INFORMATION ABOUT THE
VIRTUAL ANNUAL MEETING AND VOTING
What matters will be acted on at the
virtual Annual Meeting?
Stockholders are asked to consider and vote on the following matters at the
virtual Annual Meeting:
| | |
Proposal 1. | | | The election of 10 nominees named in this Proxy Statement to our Board. | |
| | | | | |
| Proposal 2. | | | The non-binding ratification of the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2022. | |
| | | | | |
| Proposal 3. | | | An advisory vote to approve the compensation paid to our Named Executive Officers. | |
| | | | | |
| Proposal 4. | | | The approval of the Company’s Amended and Restated 2020 Stock Incentive Plan. | |
| | | | | |
| Proposal 5. | | | Such other matters as may properly come before the virtual Annual Meeting or any adjournments or postponements thereof. | |
As of the date of this Proxy Statement, we are not aware of any other matters that will be presented for action at the
virtual Annual Meeting.
Who is entitled to vote at the
virtual Annual Meeting?
Stockholders of record of our common stock at the close of business on the “record date” are entitled to receive notice of and to vote at the
virtual Annual Meeting. Our Board has fixed the close of business on
Wednesday, March
12, 201816, 2022, as the record date.
As of the record date, there were
118,543,632121,369,554 shares of common stock outstanding and entitled to vote. Holders of common stock are entitled to one vote for each share of common stock held as of the record date on each matter to be voted on at the
virtual Annual Meeting.
What do I need to attend the
virtual Annual Meeting?
If you wish to attend the virtual Annual Meeting via webcast, you must be a stockholder as of theWednesday, March 12, 201816, 2022, the record date. You must request an admission ticket in advanceIf you are a stockholder of record, or if you hold a legal proxy for the virtual Annual Meeting provided by your bank, broker, or nominee, you may attend the virtual Annual Meeting via a live webcast by visitingwww.proxyvote.comwww.virtualshareholdermeeting.com/CXW2022 and followingentering the instructions provided (you will need the 12 digit16-digit control number included on thein your Notice, your proxy card or voter instruction form). Ticketsform. If you do not own your shares directly, but instead are the beneficial owner of shares held in “street name” by a broker, bank or other nominee and wish to attend the virtual Annual Meeting, you should follow the instructions on the voting instruction form or the Notice you receive from your bank, broker or other nominee.
In order to vote or submit a question during the virtual Annual Meeting, you will need to follow the instructions posted at www.virtualshareholdermeeting.com/CXW2022, and will need to enter the 16-digit control number included in your Notice, your proxy card or voter instruction form. Broadridge Financial Services, Inc. is hosting our virtual Annual Meeting and, on the date of the virtual Annual Meeting, will be issued onlyavailable to registeredanswer your questions regarding how to attend and beneficial owners asparticipate in the virtual Annual Meeting. More information on technical support issues relating to access to, and participation in, the virtual Annual Meeting is provided under the heading What if during the virtual Annual Meeting I have technical
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difficulties or trouble accessing the live webcast of the
record date. Stockholders whovirtual Annual Meeting? If you do not own your shares as joint-tenants will be issued one ticket with both namesdirectly, but instead are the beneficial owner of shares held in “street name” by a broker, bank or other nominee and wish to vote or submit a question during the virtual Annual Meeting, you should follow the instructions on the ticket.Requests for admission tickets will be processedvoting instruction form or the Notice you receive from your bank, broker or other nominee.
The virtual Annual Meeting platform is fully supported across browsers (Internet Explorer, Edge, Chrome, and Safari) and devices (including computers, tablets and cell phones) running the most updated version of applicable software. Participants should ensure that they have a reliable Wi-Fi connection whenever they intend to participate in the ordervirtual Annual Meeting. Participants should allow time to log in whichand ensure that they are received and mustcan hear streaming audio prior to the start of the virtual Annual Meeting.
An audio broadcast of the virtual Annual Meeting will also be
received no later than May 9, 2018.available to stockholders by telephone at 1-877-328-2502 (toll-free) or 1-412-317-5419 (international). Please note that
seating is limited and requests for tickets will be accepted on a first-come, first-served basis. On the day of the Annual Meeting, each stockholder will be required to present an admission ticket and valid picture identification such as a driver’s license or passport. No person will be admittedlistening to the
Annual Meeting without these credentials. Seating will begin at 9:15 a.m. local time and the Annual Meeting will begin at 10:00 a.m. local time.Please note that cameras (including cell phones with photographic or video capabilities), recording devices and other electronic devicestelephonic audio broadcast will not be permitted atdeemed attending the virtual Annual Meeting.
Meeting, and you cannot vote or participate in the virtual Annual Meeting from such telephonic audio broadcast.
How does our Board recommend I vote on each of the proposals?
Our Board recommends that you vote:
FORthe election of each of the 10 nominees to serve as directors on our Board.
FORthe ratification of the appointment of Ernst & Young LLP.
FORthe approval, by anon-binding advisory vote, of the compensation paid to our Named Executive Officers.
FOR the approval of the Company’s Amended and Restated 2020 Stock Incentive Plan.
If you submit a signed proxy card or submit your proxy by telephone or internet and do not specify how you want your shares voted, the proxy holder will vote your shares according to the recommendations of our Board set forth above. Further, if any other matter properly comes before the
virtual Annual Meeting or any adjournments or postponements thereof, the proxy holders will vote as recommended by our Board or, if no recommendation is given, in their own discretion.
Why did I receive the Notice in the mail instead of a full set of printed proxy materials?
Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”),SEC, we have elected to provide access to our proxy materials over the internet. Accordingly, we are sending the Notice regarding the internet availability of the proxy materials to most of our stockholders of record and beneficial owners. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or to request to receive a printed set of proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice. In addition, stockholders may request receipt of proxy materials in printed form by mail or electronically bye-mail on an ongoing basis by following instructions set forth in the Notice.
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You can vote either in person by attending the
virtual Annual Meeting
via webcast or by proxy (whether or not you attend the
virtual Annual
Meeting)Meeting via webcast).
In order to vote while attending the virtual Annual Meeting via webcast, you will need to follow the instructions posted at www.virtualshareholdermeeting.com/CXW2022 and will need to enter the 16-digit control number included in your Notice, your proxy card or voter instruction form.
If you are a record holder, you can submit your vote by proxy in any of the following ways:
vote by internet (instructions are in the Notice you received in the mail or the proxy card);
vote by toll-free telephone (instructions are on the proxy card); or
if you requested and received printed copies of this Proxy Statement and the Annual Report to Stockholders (including our Letter to Stockholders and 20172021 Annual Report on Form10-K) and other proxy materials, you may vote by filling out the proxy card enclosed with the materials, datedating and signsigning it, and returnreturning it in the accompanying postage-paid envelope.
If a bank, broker or other nominee was the record holder of your stock on the record date, you will be able to instruct your bank, broker or other nominee on how to vote by following the instructions on the voting instruction form or the Notice you receive from your bank, broker or other nominee. If you wish to vote in person
via attendance at the
virtual Annual Meeting, you will need to
presentobtain a valid proxy from your broker, bank or other nominee authorizing you to vote your shares at the
virtual Annual
Meeting.Meeting by following the instructions on the voting instruction form or the Notice you receive from your bank, broker or other nominee.
As a record holder, if you submit voting instructions by telephone or by the internet, you may change your vote by following the same instructions used in originally voting your shares. If your shares are held in the name of a broker, bank, trust or other nominee, you may change your voting instructions by following the instructions of your broker, bank, trust or other nominee. Attendance at the
virtual Annual Meeting will not by itself revoke a previously granted proxy.
Your vote is important. Whether or not you plan to attend the virtual Annual Meeting in person,via webcast, we urge you to submit your voting instructions to the proxy holders as soon as possible.
What are brokernon-votes?
A “brokernon-vote” occurs when a broker, bank or other nominee holding shares for a beneficial owner has not received voting instructions from the beneficial owner and the broker, bank or other nominee does not have discretionary authority to vote the shares. Brokers, banks and other nominees do not have discretionary authority to vote on the election of directors to serve on our Board (Proposal 1) or the advisory vote to approve the compensation paid to our Named Executive Officers (Proposal 3) or the vote to approve the CoreCivic, Inc. Amended and Restated 2020 Stock Incentive Plan (Proposal 4). Thus,As a result, if you hold your shares in street name and do not provide voting instructions on these proposals to your broker, bank or other nominee, your shares will be considered to be brokernon-votes and will not be voted on such proposals. Shares that constitute brokernon-votes will be counted as present at the virtual Annual Meeting for the purpose of determining a quorum but will not be considered entitled to vote on Proposal 1, Proposal 3 or Proposal 3.4. Brokers, banks and other nominees generally have discretionary authority to vote on Proposal 2, the non-binding ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm.
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What vote is required to approve each proposal?
Quorum
Requirement. Requirement. The presence, in person via attendance at the virtual Annual Meeting or by proxy of the Company’s stockholders entitled to cast a majority of the votes entitled to be cast at the virtual Annual Meeting is necessary to constitute a quorum for the transaction of business at the virtual Annual Meeting. Abstentions and brokernon-votes will be treated as shares present and entitled to vote for purposes of determining the presence of a quorum. Failure of a quorum to be represented at the virtual Annual Meeting will necessitate an adjournment or postponement of the virtual Annual Meeting and will subject the Company to additional expense.
Election of
Directors.Directors. Under the Company’s Ninth Amended and Restated Bylaws (the “Bylaws”), adopted by our Board in December 2017, a majority of all of the votes cast at the virtual Annual Meeting is required for the election of each nominee in an uncontested election of directors. A majority of votes cast means the number of shares cast “for” a nominee’s election exceeds the number of votes cast “against” that nominee. Brokers do not have discretionary authority to vote on the election of directors. Abstentions and brokernon-votes will have no effect on the outcome of the vote of the election of directors as they are not considered votes cast.If a director nominee is an incumbent director and does not receive a majority of the votes cast in an uncontested election, that director will continue to serve on our Board as a “holdover” director but must tender his or her resignation to our Board promptly after certification of the election results of the stockholder vote. The Nominating and Governance Committee of our Board will then recommend to our Board whether to accept the resignation or whether other action should be taken. Our Board will act on the tendered resignation, taking into account the recommendation of our Nominating and Governance Committee, and our Board’s decision will be publicly disclosed within 90 days after certification of the election results of the stockholder vote. A director who tenders his or her resignation after failing to receive a majority of the votes cast will not participate in the recommendation of our Nominating and Governance Committee or the decision of our Board with respect to his or her resignation.
Non-Binding Ratification of Ernst & Young LLP. LLP. The affirmative vote of the holders of a majority of the shares present in person via attendance at the virtual Annual Meeting or represented by proxy at the virtual Annual Meeting and entitled to vote is required to approve, on an advisory basis, the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2022. If our stockholders do not ratify the appointment of Ernst & Young LLP, our Audit Committee will reconsider the appointment and may affirm the appointment of Ernst & Young LLP or retain another independent accounting firm. Iffirm, in its sole discretion. Even if the appointment of Ernst & Young is ratified, our Audit Committee may in the future replace Ernst & Young LLP as our independent registered public accounting firm at any time if it isdetermines that a change would be in our best interest to do so.interest. Because brokers have discretionary authority to vote on the ratification of the selection of Ernst & Young LLP as our independent registered public accountants, we do not expect any brokernon-votes in connection with this proposal. If you abstain from voting on this proposal, your abstention will have the same effect as a vote against the proposal.
Advisory Vote on Executive Compensation. Compensation. The affirmative vote of the holders of a majority of the shares present in person via attendance at the virtual Annual Meeting or represented by proxy at the virtual Annual Meeting and entitled to vote is required to approve thenon-binding advisory vote of compensation paid to our Named Executive Officers. Because your vote is advisory, it will not be binding on our Board or the Company. However, our Board and our Compensation Committee will review the voting results and
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take them into consideration when making future decisions regarding executive compensation paid to our Named Executive Officers.
Broker non-votes will have no effect on the outcome of this proposal. If you abstain from voting on this proposal, your abstention will have the same effect as a vote against the proposal.
Vote on the CoreCivic, Inc. Amended and Restated 2020 Stock Incentive Plan. The affirmative vote of the holders of a majority of the shares present in person via attendance at the virtual Annual Meeting or represented by proxy at the virtual Annual Meeting and entitled to vote is required to approve the CoreCivic, Inc. Amended and Restated 2020 Stock Incentive Plan. Brokers do not have discretionary authority to vote on the approval of the CoreCivic, Inc. Amended and Restated 2020 Stock Incentive Plan, as a result broker non-votes will have no effect on the outcome of this proposal. If you abstain from voting on this proposal, your abstention will have the same effect as a vote against the proposal.
Where can I find the
virtual Annual Meeting voting results?
We will announce the voting results at the
virtual Annual Meeting. We also will report the voting results on a
Current Report on Form
8-K, which we expect to file with the SEC within four business days after the
virtual Annual Meeting has been held.
How and when may I submit a stockholder proposal for the Company’s
20192023 Annual Meeting?
Our annual meeting of stockholders generally is held in May of each year. Consistent with applicable SEC rules, we will consider for inclusion in our proxy materials for next year’s annual meeting stockholder proposals that are actually received at our executive offices no later than
Wednesday, November
29, 201830, 2022, and that comply with other SEC rules regarding form and content. Proposals must be sent to
our executive offices using the following address: CoreCivic, Attention: Secretary,
10 Burton Hills Boulevard, Nashville,5501 Virginia Way, Suite 110, Brentwood, Tennessee
37215.37027.
Other stockholder proposals may be raised at next year’s annual meeting (but not considered for inclusion in our proxy materials) if timely received and otherwise in compliance with the advance notice provisions of our Bylaws. In order to be timely, notice must be actually received at our executive offices (the applicable address listed above) between Saturday, February 8, 201911, 2023 and Monday, March 13, 2023.
How and when may I submit a nomination for an individual to serve on the Board? If you wish to nominate an individual to serve as a director, our Bylaws require that you comply with certain procedural requirements, including the delivery of a timely notice of the nomination in proper written form. The notice must include certain biographical information regarding the proposed nominee, that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the proposed nominee’s written consent to nomination and the additional information as set forth in our Bylaws. Additionally, for a stockholder nominee to appear in our proxy materials, the nominating stockholder must satisfy, among other requirements set forth in our Bylaws, certain CoreCivic capital stock ownership requirements, as well as expressly elect at the time of providing the notice described above to have its nominee included in the Company’s proxy materials.
For a stockholder’s notice to the Secretary to be timely under our Bylaws, it must be delivered to or mailed and received at our principal executive offices (the applicable address listed above) between Saturday, February 11, 2019.2023 and Monday, March 13, 2023. If the presiding officer at a meeting determines that a nomination was not properly made in accordance with the procedures set forth in our Bylaws, then the presiding officer will declare to the meeting that the nomination was defective, and the defective nomination shall be disregarded.
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In addition to satisfying the foregoing requirements under our bylaws, to comply with the universal proxy rules (once effective), shareholders who intend to solicit proxies in support of director nominees other than CoreCivic’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 13, 2023.
How can I obtain the Company’s Annual Report on Form
10-K?Any stockholder who desires a copy of our Annual Report on Form
10-K for the year ended December 31,
2017,2021, as filed with the SEC, may obtain a copy without charge by visiting our website,
www.corecivic.com. A copy of our Annual Report on Form
10-K can also be obtained, free of charge, upon written request to CoreCivic, Attention: Cameron Hopewell, Managing Director of Investor Relations,
10 Burton Hills Boulevard, Nashville,5501 Virginia Way, Suite 110, Brentwood, Tennessee
37215.37027.
What are the costs of soliciting these proxies?
The Company pays the cost of soliciting proxies. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, custodians and other like parties to the beneficial owners of shares of our common stock, in which case we will reimburse these parties for their reasonable
out-of-pocket expenses. Proxies may also be solicited personally or by telephone,
e-mail or facsimile by directors, officers and employees of the Company. No additional compensation will be paid for these services.
How many copies of the Notice and proxy materials should I receive if I share an address with another stockholder?
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single copy of the Notice and, to the extent requested, a single set of proxy materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household proxy materials unless contrary instructions have been received from the affected stockholders. Once
you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If at any time you no longerdo not wish to participate in householding and would prefer to receive a separate copy of the Notice or, to the extent requested, set of proxy materials, or if you are receiving multiple copies of proxy materials and wish to receive only one, please notify your broker if your shares are held in a brokerage account or our transfer agent, identified below, if you hold registered shares. You may also notify us by sending a written request to CoreCivic, Attention: Cameron Hopewell, Managing Director of Investor Relations, 10 Burton Hills Boulevard, Nashville,5501 Virginia Way, Suite 110, Brentwood, Tennessee 37215, or by calling Cameron Hopewell at(615) 263-3000.
37027.
Whom should I contact if I have any questions?
If you have any questions about the virtual Annual Meeting or these proxy materials, please contact Cameron Hopewell, Managing Director of Investor Relations,5501 Virginia Way, Suite 110, Brentwood, Tennessee 37027 or by telephone at 10 Burton Hills Boulevard, Nashville, Tennessee 37215,(615) 263-3000. If you are a registered stockholder and have any questions about your ownership of our common stock, please contact our transfer agent, the American Stock Transfer and Trust Company, at 6201 15th Avenue, Brooklyn, New York 11219,(800) 937-5449, or Cameron Hopewell, Managing Director of Investor Relations, at the address and phone number above. If your shares are held in a brokerage account, please contact your broker.
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What if during the virtual Annual Meeting I have technical difficulties or trouble accessing the live webcast of the virtual Annual Meeting? We encourage you to access the virtual Annual Meeting before it begins. Online check-in will start approximately thirty minutes before the meeting on Thursday, May 12, 2022. If you encounter any difficulties accessing the virtual Annual Meeting during the check-in time or meeting time, or you have any questions regarding how to use the virtual meeting platform, please call the technical support number that will be posted on the virtual shareholder meeting log-in page. On Thursday, May 12, 2022, there will be technicians available to assist you beginning at 9:30 a.m., Central Time.
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We believe effective corporate governance is important to our long-term success and our ability to create value for our stockholders. With leadership from our Nominating and Governance Committee, our Board regularly evaluates regulatory developments and trends in corporate governance to determine whether our policies and practices in this area should be enhanced. Our Nominating and Governance Committee also administers an annual self-evaluation process for our Board and its standing committees. In addition, our directors are encouraged to attend director education programs, which are reimbursed by the Company.
You can access our current corporate charter, Bylaws, Corporate Governance Guidelines, Board committee charters, Code of Ethics and certain other corporate governance information on our website,
www.corecivic.com (under the “Corporate Governance” section of the Investors page).
Messrs. Hininger and Lappin are not independent directors because
they areMr. Hininger is employed by the
Company.Company, and Mr. Lappin was employed by the Company until February 2022. Our Board has determined
that all of our other directors are independent. Accordingly,
nine of our eleven current directors are independent, and eight of our
10 current directors andten director nominees are independent. Our Audit, Risk, Compensation and Nominating and Governance Committees are composed entirely of independent directors. In making its independence determinations, our Board used the requirements and standards for director independence prescribed by the New York Stock Exchange (“NYSE”) and the SEC and
considersconsidered all relevant facts and circumstances.
Separation of Chairman and Chief Executive Officer
We do not have a formal policy regarding the separation of our Chairman of the Board of Directors (our
“Chairman”“Chair”) and Chief Executive Officer (“CEO”) positions. In general, our Board believes the determination depends on the circumstances, including our Board’s evaluation of the person or persons available to serve in those positions and the needs of the Company at a particular time.
Since October 2009, the roles of Chair and CEO have been held separately. Mark A. Emkes currently serves as our Chair, while Damon T. Hininger serves as our President and CEO. Our Board believes the Company’s leadership structure is appropriate at this particular time. Having Mr. Hininger serve as President and CEO, while Mr. Emkes serves as our Chair, helps us achieve important strategic objectives. Mr. Hininger is positioned to fully focus his energies on implementing our business strategy and administering our day-to-day affairs. Mr. Emkes is positioned to draw on his relationships with Board members and his experience to effectively discharge the duties of Chair, while also serving as a resource to Mr. Hininger. Our Board considers many factors when determining how to best select our Chair, including: familiarity with the Company and its business, proximity in location to the Company’s headquarters, experience as a leader and consensus builder, willingness and availability to dedicate sufficient time to the Company and experience working with other public companies.
Pursuant to our Bylaws, our ChairmanChair presides over meetings of our Board and meetings of the stockholders at which he or she is present and has general oversight responsibility for our business and affairs. Our CEO has responsibility for implementation of the policies of the Company, as determined by our Board, and for the administration of our business affairs. Our CEO also has responsibility for presiding over any meeting of our Board or of the stockholders at which our ChairmanChair is not present.
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Since October 2009, the roles of Chairman and CEO have been held separately. Mark A. Emkes currently serves as our Chairman, while Damon T. Hininger serves as our President and CEO. Our Board believes the Company’s leadership structure is appropriate. Having Mr. Hininger serve as President and CEO, while Mr. Emkes serves as our Chairman, helps us achieve important objectives. Mr. Hininger is positioned to fully focus his energies on implementing our business strategy and administering ourday-to-day affairs. Mr. Emkes is positioned to draw on his relationships with Board members and his past experience to effectively discharge the duties of Chairman, while also serving as a resource to Mr. Hininger. Our Board considers many factors when determining how to best select our Chairman, including: familiarity with the Company and its business, proximity in location to the Company’s headquarters, experience as a leader and consensus builder, willingness and availability to dedicate sufficient time to the Company and experience working with other public companies.
Executive Sessions of our Board
Executive sessions of our Board, or meetings of our independent directors without management present, are held periodically in order to provide an opportunity for the directors to discuss openly any and all matters. Our independent directors typically conduct their executive sessions prior to, and/or following the conclusion of, regular meetings of our Board. Our Corporate Governance Guidelines provide that executive sessions of our Board are called and chaired by an independent director appointed from time to time by our Nominating and Governance Committee. Mark A. Emkes currently serves as the executive session chair.
Board Meetings and Committees
Our Board is responsible for establishing our broad corporate policies and strategic objectives, reviewing our overall performance and overseeing management’s performance. Among other things, our Board selects and evaluates our executive officers, establishes, reviews and approves our corporate objectives and strategies and evaluates and approves major acquisitions and capital commitments.
Our Board currently consists of
1011 directors,
all10 of whom are standing for
electionre-election at the
virtual Annual Meeting and are identified, along with their biographical information
(such biographical information for incumbent director Charles L. Overby, who intends to retire as a director, and will not stand for re-election, effective as of the virtual Annual Meeting, is also included), under “Proposal 1—Election of Directors” beginning on
page16page 23 of this Proxy Statement.
In
2017,2021, our Board met
four8 times in regular session, and our independent directors met
eight10 times in executive session.
It is customary for our independentThe average attendance of all directors
to meet in executive session prior to,at Board and
following the conclusion of, regularregularly standing committee meetings
of our Board.was approximately 99%. Each director attended at least
75%93% of the
aggregate meetings of
ourthe Board and
of theany regularly standing committees
of our Board on which such director
served.was a member, during the period in which he or she served as a member of such committee. Our Corporate Governance Guidelines provide that all directors are expected to attend each annual meeting of stockholders. All of the directors
serving on the Board at such time virtually attended last year’s
virtual annual meeting of stockholders.
Our Board has five regularly standing committees: the Audit, Compensation, Nominating and Governance, Risk and Executive Committees. Each regularly standing committee has a written charter that has been approved by the
respective committee, the Nominating and Governance Committee and our Board. Each committee charter is reviewed at least annually. Our Board and its committees may act by unanimous written consent without convening a meeting, and our Board appoints and delegates certain duties to special committees from time to time as permitted by our Bylaws. The table below shows the current composition of each of our regularly standing and
two special committees
as of(the Special Litigation Committee and the
date of this Proxy Statement, togetherDiversity, Equity and Inclusion Committee). Together with a summary of each committee’s responsibilities and the number of meetings each committee held in
2017. A more complete description2021. The table below also includes the composition of
each standing committee follows the
table.Demand Review Committee, which completed its work on March 31, 2021, and was dissolved by our Board.
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Committee | | Members
| | Summary of Responsibilities | | 2017 | 2021
Meetings | |
Audit | Audit | | | John R. Prann, Jr. (Chair)
Anne L. Mariucci
Devin I. Murphy | | | Responsibilities include oversight of the integrity of our financial statements; the hiring, qualifications, independence and performance of our independent registered public accountants; and the performance of our internal audit function. | | | 5 | |
Compensation | Compensation(1) | Donna M. Alvarado (Chair)
| | Robert J. Dennis (Chair) (1)
Anne L. Mariucci
John R. Prann, Jr. | | | Responsibilities include setting executive officer compensation and overseeing the evaluation of the executive officers’ performance, and periodically reviewing and approving the Company’s compensation philosophy regarding executive compensation. | | 5 | 7 | |
| Nominating and Governance (2) | | Charles L. Overby
| Donna M. Alvarado (Chair) (2)
Thurgood Marshall, Jr.
Charles L. Overby* | | | Responsibilities include identifying and recommending director nominees to the full Board and taking a leadership role in shaping and evaluating the Board’s corporate governance initiatives. | | 4 |
| 6 | | | | | |
Committee | Risk | Members | | Summary of Responsibilities
| | 2017
Meetings |
Risk
| | Thurgood Marshall, Jr. (Chair) Donna M. Alvarado Anne Mariucci
Stacia A. Hylton (3)
Devin I. Murphy
Charles L. OverbyOverby* | | | Responsibilities include coordinating the Board’s oversight of the Company’s risk assessment and enterprise risk management practices, including the Company’s Environmental, Social and Governance (“ESG”) Reporting Program as well as the Company’s legal, regulatory and contract compliance. | | 6 | 7 | |
Executive | Executive | | | Damon T. Hininger
Charles L. Overby* | | | When necessary, and subject to authority limitations with respectas to significant corporate actions, responsible for acting on behalf of the full Board during intervals between Board meetings. | | - | — | |
| Special Litigation Committee | | | Stacia A. Hylton (Chair) Thurgood Marshall, Jr.
Devin I. Murphy
Charles L. OverbyOverby* | | | In response to stockholder demand letters, our Board formed a Special Litigation Committee in 2016. | | 2 | 6 | |
| Demand Review Committee (4) | | | Mark A. Emkes (Chair)
Robert J. Dennis
Stacia A. Hylton | | | In response to a stockholder demand letter, our Board formed a Demand Review Committee in January 2020. | | | 1 | |
| Diversity, Equity and Inclusion Committee | | | Anne L, Mariucci (Chair)
Donna M. Alvarado
Stacia A. Hylton
Thurgood Marshall Jr. | | | Formed to guide and support management's efforts to enhance Diversity, Equity and Inclusion (“DEI”) activities and actions within the Company. | | | 8 | |
*
| Mr. Overby, who intends to retire as a director, will not stand for re-election, effective as of the virtual Annual Meeting. |
(1)
| Ms. Alvarado served as Chair and member of our Compensation Committee until May 13, 2021. On that date, our Board appointed Mr. Dennis Chair and appointed Ms. Alvarado Chair of our Nominating and Governance Committee. |
(2)
| Mr. Overby served as Chair of our Nominating and Governance Committee until May 13, 2021. On that date, our Board appointed Ms. Alvarado Chair. |
(3)
| Our Board appointed Ms. Hylton to the Risk Committee on May 13, 2021. |
(4)
| The Demand Review Committee completed its work March 31, 2021 and was dissolved by the Board. |
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Our Audit Committee is responsible for:
overseeing the integrity of our financial statements;
reviewing the effectiveness of our internal control over financial reporting;
supervising our relationship with our independent registered public accounting firm, including making decisions with respect to appointment or removal, fees, scope of audit services, approval of audit andnon-audit services and annual evaluation of the audit firm’s independence;
monitoring preparation by our management of quarterly and annual financial reports and interim earnings releases and the performance of our internal audit function;
reviewing Management’s Discussion and Analysis of Financial Condition and Results of Operations prior to the filing of our periodic reports with the SEC;
overseeing management’s implementation and maintenance of effective systems of internal accounting and disclosure controls, including review of our internal auditing program;
overseeing the Company’s compliance with legal and regulatory requirements;
overseeing and making determinations with respect to our Related Party Transaction policy;
with respect to ESG matters, reviewing and overseeing our policies and practices regarding environmental and sustainability issues; and
issuing the Report of the Audit Committee in this Proxy Statement.
Our Board has determined that each member of our Audit Committee is independent as defined by the standards of the NYSE and Rule10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Act. Our Board also has determined that each member is “financially literate” as defined by the rules of the NYSE, and that each of Ms. Mariucci, Mr. Murphy, and Mr. Prann is qualified as an “audit committee financial expert” as defined in Item 407(d) of RegulationS-K under the Exchange Act. The full text of the Audit Committee charter is available on the Company’s website atwww.corecivic.com (under the “Corporate Governance” section of the Investors page).
Our Compensation Committee approves the compensation of our CEO and other executive officers, including annually reviewing and approving corporate goals and objectives relevant to their compensation. Our Compensation Committee is responsible for ensuring that our compensation programs are designed to encourage high performance, promote accountability and adherence to Company values and align with the interests of our stockholders. Our Compensation
CommitteeCommittee’s responsibilities include administration of cash and equity-based incentive compensation plans and stock ownership guidelines, evaluation of the performance of the executive officers and assessment of the material risks of our compensation programs.
With respect to ESG matters, our Compensation Committee monitors and manages our executive compensation program incentives to ensure incentives are aligned with sustainable and socially responsible business practices. Our Compensation Committee is also responsible for reviewing, and making recommendations to our Board regarding, the compensation of our Board.
The Compensation Committee may form and delegate authority to one or more subcommittees as it deems appropriate from time to time under the circumstances.
Our Compensation Committee has retained PricewaterhouseCoopersExequity LLP (“PwC”Exequity”) as its independent compensation consultant, since 2000, to provide advice and guidance on the design and market competitiveness of our executive
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compensation programs.
PwC works directly withExequity reports exclusively to the
chair of our Compensation Committee and
as directed bydoes not provide any additional services to the
chair of our Compensation Committee, with our CEO and other senior executives. In 2017, PwC was retained by the Company to provide asset valuation services with respect to which PwC was paid an aggregate amount of fees equal to approximately $75,000. PwC was also paid an aggregate amount of approximately $22,000 for consulting with our Compensation Committee on compensation matters. The valuation services were used in connection with REIT qualification testing and certain acquisitions. PwC has annually performed valuation services in anticipation of, and since, our initial conversion to a REIT. The decision to hire PwC for these services was made by management based on PwC’s experience and familiarity with the Company.
Management reviews and obtains approval of the chair of our Compensation Committee prior to engaging PwC for these services. Each year our Compensation Committee reviews the independence of the compensation consultants and other advisors who provide advice to our Compensation Committee, employing the independence factors specified in the NYSE listing standards.
In its annual review of the independence of PwC in 2017, our Compensation Committee reviewed management’s retention of PwC for the other services. Our Compensation Committee has determined
PwCExequity is independent within the meaning of the NYSE listing
standards, and the work performed by PwC for the Company does not raise any conflicts of interest.standards. In
2017, PwC2021, Exequity assisted our Compensation Committee by providing the following compensation consulting services:
performing a comprehensive review ofmonitoring and advising on our executive compensation program;
program in support of our Compensation Committee’s executive compensation objectives;assessingreviewing and revising our current peer group and peer selection methodology;
recommending companies for inclusionmethodology as a result of a re-evaluation of our peer group in light of our 2017 peer group;conversion from a real estate investment trust (“REIT”) to a taxable C Corporation; and
assistance in preparingmeasuring the effectiveness of our annual proxy statement.
executive compensation plan design.Compensation Committee Interlocks and Insider Participation
Our Board has determined that each of
Donna Alvarado,Robert J. Dennis (Chair),
Robert Dennis, Mark
A. Emkes,
Anne L. Mariucci and John R. Prann, Jr., who comprise all members of our Compensation Committee, is independent as defined by the listing standards of the NYSE. In addition, there are no relationships among our executive officers, members of our Compensation Committee or entities whose executives serve on our Board or our Compensation Committee that require disclosure. Each member also qualifies as
an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and as a
“non-employee “non-employee director” within the meaning of the SEC’s
Rule 16b-3. The full text of the Compensation Committee charter is available on the Company’s website at
www.corecivic.com (under the “Corporate Governance” section of the Investors page).
Nominating and Governance Committee
Our Nominating and Governance Committee is responsible for developing and overseeing our Board’s Corporate Governance Guidelines, and for monitoring the independence of our Board. Our Nominating and
Governance Committee also determines Board membership qualifications; selects, evaluates and recommends to the Board nominees to fill vacancies as they arise; reviews the performance of our Board and its committees; and is responsible for director education. Other responsibilities include oversight of our Board’s self-evaluation process and leading our Board’s executive succession planning efforts. With respect to ESG matters, our Nominating and Governance Committee oversees Company practices and policies related to corporate governance, social responsibility, community interests, political activities and political contributions and lobbying. Our Board has determined that each member of our Nominating and Governance Committee is independent as defined by the listing standards of the NYSE. The full text of the Nominating and Governance Committee charter is available on the Company’s website atwww.corecivic.com (under the “Corporate Governance” section of the Investors page).
Our Nominating and Governance Committee is authorized by our Board to identify director candidates; evaluate and consider candidates proposed by any director, member of management or stockholder; develop and implement screening processes it deems necessary and appropriate; and recommend for selection by our Board director nominees for each annual meeting of stockholders and, when necessary, vacancies on the Board. Our Nominating and Governance Committee is authorized by our Board to exercise sole authority in retaining any third-party search firm our Nominating and Governance Committee deems appropriate to identify and assist with the evaluation of director candidates; and has utilized that authority in past director searches.
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Our Nominating and Governance Committee may utilize a variety of methods for identifying nominees for director. Candidates may come to the attention of our Nominating and Governance Committee through current Board members, stockholders, members of management, director search firms and other persons. A stockholder who wishes to recommend a prospective nominee for our Board should notify our Secretary in writing, along with any supporting material the stockholder considers appropriate, in accordance with the stockholder proposal provisions of our Bylaws. General information concerning the submission of stockholder proposals is provided above under the
caption “Howheading How and when may I submit a stockholder proposal for the Company’s 20192023 Annual Meeting?” General information concerning the submission of stockholder nominations for an individual to serve as a director is provided above under the heading How and when may I submit a nomination for an individual to serve on the Board? Pursuant to Board policy, there are to be no differences in the manner in which our Nominating and Governance Committee evaluates candidates based on the source of the recommendation.
Our Nominating and Governance Committee evaluates prospective nominees against the criteria in our Corporate Governance Guidelines, which include professional integrity and sound judgment; sufficient time available to devote to Board activities; a general understanding of marketing, finance and other elements relevant to the success of a publicly-traded company in today’s business environment; an understanding of our
business and human rights concerns related to our business; and factors such as diversity, age, skills and educational and professional background. With respect to diversity, our Nominating and Governance Committee considers diversity in terms of age, gender,
race and ethnicity, as well as diversity of skills, expertise and experience, in its deliberations.
The Nominating and Governance Committee implements these criteria, including diversity, by considering the information about the nominee provided by the proponent, the nominee, third parties and other sources. In addition, the Board assesses the diversity of its members and nominees as part of an annual performance evaluation by considering, among other factors, diversity in age, gender, race and ethnicity, as well as diversity of skills, expertise and experience.
Our Nominating and Governance Committee may also consider other factors it deems relevant, including the current composition of our Board in terms of independence, expertise, experience and special knowledge required for the effective discharge of Board responsibilities; whether there is a need to fill vacancies or expand or contract the size of the Board; the balance of management and independent directors; the structure, membership and need for expertise on our standing committees; and the qualifications of other prospective nominees. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis
proscribedprotected by
applicable law.
With respect to determining whether current directors should stand forre-election, our Nominating and Governance Committee considers the director’s past attendance at meetings and participation in and contributions to the activities of our Board and the Company. With respect to new candidates for Board service, a full evaluation may also include detailed background checks andin-person and telephonic interviews with our Nominating and Governance Committee and other Board members. Our Nominating and Governance Committee evaluation process culminates with a decision as to whether or not to recommend the prospective nominee to the full Board for appointment and/or nomination.
Our Risk Committee is charged with coordinating our Board’s oversight of our assessment and risk management practices, (includingincluding our enterprise risk management program)(“ERM”) program; our legal and regulatory environment; and our legal, regulatory (including the special rules applicable to REITs) and contract compliance, (particularlyparticularly regarding contracts with government entities).entities. With respect to ESG matters, our Risk Committee is responsible for reviewing and discussing with management the Company’s ESG Reporting Program, making recommendations to our Board regarding ESG Reporting and overseeing publication of our ESG Report. Our Risk Committee is also responsible for
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monitoring and reviewing public policy developments and other trends facing the Company that could impact our operations and performance. Our Risk Committee further assists our Board in fulfilling its oversight responsibility with respect to organizational ethics and compliance and receives regular reports from our Corporate Ethics and Compliance Officer, who reports to the CEO, and to the chair of our Risk Committee. The full text of the Risk Committee charter is available on the Company’s website at
www.corecivic.com (under the “Corporate Governance” section of the Investors page).
Our Executive Committee is charged with acting on behalf of the full Board when necessary and subject to authority limitations with respect to the transaction of routine, administrative matters that occur between regularly scheduled Board meetings. The full text of the Executive Committee charter is available on the Company’s website at
www.corecivic.com (under the “Corporate Governance” section of the Investors page).
Special Litigation Committee
In response to stockholder demand letters, our Board formed a Special Litigation Committee to take any actions it deems appropriate or necessary to investigate, respond and otherwise properly address the matters alleged in the demand letters. The matters alleged in the demand letters were generally related to an August 18, 2016 memorandum issued by the Department of Justice (“DOJ”) in which the DOJ directed that, as each contract with privately operated prisons reaches the end of its term, the Federal Bureau of Prisons (“BOP”) should either decline to renew that contract or substantially reduce its scope in a manner consistent with law and the overall decline of the BOP's inmate population. That memorandum was rescinded on February 21, 2017, by the newly-appointed Attorney General. The Special Litigation Committee has retained independent legal counsel to advise the committee in the performance of its duties. The matters being reviewed by the Special Litigation Committee are separate from the matters reviewed by the Demand Review Committee during 2020 and 2021, which are discussed below.
Demand Review Committee
In response to a stockholder demand letter received on January 13, 2020, from the Oregon Attorney General and the Oregon State Treasurer, our Board formed a Demand Review Committee in January 2020 to take any actions it deems appropriate or necessary to investigate, respond and otherwise properly address the matters alleged in the demand letter. The demand letter’s allegations are associated with various incidents and allegations related to the Company’s operation of correctional and detention facilities. The Demand Review Committee retained independent legal counsel to advise the committee in the performance of its duties. The Demand Review Committee completed its work and was dissolved by the Board effective March 31, 2021.
Diversity, Equity and Inclusion Committee
In support of the Company’s desire to enhance its ongoing efforts to promote a diverse, equitable and inclusive workforce, our Board formed a DEI Committee. The Committee oversees the Company’s Board-approved DEI Initiative, which is designed to (i) sustain and enhance an inclusive culture that values working with diverse groups of people who offer diversity of thought and perspective; (ii) support an environment that treats persons equitably and strives to offer equality of opportunity; and (iii) promote DEI in all aspects of the Company’s endeavors.
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Limitations on Other Board Service
The Audit Committee charter provides that a member of our Audit Committee may not serve on the audit committee of more than two other public companies without Board approval. Otherwise, we do not believe our directors should be categorically prohibited from serving on boards and/or board committees of other organizations. However, our Corporate Governance Guidelines instruct our Nominating and Governance Committee and our Board to take into account the nature of and time involved with respect to a director’s service on other boards, as well as other job responsibilities, in evaluating the suitability of individual directors and in making its recommendations to our stockholders. Service on boards and/or committees of other organizations must also be consistent with our conflicts of interest policy, as set forth in our Code of Ethics. Our Corporate Governance Guidelines require a director to provide notice to the Chair of our Nominating and Governance Committee of his or her acceptance of a nomination to serve on the board of another public company in the case where such nomination has not been previously disclosed.
Communications with Directors
Stockholders, employees and other interested parties may communicate with members of our Board (including specific members of our Board or our independent directors as a group) by writing to CoreCivic, Attention: Secretary,
10 Burton Hills Boulevard, Nashville,5501 Virginia Way, Suite 110, Brentwood, Tennessee
37215.37027. To the extent such communications are received, our Secretary compiles all substantive communications and periodically submits them to our Board, the group of directors or the individual directors to whom they are addressed. Communications that the Secretary would not consider “substantive,” and therefore may exercise discretion in submitting to the addressee, may include,
but are not limited to, junk mail, mass mailings, resumes and job inquiries, surveys, business solicitations, advertisements, frivolous communications and other similarly unsuitable communications.
Communications expressing concerns or complaints relating to accounting, internal controls or auditing matters are handled in accordance with procedures established by our Audit Committee. Under those procedures,
concerns that are improperly characterized as having to do with accounting, internal controls or auditing matters or that are frivolous or clearly inconsequential may be addressed by the Secretary without presentation to our Audit Committee.
Certain Relationships and Related Party Transactions
Since the beginning of the last fiscal year, we are aware of no related party transactions between us and any of our directors, executive officers, 5% stockholders or their family members that require disclosure under Item 404 of Regulation
S-K under the Exchange Act.
Pursuant to its written charter, our Audit Committee has adopted a Related Party Transaction Policy that, subject to certain exceptions, requires our Audit Committee (or
the chairChair of our Audit Committee in certain instances) to review and either ratify, approve or disapprove all “Interested Transactions,” which are generally defined to include any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which:
the aggregate amount involved exceeded, or will or may be expected to exceed, $120,000 in any calendar year;
the Company was, is or will be a participant; and
any Related Party had, has or will have a direct or indirect interest.
For purposes of the policy, a “Related Party” is any:
person who is or was (since the beginning of the last fiscal year for which the Company has filed an Annual Report on Form10-K and proxy statement, even if they do not presently serve in that role) an executive officer, director or nominee for election as a director;
greater than 5% beneficial owner of the Company’s common stock;
immediate family member of any of the foregoing; or
firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner, managing member or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.
In determining whether to approve or ratify an Interested Transaction under the policy, our Audit Committee is to consider all relevant information and facts available to it regarding the Interested Transaction and take into account factors such as the Related Party’s relationship to the Company and interest (direct or indirect) in the transaction, the terms of the transaction and the benefits to the Company of the transaction. No director is to participate in the approval of an Interested Transaction for which he or she is a Related Party or otherwise has a direct or indirect interest.
In addition, our Audit Committee is to review and assess ongoing Interested Transactions, if any, on at least an annual basis to determine whether
any such transactions,
if any, remain appropriate or should be modified or terminated.
Stock Ownership Guidelines
We maintain stock ownership guidelines for our executive officers andnon-executive directors because we believe it is important to align the interests of our management and our Board with the interests of our stockholders. The guidelines are discussed in detail under “Executivethe headings Executive and Director Compensation – Compensation—Guidelines and Policies – Policies—Executive Officer Stock Ownership Guidelines”Guidelines and “ExecutiveExecutive and Director Compensation – Compensation—Director Compensation – DirectorsCompensation—Director Stock Ownership Guidelines” includedGuidelines in this Proxy Statement and are accessible on our website,www.corecivic.com (under the “Corporate Governance” section of the Investors page).
No Hedging or Pledging Permitted
Our insider trading guidelines include provisions that prohibit members of our Board, executive officers, other officers and employees from engaging in hedging or pledging transactions involving Company securities. Generally prohibited practices include purchasing or selling derivative securities, such as exchange-traded put or call options as well as participating in individually arranged derivative transactions. Directors, executive officers, other officers and employees are also generally prohibited from participating in long-term forward sales or monetization transactions that are used to hedge an ownership position in the Company’s securities. None of the members of our Board or our executive officers are engaged in any hedging or pledging transactions involving Company securities.
In 2015, the SEC issued proposed rules regarding the adoption of “clawback” policies by publicly listed companies in accordance with the requirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). When final SEC rules implementing these requirements become effective, publicly listed companies will be required to adopt a “clawback” policy providing for the
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recovery of certain incentive-based compensation from the executive officers of the company in the event the company is required to restate its financials as a result of material noncompliance of the company with any financial reporting requirements under the securities laws.
In order to ensure full compliance with these SEC rules, we intend to adopt our own formal “clawback” policy applicable to our executive officers complying with such rules once these final rules have been adopted by the SEC. In addition, Section 304 of the Sarbanes-Oxley Act of 2002 requires the recovery of incentive awards in certain circumstances. If we are required to restate our financials due to material noncompliance with any financial reporting requirements as a result of misconduct, our CEO and CFO will be required under Section 304 of the Sarbanes-Oxley Act to reimburse us for (1) any bonus or other incentive- or equity-based compensation received during the 12 months following the first public issuance of the non-complying document, and (2) any profits realized from the sale of our securities during such 12 month period. Our Second Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”) and our 2020 Stock Incentive Plan (the “2020 Plan”) also provide that any award made to a participant under the plan will be subject to mandatory repayment by the participant to us to the extent required by (a) any award agreement, (b) any “clawback” or recoupment policy adopted by CoreCivic to comply with the requirements of any applicable laws, rules or regulations, including final SEC rules adopted pursuant to Section 954 of the Dodd-Frank Act, or otherwise, or (c) any applicable laws which impose mandatory recoupment, under circumstances set forth in such applicable laws, including the Sarbanes-Oxley Act of 2002.
All of our directors and employees, including our CEO, Chief Financial Officer and principal accounting officer, are subject to our Code of Ethics. Our Code of Ethics and related compliance policies are designed to promote an environment in which integrity is valued, business is conducted in a legal and ethical manner and ethics and compliance issues are raised and addressed. Our Nominating and Governance Committee is responsible for reviewing our Code of Ethics annually, and our Risk Committee is responsible for addressing any violations or waivers involving our executive officers and directors. We intend to post
any amendments to or waivers from our Code of Ethics (to the extent applicable to our directors, CEO, principal financial officer or principal accounting officer) on our website. Our Code of Ethics is accessible on our website,
www.corecivic.com (under the “Corporate Governance” section of the Investors page).
Board Oversight of Corporate Strategy and Enterprise Risk
Our Board engages in proactive oversight and regular review of the development, evaluation and execution of our annual operating plan and long-term growth diversification and investment strategies. Each regular meeting of our Board includes a comprehensive business update presented by our CEO, which addresses our progress in achieving near-term operational objectives, strategic transactions completed, and new opportunities being actively pursued, as well as current and future challenges to our continued success. Each such meeting also includes presentations from members of the executive team who are directly responsible for the implementation of our growth and diversification strategy the integration of new acquisitions and the financial performance of our business. At our Board’stwo-day retreat in August of each year, management engages our Board in a detailed discussion of our growth, capital allocation and investment strategy, target opportunities,strategies, risks and challenges, and proposals for modifying our strategies to improve results. At its annual December meeting, our Board is provided the opportunity to challengeengages in discussion with management on the details of our annual operating plan prior to its approval. In addition to the opportunity to engage management and independent consultants we retain to assist with the development and execution of our growth strategy, our independent directors set aside time at each meeting to meet in executive session regularly to discuss the Company’s performance and review and deliberate upon management’s performance in strategy development and execution.long-term strategy.
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Our Risk Committee performs a leadership role on behalf of our Board and our Audit Committee in the oversight of our risk assessment and risk management practices and assists our Board and Audit Committee with oversight of our financial, legal, contractual,
regulatory and
regulatoryESG risks and organizational ethics and compliance. Our Risk Committee is also charged with oversight of management’s
enterprise risk management (“ERM”)ERM program.
Management’s ERM program entails the identification, prioritization and assessment of a broad range of risks (
e.g., financial, operational, business, reputational, governance and managerial), and the formulation of plans to develop and improve controls for managing these risks or mitigating their effects in an integrated effort involving our Board, relevant Board committees, management and other personnel. Our ERM program is led by our General Counsel, is a component of management’s strategic planning process and is overseen by our Risk Committee with periodic reports to the full Board.
The full Board maintains an ongoing, direct role in risk oversight through, among other things, regular reports from the Chair of our Risk Committee, regular reports from our CEO on the ERM process and oversight of management’s strategic planning process, which includes an evaluation of opportunities and risks presented by the Company’s current strategies and alternative strategies. Our Board also receives regular reports from each of
the executives with respect to their areas of managerial responsibility. These reports include information concerning risks and risk mitigation strategies. For example, our Board receives regular reports from our Chief CorrectionsOperating Officer with respect to key areas of operational risk; monitors risks relating to our partnership development efforts through regular reports from our Chief Development Officer; and receives regular reports from our General Counsel with respect to legal and compliance risks. In addition, our Board evaluates risk in the context of particular business strategies and transactions. For example, our Board monitors significant capital expenditures through its annual budget review and quarterly capital expenditure reports from management, and monitors risk relating to our acquisition and financing activities through in depthin-depth reviews of proposed acquisition and financing transactions.
In addition to our Risk Committee, other standing committees of our Board have responsibility for risk oversight within their areas of oversight. Our Audit Committee focuses on financial risk, including fraud risk and risks relating to our internal controls over financial reporting. It receives an annual risk assessment report from our internal auditors, as well as financial risk assessment information in connection with particular events or transactions. Our Nominating and Governance Committee addresses certain governance-related risks, such as risks related to Board and executive management succession planning. As discussed in detail below, our Compensation Committee addresses risks relating to our executive compensation strategies. The full Board receives regular reports from the chairs of these committees and receives copies of meeting materials provided to each of the committees.
Environmental, Social and Governance The Risk Committee of the Board provides oversight for ESG reporting matters, while each standing Committee of the Board shares the oversight of ESG concerns consistent with the duties specified in each Committee's charter. ESG reporting authority is delegated to CoreCivic's Chief Ethics and Compliance Officer by our President and CEO. We appointed a cross-functional team that provides annual updates to the goals and priority reporting topics within our ESG Report. In 2020, CoreCivic conducted a materiality assessment in accordance with the Global Reporting Initiative (“GRI”) processes to identify “material” ESG topics, as defined by the GRI.
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Topics identified by CoreCivic's internal and external stakeholders during our ESG assessments generally fall within the following areas:
Operational Excellence encompasses our goals for how we operate: emphasis on contract compliance; promoting a culture of ethics and integrity; delivering innovative solutions to our partners; protecting employee safety and security; and internal and external oversight.
Organizational Culture and Employee Value Proposition focuses on fostering a culture of respect; promoting diversity, equity, and inclusion within our workforce; attracting and retaining a talented workforce; and providing competitive wages, benefits, training and development opportunities for our team members.
Resident Treatment and Reentry Services focuses on health and medical services for those in our care; providing residential and nonresidential reentry services for justice-involved persons returning to the community; recognizing and protecting the human rights of those in our care; supporting resident safety and security; and offering meaningful educational, job skills and treatment programming to prepare residents for long-lasting success in their communities.
Community Impact centered on active engagement with the communities we serve; supporting community and public safety; providing positive economic impact to localities and states; and engaging the public to foster a better understanding of our industry and the services we provide.
Environmental Performance recognizes that CoreCivic and its government partners must use energy and other resources responsibly through green design and green operations and, in doing so, can improve operational efficiencies while reducing environmental impact.
For more information about our ESG efforts, including our ESG Report, which provides a detailed overview of our ESG efforts, please visit our website at www.corecivic.com/esg. Please note that our website is provided as an inactive contextual reference and the information on our website is not incorporated by reference in this proxy statement.
We expect to publish our 2021 ESG Report, providing an update to our ESG efforts, in the second quarter of 2022.
Compensation Risk Assessment
In setting compensation, our Compensation Committee considers
risks in the achievement of the Company’s goals that may be inherent in the compensation program as well as the risks to CoreCivic’s stockholders. Although a significant portion of our executives’ compensation is performance-based and
“at-risk, “at-risk,” our Compensation Committee believes our executive compensation plans are appropriately structured and do not pose a material risk to CoreCivic. Our Compensation Committee considered the following elements of our executive compensation plans and policies when evaluating whether such plans and policies encourage our executives to take unreasonable risks:
We set performance goalstargets we believe are reasonable, but uncertain, in light of past performance and current market and economic conditions.
The financial and strategic business goals (“Strategic Business Goals”) used for determining payouts under our incentive compensation plans are aligned with our near-term and long-term operating and strategic growth plans, and are established at challenging, but appropriate, levels that do not encourage unnecessary or excessive risk taking.
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We use restricted stock units rather than stock options for equity awards because, unlike options, restricted stock units retain value even in a depressed market.
Performance-based vesting over multiple years for our long-term equity incentive awards, along with a modifier based on total shareholder return, promotes the alignment of our executives’ interests with those of our stockholders for the long-term performance of the Company.
AssumingTime-based restricted stock units and, assuming achievement of at least a minimum level of performance, payouts under our performance-based plans result in some compensation at levels below full target achievement, rather than an“all-or-nothing” “all-or-nothing” approach.
Our executive stock ownership guidelines require our executives to hold significant levels of our stock, which discourages excessive risk-taking and aligns an appropriate portion of their personal wealth to the long-term performance of the Company.
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PROPOSAL 1 - ELECTION OF DIRECTORS
The current term of office of each of our 10 directors expires at the Annual Meeting. Our Board has nominated nine directors forre-election, and has nominated an additionalnon-executive director, Harley G. Lappin, who was recommended by ournon-employee directors for election by our stockholders for the first time, at the Annual Meeting.
Our Board reflects a diverse, highly engaged group of directors with a wide range of relevant
experience: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Independence
| | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ☐ | | | | ☐ | | | | | 80% | |
CEO / Senior Leadership Experience
| | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | | 100% | |
Gender / Ethnic Diversity
| | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | | 40% | |
Other Public Company Board Experience
| | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | | 60% | |
Tenure
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1 – 4 Years
| | ∎ | | | | ∎ | | | | ∎ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | | 30% | |
5 – 9 Years
| | ∎ | | | | ∎ | | | | ∎ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | | 30% | |
10+ Years
| | ∎ | | | | ∎ | | | | ∎ | | | | ∎ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | ☐ | | | | | 40% | |
Based on the recommendationexperience. The following matrix provides information about each of our Nominatingincumbent director nominees (but does not include information about Charles L. Overby, who is not standing for re-election at the virtual Annual Meeting), including certain types of knowledge, skills, experiences and Governance Committee,attributes possessed by one or more of our directors, which our Board believes are relevant to our business and operations. The matrix does not encompass all of the knowledge, skill, experience or attribute of our directors and does not suggest that a director who is not listed as having any particular knowledge, skill, experience or attribute is unable to contribute to the decision-making process in such area. No individual knowledge, skill, experience or attribute is solely dispositive of becoming a member of our Board.
The current term of office of each of our directors expires at the virtual Annual Meeting. Our Board has nominated the following 10 nominees, all of whom are currently serving asincumbent directors, for election to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified. We expect each of the 10 nominees to serve if elected. If any of them becomes unavailable to serve as a director, our Board may
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designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by our Board.
Incumbent director Charles L. Overby (whose information is provided below) intends to retire as a director, and will not stand for re-election, effective as of the virtual Annual Meeting. Mr. Overby is not retiring as a result of any disagreement with the Company. Effective as of the virtual Annual Meeting, the Board has reduced the authorized size of the Board from 11 directors to 10 directors.
The general criteria considered by our Nominating and Governance Committee with respect to director nominees are discussed beginning on page
1014 of this Proxy Statement under the heading
“NominatingNominating and Governance Committee.”Committee. Based on the evaluation of those criteria, our Nominating and Governance Committee and Board believe each nominee contributes relevant skills, expertise and experience to our Board, and that the group of nominees collectively has the skills, expertise, experience, independence,
diversity and other attributes necessary to
effectively discharge
effectively our Board’s oversight responsibilities on behalf of our stockholders.
Director Commitments
The Board believes that all members of the Board should devote sufficient time and attention to their duties and to otherwise fulfill the responsibilities required of directors. In assessing whether directors and director nominees have sufficient time and attention to devote to board duties, the Nominating and Governance Committee and the Board consider whether directors serve on an excessive number of public company boards, a situation frequently referred to as “overboarding.”
Our Board believes that each of our directors has demonstrated the ability to devote sufficient time and attention to board duties and to otherwise fulfill the responsibilities required of our directors. However, we understand that certain of our stockholders may deem Devin Murphy overboarded under their policies. In addition to serving as a director of the Company, Mr. Murphy serves as President of Phillips Edison & Company, Inc. and as a director of Apartment Income REIT Corp. Both companies are publicly traded, but Phillips Edison & Company, Inc. was a non-traded REIT at the time of Mr. Murphy’s initial election to the Board, becoming publicly traded during 2021. After careful consideration, the Board believes that Mr. Murphy has dedicated, and will continue to dedicate, sufficient time to carry out his duties as a member of the Board effectively and believes that his service with other public companies, including his service on one additional publicly traded board, does not, and will not, negatively impact his service on our Board for the following reasons:
Mr. Murphy has served on our board for three years and has assured our Board that he is fully committed to continuing to dedicate the appropriate time to fulfill his duties as a member of the Board and its committees.
Mr. Murphy has assured our Board that his ongoing commitments to his employer and Apartment Income REIT Corp. are not expected to exceed the demands that existed in past years and that his continued service to each of these companies will not detract from his service on our Board.
In 2021, Mr. Murphy attended 95% of all Board and applicable committee meetings, and since joining the Board in 2018, Mr. Murphy has attended approximately 98% of all Board and applicable committee meetings.
Mr. Murphy brings valuable experience and expertise to the Board, including in the areas of executive leadership of real estate and finance-focused organizations; broad exposure to private equity, banking and other investment businesses; and complex merger and acquisition transactions and activities.
Mr. Murphy’s experience as an executive of a public company, as well as being a member of the board of another publicly traded company, provides Mr. Murphy with insight and experience that enhances his value to our company.
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Incumbent Directors Standing for
ElectionRe-Election
Information regarding each of the
nomineesincumbent directors standing for
director,re-election, including particular qualifications considered for each nominee, is set forth below. Directors’ ages are given as of the date of this Proxy Statement.
| | |
DAMON T. HININGER | | | Director since 2009 |
Mr. Hininger, age 48,52, has served as a director and our President and Chief Executive Officer since October 2009. From 2008 until 2009, he served as our President and Chief Operating Officer. From 2007 until 2008, he served as our Senior Vice President, Federal and Local Customer Relations, after having served as Vice President, Federal and Local Customer Relations since 2002. Prior to 2002, he held several positions of increasing responsibility with the Company. Mr. Hininger joined the Company in 1992 as a correctional officer at theour Leavenworth Detention Center. He serves on the Board of Trustees of the United Way of Metropolitan Nashville and Belmont University, where he also serves on the Board of Advisors for the Massey School of Business. Mr. Hininger also serves on the Board of Directors of the Nashville ChamberPublic Education Foundation, the Men of Commerce,Valor, the Kansas State University Foundation and as a member of the Executive Board of the Middle Tennessee Council of the Boy Scouts of America. Mr. Hininger holds a bachelor’s degree from Kansas State University and a master’s degree in business administration from the Jack Massey School of Business at Belmont University. He is a 2022 recipient of the American Correctional Association’s (“ACA”) E.R. Cass Award for Correctional Achievement, the highest honor bestowed by that organization.
In making the decision to nominate Mr. Hininger to serve as a director, our Nominating and Governance Committee considered, in addition to the criteria referred to above, his current service as our President and CEO and his comprehensive knowledge of the Company, its business, operations and management team through his current position and past roles with the Company, including roles at the facility operations level, as Chief Operating Officer and as Senior Vice President, Federal and Local Customer Relations.
The Board also considered Mr. Hininger's familiarity and experience with human rights issues affecting the Company's business because of his leadership role in our Company, his multi-decade experience in our industry and his participation in human rights related panels and programs as part of his involvement with the ACA and the Correctional Leaders Association. | | |
DONNA M. ALVARADO | | | Director since 2003 |
Ms. Alvarado, age 69,73, has served as a director since December 2003, and serves as Chair of our CompensationNominating and Governance Committee. She also serves as a member of our Audit Committee, Risk Committee and Riskour DEI Committee and previously served as Chair of our Compensation Committee. Ms. Alvarado is the founder and president of Aguila International, an international business consulting firm specializing in human resources and leadership development. Ms. Alvarado has held senior management positions in government, including Deputy Assistant Secretary of Defense with the U.S. Department of Defense and Director of ACTION, the federal domestic volunteer agency. Ms. Alvarado serves as a director and member of the audit, compensation and public affairs committees of CSX Corporation, a publicly-tradedpublicly traded provider of rail and other transportation services. She serves as a director and chair of the nominating and corporate governance committee, as well as a member of the audit and risk committees, of Park National Corporation, a publicly-tradedpublicly traded bank holding company. Ms. Alvarado has served as a member and as chair of both the Ohio Board of Regents and the Ohio Workforce Policy Board. She holds both a bachelor’s degree and a master’s degree in Spanish from The Ohio State University, completed doctoral coursework in Latin American literature at the University of Oklahoma and earned a postgraduate certificate in financial management from the Wharton School of Business at the University of Pennsylvania.
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In making the decision to nominate Ms. Alvarado to serve as a director, our Nominating and Governance Committee considered, in addition to the criteria referred to above, her understanding of government through her public sector experience; her experience as a public company director and member of audit, compensation,
risk and nominating and corporate governance committees; her human resources and leadership development expertise; her civic and community involvement; and her contribution to the Board’s gender and cultural diversity.
The Board also considered Ms. Alvarado’s experience related to human rights issues, both in general and as affecting our Company’s business, including her service on various statewide commissions focused on equity in educational access, judicial reform, voting rights and equal opportunity in employment as well as her service on national commissions focused on addressing homelessness, expanded treatment for addiction, immigration and literacy. | | |
ROBERT J. DENNIS | | | Director since 2013 |
Mr. Dennis, age
64,68, has served as a director since February 2013, and serves as
a memberChair of our Compensation Committee and
as a member of our Executive Committee. Mr. Dennis
isserved as the
President, Chief Executive
Officer and ChairmanChair of the
boardBoard of
directorsDirectors of Genesco Inc., a
publicly-tradedpublicly traded retailer of footwear,
headwear, sports apparel and accessories,
where he hasfrom February 2020 to June 30, 2020. Previously, Mr. Dennis served
in an executive capacity since 2004.as Genesco’s President and Chief Executive Officer from 2008 until February 2020 and as Chair from April 2010 to February 2020. Prior to joining Genesco, Mr. Dennis held senior management positions with Hat World Corporation and Asbury Automotive and was a partner and leader of the North American Retail Practice with McKinsey & Company. Mr. Dennis serves as a director and member of the governance committee and the finance and investments committee of HCA Holdings, Inc., a
publicly-tradedpublicly traded health care services company. Mr. Dennis serves on the Board of Trustees of the United Way of Metropolitan Nashville,
the Board of Leadership Nashville, the Board of the Nashville Chamber of Commerce, and serves on the Board of Visitors at Vanderbilt University’s Owen School of Management. Mr. Dennis holds a master’s degree in business administration, with distinction, from the Harvard Business School, and bachelor’s and master’s degrees from Rensselaer Polytechnic Institute.
In making the decision to nominate Mr. Dennis to serve as a director, our Nominating and Governance Committee considered, in addition to the criteria referred to above, his leadership experience as chief executive officer of a public company; his public company director experience; his demonstrated business acumen; his understanding of corporate finance and business development matters; and his civic and community involvement.
The Board also considered Mr. Dennis’ human rights related experience associated with the management of a clothing retailer engaged in international business, labor and supply chain management. | | |
MARK A. EMKES | | | Director since 2014 |
Mr. Emkes, age 65,69, has served as a director since August 2014, and serves as the independent ChairmanChair of the Board. He also serves as a member of our Compensation Committee and our Nominating and Governance Committee andCommittee. Mr. Emkes also serves as Chair of our Executive Committee. From 2011 until 2013, Mr. Emkes served as the State of Tennessee’s Commissioner of
Finance and Administration. For more than five years until his retirement in 2010, Mr. Emkes served as Chief Executive Officer and ChairmanChair of the boardBoard of directorsDirectors of Bridgestone Americas, Inc. and Bridgestone Americas Holdings, Inc., a tire and rubber manufacturing company. He also served as President of Bridgestone Americas, Inc. from January 2009 until his retirement. From 2004 until 2010, Mr. Emkes also served as a director of Bridgestone Corporation. Mr. Emkes serves as a director and member of the compensation committee of Greif, Inc., a publicly-tradedpublicly traded industrial packaging products and services company, and asis a former director and chair of the audit committee of First Horizon National Corporation, a publicly-tradedpublicly traded regional financial institution. Mr. Emkes has served as President of the Middle Tennessee Council of the Boy Scouts of America, the Board of Directors of the Community Foundation of Middle Tennessee and the Advisory Board of Habitat for Humanity, Nashville Chapter.
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Mr. Emkes was the 2011 recipient of the Jennings A. Jones Champion of Free Enterprise Award and was inducted into the Nashville Business Hall of Fame in 2012. Mr. Emkes holds a bachelor’s degree in economics from DePauw University and a master’s degree in business administration from the Thunderbird School of Global Management.
In making the decision to nominate Mr. Emkes to serve as a director, our Nominating and Governance Committee considered, in addition to the criteria referred to above, his leadership experience in various management positions, including
theas chief executive officer and
chairmanchair of an international company; his demonstrated business acumen and his understanding of corporate finance and business development matters;
his understanding of state government through his public sector experience; and his civic and community involvement.
The Board also considered Mr. Emkes’ experience with human rights issues, including those related to sourcing, workplace practices and labor management as part of his role as executive leader of an international manufacturer operating throughout the Americas. | | |
STACIA A. HYLTON | | | Director since 2016 |
Ms. Hylton, age
57,61, has served as a director since August 2016, and is a member of our Nominating and Governance Committee and
Risk Committee. Ms. Hylton is also the Chair of our Special Litigation
Committee and a member of our DEI Committee. Since 2016, Ms. Hylton has served as a Principal for LS Advisory, a New Jersey-based business solutions advisory consultancy. In 2010,
Ms. Hylton was nominated by U.S. President Barack Obama
nominated Ms. Hylton to serve as Director of the U.S. Marshals Service
(USMS)(“USMS”), a federal agency with more than 5,600 employees responsible for federal judiciary security, fugitive operations, asset forfeitures, prisoner operations, transportation and witness security, and served as Director of the USMS until her retirement in 2015. She served as the U.S. Attorney General’s Federal Detention Trustee in the U.S. Department of Justice from 2004 to 2010. From 1980 to 2004, Ms. Hylton served in progressively senior leadership positions within the USMS. Ms. Hylton serves as a director and member of the audit committee of Spok Holdings, Inc., a
publicly-tradedpublicly traded provider of communications
solutions.solutions and as a director and member of the audit committee of the board of Trust Stamp, Inc., a publicly traded company listed on the Euronext Growth equity trading market. Ms. Hylton is a Fellow for the National Academy for Public Administration and has served on the Board of Directors of the National Center for Missing and Exploited Children and Law Enforcement Exploring. Ms. Hylton has served on the Executive Committee for the International Chiefs of Police and the Accreditation and Policy Committees for the National Sheriffs Association. Ms. Hylton holds a bachelor’s degree in criminal justice from Northeastern University.
In making the decision to nominate Ms. Hylton to serve as a director, our Nominating and Governance Committee considered, in addition to the criteria referred to above, her understanding of government through her public sector experience; her experience as a public company director and member of an audit committee; her unique understanding of the USMS; her civic and community involvement; and her contribution to the Board’s gender diversity.
The Board also considered Ms. Hylton’s experience with human rights issues related to our business, developed through leadership of a large, federal law enforcement and detention agency. In that role, Ms. Hylton led the establishment, revision and compliance monitoring of human rights standards, engaged with nongovernmental organizations and national and international stakeholders and participated in policing and detention reform initiatives. | | |
HARLEY G. LAPPIN | | | Director since 2018 |
Mr. Lappin, age 62,66, has served as a director sinceand was employed as a special operations advisor to the leadership team of the Company from January 2018. From 20112018 until his retirement effective January 1, 2018,February 2022. Mr. Lappin served as our Executive Vice President and Chief Corrections Officer.Officer from 2011 until his retirement from such position on January 1, 2018. Prior to joining the Company in 2011, Mr. Lappin served sincefrom 2003 to 2011 as Director of the Federal Bureau of Prisons (BOP).BOP. As Director of the BOP, Mr. Lappin had oversight and management responsibility for 116 federal
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prisons, 14 large, private contract facilities and more than 250 contracts for community corrections facilities, in total comprising more than 215,000 offenders managed by 38,000 employees. Mr. Lappin has received numerous awards throughout his career, including the Associate Warden of the Year award for the BOP’s South Central Region (1992); the BOP’s Excellence in Prison Management Award (2000); the Attorney General’s Award for
Excellence in Management (2001); and the Presidential Rank Award of Meritorious Executive (2004). In 2010, he received the American Correctional Association’s (ACA)ACA’s E.R. Cass Award for Correctional Achievement, the highest honor bestowed by that organization. In 2015, Mr. Lappin received the Louie L. Wainwright Award from the Association of State Correctional Administrators (ASCA)(“ASCA”). Mr. Lappin has served as chair of the Standards Committee of the ACA, is a former board member of both the National Institute of Corrections and the Federal Prison Industry Board, and a former chair of the Prison Industry Committee of ASCA. Mr. Lappin holds a bachelor’s degree from Indiana University and a master’s degree in criminal justice from Kent State University.
In making the decision to nominate Mr. Lappin to serve as a director, our Nominating and Governance Committee considered, in addition to the criteria referred to above, his comprehensive corrections industry experience, including executive leadership of federal and private sector correctional system operations; his public company leadership experience; his understanding of government through his public sector experience; and his extensive knowledge of the Company, its business, operations, facilities, customers and personnel through his past role as our Chief Corrections Officer.
The Board also considered Mr. Lappin’s extensive experience with human rights issues affecting our business, such as safe and secure detention, respect for prisoner and detainee rights, labor management, and engagement with nongovernmental organizations. He acquired this experience while serving in various roles including executive leader of the nation’s largest corrections and detention system. | | |
ANNE L. MARIUCCI | | | Director since 2011 |
Ms. Mariucci, age
60,64, has served as a director since December 2011, and serves as a member of our Audit Committee and
Riskour Compensation Committee. Ms. Mariucci also serves as Chair of our DEI Committee. Since 2003, she has been affiliated with private equity firms Hawkeye Partners (Austin, Texas), Inlign Capital Partners (Phoenix, Arizona) and Glencoe Capital (Chicago, Illinois). Prior to 2003, Ms. Mariucci served in a variety of senior executive roles with Del Webb Corporation, and following its 2001 merger with Pulte Homes, Inc., as President of Del Webb Group and Senior Vice President of Strategy for Pulte Homes, Inc. Ms. Mariucci serves as a director
and member of the audit committee of Taylor Morrison Home Corporation, a
publicly-traded homebuilder.publicly traded homebuilder where she serves as Chair, Compensation Committee, and as a member of the Audit and Nominating & Governance committees. Ms. Mariucci also serves as a director of Southwest Gas Holdings, Inc. a
publicly-tradedpublicly traded holding company, where she serves as
chairChair of the
pension investment committeePension Investment Committee and as a member of the
nominatingCompensation and
corporate governance committee.Nominating & Corporate Governance Committees. Ms. Mariucci serves as lead director of Berry Corporation (f/k/a Berry Petroleum Corporation), a publicly traded energy company, where she serves as a member of the Nominating and Corporate Governance Committee, Chair of the Compensation Committee and a member of the Audit Committee. Ms. Mariucci serves as a director of Banner Health, a
non-profit health system, where she serves as
Board Chair, a member of the
auditCompensation Committee and
compensation committees.Vice Chair of the Investment Committee. Ms. Mariucci serves as a director of the Arizona State University
Foundation and the Fresh Start Women’s Foundation. Ms. Mariucci is a past director of the Arizona State Retirement System, Scottsdale Healthcare and Action Performance Companies, as well as a past trustee of the Urban Land Institute. She also served on the Arizona Board of Regents. Ms. Mariucci holds a bachelor’s degree in accounting and finance from the University of Arizona and completed the corporate finance program at the Stanford University Graduate School of Business.
In making the decision to nominate Ms. Mariucci to serve as a director, our Nominating and Governance Committee considered, in addition to the criteria referred to above, her public company executive leadership experience; her understanding of and experience with the State of Arizona, a state where a
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significant portion of our operations is located; her background in accounting and corporate finance; her experience and knowledge with real estate; her experience as a public company director and member of audit and compensation committees; her civic and community involvement; and her contribution to the Board’s gender diversity.
| | |
THURGOOD MARSHALL, JR. | | | Director since 2002 |
Mr. Marshall, age 61,65, has served as a director since December 2002, and serves as Chair of our Risk Committee and as a member of our Nominating and Governance Committee andCommittee. Mr. Marshall also serves as a member of our Special LitigationDEI Committee. He isUntil his retirement in 2019, he served as a partner in the Washington D.C. office of the law firm of Morgan, Lewis & Bockius LLP, and a principal in the firm’s Morgan Lewis Consulting Group LLC, which assists business clients with communications, political and legal strategies. Mr. Marshall has held appointments in all three branches of the federal government. Prior to joining a predecessor of Morgan, Lewis & Bockius LLP in 2001, he served as Assistant to the President and Cabinet Secretary from 1997 to 2001. Mr. Marshall has served as Director of Legislative Affairs and Deputy Counsel to the Vice President, and as counsel to the Senate Judiciary Committee, the Senate Committee on Commerce, Science and Transportation and the Senate Government Affairs Committee. In 2006, he was confirmed by the United States Senate to serve on the Board of Governors of the United States Postal Service
and served as ChairmanChair prior to completing his service in 2013. Mr. Marshall serves as a director of Genesco Inc., a publicly-tradedpublicly traded retailer of footwear, headwear, sports apparel and accessories. He also serves onis a former member of the Board of Trustees of the Ford Foundation and the Ethics & Compliance Certification Institute. Mr. Marshall serves as a trustee on four non-profit boards – The Third Way, Campaign Legal Center, President Lincoln’s Cottage and the DC Grays. Mr. Marshall holds a bachelor’s degree and a juris doctor from the University of Virginia and served as a law clerk for United States District Judge Barrington D. Parker.
In making the decision to nominate Mr. Marshall to serve as a director, our Nominating and Governance Committee considered, in addition to the criteria referred to above, his understanding of politics and the public sector through his varied government service and consulting work; his understanding of organizational governance and oversight through his service as a director in the public,
non-profit and
for-profit sectors; his understanding of legal, regulatory and compliance issues through his education and experience as a lawyer; and his contribution to the Board’s cultural diversity.
The Board also considered Mr. Marshall’s extensive experience with and expertise in human rights issues, including his service as a board member of the American Bar Association’s Center for Human Rights, his work focusing on human rights issues as a staff member for Senator Edward M. Kennedy and his service in the Administration of President Clinton in various roles affecting United States human rights policy.DEVIN I. MURPHY | | |
CHARLES L. OVERBY | | Director since 20012018 |
Mr. Overby,Murphy, age 62, joined our Board of Directors in November 2018 and serves on our Audit and Risk Committees. Mr. Murphy also serves on our Special Litigation Committee. He is President of Phillips Edison & Company, a NASDAQ listed real estate investment trust that is one of the nation's largest owners and operators of grocery anchored shopping centers. Prior to being named President of Phillips Edison in March 2019, Mr. Murphy served as Chief Financial Officer for six years. Before joining Phillips Edison in 2013, Mr. Murphy worked for 28 years as an investment banker and held senior leadership roles at Morgan Stanley and Deutsche Bank. He was the Global Head of Real Estate Investment Banking at Deutsche Bank. His Deutsche Bank team executed over 500 transactions of all types for clients representing total transaction volume exceeding $400 billion including initial public offerings, mergers and acquisitions, common stock offerings and secured and unsecured debt offerings. Mr. Murphy began his banking career at Morgan Stanley in 1986 and held a number of senior positions including Vice Chairman, co-head of US Real Estate Investment Banking and Head of Real Estate Private Capital Markets. He also served on the Investment Committee of the Morgan Stanley Real Estate Funds, a series of global private real estate funds
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with over $35 billion in assets under management. During his 20 years with Morgan Stanley, Mr. Murphy and his teams executed numerous capital markets and mergers and acquisition transactions including a number of industry defining transactions. Mr. Murphy is an Independent Director of Apartment Income REIT Corp (AIRC), a NYSE listed apartment REIT and serves on the Audit, Compensation and Nominating Committees of AIRC. Mr. Murphy received a Bachelor of Arts in English and History with Honors from the College of William and Mary and a Masters of Business Administration from the University of Michigan.
In making the decision to nominate Mr. Murphy to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria above, his executive leadership of real estate and finance-focused organizations; his leadership experience as president of a public company; his knowledge of and experience in real estate, corporate finance, capital markets, and corporate governance; and his high-level leadership roles in complex merger and acquisition transactions and activities.
JOHN R. PRANN, JR. | | | Director since 2000 |
Mr. Prann, age 71, has served as a director since December 2001,2000, and serves as Chair of our Nominating and Governance Committee and as a member of our Special LitigationAudit Committee. He also serves as a member of our Compensation Committee. From 2009 to 2016, Mr. Prann served as Chair of the Board of Directors of a privately held motorsports business. From 2012 to 2014, Mr. Prann served as a Senior Advisor to The Pritzker Group, a private capital, venture capital and asset management firm. From 1993 to 2001, Mr. Prann served as President, Chief Executive Officer and Chief Operating Officer of Katy Industries, Inc., a publicly traded manufacturer and distributor of consumer products and maintenance cleaning products. Mr. Prann also served as President and Chief Executive Officer of CRL, Inc., a diversified holding company that held a 25% interest in Katy Industries, Inc. Mr. Prann served as a director of CPAC, Inc., a publicly traded chemicals and equipment business, and Dynojet Research, Inc. He has served as a partner with the accounting firm of Deloitte & Touche. Mr. Prann holds a bachelor’s degree in biology from the University of California, Riverside, and a master’s degree in business administration from the University of Chicago.
In making the decision to nominate Mr. Prann to serve as a director, our Nominating and Governance Committee considered, in addition to the criteria referred to above, his executive leadership experience as president and chief executive of a public company and his understanding of accounting and finance issues through his education and career.
Incumbent Director Not Standing for Re-Election CHARLES L. OVERBY | | | Director Since 2001 |
Mr. Overby, age 75, has served as a director since December 2001. He served as chair of our Nominating and Governance Committee until May 2021 and currently serves as a member of that committee, our Executive Committee, our Risk Committee and our Special Litigation Committee. From 1989 until 2011, Mr. Overby served as Chief Executive Officer of The Freedom Forum, an independent,non-partisan foundation dedicated to the First Amendment and media issues, and its predecessor, The Gannett Foundation. Mr. Overby served from 1997 to 2011 as Chief Executive Officer of The Freedom Forum’s affiliate, Newseum, an interactive museum in Washington, D.C. committed to educating visitors on free expression and the First Amendment. Prior to leading The Freedom Forum, Mr. Overby served for 16 years as a reporter, editor and corporate executive with Gannett Co., Inc., the nation’s largest newspaper company and publisher of USA TODAY, including roles as a PulitzerPrize-winning editor at The Clarion-Ledger in Jackson, Mississippi. Mr. Overby serves as Chairman of the Overby Center for Southern Journalism and Politics at the University of Mississippi and on the Board of Trustees of the Andrew Jackson Foundation. Mr. Overby holds a bachelor’s degree from the University of Mississippi.
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In making
Under the decisionCompany’s Bylaws, a majority of all of the votes cast at the virtual Annual Meeting is required for the election of each nominee in an uncontested election of directors. A majority of votes cast means the number of shares cast “for” a nominee’s election exceeds the number of votes cast “against” that nominee. Brokers do not have discretionary authority to nominate Mr. Overbyvote on the election of directors. Abstentions and broker non-votes will have no effect on the outcome of the vote of the election of directors as they are not considered votes cast.
If a director nominee is an incumbent director and does not receive a majority of the votes cast in an uncontested election, that director will continue to serve
on our Board as a
“holdover” director
but must tender his or her resignation to our Board promptly after certification of the election results of the stockholder vote. The Nominating and Governance Committee of our Board will then recommend to our Board whether to accept the resignation or whether other action should be taken. Our Board will act on the tendered resignation, taking into account the recommendation of our Nominating and Governance Committee,
considered, in addition to the criteria referred to above, his executive leadership experience and
understanding of corporate governance as chief executive of severalnon-profit organizations; his understanding of media and public relations through his career as a journalist, print media executive and executive with other media-related organizations; his political experience; and his civic and community involvement and leadership. | | |
JOHN R. PRANN, JR.
| | Director since 2000 |
Mr. Prann, age 67, has served as a director since December 2000, and serves as Chair of our Audit Committee. He also serves as a member of our Compensation Committee. From 2009 to 2016, Mr. Prann served as ChairmanBoard’s decision will be publicly disclosed within 90 days after certification of the boardelection results of directorsthe stockholder vote. A director who tenders his or her resignation after failing to receive a majority of a privately-held motorsports business. From 2012 to 2014, Mr. Prann served as a Senior Advisor to The Pritzker Group, a private capital, venture capital and asset management firm. From 1993 to 2001, Mr. Prann served as President, Chief Executive Officer and Chief Operating Officerthe votes cast will not participate in the recommendation of Katy Industries, Inc., a publicly-traded manufacturer and distributor of consumer products and maintenance cleaning products. Mr. Prann also served as President and Chief Executive Officer of CRL, Inc., a diversified holding company that held a 25% interest in Katy Industries, Inc. Mr. Prann served as a director of CPAC, Inc., a publicly-traded chemicals and equipment business, and Dynojet Research, Inc. He has served as a partner with the accounting firm of Deloitte & Touche. Mr. Prann holds a bachelor’s degree in biology from the University of California, Riverside, and a master’s degree in business administration from the University of Chicago.
In making the decision to nominate Mr. Prann to serve as a director, our Nominating and Governance Committee considered, in additionor the decision of our Board with respect to the criteria referred to above, his executive leadership experience as president and chief executive of a public company and his understanding of accounting and finance issues through his education and career.
or her resignation.
Our Board unanimously recommends a vote “FOR” each of the 10 nominees.
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
This section of the Proxy Statement discusses the philosophy, objectives and elements of our executive compensation programs and the compensation awarded to our Named Executive Officers (“NEOs”), consisting of our Chief Executive Officer, Chief Financial Officer and our next three highest paid executives in
2017.2021. This information should be read in conjunction with the Summary Compensation Table and the related tables and narratives that follow
the Compensation Discussion and Analysis in this Proxy Statement. Based on SEC proxy disclosure rules, the following individuals were our NEOs for the fiscal year ended December 31,
2017:2021: | | |
Damon T. Hininger | | | Chief Executive Officer and President, Director | |
| David M. Garfinkle | | | Executive Vice President and Chief Financial Officer | |
Harley G. Lappin* | Patrick D. Swindle | | | Executive Vice President and Chief CorrectionsOperating Officer | |
| Anthony L. Grande | | | Executive Vice President and Chief Development Officer | |
| Lucibeth N. Mayberry | | | Executive Vice President, Real Estate | |
* Mr. Lappin retired from his position as our Executive Vice President and Chief Corrections Officer effective January 1, 2018, but continues to be employed by the Company in anon-executive role, and is a nominee for election to our Board at the Annual Meeting.
Our Company and Strategy
CoreCivic is a self-managed, fully integrated equity REIT that is one of
We are the nation’s largest
ownersowner of partnership correctional, detention, and residential reentry facilities. We are one of the largest prison operators in the United
States, and we believe we are the largest private owner of real estate used by government agencies. Under ourStates. Through three
business offerings,segments, CoreCivic Safety, CoreCivic Community and CoreCivic Properties, we
offer multipleprovide a broad range of solutions
to government partners that serve the public good
by helping ourthrough corrections and detention management, a network of residential reentry centers to help address America’s recidivism crisis, and government
partners meet unique challenges in cost-effective ways.The keystone of our business strategyreal estate solutions.
Our principal corporate objective is creating long-term value for our stockholders by pursuing
profitable growth inavenues to profitably grow our primary CoreCivic Safety correctional and detention business while diversifying our revenues and cash flows by prudently expanding our CoreCivic Community and CoreCivic Properties businesses.
CoreCivic Safety pursues profitable growthavenues to profitably grow by improving performance under contracts with our existing government partners, to maintain high renewal rates, marketing available facility capacity to existing and new government partners and providing new facility capacity as appropriate to meet specific partner needs.
CoreCivic Community, the second largest community corrections provider in the United States, with 33 residential reentry centers containing 6,261 beds, prudently pursues opportunities to acquiremarket available residential reentry centers that will further expand the network of reentry assets we own and reentry services we providecapacity to existing and new government partners.
partners and to expand the scope of non-residential correctional alternative solutions available to government agencies.CoreCivic Properties which offers government partners and providers an attractive portfolio of correctional, detention, and reentry facilities that can be leased for delivering mission-critical government services, not only supports CoreCivic Safety and CoreCivic Community by marketing our available facilities for lease (asvarious needs as an alternative to contracting for“turn-key” “turn-key” correctional, detention and residential reentry services), but prudentlybed space and services and also pursues opportunities to acquire existing government-leased assets and develop, build and lease new assetsprison facilities to government and other third-party operators in need of criminal justice infrastructure.
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2021 Company Performance Highlights
In 2021, the Company's largest customer, the federal government, saw a change in presidential administrations, a shift in Senate control and the replacement of numerous key leaders. The COVID-19 pandemic continued to present challenges, strain resources and impose restrictions on population management and staffing practices in correctional, detention and residential reentry facilities. The residential nature of our business presents numerous challenges for front line employees, delivering critical services to our governmentcommunities and partners.
2017 Company Performance Highlights
Facing Despite these challenges, we entered into a challenging operating environment, which included budgetary constraintsnumber of new contracts, renewed several other significant contracts, and political transitions impacting many ofcompleted numerous other transactions and milestones, including the following:
CoreCivic Safety
Partnered with Home Builders Institute (“HBI”) in opening a Construction Academy at our government partners,Crowley County Correctional Facility in Colorado. HBI is a national nonprofit organization that provides training, curriculum development, and job placement services for the building industry. Carpentry is taught at the Construction Academy at our management team remained focused onCrowley facility, and students can earn a Pre-Apprenticeship Certificate and receive job placement assistance from HBI staff.
Partnered with Trinity Services Group, a national leader in correctional food service, in opening a Culinary Training Program at our
operational and financial performance while continuing our progressLake Erie Correctional Institution in
executing our long-term growth and diversification strategy. Highlights from 2017 include:Although our financial performance was negatively impactedOhio. Through the 10-month program offered at the Lake Erie facility, students can earn a Certified Fundamental Cook Certificate issued by the 2016 amendmentAmerican Culinary Federation. The program also teaches students restaurant and extensioncatering management skills.
Expanded our existing contract with the state of Montana at our 664-bed Crossroads Correctional Center by 96 beds to utilize 100% of the facility capacity, and replacing capacity previously utilized by the USMS.
Entered into a new contract with Mahoning County, Ohio to utilize up to 990 beds at our 2,016-bed Northeast Ohio Correctional Center to assist in caring for County inmates and federal detainees in their custody, replacing substantially all of the capacity previously utilized by USMS.
Awarded a new contract by the state of Arizona for up to 2,706 inmates at our South Texas Family3,060-bed La Palma Correctional Center in Arizona, which we expect to commence late in the first quarter or early in the second quarter of 2022.
CoreCivic Community
Activated a new contract with the BOP to provide residential reentry and home confinement services at our previously idled 289-bed Turley Residential Center and at our 494-bed Oklahoma Reentry Opportunity Center, both in Oklahoma.
CoreCivic Properties:
Completed the sale of two government-leased properties in a declinesingle transaction to a third party for an aggregate price of inmate populations from$73.0 million, generating net proceeds of $46.2 million after the Staterepayment of Californiadebt associated with one of the properties and other transaction-related costs.
Completed the sale of a 541,000 square foot government-leased property to a third-party for a price of $253.0 million, generating net proceeds of $76.4 million after the repayment of the debt associated with the property and other transaction-related costs.
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Entered into a three-year lease agreement with the state of New Mexico at our 596-bed Northwest New Mexico Correctional Center. We previously operated the Northwest New Mexico facility in our Safety segment under a contract with the state of New Mexico. The new lease agreement commenced on November 1, 2021 and includes extension options that could extend the term of the lease through October 31, 2041.
Corporate and Other:
Completed our plan to revoke our REIT election and become a taxable C Corporation, effective January 1, 2021, providing us with greater financial flexibility.
Sold $450.0 million of 8.25% senior unsecured notes at 99% of face value, resulting in an effective yield to maturity of 8.5%. The new notes mature in April 2026.
Completed a tack-on offering of $225.0 million of 8.25% senior unsecured notes at an issue price of 102.25% of face value, resulting in an effective yield to maturity of 7.65%. These notes and the expiration$450.0 million of our contracts with the Federal Bureau of Prisons at our Eden Detention Center and our Cibola County Correctional Center, our full year financial results outperformed the high end of our 2017 financial guidance, as set forth in our quarterly earning’s press release dated November 2, 2016, for Net Income, Adjusted EBITDA, Diluted EPS, Adjusted EPS and Normalized FFO per diluted share:
| | | | | | | | | | | | | | | | |
| | 2017 Financial Guidance (November 2, 2016) | | | | |
| | Low End | | | Mid-Point | | | High End | | | Actual Performance | |
Net Income (in thousands) | | $ | 164,000 | | | $ | 170,000 | | | $ | 176,000 | | | $ | 178,040 | |
Adjusted EBITDA (in thousands)(1) | | $ | 368,500 | | | $ | 376,500 | | | $ | 384,500 | | | $ | 387,881 | |
Diluted EPS | | $ | 1.38 | | | $ | 1.44 | | | $ | 1.49 | | | $ | 1.50 | |
Adjusted EPS(1) | | $ | 1.40 | | | $ | 1.45 | | | $ | 1.50 | | | $ | 1.57 | |
Normalized FFO per diluted share(1) | | $ | 2.16 | | | $ | 2.22 | | | $ | 2.27 | | | $ | 2.38 | |
| (1) | Adjusted EBITDA, Adjusted EPS, and Normalized FFO per diluted share are measures calculated and presented on the basis of methodologies other than in accordance with GAAP. Please refer to the Appendix for further discussion and reconciliations of these measures to their most comparable GAAP measures.
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We completed an offering of $250.0 million principal amount of8.25% senior unsecured notes, withconstitute a fixed stated interest ratesingle class of 4.75%, due October 15, 2027, usingsecurities and have identical terms, other than date and issue price (collectively, the “8.25% Senior Notes”).
Repaid approximately $444.0 million of indebtedness, net proceeds to pay down a portion of our revolving credit facility, which reduced our exposure to variable rate debt,the change in cash, extended our weighted average maturity of recourse debt by approximately one year, and increased availability underreduced our revolving credit facilitydebt leverage ratio to fund future growth opportunities.
CoreCivic Safety
Expanded contract with State of Ohio2.9x for upthe year ended December 31, 2021, from 3.7x for the year ended December 31, 2020.
Issued our third ESG report which summarizes our impacts and aspirational goals across environmental, social, and governance topics. The report details our commitment to an additional 996 offenders atreducing the national recidivism crisis through evidence-based practice in our2,016-bed Northeast Ohio Correctional Center
New three-year contract with City of Mesa, Arizona for up to 200 offenders at our4,128-bed Central Arizona Florence Correctional Complex
New contract with State of Nevada for up to 200 offenders at our1,896-bed Saguaro Correctional Facility reentry programs and covers progress in Arizona
New contract with Hamilton County, Tennessee to continue management, operation and maintenance of the1,046-bed Silverdale Detention Center
New contract with Commonwealth of Kentucky Department of Corrections to house offenders at our previously idled816-bed Lee Adjustment Center
human rights-related goals.• | Named one of America's Most Responsible CompaniesTM by Newsweek, making our inaugural appearance on the 2021 list published in November 2021. |
CoreCivic Community
Acquired Arapahoe Community Treatment Center, a135-bed residential reentry center in Colorado
Acquired Time to Change, Inc., a community corrections company with three residential reentry facilities in Colorado containing a total of 422 beds
Acquired Oklahoma City Transitional Center, a200-bed residential reentry center in Oklahoma City, Oklahoma
Acquired Oracle Transitional Center, a92-bed residential reentry center in Tucson, Arizona
CoreCivic Properties
Acquired Stockton Female Community Corrections Facility, a100-bed residential reentry center in California leased to a third-party operator
Acquired portfolio of four properties leased to government agencies, including a230-bed residential reentry center leased to the State of Georgia and three properties in North Carolina and Georgia leased to the General Services Administration
Stock Price Performance and TSR Ranking Within Our Peer Group
Our stock price decreasedincreased from a closing price of $24.46$6.55 at fiscalyear-end 2016 2020 to $22.50 for$9.97 at fiscalyear-end 2017. 2021. We believe our stock price was impairedpositively impacted by our performance under a new federal presidential administration which implemented numerous significant policy changes in its first year; by the generally negative correlation between rising interest rates and public REIT valuations, stricter immigration and criminal justice policies espoused by the Trump Administration not directly translating into significant new contract awards or further utilizationresilience of idle capacity in our portfolio, the renegotiationteam members in the fourth quarter of 2016face of the contract atcontinuing COVID-19 pandemic and nationwide labor market challenges; our South Texas Family Residential Centertransition from a REIT to a taxable C Corporation; and uncertainty regarding future utilization ofout-of-state capacity by the California Department of Correctionsour steady progress toward our financing and Rehabilitation at two of our facilities. balance sheet goals.
Our total stockholder return (“TSR”) for
20172021 and the three-year and five-year periods ended December 31,
2017,2021, and ranking within our peer group
(as set forth under Compensation Discussion and Analysis—Process for Determining Compensation—Independent Review and Use of Market Data—Peer Group Review and Update), are illustrated below. On March
12, 2018,16, 2022, our closing stock price was
$21.93.$9.40. | One-Year TSR (12/31/2020 - 12/31/2021) | | | 52.21% | | | 72% | |
| Three-Year TSR (12/31/2018 - 12/31/2021) | | | -36.17% | | | 7% | |
| Five-Year TSR (12/31/2016 - 12/31/2021) | | | -46.19% | | | 6% | |
(1)
| | | | | | | | |
| | TSR | | | and Percentile Ranking within Peer Group | |
were calculated by the Company’s Independent Compensation Consultant using the Peer Group discussed in One-YearCompensation Discussion and Analysis—Process for Determining Compensation—Independent Review and Use of Market Data—Peer Group Review and Update TSR | | | (3.63 | )% | | | 21 | st |
Three-Year TSR
| | | (10.12 | )% | | | 13 | th |
Five-Year TSR
| | | 1.14 | % | | | 12 | th. |
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Pay for performance is an important component of our longstanding executive compensation philosophy. Our compensation approach is designed to incentivizeattract, retain and motivate qualified, knowledgeable and talented executives. Compensation is provided using a balanced mix of short- and long-term incentives because we believe that this balance drives leadership decisions that continuously strengthen our Company and focus on returning value to stockholders.
As each year’s executive compensation program goals are set, our Compensation Committee considers our Company’s external challenges and opportunities, examining not only opportunities for desirable business outcomes, but also opportunities for our Company to contribute to the improvement of the lives of those entrusted to our care and the career and development of our workforce. The Committee also strives to align financial targets and NEO incentives with the most important aspects of our Company’s capital allocation and growth strategies.
In 2019, with the assistance of Exequity, our Compensation Committee led a comprehensive review and redesign of the Company’s executive compensation program. We believe the 2019 redesign of the Company’s executive compensation program built upon the strong foundation established under prior executive compensation policies, while creating proper incentives for our executives to substantially contribute individuallyachieve corporate and collaborativelystrategic objectives and to ourmaximize stockholder value over the long-term sustainable growth. We use Normalized FFO per share as one ofand to align pay with stockholders’ interests. In 2021, the primary performance metrics by which annual cash incentive compensation may be earned, and as the sole performance metric for the determination of vesting of performance-based restricted stock units (“RSUs”). As a REIT, we believe Normalized FFO reflects the value we deliver to our stockholders, as well as the earnings and cash-generating potential of our portfolio, and is comparable to performance metrics used by other REITs. In 2017, we added Adjusted EBITDA as a complimentary financial performance metric for our annual cash incentive plan because, unlike FFO, Adjusted EBITDA is not impacted by fluctuations in taxes and short-term financing issues, such as debt refinancing and equity issuances. We also allocated a portion of the total annual bonus opportunity
to the achievement of objective, strategic business goalspre-established by our Compensation Committee that are related to the successful execution of our long-term growth and diversification strategy.
| • | | Financial Performance Drives Annual Cash Incentive Payout. We generally target 75% of base salary for bonus awards under our annual cash incentive plan for all of our NEOs, including our Chief Executive Officer. Provided we generate positive adjusted earnings per diluted share (“Adjusted EPS”), annual cash incentives awarded to our NEOs as a percentage of base salary are determined by our actual performance againstpre-established Normalized FFO, Adjusted EBITDA and objective, strategic business goals. Despite a challenging environment, our 2017 financial results outperformed our full year financial guidance set forth in our quarterly earnings press release dated November 2, 2016 for Adjusted EPS, Normalized FFO and Adjusted EBITDA, and we achieved each of the strategic business goals adopted by our Compensation Committee. Our performance resulted in each of our NEOs earning an annual cash incentive payout at 156.79% of actual base salary:
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| | | | | | | | | | | | | | | | | | | | |
| | 2017 Financial Guidance (November 2, 2016) | | | | | | | |
| | Low End | | | Mid-Point | | | High End | | | Actual Performance | | | Bonus % of Base Salary | |
Adjusted EPS(1) | | $ | 1.40 | | | $ | 1.45 | | | $ | 1.50 | | | $ | 1.57 | | | | — | |
Normalized FFO per diluted share(1) | | $ | 2.16 | | | $ | 2.22 | | | $ | 2.27 | | | $ | 2.38 | | | | 75.00% | |
Adjusted EBITDA (in thousands) (1) | | $ | 368,500 | | | $ | 376,500 | | | $ | 384,500 | | | $ | 387,881 | | | | 56.79% | |
Strategic Business Goals(2) | | | | | | | | | | | | | | | 100% | | | | 25.00% | |
Cash Incentive Bonus Earned: | | | | 156.79% | |
| (1) | Adjusted EBITDA, Adjusted EPS, and Normalized FFO per diluted share are measures calculated and presented on the basis of methodologies other than in accordance with GAAP. Please refer to the Appendix for further discussion and reconciliations of these measures to their most comparable GAAP measures.
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| (2) | The descriptions of ourpre-established strategic business goals for 2017 and the bonus award levels available upon achievement of each such goal, are detailed under “Executive and Director Compensation—Executive Summary—NEO Compensation for 2017—Annual Cash Incentive Plan Compensation” in this Proxy Statement.
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| • | | Performance-Based RSUs Align Interests of Executives with Stockholders. We align management’s interests with those of our stockholders by ensuring a substantial portion of each executive officer’s pay is at risk based on our objective performance. Long-term incentive compensation granted by our Compensation Committee consists solely of performance-based RSUs that vest ratably over a three-year vesting period based on our performance againstpre-established Normalized FFO goals. If thepre-established Normalized FFO performance goal for any one year is not met, the tranche of RSUs for such year will not vest and will be forfeited. Our 2017 Normalized FFO performance of $2.38 per diluted share resulted in the vesting of the 2017 tranche of outstanding performance-based RSUs granted in 2017 and 2016. However, the 2017 tranche of performance-based RSUs granted in 2015 did not vest and was forfeited. The performance-based RSUs granted in 2017 and 2016 had a grant date fair value of $32.69 per share and $28.86 per share, respectively, but a realized value on the date they were earned and vested (February 22, 2018) of $21.67 per share.
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Substantial Compensation Tied to Our Objective Performance
All of our equity is granted in the form of performance-based RSUs that vest only based upon our Normalized FFO performance, and our annual cash incentives are earned based upon our objective performance againstpre-established financial performance and objective, strategic business goals. As a result, a substantial portion of executive compensation is at risk, paid based on our objective performance and tied to the interests of our stockholders and long-term value creation. The following chart illustrates the degree to which the actual total direct compensation of our CEO for 2017 was earned (or forfeited) based on our performance, as well as the
value of performance-based RSUs voluntarily surrendered by, or not granted by our Compensation Committee at the request of, our CEO:
* Base Salary, Annual Cash Incentive and Other Compensation values derive from the Summary Compensation Table for 2017 for Mr. Hininger. “Other Compensation” includes “Change in Nonqualified Deferred Compensation Earnings” and “All Other Compensation” as described in the Summary Compensation Table.
In support of the cost reduction plan we announced in 2016, Mr. Hininger voluntarily forfeited the 70,817 performance-based RSUs awarded to him in 2016, and, at Mr. Hininger’s request, our Compensation Committee did not award him any RSUs in 2017. Our 2017 Normalized FFO performance of $2.38 resulted in the vesting of the 2017 tranche of outstanding performance-based RSUs granted in 2017 and 2016, but the 2017 tranche of performance-based RSUs granted in 2015 did not vest and was forfeited. The table below sets forth the total value of at risk, incentive compensation Mr. Hininger did not receive for 2017 with respect to performance-based RSUs that were forfeited (voluntarily or based on performance) or not awarded to Mr. Hininger at his request:
| | | | | | | | | | | | | | | | | | | | |
Performance-Based RSUs Tranche | | Performance- Based RSUs (#) | | | Disposition | | Fair Value on 2018 Vesting Date(1) | | Accumulated Dividend Equivalent Rights | | | | | | Total Compensation Value | |
2017 Tranche of 2015 RSUs | | | 16,125 | | | Forfeited (Performance) | | $349,429 | | $ | 94,815 | | | | | | | $ | 444,244 | |
2017 Tranche of 2016 RSUs | | | 23,605 | | | Forfeited (Voluntary) | | $511,520 | | $ | 87,811 | | | | | | | $ | 599,331 | |
2017 Tranche of 2017 RSUs | | | 21,882 | | | Not Awarded (Voluntary) | | $474,183 | | $ | 36,762 | | | | | | | $ | 510,945 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 1,554,520 | |
(1) | The performance-based RSUs granted in 2017 had a realized value on the date they were earned and vested (February 22, 2018) of $21.67 per share.
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Compensation in Line with Market Median
In 2017, our Compensation Committee, with the assistance of PwC, performed a comprehensive review of ourExequity, reviewed the Company’s existing executive compensation program which includedfor changes it should implement as a result of the Company’s conversion from a REIT to a taxable C Corporation, effective January 1, 2021. While the structure of the Company’s executive compensation program itself did not change, Exequity recommended that the Compensation Committee adopt changes to the Company’s peer group to better align the peer group with the Company’s revocation of its REIT election and conversion to a taxable C Corporation. The Compensation Committee adopted this recommendation (see Compensation Discussion and Analysis—Process for Determining Compensation—Independent Review and Use of Market Data— Peer Group Review and Update and Compensation Discussion and Analysis—Long-Term Incentive Compensation—Revised Peer Group for Determining rTSR Modifier for Performance-Based RSU).
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Consistent with the 2019 objectives, our Compensation Committee has developed and approved an
extensive competitive market analysis. The PwC competitive market analysis indicated:Target total directexecutive compensation program providing for a range of compensation for our NEOs (consistingexecutives, with the intent of annual base salary, annual cashrewarding strong performance and reducing incentive compensation when our performance objectives are not achieved. For a detailed discussion of our short-term and long-term equity-based incentive compensation) was in line withprograms, see the market medianExecutive and Director Compensation—Annual Cash Incentive Plan and Executive and Director Compensation—Long-Term Incentive Compensation sections, respectively, of this Proxy Statement.
The charts below illustrate the balance of target total compensation during 2021 for the CEO (on the left) and the average of the other NEOs (on the right):
Elements of CEO and Other NEO Average Target Compensation (1) (1)
| The percentages of total compensation for our CEO (left) and the average of our other NEOs (right) as calculated above are based on the 2021 base salary and the value of executive-level perquisites paid to the NEO which were not paid generally to all employees, the 2021 annual cash incentive compensation award (assuming achievement at the target level (such award was ultimately paid at 175.9% for our CEO and 140.7% for our other NEOs)), the grant date fair value of the performance-based RSU awards granted in February 2021 (assuming vesting at the target achievement level) and the grant date fair value of the time-based RSU awards granted in March 2021. Each compensation element is outlined in more detail in the 2021 Summary Compensation Table on page 79 below. For the NEOs other than the CEO, the chart above is based on the average of each category. Due to rounding, percentage totals may not equal 100%. |
As the charts above indicate, a significant portion of our peer group companiesNEOs’ total target compensation is performance-based.
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Key Elements of Our Compensation Program
The following table provides a summary of the types of compensation provided to our CEO and our other NEOs.
| Base Salary | | | • Fixed compensation
• Payable in cash • Reviewed annually
• Adjusted when appropriate | | | • To attract and retain qualified executives
• Compensates for roles and responsibilities | | | • Level of responsibility
• Experience, skills and performance
• CEO and NEOs did not receive a salary increase in 2020 | | | • Our CEO received a 5.0% increase in base salaries for severalsalary, and our other NEOs (on average) received a 5.7% increase in base salary during 2021 | |
| Short-Term Cash Incentive Compensation | | | • Variable compensation
• Cash-based
• Adjusted annually as appropriate
• Tied to preset performance targets | | | • Motivates and rewards
• Incentivizes pursuit of ourshort-term strategic goals | | | • Adjusted EBITDA
• Success/failure in converting an operated federal facility to a lease
• Improving lives and respecting human rights of residents and employees | | | • Financial performance exceeded target level
• Lease conversion was not achieved
• Strategic Business Goals were achieved resulting in a 1.20x modifier
• CEO and NEOs were substantially belowreceived payout of 175.9% and 140.7%, respectively | |
| Long-Term Equity Incentive Compensation | | | • Variable compensation
• Performance-based RSUs and Time-based RSUs, vesting ratably over three years | | | • Motivates and rewards
• Incentivizes pursuit of long-term value
• Encourages multi-year retention of executives | | | • Performance-based RSUs vest from 50-150% of grant over three years based on Normalized FFO targets set annually(1) modified by Relative TSR(2)
• Time-based RSUs vest ratably over three years | | | • CEO granted a 60/40, performance/time-based split of RSUs in 2021; other NEOs granted 50/50 split.
• Normalized FFO exceeded target (after application of the market median and the 50Refinancing Adjustment)
• Relative TSR(1) at 68th percentile resulting in a 1.14x modifier | |
| Other Benefits | | | • Fixed compensation
• General programs available to all employees
• Certain executive-level perquisites not paid generally to our other employees | | | • Executives enjoy same benefits as all employees
• Provides competitive benefits to attract and retain talent | | | • Maintain common benefits across workforce
• Offer executive level benefits comparable with other similarly-positioned companies | | | • Our CEO and other NEOs receive limited executive perquisites described more fully on page 74 | |
(1)
| The Compensation Committee determined that Normalized FFO would be subject to the Refinancing Adjustment, if any, during the 2021 Performance Period. More information on the Compensation Committee’s decision to further adjust Normalized FFO with the Refinancing Adjustment can be found under the heading Compensation Discussion and Analysis—2021 Performance-Based RSU Awards (2021-2023 Performance Period). |
(2)
| Relative TSR (“rTSR”) was determined by comparing our Company’s total shareholder return (“TSR”) against the companies comprising the Russell 2000. This calculation was performed by our independent Compensation Consultant at the request of our peer group companiesCompensation Committee. More information on the Compensation Committee’s use of rTSR can be found under the heading Compensation Discussion and Analysis—2021 Performance-Based RSU Awards (2021-2023 Performance Period). |
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A greater amount of our long-term equity-based incentive compensation is subject to objective performance goals than many of our peer group companies
Significant Compensation
Committee Actions in 2017Prior to 2017, our Compensation Committee last conducted a comprehensive review of our executive compensation program in 2014 in connection with our conversion to a REIT. Practices
In
2017, our Compensation Committee, with the assistance of PwC, completed an in depth assessment of our executive compensation policies and practices to evaluate their alignment withdesigning our compensation
philosophy and objectives, effectiveness and overall competitiveness as compared to market and peer group compensation practices. The 2017 assessment built upon the more targeted review of our incentive compensation programs,
our Compensation Committee completed, with the assistance of PwC, in 2016. With careful considerationwe are mindful of the
analysis and competitive market data provided by PwC in 2016 and 2017, and other information it considered to be relevant, our Compensation Committee took the following actions in 2017:Updated our peer group selection methodology and composition
Designed and adopted a four-factor formula for the determination of annual cash incentive compensation based on objective performance againstpre-established goals for Adjusted EPS, Normalized FFO, Adjusted EBITDA and strategic business objectives
| • | | Increased base salaries of our NEOs to bring them closer to, but generally still below, the 50th percentile of our peer group companies
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Compensation Best Practices and Governance
We are committed to managing our Company for the benefit of our stockholders, acting with the upmost integrity and serving as a responsible fiduciaryrisks to our stockholders regardingthat may be inherent in our executive compensation practices. Further, we are focused on adopting best practices and practicing good governance regarding our executive compensation programs, that work within our objectives and which our Compensation Committee deems advisable. Compensationwe attempt to utilize compensation practices that illustratemitigate these commitments include:
Our Compensation Committee, working with an independentrisks. In designing our compensation consultant, completed a comprehensive review ofprograms, we also have considered feedback from our executiveinvestors and relevant third parties. Our compensation program during 2017
More than 74% ofincludes the following compensation of our executive officers in 2017 was tied to performance
practices:• | Pay for Performance—We tie pay to performance in a manner that we believe advances our stockholders’ interests by paying a significant portion of our NEOs’ total compensation opportunities in the form of variable compensation payable upon the performance of short- and long-term performance targets. As described under NEO Compensation for 2021 on page 62, 56.0% of our CEO’s total direct compensation package and 49.1% of our other NEO’s total direct compensation package (on average) was performance-based in 2021 (calculated in the manner described on page 54). |
• | Design of Our Annual Cash Incentive Plan—As described below under Annual Cash Incentive Plan on page 63, our annual cash incentive plan is performance-based, and a failure to achieve the minimum performance level in either Adjusted EBITDA or the conversion of an existing operated federal facility to a leased federal facility results in zero bonus opportunity for such category (i.e., all of this compensation is “at risk”). Further, the bonus opportunity provided by our annual cash incentive plan is increased or decreased based upon the level of achievement of certain Strategic Business Goals. |
• | Design of Our Long-Term Equity Incentive Compensation Program—As described under Long-Term Incentive Compensation on page 67, a significant portion of our NEO’s long-term incentive compensation is in the form of performance-based RSUs which vest based on the achievement of annual Normalized FFO performance targets (subject to the Refinancing Adjustment, if any, during the 2021 Performance Period) and are subject to a rTSR modifier, which may positively or negatively adjust the number of performance-based RSUs vesting, if any. As described on page 68, subject to the application of the Refinancing Adjustment, if any, during the 2021 Performance Period, the failure to achieve the minimum Normalized FFO performance target in a particular year results in no RSUs vesting and the forfeiture of that year’s performance-based award. |
• | Stock Ownership and Retention Guidelines for Executives and Directors—Our stock ownership guidelines require significant levels of stock ownership for our executives and directors. See Executive and Director Compensation—Guidelines and Policies—Executive Officer Stock Ownership Guidelines on page 75 and Executive and Director Compensation—Director Compensation—Director Stock Ownership Guidelines on page 90. |
• | No Hedging or Pledging—Our insider trading guidelines include provisions that prohibit executive officers, directors, other officers and employees from engaging in hedging or pledging transactions involving Company securities. See No Hedging or Pledging Permitted on page 18. |
• | No Tax “Gross Ups” for Severance Payments—As described in Potential Payments upon Termination or Change of Control on page 83, we do not provide excise or other tax “gross up” payments in connection with any severance payment made to an NEO. |
We maintain stock ownership guidelines for our directors and executive officers
We maintain anti-hedging and anti-pledging policies
We provide limited perquisites to our NEOs and other executive officers
We do NOT provide tax gross ups (except in connection with relocations)
Dividend equivalents on our performance-based RSUs are earned and paid in cash only when and to the extent the underlying RSUs become vested
Results of 20172021 Advisory Vote to Approve Executive Compensation
At our 20172021 Annual Meeting of Stockholders, our stockholders overwhelmingly approved the compensation of our NEOs with more than 98%96% of the votes cast voting in favor of our advisory “say on pay” proposal. Our Compensation Committee and the Company view these results as an indication that our stockholders support our executive compensation policies, and thus no changes were made to our compensation programs as a result of this vote.policies. Nonetheless, our Compensation Committee regularly evaluates our executive
compensation plans and policies, compensation best practices and
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market compensation trends, and considers alternatives for strengthening the alignment of our executive compensation program with our compensation philosophy and objectives, our business strategy, competitive market practices and long-term stockholder value creation.
The comprehensive plan design described in this Proxy Statement reflects both an acknowledgement of stockholder support for the Company’s executive compensation approach and the desire of our Compensation Committee to continuously refine our executive compensation program in accordance with the factors listed above.
Compensation Philosophy and Objectives
The foundational philosophy of our executive compensation
programsprogram is to provide a total mix of compensation,
comprised ofcomprising base salary, annual cash incentive compensation,
and long-term equity-based incentive awards
and other benefits, which enables us to attract,
retain and
retainmotivate, qualified, knowledgeable and talented executive leadership that will execute our business strategy, uphold our values, deliver positive results and create long-term value for our stockholders. Accordingly, our Compensation Committee develops compensation strategies and programs that will attract, retain and motivate
highly qualified,
knowledgeable and
high-performingtalented executives through compensation that is:
| • | | Performance-based: A significant component of total compensation should be determined based on whether or not we achieve objective performance criteria that are aligned with positive operational performance, the successful execution of our growth strategy and the creation of long-term stockholder value, and which do not encourage unreasonable risk-taking.
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| • | | Competitive: Total compensation should be market competitive relative to our peers, with total direct compensation generally being targeted at or below the 50th percentile of our peer group. We believe targeting total direct compensation at or below the 50th percentile of our peer group enables us to recruit and retain the best talent for the organization, while achieving an appropriate balance between paying for performance and maintaining control of our compensation expense. As a consequence of our full year financial results outperforming the high end of our 2017 financial guidance, the 156.79% of base salary payout under our annual cash incentive plan substantially exceeded the 75% of base salary target, which resulted in 2017 total direct compensation for certain of our NEOs that moderately exceeded the median of our peer group companies:
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NEO | | 2017 Total Direct Compensation | | | Peer Group Median Total Direct Compensation | | | Variance to Peer Group Median (%) | |
Damon T. Hininger | | $ | 2,277,306 | | | $ | 5,437,000 | | | | (58.11)% | |
David M. Garfinkle | | $ | 2,081,609 | | | $ | 1,927,000 | | | | 8.02% | |
Harley G. Lappin | | $ | 2,123,125 | | | $ | 2,299,000 | | | | (7.65)% | |
Anthony L. Grande | | $ | 2,123,125 | | | $ | 2,107,000 | | | | 0.76% | |
Lucibeth N. Mayberry | | $ | 1,740,150 | | | $ | 1,707,000 | | | | 1.94% | |
ALL NEOs | | $ | 10,345,315 | | | $ | 13,477,000 | | | | (23.24)% | |
| • | | Balanced: Performance-oriented features and retention-oriented features should be balanced so the entire program accomplishes bothpay-for-performance and executive retention objectives, while encouraging prudent risk-taking that is aligned with our growth and diversification strategies.
|
| • | | Fair: Compensation levels and plan design should fairly reflect competitive practices and the relationship of compensation levels among our executives.
|
Performance-based: A significant component of total compensation should be determined based on whether or not we achieve objective performance criteria that are aligned with positive operational performance, the successful execution of our capital allocation and growth strategies and the creation of long-term stockholder value, and which do not encourage unreasonable risk-taking.
Competitive: In order to achieve our strategic objectives and to attract, retain and motivate a team of qualified, talented and knowledgeable executives who are capable of performing their responsibilities, we design our executive compensation with the intent of providing competitive compensation programs that reward strong performance and limit compensation when our performance objectives are not achieved.
Balanced: Performance-oriented features and retention-oriented features should be balanced so the entire program accomplishes both pay-for-performance and executive retention objectives, while motivating executives and encouraging prudent risk-taking that is aligned with our capital allocation and growth strategies.
Fair: Compensation levels and plan design should fairly reflect competitive practices and the relationship of compensation levels among our executives.
Process for Determining Compensation – Independent Review and Use of Market Data
Role of Compensation Committee
Our Compensation Committee establishes and regularly reviews our compensation philosophy and programs, exercises authority with respect to the determination and payment of base and incentive compensation
to executive officers and administers our Second2020 Stock Incentive Plan (the “2020 Plan”) and our Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”). Our Compensation Committee annually reviews executive compensation and our compensation programs to ensure our CEO and the other executive officers are rewarded appropriately for their contributions to our success, and our overall compensation strategy supports the objectives and values of our organization, as well as stockholder interests. Our Compensation Committee conducts this review and makes compensation decisions through a comprehensive process involving a series of meetings primarily occurring in the first and second quarters of each year. Compensation Committee meetings typically are attended by our Compensation Committee members, legal advisors, our ChairmanChair of the Board, our CEO and, upon request, PwC, the Compensation Committee’s independent compensation consultant. As with all Board committees, other Board members
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also have a standing invitation to attend our Compensation Committee’s meetings. Our CEO generally makes recommendations to our Compensation Committee regarding equity awards for the executive officers other than himself. Our Compensation Committee meets in executive session to the extent the members deem necessary or appropriate to ensure independent analysis and determinations. Additional information regarding our Compensation Committee and its meetings is included above under
“Corporate Governance – Corporate Governance—Board of Director Meetings and Committees.”Committees
.In making executive compensation determinations, our Compensation Committee performs an overall analysis of theeach executive’s individual job performance, for the year, projected roleposition, experience, and level of responsibilities, impact on the execution of our strategy, external pay practices, emerging trends, totalcontributions to our corporate performance, job tenure and potential. The Compensation Committee relies on its general experience and subjective considerations of various factors, including our strategic business goals, information with respect to the peer group set forth below, proprietary and publicly available compensation surveys and data with respect to other public companies provided by Exequity.
Our Compensation Committee does not set specific targets or utilize any formulaic benchmarks for overall compensation or for allocations between fixed and performance-based compensation, cash and total directnon-cash compensation positioning relative to our other executives, the recommendations of our CEOor short-term and such other factorslong-term compensation. In addition, our Compensation Committee deems appropriate. uses proprietary and publicly available compensation surveys and data with respect to other public companies provided by our compensation consultant, Exequity, to obtain a general understanding of current compensation practices, including to confirm that the base salary and other elements of target total compensation opportunity for our executive officers is at a market-competitive level.
Our Compensation Committee also considers employee retention, vulnerabilitydoes not specifically target or benchmark in any formulaic manner any element of compensation or the total compensation payable to recruitment by other companies andNEOs based on the difficulty and costs associated with replacing executive talent. foregoing factors.
Based on these objectives, our Compensation Committee has determined we should provide our
executivesexecutive with compensation packages
comprised of threecomprising these primary elements:
1)
| 1) | annual base salary, which takes individual performance into account and is designed to be competitive with median salary levels in an appropriate peer group; compensate our NEOs for their roles and responsibilities and to provide a secure level or guaranteed compensation; |
2)
| 2) | annual cash incentive compensation, which is determined based on the achievement of objective financial performance and strategic business goalsStrategic Business Goals established annually by our Compensation Committee; and |
3)
| 3) | long-term equity-based incentive awards that vest partially based on the performance of the Company subject to negative or positive modification in accordance with our Company’s rTSR, which strengthens the commonality of interests between executive officers and our stockholders. stockholders, and partially based on the passage of time, which supports the retention of skilled NEOs who are incentivized to make decisions that support sustainable business operations and value creation over the long-term. |
Benefits and perquisites play a limited role in our executives’ total compensation packages. Our Compensation Committee believes that, as a result of our balance of long- and short-term incentives and our use of performance-based and time-based RSUs with dividend equivalents that provide a tie to our stockholdersstockholders’ interests and our stock ownership guidelines, our executive compensation programs currently serve our compensation philosophy and objectives well.
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Role of Independent Compensation Consultant
Since 2000, our
Our Compensation Committee has engaged PwC from timean independent compensation consultant, Exequity, to time to assist it in reviewing compensation strategies and plans and provide proprietary and publicly available compensation surveys and data with respect to provide market competitive data.other public companies. When requested, PwCExequity works directly with the chairChair of our Compensation Committee and as directed by the chairChair of our Compensation Committee, with our CEO and other executive officers. PwCExequity representatives also attend Compensation Committee meetings when requested by the Compensation Committee. Exequity was selected due to its extensive experience in providing compensation consulting services. services and its status as a nationally-recognized advisor on executive and director compensation programs.
At our Compensation Committee’s request, PwCExequity has from time to time performed compensation analyses, including peer and market comparisons, internal pay equity assessments, updating of the executive salary structure and modeling of executive compensation levels at different levels of company performance. These analyses and input from PwCExequity have assisted our Compensation Committee in determining whether our strategies and plans were advisable based on the Company’s current financial position and strategic business goals,Strategic Business Goals, competitive with our peers and consistent with bestcurrent practices in corporate governance and compensation design. Additional information regarding the engagement and independence of
PwC Exequity as independent compensation consultant to our Compensation Committee is included above under “Corporate Governance – the heading Corporate Governance—Board of Director Meetings and Committees.”
2017 Committees.
Peer Group Review and Update
At
In 2021, at the request of our Compensation Committee, PwCExequity assessed and recommended adjustments with respect to our peer group selection methodology and composition. Based onIn reviewing the existing peer group, the Compensation Committee sought to identify which of the Company’s 2020 peer group members were appropriate going forward as the Company had elected to no longer function as a REIT.
In 2021, the Compensation Committee considered the recommendations of
PwC, our Compensation Committee adoptedExequity in its adoption of the following criteria for identifying appropriate companies to include in our peer group:
Owners and operators of multi-state facilities and complex operations;
Global Industry Classification Standard (GICS) Code 601010 – Equity REITs;
Revenues of $1 billion to $6 billion;
Greater than 10,000 employees;
Market capitalization between $3$1 billion toand $6 billion;
Dividend payout ratio of greater than 60% of net income;
Investment in fixed assets of $1.5 billion to $6 billion;
Local competitors for executive talent;
Dependence on the maintenance and development of a stable workforce and an emphasis on human dignity; and
Future growth heavily dependent upon the acquisition or development of additional facilities.
Applying the foregoing selection criteria and Exequityʼs recommendations for potential peer group companies, and considering the Company’s overall compensation strategy, the peer group used by our Compensation Committee for 2021 consisted of the following companies werecompanies.
| Acadia Healthcare Company, Inc. | | | Hilton Grand Vacations Inc. | |
| American Campus Communities, Inc. | | | Hyatt Hotels Corporation | |
| Americold Realty Trust | | | Iron Mountain Incorporated | |
| Boyd Gaming Corporation | | | Marriott Vacations Worldwide Corporation | |
| Cinemark Holdings, Inc. | | | Mid-America Apartment Communities, Inc. | |
| Encompass Health Corporation | | | Penn National Gaming, Inc. | |
| The Ensign Group, Inc. | | | Red Rock Resorts, Inc. | |
| Extended Stay America, Inc. | | | Ryman Hospitality Properties, Inc. | |
| FirstCash, Inc. | | | Sun Communities, Inc. | |
| The GEO Group Inc. | | | Surgery Partners, Inc. | |
Previously, the peer group considered by the Compensation Committee consisted of the following companies: Acadia Healthcare Company, Inc., Americold Realty Trust, Brookdale Senior Living, Inc., CBL & Associates Properties, Inc., Cinemark Holdings, Inc., Duke Realty Corporation, Encompass Health Corporation, Extended Stay America, Inc., Federal Realty Investment Trust, The GEO Group, Inc., Hyatt Hotels Corporation, Iron Mountain Incorporated, Marriott Vacations Worldwide Corporation, Mid-America Apartment Communities, Inc., Penn National Gaming, Inc., Piedmont Office Realty Trust, Inc., Rayonier, Inc., Realty Income Corporation, Red Rock Resorts, Inc., Ryman Hospitality Properties, Inc. and Weingarten Realty Investors.
Our 2021 peer group removed over a third of our 2020 peers, substituting peers recommended by
PwCExequity and approved by our Compensation
Committee. The Compensation Committee
for inclusion in our 2017 peer group: | | |
• Brookdale Senior Living, Inc.
| | • LaSalle Hotel Properties
|
• CBL & Associates Properties, Inc.
| | • LifePoint Health, Inc.
|
• Cinemark Holdings, Inc.
| | • Packaging Corporation of America
|
• Duke Realty Corporation
| | • Penn National Gaming, Inc.
|
• Federal Realty Investment Trust
| | �� Piedmont Office Realty Trust
|
• The Geo Group, Inc.
| | • Quanta Services, Inc.
|
• Encompass Health Corporation
| | • Rayonier, Inc.
|
(f/k/a Health South Corporation)
| | • Realty Income Corporation
|
• Hyatt Hotels Corporation
| | • Regal Entertainment Group
|
• Iron Mountain Incorporated
| | • Weingarten Realty Investors
|
Hospitality Properties Trust and Senior Housing Properties Trust, which were included in our 2016believes that the new peer group were not included in our 2017preserves those companies from the 2020 peer group because they are externally managed REITs.
that remain the most comparable while substituting more appropriate peers in the other cases, taking into account such factors as our Company’s transition from a REIT to a taxable C Corporation; our Company’s focus on reducing indebtedness and enhancing its balance sheet; and our Company’s reduced focus on acquisitions and non-justice leased properties.
While none of our peer group companies met all of the selection criteria above, each peer group company met twothree or more of the selection criteria. Generally, we wereAt the time the Compensation Committee initially selected the peer group, our revenue was at approximately the 50th60th percentile of market capitalization among our peers, and betweenwhen compared with the 25thand 50thpercentile of revenues and fixed assetsrevenue of our peers.
The following tables summarize the companies that were added and removed from our peer group:
| Removed (Eight Companies) | |
| Brookdale Senior Living, Inc.
CBL & Associates Properties, Inc.
Duke Realty Corporation
Federal Realty Investment Trust
Piedmont Office Realty Trust, Inc.
Rayonier, Inc.
Realty Income Corporation
Weingarten Realty Investors | |
| Added (Seven Companies) | |
| American Campus Communities, Inc.
Boyd Gaming Corporation
The Ensign Group, Inc.
FirstCash, Inc.
Hilton Grand Vacations Inc.
Sun Communities, Inc.
Surgery Partners, Inc.
| |
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NEO Compensation for
20172021
Components of NEO Compensation
The primary components of the
20172021 compensation program for our NEOs were:
Annual cash incentive compensation; and
Long-term incentive compensation consisting of RSU awards with performance-based vesting.
awards.We seek to provide base salaries for our executive officers that provide a secure level of guaranteed cash compensation in accordance with their experience,
professional statusskills, performance, and job
roles and responsibilities. Typically, in the second quarter of each year, our Compensation Committee reviews and, if applicable, approves
a revisedan annual salary plan for our executive officers, taking into account several factors, including prior year’s salary, responsibilities, tenure, individual performance, salaries paid by companies in our peer group for comparable positions, the Company’s overall pay scale and the Company’s recent and projected financial performance.
As a general guideline, our Compensation Committee believes the base salary of each executive officer should be set at or below the 50th percentile of market survey and peer group benchmark data provided by PwC, subject to adjustment to account for the individual factors described above, in order to provide competitive base salaries for recruiting and retention purposes.Our Compensation Committee also solicits the views and recommendations of our CEO, in consultation with our
Chairman,Chair, when setting the base salaries of the other executive officers, given their respective insight into internal pay equity and positioning issues, as well as executive performance. At a Compensation Committee meeting typically held in the first or second quarter of each year, our CEO summarizes his assessment of the performance during the previous year of each of the other executive officers. Our CEO, in consultation with our
Chairman,Chair, also provides his recommendations on any compensation adjustments. Our Compensation Committee approves any base salary adjustments for these executives based on factors such as the competitive compensation analysis, our CEO’s assessment of individual performance, the Company’s performance, the location of the executive’s current salary within the applicable salary range, general market conditions and internal pay equity considerations.
The process is similar for determining any base salary adjustments for our CEO, except our CEO does not provide our Compensation Committee with a recommendation. Our CEO presents a self-assessment of his performance during the year to our Compensation Committee, which then approves any base salary adjustment based on the factors described above with respect to our other executives. To the extent it deems necessary and appropriate, our Compensation Committee meets in executive
sessionsessions to discuss adjustments to the base salaries of our executive officers, including our CEO. Such adjustments typically take effect on or about July 1 of each year.
Prior to 2017,
In 2021, base salary represented approximately 19.5% of our
CEO’s total direct compensation package (and, on average, approximately 24.4% of our other NEOs’ total compensation package at target performance (calculated in the manner described on page 55)). Specifically, the Compensation Committee
last engaged PwC in 2014 to provide a market assessment and benchmarking data for the total cash compensationconsidered each NEO’s current base pay, taking into account base salary levels paid to
our executive officers. The updated market compensation survey andpersons holding similar positions at peer
data PwC providedcompanies, as well as the absence of base salary adjustments made to
oureach NEO’s base salary in 2020. Based on its review, the Compensation Committee
determined that a 5.00% increase in
2017 indicatedMr. Hininger’s base salary was necessary to continue to maintain a market-competitive level of compensation for Mr. Hininger, taking into account his experience level and job responsibilities. The committee also increased the base salaries
paid to our NEOs were substantially below the 50th percentile of
their peers. After reviewing PwC’s updated peer and market data, and consulting with our CEO regarding the other
NEOs’ responsibilities, performance and his recommendations, ourNEOs, in order to maintain a market-competitive level of compensation for these executives, based on the review described above.
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Based on its review of the factors described above, the Compensation Committee
approved the following increases to the base salaries paid to our NEOs: | | | | | | | | | | | | |
Name | | 2017 Base Salary | | | 2016 Base Salary | | | Percentage Increase | |
Damon T. Hininger | | $ | 912,660 | | | $ | 861,000 | | | | 6.0% | |
David M. Garfinkle | | $ | 429,570 | | | $ | 387,000 | | | | 11.0% | |
Harley G. Lappin | | $ | 436,814 | | | $ | 412,089 | | | | 6.0% | |
Anthony L. Grande | | $ | 436,814 | | | $ | 412,089 | | | | 6.0% | |
Lucibeth N. Mayberry | | $ | 398,394 | | | $ | 314,600 | | | | 26.6% | |
These base salary increases, in our Compensation Committee’s view, correctly positioned each of our NEO’s salary relative to the 50th percentile of our peer group companies. In addition to the aforementioned
factors, in determiningdetermined that the base salary increaseamounts for Ms. Mayberry, our Compensation Committee considered the expansion of Ms. Mayberry’s role to include direct leadership responsibility for our CoreCivic Properties business and our mergers and acquisitions activities.
NEOs should be set at the following levels:
| Damon T. Hininger | | | $987,042 | | | 5.00% | |
| David M. Garfinkle | | | $520,329 | | | 5.00% | |
| Patrick D. Swindle | | | $490,320 | | | 6.50% | |
| Anthony L. Grande | | | $529,103 | | | 5.00% | |
| Lucibeth N. Mayberry | | | $490,320 | | | 6.50% | |
Annual Cash Incentive Plan
CompensationOur annual cash incentive plan provides our executive officers with an opportunity to earn cash compensation based on the extent to which objective performance
goalstargets set in advance by our Compensation Committee are met.
Generally, our Compensation Committee setsIn 2021, assuming performance at the
maximum bonus opportunity at 200%target level of
actual base salary paid during the year, with a target bonus opportunity of 75% of actual base salary, and exercises negative discretion to determine the actualachievement, annual cash incentive
award for eachcompensation represented approximately 24.4% of our
executive officers basedCEO’s total compensation package and, on
our performance against thepre-established, objective goals. Prior to 2017, our annual cash incentive plan utilized two financial performance metrics for determining annual cash bonus awards: Adjusted EPS and Normalized FFO. Provided we achieved positive Adjusted EPS for the year, the annual cash bonus earned by eachaverage, 24.4% of our
NEOs was determined by our Normalized FFO performance.other NEOs’ total compensation packages (calculated in the manner described on page 55).
In
2016, our Compensation Committee, with the assistance of PwC, completed a comprehensive review of the annual and long-term incentive compensation plans for our executive management team. Based on this review,2021, our Compensation Committee concluded the competitiveness of our annual cash incentive plan for attracting, retaining and
rewarding high performingmotivating qualified, knowledgeable and talented executives, as well
as its alignment with our
growth, investmentcapital allocation and
diversificationgrowth strategies, would be improved by:
Addingincluding Adjusted EBITDA (as described below) as a financial performance metric;
linking a fixed percentage (as described below) to the Company’s success or failure in converting an operated federal facility to a leased federal facility;
subjecting the combined results of the two cash incentive metrics above to a modifier based on the achievement of Strategic Business Goals (as described below).
The Compensation Committee determined to use Adjusted EBITDA as a complimentary financial performance metric, to Normalized FFO
Allocating a portion of the total incentive compensation opportunity to the achievement of objective, strategic business goals
Providing for a minimum level of annual cash incentive compensation (assuming we achieve positive Adjusted EPS), while reducing the maximum bonus opportunity
Our Compensation Committee added Adjusted EBITDA as a complimentary financial performance goal to Normalized FFO because unlike FFO, Adjusted EBITDAit is not impacted by taxes and short-term financing issues,decisions, such as debt refinancing and equity issuances or repurchases that are not reflective of operating performance. Objective, strategicEBITDA is a primary metric used by the Company to assess performance and its ability to service and repay debt, and the Compensation Committee concluded that aligning incentive compensation with this metric would reinforce the Company’s business goalsstrategies.
The Compensation Committee believes that the Adjusted EBITDA incentive properly places focus on the Company’s correctional, detention and residential reentry businesses conducted by the Safety segment and Community segment, as well as addresses the increasing importance of efficient and effective management of our Properties segment. EBITDA and Adjusted EBITDA are amounts calculated and presented on the basis of methodologies other than in accordance with GAAP. Please refer to Appendix A for further explanation and reconciliation of EBITDA and Adjusted EBITDA to net income, its most directly comparable GAAP measure.
In light of federal policy changes discouraging the use of privately owned and managed criminal detention facilities, the Compensation Committee also elected to tie a specific annual cash incentive percentage to the Company’s success or failure in converting an existing federal contract prison or criminal detention
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center to a federally leased facility (the “Lease Conversion”). The Compensation Committee believes that Company-leased, government-operated prison and detention centers provide an alternative means for federal users to occupy Company facilities in a manner consistent with federal policy.
Further, the Compensation Committee deemed it appropriate to cause any resulting cash bonus to which our NEOs were eligible to receive as a result of the two foregoing metrics (achievement of the performance targets established for Adjusted EBITDA and the Lease Conversion) to be subjected to a Strategic Business Goals modifier, which may increase or decrease such cash bonus depending on the level of achievement of the Strategic Business Goals established by the Compensation Committee.
The Compensation Committee adopted objective, Strategic Business Goals as a performance metricmodifier to the annual cash incentive compensation because our Compensation Committee believes achieving meaningful progress in growing and diversifying our business and cash flowsthat value is criticalreturned to creating long-term value for our stockholders but such progress may not be immediately reflectedwhen we invest in the lives and futures of our financial results. workforce and those entrusted to our care by our government partners.
Our Compensation Committee believes the
additional performance goals strikeaddition of the Strategic Business Goals modifier strikes an appropriate balance in rewarding our executive officers for achieving positive financial results in the near-term, while strengthening their focus on the successful execution of our long-term growth
strategy.After careful considerationstrategy, as well as the development of both our workforce and those entrusted to our care by our government partners. Achievement of the market data, peer benchmarking and input from PwC, our Compensation Committee adopted a four-factor formula (the“4-Factor Bonus Formula”) for the determination of awards to our executive officers under our annual cash incentive plan:
| | | | | | | | | | | | |
| | 2017 Bonus Opportunity | |
Performance Metric | | Minimum | | | Target | | | Maximum | |
Adjusted EPS* | | | N/A | | | | N/A | | | | N/A | |
Normalized FFO | | | 8.50% | | | | 38.70% | | | | 75.00% | |
Adjusted EBITDA | | | 8.50% | | | | 38.70% | | | | 75.00% | |
Strategic Business Goals | | | — | | | | — | | | | 25.00% | |
TOTAL | | | 17.00% | | | | 77.40% | | | | 175.00% | |
| * | Positive Adjusted EPS is required as a threshold for incentive awards.
|
Under the4-Factor Bonus Formula, no cash incentive compensationStrategic Business Goals is payable unless we generate positive Adjusted EPS for the year. Presuming we generate positive Adjusted EPS, the4-Factor Bonus Formula provides for a minimum cash incentive of 17% of actual base salary, but contemplates the maximum bonus awarded will not exceed 175% (rather than 200%) of actual base salary. Whether the actual cash bonus will exceed the 17% minimum bonus principally depends on our objective performance againstpre-established Normalized FFO and Adjusted EBITDA goals. An additional bonus amount not to exceed 25% of actual base salary may be awarded at the discretion ofdetermined by our Compensation Committee based on their assessment of our performance with respect to severalpre-established, strategic business goals relatedthe Strategic Business Goals. For these reasons, the entirety of each NEO’s annual cash incentive bonus opportunity for 2021 was subjected to a modifier tied to achievement of the successful execution of our long-term growth, investmentfollowing three goals:
Diversity, Equity and diversification strategy.OurInclusion (DEI) Leader Development.
The Company’s leaders at all levels will complete DEI training with a focus on conscious inclusion. For this goal, the Compensation Committee
establishedset a minimum target of 80% to achieve the
followinggoal. Human Rights Development. The Company will require no fewer than 95% of its continuing employees to complete human rights training; will adopt a revised human rights policy and will develop and deploy a human rights assessment at the Safety and Community facility level. For this goal, the Compensation Committee required the Company to satisfy all the conditions to achieve the goal.
Reentry Programs Growth and Performance. The Company will (1) achieve a reduction in criminal thinking (CT) in no less than 75% of the facilities offering cognitive-behavioral programming as measured by a standardized and validated assessment instrument; (2) achieve a completion rate of no less than 75% for Go Further reentry programs/journals for facilities offering the Go Further reentry program during 2021; (3) initiate National Career Readiness Certificate employability testing in no fewer than ten facilities with educational goals in areas such as GED/HISET and industry-recognized certificate vocational programs in 2021; and (4) implement new reentry-focused programs at three or more sites during 2021. For this goal, the Compensation Committee required the Company to satisfy no fewer than three of the four conditions to achieve the goal.
The Strategic Business Goals modifier can increase or decrease the amount of annual cash incentive compensation calculated based on Adjusted EBITDA and the Lease Conversion, which could also result in annual cash incentive compensation above the maximums or below the minimums described below.
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The table below sets forth the performance targets and corresponding
cash bonuspercentage of base salary amounts
under the4-Factor Bonus Formula for Normalized FFOto be awarded to our CEO and
Adjusted EBITDAother NEOs based on the
full year financial guidance set forth in our earnings press release dated November 2, 2016: | | | | | | | | | | |
NORMALIZED FFO GOAL | | ADJUSTED EBITDA GOAL |
Normalized FFO per share | | Bonus % of Base Salary | | | | Adjusted EBITDA (in thousands) | | Bonus % of Base Salary | | |
| | 8.50% | | Minimum Bonus | | | | 8.50% | | Minimum Bonus |
$2.16 | | 11.52% | | | | $368,683 | | 11.52% | | |
$2.17 | | 14.54% | | | | $369,963 | | 14.54% | | |
$2.18 | | 17.56% | | | | $371,244 | | 17.56% | | |
$2.19 | | 20.58% | | | | $372,525 | | 20.58% | | |
$2.20 | | 23.60% | | | | $373,805 | | 23.60% | | |
$2.21 | | 26.62% | | | | $375,086 | | 26.62% | | |
$2.22 | | 29.64% | | | | $376,367 | | 29.64% | | |
$2.23 | | 32.66% | | | | $377,647 | | 32.66% | | |
$2.24 | | 35.68% | | | | $378,928 | | 35.68% | | |
$2.25 | | 38.70% | | Target Bonus | | $380,209 | | 38.70% | | Target Bonus |
$2.26 | | 41.72% | | | | $381,489 | | 41.72% | | |
$2.27 | | 44.74% | | | | $382,770 | | 44.74% | | |
$2.28 | | 47.76% | | | | $384,051 | | 47.76% | | |
$2.29 | | 50.78% | | | | $385,332 | | 50.78% | | |
$2.30 | | 53.80% | | | | $386,612 | | 53.80% | | |
$2.31 | | 56.82% | | | | $387,893 | | 56.82% | | |
$2.32 | | 59.84% | | | | $389,174 | | 59.84% | | |
$2.33 | | 62.86% | | | | $390,454 | | 62.86% | | |
$2.34 | | 65.88% | | | | $391,735 | | 65.88% | | |
$2.35 | | 68.90% | | | | $393,016 | | 68.90% | | |
$2.36 | | 71.92% | | | | $394,296 | | 71.92% | | |
$2.37 | | 75.00% | | Maximum Bonus | | $395,577 | | 75.00% | | Maximum Bonus |
Adjusted EPS, Normalized FFO andachievement of Adjusted EBITDA are adjusted for anyduring the year ended December 31, 2021, as established by the Compensation Committee on March 30, 2021. Under this established framework, Adjusted EBITDA and the Lease Conversion metric determine the percentage of the items set forthannual cash incentive award before that award is adjusted upward or downward based on the achievement of Strategic Business Goals:
| Min | | | $275,109,600 | | | 31.25% | | | 25.00% | | | | | | Achieved | | | 31.25% | | | 25.00% | |
| | | | $281,987,340 | | | 37.50% | | | 30.00% | | | | | | Not Achieved | | | 0.00% | | | 0.00% | |
| | | | $288,865,080 | | | 43.75% | | | 35.00% | | | | | | | | | | | | | |
| | | | $295,742,820 | | | 50.00% | | | 40.00% | | | | | | | | | | | | | |
| | | | $302,620,560 | | | 56.25% | | | 45.00% | | | | | | | | | | | | | |
| | | | $309,498,300 | | | 62.50% | | | 50.00% | | | | | | | | | | | | | |
| | | | $316,376,040 | | | 68.75% | | | 55.00% | | | | | | | | | | | | | |
| | | | $323,253,780 | | | 75.00% | | | 60.00% | | | | | | | | | | | | | |
| | | | $330,131,520 | | | 81.25% | | | 65.00% | | | | | | | | | | | | | |
| | | | $337,009,260 | | | 87.50% | | | 70.00% | | | + | | | | | | | | | | |
| Target | | | $343,887,000 | | | 93.75% | | | 75.00% | | | | | | | | | | | | | |
| | | | $350,764,740 | | | 100.00% | | | 80.00% | | | | | | | | | | | | | |
| | | | $357,642,480 | | | 106.25% | | | 85.00% | | | | | | | | | | | | | |
| | | | $364,520,220 | | | 112.50% | | | 90.00% | | | | | | | | | | | | | |
| | | | $371,397,960 | | | 118.75% | | | 95.00% | | | | | | | | | | | | | |
| | | | $378,275,700 | | | 125.00% | | | 100.00% | | | | | | | | | | | | | |
| | | | $385,153,440 | | | 131.25% | | | 105.00% | | | | | | | | | | | | | |
| | | | $392,031,180 | | | 137.50% | | | 110.00% | | | | | | | | | | | | | |
| | | | $398,908,920 | | | 143.75% | | | 115.00% | | | | | | | | | | | | | |
| | | | $405,786,660 | | | 150.00% | | | 120.00% | | | | | | | | | | | | | |
| Max | | | $412,664,400 | | | 156.25% | | | 125.00% | | | | | | | | | | | | | |
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Under the annual cash incentive opportunity, a failure to achieve the minimum bonus level in Section 11.2 of the 2008 Plan. Adjusted EPS, Normalized FFO and Adjusted EBITDA category or a failure to achieve the Lease Conversion results in zero bonus opportunity for that category. Similarly, achievement of performance above the maximum bonus level in the Adjusted EBITDA category results in a bonus opportunity at the maximum level only for that category. Assuming the achievement of Adjusted EBITDA at or above the minimum level, the percentage of salary awarded for performance falling between the listed achievement levels is determined by using straight-line interpolation. Because the Lease Conversion category is success or failure only, there is no means by which an NEO could exceed that measure or for the utilization of straight-line interpolation.
Cash incentive awards achieved under the 2021 Annual Cash Incentive Opportunity table above are
amounts calculated and presentedfurther increased or decreased based upon the achievement of Strategic Business Goals established by our Compensation Committee on
the basis of methodologies other thanMarch 30, 2021 in accordance with
GAAP. Please refer to the
Appendix for further discussion and reconciliations of these measures to their most comparable GAAP measures.table below.
| None | | | 0.800x | |
| One | | | 0.933x | |
| Two | | | 1.067x | |
| Three | | | 1.200x | |
For 2017,2021, we generated $1.57 of positive Adjusted EPS, $2.38 of Normalized FFO and $387,881,000$402.0 million of Adjusted EBITDA, resulting in bonuses being earned under the4-Factor Bonus Formula at 75.00% for our Normalized FFO performance and 56.79% for our Adjusted EBITDA performance. Our Compensation
Committee determined a bonus amount of 25.00% had been earned for our performancebut were unsuccessful in achieving thepre-established 2017 strategic business pass/fail target of the lease conversion goal. As a result, our CEO’s annual cash incentive opportunity was 146.58% of base salary and our other NEOs’ annual cash incentive opportunity was 117.27% of base salary, before the application of the Strategic Business Goals modifier. As indicated in the table below, the Compensation Committee determined that we achieved all three of our Strategic Business Goals, which resulted in a Strategic Business Goals modifier of 1.200x.
The following table reflects our Compensation Committee’s determination of the appropriate modifier based on Strategic Business Goals established by the Committee on March 30, 2021:
| DEI leader development (1) | | | 95% | | | >=95% | | | YES | |
| Human rights development (2) | | | Yes | | | Pass | | | YES | |
| Reentry program growth and performance (3) | | | Yes | | | Pass | | | YES(4) | |
| Resulting Modifier | | | | | | | | | 1.200x | |
(1)
| Completion of DEI/Conscious Inclusion training by no less than 80% of all Company leaders. |
(2)
| Completion of three human rights-related objectives: (a) Completion of Company-wide human rights training by no less than 95% of our remaining employees; (b) Adoption of a new human rights policy; and (c) Development and deployment of a facility-level human rights assessment. |
(3)
| Completion of no fewer than three of four programming goals: (a) Reduction in CT in no less than 75% of facilities offering cognitive behavioral programming as measured by a standardized and validated assessment instrument; (b) Achieve no less than a 75% completion rate for Go Further reentry programs/journals for facilities offering the Go Further reentry program during 2021; (c) Initiation of National Career Readiness Certificate testing in no fewer than ten facilities with educational goals in areas such as GED/HISET and industry-recognized certificate vocational programs in 2021; and (d) Implementation of new reentry-focused programs at three or more sites during 2021. |
(4)
| The Company satisfied the criteria of three of the four programming goals, meeting the three-of-four completion requirement. |
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| | | | | | | | | | | | |
Strategic Goal | | Maximum Bonus (%) | | | 2017 Performance | | | Actual Bonus Award (%) | |
Execute contract for CoreCivic Properties real estate-only solution (develop new facility or lease owned facility) | | | 10% | | | | 100% | | | | 10% | |
Complete financing transaction that extends weighted average maturity, adds liquidity, reduces leverage, enables use of project-specific financing or lowers overall weighted average cost of capital | | | 10% | | | | 100% | | | | 10% | |
Execute new contract(s) that offset(s) EBITDA erosion attributable to reduced Californiaout-of-state populations | | | 5% | | | | 100% | | | | 5% | |
Based on our
20172021 performance, the following annual cash incentive plan compensation was awarded to our NEOs in February
2018 consistent with the4-Factor Bonus Formula: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Normalized FFO Goal | | | Adjusted EBITDA Goal | | | Strategic Business Goals | | | 2017 Cash Incentive Compensation | |
Name | | 2017 Base Salary | | | Bonus (%) | | | Bonus ($) | | | Bonus (%) | | | Bonus ($) | | | Bonus (%) | | | Bonus ($) | | | Bonus (%) | | | Bonus ($) | |
Damon T. Hininger | | $ | 886,830 | | | | 75.00% | | | $ | 665,122 | | | | 56.79% | | | $ | 503,647 | | | | 25.00% | | | $ | 221,707 | | | | 156.79% | | | $ | 1,390,476 | |
David M. Garfinkle | | $ | 408,285 | | | | 75.00% | | | $ | 306,214 | | | | 56.79% | | | $ | 231,872 | | | | 25.00% | | | $ | 102,071 | | | | 156.79% | | | $ | 640,157 | |
Harley G. Lappin | | $ | 424,452 | | | | 75.00% | | | $ | 318,339 | | | | 56.79% | | | $ | 241,054 | | | | 25.00% | | | $ | 106,113 | | | | 156.79% | | | $ | 665,506 | |
Anthony L. Grande | | $ | 424,452 | | | | 75.00% | | | $ | 318,339 | | | | 56.79% | | | $ | 241,054 | | | | 25.00% | | | $ | 106,113 | | | | 156.79% | | | $ | 665,506 | |
Lucibeth N. Mayberry | | $ | 346,310 | | | | 75.00% | | | $ | 259,733 | | | | 56.79% | | | $ | 196,675 | | | | 25.00% | | | $ | 86,577 | | | | 156.79% | | | $ | 542,985 | |
Performance-Based Equity2022:
| Damon T. Hininger | | | $963,540 | | | 146.6% | | | $1,412,381 | | | 0% | | | $— | | | 1.2x | | | 175.9% | | | $1,694,859 | |
| David M. Garfinkle | | | $507,940 | | | 117.3% | | | $595,641 | | | 0% | | | $— | | | 1.2x | | | 140.7% | | | $714,770 | |
| Patrick D. Swindle | | | $475,357 | | | 117.3% | | | $557,432 | | | 0% | | | $— | | | 1.2x | | | 140.7% | | | $668,919 | |
| Anthony L. Grande | | | $516,506 | | | 117.3% | | | $605,685 | | | 0% | | | $— | | | 1.2x | | | 140.7% | | | $726,823 | |
| Lucibeth N. Mayberry | | | $475,357 | | | 117.3% | | | $557,432 | | | 0% | | | $— | | | 1.2x | | | 140.7% | | | $668,919 | |
(1)
| The amounts in this column reflect the base salary actually paid by the Company to the NEO during the year and reflect, to the extent applicable, any changes in base salary during the year. |
Long-Term Incentive Compensation
Our pay mix is
shiftedweighted toward equity compensation because we believe long-term, equity-based incentive compensation strengthens and aligns the interests of our executive officers with our stockholders. Equity incentive awards are generally granted to our executive officers on an annual basis.
For 2017, we granted allIn 2021, long-term equity incentive compensation represented approximately 52.7% of our
CEO’s total direct compensation package and, on average, approximately 49.4% of our other NEOs’ total compensation package (calculated in the manner described on page 55).Long-Term Equity Incentive Compensation Plan Components
Our long-term equity incentive awards inplan components are:
Vest over a three-year period based on the formachievement of an annual Normalized FFO performance target (subject to the Refinancing Adjustment, if any, during the 2021 Performance Period) and subject to an rTSR modifier, which may positively or negatively adjust the number of performance-based RSUs whichvesting.
Awards settled in stock, with cash dividends on RSUs, if any, being paid in cash only for RSUs that ultimately vest upon the achievement of performance targets.
Granted to NEOs, executive officers and other vice presidents.
Time-Based RSUs
Annual time-based RSU awards vest in equal amounts over three years beginning on the later of (i) the anniversary date of the grant or (ii) the delivery of the audited financial statements by the Company’s independent registered public accountant for the applicable fiscal year (in the Company’s filing of the Annual Report on Form 10-K).
Awards settled in stock, with cash dividends on RSUs, if any, being paid in cash only for RSUs that ultimately vest.
Granted to the NEOs as well as to other eligible employees.
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2021 Long-Term Equity Incentive Compensation Awards As part of its 2019 review of the executive compensation programs described above, the Compensation Committee discussed with Exequity the most appropriate way to motivate and retain our executives. The Compensation Committee believed it was important to continue to use RSU awards instead of stock options to better align management’s interests with thosethe interest of our executives with our stockholders, by puttingto encourage executive retention and to conform to compensation practices which provide for granting of both time-based and performance-based equity awards to executive officers.
As a
substantial portionresult of
an executive’s pay at risk and dependent upon our performancethese discussions, the Compensation Committee made the decision to structure long-term equity incentive compensation awards in 2021 as a
REIT.combination of performance-based RSUs and time-based RSUs. Our Compensation Committee considered many factors in determining whether to grantthe mix and value of the time-based and performance-based RSUs to be granted to our NEOs (as well as the value of RSUs granted), includingNEOs. Factors considered included our financial performance, our progress in the successful execution of our capital allocation and growth and diversification strategy,strategies, competitive market practices, internal pay equity, executive recruitment and retention, and our focus on equity compensation in our pay mix to encourage long-term value creation. creation, and the volatile nature of the stock market in general and the Company’s common stock in particular. In addition, the Compensation Committee sought to transition from its previous approach, which amounted to an “all-or-nothing” RSU vesting to a design that created a range of upside and downside risk for our NEOs, thereby providing an incentive to maximize the value of our common stock even when our executives earn less than the targeted equity compensation. Performance-based RSUs create substantial upside opportunity in that vesting depends on the achievement of targets aligned with the Company’s business strategy, while time-based RSUs offer a level of predictability in that they vest in accordance with a preset schedule so long as the grantee remains employed at the time of vesting. Both performance-based and time-based RSUs offer upside and downside potential because each type of RSU is tied to our stock price and each offers the opportunity to accrue dividend equivalents before vesting (if dividends are distributed), but are not paid until vesting, and then only to the extent the associated performance-based RSUs or time-based RSUs vest and the underlying shares are issued (see Compensation Discussion and Analysis—NEO Compensation for 2021—Dividend Equivalent Rights). Utilizing both types of RSUs closely align our CEO and other NEOs with the long-term interests of our stockholders.
The Compensation Committee believed the use of Normalized FFO as a performance metric for purposes of our performance-based RSUs reflects the value we deliver to our stockholders, as well as the earnings and cash-generating potential of our portfolio and is comparable to performance metrics used by real estate operating companies. For the 2021 Performance Period, the Compensation Committee determined the Normalized FFO would be subject to the Refinancing Adjustment, if any, to properly capture the value to our Company and stockholders from the accomplishment of refinancing initiatives approved by the Board. See Compensation Discussion and Analysis—Long-Term Incentive Compensation—2021 Performance-Based RSU Awards (2021-2023 Performance Period). Additionally, by subjecting the performance-based RSUs to the rTSR modifier, the Compensation Committee effected a change designed to better align NEO long-term compensation more fully with the market results experienced by investors.
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As a result of the determination discussed above, the Committee made the following long-term incentive compensation awards to the NEOs in the form of time-based RSUs on February 17, 2021 and performance-based RSUs on March 30, 2021:
| Damon T. Hininger | | | 157,895 | | | 136,842 | | | $2,600,002 | |
| David M. Garfinkle | | | 50,607 | | | 65,789 | | | $999,993 | |
| Patrick D. Swindle | | | 50,607 | | | 65,789 | | | $999,993 | |
| Anthony L. Grande | | | 50,607 | | | 65,789 | | | $999,993 | |
| Lucibeth N. Mayberry | | | 50,607 | | | 65,789 | | | $999,993 | |
(1)
| The performance-based RSUs vest annually in three anniversary tranches subject to the achievement of the annual Normalized FFO performance target (subject to the Refinancing Adjustment, if any, during the 2021 Performance Period), and further subject to an rTSR modifier. Based on Normalized FFO performance (subject to the Refinancing Adjustment, if any, during the 2021 Performance Period), our NEOs are eligible to earn as high as 150% of the original grant value, subject to adjustment by an rTSR modifier, which may positively or negatively adjust the number of performance-based RSUs vesting, or as low as 0% of the original grant value if the threshold performance metric is not achieved. |
(2)
| The time-based RSUs vest in equal amounts over three years on the later of (i) the anniversary date of the grant or (ii) the delivery of the audited financial statements by the Company’s independent registered public accountant for the applicable fiscal year (in the Company’s filing of the Annual Report on Form 10-K). |
(3)
| The grant date fair value was calculated using a Monte Carlo valuation of $9.88 per share for the performance-based RSUs and a closing share price of $7.60 per share for the time-based RSUs, in each case, as of the respective grant date. |
The grant date fair value of performance-based RSUs awarded
to NEOs in
20172021 was
5% higher thanconsistent with the RSUs awarded in
2016: | | | | | | | | |
Name | | 2017 Performance-based RSUs Granted | | | Grant Date Fair Value | |
Damon T. Hininger(1) | | | — | | | $ | — | |
David M. Garfinkle | | | 31,605 | | | $ | 1,033,167 | |
Harley G. Lappin | | | 31,605 | | | $ | 1,033,167 | |
Anthony L. Grande | | | 31,605 | | | $ | 1,033,167 | |
Lucibeth N. Mayberry | | | 26,028 | | | $ | 850,855 | |
2020.2021 Time-Based RSU Awards
The time-based RSUs granted to the NEOs reflected in the table above vest in equal amounts over three years on the later of (i) the anniversary date of the grant or (ii) the delivery of the audited financial statements by the Company’s independent registered public accountant for the applicable fiscal year (in the Company’s filing of the Annual Report on Form 10-K). The Compensation Committee believes the amount of the time-based RSUs granted to our NEOs was appropriate given our compensation philosophy and objectives, including our retention objectives. In 2021, time-based RSUs represented approximately 21.1% of our CEO’s total compensation package, and on average, 24.7% of our other NEOs’ total compensation package (calculated in the manner described on page 55). Revised Peer Group for Determining rTSR Modifier for Performance-Based RSU Awards Our Compensation Committee determined that, in light of the Company's transition to a taxable C Corporation for the year commencing January 1, 2021, the most appropriate rTSR comparator group was no longer the group it utilized in 2020, which was comprised exclusively of equity REITs. Instead, the Compensation Committee determined that the broader group of companies comprising the Russell 2000 was the appropriate rTSR comparator peer group for the Company in 2021. Because the Russell 2000 includes the smaller companies within the Russell 3000 and because it covers a broad array of industries, the Compensation Committee determined that the Russell 2000 provided a useful comparison source both reflective of broader market performance and investor expectations. Because of this substantial reset, the Compensation Committee determined to set the rTSR performance period for all performance-based RSUs vesting in 2022 based on 2021 rTSR performance.
On February 16, 2022, our Compensation Committee established a two-year rTSR performance period (2021-2022) for the vesting of the first tranche of NEO RSU awards made in 2022 as well as for the vesting
| (1) | In support of the cost reduction plan we announced in 2016, Mr. Hininger voluntarily forfeited the 70,817 performance-based RSUs awarded to him in 2016, and, at Mr. Hininger’s request, our Compensation Committee did not award him any performance-based RSUs in 2017.
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Terms of the second tranche of RSU awards made in 2021 and for vesting of the third tranche of RSU awards made in 2020. On that same date, our Compensation Committee determined to again use the companies comprising the Russell 2000 to calculate our Company's rTSR for the two-year performance period.
2021 Performance-Based RSU Awards (2021-2023 Performance Period)
In 2021, after taking into account the dynamic nature of our Company’s business, industry and growth strategy, the Compensation Committee decided to establish an annual Normalized FFO performance target for the first award tranche, subject to further adjustment, if any, to eliminate the after-tax impact of the net incremental interest expense resulting from refinancing activities approved by the Board and completed in 2021, to the extent they would otherwise be reflected in Normalized FFO (the “Refinancing Adjustment”) during the performance period beginning on January 1, 2021 and ending December 31, 2021 (the “2021 Performance Period”). The Compensation Committee determined that the Refinancing Adjustment, if any, would be appropriate to eliminate the negative short-term impact of any such refinancing activities completed in the 2021 Performance Period. The Compensation Committee established the vesting targets for the 2021 Performance Period on March 30, 2021, in accordance with the following table. Subject to the application of the Refinancing Adjustment, if any, during the 2021 Performance Period, the failure to achieve the minimum Normalized FFO performance target in a particular year results in no RSUs Granted in 2017. Thevesting and the forfeiture of that year’s tranche of performance-based award. Additionally, the amount of RSUs we granted in 2017that will ultimately vest based on our achievementthe Normalized FFO targets, subject to the Refinancing Adjustment, if any, in the table below will be adjusted positively or negatively based on the rTSR modifier.
| $1.30 | | | 50.00% | | | Min (80%) | | | $ 1.62 | | | 100.00% | | | Target | |
| $ 1.31 | | | 51.56% | | | | | | $1.63 | | | 101.56% | | | | |
| $ 1.32 | | | 53.13% | | | | | | $1.64 | | | 103.13% | | | | |
| $ 1.33 | | | 54.69% | | | | | | $1.65 | | | 104.69% | | | | |
| $ 1.34 | | | 56.25% | | | | | | $1.66 | | | 106.25% | | | | |
| $ 1.35 | | | 57.81% | | | | | | $1.67 | | | 107.81% | | | | |
| $ 1.36 | | | 59.38% | | | | | | $1.68 | | | 109.38% | | | | |
| $ 1.37 | | | 60.94% | | | | | | $1.69 | | | 110.94% | | | | |
| $ 1.38 | | | 62.50% | | | | | | $1.70 | | | 112.50% | | | | |
| $ 1.39 | | | 64.06% | | | | | | $1.71 | | | 114.06% | | | | |
| $ 1.40 | | | 65.63% | | | | | | $1.72 | | | 115.63% | | | | |
| $ 1.41 | | | 67.19% | | | | | | $1.73 | | | 117.19% | | | | |
| $ 1.42 | | | 68.75% | | | | | | $1.74 | | | 118.75% | | | | |
| $ 1.43 | | | 70.31% | | | | | | $1.75 | | | 120.31% | | | | |
| $ 1.44 | | | 71.88% | | | | | | $1.76 | | | 121.88% | | | | |
| $ 1.45 | | | 73.44% | | | | | | $1.77 | | | 123.44% | | | | |
| $ 1.46 | | | 75.00% | | | | | | $1.78 | | | 125.00% | | | | |
| $ 1.47 | | | 76.56% | | | | | | $1.79 | | | 126.56% | | | | |
| $ 1.48 | | | 78.13% | | | | | | $1.80 | | | 128.13% | | | | |
| $ 1.49 | | | 79.69% | | | | | | $1.81 | | | 129.69% | | | | |
| $ 1.50 | | | 81.25% | | | | | | $1.82 | | | 131.25% | | | | |
| $ 1.51 | | | 82.81% | | | | | | $1.83 | | | 132.81% | | | | |
| $ 1.52 | | | 84.38% | | | | | | $1.84 | | | 134.38% | | | | |
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| $ 1.53 | | | 85.94% | | | | | | $1.85 | | | 135.94% | | | | |
| $ 1.54 | | | 87.50% | | | | | | $1.86 | | | 137.50% | | | | |
| $ 1.55 | | | 89.06% | | | | | | $1.87 | | | 139.06% | | | | |
| $ 1.56 | | | 90.63% | | | | | | $1.88 | | | 140.63% | | | | |
| $ 1.57 | | | 92.19% | | | | | | $1.89 | | | 142.19% | | | | |
| $ 1.58 | | | 93.75% | | | | | | $1.90 | | | 143.75% | | | | |
| $ 1.59 | | | 95.31% | | | | | | $1.91 | | | 145.31% | | | | |
| $ 1.60 | | | 96.88% | | | | | | $1.92 | | | 146.88% | | | | |
| $ 1.61 | | | 98.44% | | | | | | $1.93 | | | 148.44% | | | | |
| $ 1.62 | | | 100.00% | | | Target | | | $1.94 | | | 150.00% | | | Max (120%) | |
(1)
| Subject to the Refinancing Adjustment, if any. |
Normalized FFO is an amount calculated and presented on the basis of methodologies other than in accordance with GAAP. Please refer to Appendix A for further explanation and reconciliation of Normalized FFO goalsto net income, its most directly comparable GAAP measure.
At the same time our Compensation Committee established the Normalized FFO performance targets for the 2021 Performance Period (subject to the Refinancing Adjustment, if any), the Compensation Committee also established the following rTSR modifier levels, which positively or negatively modify any Normalized FFO performance achieved (subject to the Refinancing Adjustment, if any) based on the table below.
| 25th | | | 0.800x | |
| 50th | | | 1.000x | |
| 75th | | | 1.200x | |
(1)
| In the event that the Company’s absolute TSR for the performance period is less than zero, the rTSR modifier shall not exceed 1.000x for the performance period. |
(2)
| If the applicable rTSR percentile performance falls between the listed rTSR percentiles, straight-line interpolation is used to determine the applicable modifier. |
As described above, for 2021, our Company’s rTSR was calculated based on the TSRs of the companies comprising the Russell 2000. The Compensation Committee chose this comparison group as it believes that it represents the most appropriate set of companies on which to base the Company’s rTSR performance. The Compensation Committee determined that calculating rTSR against the companies comprising the Russell 2000 provides a more comprehensive comparison for our share price performance compared to our compensation peer group which is a customized comparator based on a limited number of companies. The Compensation Committee also believes that comparing our Company’s shareholder return against the shareholder return of the companies in each yearthis group closely aligns this key compensation metric with the expectations of investors in small cap companies.
For 2021, our Company achieved a three-year vestingNormalized FFO of $1.85. As described above, the Compensation Committee determined that Normalized FFO would be subject to the Refinancing Adjustment, if any, for the 2021 performance period. As a result of the refinancing activities approved by our Board and completed by the Company during 2021, the Compensation Committee determined that the Refinancing Adjustment caused Normalized FFO to increase $0.12, which resulted in the achievement of an adjusted Normalized FFO (i.e., Normalized FFO after the Refinancing Adjustment) performance of $1.97 or 150%.
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The refinancing transactions completed in 2021 for purposes of determining the Refinancing Adjustment included the issuance the 8.25% Senior Notes, and the utilization of proceeds to (i) redeem all of our $250.0 million 5.0% senior unsecured notes, including the payment of the applicable “make-whole” redemption amount and accrued interest, (ii) repurchase $176.3 million of our 4.625% senior unsecured notes, and (iii) pay down a portion of the amounts outstanding under our revolving credit facility.
The Company’s one-year rTSR performance of 37% landed in the upper half of the third quartile, resulting in an rTSR modifier of 1.142x. As a result of the application of the rTSR modifier, the number of 2021 performance-based RSUs that actually vested amounted to 171.3% of the original grant amount, or 114.2% of the adjusted Normalized FFO performance achieved of 150%.
The Compensation Committee believed the amount of these awards was appropriate given our compensation philosophy and objectives. The Compensation Committee believed that the effect of the combined adjusted Normalized FFO and rTSR calculations properly rewarded our CEO and other NEOs because the rTSR modifier further increased the impact of adjusted Normalized FFO performance on CEO and NEO equity incentive awards. In 2021, performance-based RSUs represented approximately 31.6% of our CEO’s total compensation package, and on average, 24.7% of our other NEOs’ total compensation package (calculated in the manner described on page 55). Outstanding 2020 Performance-Based RSU Awards (2020-2022 Performance Period)
The second tranche of performance-based RSUs granted
is divided into three equal tranches, with each tranche vesting if we achieve thepre-established Normalized FFO performance goal assigned to the vesting year. If we fail to achieve the Normalized FFO performance goal for any vesting year, the tranche for such year will not vest and will, instead, be forfeited.The table below sets forth the Normalized FFO performance goal for each year in the three-year vesting period for the performance-based RSUs granted in 2017:
| | | | |
Period/Tranche | | Normalized FFO Required for Vesting of Tranche Each Year | |
2017 | | $ | 1.70 | |
2018 | | $ | 1.74 | |
2019 | | $ | 1.78 | |
Outstanding Performance-Based RSUs Granted in 2016. In 2016, we granted performance-based RSUs that2020 are subject to the same vesting principles asadjusted Normalized FFO modifier of 150% described above and the same one-year rTSR modifier described above. The Compensation Committee determined that using a one-year rTSR modifier for the second tranche of the 2020 RSUs was appropriate due to the Company’s substantial revision of its rTSR comparator group from publicly traded REITs with revenues between $1 billion and $6 billion to the Russell 2000 following our conversion from a REIT to a taxable C Corporation. As a result of the application of the one-year rTSR modifier, the number of the second tranche of 2020 performance-based RSUs that actually vested amounted to 171.3% of the original grant amount, or 114.2% of the adjusted Normalized FFO performance achieved of 150%.
Outstanding 2019 Performance-Based RSU Awards (2019-2021 Performance Period)
The third tranche of performance-based RSUs granted in
2017. The table below sets forth the Normalized FFOperformance goal for each year in the three-year vesting period for the performance-based RSUs granted in 2016: | | | | |
Period/Tranche | | Normalized FFO Required for Vesting of Tranche Each Year | |
2016 | | $ | 2.25 | |
2017 | | $ | 2.31 | |
2018 | | $ | 2.38 | |
Outstanding Performance-Based RSUs Granted in 2015. In 2015, we granted performance-based RSUs that2019 are subject to the same vesting principles asadjusted Normalized FFO modifier of 150% described above and the same one-year rTSR modifier described above. The Compensation Committee determined that using a one-year rTSR modifier for the final third of the 2019 RSUs was appropriate due to the Company’s substantial revision of its rTSR comparator group from publicly traded REITs with revenues between $1 billion and $6 billion to the Russell 2000 following our conversion from a REIT to a taxable C Corporation. As a result of the application of the one-year rTSR modifier, the number of the third tranche of 2019 performance-based RSUs granted in 2017. The table below sets forththat actually vested amounted to 171.3% of the original grant amount, or 114.2% of the adjusted Normalized FFOperformance goal for each year in the three-year vesting period for the performance-based RSUs granted in 2015:
| | | | |
Period/Tranche | | Normalized FFO Required for Vesting of Tranche Each Year | |
2015 | | $ | 2.36 | |
2016 | | $ | 2.44 | |
2017 | | $ | 2.51 | |
FFO performance achieved of 150%.
Vesting of 2019-2021 Time-Based RSUs Based on the Passage of Time and 2019-2021 Performance-Based RSUs Based on 20172021 Performance. As set forth in the table below, as a result of our adjusted Normalized FFO performance of $2.38$1.97 for 2017 resulted in2021, and the vestingapplication of the 2017 trancheapplicable rTSR modifier described above, the 2021 performance period tranches for outstanding performance-based RSUs granted in 20172019, 2020 and 2016, but2021 vested in the 2017 tranche of performance-based RSUs granted in 2015 did not vest and was forfeited.amounts set forth below. In accordance with the terms of the awards, the vesting occurs and shares are issued on the later of (i) delivery of the audited financial statements by the Company’s certified independent registered public accountantsaccountant for the applicable fiscal year (in the Company’s filing of the Annual Report on Form10-K) and
(ii) the applicable anniversary of the grant date. Thus,Additionally, as set
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forth in the
tranche oftable below, the
2017time-based RSUs granted in 2019, 2020 and
20162021 vested on February 18, 2022. The performance-based RSUs
thatgranted in 2020 and 2019 also vested
based on 2017 performance were deemed vested, and the shares were issued, on February
22, 2018. | | | | | | | | | | | | |
Name | | 2017 Performance-Based RSUs that Vested based on 2017 Performance and Issued in 2018 | | | 2016 Performance-Based RSUs that Vested based on 2017 Performance and Issued in 2018 | | | 2015 Performance-Based RSUs that Vested based on 2017 Performance and Issued in 2018 | |
Damon T. Hininger(1) | | | — | | | | — | | | | — | |
David M. Garfinkle | | | 10,535 | | | | 11,365 | | | | — | |
Harley G. Lappin | | | 10,535 | | | | 11,365 | | | | — | |
Anthony L. Grande | | | 10,535 | | | | 11,365 | | | | — | |
Lucibeth N. Mayberry | | | 8,676 | | | | 9,359 | | | | — | |
18, 2022. The performance-based RSUs for 2021 vested on March 30, 2022. | Damon T. Hininger | | | 45,614 | | | 20,684 | | | 16,245 | | | 90,157 | | | 52,121 | | | 40,954 | |
| David M. Garfinkle | | | 21,929 | | | 9,944 | | | 7,810 | | | 28,897 | | | 16,705 | | | 13,127 | |
| Patrick D. Swindle | | | 21,929 | | | 9,944 | | | 7,810 | | | 28,897 | | | 16,705 | | | 13,127 | |
| Anthony L. Grande | | | 21,929 | | | 9,944 | | | 7,810 | | | 28,897 | | | 16,705 | | | 13,127 | |
| Lucibeth N. Mayberry | | | 21,929 | | | 9,944 | | | 7,810 | | | 28,897 | | | 16,705 | | | 13,127 | |
(1)
| (1) | In support
“TBRSUs” refers to time-based restricted stock units as described in the section of the cost reduction plan we announced in 2016, Mr. Hininger voluntarily forfeited the 70,817 performance-based RSUs awarded to him in 2016, and, at Mr. Hininger’s request, ourthis Proxy titled 2021 Long-Term Equity Incentive Compensation Committee did not award him any performance-based RSUs in 2017.Awards. |
(2)
| “PBRSUs” refers to performance-based restricted stock units as described in the section of this Proxy titled 2021 Long-Term Equity Incentive Compensation Awards. |
Dividend Equivalent Rights.
The performance-based RSUs and time-based RSUs have associated dividend equivalent rights that are earned based on cash dividends, if any, paid by the Company while the award is unvested and outstanding. The dividend equivalent rights, if any, are paid in cash, and do not vest and are not paid until, and then only to the extent, the associated performance-based RSUs or time-based RSUs vest and the underlying shares are issued. This further aligns the executive officer’s interests with our stockholders, encourages dividend growth performance and does not result in any unearned compensation. The Company has not declared a dividend since the payment of our first quarter dividend in 2020. In August 2020, our Board unanimously voted to discontinue our quarterly dividend and prioritize allocating our free cash flow to reduce debt levels. Any future dividend is subject to our Board’s determinations as to the amount and timing thereof, as well as limitations under the Company’s debt covenants.
Substantial Compensation Tied to Our Objective Performance
RSUs granted in 2021 comprised both performance-based RSUs that vest based on the achievement of an annually set Normalized FFO (subject to the Refinancing Adjustment, if any, during the 2021 Performance Period) performance target, subject to a positive or negative adjustment by an rTSR modifier, and time-based RSUs that vest ratably over three years. In 2021, our annual cash incentives were earned based upon our objective performance against a pre-established financial performance target (Adjusted EBITDA) and a pass/fail business target (Lease Conversion) and modified positively or negatively based on our achievement of objective Strategic Business Goals. As a result, a substantial portion of executive compensation is at risk, paid based on our objective performance and tied to the interests of our stockholders and long-term value creation.
Severance and Change in Control Benefits
We believe reasonable severance and change in control benefits are necessary in order to recruit and retain effective senior managers. These severance benefits reflect the fact that it may be difficult for such executives to find comparable employment within a short period of time and are a product of a generally competitive recruiting environment within our industry. We also believe a change in control arrangement will provide an executive security that will likely reduce any reluctance of an executive to pursue a change in control transaction that could be in the best interests of our stockholders. In addition, we have sought to
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maintain a high level of consistency in the contractual terms applicable to all members of the executive team. We maintain employment agreements with each of our executive officers that provide cash severance equal to their then-current annual base salary for termination of employment by the Company without “cause” or resignation for “good reason,” and a double trigger payment of 2.99 times their base salary, plus certain other benefits, in the event of termination of employment by the Company without “cause” or resignation for “good reason” in connection with a “change in control.”
The executive employment agreements and the potential costs in the event of a change in control are reviewed periodically by our Compensation Committee, which stays abreast of developments and suggested best practices in compensation structure and design. The employment agreements with our executive officers other than Mr. Swindle were set to expire in December 2017. In 2017,2020, we undertook a comprehensive review of the provisions of the executive employment agreements (including protections provided in the event of a change in control, compliance with applicable law and provisions related to post-terminationnon-competition,non-solicitation, confidentiality andnon-disclosure) and, effective January 1, 2018,2021, we entered into new employment agreements with each of our then-current senior executives. The new employment agreements provide for an initial term of two years,expiring December 31, 2022, with automatic renewal for an additional year absent notice of nonrenewal by the Company or the executive update the base salaryat least 60 days in advance of the executiveexpiration of the initial term. The new agreements also implement revised confidentiality, non-disclosure, non-competition, and non-solicitation provisions. Each of these agreements provides for a minimum annual salary. In addition, during the term, the executives are eligible to the current amount, eliminate the accrual of paid vacation benefits and update post-termination covenants to enhance protections toparticipate in all compensation or employee benefit plans or programs maintained by the Company for the benefit of its salaried employees or senior executives from time to time. These plans and ensure compliance with applicable law.programs may include health and life insurance. In addition, during the term, these agreements provide for reimbursement for certain professional and civic memberships that are approved in advance by the Company. Each of the employment agreements, provides for severance benefits, which are more fully discussed under the heading Compensation Discussion and Analysis—Potential Payments Upon Termination or Change in Control in this Proxy Statement.
Under our equity award agreements, all outstanding equity awards would accelerate upon a change in control. Our Compensation Committee believes the single trigger equity acceleration encourages management to stay committed towards any potential transaction that may be in the best interests of our stockholders. For a detailed discussion of potential severance and change in control benefits, see “PotentialCompensation Discussion and Analysis—Potential Payments Upon Termination or Change in Control”, beginning on page 5183 of this Proxy Statement.
Perquisites and Other Benefits
The Company has paid relocation expenses, either in the form of reimbursement or a lump sum payment, to the NEOs who have relocated to Nashville, Tennessee in order to assume their positions with the Company. We permit limited tax gross up payments to our executives to cover the income tax associated with the taxable portions (if any) of such relocation reimbursement payments.
The NEOs are also eligible for benefits generally available to and on the same terms as the Company’s employees who are exempt for purposes of the Fair Labor Standards Act, including health insurance, short-term disability insurance and dental insurance. Additionally, the Company pays supplemental life and long-term disability insurance premiums for the NEOs. Pursuant to their employment agreements and in order to encourage community involvement, the named executive officersNEOs are also eligible for reimbursement for certain civic and professional memberships that are approved in advance. We also pay for physicals for executive officers up to $2,000 per individual on an annual basis.basis and reimburse our NEOs for certain wellness memberships.
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The Company maintains a qualified 401(k) plan. The Company matches a percentage of eligible employee contributions to our 401(k) Plan. Employer matching contributions are made in cash on a
dollar-for-dollar basis up to 5% of the employee’s base salary and are 100% vested immediately.
The Company also maintains a
nonqualifiednon-qualified deferred compensation plan covering our executive officers and certain key employees (the “Executive Deferred Compensation Plan”). Under the terms of the Executive Deferred Compensation Plan, participants are eligible to defer up to 50% of their annual base salary and 100% of their
cash incentive bonus each plan year. The Company, in its discretion, may make matching contributions to the plan. Currently, the Company makes matching contributions equal to 100% of amounts deferred up to 5% of total cash compensation. The matching contribution is credited on a monthly basis but is reduced at the end of the plan year for any matching amounts contributed to the participant’s 401(k) account. Any compensation deferred and matching contributions, if any, earn a return based on a fixed rate that is established by the Company based on the return received by the Company on certain investments designated as a funding mechanism for meeting its obligations under the
plan.Executive Deferred Compensation Plan. Participants are 100% vested in amounts deferred under the Executive Deferred Compensation Plan and earnings on those amounts, while the matching contributions vest 20% after two years of service, 40% after three years of service, 80% after four years of service and 100% after five years of service, subject to accelerated vesting in the event of a change in control, death, disability or retirement (age 62).
Executive Officer Stock Ownership Guidelines
We maintain stock ownership guidelines applicable to our executive officers andnon-executive directors. The stock ownership guidelines are designed to align the economic interests of executive officers and our Board with those of stockholders and to discourage excessive risk-taking by management and directors. Under these guidelines, each of our executive officers is expected to own a fixed number of shares of the Company’s common stock equal to three times such executive officer’s base salary on his or her hire or promotion date divided by the Company’s closing common stock price, as reported by the NYSE, on such date. Executive officers are expected to achieve these ownership levels, subject to a limited hardship exemption, within five years following their date of hire or promotion, as applicable, or (in the case of those serving at the time the guidelines were adopted) by March 1, 2012.promotion.
The following rules are used in determining share ownership of our executive officers and directors under the guidelines:
shares of common stock owned outright by the executive officer or director and his or her immediate family members who share the same household, whether held individually or jointly;
shares of restricted stock or RSUs where the restrictions have lapsed, even though such shares may be subject to an election made by the holder to defer receipt of the shares; and
shares held in trusts or other legal entities established for estate planning purposes with respect to which the executive officer or director retains beneficial ownership (due to complexities of these arrangements, requests to include shares held in such arrangements must be reviewed and approved by our Compensation Committee).
The guidelines were based, in part,
Based on information provided by PwC that summarized the existencea review of such programs at Fortune 500 companies, and reported on the most common types of such programs. Based on such research, our Board determined that the Company’s ownership requirements were fair, yet challenging, ownership requirements and that five years was a reasonable time period during
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which executives and directors would be able to comply. Our Board believes these ownership guidelines encourage executive officers of the Company
and the Board to act in the long-term interests of our stockholders, while discouraging excessive risk-taking.
Our guidelines and the compliance status of our NEOs as of the last quarterly review date of February
21, 201818, 2022 are shown in the table below:
| | | | | | | | | | | | |
Name | | Shares Required by Guidelines | | | Number of Shares Held | | | Compliance Deadline | |
Damon T. Hininger | | | 87,138 | | | | 224,758 | | | | 10/15/2014 | |
David M. Garfinkle | | | 32,777 | | | | 84,106 | | | | 5/1/2019 | |
Harley G. Lappin(1) | | | — | | | | — | | | | — | |
Anthony L. Grande | | | 35,671 | | | | 39,510 | | | | 8/21/2013 | |
Lucibeth N. Mayberry | | | 22,340 | | | | 45,615 | | | | 11/01/2018 | |
| Damon T. Hininger | | | 87,138 | | | 438,002 | | | 10/15/2014 | |
| David M. Garfinkle | | | 32,777 | | | 225,893 | | | 5/1/2019 | |
| Patrick D. Swindle | | | 53,119 | | | 102,661 | | | 1/1/2023 (1) | |
| Anthony L. Grande | | | 35,671 | | | 83,209 | | | 8/21/2013 | |
| Lucibeth N. Mayberry | | | 22,340 | | | 182,655 | | | 11/1/2018 | |
(1)
| (1) | Mr. Lappin retired from his position as our Executive Vice President and Chief Corrections Officer effective January 1, 2018. Effective January 1, 2018, Mr. Lappin was appointed to our Board andSwindle first became subject to the stock ownership guidelines applicable to ournon-executive directors. beginning January 1, 2018, with a five-year compliance period. |
Grant Timing Policy
To ensure our equity compensation awards are granted for stock option exercise price determinations:
Grants of equity awards for executive officers are typically made on the date of the February Compensation Committee meeting, after our Compensation Committee has had the opportunity to review full year results for the prior year and consider anticipated results for the current year.
Our Compensation Committee occasionally approves additional equity awards in certain special circumstances, such as upon an executive officer’s initial employment with the Company, the promotion of an executive officer to a new position or in recognition of special contributions made by an executive officer. For grants to executive officers, all such grants are approved by our Compensation Committee with an effective date of grant on or after the date of such approval. If the grant date is after the date of approval, it is on a date that is specified by our Compensation Committee at the time of approval.
The Company strives to ensure equity grants are made following the public release of important information such asyear-end results or anticipated results for the succeeding year.
Deductibility of Executive Compensation
Section 162(m) of the Code limits the tax deductibility of compensation over $1.0 million paid to certain executive officers of the Chief Executive Officer and the three highest compensated officers (excluding the Chief Executive Officer) serving at the end of each fiscal year.Company. Prior to the 2017 enactment of the Tax Cuts and Jobs Act (H.R. 1) (the “TCJA”) on December 22, 2017, which is, Section 162(m) provided an exemption from the deduction limitation for compensation that constituted “qualified performance-based compensation.” The TCJA, however, repealed the exemption for “qualified performance-based compensation,” effective for taxtaxable years beginning after December 31, 2017, subject to transitional relief for certain arrangements in place as of November 2, 2017. This change, among others, has caused more of the compensation we pay to our executive officers to be non-deductible under Section 162(m) and has eliminated our ability to structure performance-based awards to be exempt from the Section 162(m) limit on deductiblelimitations.
In designing our executive compensation
did not apply to compensation that constituted “qualified performance-based compensation” or that was paid to our Chief Financial Officer. To meet this exception for performance-based compensation, all of the following criteria must have been met:program and determining the compensation is contingent on the attainment of one or morepre-established, objective performance goals;
the performance goals are set by our Compensation Committee;
the plan pursuant to which the performance-based compensation is determined are disclosed to and approved by our stockholders before the compensation is paid; and
our Compensation Committee certifies in writing that the performance goals and any other material terms of the performance-based compensation were satisfied.
All Compensation Committee actions in 2017 were taken prior to the enactment of the TCJA and prior to November 2, 2017, and our Compensation Committee made reasonable efforts to ensure the Company’s performance-based awards constituted “qualified performance-based compensation” under Section 162(m) while simultaneously providing appropriate rewards for actual performance; however, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and related regulations, no assurance can be given that compensation intended to satisfy the requirements for deductibility under Section 162(m) will in fact do so. Additionally,executive officers, the Compensation Committee considers multiple factors, including the potential impact of the deduction limitation contained in Section 162(m). However, the Compensation Committee will not necessarily limit executive compensation to that which is or may be deductible under Section 162(m). The deductibility of some types of compensation depends upon the timing of an executive officer’s vesting or exercise of previously granted rights. Additionally, interpretations of and changes in the tax laws, and other
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factors beyond the Compensation Committee’s control will also affect the deductibility of compensation. The Compensation Committee will consider alternative arrangements to preserve the deductibility of compensation payments and benefits to the extent consistent with its compensation goals and will continue to monitor any developments regarding Section 162(m).
To maintain flexibility to compensate our executive officers in a manner designed to promote our short-term and long-term corporate goals, the Compensation Committee has not adopted a policy that all compensation must be deductible. The Compensation Committee believes that stockholderour stockholders’ interests are best served if we retainits discretion and flexibility in awarding compensation to our NEOs,is not restricted, even where thethough some compensation paid under such programsawards may not be fully deductible, and the result in a non-deductible compensation expense.
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Compensation Committee
has approved and will continue to approve, the payment of compensation outside of the deductibility limitations of Section 162(m).As a result of the enactment of the TCJA, the exception of allowing the full deductibility of “qualified performance-based compensation” will no longer apply to compensation paid after January 1, 2018, unless paid pursuant to a written binding contract, such as certain long-term equity incentive compensation awards that the Compensation Committee granted in 2017 in effect on or before November 7, 2017. The Compensation Committee will continue to retain the flexibility to design and maintain the Company’s executive compensation programs in a manner that is most beneficial to the Company’s stockholders, including the payment of compensation that may not be deductible under Section 162(m).
ReportReport of the Compensation Committee
The following Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
Our Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis set forth above with our management. Taking this review and discussion into account, the undersigned Committee members recommended to our Board that our Board approve the inclusion of the
Compensation Discussion and Analysis in our Proxy Statement on Schedule 14A for filing with the SEC.
Submitted by the Compensation Committee:
Donna M. Alvarado, Chair
Anne L. Mariucci
John R. Prann, Jr.
Summary Compensation Table
The following table summarizes the compensation earned or paid to our
Named Executive OfficersNEOs for service in the fiscal years ended December 31,
2017, 20162021, 2020 and
2015, with the exception of Ms. Mayberry, who first became a Named Executive Officer in 2017: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | | Salary ($) | | | Stock Awards ($) (1) | | | Non-Equity Incentive Plan Compensation ($) (2) | | | Change in Nonqualified Deferred Compensation Earnings ($) (3) | | | All Other Compensation ($) (4) | | | Total ($) | |
Damon T. Hininger | | | 2017 | | | $ | 886,830 | | | $ | — | | | $ | 1,390,476 | | | $ | 32,303 | | | $ | 64,048 | | | $ | 2,373,657 | |
President and Chief Executive Officer | |
| 2016
|
| | $
| 861,000
|
| | $
| 2,043,779
|
| | $
| 86,100
|
| | $
| 29,355
|
| | $
| 80,964
|
| | $
| 3,101,198
|
|
| | 2015 | | | $ | 882,807 | | | $ | 1,946,449 | | | $ | 450,232 | | | $ | 25,148 | | | $ | 100,681 | | | $ | 3,405,317 | |
David M. Garfinkle | | | 2017 | | | $ | 408,285 | | | $ | 1,033,167 | | | $ | 640,157 | | | $ | 7,688 | | | $ | 37,312 | | | $ | 2,126,609 | |
Executive Vice President and Chief Financial Officer | |
| 2016
|
| | $
| 387,000
|
| | $
| 983,982
|
| | $
| 38,700
|
| | $
| 6,930
|
| | $
| 42,145
|
| | $
| 1,458,757
|
|
| | 2015 | | | $ | 387,347 | | | $ | 937,109 | | | $ | 197,547 | | | $ | 5,697 | | | $ | 41,738 | | | $ | 1,569,438 | |
Harley G. Lappin | | | 2017 | | | $ | 424,452 | | | $ | 1,033,167 | | | $ | 665,506 | | | $ | 4,010 | | | $ | 35,134 | | | $ | 2,162,269 | |
Executive Vice President and Chief Corrections Officer | |
| 2016
|
| | $
| 412,089
|
| | $
| 983,982
|
| | $
| 41,209
|
| | $
| 5,677
|
| | $
| 53,076
|
| | $
| 1,496,033
|
|
| | 2015 | | | $ | 422,527 | | | $ | 937,109 | | | $ | 215,489 | | | $ | 4,347 | | | $ | 55,789 | | | $ | 1,635,261 | |
Anthony L. Grande | | | 2017 | | | $ | 424,452 | | | $ | 1,033,167 | | | $ | 665,506 | | | $ | 18,368 | | | $ | 36,492 | | | $ | 2,177,985 | |
Executive Vice President and Chief Development Officer | |
| 2016
|
| | $
| 412,089
|
| | $
| 983,982
|
| | $
| 41,209
|
| | $
| 16,901
|
| | $
| 44,588
|
| | $
| 1,498,769
|
|
| | 2015 | | | $ | 422,527 | | | $ | 937,109 | | | $ | 215,489 | | | $ | 14,793 | | | $ | 49,941 | | | $ | 1,639,859 | |
Lucibeth N. Mayberry | | | 2017 | | | $ | 346,310 | | | $ | 850,855 | | | $ | 542,985 | | | $ | 7,667 | | | $ | 22,999 | | | $ | 1,770,816 | |
Executive Vice President, Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2019: | Damon T. Hininger | | | 2021 | | | $963,540 | | | $2,600,002 | | | $1,694,859 | | | $85,678 | | | $101,237 | | | $5,445,316 | |
| President & | | | 2020 | | | $940,040 | | | $2,600,000 | | | $658,978 | | | $55,536 | | | $150,897 | | | $4,405,451 | |
| Chief Executive Officer | | | 2019 | | | $940,040 | | | $2,600,002 | | | $1,677,556 | | | $19,569 | | | $111,759 | | | $5,348,926 | |
| David M. Garfinkle | | | 2021 | | | $507,940 | | | $999,993 | | | $714,770 | | | $15,694 | | | $34,824 | | | $2,273,221 | |
| Executive Vice President & | | | 2020 | | | $495,551 | | | $1,000,003 | | | $277,910 | | | $10,839 | | | $34,480 | | | $1,818,783 | |
| Chief Financial Officer | | | 2019 | | | $488,335 | | | $1,000,007 | | | $697,170 | | | $4,246 | | | $34,182 | | | $2,223,940 | |
| Patrick D. Swindle | | | 2021 | | | $475,357 | | | $999,993 | | | $668,919 | | | $— | | | $28,753 | | | $2,173,022 | |
| Executive Vice President & | | | 2020 | | | $460,394 | | | $1,000,003 | | | $258,193 | | | $— | | | $28,223 | | | $1,746,813 | |
| Chief Operating Officer | | | 2019 | | | $444,334 | | | $1,000,007 | | | $634,352 | | | $— | | | $27,900 | | | $2,106,593 | |
| Anthony L. Grande | | | 2021 | | | $516,506 | | | $999,993 | | | $726,823 | | | $36,385 | | | $58,184 | | | $2,337,891 | |
| Executive Vice President & | | | 2020 | | | $503,908 | | | $1,000,003 | | | $282,595 | | | $30,099 | | | $79,212 | | | $1,895,817 | |
| Chief Development Officer | | | 2019 | | | $496,570 | | | $1,000,007 | | | $708,927 | | | $10,795 | | | $65,686 | | | $2,281,985 | |
| Lucibeth N. Mayberry | | | 2021 | | | $475,357 | | | $999,993 | | | $668,919 | | | $13,965 | | | $30,521 | | | $2,188,755 | |
| Executive Vice President, | | | 2020 | | | $460,394 | | | $1,000,003 | | | $258,193 | | | $9,644 | | | $29,986 | | | $1,758,220 | |
| Real Estate | | | 2019 | | | $444,334 | | | $1,000,007 | | | $634,352 | | | $3,778 | | | $29,644 | | | $2,112,115 | |
(1)
| The amounts shown in this column represent the aggregate grant-dategrant date fair value of performance-based RSUs and time-based RSUs granted during the given year calculated in accordance with FASB ASC Topic 718. Performance-basedBeginning in 2019, the Compensation Committee began granting a mix of performance-based RSUs and time-based RSUs. Amounts in this column for 2019-2021 include the target amount awarded by the Compensation Committee for the first, second and third tranches of performance-based RSU’s granted in 2019-2021, which vest based upon achieving normalizedannually in three anniversary tranches subject to the achievement of annual Normalized FFO performance objectives that weretargets established at the beginning of each year (for the 2021 Performance Period, the Normalized FFO performance was subject to the Refinancing Adjustment discussed under the heading pre-establishedCompensation Discussion and Analysis—Long-Term Incentive Compensation—2021 Performance-Based RSU Awards (2021-2023 Performance Period). In addition, as discussed on page 67 under the heading Compensation Discussion and Analysis—Long-Term Incentive Compensation by our Compensation Committee. The grant date values forin this Proxy Statement, the 20172019-2021 performance-based RSUs reflectare also subject to an rTSR modifier, which increases or reduces the probable outcome that the performance conditions will be met as estimated on the datenumber of grant. At the time of grant for the 2017 performance-based RSUs it was determined that maximum performance undervesting in accordance with the performance condition wastable presented on page 71 of this Proxy Statement (the amounts presented above do not include the probable outcome, and thusimpact of the rTSR modifier). The table below presents the grant date fair value was determinedof the 2021 time-based RSUs and the 2021 performance-based RSUs (the amounts presented below do not include the impact of the rTSR modifier). As a result of the performance criteria for each tranche of the 2021 performance-based RSUs being established on an annual basis, the performance-based RSU amounts presented below are for the first year of the three-year performance period beginning in 2021 based on $32.69 per share (reflectingthe target amount awarded. |
| Damon T. Hininger | | | $1,039,999 | | | $520,001 | | | $1,560,000 | |
| David M. Garfinkle | | | $499,996 | | | $166,666 | | | $666,662 | |
| Patrick D. Swindle | | | $499,996 | | | $166,666 | | | $666,662 | |
| Anthony L. Grande | | | $499,996 | | | $166,666 | | | $666,662 | |
| Lucibeth N. Mayberry | | | $499,996 | | | $166,666 | | | $666,662 | |
(a)
| The value of such probability) multiplied byawards assuming the maximum numberhighest level of shares that may vest, which equates toperformance conditions will be achieved (not including the number granted. All grants of equity awards were made under the 2008 Plan and are subject to individual award agreements. RSUs earn dividend equivalent rights that accumulate and are paid in cash when and only to the extent the underlying award vests. In supportimpact of the cost reduction plan announced by the Company on September 27, 2016,rTSR modifier) would amount to $780,001 for Mr. Hininger, voluntarily forfeited the 70,817 performance-based RSUs awarded to him on February 19, 2016, and requested that our Compensation Committee not award him any equity-based compensation in 2017.$249,999 for each of Messrs. Garfinkle, Swindle, Grande, and Ms. Mayberry. |
All grants of equity awards were made under the 2020 Plan and are subject to individual award agreements. RSUs earn dividend equivalent rights, if any, that accumulate and are paid in cash when and only to the extent the underlying award vests.
(2)
| The amounts shown in this column reflect cash incentive plan compensation earned pursuant to the Company’s annual cash incentive plan, which is discussedplan. A detailed discussion of the amounts paid in detail2021 begins on page 3763 under the heading “AnnualCompensation Discussion and Analysis—Annual Cash Incentive Plan Compensation” in the Compensation Discussion and Analysis section of this Proxy Statement. |
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(3)
| The amounts shown in this column represent above-market earnings on amounts that the Named Executive OfficerNEO chose to defer pursuant to the Company’s Executive Deferred Compensation Plan (“DCP”), which is more fully described on page 82under the heading “NonqualifiedCompensation Discussion and Analysis—Non-qualified Deferred Compensation in 2017.”2021. Amounts shown are based on the excess of the Company’s fixed rate for 20172021 of 5.00% over 120% of the applicable federal long-term rate, with compounding (as prescribed under section 1274(d) of the CodeCode) of 2.72%1.58%. |
(4)
| The amounts shown as All Other Compensation for 20172021 include the following: |
| | | | | | | | | | | | | | | | | | | | | | |
Name | | 401(k) Plan Matching Contributions | | | | | DCP Matching Contributions | | | | | Life Insurance Premiums | | | | | Long-Term Disability Premiums (a) | |
Damon T. Hininger | | | $ 13,250 | | | | | | $ 35,396 | | | | | | $ 2,398 | | | | | | $ 13,004 | |
David M. Garfinkle | | | $ 13,250 | | | | | | $ 9,099 | | | | | | $ 3,091 | | | | | | $ 11,872 | |
Harley G. Lappin | | | $ 13,250 | | | | | | $ — | | | | | | $ 7,607 | | | | | | $ 14,277 | |
Anthony L. Grande | | | $ 13,250 | | | | | | $ 10,033 | | | | | | $ 2,273 | | | | | | $ 10,936 | |
Lucibeth N. Mayberry | | | $ 13,250 | | | | | | $ — | | | | | | $ 1,788 | | | | | | $ 7,961 | |
| Damon T. Hininger | | | $14,500 | | | $66,626 | | | $2,375 | | | $17,736 | | | $— | |
| David M. Garfinkle | | | $14,500 | | | $— | | | $3,810 | | | $16,514 | | | $— | |
| Patrick D. Swindle | | | $14,500 | | | $— | | | $2,369 | | | $11,884 | | | $— | |
| Anthony L. Grande | | | $14,500 | | | $25,455 | | | $2,532 | | | $15,043 | | | $654 | |
| Lucibeth N. Mayberry | | | $14,500 | | | $— | | | $2,933 | | | $13,088 | | | $— | |
(a)
| (a) | The Company pays the long termlong-term disability premiums of its executive officers and certain other employees but does not pay such premiums for all employees. |
(b)
| During 2021, Mr. Grande received a taxable perquisite in the form of a reimbursement for a health club membership amounting to $654. |
Grants of Plan-Based Awards in 2017
2021
The following table sets forth the grants of plan-based awards that were made to the
Named Executive OfficersNEOs during the fiscal year ended December 31,
2017: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Possible Payouts Under Non- Equity Incentive Plan Awards (1) | | | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | |
Name | | Grant Date | | Minimum | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | | | Grant Date Fair Value of RSU Awards ($) (3) | |
Damon T. Hininger | | 2/16/2017 | | $ | 150,761 | | | $ | 686,406 | | | $ | 1,551,953 | | | | — | | | | (2) | | | | — | | | $ | — | |
David M. Garfinkle | | 2/16/2017 | | $ | 69,408 | | | $ | 316,013 | | | $ | 714,499 | | | | 10,535 | | | | (2) | | | | 31,605 | | | $ | 1,033,167 | |
Harley G. Lappin | | 2/16/2017 | | $ | 72,157 | | | $ | 328,526 | | | $ | 742,791 | | | | 10,535 | | | | (2) | | | | 31,605 | | | $ | 1,033,167 | |
Anthony L. Grande | | 2/16/2017 | | $ | 72,157 | | | $ | 328,526 | | | $ | 742,791 | | | | 10,535 | | | | (2) | | | | 31,605 | | | $ | 1,033,167 | |
Lucibeth N. Mayberry | | 2/16/2017 | | $ | 58,873 | | | $ | 268,044 | | | $ | 606,043 | | | | 8,676 | | | | (2) | | | | 26,028 | | | $ | 850,855 | |
2021: | Damon T.
Hininger | | | | | | $301,106 | | | $1,204,425 | | | $1,806,638 | | | — | | | — | | | — | | | — | | | $— | |
| 3/30/2021 | | | $— | | | $— | | | $— | | | 78,948 | | | 157,895 | | | 236,843 | | | — | | | $1,560,003 | |
| 2/17/2021 | | | $— | | | $— | | | $— | | | — | | | — | | | — | | | 136,842 | | | $1,039,999 | |
| David M.
Garfinkle | | | | | | $126,985 | | | $507,940 | | | $761,910 | | | — | | | — | | | — | | | — | | | $— | |
| 3/30/2021 | | | $— | | | $— | | | $— | | | 25,304 | | | 50,607 | | | 75,911 | | | — | | | $499,997 | |
| 2/17/2021 | | | $— | | | $— | | | $— | | | — | | | — | | | — | | | 65,789 | | | $499,996 | |
| Patrick D.
Swindle | | | | | | $118,839 | | | $475,357 | | | $713,036 | | | — | | | — | | | — | | | — | | | $— | |
| 3/30/2021 | | | $— | | | $— | | | $— | | | 25,304 | | | 50,607 | | | 75,911 | | | — | | | $499,997 | |
| 2/17/2021 | | | $— | | | $— | | | $— | | | — | | | — | | | — | | | 65,789 | | | $499,996 | |
| Anthony L.
Grande | | | | | | $129,127 | | | $516,506 | | | $774,759 | | | — | | | — | | | — | | | — | | | $— | |
| 3/30/2021 | | | $— | | | $— | | | $— | | | 25,304 | | | 50,607 | | | 75,911 | | | — | | | $499,997 | |
| 2/17/2021 | | | $— | | | $— | | | $— | | | — | | | — | | | — | | | 65,789 | | | $499,996 | |
| Lucibeth N. Mayberry | | | | | | $118,839 | | | $475,357 | | | $713,036 | | | — | | | — | | | — | | | — | | | $— | |
| 3/30/2021 | | | $— | | | $— | | | $— | | | 25,304 | | | 50,607 | | | 75,911 | | | — | | | $499,997 | |
| 2/17/2021 | | | $— | | | $— | | | $— | | | — | | | — | | | — | | | 65,789 | | | $499,996 | |
(1)
| The amounts shown in these columns reflect the minimum (17.00%(31.25% of base salary), target (77.40%(125% of base salary) and maximum (175.00%(187.5% of base salary) amounts that the Chief Executive Officer or the minimum (25% of base salary), target (100% of base salary) and maximum (150% of base salary) amounts that each of the Named Executive Officersother NEOs could have earned for the fiscal year ended December 31, 20172021, respectively, pursuant to the Company’s annual cash incentive plan, based on positive Adjusted EPS, Normalized FFO, Adjusted EBITDA and strategic business goals,Strategic Business Goals, as discussed in detail on page 3763 under the heading “AnnualCompensation Discussion and Analysis—Annual Cash Incentive Plan Compensation” in the Compensation Discussion and Analysis section of this Proxy Statement. The amounts actually awarded to each of the named executive officersNEOs are reflected in the Summary Compensation Table. The amounts presented in these columns do not include the impact of the Strategic Business Goals modifier, which increases or reduces any payout in accordance with the table presented on page 66. Because of the impact of this modifier, the actual minimum could be lower and the maximum higher than presented. |
(2)
| The amounts shown in these columns asthe threshold column reflect the minimum number (or 1/3rd50% of the granted amount) of performance-based RSUs that could vest if only one tranchethe minimum performance-based condition of the performance-based RSUs achieve the Normalized FFO performance goals.vesting is satisfied. Maximum reflects vesting in full of all150% of the performance-based RSUs granted which occurs whenif the maximum performance under the Normalized FFO performance goalsperformance-based condition to vest is achieved for each of 2017, 2018 and 2019, resulting in the vesting of each of the three tranches following each such year.satisfied. Target is not established, as vesting may range from 1/3rd, 2/3rd orreflects 100% of the number of performance-based RSUs granted.shares awarded. The performance-based RSUs were awarded pursuant to the Company’s 20082020 Plan and have dividend equivalent rights, if any, payable in cash, |
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but only to the extent and when the performance-based RSUs vest and the underlying shares are issued. The performance-based RSUs are discussed in detail, including the portion of the awards vesting for the 2021 Performance Period, beginning on page 67 under the heading Compensation Discussion and Analysis—Long-Term Incentive Compensation in this Proxy Statement. The amounts presented in these columns do not include the impact of the rTSR modifier, which increases or reduces any vested RSUs in accordance with the table presented on page 71. Because of the impact of this modifier, the actual minimum could be lower, and the maximum could be higher than presented. (3)
| The amounts shown in this column represent the time-based RSUs which vest in equal amounts over three years on the later of (i) the anniversary date of the grant or (ii) the delivery of the audited financial statements by the Company’s independent registered public accountant for the applicable fiscal year (in the Company’s filing of the Annual Report on Form 10-K). The time-based RSUs were awarded pursuant to the Company’s 2020 Plan and have dividend equivalent rights, if any, payable in cash, but only to the extent and when the performance-basedtime-based RSUs vest and the underlying shares are issued. The performance-based RSUs are discussed in detail beginning on page 39 under the heading “Performance-Based Equity Incentive Compensation” in the Compensation Discussion and Analysis section of this Proxy Statement. |
(3)(4)
| The amounts shown in this column represent the aggregate grant-date fair valuetarget amount awarded by the Compensation Committee on February 17, 2021 (for time-based RSUs) and March 30, 2021 (for performance-based RSUs) (both representing the grant dates). The targeted number of the performance–performance-based RSU awards was based RSUs granted in 2017 calculated in accordance with FASB ASC Topic 718. These awards vest in 1/3rd increments based upon achieving Normalized FFO performance goals that werepre-established by our Compensation Committee. At the time of grant for the 2017 performance-based RSUs, it was determined that maximum performance under the performance condition was the probable outcome, and thuson the grant date fair value was determined based on $32.69using a Monte Carlo valuation of $9.88 per share, for the February 16, 2017 grants (reflecting such probability) multiplied by the maximum number of shares that may vest, which equates toand the number of time-based RSU awards was based on the grant date fair value of $7.60 per share reflecting the closing price of the shares of our common stock on the grant date. Consistent with the presentation in the Summary Compensation Table, amounts in this column include the target amount awarded by the Compensation Committee for the performance-based RSUs. Performance-based RSUs granted. No options were grantedawarded in 2021 vest annually in three anniversary tranches subject to our Named Executive Officersthe achievement of annual Normalized FFO performance targets established at the beginning of each year during the performance period. For a presentation of the 2021 performance-based RSU amounts for the first tranche of the three-year performance period beginning in 2017. 2021 based on the target amount awarded by the Compensation Committee, see footnote 1 to the Summary Compensation Table. |
Employment Agreements
Effective January 1, 2018, the Company entered into new employment agreements with each of our NEOs, which replaced existing employment agreements, most of which were scheduled to expire on December 31, 2017. Each agreement has atwo-year initial term, and is subject to one automaticone-year renewal unless either party provides notice ofnon-renewal at least 60 days in advance of the expiration of the initial term. Each of these agreements provides for a minimum annual salary. In addition, during the term, the executives are eligible to participate in all compensation or employee benefit plans or programs maintained by the Company for the benefit of its salaried employees or senior executives from time to time. These plans and programs may include health and life insurance. In addition, during the term, these agreements provide for reimbursement for certain professional and civic memberships that are approved in advance by the Company. Each of the employment agreements, provides for severance benefits which are more fully discussed under “Potential Payments Upon Termination or Change in Control” in the “Compensation Discussion and Analysis” included in this Proxy Statement.
Outstanding Equity Awards at 20172021 FiscalYear-End
The following table sets forth information concerning
options and unearned performance-based RSUs for each of the
Named Executive Officersequity awards held by our NEOs that were outstanding as of December 31,
2017: | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards(1) | | | RSU Awards | |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) | | | Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | |
Damon T. Hininger | | | 38,112 | | | | | | | $ | 22.72 | | | | 2/20/2018 | | | | | | | | | |
| | | 14,027 | | | | | | | $ | 24.00 | | | | 8/14/2018 | | | | | | | | | |
| | | 35,324 | | | | | | | $ | 17.38 | | | | 8/13/2019 | | | | | | | | | |
| | | 126,924 | | | | | | | $ | 17.57 | | | | 2/18/2020 | | | | | | | | | |
| | | 107,298 | | | | | | | $ | 20.78 | | | | 2/23/2021 | | | | | | | | | |
| | | 139,273 | | | | | | | $ | 22.34 | | | | 3/16/2022 | | | | | | | | | |
David M. Garfinkle | | | 10,020 | | | | | | | $ | 9.13 | | | | 2/18/2019 | | | | | | | | | |
| | | 19,385 | | | | | | | $ | 17.57 | | | | 2/18/2020 | | | | | | | | | |
| | | 16,314 | | | | | | | $ | 20.78 | | | | 2/23/2021 | | | | 22,730 | | | $ | 511,425 | |
| | | 21,175 | | | | | | | $ | 22.34 | | | | 3/16/2022 | | | | 31,605 | | | $ | 711,113 | |
Harley G. Lappin | | | | | | | | | | | | | | | | | | | 22,730 | | | $ | 511,425 | |
| | | | | | | | | | | | | | | | | | | 31,605 | | | $ | 711,113 | |
Anthony L. Grande | | | | | | | | | | | | | | | | | | | 22,730 | | | $ | 511,425 | |
| | | | | | | | | | | | | | | | | | | 31,605 | | | $ | 711,113 | |
Lucibeth N. Mayberry | | | 21,175 | | | | | | | $ | 22.34 | | | | 3/16/2022 | | | | 18,719 | | | $ | 421,178 | |
| | | | | | | | | | | | | | | | | | | 26,028 | | | $ | 585,630 | |
2021: | Damon T. Hininger | | | 139,273 | | | — | | | $ 22.34 | | | 3/16/2022 | | | 57,199 | | | $570,274 | |
| | | | | | | | | | | | | 123,917 | | | $1,235,452 | |
| | | | | | | | | | | | | 332,263 | | | $3,312,662 | |
| David M. Garfinkle | | | 21,175 | | | — | | | $22.34 | | | 3/16/2022 | | | 20,937 | | | $208,742 | |
| | | | | | | | | | | | | 46,348 | | | $462,090 | |
| | | | | | | | | | | | | 128,424 | | | $1,280,387 | |
| Patrick D. Swindle | | | — | | | — | | | $— | | | — | | | 20,937 | | | $208,742 | |
| | | | | | | | | | | | | 46,348 | | | $462,090 | |
| | | | | | | | | | | | | 128,424 | | | $1,280,387 | |
| Anthony L. Grande | | | — | | | — | | | $— | | | — | | | 20,937 | | | $208,742 | |
| | | | | | | | | | | | | 46,348 | | | $462,090 | |
| | | | | | | | | | | | | 128,424 | | | $1,280,387 | |
| Lucibeth N. Mayberry | | | 21,175 | | | — | | | $22.34 | | | 3/16/2022 | | | 20,937 | | | $208,742 | |
| | | | | | | | | | | | | 46,348 | | | $462,090 | |
| | | | | | | | | | | | | | | | 128,424 | | | $1,280,387 | |
(1)
| Option awards reflect the equitable and proportionate adjustments made to our outstanding options as a result of our REIT conversion special dividend of $6.66 per share paid in May 2013, resulting in an increase in the outstanding number of options and a corresponding reduction in the exercise price. |
(2)
| Performance-based RSUs granted in 2015, 2016 and 2017 vest and are earned based upon achieving Normalized FFO goals that arepre-established by our Compensation Committee, with 1/3rd of the amount granted being earned and vested per year if we achieve the Normalized FFO goal for that year. If the Normalized FFO goal for that year is not achieved, then the 1/3rd tranche would not vest and is forfeited. Based on our Normalized FFO of $2.38 for 2017, 1/3rd of the 2016 and 2017 performance-based RSUs vested. However, the 2017 1/3rd tranche of the 2015 performance-based RSUs did not vest and was forfeited.
The vesting date does not occur until delivery of the audited financial statements by the Company’s certified independent registered public accountantsaccountant for the respective fiscal year, orone-year anniversary of the grant date, whichever is later. ThisAs a result, this table thus includes (a) the final 1/3rd tranche of 20162019 performance-based RSUs that vested in February 20182022 based on 20172021 performance andsubject to an rTSR modifier; (b) the second 1/3rd tranche of 20172020 performance-based RSUs that vested in February 20182022 based on 2017 performance. This table also includes2021 performance subject to an rTSR modifier; (c) the remainingfirst 1/3rd tranchestranche of the 2021 performance-based RSUs that vestvested in March 2022 based on 2018 and 20192021 performance as applicable. For further discussion of the performance-based RSUs, see “Performance-Based Equity Incentive Compensation” in the Compensation Discussion and Analysis section of this Proxy Statement.subject to |
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an rTSR modifier; (d) the third 1/3rd tranche of the time-based RSUs granted in 2019; (e) the second and third 1/3rd tranches of the time-based RSUs granted in 2020; and (f) the first, second and third 1/3rd tranches of the time-based RSUs granted in 2021. This table also includes the remaining 1/3rd tranches that could vest based on 2022 and 2023 performance, as applicable, from the 2020 and 2021 awards. For further discussion of the performance-based RSUs, see Compensation Discussion and Analysis—2021 Long-Term Equity Incentive Compensation Awards in this Proxy Statement. The market or payout value was based on the closing price of our common stock of $9.97 on December 31, 2021.
Option Exercises and Stock Vested in
20172021
The following table sets forth information regarding the exercise of stock options and the vesting of
performance-based RSUs during the fiscal year ended December 31,
20172021 for each of the
Named Executive Officers. | | | | | | | | | | | | | | | | |
| | Option Awards | | | RSU Awards | |
Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) (1) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($) (2) | |
Damon T. Hininger | | | 13,409 | | | $ | 119,916 | | | | 36,156 | | | $ | 1,229,304 | |
David M. Garfinkle | | | 43,409 | | | $ | 467,006 | | | | 28,759 | | | $ | 977,806 | |
Harley G. Lappin | | | — | | | $ | — | | | | 28,772 | | | $ | 978,248 | |
Anthony L. Grande | | | — | | | $ | — | | | | 28,772 | | | $ | 978,248 | |
Lucibeth N. Mayberry | | | 6,236 | | | $ | 60,000 | | | | 21,739 | | | $ | 739,126 | |
NEOs. | Damon T. Hininger | | | — | | | $ — | | | 92,640 | | | $703,138 | |
| David M. Garfinkle | | | — | | | $— | | | 40,932 | | | $310,674 | |
| Patrick D. Swindle | | | — | | | $— | | | 40,932 | | | $310,674 | |
| Anthony L. Grande | | | — | | | $— | | | 40,932 | | | $310,674 | |
| Lucibeth N. Mayberry | | | — | | | $— | | | 40,932 | | | $310,674 | |
(1)
| The value realized upon exercise of stock options reflects the price at which shares acquired upon exercise of the stock options were sold or valued for income tax purposes, net of the exercise price for acquiring such shares. |
(2)
| The value realized on vesting of performance-based RSUs was calculated as the product of the closing price on the New York Stock Exchange of a share of our common stock on the vesting date, multiplied by the number of unitsRSUs vested. The performance-based RSUs that vested in 2017 were earned and vested based on our achievement of the applicable Normalized FFO goals for 2016. |
NonqualifiedNon-qualified Deferred Compensation in
20172021
The following table sets forth information concerning contributions made by the
Named Executive OfficersNEOs and the Company pursuant to the Company’s Executive Deferred Compensation Plan as well as aggregate individual account balances as of December 31,
2017: | | | | | | | | | | | | | | | | | | | | |
Name | | Executive Contributions in 2017(1) | | | Company Contributions in 2017(2) | | | Aggregate Earnings in 2017 (3) | | | Aggregate Withdrawals/ Distributions in 2017 | | | Aggregate Balance at 12/31/2017(4) | |
Damon T. Hininger | | $ | 39,778 | | | $ | 35,396 | | | $ | 70,840 | | | $ | — | | | $ | 1,531,227 | |
David M. Garfinkle | | $ | 10,101 | | | $ | 9,099 | | | $ | 16,859 | | | $ | — | | | $ | 366,674 | |
Harley G. Lappin | | $ | — | | | $ | — | | | $ | 8,794 | | | $ | (188,359) | | | $ | 105,108 | |
Anthony L. Grande | | $ | 23,283 | | | $ | 10,033 | | | $ | 40,280 | | | $ | — | | | $ | 866,566 | |
Lucibeth N. Mayberry | | $ | — | | | $ | — | | | $ | 16,813 | | | $ | — | | | $ | 353,071 | |
2021: | Damon T. Hininger | | | $71,490 | | | $66,626 | | | $125,261 | | | $— | | | $2,690,113 | |
| David M. Garfinkle | | | $— | | | $— | | | $22,945 | | | $— | | | $481,849 | |
| Patrick D. Swindle | | | $— | | | $— | | | $— | | | $— | | | $— | |
| Anthony L. Grande | | | $39,955 | | | $25,455 | | | $53,195 | | | $(696,829) | | | $733,510 | |
| Lucibeth N. Mayberry | | | $— | | | $— | | | $20,417 | | | $— | | | $428,752 | |
(1)
| (1) | Of the amounts shown in this column, the following amounts are included in the “Salary” column of the Summary Compensation Table for 2017:2021: Mr. Hininger - $35,473; Mr. Garfinkle - $8,166;− $38,541; and Mr. Grande - $21,223;− $25,825; the remaining amounts are included in the“Non-Equity “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for 2017. 2020. |
(2)
| (2) | Of theThe amounts shown in this column the following amounts are also reported in the “All Other Compensation” column of the Summary Compensation Table for 2017: Mr. Hininger - $35,396; Mr. Garfinkle - $9,099; and Mr. Grande - $10,033. 2021. |
(3)
| (3) | Of the amounts shown in this column, the following amounts are reported in the “Change in NonqualifiedNon-qualified Deferred Compensation Earnings” column of the Summary Compensation Table for 2017:2021: Mr. Hininger - $32,303;− $85,678; Mr. Garfinkle - $7,688; Mr. Lappin - $4,010;− $15,694; Mr. Grande - $18,368;− $36,385; and Ms. Mayberry - $7,667. − $13,965. |
(4)
| (4) | Of the amounts shown in this column, the following amounts were reported as compensation to the NEOs in the Summary Compensation Table for 2017, 20162021, 2020 and 2015:2019: Mr. Hininger - $103,172– $190,845 for 2017, $120,4112021, $242,716 for 20162020 and $155,000$218,250 for 2015;2019; Mr. Garfinkle - $24,953– $15,694 for 2017, $28,7122021, $10,839 for 20162020 and $55,412$4,246 for 2015; Mr. Lappin -$4,010 for 2017, $44,419 for 2016 and $51,349 for 2015;2019; Mr. Grande - $49,624– $87,665 for 2017, $57,6942021, $115,816 for 20162020 and $73,710$103,990 for 2015;2019; and Ms. Mayberry - $7,667– $13,965 for 2017. 2021, $9,644 for 2020 and $3,778 for 2019. |
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The Executive Deferred Compensation Plan is an unfunded,
non-qualified deferred compensation plan maintained by the Company for certain of its senior executives and other key employees, including the NEOs. Eligible employees who participate in the Executive Deferred Compensation Plan may defer a portion of their compensation by electing to contribute such compensation to the plan.
Pursuant to the Executive Deferred Compensation Plan, participating executives may elect to contribute on a
pre-tax basis up to 50% of their base salary and up to 100% of their annual cash bonus. The Company matches 100% of contributions up to 5% of total cash compensation. The matching contribution is credited on a monthly basis but is reduced at the end of the plan year for any matching amounts contributed to the participant’s 401(k) account. The Company also contributes a fixed rate of return on balances in the Executive Deferred Compensation Plan, determined at the beginning of each plan year. Participants are 100% vested in amounts deferred under the plan and earnings on those amounts, while the matching contributions vest 20% after two years of service, 40% after three years of service, 80% after four years of service and 100% after five years of service. Each participant, however, shall become 100% vested in the matching contribution amounts upon termination of employment by reason of death, disability or retirement or upon the occurrence of a change in control; provided, however, that the
Participantparticipant shall not become vested upon the occurrence of a change in control to the extent such vesting would cause any portion of his or her deferred compensation benefits to constitute an “excess parachute payment” under Section 280G of the Code.
Distributions to senior executives are generally payable no earlier than five years subsequent to the date an executive becomes a participant in the Plan, or upon termination of employment, at the election of the participant, but not later than the
15th15th day of the month following the month the individual attains age 65.
During
2017,2021, the Company provided a fixed return of 5.00% to participants in the Executive Deferred Compensation Plan, which rate was based on the return received by the Company on the life insurance policies the Company has purchased on the lives of certain participating executives, including each of the
Named Executive Officers.NEOs. The life insurance policies are intended to partially fund distributions from the Executive Deferred Compensation Plans, and the Company is the sole beneficiary of such policies. The Company has established an irrevocable Rabbi Trust to secure the plan’s obligations. However, assets in the Executive Deferred Compensation Plan are subject to creditor claims in the event of bankruptcy.
Potential Payments
Uponupon Termination or Change in Control
Each of our NEOs is eligible to receive certain payments upon termination of employment under the circumstances described below:
Retirement
. In the event of a termination of employment due to retirement (generally after attaining age 62), our equity award agreements provide that:vested options would be exercisable for the remaining stated term of the option (as opposed to a voluntary or for “cause” termination, in which case the NEO would generally have three months following termination to exercise vested options); and
if the retirement is effective after December 31 of any fiscal year but prior to the applicable performance-based RSU vesting date with respect to such year (which typically occurs in February of the immediately following fiscal year), the applicable portion of unvested performance-based RSUs, if any, that would vest on such vesting date but for the NEO’s termination of employment would vest and be issued to the NEO despite the fact that the NEO is no longer an employee of the Company on such vesting date.
Furthermore, in the event of an NEO’s retirement, matching contributions under the Executive Deferred Contribution Plan would become 100% vested.
Death or Disability
. In the event of death or disability, benefits under our disability plan and payments under our life insurance plan, as applicable, would be payable, which, in the event of death, would equal twice the executive’s compensation subject to certain caps. In addition, matching contributions under the Executive Deferred Contribution Plan would become 100% vested.In accordance with the terms of our equity award agreements, in the event of the death or disability of
a Named Executive Officeran NEO (1) all performance-based
RSUs and time-based RSUs will become immediately and fully vested and
non-forfeitable and (2) all unvested options that have not earlier terminated or expired in accordance with their terms will automatically vest in full and will be exercisable until the expiration of their stated term.
Termination Without Cause or for Good Reason
. In accordance with the employment agreements with our current executive officers, if we terminate the employment of the executive without “cause,” or if the executive terminates the employment for “good reason,” we generally are required to pay a cash severance amount equal to the executive’s annual base salary then in effect, payable in instalmentsinstallments in accordance with the terms of the agreements.
Change in Control
. In accordance with the terms of our equity award agreements, in the event of a change of control (1) all performance-based RSUs and time-based RSUs will become immediately and fully vested andnon-forfeitable and (2) all unvested options that have not earlier terminated or expired in accordance with their terms will automatically vest in full and will be exercisable until the expiration of their stated term.Our Executive Deferred Compensation Plan provides that upon a change in control, the matching contributions would become 100% vested, unless such vesting would cause any portion of the deferred compensation benefits to constitute an “excess parachute payment” under Section 280G of the Code.
Qualifying Termination Within 180 days of a Change in Control
. Pursuant to each of the employment agreements with our current executive officers, in the event of a termination by the Company (other than for “cause”) or (subject to certain procedural requirements) termination by the executive for “good reason,” withinone-hundred eighty (180) days following a change in control, each NEO would be entitled to receive a lump sum cash payment equal to 2.99 times his or her base salary then in effect, and the NEO would continue to be covered under existing life, medical, disability and health insurance plans for a period of one year. All severance payments are made promptly after the time of termination in order to make a clean separation from, and avoid continued entanglement with, the NEO.
Definitions.
Our employment agreements with our current executive officers and our equity plans generally provide for the following definitions:The definition of “Good Reason” means when the executive terminates employment with the Company due to (i) a material reduction in the duties, powers or authority of the executive as an officer or employee of the Company or (ii) relocation of the Company’s headquarters to a location more than 30 miles outside of the
Nashville,Brentwood, Tennessee metropolitan area, in either case without the executive’s consent. A termination under these circumstances shall be due to Good Reason only if (A) the executive notifies the Company of the existence of the condition that otherwise constitutes Good Reason within thirty (30) days of the initial existence of the condition, (B) the Company fails to remedy the condition within thirty (30) days following its receipt of executive’s notice of the condition constituting Good Reason (the “Cure Period”) and
(C) if the Company fails to remedy the condition constituting Good Reason during the Cure Period, the executive terminates employment with the Company due to the condition within thirty (30) days of the expiration of the Cure Period.
The definition of “Cause” includes, among other things, the death or permanent disability of the executive, conviction of certain felonies or criminal acts, willful or material wrongdoing (including dishonesty or fraud), material breach by the executive of his employment agreement or of his fiduciary duty to the Company or its stockholders, material violations of the Company’s Code of ConductEthics or intentional violation of any applicable
law or regulation affecting the Company in a material respect, which event, action or breach may be subject to a right of the executive to cure under certain conditions.
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The definition of “Change in Control” generally means:
a “change in the ownership of the Company”;
a “change in the effective control of the Company”; or
a “change in the ownership of a substantial portion of the assets of the Company”,
as such terms are defined inSection 1.409A-3(i)(5) of the Treasury Regulations.
In addition, under our 2008 Plan and 2020 Plan, the vesting of all or a portion of an outstanding restricted stock award will be accelerated upon a “change in control,” as defined in the plans. The 2008 Plan (pursuant to which certain options remain outstanding, but no further options are being granted) provides that upon a “change in control,” as defined in the 2008 Plan, all unvested options that have not earlier terminated or expired in accordance with their terms will automatically vest in full and will be exercisable for one year following the change in control.
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Table of Potential Payments
Uponupon Termination or Change in Control
The table below reflects the amount of compensation payable to each of the NEOs in the event of termination of such executive’s employment. The amount of compensation payable to each
NEOsNEO upon a change of control, qualifying termination in connection with a change in control, involuntary termination not for cause, and in the event of disability or death of the executive is shown below. The amounts assume that such event was effective as of December 31,
2017,2021, and thus do not include amounts earned through such time and are estimates of the awards and amounts that would be paid out to the NEOs upon their termination. The amounts shown do not include: (i) benefits earned during the term of our NEOs’ employment that are available to all salaried employees, and (ii)
20172021 cash incentives that were earned as of December 31,
2017.2021. The actual awards and amounts to be paid out can only be determined at the time of such executive’s separation from the Company. Reference below to RSUs means our
time- and performance-based RSUs and includes all dividend equivalent
rights. | | | | | | | | | | | | | | | | |
Name | | Change in Control Only | | | Qualifying Termination upon Change in Control | | | Involuntary Termination Without Cause | | | Death or Disability | |
Damon T. Hininger | | | | | | | | | | | | | | | | |
Accelerated Vesting of RSUs(1) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Cash Severance (2) | | $ | — | | | $ | 2,728,853 | | | $ | 912,660 | | | $ | — | |
Insurance Benefits (3) | | $ | — | | �� | $ | 31,181 | | | $ | — | | | $ | 1,500,000 | |
Total: | | $ | — | | | $ | 2,760,034 | | | $ | 912,660 | | | $ | 1,500,000 | |
David M. Garfinkle | | | | | | | | | | | | | | | | |
Accelerated Vesting of RSUs(1) | | $ | 1,360,190 | | | $ | 1,360,190 | | | $ | — | | | $ | 1,360,190 | |
Cash Severance (2) | | $ | — | | | $ | 1,284,414 | | | $ | 429,570 | | | $ | — | |
Insurance Benefits(3) | | $ | — | | | $ | 30,214 | | | $ | — | | | $ | 1,305,000 | |
Total: | | $ | 1,360,190 | | | $ | 2,674,818 | | | $ | 429,570 | | | $ | 2,665,190 | |
Harley G. Lappin | | | | | | | | | | | | | | | | |
Accelerated Vesting of RSUs(1) | | $ | 1,360,190 | | | $ | 1,360,190 | | | $ | — | | | $ | 1,360,190 | |
Cash Severance (2) | | $ | — | | | $ | 1,306,074 | | | $ | 436,814 | | | $ | — | |
Insurance Benefits(3) | | $ | — | | | $ | 9,240 | | | $ | — | | | $ | 1,358,000 | |
Total: | | $ | 1,360,190 | | | $ | 2,675,504 | | | $ | 436,814 | | | $ | 2,718,190 | |
Anthony L. Grande | | | | | | | | | | | | | | | | |
Accelerated Vesting of RSUs(1) | | $ | 1,360,190 | | | $ | 1,360,190 | | | $ | — | | | $ | 1,360,190 | |
Cash Severance(2) | | $ | — | | | $ | 1,306,074 | | | $ | 436,814 | | | $ | — | |
Insurance Benefits (3) | | $ | — | | | $ | 29,114 | | | $ | — | | | $ | 1,415,000 | |
Total: | | $ | 1,360,190 | | | $ | 2,695,378 | | | $ | 436,814 | | | $ | 2,775,190 | |
Lucibeth N. Mayberry | | | | | | | | | | | | | | | | |
Accelerated Vesting of RSUs(1) | | $ | 1,120,169 | | | $ | 1,120,169 | | | $ | — | | | $ | 1,120,169 | |
Cash Severance(2) | | $ | — | | | $ | 1,191,198 | | | $ | 398,394 | | | $ | — | |
Insurance Benefits(3) | | $ | — | | | $ | 27,392 | | | $ | — | | | $ | 1,052,000 | |
Total: | | $ | 1,120,169 | | | $ | 2,338,759 | | | $ | 398,394 | | | $ | 2,172,169 | |
rights, if any. | Damon T. Hininger | | | | | | | | | | | | | |
| Accelerated Vesting of RSUs(1) | | | $5,298,750 | | | $5,298,750 | | | $— | | | $5,298,750 | |
| Cash Severance(2) | | | $— | | | $2,951,256 | | | $987,042 | | | $— | |
| Insurance Benefits (3) | | | $— | | | $39,434 | | | $— | | | $1,500,000 | |
| Total: | | | $5,298,750 | | | $8,289,440 | | | $987,042 | | | $6,798,750 | |
| David M. Garfinkle | | | | | | | | | | | | | |
| Accelerated Vesting of RSUs(1) | | | $2,017,673 | | | $2,017,673 | | | $— | | | $2,017,673 | |
| Cash Severance(2) | | | $— | | | $1,555,784 | | | $520,329 | | | $— | |
| Insurance Benefits (3) | | | $— | | | $38,787 | | | $— | | | $1,500,000 | |
| Total: | | | $2,017,673 | | | $3,612,244 | | | $520,329 | | | $3,517,673 | |
| Patrick D. Swindle | | | | | | | | | | | | | |
| Accelerated Vesting of RSUs (1) | | | $2,017,673 | | | $2,017,673 | | | $— | | | $2,017,673 | |
| Cash Severance(2) | | | $— | | | $1,466,057 | | | $490,320 | | | $— | |
| Insurance Benefits(3) | | | $— | | | $30,846 | | | $— | | | $1,500,000 | |
| Total: | | | $2,017,673 | | | $3,514,576 | | | $490,320 | | | $3,517,673 | |
| Anthony L. Grande | | | | | | | | | | | | | |
| Accelerated Vesting of RSUs(1) | | | $2,017,673 | | | $2,017,673 | | | $— | | | $2,017,673 | |
| Cash Severance(2) | | | $— | | | $1,582,018 | | | $529,103 | | | $— | |
| Insurance Benefits(3) | | | $— | | | $31,514 | | | $— | | | $1,500,000 | |
| Total: | | | $2,017,673 | | | $3,631,205 | | | $529,103 | | | $3,517,673 | |
| Lucibeth N. Mayberry | | | | | | | | | | | | | |
| Accelerated Vesting of RSUs(1) | | | $2,017,673 | | | $2,017,673 | | | $— | | | $2,017,673 | |
| Cash Severance(2) | | | $— | | | $1,466,057 | | | $490,320 | | | $— | |
| Insurance Benefits (3) | | | $— | | | $32,615 | | | $— | | | $1,500,000 | |
| Total: | | | $2,017,673 | | | $3,516,345 | | | $490,320 | | | $3,517,673 | |
(1)
| Represents the value of accelerated vesting of performance-based RSUs, which occurs upon a change in control (whether or not the executive’s employment is terminated) and upon the death or disability of the executive. |
| Accelerated vesting of performance-based RSUs is calculated using the NYSE closing market price on December 29, 201731, 2021 ($22.509.97 per share), and includes the outstanding dividend equivalents associated with such RSUs that similarly vest on an accelerated basis. |
(2)
| In the event of an involuntary termination absent a change in control and without cause, represents an amount equal to 100% of current base salary paid out on the same terms and with the same frequency as the executive’s base salary was paid prior to December 31, 2017.2021. In the event of a qualifying termination upon a change in control, represents an amount equal to 2.99 times current base salary, to be paid out in a lump sum within 40 days of the termination date. |
(3)
| In the event of a qualifying termination upon a change in control, represents the premiums expected to be paid based upon the types of insurance coverage the Company carried for such executive as of December 31, 20172021, and the premiums in effect on such date. In the event of death, represents the payouts under life insurance policies, equal to two times total cash compensation, subject to certain caps. The benefits payable under supplemental long-term disability policies in the event of a disability are not shown in the table. In general, executive officers are entitled to higher payment formulas and higher caps for a potentially longer period of time than other employees under supplemental long termlong-term disability policies. |
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2021 CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and RegulationS-K under the Exchange Act,
In accordance with SEC Rules, we are disclosing the ratio of CEO pay to the median employee pay of all our employees (other than the CEO) in
2017,2021, calculated in accordance with Item 402(u) of Regulation
S-K. The ratio of the annual total compensation of our CEO to the median total compensation of all employees (other than our CEO) for
20172021 was
62123 to
1.one. This ratio was based on the following:
the annual total compensation of our CEO, determined as described in the Summary Compensation Table included in this Proxy Statement, was $2,373,657;$5,445,316 and
the median of the total compensation of all employeesour median employee (other than our CEO), determined in accordance with SEC rules, was $38,236.
$44,154.To calculate our CEO pay ratio, we are required to identify a
For 2021, the Company identified its median employee based on our total workforce, without regard to their location, compensation arrangements or employment status (i.e., full-time or part-time).in accordance with the rules prescribed by law. The methodology as well asand the material assumptions and estimates we used to determine the median employee in 2021 were as follows:
Total Employee Population: We determined that, as of November 30, 2021, the date we selected to identify the median employee, our employee population consisted of approximately 10,702 individuals.
Compensation Measure Used to Identify the Median Employee: For purposes of measuring the total compensation of our
employees to identify the median employee,
population werewe used base salary, including overtime pay, for the period beginning December 1, 2020 and ending November 30, 2021. Compensation for non-seasonal employees hired during the period was annualized as
follows: | • | | Total Employee Population: We determined that, as of November 30, 2017, the date we selected to identify the median employee, our employee population consisted of approximately 12,600 individuals. As permitted by Item 402(u) of Regulation S-K, we excluded from our total employee population those individuals who became our employees as the result of our acquisition during the 2017 calendar year of Arapahoe Community Treatment Center Inc., Center Point, Inc., New Beginnings Treatment Center, Inc. and Time to Change, Inc., which comprised approximately 139 employees.
|
| • | | Compensation Measure Used to Identify the Median Employee: For purposes of measuring the total compensation of our employees to identify the median employee, we used base salary, including overtime pay, for the period beginning December 1, 2016 and ending November 30, 2017. We used base salary, including overtime pay, as our consistently applied compensation measure as it represents the primary compensation component paid to all of our employees. As a result, we believe base salary, including overtime pay, provides an accurate depiction of total earnings for the purpose of identifying our median employee. Compensation for employees hired during the period was annualized as permitted by SEC rules.
|
| • | | Total Compensation of Median Employee: In order to determine the total compensation of the median employee, we identified and calculated that employee’s base salary, including overtime pay, for the period beginning December 1, 2016 and ending November 30, 2017 in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K, resulting in total compensation of $38,236.
|
| • | | Annual Total Compensation of CEO: With respect to the annual total compensation of our CEO, in accordance with SEC rules, we used the amount reported for Mr. Hininger in the “Total” column for 2017 in the Summary Compensation Table included in this Proxy Statement.
|
| • | | Special Circumstances for 2017: In support of the cost reduction plan we announced in 2016, at Mr. Hininger’s request, our Compensation Committee did not award him any RSUs in 2017. Consequently, Mr. Hininger’s annual total compensation (and the resulting pay ratio) for 2017 is lower than it would have been had our Compensation Committee not taken such action. If our Compensation Committee had awarded RSUs to Mr. Hininger in 2017, our CEO’s annual total compensation for 2017 would have been approximately $4,519,625, and the resulting pay ratio would have been 118 to 1.
|
Total Compensation of Median Employee: In order to determine the total compensation of the median employee, we identified and calculated that employee’s base salary, including overtime pay, for the period beginning December 1, 2020 and ending November 30, 2021 in accordance with the requirements of Item 402(u) of Regulation S-K, resulting in total compensation of $44,154.
Annual Total Compensation of CEO: With respect to the annual total compensation of our CEO, in accordance with SEC rules, we used the amount reported for Mr. Hininger in the “Total” column for 2021 in the Summary Compensation Table included in this Proxy Statement.
Our reported pay ratio information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation
S-K. The SEC rules for identifying the median employee and calculating pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions. As a result, our pay ratio may not be comparable to the pay ratio reported by other companies.
Non-employee directors (
i.e., all directors other than
Messrs.Mr. Hininger and
Lappin)Mr. Lappin until February 2022) are compensated pursuant to our
Non-Employee Directors’ Compensation Plan and the
2008 Stock2020 Plan, which for
20172021 provided for the following:
Annual Board, committee and committee chair retainers; and
Board and committee unscheduled meeting fees.
Non-employee directors may elect to receive all or a portion of their retainers in the form of common stock rather than cash.
Non-executive directors may also defer all or a portion of their retainer and meeting fees pursuant to our
Non-Employee Directors’ Deferred Compensation Plan. In addition,
non-employee directors are reimbursed for reasonable expenses incurred to attend Board and committee meetings, as well as director education programs.
The retainers paid to ournon-employee directors for 20172021 are as follows:
Retainers and Fees | | 2017 | Amount | |
| Independent Board ChairmanChair retainer | | $ | $ 100,000 | |
| Non-Chair Board retainer | | $ | $80,000 | |
Audit Committee member retainer | | $ | 8,000 | |
Special Litigation Committee member retainer
| | $ | 20,000 | |
Other committee member retainer
| | $ | 4,000 | |
Audit Committee chair retainer
| | $ | 20,000 | |
Special Litigation Committee chair retainer
| | $ | 28,000 | |
Other committee chair retainer
| | $ | 10,000 | |
Board and committee unscheduled meeting fee | | $ | $1,000 | |
| Audit Committee chair retainer | | | $20,000 | |
| Audit Committee member retainer | | | $8,000 | |
| Compensation Committee chair retainer | | | $15,000 | |
| Compensation Committee member retainer | | | $4,000 | |
| Nominating and Governance Committee chair retainer | | | $10,000 | |
| Nominating and Governance Committee member retainer | | | $4,000 | |
| Risk Committee chair retainer | | | $15,000 | |
| Risk Committee member retainer | | | $4,000 | |
| DEI Committee chair retainer | | | $28,000 | |
| DEI Committee member retainer | | | $20,000 | |
| Special Litigation Committee chair retainer | | | $28,000 | |
| Special Litigation Committee member retainer | | | $20,000 | |
| Demand Review Committee member retainer(1) | | | $20,000 | |
| Demand Review Committee chair retainer(1) | | | $20,000 | |
(1)
| The Demand Review Committee completed its work and was dissolved by the Board of Directors on March 31, 2021. For this reason, the committee members and chair were paid approximately 25% of the listed amounts during 2021. |
In addition to cash compensation,non-employee directors are granted RSUs with a grant date fair market value of approximately $120,000$135,000 per year, generally on the same date as grants of equity awards are made to our
executive officers and other employees. Subject to certain exceptions contained in the award agreement, these RSUs vest on theone-year anniversary of the grant date.
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2021 Director Compensation Table
The following table summarizes the compensation paid with respect to the fiscal year ended December 31,
20172021, to each of the Company’s directors except
Messrs.Mr. Hininger
and Lappin whose compensation is reflected in the Summary Compensation
Table. C. Michael Jacobi did not stand forre-election at the 2017 Annual Meeting of Stockholders: | | | | | | | | | | | | | | | | | | | | |
Name | | Fees Earned or Paid in Cash | | | Stock Awards(2) (4) | | | Change in Nonqualified Deferred Compensation Earnings(3) | | | All Other Compensation | | | Total | |
Donna M. Alvarado | | $ | 103,000 | | | $ | 120,005 | | | $ | — | | | $ | — | | | $ | 223,005 | |
Robert J. Dennis | | $ | 85,000 | | | $ | 120,005 | | | $ | — | | | $ | — | | | $ | 205,005 | |
Mark A. Emkes | | $ | 139,000 | | | $ | 170,005 | | | $ | — | | | $ | — | | | $ | 309,005 | |
Stacia A. Hylton | | $ | 112,000 | | | $ | 120,005 | | | $ | — | | | $ | — | | | $ | 232,005 | |
C. Michael Jacobi(1) (5) | | $ | 31,912 | | | $ | — | | | $ | — | | | $ | 15,000 | | | $ | 46,912 | |
Anne L. Mariucci | | $ | 92,000 | | | $ | 120,005 | | | $ | 2,989 | | | $ | — | | | $ | 214,994 | |
Thurgood Marshall, Jr. | | $ | 114,000 | | | $ | 120,005 | | | $ | — | | | $ | — | | | $ | 234,005 | |
Charles L. Overby | | $ | 114,000 | | | $ | 120,005 | | | $ | — | | | $ | — | | | $ | 234,005 | |
John R. Prann, Jr. | | $ | 105,000 | | | $ | 120,005 | | | $ | 21 | | | $ | — | | | $ | 225,026 | |
Table: | Donna M. Alvarado | | | $131,868 | | | $134,997 | | | $— | | | $ — | | | $266,865 | |
| Robert J. Dennis | | | $99,694 | | | $134,997 | | | $— | | | $— | | | $234,691 | |
| Mark A. Emkes | | | $149,722 | | | $184,995 | | | $— | | | $— | | | $334,717 | |
| Stacia A. Hylton | | | $144,261 | | | $134,997 | | | $— | | | $— | | | $279,258 | |
| Harley G. Lappin(1) | | | $— | | | $— | | | $— | | | $— | | | $— | |
| Anne L. Mariucci | | | $127,000 | | | $134,997 | | | $18,599 | | | $— | | | $280,596 | |
| Thurgood Marshall, Jr. | | | $126,000 | | | $134,997 | | | $— | | | $— | | | $260,997 | |
| Devin I. Murphy | | | $116,000 | | | $134,997 | | | $4,427 | | | $— | | | $255,424 | |
| Charles L. Overby(4) | | | $117,220 | | | $134,997 | | | $— | | | $— | | | $252,217 | |
| John R. Prann, Jr. | | | $111,000 | | | $134,997 | | | $— | | | $— | | | $245,997 | |
(1)
| In 2021, Mr. Jacobi retired fromLappin was employed as a special operations advisor to the Board atleadership team of the Company and is compensated for the services provided in such capacity. Mr. Lappin is not compensated for his services as a director of the Company. Mr. Lappin was paid a salary of $190,000 for his services as a special operations advisor to the leadership team of the Company. The Company provided a matching contribution of $9,500 to his 401(k) account. In 2021, he also earned $4,157 of above-market earnings on amounts he chose to defer pursuant to the Company’s 2017 Annual MeetingDeferred Compensation Plan. This amount is based on the excess of Shareholders. Consequently, the amounts listed represent compensation earned byCompany’s fixed rate for 2021 of 5.00% over 120% of the applicable federal long-term rate, with compounding (as prescribed under section 1274(d) of the Code) of 1.58%. Mr. Jacobi priorLappin is also eligible to participate in various benefit programs generally made available to employees of the 2017 Annual Meeting. Company. |
(2)
| The amounts shown in this column represent the aggregate grant-dategrant date fair value of RSUs based on the closing stock price of $32.69$6.95 on February 16, 2017,18, 2021, the date of an annual grant of 3,671 RSUs.19,424 RSUs to each non-employee director. Mr. Emkes’Emkesʼ stock awards also include an award of $50,000,$49,998 or 1,5246,410 RSUs, which he elected to receive on May 11, 201713, 2021 as compensation for 50% of his annual independent Board ChairmanChair retainer. The director RSUs vest on the anniversary date of the grant and have dividend equivalent rights, if any, that are payable in cash only when and to the extent the RSUs vest and the underlying shares are issued. All grants of RSUs and dividend equivalents were made under the 20082020 Plan. |
(3)
| The amounts shown in this column represent above-market earnings on fees the director elected to defer pursuant to theNon-Employee Directors’ Deferred Compensation Plan, which is more fully described below.under the heading Compensation Discussion and Analysis—Non-qualified Deferred Compensation in 2021 in this Proxy Statement. Amounts shown are based on the excess of the Company’s fixed rate for 20172021 of 5.00%, over 120% of the applicable federal long-term rate, with compounding (as prescribed under section 1274(d) of the Code) of 2.72%1.58%. |
(4)
| Mr. Overby will not stand for reelection at the Company’s Annual Meeting and plans to retire from service on that date. |
(5)
| As of December 31, 2017,2021, the aggregate number of unvested stock awards and option awards outstanding for each of the Company’snon-employee directors were as follows: |
| | | | | | | | |
Name | | Aggregate RSU Awards Outstanding as of December 31, 2017 | | | Aggregate Option Awards Outstanding as of December 31, 2017 | |
Donna M. Alvarado | | | 3,671 | | | | 59,532 | |
Robert J. Dennis | | | 3,671 | | | | — | |
Mark A. Emkes | | | 5,195 | | | | — | |
Stacia A. Hylton | | | 3,671 | | | | — | |
Anne L. Mariucci | | | 3,671 | | | | 10,952 | |
Thurgood Marshall, Jr. | | | 3,671 | | | | 59,532 | |
Charles L. Overby | | | 3,671 | | | | 59,532 | |
John R. Prann, Jr. | | | 3,671 | | | | 29,430 | |
| Donna M. Alvarado | | | 19,424 | | | 7,888 | |
| Robert J. Dennis | | | 19,424 | | | — | |
| Mark A. Emkes | | | 25,834 | | | — | |
| Stacia A. Hylton | | | 19,424 | | | — | |
| Anne L. Mariucci | | | 19,424 | | | 7,888 | |
| Thurgood Marshall, Jr. | | | 19,424 | | | 7,888 | |
| Devin I. Murphy | | | 19,424 | | | — | |
| Charles L. Overby(a) | | | 19,424 | | | — | |
| John R. Prann, Jr. | | | 19,424 | | | 7,888 | |
(5)(a)
| On February 16, 2017,Mr. Overby will not stand for reelection at the Compensation Committee approved a retirement giftCompany's virtual Annual Meeting and plans to Mr. Jacobi with a value of up to $15,000, including a tax gross up. retire from service on that date. |
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Director Stock Ownership Guidelines
We maintain stock ownership guidelines applicable to our executive officers and
non-executive directors. The stock ownership guidelines are designed to align the economic interests of executive officers and the Board with those of stockholders and to discourage excessive risk-taking by management and directors. The guidelines as applied to our directors provide that the Company’s
non-executive directors are expected to own a fixed number of shares of common stock of the Company equal to four times such director’s annual retainer (excluding any retainer for chairing or serving as a member of a committee) in effect as of the later of March 1, 2012 or the date of their initial election or appointment to the Board, divided by the Company’s closing common stock price, as reported on the NYSE, on such date. The stock ownership guidelines were amended by our Board in May 2013 to increase the number of shares our executive officers and
non-executive directors are expected to own to give effect to the REIT conversion special dividend.
Non-executive directors are expected to achieve these ownership levels, subject to a limited hardship exemption, five years following their initial election or appointment to the Board, or (in the case of directors serving on the Board at the time the guidelines were adopted) by March 1, 2012.
See “ExecutiveExecutive and Director Compensation—Guidelines and Policies—Executive Officer Stock Ownership Guidelines” in the “Compensation Discussion and Analysis” includedGuidelines in this Proxy Statement for a description of the shares counted in determining share ownership.
Our guidelines and the compliance status of the Company’s currentnon-executive directors as of the last quarterly review date of February 21, 201818, 2022 are shown in the table below.
| Donna M. Alvarado | | | 9,105 | | | 98,404 | | | 3/1/2012 | |
| Robert J. Dennis | | | 7,112 | | | 60,577 | | | 2/21/2018 | |
| Mark A. Emkes | | | 6,050 | | | 99,497 | | | 8/14/2019 | |
| Stacia A. Hylton | | | 12,353 | | | 44,920 | | | 8/11/2021 | |
| Harley G. Lappin | | | 14,222 | | | 59,755 | | | 1/1/2023 | |
| Anne L. Mariucci | | | 11,909 | | | 76,185 | | | 12/8/2016 | |
| Thurgood Marshall, Jr. | | | 9,105 | | | 45,827 | | | 3/1/2012 | |
| Devin I. Murphy | | | 14,685 | | | 35,192 | | | 11/6/2023 | |
| John R. Prann, Jr. | | | 9,105 | | | 77,547 | | | 3/1/2012 | |
TABLE OF CONTENTS
| | | | | | | | | | | | |
Name | | Shares Required by Guidelines | | | Number of Shares Held | | | Compliance Date | |
Donna M. Alvarado | | | 9,105 | | | | 53,133 | | | | 3/1/2012 | |
Robert J. Dennis | | | 7,112 | | | | 21,534 | | | | 2/21/2018 | |
Mark A. Emkes | | | 6,050 | | | | 44,426 | | | | 8/14/2019 | |
Stacia A. Hylton | | | 12,353 | | | | 5,877 | | | | 8/11/2021 | |
Harley G. Lappin | | | 14,222 | | | | 47,846 | | | | 1/1/2023 | |
Anne L. Mariucci | | | 11,909 | | | | 37,142 | | | | 12/8/2016 | |
Thurgood Marshall, Jr. | | | 9,105 | | | | 31,083 | | | | 3/1/2012 | |
Charles L. Overby | | | 9,105 | | | | 35,709 | | | | 3/1/2012 | |
John R. Prann, Jr. | | | 9,105 | | | | 38,504 | | | | 3/1/2012 | |