UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

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☐ Soliciting Material Pursuant to §240.14a-12

Conduent Incorporated

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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LOGO

April 10, 201822, 2019

Dear Shareholders:

You are cordially invited to attend the annual meeting of shareholders of Conduent Incorporated on Friday,Tuesday, May 25, 201821, 2019 at 9:00 a.m., Eastern Time. The meeting will be held at The Madison Hotel, 1 Convent Road, Morristown,Conduent Corporate Headquarters, 100 Campus Drive, Suite 200, Florham Park, New Jersey.

The attached notice of the 2018 annual meeting2019 Annual Meeting of shareholdersShareholders and proxy statement provide important information about the meeting and will serve as your guide to the business to be conducted at the meeting. We urge you to read the accompanying materials regarding the matters to be voted on at the meeting.

At the Annual Meeting of Shareholders, you will be asked to vote upon:

 

A proposal to elect nine directors;

 

A proposal to ratify the selectionappointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018;2019; and

 

A proposal to approve, on an advisory basis, the 20172018 compensation of our named executive officers.

The Board of Directors unanimously recommends that you vote in favor of these proposals.

It is important that your shares be represented and voted at the Annual Meeting of Shareholders, regardless of whether or not you plan to attend in person. Therefore, you are urged to vote your shares using one of the methods described on page 1 under “How do I vote?”.

Thank you for your continued support of, and ongoing interest in, Conduent Incorporated.

For the Board of Directors,

 

LOGO

William G. Parrett
Chairman of the Board

William G. Parrett

Chairman of the Board

Notice of 20182019 Annual Meeting of Shareholders

 

Date and Time:  Friday,Tuesday, May 25, 2018,21, 2019, at 9:00 a.m., Eastern Time
Location:  

The Madison HotelConduent Corporate Headquarters

1 Convent Road100 Campus Drive, Suite 200

Morristown,Florham Park, New Jersey 0796007932

Purpose:  

Our shareholders will be asked to:

 

(1) Elect 9 directors;

 

(2) Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018;2019;

 

(3) Approve, on an advisory basis, the 20172018 compensation of our named executive officers; and

 

(4) Consider such other business as may properly come before the meeting.

Record Date:  March 27, 20182019 — You are eligible to vote if you were a shareholder of record as of the close of business on this date.
Proxy Voting:  

(1) Telephone;

 

(2) Internet; or

 

(3) Proxy Card.

 

PleaseFor voting instructions, please review the Notice of Internet Availability of Proxy Materials or accompanying proxy card for voting instructions.card.

Importance of Vote:  Whether or not you plan to attend, please submit your proxy as soon as possible to ensure that your shares are represented.

Important Notice Regarding the Availability of Proxy Materials for the

Annual Meeting of Shareholders to be Held on May 25, 2018.21, 2019.

The Proxy Statement and 20172018 Annual Report are available at

www.envisionreports.com/CNDTorhttps://investor.conduent.com.

By order of the Board of Directors,

 

LOGO

J. Michael Peffer

Executive Vice President, General Counsel and Secretary

April 10, 201822, 2019

TABLE OF CONTENTS

 

GENERAL INFORMATION ABOUT THE ANNUAL MEETING

   1 

The Annual Meeting

   1 

What is the purpose of the Annual Meeting?

   1 

Who is entitled to vote?

   1 

How do I vote?

   1 

How does the Board recommend that I vote?

   2 

How can I attend the Annual Meeting?

   2 

How many shares are required to be present to hold the Annual Meeting?

   2 

How many votes are required to approve each proposal?

   3 

What is a brokernon-vote and how will it affect the voting?

   3 

May I change my vote?

   3 

Who will count the vote? Is my vote confidential?

   3 

How are proxies solicited?

   4 

Why did I receive a notice in the mail regarding Internet availability of proxy materials instead of a full set of printed proxy materials?

4

How can I electronically access the proxy materials?

   4 

What are the deadlines and requirements for shareholder submission of proposals, director nominations and other business for the 20192020 Annual Meeting?

   4 

How can I contact the Board?

   4 

What if multiple shareholders have the same address?

   5 

How may I get additional copies of the Annual Report and Proxy Statement?

   5 

Is there a list of shareholders entitled to vote at the Annual Meeting?

   5 

PROPOSAL 1 — ELECTION OF DIRECTORS

   6 

Biographies

   6 

Corporate Governance

   12 

Director Nomination Process

   12 

Board Leadership Structure

   12 

Risk Oversight

   13 

Director Independence

   13 

Certain Relationships and Related Person Transactions

   14 

BOARD OF DIRECTORS AND BOARD COMMITTEES

   14 

Committee Functions, Membership and Meetings

   14 

Board and Committee Meetings; Annual Meeting Attendance

   17 

Summary of Annual Director Compensation

   17 

SECURITIES OWNERSHIP

   1920 

Ownership of Company Securities

   1920 

Section 16(a) Beneficial Ownership Reporting Compliance

   2122 

COMPENSATION DISCUSSION AND ANALYSIS

   2122 

Compensation Committee Report

   3736 

Summary Compensation Table

   37 

 

i

Grants of Plan-Based Awards in 20172018

   4039 

Outstanding Equity Awards at 20172018 FiscalYear-End

41

Option Exercises and Stock Vested in 2018

   42 

Option Exercises and Stock Vesting in 2017

43

Non-Qualified Deferred Compensation for the 20172018 Fiscal Year

   4342 

Potential Payments upon Termination or Change in Control

   4443 

Equity Compensation Plan Information

   4746 

OTHER INFORMATION

   4847 

Indemnification Actions

   4847 

Directors and Officers Liability Insurance and Indemnity

   4847 

Non-GAAP Financial Measures

   4847 

Non-GAAP Reconciliations

   5049 
PROPOSAL 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   5352 

Principal Auditor Fees and Services

   5352 

Audit Committee Report

   5453 
PROPOSAL 3 — PROPOSAL TO APPROVE, ON AN ADVISORY BASIS, THE 20172018 COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS   5554 

 

ii

PROXY STATEMENT

GENERAL INFORMATION ABOUT THE ANNUAL MEETING

 

 

The Annual Meeting

The 20182019 Annual Meeting of Shareholders (the “Annual Meeting”) of Conduent Incorporated (the “Company,” “we,” “us,” or “our”) will be held on Friday,Tuesday, May 25, 2018,21, 2019, at 9:00 a.m., Eastern Time, at The Madison Hotel, 1 Convent Road in Morristown,Conduent Corporate Headquarters, 100 Campus Drive, Suite 200, Florham Park, New Jersey.

 

 

What is the purpose of the Annual Meeting?

At the Annual Meeting, shareholders will consider and vote on the following matters:

 

 1.

Election of the nine nominees named in this Proxy Statement to our Board of Directors (the “Board”), each for a term of one year.

 

 2.

Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2019.

 

 3.

Approval, on an advisory basis, of the 20172018 compensation of our named executive officers.

Shareholders will also act on any other business that may properly come before the meeting. In addition, our management will report on the Company’s performance during fiscal 20172018 and respond to questions from shareholders.

 

 

Who is entitled to vote?

Owners of our common stock, par value $0.01 per share (the “Common Stock”), as of the close of business on the record date, March 27, 20182019 (the “Record Date”), are entitled to vote at the Annual Meeting. The shares owned as of that date include (1) shares you held on that date (1) directly in your name as the shareholder of record (registered shareholder) and/or (2) shares held in the name of a broker, bank or other holder of record where the shares were held for you as the beneficial owner (beneficial owner). Each share of Common Stock is entitled to one vote on each matter to be voted on. As of the Record Date, there were 210,493,863210,392,926 shares of our Common Stock outstanding and entitled to vote.

 

 

How do I vote?

Beneficial owners will receive a separate Notice of Internet Availability of Proxy Materials (the “Notice”) with voting instructionsinstruction form from the bank, broker or other holder of record where the shares are heldnominee that must be followed in order for their shares to be voted.

Registered shareholders can vote in any one of four ways:

 

BY INTERNET

 

   

 BY TELEPHONE

 

If you have Internet access, you may vote your shares by following the “Vote by Internet” instructions included in the Notice or on the enclosed proxy card. If you vote via the Internet,do not return your proxy card.

 

   

If you received written materials, youYou may vote your shares by following the “Vote by Telephone” instructions on the enclosed proxy card. If you vote by telephone,do not return your proxy card.

 

BY MAIL

 

 

 

IN PERSON

 

 

If you received written materials, youYou may vote by completing and signing the proxy card enclosed with this Proxy Statement and promptly mailing it in the enclosed postage-prepaid envelope. The shares you own will be voted according to your instructions on the proxy card you mail. If you sign and return your proxy card but do not indicate your voting instructions on one or more of the matters listed, the shares you own will be voted by the named proxies in accordance with the recommendations of our Board.

 

 

 

If you submit a proxy or voting instructions via the Internet, telephone or by mail, youdo not need to vote at the Annual Meeting. We will pass out written ballots to any shareholder of record or authorized representative of a shareholder of record who wants to vote in person at the Annual Meeting instead of by proxy. Voting in person will revoke any proxy previously given. If you hold your shares through a broker, bank or nominee, you must obtain a proxy from your broker, bank or nominee to vote in person.

 

 

 

If you use your proxy to vote by Internet, telephone or mail, you authorize each of the two directors, whose names are listed on the accompanying proxy, to act as your proxies to represent you and vote your shares as you direct.

 

 

How does the Board recommend that I vote?

The Board recommends that you vote:

 

 • 

FOR the election of each of the nine director nominees;

 

 • 

FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018;2019; and

 

 • 

FOR the approval, on an advisory basis, of the 20172018 compensation of our named executive officers.

 

 

How can I attend the Annual Meeting?

All shareholders on the Record Date may attend. In order to be admitted to the meeting, please obtain an admission ticket in advance and bring a form of personal photo identification, such as a driver’s license. To obtain an admission ticket:

If you are aregistered shareholder:

 

If you vote via the Internet or by telephone, you will be asked if you would like to receive an admission ticket.

 

If you vote by proxy card, please mark the appropriate box on the proxy card and an admission ticket will be sent to you.

If you are abeneficial owner:

 

Please request an admission ticket in advance by calling Shareholder Services at973-526-7158 or by mailing a written request, along with proof of your ownership of Conduent Common Stock as of the Record Date, to Conduent Incorporated, Shareholder Services, 100 Campus Drive, Suite 200, Florham Park, New Jersey 07932. All calls and written requests for admission tickets must be received no later than the close of business on May 15, 2018.10, 2019.

You can find directions to the meeting online at www.envisionreports.com/CNDT. If you have any further questions regarding admission or directions to the Annual Meeting, please call Shareholder Services at973-526-7158.

 

 

How many shares are required to be present to hold the Annual Meeting?

A quorum is necessary to hold a valid meeting of shareholders. For each of the proposals to be presented at the meeting, the presence at the meeting, in person or by proxy, of the holders of a majority of the shares of our Common Stock outstanding on the Record Date will constitute a quorum. As of the Record Date, there were 210,493,863210,392,926 shares of our Common Stock outstanding. If you vote — including by Internet, telephone or proxy card — your shares will be counted towards the quorum for the Annual Meeting. Brokernon-votes and abstentions are counted as present for the purpose of determining a quorum.

 

How many votes are required to approve each proposal?

Election of Directors. Under ourby-laws, directors are elected by majority vote, meaning that in an uncontested director election, the votes cast “for” the nominee’s election must exceed the votes cast “against” the nominee’s election, with abstentions and brokernon-votes not counting as votes “for” or “against.” Ourby-laws require that any incumbent nominee for director who receives a greater number of votes cast “against” his or her election than “for” his or her election shall tender his or her resignation promptly after such election. The independent directors will then evaluate and determine, based on the relevant facts and circumstances, whether to accept or reject the resignation. The Board’s explanation of its decision will be promptly disclosed on a Form8-K filed with the Securities and Exchange Commission (“SEC”).

Other Items

The affirmative vote of a majority of the votes cast at the meeting will be required for approval of the following proposals, meaning these proposals will be approved if the number of votes cast “for” the proposal exceed the number of votes cast “against” the resolution.resolution:

 

Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm

 

Approval, on an advisory basis, of the 20172018 compensation of our named executive officers

Abstentions and brokernon-votes are not counted as votes “for” or “against” for the purpose of determining the outcome of the other above matters. For additional information regarding brokernon-votes, see below underWhat is a brokernon-vote and how will it affect the voting?

Although the advisory vote on the 20172018 compensation of our named executive officers isnon-binding, the Board valuesand Compensation Committee value the opinions of shareholders and will consider the outcome of the vote on these proposalsthis proposal when making future decisions regarding executive compensation.

At present, the Board does not intend to present any other matters at this meeting and knows of no matters other than these to be presented for shareholder action at the Annual Meeting. If any other matters properly come before the meeting, the persons named in the accompanying proxy intend to vote the proxies in accordance with their best judgment.

 

 

What is a brokernon-vote and how will it affect the voting?

Under NYSE rules, brokers are not permitted to vote the shares they hold on behalf of beneficial owners without the beneficial owner’s voting instruction for matters that are deemed to be “non-routine.“non-routine.” A brokernon-vote occurs with respect tonon-routine matters when the beneficial owner of the shares fails to furnish timely voting instructions to the broker, and the broker is not permitted under applicable NYSE rules to vote the shares in its discretion. Election of directors and the advisory vote on executive compensation are considerednon-routine matters. Shares constituting brokernon-votes, while counted towards the quorum, are not counted as votes “for” or “against” for the purpose of determining whether shareholders have approved anon-routine matter. As a result, brokernon-votes will have no impact on the outcome of these matters.

Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm (sometimes referred to as our “independent auditors”) is aroutine matter, and, therefore, brokers would have discretion to vote on this proposal without having received timely voting instructions. Accordingly, there will be no brokernon-votes with respect to this proposal.

 

 

May I change my vote?

Yes. You may revoke your proxy at any time before the Annual Meeting by submittingdelivering a later dated proxy card, by a later telephone oron-line vote, by notifying the Secretary of the Company in writing that you have revoked your proxy or by attending the Annual Meeting and either giving notice of revocation or voting in person.

 

 

Who will count the vote? Is my vote confidential?

Representatives of Computershare will act as Inspector of Election, supervise the voting, decide the validity of proxies and receive and tabulate proxies. As a matter of policy, we keep confidential all shareholder meeting

proxies, ballots and voting tabulations that identify individual shareholders. In addition, the vote of any shareholder is not disclosed except as may be necessary to meet legal requirements.

 

 

How are proxies solicited?

The solicitation of proxies is made by our Board and will be conducted primarily by mail. We also request brokerage firms, nominees, custodians and fiduciaries to forward soliciting material to the beneficial owners of stock held of record and reimburse such persons for the cost of forwarding the material. We have engaged Innisfree M&A Incorporated to handle the distribution of soliciting material to, and the collection of proxies from, such entities. We will pay Innisfree M&A Incorporated a fee of $17,500, plus reimbursement ofout-of-pocket expenses for this service. Proxies may also be solicited on our behalf by our directors, officers or employees by telephone, electronic or facsimile transmission or in person, without compensation. We bear the cost of preparing all proxy materials and proxy solicitation.

Why did I receive a notice in the mail regarding Internet availability of proxy materials instead of a full set of printed proxy materials?

Pursuant to rules adopted by the SEC, the Company has elected to provide access to its proxy materials over the Internet. Accordingly, on or about April 10, 2018, a Notice is being sent to all of the Company’s registered shareholders and beneficial owners of record as of March 27, 2018. The Notice contains instructions on how to access the proxy materials over the Internet and how to request a paper copy of the proxy materials, including a proxy card, as well as how shareholders may request to receive proxy materials in printed form by mail, or electronically by email, on a going forward basis.

 

 

How can I electronically access the proxy materials?

You can access the proxy materials online atwww.envisionreports.com/CNDT orhttps://investor.conduent.com. Shareholders may receive Proxy Statements, Annual Reports and other shareholder materials via electronic delivery. Registered shareholders can sign up for electronic delivery atwww.computershare.com/investor. Beneficial owners can sign up for electronic delivery athttp://enroll.icsdelivery.com/cndt or by checking the information provided in the proxy materials mailed to you by your bank or broker regarding the availability of this service. Opting to receive future proxy materials electronically by email will provide the Company cost savings relating to printing and postage and reduce the environmental impact of delivering documents to you.

 

 

What are the deadlines and requirements for shareholder submission of proposals, director nominations and other business for the 20192020 Annual Meeting?

We expect to hold our 20192020 Annual Meeting of Shareholders during the second half of May 20192020 and to file and make available or mail, as applicable, our Proxy Statement for that meeting during the first half of April 2019.2020. Under SEC proxy rules, if a shareholder wants us to include a proposal in our Proxy Statement and proxy card for the 20192020 Annual Meeting of Shareholders, the proposal must be received by us no later than December 11, 2018.10, 2019.

Any shareholder wishing to make a nomination for director or wishing to introduce any business at the 20192020 Annual Meeting of Shareholders (other than a proposal submitted for inclusion in the Company’s proxy materials) must provide the Company advance notice of such nominee or business which must be received by the Company no earlier than November 11, 201810, 2019 and no later than December 11, 2018.10, 2019. Any such notice must comply with requirements set forth in ourby-laws. Nominations for director must be accompanied by a written consent of the nominee consenting to being named as a nominee and serving as a director if elected. Proposals and other items of business should be directed to Conduent Incorporated, 100 Campus Drive, Suite 200, Florham Park, NJ 07932, Attention: Corporate Secretary.

 

 

How can I contact the Board?

Under our Corporate Governance Guidelines, shareholders and other interested parties may contact thenon-management members of the Board by contacting the Chairman of the Corporate Governance Committee using the “Contact the Board” link posted on our Company’s website atwww.conduent.com/corporate-governance.

 

What if multiple shareholders have the same address?

To reduce the expenses of delivering duplicate proxy materials, we deliver a single Notice, or for shareholders who receive paper copies of our proxy materials, a single Proxy Statement and Annual Report to multiple shareholders who reside in the same household unless we have received instructions otherwise. If (i) you and another shareholder residing in the same household each receive a Notice or, as applicable, a set of printed proxy materials, and as a household wish to receive only one Notice or one set of printed proxy materials or (ii) you share a household with another shareholder and received a single Notice or, as applicable, set of printed proxy materials and would like to receive separate copies of the Notice or proxy materials, you may request a change in delivery preferences. For registered shareholders, you may contact our transfer agent at866-574-5496 or write them at Computershare, P.O. Box 505000, Louisville, KY 40233. For beneficial owners, you may call the bank, broker or other nominee where your shares are held in street name or call800-542-1061.

 

 

How may I get additional copies of the Annual Report and Proxy Statement?

Additional paper copies of these documents are available upon request made to Conduent Incorporated, 100 Campus Drive, Suite 200, Florham Park, NJ 07932, Attention: Corporate Secretary. The Annual Report and Proxy Statement are also available on the Company’s website athttps://investor.conduent.com orwww.envisionreports.com/CNDT. The Notice also provides you with instructions on how to request paper copies of the proxy materials. There is no charge to receive theany such materials by mail. You may request paper copies of the materials until one year after the date of the Annual Meeting.

 

 

Is there a list of shareholders entitled to vote at the Annual Meeting?

A list of registered shareholders entitled to vote at the Annual Meeting will be available at the Annual Meeting and for ten days prior to the Annual Meeting at our offices located at Conduent Corporate Headquarters, 100 Campus Drive, Suite 200, Florham Park, NJ 07932.

PROPOSAL 1 — ELECTION OF DIRECTORS

Shareholders annually elect directors to serve for one year and until their successors have been elected and qualified. Based on the director nomination process described below, the nine persons whose biographies appear below have been nominated by the Board to serve as directors based on the recommendation of the Corporate Governance Committee. Each nominee brings to us valuable experience from a variety of fields. The biographical information presented regardingpresents each nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director. All of our incumbent director nominees have demonstrated business acumen and an ability to exercise independent and sound judgment, as well as an understanding of the Company’s business environment and a commitment to serve the Company and our Board. We also value the significant experience of each of our nominees on other public company boards of directors and board committees.

All nominees other than Nicholas Graziano, are currently directors of the Company and were elected by our shareholders at the 20172018 annual meeting of shareholders. Our current director, Vincent Intrieri, will not stand for reelection atshareholders, except Scott Letier, who was elected to the Board effective December 18, 2018, Annual Meeting.and Jesse A. Lynn, who was elected to the Board effective April 18, 2019. Mr. Letier was elected to replace Paul S. Galant who tendered his resignation in accordance with the Company’s Corporate Governance Guidelines due to a substantial change in his position of principal employment. Mr. Lynn was elected to replace Michael Nevin, who tendered his resignation on April 8, 2019.

On December 31, 2016, the Company entered into a Joinder Agreement to a letter agreement, dated as of January 28, 2016, entered into by Xerox Corporation, our former parent company (“Xerox”), with Icahn Partners Master Fund LP, Icahn Partners LP, Icahn Onshore LP, Icahn Offshore LP, Icahn Capital LP, IPH GP LLC, Icahn Enterprises Holdings LP, Icahn Enterprises G.P. Inc., Beckton Corp., High River Limited Partnership, Hopper Investments LLC, Barberry Corp., Jonathan Christodoro and Carl C. Icahn (collectively, the “Icahn Group”) pursuant to which, among other things, Michael NevinNicholas Graziano, Jesse A. Lynn and Courtney Mather were appointed to the Board at the effective time of our separation from Xerox (“Icahn Agreement”). The Icahn Group has identified Nicholas Graziano as a director nominee for election at the Company’s 2018 Annual Meeting. Additionally, the Company is a third party beneficiary to a letter agreement, dated as of June 27, 2016, entered into by Xerox with the Icahn Group pursuant to which, among other things, the Icahn Group is required to vote in favor of the directors nominated by the Board at the Company’s 2019 Annual Meeting.

On December 18, 2018, the Company entered into a Shareholder Agreement with Darwin Deason (“Deason Agreement”) pursuant to which, among other things, Scott Letier was appointed to the Board and Darwin Deason is required to vote in favor of the directors nominated by the Board at the Company’s 2019 Annual Meeting.

The Board has determined that each of the nominees (other than Ashok Vemuri, Chief Executive Officer of the Company) is independent under NYSE Corporate Governance Rules and the Company’s more stringent independence standards. Although not anticipated, if for any reason, a nominee is unable to serve, the proxies may use their discretion to vote for a substitute nominated by the Board.

Biographies

The table below summarizes key qualifications, skills and attributes that each of our director nominees possesses which were most relevant to the decision to nominate him or her to serve on the Board. The lack of a mark does not mean the director nominee does not possess that qualification or skill or that other qualities were not also considered; rather, a mark indicates a specific area of focus or expertise on which the Board relies most heavily. Each director nominee’s biography below describes his or her qualifications and relevant experience in more detail.

Skills and Qualifications of our Board of Director Nominees

 

Experience,
expertise
or attribute

 

 

  Vemuri  

 

 

  Galant  

Graziano  

 

 

  Gregor  

 

 

  MatherLetier  

 

 

  NevinLynn  

  Mather  

 

 

  Nutter  

 

 

  Parrett  

 

 

  Wilson  

 

 

Services

 

  

 

 

 

 

X

 

 

 

            

X

                 

 

 

 

 

 

X  

 

 

 

 

 

  

 

 

 

 

 

X

 

 

 

 

 

Leadership

 

  

 

 

 

 

X

 

 

 

   

X

    

X

  

 

 

 

 

X

 

 

 

            

 

 

 

 

X

 

 

 

  

 

 

 

 

X  

 

 

 

  

 

 

 

 

 

 

X

 

 

 

 

Global Business

 

  

 

 

 

 

X

 

 

 

  

X

                           

 

 

 

 

X  

 

 

 

  

 

 

 

 

X

 

 

 

Financial

 

  

 

 

 

 

X

 

 

 

  

 

 

 

 

X

 

 

 

  

 

 

 

 

X

 

 

 

  

 

 

 

 

X

 

 

 

  

 

 

 

 

X

 

 

 

  

 

 

 

 

X

 

 

 

        X     X

Public Company

 

       

 

 

 

 

X

 

 

 

  

 

 

 

 

X

 

 

 

  

X

X  

 

 

 

 

X

 

 

 

       

 

 

 

 

X  

 

 

 

  

 

 

 

 

X

 

 

 

 

Boards & Corporate Governance

 

       

 

 

 

X

 

  

 

 

 

X

 

  

 

 

 

X

 

  X

 

 

 

X

 

  

 

 

 

X

 

  

 

 

 

X  

 

     

Business Operations

 

  

 

 

 

 

X

 

 

 

  

X

                           

 

 

 

 

X  

 

 

 

  

 

 

 

 

X

 

 

 

 

Diversity

 

  

 

 

 

 

X

 

 

 

       

 

 

 

 

X

 

 

 

            

 

 

 

 

X

 

 

 

       

 

 

 

 

X

 

 

 

In addition to the qualifications and skills referenced above, we have provided below the principal occupation and other information about the relevant experience, qualifications, attributes or skills that the Board has concluded qualify each of the nominees to serve as a director of the Company.

For purposes of the below biographies,Conduent securities owned means the Company’s Common Stock, including Deferred Stock Units (“DSUs”) issued under the Conduent Incorporated Equity Compensation Plan forNon-Employee Directors, as amended (the “Director Equity Plan”). For Mr. Vemuri,Rightsrefers to his outstanding restricted shares, restricted stock units and performance shares at target. None of the independent director nominees owns any other Company securities.

Unless otherwise noted, allConduent securities owned are beneficially owned by the nominee. Beneficial ownership means he or she has or shares voting power and/or investment power with respect to the securities, even though another name (that of a broker, for example) may appear in the Company’s records. All ownership figures are as of February 28, 2018.2019.

 

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Ashok Vemuri

Age: 4950        Director since: 2017

Conduent securities owned: 239,161216,026 Common Stock;Rights:Rights: 848,351710,875 Common Stock

Occupation: Chief Executive Officer, Conduent Incorporated

Other Directorships: The Kroger Co. (since 2019); Infosys (2011-2013); IGATE (2013-2015)

Other Background: Mr. Vemuri has served as our Chief Executive Officer since January 2017. He previously served as Chief Executive Officer of Xerox Business Services, LLC and as an Executive Vice President of Xerox Corporation sincefrom July 2016.2016 to January 2017. Mr. Vemuri previously was President, Chief Executive Officer and a member of the Board of Directors of IGATE Corporation, a New Jersey-based global technology and services company now part of global technology and outsourcing company Capgemini, from 2013 to 2015. Before joining IGATE, Mr. Vemuri spent 14 years at Infosys Limited, a multinational consulting and IT services company, in a variety of leadership and business development roles, including Member of the Executive Council, Head of Americas, Global Head of Financial Services from 2003 to 2012 and Global Head of Manufacturing and Engineering Services from 2012 to 2013. Prior to joining Infosys in 1999, Mr. Vemuri worked in the investment banking industry at Deutsche Bank and Bank of America.

Mr. Vemuri brings to the Board unique operational, financial and client experience and a proven track record of leading growth and corporate transformations through his leadership positions with IGATE and Infosys.

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Paul S. Galant

Age: 50        Director since: 2017

Conduent securities owned: 20,984 DSUs

Occupation: Chief Executive Officer, VeriFone Systems Inc.

Other Directorships: VeriFone Systems Inc. (since October 2013); Vivint Inc. (since October 2015)

Other Background: Mr. Galant has served as the Chief Executive Officer of VeriFone since October 2013. From 2010 until joining VeriFone, Mr. Galant served as CEO of the Citi Enterprise Payments business which serves institutional clients and leverages the bank’s industry-leading wholesale and retail payment capabilities across regions and organizations globally. In this role, he oversaw the design, marketing, and implementation of global business-to-consumer and consumer-to-business digital payments solutions for the world’s largest corporations, financial institutions and governments. Prior to this, from 2009, Mr. Galant also served as the CEO of Citi Cards, leading Citi’s North American and International Credit Cards business through a time of dramatic change in the industry; and prior to that, from 2007, as CEO of Citi Transaction Services, a division of Citi’s Institutional Clients Group. Mr. Galant is also an Executive Member on the NY Weill Cornell Medical Center Council.

Mr. Galant brings extensive global business experience, strong management skills and broad knowledge of complex financial and operational issues from his time as CEO of VeriFone Systems, as well as various CEO and leadership roles at Citigroup, Donaldson, Lufkin & Jenrette, Smith Barney and Credit Suisse First Boston. He also brings broad financial industry experience from his time as chairman of the NY Federal Reserve Payments Risk Committee and Chairman of The Clearing House Secure Digital Payments LLC.

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Nicholas Graziano

Age: 4647        Director since: New nominee2018

Conduent securities owned: None21,565DSUs

Occupation: Portfolio Manager, Icahn Capital LP

Other Directorships: Herc Holdings Inc. (since 2018); Xerox Corporation (since 2018); Herbalife Nutrition LTD (since 2018); Fair Isaac Corporation (2008-2013); WCI Communities Inc.(2007-2009); InfoSpace Inc. (2007-2008). Carl Icahn has anon-controlling interest in each of Herc Holdings Inc.; Xerox Corporation; and Herbalife Nutrition LTD through the ownership of securities.

Other Background: Mr. Graziano has served as Portfolio Manager of Icahn Capital LP, the entity through which Carl C. Icahn manages investment funds, since February 2018, and prior to joining Icahn Capital, was previously the Founding Partner and Chief Investment Officer of the hedge fund Venetus Partners LP from June 2015 to August 2017, where he was responsible for portfolio and risk management, along withday-to-day firm management, from June 2015 to August 2017.management. Prior to founding Venetus, Mr. Graziano was a Partner and Senior Managing Director at the hedge fund Corvex Management LP from December 2010 to March 2015. At Corvex, Mr. Graziano played a key role in investment management and analysis, hiring and training of analysts and risk management. Prior to Corvex, Mr. Graziano was a Portfolio Manager at the hedge fund Omega Advisors, Inc., where he managed a proprietary equity portfolio and made investment recommendations, from September 2009 until December 2010. Before Omega, Mr. Graziano served as a Managing Director and Head of Special Situations Equity at the hedge fund Sandell Asset Management, where he helped build and lead the special situations team responsible for managing a portfolio of concentrated equity and activist investments, from July 2006 to July 2009.

Mr. Graziano is a director nominee selected by the Icahn Group pursuant to the Icahn Agreement. He brings to the Board financial expertise and extensive experience offering strategic advice and guidance to companies from his management experience and his service as a director on various company boards.

 

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Joie Gregor

Age: 6869        Director since: 2017

Conduent securities owned: 20,98436,791 DSUs

Occupation: Former Managing Director for Leadership Development, Warburg Pincus LLC

Other Directorships: ConAgra Brands, Inc. (since February 2009)

Other Background: Ms. Gregor served as the first Managing Director for Leadership Development at Warburg Pincus LLC beginning in 2014 until her retirement in 2016. In this role, she provided organizational guidance and strategic direction across all firm investing areas and assisted with bothpre- and post-investment opportunities, focusing on strategy, organizational structure, operating initiatives, and talent identification and development. She also worked within the firm on professional development and effective organizational alignment.

Previously,Prior to joining Warburg Pincus, Ms. Gregor served as the Assistant to the President of the United States for Presidential Personnel, a role she assumed in October 2007. Before joining the President’s senior staff, Ms. Gregor served as Vice Chairman of the executive search firm Heidrick & Struggles, Inc. beginning in 2002. After joining as a Partner in 1993, she served in a number of senior leadership roles, including President, North America, the firm’s largest business unit. She also served as Managing Partner of the firm’s New York office, and as a member of the firm’s Management Committee. Prior to her work in executive search, Ms. Gregor was with the IBM Corporation, where she held a variety of leadership positions of increasing responsibility over a13-year period. Ms. Gregor also currently serves on the Board of Directors of a private company, TriMark USA.

Ms. Gregor brings the Board significant experience in human capital development, market development, finance and planning, product strategy, sales and service, and global account management from roles at Warburg Pincus, Heidrick & Struggles, IBM and other advisory positions for major organizations. She also deliversbrings her experience from working closely with major public company boards to implement best practices in corporate governance, director selection and succession planning.

 

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Scott Letier

Age: 58        Director since: 2018

Conduent securities owned:2,000 Common Stock; 18,789 DSUs

Occupation: Managing Director of Deason Capital Services, LLC, the family office for

Darwin Deason

Other Directorships: Xerox Corporation (since 2018). Darwin Deason has anon-controlling interest in Xerox Corporation through the ownership of securities.

Other Background:Scott Letier has been Managing Director of Deason Capital Services, LLC (“DCS”) since July 2014. Prior to joining DCS, Mr. Letier was the Managing Director of JFO Group, LLC, the family office for the Jensen family from September 2006 to July 2014. Mr. Letier has over 20 years of prior leadership roles serving as a private equity investment professional and chief financial officer, and began his career in the audit group at Ernst & Whinney (now Ernst & Young). Mr. Letier has served on numerous boards in the past, and in addition to Xerox Corporation, he currently serves on the Board of Directors for a number of private companies including: MV Transportation, Inc, the leading provider of paratransit services and the largest privately-owned passenger transportation contracting firm in the United States, Stellar Global, LLC, an Australian and U.S. based BPO/CRM Call Center Company, Colvin Resources Group, a Dallas based search and staffing firm, Grow 52, LLC (dba, Gardenuity), a tech enabled retailer, and serves on the fund advisory board of Griffis Residential, a Denver based multi-family real estate management and investment firm. Mr. Letier also serves as Treasurer, board member, executive committee member, and is Chairman of the audit and finance committees of the Dallas County Community College District Foundation. Mr. Letier is a Certified Public Accountant and has a BBA with a concentration in accounting from the Southern Methodist University – Cox School of Business.

Mr. Letier is a director selected by Darwin Deason pursuant to the Deason Agreement. With his over 20 years of prior leadership roles and service on other company boards and committees, Mr. Letier brings to the Board expertise relevant to Conduent, including his significant audit experience and his investment and financial expertise gained from serving as a private equity and investment professional and chief financial officer.

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Jesse A. Lynn

Age: 48        

Conduent securities owned: 0

Occupation: General Counsel, Icahn Enterprises L.P.

Other Directorships: Herbalife Nutrition LTD. (since 2014); The Manitowoc Company, Inc. (2015-2018). Carl Icahn has a non-controlling interest in Herbalife Nutrition LTD through the ownership of securities.

Other Background: Mr. Lynn has been General Counsel of Icahn Enterprises L.P., a diversified holding company engaged in a variety of businesses, including investment, automotive, energy, food packaging, metals, mining, real estate and home fashion, since 2014. From 2004 to 2014, Mr. Lynn was Assistant General Counsel of Icahn Enterprises. Prior to joining Icahn Enterprises, Mr. Lynn worked as an associate in the New York office of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. in its business and finance department from 2000 until 2004. From 1996 until 2000, Mr. Lynn was an associate in the corporate group at Gordon Altman Butowsky Weitzen Shalov & Wein. Mr. Lynn has been a director of Herbalife Ltd., a nutrition company, since 2014. Mr. Lynn was previously a director of The Manitowoc Company, Inc., a capital goods manufacturer, from 2015 to 2018. Mr. Lynn has been a Board Observer at each of Xerox Corporation, a provider of document management solutions, since May 2018 and SandRidge Energy, Inc., an oil and natural gas company with a principal focus on exploration and production activities in the U.S. Mid-Continent and North Park Basin of Colorado, since June 2018. Carl C. Icahn has or previously had non-controlling interests in each of SandRidge, Xerox, Herbalife and Manitowoc through the ownership of securities. Mr. Lynn received a B.A. from the University of Michigan and a J.D. from the Boston University School of Law.

Mr. Lynn is a director selected by the Icahn Group pursuant to the Icahn Agreement. He brings to the Board legal and finance expertise gained both in private practice as well as his positions with Icahn Enterprises and his experience as a director of other public companies.

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Courtney Mather

Age: 4142        Director since: 2017

Conduent securities owned: 23,362 44,650 DSUs

Occupation: Portfolio Manager, Icahn Capital LP

Other Directorships: Caesars Entertainment (since 2019); Cheniere Energy Inc. (since 2018); Newell Brands Inc. (since March 2018); Herc Holdings Inc. (since June 2016); Trump Entertainment Resorts,TER Holdings I, Inc. (since 2016); Freeport-McMoRan Inc. (since 2015); Ferrous Resources Limited (since 2015); Freeport-McMoRan Inc. (2015-2019); Federal-Mogul Holdings Corporation (2015-2017); Viskase Companies Inc.(2015-2016); American Railcar Industries, Inc. (2014-2016); CVR Refining, LP(2014-2016); CVR Energy, Inc. (2014-2016). Trump Entertainment Resorts,TER Holdings I, Inc., Ferrous Resources Limited, Federal-Mogul, American Railcar Industries, CVR Refining, CVR Energy and Viskase are each indirectly controlled by Carl C. Icahn. Mr. Icahn also has anon-controlling interest in each of Caesars Entertainment, Cheniere Energy Inc., Newell Brands Inc., Herc Holdings Inc. and Freeport-McMoRan Inc. through the ownership of securities.

Other Background: Mr. Mather has served as Portfolio Manager of Icahn Capital LP, the entity through which Carl C. Icahn manages investment funds, since December 2016, and was previously Managing Director from 2014 to 2016. Prior to joining Icahn Capital, Mr. Mather was at Goldman Sachs & Co from 1998 to 2012, most recently as Managing Director responsible for Private Distressed Trading and Investing, where he focused on identifying and analyzing investment opportunities for both Goldman Sachs and clients. Mr. Mather received a B.A. from Rutgers College and attended the United States Naval Academy. Mr. Mather holds the Chartered Alternative Investment Analyst (CAIC) and(CAIA), Chartered Financial Analyst (CFA) and Certified Financial Risk Manager (FRM) professional designations.

Mr. Mather is a director selected by the Icahn Group pursuant to the Icahn Agreement. He brings to the Board significant experience in finance and experience providing strategic advice and guidance to companies through his service as a director on various public company boards.

 

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Michael Nevin

Age: 34        Director since: 2017

Conduent securities owned: 20,984 DSUs

Occupation: Financial Analyst, Icahn Enterprises L.P.

Other Directorships: American Railcar Industries, Inc. (since 2017); Ferrous Resources Limited (since 2016); Viskase Companies Inc. (since 2017); Federal-Mogul Holdings Corporation (2016-2017). American Railcar, Federal-Mogul and Viskase are each indirectly controlled by Carl C. Icahn.

Other Background: Mr. Nevin has served as a Financial Analyst at Icahn Enterprises L.P., a diversified holding company engaged in a variety of businesses, including investment, automotive, energy, gaming, railcar, food packaging, metals, mining, real estate and home fashion, since July 2015. Prior to that time, Mr. Nevin was employed by Jefferies LLC as a Research Analyst from 2014 to 2015 covering the Utilities sector. Mr. Nevin was also employed by JP Morgan Investment Bank in various roles from 2009 to 2015.

Mr. Nevin is a director selected by the Icahn Group pursuant to the Icahn Agreement. Mr. Nevin brings to the Board financial expertise.

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Michael A. Nutter

Age: 6061        Director since: 2017

Conduent securities owned: 20,98411,297 Common Stock; 25,494 DSUs

Occupation: Former Mayor, Philadelphia, Pennsylvania

Other Directorships:Directorships: None

Other Background: Mr. Nutter was elected Mayor of Philadelphia, Pennsylvania in 2007, serving from 2008 until the conclusion of his second term in 2016. During his tenure as Mayor of Philadelphia, Mr. Nutter served as President of the United States Conference of Mayors from 2012 until 2013. Since the conclusion of his second mayoral term, he has served as a member of the Homeland Security Advisory Council, as chairman of the Airbnb Mayor’s Advisory Council, as the inaugural David N. Dinkins Professor of Professional Practice in Urban and Public Policy at Columbia University and in various other advisory, academic and media commentary positions consistent with his longstanding commitment to public policy, government and civic life. Prior to entering politics, Mr. Nutter held various roles of increasing responsibility forat the financial services firm Pryor, Counts & Co.

Mr. Nutter brings to the Board nearly 25 years of financial stewardship and leadership experience as an elected official and public manager.

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William G. Parrett

Age: 7273        Director since: 2017

Conduent securities owned: 44,650 23,362 DSUs

Occupation: Chairman of the Board, Conduent Incorporated; Retired Chief Executive Officer, Deloitte Touche Tohmatsu

Other Directorships: Oracle Corporation (since 2018); Blackstone Group LP (since 2007); Eastman Kodak Company (since 2007); UBS AG (2008 to May 2018); Thermo Fisher Scientific Inc. (2008 to May 2018); IGATE Corporation(2013-2015); United States Council for International Business (2005-2010); International Chamber of Commerce (2006-2008)

Other Background: Mr. Parrett served as the Chief Executive Officer of Deloitte Touche Tohmatsu. He joined Deloitte in 1967 and served in a series of roles of increasing responsibility, including Managing Partner of Deloitte & Touche USA LLP. Mr. Parrett is a member of the Board of Directors of Thermo Fisher Scientific Inc., where he chairs the audit committee and is a member of the compensation committee, and Eastman Kodak Company, where he chairs the finance and audit committee. Mr. Parrettcommittee; Oracle Corporation, where he is also a member of the Board of Directors of UBS AG,finance and audit committee; and Blackstone Group LP, where he chairs the audit committee and is a member of the corporate culture and responsibility and compensation committees, and Chairman of the Board of Directors of UBS Americas Holding LLC. In addition, Mr. Parrett is Chairman of the Board of Conduent Incorporated and serves on the governance and financeconflicts committees. Mr. Parrett is a past member of the Board of Trustees of Carnegie Hall, a Senior Trustee of the United States Council for International Business and a past Chairman of the Board of Trustees of United Way Worldwide. Mr. Parrett is a Certified Public Accountant with an active license.

Mr. Parrett brings to the Board extensive global business experience, strong management skills and extensive knowledge of complex financial and operational issues, demonstrated by his experience as Chief Executive Officer of Deloitte Touche Tohmatsu. He also brings to the Board public company governance experience through his membership on boards of other public companies.

LOGO  

Virginia M. Wilson

Age: 6364        Director since: 2017

Conduent securities owned: 20,98411,297 Common Stock; 25,494 DSUs

Occupation: Former Senior Executive Vice President and Chief Financial Officer, Teachers Insurance and Annuity Association (TIAA)

Other Directorships: None

Other Background: Ms. Wilson has beenserved as the Senior Executive Vice President and Chief Financial Officer of Teachers Insurance and Annuity Association (TIAA), a financial services organization that is a leading retirement provider for people who work in the academic, research, medical and cultural field, since 2010.from 2010 to 2018. Prior to joining TIAA, she was Executive Vice President and Chief Financial Officer of Wyndham Worldwide Corporation, which was the holding company for Wyndham Hotels & Resorts, RCI and other hospitality brands, from 2006 to 2009. She has also served as a financial officer at Cendant, MetLife and Transamerica Life Insurance, and was an audit partner at Deloitte earlier in her career. Ms. Wilson is a Certified Public Accountant with an active license.

Ms. Wilson brings to the Board extensive financial experience, demonstrated by her role in overseeing financial management and planning, actuarial, tax, accounting, corporate services, sourcing and financial reporting functions for TIAA.TIAA and her experience as a chief financial officer of a public company.

The Board recommends a vote

FOR

the election of the nine (9) Directors nominated by the Board

CORPORATE GOVERNANCE

The Company is committed to the highest standards of business integrity and corporate governance. All of our directors, executives and employees must act ethically. In addition, our directors must act in accordance with our Code of Business Conduct and Ethics for Members of the Board; our principal executive officer, principal financial officer and principal accounting officer, among others, must act in accordance with our Finance Code of Conduct; and all of our executives and employees must act in accordance with our Code of Business Conduct. Each of these codes of conduct, as well as our Corporate Governance Guidelines and the charters of our Audit, Compensation, Corporate Governance and Finance Committees can be accessed through our website atwww.conduent.com/corporate-governance. They are also available to any shareholder who requests them in writing addressed to Conduent Incorporated, 100 Campus Drive, Suite 200, Florham Park, NJ 07932, Attention: Corporate Secretary. We will disclose any future amendments to, or waivers from, provisions of our Code of Business Conduct and Ethics for members of the Board and our Code of Business Conduct and our Finance Code of Conduct for our officers on our website as promptly as practicable, and consistent with the requirements of applicable SEC and NYSE rules. The Corporate Governance Committee of the Board periodically reviews and reassesses the adequacy of our overall corporate governance and Corporate Governance Guidelines and committee charters.Guidelines.

Director Nomination Process

The Corporate Governance Committee considers candidates for Board membership recommended by Board members, management shareholders and othersshareholders (see below). The Corporate Governance Guidelines require that a substantial majority of the Board consist of independent directors and that management representation on the Board should be limited to senior Company management. There are no specific minimum qualifications that the Corporate Governance Committee believes must be met by prospective candidates; however, the Corporate Governance Committee applies the criteria set forth in our Corporate Governance Guidelines. These criteria include, among other things, the candidate’s broad perspective, integrity, independence of judgment, experience, expertise, diversity, ability to make independent analytical inquiries, understanding of the Company’s business environment and willingness to devote adequate time and effort to Board responsibilities. The Corporate Governance Committee does not assign specific weight to particular criteria and no particular criterion is necessarily applicable to all prospective nominees.

Our Corporate Governance Guidelines dictate that diversity should be considered by the Corporate Governance Committee in the director identification and nomination process. This means that the Corporate Governance Committee seeks nominees who bring a variety of business backgrounds, experiences and perspectives to the Board. We believe that the backgrounds and qualifications of the directors, considered as a group, should provide a broad diversity of experience, professions, skills, geographic representations, knowledge and abilities that will allow the Board to fulfill its responsibilities.

Shareholders who wish to recommend individuals for consideration by the Corporate Governance Committee may do so by submitting a written recommendation to the Secretary of the Company at Conduent Incorporated, 100 Campus Drive, Suite 200, Florham Park, NJ 07932. Submissions must include sufficient biographical information concerning the recommended individual, including age, employment and current board memberships (if any), for the Corporate Governance Committee to consider. The submission must be accompanied by the written consent of the nominee to stand for election if nominated by the Board and to serve if elected by the shareholders. All submissions are reviewed by the Corporate Governance Committee. Recommendations received no earlier than November 11, 201810, 2019 and no later than December 11, 201810, 2019 will be considered for nomination at the 20192020 Annual Meeting of Shareholders.

Board Leadership Structure

We believe that the most effective board structure is one that emphasizes Board independence and ensures that the Board’s deliberations are not dominated by management while also ensuring that the Board and senior management act with a common purpose and in the best interest of the Company. WeAt this time, we believe this balance is achieved through the appointment of an independent Chairman of the Board. Accordingly, William G. Parrett, an independent director, serves as Chairman of the Board. Under our Corporate Governance Guidelines, each regularly scheduled Board meeting must include an executive session of all directors and the CEO and a separate executive session attended only by the independent directors. OurIn terms of our Board is 89 percent comprised of directors who qualify

composition, 89% of our directors qualify as independent directors, and each of our standing Board committees is comprised solely of independent directors, including our Corporate Governance Committee, which establishes our corporate governance policy and monitors the effectiveness of this policy at the Board level. You can find more information on boardour Board leadership structure in the Corporate Governance Guidelines posted on the Company’s website atwww.conduent.com/corporate-governance.

Risk Oversight

Our Board has ultimate oversight responsibility for our Enterprise Risk Management (“ERM”) program. The Board oversees our ERM program primarily through the Audit Committee of the Board, which previews the ERM assessmentprogram, assessments and processremediation plans for subsequent review by the Board. Our ERM program is designed to strengthen our risk-management capability by developing and implementing a governance structure, policy and standards necessary to identify, assess, monitor and manage all categories of business risk, including strategic, operational, compliance and financial reporting. The Company’s General CounselERM program is responsible foralso designed to preserve and create organizational value through effective control management and integration of risk practices into strategic planning and day to day decision making. Enterprise Risk Management operates within our Chief Compliance Office and is headed by the Company’s ERM function through an ERM director who chairs an Enterprise Risk Management Committee (“ERMC”) that. The ERMC is comprised of the Chief Financial Officer, General Counsel, Chief People Officer, Chief Information Officer, Chief Accounting Officer, Chief Compliance Officer, Chief Ethics Officer, Chief Privacy Officer, Sector PresidentsGroup Executives and Corporate Auditor. The ERMC reviews and establishes risk tolerances, prioritizes the remediation of risks, inspects risk mitigation plans and progress, identifies and addresses emerging risks, and shares mitigation best practices across the Company. Additionally, to ensure that ERM is integrated with our business management, the Company’s Management Committee monitorsCompany and promotes risk exposure and the effectivenessmitigation practices within their lines of how we manage these risks.business.

Director Independence

A director is not considered independent unless the Board determines that he or she has no material relationship with the Company. The Board has adopted categorical standards to assist in both its determination and the Corporate Governance Committee’s recommendation as to each director’s independence. Under these categorical standards, a director will be presumed not to have a material relationship with the Company if:

 

 1)

he or she satisfies the bright-line independence and other applicable requirements under the listing standards of the NYSE and all other applicable laws, rules and regulations regarding director independence, in each case from time to time in effect;

 

 2)

he or she is not a current employee (and none of his or her “immediate family members” is employed as an “executive officer,” each as defined by the NYSE Corporate Governance Rules) of a company that has made payments to, or received payments from, the Company or any of its consolidated subsidiaries for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or one percent of such other company’s consolidated gross revenues; and

 

 3)

in the event that he or she serves as an executive officer or director of a charitable organization, the Company and its consolidated subsidiaries donated less than five percent of that organization’s charitable receipts (provided that if within the preceding three years the Company and its consolidated subsidiaries donated annual aggregate contributions in excess of $1 million or two percent of the annual consolidated gross revenue of the charitable organization, such contributions must be disclosed in the Company’s Proxy Statement).

Our Board has determined that all of the nominees for election as directors are independent under the NYSE Corporate Governance Rules and our Corporate Governance Guidelines, with the exception of Ashok Vemuri, our Chief Executive Officer.

In addition, the Corporate Governance Committee reviews relationships involving members of the Board, their immediate family members and affiliates, and transactions in which members of the Board, their immediate family members and their affiliates have a direct or indirect interest in which the Company is a participant to determine whether such relationship or transaction is material and could impair a director’s independence. In making independence determinations, the Board considers all relevant facts and circumstances from the point of view of both the director and the persons or organizations with which the director has relationships. See“Certain Relationships and Related Person Transactions”.

As a result of the aforementioned review, 89%our Board has determined that all of ourthe nominees for election as directors at the 2019 Annual Meeting are deemed to be independent.independent under the NYSE Corporate Governance Rules and our Corporate Governance Guidelines, with the exception of Ashok Vemuri, our Chief Executive Officer.

Certain Relationships and Related Person Transactions

Related Person Transactions Policy

The Board has adopted a policy addressing the Company’s procedures with respect to the review, approval and ratification of “related person transactions” that are required to be disclosed pursuant to Item 404(a) of RegulationS-K. The policy provides that any transaction, arrangement or relationship, or series of similar transactions, in which the Company will participate or has participated and a “related person” (as defined in Item 404(a) of RegulationS-K) has or will have a direct or indirect material interest, and whichwhere the amount involved exceeds $120,000 in the aggregate, is subject to review (each such transaction, a “Related Person Transaction”). In its review of Related Person Transactions, the Corporate Governance Committee reviews the material facts and circumstances of the transaction and takes into account certain factors, where appropriate, based on the particular facts and circumstances, including: (i) the nature of the “related person’s” interest in the transaction; (ii) the significance of the transaction to the Company and to the “related person”; and (iii) whether the transaction is likely to impair the judgment of the “related person” to act in the best interest of the Company.

No member of the Corporate Governance Committee may participate in the review, approval or ratification of a transaction with respect to which he or she is a “related person.”

During 2019, we hired the law firm of King and Spalding LLP (King & Spalding) to represent the Company in a lawsuit filed against the Company in 2019 (Nelson et.al v. Comerica Bank and Conduent Business Services LLClitigation). James C. Woolery, an equity partner at King & Spalding, is thebrother-in-law of our Executive Vice President, General Counsel and Secretary, J. Michael Peffer. Mr. Peffer’s son is also an associate at King & Spalding. The Corporate Governance Committee reviewed and approved this relationship under our related party transaction policy.

Icahn Agreements and Deason Agreement

See above under “Proposal 1 – Election of Directors” for information regarding our interest in (1) agreements between Xerox and the Icahn Group.Group and (2) the agreement with Darwin Deason.

Certain Employment Arrangements

We actively recruit qualified candidates for our employment needs. Relatives of our executive officers and other employees are eligible for hire. In 2017, we did not have any employees who were2018, no immediate family member of our current executive officers or directors was employed by the Company or one of its subsidiaries whoand received more than $120,000 in annual compensation (salary, incentive cash awards, equity awards and commissions) and are immediate family members of our current executive officers or directors..

BOARD OF DIRECTORS AND BOARD COMMITTEES

Committee Functions, Membership and Meetings

Our Board has four standing committees: Audit, Compensation, Corporate Governance and Finance. Set forth below is a list of the committees of our Board, a summary of the responsibilities of each committee, the number of committee meetings held during 20172018 for each committee and a list of the members of each committee.

Audit Committee (12(10 meetings)

A copy of the charter of the Audit Committee is posted on the Company’s website atwww.conduent.com/corporate-governance.

The responsibilities of the Audit Committee include:

 

directly appoint, compensate, retain and oversee the work of our independent auditor;

 

oversee the integrity of the Company’s financial statements;

 

oversee the Company’s compliance with legal and regulatory requirements;

 

oversee the Company’s risk assessment policies and practices, including the ERM process, and preview the ERM assessment and process for subsequent review by the Board;

 

assess independent auditor’s qualifications and independence;

 

assess performance of the Company’s independent auditors and the internal audit function;

review the Company’s audited financial statements, including the Company’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and recommend to the Board their inclusion in the Company’s Annual Report on Form10-K; and

 

review and approve the Company’s codeCode of business conductBusiness Conduct and ethics.Ethics.

The Audit Committee is also responsible for the preparation of the Audit Committee Report that is included in this Proxy Statement beginning on page 54.53.

Members: Joie A. Gregor; Michael Nevin;Nicholas Graziano; and Virginia M. Wilson

Chair: Ms. Wilson

The Board has determined that (1) all of the members of the Audit Committee are independent under the Company’s Corporate Governance Guidelines and under the applicable SEC and NYSE Corporate Governance Rules and are financially literate and (2) Ms. Wilson and Mr. NevinGraziano are “audit committee financial experts,” as defined in the applicable SEC rules. Designation or identification of a person as an audit committee financial expert does not impose any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit Committee and the Board in the absence of such designation or identification.

Compensation Committee (10(8 meetings)

A copy of the charter of the Compensation Committee is posted on the Company’s website atwww.conduent.com/corporate-governance.

The responsibilities of the Compensation Committee include:

 

oversee development and administration of the Company’s executive compensation plans;

 

set the compensation of the CEO and other executive officers;

 

review and approve the performance goals and objectives with respect to the compensation of the CEO and other executive officers;

 

oversee the evaluation of the CEO and other executive officers;

 

have sole authority to retain and terminate the consulting firms engaged to assist the Compensation Committee in the evaluation of the compensation of the CEO and other executive officers;

 

oversee the work of the compensation consultants, including determination of compensation to be paid to any such consultant by the Company;

 

conduct an independence assessment of any compensation consultants, including consideration of the six independence factors required under SEC rules and NYSE listing standards; and

 

review and approve employment, severance,change-in-control, termination and retirement arrangements for executive officers.

The Compensation Committee is also responsible for reviewing and discussing the Compensation Discussion and Analysis (“CD&A”) with management, and has recommended to the Board that the CD&A be included in this Proxy Statement (beginning on page 21)22) and incorporated by reference in the Company’s 20172018 Annual Report on Form10-K. The CD&A discusses the material aspects of the Company’s compensation objectives, policies and practices. The Compensation Committee’s report appears on page 3736 of this Proxy Statement.

The Compensation Committee has not delegated its authority with respect to executive compensation decisions. The Compensation Committee has, however, delegated authority under the Company’s equity plan to the CEO to grant equity awards to employees who are not executive officers. The CEO is also responsible for setting the compensation of, reviewing performance goals and objectives for, and evaluating officers who are not executive officers.

Executive officer compensation decisions are made by the Compensation Committee after discussing recommendations with the CEO and the Chief People Officer. The Chief Financial Officer confirms the Company’s financial results used by the Compensation Committee to make compensation decisions. The Chief Financial Officer attends Compensation Committee meetings to discuss financial targets and results for the

Annual Performance Incentive Plan and the Executive Long-Term Incentive Program as described in the CD&A. The Compensation Committee meets in executive session to review and approve compensation actions for the CEO.

The Compensation Committee has retained Frederic W. Cook & Co. (“F.W. Cook”), as an independent consultant to the Compensation Committee. F.W. Cook provides no services to management and provides an

annual letter to the Compensation Committee regarding its independence, which the Compensation Committee reviews and determines whether there is any conflict of interest. Based on its review for 2017,2018, the Compensation Committee determined that F.W. Cook’s work has not raised any conflict of interest and that such firm is independent. The consultant’s responsibilities are discussed on page 2526 of this Proxy Statement.

Members: Paul Galant; Joie A. Gregor;Gregor and Courtney MatherWilliam G. Parrett

Chair: Ms. Gregor

The Board has determined that all of the members of the Compensation Committee are independent under the Company’s Corporate Governance Guidelines and the applicable NYSE Corporate Governance Rules. In addition,rules and that each Committee member is a “non-employee“non-employee director” as defined in Rule16b-3 under the Securities Exchange Act of 1934 (“Exchange Act”), and is an “outside director” as defined in Section 162(m) of the Internal Revenue Code, as in effect for tax years prior to December 31, 2017..

Compensation Committee Interlocks and Insider Participation

During 2018, Mr. Galant, Ms. Gregor, Mr. Mather, Mr. Nevin and Mr. Parrett served on our Compensation Committee. No member of the Compensation Committee was or is an officer or employee of the Company or any of its subsidiaries. In addition, during the last fiscal year, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on our Board or Compensation Committee.

Corporate Governance Committee (6(5 meetings)

A copy of the charter of the Corporate Governance Committee is posted on the Company’s website atwww.conduent.com/corporate-governance.

The responsibilities of the Corporate Governance Committee include:

 

identify and recommend to the Board individuals to serve as directors of the Company and on Board committees;

 

develop and recommend to the Board director qualification criteria and establish procedures for evaluating the suitability of director nominees;

 

advise the Board regarding Board composition, procedures and committees;

 

develop, recommend to the Board and annually review the corporate governance principles applicable to the Company;

 

review significant environmental and corporate social responsibility matters;

 

administer the Company’s Related Person Transactions Policy;

 

evaluate and recommend director compensation to the Board; and

 

oversee the annual Board and committee evaluation processes.

The Corporate Governance Committee recommends to the Board nominees for election as directors of the Company and considers the performance of incumbent directors in determining whether to recommend their nomination.

Members: Vincent J. Intrieri*;Nicholas Graziano; Michael A. Nutter;Nutter and William G. Parrett

Chair: Mr. Nutter

*Not standing for reelection at the 2018 Annual Meeting.

The Board has determined that all of the members of the Corporate Governance Committee are independent under the Company’s Corporate Governance Guidelines and the applicable NYSE Corporate Governance Rules.rules.

Finance Committee (6(5 meetings)

A copy of the charter of the Finance Committee is posted on the Company’s website atwww.conduent.com/corporate-governance.

The responsibilities of the Finance Committee include:

 

review the Company’s cash position, capital structure, status of credit ratings and strategies, financing strategies and insurance coverage and report to the full Board with respect thereto as appropriate;

review and make recommendations to the management and the full Board as appropriate with respect to the Company’s dividend policy and capital allocation policy;

 

review the adequacy of the funding of the Company’s funded retirement plans and welfare benefits plans (other than those plans maintained pursuant to a collective agreement that names the Joint Administrative Board as the governing plan fiduciary) in terms of the Company’s corporate purposes;

 

review the Company’s policy on derivatives;

 

 • 

approve, at least annually, whether the Company and its subsidiaries shall enter into swap and security-based swap transactions that are not cleared with a Commodity Exchange Act registered clearing organization in reliance on the exemptions provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act and rules and regulations thereunder (the “Dodd Frank Act”);

 

Review and approve the three year strategic plan and the annual capital budget; and

 

Review and approve (1) acquisitions in excess of $75M or involving the issuance of Company stock and (2) dispositions of assets or stock of a subsidiary in excess of $50M.

Members: Vincent J. Intrieri*;Scott Letier; Courtney Mather; Michael A. Nutter; William G. Parrett; and Virginia M. Wilson (Mr. Parrett was reassigned by the Board from the Finance Committee to the Compensation Committee on December 18, 2018 and the Board appointed Mr. Letier to the Finance Committee on his election to the Board on that date.)

Chair: Mr. Intrieri*Mather.

*Not standing for reelection at the 2018 Annual Meeting.

The Board has determined that all of the members of the Finance Committee are independent under the Company’s Corporate Governance Guidelines and the applicable NYSE Corporate Governance Rules.rules.

Board and Committee Meetings; Annual Meeting Attendance

Board and Committee Meeting Attendance: 811 meetings of the Board of Directors were held in 2017.2018. The number of meetings held by each of our Board committees is noted above under “Committee Functions, Membership and Meetings.” All incumbent directors attended at least 95% of the total number of meetings of the Board and Board committees on which they served.

Annual Meeting Attendance Policy: The Company’s policy generally is for all members of the Board to attend the Annual Meeting of Shareholders. All nominees who served as directors last year attended the 2017 Annual Meeting of Shareholders, except one. We believe that attendance at meetings is only one means by which directors may contribute to the effective management of the Company and that the contributions of all directors have been substantial and are highly valued.

Annual Meeting Attendance Policy: The Company’s policy generally is for all members of the Board to attend the Annual Meeting of Shareholders. All nominees who were serving as directors at the time attended the 2018 Annual Meeting of Shareholders.

Summary of Annual Director Compensation

Our Board, upon the review and recommendation of our Corporate Governance Committee, previously adopted a compensation program for ournon-employee directors effective January 1, 2017.2018. The following table shows the compensation paid by Conduent for the fiscal year ended December 31, 2017 to its non-employee directors. Ashok Vemuri, Chief Executive Officer, is not included in this table because he is an employeea brief summary of the Company and receives no additional compensation for his service as a director. The compensation received by Mr. Vemuri as an employee is shown inmaterial elements of the 2017 Summary Compensation Table.program.

                    Name 

Fees Earned or

Paid in Cash ($)

 Stock Awards
($)(1)		 All Other
Compensation ($)		 Total ($) 

 

                     Paul S. Galant          

 $  92,000 $145,000 

 

—

 $237,000 
                     Joie Gregor           $115,000 $145,000 

 

—

 $260,000 
                     Vincent J. Intrieri           $105,000 $145,000 

 

—

 $250,000 
                     Courtney Mather           $  92,000 $145,000 

 

—

 $237,000 
                     Michael Nevin           $  95,000 $145,000 

 

—

 $240,000 
                     Michael A. Nutter           $105,000 $145,000 

 

—

 $250,000 
                     William G. Parrett           $225,000 $145,000 

 

—

 $370,000 
                      Virginia M. Wilson           $115,000 $145,000 

 

—

 $260,000 

(1)The cash value of compensation awarded in the form of DSUs is reflected in this column. The amount presented in this column reflects the aggregate grant date fair value of the DSUs awarded during 2017 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718, Compensation—Stock Compensation.

The total number of all DSUs held by each director as of December 31, 2017 is as follows: Mr. Galant, 9,687; Ms. Gregor, 9,687; Mr. Intrieri, 9,687; Mr. Mather, 9,687; Mr. Nevin, 9,687; Mr. Nutter, 9,687; Mr. Parrett, 9,687; and Ms. Wilson, 9,687.

Cash Compensation

Under the 2017 program,non-employee directors receivedreceive $80,000 per year as an annual cash retainer for their service on the Board. In addition,non-employee directors receivedreceive additional cash retainers for the following roles:

 

TheNon-Executive Chairman receivedreceives $125,000 per year;

 

The Chair of the Audit Committee receivedreceives $25,000 per year and each other member of the Audit Committee receivedreceives $15,000 per year;

 

The Chair of the Compensation Committee receivedreceives $20,000 per year and each other member of the Compensation Committee receivedreceives $12,000 per year; and

 

The Chair of the Corporate Governance Committee receivedreceives $15,000 per year and each other member of the Corporate Governance Committee receivedreceives $10,000 per year.year, and

The Chair of the Finance Committee receivedreceives $15,000 per year and each other member of the Finance Committee receivedreceives $10,000 per year.

All directors are also reimbursed for reasonable expenses incurred in connection with service on the Board or any of its Committees.

Equity Compensation

Under the program, eachnon-employee director is automatically eligible for an annual equity award grantsgranted in the form of DSUs under the Director Equity Plan. DSUs areA DSU is a bookkeeping entry that represents the right to receive one share of our Common Stock at a future date. DSUs are vested on the date of grant and include the right to receive dividend equivalents, which are credited in the form of additional DSUs, at the same time and in approximately the same amounts that the holder of an equivalent number of shares of our Common Stock would be entitled to receive in dividends. For 2017,2018, ournon-employee directors received a grant of DSUs with a grant date fair value of $145,000.

Changes$190,000. If a director separates from service prior to Director Compensation Program for 2018

On December 8, 2017, our Board adopted changes to the compensation program for our non-employee directors effective January 1, 2018. The program was modified as follows:

The grant date fair value of annualyear-end, DSU grants was increased from $145,000 to $190,000 to bring total pay in line with our peer group and emphasize equity in the mix of compensation.

DSU grants are subject to a mandatory holding period of one year following the grant date (previously one year following separation from service).

DSU agreements now include a clawback provision allowing for recovery of DSUs granted during the year of separation from service on a pro rata basis, if a director separates from service prior to year-end.
basis.

Deferral of Retainer Fees

Board members can now elect to receive up to 100% of their $80,000 annual cash retainer and/or annual equity grant in the form of DSUs which are deferred for a specified number of years following grant, as determined by the director, or until any earlier separation from service.

Director Stock Ownership Guidelines

In 2017, our Board establishedThe program includes stock ownership guidelines that require directors to own Common Stock in a minimum amount equal to 6 times the annual cash retainer ($80,000 x 6 = $480,000) within 3 years of adoption of the guidelines (or within 3 years of appointment to the Board for directors elected after 2017). Directors are required to hold all net after-tax shares of Common Stock granted to the director until compliance with the guidelines are met.

2018 Director Compensation Table

The following table shows the compensation paid by Conduent for the fiscal year ended December 31, 2018 to itsnon-employee directors. Ashok Vemuri, Chief Executive Officer, is not included in this table because he is an employee of the Company and receives no additional compensation for his service as a director. The compensation received by Mr. Vemuri as an employee is shown in the 2018 Summary Compensation Table.

                               Name 

Fees Earned or

Paid in Cash ($)

 

Stock Awards

($)(1)

 

All Other

Compensation ($)

 Total ($)              

 

                         Nicholas Graziano (2)          

 $  55,417     $110,842 

 

—

  $166,259           

                         Paul S. Galant(2)          

 $  92,000     $190,000 

 

—

  $282,000 

                         Joie Gregor          

 $115,000     $190,000 

 

—

  $305,000 

                         Vincent J. Intrieri (4)          

 $  52,500     $190,000 

 

—

  $242,500 

                         Scott Letier(2)          

 $    7,500     $  15,833 

 

—

  $  23,333 

                         Courtney Mather          

 $  92,000(3) $190,000 

 

—

  $282,000 

                         Michael Nevin(5)          

 $  95,000     $190,000 

 

—

  $285,000 

                         Michael A. Nutter          

 $105,000      $190,000 

 

—

  $295,000 

                         William G. Parrett          

 $225,000(3) $190,000 

 

—

  $415,000 

                         Virginia M. Wilson          

 $115,000      $190,000 

 

—

  $305,000 

(1)

This column reflects the aggregate grant date fair value of the annual equity grant made tonon-employee directors in the form of DSUs ($190,000) in January 2018 and computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718, Compensation—Stock Compensation.

(2)

Messrs. Graziano, Galant and Letier did not serve on the Board for the full year. Mr. Graziano joined the Board and received a prorated grant of DSUs on June 1, 2018. Mr. Galant resigned from the Board effective December 18, 2018, and Mr. Letier joined the Board on December 18, 2018. Mr. Letier’s cash was paid and his DSUs were awarded in January 2019.

(3)

Messrs. Mather and Parrett elected to defer $80,000 of annual cash retainer reflected in the Fees Earned or Paid in Cash column in the form of DSUs.

(4)

Mr. Intrieri did not stand for reelection at the 2018 Annual Meeting. A prorated portion of Mr. Intrieri’s DSUs was forfeited in accordance with its terms.

(5)

Mr. Nevin resigned from the Board effective April 8, 2019.

The total number of all DSUs held by each director as of December 31, 2018 is as follows: Mr. Graziano, 5,758; Ms. Gregor, 20,984; Mr. Letier, 0 (Mr. Letier’s DSUs for his 2018 service were awarded in January 2019); Mr. Mather, 25,515; Mr. Nevin, 20,984; Mr. Nutter, 20,984; Mr. Parrett, 25,515; and Ms. Wilson, 20,984.

SECURITIES OWNERSHIP

Ownership of Company Securities (1)

We are not aware of any person who, or group which, owns beneficially more than 5% of any class of the Company’s equity securities as of December 31, 2017,2018, except as set forth below.

 

Title of Class   Name and Address of Beneficial Owner  Amount and
Nature of
Beneficial
Ownership		   Percent
of Class		   Name and Address of Beneficial Owner  

Amount and

Nature of

Beneficial

Ownership

   

Percent

of Class

 

Common Stock

  

FMR, LLC (2)

245 Summer St.

Boston, MA 02210

   23,289,802    11.07%   

FMR, LLC (2)

245 Summer St.

Boston, MA 02210

   21,646,167    10.244% 

Common Stock

  

Mr. Carl C. Icahn (3)

c/o Icahn Capital LP

767 Fifth Avenue, 47th Floor

New York, NY 10153

   19,806,000    9.8%   

Mr. Carl C. Icahn (3)

c/o Icahn Capital LP

767 Fifth Avenue, 47th Floor

New York, NY 10153

   24,586,540    11.64% 

Common Stock

  

The Vanguard Group (4)

100 Vanguard Blvd.

Malvern, PA 19355

   17,298,502    8.22%   

The Vanguard Group (4)

100 Vanguard Blvd.

Malvern, PA 19355

   16,507,528    7.81% 

Common Stock

  

Mr. Darwin A. Deason (5)

5956 Sherry Ln.

Dallas, TX 75225

   12,320,307    5.86%   

Mr. Darwin A. Deason (5)

5956 Sherry Ln., Suite 800

Dallas, TX 75225

   12,320,307    5.8% 

 

 

(1)

The words “group” and “beneficial” are as defined in regulations issued by the SEC. Beneficial ownership under such definition means possession of sole voting power, shared voting power, sole dispositive power or shared dispositive power. The information provided in this table is based solely upon the information contained in the most recent Schedule 13G or 13G/A (or in the case of Mr. Icahn and Mr. Deason, the most recent Schedule 13D/A) filed by the named entity with the SEC.

 

(2)

Based on a Schedule 13G13G/A filed with the SEC on March 12, 2018February 11, 2019 by FMR LLC (“FMR”) to report FMR’s beneficial ownership of Common Stock as of February 28, 2018.January 31, 2019. FMR has sole voting power for 106,528120,324 shares of Common Stock, sole dispositive power for 23,289,80221,646,167 shares of Common Stock and has no shared voting power or shared dispositive power for any shares of Common Stock. Based on a Schedule 13G filed with the SEC on February 13, 20188, 2019 by FMR, FMR beneficially owned 14,262,33020,887,388 shares of Common Stock (6.78%(9.885%) as of December 31, 2017.2018.

 

(3)

Based on a Schedule 13D13D/A filed with the SEC on January 9, 2017December 3, 2018 by Carl C. Icahn.Icahn to report his beneficial ownership as of that date.

Represents shares of Common Stock held by the following group of entities associated with Carl C. Icahn: High River Limited Partnership (“High River”), Hopper Investments LLC (“Hopper”), Barberry Corp. (“Barberry”), Icahn Partners Master Fund LP (“Icahn Master”), Icahn Offshore LP (“Icahn Offshore”), Icahn Partners LP (“Icahn Partners”), Icahn Onshore LP (“Icahn Onshore”), Icahn Capital LP (“Icahn Capital”), IPH GP LLC (“IPH”), Icahn Enterprises Holdings L.P. (“Icahn Enterprises Holdings”), Icahn Enterprises G.P. Inc. (“Icahn Enterprises GP”) and Beckton Corp. (“Beckton”)(collectively, the “Reporting Persons”). The principal business address of (i) each of High River, Hopper, Barberry, Icahn Offshore, Icahn Partners, Icahn Master, Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP and Beckton is White Plains Plaza, 445 Hamilton Avenue - Suite 1210, White Plains, NY 10601, and (ii) Mr. Icahn is c/o Icahn Associates Holding LLC, 767 Fifth Avenue, 47th Floor, New York, NY 10153.

High River has sole voting power and sole dispositive power with regard to 3,961,2004,917,308 shares of Common Stock. Each of Hopper, Barberry and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of Common Stock. Icahn Master has sole voting power and sole dispositive power with regard to 6,563,0188,156,433 shares of Common Stock. Each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of Common Stock. Icahn Partners has sole voting power and

sole dispositive power with regard to 9,281,78211,512,799 shares of Common Stock. Each of Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of Common Stock.

Each of Hopper, Barberry and Mr. Icahn, by virtue of their relationships to High River, may be deemed to indirectly beneficially own the shares of Common Stock which High River directly beneficially owns. Each of Hopper, Barberry and Mr. Icahn disclaims beneficial ownership of such shares of Common Stock for all other purposes. Each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn, by virtue of their relationships to Icahn Master, may be deemed to indirectly beneficially own the shares of Common Stock which Icahn Master directly beneficially owns. Each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn disclaims beneficial ownership of such shares of Common Stock for all other purposes. Each of Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn, by virtue of their relationships to Icahn Partners, may be deemed to indirectly beneficially own the shares of Common Stock which Icahn Partners directly beneficially owns. Each of Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn disclaims beneficial ownership of such shares of Common Stock for all other purposes.

 

(4)

Based on a Schedule 13G filed with the SEC on February 8, 201811, 2019 by The Vanguard Group (“Vanguard”). Vanguard has sole voting power for 101,32590,210 shares of Common Stock, sole dispositive power for 17,186,96516,412,551 shares of Common Stock, shared voting power for 23,520 shares of Common Stock and shared dispositive power for 111,53794,977 shares of Common Stock.

 

(5)

Based on a Schedule 13G13D/A filed with the SEC on February 12,December 19, 2018 by Darwin A. Deason.Deason to report his beneficial ownership of Common Stock as of December 18, 2018. Mr. Deason has sole voting power and sole dispositive power for 12,320,307 shares of Common Stock and has no shared voting power or shared dispositive power for any shares of Common Stock. Mr. Deason’s shares of Common Stock includesinclude 5,393,256 shares of Common Stock issuable upon the conversion of 120,000 shares of Conduent Series A Convertible Perpetual Preferred Stock that he holds.

Shares of Common Stock of the Company owned beneficially by the directors and nominees for director, each of the current executive officers named in the Summary Compensation Table and all directors and current executive officers as a group, as of February 28, 2018,2019, were as follows. These individuals have sole voting and dispositive power with respect to the reported shares.

 

Name of

Beneficial Owner

Amount

Beneficially

Owned

 

Ashok Vemuri

 

 

239,161820,049

 

 

David Amoriell

 

 

107,798187,705

 

 

Jeffrey Friedel

 

 

  85,112250,605

 

 

  Paul GalantNicholas Graziano

 

 

    20,9845,758

 

 

  Nicholas GrazianoJoie A. Gregor

 

  11,297

Scott Letier

    2,000

Jesse A. Lynn

 

           0

 

 

  Joie A. GregorCourtney Mather

 

 

  20,98413,675

 

 

  Vincent J. IntrieriMichael A. Nutter

 

 

  20,98411,297

 

 

  Courtney MatherWilliam G. Parrett

 

 

  23,36213,675

 

 

J. Michael NevinPeffer

 

 

  20,984294,859

 

 

  Michael A. NutterBrian Webb-Walsh

 

 

  20,984305,149

 

 

  William G. ParrettVirginia M. Wilson

 

 

  23,36211,297

 

 

  J. Michael Peffer

  98,313

  Brian Webb-Walsh

102,930

  Virginia M. Wilson

  20,984

All directors and executive officers as a group (15)(14)

 

 

813,7951,930,256

 

 

Percent Owned by Directors and Executive Officers: Each director and executive officer beneficially owned less than 1% of the aggregate number of shares of Common Stock outstanding as of February 28, 2018.2019. The amount beneficially owned by all directors and executive officers as a group also amounted to less than 1%.

Amount Beneficially Owned: The numbers shown are the shares of Common Stock considered beneficially owned by the directors and executive officers in accordance with SEC rules and includes shares held indirectly, such as shares held in a grantor retained annuity trust or by family members.indirectly.

Shares of Common Stock which executive officers, directors and nominees have a right, within 60 days of February 28, 2018,2019, to acquire upon the exercise of options or rights or upon vesting of performance shares, DSUs or restricted stock units are also required to be included for purposes of determining beneficial ownership. None of our executive officers, directors or nominees hold any Company securities which are exercisable or scheduled to vest within 60 days of February 28, 20182019 with the exception of DSUs.DSUs as follows: Graziano, 5,758; Gregor, 11,297; Mather, 13,675; and Parrett, 13,675.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act (“Section 16”) requires the Company’s directors, executive officers and persons who own more than ten percent of the Common Stock of the Company, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of Common Stock of the Company. Based solely on review of these reports, or written representations from these persons that no other reports were required to be filed with the SEC, the Company believes that all reports for the Company’s directors, and executive officers and ten percent shareholders that were required to be filed under Section 16 during the fiscal year ended December 31, 20172018 were timely filed.filed with the exception of one Form 4 reporting one transaction filed jointly by Carl C. Icahn, High River Limited Partnership, Icahn Partners LP and Icahn Partners Master Fund LP.

COMPENSATION DISCUSSION AND ANALYSIS

In this Compensation Discussion and Analysis (“CD&A”), we discuss the compensation philosophy, programs and practices adopted by the Compensation Committee of the Board of Directors of Conduent (the “Compensation Committee”) for our named executive officers and review the various objectives and elements of our executive compensation program, its alignment with performance and the 2018 compensation decisions regarding our named executive officers.

For purposes of this CD&A and the disclosure that follows, the following are our named executive officers for 2018:

Ashok Vemuri, Chief Executive Officer

Brian Webb-Walsh, Executive Vice President & Chief Financial Officer

•

David Amoriell1, President

James Michael Peffer, Executive Vice President, General Counsel & Secretary

Jeffrey Friedel, Executive Vice President, Chief People Officer

1 Mr. Amoriell retired from the Company on January 11, 2019.

EXECUTIVE SUMMARY

2017 Business HighlightsConduent continued to make progress in 2018 by transforming in meaningful ways and positioning itself for sustainable, profitable growth in the future. We achieved success on a number of fronts, including strengthening our balance sheet, completing the program to divest ournon-core businesses, exceeding the goals under our3-year transformation program, completing the tender offer of our senior unsecured high-yield notes, and completing the Company’s first acquisition. However, due to continued pressure on revenue growth and operational challenges during the third and fourth quarters of fiscal 2018, we achieved lower than target financial performance on two measures: revenue and adjusted EBITDA. As a result, the named executive officers achieved lower than target variable compensation payouts commensurate with our results. We are addressing the challenges that we faced in 2018 head-on and have made significant investments in technology modernization and standardization to support our long-term strategy and focus on digital interactions. We

ended the year with a strong balance sheet, a portfolio of core businesses and offerings, a refreshed sales team andgo-to-market strategy, and the right team to lead the organization to the next phase – our pivot to growth.

20172018 Financial Achievements

 

Revenue of $6,022$5,393 million in line with guidance

 

Net income from continuing operations of $177$(416) million

 

Adjusted net income of $186 million
•

Adjusted net income2 of $230 million

 

Adjusted EBITDA of $672 million, up 6% year-over-year
•

Adjusted EBITDA2 of $640 million, up 7.0% year-over-year, excluding impact from ASC 606 and divestitures

 

$302 million of cash flow from operations and $204 million of free cash flow (adjusted for cash payments to deferred compensation plan participants)
•

$283 million of cash flow from operations and $218 million of adjusted free cash flow2

20172018 Operational Achievements

 

Overachieved 2017 strategic

Exceeded3-year transformation goalsinitiative targets; achieved ~$730 million of cumulative savings

 

Established the Conduent brand and a clear go-to-market strategy

Completed divestiture plan of $1 billion ofnon-core business revenue

 

Expanded our salesforce

Divested four businesses (Commercial Vehicle Operations,Off-Street Parking, Actuarial and client partnersHR Consulting, and select Local Government Services) in 2018 for aggregate proceeds of ~$700 million in cash

Announced an agreement to better meet the needssell a select portfolio of our clientsstand-alone customer care contracts and completed the sale of those contracts in early 2019

 

Paid down $476 million of high-interest notes from ourspin-off

Invested in platforms,platform and IT infrastructure technology

Acquired Health Solutions Plus in January 2019 (leading digital healthcare core administrative processing system)

2Please see“Non-GAAP Financial Measures” and infrastructure

Summary of 2017 Actions“Non-GAAP Reconciliations” on pages 47-51 in this Proxy Statement for information on ournon-GAAP financial measures.

LinkingShareholder Say on Pay with Performance

2017 markedOur executive compensation is subject to an annual advisory vote of shareholders at our first yearAnnual Meeting. The Compensation Committee considers the outcome of operations as Conduent. As a new Company,say on pay votes when making compensation decisions for our named executive officers. At the 2018 Annual Meeting of Shareholders, 98.7% of shares voted were in favor of our executive compensation. Our Board and the Compensation Committee made several decisions regardinggreatly value the compensationbenefits of namedmaintaining a dialogue with our shareholders and understanding their views. The executive officersmanagement team of Conduent established and participated in 2017.

various shareholder engagement activities in 2018. Conduent’s investor relations function proactively engages with our shareholders to provide updates on the performance of the Company and solicit feedback on various topics.

OUR EXECUTIVE COMPENSATION PROGRAM

Compensation Philosophy

Our Executive Compensation Programs are designed to attract, motivate, reward and retain the world class talent necessary to drive our business strategy, creating shareholder value. Our programs are designed to follow these principles:

 

provide competitive compensation to attract and retain executives critical to our long-term success;

 

align executive and shareholder interests through the use ofusing both short-term and long-term financial and strategic objectives that build a sustainable Company;

 

recognize and reward collective accountability and individual contribution to ensure enterprise results;

 

instill high standards of corporate governance and best practices; and

 

mitigate excess risk taking and/or behavior that is inconsistent with the Company’s strategic plans and high ethical standards.

Checklist of Compensation Practices

 

  

What We Do

  

What We Don’t Do

✓

  Deliver a significant portion of compensation through long-term incentives tied directly to shareholder value creation.  X  Permitre-pricing of underwater stock options.

✓

  Balance short- and long-term incentives with multiple performance metrics.  X  Provide defined-benefit pension plan or SERPs to executives (onlyall-employee 401(k) plan).

✓

  Maintainpay-recoupment policy that allows claw back of compensation earned as a resultbecause of fraudulent or illegal conduct.  X  Provide excessive perquisites or termination payments.

✓

  Maintain stock ownership requirements for all of our named executive officers.  X  Allow hedging or pledging of Company stock.

✓

  Conduct an annual review of programs to ensure they do not encourage risks that have a material adverse effect on the Company.  X  Permit taxgross-ups on change in control or other severance paymentspayments.

✓

  Maintainnon-competition andnon-solicitation agreements with our named executive officers that prohibit competing against Conduent and soliciting our customers or current employees after termination.  X  Maintain written employment contracts with our executive officers (other than theour Chief Executive Officer) that provide special benefits.Officer’s offer letter)

✓

  Employ an Independent Consultant under the direction of the Compensation Committee.  X  Allow single-trigger vesting change in control arrangements.

20172018 Total Direct Compensation Targets for Named Executive Officers

The Compensation Committee approved the annual target compensation levels for all Executive Officers, focusing on the key elements of compensation—annual base salary, annual performance bonus and long-term equity incentives.executive officers. To re-inforcereinforce the Company’s pay for performance philosophy, 86% of our CEO’s targeted total director compensation, and on average 70% for our other named executive officers, is variable and “at risk.” Additionally, 53% of targeted total direct compensation for our Chief Executive Officer and, on average, 46% for our other named executive officers is performance-based.subject to achievement of performance goals.

 

Executive  Title Base
Salary		  Target Short-
Term Incentive
(% of Salary)		  Target Long-
Term  Incentive
(Grant Date
Value on 4/1/17)		 

 

Title

 

 

Base

Salary

 

Target Short-

Term Incentive

(% of Salary)

 

Target Long-

Term Incentive

(Grant Date

Value on 4/1/18)

 

Ashok Vemuri

  Chief Executive Officer (CEO) $1,000,000   150%  $5,000,000 

 

  Chief Executive Officer (CEO)

 

 

$

 

 

1,000,000

 

 

 

 

 

 

 

150

 

 

%              

 

 

$

 

 

5,000,000

 

 

 

Brian Webb-Walsh

  Executive Vice President and Chief Financial Officer (CFO) $450,000   75%  $975,000 

 

  Executive Vice President and

  Chief Financial Officer (CFO)

 

 

$

 

 

450,000

 

 

 

 

 

 

 

75

 

 

%

 

 

$

 

 

975,000

 

 

 

Dave Amoriell

  President $536,000   75%  $800,000 

 

  President

 

 

$

 

 

536,000

 

 

 

 

 

 

 

75

 

 

%

 

 

$

 

 

800,000

 

 

 

J. Michael Peffer

  Executive Vice President, General Counsel and Secretary $500,000   75%  $800,000 

 

  Executive Vice President,

  General Counsel and Secretary

 

 

$

 

 

500,000

 

 

 

 

 

 

 

75

 

 

%

 

 

$

 

 

800,000

 

 

 

Jeffrey Friedel

  Executive Vice President, Chief People Officer $425,000   75%  $500,000 

 

  Executive Vice President, Chief

  People Officer

 

 

$

 

 

425,000

 

 

 

 

 

 

 

75

 

 

%

 

 

$

 

 

500,000

 

 

 

ThisThe table does not reflect the Strategic Initiative Grants described below that werespecialone-time strategic leadership grant awarded to each of the named executive officers.Messrs. Vemuri and Webb-Walsh. Additional information regarding these awards can be found under “Strategic Initiative Grants”Leadership RSU Grant” on page 31.

The charts below reflect the 20172018 pay mix for our named executive officers and the portion of their targeted total direct compensation that is variable pay. Basing this variable compensation upon financial results and share price directly aligns our executives with shareholder value creation.

 

LOGOLOGO
CEO - Pay Mix  All Other Named Executive Officers – Pay Mix

Performance-based IncentivesLinking Pay with Performance

Short-Term Incentives

AllEach of our named executive officers participated in the Annual Performance Incentive Program (“APIP”) which focused on the business priorities for 2017.2018. The 20172018 performance measures and weightings for APIP were: Adjusted EBITDA (60%(50%), Revenue Growth (at constant currency) (30%(40%) and an M&A Strategic Goal (10%). For 2018, the Committee determined to use an M&A Goal as a performance metric to replace Revenue Productivity (per employee) (10%). Adjusted EBITDA represents income (loss) before interest, income taxes, depreciation and amortization adjusted for Restructuring and related costs, Separation costs, Other (income) expenses, net, the NY Medicaid Management Information System (NY MMIS), Health Enterprise charge (HE charge) and (Gain) loss on sale of asset and business. Revenue Growth is measured at constant currency and excludes the impact of changes in the translation of foreign currencies into U.S. Dollars. Revenue Productivity measures how efficiently the Company utilized its employees, supported by the cost reduction initiatives and the move towards automation. Results for the measure were evaluated based on the revenue from all business units, divided by total headcount (excluding corporate and contingent workers), and averaged each quarter.to more closely align our named executive officers’ incentive compensation with our strategic priorities.

Additional information regarding short-term incentives can be found under “2017“2018 Compensation for the Named Executive Officers—Short-Term Incentives.”

Long-Term Incentives

In early 2017,2018, the Compensation Committee reviewed peer group data and approved an Executivea Long-Term Incentive Program (“ELTIPLTIP”) that aligned with the interests of shareholders and the Company. The 2017 ELTIP2018 annual LTIP award includes a mix of 50% performance basedperformance-based awards (performance shares)(Performance Stock Units) and 50% time basedtime-based awards (restricted shares)(Restricted Stock Units). This approach balances the need to motivate and drive future behavior while being retentive and fostering stock ownership. Performance sharesStock Units are measured over three years. Performance for each year is measured againstpre-established annual goals and the subsequent payoutperformance achievement is averaged over the three yearthree-year performance period (2017 through 2019)(2018—2020). Vesting occurs at the end of the three-year performance period. Restricted sharesStock Units are subject to three-year ratable vesting (one-third on 12/31/17, 12/31/18 and 12/31/19 respectively).vesting.

The Compensation Committee approved ELTIPannual LTIP awards with a grant date of April 1, 2017.2018. Officers participated at their individual ELTIPLTIP target level. The 20172018 performance measures and weightings are as follows: Adjusted Profit Before Tax (PBT)(“PBT”) (50%) and Free Cash Flow, as adjusted (50%). Adjusted Profit Before Tax is defined as income or loss before Income Taxes as reported on the Consolidated statement of Income (Loss), less amortization of intangible assets; restructuring and related costs; Separation costs; other expenses net, including losses (gains) on sales of businesses and assets, currency (gains) losses, net, litigation matters and all other expenses, net. Free Cash Flow is defined as cash flow from operating activities as reported on the Consolidated statement of cash flows, less cost of additions to land, buildings and equipment and cost of additions to internal use software plus proceeds from sales of land, building and equipment. Additional information regarding long-term incentives can be found under “2017“2018 Compensation for the Named Executive Officers—Long-Term Incentives.”

Strategic Initiative Grants

In 2017,addition to the annual LTIP award, Messrs. Vemuri and Webb-Walsh each received aone-time Restricted Stock Unit award in lightrecognition of the significant challenges facingtheir strategic leadership in establishing Conduent following its separation from Xerox Corporation (“Separation”), the Compensation Committee approvedas a special stock award (“Strategic Initiative Grant” or “SIG”) for each of the named executive officers. The key program objectives are to strengthen the alignment of management with shareholders, accelerate the growth of stock ownership levels among the new executive officer team, motivatesuccessful stand-alone company and promote the successful and expedited business turn around, facilitate cultural change and talent upgrade and retain key executives. The SIG was granted in 50% performance based awards (performance shares) and 50% time based awards (restricted shares). As noted above under “Long-Term Incentives”, this approach balances the need to motivate and drive future behavior while being retentive and fostering stock ownership. The performance shares include two cost transformation and two client outcome metrics, all equally weighted. These measures are: Cost Transformation – Information Technology (25%), Cost Transformation – Real Estate, General & Administrative (25%), Service Line Penetration (25%), and New Business Signing growth (25%). Many of the terms and conditions of the SIG are the same as our ELTIP. For additional information regarding these awards, see the “Long-Term Incentives - Strategic Initiative Grants” section of the CD&A.exceeding transformational goals.

PROCESS FOR DETERMINING COMPENSATION

Role of the Compensation Committee

The Compensation Committee administers the executive compensation program for our named executive officers on behalf of our Board of Directors and shareholders. The members of the Compensation Committee are Paul Galant, Joie A. Gregor and Courtney Mather. All members of the Compensation Committee are independent directors in accordance with applicable SEC and NYSE standards, including heightened independence requirements for Compensation Committee members. The biographies of the Compensation Committee members appear beginning on page 7 of this Proxy Statement.

The Compensation Committee has the authority to retain, and did retain for 2017,retains an independent advisorconsultant for the purpose of reviewing and providing guidance related to executive compensation programs. The Compensation Committee’s responsibilities are discussed beginning on page 15 of this Proxy Statement. A complete description of the Compensation Committee’s responsibilities and functions appears in its charter, which can be found on our website atwww.conduent.com/corporate-governance.

The Compensation Committee evaluates many factors when designing and establishing the executive compensation plans and targets. In determining the appropriate compensation levels, the Compensation Committee considers the scope and impact of the executive’s role within the organization, experience, sustained performance and future potential. The Committee also reviews the compensation levels of similarly positioned executives at peer companies, general industry compensation data, and internal pay considerations.

Role of the CEO

While the Compensation Committee is ultimately responsible for making all compensation decisions affecting compensation of our named executive officers, the CEO participates in the process by:

 

Periodically discussing with the Compensation Committee the performance of the Company and each executive officer.officer with the Compensation Committee.

 

Making recommendations on the components of compensation for the other executive officers.

After receiving input from the CEO, the Compensation Committee makes its own assessments and formulates compensation amounts for each of our executive officers, including our named executive officers, ensuring that the total compensation for each is appropriate and competitive.

Role of the Independent Consultant

The Compensation Committee has retained the services of an independent compensation consulting firm, Frederic W. Cook & Co., Inc. (the “Consultant”), to assist with its responsibilities. The Consultant reports only to the Compensation Committee and has not performed any other work for Conduent since being retained as an independent consultant to the Compensation Committee, except in its capacity as an independent advisor to the Corporate Governance Committee onnon-employee director compensation matters. As provided in its charter, the Compensation Committee has the authority to determine the scope of the Consultant’s services and may terminate the Consultant’s engagement at any time.

During 2017,2018, the Consultant provided the following services:

 

regularly updated the Compensation Committee on trends in executive compensation, including providing proactive advice on emerging trends and best practices;

 

reviewed officer compensation levels and overall performance compared to a peer group made up of organizations with which Conduent is likely to compete for executive expertise,business, investor capital and/or share with Conduent a similar business model in one or more areas;executive talent;

 

reviewed incentive compensation designs for short-term and long-term programs;

 

advised the Compensation Committee on peer group companies for pay and performance comparisons;

 

reviewed the Compensation Discussion and Analysis and related compensation tables for the proxy statement on Schedule 14A, filed with the SEC;inclusion in this Proxy Statement;

 

reviewed Compensation Committee meeting materials with management before distribution;

 

attended Compensation Committee meetings, including meetings in executive session, as requested by the Compensation Committee chair; and

 

offered independent analysis and input on CEO compensation; andcompensation.

advised on post Separation related compensation actions.

Peer Group

In 2017, theThe Compensation Committee approved a peer group of companies with whom Conduent competes for business, investor capital andand/or executive talent. The Committee determined that the identified peer group companies are reasonably similar to Conduent in terms of industry profile, size, and market capitalization.

The 2017 peer group consisted of the following companies:

ADP

CGI Group Inc.

Genpact

Aon

Cognizant Tech Solutions

MAXIMUS

CACI International

DXC Technology

Paychex

Cerner CorpConvergys

IQVIA

The peer group is reviewed annually and is used to benchmark compensation for our named executive officers as well as for general pay practices and trends. The 2018 peer group consisted of the following companies:

Aon plc.

CGI Group Inc.

Genpact Limited

Automatic Data Processing, Inc.

Cognizant Technology Solutions Corp.

IQVIA Holdings Inc.

CACI International Inc.

Convergys Corporation

MAXIMUS, Inc.

Cerner Corporation

DXC Technology Company

Paychex, Inc.

In November 2018, the Committee approved a new peer group for 2019 which the Committee believes more closely aligns with Conduent, considering the Company’s current industry profile, size and market capitalization.

The 2019 peer group will consist of the following companies: Booz Allen Hamilton Holding Corporation, CACI International Inc., Cerner Corporation, CGI Group Inc., Cognizant Technology Solutions Corporation, Fidelity National Information Services, Inc., First Data Corporation, Genpact Limited, Global Payments Inc., IQVIA Holdings Inc., Leidos Holdings, Inc., MAXIMUS, Inc., Roper Technologies, Inc. and Willis Towers Watson Public Limited Company.

Competitive Market Information

In 2017,2018, the Compensation Committee received a report comparing the compensation of its named executive officers with the compensation of executives in comparable positions at our peer group named executive officerscompanies based on the most recent proxy filings (primarily used for the CEO, CFO and General Counsel) as well as general industry survey data to recognize the limitations of proxy data (Willis Tower’s Watson CDB General Industry Executive Compensation survey). This comparison included compensation data for these elements of pay:

 

base salary;

 

short-term incentives;

 

total target cash compensation (base salary plus target short-term incentives);

 

target long-term incentives; and

 

total direct compensation (total target cash compensation plus target long-term incentives).

The competitive market data is prepared, analyzed and presented to the Compensation Committee by the Committee’s Consultant. The market pay range is viewed as a competitive reference point, but that data is not used to match a specific percentile of the market. Emphasis is placed on total target pay.direct compensation. In 2017,2018, the Compensation Committee reviewed target total direct compensation (excluding the Strategic Initiative Grants) against the market data using the 50th percentile as a reference point. The Compensation Committee exercises discretion in setting individual compensation levels to reflect an assessment of the executive’s impact, responsibilities and expected contributions to Conduent, as well as potential for advancement.

20172018 COMPENSATION FOR THE NAMED EXECUTIVE OFFICERS

20172018 Total TargetDirect Compensation

Total targetdirect compensation includes base salary, target annual short-term cash incentiveincentives and target annual long-term equity incentive awards, which includes the April 1, 2017 ELTIP grants and excludes the special Strategic Initiative Grant.incentives, including Performance Stock Units at target. The majority of our named executive officer payofficers’ compensation is provided under our variable incentive compensation programs. Variable pay increases with responsibility while long-term incentive compensation represents the greatest component of pay. The 20172018 total targetdirect compensation which includes annual base salary, target short-term incentive compensation as a percentage of base salary and target long-term incentive compensationour named executive officers can be found under the heading “Executive Summary—20172018 Total Direct Compensation Targets for Named Executive Officers.” For further information regarding the process the Compensation Committee used to determine compensation for our named executive officers, please see above under “Process for Determining Compensation”.Compensation.”

More complete compensation information appears in the “Summary Compensation Table” on page 37.

Base Salary

Base salary is the fixed pay element of our compensation program that reflects the level and scope of responsibility within the Company. The Compensation Committee reviews each named executive officer’s base salary annually as well as in connection with a promotion or other change in responsibility. In connection with the promotion of Jeffrey Friedel to Chief People Officer, his base salary was increased from $285,000 to $425,000, effective February 1, 2017. The 2018 base salaries for our other named executive officers were unchanged from 2016.2017.

Short-Term Incentives

The Annual Performance Incentive Plan (“APIP”) provides for short-term incentive awards that reward performance against our annual operating plan, paid in the form of cash to our named executive officers and other eligible employees. Each year, the Compensation Committee determinesreviews the target short-term incentive award opportunity, scaled to the executive’s level of responsibility and stated as a percentage of base salary, and the maximum payout opportunity.

The following chart reflects Conduent’s process for setting short-term incentive awards. This process typically takes place in the first quarter of the year.

 

LOGO

LOGO

Short-Term Incentive Target Award Opportunity for the Individual Named Executive Officers

The annual short-term incentive target award opportunity for each of our named executive officers takes into account many factors, including scope of responsibility, past contributions, expected future contributions, internal pay equity and competitive executive compensation practices. If an executive’s role or responsibilities change after the terms of the award are approved, the Compensation Committee is permitted to adjust the short-term incentive target award opportunity at that time.

The 20172018 APIP target award opportunity was approved by the Compensation Committee at 150% of base salaryopportunities for Mr. Vemuri and 75% of base salary for the otherour named executive officers. Mr. Friedel’s APIP target opportunity was increased to 75%officers remain unchanged from 50%, effective February 1, 2017, to reflect his promotion to Chief People Officer.2017.

Short-Term Incentive Performance Measures

Short-term incentive awards (APIP) for our named executive officers were intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code. The Compensation Committee established maximum payout opportunities under the Short-Term Incentive Pool (“STI Pool”). EachAPIP for 2018 pursuant to which each named executive officer is covered under the STI Pool,entitled to receive an incentive payout assuming Conduent attains certainpre-established performance goals. In 2017, while2018, the performance goalgoals for the STI Pool wasAPIP were based on achievement of positive Adjusted EBITDA, with achievement of the performance threshold resulting in funding of the STI Pool at maximum, subject to the Compensation Committee’s negative discretion, the amount of each named executive officer’s actual bonus was determined based on the achievement of the applicable performance metrics, which may result in actual payouts less than the named executive officer’s allocation under the STI Pool.Revenue and an M&A strategic goal. For this purpose, Adjusted EBITDA represents income (loss)or loss before interest, income taxes adjusted for interest expense, depreciation and amortization, restructuring and related costs, (gain) loss on divestitures and

amortization adjusted for Restructuring and relatedtransaction costs, Separationlitigation costs Other(recoveries), net, loss on extinguishment of debt, other (income) expenses net, NY MMIS,and legacy charges/credits such as New York Medicaid Management Information System (NY MMIS) and Health Enterprise charge (HE charge)(HE). Revenue is measured at constant currency which excludes the impact of changes in the translation of foreign currencies into U.S. Dollars and (Gain) loss on salecertain other discrete adjustments. The M&A strategic goal required completion of asset and business. After certifying that Conduent had achieved positive Adjusted EBITDA and that the STI Pool was fully funded, the Compensation Committee exercised its discretion and reduced the short-term incentive award amounts payable and approved the payouts as described on page 29.three of five planned divestitures.

Results of financial performance may be adjusted plus or minus 20% on a discretionary basis to recognize individual performance, but in no event would an APIP payout exceed the maximum payout target (200%). PayoutWith respect to our financial performance measures, payout for achieving threshold performance is 50%, of target, payout for achieving target performance is 100% of target and payout for achieving maximum performance is 200%. of target. Performance results and payouts are interpolated between these points. There is no required payout for business performance below threshold levels.

The measures, weightings, goals and target and maximum payout ranges set by the Compensation Committee for 20172018 (in millions) were as follows:

 

  Performance MeasureWeighting            Target      
       (100% payout)      		Maximum  
(200%  payout)  

  Adjusted EBITDA

60%  

$672 million

$ 690 million

  Revenue Growth (at constant currency)

30%  

$6,152 million

$6,190 million

  Revenue Productivity (per employee)

10%  

Increase of
$500/employee

Increase of
$1,000/employee

Performance Measure

 

   Weighting   

Target

(100% payout)

 

Maximum

(200% payout)

 

Adjusted EBITDA

 

 

 

50%

 

 

 

$721

 

 

 

$ 739

 

 

Revenue (at constant currency)

 

 

 

40%

 

 

 

$5,739

 

 

 

$5,800

 

 

M&A Strategic Goal

 

 

 

10%

 

 Completing 3 of 5  

planned divestitures  

 

 

Completing 4 or more planned  
divestitures and qualitative  
assessment  

 

 

These goals were aligned with Conduent’s 20172018 operating plan at the time they were established and designed to be challenging yet achievable.

Determining Short-Term Incentive Award Payouts

After the end of the fiscal year the CFO confirms the financial results and communicates the results to the Compensation Committee. Subject to the Compensation Committee’s review and approval, any extraordinary items or material unusual charges or gains are reviewed with the Compensation Committee for possible impact on APIP plan calculations.

Each performance measure is assessed and calculated independently. The weighted results of each measure are added together to determine overall performance results. Payouts are made proportionately for achievement at levels between the goals. Even ifpre-established performance measures are achieved, the Compensation Committee retains discretion to determine a lesser short-term incentive than the calculated incentive payout, or no short-term incentive at all, as it deems appropriate. The Compensation Committee also retains its discretion to increase or decrease an APIP award (plus or minus 20% as described above) based on individual performance, provided that the named executive officer’s award may never exceed their maximum payout target.

20172018 Performance for Short-Term Incentive Award Payouts

Performance results for 20172018 against the APIP performance measures (in millions) were:

 

Performance
Measures		 Actual  Adjust-
ments		  Adjusted
Results		     

Calculated

Factor

  Weighting  Payout
Percentage		 

Adjusted EBITDA

 $672  $6  $678     133%   60%   80% 

Revenue Growth
(at constant currency)

 $6,022  $101  $6,123     77%   30%   23% 

Revenue Productivity
(per employee)

  
Below
threshold		 
 		  n/a   
Below
threshold		 
 		    0%   10%   0% 
   

Final Calculated Payout ->

   103% 
      

Performance

Measures

 Target    

Actual

(as adjusted)

     

Performance    

Achievement    

 Weighting 

Payout

Percentage

 

Adjusted EBITDA(1)

 

 

 

 

 

 

$   721    

 

 

 

 

 

 

 

 

 

$   700    

 

 

 

 

  

 

  63%

 

 

 

50%

 

 

 

32%

 

 

Revenue(2)
(at constant currency)

 

 

 

 

 

 

$5,739    

 

 

 

 

 

 

 

 

 

$5,658    

 

 

 

 

  

 

    0%

 

 

 

40%

 

 

 

  0%

 

 

M&A Strategic Goal(3)

 

 

 

 

 

 

3 of 5    

 

 

 

 

 

 

 

 

 

4 of 5    

 

 

 

 

  

 

200%

 

 

 

10%

 

 

 

20%

 

 

 

        Final Calculated Payout =>  

 

 

 

52%

 

 

Adjusted EBITDA: $678M, adjusted for the impact of hurricanes on U.S. and Latin America operations, as well as divestures.

(1)

Adjusted EBITDA: $700M, reflects reported adjusted EBITDA of $640M and partial year adjustments for divestitures completed in 2018, and impacts from certain strategic contract exits.

Revenue Growth (at constant currency): $6,123M, adjusted for incremental strategic actions, hurricane impact, and translation currency.
(2)

Revenue (at constant currency): $5,658M, reflects reported adjusted revenue of $5,393 adjusted for currency, and partial year adjustments for divestitures completed in 2018, and impacts from certain strategic contract exits.

Revenue Productivity (per employee): The Company did not achieve its targets on Revenue Productivity due to decisions impacting labor such as insourcing of IT roles, conversion of subcontractors, and shifting headcount to lower cost locations.

(3)

M&A Strategic Goal: The Company successfully completed 4 out of 5 planned divestitures in 2018, with a 5th divestiture closed in February 2019. The Compensation Committee also considered that the Company completed an acquisition supporting our core business in January 2019.

Following the CFO certification of performancethe financial results for 2017,2018, the Compensation Committee reviewed the calculatedachievement of the performance measures on APIP. Based on this, the Committee approved a 52% payout onfactor.

Our named executive officers received payouts at or below the APIP. The Committee supported management’s recommendation to apply negative discretion based on the mixed performance results,approved payout factor, as well as the impact of adjustments on the calculated payout and approved an 80% payout factor.set forth below, except for Mr. Peffer’s awardWebb-Walsh, who was increased to 90%,62% reflecting his achievementscontribution in standing up Conduent as a new public company.Real Estate consolidation and Finance transformation projects and Mr. Amoriell’s awardFriedel who was increased to 90%57% reflecting his strong performance leadingcontribution to the Public Sector business. Mr. Walsh’s award was increased to 96% reflecting his outstanding performance in the finance transformation, as well as the completion of five divestitures.successful Accushoring™, effort.

In view of 2017 results,

Executive

 

2018 APIP
Target ($)

 

2018 APIP Actual  
Payout ($)

 

 

Ashok Vemuri

 

 

 

 

 

$1,500,000

 

 

 

 

 

 

 

 

$780,000

 

 

 

 

 

Brian Webb-Walsh

 

 

 

 

 

$   337,500

 

 

 

 

 

 

 

 

$210,600

 

 

 

 

 

Dave Amoriell

 

 

 

 

 

$   402,000

 

 

 

 

 

 

 

 

$188,136

 

 

 

 

 

J. Michael Peffer

 

 

 

 

 

$   375,000

 

 

 

 

 

 

 

 

$195,000

 

 

 

 

 

Jeffrey Friedel

 

 

 

 

 

$   318,750

 

 

 

 

 

 

 

 

$182,325

 

 

 

 

*

Accushoring™, allowing the company to use talent anywhere in the world and giving it the flexibility to leverage human capital from locations with the best balance of skill, availability and costs.

Given Conduent’s 2018 achievements, the Compensation Committee and our CEO believe thatconcluded the annual short-term incentiveAPIP payments resulted in reasonable and appropriate performance-related incentive payments to our named executive officers. The annual incentives paid to our named executive officers in March2019 for 2018 for 2017 performance are shown in the “Summary Compensation Table.” Additional information about the short-term incentive opportunities is shown in the “Grants of Plan-Based Awards in 2017”2018” table. Information regarding short-term incentive payouts under certain termination events and the amount of the estimated payouts and benefits payable to the named executive officers assuming a change in control of Conduent and a qualifying termination of employment is presented in the “Potential Payments Upon Termination or Change in Control” table.

Long-Term Incentives

We provide long-term incentives to reward our named executive officers for sustained performance, as a retention incentive and to align executive’s interests with shareholders to drive long-term value creation. Awards are intended to encourage a strong ownership stake in the Company to drive superior performance on long-term Company objectives. The Committee considers peer data, relative impact of the executive’s position, responsibilities and role toat Conduent and each named executive officer’s performance when determining long-term incentive awards.

Executive Long-Term Incentive Program and Performance Measures

Long-term incentive awards are made pursuant to the Conduent Incorporated Performance Incentive Plan. Restricted Stock Units vest ratably over a three-year period.

Performance sharesStock Units are measured over a three-year performance period. Performance for each year is measured againstpre-established annual goals and the subsequent payoutperformance achievement is averaged over the three-year period.performance period (2018—2020). The 2018 performance measures and weightings are as follows: Adjusted PBT (50%) and Free Cash Flow, as adjusted (50%). Adjusted PBT is defined as income or loss before income taxes as reported on the Consolidated Statements of Income (Loss), less amortization of intangible assets; restructuring and related costs; (gain) loss on divestitures and transaction costs; litigation costs (recoveries), net; loss on extinguishment of debt and other (income) expenses, net, business and assets, currency (gains) losses, net, litigation matters and all other expenses, net. Free Cash Flow is defined as cash flow from operating activities as reported on the Consolidated Statements of Cash Flows, less cost of additions to land, buildings and equipment and cost of additions to internal use software and vendor financed capital lease additions plus proceeds from sales of land, building and equipment, partial year adjustments for divestitures

and tax payments related to divestitures completed in 2018. Adjusted Free Cash Flow is defined as the free cash flow from above plus deferred compensation payments, transaction costs and other identified items. The entire award vests at the end of the three-year performance period, subject to Compensation Committee certification of performance results. Restricted shares are not tied to performance measures and vest ratably over a three-year period.

Once vested, performance sharesRestricted Stock Units and restricted sharesPerformance Stock Units are paid out in the form of shares of Conduent Common Stock. Any dividends during the vesting period willwould be accrued and paid on vesting in an amount equal to the dividends the executive would have earned from owning the same amount of Conduent Common Stock which vested under the award throughout the vesting period.

Although equity awards generally are granted on a regular annual cycle, the Compensation Committee may grantoff-cycle equity awards for special purposes, such as new hire, promotion, retention, and recognition.

Compensation Committee Actions Relating to ELTIPLTIP Awards

The following chart reflects Conduent’s process for setting long-term incentive awards. This process typically takes place in the first quarter of the year.

LOGO

During the first fiscal quarter of 2017,2018, the Compensation Committee approved ELTIPLTIP grants for our named executive officers,officers. As part of this approval, the Committee established performance goals and award values, a payout range of 50% to 200% of target and an April 1, 20172018 grant date. Mr. Vemuri’s 2017 ELTIP award was approved as part of his letter agreement as described under “Named Executive Officers with Unique Compensation Arrangements.” The 2017 ELTIP awards approved by the Compensation Committee for the other named executive officers are commensurate with their new roles leading Conduent as a standalone public company. Additional information regarding the 2017 ELTIP2018 LTIP awards can be found in the “Summary Compensation Table” and the “Grants of Plan-Based Awards in 2017”2018” table.

The 2017 ELTIP2018 LTIP award was granted in 50% performance sharesPerformance Stock Units and 50% restricted shares.Restricted Stock Units. The target number of performance shares and restricted sharesunits granted to our named executive officers in April 20172018 was determined by dividing the approved target award value by the closing price of Conduent Common Stock on the grant effective date.

For 2017 restricted shares, 2018 Restricted Stock Units,one-third vested on 12/31/17, one-third will vest on 12/31/18, and one-thirdthe balance will vestone-third on 12/31/19.19 andone-third on 12/31/20, subject to continued employment. The performance period for the 2017 performance shares2018 Performance Stock Units is 2017 through 2019.January 1, 2018 – December 31, 2020. Performance for each year (2017, 2018 and 2019) is measured againstpre-established annual goals and the subsequent payoutperformance achievement is averaged over the three-year performance period. The entire award does not vest until the end of the three-year performance period on December 31, 20192020 with payout in the first quarter of 2020,2021, following Compensation Committee certification of the performance results.

The payout for achieving threshold performance is 50%, the payout for achieving target performance is 100%, and the payout for achieving maximum performance is 200%. Payouts are made proportionately for achievement at levels between these goals. There is no payout if performance falls below each of the threshold goals established by the Compensation Committee.

 

        Payout Range
Performance Measures  Weighting  Threshold  Target  Maximum

Adjusted PBT

  50%  50%  100%  200%

Free Cash Flow

  50%  50%  100%  200%

      

Payout Range

 

Performance Measures

 

 

Weighting     

 

 

Threshold   

 

 

Target     

 

 

Maximum     

 

 

Adjusted PBT

 

 

 

50%    

 

 

 

50%    

 

 

 

100%   

 

 

 

200%    

 

 

Free Cash Flow, as adjusted

 

 

 

50%    

 

 

 

50%    

 

 

 

100%   

 

 

 

200%    

 

The performance goals were aligned with Conduent’s 20172018 three-year financial model at the time the goals were established. Target performance levels are challenging but achievable with a level of performance that is in line with the Board-approved operating plan, whereas maximum performance levels represent stretch goals which can only be achieved with exceptional performance.

The performance goalsStrategic Leadership RSU Grant

Messrs. Vemuri and resultsWebb-Walsh each received aone-time Restricted Stock Unit award in recognition of their leadership in establishing Conduent as a successful stand-alone company and exceeding transformational goals. Mr. Vemuri received an award of 12,875 Restricted Stock Units, vestingone-third on 12/31/18,one-third on 12/31/19 andone-third on 12/31/20. Mr. Webb-Walsh received an award of 10,000 Restricted Stock Units, vesting 50% on 12/31/18, 25% on 12/31/19 and 25% on 12/31/2020.

PERFORMANCE RESULTS AND PAYOUTS UNDER PRIOR EQUITY AWARDS

2017 – 2019 Strategic Initiative Grant

In 2017, the Committee approved a special stock award (“Strategic Initiative Grant” or “SIG”) for the first year (2017)each of the 2017-2019 ELTIP Plan (in millions) were:

Performance Measures  Target   Actual   Adjust-
ments		   Adjusted
Results		      Calculated
Factor		  Weighting  Payout
Percentage		 

Adjusted PBT

  $236   $281    —   $281      200%   50%   100% 

Free Cash Flow

  $150   $187   $17   $204      200%   50%   100% 
    

2017 Results ->

   200% 

Free Cash Flow: $17M added back for deferred compensation payments from terminated deferred compensation plans.

Information regarding ELTIP payouts under certain termination events and the amount of the estimated payouts and benefits payable to the named executive officers assuming a change in control of Conduent and a qualifying termination of employment is presented in the “Potential Payments Upon Termination or Change in Control” table.

Strategic Initiative Grants

In light of the challenges facing Conduent in organizing itself as an independent company and improving operational and financial performance and consistent with the actions of similar companies following a spin, the Compensation Committee elected to provide a special award program to the named executives to better align the economic interest of our officers with those of our shareholders.officers. The key program objectives arewere to buildstrengthen the alignment of management with

shareholders, accelerate the growth of stock ownership levels among the new officer team, cohesion, motivate and promote the successful and expedited business turn around,turnaround, facilitate cultural change and talent upgrade, talent and foster retention.

retain key executives. The SIG award was granted in 50% performance based sharesperformance-based awards (performance shares) and 50% time based (restricted) shares.time-based awards (restricted shares). The performance shares fully vestinclude two cost-transformation and two client-outcome metrics, all equally weighted. These measures are: Cost Transformation – Information Technology (25%), Cost Transformation – Real Estate, General & Administrative (25%), Service Line Penetration (25%) and New Business Signing Growth (25%). Information Technology, Real Estate and General & Administrative represent substantial optimization and savings opportunities. Service Line Penetration measures the ability to cross-sell additional service lines to the top commercial clients. New Business Signings growth measures the total contract value of new business signings based on Compound Annual Growth Rate (CAGR) over three-years and are subject to pre-established performance criteria, detailed below, that are critical to Conduent’s strategic plan to drive profitable growth and build a business for the long-term as communicated to our investors. 2016 baseline.

Although the goals reflectreflected three-year cumulative performance (2017 – 2019), there iswas an opportunity for up to 50% of the award to be earned and paid at the end of the second year (2018)(December 31, 2018). While the performance targets reflect challenging three-year goals aligned with the Company’s multi-year transformation plan, the Compensation Committee believed it would benefit Conduent and shareholders to further incentivize management to expedite the achievement of these critical milestones. Performance against goals will be measured again at the end of 2019 and the payout earned will be reduced by anythe awards that vested at the end of 2018. Payout is subject to Compensation Committee certification of performance results. Restricted shares will vest ratably over a three-year period (one-third of the award vested on December 31, 2017, one-third will vest on December 31, 2018 and one-third on December 1, 2019). The Compensation Committee approved SIG awards for each of the named executive officers with a grant date of April 1, 2017 and target grant date award values as follows: Mr. Vemuri - $4,614,500; Mr. Webb-Walsh - $2,936,500; Mr. Peffer - $2,936,500; Mr. Amoriell - $2,936,500 and Mr. Friedel - $2,936,500.

The performance shares include two cost transformation and two client outcome metrics, all equally weighted. These measures are: Cost Transformation – Information Technology (25%), Cost Transformation – Real Estate, General & Administrative (25%), Service Line Penetration (25%), New Business Signings growth (25%). New Business Signings growth measures the Total Contract Value new business signings based on Compound Annual Growth Rate (CAGR) over the 2016 baseline. Service Line Penetration measures the ability to cross-sell additional service lines to the top commercial clients. Information Technology, Real Estate and General & Administrative represent substantial optimization and savings opportunities.

The measures, weightings and threshold to maximum payout ranges set by the Compensation Committee for the SIG are as follows:

 

      

Payout Range

 

 

Performance Measure

 

 

 

Weighting  

 

 

 

Threshold     

 

 

 

Target   

 

 

 

Maximum   

 

 

Cost Transformation – IT

 

 

 

25%

 

 

 

50%

 

 

 

100%   

 

 

 

200%   

 

 

Cost Transformation – Real Estate and G&A

 

 

 

25%

 

 

 

50%

 

 

 

100%   

 

 

 

200%   

 

 

Service Line Penetration

 

 

 

25%

 

 

 

50%

 

 

 

100%   

 

 

 

200%   

 

 

New Business Signings

 

 

 

25%

 

 

 

50%

 

 

 

100%   

 

 

 

200%   

 

The termsperformance results and conditions of the SIG are the samepayout against these goals effective December 31, 2018 were as ELTIP noted above.follows:

Additional

Performance Measure

 

 

Performance   
Achievement   
in 2018   

 

 

Weighting   

 

 

Payout   
Percentage   

 

 

Payout   
for 2018   

 

 

Payout   
for 2019   

 

 

Cost Transformation – IT

 

 

 

200%

 

 

 

25%

 

 

 

50%

 

 

 

25%

 

 

 

25%

 

 

Cost Transformation – Real Estate and G&A

 

 

 

200%

 

 

 

25%

 

 

 

50%

 

 

 

25%

 

 

 

25%

 

 

Service Line Penetration

 

 

 

0%

 

 

 

25%

 

 

 

0%

 

 

 

0%

 

 

 

TBD

 

 

New Business Signings

 

 

 

0%

 

 

 

25%

 

 

 

0%

 

 

 

0%

 

 

 

TBD

 

 

        Final Calculated Payout =>             

 

 

 

50%

 

 

 

TBD

 

The Outstanding Equity Awards at 2018 FiscalYear-End table provides additional information regarding the SIG awards can be found in the “Summary Compensation Table” and the “Grant of Plan-Based Awards in 2017” table.’’

SHAREHOLDER SAY ON PAY

Our executive compensation is subject to an advisory vote of shareholders at our Annual Meeting. The Compensation Committee considers the outcome of say on pay votes when making compensation decisions for our named executive officers. At the 2017 Annual Meeting of Shareholders, 98.8% of shares voted were in favorresults of our executive compensation. In addition, 94.0%performance through 2018year-end with respect to outstanding performance based stock awards. The Option Exercises and Stock Vested in 2018 table provides additional information regarding the portion of shares voted were in favor of holding an annual say on pay vote. Our Board and the Compensation Committee greatly value the benefits of maintaining a dialogue with our shareholders and understanding their views. The executive management team of Conduent established and participated in various shareholder engagement activities in 2017. Conduent’s investor relations function proactively engages with our shareholders to provide updates on the performance of the Company and solicit feedback on various topics.

NAMED EXECUTIVE OFFICERS WITH UNIQUE COMPENSATION ARRANGEMENTS

Ashok Vemuri

In June 2016, Mr. Vemuri entered into a letter agreement which provided he would become CEO of Conduent following Separation. The terms of his new hire offer letter included a 2017 ELTIP award target value of $5,000,000.

In addition, if, prior to the first anniversary of Mr. Vemuri’s July 1, 2016 start date, he voluntarily terminated employment for “Good Reason” (as defined in the offer letter) or was terminated by Xerox or Conduent other than for “Cause” (as defined in his equity award agreement), then he would have been entitled to salary continuation paid over 12 months equal to his annual base salary. If Mr. Vemuri incurs such a termination after the first anniversary of his start date, he will be entitled to severance equal to six months’ salary or, if greater, the amount he is entitled to under the applicable Conduent severance policy at such time.

In connection with the offer letter, Mr. Vemuri agreed to be bound by non-competition and non-solicitation restrictive covenants during the period of his employment and for 12 months following termination of employment. All compensation under the offer letter is subject to Conduent’s standard clawback provisions (including detrimental activity). The offer letter also provided that Mr. Vemuri would be party to Xerox’s customary form of change in control severance agreement. On December 12, 2016, Mr. Vemuri’s change in control severance agreement was amended to increase the change in control trigger from 20% to 50% of the combined voting power of the Company’s then outstanding shares, to be consistent with the provisions of the change in control severance agreements of his Conduent senior leadership team. In August 2017, Conduent adopted the Conduent Incorporated Executive Change in Control Severance PlanStrategic Initiative Grants (“CIC PlanSIG”) effective Octoberawarded on April 1, 2017, as described in the Change-in-Control Benefits section below. The terms of Mr. Vemuri’s change in control severance agreement remained in effect untilwhich partially vested on December 31, 2017, after which he was covered under the CIC Plan.2018.

Jeffrey Friedel

Mr. Friedel was initially hired in September 2016 as Chief of Staff for Mr. Vemuri. In order to replace certain equity and annual incentive compensation Mr. Friedel would have received from his prior employer, his new hire package included a cash sign-on award of $150,000 payable in two installments, the first payment of $75,000 after three months following his date of hire and the second installment of $75,000 after his one-year anniversary. The first payment was made in January 2017 and the second was made in October 2017. If Mr. Friedel voluntarily terminates or is terminated for cause by the Company within 12 months following receipt of these payments, he is required to pay back the entire amount upon separation.

SAVINGS PLANS

Conduent Savings Plan (401(k))

All of our named executive officers are eligible to participate in the Conduent Savings Plan in the same manner as all U.S. employees. After one year of service, participants are eligible for a 100% match on 3% of eligible pay saved, subject toIRS-qualified plan compensation limits and highly compensated threshold limits and may not receive 401(k) benefits in excess of these limits. Mr. Vemuri, Mr. Webb-Walsh, Mr. Amoriell, Mr. Peffer and Mr. Friedel elected to save in the Conduent Savings Plan in 2017. All2018, and all received a Company matching contribution except for Mr. Friedel who was not eligible to receive a Company matching contribution in 2017 since he had not completed one year of service.

Supplemental Savings Plan

In 2017,contribution under the Supplemental Savings Plan, “highly compensated employees” (as defined under ERISA) including our named executive officers, were eligible to defer up to 85% of their base salary, bonus and commissions. Conduent may make discretionary employer contributions for plan participants, but no discretionary contributions were made. In 2017, Mr. Amoriell and Mr. Peffer elected to save in the Supplemental Savings Plan.

In September 2017, Conduent terminated the Supplemental Savings Plan. No additional elective deferrals were made after September.plan. The Company does not maintain anynon-qualified deferred compensation plans or other retirement plans.

PERQUISITES AND OTHER BENEFITS

General Benefits

We generally maintain medical and dental coverage, life insurance, accidental death insurance and disability benefits programs or plans for all of our employees, as well as customary vacation, leave of absence and other similar policies. Our named executive officers are eligible to participate in these programs and plans on the same basis as all other salaried employees, except as otherwise disclosed.

Perquisites

Following Separation,In August 2018, the Compensation Committee reviewed and approved our limited perquisites which are intended to support the health, safety and productivity of our named executive officers. Conduent does not provide taxgross-ups in connection with perquisites (except in relation to relocation per the U.S. relocation policy).

In 2017,2018, all named executive officers were eligible to receive Company-paid financial and tax planning assistance of up to $15,000 per year. Solid financialFinancial planning by experts reduces the amount of time and attention that named executive officers devote to their finances and maximizes the value of their compensation.personal finances. To safeguard their health, all named executive officers were also eligible to receive an annual physical examination through our preferred provider or reimbursement of up to $5000$5,000 for the cost of a physical should the named executive officer chose to use their own physician. In addition, to assist with managing financial security, all named executive officers were eligible for annual credit monitoring up to $350. Mr. Vemuri also receives home security benefits. The Company also holds corporate club memberships in the names of Messrs. Vemuri, Walsh and Peffer primarily for business purposes, although personal use is permitted. The Company pays the annual dues and other fixed costs associated with club membership, but all costs attributable directly to personal use of the club membership, such as meals and other incidentals, are reimbursed by the executive. The total costscost to Conduent for providing perquisites and personal benefits to the named executive officers during 20172018 are shown in the “Summary Compensation Table.”

CHANGE-IN-CONTROL BENEFITS

The Compensation Committee approved the Executive Change in Control Severance Plan (“CIC Plan”), effective October 1, 2017. All named executive officers were covered under the CIC Plan as of January 1, 2018. The CIC Plan is intended to replacereplaced prior individual change in control agreements entered into with

Xerox prior to January 1, 2017 (“Prior CIC Agreements”) with a consistent and standardized design. The CIC Plan provides certain enhanced benefits to key management employees who the Company determines are most likely to be impacted by a change in control (primarily the Company’s executive officers), so that they can continue to exercise their judgment and legal responsibilities without the potential for distraction and bias that can arise from concerns regarding their personal circumstances.

Eligible employees are selected by the Compensation Committee to participate in the CIC Plan. The CIC Plan provides eligible employees with severance payments and benefits in the event that an eligible employee’s employment with the Company is terminated and such termination is a “qualifying termination” within the period beginning 90 days prior to or within 24-monthsa “change in control” and ending, for theour CEO, and 12-months24-months following, or for any other participant, one year immediately following, a “change in control”control.” A “qualifying termination” means a participant’s termination of the Company eitheremployment (a) by the employer company for any reason other than “cause”, “disability” or death or (b) by the eligible employee for “good reason”. The severance payments and benefits to be provided, subject to the employee’s execution of a release of claims, are as follows:

 

 (1)

A lump sum payment, in cash, equal to the sum of (a) unpaid salary with respect to any paid time off accrued but not taken as of the date of termination, (b) accrued but unpaid salary through the date of termination and (c) any earned but unpaid annual incentive bonus from the fiscal year immediately preceding the year in which the date of termination occurs;

 

 (2)

A lump sum payment, in cash, equal to the product of (a) the participant’s annual rate of base salary in effect on the date that notice of termination is given and the annual target bonus applicable to the participant for the year in which notice of termination is given, multiplied by (b) a “factor” (whichwhich in the case of the CEO, CFO, President, General Counsel and Secretary and Chief People Officereach of our named executive officers is two);two;

 (3)

Participant shall continue to be entitled to receive all benefits payable under any other plan or agreement relating to retirement benefits or to compensation previously earned and not yet paid; and

 

 (4)

Participant shall continue to be eligible to participate in the medical, dental and health care reimbursement account coverage in effect at the date of termination as if the participant had continued in employment duringfor the lesser of (a) the severance period or (b) twelve months. The severance period is based on the “factor” used for the lump sum payment calculation noted in (2) above. For the CEO, CFO, President, General Counselabove, and Secretary and Chief People Officer, the severance period is two years. Ifif the severance period exceeds twelve months, the participant will receive a cashlump-sum payment equal to the projected value of the employer portion of the premiums for medical and dental benefits for the time period between the end of the twelve months and the remainder of the severance period. OurFor each of our named executive officers, the severance period is two years. Accordingly, our named executive officers would be eligible to participate in medical, dental and health care reimbursement coverage for twelve months and would receive a lump sum cash payment to cover the employer premiums between the end of the twelve months and the end of their severance period.

Conduent does not provide excise tax reimbursement on severance payments.

The CIC Plan had a three-month term in 2017 and will automatically renew for successive one-year periods beginning in 2018 unless the Company gives notice that it does not wish to extend the CIC Plan. In addition, the CIC Plan promises each participant payment of his or her legal fees in the event the participant brings suit in good faith to enforce his or her rights under the CIC Plan.

Additional information and the amount of the estimated payments and benefits payable to the named executive officers assuming a change in control of Conduent and a qualifying termination of employment is presented in the “Potential Payments Upon Termination or Change in Control” table.

EMPLOYMENT AND SEPARATION

Named executive officers serve at the will of the Board. This enables the Board to remove a named executive officer whenever it is in the best interests of Conduent, with full discretion of the Compensation Committee to decide on an appropriate severance package (except in the case of the CEO, forwho is entitled to certain severance benefits that have vestedas per his offer letter, or in the case of a change in control). When a named executive officer is removed from his or her position, the Compensation Committee exercises its business judgment in considering whether to approve a severance arrangement in light of all relevant circumstances, including how long the officer was with the Company, past accomplishments and the reasons for separation. If the Compensation Committee does not approve a special

severance arrangement for a named executive officer whose position has been eliminated, that officer will be covered under the Company’s U.S. Executive Severance and Salary Continuance Policy, as applicable.

For separations due to the elimination of the executive’s position, the U.S. Executive Severance and Salary Continuance Policy entitles executives, including our named executive officers, to 26 weeks of base pay, paid out over the severance period, with continued fullhealth benefits (excluding disability and 401(k) contributions)participation). This payment is contingent upon signing a release of claims against Conduent as may be required. As described in the section entitled “Named Executive Officers with Unique Compensation Arrangements,” Mr. Vemuri was eligible to receive enhanced severance under a special severance arrangement pursuant to his offer letter through the first anniversary of his July 2016 start date. For further information, see the “Potential Payments Upon Termination or Change in Control” table.

GOVERNANCE OF THE EXECUTIVE COMPENSATION PROGRAMS

Risk Assessment

The Compensation Committee believes that its programs encourage positive behavior while balancing risk and reward, consistent with the interests of its shareholders. Conduent management conducts risk assessments each year and presents the findings to the Compensation Committee. Based on the assessment of programs covering its employees and executives for 2017,2018, the Compensation Committee determined that its compensation plans, programs and practices do not motivate behavior that is reasonably likely to have a material adverse impact on Conduent, based on the following factors:

Key Program Features:

 

Program weighted towards long-term incentives

 

Balanced mix of performance measures (financial and operational) approved by the Compensation Committee in advance

 

Financial goals tied to the operating plan approved by the Board

 

Payout limitations/caps

 

Overlapping performance periods for long-term incentives

Risk Mitigators:

 

Independent Compensation Committee oversight

 

Officer stock ownership guidelines

 

Pay recoupment policy

 

Anti-hedging practicepolicy

Ownership Requirements

The Board approvedCompany maintains a new stock ownership policy for ourthe named executive officers in order to ensure they build and maintain a meaningful level of stock ownership. The stock ownership guidelines are as follows:

 

Ownership requirements of 5x, 3x and 1x base salary, for the CEO, CEO’s direct reports and all other officers, respectively.

 

Need

Required to satisfymeet the applicable level of ownership requirement by the end of the fifth full calendar year after becoming an executive.

 

If executive fails to reach compliance within five years, there will be a mandatory retention of 50% of all vested shares (net of taxes) until the threshold is achieved.

 

CEO has the authority to permit discretionary hardship exceptions from the ownership and holding requirements (the Board has the authority to permit discretionary hardship exceptions for the CEO).

The following types of awards will count toward the guidelines described above: Common Stock held outright and unvested Restricted Stock and Restricted Stock Units. The following types of unvested equity awards will not count toward the stock ownership guidelines: unexercised stock options, unearned performance awardsPerformance Stock Units and cash settledany cash-settled units. Once stock ownership levels are achieved, named executive officers are required to continue to hold that amount of stock as long as they remain with Conduent.

Trading, Hedging and Pledging

Our named executive officers are prohibited from engaging in short-swing trading and trading in puts and calls with respect to our Common Stock. In addition, our named executive officers are prohibited from using any strategies or products to hedge against potential changes in the value of our Common Stock.

Under our insider trading policy, our named executive officers may purchase or sell Conduent securities only during “window” periods, which are generally 10 business daythe periods that begincommencing on the second business day following the date of each quarterly earnings announcement.announcement and ending on the close of business on the 15th day of the month before the end of the then-current quarter. The only exception to this restriction is for our named executive officers who have entered into trading plans pursuant to SEC Rule10b5-1.

As a result, our named executive officers are effectively precluded from pledging our Common Stock as collateral, including holding our Common Stock in a margin account, since their stock can only be sold during “window” periods and trading plans pursuant to SEC Rule10b5-1, and therefore is not available to be sold at any time.

Compensation Recovery Policy (Clawbacks)

Under the Conduent Performance Incentive Plan, if the Compensation Committee deems a named executive officer to have engaged in activity that is detrimental to Conduent, it may cancel any awards granted to that individual. In addition, if such a determination is made before any change in control of Conduent, the Compensation Committee may rescind any payment or delivery of any equity and annual cash incentive award that occurred fromwithin the six months beforepreceding the detrimental activity. For this purpose, detrimental activity may include a violation of anon-compete agreement with Conduent, disclosing confidential information (except for reporting and other communications protected by “whistleblower” provisions of the Dodd- Frank Wall Street Reform and Consumer Protection Act), soliciting an employee to terminate employment with Conduent, or soliciting a customer to reduce its level of business with Conduent. If a payment or award is rescinded, the named executive officer will be expected to pay Conduent the amount of any gain realized or payment received in a manner the Compensation Committee or its delegate requires.

Conduent’s stock award agreements include a clawback provision that applies if an accounting restatement is required to correct any materialnon-compliance with financial reporting requirements. Under this provision,

Conduent can recover, for the three prior years, any excess incentive-based compensation (the excess over what would have been paid under the accounting restatement) from executive officers or former executive officers.

In addition, the Compensation Committee implemented a compensation recovery policy that is applicable to our named executive officers. If an accounting restatement is required to correct any materialnon-compliance with financial reporting requirements under relevant securities laws, Conduent may recover any excess incentive-based compensation from the executive officersofficer or former executive officers (in excess of what would have beenofficer any incentive-based compensation paid under the accounting restatement), including entitlement to shares of Common Stock, that was based on such erroneous data and paidhim or her during the three-year period preceding the date on which Conduent is required to prepare the accounting restatement.restatement that was in excess of what would have been paid based on the restated results. Conduent may implement any policy or take any action with respect to the recovery of excess incentive-based compensation including entitlement to shares of Common Stock that Conduent determines to be necessary or advisable in order to comply with the requirements of the Dodd-Frank Act.

Compensation recovery arrangements may be included in letter agreements with executives, as disclosed for Mr. Vemuri inAct, including the “Named Executive Officers with Unique Compensation Arrangements” sectionrecoupment of shares of Common Stock issued upon the CD&A.vesting of a long-term incentive award.

CERTAIN TAX IMPLICATIONS OF EXECUTIVE COMPENSATION

With certain material exceptions, Section 162(m) of the Internal Revenue Code generally limits to $1 million per year the federal income tax deduction available to public corporations for compensation paid forin any fiscal year to the corporation’s CEO and certain other named executive officers at year end (but not the CFO)and certain former named executive officers included in the “SummarySummary Compensation Table”Table in the corporation’s proxy statement.

Pursuant to Section 162(m), as in effect for 2017, compensation in excess of $1 million per year paid to Conduent’s CEO and three other highest paid executive officers (other than the CFO) was not deductible unless it qualified as “performance-based” compensation. In connection with granting incentive compensation to the named executive officers, the Compensation Committee has considered the implications under Section 162(m) while retaining flexibility to design programs that it believed were in the best interests of

Conduent and its stockholders and consistent with the objectives of our executive compensation programs, including the flexibility to authorize payments that might not be deductible. The Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, eliminated the exception for “performance-based” compensation with respect to 2018 and future years. As a result, Conduent expects that except to the extent that compensation is eligible for limited transition relief applicable to binding contracts in effect on November 2, 2017 that are not modified in any material respect after that date, compensation over $1 million per year paid to any named executive officer, including our CFO (and any person who was a named executive officer for any year beginning with 2017), will be nondeductible under Section 162(m).

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Conduent management. Based upon its review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be incorporated by reference in the Company’s Annual Report on Form10-K for the year ended December 31, 20172018 and be included in the Proxy Statement for the 20182019 Annual Meeting of Shareholders.

Joie A. Gregor, Chair

Paul GalantWilliam Parrett

Courtney Mather

SUMMARY COMPENSATION TABLE

The Summary Compensation Table below provides compensation information for our principal executive officer, our principal financial officerthe Company’s Chief Executive Officer, Chief Financial Officer and the next three other most highly compensated executive officers who served during the fiscal year ended December 31, 20172018 (collectively referred to as named executive officers). The table includes the dollar value of base salary earned, bonus, stock awards, non-equity incentive plan compensation earned and all other compensation, whether paid or deferred. Unless otherwise stated, the compensation tables included in this section reflect amounts paid or payable or awards granted to our named executive officers by Conduent under Conduent’s compensation plans and programs during 2017.

For a summary of the Conduent Compensation Committee’s decisions on the compensation awarded to our named executive officers for 2017, please refer to the “Compensation Discussion and Analysis.”

 

          

Name &

Principal

Position

 

 

Year

 

  

  Salary
  ($) (A)

 

  

Bonus
($) (B)

 

  

Stock
Awards
($) (C)

 

  

Option  
Awards  
($) (D)

 

 

Non-Equity  
Incentive Plan  
  Compensation  
($) (E)  

 

 

Change in
Pension
Value
and
NQDC
Earnings
($) (F)

 

  

All Other  
Compensation  
($) (G)  

 

  

Total

($)

 

 

Ashok Vemuri,

Chief Executive

Officer

 

 

 

 

 

2017

 

2016

 

 

 

 

 

 

 

 

 

  1,000,000

 

  503,846

 

 

 

 

 

 

 

 

-

 

1,750,000

 

 

 

 

 

 

 

 

 

9,614,470

 

2,500,004

 

 

 

 

 

 

-

-

 

 

1,200,000  

 

   702,865  

  

 

-

 

-

 

 

 

 

 

 

 

 

  15,004  

 

  22,192  

 

 

 

 

 

 

 

11,829,474

 

5,478,907

 

 

 

 

 

Brian Webb-Walsh,

Executive Vice President

and Chief Financial

Officer

 

 

 

 

 

2017

 

2016

 

 

 

 

 

 

 

 

 

  450,000

 

  333,750

 

 

 

  

 

-

 

-

 

 

 

 

 

 

 

 

3,911,486

 

500,000

 

 

 

 

 

 

-

 

-

 

 

   324,000  

 

   187,256  

 

 

 

 

 

-

 

  29,004

 

 

 

 

 

 

 

 

 

105,439  

 

  34,753  

 

 

 

 

 

 

 

 

4,790,925

 

1,084,763

 

 

 

 

 

David Amoriell,

President

 

 

 

 

 

 

2017

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

  536,000

 

  532,869

 

  525,000

 

 

 

 

 

 

 

 

 

 

 

-

 

-

 

553,986

 

 

 

 

 

 

 

 

 

 

 

 

3,736,470

 

800,005

 

800,007

 

 

 

 

 

 

 

 

-

 

-

 

-

 

 

 

   361,800  

 

   359,944  

 

   109,295  

 

 

 

 

 

 

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  11,852  

 

  11,663  

 

  22,832  

 

 

 

 

 

 

 

 

 

 

 

4,646,122

 

1,704,481

 

2,011,120

 

 

 

 

 

 

 

J. Michael Peffer,

Executive Vice President,

General Counsel and

Secretary

 

 

 

 

2017

 

 

 

 

 

 

  500,000

 

 

 

 

 

 

-

 

 

 

 

 

 

3,736,470

 

 

 

 

-

 

 

 

   337,500  

 

 

 

 

 

-

 

 

 

 

 

 

 

 

  36,354  

 

 

 

 

 

 

4,610,324

 

 

 

Jeffrey Friedel,

Executive Vice President,

Chief People Officer

 

 

 

 

2017

 

 

 

 

 

 

  407,769

 

 

 

 

 

 

150,000

 

 

 

 

 

 

3,436,476

 

 

 

 

-

 

 

 

   243,250  

 

 

 

 

 

-

 

 

 

 

 

 

 

 

    8,620  

 

 

 

 

 

 

4,246,115

 

 

          

Name &

Principal

Position

 

Year

 

Salary
($) (A)

 

Bonus
($) (B)

 

Stock
Awards
($) (C)

 

Option
Awards
($) (D)

 

Non-Equity
Incentive Plan
Compensation
($) (E)

 

Change in
Pension
Value

and
NQDC
Earnings
($) (F)

 

All Other
Compensation
($) (G)

 

Total

($)

 

 

Ashok Vemuri,

Chief Executive

Officer

 

 

 

 

 

 

 

2018

 

2017

 

2016

 

 

 

 

 

 

 

 

 

1,000,000

 

1,000,000

 

503,846

 

 

 

 

 

 

 

 

-

 

-

 

1,750,000

 

 

 

 

 

 

 

 

5,239,984

 

9,614,470

 

2,500,004

 

 

 

 

 

 

 

 

-

 

-

 

-

 

 

 

 

 

 

 

 

780,000

 

1,200,000

 

702,865

 

 

 

 

 

 

 

 

-

 

-

 

-

 

 

 

 

 

 

 

 

46,033

 

28,588

 

22,192

 

 

 

 

 

 

 

 

7,066,017

 

11,843,058

 

5,478,907

 

 

 

 

Brian Webb-Walsh,

Executive Vice President

and Chief Financial

Officer

 

 

 

 

 

2018

 

2017

 

2016

 

 

 

 

 

 

 

 

450,000

 

450,000

 

333,750

 

 

 

 

 

 

 

 

100,000

 

-

 

-

 

 

 

 

 

 

 

 

1,161,384

 

3,911,486

 

500,000

 

 

 

 

 

 

 

 

-

 

-

 

-

 

 

 

 

 

 

 

 

210,600

 

324,000

 

187,256

 

 

 

 

 

 

 

 

-

 

-

 

29,004

 

 

 

 

 

 

 

 

39,289

 

119,732

 

34,753

 

 

 

 

 

 

 

 

1,961,273

 

4,805,218

 

1,084,763

 

 

 

 

David Amoriell,

President

 

 

 

 

 

2018

 

2017

 

2016

 

 

 

 

 

 

 

 

536,000

 

536,000

 

532,869

 

 

 

 

 

 

 

 

300,000

 

-

 

-

 

 

 

 

 

 

 

 

799,992

 

3,736,470

 

800,005

 

 

 

 

 

 

 

 

 

-

 

-

 

 

 

 

 

 

 

 

188,136

 

361,800

 

359,944

 

 

 

 

 

 

 

 

 

-

 

-

 

 

 

 

 

 

 

 

20,075

 

11,852

 

11,663

 

 

 

 

 

 

 

 

1,844,203

 

4,646,122

 

1,704,481

 

 

 

 

J. Michael Peffer,

Executive Vice President,

General Counsel and

Secretary

 

 

 

 

2018

 

2017

 

 

 

 

 

 

500,000

 

500,000

 

 

 

 

 

 

 

-

 

 

 

 

 

 

799,992

 

3,736,470

 

 

 

 

 

 

 

-

 

 

 

 

 

 

195,000

 

337,500

 

 

 

 

 

 

 

-

 

 

 

 

 

 

31,970

 

50,647

 

 

 

 

 

 

1,526,962

 

4,624,617

 

 

 

Jeffrey Friedel,

Executive Vice President,

Chief People Officer

 

 

 

 

2018

 

2017

 

 

 

 

 

 

425,000

 

407,769

 

 

 

 

 

 

 

150,000

 

 

 

 

 

 

499,999

 

3,436,476

 

 

 

 

 

 

 

-

 

 

 

 

 

 

182,325

 

243,250

 

 

 

 

 

 

 

-

 

 

 

 

 

 

10,006

 

8,620

 

 

 

 

 

 

1,117,330

 

4,246,115

 

 

 

Compensation reported in this table is in U.S. dollars and rounded to the nearest dollar.

 

(A)

Amounts shown represent base salary earned in 2017. Effective February 1, 2017, Mr. Friedel’s annual base salary was increased from $285,000 to $425,000 to reflect his promotion to Chief People Officer.fiscal year 2018.

 

(B)Unless otherwise indicated,

Amounts shown for Messrs. Webb-Walsh and Amoriell represent payouts received in January 2018 under the 2016 Separation Retention Program granted by Xerox in 2016 prior to thespin-off. Payouts made to the named executive officers under the 2018 Annual Performance Incentive Plan (APIP) awards(2018 APIP) appear as “Non-Equity“Non-Equity Incentive Plan Compensation” in column (E). For Mr. Friedel, the amount shown in column (B) represents the $150,000 cash sign-on award in accordance with the terms of his offer letter in connection with his hiring effective September 26, 2016. For more information about this payment, see the “Named Executive Officers with Unique Compensation Arrangements” section of the CD&A.

 

(C)

Included in this column are the aggregate grant date fair values of equity awards made to our named executive officers in fiscal year 20172018 as computed in accordance with FASB ASC Topic 718 as described in718. For additional information, refer to Note 1516 in the Company’s 2017audited financial statements for the fiscal year ended December 31, 2018, included in the 2018 Annual Report on Form 10-K. For ELTIP and SIG performance shares,10-K filed with the amounts are basedSEC on the target outcome of the performance conditions as of the grant date.February 28, 2019. These amounts reflect an estimate of the grant date fair value and may not be equivalent to the actual value recognized by the named executive officer.

Three-year performance sharePerformance Stock Unit awards under the 2017 ELTIP2018 LTIP were granted on April 1, 20172018. The grant date value of these awards is based on the probable outcome of the performance conditions as of the grant date, or target, as follows: Mr. Vemuri - $2,499,985;$2,499,997; Mr. Webb-Walsh - $487,493;$487,492; Mr. Amoriell - $399,985;$399,996; Mr. Peffer - $399,985;$399,996; and Mr. Friedel - $249,988.$250,000. The grant date fair value of these awards if paid atassuming maximum performance achievement is as follows: Mr. Vemuri - $4,999,970;$4,999,994; Mr. Webb-Walsh - $974,985; Mr. Amoriell - $799,970; Mr. Peffer - $799,970; and Mr.FriedelMr. Friedel - $499,977. $499,999.

Restricted shareStock Unit awards under the 2017 ELTIP2018 LTIP were granted on April 1, 20172018 as follows: Mr. Vemuri - $2,499,985;$2,499,997; Mr. Webb-Walsh - $487,493;$487,492; Mr. Amoriell - $399,985;$399,996; Mr. Peffer - $399,985$399,996; and Mr. Friedel $249,988. Also included in this column is the- $250,000.

The Strategic Leadership RSU grants for Mr. Vemuri and Mr. Webb-Walsh were granted on April 1, 2018 as follows: Mr. Vemuri received an award of 12,875 Restricted Stock Units with a grant date fair value of the SIG. The performance share awards under the SIG were granted on April 1, 2017 as follows: Mr. Vemuri - $2,307,250;

$239,990, and Mr. Webb-Walsh - $1,468,250; Mr. Amoriell - $1,468,250; Mr. Peffer - $1,468,250; and Mr. Friedel - $1,468,250. Thereceived an award of 10,000 Restricted Stock Units with a grant date fair value of these awards if paid at maximum performance is as follows: Mr. Vemuri - $4,614,500; Mr. Webb-Walsh - $2,936,500; Mr. Amoriell - $2,936,500; Mr. Peffer - $2,936,500; and Mr.Friedel - $2,936,500. Restricted share awards under the SIG were granted on April 1, 2017 as follows: Mr. Vemuri - $2,307,250; Mr. Webb-Walsh - $1,468,250; Mr. Amoriell - $1,468,250; Mr. Peffer - $1,468,250; and Mr. Friedel - $1,468,250. For more information about these awards, see the “Long-Term Incentives” section of the CD&A.$186,400.

 

(D)

There were no stock options granted in 2017.2018.

 

(E)The Non-Equity Incentive Plan payment for

Included in this column are payments to our named executive officers under the 20172018 APIP based on 2017 performance, was approved by the Conduent Compensation Committee. Effective February 1, 2017, Mr. Friedel’s target was increased from 50% to 75% in connection with his promotion to Chief People Officer. Actual 2017 full-year payments were made at 80% of target for Mr. Vemuri, 96% of target for Mr. Webb-Walsh, 90% of target for Mr. Peffer and Mr. Amoriell and 80% of target for Mr. Friedel. For more information, see the “Determining Short-Term Incentive Award Payouts” section in the CD&A.2018 performance.

 

(F)

Conduent does not have a defined benefit pension plan.plan, and no above-market earnings were credited under the Supplemental Savings Plan. The pension information shown for Mr. Webb-Walsh in 2016 reflectedreflects his Xerox pension benefits prior to Separation. In 2017, Mr. Amoriell and Mr. Peffer participated in the Supplemental Savings Plan prior to its termination in September 2017. No above-market earnings were credited under this plan.spin-off.

(G)

The table below provides additional data on the amounts included under the “All Other Compensation” column.

 

Name

 

  

Year

 

 

Life

Insurance
Premiums
Paid by
    Registrant  

($) (1)

 

Tax Related
    Reimbursements  
($) (2)

 

 

401(k)

Match

($) (3)

 

    Miscellaneous  

($) (4)

 

  

    Total All Other  
Compensation

($)

 

 

Ashok Vemuri

  

 

2017

2016

 

 

     810

     371

 

 

-

-

 

 

-

-

 

 

 

 

14,194

21,821

 

 

 

 

 

  15,004

  22,192

 

Brian Webb-Walsh

  

 

2017

2016

 

 

     480

       80

 

 

26,553

-

 

 

  7,581

  9,289

 

 

 

 

70,825

25,384

 

 

 

 

 

 105,439

  34,753

 

David Amoriell

  

 

2017

2016

2015

 

 

  3,564

  3,564

-

 

 

-

-

  7,456

 

 

  8,264

  8,099

  7,950

 

 

 

 

24

-

  7,426

 

 

 

 

 

 

  11,852

  11,663

  22,832

 

J. Michael Peffer

  

 

2017

 

 

  2,322

 

 

  8,125

 

 

  8,100

 

 

 

 

17,807

 

 

 

 

  36,354

 

Jeffrey Friedel

  

 

2017

 

 

     971

 

 

-

 

 

-

 

 

 

 

  7,649

 

 

 

 

    8,620

Name

  Year  

Life

Insurance

Premiums

Paid by

Registrant

($) (1)

Tax Related
Reimbursements
($) (2)

401(K)

   Match   

($) (3)

Miscellaneous

($) (4)

Total All Other

Compensation

($)

Ashok Vemuri

2018

2017

2016

1,242

   810

   371

-

-

-

8,250

-

-

36,541

27,778

21,821

  46,033

  28,588

  22,192

Brian Webb-Walsh

2018

2017

2016

   480

   480

     80

-

26,553

-

8,250

7,581

9,289

30,559

85,118

25,384

  39,289

119,732

  34,753

David Amoriell

2018

2017

2016

3,564

3,564

3,564

-

-

-

8,250

8,264

8,099

  8,261

       24

-

  20,075

  11,852

  11,663

J. Michael Peffer

2018

2017

2,322

2,322

-

  8,125

8,250

8,100

21,398

32,100

  31,497

  50,647

Jeffrey Friedel

2018

2017

1,035

   971

-

-

3,433

-

  5,538

  7,649

  10,006

    8,620

 

 

(1)

This column includes group life imputed income for each individual for group life insurance for 2017.2018.

 

(2)This column includes

There were no taxgross-ups in connection with relocation expenses under the U.S. relocation program.for our named executive officers in 2018.

 

(3)

This column includes Company matches paid under the Conduent 401(k) Savings Plan. There were no matches under the Supplemental Savings Plan.

 

(4)

Amounts in this column for 20172018 include financial and tax planning assistance for Mr. Vemuri, ($8,565), Mr. Webb-Walsh, ($9,500)Mr. Amoriell, Mr. Peffer and Mr. Friedel ($2,500). Also included isFriedel; home security for Mr. Vemuri,Vemuri; executive physicals for Messrs. Vemuri, Webb-WalshPeffer and Friedel ($4,825 for each) andFriedel; identity theft protection for Messrs. Vemuri, Amoriell and Friedel. AmountsFriedel; and corporate club memberships held in this column also include relocation expense reimbursementsthe names of Messrs. Vemuri, Walsh and Peffer primarily for Mr. Webb-Walsh ($56,500)business purposes, although personal use is permitted the Company pays the annual dues and Mr. Peffer ($17,807) underother fixed costs associated with club membership, but all costs attributable directly to personal use of the U.S. relocation program.club membership, such as meals and other incidentals, are reimbursed by the executive.

For further information on the material features of the compensation disclosed in the Summary Compensation Table, see the sections entitled “2017 Compensation for the Named Executive Officers”, “Named Executive Officers with Unique Compensation Arrangements”, “Savings Plans” and “Perquisites and Other Benefits” in the CD&A.

GRANTS OF PLAN-BASED AWARDS IN 20172018

The following table provides additional detail for each of the named executive officers on potential amounts payable under the 2018 APIP ELTIP and SIG,LTIP, as presented in the “Summary Compensation Table.” Threshold, target and maximum award opportunities are provided. No stock options were awarded in fiscal year 2018.

 

    Name

 

 

Award

(A)

 

 

Grant
Date

(A)

  

 

Approval
Date

(A)

  

Estimated Future Payout Under

Non-Equity Incentive Awards
(B)

    

Estimated Future Payout Under

Equity Incentive Awards
(C)

  

 

All Other
Stock
Awards:
Number

of Shares
or Units  
(#)(D)

 

  

Grant

Date Fair
Value of
Stock
Awards
($)(E)

 

 

 
    

Threshold

($)

 

  

Target

($)

 

  

Maximum

($)

 

    

Threshold

(#)

 

  

Target

(#)

 

  

Maximum

(#)

 

   

 

Ashok Vemuri

       

 

 

 

75,000

 

 

 

 

 

 

1,500,000

 

 

 

 

 

3,000,000

 

 

    -   -   -   
-
 
  
-
 
  ELTIP RS  4/1/17   3/8/17   -   -   -     -   -   -   148,986   2,499,985 
  ELTIP PS  4/1/17   3/8/17   -   -   -     37,347   148,986   297,972   -   2,499,985 
  SIG RS  4/1/17   3/8/17   -   -   -     -   -   -   137,500   2,307,250 
  SIG PS  4/1/17   3/8/17   -   -   -     17,188   137,500   275,000   -   2,307,250 

 

Brian Webb-Walsh

       

 

 

 

16,875

 

 

 

 

 

 

337,500

 

 

 

 

 

 

675,000

 

 

   

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

  ELTIP RS  4/1/17   3/6/17   -   -   -     -   -   -   29,052   487,493 
  ELTIP PS  4/1/17   3/6/17   -   -   -     7,263   29,052   58,104   -   487,493 
  SIG RS  4/1/17   3/6/17   -   -   -     -   -   -   87,500   1,468,250 
  SIG PS  4/1/17   3/6/17   -   -   -     10,938   87,500   175,000   -   1,468,250 

David Amoriell

        20,100   402,000  804,000     -   -   -   -   - 
  ELTIP RS  4/1/17   3/6/17   -   -   -     -   -   -   23,837   399,985 
  ELTIP PS  4/1/17   3/6/17   -   -   -     5,959   23,837   47,674   -   399,985 
  SIG RS  4/1/17   3/6/17   -   -   -     -   -   -   87,500   1,468,250 
  SIG PS  4/1/17   3/6/17   -   -   -     10,938   87,500   175,000   -   1,468,250 

J. Michael Peffer

        18,750   375,000  750,000     -   -   -   -   - 
  ELTIP RS  4/1/17   3/6/17   -   -   -     -   -   -   23,837   399,985 
  ELTIP PS  4/1/17   3/6/17   -   -   -     5,959   23,837   47,674   -   399,985 
  SIG RS  4/1/17   3/6/17   -   -   -     -   -   -   87,500   1,468,250 
  SIG PS  4/1/17   3/6/17   -   -   -     10,938   87,500   175,000   -   1,468,250 

Jeffrey Friedel

        15,203   304,063  608,126     -   -   -   -   - 
  ELTIP RS  4/1/17   3/8/17   -   -   -     -   -   -   14,898   249,988 
  ELTIP PS  4/1/17   3/8/17   -   -   -     3,725   14,898   29,796   -   249,988 
  SIG RS  4/1/17   3/8/17   -   -   -     -   -   -   87,500   1,468,250 
  SIG PS  4/1/17   3/8/17   -   -   -     10,938   87,500   175,000   -   1,468,250 

        
Name 

Award

(A)

 

   Grant   
   Date   

   (A)   

 

   Approval   
   Date   

   (A)   

 

Estimated Future Payout Under

Non-Equity Incentive Awards

(B)

   

Estimated Future Payout Under

Equity Incentive Awards

(C)

 

 

   All Other   
Stock
Awards:

Number
of Shares
or Units
(#)(D)

 Grant
Date Fair
Value of
Stock
Awards
($)(E)
 

   Threshold   

   ($)   

 

   Target   

($)

 

   Maximum   

($)

   

   Threshold   

(#)

 

   Target   

(#)

 

   Maximum   

(#)

 

Ashok Vemuri

       

 

75,000

 

 

1,500,000

 

 

3,000,000

   - - - - -  
  Strategic RSU 4/1/18 3/7/18 - - -   - - -   12,875    239,990  
  LTIP RSU 4/1/18 3/7/18 - - -   - - - 134,120 2,499,997  
  

LTIP PSU

 

 4/1/18

 

 3/7/18

 

 -

 

 -

 

 -

 

   33,530

 

 134,120

 

 268,240

 

 -

 

 2,499,997  

 

 

Brian Webb-Walsh

       

 

16,875

 

 

   337,500

 

 

   675,000

   

 

-

 

 

-

 

 

-

 

 

-

 

 

-  

  Strategic RSU 4/1/18 3/7/18 - - -   - - -   10,000    186,400  
  LTIP RSU 4/1/18 3/7/18 - - -   - - -   26,153    487,492  
  

LTIP PSU

 

 4/1/18

 

 3/7/18

 

 -

 

 -

 

 -

 

     6,538

 

   26,153

 

   52,306

 

 -

 

    487,492  

 

 

David Amoriell

       

 

20,100

 

 

   402,000

 

 

   804,000

   

 

-

 

 

-

 

 

-

 

 

-

 

 

-  

  LTIP RSU 4/1/18 3/7/18 - - -   - - -   21,459    399,996  
  

LTIP PSU

 

 4/1/18

 

 3/7/18

 

 -

 

 -

 

 -

 

     5,365

 

   21,459

 

   42,918

 

 -

 

    399,996  

 

 

J. Michael Peffer

       

 

18,750

 

 

   375,000

 

 

   750,000

   

 

-

 

 

-

 

 

-

 

 

-

 

 

-  

  LTIP RSU 4/1/18 3/7/18 - - -   - - -   21,459    399,996  
  

LTIP PSU

 

 4/1/18

 

 3/7/18

 

 -

 

 -

 

 -

 

     5,365

 

   21,459

 

   42,918

 

 -

 

    399,996  

 

 

Jeffrey Friedel

       

 

15,938

 

 

   318,750

 

 

   637.500

   

 

-

 

 

-

 

 

-

 

 

-

 

 

-  

  LTIP RSU 4/1/18 3/7/18 - - -   - - -   13,412    250,000  
  

LTIP PSU

 

 4/1/18

 

 3/7/18

 

 -

 

 -

 

 -

 

     3,353

 

   13,412

 

   26,824

 

 -

 

    250,000  

 

 

 

(A)RS

RSU refers to shares of restricted stockRestricted Stock Units subject to service-based vesting conditions and PSPSU refers to shares of restricted stockPerformance Stock Units subject to service-based and performance-based vesting conditions. The “Grant Date” is the effective date of the ELTIP and SIGLTIP awards. The “Approval Date” is the date on which the Compensation Committee took action to approve these awards.

 

(B)

These columns reflect the threshold, target and maximum payout opportunities for Conduentthe performance measures under the 20172018 APIP set by the Compensation Committee. The actual APIP payout, which was based on 20172018 performance and paid in March 2018,April 2019, is presented in the “Summary Compensation Table” in column (E). The Conduent Corporate APIP measures and weightings for 20172018 were Adjusted EBITDA (60%(50%), Revenue Growth (30%(40%) and Revenue ProductivityM&A Strategic Goal (10%). Please refer to the section entitled “Short-Term Incentives” in the CD&A for additional information on the 20172018 APIP payout opportunity, measures and weightings that applied to each of our named executive officers. The target value reflects payout if target performance was achieved on all performance measures. The maximum value reflects payout if maximum or higher performance was achieved on all performance measures. Threshold payout was determinedThe threshold value reflects 5% of target based on achieving Conduent’s Revenue Productivity performance measure atminimum achievement on the minimum performance levelM&A strategic goal with no other performance measures being achieved. There would be no APIP payout if threshold performance was not achieved on anySee column (E) of the performance measures. See the “Summary Compensation Table,” footnote (E),Table” for additional information regarding the actual payout of these awards.

(C)

The threshold, target and maximum payout opportunities for the 2017 ELTIP and the SIG2018 LTIP awards were set by the Compensation Committee. The number of sharesunits at target for these awards was determined by dividing the approved values of the respective awards by the closing stock price on the grant date and rounding the number of shares down to the nearest share. The closing stock price for this awardon the grant date was $16.78.$18.64.

Performance sharesStock Units awarded under ELTIP can bethe 2018 LTIP are earned by achieving three-year cumulative performance goals between threshold and maximum. The performance measures and weightings for ELTIPthe 2018 LTIP are Adjusted Profit before Tax (50%) and Free Cash Flow as adjusted (50%). The performance period for the 2017 ELTIP2018 LTIP is January 1, 20172018 through December 31, 2019.2020. Performance sharesStock Units that are earned will vest at the end of the three-year performance period, following Compensation Committee certification of performance results. Performance shares under SIG can be earned as follows: up to 50% of performance shares will vest on December 31, 2018 based on cumulative performance results for 2017 and 2018, following Compensation Committee certification of results. The performance measures and weightings for the SIG performance shares are Cost Transformation – Information Technology (25%), Cost Transformation – Real Estate, General & Administrative (25%), Service Line Penetration (25%), New Business Signings growth (25%). Performance against the same goals will be measured again at the end of 2019 and the payout earned will be reduced by any awards that vested at the end of 2018. Vesting will occur following Compensation Committee certification of performance results.

The target column reflects the number of performance sharesPerformance Stock Units that can be earned if target performance is achieved on all performance measures. The maximum column reflects the greatest number of performance sharesPerformance Stock Units that can be earned if maximum or higher performance is achieved on all performance measures. The threshold column reflects the lowest number of performance sharesPerformance Stock Units that can be earned assuming that performance is achieved at the minimum level for only one of the performance measures. The number of performance sharesPerformance Stock Units earned will be interpolated in the event that Conduent’s performance varies between threshold and maximum, as determined by the Compensation Committee. If threshold performance is not achieved for both performance measures, no performance sharesPerformance Stock Units will be earned.

 

(D)

This column includes restricted sharesRestricted Stock Units granted under our ELTIP and SIG,the 2018 LTIP, which vest ratably on December 31, 2017,2018, December 31, 2019 and December 31, 2020. This column also includes Strategic Restricted Stock Units granted to Mr. Vemuri, which vest ratably on December 31, 2018, December 31, 2019 and December 31, 2019.2020, and to Mr. Webb-Walsh, which vest 50% on December 31, 2018, 25% on December 31, 2019 and 25% on December 31, 2020. The number of restricted sharesRestricted Stock Units was determined by dividing the approved values of the respective awards by the closing stock price on the grant date and rounding the number of shares down to the nearest share. The closing stock price for this awardon the grant date was $16.78.$18.64.

 

(E)

The value reported in this column with respect to the stock awards reported in column (C) is based on the target award and the grant date closing market price noted above in footnote (C). The value reported in this column with respect to the stock awards reported in column (D) is based on the grant date closing market price noted above in footnote (D). This value is recorded over the requisite serviced period as required by FASB ASC Topic 718. See footnote (C) to the “Summary Compensation Table” and the “Long-Term Incentives” section in the CD&A for additional information on these equity awards.

For a description of the material features of the compensation disclosed in the 20172018 Grants of Plan-Based Awards table see the “Short-Term Incentives” and the “Long-Term Incentives” section of the CD&A.

OUTSTANDING EQUITY AWARDS AT 20172018 FISCALYEAR-END

The following table summarizes the unvested stock awards held by the named executive officers at the end of fiscal year 2017.2018. There are no outstanding stock option awards.

 

Name Grant
Date		  

Number of
Shares or
Units of Stock
That Have  Not
Vested
(#)(1)

 

  

Market Value
of Shares or
Units of Stock
That Have Not
Vested
($) (2)

 

  

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested
(#) (3)

 

   

Equity
Incentive Plan
Awards: Market
or Payout Value
of  Unearned
Shares, Units
or Other Rights
That Have Not
Vested
($) (2)

 

 

Grant

Date

 

Number of

Shares or

Units of Stock

That Have Not

Vested

(#)(1)

 

Market Value

of Shares or

Units of Stock

That Have Not

Vested

($) (2)

 

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares, Units

or Other Rights

That Have Not

Vested

(#) (3)

 

Equity

Incentive Plan

Awards: Market

or Payout Value

of Unearned

Shares, Units

or Other Rights

That Have Not

Vested

($) (2)

 

Ashok Vemuri

  

7/1/16

4/1/17

 

 

  

163,614

191,945

(4) 

(5) 

 $

$

2,644,002

3,101,831

 

 

 286,486   $4,629,614 

 

 

 

7/1/16

 

 

 

 

163,614

 

(4)

 

 

 

 

td,739,217

 

 

 

 

 

-

 

 

 

 

-

 

Ashok Vemuri

 4/1/17 166,155(8)  td,766,228  435,472 $4,629,067 
 

 

4/1/18

 

 

 

 

98,000

 

(9)

 

 		 

 

td,041,740

 

 

 

 

 

134,120

 

 

 

 

td,425,696

 

 

 

 

 

 

7/1/16

 

 

 

 

16,361

 

(4)

 

 

 

 

$   173,917

 

 

 

 

 

-

 

 

 

 

-

 

 

Brian Webb-Walsh

 10/1/16 15,402(7)  $   163,723  - - 
 4/1/17 83,377(8)  $   886,298  145,604 td,547,771 
 4/1/18 17,436(9)  $   185,345  26,153 $   278,006 
  

7/1/15

7/1/16

10/1/16

4/1/17

 

 

 

 

  

7,061

16,361

15,402

78,089

(4) 

(4) 

(6) 

(5) 

 $

$

$

$

114,106

264,394

248,896

1,261,918

 

 

 

 

 116,552   $1,883,480  

 

4/1/18

 

 

 

 

5,000

 

(10)

 

 		 

 

$     53,150

 

 

 

 

 

-

 

 

 

 

-

 

 

 

  

7/1/15

7/1/16

4/1/17

 

 

 

  

15,586

52,357

74,595

(4) 

(4) 

(5) 

 $

$

$

251,870

846,089

1,205,455

 

 

 

 111,337   $1,799,206 

 

 

 

7/1/16

 

 

 

 

52,357

 

(4)

 

 

 

 

$   556,555

 

 

 

 

 

-

 

 

 

 

-

 

 

David Amoriell

 4/1/17 81,604(8)  $   867,451  135,174 td,436,900 
 

 

4/1/18

 

 

 

 

14,306

 

(9)

 

 		 

 

$   152,073

 

 

 

 

 

21,459

 

 

 

 

$   228,109

 

 

 

 

 

 

1/1/16

 

 

 

 

18,098

 

(5)

 

 

 

 

$   192,382

 

 

 

 

 

-

 

 

 

 

-

 

 

J. Michael Peffer

 7/1/16 24,704(4)  $   262,604  - - 
 8/1/16 18,464(6)  $   196,272  - - 
 4/1/17 81,604(8)  $   867,451  135,174 td,436,900 
  

7/1/15

1/1/16

7/1/16

8/1/16

4/1/17

 

 

 

 

 

  

5,552

18,098

24,704

18,464

74,595

(4) 

(7) 

(4) 

(8) 

(5) 

 $

$

$

$

$

89,720

292,464

399,217

298,378

1,205,455

 

 

 

 

 

 111,337   $1,799,206  

 

4/1/18

 

 

 

 

14,306

 

(9)

 

 		 

 

$   152,073

 

 

 

 

 

21,459

 

 

 

 

$   228,109

 

 

 

  

10/1/16

4/1/17

 

 

  

21,563

68,606

(6) 

(5) 

 $

$

348,458

1,108,673

 

 

 102,398   $1,654,752 

 

 

 

10/1/16

 

 

 

 

21,563

 

(7)

 

 

 

 

$   229,215

 

 

 

 

 

-

 

 

 

 

-

 

 

Jeffrey Friedel

 4/1/17 78,565(8)  $   835,146  117,656 td,250,683 
 

 

4/1/18

 

 

 

 

8,941

 

(9)

 

 		 

 

$     95,043

 

 

 

 

 

13,412

 

 

 

 

$   142,570

 

 

 

 

 

(1)

The awards presented in these columnsthis column include earned unvested performance units and shares and unvested restricted stock units and shares (as of December 31, 2017)2018).

 

(2)

The market value is based on the December 31, 20172018 closing price of our Common Stock of $16.16$10.63 per share.

 

(3)

The awards presented in this column consist of unearned performance share awards (as of December 31, 2017) at target2018) granted under the ELTIPLTIP and SIG on April 1, 2017.2017 and unearned performance stock unit awards granted under the LTIP on April 1, 2018. The performance period for the 2017 LTIP and SIG is January 1, 2017 through December 31, 2019. The ELTIPLTIP award and remaining unvested SIG performance shares vest at the end of the performance period following Compensation Committee certification of results and is presented here at maximum. The performance period for the 2018 LTIP is January 1, 2018 through December 31, 2020. The 2018 LTIP award vests at the end of the performance period following Compensation Committee certification of results. Up toresults and is presented here at target. Not included in this number is the 50% payout of the SIG award will vestthat vested on December 31, 2018 based on cumulative performance results for 2017 and 2018. Performance results will be measured again at the end of 2019 and the payout earned will be reduced by any awards that vested at the end of 2018, following Compensation Committee certification of performance results.

 

(4)

These awards consist of earned unvested performance units and unvested restricted stock units reflecting equity awards granted prior to thespin-off (made with respect to shares of Xerox common stock), that were adjusted and converted into Conduent equity awards in shares of our Common Stock following Separation. In general, the adjusted and converted equity awards are subject to substantially the same terms and conditions as the original equity awards, including the original vesting schedule andpro-ration eligibility. Awards granted on July 1, 20152016 fully vest on July 1, 2018 and awards granted on July 1, 2016 vest on July 1, 2019.

 

(5)

Represents restricted stock units which fully vested on January 1, 2019.

(6)

Represents restricted stock units which fully vest on August 1, 2019.

(7)

Represents restricted stock units which fully vest on October 1, 2019.

(8)

Represents earned performance units and restricted stock units which fully vest on December 31, 2019.

(9)

These awards represent restricted sharesstock units were granted on April 1, 2017.2018 and will vestone-half on December 31, 2019 andone-half December 31, 2020. On December 31, 2017, 2018,one-third of the April 1, 2017 restricted sharesstock units vested and are not reflected in the numbers above for our named executive officesofficers as follows: Vemuri - 94,541,– 48,995, Webb-Walsh - 38,463,– 8,717, Amoriell - 36,742,– 7,153, Peffer - 36,742– 7,153 and Friedel - 33,792. Half of the restricted shares reflected above will vest on December 31, 2018 and half on December 31, 2019.

– 4,471.

(6)Represents restricted stock units which fully vest on October 1, 2019.

 

(7)(10)Represents

These restricted stock units which fullywere granted on April 1, 2018 and will vestone-half on January 1, 2019.

(8)RepresentsDecember 31, 2019 andone-half on December 31, 2020. On December 31, 2018, 5,000 restricted stock units which fully vest on August  1, 2019vested and are not reflected in the number above.

OPTION EXERCISES AND STOCK VESTINGVESTED IN 20172018

The following table shows the amount realized by named executive officers upon the vesting of stock awards during 2017.2018. No stock options were exercised during 2018.

 

  Stock Awards   Option Awards  Stock Awards  Option Awards
Name  

Number of Shares
Acquired on Vesting

(#) (A)

 

   

Value Realized
on Vesting

($) (B)

 

   

Number of Shares
Acquired on Exercise

(#) (C)

 

   

Value Realized
on Exercise

($) (D)

 

  

Number of Shares          

Acquired on Vesting          

(#) (A)          

 

  

Value Realized     

on Vesting     

($) (B)     

 

  

Number of Shares         

Acquired on Exercise         

(#)         

 

 

Value Realized         

on Exercise         

($)         

 

Ashok Vemuri

   94,541   $1,527,783          -                -        212,285        

 

   

 

2,256,590        

 

 

 

   -           

 

   -           

 

Brian Webb-Walsh

   48,306   $768,023          -                -        102,990        

 

   

 

1,148,024        

 

 

 

   -           

 

   -           

 

David Amoriell

   54,829   $853,462    103,172   $707,950  103,230        

 

   

 

1,214,853        

 

 

 

   -           

 

   -           

 

J. Michael Peffer

   42,395   $674,922          -                -        93,196        

 

   

 

1,032,536        

 

 

 

   -           

 

   -           

 

Jeffrey Friedel

   33,792   $546,079          -                -        82,012        

 

   

 

871,788        

 

 

 

   -           

 

   -           

 

 

(A)

The shares shown in this column include (i) performance shares that vested on January 1 and July 1, 20172018 that were from awards granted by Xerox prior to the Separation and converted to Conduent awards.awards, and (ii) performance shares from the April 1, 2017 SIG awards, which have a performance period from January 1, 2017 through December 31, 2019, but 50% of which were eligible to, and did, vest on December 31, 2018 based on cumulative performance results for 2017 and 2018. This column also includes restricted shares and restricted stock units that vested on December 31, 2017.2018.

 

(B)

Amounts shown are based on the number of shares that vested and the fair market value of our Common Stock on the applicable vesting date. The aggregate dollar value realized upon vesting includes the value of shares withheld to pay taxes.

(C)This column reflects the total number of shares acquired upon the exercise of vested stock options that were granted to Mr. Amoriell on August 20, 2009.

(D)The amount reflects the difference between the exercise price of the options and the market price at the time of exercise.

NON-QUALIFIED DEFERRED COMPENSATION FOR THE 20172018 FISCAL YEAR

The Non-Qualified Deferred Compensation table discloses executive and employer contributions, as applicable, named executive officer withdrawals and earnings, if any, and fiscal year-end balances under the Supplemental Savings Plan (“SSP”).

Name

 

  

Plan 

Name 

 

 

Executive  
Contributions  
   in Last FY  
($)

 

   

Registrant 
Contributions 
in Last FY 
($)

 

  

Aggregate 
Earnings in 
Last FY 
($) (A)

 

  

Aggregate
Withdrawals/
Distributions 
($)

 

  

Aggregate 
Balance
at Last FY
($)

 

 

 

Ashok Vemuri

  SSP        -         -         -               -               -       

Brian Webb-Walsh

  SSP        -         -         -               -                 -       

David Amoriell

  SSP $96,171   -  $61,360         -        $1,319,509 

J. Michael Peffer

  SSP $7,308   -  $8,121         -        $69,974 

Jeffrey Friedel

  SSP        -         -         -               -                 -       

(A)No portion of the amounts shown in this column for the SPP is reported in the “Summary Compensation Table” as above market interest.

Supplemental Savings Plan

In 2017, Mr. Amoriell and Mr. Peffer elected to save in the SSP. Under the SSP, “highly compensated employees” (as defined under ERISA) were eligible to defer up to 85% of their base salary, bonus and

commissions. To participate, employees must elect to defer by December of the year preceding the year of the employee deferral. Notional earnings on participant contributions are credited to each participant’s account based on the market rate of return of the available investment alternatives offered under the SSP. Participants may change the asset allocation of their account balance or make changes to the allocation for future contributions at any time. Conduent may make discretionary employer contributions for plan participants; there were no Conduent contributions under this plan in 2017. All balances are fully vested. In September 2017, Conduent terminated the Supplemental Savings Plan.Plan (“SSP”), at which time all balances were fully vested. As required under the plan,Supplemental Savings Plan, these balances will bewere paid to participants in October 2018. Messrs. Amoriell and Peffer received their distributions at that time, leaving their aggregate balance at zero at the fourth quarterend of 2018.the 2018 fiscal year.

Name

 

  

Plan 

Name 

 

 

Executive  

Contributions  

  in Last FY  

($)

 

  

Registrant

Contributions

in Last FY

($)

 

  

Aggregate

Earnings in

Last FY

($)

 

 

Aggregate

Withdrawals/

Distributions

($)

 

  

Aggregate

Balance

at Last FY

($)

 

 

 

 

Ashok Vemuri

 

  

SSP

 

 -

 

  -

 

  -

 

  

 

      -      

 

 

 

  

 

      -      

 

 

 

 

Brian Webb-Walsh

 

  

SSP

 

 -

 

  -

 

  -

 

  

 

      -      

 

 

 

  

 

      -      

 

 

 

 

 

David Amoriell

  

SSP

 

 -

 

  -

 

  -

 

  

 

1,335,405

 

 

 

 $

 

0

 

 

 

 

 

J. Michael Peffer

  

SSP

 

 -

 

  -

 

  -

 

  

 

70,817

 

 

 

 $

 

0

 

 

 

 

 

Jeffrey Friedel

  

SSP

 

 -

 

  -

 

  -

 

  

 

      -      

 

 

 

  

 

      -      

 

 

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

Conduent has entered into certain agreements and maintains certain plans that provide compensation to named executive officers in the event of a termination of employment or a change in control. The amount of compensation payable to each named executive officer, assuming that each hypothetical termination orchange-in-control situation occurred on December 31, 2017,2018, is listed in the table below. The values for equity incentive awards presented in this table reflect the acceleration of grants not vested as of December 31, 20172018 and are based on the closing market price of Conduent Common Stock of $16.16$10.63 as of December 29, 2017.31, 2018.

 

   Cash
Severance
($)		  Non-
Equity
Incentive
Awards
($)		  Equity
Incentive
Awards
($)		  Healthcare/
Life
Insurance
Benefits
($)		  Total
Termination
Benefits
($)		 

Ashok Vemuri

 

      

•  Voluntary Termination for Good Reason (A)

 

 

 

 

 

 

500,000

 

 

 

 

 

 

 

 

 

1,200,000

 

 

 

 

 

 

 

 

 

3,899,133

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

5,599,133

 

 

 

 

•  Involuntary Termination not for Cause (B)

 

  500,000   1,200,000   3,899,133   6,961  5,606,094 

•  Involuntary or Good Reason Termination after Change in Control (CIC) (C)

 

 

 

 

 

 

5,000,000

 

 

 

 

 

 

 

 

 

1,200,000

 

 

 

 

 

 

 

 

 

10,375,447

 

 

 

 

 

 

 

 

 

27,842

 

 

 

 

 

 

 

 

16,603,289

 

 

 

 

•  Death (D)

 

  -   1,200,000   7,289,033   500,000  8,989,033 
Brian Webb-Walsh      

 

•  Voluntary Termination/ Retirement (A)

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

  

 

-

 

 

 

•  Involuntary Termination not for Cause (B)

 

  225,000   324,000   958,837   4,556   1,512,393 

•  Involuntary or Good Reason Termination after Change in Control (CIC) (C)

 

 

 

 

 

 

1,575,000

 

 

 

 

 

 

 

 

 

324,000

 

 

 

 

 

 

 

 

 

3,772,794

 

 

 

 

 

 

 

 

 

18,225

 

 

 

 

 

 

 

 

 

5,690,019

 

 

 

 

•  Death (D)

 

  -   324,000   2,517,146   450,000   3,291,146 
David Amoriell      

 

•  Voluntary Termination/ Retirement (A)

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

361,800

 

 

 

 

 

 

 

 

 

1,232,685

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

1,594,485

 

 

 

 

•  Involuntary Termination not for Cause (B)

 

  268,000   361,800   1,232,685   4,991  1,867,476 

•  Involuntary or Good Reason Termination after Change in Control (CIC) (C)

 

 

 

 

 

 

1,876,000

 

 

 

 

 

 

 

 

 

361,800

 

 

 

 

 

 

 

 

 

4,102,620

 

 

 

 

 

 

 

 

 

18,594

 

 

 

 

 

 

 

 

 

6,359,014

 

 

 

 

•  Death (D)

 

  -   361,800   2,903,160   500,000   3,764,960 
J. Michael Peffer      

 

•  Voluntary Termination/ Retirement (A)

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

-

 

 

 

 

•  Involuntary Termination not for Cause (B)

 

  250,000   337,500   1,210,012   4,607   1,802,119 

•  Involuntary or Good Reason Termination after Change in Control (CIC) (C)

 

 

 

 

 

 

1,750,000

 

 

 

 

 

 

 

 

 

337,500

 

 

 

 

 

 

 

 

 

4,084,440

 

 

 

 

 

 

 

 

 

18,428

 

 

 

 

 

 

 

 

 

6,190,368

 

 

 

 

•  Death (D)

 

  -   337,500   2,884,980   500,000   3,722,480 
Jeffrey Friedel      

 

•  Voluntary Termination/ Retirement (A)

 

 

 

 

 

 

-

 

 

 

 

  

 

 

 

 

-

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

-

 

 

 

 

•  Involuntary Termination not for Cause (B)

 

  212,500   243,250   696,787   6,893   1,159,430 

•  Involuntary or Good Reason Termination after Change in Control (CIC) (C)

 

 

 

 

 

 

1,487,500

 

 

 

 

 

 

 

 

 

243,250

 

 

 

 

 

 

 

 

 

3,111,883

 

 

 

 

 

 

 

 

 

26,474

 

 

 

 

 

 

 

 

 

4,869,107

 

 

 

 

•  Death (D)

 

  -   243,250   2,008,720   425,000   2,676,970 

 

Termination for
Good Reason or

Retirement

(A)

Involuntary
Termination Not
for Cause

(B)

Involuntary
Termination Not
for Cause or
Termination for
Good Reason after

Change in Control

(C)

Death

(D)

Disability

(E)

      

Ashok Vemuri

 

 

•  Cash Severance ($)

 

 

 

 

 

500,000

 

 

 

 

 

 

 

500,000

 

 

 

 

 

 

 

5,000,000

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

 

•  Non-Equity Incentive Awards ($)

 

 

 

 

 

780,000

 

 

 

 

 

 

 

780,000

 

 

 

 

 

 

 

780,000

 

 

 

 

 

 

 

780,000

 

 

 

 

 

 

 

780,000

 

 

 

 

•  Equity Incentive Awards ($)

 

 

 

 

 

3,224,005

 

 

 

 

 

 

 

3,224,005

 

 

 

 

 

 

 

7,556,601

 

 

 

 

 

 

 

6,541,489

 

 

 

 

 

 

 

6,251,620

 

 

 

 

•  Healthcare/Life Insurance Benefits ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

7,864

 

 

 

 

 

 

 

30,090

 

 

 

 

 

 

 

500,000

 

 

 

 

 

 

 

-

 

 

 

      

Ashok Vemuri Total Termination Benefits ($)

 

 

 

4,504,005

 

 

 

 

4,511,869

 

 

 

 

13,366,691

 

 

 

 

7,821,489

 

 

 

 

7,031,620

 

 

      

Brian Webb-Walsh

 

 

•  Cash Severance ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

225,000

 

 

 

 

 

 

 

1,575,000

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

 

•  Non-Equity Incentive Awards ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

210,600

 

 

 

 

 

 

 

210,600

 

 

 

 

 

 

 

210,600

 

 

 

 

 

 

 

210,600

 

 

 

 

•  Equity Incentive Awards ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

721,309

 

 

 

 

 

 

 

2,049,262

 

 

 

 

 

 

 

1,636,276

 

 

 

 

 

 

 

1,566,373

 

 

 

 

•  Healthcare/Life Insurance Benefits ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

5,171

 

 

 

 

 

 

 

19,454

 

 

 

 

 

 

 

450,000

 

 

 

 

 

 

 

-

 

 

 

      

Brian Webb-Walsh Total Termination Benefits ($)

 

 

 

-

 

 

 

 

1,162,080

 

 

 

 

3,854,316

 

 

 

 

2,296,876

 

 

 

 

1,776,973

 

 

      

David Amoriell (F)

 

 

•  Cash Severance ($)

 

 

 

-

 

 

 

 

268,000

 

 

 

 

1,876,000

 

 

 

 

-

 

 

 

 

-

 

 

 

•  Non-Equity Incentive Awards ($)

 

 

 

 

 

188,136

 

 

 

 

 

 

 

188,136

 

 

 

 

 

 

 

188,136

 

 

 

 

 

 

 

188,136

 

 

 

 

 

 

 

188,136

 

 

 

 

•  Equity Incentive Awards ($)

 

 

 

 

 

787,736

 

 

 

 

 

 

 

863,773

 

 

 

 

 

 

 

2,057,575

 

 

 

 

 

 

 

1,663,064

 

 

 

 

 

 

 

1,570,306

 

 

 

 

•  Healthcare/Life Insurance Benefits ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

5,206

 

 

 

 

 

 

 

19,454

 

 

 

 

 

 

 

500,000

 

 

 

 

 

 

 

-

 

 

 

      

David Amoriell Total Termination Benefits ($)

 

 

 

975,872

 

 

 

 

1,325,115

 

 

 

 

4,141,165

 

 

 

 

2,351,200

 

 

 

 

1,758,442

 

 

      

J. Michael Peffer

 

 

•  Cash Severance ($)

 

 

 

-

 

 

 

 

250,000

 

 

 

 

1,750,000

 

 

 

 

-

 

 

 

 

-

 

 

 

•  Non-Equity Incentive Awards ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

195,000

 

 

 

 

 

 

 

195,000

 

 

 

 

 

 

 

195,000

 

 

 

 

 

 

 

195,000

 

 

 

 

•  Equity Incentive Awards ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

985,954

 

 

 

 

 

 

 

2,202,175

 

 

 

 

 

 

 

1,807,663

 

 

 

 

 

 

 

1,725,749

 

 

 

 

•  Healthcare/Life Insurance Benefits $)

 

 

 

 

 

-

 

 

 

 

 

 

 

4,919

 

 

 

 

 

 

 

18,309

 

 

 

 

 

 

 

500,000

 

 

 

 

 

 

 

-

 

 

 

      

J. Michael Peffer Total Termination Benefits ($)

 

 

 

-

 

 

 

 

1,435,873

 

 

 

 

4,165,484

 

 

 

 

2,502,663

 

 

 

 

1,920,749

 

 

      

Jeffrey Friedel

 

 

•  Cash Severance ($)

 

 

 

-

 

 

 

 

212,500

 

 

 

 

1,487,500

 

 

 

 

-

 

 

 

 

-

 

 

 

•  Non-Equity Incentive Awards ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

182,325

 

 

 

 

 

 

 

182,325

 

 

 

 

 

 

 

182,325

 

 

 

 

 

 

 

182,325

 

 

 

 

•  Equity Incentive Awards ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

499,132

 

 

 

 

 

 

 

1,460,339

 

 

 

 

 

 

 

1,097,505

 

 

 

 

 

 

 

1,059,301

 

 

 

 

•  Healthcare/Life Insurance Benefits ($)

 

 

 

 

 

-

 

 

 

 

 

 

 

7,251

 

 

 

 

 

 

 

27,840

 

 

 

 

 

 

 

425,000

 

 

 

 

 

 

 

-

 

 

 

      

Jeffrey Friedel Total Termination Benefits ($)

 

 

 

-

 

 

 

 

901,208

 

 

 

 

3,158,004

 

 

 

 

1,704,830

 

 

 

 

1,241,626

 

 

 

 

(A)None of these individuals

The named executive officers would not receive any payments if they left voluntarily, other than Mr.Messrs. Vemuri and Mr. Amoriell. Per his offer letter, if Mr. Vemuri voluntarily terminated his employment for Good Reason, he would be entitled to salary continuation paid over 6 months equal to his annual base salary. In addition, Mr. Vemuri would receive a short-term incentive payment (Non-Equity Incentive Award) for 2017 performance, reflected above at actual achievement against performance goals, and pro-rated restricted stock and performance shares (based on the number of full months of service as an employee during the vesting period per the terms of the applicable award agreements) shown at target but subject to actual performance achievement for unearned performance based awards. If Mr. Vemuri left voluntarily not for Good Reason, he would not receive any payments. Mr. Amoriell is retirement eligible under our short-term and long-term incentive award programs and would receive a short-term incentive payment (Non-Equity Incentive Award) for 2017 performance, reflected above at actual achievement against performance goals, and pro-rated restricted stock and performance shares (based on the number of full months of service as an employee during the vesting period per the applicable award agreements), shown at target but subject to actual performance achievement.

Per Mr. Vemuri’s offer letter, if he voluntarily terminated his employment for Good Reason, he would be entitled to salary continuation for 6 months at his then base salary rate. In addition, Mr. Vemuri would receive a short-term incentive payment(Non-Equity Incentive Award) for 2018 performance, reflected above at actual achievement against performance goals, as well aspro-rated vesting of restricted stock and performance shares (based on the number of full months of service as an employee during the vesting period per the terms of the applicable award agreements), with the number of performance shares earned

based on actual performance achievement (the amount shown here is based on target). If Mr. Vemuri left voluntarily not for Good Reason, he would not receive any payments.

Mr. Amoriell is retirement eligible under our short-term program and long-term incentive award programs before 2018. As a result, he would receive a short-term incentive payment(Non-Equity Incentive Award) for 2018 performance, reflected above at actual achievement against performance goals, as well aspro-rated vesting of restricted stock and performance shares granted prior to 2018 (based on the number of full months of service as an employee during the vesting period per the applicable award agreements), with the number of performance shares earned based on actual performance achievement (the amount shown here is based on target).

Long-term incentive awards and short-term incentive awards are subject to clawback provisions as described in the “Governance of the Executive Compensation Programs—Compensation Recovery Policy (Clawbacks)” section in the CD&A.

 

(B)

Under the terms of the Conduent severance policy, all the NEOs would receive salary continuance payments and continued benefits coverage (excluding disability and 401(k) contributions) for 26 weeks. The amounts reported in the table assume salary continuance is paid as a lump sum, although such payments are generally paid periodicallyin installments consistent with the normal payroll cycle during active employment.cycle. In addition, all named executive officers would receive a short-term incentive payment (Non-Equity(Non-Equity Incentive Award) for 20172018 performance, reflected above at actual achievement against performance goals, and as well aspro-rated vesting of restricted stockshares/units and performance sharesshares/units (based on the number of full months of service as an employee and full months of salary continuance payments during the vesting period per the applicable award agreements), shown at target but subject towith the number of performance shares/units being earned based on actual performance achievement.achievement (the amount shown here is based on target).

 

(C)

If there was a change in control on December 31, 2017, Mr. Amoriell and Mr. Friedel2018, all our named executive officers would have been covered under the new Change-in-Control (“CIC”) Plan (effective January 1, 2018) as described in the CD&A, which provides them specified severance benefits if, within 90 days prior to, or within 12 months (or, for our CEO, 24 months) following a change in control of Conduent, their employment was terminated either involuntarily other than for cause, death or disability, or voluntarily for good reason. TheseThis arrangement whereby change in control severance benefits under the CIC Plan includeare provided only upon a lump sum cash payment equal to two times the then-current annual base salary and short-term incentive award target,qualifying termination event following a change in control is commonly described as well as continuation of specified welfare benefits at active employee rates for a period of 24 months.“double-trigger”.

Mr. Vemuri, Mr. Webb-Walsh and Mr. Peffer would have been covered under the prior changeChange in control severance agreement which provided specified severance benefits if, within two years following a change in control of Conduent, employment was terminated either involuntarily other than for cause, death or disability, or voluntarily for good reason. These benefits under the prior change in control severance agreements included aall named executive officers include:

A lump sum cash payment equal to two times the then-current annual base salary and short-term incentive award target, as well as continuation of specified welfare benefits at active employee rates for a period of 24 months.target.

Change in control severance benefits for all named executive officers include:

Continuation

of specified welfare benefits at active employee rates for a period of 24 months.

 

Payment of reasonable legal fees and expenses incurred when the named executive officer, in good faith, is involved in a dispute while seeking to enforce the benefits and rights provided by the severance agreement.

 

Pursuant to the terms of the applicable agreements, upon involuntary or good reason termination, these executives would also be entitled to: (i) accelerated vesting of stock awards, including performance shares at target, which will occur following a change in control only upon an involuntary termination of employment (other than a termination for cause) or a voluntary termination for good reason (commonly described as “double-trigger”); and (ii) a short-term incentive (Non-Equity(Non-Equity Incentive Award) payment for the 20172018 performance reflected above at actual achievement against performance goals.

If excise tax is payable by any of the named executives, Conduent will reduce the named executive officer’s CIC payment to a level that will not trigger an excise tax payment if it is determined that doing so will result in a greater netafter-tax amount for the executive.

All named executive officers fall under the CIC Plan as of January 1, 2018.

 

(D)

Following death, the estates or, with respect to certain types of payments and elections made, the spouses of all named executive officers would receive payment of a 20172018 short-term incentive payment shown at actual achievement against performance goals; full vesting for performance shares at target for awardsgranted prior to January 1, 2017 and (amount shown here is based on actual shares earned);pro-rated vesting of performance shares for awards on or after January 1,granted in 2017 (basedbased on the number of full months of service as an employee during the vesting period per the applicable award agreement, subject to actual performance achievement)achievement (amount shown here is based on target); full vesting of Performance Stock Units granted in 2018, subject to actual performance achievement (amount shown here is based on target); accelerated vesting of time-based restricted stock; their deferred compensation balance, if any;stock and restricted stock units; and a life insurance benefit.

(E)

Assuming termination following disability on December 31, 2018, all named executive officers would be eligible forpro-rated vesting for performance shares granted prior to January 1, 2017 (amount shown here is based on actual shares earned);pro-rated vesting of performance shares granted in 2017 based on the number of full months of service as an employee during the vesting period per the applicable award agreement, subject to actual performance achievement (amount shown here is based on target); full vesting of Performance Stock Units granted in 2018, subject to actual performance achievement (amount shown here is based on target);pro-rated vesting of restricted stock awards granted prior to January 1, 2017; full vesting of restricted stock awards granted in 2017 and full vesting of Restricted Stock Units granted in 2018, per the terms of the applicable awards agreements.

Termination Following Disability

(F)

Mr. Amoriell retired from the Company January 11, 2019 and received benefits consistent with those reported in column A. The value to be realized upon the vesting of equity will be dependent on the price of our stock on the date of vesting.

Assuming termination following disability on December 31, 2017, all named executive officers would be eligible for pro-rated performance shares (based on the number of full months of service as an employee during the vesting period), subject to actual performance achievement, prorated restricted stock for awards prior to January 1, 2017 and accelerated vesting of restricted stock for awards on or after January 1, 2017, per the terms of the applicable awards agreements. Mr. Vemuri would also be entitled to a $500,000 cash severance payment as shown under “Involuntary Termination Not for Cause.”

Involuntary Termination for Cause

Assuming involuntary termination for cause due to engagement in detrimental activity against Conduent, there would be no payments to the named executive officers other than their deferred compensation balance, if any. All unvested shares would be immediately cancelled upon termination for cause. See the “Governance of the Executive Compensation Programs—Compensation Recovery Policy (Clawbacks)” section of the CD&A for additional information.

Change-in-Control Severance AgreementDefinitions Under the CIC Plan

Generally, for purposes of change-in-control severance agreements and the CIC Plan, a change in control is deemed to have occurred, subject to specific exceptions, if:

 

Any person becomes a beneficial owner representing 50 percent or more of the combined voting power of the outstanding securities of Conduent.

 

A majority of the Conduent Board is replaced under specific circumstances.

 

There is a merger or consolidation involving Conduent unless (i) the directors of Conduent who were members of the Board immediately before the merger/consolidation continue to constitute a majority of the Conduent Board of Directors or (ii) the merger/consolidation is effectedaffected to implement a recapitalization and no person becomes the beneficial owner representing 50 percent or more of the combined voting power of Conduent’s then outstanding voting securities.

 

All or substantially all of Conduent’s assets are sold, or Conduent’s shareholders approve a plan of complete liquidation or dissolution.

A voluntary termination for good reason in the event of a change in control includes:

 

The material diminution of authority, duties, or responsibilities, including being an executive officer of Conduent before a change in control and ceasing to be an executive officer of the surviving company. Thechange-in-control benefits for this provision will only be triggered if the executive officer has not voluntarily terminated his/her employment and the “material diminution of authority, duties, or responsibilities” has occurred and not been remedied.

 

A material reduction in annual base salary, annual target short-term incentive or employee benefits in the aggregate, except to the extent such reduction is consistent with anacross-the-board reduction for employees.

 

A material change in the geographic location where the executive is required to be based.

 

Failure of Conduent to obtain a satisfactory agreement from any successor to assume and agree to perform in a manner consistent with the change in control agreement.

EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes information with respect to equity awards under Conduent’s equity compensation plans as of December 31, 2017:2018:

 

  

Plan Category

 

(A)

  Number of Securities  

to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights(1)

 

  

(B)

Weighted Average

Exercise Price of

Outstanding
Options, Warrants
and Rights(1)

 

  

(C)

Number of Securities
Available for Future
Issuance Under Equity

Compensation Plans
(Excluding Securities
  Reflected in Column (A))(2)  

 

  

(A)

  Number of Securities  

to be Issued Upon

Exercise of

Outstanding

Options, Warrants

and Rights(1)

 

 

(B)

  Weighted Average  

Exercise Price of

Outstanding

Options, Warrants

and Rights(1)

 

 

(C)

Number of Securities

Available for Future

Issuance Under Equity

Compensation Plans

(Excluding Securities

  Reflected in Column (A)(2)  

 

Equity compensation plans approved by security holders

 

 

 

 

3,693,025

 

 

 

 

$

 

10.35

 

 

 

 

 

 

15,302,004

 

 

 

 

3,379,082

 

 

$10.15

 

 

15,027,768

Equity compensation plans not approved by security holders

 

 

 

 

 

-

 

 

 

 

 

 

$

 

 

       -  

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

-

 

 

 

  -    

 

 

 

  -    

 

Total

  3,693,025  $10.35   15,302,004  3,379,082 $10.15 15,027,768

 

 

(1)

Column (A) includes:includes (i) 1,356,4441,802,117 shares underlying outstanding RSUsrestricted stock units and 1,911,1381,359,206 shares underlying outstanding performance stock units and performance shares awarded under the Conduent Performance Incentive Plan (of which 1,306,154(included in these amounts are 1,042,207 RSUs and 1,859,854677,541 performance shares representrepresenting outstanding awards granted by Xerox and converted to Conduent awards following the Separation); (ii) 77,49698,607 shares underlying outstanding deferred stock units (“DSUs”DSUs”) outstandingawarded under the Conduent Director Equity Plan; and (iii) 347,947119,152 shares underlying outstanding options awarded under the 2007 ACS Plan. Because there is no exercise price associated with performance shares, RSUsperformance stock units, restricted stock units or DSUs, these stock awards are not included in the weighted-average exercise price calculation presented in column (B).

 

(2)

The 2007 ACS Plan was discontinued as of February 5, 2010. No further grants can be made under this plan. Any shares that are cancelled, forfeited or lapse under the Conduent Performance Incentive Plan become available again for issuance under this plan.the Performance Incentive Plan. Any shares that are cancelled, forfeited or lapse under the Conduent Director Equity Plan become available again for issuance under thisthe Director plan.Equity Plan.

CEO Pay Ratio Disclosure

For 2017,2018, the median of the annual total compensation of all employees of our companyCompany (other than our CEO), was $33,040.$31,308. The 20172018 annual total compensation of our CEO was $11,829,474,$7,066,017, as reported in the “Total” column of the “Summary Compensation Table” included above in this Proxy Statement. Based on this information, we estimate the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees for 20172018 was 358:226:1. This represents a reasonable estimate calculated in a manner consistent with SEC regulations.

WeFor 2018, we did not use the same median employee identified for our 2017 pay ratio disclosure because this individual is no longer employed by the Company. As permitted by SEC rules, for purposes of our 2018 pay ratio disclosure, we identified an employee whose position and compensation were substantially similar to our median employee identified for 2017 based on the same consistently applied compensation measure used to select our 2017 median employee, as described below. There has otherwise been no material change in our employee population or compensation arrangements in 2018 that would result in a significant change in our pay ratio disclosure or median employee.

To determine our median employee, we ascertained that, as of ourthe December 31, 2017 determination date, our total employee population consisted of 90,511 employees, which included 43,572 U.S. employees and 46,939 non-U.S. employees. As is permitted under the SEC rules, we excluded employees from Germany (2,079

employees) and Turkey (1,521 employees), which representrepresented less than 5% of our total employee population.population as of the determination date. We then determined our “median employee” using the remaining employee population of 86,911.86,911, which included 43,572 U.S. employees and 43,839 non-U.S. employees.

We chose to use annual base compensation as our consistently applied compensation measure to determine our “median employee”. We determined annual base compensation for our salaried employees using base salary paid for 2017. We determined annual base compensation for our hourly paid employees by multiplying the hourly rate by the scheduled hours for the year. We annualized the compensation of all permanent employees in our population who were hired in 2017 but did not work for us the entire year. Once we identified our median employee, we determined that person’s annual total compensation in accordance with the requirements of the Summary Compensation Table.

Additional Information

Our CEO received a one-time special stock award (the Strategic Initiative Grant, or “SIG”) as part of the Separation. This one-time award is not part of the CEO’s ongoing compensation program and is likely not reflective of our pay ratio for subsequent years.

If we exclude the SIG award, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees for 2017 would be 213:1. We believe that this ratio is a useful way to better understand how our Compensation Committee and our Board of Directors view the compensation of our CEO and should be viewed as a supplement to, and not as a replacement of, the required pay ratio disclosure included in this section.

OTHER INFORMATION

Indemnification Actions

The Company’sby-laws provide for indemnification of officers and directors to the fullest extent permitted by New York law. The Company has not advanced any counsel fees or other reasonable fees and expenses to any officer or director under ourby-laws. In accordance with the requirements of the Business Corporation Law of the State of New York (the “BCL”), in the event the Company advances counsel fees or other reasonable fees and expenses, the individuals on whose behalf any such expenditures are made are required to execute an undertaking to repay such expenses if they are finally found not to be entitled to indemnification under the Company’sby-laws or the BCL.

Directors and Officers Liability Insurance and Indemnity

On JanuaryJune 1, 2018, the Company renewed its policies for directorsdirectors’ and officersofficers’ liability insurance. The policies are issued by Federal InsuranceChubb insurance Company of New Jersey, XL Specialty Insurance Company, Travelers Casualty and Surety Company of America, Twin City Fire Insurance Company, U.S. Specialty Insurance Company, Arch Insurance Company, ACE American Insurance Company,Zurich Excess Select insurance Policy, Marsh Alpha (Lloyd’s of London), Allied World Assurance Company Ltd, Axis Insurance Company and Illinois NationalUnion Fire Insurance Company.Company of Pittsburgh, PA. The policies expire June 18, 2018,1, 2019, and the total annual premium is approximately $1,288,060.$1,290,000.

NON-GAAP FINANCIAL MEASURES

We have reported our financial results in accordance with U.S. GAAP. In addition, we have discussed our results usingnon-GAAP measures.

We believe thesenon-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related tax effects. Management believes that thesenon-GAAP financial measures provide an additional means of analyzing the current periods’ results against the corresponding prior periods’ results. However, thesenon-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with U.S. GAAP. Ournon-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures and should be read only in conjunction with our Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our supplementalnon-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions, and providing suchnon-GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. Thesenon-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on thesenon-GAAP measures.

A reconciliation of thenon-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP is provided below.

These reconciliations also include the income tax effects for ournon-GAAP performance measures in total, to the extent applicable. The income tax effects are calculated under the same accounting principles as applied to our reportedpre-tax performance measures under ASC 740, which employs an annual effective tax rate method. The noted income tax effect for ournon-GAAP performance measures is effectively the difference in

income taxes for reported and adjustedpre-tax income calculated under the annual effective tax rate method. The tax effect of thenon-GAAP adjustments was calculated based upon evaluation of the statutory tax treatment and the applicable statutory tax rate in the jurisdictions in which such charges were incurred.

Adjusted Net Income (Loss)

We make adjustments to Income (Loss) before Income Taxes for the following items for the purpose of calculating Adjusted Net Income (Loss):

 

Amortization of acquired intangible assets. The amortization of intangible assets is driven by acquisition activity, which can vary in size, nature and timing as compared to other companies within our industry from period to period.

 

Restructuring and related costs. Restructuring and related costs include restructuring and asset impairment charges as well as costs associated with our strategic transformation program.

 

Separation

(Gain) loss on divestitures and transaction costs. SeparationRepresents (gain) loss on divested businesses and transaction costs.

Litigation costs (recoveries), net. Litigation costs (recoveries), net represents reserves for the State of Texas litigation, Student Loan Service exposures and certain terminated contracts that are expenses incurred in connection with the separation from Xerox Corporation into a separate, independent, publicly traded company. These costs primarily relatesubject to third-party investment banking, accounting, legal, consultinglitigation.

(Gain) loss on extinguishment of debt. Represents premium on debt extinguishment and other similar types of services related to the separation transaction as well as costs associated with the operational separationwrite down of the two companies.associated unamortized discount and issuance costs.

 

Other (income) expenses, net. Other (income) expenses, net includes currency (gains) losses, net litigation matters and all other (income) expenses, net.

 

NY Medicaid Management Information System (NY MMIS) charge (credit). Costs associated with the companyCompany not fully completing the State of New York Health Enterprise platform project.

 

Health Enterprise (HE charge)(HE) charge (credit). Cost associated with not fully completing the Health Enterprise Medical platform implementation projects in California and Montana.

(Gain) loss on sale of asset and businesses.

The Company provides adjusted net income and adjusted EPS financial measures to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods, by adjusting for certain items which may be recurring ornon-recurring and which in our view do not necessarily reflect ongoing performance. We also internally use these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions.

Adjusted EBITDA

We use Adjusted EBITDA as an additional way of assessing certain aspects of our operations that, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of ouron-going business. Adjusted EBITDA represents income (loss) before interest expense, income taxes, depreciation and amortization adjusted for the following items:

 

Restructuring and related costs.

 

Separation

(Gain) loss on divestitures and transaction costs.

 

Litigation costs (recoveries), net.

(Gain) loss on extinguishment of debt.

Other (income) expenses, net.

 

NY MMIS.MMIS charge (credit).

 

HE charge.

charge (credit).

(Gain) loss on sale of asset and businesses.

Adjusted EBITDA is not intended to represent cash flows from operations, operating income (loss) or net income (loss) as defined by U.S. GAAP as indicators of operating performances. Management cautions that amounts presented in accordance with Conduent’s definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other companies because not all companies calculate Adjusted EBITDA in the same manner.

Free Cash Flow

Free Cash Flow is defined as cash flows from operating activities as reported on the consolidated statement of cash flows, less cost of additions to land, buildings and equipment, cost of additions to internal use software and vendor financed capital lease additions plus tax payments related to divestitures and proceeds from sales of land, buildings and equipment. We use thenon-GAAP measure of Free Cash Flow as a criterion of liquidity and performance-based components of employee compensation. We use Free Cash Flow as a measure of liquidity to determine, after required principal payment on debt, amounts we can reinvest in our core businesses, such as amounts available to make acquisitions, invest in land, buildings and equipment and internal use software and make principal payments on debt.software. In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow reconciled to cash flow provided by operating activities, which we believe to be the most directly comparable measure under U.S. GAAP. Adjusted free cash flow is defined as free cash flow from above plus deferred compensation payments.payments, transaction costs and other identified items.

Non-GAAP Reconciliations

Adjusted Net Income Reconciliation:

 

                              
(in millions)  

Year Ended
December 31,

2017

 
  

 

 

 

GAAP as Reported from Continuing Operations

  $177 

Adjustments:

  

Amortization of intangible assets

   243 

NY MMIS

   9 

Restructuring and related costs

   101 

HE charge

   (8) 

Separation costs

   12 

(Gain) loss on sale of asset and businesses

   (42) 

Other (income) expenses, net

   (18) 

Less: Income tax adjustments(1)

   (288) 
  

 

 

 

Adjusted Net Income

  $186 
  

 

 

 
  (in millions)

Year Ended

December 31,

2018

  GAAP as Reported from Continuing Operations

$(416)

  Adjustments:

Restructuring and related costs

      81

Amortization of acquired intangible assets

    242

(Gain) loss on divestitures and transaction costs

      42

Litigation costs (recoveries), net

    227

(Gain) loss on extinguishment of debt

    108

Other (income) expenses, net

        5

NY MMIS charge (credit)

        (2)

HE charge (credit)

        (1)

  Less: Income tax adjustments(1)

      (56)

  Adjusted Net Income

$   230

 

 

(1)

Income Tax Adjustments

 

(in millions)  Year Ended
December 31,
2017		 
  

 

 

 

GAAP Income Tax Benefit as Reported

  $(193) 

Non-GAAP adjustments

  

Benefit from tax law changes

   198 

Termination of COLI plan

   (19) 

Other non-GAAP adjustments

   109 
  

 

 

 

Income tax adjustments

  $288 
  

 

 

 
  (in millions)

Year Ended

December 31,

2018

  GAAP Income Tax Expense as Reported

$21

  Tax Impact onnon-GAAP adjustments

  35

  Income tax adjustments

$56

Adjusted EBITDA Reconciliations:

 

(in millions) 

Year Ended

December 31,

2017

 

Revenue

 $6,022 

Reconciliation to Adjusted EBITDA

 

Net Income (Loss) from Continuing Operations

 $177 

Interest Expense

  137 

Income tax benefits

  (193) 

Depreciation

  125 

Amortization

  372 
 

 

 

 

EBITDA

 $618 
 

 

 

 
 

EBITDA

 $618 

Adjustments:

 

Restructuring and related costs

  101 

Separation costs

  12 

NY MMIS

  9 

HE charge

  (8) 

(Gain) Loss on sale of assets and business

  (42) 

Other (income) expenses, net

  (18) 
 

 

 

 

Adjusted EBITDA

 $672 
 

 

 

 

  (in millions)

Year Ended

December 31,

2018

  Revenue

$5,393        

Reconciliation to Adjusted EBITDA

  Net Income (Loss) from Continuing Operations

$  (416)       

Interest Expense

112        

Income tax expense

21        

Depreciation and amortization

460        

Contract inducement amortization

3        

  EBITDA

$   180        

EBITDA Margin

3.3%

  EBITDA

$   180        

Adjustments:

Restructuring and related costs

81        

(Gain) Loss on divestitures and transaction costs

42        

Litigation costs (recoveries), net

227        

(Gain) Loss on extinguishment of debt

108        

Other (income) expenses, net

5        

NY MMIS

(2)       

HE charge

(1)       

  Adjusted EBITDA

$   640        

Impact from 2018 divestitures(1)

57        

Strategic contracts exits(1)

3        

  Defined Adjusted EBITDA(1)

$   700        

(1)

Reflects estimated EBITDA not realized due to the timing of divestitures and/or exiting of certain contracts.

Free Cash Flow/Adjusted Free Cash Flow Reconciliation:

 

(in millions) Year Ended
December 31,
2017		 
 

 

 

 

Operating Cash Flow

 $302 

Cost of additions to land, buildings and equipment

  (96) 

Proceeds from sales of land, buildings and equipment

  33 

Cost of additions to internal use software

  (36) 

Vendor financed capital leases

  (16) 
 

 

 

 

Free Cash Flow

 $187 
 

 

 

 

Free Cash Flow

 $187 

Deferred compensation payments

  17 
 

 

 

 

Adjusted Free Cash Flow

 $204 
 

 

 

 

 (in millions)

Year Ended

December 31,

2018

 Operating Cash Flow

$ 283       

 Cost of additions to land, buildings and equipment

(179)      

 Proceeds from sales of land, buildings and equipment

13       

 Cost of additions to internal use software

(45)      

 Tax payment related to divestitures

90       

 Vendor financed capital leases

(14)      

Free Cash Flow

$ 148       

 Free Cash Flow

$ 148       

 Transaction costs

33       

 Transaction costs tax benefit

(5)      

 Debt buyback tax benefit

(26)      

 Deferred compensation tax benefit

(31)      

 Deferred compensation payments and adjustments

99       

Adjusted Free Cash Flow

$ 218       

PROPOSAL 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed PricewaterhouseCoopers LLP (“PWC”), an independent registered public accounting firm, to act as independent auditors of the Company for 2018.2019. PwC has served as the Company’s independent auditors since 2016. Representatives of the firm are expected to be at the Annual Meeting to respond to appropriate questions and to make a statement, if they wish.

Principal Auditor Fees and Services

Aggregate fees for professional services rendered for the Company by PwC were ($ in millions):

 

   

 

    2017  

 

 

  

 

    2016(1)  

 

 

 

Audit Fees(2)

 

 $

 

7.0

 

 

 

 $

 

5.8

 

 

 

Audit Related Fees(3)

 

 $

 

4.6

 

 

 

 $

 

0.7

 

 

 

Tax Fees(4)

 

 $

 

0.7

 

 

 

 $

 

0.2

 

 

 

All Other Fees(5)

 

 $

 

0.2

 

 

 

 $

 

0

 

 

 

Total Fees

 $12.5  $6.7 
   

 

    2018  

 

 

 

 

    2017  

 

 

 

Audit Fees(1)

 

 

 

$6.2

 

 

 

$  7.0

 

 

Audit Related Fees(2)

 

 

 

$2.6

 

 

 

$  4.6

 

 

Tax Fees(3)

 

 

 

$0.6

 

 

 

$  0.7

 

 

All Other Fees(4)

 

 

 

$0.1

 

 

 

$  0.2

 

 

Total Fees

 

 

 

$9.5

 

 

 

$12.5

 

 

 

(1)The Company paid $1,621,000 to PwC for services rendered for 2016. The remainder of the $6.7 million paid to PwC for services rendered for 2016 was paid directly by Xerox because the Company’s results were included in Xerox’s consolidated financial statements.

(2)These audit fees were for professional services rendered for the audits of consolidated financial statements, reviews of interim financial statements included in periodic reports, audits related to internal control over financial reporting and statutory audits.

 

(3)(2)

These audit-related fees were for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and are not reported under the “audit fees” category above. These services include carve-out audits, SSAE 16SOC 1 engagements and other service organization reports, implementation of new accounting standards and regulations, technical accounting advice and agreed-upon procedures.

 

(4)(3)

Tax fees were for tax compliance, tax advice and tax planning. These services included the preparation and review of required tax return compliance filings, assistance with tax audits and transfer pricing matters, advisory services relating to federal, state, provincial and international tax compliance, customs and duties, and restructurings, mergers and acquisitions.

 

(5)(4)

Fees disclosed in the tables above under the item “all other fees”“All Other Fees” were for services other than the audit fees, audit-related fees and tax fees described above.

Pursuant to its charter, the Audit Committee is directly responsible for the appointment, retention, compensation and oversight of the Company’s independent auditors. In addition to assuring the regular rotation of the lead audit partner as required by law,applicable rules, the Audit Committee is involved in the evaluation and selection of the lead audit partner and considers whether there should be regular rotation of the independent auditors.

The Audit Committee is also required to review andpre-approve all of the audit andnon-audit services to be performed by the Company’s independent auditors, including the firm’s engagement letter for the annual audit of the Company, the proposed fees in connection with such audit services, and any additional services that management chooses to hire the independent auditors to perform. The authority for suchpre-approval may be delegated to one or more members of the Audit Committee, provided that the decisions of any member to whompre-approval authority is delegated must be presented to the full Audit Committee at its next meeting. Additionally, the Audit Committee can establishpre-approval policies and procedures with respect to the engagement of the Company’s independent auditors fornon-audit services. In accordance with the Audit Committee Charter, all of the foregoing audit andnon-audit fees paid to, and the related service provided by, PwC werepre-approved by the Audit Committee.

At least annually, the Audit Committee reviews the Company’s independent registered public accounting firm to decide whether to retain such firm on behalf of the Company. PwC has been the Company’s independent registered public accounting firm since 2016.

When conducting its latest review of PwC, the Audit Committee considered the following factors:

 

The professional qualifications of PwC, the lead audit partner and other key engagement partners on the engagement;

The appropriateness of PwC’s fees relative to both efficiency and audit quality;

 

PwC’s independence policies and processes for maintaining its independence;

 

PwC’s capability, expertise and efficiency in handling the breadth and complexity of the Company’s operations across the globe; and

 

PwC’s demonstrated professional integrity and objectivity.

The Audit Committee and the Board believe that the continued retention of PwC to serve as our independent auditors is in the best interests of the Company and its shareholders.

Audit Committee Report

The responsibilities of the Audit Committee are discussed under “Committee Functions, Membership and Meetings” beginning on page 14 and can also be found on our website atwww.conduent.com/corporate-governance. Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an audit of the Company’s consolidated financial statements and the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and to issue a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.

Consistent with the foregoing, the Audit Committee has:

 

Reviewed and discussed with the management of the Company and PwC the audited consolidated financial statements of the Company for the year ended December 31, 2017,2018, including the specific disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s key accounting policies and use of estimates;

 

Discussed with PwC the matters required to be communicated in PCAOB Auditing Standards Nos. 1301 (Communication with Audit Committees) and 2410 (Related Parties); and

 

Received the written disclosures and the letter from PwC required by the applicable PCAOB independence rules and New York Stock Exchange Rule 303A.07 (Auditor Quality Control Procedures) and has discussed with PwC that firm’s independence and quality control procedures.

Based upon the foregoing review and discussions, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s 20172018 Annual Report to Shareholders and in the Company’s Annual Report on Form10-K for the year ended December 31, 20172018 for filing by the Company with the SEC.

Virginia M. Wilson, Chair

Nicholas Graziano

Joie A. Gregor

Michael Nevin

The Board recommends a vote

FOR

the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year 20182019

PROPOSAL 3 — PROPOSAL TO APPROVE, ON AN ADVISORY BASIS, THE 20172018 COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

As required by the Dodd-Frank Act, under Section 14A of the Exchange Act, we are seeking your vote, on anon-binding advisory basis, on the compensation of our named executive officers as described in the Compensation Discussion and Analysis, compensation tables and narrative disclosure, as provided in this proxy statement.Proxy Statement. Specifically, shareholders are being asked to vote upon, and the Board has approved and unanimously recommends approval of, the followingnon-binding advisory resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Company’s Proxy Statement for the 20182019 Annual Meeting of Shareholders pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED. “

The Board believes that our executive compensation program is well designed, appropriately aligns executive pay with Company performance and incentivizes desirable executive performance. This proposal gives you an opportunity to express your own view of our 20172018 executive compensation practices. We provide shareholders with the opportunity to cast their advisory vote on our executive compensation practices on an annual basis, in accordance with the preference expressed by our shareholders at the 2017 annual meeting regarding the frequency of our advisory vote on executive compensation.

While this vote does not address any specific item of compensation and is not binding on the Board, the Board and its Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions.

The Board recommends a vote

FOR

the proposal to approve the compensation of the named executive officers as disclosed in this Proxy Statement

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Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.

VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.

Proxies submitted by the Internet or telephone must be received by 9:00 a.m., Eastern Time, on May 25, 2018.

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qIF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q

 A Proposals — The Board of Directors recommends a voteFOR all the nominees listed.

1. Election of Directors:

    01 - Paul S. Galant

    04 - Courtney Mather

    07 - William G. Parrett

For

☐

☐

☐

Against

☐

☐

☐

Abstain

☐

☐

☐

02 - Nicholas Graziano

05 - Michael Nevin

08 - Ashok Vemuri

For

☐

☐

☐

Against

☐

☐

☐

Abstain

☐

☐

☐

03 - Joie Gregor

06 - Michael A. Nutter

09 - Virginia M. Wilson

For

☐

☐

☐

Against

☐

☐

☐

Abstain

☐

☐

☐

+        

 B The Board of Directors recommends a voteFOR Proposals 2 and 3.

ForAgainstAbstainForAgainstAbstain

2. Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm.

☐☐☐

3. Approve, on an advisory basis, the 2017 compensation of our named executive officers.

☐☐☐

 C Non-Voting Items

Change of Address— Please print your new address below.Comments— Please print your comments below.Meeting Attendance

Mark the box to the right

if you plan to attend the

Annual Meeting.

☐

 D Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

01—Nicholas Graziano 04—Jesse A. Lynn 07—William G. Parrett 02—Joie Gregor 05—Courtney Mather 08—Ashok Vemuri 03—Scott Letier 06—Michael A. Nutter 09—Virginia M. Wilson For Against Abstain For Against Abstain For Against Abstain 9 2 B M Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. 0313CE + + Proposals — The Board of Directors recommends a vote FOR all the nominees listed A and FOR Proposals 2 and 3. 2. Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. 3. Approve, on an advisory basis, the 2018 compensation of our named executive officers. 1. Election of Directors: For Against Abstain Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

Date (mm/dd/yyyy) — Please print date below. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box.Signature 2 — Please keep signature within the box.
      /      /

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02S2SB

2018 Annual Meeting Admission Ticket

2018 Annual Meeting of

Conduent Incorporated Shareholders

May 25, 2018 at 9:00 a.m. Eastern Time

The Madison Hotel

1 Convent Road

Morristown, New Jersey 07960

Upon arrival, please present this admission ticket

— Please keep signature within the box. Signature 2 — Please keep signature within the box. B Authorized Signatures — This section must be completed for your vote to count. Please date and photo identification at the registration desk.

q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,sign below. qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.ENVELOPE.q 2019 Annual Meeting Proxy Card For Against Abstain 000004 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 ENDORSEMENT_LINE SACKPACK 1234 5678 9012 345 MMMMMMMMM MMMMMMMMMMMMMMM 4 1 8 8 2 9 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND C 1234567890 J N T C123456789 MMMMMMMMMMMM MMMMMMM 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext If no electronic voting, delete QR code and control # Δ â‰^ You may vote online or by phone instead of mailing this card. Online Go to www.envisionreports.com/CNDT or scan the QR code — login details are located in the shaded bar below. Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/CNDT Phone Call toll freeq1-800-652-VOTE (8683) within the USA, US territories and Canada Votes submitted electronically must be received by 9:00 a.m., Eastern Time, on May 21, 2019. Your vote matters – here’s how to vote!

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Proxy — Conduent Incorporated

Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/CNDT Notice of 20182019 Annual Meeting of Shareholders

Proxy Solicited by Board of Directors for Annual Meeting — May 25, 2018

21, 2019 Ashok Vemuri and William G. Parrett, or either of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of StockholdersShareholders of Conduent Incorporated to be held at The Madison Hotel, 1 Convent Road, Morristown, New Jersey 07960Conduent Corporate Headquarters, 100 Campus Drive, Suite 200, Florham Park, NJ 07932 on May 25, 201821, 2019 at 9:00 a.m. (ET) or at any postponement or adjournment thereof.

Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to voteFOR all Nominees andFOR Proposals 2 and 3.

In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.

(Items (Items to be voted appear on reverse side.)side) Proxy — Conduent Incorporated qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q CNon-Voting Items + + Change of Address — Please print new address below. Comments — Please print your comments below. Meeting Attendance Mark box to the right if you plan to attend the Annual Meeting. 2019 Annual Meeting Admission Ticket 2019 Annual Meeting of Conduent Incorporated Shareholders May 21, 2019 at 9:00 a.m. Eastern Time Conduent Corporate Headquarters 100 Campus Drive, Suite 200 Florham Park, NJ 07932 Upon arrival, please present this admission ticket and photo identification at the registration desk.