H. Armacost
Russell L. Fleischer (Chair) | Ronald S. BeardBavan M. Holloway
John F. Lundgren | Adebayo O. Ogunlesi |
Anthony S. Thornley
INFORMATION CONCERNING INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Fees of Independent Registered Public Accounting Firm
The following table shows the fees billed by Deloitte & Touche LLP for the years ended December 31, 2017 and2023 and December 31, 2016: | | | | | | | | | | |
| | | 2017 | | | 2016 | | | Description |
| Audit Fees | | | $2,007,800 | | | | $1,585,450 | (1) | | Includes fees for (i) the audit of the Company’s annual financial statements, (ii) the review of the Company’s interim financial statements, (iii) the audit of the Company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, (iv) statutory audits and related services for the Company’s international subsidiaries, and (v) other services that generally only the independent auditor can reasonably provide, including comfort letters, statutory audits, attest services, and consents and assistance with and review of documents filed with the SEC. The Company reimburses Deloitte for expenses incurred in connection with the audit in an amount not to exceed 6% of the audit fees. The amounts of these reimbursements are not included in the audit fees shown. Audit fees for 2017 include additional audit services in connection with the travisMathew, LLC and OGIO International, Inc. acquisitions completed in August 2017 and January 2017, respectively, as well as additional audit services related to the Company’s reversal of the deferred tax valuation allowance and the enactment of the Tax Cuts and Jobs Act in December 2017. |
| Audit-Related Fees | | | $281,335 | | | | $221,000 | | | Includes fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements. The fees incurred in 2017 were primarily related to due diligence services rendered in connection with the acquisitions of travisMathew, LLC and OGIO International, Inc. and the implementation of the new revenue recognition accounting standard. The fees incurred in 2016 were for due diligence services rendered in connection with the OGIO International, Inc. acquisition and the Japan apparel joint venture completed in July 2016. |
| Tax Fees | | | $103,400 | | | | $129,606 | (1) | | Includes fees for services performed by the professional staff in Deloitte’s tax department except for those tax services that could be classified as audit or audit-related services, including routine foreign tax compliance and tax advice. |
| All Other Fees | | | -- | | | | -- | | | Includes fees for all services except those described above. |
(1) Prior period amounts have been reclassified2022:
| | | | | | | | | | | |
| 2023 | 2022 | Description |
| Audit Fees | $6,272,106 | | $5,379,693 | | Includes fees for (i) the audit of the Company’s annual financial statements, (ii) the review of the Company’s interim financial statements, (iii) the audit of the Company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”), (iv) statutory audits and related services for the Company’s international subsidiaries, and (v) other services that generally only the independent auditor can reasonably provide, including comfort letters, statutory audits, attest services, and consents and assistance with and review of documents filed with the SEC. The fees for 2023 include out of scope services related to procedures over IT access controls. The Company reimburses Deloitte for expenses incurred in connection with the audit in an amount not to exceed 6% of the audit fees. The amounts of these reimbursements are not included in the audit fees shown. |
| Audit-Related Fees | $186,318 | | $— | | Includes fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements not reported under “Audit Fees.” |
| Tax Fees | $377,983 | | $232,918 | | Includes fees for services performed by the professional staff in Deloitte’s tax department except for those tax services that could be classified as audit or audit-related services, including routine foreign tax compliance, tax advice and transfer price studies. |
| All Other Fees | $— | | $— | | Includes fees for all services except those described above. |
All of the services relating to
conform with the current year presentation of fees associated with the acquisitions of travisMathew, LLC and OGIO International, Inc.None of the fees listed above were approved by the Audit Committee. None of such services were approved by the Audit Committee in reliance on a waiver frompre-approval under Rule2-01(c)(7)(i)(C) of RegulationS-X.
Policy for Preapproval of Auditor Fees and Services
The Audit Committee has adopted a policy that it must preapprove all audit andnon-audit services to be performed by the Company’s independent registered public accounting firm before the
firm is engaged to perform the services. The Audit Committee must also preapprove the estimated fees for such services, as well as any material change to the terms, conditions or fees related thereto. The Audit Committee will only preapprove those services that would not impair the independence of the independent registered public accounting firm and only those audit-related, tax ornon-audit services that are consistent with the SEC’s and PCAOB’s rules on auditor independence. The policy specifically provides that the followingnon-audit services will not be preapproved: (i) bookkeeping or other services related to the Company’s accounting records or financial statements, (ii) financial information systems design and implementation, (iii) appraisal or valuation services, fairness opinions orcontribution-in-kind reports, (iv) actuarial services, (v) internal audit outsourcing services, (vi) management functions, (vii) human resources, (viii) broker-dealer, investment adviser or investment banking services, (ix) legal services and (x) expert services unrelated to an audit for the purpose of advocating the Company’s interests in litigation or in a regulatory or administrative proceeding or investigation.
The Audit Committee has delegated to the Audit Committee Chair the authority (within specified limits) to preapprove services consistent with the policy if it is not practical to wait until the next Audit Committee meeting to seek such approval. The Audit Committee Chair must report any services it
preapprovedpreapproves to the Audit Committee at its next meeting.
Under the policy, the Audit Committee at least annually will review and where appropriate preapprove the services expected to be performed by the Company’s independent registered public accounting firm. Any subsequent request to have the independent registered public accounting firm perform any additional services must be submitted to the Audit Committee by the Company’s Chief Financial Officer or Chief Accounting Officer, together with the independent registered public accounting firm, and must include an affirmation that the provision of such services is consistent with the SEC’s and PCAOB’s rules on auditor independence.
PROPOSAL NO. 2 - RATIFICATION OF THE APPOINTMENTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee, which is comprised entirely of independent directors, has appointed Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31,
2018.2024. This appointment was made following the Audit Committee’s formal evaluation of Deloitte’s performance in
2017.2023. Deloitte has served as the Company’s independent registered public accounting firm since December 2002. Information concerning the services performed by Deloitte and the fees for such services for
20172023 and
20162022 are set forth
above under “Information Concerning Independent Registered Public Accounting Firm—Fees of Independent Registered Public Accounting
Firm,” above.Firm”. Deloitte representatives are expected to attend the Annual Meeting and to be available to respond to appropriate questions, and if they desire, will have the opportunity to make a statement.
The Audit Committee and the Board seek shareholder ratification of the Audit Committee’s appointment of Deloitte as the Company’s independent registered public accounting firm to audit the Company’s and its subsidiaries’ financial statements for the fiscal year ending December 31,
2018.2024 and to audit the Company’s internal control over financial reporting. Ratification of this appointment is not required to be submitted to shareholders. However, such ratification is being sought as a matter of good corporate governance. If the shareholders do not ratify the appointment, the Audit Committee will reconsider it. Because the Audit Committee is directly responsible for appointing the Company’s independent registered public accounting firm, however, the ultimate decision to retain or appoint Deloitte in the future as the Company’s independent registered public accounting firm will be made by the Audit Committee based upon the best interests of the Company at that time.
| | | | |
| | Vote Required. Required. Assuming a quorum is present, the affirmative vote of the holders of a majority of the shares of Common Stock having voting power present in person or represented by proxy at the Annual Meeting is required for approval of this proposal.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF DELOITTE AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018.
| | 2024. |
EXECUTIVE OFFICER COMPENSATION
COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE REPORT The Compensation
and Management Succession Committee
(“Compensation Committee”) reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K. Based on such review and discussion, the Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in this Proxy Statement for filing with the SEC.
COMPENSATIONAND MANAGEMENT SUCCESSION COMMITTEE Linda B. Segre (Chair) | Laura J. Flanagan
Russell L. Fleischer | John F. Lundgren
(Chair) | Samuel H. ArmacostRonald S. Beard | John C. Cushman, III |
Linda B. Segre
Varsha R. Rao
COMPENSATION DISCUSSION AND ANALYSIS This Compensation Discussion and Analysis (“CD&A”) is designed to provide shareholders with an understanding of the Company’s compensation philosophy and objectives as well as the analysis that the Company performed in setting executive compensation for
2017.2023. The Board has delegated to the Compensation Committee the general responsibility for oversight of the Company’s compensation philosophy, policies and programs, including those applicable to the Company’s named executive officers (“NEOs”). This CD&A discusses the Compensation Committee’s determination of how and why, in addition to what, compensation actions were taken during
20172023 for the NEOs. The NEOs, as determined in accordance with SEC rules, for
20172023 were:
| | | | | |
| Oliver G. (Chip) Brewer III | | President and Chief Executive Officer |
| Brian P. Lynch | | SeniorExecutive Vice President, Chief Financial Officer General Counsel and Corporate SecretaryChief Legal Officer |
| Arthur F. Starrs | Chief Executive Officer, Topgolf International, Inc. |
| Glenn F. Hickey | Executive Vice President and President, Callaway Golf |
| Mark F. Leposky | | Senior Vice President, Global Operations |
Richard H. Arnett | | Senior Vice President, Global Marketing and President, OGIO |
Alan Hocknell | | Senior Vice President, Research and Development |
Robert K. Julian | | Former SeniorExecutive Vice President and Chief FinancialSupply Chain Officer |
Investors are encouraged to read this CD&A in conjunction with the compensation tables and related notes, which include more detailed information about the compensation of the NEOs for
2017.2023. See
“2017“2023 Compensation Tables,” below.
Overview1
Corporate 2017 Performance
2023 Financial and Business Environment.OnOperational Results
2023 marked an important turning point for the Company from a financial strategicperspective as we generated $365 million in cash flow from operations and transitioned to generating positive Free Cash Flow.1 2023 also saw several operational wins: Topgolf generated substantial venue-level margin expansion driven by operational efficiency gains within our venues as we rolled out our proprietary inventory management tool (“PIE”) to all of our U.S. venues other than Las Vegas, as well as our Toptracer ball tracking technology. On the equipment side of the business, the Callaway brand was the #1 golf club and #2 golf ball brand by dollar market share. The Company’s success was underpinned by a combination of unit growth and strong operating performance basis, 2017 was a very strong yearat the Topgolf venues and continued high demand for the Company. The Company not onlyCompany’s golf equipment and lifestyle apparel products.
Specific highlights include:
•Delivered net revenue of $4,284.8 million, an increase of 7% compared to 2022.
•Earned Adjusted EBITDA1Non-GAAP Information. of $596.8 million, up 7% compared to 2022.
•Topgolf delivered full-year 1% same venue sales growth.
•Golf Equipment maintained strong U.S. market share in 2023 including #1 model in total clubs; Paradym was the #1 model in drivers and fairway woods.
•Active Lifestyle revenue grew over 9%, driven primarily by double digit growth at TravisMathew.
____________________
(1)This Compensation Discussion and Analysis includes certain non-GAAP information. In order to assist interested parties with period-over-period comparisons on a consistent and comparable basis, the discussion set forth in this section provides certainnon-GAAP information regarding the Company’s financial results, includingincluding: (i) “Free Cash Flow”, which is cash flow from operations, less capital expenditures net income, diluted earnings per shareof proceeds from financing arrangements and government grants; and (ii) “Adjusted EBITDA” which is earnings before interest, taxes, and depreciation and amortization expenses, adjusted for,non-cash stock compensation expenses, and non-cash lease amortization expense, in 2017,addition to costs associated with certain non-recurring and non-cash items. These non-recurring and non-cash items include (i) certain non-cash amortization and depreciation of intangibles and other assets related to thenon-recurring transaction Company’s acquisitions, (ii) acquisition and transition-related expensesother non-recurring items, including charges related to the impairment and abandonment of the OGIOShankstars media game, charges in connection with the 2023 debt modification, IT integration and travisMathew acquisitionsimplementation costs stemming primarily from the merger with Topgolf, restructuring and reorganization charges in 2017our Topgolf and thenon-recurring impacts of the 2017 Tax CutsActive Lifestyle segments, and Jobs Act and othernon-recurring tax adjustments; and for 2016, the gain on the sale ofcosts related to a portion of the Company’s Topgolf investment in 2016 and the impact of the valuation allowance reversal in 2016. Thisnon-GAAP information may includenon-GAAP financial measures within the meaning of Regulation G.cybersecurity incident. Appendix A to this Proxy Statement includes a reconciliation of suchnon-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP.
grew market share and increased net sales, profitability and cash from operations, but also continued executing its strategy
Summary of investing in growth opportunities in golf and in areas tangential to golf. In January 2017, the Company acquired OGIO International, Inc. This acquisition both enhanced the Company’s presence in golf and provided a platform for growth in the lifestyle category. In August 2017, the Company acquired travisMathew, LLC a dynamic golf and lifestyle apparel company. This acquisition expanded the Company’s presence in the apparel category.Some specific 2017 highlights include:
Net sales increased $178 million, or 20%, in 2017 compared to 2016.
Gross margin increased 160 basis points to 45.8% in 2017 compared to 2016.
Operating income increased $35.0 million (78%) in 2017 compared to 2016.
Non-GAAP net income (adjusted for items mentioned in the footnote above) increased $28.0 million (122%) in 2017 compared toNon-GAAP net income in 2016. GAAP net income decreased from $191.0 million in 2016 to $41.7 million in 2017.
Non-GAAP diluted earnings per share (“EPS”) (adjusted for items mentioned in the footnote above) increased $0.29 (121%) in 2017 compared toNon-GAAP diluted EPS in 2016. GAAP diluted EPS decreased from $1.98 in 2016 to $0.42 in 2017.
Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) (adjusted for items mentioned in the footnote above) increased $42.0 million (72%) in 2017 compared to Adjusted EBITDA in 2016.
2017 cash provided by operations increased to $118 million (51%) compared to 2016.
Total shareholder return in 2017 was 27%, compared to 17% in 2016.
Overview of 2017Key 2023 Executive Compensation Decisions.Actions
Set forth below is a summary of
certain compensation-related
actionsdecisions the Company made during
20172023 and early
2018 and the status of certain compensation practices:2024:•Market-Based Base Salary Increases - The Compensation Committee, as part of its annual executive base salary review process, held the 2017 base salary of the Company’s Chief Executive Officer at the 2016 level, and approved modest2023 base salary increases for the other NEOs for 2017NEOs. Increases were based uponon individual performance, scope of responsibilities, market competitiveness, and alignment with the overall strategy of attracting and retaining top executive talent.
•Below Target Annual Incentive Award Payouts Based on Company-wide Adjusted EBITDA and Business Unit Results - The base salary of Mr. Lynch was also increased due to his promotion to Chief Financial Officer.
Above-target bonuses were paidCompany’s financial results for 2023 resulted in below target Adjusted EBITDA performance relative to the NEOs for 2017goals established under the Company’s 20172023 annual incentive programprogram. Furthermore, the respective business units led by Mr. Starrs and Mr. Hickey posted similar below target results relative to their specific financial goals, as described in the Company exceeded the maximum financial performance goals under the program, reflecting the Company’s exceptional operational performance.
“Annual Incentive” section below.•Majority of Long-Term Incentive Awards Tied To Performance - In 2017,2023, the Company granted to the NEOs performance-based restricted stock units (“PRSUs”) and service-based restricted stock units (“RSUs”) as the long-term incentive awards.
As was The Company continued its practice of granting the case in 2016, a majority of the long-term incentive awards granted in 2017 were PRSUs.
The frameworksubject to performance criteria, with 55% of the 2017annual long-term incentive
awards granted to the NEOs being PRSUs, for executive officers remained consistent with the 2016 framework. exception of Mr. Brewer. Mr. Brewer’s 2023 long-term incentive award consisted of 75% PRSUs, in line with the 2022 award structure.
•PRSUs Based Solely on relative Total Shareholder Return (rTSR) - The PRSUs granted in 20172023 will vest after three yearssolely based on the Company’s rTSR performance relative to the S&P Composite 1500 Consumer Discretionary, excluding the Automobiles and Components sub-industry group.
•Above Target PRSU Vesting for the 2021 - 2023 Annual Award PRSUs Tied to Strong Adjusted Pre-tax Income and rTSR Performance - The PRSUs granted under the 2021 - 2023 LTIP achieved the following results:
◦Our three-year cumulative currency neutral adjusted EPS goals over a three year performance period beginning January 1, 2017 and ending December 31, 2019, with opportunities to bank a limited portionAdjusted Pre-tax Income (“APTI”) result of $586.5 million exceeded the maximum goal resulting in 200% of the awardunderlying adjusted APTI-related PRSU awards being earned by the NEOs who held the awards. APTI is a non-GAAP measure and is described in more detail under “Annual Long-Term Equity Incentive Award Outcomes” below.
◦Our three-year cumulative relative total shareholder return (“rTSR”) performance result relative to the total shareholder return (“TSR”) of the companies listed in the S&P Composite 1500 Consumer Durables & Apparel, excluding Homebuilders, fell between threshold and target, resulting in 52.0% of the underlying rTSR-related PRSU awards being earned by the NEOs who held the awards.
◦The combination of APTI and rTSR performance resulted in 126.0% of the total 2021-2023 PRSU awards being earned by the NEOs who held the awards.
•Maximum Vesting of the 2021 - 2023 One-Time Transaction Award PRSUs related to the 2021 Topgolf Merger and tied to cumulative Adjusted EBITDA. With respectto the one-time transaction PRSUs held by each NEO other than Mr. Starrs, which were earned based on interim year performance.the three-year cumulative combined Company Adjusted EBITDA, the three-year cumulative combined Company Adjusted EBITDA result of $1,591.9 million exceeded the maximum goal resulting in 150% of the underlying PRSU awards being earned by the NEOs who held the awards. With respect to the one-time transaction PRSUs held by Mr. Starrs, which were earned based on the three-year cumulative Topgolf-only Adjusted EBITDA, the cumulative Topgolf Adjusted EBITDA result of $706.2 million exceeded the maximum goal resulting in 150% of the underlying PRSU awards being earned by Mr. Starrs.
Pay for Performance Philosophy Evident in 2023 Pay Mix
The overarching goal of our compensation philosophy and incentive plan design is to motivate management and to align their interests with those of our shareholders. Accordingly, each of the Company’s NEOs receives the vast majority of pay from performance-based compensation tied to quantitative, objective metrics, or tied to the value of our stock price. In 2017,2023, (i) approximately 70% of the Company revised itsChief Executive Officer’s targeted total direct compensation, peer group by removing two corporationsand approximately 51% of the targeted total direct compensation for each of the other NEOs, was comprised of short-term and long-term incentives that were purchased by larger conglomerates,subject to corporate and adding three companies with similar revenue sizeindividual performance and industry characteristics. This revision includedtherefore at risk (annual non-equity incentive plan compensation and PRSUs) and (ii) approximately 71% of the additionChief Executive Officer’s targeted total direct compensation, and approximately 55% of Acushnet Holdings Corporation, athe targeted total direct competitorcompensation for the other NEOs, was provided in the golf industry, that includesform of long-term equity compensation (PRSUs and RSUs).
The following graphs provide a snapshot of the Titleist, FootJoy,elements of pay for the Company’s NEOs:
Note: The percentages in the charts above reflect the base salary, target annual incentive and targeted value of all long-term equity incentive awards for the NEOs for 2023, but do not include other forms of compensation, and thus are not intended to match amounts shown in the Summary Compensation Table or the Grant of Plan-Based Awards Table below.
Consideration of Say-on-Pay Vote Results and Shareholder Engagement
At the Company’s annual meeting of shareholders in May 2023, more than 97% of the votes were cast in favor of the say-on-pay proposal. Notwithstanding the shareholders’ overwhelming support of the Company’s compensation programs in the 2023 say-on-pay proposal, throughout 2023 and early 2024, the Company undertook a shareholder outreach campaign to shareholders holding over 50% of the Company’s outstanding shares. Of this group, holders of nearly 35% of the outstanding shares elected to meet with the Company. The Chairman of our Board of Directors and the Company’s CEO and CFO participated in certain of these meetings, as well as a representatives of the Company’s investor relations, finance and legal teams. In these meetings, in addition to the feedback on governance and other golf specific brands.ESG matters described under “Board of Directors and Corporate Governance —Shareholder Engagement, Say-on-Pay Vote” above, we were provided valuable feedback on the strengths and suggestions for our executive compensation program. During these meetings, we heard from shareholders that they were generally supportive of the design of our executive compensation program and, therefore, we maintained the structure of our compensation program during 2023 and 2024.
Compensation Best Practices. In 2017
We regularly review and
early 2018, the Company continued the followingrefine our executive compensation
practices:program to ensure that it continues to reflect practices and policies that are aligned with our pay-for-performance philosophy. We believe that our practices and policies set forth below are in line with current best practices for aligning executive and shareholder interests and sound corporate governance practices. | | | | | | | | | | | |
| | What We Do | | | | What We Do Not Do |
✓
ü | | Link annual incentive pay to objective,pre-established Company financial goals, while also taking into account individual executive performance | û | × | | No excise tax gross ups in the Company’s executive employment agreements |
| | | |
✓
ü | | Grant a majorityover 50% of thelong term incentive awards with vesting contingent on achieving clearly defined and objective performance measures in both annual cash incentive program and PRSUs that are focused on drivers of shareholder value creation | û | × | | No single triggerchange-in-control severance payments under the Company’s executive employment agreements |
| | | |
✓
ü | | Grant equity awards under a policy that has strict controls on grant processes and timing | | × | û | No single trigger accelerated vesting of equity awards in the event of achange-in-control under the Company’s executive employment agreements |
| | | |
✓
ü | | Include clawback provisions in U.S. executive employment agreements and maintain an SEC- and NYSE-compliant clawback policy for recovery of erroneously awarded incentive compensation | û | × | | No dividends on RSUs prior to vesting |
| | | |
✓
ü | | Maintain stock ownership guidelines and holding requirements for executive officers and directors | û | × | | No dividends on PRSUs |
| | | |
✓
ü | | Engage an independent compensation consultant through the Compensation Committee | û | × | | No pension benefits to executives |
| | | |
✓
ü | | Engage with shareholders as appropriate and consider their input in designing the Company’s executive compensation programs | û | × | | Nore-pricing of stock options without shareholder approval |
| | | |
✓
ü | | Conduct an annual risk assessment of the Company’s executive and broad-based compensation programs | û | | | |
| | | |
✓ | | ProhibitNo hedging, short sales andor pledging of Company stock by executive officers and directors | | | | permitted |
| | | |
Purpose of
Guiding Principles for Executive Compensation
ProgramsCallaway Golf Company is a publicly traded corporation engaged in
Given the manufacture and salecompetitive nature of golf clubs and golf balls, as well as the sale of other golf-related products, including golf bags, footwear and accessories, as well as golf and lifestyle apparel, backpacks and other gear. The sale of golf products is a highly competitiveour business, that is becoming more competitive each year. The Company has operations in the United States, the United Kingdom, Japan, Canada, Korea, Australia, China, India and other regions, and directly, or indirectly through third party distributors, sells its products in over 100 countries worldwide. In 2017, the Company had net sales of over $1 billion. The Company
also added to the size and complexity of its operations, brand and product portfolio with the addition of the OGIO brand and product lines and the acquisition of the travisMathew retail apparel business in 2017. Within this context, the Board must recruit and appoint highly qualifiedhighly-qualified individuals to serve as the Company’s executive officers to oversee and manage the Company’s complex global operations. The purpose of the Company’s executive compensation program is to attract, retain, motivate and appropriately reward these executive officers and to align their interests with those of the Company’s shareholders by incentivizing the executive officers to operate the Company in a manner that creates shareholder value.
Guiding Principles for Executive Compensation
In developing appropriate executive compensation programs, the Compensation Committee is generally guided by the following principles:
Compensation levels should be sufficiently competitive to attract and retain the executive talent needed.needed to compete. The Company’s overall compensation levels are targeted to attract the management talent needed to achieve and maintain a leadership position in the businesses where the Company chooses to compete. As discussed below under “—The Compensation Committee’s Role of the Compensation Committee—The—The Role of Peer Companies and Benchmarking,Competitive Market Data,” the Company does not target or position compensation at a specific percentile relative to market data. Instead, given the complexity and competitiveness of the Company’s business, as well as the high cost of living in San Diego where its principal offices are located, this information is used as a general guide in setting and assessing executive compensation levels and practices.
A significant portion of total compensation should be related to performance.Executive compensation should be linked to Company or business unit and individual performance. The annual incentive compensation element is tied directly to short-term corporate or business unit performance, but the final payout may be affected by individual performance, and a majority of the long-term incentive compensation element is tied to corporate performance. Over time, there is a strong correlation between the Company’s long-term performance and the Company’s stock price. Under the Company’s plans, performance above targeted goals generally results in compensation above targeted levels, and performance below targeted goals generally results in compensation below targeted levels.
Compensation should reflect position and responsibility, and incentive compensation should be a greater proportion of total compensation for more senior positions.Total compensation should generally increase with position and responsibility. At the same time, a greater percentage of total compensation should be tied to corporate and individual performance, and therefore at risk, as position and responsibility increases.increase. Accordingly, individuals with greater roles and responsibility for achieving the Company’s performance targets should bear a greater proportion of the risk thatif those goals are not achieved and should receive a greater proportion of the reward if goals are met or surpassed.
Incentive compensation should strike a balance between short-term and long-term performance.performance.The Company’s compensation plans focus management on achieving strong annual performance in a manner that supports the Company’s long-term success and profitability. Accordingly, the Company uses both annual incentives and long-term incentives, with the proportion of long-term incentives increasing at higher levels of responsibility where individuals have the greatest influence over the Company’s strategic direction and results over time.
A significant portion of executive compensation should be stock-based.In order toequity-based. To further align the interests of the Company’s executive officers with those of the Company’s shareholders, the Compensation Committee believes that a significant portion of executive compensation should be stock-based compensation. As a result, in any given year, all or a majority of the Company’s long-term incentives for executive officers is stock-based in the form of stock options, stock appreciation rights,
restricted stock units, and performance units settled in cash or stock. The executive officers are also subject to stock ownership guidelines which require the executive officers to own a specified minimum amount of Common Stock interests and hold a portion of the shares of Common Stock received from the long-term incentive awards if they are not in compliance with the guidelines.
The Compensation Committee uses various resources to guide its compensation decisions.In setting compensation, the Compensation Committee works with the Company’s Chief Executive Officer and Senior Vice President of Global Human Resources.EVP, Chief People Officer. In addition, the Compensation Committee has engaged an outside independent compensation consultant to provide independent advice and information on executive compensation matters. See below “—The Compensation Committee’s Role—The Independent Compensation Consultant’s Role,” below.Role”.
The Compensation Committee’s Role
The Board has delegated to the Compensation Committee
the general responsibility for oversight of the Company’s compensation philosophy, policies and programs, including those applicable to the NEOs.
The Compensation Committee, comprised entirely of independent directors,
has the responsibilityis responsible for, among other things, approving and overseeing the Company’s executive compensation
programs, includingprograms. This includes the design and implementation of those programs to ensure
that the programsthey are reasonable and not excessive,
that they reward corporate and individual performance,
and that they provide appropriate incentives for the executive officers, and do not encourage excessive risk taking.
This responsibilityIt also includes setting base salaries, developing appropriate short-term and long-term incentives,
and approving stock-based award plans and grants,
approving employment agreements (including severance and
change-in-control provisions), and
approving other compensation
orand benefit plans, arrangements and agreements applicable to executive officers.
The Compensation Committee, in consultation with the other independent directors, sets the compensation of the Chief Executive Officer, and the Compensation Committee, in consultation with the Chief Executive Officer, sets the compensation of the other executive officers. The Compensation Committee consults with outside compensation advisors and legal counsel as it deems appropriate.
The Compensation Committee reviews the performance of the executive officers. The review includes a detailed comparison of the Company’s financial performance in absolute terms and against its annual operating plan, a review of performance against stipulated metrics and performance criteria in various compensation plans, a review of the respective executive’s accomplishments including performance against any agreed-upon objectives, and any other relevant factors pertinent to thatthe year’s results as discussed below. In the case of the
Company’s Chief Executive Officer, the review also includes a written evaluation of his performance by the independent directors based upon
a review of the Chief Executive Officer’shis agreed-upon annual objectives and accomplishments
as well asand his self-appraisal of his performance. The Compensation Committee also seeks input from the Chief Executive Officer’s direct reports as appropriate. Following this detailed review, all of the independent directors participate in executive session to review this information and provide input to the Compensation Committee in its consideration of any changes in compensation for the Chief Executive Officer. Mr. Brewer is not present during voting or deliberations by the independent directors regarding his own compensation.
The Compensation Committee routinely reviews the Company’s executive compensation programs and makes modifications as appropriate in light of Company and industry dynamics as well as current trends and best practices. The amounts paid to an individual executive in any given year reflect the Company’s current compensation programs, continuing prior commitments under previous programs or contracts, and the current performance of that executive. Additional information concerning the Compensation Committee’s responsibilities can be found under the section entitled “Board of Directors and Corporate Governance—Board Committees,” above.
The Chief Executive Officer’s Role
At the Compensation Committee’s request, the Company’s Chief Executive Officer, Mr. Brewer, provides input regarding the performance and appropriate compensation of the Company’s other executive officers. The Compensation Committee considers Mr. Brewer’s evaluation of the other executive officers because of his direct knowledge of each executive officer’s performance and contributions. The Compensation Committee sets the compensation of the Company’s other executive officers after considering Mr. Brewer’s input.
The Independent Compensation Consultant’s Role
The Compensation Committee selects and retains the services of its own independent compensation consultant and annually reviews the performance of the selected consultant. As part of the review process, the Compensation Committee considers the independence of the consultant in accordance with applicable SEC and NYSE rules.
In 2017,2023, the Compensation Committee engaged Mercer, LLC (“Mercer”) as its compensation consultant to provide independent advice and information on executive compensation matters. Mercer representatives report directly to the Compensation Committee and provide comparative market data, information on compensation trends, and an objective view of compensation matters. Mercer representatives generally interact with the Compensation Committee Chair and with senior management at the direction of the Compensation Committee, attend Compensation Committee meetings, and meet in executive session with Compensation Committee members and, for matters relating to the compensation of the Company’s Chief Executive Officer, with the other independent directors as well. The Company
generally does not use Mercer
or Mercer’s affiliates for any other purpose, except that the Company occasionally purchases broad industry compensation survey data from Mercer that it makes available for third parties to purchase. The Compensation Committee requires that the Company obtain the
committee’sCompensation Committee’s approval prior to engaging Mercer for any other purpose. The Compensation Committee has reviewed an assessment of any potential conflicts of interest raised by Mercer’s work for the Compensation Committee, which assessment considered the following six factors: (i) the provision of other services to the Company by Mercer and its affiliates; (ii) the amount of fees received from the Company by Mercer and its affiliates, as a percentage of Mercer’s and its affiliates’ total revenue; (iii) the policies and procedures of Mercer that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the Mercer consultant with a member of the Compensation Committee; (v) any Company stock owned by the Mercer consultants; and (vi) any business or personal relationship of the Mercer consultant or Mercer and its affiliates with any of the Company’s executive officers. The
Compensation Committee assessed Mercer’s independence in light of these standards and determined that there were no
conflictconflicts of interest or independence concerns with respect to Mercer. The Compensation Committee also receives advice from legal counsel as appropriate and conducts a review of the same six factors with regard to the outside legal counsel providing such advice.
The Role of Peer Companies and
BenchmarkingCompetitive Market Data
In determining the reasonableness and competitiveness of the Company’s executive officer compensation, the Compensation Committee periodically reviews market data for comparisons to the Company’s programs. These comparisons are used as reference guides to aid the Compensation Committee in assessing the
reasonableness of the Company’s proposed compensation levels and targets in any given year. The Company, however, does not target or position compensation at a specific percentile relative to the market data.
Depending upon the particular issue or circumstance, the Compensation Committee will use (i) summary broad industry survey data (without disclosure of the individual corporations) from AON Radford Equilar and Mercer for companies of similar revenue size as the Company and/or (ii) a small predetermined group of corporations in the leisure equipment and products and textiles, apparel and luxury goods industries (the “Compensation Comparison Group”)., as described below.
The Compensation Comparison Group consists of companies that are similar in revenue size to, and have similar business characteristics
to those of the Company. In addition, the Company often competes for executive talent with corporations outside the golf industry, as the
Company.complexity of the Company’s operations, brand and product portfolio continues to expand. Therefore, the Compensation Committee compares executive compensation levels to companies in industries with similar characteristics. The Compensation Comparison Group is reviewed periodically as warranted and revised as appropriate to ensure that the companies in the group continue to be a reasonable comparison for compensation purposes.
The
In 2023, the companies included in the Compensation Comparison Group were
changed in 2017, as recommended byslightly refined relative to the
Company’s outside independent compensation consultants. Until recently, none of the Company’s major competitors were stand-alone public golf companies; rather, they are part of larger corporate conglomerates or are privately owned. Thus, it has been difficult2022 group to
obtain meaningful specific comparative data on their golf businesses. In late 2016, Acushnet Holdings Corp.remove Wolverine World Wide, Inc.,
which owns the Titleist and
FootJoy brands, became a public corporationadd Darden Restaurants, Inc., Electronic Arts Inc., Polaris, Inc. and
the Company has added Acushnet Holdings Corp.Yum! Brands, Inc. to
its Compensation Comparison Group (defined below). In addition, the Company often competes for executive talent with corporations outside the golf industry. The Compensation Committee therefore compares executive compensation levels with other companies. Changes tobetter align the Compensation Comparison Group
includedwith the
removalgo-forward portfolio balance of
two companies that were purchased by larger conglomerates (specifically, Artic Cat, Inc. and LeapFrog Enterprises were removed). These were replaced by companies with similar revenue range and industry characteristics (specifically, Sturm, Ruger & Co., Inc. and Vista Outdoors, Inc. were added), along with a direct golf industry representative, Acushnet Holdings Corp.the Company. The
revised Compensation Comparison Group
adopted in 2017 was comprised of 13 companies that were approximately 0.5used to
2.0 times the Company’s 2016 revenue (with one company slightly below 0.5 times and two slightly over 2.0 times):inform 2023 pay decisions is listed below. | | | | | | | | | | | |
American Outdoor Brands Corporation* | | Johnson Outdoors, Inc. | | Perry Ellis International, Inc. |
| Acushnet Holdings Corp. | Darden Restaurants, Inc. | LifetimeLululemon Athletica Inc. | Vail Resorts, Inc. |
| Bloomin’ Brands, Inc. | Dave & Buster’s Entertainment, Inc. | Steve Madden, LTDPeloton Interactive, Inc. | Vista Outdoor, Inc. |
Crocs,Brinker International, Inc. | | Movado Group, Inc. | | Sturm, Ruger & Co., Inc. |
| Deckers Outdoor Corporation | Polaris, Inc. | Oxford Industries | | Vista Outdoors,Yum! Brands, Inc. |
Jakks Pacific,Brunswick Corporation
| Electronic Arts, Inc. | Texas Roadhouse, Inc. | | | |
| Columbia Sportswear Company | G-III Apparel Group, Ltd. | Under Armour, Inc. | | |
*American Outdoor Brands Corporation was previously listed as Smith & Wesson Holding Corporation
The Compensation Committee reviews broad industry survey data and the compensation practices and program design at peer companies, including those in the Compensation Comparison Group, to inform its decision-making process in setting compensation. The Company, however, does not target or position compensation at a specific percentile relative to this market data.
The Compensation Committee’s executive compensation determinations are subjective and the result of the Compensation Committee’s business judgment, which is informed by the experiences of the members of the Compensation Committee, market data, and input provided by the Compensation Committee’s independent compensation consultant.
Consideration ofSay-on-Pay Vote Results
The Board and the Compensation Committee value the feedback provided by the Company’s shareholders and have discussions with shareholders regarding various corporate governance topics, including executive compensation. Shareholders are provided with the opportunity to cast an annual advisory vote on executive compensation. At the Company’s 2017 and 2016 annual meetings of shareholders, shareholders expressed approval
Components of the Executive Compensation Program
The executive compensation program
with over 98% and over 96%, respectively, of the shares cast being voted for approval of the compensation of the NEOs.The Compensation Committee considers the outcome of thesay-on-pay votes and other shareholder feedback when designing future compensation programs. Because the Compensation Committee incorporated changes to the framework used for our PRSUs commencing in 2016 as a
result of shareholder feedback received in connection with the 2015say-on-pay vote, no additional significant changes were made to our executive compensation program in 2017 as a result of thesay-on-pay vote results and the Compensation Committee determined to continue the general design of the executive compensation program from 2016.
Components of the 2017 Executive Compensation Program
The 2017 executive compensation program hadhas three elements of total direct compensation: base salary, annual incentives and long-term equity incentives, which are summarized in the table below. The Company also provides NEOs with certain perquisites and benefits, as described below. Each element of total direct compensation is intended to reward and motivate executives in different ways consistent with the Company’s overall guiding principles for compensation described above. Mercer advisedWhile the Compensation Committee thattable below reflects the 2017three pillars of our executive compensation program, was generally consistent with the Compensation Committee’s guiding principles and was reasonably based and not excessive under the circumstances. TheBoard or our Compensation Committee intendsmay choose to continue working with Mercer to ensure the Company’sutilize different compensation practices continue to be aligned with shareholder interests and with evolving best practices.
components as needed. | | | | | | | | | | | | | | |
Element | | Purpose & Characteristics | | Tie to Compensation Philosophy |
| Base Salary | | •Fixed cash compensation recognizing individual performance, time in role, scope of responsibility, leadership skills and experience. •Compensates for day to dayday-to-day job responsibilities. •Reviewed annually and adjusted when appropriate based uponon individual performance, expanded duties and changes in the competitive marketplace. | | •Competitive base salaries help attract and retain executive talent. •Increases are not automatic or guaranteed, to promote a performance culture. •The Compensation Committee also considers how an executive’s base salary compares to the base salaries of the other executives. |
| Annual Incentive | | •Variable compensation based on performance against annually established targets and individual performance; payable in cash. •Intended to provide an incentive to drive a high level of business unit, corporate and individual performance without excessive risk taking. | | • MetricsTarget award values, metrics, and targetsgoals are evaluated each year for alignment with business strategy. |
strategy as well as Company and industry dynamics. | | | | |
Element
Annual Long-Term Equity Incentives | | Purpose & Characteristics
| | Tie to Compensation Philosophy
|
Long-Term Incentive | | •Variable compensation; payableannual awards granted in the form of equity awards (RSUsPRSUs (75% CEO / 55% other NEOs) and PRSUs)RSUs (25% CEO / 45% other NEOs). • 55% of target award value in the form of performance-based awards.•
Designed to drive long-term Company performance, provide a means for retaining executives through long-term vesting, and align the interests of the executives with the interests of shareholders through stock-based incentives. •PRSU awards for NEOs based exclusively on rTSR objectives. •A multiple of the target number of PRSUs (0(0% to 200%) vestvests after three years based on achievement of rTSR performance goals over a three-year performance period with the opportunity to bank a limited portion of the award based on interim performance.period. •RSUs vest ratably over three-years. | | •Target award value, and performance metrics, and goals reviewed annually. •RSUs are designed to motivate an executive to remain with the Company and to align an executive’s interests with shareholders. •PRSUs reward executives for achieving longer term financial and operational goals, as well as creating long-term shareholder value. •Awards are consistent with the Compensation Committee’s guiding principles in that a majority of these long-term incentives are performance-based and all are equity-based.
|
The amount of total direct compensation intended to come from each element varies with position and level of responsibility, reflecting the principles that total compensation should increase with position and responsibility and that a greater percentage of an executive’s compensation should be performance based, and therefore at risk, as position and responsibility increase.
Consistent with the Company’s compensation philosophy, the
2017 executive compensation program
incorporatedincorporates a balance between guaranteed and
at-risk compensation,
a balance between cash and stock-based compensation, and
a balance between short-term and long-term compensation.
In 2017, (i) approximately 53% of the Chief Executive Officer’s targeted total direct compensation, and approximately 42% to 46% of the targeted total direct compensation for each of the other NEOs, was comprised of short-term and long-term incentives that were subject to corporate and individual performance and therefore at risk (annualnon-equity incentive plan compensation and PRSUs) and (ii) approximately 65% of the Chief Executive Officer’s targeted total direct compensation, and approximately 35% to 42% of the targeted total direct compensation for the other NEOs, was provided in the form of long-term, stock-based compensation (PRSUs and RSUs).In setting the amount of base salaries for the Company’s NEOs, the Compensation Committee reviews the complexity of the job requirements and performance expectations and the market data described above including, as warranted, information from the Compensation Comparison Group, and
consults with its independent compensation consultant. The annualized base salaries of the NEOs during 20172023 and 20162022, and the percentage of increase between the two years, are set forth in the table below. The increases were merit based, and were made after a review of individual performance and relevant competitive market data, and reflect these factors as well as recognitionthe increased scope and complexity of the continued increases inbusiness. In particular, the competitive market share and profitability.
| | | | | | | | | | | | |
Name | | 2017 | | | 2016 | | | % Change | |
Oliver G. (Chip) Brewer III | | $ | 800,000 | | | $ | 800,000 | | | | 0.0% | |
Brian P. Lynch | | $ | 400,000 | | | $ | 338,130 | | | | 18.3%(1) | |
Mark F. Leposky | | $ | 424,483 | | | $ | 416,160 | | | | 2.0% | |
Richard H. Arnett | | $ | 400,000 | | | $ | 366,720 | | | | 9.1%(2) | |
Alan Hocknell | | $ | 372,006 | | | $ | 364,712 | | | | 2.0% | |
Robert K. Julian (3) | | $ | 468,180 | | | $ | 459,000 | | | | 2.0% | |
(1)data led to Mr. Lynch’sStarrs’ base salary increase reflects a 5.0% merit based increase in early 2017, followedbeing adjusted by a 12.7% increase as a result oflarger amount than the other NEOs in order to keep his promotion to the role of Chief Financial Officer in August 2017.
(2) Mr. Arnett’s base salary increase reflects the added responsibilities related to oversightcompetitive with that of the OGIO brand portfolio that were assigned upon completion of the acquisition in early 2017.
(3) Mr. Julian departed from the Company in April 2017.
comparable executives at other similar companies.
| | | | | | | | | | | | | | | | | |
| Name | | 2023 | | 2022 | % Change |
| Oliver G. (Chip) Brewer III | | $ | 1,100,000 | | | $ | 1,050,000 | | 4.8 | % |
| Brian P. Lynch | | $ | 625,000 | | | $ | 600,000 | | 4.2 | % |
| Arthur F. Starrs | | $ | 825,000 | | | $ | 750,000 | | 10.0 | % |
| Glenn F. Hickey | | $ | 520,000 | | | $ | 500,000 | | 4.0 | % |
| Mark F. Leposky | | $ | 520,000 | | | $ | 500,000 | | 4.0 | % |
The annual incentive
bonus serves as the short-term
incentive compensationperformance-based element of the executive compensation program. The
bonusincentive is
at-risk, with payment based
upon designated corporateon Company-wide goals
for the CEO, CFO, and
individual performance.Mr. Leposky, and business unit goals for Mr. Starrs and Mr. Hickey. The
bonusincentive is intended to
provide an incentive formotivate an executive to drive a high level of
corporate and individualCompany-wide and/or business unit performance without excessive risk taking.
It allows those NEOs with primary oversight of a significant business unit to be rewarded for strong business unit performance, up to target level awards, but requires achievement of minimum Company-wide performance levels to fund business unit awards above target, as described below. The payout of annual
bonusesincentives to executive officers is subject to the Compensation Committee’s approval following its review and assessment of
corporateCompany-wide and
of individual performance.Bonus Pool Funding
In 2017, the Company accrued a maximum pool of funds to be usedbusiness unit performance results.
How Incentive Opportunity and Payout is Determined
The annual incentive payout for the bonus payoutsNEOs is determined using the following process:
First, the participant’s annual base salary is multiplied by the participant’s target incentive percentage and by the participant’s achieved performance modifier, as described below, to determine the executive officers underparticipant’s baseline incentive payout.
| | | | | | | | | | | | | | | | | | | | |
Participant’s Annual Base Salary | X | Participant’s Target Incentive % | X | Participant’s Performance Modifier % | = | Baseline
Incentive
Payout |
Second, the
annualparticipant’s baseline incentive
program. The amountpayout may be adjusted upward or downward based on individual performance relative to individual performance factors set for such executives for 2023, in the sole discretion of the
bonus pool was determined based upon the Company’s performance in 2017. The funding formula, which provided funding to cover the maximum bonuses payable to each eligible executive officer, was the aggregate of the following for each of the executive officers: | | | | | | | | | | | | | | | | |
Base
Salary
| | X
| | Target
Bonus
%
| | X
| | EBITDA
Modifier
| | X
| | 150%
(Individual
Performance
Modifier)
| | =
| | Bonus Pool |
The 150% individual performance modifier was intended to provide funding to allow for a modest level of discretion to recognize exceptional individual performance. The Compensation Committee, may adjust funding downward to result in an individual executive’sdetermine the final payoutincentive payout. Any upward adjustment based on performance against agreed upon objectives (or other performance during the year not anticipated at the beginning of the year when objectives are set)individual factors is limited to no more than 33%. The finalA participant’s incentive payout amount willmay not exceed 200% of the executive’s target bonus percentage regardless of performance.
How Bonus Opportunityincentive.
Target Incentive and Payout is DeterminedBase Salary. The amount of an executive officer’s annual incentive bonus is generally based upon the level of achievement of the corporate performance metric as well as individual performance and accomplishments for the applicable year, including the degree to which predetermined regional or department goals are achieved. The base salary component of the formula is the executive’s 2017 annualized base salary.
Target Bonus.Business Unit Performance Basis.
The target bonusincentive percentage, which the Compensation Committee sets each year, is a percentage of the executive’s base salary and is the amount the executive could earn based upon the corporate performance portion of the bonus assuming the Company or business unit achieved its target goals, and the executive achieved hishis/her individual objectives, and otherwise met performance expectations. The 2023 target bonusincentive percentages were increased from the 2022 levels, for 2017Mr. Brewer, Mr. Lynch, and Mr. Starrs based on a review of their scope of responsibilities and relevant competitive market data. Target incentive percentages were based on each executive’s position and were set to be generally consistent with market data and the range of total direct compensation that the Compensation Committee targets for the NEOs. The 2017 target bonus percentageincentive percentages for each NEO was unchanged from 2016, with the exception of Mr. Lynch. Mr. Lynch’s target bonus percentage was increased from 55% to 65% in 2017 as a result of his promotion to the role of Chief Financial Officer. The increased bonus percentage was consistent with market dataduring 2023 and the structure of previous incumbents in the Chief Financial Officer role. The target bonus percentages for 20172022 are set outdetailed in the table under “—2017 Annual Incentive Payouts,” below.
| | | | | | | | | | | | | | |
| Name | | 2023 | | 2022 |
| Oliver G. (Chip) Brewer III | | 140% | | 125% |
| Brian P. Lynch | | 100% | | 85% |
| Arthur F. Starrs | | 100% | | 85% |
| Glenn F. Hickey | | 75% | | 75% |
| Mark F. Leposky | | 75% | | 75% |
As discussed below, the actual
bonusincentive payouts for each executive can vary from zero to 200% of such executive’s target
bonusincentive percentage.
EBITDA Modifier.
Company-Wide Performance Goal. Adjusted EBITDA, as further adjusted for items mentioned in the table footnote below, was chosen as the corporateCompany-wide performance metric for 2017 because2023.
Business Unit Performance Goals. The primary financial metrics for the primary objective for 2017 was sustaining the Company’s earnings growth and increasing liquidity. In addition, many of the Company’s investors value the Company based upon multiples ofdefined business units are Contribution to Profit (“CTP”) or Adjusted EBITDA. Business unit metrics spanning multiple global locations are currency neutral to planned budgeted currency exchange rates.
The
2017 adjusted2023 Company-wide Adjusted EBITDA performance goals,
and business unit level CTP and Adjusted EBITDA goals, were set
at threshold, target and maximum levels by the Compensation Committee in
January 2017.February 2023. In setting these goals, the Compensation Committee considered the
Company’s 20162022 Company-wide and business unit level performance, the
Company’s 20172023 Company-wide and business unit level operational goals, and the
20172023 budget. Prior to approving the goals, the Compensation Committee discussed them with management and with its outside compensation consultant.
The
Potential payouts attributable to the Company-wide or business unit modifiers are determined based on the performance level achieved, and are interpolated on a straight-line basis for achievement between threshold, target, and maximum adjusted EBITDA performance goals for 2017 were $42.7 million, $52.7 million, and $60.2 million, respectively.goals. No annual incentive bonus is paid unless the threshold performance goal is achieved. The targetFurthermore, the achieved performance goal was consistent withmodifier opportunity for the Company’s budget for 2017respective business unit metrics is limited based on the overall Company-wide Adjusted EBITDA performance levels as described below:
| | | | | |
Business Unit
Achievement Level Modifier | Required Company-wide Adjusted EBITDA Modifier |
| 50% - 100% | None |
| 100% - 150% | 100% Minimum |
| 150% - 200% | 150% Minimum |
Should the Company-wide achievement modifier exceed the calculated business unit achievement level modifier, the business unit level modifier will be applied to the participant’s incentive calculation and
approximately 9% greater thanwill not be increased or adjusted relative to the
2016 target performance goal. The 2017 target goal reflected both an anticipated increase in sales in 2017 as well as the significant negative effect that changes in foreign currency rates were expected to have upon the Company’s business. The EBITDA Modifier is capped even if performance exceeds the maximum goals.Company-wide modifier.
Potential payouts attributable to
the EBITDA modifierCompany-wide or business unit modifiers are determined based on the
EBITDA performance level achieved, and are interpolated on a
straight linestraight-line basis for achievement between
the threshold, target, and maximum performance goals. The table below shows the
2023 Company-wide and business unit performance goals, the NEO associated with each, the relationship between the
performancerespective goals and
the EBITDA modifierrelated performance modifiers for purposes of determining the potential
payout: | | | | | | | | | | |
| | | Threshold | | Target | | Maximum | | Actual Performance | | |
Adjusted EBITDA2 | | $47.2 million | | $52.7 million | | $60.2 million | | $100.0 million | | |
EBITDA Modifier | | 50% | | 100% | | 150% | | 150% | | |
Individual Performance Modifier.The individual performance modifier is for funding purposes only and is applied after the calculation of the EBITDA modifier. As a result, as EBITDA performance varies from target, so does the relative size of the individual performance modifierpayout, and the level of negative discretion it affords the Compensation Committee as a percentage of the NEO’s total bonus opportunity. It is fixed at 150% to allow for the Compensation Committee to exercise negative discretion from the maximum individual funded payout levels to arrive at the final payout for the executive. In making its determination of the final bonus for a particular executive, the Compensation Committee considers the executive’s individualactual performance and accomplishments, and other than with respect to the Chief Executive Officer, the Chief Executive Officer’s recommendation.
2017 Annual Incentive Payouts
For purposes of calculating the annual incentives, the Compensation Committee excluded from 2017 EBITDA transaction related costs for the OGIO and travisMathew acquisitions. Excluding these costs, the Company achieved Adjusted EBITDA of $100.0 million for 2017, which represents a
2payout modifier achieved:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Metric /
Performance Levels: | Associated NEO | Threshold | Target | Maximum | Actual |
| Value | Modifier | Value | Modifier | Value | Modifier | Value | Modifier |
Company-wide Adjusted EBITDA(1) | Mr. Brewer,
Mr. Lynch &
Mr. Leposky | $584.9 MM | 50% | $635.8 MM | 100% | $686.7 MM | 200% | $596.6 MM | 61.5% |
Topgolf Overall EBITDA(2) | Mr. Starrs | $296.1 MM | 50% | $322.1 MM | 100% | $348.1 MM | 200% | $304.0 MM | 65.1% |
Aggregate CTP - Callaway Equipment & Soft Goods(3) | Mr. Hickey | $278.6 MM | 50% | $303.6 MM | 100% | $328.6 MM | 200% | $284.3 MM | 61.5% |
(1)Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization expenses, non-cash stock compensation expenses, and non-cash lease amortization expense, in addition to costs associated with certain non-recurring and non-cash items. These non-recurring and non-cash items for 2023 included charges related to the impairment and abandonment of the Shankstars media game, charges in connection with the 2023 debt modification, IT integration and implementation costs stemming primarily from the merger with Topgolf, restructuring and reorganization charges in our Topgolf and Active Lifestyle segments, and costs related to a non-GAAP financial measure within the meaning of Regulation G.cybersecurity incident. Appendix A to this Proxy Statement includes a reconciliation of adjustedAdjusted EBITDA to net income, the most directly comparable financial measuresmeasure prepared in accordance with GAAP.
72% increase over 2016(2)Topgolf segment Adjusted EBITDA (which excludedis the impact of the gain on the sale of a portion ofAdjusted EBITDA for the Company’s Topgolf investment in 2016). 2017segment. See Appendix A to this Proxy Statement for a reconciliation of Topgolf segment Adjusted EBITDA exceededto Topgolf segment operating income.
(3)Aggregate CTP - Callaway Equipment & Soft Goods is revenue minus direct expenses for the maximum performance goal underCallaway Golf Equipment business, the termsCallaway Golf soft goods business, the TravisMathew business in Japan, Korea and the rest of Asia and the bonus plan. However,Jack Wolfskin business in Japan.
2023 Annual Incentive Payouts
As noted above, the
Company-wide Adjusted EBITDA for 2023 was $596.6 million, an increase of 6.9% compared to 2022. This result was between threshold and target level goals for the annual incentive plan, resulting in an Adjusted EBITDA modifier
was capped at 150%of 61.5%. The respective performance results for each
ofbusiness unit was also between threshold and target levels, resulting in the
NEOs.In determining the final recommended bonus of each NEO, the Compensation Committee considered the exceptional 2017 financial and market share performance of the Company’s core business, and the assessment of each NEO’s strongaward level modifiers shown below. The NEOs listed were deemed to have met their individual performance towardobjectives relative to each person’s individual goals for the expansion offiscal year. Therefore no additional adjustments to the Company beyond the core business operations.calculated incentive payouts were recommended. The Compensation Committee believed that the individual performance of each NEO was strong in 2017, resulting in a $178 million, or 20%, increase in net sales in 2017 compared to 2016; the Company’s achieving over $1 billion in annual net sales for the first time since 2008; a 160 basis point increase in gross margin in 2017 compared to 2016, a $35 million, or 78%, increase in operating income in 2017 compared to 2016; increased market share and expanded market opportunities for the Company; total shareholder return in 2017 of 27%; and other achievements, including those listed above under “Compensation Discussion and Analysis—Overview—Corporate 2017 Performance and Business Environment.” In light of the foregoing, the Compensation Committee recommended, for Mr. Brewer, and the Board approved, a bonusincentive payouts consistent with the business performance modifier applicable to each NEO. As detailed below, the payout percentages were 61.5% of $1,600,000, which is equal to 200% of the target amountfor all NEOs, other than for Mr. Brewer. Based upon an assessmentStarrs, whose payout percentage was 65.1% of individual performance and accomplishments in 2017, along with the exceptional overall corporate performance, the Company’s Chief Executive Officer recommended, and the Compensation Committee approved, 200% maximum bonus payouts for all other NEOs, with the exceptiontarget.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Base Salary | X | Incentive Target % | X | Business Performance Modifier | | Individual
Performance
Modifier | = | Actual Incentive $ |
| Oliver G. (Chip) Brewer III | | $ | 1,100,000 | | x | 140.0% | x | 61.5% | x | 100.0% | = | $ | 947,100 | |
| Brian P. Lynch | | $ | 625,000 | | x | 100.0% | x | 61.5% | x | 100.0% | = | $ | 384,375 | |
| Arthur F. Starrs | | $ | 825,000 | | x | 100.0% | x | 65.1% | x | 100.0% | = | $ | 537,075 | |
| Glenn F. Hickey | | $ | 520,000 | | x | 75.0% | x | 61.5% | x | 100.0% | = | $ | 239,850 | |
| Mark F. Leposky | | $ | 520,000 | | x | 75.0% | x | 61.5% | x | 100.0% | = | $ | 239,850 | |
Annual Long-Term Equity Incentives
Overview of
Mr. Julian based on his departure from the Company in April 2017. (Also summarized in the table below).The table below provides the actual bonus amounts reflecting the results from the application of the formulas above:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name(1) | | Base
Salary | | | X | | | Bonus
Target
% | | | X | | | ( | | | EBITDA
Modifier | | | X | | | Individual
Performance
Modifier | | | = | | | Total
Maximum
Bonus
Opportunity
(2) | | | ) | | | = | | | Maximum
Potential
Payout | | | Actual
Bonus
$ | | | Actual
Bonus
% of Target | |
Mr. Brewer | | $ | 800,000 | | | | X | | | | 100 | % | | | X | | | | ( | | | | 150 | % | | | X | | | | 150 | % | | | = | | | | 200 | % | | | ) | | | | = | | | $ | 1,600,000 | | | $ | 1,600,000 | | | | 200.0 | % |
Mr. Lynch | | $ | 400,000 | | | | X | | | | 65 | % | | | X | | | | ( | | | | 150 | % | | | X | | | | 150 | % | | | = | | | | 200 | % | | | ) | | | | = | | | $ | 520,000 | | | $ | 520,000 | | | | 200.0 | % |
Mr. Leposky | | $ | 424,483 | | | | X | | | | 55 | % | | | X | | | | ( | | | | 150 | % | | | X | | | | 150 | % | | | = | | | | 200 | % | | | ) | | | | = | | | $ | 466,931 | | | $ | 466,931 | | | | 200.0 | % |
Mr. Arnett | | $ | 400,000 | | | | X | | | | 55 | % | | | X | | | | ( | | | | 150 | % | | | X | | | | 150 | % | | | = | | | | 200 | % | | | ) | | | | = | | | $ | 440,000 | | | $ | 440,000 | | | | 200.0 | % |
Mr. Hocknell | | $ | 372,006 | | | | X | | | | 55 | % | | | X | | | | ( | | | | 150 | % | | | X | | | | 150 | % | | | = | | | | 200 | % | | | ) | | | | = | | | $ | 409,207 | | | $ | 409,207 | | | | 200.0 | % |
(1) Mr. Julian left the Company in April 2017. He received a bonus payout amount of $143,836, equal to a prorated amount of his target bonus, based on the number of days he served as the Company’s Chief Financial Officer in 2017 (approximately 31.5%).
(2) Bonuses are capped at 200% of target.
Annual Long-Term Incentive
Overview
Equity Incentives
Consistent with the Compensation Committee’s goal of aligning executive compensation with long-term Company performance and with the Compensation Committee’s guiding principle that a majority of the long-term incentives should be performance-based, and that all
long-term incentives should be equity-based, the Compensation Committee determined to award PRSUs and RSUs to the NEOs in
2017.2023.
These awards wereare designed to motivate our executives to remain with the Company, achieve strong long-term operational performance and increase shareholder value. PRSUs tie executivesexecutives’ interests to the interests of shareholders by focusing and rewarding our executives for achievement ofachieving key financial objectives that link to the creation of shareholder value. RSUs provide a retention incentive as they vest solely based uponon continued service, and upon vesting they provide an ownership stake in the Company. They also further align the interests of the executives with those of the Company’s shareholders as the executives generally have the same long-term economic benefits and risks as those of a shareholder.
All
executive officerNEO awards in
20172023 were made under
the Callaway Golf Company Amended and Restated 2004our 2022 Incentive Plan
as amended (the
“Equity“2022 Plan”).
The 2017 awards granted to the NEOs were approved on February 6, 2017 and were granted on February 6, 2017.
How
theAnnual Long-Term Equity Incentive Awards are Determined
For each
of the NEOs,NEO, the Compensation Committee sets
aan annual targeted long-term incentive award value. The targeted value
for all of the Company’s officers generally varies by position and responsibility and is reviewed annually. In setting the targeted value, the Compensation Committee
generally consults with its independent compensation consultant and
periodically compares the targeted value to applicable market data, including broad industry data and, as warranted, data from the Compensation Comparison Group. It also considers the effect the long-term
incentive element wouldincentives may have
uponon the executive’s total direct
compensation.and realizable compensation opportunities.
The Compensation Committee then allocates the targeted
annual long-term incentive award value between PRSUs and RSUs. The mix of the awards
wasis intended to align with the Company’s philosophy that a majority of the long-term incentive awards for senior executives should be
performance based. Theperformance-based. With the exception of Mr. Brewer, for 2023, the target number of shares underlying the PRSUs and
the number of shares underlying the RSUs
iswas determined by multiplying the targeted
annual long-term incentive award value by 55% and 45%, respectively, and dividing that number by the average closing price of the Common Stock for the
20-trading 20 trading days immediately preceding the date on which the Compensation Committee approves the awards.
For Mr. Brewer, the allocation of underlying shares for the PRSUs and RSUs used a factor of 75% and 25% respectively, then applied the average closing stock price as described above. A
20-trading 20 trading day average price, as opposed to a single price on the approval date,
wasis used to mitigate the potential impact of single trading day aberrations on the number of shares granted.
The table below sets forth,
for 2023, the targeted
annual long-term incentive value
and the
resulting “target” number of PRSUs and the number of RSUs for each of the NEOs
for 2017: | | | | | | | | |
| Name | | 2017 Targeted Long-term Incentive Award Value | | | Target No. of Shares Underlying PRSUs(1) | | No. of Shares Underlying RSUs |
Oliver G. (Chip) Brewer III | | $ | 3,000,000 | �� | | 146,018 | | 119,469 |
Brian P. Lynch | | $ | 350,000 | | | 17,035 | | 13,938 |
Mark F. Leposky | | $ | 350,000 | | | 17,035 | | 13,938 |
Richard H. Arnett | | $ | 450,000 | | | 21,903 | | 17,920 |
Alan Hocknell | | $ | 350,000 | | | 17,035 | | 13,938 |
Robert K. Julian | | $ | 500,000 | | | 24,336 | | 19,912 |
(1) As explained below, zero to 200% of the target number of shares underlying the PRSUs will be eligible to vest after three years depending on the Company’s currency neutral adjusted EPS achievement over a three year performance period with opportunities to bank a limited portion of the award based upon interim year performance. |
Other than with respectsubject to Messrs. Brewer and Arnett, the 2017 targetedtheir annual long-term incentive value for all of the NEOs was unchanged from 2016. Following a review of the Company’s performance, a discussion of Mr. Brewer’s leadership and contribution to that performance, as well as applicable market compensation data, Mr. Brewer received aawards granted in February 2023:
| | | | | | | | | | | | | | | | | | | | |
| Name | | 2023 Targeted Long-Term (1) Incentive Award Value | | Target No. of Shares Underlying PRSUs | | No. of Shares Underlying RSUs |
| Oliver G. (Chip) Brewer III | | $ | 6,500,000 | | | 202,199 | | 67,400 |
| Brian P. Lynch | | $ | 1,500,000 | | | 34,219 | | 27,997 |
| Arthur F. Starrs | | $ | 2,250,000 | | | 51,328 | | 41,996 |
| Glenn F. Hickey | | $ | 1,000,000 | | | 22,813 | | 18,665 |
| Mark F. Leposky | | $ | 1,000,000 | | | 22,813 | | 18,665 |
(1)The targeted long-term incentive award values were increased in 2023. In 2022, these amounts were: Mr. Brewer, $5,500,000; Mr. Lynch, $1,250,000; Mr. Starrs, $1,500,000; Mr. Hickey, $800,000; and Mr. Leposky, $800,000.
As described above, these “target” values are converted at the time of $3,000,000grant into a “target” number of PRSUs and RSUs, respectively, based on the 20 trading day average price described above. As a result, the actual aggregate grant date fair value of these awards, computed in 2017, as compared to $2,500,000 in 2016. The increase reflectsaccordance with ASC Topic 718, may differ from the Compensation Committee’s recognition of Mr. Brewer’s roletarget values reflected in the significant improvement in the Company’s operating performance as well as an incentive to drive further improvements going forward. Mr. Arnett’s targeted long-term incentive award was increased to $450,000 in 2017 from $350,000 in 2016. The increase reflects the added responsibilities related to oversight of the OGIO brand that were assigned upon completion of the acquisition in early 2017, and the Compensation Committee’s determination of an appropriate award value following a review of applicable market data relative to the elevated responsibilities and the effect of the award on the value of Mr. Arnett’s overall total direct compensation.
In addition to the awards listed above, the Compensation Committee approved for Mr. Leposky a separateone-time award of RSUs with a target value of $500,000, resulting in 44,248 underlying shares, as both recognition of the significant operational improvement achieved under his leadership and a long-term retention vehicle. Fifty percent of the RSUs will vest after 3 years, and the remaining 50% after four years fromtable above. For the grant date of February 6, 2017. Mr. Lynch was awarded aone-time grant of RSUs with a targetfair value of $500,000, resulting in 39,094 underlying shares, relatedthe PRSU and RSU awards granted to his promotion to Chief Financial Officer in July 2017. The grant date of the award was August 1, 2017, and it will cliff vest five years fromCompany’s NEOs during 2023, please see the grant date.
How theSummary Compensation Table below.
2023 Annual Long-Term Equity Incentive Awards
Vest Both RSUs and PRSUs are contingent rights to receive one share of Common Stock upon vesting of the applicable award.
RSUs. Except as described above with respect to the promotional and retention awards to Messrs. Lynch and Leposky, theThe RSUs granted in 20172023 vest and the restrictions lapse in three equal annual installments commencing on theone-year anniversary of the grant date, subject to continued employment through each applicable vesting date. This schedule means that, to receive the full benefit of the RSUs, the recipient must generally perform three years of continuous service following the grant date.
PRSUs.The PRSUs granted in 20172023 are subject to both service-based and performance-based and service-based vesting. Thevesting with performance tied 100% to the Company’s performance relativerTSR, to currency neutral adjusted EPS will be measured over a three-year performance period beginning January 1, 20172023 and ending December 31, 2019.2025. Any PRSUs for which the performance criteria are satisfied will cliff-vest on the third anniversary of the grant date.
To calculate the Company’s rTSR, the TSR of the Company for the three-year performance period is ranked on a percentile basis in comparison to the calculated TSR for companies listed in the S&P Composite 1500 Consumer Discretionary sector, excluding the Automobiles and Components sub-industry group (the “LTIP
Reference Group”). The number of shares earned
based on the Company’s calculated rTSR over the three-year performance period compared to the LTIP Reference Group may vary from
zero0% to 200%
. The final calculation will be based only on those companies included in the LTIP Reference Group as of
the target number of shares underlying the PRSUs depending on the Company’s currency neutral adjusted EPS performance during this three-year period. A portion of the total award may be “banked” at the end of each interim year based on cumulative currency neutral adjusted EPS achievement during the interim performance period relative to the threshold, target and maximum levels established by the Compensation Committee in January 2017. However, final vesting of the PRSUs will not occur until the end of the
three-year performance
period and will be subject to continued employment through that date. Banked awards cannot be decreased based on performance in subsequent years. In addition, banked awardsperiod. If a company is removed from the index during
the first year of the three-year performance period,
are capped at 50%they will be removed from the LTIP Reference Group for purposes of the
“target” award,final calculation. The TSR for the Company and
cumulative banked awards after the
second yearLTIP Reference Group is calculated using a trailing 20 trading day average at the beginning and end of the
three-year performance
periodperiod. The performance goals for rTSR relative to the LTIP Reference Group, and related vesting levels are
capped at 80% of the “target” award. As such, vesting at the “target” level or above can only be achieved if the Company’s performance is at or above the three-year target performance goal.as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Period | | No Payout | | Threshold (50% Award) | | Target
(100% Award) | | Maximum Award (200% Award) |
| 2023 - 2025 | | Below 25th
Percentile | | 25th Percentile | | Median
(50th Percentile) | | 75th Percentile or
Above |
The extent to which PRSUs are eligible to vest is determined based on the performance level achieved, and arewith award levels interpolated on a straight linestraight-line basis for achievement between the threshold, target and maximum performance goals. Performance below the threshold performance goal results in no PRSUs being eligible to vest.
The PRSUs are subject to double-trigger acceleration. If
an executive’s employment is terminated without cause or for good reason, in either case within the
Compensation Committee determines that vesting of the PRSUs is accelerated in connection withone year period following a change in control,
prior to the
completion of the performance periodPRSUs will be eligible for
the performance metric pursuant to Section 4(a) of the Agreement, the value of the PSUs will vest upon closure and be paid outaccelerated vesting at the target performance level.
The PRSUs granted by the Company in 2022, which will be measured over a three-year performance period beginning January 1, 2022 and ending December 31, 2024, are subject to the same performance goals as described above for the 2023 PRSUs.
Annual Long-Term Equity Incentive Award Outcomes
2021 - 2023 LTIP Plan. PRSUs for the three-year performance period that ended on December 31, 2023 were earned based on the achievement of APTI and rTSR objectives. The APTI performance goals were set by the Compensation Committee in February 2021, based on the budgeted APTI forecast approved by the Board and prior to the consummation of the Topgolf transaction. At that time, the Company was still facing significant uncertainty regarding the ongoing impact of COVID-19 on its future results (and the future results for Topgolf). The Compensation Committee established the threshold, target and maximum levels in February 2021 in light of the business environment at that time, including considering the significant COVID-19-related challenges faced by Topgolf’s business in 2020, and the uncertainty regarding the extent to which the COVID-19-related challenges would continue throughout 2021 and in the future. For example, there was significant uncertainty regarding Topgolf’s ability to reopen and staff existing venues let alone launch new venues, in addition to uncertainty regarding consumers’ willingness to gather in Topgolf facilities in the 2016—2018 LTIP plan,midst of the ongoing pandemic. In setting these goals, the Compensation Committee considered the Company’s 2020 performance, 2021 operational goals, 2021 budget, Topgolf projected contributions to APTI and long-term financial plans based on the financial information provided at the time the transaction was approved. The cumulative APTI objectives, and the actual cumulative performance level, as well as the cumulative thresholdrTSR objectives and target currency neutral Adjusted EPSactual rTSR performance forcompared to thetwo-year period of January 1, 2016 – December 31, 2017, that would result in up to 80% constituents of the target award being banked were $0.26 (threshold)S&P 1500 Composite Consumer Durables & Apparel, excluding Homebuilders, are described in the table below.
| | | | | | | | | | | | | | | | | |
| 2021 - 2023 LTIP Plan Final Metric Performance and Award Summary |
| Cumulative Metrics / Performance |
| Metric (Weighting) | Threshold | Target | Maximum | Actual | Weighted Achievement |
Cumulative APTI (50%)(1) | $16.0MM | $32.0MM | $64.0MM | $586.5MM | 100.0% |
| Achieved APTI-related award level | 50.0% | 100.0% | 200.0% | 200.0% |
| | | | | |
| Cumulative rTSR (50%) | 25th percentile | 50th percentile | 75th percentile | 26th percentile | 26.0% |
| Achieved rTSR-related award level | 50.0% | 100.0% | 200.0% | 52.0% |
| Total Award Earned | | | | | 126.0%
of Target |
(1) Adjusted Pre-tax Income (APTI) is a non-GAAP measure. Cumulative APTI excludes costs related to our acquisitions, amortization and $0.49 (target). Forother non-recurring costs related to the cumulative performance from January 1, 2016 – December 31, 2017,Company’s acquisitions, non-cash amortization of the Company exceededdebt discount related to the targetCompany’s convertible notes, a non-cash valuation allowance recorded against certain of the Company’s deferred tax assets as a result of the Topgolf merger, costs related to the transition to the Company’s new North American Distribution Center, costs related to the implementation of new IT systems, certain Callaway corporate and one-time costs related to the Topgolf merger, hedging offsets, and is adjusted for budgeted foreign currency neutral Adjusted EPS. rates.
On January 31, 2018,February 6, 2024, the Compensation Committee determined that, based on suchthese results, 80%126.0% of the “target” 2016total aggregate PRSUs were deemedearned and vested.
2021 - 2023 One-time Transaction Award. With the exception of Mr. Starrs, PRSUs for the three-year performance period that ended on December 31, 2023 were earned based on the achievement of cumulative combined Company Adjusted EBITDA objectives. The PRSUs awarded to be banked underMr. Starrs were earned based on the
terms achievement of three-year cumulative Topgolf-only Adjusted EBITDA. As with the APTI performance goals discussed above, the Compensation Committee established the threshold, target and maximum levels, with the target level slightly above the Board approved forecast for Adjusted EBITDA, in February 2021 in light of the PRSUsbusiness environment at that time, including considering the significant COVID-19-related challenges faced by Topgolf’s business in 2020, and these units will vestthe uncertainty regarding the extent to which the COVID-19-related challenges would continue throughout 2021 and in the future. For example, there was significant uncertainty regarding Topgolf’s ability to reopen and staff existing venues let alone launch new venues, in addition to uncertainty regarding consumers’ willingness to gather in Topgolf facilities in the midst of the ongoing pandemic. In setting the Adjusted EBITDA goals, the Compensation Committee considered the Company’s 2020 performance, 2021 operational goals, 2021 budget and Topgolf projected contributions to pro forma Adjusted EBITDA based on the third anniversaryfinancial information provided at the time the transaction was approved. The target pro forma Adjusted EBITDA level set by the Compensation Committee represented growth of more than 65% over Adjusted EBITDA for 2020, and the grant date, subject to continued employment through the vesting date.
For the 2017–2019 LTIP plan, the 2017, threshold and target currency neutral Adjusted EPS performanceCompensation Committee viewed this as a rigorous, substantial hurdle that would resultreward executives for target level performance only if the Company’s budgeted Adjusted EBITDA objectives were met. The cumulative Adjusted EBITDA objectives, and the actual cumulative performance level for both awards are described in upthe table below.
| | | | | | | | | | | |
Cumulative Topgolf Callaway Brands Adjusted EBITDA(1) |
| Threshold | Target | Maximum | Actual |
| $858.5 MM | $1,010.0 MM | $1,161.5 MM | $1,591.9 MM |
| 50% | 100% | 150% | 150% |
| | | | | | | | | | | |
Cumulative Topgolf-only Adjusted EBITDA(1) |
| Threshold | Target | Maximum | Actual |
| $358.5 MM | $478.0 MM | $597.5 MM | $706.2 MM |
| 50% | 100% | 150% | 150% |
(1)Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization expenses, non-cash stock compensation expenses, and non-cash lease amortization expense, in addition to 50%costs associated with certain non-recurring and non-cash items. These non-recurring and non-cash items for 2023 include certain noncash asset write-downs, IT integration and implementation costs stemming primarily from the merger with Topgolf, costs related to our debt modification and reorganization costs in our Topgolf and Active Lifestyle segments and costs related to a cybersecurity incident. In 2022, non-recurring items include non-cash asset write downs, implementation costs associated with new ERP systems stemming from acquisitions, legal costs and credit agency fees related to a postponed debt refinancing and reorganization expenses. In 2021, non-recurring items include the recognition of a gain on the award being banked were $0.14 (threshold)Company’s pre-merger investment in Topgolf, transaction costs associated with the merger with Topgolf and $0.20 (target). For 2017,costs related to the Company exceededimplementation of new IT systems for Jack Wolfskin. Appendix A to this Proxy Statement includes a reconciliation of Adjusted EBITDA to net income, the target currency neutralmost directly comparable financial measure prepared in accordance with GAAP.
(2)Topgolf segment Adjusted EPS. EBITDA is the Adjusted EBITDA for the Company’s Topgolf segment. See Appendix A to this Proxy Statement for a reconciliation of Topgolf segment Adjusted EBITDA to Topgolf segment operating income.
On
January 31, 2018,February 6, 2024, the Compensation Committee determined that, based on
suchthese results,
50%150% of the
“target” 2017underlying PRSUs were
deemed to be banked under the termsearned. For Mr. Brewer and Mr. Lynch, fifty percent (50%) of the
PRSUs and these units will vestearned awards vested on
March 8, 2024, the third anniversary of the
grantaward date,
subject to continued employment throughand the
vesting date.These “banked” PRSUs from bothremaining fifty percent (50%) will vest on the 2016–2018 and 2017–2019 LTIP plans are reported in the “Number of Shares or Units of Stock That Have Not Vested” columnfourth anniversary of the “Outstanding Equity Awards at Fiscal-Year End 2017 Table.” Each NEO remains eligible to vest inaward date, March 8, 2025. The earned awards for Mr. Starrs vested on April 5, 2024,
which was the
remaining PRSUs reflected inthird anniversary of his original hire date. For Mr. Hickey and Mr. Leposky, the
originalearned awards
(up to a total of 200%vested on March 8, 2024, the third anniversary of the
“target” PRSUs) subject to the Company’s currency neutral EPS achievement during the remainder of the respective performance periods (and subject to additional potential “banking” following the completion of each interim performance year). The number of PRSUs in which a NEO remains eligible to vest is reported in the “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” column of the “Outstanding Equity Awards at Fiscal-Year End 2017 Table.” See “2017 Compensation Tables—Outstanding Equity Awards at Fiscal-Year End 2017 Table,” below.Approval and Timing of Grants
The Compensation Committee has adopted specific guidelines that govern the approval and timing of stock-based awards. The guidelines provide that (i) all stock-based award grants must be approved by the Compensation Committee, (ii) the annual stock-based awards will be approved at a regularly scheduled or special meeting of the Compensation Committee with the effective date of grant being the second trading day following the Company’s announcement of actual full year financial results for the prior year, (iii) promotion or other special event award grants made outside of the annual grant process will be approved at the first regularly scheduled meeting of the Compensation Committee following the applicable event with the effective date of grant being on the first trading day of the month following the month in which such approval is obtained, and (iv) new hire award grants made outside of the annual award process will be approved at a regularly scheduled or special meeting of the Compensation Committee prior to the date the employee commences employment or the first regularly scheduled meeting of the Compensation Committee following the date of hire. The effective date of grant of the new hire awards will be the date the employee commences employment if the approval occurred prior to such date or the first trading day of the month following the month in which approval is obtained if the approval occurs subsequent to the date on which the employee commences employment. The Compensation Committee’s approval includes the eligible participants, type of awards, the size of award for each participant, the performance criteria where applicable, as well as the other terms of the awards and program. In accordance with these guidelines, the 2017 annual long-term incentive awards for the NEOs were approved by the Compensation Committee on February 6, 2017 and the awards were granted on February 6, 2017. The average closing price of the Common Stock for the20-trading days immediately preceding the date of approval by the Compensation Committee of these awards was $11.30 and on the date of grant was $10.10. Additional promotion and retention long-term incentive awards for Messrs. Lynch and Leposky, respectively, were approved separately by the Compensation Committee in 2017.
date.
None of the PRSUs include dividend equivalents. Unvested RSUs granted to all of the Company’s employees, including the NEOs, have dividend equivalents in the form of additional RSUs.
Dividend equivalents entitle holders of RSUs to the same dividend value per share as holders of Common Stock but are accrued in additional RSUs. Dividend equivalents are subject to the same vesting and other terms and conditions as the corresponding unvested RSUs. The additional RSUs accrued in respect of dividends are accumulated and issued when and to the extent the underlying RSUs vest.
In August 2020, as part of the Company's effort to manage costs and capital allocation most efficiently, the Company announced the cessation of its quarterly dividends.
Various benefits are established for the NEOs to enhance productivity, provide for healthcare needs, and encourage work/life balance. Consistent with the benefits provided to other
U.S. employees, the Company’s primary benefits for executives include the Company’s health, dental and vision plans, and various insurance plans, including life, long-term disability, and accidental death and dismemberment
insurance, as well as paid time off.insurance. The Company covers the costs of an annual physical, the costs of tax and estate planning fees and, consistent with the Company’s position as a leader in the
modern golf industry, many executives are provided subsidized country club memberships or a limited amount of green fee reimbursements and a limited amount of the Company’s products. The Company from time to time provides other benefits to employees or officers as a group or to an individual officer as warranted. See the
“2017“2023 Compensation Tables—
20172023 Summary Compensation
Table,”Table” below for additional information about the value of benefits and perquisites provided to the NEOs in
2017.2023.
The Company does not provide the executive officers with any defined benefit pension plans or supplemental executive retirement plans,
(SERPs), or other similar types of retirement benefits. The only retirement benefit the Company currently provides the NEOs is the right to participate in the Company’s 401(k) Retirement Investment Plan. This retirement benefit is provided to all
US Company employees and the NEOs’ right to participate is the same as other Company employees.
The Company’s 401(k) plan allows participants,
with the exception of Mr. Starrs, to contribute a portion of their compensation into the plan with the Company providing a matching contribution up to 3% of the participant’s compensation (subject to a maximum matching contribution of up to
$8,100$9,900 in
2017)2023). The funds held in the 401(k) plan are invested through Vanguard in various funds selected by the participant.
Deferred Compensation Plan
In December 2016, the Company adopted the Callaway Golf Company Deferred Compensation Plan (the “DCP”). The DCP was intended
As an employee of Topgolf, Mr. Starrs is allowed to
help buildparticipate in, and contribute a
supplemental source of savings and retirement income throughpre-tax deferralsportion of eligible compensation
which included base salary, annual cash bonus awards,sign-on cash bonus awards, commissions, long term cash incentive compensation, stock unit awards and/or any other payments designated as eligible for deferral underto, the
DCP from timeTopgolf 401(k) plan. The Company provides a matching contribution up to
time. Effective November 2017, as a result of minimal participation, and expressed lack of future interest in additional participation by eligible employees, and in consideration4% of the
administrative cost and time requirements necessaryparticipant’s compensation (subject to
support the DCP long-term, the DCP was terminated. As a
result of this action, no further deferral opportunities will be provided. Any 2017 deferrals will be distributed to the participants no earlier than 12 months, and no later than 24 months, following the termination of the DCP in accordance with the requirements of Section 409A of the Code.Employees at a vice president level or above were eligible to participate in the DCP. During 2017, Mr. Brewer was the only NEO currently employed by the Company who elected to make deferrals under the DCP. Mr. Julian also elected to make deferrals under the DCP in 2017; however his deferral was accelerated in connection with his departure from the Company in April 2017. Under the DCP, the Company provided participants with the opportunity to make annual elections to defer a specified percentagemaximum matching contribution of up to 80% of their eligible cash compensation and up to 100% of their stock
unit awards. No deferrals of cash compensation were made under the DCP. Elective deferrals of stock unit awards are credited to a bookkeeping account established$13,200 in 2023). The funds held in the name of the participant with respect to an equivalent number of shares of Common Stock, and such credited sharesTopgolf 401(k) plan are subject to the same vesting conditions as are applicable to the stock unit award subject to the election.
At the time of deferral, deferrals of stock unit awards under the DCP are deemed rights to receive an issuance of Common Stock and may not be deemed allocated to any investment fund.
Under the DCP, with respect to deferrals of restricted stock units, the Company will be obligated to issue shares of Common Stock on a future date (the “Obligations”). The Obligations are unfunded, unsecured general obligations of the Company and rankinvested through Fidelity in parity with the Company’s other unsecured and unsubordinated indebtedness, subject to the claims of the Company’s general creditors. The Obligations are not transferable except upon death of the participant.
Prior to the termination of the DCP, payments were to be distributed in connection with either the participant’s separation of service, a change in control of the Company or avarious funds selected specified distribution date or dates, depending upon the distribution election made by the participant at the timeparticipant.
Employment and Change in Control Agreements
Employment Agreements of
deferral. For amounts elected for distribution upon a specified date, participants were able to elect the form of payment as a single lump sum payment or annual installment payments of up to five years. However, if a participant’s service with the Company terminates prior to the selected specified distribution date or dates, payment would instead be made or commence in connection with such separation from service. Participants were able to elect the form of payment as a lump sum or annual installments of up to fifteen years for distributions to be made upon the participant’s separation from service due to retirement, which means a separation from service after the participant has attained age 55 and has at least five years of service with the Company. Any distribution triggered by a separation from service that occurs prior to the participant’s retirement would be paid in a single lump sum. Additionally, if a participant’s service terminates with us due to death or disability, or the participant is receiving installment payments and dies or becomes disabled prior to payment of all the installments, the Obligation would become immediately payable in a single lump sum. In addition, participants were entitled to receive payments through certain unforeseeable emergency withdrawals. Due to the termination of the DCP, any 2017 deferrals will be distributed to the participants no earlier than 12 months, and no later than 24 months, following the termination of the DCP in accordance with the requirements of Section 409A of the Code. Currently, the Company expects to distribute any deferrals in November 2019.Employment Agreements
NEOs
The Company has entered into an employment agreement with each of the NEOs, copies of which have been filed with the SEC. The Company believes that employment agreements are beneficial to it as they provide, among other things, protections related to the Company’s trade secrets and intellectual property. Each employment agreement generally requires the executive officer to devote his or her full productive time and best efforts to the Company, to hold in confidence all trade secrets and proprietary information he or she receives from the Company and to disclose and assign to the Company any inventions and innovations he or she develops during the course of employment with the Company. The employment agreements set forth the base salary, incentive compensation, and, in general terms, the benefits and perquisites that the executive officer is entitled to as described above. The employment agreements also set forth the benefits and rights the executive officer is entitled to upon termination of employment and upon achange-in-control of the Company. These rights are described below, and tables quantifying the potential payments to the NEOs upon the occurrence of such events are included with the other compensation tables included in this Proxy Statement. In connection with Mr. Julian’s departure from the Company in April 2017, we entered into a separation agreement with him, which is described below under “—Separation Arrangements with Robert K. Julian.”
Termination of Employment Generally
In general, whether a NEO is entitled to severance benefits upon termination of employment depends upon the reason for the termination of employment. If an executive voluntarily resigns without “good reason” or the Company terminates
histhe executive’s employment for “substantial cause,” then the executive is generally not entitled to any severance benefits. If the Company terminates
histhe executive’s employment without substantial cause or if
hethe executive resigns for good reason or because the Company elected not to renew
histhe executive’s employment agreement at the expiration of its term, then
hethe executive is generally entitled to severance benefits described below.
“Substantial cause” means the executive’s (i) failure to substantially perform histhe executive’s duties, (ii) material breach of histhe executive’s employment agreement, (iii) misconduct, including use or possession of illegal drugs during work and/or any other action that is damaging or detrimental in a significant manner to the Company, (iv) conviction of, or plea of guilty ornolo contendere to, a felony, or (v) failure to cooperate with, or any attempt to obstruct or improperly influence, any investigation authorized by the Board or any governmental or regulatory agency. “Good reason” means a material breach of the employment agreement by the Company, and with respect to Mr. Brewer, also means any material diminishment in his position or duties or any requirement that he relocate his principal residence. The severance benefits to which the NEOs may be entitled are based upon an assessment of competitive market terms and a determination of what is needed to attract and retain the executive officers. Having negotiated these terms in advance allows for an orderly and amicable separation and, with respect to certain of these benefits, for the obtainment for the Company’s benefit of a release of claims, and provides an incentive for the executive not to compete with the Company.
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Termination Event | | Cash Payments | | Equity Award Vesting | | Other Benefits |
| By executive without “good reason” or by Company with “substantial cause” | | None. | | None. | | None. | | None. |
| | | |
| By the Company without “substantial cause,” by executive for “good reason,” or failure by the Company to renew expired employment agreement | | An amount equal to the annual incentive payment hethe executive would have received in the then-current year in light of the Company’s actual performance as measured against the requirements of the annual incentive plan,pro-rated to the date of termination.(1) A payment of .50 times (.75 times for Mr. Brewer) the sum of his most recent base salary and annual target incentive payable over 12 months (18 months for Mr. Brewer). (2) A payment of .50 times (.75 times for Mr. Brewer) the sum of his most recent base salary and annual target incentive payable over 12 months (18 months for Mr. Brewer) (the “Incentive Payments”) (3) | | Accelerated vesting of all long-term incentive compensation awards held by the executive that would have vested had hethe executive continued to perform services pursuant to histhe employment agreement for 12 months (18 months for Mr. Brewer) from the date of termination. (1) | | Payment of COBRA and/or CalCOBRA premiums and the continuation of the financial, tax and estate planning services benefit for 12 months (18 months for Mr. Brewer) and outplacement services for one year.(2) |
(1)These benefits will be paid after the completion of the relevant performance period and after the evaluation of whether, and the degree to which, the performance criteria have been met. Performance-based awards will accelerate only accelerate to the extent the underlying performance objectives are achieved. (2)Subject to the executive executing a release of claims in favor of the Company, the executive not engaging in any disparaging conduct or communications and his compliance with certain other requirements of his employment agreement. (3)Payable soas long as the executive chooses not to engage in any business that competes with the Company.
Termination of Employment Due to Disability or Death
In the event of a NEO’s permanent disability,
then the executive is generally entitled to the following benefits (i) a cash payment based on the incentive payment the executive would have received in light of the Company’s actual performance as measured against the requirements of the annual incentive plan and
pro-rated to the date of permanent disability; (ii) a lump sum payment equal to six months of then current base salary; (iii) the vesting of all unvested long-term incentive compensation awards held by the executive that would have vested had
hethe executive continued to perform services pursuant to
histhe employment agreement for 12 months (18 months for Mr. Brewer) from the date of permanent disability; and (iv) the payment of premiums owed for COBRA insurance benefits for 12 months (18 months for Mr. Brewer) from the date of permanent disability. The payment of any benefits described in clauses (i) and (iii) above will be paid after the completion of the relevant performance period and the evaluation of whether, and the degree to which, the performance criteria have been met.
In the event of a NEO’s death, the executive’s estate is generally entitled to accelerated vesting of all service-based full value long-term incentive awards held by the executive.
Change-in-Control Arrangements
with NEOs
To provide independent leadership consistent with the shareholders’ best interests in the event of an actual or threatened
change-in-control of the Company, the Company’s employment agreements with its officers, including the NEOs, provide certain protections in the event of a
change-in-control. A
“change-in-control” “change-in-control” of the Company is defined, in general, as the acquisition by any person of beneficial ownership of 30% or more of the voting stock of the Company, the incumbent members of the Board cease to constitute a majority of the Board, certain business combinations of the Company, or any shareholder-approved or court-ordered plan of liquidation of the Company.
The Company’s
change-in-control benefits require a double trigger prior to payment. In other words, there must be a
change-in-control and a “termination event” (described below) within one year following a
change-in-control. A “termination event” generally means the occurrence of any of the following within one year of the
change-in-control: (i) the termination without substantial cause or a material breach of the employment agreement by the Company, (ii) failure by the successor company to assume the employment agreement, (iii) any material diminishment in the position or duties that the executive had immediately prior to the
change-in-control, (iv) any reduction in compensation or benefits, or (v) any requirement that the executive relocate his principal residence.
In the event there is such a
change-in-control and termination event, each named executive officer currently employed by the Company is generally entitled to the following benefits:
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| | Cash Payments | | Equity Award Vesting | | Other Benefits |
| | An amount equal to the annual incentive payment hethe executive would have received in the then-current year in light of the Company’s actual performance as measured against the requirements of the annual incentive plan,pro-rated to the date of termination.(1) A payment of 1.0 times the sum of histhe most recent base salary and annual target incentive payable over 24 months.(2) A payment of 1.0 times the sum of histhe most recent base salary and annual target incentive payable over 24 months(3) | | Accelerated vesting of all long-term incentive compensation awards held by the executive that would have vested had hethe executive continued to perform services pursuant to his employment agreement for 12 months (18 months for Mr. Brewer) from the date of termination. (1) | | Payment of COBRA and/or CalCOBRA premiums and the continuation of the financial, tax and estate planning services benefit for 24 months and outplacement services for one year. (2) |
(1)These benefits will be paid after the completion of the relevant performance period and after the evaluation of whether, and the degree to which, the performance criteria have been met. Performance-based awards will only accelerate to the extent the underlying performance objectives are achieved.
(2)Subject to the executive executing a release of claims in favor of the Company, the executive not engaging in any disparaging conduct or communications and his compliance with certain other requirements of his employment agreement. (3)Payable soas long as the executive chooses not to engage in any business that competes with the Company. Our current form of long-term equity award agreements provide that upon a change of controlchange-in-control the Compensation Committee will determine (based upon the nature of thechange-in-control transaction) whether the
awards are assumed or continued or a substitute award is issued or whether, in the event the awards are not assumed or continued or substituted for, the awards vest on an accelerated basis. For this purpose, if the Compensation Committee determines that the awards vest on an accelerated basis, performance awards will vest at “target” if the performance period has not been completed.
In addition, for awards that are assumed, continued or substituted for in a change-in-control, our current form of long-term equity award agreements provide for accelerated vesting in the event of an executive’s termination other than for substantial cause or resignation for good reason, in either case within one year following a change-in-control (with the PRSUs vesting at “target” levels), which acceleration is in addition to the accelerated vesting provided in the employment agreements. The Company’s 401(k)
Retirement Investment Plan also provides for full vesting of all participant accounts immediately prior to a
change-in-control (as defined in the plan).
Separation Arrangements with Robert K. Julian
Effective April 25, 2017, Robert K. Julian departed from his position as Senior Vice President and Chief Financial Officer of the Company. In addition to any compensation accrued and unpaid as of the date his employment terminated and a payment equal to the annual incentive payment he would have received in 2017 in light of the Company’s actual performance, prorated based upon the number of days employed in 2017 (which bonus was $143,836), Mr. Julian’s separation benefits included: (i) the vesting of all equity-based long-term incentive awards held by him that would have vested within 12.5 months following the date of termination consisting of 170,558.88 shares; (ii) severance equal to (a) payment of an amount equal toone-half of the sum of his annual base salary and his annual target incentive, payable over 12 months ($386,248.50); (b) Company-paid COBRA benefits, financial planning and outplacement services for a period of 12 months (which benefits have an aggregate value of $4,561); and (c) accelerated vesting of certain additional long-term incentive compensation awards; and (iii) so long as he does not engage in any activities that compete with the Company, Mr. Julian is entitled to an amount equal toone-half of the sum of his annual base salary and his annual target incentive, payable over 12 months ($386,248.50). The aggregate value of the cash severance or severance benefits payable or to be provided to Mr. Julian is $772,497. Mr. Julian’s right to the foregoing severance was subject to his compliance with certain requirements of his employment agreement. Mr. Julian executed a release of claims in favor of the Company with an effective date of May 4, 2017.
Governance and Other Considerations
Each of the employment agreements for the Company’s NEOs contains “clawback” provisions. If the Company is required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirements under the U.S. securities laws as a result of the intentional misconduct or gross negligence of a NEO, then the applicable NEO is required to forfeit and reimburse the Company for all of the following: (i) any incentive or incentive compensation or equity compensation paid based upon such erroneously stated financial information;information, (ii) any incentivebonus or incentive compensation or equity compensation received by the applicable NEO during the12-month period following the earlier of the first public issuance or filing with the SEC of the financial document embodying the financial reporting requirement, (iii) any profits realized from the sale of Company securities during that same12-month period, and (iv) if the individual’s employment is terminated, the right to receive special severance and incentive payments and any unvested and/or unexercised long-term incentive compensation awards.
In addition, ifwe have adopted a Policy for the NEO is oneRecovery of Erroneously Awarded Compensation (the “Clawback Policy”) that applies to our current and former executive officers (including our Chief Executive Officer) in compliance with Section 10D-1 under the personsSecurities Exchange Act of 1934, as amended, and the corresponding rules adopted by the New York Stock Exchange. Under the Clawback Policy, the Company must recover erroneously awarded incentive-based compensation, as determined on a pre-tax basis, subject to automatic forfeiturelimited exceptions permitted under Section 304 of10D-1 under the Sarbanes-OxleySecurities Exchange Act of 20021934, as amended, and New York Stock Exchange rules, from current and former officers in the event the Company is required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirement under the United States securities laws as a resultrestatement. The Clawback Policy requires recovery of misconducterroneously awarded incentive-based compensation regardless of such NEO (within the meaning of Section 304, but other than as a result of intentionalwhether an executive officer engaged in misconduct or gross negligence (which are coveredotherwise caused or contributed to the requirement for the restatement and applies to incentive-based compensation received by a current or former executive officer during the paragraph above)), then, in additionthree completed fiscal years immediately preceding the date that the Board, or a committee of the Board, or the officer or officers of the Company authorized to any penalty prescribed by Section 304,take such action if Board action is not required, concludes, or reasonably should have concluded, that the applicable individualCompany is required to forfeit and reimburseprepare an accounting restatement. The amount required to be recovered is the Company for allexcess of the following: (i) any incentive or incentiveamount of incentive-based compensation or equity compensationactually received by Employee duringover the twelve (12) month period followingamount that otherwise would have been received had it been determined based on the earlier of the first public issuance or filing with the SEC of therestated financial document embodying the financial reporting requirement and (ii) any profits realized from the sale of Company securities during that same twelve (12) month period.
measure.
Risk Assessment of Compensation Programs
The Company has determined that its compensation policies, plans and practices are consistent with the Company’s strategic objectives, are appropriately balanced and do not create risks that are reasonably likely to have a material adverse effect on the Company. In making this determination, the Company’s human resources and law departments conducted their annual review of the compensation policies, plans and practices for its executive officers, as well as for all other employees, and then discussed their findings with the Company’s Chief Executive Officer, the Compensation Committee and the Compensation’sCompensation Committee’s independent compensation consultant. The Company identified its compensation policies, plans and practices that: covered its employee population; were structured differently from those of other business units; or represented a significant portion of its compensation expense. The Company then assessed the risk-taking incentives inherent in the design and operation of these policies, plans and practices, including the following features of such policies, plans and practices: design, payment methodology, potential payment volatility, relationship to financial results, length of performance period, risk-mitigating features, performance measures and goals, oversight and controls, and plan features and values compared to market practices. The Company also assessed the various controls that mitigate risks relating to compensation policies, plans and practices, such as executive stock ownership guidelines, hedging prohibitions
and forfeiture provisions contained in the employment agreements of the named executive officers that enable the recovery of certain incentive compensation payments in certain circumstances.
Based on this review, the Company believes that its compensation policies, plans and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. This conclusion is based on, among other things, the approach employed by the Company in developing its compensation policies and practices, including the following:
•In setting these policies and practices, the Company wasis careful to ensure that they wereare consistent with the Company’s strategic objectives and that none of the policies or practices variedvaries significantly from the overall risk and reward structure of the Company. As a result, by design, no individual award is large enough such that its value could create material financial risk to the Company.
•The Company employedemploys a balanced approach to its policies and practices. More specifically, in setting these policies and practices, the Company balancedbalances short-term and long-term incentives;incentives, cash and stock-based compensation;compensation, service-based and performance-based compensation;compensation, and corporate and individual performance incentives. The Company believes that this overall balanced approach significantly reduces the risk that the Company’s compensation policies or practices could have a material adverse effect on the Company.
•The Company’s performance incentive plans could notcannot be easily manipulated as they provide for a minimum level of overall corporate profitability before any payout occurs.
