(4) | This amount represents deferred restricted stock units
(4)This amount represents deferred RSUs under the Restricted Stock Plan, an equity compensation plan not approved by stockholders under which we have outstanding awards. All of our directors, officers and employees were eligible to receive awards under the plan, which provided for the grant of contingent rights to receive shares of our common stock. Awards under the plan were granted at the discretion of the Compensation Committee. Each award granted under the plan represents the right of the holder of the award to receive shares of our common stock, cash or a combination of shares and cash, subject to the holder’s continued employment with us for a period of time after the grant date of the award. The Compensation Committee determined each recipient of an award under the plan, the number of shares of common stock subject to such an award and the period of continued employment required for the vesting of such award. The last year we made awards under this plan was 2009.
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| 2022 PROXY STATEMENT
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Audit Matters |
Audit Matters Item 3ITEM 2 – Ratification of Appointment of Independent Auditor
The Audit Committee has considered the qualifications of Ernst & Young LLP and has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022.2024. As a matter of good governance, the Board is submitting the appointment of Ernst & Young LLP to our stockholders for ratification. If the appointment of Ernst & Young LLP is not ratified, the Audit Committee will consider the outcome of this vote in its future deliberations regarding the selection of our independent registered public accounting firm. Principal Accountant Fees and Services The following is a summary of Ernst & Young LLP’s fees for professional services rendered to us for the fiscal years ended December 31, 20212023 and 2020:2022:
| | | | | | | 2023 | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | | | | | | | Audit Fees(1) | | $ | 5,126,000 | | | $ | 4,723,000 | | $ | 7,374,000 | | | $ | 6,371,000 | | | | | | | | | | | | | | | | | | | Audit-Related Fees(2) | | | 1,450,000 | | | | 1,420,000 | | | 2,033,000 | | | | 1,828,000 | | | | | | | | | | | | | | | | | | | Tax Compliance Fees(3) | | | 116,000 | | | | 1,022,000 | | | 610,000 | | | | 208,000 | | | | | | | | | | | | | | | | | | | Tax Advisory Fees(4) | | | 623,000 | | | | 525,000 | | | 466,000 | | | | 554,000 | | | | | | | | | | | | | | | | | | | All Other Fees(5) | | | 4,000 | | | | 7,000 | | | 11,000 | | | | 6,000 | | | | | | | | | | | | | | | | | | | Totals | | $ | 7,319,000 | | | $ | 7,697,000 | | $ | 10,494,000 | | | $ | 8,967,000 | | | | | | | | | | |
(1) | Audit fees include fees associated with the annual audit of our company and our subsidiaries and the effectiveness of internal control over financial reporting, the review of our Quarterly Reports on Form 10-Q and Annual Report on Form 10-K, and statutory audits required internationally.
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(2) | Audit-related fees principally include issuance of service auditor reports (SOC 1 and SOC 2) related to operations at several of our subsidiaries, due diligence in connection with acquisitions, debt and equity issuance comfort letter procedures and advisory work related to our compliance with foreign statutory requirements.
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(3) | Tax compliance fees include fees associated with the preparation of our annual Federal, state and international tax returns.
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(4) | Tax advisory fees include tax advice and tax planning related to Federal, state and international tax matters.
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(5) | All other fees principally include fees for access to an online accounting information database.
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(1)Audit fees include fees associated with the annual audit of our company and audit-relatedour subsidiaries and the effectiveness of internal control over financial reporting, the review of our Quarterly Reports on Form 10-Q and Annual Report on Form 10-K, and statutory audits required internationally. (2)Audit-related fees principally include issuance of service auditor reports (SOC 1 and SOC 2) related to operations at several of our subsidiaries, due diligence in connection with acquisitions, debt and equity issuance comfort letter procedures and advisory work related to our compliance with foreign statutory requirements. (3)Tax compliance fees include fees associated with the preparation of our annual Federal, state and international tax returns. (4)Tax advisory fees include tax advice and tax planning related to Federal, state and international tax matters. (5)All other fees principally include fees for access to an online accounting information database. Audit fees were higher in 20212023 due to increases in fees charged for audit services and an increase in audit fees and scope of services provided primarily as a result of the acquisition of Willis Reactivity during 2023 and other audit-related matters. Audit-related fees were higher in 2023 due to increased activity related to debt and equity registration statements, service auditor report (SOC 1reports and SOC 2) work in 2021, partially offset by less statutory audit and due diligence work.compliance-related matters. Tax advisory fees were lower in 2023 due to a decrease in scope of services. Tax compliance fees were higher in 20212023 due to an increase in scope of services primarily as a result of acquisition and legal entity restructuring activity. Tax compliance fees were lower in 2021 duerelated to a decrease in scope of services provided. In 2021, ourfiling amended prior year income tax compliance work was transitioned to a different international accounting firm.returns. Audit Committee Pre-Approval Policies and Procedures All audit services, audit-related services, tax services and other services for fiscal years 20212023 and 20202022 were pre-approved by the Audit Committee. It is the policy of the Audit Committee to pre-approve the engagement of Ernst & Young LLP before we engage such firm to render audit or other permitted non-audit services. The Audit Committee has adopted procedures for pre-approving all audit and permitted non-audit services provided by Ernst & Young LLP. The Audit Committee annually pre-approves a list of specific services and categories of services, subject to a specified cost level. Part of this approval process includes making a determination as to whether permitted non-audit services are consistent with the SEC’s rules on auditor independence. The Audit Committee has delegated pre-approval authority to the ChairmanChair of the Audit Committee for the types of services that Ernst & Young LLP has historically been retained to perform related to integrated audit and other recurring services, subject to reporting any such approvals at the next Audit Committee meeting. A representative of Ernst & Young LLP is expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement if the representative so desires.
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| THE BOARD RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNSTThe Board recommends that you vote “FOR” ratification of the appointment of Ernst & YOUNGYoung LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBERas our independent registered public accounting firm for the year ending December 31, 20222024 |
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Audit Committee Report
The Audit Committee represents and assists the Board in fulfilling its responsibilities for general oversight of the integrity of the company’s financial statements, risk assessment and risk management, and compliance with legal and regulatory requirements. The Audit Committee manages the company’s relationship with and is responsible for the appointment, retention, termination and compensation of Ernst & Young LLP. Ernst & Young LLP has served as the company’s auditor since 1973. The Audit Committee reviews Ernst & Young LLP’s independence, capabilities, expertise, performance and fees in deciding whether to retain its services.
The company’s management is responsible for the preparation, presentation and integrity of its consolidated financial statements, accounting and financial reporting principles, and internal controls designed to assure compliance with accounting standards and applicable laws and regulations. Ernst & Young LLP is responsible for auditing the company’s consolidated financial statements and expressing an opinion as to their conformity with U.S. generally accepted accounting principles and for auditing the effectiveness of the company’s internal controls over financial reporting. The Audit Committee monitors the financial reporting process and reports its findings to the Board.
The Audit Committee carried out its duties and responsibilities, including the following specific actions:
| Audit Committee Report The Audit Committee represents and assists the Board in fulfilling its responsibilities for general oversight of the integrity of the company’s financial statements, risk assessment and risk management, and compliance with legal and regulatory requirements. The Audit Committee manages the company’s relationship with and is responsible for the appointment, retention, termination and compensation of Ernst & Young LLP. Ernst & Young LLP has served as the company’s auditor since 1973. The Audit Committee reviews Ernst & Young LLP’s independence, capabilities, expertise, performance and fees in deciding whether to retain its services. The company’s management is responsible for the preparation, presentation and integrity of its consolidated financial statements, accounting and financial reporting principles, and internal controls designed to assure compliance with accounting standards and applicable laws and regulations. Ernst & Young LLP is responsible for auditing the company’s consolidated financial statements and expressing an opinion as to their conformity with U.S. generally accepted accounting principles and for auditing the effectiveness of the company’s internal controls over financial reporting. The Audit Committee monitors the financial reporting process and reports its findings to the Board. The Audit Committee carried out its duties and responsibilities, including the following specific actions: •Reviewed and discussed with management and Ernst & Young LLP the company’s audited consolidated financial statements as of and for the fiscal year ended December 31, 20212023 and its internal control over financial reporting as of December 31, 2021; | |
| 2023; • | | Reviewed and discussed with Ernst & Young LLP all matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board (PCAOB) and the SEC; and | |
| • | | Obtained the written disclosures and letter from Ernst & Young LLP regarding its communications with the Audit Committee concerning Ernst & Young LLP’s independence as required by the PCAOB, including the requirements under PCAOB Rule 3526, and has discussed with Ernst & Young LLP its independence. Based on these reviews and discussions with management and Ernst & Young LLP, the Audit Committee recommended to the Board that the company’s audited consolidated financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, for filing with the SEC. The Audit Committee believes that the retention of Ernst & Young LLP to serve as the company’s independent registered public accounting firm is in the best interests of the company. | AUDIT COMMITTEE Ralph Nicoletti (Chair) William Bax Teresa Clarke Norman Rosenthal |
Based on these reviews and discussions with management and Ernst & Young LLP, the Audit Committee recommended to the Board that the company’s audited consolidated financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021, for filing with the SEC. The Audit Committee believes that the retention of Ernst & Young LLP to serve as the company’s independent registered public accounting firm is in the best interests of the company.
AUDIT COMMITTEE
Ralph J. Nicoletti (Chair)
William L. Bax
Teresa H. Clarke
Christopher C. Miskel
Norman L. Rosenthal
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| Compensation Discussion and Analysis |
Compensation Discussion and Analysis
| | | | | | COMPENSATION TOPICS |
| This Compensation Discussion and Analysis discusses the compensation of the following named executive officers: | | | •Pat Gallagher
| | Chairman, President and Chief Executive Officer
| | | •Doug Howell
| | Chief Financial Officer
| | | •Tom Gallagher
| | President – Global P/C Brokerage
| | | •Scott Hudson
| | President – Risk Management | | | •Walt Bay
| | General Counsel and Secretary
| Non-GAAP financial measures. See Exhibit B for additional information regarding the non-GAAP financial measures referred to
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| Overview of Our Executive Compensation Program |
| 22 | Pat Gallagher Chairman and Chief Executive Officer
Doug Howell Chief Financial Officer
Tom Gallagher President
Scott Hudson President – Risk Management
Walt Bay General Counsel and Secretary |
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| Key Executive Compensation Practices |
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| 2023 Compensation |
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See Exhibit A for additional information regarding the non-GAAP financial measures referred to in this Proxy Statement (adjusted revenue, adjusted EBITDAC, adjusted EBITDAC per share, adjusted EBITDAC margin and organic revenue growth as used in our annual cash incentive and performance share unit programs), including required reconciliations to the most directly comparable GAAP financial measures.
| | | Compensation Discussion and Analysis |
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Overview of Our Executive Compensation Program The Compensation Committee (the Committee) believes that our executive compensation program promotes the long-term interests of the company and its stockholders. We reward performance by emphasizing a balance of short- and long-term compensation vehicles. The key principles and features of the program are set forth below.
| | | Principle |
| Program Features | Principle
| | Program Features
| | | Pay for Performance |
| •Our program emphasizes at-risk incentive award opportunities tied to key financial measures. •Maximum award opportunities under our annual cash incentive program are determined based on achievement of adjusted revenue and adjusted EBITDAC growth goals set by the Compensation Committee. Final award determinations reflect the Committee’s consideration of additional factors including organic revenue growth, adjusted EBITDAC margin, divisional performance and individual achievement, including progress toward inclusion and diversity goals. •Performance share units (PSUs), representing 75% of our CEO’s and a significant portion60% of other executive officers’ long-term incentive compensation, are tied to three-year growth in adjusted EBITDAC per share.
| | | Stockholder Alignment |
| • Performance share units,PSUs, stock options restricted stock units and Deferred Equity Participation Plan (DEPP) awards encourage executive officers to pursue the growth of our business in a way that benefits stockholders over the long term. •Our executive officers own significant amounts of Gallaghercompany stock and are subject to stock ownership guidelines (six times salary for CEO, four times for CFO and three times for other executive officers). All of our executive officers meet these guidelines.
| | | Attract and Retain
World-Class Talent |
| •Compensation elements and award opportunities enable us to compete effectively for executive talent. •The Compensation Committee engages aan external compensation consultant to conduct a market assessment to ensure that our program is highly competitive. •High performers are awarded above-target pay when company performance goals are exceeded. •DEPP awards encourage retention over the long term by requiring executivesexecutive officers to remain employed with us through at least age 62 in order to vest in their awards.
| | | Committee Discretion |
| •While annual incentive awards are determined primarily based on achievement of company performance objectives, the Committee exercises discretion when necessary to adjust awards based on factors such as organic revenue growth, individual or division performance, changes in accounting standards, economic or business conditions, inclusion and diversity objectives, adherence to our cultural values or similar matters.
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| Compensation Discussion and Analysis 2022 PROXY STATEMENT
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Key Executive Compensation Practices
COMPENSATION DISCUSSION AND ANALYSIS
Key Pay and Governance Practices
The Compensation Committee continually evaluates emerging best practices related to executive compensation and governance and considers modifications to our executive compensation program that support our strategic objectives, provide an appropriate balance of risk and reward for our named executive officers, and align their compensation with the long-term interests of the company. In 2023, stockholders expressed support for our executive compensation program, approving our “say on pay” proposal with 92.5% of the vote. The following charts summarize certain of our key pay and governanceexecutive compensation practices.
| | | | | What We Do |
| What We Don’t Do | What We Do
| Double-trigger change-in-control agreements |
| | No automatic single-trigger change-in-control payments in our equity plans or our change in control agreements | | |
| | Double-trigger change-in-control agreements
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| | Our 2022 Long-Term Incentive Plan requiresequity plans require the Board to approve any accelerated payouts on a change in control (i.e., not single-trigger)(no automatic single-trigger vesting) |
| | No new excise tax gross-ups in executive officer change-in-control agreements | | |
| | Performance share units (PSUs)PSUs with three-year performance period
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| | No guaranteed incentive awards for executive officers | | |
| | Minimum vesting requirements for equity awards under our plans. In practice, PSUs cliff vest in three years and stock options vest ratably over years three through five and RSUs cliff vest in five years |
| | No employment agreement with any of our named executive officers | | Executive compensation clawbacks (see below) |
| | No pledges of common stock by directors or executive officers |
| | Stock ownership guidelines for(see below) |
| | No hedging of common stock by directors, executive officers and directors | | |
| | Clawback policy for equity and cash incentive awards
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| | Our by-laws provide for proxy access (3% ownership / 3 years / group of up to 20 / greater of 20% of Board seats or 2 directors)
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| | Equity grant policy, including a uniform grant date for annual equity awards |
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| No single-trigger change-in-control payments in our equity plans or our change in control agreements
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| | No guaranteed incentive awards for senior executives
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| | No employment agreement with any of our named executive officers
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| | No pledging of common stock by executive officers and directors without prior approval
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| | No hedging of common stock by directors, executive officers or employees
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| | No excessive perquisites or related tax gross-ups | | |
| | No new excise tax gross-ups upon change in control
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| | No stock option repricing or stock option cash buyouts or liberal share recycling in equity plans |
Stockholder Views
When making determinations regarding corporate governanceClawbacks. As required by the NYSE, the Board has adopted an Incentive Compensation Recovery Policy under which the company will seek to recover incentive compensation “erroneously awarded” to Section 16 Officers in the event of a qualifying accounting restatement. In addition, our plan documents and award agreements provide that the company may recover executive compensation, our Boardofficers’ annual cash incentive and equity awards in the event of Directors pays close attentioncertain material misconduct or behavior that could cause harm to stockholders or material reputational risk to the viewscompany, including activity contrary, inimical, or harmful to the interests of the company, that violates company policies including our Insider Trading Policy and Global Standards of Business Conduct or conduct that could give rise to criminal or civil penalties.
Stock Ownership Guidelines. As set forth in our Governance Guidelines, executive officers with at least five years of service are expected to own an amount of our stockholders, includingcommon stock with a value equal to a multiple of his or her annualized base salary, as follows: six times annualized base salary for the 91.8% approval rate receivedChief Executive Officer, four times annualized base salary for our “say on pay” proposalthe Chief Financial Officer and three times annualized base salary for the other executive officers. For purposes of determining whether executive officers have met the stock ownership guidelines, shares owned directly and net shares underlying vested stock options, unvested restricted stock units, deferred vested shares, and amounts deemed invested in 2021, when making determinations regarding corporate governancecompany stock through the company’s nonqualified deferred compensation plans (including the DEPP and executive compensation. In addition, during the year, membersSS&T Plan), are included in calculating ownership levels. All of our management team engagedexecutive officers are currently in compliance with stockholders representing more than 50% of our outstanding shares to discuss the 2022 Long-Term Incentive Plan and related share authorization request, as well as various environmental, social and governance (ESG) and executive compensation matters. Based in part on feedback from our stockholders, in 2021 we published our first Climate Disclosure Report includingthese guidelines. See “Director Compensation” for information regarding stock ownership guidelines applicable to our carbon emissions. In addition, we considered the views of our stockholders when determining the size and design of the 2022 Long-Term Incentive Plan, and related share authorization request, included in this Proxy Statement.directors.
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| | | Compensation Discussion and Analysis |
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2023 Compensation
COMPENSATION DISCUSSION AND ANALYSIS
2021 Compensation
Components of Compensation for Named Executive Officers
| | | Compensation Element | Objective | | | | | Key Features | Compensation Element
Base Salary | | Objective
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| | | | | | | Base Salary
| | Recognize the experience and expertise of our named executive officers and compensate them for fulfilling the duties and responsibilities of their positions | | Base salaries reflect internal pay equity considerations and may be increased from time to time based on job performance, promotion into a new role, expansion of duties, or market conditions | | | | | | See 2023 Compensation Actions for the 2023 base salary decisions for our named executive officers | Annual Cash Incentives | | Reward strong operational and financial performance that further short-term strategic objectives | | Maximum annual cash incentive opportunities are tied to significant growth in adjusted revenue and adjusted EBITDAC. Final awards are subject to the Compensation Committee’s discretion and are determined by thesuch Committee based on various factors, including the company’s organic revenue growth, individual or division performance, changes in accounting standards, economic or business conditions, inclusion and diversity objectives, adherence to our culturecultural values or similar matters See page 2725 for more information | | | | | | | Long-Term Incentives Performance share units (PSUs), stock options and restricted stock units
| | Tie a significant portion of compensation to our long-term performance, promote retention of named executive officers and align the financial interests of named executive officers with those of stockholders | | PSUs and stock options and restricted stock units each tie named executive officers’ long-term wealth to the performance of our stock while multi-year vesting requirements reinforce sustainable value creation and promote retention of key executivesexecutive officers See pages 2725 to 3129 for more information | | | | | | | Deferred Equity Participation Plan (DEPP) | | Promote retention of named executive officers and align their financial interests with those of stockholders | | Vesting of awards is delayed until named executive officers reach age 62, and for one-year increments after such age Each named executive officer has made irrevocable elections to invest their awards in a fund representing our common stock See page 3634 for more information | | |
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| Compensation Discussion and Analysis |
COMPENSATION DISCUSSION AND ANALYSIS
Annual Cash Incentives In 2021,2023, consistent with performance results, the Compensation Committee approved maximum award opportunitiesawards under our annual cash incentive program, to be determined as follows: (i) target award opportunitiesawards of 200%225% of base salary for our CEO and 100%125% of base salary for our other named executive officers (these percentages were unchanged from 2022), multiplied by (ii) a percentage determined by the combination of adjusted revenue growth and adjusted EBITDAC growth set forth in the table below. The percentages set outin the table below are maximum award opportunities and the Compensation Committee retains discretion to reduce awards for performance that does not meet its objectives.
| | | | | | | | | | | | | | | | | Adjusted Revenue Growth* | | | | | 0% to 2.49% | | 2.5% to 4.99% | | 5% to 7.49% | | 7.5% to 9.99% | | ≥ 10% | Adjusted EBITDAC Growth* | | 0% to 4.99% | | 100% | | 100% | | 100% | | 100% | | 100% | | 5% to 9.99% | | 100% | | 100% | | 125% | | 125% | | 150% | | 10% to 13.99% | | 100% | | 125% | | 150% | | 150% | | 175% | | 14% to 19.99% | | 100% | | 125% | | 150% | | 175% | | 200% | | ≥20% | | 100% | | 150% | | 175% | | 200% | | 200% |
| | | | | | | | | | | | | | | | | | | | | | | Adjusted Revenue Growth | | | | | | | | | | | | | | | | | | | 0% to 2.49% | 2.5% to 4.99% | 5% to 7.49% | 7.5% to 9.99% | ≥ 10% | | 0% to 4.99% | | 100% | | | 100% | | | 100% | | | 100% | | | 100% | Adjusted | 5% to 9.99% | | 100% | | | 100% | | | 125% | | | 125% | | | 150% | EBITDAC | 10% to 13.99% | | 100% | | | 125% | | | 150% | | | 150% | | | 175% | Growth* | 14% to 19.99% | | 100% | | | 125% | | | 150% | | | 175% | | | 200% | | ≥ 20% | | 100% | | | 150% | | | 175% | | | 200% | | | 200% |
* | We define “adjusted revenue” the same here as we do in our other filings (i.e., revenue for the brokerage segment and revenue before reimbursements for the risk management segment excluding gains on sales of books of business and adjusted to remove the effect of foreign currency translation). However, we define “adjusted EBITDAC” for our annual cash incentives and performance share units as follows: EBITDAC for the brokerage and risk management segments excluding (i) gains on sales of books of business, (ii) lease abandonment and workforce termination charges, and (iii) the effect of foreign currency translation. Unlike adjusted EBITDAC as presented in our most recent earnings release, in this context the measure does not exclude acquisition integration costs and other acquisition-related adjustments.
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* We define “adjusted EBITDAC” for our annual cash incentives and PSUs as follows: EBITDAC for the brokerage and risk management segments excluding (i) gains on sales of books of business, (ii) lease abandonment and workforce termination charges, and (iii) the effect of foreign currency translation. Unlike adjusted EBITDAC as presented in our most recently filed Annual Report on Form 10-K, in this context the measure does not exclude acquisition integration costs other than de minimis amounts included therein related to severance costs. For the annual cash incentive program, the Compensation Committee uses adjusted revenue growth and adjusted EBITDAC growth as defined above because it believes these measures:
• incentivize our executivesexecutive officers to make business decisions that align with the long-term interests of our stockholders, • hold our executivesexecutive officers accountable for acquisition-relatedintegration expenses associated with our merger and acquisition activity, and • provide strong line of sight between operating decisions and the annual cash incentives earned by our executives.executive officers. In 2021,2023, we achieved adjusted revenue growth of 13.1%18.7% and adjusted EBITDAC growth of 17.2%19.0%. Based on this performance, as highlighted in the table above, each named executive officer qualified for a maximum award opportunity of 200% of his target award. Final awards for each named executive officer, discussed under 20212023 Compensation Actions, were determined in the discretion of the Compensation Committee taking into account achievements of the company, the applicable division and each individual, among other factors. Long-Term Incentives In 2021,2023, the Compensation Committee determined a target long-term incentive award value (as a percentage of base salary) for each named executive officer. In considerationThe Committee based this target value upon a number of the company’s consistently strong financial performance over recent yearsfactors including retention considerations, internal pay equity, our historical practices and to better align Pat Gallagher’s compensation with the compensationexternal market data (see discussion of similarly situated CEOs in our peer group, the Committee increased Pat Gallagher’s target long-term incentive award from 315% to 360% of base salary.pay comparison groups on page 31). The Compensation Committee allocated the target award value for each named executive officer between PSUs and stock options. PSUs continue to make up the largest portion of each named executive officer’s award due to the Committee’s commitment to drive business performance and align executive interests with stockholder interests. For the PSUs, the Compensation Committee uses a three-year average of adjusted EBITDAC per share growth (as defined) because it believes this measure:
• incentivizes our executivesexecutive officers to make business decisions that align with the long-term interests of our stockholders, • holds our executivesexecutive officers accountable for acquisition-relatedintegration expenses associated with our merger and acquisition activity, • provides strong line of sight between operating decisions and the long-term incentives earned by our executives,executive officers, and • by calculating it on a per-share basis, ensures that we maintain an optimal capital structure and act as effective stewards of our stockholders’ investment.
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COMPENSATION DISCUSSION AND ANALYSIS
| | | Compensation Discussion and Analysis |
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Set forth below is the target award value and allocation between award types for each named executive officer. See 2023 Compensation Actions for the actual grant date fair value of the PSU and stock option awards granted.
| | | | | | | | | | | | | | | | | | | | | | Named Executive Officer | | Target Percent of Salary | | Target Grant Amount | | | Performance Share Units | | Stock Options | Target Percent of Salary* | Target Grant Amount | Performance Share Units | Stock Options | | | | | | | | | | | | | | | | Pat Gallagher | | 360% | | $ | 4,680,000 | | | 75% | | 25% | | 435% | | | $ | 5,655,000 | | | | 75% | | | 25% | | | | | | Doug Howell | | 125% | | $ | 1,187,500 | | | 60% | | 40% | | 150% | | | $ | 1,425,000 | | | | 60% | | | 40% | | | | | | Tom Gallagher | | 125% | | $ | 1,250,000 | | | 60% | | 40% | | 150% | | | $ | 1,500,000 | | | | 60% | | | 40% | | | | | | Scott Hudson | | 125% | | $ | 875,000 | | | 60% | | 40% | | 150% | | | $ | 1,125,000 | | | | 60% | | | 40% | | | | | | Walt Bay | | 125% | | $ | 931,250 | | | 60% | | 40% | | 150% | | | $ | 1,112,500 | | | | 60% | | | 40% | |
Performance Share Units (PSUs)
* See “Comparative Market Assessment” on page 31 for more information regarding these percentages. PSUs. PSUs are granted on a provisional basis and are earned based on our average annual growth in “adjusted EBITDAC” per share (see the definition of “adjusted EBITDAC” under Annual Cash Incentives) over a three-year period. The award is forfeited for growth less than 4%; 4-9% growth results in a number of earned PSUs interpolated on a straight-line basis between 50% and 100%; 9-14% growth results in a number of earned PSUs interpolated on a straight-line basis between 100% and 200%; and growth of 14% and above results in named executive officers earning 200% of their original award amounts. Earned PSUs vest on the third anniversary of the grant date and settle in shares. For 2021,2023, our one-year growth in adjusted EBITDAC per share was 10.4%16.4%. PSUs granted in 20212023 and earned on the basis of average 2021-20232023-2025 performance will vest on March 16, 202415, 2026 and PSUs granted in 20202022 and earned on the basis of average 2020-20222022-2024 performance will vest on March 12, 2023.15, 2025. Based on 2019-20212021-2023 average annual growth in adjusted EBITDAC per share of 14.1%13.7%, named executive officers earned 200%194% of PSUs granted in 2019.2021. See 2021Outstanding Equity Awards at 2023 Fiscal Year End and 2023 Option Exercises and Stock Vested for more information. Stock Options. Stock options vest one-third on each of the third, fourth and fifth anniversaries of the grant date and restricted stock units cliff vest on the fifth anniversary of the grant date. See Outstanding Equity Awards at 2021 2023 Fiscal Year-End and 20212023 Option Exercises and Stock Vested for information regarding vesting and exercise activity in 20212023 for these awards. Perquisites In lightorder to support our named executive officers’ efficiency in the performance of travel safety concerns at the outset of the COVID-19 pandemic,their duties, the Board has approved the use of Directors determined thatprivate aircraft by named executive officers should use chartered aircraft for business travel, as well as for personal travel when approved by our CEO. Named executive officers also received corporate and auto insurance, financial advisory services and other perquisites as reported in footnote (6) to the 2023 Summary Compensation Table. In addition, the company provides for reimbursement of certain taxes incurred outside the U.S. The company does not provide tax gross-ups on perquisites, including with respectperquisites. See footnote (6) to the imputed income from personal use of chartered aircraft. See footnote 6 to the 20212023 Summary Compensation Table for information about any such expenses for named executive officers in 2021.2023.
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2022 PROXY STATEMENT
| | |
COMPENSATION DISCUSSION AND ANALYSIS
2021 Compensation Actions
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| Compensation Discussion and Analysis |
2023 Compensation Actions
| | | | Pat Gallagher – Chairman and CEO |
| | |
| Performance
| Performance | Compensation |
| Compensation |
| The Compensation Committee believes that Pat Gallagher performed extremely well in 2021,2023, leading the company to 13.1%18.7% adjusted revenue growth, 17.2%19.0% adjusted EBITDAC growth and 10.4%16.4% adjusted EBITDAC per share growth in our combined brokerage and risk management segments (for definitions of these measures see Annual Cash Incentives above). Gallagher’s total return to stockholders in 20212023 was 39.0%20.5%. This performance compares favorably to the S&P 500 and S&P P&C Insurance indices,index, which had a total shareholder returnsreturn of 28.7% and 17.5%, respectively.10.7%. In addition, the Committee recognized the following aspects of Mr.Pat Gallagher’s performance: Organic growth. The company achieved 8.6%9.8% organic revenue growth during the year, 8.0%8.9% in the brokerage segment and 12.2%15.8% in the risk management segment. Mergers and acquisitions.The company completed 3851 acquisitions, including the treaty reinsurance brokerage operations of Willis Towers Watson (“Willis Re”), the largest and most strategic acquisitionrepresenting $885.1 million in the company’s history, representing $1.0 billion inestimated total acquired annualized revenue.revenue, including larger acquisitions such as Buck, Cadence Insurance, Eastern Insurance and My Plan Manager. The company also made significant progress integrating the Willis Re and Buck acquisitions. Quality and productivity.Productivity. The company increased its adjusted EBITDAC margin 12248 basis points to 31.8%32.5%.
Capital management. The company returned $392.0$473.6 million to stockholders as dividends, maintained significant liquidity and remained well within its debt covenants. ESG.Sustainability. In 2021,2023, the company released its first Climate Disclosurean updated Sustainability Report, which includes information regardinga goal of Net Zero emissions in the company’s carbon emissions prepared in accordance with the Greenhouse Gas Protocol’s Corporate Accountingdirect operations (Scope 1 and Reporting Standard. Mr.Scope 2) by 2050 and an interim 2030 goal. Pat Gallagher also made continued progress on inclusion and diversity, including the establishment of the company’s Global Inclusioninitiatives to track and Diversity Committee and Inclusion Roundtable.improve supplier diversity.
Culture. Despite the vast majority of our colleagues working apart from one another due to the pandemic, Mr. Pat Gallagher continued to effectively promote our culture to colleagues around the world. In addition, for the eleventh consecutive year, the company was recognized by Ethisphere as a World’s Most Ethical Company.
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| Based on Pat Gallagher’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2021:2023: Base salary – increased from $1,250,000 toremained the same, at $1,300,000. Annual cash incentive – $5,200,000,$5,850,000, 200% of his target award. 20212023 target PSU award – 28,87022,524 PSUs with a grant date value of $3,692,473.$3,988,775.
Stock option award – 76,97530,029 stock options with an exercise price of $127.90$177.09 and a grant date value of $1,799,676.$1,388,841. DEPP award – $1,500,000.$2,250,000. OverIn early 2023, the past three years, our total returnCompensation Committee approved an increase in Pat Gallagher's 2023 target long-term incentive award from 360% to stockholders (including dividends) was 142.1%, while Pat Gallagher’s compensation increased by 71.5%.435% of base salary. Please see "Comparative Market Assessment" below. The Compensation Committee believes that, with this change, Pat Gallagher’s compensation is appropriately aligned with the long-term interests of the company and its stockholders.
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| 2024 PROXY STATEMENT | 2022 PROXY STATEMENT
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27 |
COMPENSATION DISCUSSION AND ANALYSIS
| | | Compensation Discussion and Analysis |
|
|
| | | | Doug Howell – Chief Financial Officer |
| | |
| Performance
| Performance | Compensation |
| Compensation |
| The Compensation Committee evaluated Doug Howell’s performance in light of the company’s overall performance as described above for Pat Gallagher. In addition, the Compensation Committee considered the following items: •his contributions as a member of the senior management team to the company’s strong overall financial performance; •his leadership of significant expense saving initiatives, despite an inflationary environment, as well as the return of travel and other expenses post-pandemic, resulting in an increase of our adjusted EBITDAC margin of 12248 basis points to 31.8%32.5%; •success in obtainingmaintaining investment grade credit ratings from S&P, Moody’s and Moody’sFitch in support of the company’s first issuances of public debt; • his contributions to the successful negotiation and completion of the acquisition of Willis Re, the largest and most strategic acquisition in the company’s history, including management of $3.0$1.95 billion in public debt issuances and equity offerings to finance the transaction;successful renewal of our $1.7 billion credit facility; and • $97.4 millionsuccessful execution and financing of net earnings from our clean energy investments.acquisition program using primarily cash and debt.
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| Based on Doug Howell’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2021:2023: Base salary – increased from $900,000 toremained the same, at $950,000. Annual cash incentive – $1,900,000,$2,375,000, 200% of his target award. 20212023 target PSU award – 5,8604,541 PSUs with a grant date value of $749,494.$804,166.
Stock option award – 31,26512,107 stock options with an exercise price of $127.90$177.09 and a grant date value of $730,976.$559,949. DEPP award – $600,000. Special acquisition bonus –in consideration of his contributions to the Willis Re acquisition in 2021, including the completion of debt and common stock offerings to finance the transaction, Doug Howell was awarded a one-time cash bonus of $500,000 in early 2022.$900,000.
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| | | | Tom Gallagher – President, Global P/C Brokerage President* |
| | |
| Performance
| Performance | Compensation |
| Compensation |
| In evaluating Tom Gallagher’s performance in 2021,2023, the Compensation Committee considered the following items: •his contributions as a member of the senior management team to the company’s strong overall financial performance; •the strong financial performance of our global P/C brokerage business, including 13.1% adjusted revenue growth, 16.1% adjusted EBITDAC growth and 8.1% organic revenue growth;business; •completion by our global P/C brokerage business of 2543 acquisitions representing $889$500.9 million in estimated acquired annualized revenue; •his ongoing oversight of the integration of the Willis Re acquisition into our global P/C brokerage business; and •his leadership role in successfully negotiating and completingreorganizing the acquisitionleadership structure of Willis Re, the largest and most strategic acquisitionour global P/C brokerage business units in the company’s history.light of continued global growth.
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| Based on Tom Gallagher’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2021:2023: Base salary – increased from $900,000 toremained the same, at $1,000,000. Annual cash incentive – $2,000,000,$2,500,000, 200% of his target award. 20212023 target PSU award – 6,1704,780 PSUs with a grant date value of $789,143.$846,490.
Stock option award – 32,89512,744 stock options with an exercise price of $127.90$177.09 and a grant date value of $769,085.$589,410. DEPP award – $600,000. Special acquisition bonus –in consideration of his leadership role in the Willis Re acquisition in 2021, Tom Gallagher was awarded a one-time cash bonus of $1,000,000 in early 2022.$900,000.
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* On October 24, 2023, the Board of Directors appointed Tom Gallagher as President, succeeding Pat Gallagher in such role, effective January 1, 2024. Performance results are based on Tom Gallagher's prior role as President - P/C Brokerage.
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28 | |
2022 PROXY STATEMENT
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COMPENSATION DISCUSSION AND ANALYSIS
| | |
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| Compensation Discussion and Analysis |
| | | | Scott Hudson – President, Risk Management |
| | |
| Performance
| Performance | Compensation |
| Compensation |
| In evaluating Scott Hudson’s performance in 2021,2023, the Compensation Committee considered the following items: •his contributions as a member of the senior management team to the company’s strong overall financial performance; •the strong financial performance of our risk management segment, including 9.5%18.4% adjusted revenue growth, 21.5%28.6% adjusted EBITDAC growth and 12.2%15.8% organic revenue growth; •the completion by our risk management segment of a large acquisition representing $59.1 million in estimated acquired annualized revenue; and •the ongoing diversification of our risk management segment’s book of business driven by significant growth in carrier and captive manager claims management outsourcing opportunities;opportunities. • the reshaping of our risk management segment’s workforce to one that is over 70% virtual and a significant reduction in the segment’s physical office footprint; and
• continued progress by our risk management segment in its overall utilization of our service centers in India and Las Vegas.
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| Based on Scott Hudson’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2021:2023: Base salary – remained the same, at $700,000.$750,000. Annual cash incentive – $1,400,000,$1,875,000, 200% of his target award. 20212023 target PSU award – 4,3203,585 PSUs with a grant date value of $552,528.$634,868.
Stock option award – 23,0259,558 stock options with an exercise price of $127.90$177.09 and a grant date value of $538,325.$442,058. DEPP award – $500,000.$750,000. |
| | | | Walt Bay – General Counsel and Secretary |
| | |
| Performance
| Performance | Compensation |
| Compensation |
| In evaluating Walt Bay’s performance in 2021,2023, the Compensation Committee considered the following items: •his contributions as a member of the senior management team to the company’s strong overall financial performance; •strong leadership of the company’s legal and compliance departments; •successful management of the company’s legal and reputational risks, including litigation, mergers and acquisitions and regulatory compliance issues; and •his role as a strategic advisor to our Board, CEO and executive management team on key legal and business matters; andmatters. • his leadership role in successfully negotiating and completing the acquisition of Willis Re, the largest and most strategic acquisition in the company’s history.
|
| Based on Walt Bay’s and the company’s performance, the Compensation Committee made the following compensation decisions for 2021:2023: Base salary – increased from $675,000 toremained the same, at $725,000. Annual cash incentive – $1,450,000,$1,812,500, 200% of his target award. 20212023 target PSU award – 4,5953,545 PSUs with a grant date value of $587,701.$627,784.
Stock option award – 24,5009,452 stock options with an exercise price of $127.90$177.09 and a grant date value of $572,810.$437,155. DEPP award – $450,000.$675,000. |
| | | Compensation Discussion and Analysis |
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| | | Compensation Decision-Making Process The Compensation Committee is responsible for determining compensation opportunities for our named executive officers, establishing the annual total value to be transferred through our equity plans, setting thresholds, targets and maximum awards for incentive compensation, establishing performance measures and approving final award amounts. To determine compensation opportunities for our named executive officers, the Committee takes into account the compensation objectives noted earlier under Components of Compensation for Named Executive Officers, compensation data for our comparison groups, trends in the financial service and insurance brokerage sectors and the strategic value of a given role, among other factors. The Compensation Committee may delegate all or a portion of its duties and responsibilities to a subcommittee of the Compensation Committee, members of the Board or officers or other employees of the company all or any portion of the Committee’s authority, duties and responsibilities, to the extent permitted by law or applicable plan documents. Special acquisition bonus –Tally Sheets
The Compensation Committee also considers the data compiled in considerationa tally sheet prepared by management for each named executive officer. Tally sheets provide: •a comprehensive view of our compensation payout exposure under various termination scenarios (for example, voluntary or involuntary termination, retirement, and change in control); •details regarding all compensation, benefits and perquisites delivered to our named executive officers during the most recent four-year period and a projection for the coming year; and •an analysis of equity and deferred compensation, which provides insight into total wealth accumulation for each officer, as well as the sensitivity of these figures to changes in our stock price. This information provides a comprehensive context in which the Committee can determine the appropriate type and amount of compensation for each named executive officer. Role of the CEO At the beginning of each year, Pat Gallagher proposes performance objectives for the company and himself. The Compensation Committee and the Board review these objectives with Mr. Gallagher and make modifications as necessary. Following this review and discussion, the Compensation Committee and the Board finalize and approve the objectives for Mr. Gallagher and the company. The objectives include both quantitative financial measurements and qualitative strategic and operational considerations that focus on factors Mr. Gallagher and the Board believe create long-term stockholder value. Mr. Gallagher reviews and discusses preliminary considerations regarding his own compensation with the Compensation Committee but does not participate in the Committee’s final determination of his leadership rolecompensation. Mr. Gallagher also reviews the performance of each other named executive officer and presents a summary of these performance reviews to the Committee, along with preliminary recommendations regarding salary adjustments, if any, and annual award amounts. |
| Role of the Compensation Consultant The Compensation Committee retained Pearl Meyer as its independent executive compensation consultant. In connection with its engagement, Pearl Meyer reviewed 2023 proxy season results and implications for our pay practices; assisted in negotiating the acquisitionreview and confirmation of Willis Re in 2021, Walt Bay was awarded a one-time cash bonusour peer group for executive compensation and performance review purposes; provided updates on emerging executive compensation trends, including proxy advisory firm and regulatory developments; and reviewed and assessed individual elements of $500,000 in early 2022.our pay programs for executive officers, including the competitiveness of pay levels and incentive program design. The Committee assessed Pearl Meyer’s independence pursuant to SEC and NYSE rules and concluded that no conflict of interest exists that would prevent Pearl Meyer from serving as an independent consultant to the Committee. |
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| Compensation Discussion and Analysis |
| | | | Comparative Market Assessment |
| Professional / Financial Services Firms | The Compensation Committee reviews compensation data from two different comparison groups as a market reference for its named executive officer compensation decisions. Proxy Comparison Group
The Compensation Committee uses the Proxy Comparison Group as a reference point for our compensation plan structure, pay mix, general equity granting practices and individual pay levels. This group is focused on our direct competitors for executive talent. Its members are selected from insurance brokers and carriers and from professional and financial services companies that may compete with us for executive talent or in specific lines of business. The companies listed below under “Insurance Brokers” are of particular interest for the Compensation Committee. Although Aon plc and Marsh & McLennan Companies are larger than we are on certain size dimensions, the Committee believes it is important to understand their compensation programs given that they directly compete with us for executive talent. Additionally, we are similarly-sized or significantly larger, depending on the size dimension, compared to the median-sized company in the broader peer group. The Compensation Committee used the companies set forth below for the 2023 analysis. There were no changes from the comparison group disclosed in the prior year.
| | Automatic Data Processing, Inc. 2022 PROXY STATEMENT
| | 31
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COMPENSATION DISCUSSION AND ANALYSIS
Compensation Decision-Making Process
The Compensation Committee is responsible for determining compensation opportunities for our named executive officers, establishing the annual total value to be transferred through our equity plans, setting thresholds, targets and maximum awards for incentive compensation, establishing performance measures and approving final award amounts. To determine compensation opportunities for our named executive officers, the Committee takes into account the compensation objectives noted earlier under Components of Compensation for Named Executive Officers, compensation data for our comparison groups, trends in the financial service and insurance brokerage sectors and the strategic value of a given role, among other factors.
Tally Sheets
The Compensation Committee also considers the data compiled in a tally sheet prepared by management for each named executive officer. Tally sheets provide:
a comprehensive view of our compensation payout exposure under various termination scenarios (for example, voluntary or involuntary termination, retirement, and change in control);
details regarding all compensation, benefits and perquisites delivered to our named executive officers during the most recent four-year period and a projection for the coming year; and
an analysis of equity and deferred compensation, which provides insight into total wealth accumulation for each officer, as well as the sensitivity of these figures to changes in our stock price.
This information provides a comprehensive context in which the Committee can determine the appropriate type and amount of compensation for each named executive officer.
Role of the CEO
At the beginning of each year, Pat Gallagher proposes performance objectives for the company and himself. The Compensation Committee and the Board review these objectives with Mr. Gallagher and make modifications as necessary. Following this review and discussion, the Compensation Committee and the Board finalize and approve the objectives for Mr. Gallagher and the company. The objectives include both quantitative financial measurements and qualitative strategic and operational considerations that focus on factors Mr. Gallagher and the Board believe create long-term stockholder value. Mr. Gallagher reviews and discusses preliminary considerations regarding his own compensation with the Compensation Committee but does not participate in the Committee’s final determination of his compensation. Mr. Gallagher also reviews the performance of each other named executive officer and presents a summary of these performance reviews to the Committee, along with preliminary recommendations regarding salary adjustments, if any, and annual award amounts.
Role of the Compensation Consultant
The Compensation Committee retained Pearl Meyer & Partners, LLC (Pearl Meyer) as its independent executive compensation consultant. In connection with its engagement, Pearl Meyer reviewed 2021 proxy season results and implications for our pay practices; assisted in the review and confirmation of our peer group for executive compensation and performance review purposes; provided updates on emerging executive compensation trends, including proxy advisory firm and regulatory developments; and reviewed and assessed all elements of our pay programs for executive officers, including the competitiveness of pay levels and incentive program design. The Committee assessed Pearl Meyer’s independence pursuant to SEC and NYSE rules and concluded that no conflict of interest exists that would prevent Pearl Meyer from serving as an independent consultant to the Committee.
| | | | | The Bank of New York Mellon Corporation 32
| | 2022 PROXY STATEMENT
| | |
COMPENSATION DISCUSSION AND ANALYSIS
Comparative Market Assessment
The Compensation Committee reviews compensation data from two different comparison groups as a market reference for its named executive officer compensation decisions.
Proxy Comparison Group
The Compensation Committee uses the Proxy Comparison Group as a reference point for our compensation plan structure, pay mix, general equity granting practices and individual pay levels.
This group is focused on our direct competitors for executive talent. Its members are selected from insurance brokers and carriers and from professional and financial services companies that may compete with us for executive talent or in specific lines of business.
The companies listed below under “Insurance Brokers” are of particular interest for the Compensation Committee. Although Aon, Marsh & McLennan and Willis Towers Watson are larger than we are on certain size dimensions, the Committee believes it is important to understand their compensation programs given that they directly compete with us for executive talent. Additionally, we are similarly-sized to the median-sized company in the broader peer group.
The Compensation Committee used the companies set forth below for the 2021 analysis. There were no changes from 2020. See below for a discussion of changes made to this group in 2021 for purposes of the 2022 analysis.
| Insurance Brokers
The Charles Schwab Corporation | Fidelity National Financial, Inc. | Aon plc
Franklin Resources, Inc. | Moody’s Corporation | Northern Trust Corporation | Raymond James Financial, Inc. | Robert Half International Inc. | S&P Global Inc. |
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| Survey Comparison Group The Compensation Committee also uses a Survey Comparison Group as a reference point for individual pay levels for certain executive positions. This group consists of insurance and general industry companies similar to us in total assets, revenue or number of employees. In 2023, the Compensation Committee reviewed pay data from published surveys conducted by Aon-Hewitt. Results of the Comparative Market Assessment For 2023, the Compensation Committee examined the total direct compensation opportunity (base salary, annual cash incentives and long-term incentives) for each named executive officer, as well as individual elements of compensation. Data from the Proxy Comparison Group and Survey Comparison Group were used as a market reference for compensation decisions. The Compensation Committee does not target total compensation to a specific percentile of comparison group compensation. The comparative market assessment showed that target long-term incentives were below the 50th percentile for Pat Gallagher and at the 50th percentile for the other named executive officers compared to the Proxy Comparison Group. Taking the results of this assessment into consideration, the Compensation Committee approved increases in the long-term incentive targets for named executive officers, other than Pat Gallagher, from 125% of salary to 150% of salary, and for Pat Gallagher from 360% to 435% of salary. | Insurance Brokers | Aon plc | Brown & Brown, Inc. | | Marsh & McLennan Companies, Inc. | | Willis Towers Watson plc |
| Insurance Carriers
| Insurance Carriers | Alleghany Corporation
| | American Financial Group Inc. | | Arch Capital Group Ltd. | CNA Financial Corp. | Axis Capital Holdings Ltd.
The Hartford Financial Services Group, Inc. | Markel Corp. | W.R. Berkley Corp.
| | CNA Financial Corp.
| | The Hanover Insurance Group
| | Markel Corp.
| | Old Republic International Corp.
| | Unum Group
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| Professional / Financial Services Firms
| | Fidelity National Financial, Inc.
| | Raymond James Financial, Inc.
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In 2021,
| | | Compensation Discussion and Analysis |
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| Compensation Committee Report The Compensation Committee oversees the company’s compensation program for named executive officers on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on the review and discussion referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the company’s 2024 Proxy Statement and incorporated by reference in its 2023 Annual Report on Form 10-K, which it files with the SEC. Compensation Committee Sherry Barrat (Chair) David Johnson Chris Miskel |
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| Executive Compensation Tables |
Executive Compensation Tables 2023 Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Bonus ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pat Gallagher | 2023 | 1,300,000 | | 3,988,775 | | 1,388,841 | | 5,850,000 | | — | | 36,498 | | 2,932,108 | | 15,496,222 | | Chairman and | 2022 | 1,300,000 | | 3,575,528 | | 1,227,365 | | 5,850,000 | | — | | — | | 2,242,033 | | 14,194,926 | | Chief Executive Officer | 2021 | 1,300,000 | | 3,692,473 | | 1,799,676 | | 5,200,000 | | — | | 19,063 | | 1,871,043 | | 13,882,255 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Doug Howell | 2023 | 950,000 | | 804,166 | | 559,949 | | 2,375,000 | | — | | 984 | | 1,177,179 | | 5,867,278 | | Chief Financial Officer | 2022 | 950,000 | | 726,205 | | 498,312 | | 2,375,000 | | — | | — | | 779,346 | | 5,328,863 | | | 2021 | 950,000 | | 749,494 | | 730,976 | | 1,900,000 | | 500,000 | | 191 | | 770,200 | | 5,600,861 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Tom Gallagher | 2023 | 1,000,000 | | 846,490 | | 589,410 | | 2,500,000 | | — | | 27,671 | | 1,725,962 | | 6,689,533 | | President | 2022 | 1,000,000 | | 764,259 | | 524,521 | | 2,500,000 | | — | | — | | 1,382,682 | | 6,171,462 | | | 2021 | 1,000,000 | | 789,143 | | 769,085 | | 2,000,000 | | 1,000,000 | | — | | 935,000 | | 6,493,228 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scott Hudson | 2023 | 750,000 | | 634,868 | | 442,058 | | 1,875,000 | | — | | — | | 904,161 | | 4,606,086 | | President – | 2022 | 750,000 | | 573,194 | | 393,305 | | 1,875,000 | | — | | — | | 624,545 | | 4,216,044 | | Risk Management | 2021 | 700,000 | | 552,528 | | 538,325 | | 1,400,000 | | — | | — | | 612,805 | | 3,803,658 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Walt Bay | 2023 | 725,000 | | 627,784 | | 437,155 | | 1,812,500 | | — | | — | | 870,068 | | 4,472,507 | | General Counsel | 2022 | 725,000 | | 569,230 | | 390,735 | | 1,812,500 | | — | | — | | 598,359 | | 4,095,825 | | and Secretary | 2021 | 725,000 | | 587,701 | | 572,810 | | 1,450,000 | | 500,000 | | — | | 583,357 | | 4,418,868 | | | | | | | | | | | | | | | | | | | |
(1)This column includes the full grant date fair value of PSUs and RSUs granted during each fiscal year. The amounts reported in this column have been calculated in accordance with FASB ASC Topic 718, Compensation Committee conducted a strategic review– Stock Compensation. The amounts reported in this column for PSUs granted during each fiscal year represent the value of each award at the grant date based upon the probable outcome of the proxy comparison groupperformance conditions under the program, determined in light of concerns overaccordance with FASB ASC Topic 718. In accordance with SEC rules, any estimate for forfeitures is excluded from, and does not reduce, such amounts. Maximum payouts for the comparability of insurance carriers,2023 PSU awards as well as the growing importance of other screening criteria, including human capital management, which increases the relevance of the company’s total numberdate of employees in the determination of an appropriate peer group. Following this review, the Compensation Committee adopted a new peer group for the 2022 analysis. The new peer group retains 10 of the 16 peer group members for the 2021 analysis, with the following changes: (i) the removal of Alleghany Corporation, Unum Group, Old Republic International Corp., W.R. Berkley Corp., The Hanover Insurance Group and Axis Capital Holdings Ltd.; and (ii) the addition of Automatic Data Processing, Inc., Franklin Templeton, Moody’s Corporation, Nielsen Holdings plc, Northern Trust Corporation, Robert Half International Inc., S&P Global Inc., The Bank of New York Mellon Corporation, The Charles Schwab Corporation and The Hartford Financial Services Group, Inc. The Committee believes the new peer group provides a better representation of the talent market for the Company’s executives.Survey Comparison Group
The Compensation Committee also uses a Survey Comparison Groupgrant were as a reference point for individual pay levels for certain executive positions.
This group consists of insurance and general industry companies similar to us in total assets, revenue or number of employees. In 2021, the Compensation Committee reviewed pay data from a published survey conducted by Aon-Hewitt.
Results of the Comparative Market Assessment
For 2021, the Compensation Committee examined the total direct compensation opportunity (base salary, annual cash incentives and long-term incentives) for each named executive officer, as well as each individual element of compensation. Data from the Proxy Comparison Group and Survey Comparison Group were used as a market reference for compensation decisions. The Compensation Committee does not target total compensation to a specific percentile of comparison group compensation.
The comparative market assessment led the Committee to approve increases in the 2022 annual cash incentive targets for named executive officers, other thanfollows: Pat Gallagher from 100%– $7,977,550; Doug Howell – $1,608,331; Tom Gallagher – $1,692,980; Scott Hudson – $1,269,735; and Walt Bay – $1,255,568. For a discussion of salary to 125% of salary, and for Pat Gallagher from 200% to 225% of salary, which we will disclose in our 2023 Proxy Statement.
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Compensation Committee Report
The Compensation Committee oversees the company’s compensation program for named executive officers on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth above.
BasedPSUs, see page 26. For additional information on the review and discussion referredvaluation assumptions with respect to above, the Compensation Committee recommendedstock grants, refer to the Board that the Compensation Discussion and Analysis be includedNote 12 to our consolidated financial statements in the company’s 2022 Proxy Statement and incorporated by reference in its 2021 Annual Report on Form 10-K for the year ended December 31, 2023.
(2)This column represents the full grant date fair value of stock option awards granted during each fiscal year. The amounts reported in this column have been calculated in accordance with FASB ASC Topic 718. In accordance with SEC rules, any estimate for forfeiture is excluded from, and does not reduce, such amounts. For additional information on the valuation assumptions with respect to option grants, refer to Note 10 to our consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2023. (3)This column represents annual performance-based cash incentive awards related to services rendered in 2021, 2022 and 2023. Awards are reported for the year in which it filesthey are earned, regardless of the year in which they are paid. The 2021, 2022 and 2023 awards were paid fully in cash in April of 2022 and 2023 and expected to be paid April of 2024, respectively. (4)The amounts set forth for 2021 represent one-time cash bonuses awarded to Doug Howell, Tom Gallagher and Walt Bay in connection with their contributions to completing the SEC.Wills Re acquisition. These amounts were paid out in April of 2022. (5)The amounts shown in this column represent the aggregate change in actuarial present value of each named executive officer’s benefits under our pension plan, except where such change is a negative value. When that is the case, SEC rules require that a zero be included in this table. In 2023, such figures were all positive. Scott Hudson and Walt Bay do not have any accrued benefits under our pension plan. COMPENSATION COMMITTEE
Sherry S. Barrat (Chair)
David S. Johnson
Kay W. McCurdy
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| 2024 PROXY STATEMENT | 2022 PROXY STATEMENT
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Executive Compensation Tables
2021 Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | | Salary ($) | | | Stock Awards ($) (1) | | | Option Awards ($) (2) | | | Non-Equity Incentive Plan Compensation ($) (3) | | | Bonus (4) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (5) | | | All Other Compensation ($) (6) | | | Total ($) | | | | | | | | | | | Pat Gallagher Chairman, President and Chief Executive Officer | | | 2021 | | | | 1,300,000 | | | | 3,692,473 | | | | 1,799,676 | | | | 5,200,000 | | | | — | | | | 19,063 | | | | 1,871,043 | | | 13,882,255 | | | 2020 | | | | 1,250,000 | | | | 2,953,046 | | | | 684,815 | | | | 4,375,000 | | | | — | | | | 98,106 | | | | 1,816,494 | | | 11,177,460 | | | 2019 | | | | 1,250,000 | | | | 2,103,166 | | | | 471,776 | | | | 3,750,000 | | | | — | | | | 120,475 | | | | 1,265,199 | | | 8,960,616 | | | | | | | | | | | Doug Howell Chief Financial Officer | | | 2021 | | | | 950,000 | | | | 749,494 | | | | 730,976 | | | | 1,900,000 | | | | 500,000 | | | | 191 | | | | 770,200 | | | 5,600,861 | | | 2020 | | | | 900,000 | | | | 983,200 | | | | 171,129 | | | | 1,575,000 | | | | — | | | | 3,566 | | | | 716,222 | | | 4,349,117 | | | 2019 | | | | 900,000 | | | | 897,377 | | | | 151,011 | | | | 1,800,000 | | | | — | | | | 3,849 | | | | 671,219 | | | 4,423,456 | | | | | | | | | | | Tom Gallagher President – Global P/C Brokerage | | | 2021 | | | | 1,000,000 | | | | 789,143 | | | | 769,085 | | | | 2,000,000 | | | | 1,000,000 | | | | — | | | | 935,000 | | | 6,493,228 | | | 2020 | | | | 900,000 | | | | 674,711 | | | | 313,087 | | | | 1,575,000 | | | | — | | | | 79,381 | | | | 657,787 | | | 4,199,945 | | | 2019 | | | | 900,000 | | | | 672,536 | | | | 302,022 | | | | 1,800,000 | | | | — | | | | 96,662 | | | | 549,991 | | | 4,321,211 | | | | | | | | | | | Scott Hudson President – Risk Management | | | 2021 | | | | 700,000 | | | | 552,528 | | | | 538,325 | | | | 1,400,000 | | | | — | | | | — | | | | 612,805 | | | 3,803,658 | | | 2020 | | | | 700,000 | | | | 524,775 | | | | 243,456 | | | | 1,225,000 | | | | — | | | | — | | | | 557,382 | | | 3,250,593 | | | 2019 | | | | 700,000 | | | | 523,304 | | | | 234,549 | | | | 1,225,000 | | | | — | | | | — | | | | 526,225 | | | 3,209,078 | | | | | | | | | | | Walt Bay General Counsel and Secretary | | | 2021 | | | | 725,000 | | | | 587,701 | | | | 572,810 | | | | 1,450,000 | | | | 500,000 | | | | — | | | | 583,357 | | | 4,418,868 | | | 2020 | | | | 675,000 | | | | 616,115 | | | | 176,124 | | | | 1,181,250 | | | | — | | | | — | | | | 528,205 | | | 3,176,694 | | | 2019 | | | | 675,000 | | | | 614,833 | | | | 169,754 | | | | 1,350,000 | | | | — | | | | — | | | | 478,840 | | | 3,288,427 |
(1) | This column includes the full grant date fair value of PSUs and restricted stock units granted during each fiscal year. The amounts reported in this column have been calculated in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. The amounts reported in this column for PSUs granted during each fiscal year represent the value of each award at the grant date based upon the probable outcome of the performance conditions under the program, determined in accordance with FASB ASC Topic 718. In accordance with SEC rules, any estimate for forfeitures is excluded from, and does not reduce, such amounts. Maximum payouts for the PSU awards as of the date of grant were as follows: Pat Gallagher – $7,384,946; Doug Howell – $1,498,988; Tom Gallagher – $1,578,286; Scott Hudson – $1,105,056; and Walt Bay – $1,175,402. For a discussion of PSUs, see page 28. For additional information on the valuation assumptions with respect to stock grants, refer to Note 12 to our consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2021.33
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| (2) | | Executive Compensation Tables | This column represents the full grant date fair value of stock option awards granted during each fiscal year. The amounts reported in this column have been calculated in accordance with FASB ASC Topic 718. In accordance with SEC rules, any estimate for forfeiture is excluded from, and does not reduce, such amounts. For additional information on the valuation assumptions with respect to option grants, refer to Note 10 to our consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2021.
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(3) | This column represents annual performance-based cash incentive awards related to services rendered in 2019, 2020 and 2021. Awards are reported for the year in which they are earned, regardless of the year in which they are paid. These awards were paid fully in cash in March of 2020, April of 2021 and expected to be paid April of 2022, respectively.
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(6)For 2023, includes the following:
(4) | The amounts set forth for 2021 represent one-time cash bonuses awarded to Doug Howell, Tom Gallagher and Walt Bay in connection with their contributions to completing the Wills Re acquisition. These amounts are expected to be paid out in April of 2022.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Named Executive Officer | DEPP Awards* ($) | SS&T Plan Match** ($) | 401(k) Match*** ($) | Corporate Auto & Insurance ($) | Financial Advisory Services ($) | Non U.S Tax Reimbursement ($)(1) | Private Aircraft**** ($) | Other***** ($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pat Gallagher | | | 2,250,000 | | | | | 341,000 | | | | | 16,500 | | | | | 8,664 | | | | | — | | | | | — | | | | | 186,448 | | | | | 129,496 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Doug Howell | | | 900,000 | | | | | 149,750 | | | | | 16,500 | | | | | 8,664 | | | | | 17,555 | | | | | — | | | | | 57,895 | | | | | 26,815 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Tom Gallagher | | | 900,000 | | | | | 158,500 | | | | | 16,500 | | | | | 5,064 | | | | | — | | | | | 507,361 | | | | | 84,112 | | | | | 54,425 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scott Hudson | | | 750,000 | | | | | 114,750 | | | | | 16,500 | | | | | — | | | | | 17,555 | | | | | — | | | | | 5,356 | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Walt Bay | | | 675,000 | | | | | 110,375 | | | | | 16,500 | | | | | 8,664 | | | | | 17,555 | | | | | — | | | | | 24,618 | | | | | 17,356 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(5) | The amounts shown in this column represent the aggregate change in actuarial present value of each named executive officer’s benefits under our pension plan, except where such change is a negative value. When that is the case, SEC rules require that a zero be included in this table. In 2021, such figure was: Tom Gallagher – $(313). Scott Hudson and Walt Bay do not have any accrued benefits under our pension plan.
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(1)The amount reported in this column represents non-U.S. tax reimbursements related to an expatriate assignment that ended in 2016. | | | | |
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EXECUTIVE COMPENSATION TABLES
(6) | For 2021, includes the following:
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Named Executive Officer | | DEPP Awards* ($) | | | Supplemental Plan Match** ($) | | | 401(k) Match*** ($) | | | Corporate Auto & Insurance ($) | | | Financial Advisory Services ($) | | | Non U.S Tax Reimbursement ($) | | | Chartered Aircraft**** ($) | | | Club Memberships Not Exclusively For Business Use, Cell Phone Allowance, Corporate Event Tickets, Employee Commission Return ($) | | | | | | | | | | | Pat Gallagher | | | 1,500,000 | | | | 269,250 | | | | 14,500 | | | | 8,664 | | | | — | | | | — | | | | 37,817 | | | | 40,812 | | | | | | | | | | | Doug Howell | | | 600,000 | | | | 111,750 | | | | 14,500 | | | | 8,664 | | | | 16,555 | | | | — | | | | — | | | | 18,731 | | | | | | | | | | | Tom Gallagher | | | 600,000 | | | | 114,250 | | | | 14,500 | | | | 5,064 | | | | — | | | | 156,546 | | | | 38,487 | | | | 6,153 | | | | | | | | | | | Scott Hudson | | | 500,000 | | | | 81,750 | | | | 14,500 | | | | — | | | | 16,555 | | | | — | | | | — | | | | — | | | | | | | | | | | Walt Bay | | | 450,000 | | | | 80,813 | | | | 14,500 | | | | 8,664 | | | | 16,555 | | | | — | | | | — | | | | 12,825 | |
*Deferred Equity Participation Plan (DEPP) Deferred cash awards under the DEPP are nonqualified deferred compensation awards under Section 409A of the Internal Revenue Code. Each named executive officer has made an irrevocable election to have such awards deemed invested in a fund representing shares of our common stock. Awards under the DEPP do not vest until participants reach age 62 (or the one-year anniversary of the date of grant for participants over the age of 61, which applies to Pat Gallagher, Doug Howell, Tom Gallagher and Tom Gallagher)Scott Hudson). Accordingly, amounts in the plan are subject to forfeiture in the event of a voluntary termination of employment prior to age 62 (or the minimum one-year vesting period). Awards deemed invested in our common stock provide an incentive for our named executive officers to manage our company for earnings growth and total shareholder return. In addition, the deferred realization of these awards encourages retention of our named executive officers until a normal retirement age, and for one-year increments after such age. **Supplemental Savings and Thrift Plan (Supplemental(SS&T Plan) Match The SupplementalSS&T Plan allows certain highly compensated employees (those with compensation greater than an amount set annually by the IRS)Internal Revenue Service (IRS) to defer up to 80% of their base salary and annual cash incentive payment. We match any deferrals of salary and annual cash incentive payments on a dollar-for-dollar basis up to the lesser of (i) the amount deferred or (ii) 5% of the employee’s regular earnings minus the maximum contribution that we could have matched under the 401(k) Plan. All such cash deferrals and match amounts may be deemed invested, at the employee’s election, in a number of investment options that include various mutual funds, an annuity product and a fund representing our common stock. Such employees may also defer restricted stock units and PSUs, but these deferrals are not subject to company matching. Amounts held in the SupplementalSS&T Plan accounts are payable as of the employee’s termination of employment, or at such other time as the employee elects in advance of the deferral, subject to certain exceptions set forth in IRS regulations. ***401(k) Match Under our 401(k) Savings and Thrift Plan (401(k) Plan), a tax qualified retirement savings plan, participating employees, including our named executive officers, may contribute up to 75% of their earnings on a before-tax or after-tax basis into their 401(k) Plan accounts, subject to limitations imposed by the Internal Revenue Service (IRS).IRS. For fiscal 2021,year 2023, we matched an amount equal to one dollar for every dollar an employee contributed on the first 5% of his or her regular earnings, subject to standard IRS compensation limits. The 401(k) Plan has other standard terms and conditions. ****CharteredPrivate Aircraft Amounts in this column represent the incremental cost to the company of personal use of aircraft chartered by the company.private aircraft. See page 2826 for additional information. The incremental cost of aircraft chartered by the company is calculated as the actual cost billed to the company for the applicable chartered flight. The incremental cost of personal use of company aircraft is calculated using the hourly incremental variable cost for flight services, including fuel costs, crew trip expenses and landing and parking fees. Fixed costs that do not change based on usage, such as pilot salaries, amortized costs of the company aircraft and maintenance costs not related to trips, are excluded. Where more than one executive officer was on the same flight, the cost was allocated proportionally between them. The imputed income attributable to such flights was taxable income and the associated taxes were not reimbursed or paid by the company. *****Other Amounts in this column include club memberships not exclusively for business use, cell phone allowance, corporate event tickets, and for Pat Gallagher and Tom Gallagher $25,891 relating to travel in connection with a one-time retirement event for certain recent retirees in recognition of their contributions to the company.
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| | | 2022 PROXY STATEMENT
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| Executive Compensation Tables |
EXECUTIVE COMPENSATION TABLES
20212023 Grants of Plan-Based Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Plan | | | Grant Date | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | All Other Option Awards: Number of Securities Underlying Options (#) | | | Exercise or Base Price of Option Awards ($/sh) | | | Grant Date Fair Value of Stock and Option Awards ($) | | Threshold ($) | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | | | | | | | | | | | | | Pat Gallagher | | | LTIP | (1) | | | 3/16/21 | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 76,975 | | | | 127.90 | | | 1,799,676 | | | | | | | | | | | | | | | | | LTIP | (2) | | | 3/16/21 | | | — | | | — | | | | — | | | | 14,435 | | | | 28,870 | | | | 57,740 | | | | — | | | | — | | | | — | | | 3,692,473 | | | | | | | | | | | | | | | | | ANNUAL | (3) | | | N/A | | | N/A | | | 2,600,000 | | | | 5,200,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | N/A | | | | | | | | | | | | | | Doug Howell | | | LTIP | (1) | | | 3/16/21 | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 31,265 | | | | 127.90 | | | 730,976 | | | | | | | | | | | | | | | | | LTIP | (2) | | | 3/16/21 | | | — | | | — | | | | — | | | | 2,930 | | | | 5,860 | | | | 11,720 | | | | — | | | | — | | | | — | | | 749,494 | | | | | | | | | | | | | | | | | ANNUAL | (3) | | | N/A | | | N/A | | | 950,000 | | | | 1,900,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | N/A | | | | | | | | | | | | | | Tom Gallagher | | | LTIP | (1) | | | 3/16/21 | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 32,895 | | | | 127.90 | | | 769,085 | | | | | | | | | | | | | | | | | LTIP | (2) | | | 3/16/21 | | | — | | | — | | | | — | | | | 3,085 | | | | 6,170 | | | | 12,340 | | | | — | | | | — | | | | — | | | 789,143 | | | | | | | | | | | | | | | | | ANNUAL | (3) | | | N/A | | | N/A | | | 1,000,000 | | | | 2,000,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | N/A | | | | | | | | | | | | | | Scott Hudson | | | LTIP | (1) | | | 3/16/21 | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 23,025 | | | | 127.90 | | | 538,325 | | | | | | | | | | | | | | | | | LTIP | (2) | | | 3/16/21 | | | — | | | — | | | | — | | | | 2,160 | | | | 4,320 | | | | 8,640 | | | | — | | | | — | | | | — | | | 552,528 | | | | | | | | | | | | | | | | | ANNUAL | (3) | | | N/A | | | N/A | | | 700,000 | | | | 1,400,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | N/A | | | | | | | | | | | | | | Walt Bay | | | LTIP | (1) | | | 3/16/21 | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 24,500 | | | | 127.90 | | | 572,810 | | | | | | | | | | | | | | | | | LTIP | (2) | | | 3/16/21 | | | — | | | — | | | | — | | | | 2,298 | | | | 4,595 | | | | 9,190 | | | | — | | | | — | | | | — | | | 587,701 | | | | | | | | | | | | | | | | | ANNUAL | (3) | | | N/A | | | N/A | | | 725,000 | | | | 1,450,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | N/A |
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| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of | | All Other Option Awards: Number of Securities | | Exercise or Base Price of Option | | Grant Date Fair Value of Stock | | Name | Plan | Grant Date | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | Stock or Units (#) | | Underlying Options (#) | | Awards ($/sh) | | and Option Awards ($) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pat | LTIP(1) | 3/15/23 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 30,029 | | 177.09 | | | 1,388,841 | | Gallagher | LTIP(2) | 3/15/23 | | — | | | — | | | — | | | 11,262 | | | 22,524 | | | 45,048 | | | — | | | — | | | — | | | 3,988,775 | |
| ANNUAL(3) | N/A | N/A | | | 2,925,000 | | | 5,850,000 | | | — | | | — | | | — | | | — | | | — | | | — | | N/A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Doug | LTIP(1) | 3/15/23 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 12,107 | | | 177.09 | | | 559,949 | | Howell | LTIP(2) | 3/15/23 | | — | | | — | | | — | | | 2,271 | | | 4,541 | | | 9,082 | | | — | | | — | | | — | | | 804,166 | |
| ANNUAL(3) | N/A | N/A | | | 1,187,500 | | | 2,375,000 | | | — | | | — | | | — | | | — | | | — | | | — | | N/A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Tom | LTIP(1) | 3/15/23 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 12,744 | | | 177.09 | | | 589,410 | | Gallagher | LTIP(2) | 3/15/23 | | — | | | — | | | — | | | 2,390 | | | 4,780 | | | 9,560 | | | — | | | — | | | — | | | 846,490 | |
| ANNUAL(3) | N/A | N/A | | | 1,250,000 | | | 2,500,000 | | | — | | | — | | | — | | | — | | | — | | | — | | N/A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scott | LTIP(1) | 3/15/23 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 9,558 | | | 177.09 | | | 442,058 | | Hudson | LTIP(2) | 3/15/23 | | — | | | — | | | — | | | 1,793 | | | 3,585 | | | 7,170 | | | — | | | — | | | — | | | 634,868 | |
| ANNUAL(3) | N/A | N/A | | | 937,500 | | | 1,875,000 | | | — | | | — | | | — | | | — | | | — | | | — | | N/A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Walt | LTIP(1) | 3/15/23 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 9,452 | | | 177.09 | | | 437,155 | | Bay | LTIP(2) | 3/15/23 | | — | | | — | | | — | | | 1,773 | | | 3,545 | | | 7,090 | | | — | | | — | | | — | | | 627,784 | | | ANNUAL(3) | N/A | N/A | | | 906,250 | | | 1,812,500 | | | — | | | — | | | — | | | — | | | — | | | — | | N/A | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Stock options under our 2017
(1)Stock options under our 2022 Long-Term Incentive Plan, vesting one-third on each of the third, fourth and fifth anniversaries of the grant date. (2)The amounts represent the range of possible shares issuable to each named executive officer on the third anniversary of the grant date related to PSUs under our 2022 Long-Term Incentive Plan. See page 26. (3)The amounts in this line represent the range of possible annual cash incentive award the named executive officer was eligible to receive in April 2024, related to 2023 performance under our annual cash incentive program. The amounts were subject to performance criteria and subject to the Compensation Committee’s downward discretion. The amounts actually paid to each named executive officer are reported in the “Non-Equity Incentive Plan Compensation” column of the 2023 Summary Compensation Table and footnote (3) thereto.
| (2) | | Executive Compensation Tables | The amounts represent the range of possible shares issuable to each named executive officer on the third anniversary of the grant date related to performance share units under our 2017 Long-Term Incentive Plan. See page 28.
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(3) | The amounts in this line represent the range of possible annual cash incentive award the named executive officer was eligible to receive in April 2022, related to 2021 performance under our annual cash incentive program. The amounts were subject to performance criteria and subject to the Compensation Committee’s downward discretion. The amounts actually paid to each named executive officer are reported in the “Non-Equity Incentive Plan Compensation” column of the 2021 Summary Compensation Table and footnote (3) thereto.
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EXECUTIVE COMPENSATION TABLES
Outstanding Equity Awards at 20212023 Fiscal Year-End
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| | | | | | | | Option Awards(1) | Stock Awards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Option Awards (1) | | | Stock Awards | | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested(2) (#) | Market Value of Shares or Units of Stock That Have Not Vested(3) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(4) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(5) ($) | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (2) (#) | | | Market Value of Shares or
Units of Stock That Have Not Vested (3) ($) | | | Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (4) (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (5) ($) | | | | Pat Gallagher | | | 51,000 | | | | 0 | | | | 46.17 | | | | 3/11/22 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 62,900 | | | | 0 | | | | 43.71 | | | | 3/17/23 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 38,867 | | | | 19,433 | | | | 56.86 | | | | 3/16/24 | | | | — | | | | — | | | | — | | | | — | | | | 58,300 | | | | — | | | | 56.86 | | | 3/16/24 | | | — | | | | — | | | | — | | | | — | | | | | | | 41,400 | | | | — | | | | 70.74 | | | 3/15/25 | | | — | | | | — | | | | — | | | | — | | | | | | 13,801 | | | | 27,599 | | | | 70.74 | | | | 3/15/25 | | | | — | | | | — | | | | — | | | | — | | | | 29,367 | | | | 14,683 | | | | 79.59 | | | 3/14/26 | | | — | | | | — | | | | — | | | | — | | | Pat Gallagher | | | | 22,851 | | | | 45,699 | | | | 86.17 | | | 3/12/27 | | | — | | | | — | | | | — | | | | — | | | | | | | — | | | | 76,975 | | | | 127.90 | | | 3/16/28 | | | — | | | | — | | | | — | | | | — | | | | | | 0 | | | | 44,050 | | | | 79.59 | | | | 3/14/26 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 35,825 | | | | 158.56 | | | 3/15/29 | | | — | | | | — | | | | — | | | | — | | | | | | | — | | | | 30,029 | | | | 177.09 | | | 3/15/30 | | | — | | | | — | | | | — | | | | — | | | | | | 0 | | | | 68,550 | | | | 86.17 | | | | 3/12/27 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | 56,008 | | | | 12,595,034 | | | | 90,148 | | | | 20,272,482 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 76,975 | | | | 127.90 | | | | 3/16/28 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,900 | | | | — | | | | 70.74 | | | 3/15/25 | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | 52,850 | | | | 8,967,060 | | | | 126,280 | | | | 21,425,928 | | | | 9,401 | | | | 4,699 | | | | 79.59 | | | 3/14/26 | | | — | | | | — | | | | — | | | | — | | | | | | | 5,711 | | | | 11,419 | | | | 86.17 | | | 3/12/27 | | | — | | | | — | | | | — | | | | — | | | Doug Howell | | | 19,100 | | | | 0 | | | | 46.17 | | | | 3/11/22 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 31,265 | | | | 127.90 | | | 3/16/28 | | | — | | | | — | | | | — | | | | — | | | | | | | — | | | | 14,545 | | | | 158.56 | | | 3/15/29 | | | — | | | | — | | | | — | | | | — | | | | | | 26,700 | | | | 0 | | | | 43.71 | | | | 3/17/23 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 12,107 | | | | 177.09 | | | 3/15/30 | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | 17,043 | | | | 3,832,720 | | | | 18,242 | | | | 4,102,261 | | | | | | 13,201 | | | | 6,599 | | | | 56.86 | | | | 3/16/24 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,967 | | | | 9,933 | | | | 70.74 | | | | 3/15/25 | | | | — | | | | — | | | | — | | | | — | | | | 37,300 | | | | — | | | | 56.86 | | | 3/16/24 | | | — | | | | — | | | | — | | | | — | | | | | | | 29,800 | | | | — | | | | 70.74 | | | 3/15/25 | | | — | | | | — | | | | — | | | | — | | | | | | 0 | | | | 14,100 | | | | 79.59 | | | | 3/14/26 | | | | — | | | | — | | | | — | | | | — | | | | 18,801 | | | | 9,399 | | | | 79.59 | | | 3/14/26 | | | — | | | | — | | | | — | | | | — | | | | | | | | 0 | | | | 17,130 | | | | 86.17 | | | | 3/12/27 | | | | — | | | | — | | | | — | | | | — | | | | | | | 0 | | | | 31,265 | | | | 127.90 | | | | 3/16/28 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | 29,525 | | | | 5,009,507 | | | | 28,840 | | | | 4,893,283 | | | | Tom Gallagher | | | 26,800 | | | | 0 | | | | 46.17 | | | | 3/11/22 | | | | — | | | | — | | | | — | | | | — | | | | 10,447 | | | | 20,893 | | | | 86.17 | | | 3/12/27 | | | — | | | | — | | | | — | | | | — | | | | | | | | 35,400 | | | | 0 | | | | 43.71 | | | | 3/17/23 | | | | — | | | | — | | | | — | | | | — | | | | | | | 24,867 | | | | 12,433 | | | | 56.86 | | | | 3/16/24 | | | | — | | | | — | | | | — | | | | — | | | | | | | 9,934 | | | | 19,866 | | | | 70.74 | | | | 3/15/25 | | | | — | | | | — | | | | — | | | | — | | | | | | — | | | | 32,895 | | | | 127.90 | | | 3/16/28 | | | — | | | | — | | | | — | | | | — | | | | | | 0 | | | | 28,200 | | | | 79.59 | | | | 3/14/26 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 15,310 | | | | 158.56 | | | 3/15/29 | | | — | | | | — | | | | — | | | | — | | | | | | | — | | | | 12,744 | | | | 177.09 | | | 3/15/30 | | | — | | | | — | | | | — | | | | — | | | | | | 0 | | | | 31,340 | | | | 86.17 | | | | 3/12/27 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | 11,970 | | | | 2,691,769 | | | | 19,200 | | | | 4,317,696 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 32,895 | | | | 127.90 | | | | 3/16/28 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 30,300 | | | | — | | | | 56.86 | | | 3/16/24 | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | 16,900 | | | | 2,867,423 | | | | 28,000 | | | | 4,750,760 | | | | 23,200 | | | | — | | | | 70.74 | | | 3/15/25 | | | — | | | | — | | | | — | | | | — | | | | | | | 14,601 | | | | 7,299 | | | | 79.59 | | | 3/14/26 | | | — | | | | — | | | | — | | | | — | | | Scott Hudson | | | 42,600 | | | | 0 | | | | 46.17 | | | | 3/11/22 | | | | — | | | | — | | | | — | | | | — | | | | 8,124 | | | | 16,246 | | | | 86.17 | | | 3/12/27 | | | — | | | | — | | | | — | | | | — | | | | | | | — | | | | 23,025 | | | | 127.90 | | | 3/16/28 | | | — | | | | — | | | | — | | | | — | | | | | | 30,700 | | | | 0 | | | | 43.71 | | | | 3/17/23 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 11,480 | | | | 158.56 | | | 3/15/29 | | | — | | | | — | | | | — | | | | — | | | | | | | — | | | | 9,558 | | | | 177.09 | | | 3/15/30 | | | — | | | | — | | | | — | | | | — | | | | | | 20,201 | | | | 10,099 | | | | 56.86 | | | | 3/16/24 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | 8,381 | | | | 1,884,674 | | | | 14,400 | | | | 3,238,272 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,734 | | | | 15,466 | | | | 70.74 | | | | 3/15/25 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 16,800 | | | | — | | | | 70.74 | | | 3/15/25 | | | — | | | | — | | | | — | | | | — | | | | | | 0 | | | | 21,900 | | | | 79.59 | | | | 3/14/26 | | | | — | | | | — | | | | — | | | | — | | | | 10,567 | | | | 5,283 | | | | 79.59 | | | 3/14/26 | | | — | | | | — | | | | — | | | | — | | | | | | | 5,877 | | | | 11,753 | | | | 86.17 | | | 3/12/27 | | | — | | | | — | | | | — | | | | — | | | Walt Bay | | | | — | | | | 24,500 | | | | 127.90 | | | 3/16/28 | | | — | | | | — | | | | — | | | | — | | | | | | 0 | | | | 24,370 | | | | 86.17 | | | | 3/12/27 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 11,405 | | | | 158.56 | | | 3/15/29 | | | — | | | | — | | | | — | | | | — | | | | | | | — | | | | 9,452 | | | | 177.09 | | | 3/15/30 | | | — | | | | — | | | | — | | | | — | | | | | | 0 | | | | 23,025 | | | | 127.90 | | | | 3/16/28 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | 14,664 | | | | 3,297,708 | | | | 14,270 | | | | 3,209,038 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 13,150 | | | | 2,231,161 | | | | 20,820 | | | | 3,532,529 | |
(1)Stock options vest or vested in accordance with the following vesting schedules:
| | | | | | | 38
Expiration Date |
| 2022 PROXY STATEMENT
| | |
EXECUTIVE COMPENSATION TABLES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Option Awards (1) | | | Stock Awards | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (2) (#) | | | Market Value of Shares or
Units of Stock That Have Not Vested (3) ($) | | | Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (4) (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (5) ($) | | | | | | | | | | | Walt Bay | | | 17,700 | | | | 0 | | | | 43.71 | | | | 3/17/23 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | 14,534 | | | | 7,266 | | | | 56.86 | | | | 3/16/24 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | 5,601 | | | | 11,199 | | | | 70.74 | | | | 3/15/25 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | 0 | | | | 15,850 | | | | 79.59 | | | | 3/14/26 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | 0 | | | | 17,630 | | | | 86.17 | | | | 3/12/27 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | 0 | | | | 24,500 | | | | 127.90 | | | | 3/16/28 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 22,750 | | | | 3,859,993 | | | | 18,990 | | | | 3,222,033 | |
(1) | Stock options vest or vested in accordance with the following vesting schedules:
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| | | Expiration Date
| | One-third vests on each of: |
|
| | | 3/11/2216/24 |
| March 11, 2018, March 11, 2019 and March 11, 2020
| | | 3/17/23
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| March 17, 2019, March 17, 2020 and March 17, 2021
| | | 3/16/24
| | March 16, 2020, March 16, 2021 and March 16, 2022 |
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| | | 3/15/25 |
|
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| March 15, 2021, March 15, 2022 and March 15, 2023 |
|
| | | 3/14/26 |
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| March 14, 2022, March 14, 2023 and March 14, 2024 |
|
| | | 3/12/27 |
|
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| March 12, 2023, March 12, 2024 and March 12, 2025 |
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| | | 3/16/28 |
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| March 16, 2024, March 16, 2025 and March 16, 2026 |
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(2)3/15/29 | The following table provides information with respect to the vesting of each named executive officer’s unvested restricted stock units
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|
| March 15, 2025, March 15, 2026 and earned performance share units as of December 31, 2021:March 15, 2027 |
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| 3/15/30 |
|
|
| March 15, 2026, March 15, 2027 and March 15, 2028 |
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| | | | | | | | | | | | | | | Vesting Date | | Type of award | | Pat Gallagher | | Doug Howell | | | Tom Gallagher | | Scott Hudson | | Walt Bay | | | | | | | | 3/16/22 | | Restricted Stock Units* | | — | | | 3,700 | | | — | | — | | 4,550 | | | | | | | | 3/15/23 | | Restricted Stock Units* | | — | | | 3,250 | | | — | | — | | 4,000 | | | | | | | | 3/14/24 | | Restricted Stock Units* | | — | | | 2,825 | | | — | | — | | 3,500 | | | | | | | | 3/12/25 | | Restricted Stock Units* | | — | | | 2,850 | | | — | | — | | 2,250 | | | | | | | | 3/16/22 | | Performance Share Units** | | 52,850 | | | 16,900 | | | 16,900 | | 13,150 | | 8,450 | | | | | | | | Total | | | | 52,850 | | | 29,525 | | | 16,900 | | 13,150 | | 22,750 |
| | * | 36 | Granted in 2017, 2018, 2019 and 2020 (vesting five years from the date of grant).
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|
| | ** |
| Granted in 2019; 200% of award earned based on our 2019-2021 performance.
| Executive Compensation Tables |
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| | 2022 PROXY STATEMENT
| | 39
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(2)The following table provides information with respect to the vesting of each named executive officer’s unvested RSUs and earned PSUs as of December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Vesting Date
| | Type of award | Pat Gallagher | Doug Howell | Tom Gallagher | Scott Hudson | Walt Bay | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/14/24 | | Restricted Stock Units* | | | — | | | | | 2,825 | | | | | — | | | | | — | | | | | 3,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/12/25 | | Restricted Stock Units* | | | — | | | | | 2,850 | | | | | — | | | | | — | | | | | 2,250 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/16/24 | | Performance Share Units** | | | 56,008 | | | | | 11,368 | | | | | 11,970 | | | | | 8,381 | | | | | 8,914 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | 56,008 | | | | | 17,043 | | | | | 11,970 | | | | | 8,381 | | | | | 14,664 | | | | | | | | | | | | | | | | | | | | | | | | | |
EXECUTIVE COMPENSATION TABLES* Granted in 2019 and 2020 (vesting five years from the date of grant).
** Granted in 2021, 200% of award earned based on our 2021-2023 performance. (3)The amounts in this column are based on a closing stock price of $224.88 for our common stock on December 31, 2023. (4)The following table provides information with respect to the vesting of each named executive officer’s unearned unvested PSUs as of December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Vesting Date
| | Type of award | Pat Gallagher | Doug Howell | Tom Gallagher | Scott Hudson | Walt Bay | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/15/25 | | Performance Share Units* | | | 45,100 | | | | | 9,160 | | | | | 9,640 | | | | | 7,230 | | | | | 7,180 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/15/26 | | Performance Share Units** | | | 45,048 | | | | | 9,082 | | | | | 9,560 | | | | | 7,170 | | | | | 7,090 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | 90,148 | | | | | 18,242 | | | | | 19,200 | | | | | 14,400 | | | | | 14,270 | | | | | | | | | | | | | | | | | | | | | | | | | |
* Granted in 2022, to be earned on the basis of 2022-2024 performance. The amounts reported represent maximum payouts (200% of target awards) based on 2022-2023 performance. See page 26 for more information. (3) | The amounts in this column are based on a closing stock price of $169.67 for our common stock on December 31, 2021.
|
(4) | The following table provides information with respect to the vesting of each named executive officer’s unearned unvested performance share units as of December 31, 2021:
|
** Granted in 2023, to be earned on the basis of 2023-2025 performance. The amounts reported represent maximum payouts (200% of target awards) based on 2023 performance. See page 26 for more information. | | | | | | | | | | | | | | | | | | | | | | | Vesting Date | | Type of award | | Pat Gallagher | | | Doug Howell | | | Tom Gallagher | | | Scott Hudson | | | Walt Bay | | 3/12/23 | | Performance Share Units* | | | 68,540 | | | | 17,120 | | | | 15,660 | | | | 12,180 | | | | 9,800 | | 3/16/24 | | Performance Share Units** | | | 57,740 | | | | 11,720 | | | | 12,340 | | | | 8,640 | | | | 9,190 | | Total | | | | | 126,280 | | | | 28,840 | | | | 28,000 | | | | 20,820 | | | | 18,990 | |
(5)The amounts in this column are based on a closing stock price of $224.88 for our common stock on December 31, 2023. | * | Granted in 2020, to be earned on the basis of 2020-2022 performance. The amounts reported represent maximum payouts (200% of target awards) based on 2020-2021 performance. See page 28 for more information.
|
| ** | Granted in 2021, to be earned on the basis of 2021-2023 performance. The amounts reported represent maximum payouts (200% of target awards) based on 2021 performance. See page 28 for more information.
|
(5) | The amounts in this column are based on a closing stock price of $169.67 for our common stock on December 31, 2021.
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20212023 Option Exercises and Stock Vested
| | | Option Awards | | | Stock Awards | | | | Option Awards | Stock Awards | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#) (1) (2) | | | Value Realized on Vesting ($) (1) | | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(1)(2) | Value Realized on Vesting ($)(1) | | | | | | | | | | | | | | | | | | | | | | | Pat Gallagher | | | — | | | | — | | | | 53,800 | | | | 7,009,620 | | | | 62,900 | | | | | 9,429,968 | | | | | 68,540 | | | | 12,677,158 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Doug Howell | | | 1,200 | | | | 93,336 | | | | 24,750 | | | | 1,263,816 | | | | 16,800 | | | | | 3,013,367 | | | | | 20,370 | | | | 1,576,629 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Tom Gallagher | | | 27,700 | | | | 2,050,631 | | | | 19,400 | | | | 2,527,632 | | | | 25,400 | | | | | 3,676,904 | | | | | 15,660 | | | | 2,896,473 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scott Hudson | | | 16,650 | | | | 1,660,021 | | | | 15,100 | | | | 1,967,384 | | | | 18,700 | | | | | 2,747,883 | | | | | 12,180 | | | | 2,252,813 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Walt Bay | | | — | | | | — | | | | 15,050 | | | | 1,977,846 | | | | 21,800 | | | | | 3,818,074 | | | | | 13,800 | | | | 2,535,578 | | | | | | | | | | | | | |
(1) | These columns reflect the vesting of restricted stock units and performance share units, as applicable. Restricted stock units awarded on March 17, 2016 vested on March 17, 2021 with value realized of $128.43 per share plus accrued cash dividend equivalents. Performance share units awarded on March 15, 2018 were earned at 200% on the basis of 2018-2020 performance and vested on March 15, 2021 with value realized of $127.21
(1)These columns reflect the vesting of RSUs and PSUs, as applicable. RSUs awarded on March 15, 2018 vested on March 15, 2023 with value realized of $177.09 per share plus accrued cash dividend equivalents. PSUs awarded on March 12, 2020 were earned at 200% on the basis of 2020-2022 performance and vested on March 12, 2023 with value realized of $182.76 per share plus accrued cash dividend equivalents. (2)Pursuant to the terms of the SS&T Plan (see page 34), Doug Howell deferred receipt of his RSUs vesting in 2023 and half of his PSUs vesting in 2023. He elected lump-sum distributions of the deferred RSUs in July 2028 and the deferred PSUs in July 2024.
| (2) | | Executive Compensation Tables | Pursuant to the terms of the Supplemental Plan (see page 36), Doug Howell deferred receipt of half of his performance share units vesting in 2021. He elected a lump-sum distribution in July 2023.
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2021
2023 Pension Benefits | | | | | | | | | | | | | Name | | Plan Name | | | Number of Years of Credited Service (#) (1) | | | Present Value of Accumulated Benefit ($) | | | | | | Pat Gallagher | | | Arthur J. Gallagher & Co. Employees’ Pension Plan | | | | 25 | | | | 1,017,698 | | | | | | Doug Howell | | | Arthur J. Gallagher & Co. Employees’ Pension Plan | | | | 1 | | | | 31,528 | | | | | | Tom Gallagher | | | Arthur J. Gallagher & Co. Employees’ Pension Plan | | | | 25 | | | | 648,646 | | | | | | Scott Hudson | | | Arthur J. Gallagher & Co. Employees’ Pension Plan | | | | — | | | | — | | | | | | Walt Bay | | | Arthur J. Gallagher & Co. Employees’ Pension Plan | | | | — | | | | — | |
(1) | The last year of credited service was 2005. Total years of actual service were as follows at December 31, 2021: Pat Gallagher - 47; Doug Howell - 18; Tom Gallagher - 41; Scott Hudson - 11; and Walt Bay - 14.
| No payments were made under our defined benefit plans during 2023.
| | | | | | | | | | | | | Name | | Plan Name | Number of Years of Credited Service (#)(1) | Present Value of Accumulated Benefit ($) | | | | | | | | | | | | | | | | | | | | | | | Pat Gallagher | | Arthur J. Gallagher & Co. Employees’ Pension Plan | | | 25 | | | | | 904,862 | | | | | | | | | | | | | | | | | | | | | | | | | Doug Howell | | Arthur J. Gallagher & Co. Employees’ Pension Plan | | | 1 | | | | | 26,929 | | | | | | | | | | | | | | | | | | | | | | | | | Tom Gallagher | | Arthur J. Gallagher & Co. Employees’ Pension Plan | | | 25 | | | | | 525,307 | | | | | | | | | | | | | | | | | | | | | | | | | Scott Hudson | | Arthur J. Gallagher & Co. Employees’ Pension Plan | | | — | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | Walt Bay | | Arthur J. Gallagher & Co. Employees’ Pension Plan | | | — | | | | | — | | | | | | | | | | | | | |
(1)The last year of credited service was 2005. Total years of actual service were as follows at December 31, 2023: Pat Gallagher - 49; Doug Howell - 20; Tom Gallagher - 43; Scott Hudson - 13; and Walt Bay - 16. EXECUTIVE COMPENSATION TABLES
We maintain the Arthur J. Gallagher & Co. Employees’ Pension Plan (the Pension Plan) which is qualified under the Internal Revenue Code and which historically covered substantially all domestic employees. In 2005, we amended the Pension Plan to freeze the accrual of future benefits for all domestic employees effective July 1, 2005. Benefits under the Pension Plan are based upon the employee’s highest average annual earnings for a five calendar-year period with us and are payable after retirement in the form of an annuity or a lump sum. The maximum amount of annual earnings that may be considered in calculating benefits under the Pension Plan is $210,000 (the maximum amount of annual earnings allowable by law in 2005, the last year that benefits accrued under the Pension Plan). Benefits under the Pension Plan are calculated as an annuity equal to 1% of the participant’s highest annual average earnings multiplied by years of service, and commencing upon the participant’s retirement on or after age 65. The maximum benefit under the pension plan upon retirement would be $53,318 per year, payable at age 65 in accordance with IRS regulations. Participants also may elect to commence their pensions anytime on or after attaining age 55 if they retire prior to age 65, with an actuarial reduction to reflect the earlier commencement date, ranging from 54% at age 55 to no reduction at age 65. All of our named executive officers with accumulated benefits under the plan are eligible to take this early retirement option. Pat Gallagher and Tom Gallagher are eligible for normal age retirement under the Pension Plan. For additional information on the valuation assumptions with respect to pensions, refer to Note 13 to our consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2021.2023. 2021
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2023 Nonqualified Deferred Compensation
| Name | | Plan Name | | Executive Contributions in Last Fiscal Year ($) (1) | | | Registrant Contributions in Last Fiscal Year ($) (2) | | | Aggregate Earnings in Last Fiscal Year ($) (3) | | | Aggregate Withdrawals/ Distributions in Last Fiscal Year ($) (4) | | | Aggregate Balance at Last Fiscal Year End ($) (4)(5) | | Plan Name | Executive Contributions in Last Fiscal Year(1) ($) | Registrant Contributions in Last Fiscal Year(2) ($) | Aggregate Earnings in Last Fiscal Year(3) ($) | Aggregate Withdrawals/ Distributions in Last Fiscal Year(4) ($) | Aggregate Balance at Last Fiscal Year End(4)(5) ($) | | | | | | | | | | | | | | | | Pat Gallagher | | DEPP | | | — | | | | 1,500,000 | | | | 6,867,792 | | | | 2,562,752 | | | 23,280,178 | | | | | | | | | | | | | Pat Gallagher | | Supplemental Plan | | | 567,500 | | | | 269,250 | | | | 3,255,341 | | | | — | | | 23,437,116 | | DEPP | | | — | | | | 2,250,000 | | | | 5,665,597 | | | | | 2,070,418 | | | | | 31,562,361 | | | | | | | SS&T Plan | | | 715,000 | | | | 341,000 | | | | 4,098,449 | | | | | — | | | | | 28,193,642 | | | Doug Howell | | DEPP | | | — | | | | 600,000 | | | | 8,676,307 | | | | — | | | 30,993,083 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Doug Howell | | Supplemental Plan | | | 2,329,306 | | | | 111,750 | | | | 11,206,547 | | | | — | | | 36,118,280 | | DEPP | | | — | | | | 900,000 | | | | 6,642,920 | | | | | 42,023,978 | | | | | 1,096,458 | | | | | | | SS&T Plan | | | 2,843,916 | | | | 149,750 | | | | 5,391,634 | | | | | — | | | | | 46,800,371 | | | Tom Gallagher | | DEPP | | | — | | | | 600,000 | | | | 334,982 | | | | 854,251 | | | 806,603 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Tom Gallagher | | Supplemental Plan | | | 128,750 | | | | 114,250 | | | | 442,464 | | | | — | | | 2,238,947 | | DEPP | | | — | | | | 900,000 | | | | 520,275 | | | | | 31,135 | | | | | 2,977,852 | | | | | | | SS&T Plan | | | 175,000 | | | | 158,500 | | | | 63,996 | | | | | — | | | | | 2,942,905 | | | Scott Hudson | | DEPP | | | — | | | | 500,000 | | | | 3,812,085 | | | | — | | | 13,645,025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scott Hudson | | Supplemental Plan | | | 134,750 | | | | 81,750 | | | | 281,325 | | | | — | | | 1,559,171 | | DEPP | | | — | | | | 750,000 | | | | 4,930,824 | | | | | 20,713,970 | | | | | 913,715 | | | | | | | SS&T Plan | | | 206,250 | | | | 114,750 | | | | 470,372 | | | | | — | | | | | 2,364,506 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Walt Bay | | DEPP | | | — | | | | 450,000 | | | | 4,050,848 | | | | — | | | 14,490,134 | | DEPP | | | — | | | | 675,000 | | | | 3,602,267 | | | | | — | | | | | 21,114,475 | | | | Supplemental Plan | | | 100,000 | | | | 80,813 | | | | 310,904 | | | | — | | | 3,087,428 | | | | SS&T Plan | | | 126,875 | | | | 110,375 | | | | 764,979 | | | | | — | | | | | 4,008,238 | | | | | | | | | | | | | | | |
(1) | Amounts in this column include amounts reported in the “Salary” and/or “Non-Equity Incentive Plan Compensation” columns in the 2021 Summary Compensation Table. For Doug Howell, the amount in this column also includes the value of performance share units which vested in 2021 and which he deferred until 2023. For more information regarding such deferred by Doug Howell, see also footnote (2) to the 2021 Option Exercises and Stock Vested table.
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(1)Amounts in this column include amounts reported in the “Salary” and/or “Non-Equity Incentive Plan Compensation” columns in the 2023 Summary Compensation Table. (2)These amounts are included in the “All Other Compensation” column of the 2023 Summary Compensation Table. (3)Amounts in this column are not included in the 2023 Summary Compensation Table. These amounts represent the change in market value on deferred and matched amounts under the SS&T Plan and on our contributions to the DEPP, based on the market-rate returns and dividend equivalents credited to participant accounts for the period January through December 2023. Participants may direct their SS&T Plan account balances into a number of deemed investment options that include mutual funds, an annuity product and a fund representing our common stock, and may change such deemed investments on any regular business day, subject to our Insider Trading Policy. Awards under the DEPP are credited with returns of deemed investments elected by the participant, including a fund representing our common stock. Each of our named executive officers has elected the fund representing our common stock. (4)For Pat Gallagher, this amount includes both an accelerated distribution under the DEPP to cover applicable taxes on vested awards and receipt of a distribution in accordance with prior elections under the DEPP. Doug Howell, Tom Gallagher and Scott Hudson also received an accelerated distribution under the DEPP to cover applicable taxes on a vested award. (5)The DEPP amounts include the following amounts also reported as compensation in this and prior years’ Summary Compensation Tables (as applicable): Pat Gallagher - $12,150,000; Doug Howell - $8,200,000; Tom Gallagher - $5,300,000; Scott Hudson - $3,000,000; and Walt Bay - $2,675,000. (2) | These amounts are included in the “All Other Compensation” column of the 2021 Summary Compensation Table.
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(3) | Amounts in this column are not included in the 2021 Summary Compensation Table. These amounts represent the change in market value on deferred and matched amounts under the Supplemental Plan and on our contributions to the DEPP, based on the market-rate returns and dividend equivalents credited to participant accounts for the period January through December 2021. Participants may direct their Supplemental Plan account balances into a number of deemed investment options that include mutual funds, an annuity product and a fund representing our common stock, and may change such deemed investments on any regular business day. Awards under the DEPP are credited with returns of deemed investments elected by the participant, including a fund representing our common stock. Each of our named executive officers has elected the fund representing our common stock.
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(4) | For Pat Gallagher and Tom Gallagher, this amount includes both an accelerated distribution under the DEPP to cover applicable taxes on vested awards and receipt of a distribution in accordance with prior elections under the DEPP.
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(5) | The DEPP amounts include the following amounts also reported as compensation in this and prior years’ Summary Compensation Tables (as applicable): Pat Gallagher - $8,400,000; Doug Howell - $6,700,000; Tom Gallagher - $3,800,000; Scott Hudson - $1,750,000; and Walt Bay - $1,550,000.
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EXECUTIVE COMPENSATION TABLES
20212023 Potential Payments upon Termination or Change in Control
Change-in-Control Agreements We provide our named executive officers with change-in-control agreements, which we believe are an important part of their overall compensation. In addition to helping secure their continued dedication to stockholder interests prior to or following a change in control, the Compensation Committee also believes these agreements are important for recruitment and retention, as all or nearly all of our competitors for talent have similar agreements in place for their senior employees. In general, compensation levels under these agreements are separate and unrelated to named executive officers’ overall compensation decisions for a given year. Double Trigger Each named executive officer’s change-in-control agreement provides for payments if there is a “Termination” of the individual within 24 months after a “Change in Control” (commonly referred to in combination as a “double trigger”).
• A Change in Control occurs (i) if a person or group is or becomes the beneficial owner, directly or indirectly, of our securities representing 50% or more of the voting power to elect directors, (ii) if there is a change in the composition of the Board such that within a period of two consecutive years, individuals who at the beginning of such two-year period constitute the Board and any new directors elected or nominated by at least two-thirds of the directors who were either directors at the beginning of the two-year period or were so elected or nominated, cease for any reason to constitute at least a majority of the Board, or (iii) our stockholders approve the sale of all or substantially all of our assets or any merger, consolidation, issuance of securities or purchase of assets, the result of which would be the occurrence of any event described in (i) or (ii) above. A substantially similar change-in-control definition is used under our equity plans, the DEPP and the SupplementalSS&T Plan, except that our equity plans and the DEPP do not include subsection (iii) above. • A Termination means either (i) a termination of employment by us for any reason other than death, physical or mental incapacity or “cause” (defined as gross misconduct or willful and material breach of the change-in-control agreement) or (ii)
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resignation upon the occurrence of (1) a material change in the nature or scope of the individual’s authorities, powers, functions or duties, (2) a reduction in total compensation, (3) any relocation of the individual’s principal place of employment more than 35 miles from his or her location prior to the Change in Control, (4) a breach of the change-in-control agreement by us or (5) a good faith determination by the individual that as a result of the Change in Control, his or her position is materially affected. Payments upon Double Trigger Under the change-in-control agreements, each named executive officer subject to a Termination within 24 months after a Change in Control is entitled to receive:
•Severance – two-times salary, bonus and annual cash incentive. A lump sum severance payment equal to salary, bonus and annual cash incentive compensation payments for a 24-month period on the basis of a salary rate not less than his annual salary prior to the termination, or if greater, the salary at the time of the Change in Control and the bonus and annual cash incentive payment prior to termination or, if greater, the bonus and annual cash incentive payment prior to the Change in Control. The severance payment would be made in a lump sum not more than seven days after the date of termination. • No new excise tax gross-up payments. Our change-in-control agreements entered into prior to 2008 provide that the named executive officer would be eligible to receive an excise tax “gross-up”“gross-up” payment as defined in Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended, relating to so-called “excess parachute payments.” However, our change-in-control agreements entered into after 2008 do not contain excise tax gross-ups, and it is our policy not to enter into new change-in-control agreements that contain excise tax gross-ups, or amend existing change-in-control agreements without removing these provisions. • Participation in benefit plans. The change-in-control agreements also provide for continued participation in welfare benefit plans, including medical, dental, life and disability insurance, on the same basis and at the same cost as prior to the Termination, for the shorter of a two-year period or until the individual becomes covered by a different plan with coverage or benefits equal to or greater than the plan provided by us. The agreements also provide for the payment of any unpaid salary and a lump sum cash payment for accumulated but unused vacation. Other Termination and Change-in-Control Payments The table below shows potential incremental payments, benefits and equity award accelerations upon termination of our named executive officers. The amounts are determined under existing agreements and plans for various termination scenarios. The amounts assume that the trigger events for all such payments occurred on December 31, 20212023 and use the closing price of our common stock on that date of $169.67.$224.88. The amounts in the table below do not include the amount of pension or deferred compensation our named executive officers would receive under each termination scenario. Instead, these amounts are reflected in the 20212023 Pension Benefits and 20212023 Nonqualified Deferred Compensation tables presented above.
• Stock options. All of our named executive officers have outstanding stock options, which they are eligible to exercise upon termination of employment. If they are terminated for cause they are eligible to exercise all options that are vested at the time of termination, subject to the restrictive covenant and clawback provisions in their award agreements. Because our named executive officers have all
EXECUTIVE COMPENSATION TABLES
| reached the age of 55, upon a voluntary resignation or termination without cause, their stock options would not be subject to forfeiture if their departure from the company is at least two years after the date of grant. If a named executive officer is terminated due to death or disability, all stock options vest and remain outstanding through their original expiration date. Upon a change in control, stock options granted prior to the approval of our 2017 Long-Term Incentive Plan vest immediately and may be exercised through their original expiration date. For stock options granted after the approval of our 2017 Long-Term Incentive Plan, accelerated vesting at a change in control requires Board approval. |
Restricted stock units.options would not be subject to forfeiture if their departure from the company is at least two years after the date of grant. If a named executive officer is terminated due to death or disability, all stock options vest and remain outstanding through their original expiration date. Upon a change in control, stock options granted prior to the approval of our 2017 Long-Term Incentive Plan vest immediately and may be exercised through their original expiration date. For stock options granted after the approval of our 2017 and 2022 Long-Term Incentive Plans, accelerated vesting at a change in control (or at termination of employment within six months prior to or twenty-four months following the change in control) requires Board approval.
•RSUs. Doug Howell and Walt Bay have outstanding restricted stock units.RSUs. Upon a termination for cause, all unvested restricted stock unitsRSUs would lapse. Because they have reached the age of 55, upon a voluntary resignation or termination without cause, their restricted stock unitsRSUs would not be subject to forfeiture if their departure from the company is at least two years after the date of grant, although vesting and distribution will still occur in accordance with the original schedule. If they terminate because of death or disability the awards vest immediately. Accelerated vesting of their RSUs at a change in control (or upon termination of employment within six months prior to or twenty-four months following the change in control) requires Board approval. •PSUs. All of our named executive officers have outstanding PSUs. Upon a termination for cause, all unvested PSUs would lapse. Because our named executive officers have all reached the age of 55, upon a voluntary resignation or termination without cause, the earned portion of PSUs would not be subject to forfeiture if their departure from the company is at least two years after the date of grant, although vesting and distribution will still occur in accordance with the original schedule. If they terminate because of death or disability the awards vest immediately at target. Upon a change in control, all restricted stock units grantedor upon termination of employment within six months prior to the approval of our 2017 Long-Term Incentive Plan vest immediately. For restricted stock units granted after the approval of our 2017 Long-Term Incentive Plan, accelerated vesting ator twenty-four months following a change in control, requiresimmediate vesting of all earned PSUs and the deemed satisfaction of performance conditions at target levels for unearned PSUs or, if greater, on a pro rata basis based on actual achievement as of the date of the change in control, require Board approval. • | | PSUs. All of our named executive officers have outstanding PSUs. Upon a termination for cause, all unvested PSUs would lapse. Because our named executive officers have all reached the age of 55, upon a voluntary resignation or termination without cause, the earned portion of PSUs would not be subject to forfeiture if their departure from the company is at least two years after the date of grant, although vesting and distribution will still occur in accordance with the original schedule. If they terminate because of death or disability the awards vest immediately at target. Upon a change in control, all earned PSUs granted prior to the approval of our 2017 Long-Term Incentive Plan vest immediately and the performance conditions for unearned PSUs are deemed satisfied at target levels or, if greater, on a pro rata basis based on actual achievement as of the date of the change in control. For PSUs granted after the approval of our 2017 Long-Term Incentive Plan, Board approval is required at a change in control both for accelerated vesting and for the deemed satisfaction of performance conditions described in the prior sentence.
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• DEPP. All of our named executive officers participate in the DEPP. Amounts in this plan vest on the earliest to occur of (1) the date the participant turns 62 (or the one-year anniversary of the date of grant for participants over 61), (2) death, (3) termination of employment because of disability, (4) termination in a manner that grants the person severance pay under our Severance
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Plan (filed as an exhibit to our Securities Exchange Act of 1934, as amended (Exchange Act) filings) and (5) a change in control. Accordingly, vesting would accelerate under all of the termination scenarios other than a voluntary resignation or a termination for cause. • | | Termination for Cause. Where applicable, termination “for cause” under our plans generally means a termination of employment based upon the good faith determination of the company that one or more of the following events has occurred: (i) the participant has committed a dishonest or fraudulent act to the material detriment of the company; (ii) the participant has been convicted (or pleaded guilty or nolo contendere) for a crime involving moral turpitude or for any felony; (iii) material and persistent insubordination on the part of the participant; (iv) the loss by the participant, for any reason, of any license or professional registration without the company’s written consent; (v) the diversion by the participant of any business or business opportunity of the company for the benefit of any party other than the company; (vi) material violation of the company’s Global Standards of Business Conduct by the participant; or (vii) the participant has engaged in illegal conduct, embezzlement or fraud with respect to the assets, business or affairs of the company.
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• Termination for Cause. Where applicable, termination “for cause” under our plans generally means a termination of employment based upon the good faith determination of the company that one or more of the following events has occurred: (i) the participant has committed a dishonest or fraudulent act to the material detriment of the company; (ii) the participant has been convicted (or pleaded guilty or nolo contendere) for a crime involving moral turpitude or for any felony; (iii) material and persistent insubordination on the part of the participant; (iv) the loss by the participant, for any reason, of any license or professional registration without the company’s written consent; (v) the diversion by the participant of any business or business opportunity of the company for the benefit of any party other than the company; (vi) material violation of the company’s Global Standards of Business Conduct by the participant; or (vii) the participant has engaged in illegal conduct, embezzlement or fraud with respect to the assets, business or affairs of the company. •No Liberal Change-in-Control Definitions in Equity Plans or DEPP. None of our equity plans or the DEPP has a “liberal” change-in-control definition (i.e., they do not provide for buyout thresholds lower than 50%, and a change in control is deemed to occur upon completion, rather than stockholder approval, of a transaction).
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| | Executive Benefits and Payments Upon Separation | Voluntary Resignation ($) | | Death or Disability ($) | | Termination with Cause ($) | | Termination without Cause ($) | | Change in Control(1) ($) | | Termination without Cause or Resignation for Good Reason Following Change in Control ($) | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Severance Pay | | | — | | | | — | | | | — | | | | 1,300,000 | | | | — | | | | 14,300,000 | | | | Stock Options | | | 15,937,237 | | | | 19,748,237 | | | | — | | | | 15,937,237 | | | | 19,748,237 | | | | 19,748,237 | |
| | PSUs(2) | | | 12,759,016 | | | | 29,808,808 | | | | — | | | | 12,759,016 | | | | 29,808,808 | | | | 29,808,808 | | Pat Gallagher | | DEPP(3) | | | 28,821,215 | | | | 31,562,361 | | | | 28,821,215 | | | | 31,562,361 | | | | 31,562,361 | | | | 31,562,361 | |
| | Benefit Plan Participation(4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 58,290 | |
| | Excise Tax Gross-Up | | | — | | | | — | | | | — | | | | — | | | | — | | | | 22,288,923 | | | | Total | | | 57,517,468 | | | | 81,119,406 | | | | 28,821,215 | | | | 61,558,614 | | | | 81,119,406 | | | | 117,766,619 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Severance Pay | | | — | | | | — | | | | — | | | | 730,769 | | | | — | | | | 6,650,000 | |
| | Stock Options | | | 5,298,727 | | | | 6,841,945 | | | | — | | | | 5,298,727 | | | | 6,841,945 | | | | 6,841,945 | |
| | RSUs | | | 1,310,932 | | | | 1,310,932 | | | | — | | | | 1,310,932 | | | | 1,310,932 | | | | 1,310,932 | | Doug Howell | | PSUs(2) | | | 2,589,811 | | | | 6,041,265 | | | | — | | | | 2,589,811 | | | | 6,041,265 | | | | 6,041,265 | |
| | DEPP(3) | | | — | | | | 1,096,458 | | | | — | | | | 1,096,458 | | | | 1,096,458 | | | | 1,096,458 | |
| | Benefit Plan Participation(4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 51,766 | |
| | Excise Tax Gross-Up | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | Total | | | 9,199,469 | | | | 15,290,600 | | | | — | | | | 11,026,696 | | | | 15,290,600 | | | | 21,992,366 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Severance Pay | | | — | | | | — | | | | — | | | | 1,000,000 | | | | — | | | | 7,000,000 | | | | Stock Options | | | 7,453,806 | | | | 9,078,201 | | | | — | | | | 7,453,806 | | | | 9,078,201 | | | | 9,078,201 | | | | PSUs(2) | | | 2,726,814 | | | | 6,359,485 | | | | — | | | | 2,726,814 | | | | 6,359,485 | | | | 6,359,485 | | Tom Gallagher | | DEPP(3) | | | 1,881,394 | | | | 2,977,852 | | | | 1,881,394 | | | | 2,977,852 | | | | 2,977,852 | | | | 2,977,852 | | | | Benefit Plan Participation(4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 65,061 | | | | Excise Tax Gross-Up | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | Total | | | 12,062,014 | | | | 18,415,538 | | | | 1,881,394 | | | | 14,158,472 | | | | 18,415,538 | | | | 25,480,599 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Severance Pay | | | — | | | | — | | | | — | | | | 375,000 | | | | — | | | | 5,250,000 | | | | Stock Options | | | 5,546,919 | | | | 6,765,049 | | | | — | | | | 5,546,919 | | | | 6,765,049 | | | | 6,765,049 | | | | PSUs(2) | | | 1,909,212 | | | | 4,633,715 | | | | — | | | | 1,909,212 | | | | 4,633,715 | | | | 4,633,715 | | Scott Hudson | | DEPP | | | — | | | | 913,715 | | | | — | | | | 913,715 | | | | 913,715 | | | | 913,715 | | | | Benefit Plan Participation(4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 67,084 | | | | Excise Tax Gross-Up | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | Total | | | 7,456,131 | | | | 12,312,479 | | | | — | | | | 8,744,845 | | | | 12,312,479 | | | | 17,629,563 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Severance Pay | | | — | | | | — | | | | — | | | | 446,154 | | | | — | | | | 5,075,000 | | | | Stock Options | | | 4,773,836 | | | | 5,981,926 | | | | — | | | | 4,773,836 | | | | 5,981,926 | | | | 5,981,926 | |
| | RSUs | | | 1,315,678 | | | | 1,315,678 | | | | — | | | | 1,315,678 | | | | 1,315,678 | | | | 1,315,678 | | Walt Bay | | PSUs(2) | | | 2,030,747 | | | | 4,731,254 | | | | — | | | | 2,030,747 | | | | 4,731,254 | | | | 4,731,254 | |
| | DEPP | | | — | | | | 21,114,475 | | | | — | | | | 21,114,475 | | | | 21,114,475 | | | | 21,114,475 | | | | Benefit Plan Participation(4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 67,082 | |
| | Excise Tax Gross-Up | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,320,573 | |
| | Total | | | 8,120,261 | | | | 33,143,333 | | | | — | | | | 29,680,889 | | | | 33,143,333 | | | | 44,605,988 | |
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EXECUTIVE COMPENSATION TABLES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive Benefits and Payments Upon Separation | | Voluntary Resignation | | | Death or Disability | | | Termination with Cause | | | Termination without Cause | | | Change in Control (1) | | | Termination without Cause or Resignation for Good Reason Following Change in Control | | Pat Gallagher | | Severance Pay | | $ | — | | | $ | — | | | $ | — | | | $ | 1,300,000 | | | $ | — | | | $ | 13,000,000 | | | | Stock Options (2) | | | 28,861,933 | | | | 37,801,104 | | | | 19,971,303 | | | | 28,861,933 | | | | 37,801,104 | | | | 37,801,104 | | | | Restricted Stock Units | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | PSUs (3) | | | 8,979,744 | | | | 24,290,102 | | | | — | | | | 8,979,744 | | | | 24,290,102 | | | | 24,290,102 | | | | DEPP (4) | | | 21,263,670 | | | | 23,280,178 | | | | 21,263,670 | | | | 23,280,178 | | | | 23,280,178 | | | | 23,280,178 | | | | Benefit Plan Participation (5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 64,133 | | | | Excise Tax Gross-Up | | | — | | | | — | | | | — | | | | — | | | | 10,815,995 | | | | 18,177,755 | | | | Total | | $ | 59,105,347 | | | $ | 85,371,384 | | | $ | 41,234,973 | | | $ | 62,421,855 | | | $ | 96,187,379 | | | $ | 116,613,272 | | Doug Howell | | Severance Pay | | $ | — | | | $ | — | | | $ | — | | | $ | 657,692 | | | $ | — | | | $ | 5,700,000 | | | | Stock Options (2) | | | 10,699,805 | | | | 13,436,099 | | | | 7,702,572 | | | | 10,699,805 | | | | 13,436,099 | | | | 13,436,099 | | | | Restricted Stock Units | | | 1,683,488 | | | | 2,176,367 | | | | — | | | | 1,683,488 | | | | 2,176,367 | | | | 2,176,367 | | | | PSUs (3) | | | 2,869,451 | | | | 6,441,592 | | | | — | | | | 2,869,451 | | | | 6,441,592 | | | | 6,441,592 | | | | DEPP | | | — | | | | 30,993,083 | | | | — | | | | 30,993,083 | | | | 30,993,083 | | | | 30,993,083 | | | | Benefit Plan Participation (5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 64,592 | | | | Excise Tax Gross-Up | | | — | | | | — | | | | — | | | | — | | | | 5,243,502 | | | | 9,052,966 | | | | Total | | $ | 15,252,744 | | | $ | 53,047,141 | | | $ | 7,702,572 | | | $ | 46,903,519 | | | $ | 58,290,643 | | | $ | 67,864,699 | | Tom Gallagher | | Severance Pay | | $ | — | | | $ | — | | | $ | — | | | $ | 1,000,000 | | | $ | — | | | $ | 6,000,000 | | | | Stock Options (2) | | | 17,464,967 | | | | 21,455,881 | | | | 11,556,801 | | | | 17,464,967 | | | | 21,445,881 | | | | 21,445,881 | | | | Restricted Stock Units | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | PSUs (3) | | | 2,871,479 | | | | 6,289,425 | | | | — | | | | 2,871,479 | | | | 6,289,425 | | | | 6,289,425 | | | | DEPP | | | — | | | | 806,603 | | | | — | | | | 806,603 | | | | 806,603 | | | | 806,603 | | | | Benefit Plan Participation (5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 50,768 | | | | Excise Tax Gross-Up | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,540,813 | | | | Total | | $ | 20,336,446 | | | $ | 28,551,909 | | | $ | 11,556,801 | | | $ | 22,143,049 | | | $ | 28,541,909 | | | $ | 41,133,490 | | Scott Hudson | | Severance Pay | | $ | — | | | $ | — | | | $ | — | | | $ | 296,154 | | | $ | — | | | $ | 4,200,000 | | | | Stock Options (2) | | | 16,814,143 | | | | 19,810,792 | | | | 12,172,071 | | | | 16,814,143 | | | | 19,810,792 | | | | 19,810,792 | | | | Restricted Stock Units | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | PSUs (3) | | | 2,234,317 | | | | 4,802,651 | | | | — | | | | 2,234,317 | | | | 4,802,651 | | | | 4,802,651 | | | | DEPP | | | — | | | | 13,645,025 | | | | — | | | | 13,645,025 | | | | 13,645,025 | | | | 13,645,025 | | | | Benefit Plan Participation (5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 47,946 | | | | Excise Tax Gross-Up | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | Total | | $ | 19,048,460 | | | $ | 38,258,468 | | | $ | 12,172,071 | | | $ | 32,989,639 | | | $ | 38,258,468 | | | $ | 42,506,414 | | Walt Bay | | Severance Pay | | $ | — | | | $ | — | | | $ | — | | | $ | 390,385 | | | $ | — | | | $ | 4,350,000 | | | | Stock Options (2) | | | 7,778,542 | | | | 10,274,012 | | | | 4,423,179 | | | | 7,778,542 | | | | 10,274,012 | | | | 10,274,012 | | | | Restricted Stock Units | | | 2,075,242 | | | | 2,464,357 | | | | — | | | | 2,075,242 | | | | 2,464,357 | | | | 2,464,357 | | | | PSUs (3) | | | 1,435,740 | | | | 3,712,700 | | | | — | | | | 1,435,740 | | | | 3,712,700 | | | | 3,712,700 | | | | DEPP | | | — | | | | 14,490,134 | | | | — | | | | 14,490,134 | | | | 14,490,134 | | | | 14,490,134 | | | | Benefit Plan Participation (5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 59,511 | | | | Excise Tax Gross-Up | | | — | | | | — | | | | — | | | | — | | | | 4,495,711 | | | | 7,543,627 | | | | Total | | $ | 11,289,524 | | | $ | 30,941,203 | | | $ | 4,423,179 | | | $ | 26,170,043 | | | $ | 35,436,914 | | | $ | 42,894,341 | |
(1) | For stock options, restricted stock units(1)
For stock options, RSUs and PSUs granted after 2017, assumes Board approval of accelerated payouts at a change in control. (2)For purposes of this table we assume that unearned PSUs are valued at actual achievement as of December 31, 2023. (3)The participant has reached age 62, which means that substantially all award balances under the plan are vested. (4)Represents the lump sum present value of two years of benefits as described above under Participation in benefit plans.
| (2) A substantial portionItem 3 – Advisory vote to Approve the Compensation of the values shown represent fully vested amounts, which are disclosed above under Outstanding Equity Awards at 2021 Fiscal Year-end.our Named Executive Officers
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(3) | For purposes of this table we assume that unearned PSUs are valued at actual achievement as of December 31, 2021.
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(4) | The participant has reached age 62, which means that substantially all award balances under the plan are vested.
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(5) | Represents the lump sum present value of two years of benefits as described above under Participation in benefit plans.
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Item 43 – Advisory Votevote to Approve the Compensation of Ourour Named Executive Officers Pursuant to Section 14A of the Exchange Act, we are asking our stockholders to vote, on a non-binding, advisory basis, to approve the compensation of our named executive officers, as described in the Compensation Discussion and Analysis, compensation tables and related narrative discussion in this Proxy Statement. This proposal, commonly known as “say-on-pay”“say-on-pay”, gives our stockholders the opportunity to express their views on the compensation of our named executive officers.officers and is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and our executive compensation philosophy, policies and practices. Our stockholders are given the opportunity to vote, on a non-binding, advisory basis, on say-on-pay proposals annually. Our stockholders will have the next opportunity to vote on such a proposal at the 20232025 Annual Meeting. We believe that our compensation program for named executive officers is structured in the best manner possible to support our company and business objectives, as well as to support our culture and traditions developed since our founding in 1927. We believe our program strikes the appropriate balance between using responsible, measured pay practices and effectively motivating our executives to dedicate themselves fully to value creation for our stockholders. We encourage you to read our Compensation Discussion and Analysis on pages 2421 to 3331 of this Proxy Statement and our Executive Compensation tables on pages 3533 to 44.41. ResolutionThe vote is advisory, which means that the vote is not binding on the Board or the Compensation Committee and Recommendation
neither the Board nor the Compensation Committee will be required to take any action, or refrain from taking any action, as a result of the outcome of the vote on this proposal. The Board strongly endorsesand the company’sCompensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program for named executive officers and recommends that stockholders vote in favor of the following resolution:program.
| Resolution and Recommendation The Board strongly endorses the company’s compensation program for named executive officers and recommends that stockholders vote in favor of the following resolution: RESOLVED, that the compensation of the named executive officers of Arthur J. Gallagher & Co., as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative in this Proxy Statement, is hereby APPROVED. |
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| The Board recommends that you vote “FOR” the advisory resolution approving the compensation of the company’s named executive officers |
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Pay Versus Performance As required by Item 402(v) of Regulation S-K, we are providing the following information regarding the relationship between executive “compensation actually paid” and the company’s financial performance for each of the last three completed calendar years. For further information concerning the company’s pay for performance philosophy and how the company aligns executive compensation with performance, see Overview of Our Executive Compensation Program and Components of Compensation for Named Executive Officers.
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| | | | | | | | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | | | | | Year | | Summary Compensation Table Total for PEO(1) | | | Compensation Actually Paid to PEO(2) | | | Average Summary Compensation Table Total for Non-PEO Named Executive Officers(3) | | | Average Compensation Actually Paid to Non-PEO Named Executive Officers(4) | | | Total Shareholder Return(5) | | | Peer Group Total Shareholder Return(6) | | | Net Income (millions) | | | Adjusted EBITDAC Growth(7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2023 | | $ | 15,496,222 | | | $ | 32,997,722 | | | $ | 5,408,851 | | | $ | 9,743,063 | | | $ | 120.50 | | | $ | 108.60 | | | $ | 969.5 | | | | 19.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2022 | | $ | 14,194,926 | | | $ | 23,190,737 | | | $ | 4,953,048 | | | $ | 6,908,560 | | | $ | 112.43 | | | $ | 97.54 | | | $ | 1,114.2 | | | | 18.4 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | | $ | 13,882,255 | | | $ | 36,172,141 | | | $ | 5,079,153 | | | $ | 11,580,235 | | | $ | 139.01 | | | $ | 141.53 | | | $ | 906.8 | | | | 17.2 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | $ | 11,177,460 | | | $ | 26,471,099 | | | $ | 3,744,087 | | | $ | 8,713,871 | | | $ | 132.15 | | | $ | 106.24 | | | $ | 818.8 | | | | 21.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)The dollar amounts reported in this column are the amounts reported for Pat Gallagher (the company’s Chairman and Chief Executive Officer) for each of the corresponding years in the “Total” column of the Summary Compensation Table. (2)The dollar amounts reported in this column represent the amount of “compensation actually paid” to Pat Gallagher, as computed in accordance with Item 402(v) of Regulation S-K and do not reflect total compensation actually realized or received. In accordance with these rules, these amounts reflect “Total Compensation” as set forth in the Summary Compensation Table for each year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Compensation Actually Paid to PEO | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Summary Compensation Table Total | | $ | 15,496,222 | | | $ | 14,194,926 | | | $ | 13,882,255 | | | $ | 11,177,460 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less, value of “Stock Awards” and “Option Awards” reported in Summary Compensation Table | | $ | 5,377,616 | | | $ | 4,802,893 | | | $ | 5,492,149 | | | $ | 3,637,861 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less, Change in Pension Value reported in Summary Compensation Table | | $ | 36,498 | | | | — | | | $ | 19,063 | | | $ | 98,106 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus, year-end fair value of outstanding and unvested equity awards granted in the year | | $ | 11,639,809 | | | $ | 7,503,151 | | | $ | 13,095,137 | | | $ | 10,030,670 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus, fair value as of vesting date of equity awards granted and vested in the year | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years | | $ | 12,000,551 | | | $ | 7,566,230 | | | $ | 14,263,150 | | | $ | 10,345,366 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus (less), change in fair value from prior year end until the vesting date of equity awards granted in prior years that vested in the year | | $ | (762,443 | ) | | $ | (1,297,632 | ) | | $ | 416,987 | | | $ | (1,371,701 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus, dividends or other earnings paid on awards in the covered fiscal year prior to vesting if not otherwise included in the Summary Compensation Table Total for the covered fiscal year | | $ | 37,697 | | | $ | 26,954 | | | $ | 25,824 | | | $ | 25,271 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less, prior year-end fair value for any equity awards forfeited in the year | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus, pension service cost for services rendered during the year | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Compensation Actually Paid to Pat Gallagher | | $ | 32,997,722 | | | $ | 23,190,737 | | | $ | 36,172,141 | | | $ | 26,471,099 | | | | | | | | | | | | | | | | |
(3)The dollar amounts reported in this column represent the average of the amounts reported for the company’s named executive officers as a group (excluding Pat Gallagher) in the “Total” column of the Summary Compensation Table in each applicable year. The named executive officers included for these purposes in each applicable year 2020 through 2023 are as follows: Doug Howell, Tom Gallagher, Scott Hudson and Walt Bay.
(4)The dollar amounts reported in this column represent the average amount of “compensation actually paid” to the named executive officers of Arthur J. Gallagher & Co.as a group (excluding Pat Gallagher), as computed in accordance with Item 402(v) of Regulation S-K. In accordance with these rules, these amounts reflect “Total Compensation” as set forth in the Summary Compensation Table for each year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed pursuantat the time of the grant.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Average Compensation Actually Paid to Non-PEO Named Executive Officers | 2023 | 2022 | 2021 | 2020 | | | | | | | | | | | | | | | 1 | | | | | | | | | | | | | | Summary Compensation Table Total | | $ | 5,408,851 | | | $ | 4,953,048 | | | $ | 5,079,153 | | | $ | 3,744,087 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less, value of “Stock Awards” and “Option Awards” reported in Summary Compensation Table | | $ | 1,235,470 | | | $ | 1,109,940 | | | $ | 1,322,515 | | | $ | 925,649 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less, Change in Pension Value reported in Summary Compensation Table | | $ | 7,164 | | | | — | | | $ | 48 | | | $ | 20,737 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus, year-end fair value of outstanding and unvested equity awards granted in the year | | $ | 2,387,352 | | | $ | 1,578,828 | | | $ | 2,958,220 | | | $ | 2,498,015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus, fair value as of vesting date of equity awards granted and vested in the year | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years | | $ | 3,439,861 | | | $ | 1,941,447 | | | $ | 4,681,938 | | | $ | 3,877,807 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus (less), change in fair value from prior year end until the vesting date of equity awards granted in prior years that vested in the year | | $ | (258,894 | ) | | $ | (462,939 | ) | | $ | 174,571 | | | $ | (467,652 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus, dividends or other earnings paid on awards in the covered fiscal year prior to vesting if not otherwise included in the Summary Compensation Table Total for the covered fiscal year | | $ | 8,526 | | | $ | 8,115 | | | $ | 8,916 | | | $ | 8,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less, prior year-end fair value for any equity awards forfeited in the year | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plus, pension service cost for services rendered during the year | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Average Compensation Actually Paid to Non-PEO Named Executive Officers | | $ | 9,743,063 | | | $ | 6,908,560 | | | $ | 11,580,235 | | | $ | 8,713,871 | | | | | | | | | | | | | | | | |
(5)Total Shareholder Return (TSR) is calculated by dividing (a) the sum of (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (ii) the difference between the company’s share price at the end of each fiscal year shown and the beginning of the measurement period, by (b) the company’s share price at the beginning of the measurement period. The beginning of the measurement period for each year in the table is December 31 of the prior fiscal year. (6)Includes Aon plc; Marsh & McLennan Companies, Inc.; Willis Towers Watson plc; and Brown & Brown, Inc. (7)“Adjusted EBITDAC” growth as defined for our annual cash incentives and PSUs under Annual Cash Incentives and Long-Term Incentives. See Exhibit A for reconciliations of non-GAAP measures.
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Description of Relationships between Information Presented in Pay versus Performance Table As discussed in more detail under Overview of our Executive CompensationProgram, an important part of the company’s executive compensation program is pay-for-performance. While we use several performance measures to align executive compensation with company performance, not all of those measures are presented in the Pay versus Performance table. We seek to promote the long-term interests of the company and its stockholders and therefore the performance measures used by the company do not always correspond directly to compensation actually paid for a particular year (as calculated in accordance with SEC rules). In accordance with SEC rules, we are providing the following descriptions of the relationships between information presented in the Pay versus Performance table.
| Compensation Actually Paid, Cumulative TSR and Peer Group TSR
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Compensation Actually Paid and Net Income
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Compensation Actually Paid and Adjusted EBITDAC Growth
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Financial Performance Measures The most important financial performance measure used to link compensation actually paid to the compensation disclosure rules ofcompany’s named executive officers for the Securitiesmost recently completed fiscal year to the company’s performance is adjusted EBITDAC growth, although we also consider adjusted revenue growth and Exchange Commission, includingadjusted EBITDAC per share growth in connection with final award determinations for annual cash incentives and PSU payouts. The measures used for both long-term and short-term incentive awards have been selected because the Compensation DiscussionCommittee believes they incentivize our executive officers to make business decisions that align with the long-term interests of our stockholders and Analysis,act as effective stewards of our stockholders’ investment. We believe these measures hold our executive officers accountable for integration expenses associated with our merger and acquisition activity and provide a strong connection between operating decisions and cash incentives. Further, calculating adjusted EBITDAC growth on a per-share basis to determine PSUs awards promotes management accountability around the executive compensation tablesfinancing of our merger and the related narrative in this Proxy Statement, is hereby APPROVED.acquisition activity within an appropriate capital structure. | | Most Important Measures in Determining NEO Pay |
| Adjusted EBITDAC growth |
| Adjusted Revenue growth | Adjusted EBITDAC per share growth |
| | | 46 | | THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ADVISORY RESOLUTION APPROVING THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
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CEO Pay Ratio Disclosure As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the ratio of the annual total compensation of Pat Gallagher, our CEO, to the annual total compensation of the median compensated of all our other employees who were employed as of December 31, 2021.2023. For 2021,2023, Pat Gallagher’s total compensation was $13,882,255$15,496,222 and the annual total compensation of our median compensated employee was $64,135.$63,485. The ratio between these two amounts was 216244 to 1. This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) and the methodology described below. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. As of December 31, 2021,2023, our total employee population consisted of approximately 39,53152,155 employees. As permitted by the rule, we excluded approximately 4,0784,334 employees of the businesses we acquired during 2021,2023, which are identified in Note 43 to our consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2021.2023. We also excluded approximately 1,2812,535 non-U.S. employees, or less than 4%5% of our total U.S. and non-U.S. employee population, from the following non-U.S. jurisdictions: Colombia (260)Ireland (296), Peru (238), Chile (141)(227), Brazil (215), Bermuda (157), Sri Lanka (152), Romania (151), Singapore (112), Guernsey (110), Peru (110), Bermuda (83), Jersey (68), Sweden (65), Jamaica (64)(103), Trinidad and Tobago (98), Sweden (70), Jamaica (57), Norway (56), Singapore (49)United Arab Emirates (55), Sri Lanka (48)Jersey (53), Germany (53), Japan (50), Barbados (44), Brazil (26)(46), Switzerland (24)(34), France (33), Malaysia (33), Cayman Islands (23)(32), Turkey (27), Isle of Man (21)(26), Gibraltar (20)(19), NorwayItaly (19), Hong Kong (17), Malta (16), Taiwan (16), South Africa (14), Republic of Korea (13), Saint Lucia (10)(7), Belgium (6)(7), Spain (5), Saint Vincent and the Grenadines (4), Vietnam (4), Antigua and Barbuda (3), Dominica (3), Grenada (3), United Arab EmiratesDenmark (3), SaintNetherlands (3), Saints Kitts and Nevis (2), Liechtenstein (2), and Vietnam (2)Finland (1). After giving effect to these two adjustments, our employee population consisted of approximately 34,17245,246 individuals. We used 20212023 gross taxable income as set forth in our payroll data to determine our “median employee,” which we annualized for all permanent employees who did not work for the entire year. Once identified, we calculated the annual total compensation of our “median employee” for 20212023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of the 20212023 Summary Compensation Table included in this Proxy Statement.
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| 2024 PROXY STATEMENT | 2022 PROXY STATEMENT
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47 |
| Questions & Answers About the Annual Meeting |
Questions & Answers About the Annual Meeting What is the quorum requirement for holding the Annual Meeting?
The holders of a majority of the stock issued and outstanding and entitled to vote at a meeting of the stockholders, present in person or deemed to be present or represented by proxy, shall constitute a quorum for purposes of any Annual Meeting of Stockholders. Broker non-votes and abstentions are counted for purposes of determining the presence of a quorum at this Annual Meeting. If a quorum is not present at the scheduled time of the Annual Meeting, the stockholders entitled to vote thereat, present in person, deemed to be present or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present, deemed to be present or represented.
What are broker non-votes?
A “broker non-vote” occurs with respect to a proposal when a broker, trustee, or other nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of stockholders but is not permitted to vote on other proposals without instructions from the beneficial owner and the beneficial owner fails to provide the nominee with such instructions. Under the rules of the NYSE, brokers, trustees or other nominees may (but are not required to) generally vote on routine matters but cannot vote on non-routine matters. Only the ratification of the appointment of our independent auditor is considered a routine matter. The other proposals are not considered routine matters, and without your instructions, your broker cannot vote your shares.
Will any matters other than those identified in this Proxy Statement be decided at the Annual Meeting?
As of the date of this Proxy Statement, we are not aware of any matters to be raised at the Annual Meeting other than those described in this Proxy Statement. If any other matters are properly presented at the Annual Meeting for consideration, the people named as proxy holders on the proxy card will vote your proxy on those matters in their discretion. If any of our nominees are not available as a candidate for director, the proxy holders will vote your proxy for any other candidate the Board may nominate or the Board may choose to decrease the size of the Board or leave a vacancy on the Board.
Who can vote, and how do I vote?
Only holders of our common stock at the close of business on the record date of March 16, 2022 are entitled to notice of and to vote at the Annual Meeting. We have no other outstanding securities entitled to vote, and there are no cumulative voting rights for the election of directors. At the close of business on the record date, we had 209,614,153 shares of common stock outstanding and entitled to vote. Each holder of our common stock on that date will be entitled to one vote for each share held on all matters to be voted upon at the Annual Meeting.
“Record holders” may vote (1) by completing and returning a proxy card, (2) on the Internet, or (3) using a toll-free telephone number. Please see the proxy card for specific instructions on how to vote using one of these methods. The telephone and
Internet voting facilities for record holders will close at 11:59 p.m. Eastern Daylight Time on May 9, 2022. “Beneficial owners” will receive instructions from their broker or other intermediary (or should contact their broker or other intermediary for instructions) describing the procedures and options for voting. Shares held in the Arthur J. Gallagher & Co. Employees’ 401(k) Savings and Thrift Plan must be voted by 5:00 p.m. Eastern Daylight Time on May 5, 2022.
What is the voting standard and the treatment of abstentions and broker non-votes for each item on the proxy card?
| | | | | | What is the quorum requirement for holding the Annual Meeting? The holders of a majority of the stock issued and outstanding and entitled to vote at a meeting of the stockholders, present in person or deemed to be present or represented by proxy, shall constitute a quorum for purposes of any Annual Meeting of Stockholders. Broker non-votes and abstentions are counted for purposes of determining the presence of a quorum at this Annual Meeting. If a quorum is not present at the scheduled time of the Annual Meeting, the stockholders entitled to vote thereat, present in person, deemed to be present or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present, deemed to be present or represented. What are broker non-votes? A “broker non-vote” occurs with respect to a proposal when a broker, trustee, or other nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of stockholders but is not permitted to vote on other proposals without instructions from the beneficial owner and the beneficial owner fails to provide the nominee with such instructions. Under the rules of the NYSE, brokers, trustees or other nominees may (but are not required to and may elect not to) generally vote on routine matters but cannot vote on non-routine matters. We expect that only the ratification of the appointment of our independent auditor will be considered a routine matter. We do not expect the other proposals to be considered routine matters, and, as such, without your instructions, your broker cannot vote your shares. Whether a proposal is considered routine or non-routine is subject to NYSE rules and final determination by the NYSE. As indicated above, even with respect to routine matters, some brokers choose not to exercise discretionary voting authority. Therefore, we encourage you to provide voting instructions to your broker or other nominee as soon as possible. Will any matters other than those identified in this Proxy Statement be decided at the Annual Meeting? As of the date of this Proxy Statement, we are not aware of any matters to be raised at the Annual Meeting other than those described in this Proxy Statement. If any other matters are properly presented at the Annual Meeting for consideration, the people named as proxy holders on the proxy card will vote your proxy on those matters in their discretion. If any of our nominees are not available as a candidate for director, the proxy holders will vote your proxy for any other candidate the Board may nominate or the Board may choose to decrease the size of the Board or leave a vacancy on the Board. |
| | | Who can vote, and how do I vote? Only holders of our common stock at the close of business on the record date of March 18, 2024 are entitled to notice of and to vote at the Annual Meeting. We have no other outstanding securities entitled to vote, and there are no cumulative voting rights for the election of directors. At the close of business on the record date, we had 218,302,819 shares of common stock outstanding and entitled to vote. Each holder of our common stock on that date will be entitled to one vote for each share held on all matters to be voted upon at the Annual Meeting. “Record holders” may vote (1) by completing and returning a proxy card, (2) on the Internet, or (3) using a toll-free telephone number. Please see the proxy card for specific instructions on how to vote using one of these methods. The telephone and Internet voting facilities for record holders will close at 11:59 p.m. Eastern Daylight Time on May 6, 2024. “Beneficial owners” will receive instructions from their broker or other intermediary (or should contact their broker or other intermediary for instructions) describing the procedures and options for voting. Shares held in the Arthur J. Gallagher & Co. Employees’ 401(k) Savings and Thrift Plan must be voted by 5:00 p.m. Eastern Daylight Time on May 2, 2024. What is the voting standard and the treatment of abstentions and broker non-votes for each item on the proxy card? |
| Voting Item | Voting Standard | Voting
Standard | | Treatment of
Abstentions &
Broker Non-Votes | | | |
|
| Election of directors
(Item 1) |
| Majority of votes cast | | Not counted as votes cast and therefore no effect | | | | 2022 Long-Term Incentive Plan (Item 2)
|
|
|
|
|
| Auditor ratification (Item 2) |
| Majority of stock having voting power and present | | Abstentions treated as votes against. Broker non-votes have no effect | | | are not expected to be applicable | Auditor
ratification
|
|
|
|
|
| Say-on-pay (Item 3) |
| Majority of stock having voting power and present | | Abstentions treated as votes against. Broker non-votes, not applicable (routine matter, so brokers can vote) | | | if any, have no effect | Say-on-pay
(Item 4)
|
| Majority of
stock having
voting power
and present
|
| Abstentions treated as votes against. Broker non-votes have no effect
|
What is the difference between a “record holder” and a “beneficial owner”?
If your shares are registered directly in your name, you are considered the “record holder” of those shares. If, on the other hand, your shares are held in a brokerage account or by a bank or other intermediary, you are considered the “beneficial owner” of shares held in street name, and a Notice of Internet Availability of Proxy Materials (Internet Availability Notice) was forwarded to you automatically from your broker or other intermediary. As a beneficial owner, you have the right to instruct your broker or other intermediary to vote your shares in accordance with your wishes. You are also invited to attend the Annual Meeting. Because a beneficial owner is not the record holder, you may not vote your shares in person at the meeting unless you obtain a “legal proxy” from your broker or other intermediary. Your broker or other intermediary has provided you with an explanation of how to instruct it regarding the voting of your shares. If you do not provide your broker or other intermediary with voting instructions, your broker or other intermediary will not be allowed to vote your shares at the Annual Meeting for any matter other than ratification of the appointment of our independent auditor.
If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If you
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2022 PROXY STATEMENT
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QUESTIONS & ANSWERS ABOUT THE ANNUAL MEETING
are a record holder and sign the proxy card without giving specific instructions, your shares will be voted in accordance with the recommendations of the Board (FOR all of our nominees to the Board, FOR the 2022 Long-Term Incentive Plan, FOR ratification of the appointment of our independent registered public accounting firm, and FOR the approval of the compensation of our named executive officers).
What is “householding”?
Householding is a procedure approved by the SEC whereby multiple stockholders of record who share the same last name and address will receive only one Internet Availability Notice or one set of proxy materials. Each stockholder of record will continue to receive a separate proxy card. We have undertaken householding to reduce printing costs and postage fees. A stockholder must affirmatively consent to householding. Record holders who wish to begin or discontinue householding may contact Broadridge Investor Communication Solutions, Inc. (Broadridge) by calling 1-800-542-1061, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717. Broadridge will undertake the necessary steps to continue or discontinue householding upon such request of a record holder. Beneficial owners who wish to begin or discontinue householding should contact their broker or other intermediary. You can also request prompt delivery of a copy of the Proxy Statement and Annual Report by contacting our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050 (telephone number: 630-773-3800).
What should I do if I receive more than one Internet Availability Notice or proxy card?
If you own some shares of common stock directly as a record holder and other shares indirectly as a beneficial owner, or if you own shares of common stock through more than one broker or other intermediary, you may receive multiple Internet Availability Notices or, if you request proxy materials to be delivered to you by mail, you may receive multiple proxy cards. It is necessary for you to vote, sign and return all of the proxy cards or follow the instructions for any alternative voting procedure on each of the Internet Availability Notices you receive in order to vote all of the shares you own. If you request proxy materials to be delivered to you by mail, each proxy card you receive will come with its own prepaid return envelope. If you vote by mail, please make sure you return each proxy card in the return envelope that accompanied the proxy card.
May I change my vote after I return my proxy?
Yes. If you are a record holder, even after you have submitted your proxy, you may revoke your proxy at any time before it is exercised by delivering a written notice of revocation to our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050. You may also revoke your proxy and change your vote at any time by timely mailing a proxy card that is properly signed and dated with a later date than your previous vote, by casting a later dated proxy via the Internet or telephone, or by voting on the Internet at the virtual Annual Meeting.
If you are a beneficial owner of shares held in street name, you must contact the holder of record to revoke a previously authorized proxy. Beneficial owners must have a “legal proxy” from their broker to vote in person at the Annual Meeting. Attendance at the Annual Meeting will not, by itself, revoke a proxy.
Who will pay the costs of soliciting these proxies?
We are soliciting proxies from stockholders on behalf of our Board and we will pay the costs of soliciting proxies to be voted at the Annual Meeting. After the Internet Availability Notices are initially distributed, we and our agents may also solicit proxies by mail, electronic mail, telephone or in person. We will also reimburse brokers and other intermediaries for their expenses in sending Internet Availability Notices to beneficial owners. In addition, we have hired Morrow Sodali LLC, 470 West Ave., Stamford, CT 06902, to assist us in soliciting proxies, for which we will pay a fee of $10,000 plus their reasonable out-of-pocket expenses.
What is the deadline for submitting a director nominee under our “proxy access” by-law or a stockholder proposal under Rule 14a-8 to be included in the 2023 Proxy Statement?
Pursuant to Rule 14a-8, if a stockholder wants the company to consider a proposal for inclusion in our proxy materials for presentation at our 2023 Annual Meeting, the proposal should be addressed to our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050, must comply with all relevant SEC requirements, and must be received by us not later than close of business on November 22, 2022.
Our by-laws permit a stockholder, or a group of up to 20 stockholders, owning 3% or more of the company’s outstanding common stock continuously for at least three years to nominate and include in the company’s proxy materials directors constituting up to the greater of two or 20% of board seats, if the stockholder(s) and the nominee(s) meet the requirements in our by-laws. Notice of director nominations submitted under these proxy access by-law provisions must be delivered to our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050, no earlier than the close of business on October 23, 2022 and no later than the close of business on November 22, 2022. For these purposes, “close of business” means 5:00 p.m. CDT. If the date of the Annual Meeting is more than 30 days before or after May 10, 2023, a notice under our proxy access by-law must be so delivered not earlier than the close of business on the 150th day prior to the 2023 Annual Meeting and not later than the close of business on the later of the 120th day prior to the 2023 Annual Meeting or the 10th day following the date the 2023 Annual Meeting date is publicly announced. Director nominations submitted pursuant to the proxy access provisions of our by-laws must comply with all of the requirements of our by-laws.
How do I submit a proposal regarding a director nomination or other item of business to be presented directly at the 2023 Annual Meeting?
Under our by-laws, notice of any matter that is not submitted for inclusion in our Proxy Statement and proxy card for the 2023 Annual Meeting under Rule 14a-8, but that a stockholder instead wishes to present directly at the Annual Meeting, including director nominations outside of our proxy access by-law and other items of business, must be delivered to our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050, not later than the close of business on February 9, 2023 and not earlier than the close of business on January 10, 2023. If the date of the 2023 Annual Meeting is more than 30 days before or after May 10, 2023, notice of any such matter must be delivered not earlier than the close of business on the 120th day prior to the
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| | 2022 PROXY STATEMENT
| | 47
Questions & Answers About the Annual Meeting |
| | | What is the difference between a “record holder” and a “beneficial owner”? If your shares are registered directly in your name, you are considered the “record holder” of those shares. If, on the other hand, your shares are held in a brokerage account or by a bank or other intermediary, you are considered the “beneficial owner” of shares held in street name, and a Notice of Internet Availability of Proxy Materials (Internet Availability Notice) was forwarded to you automatically from your broker or other intermediary. As a beneficial owner, you have the right to instruct your broker or other intermediary to vote your shares in accordance with your wishes. You are also invited to attend the Annual Meeting. Because a beneficial owner is not the record holder, you may not vote your shares in person at the meeting unless you obtain a “legal proxy” from your broker or other intermediary. Your broker or other intermediary has provided you with an explanation of how to instruct it regarding the voting of your shares. If you do not provide your broker or other intermediary with voting instructions, your broker or other intermediary may in some cases vote the shares in their discretion, but are not permitted to vote on certain proposals and may choose not to vote on any of the proposals. If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If you are a record holder and sign the proxy card without giving specific instructions, your shares will be voted in accordance with the recommendations of the Board (FOR all of our nominees to the Board, FOR ratification of the appointment of our independent registered public accounting firm, and FOR the approval of the compensation of our named executive officers). What is “householding”? Householding is a procedure approved by the SEC whereby multiple stockholders of record who share the same last name and address will receive only one Internet Availability Notice or one set of proxy materials. Each stockholder of record will continue to receive a separate proxy card. We have undertaken householding to reduce printing costs and postage fees. A stockholder must affirmatively consent to householding. Record holders who wish to begin or discontinue householding may contact Broadridge Investor Communication Solutions, Inc. (Broadridge) by calling 1-800-542-1061, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717. Broadridge will undertake the necessary steps to continue or discontinue householding upon such request of a record holder. Beneficial owners who wish to begin or discontinue householding should contact their broker or other intermediary. You can also request prompt delivery of a copy of the Proxy Statement and Annual Report by contacting our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050 or at the following telephone number: 630-773-3800. |
| What should I do if I receive more than one Internet Availability Notice or proxy card? If you own some shares of common stock directly as a record holder and other shares indirectly as a beneficial owner, or if you own shares of common stock through more than one broker or other intermediary, you may receive multiple Internet Availability Notices or, if you request proxy materials to be delivered to you by mail, you may receive multiple proxy cards. It is necessary for you to vote, sign and return all of the proxy cards or follow the instructions for any alternative voting procedure on each of the Internet Availability Notices you receive in order to vote all of the shares you own. If you request proxy materials to be delivered to you by mail, each proxy card you receive will come with its own prepaid return envelope. If you vote by mail, please make sure you return each proxy card in the return envelope that accompanied the proxy card. May I change my vote or revoke my proxy? Yes. If you are a record holder, even after you have submitted your proxy, you may revoke your proxy at any time before it is exercised by delivering a written notice of revocation to our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050. You may also revoke your proxy and change your vote at any time by timely mailing a proxy card that is properly signed and dated with a later date than your previous vote, by casting a later dated proxy via the Internet or telephone, or by voting on the Internet at the virtual Annual Meeting. If you are a beneficial owner of shares held in street name, you must contact the holder of record to revoke a previously authorized proxy. Beneficial owners must have a “legal proxy” from their broker to vote in person at the Annual Meeting. Attendance at the Annual Meeting will not, by itself, revoke a proxy. Who will pay the costs of soliciting these proxies? We are soliciting proxies from stockholders on behalf of our Board and we will pay the costs of soliciting proxies to be voted at the Annual Meeting. After the Internet Availability Notices are initially distributed, we and our agents may also solicit proxies by mail, electronic mail, telephone or in person. We will also reimburse brokers and other intermediaries for their expenses in sending Internet Availability Notices to beneficial owners. In addition, we have hired Morrow Sodali LLC, 333 Ludlow Street, 5th Floor, Stamford, CT 06902, to assist us in soliciting proxies, for which we will pay a fee of $11,000 plus their reasonable out-of-pocket expenses. |
QUESTIONS & ANSWERS ABOUT THE ANNUAL MEETING
date of the 2023 Annual Meeting and not later than the close of business on the later of the 90th day prior to the 2023 Annual Meeting or the 10th day following the date the 2023 Annual Meeting date is publicly announced. For these purposes, “close of business” means 5:00 p.m. CDT. We will not entertain any nominations or other items of business at the 2023 Annual Meeting that do not meet the requirements in our by-laws. If we do not receive notice of a matter by February 9, 2023 (or the applicable deadline if the 2023 Annual Meeting is more than 30 days before or after May 10, 2023), SEC rules permit the people named as proxy holders on the proxy card to vote proxies in their discretion when and if the matter is raised at the 2023 Annual Meeting. Any stockholder proposal relating to a director nomination should set forth all information relating to such person required to be disclosed in solicitations of proxies for contested director elections under Regulation 14A of the Exchange Act, including, among other things, the particular experience, qualifications, attributes or skills of the nominee that, in light of our business and structure, led to the stockholder’s conclusion that the nominee should serve on the Board. The proposal should also include the director nominee’s written consent to be named in our Proxy Statement as a nominee and to serve as a director if elected. Stockholders are also advised to review our by-laws, which contain additional disclosure and other requirements regarding the information to be included in the advance notices of stockholder proposals and director nominations.
In addition, notice that a stockholder intends to solicit proxies pursuant to Rule 14a-19, the SEC’s universal proxy rule, in support of nominees submitted under the Company’s advance notice bylaws must be delivered to our Corporate Secretary not later than March 11, 2023.
How do I recommend a proposed director nominee to the Board for consideration?
Any stockholder who wishes to propose director nominees for consideration by the Board’s Nominating/Governance Committee, but does not wish to present such proposal at an annual meeting, may do so at any time by directing a description of each nominee’s name and qualifications for Board membership to the Chair of the Nominating/Governance Committee, c/o our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050. The recommendation should contain all of the information regarding the nominee described in the question and answer above and in our by-laws relating to director nominations brought before an annual meeting. The Nominating/Governance Committee evaluates nominee proposals submitted by stockholders in the same manner in which it evaluates other nominees.
Where can I find the voting results of the Annual Meeting?
An automated system administered by Broadridge will tabulate the votes. Voting results will be reported in a Current Report on Form 8-K that we will file with the SEC within four business days following the Annual Meeting.
Any stockholder who would like a copy of our Annual Report on Form 10-K, including the related financial statements and financial statement schedules, may obtain one, without charge, by addressing a request to the attention of the Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050. Our copying costs will be charged if copies of exhibits to the Annual Report are requested. You may also obtain a copy of the Annual Report, including exhibits, from our website, investor.ajg.com, by clicking on “Financials.”
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| 2024 PROXY STATEMENT | 49 2022 PROXY STATEMENT
| | |
Exhibit A
Arthur J. Gallagher & Co. 2022 Long-Term Incentive Plan
I. Introduction
1.1 Purposes. The purposes of the Arthur J. Gallagher & Co. 2022 Long-Term Incentive Plan (this “Plan”) are (i) to align the interests of the Company’s stockholders and the recipients of Awards under this Plan by increasing the proprietary interest of such recipients in the Company’s growth and success, (ii) to advance the interests of the Company by attracting and retaining directors, officers and other employees, and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders. As of the effective date of the Plan, no further awards shall be granted under the Prior Plans, as defined in Section 1.2.
1.2 Certain Definitions.
“Agreement” shall mean the written or electronic agreement evidencing an Award hereunder. An Agreement may be in the form of an agreement to be executed by both the Participant and the Company (or an authorized representative of the Company) or certificates, memoranda, notices or similar instruments as approved by the Committee.
“Automatic Exercise Date” shall mean the last business day of the term of an Option or SAR.
“Award” shall mean an Option, Restricted Stock Award, Restricted Stock Unit Award, or a SAR, which may be awarded or granted under the Plan (collectively, “Awards”).
“Board” shall mean the Board of Directors of the Company.
“Change in Control” shall have the meaning set forth in Section 4.8(b).
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Committee” shall mean the Committee designated by the Board, consisting of two or more members of the Board, each of whom shall be (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent” within the meaning of the rules of the New York Stock Exchange or, if the Common Stock is not listed on the New York Stock Exchange, within the meaning of the rules of the principal national stock exchange on which the Common Stock is then traded. Any reference herein to the Committee shall be deemed to include any person to whom any duty of the Committee has been delegated pursuant to Section 1.3.
“Common Stock” shall mean the common stock, par value $1.00 per share, of the Company.
“Company” shall mean Arthur J. Gallagher & Co., a Delaware corporation, or any successor thereto.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Fair Market Value” shall mean the closing transaction price (or, at the discretion of the Committee, the real time price) of a share of Common Stock as reported on the New York Stock Exchange on the date as of which such value is being determined or, if the Common Stock is not listed on the New York Stock Exchange, the closing transaction price of a share of Common Stock on the principal national stock exchange on which the Common Stock is traded on the date as of which such value is being determined or, if there shall be no reported transactions for such date, on the next preceding date for which transactions were reported; provided, however, that if the Common Stock is not listed on a national stock exchange or if Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion and in accordance with the applicable provisions of Section 409A of the Code, shall at such time deem appropriate. For purposes of Section 2.1(c)(i)(B), Section 2.1(c)(i)(C) and Section 4.5, the Fair Market Value of any shares of Common Stock shall be the market value determined by such methods or procedures as shall be established from time to time by the Committee.
“Free-Standing SAR” shall mean a SAR which is not granted in tandem with, or by reference to, an Option, which entitles the holder thereof to receive, upon exercise, shares of Common Stock (which may be Restricted Stock) or cash with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of such SARs which are exercised.
“Full Value Award” shall mean any Award settled in shares of Common Stock other than (i) an Option or (ii) a SAR.
“Incentive Stock Option” shall mean an Option that meets the requirements of Section 422 of the Code, or any successor provision, which is intended by the Committee to constitute an Incentive Stock Option and is specified to be an Incentive Stock Option in the applicable Award Agreement.
“Non-Employee Director” shall mean any director of the Company who is not an officer or employee of the Company or any Subsidiary.
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| | 2022 PROXY STATEMENT
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Questions & Answers About the Annual Meeting |
| | | What is the deadline for submitting a director nominee under our “proxy access” by-law or a stockholder proposal under Rule 14a-8 to be included in the 2025 Proxy Statement? Pursuant to Rule 14a-8, if a stockholder wants the company to consider a proposal for inclusion in our proxy materials for presentation at our 2025 Annual Meeting, the proposal should be addressed to our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050, must comply with all relevant SEC requirements, and must be received by us not later than close of business on November 22, 2024. Our by-laws permit a stockholder, or a group of up to 20 stockholders, owning 3% or more of the company’s outstanding common stock continuously for at least three years to nominate and include in the company’s proxy materials directors constituting up to the greater of two or 20% of board seats, if the stockholder(s) and the nominee(s) meet the requirements in our by-laws. Notice of director nominations submitted under these proxy access by-law provisions must be delivered to our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050, no earlier than the close of business on October 23, 2024 and no later than the close of business on November 22, 2024. For these purposes, “close of business” means 5:00 p.m. CDT. If the date of the Annual Meeting is more than 30 days before or after May 7, 2025, a notice under our proxy access by-law must be so delivered not earlier than the close of business on the 150th day prior to the 2025 Annual Meeting and not later than the close of business on the later of the 120th day prior to the 2025 Annual Meeting or the 10th day following the date the 2025 Annual Meeting date is publicly announced. Director nominations submitted pursuant to the proxy access provisions of our by-laws must comply with all of the requirements of our by-laws, which are currently under review by our Board. If amendments are approved by our Board, such changes will be timely disclosed pursuant to SEC rules through the filing of a Form 8-K. How do I submit a proposal regarding a director nomination or other item of business to be presented directly at the 2025 Annual Meeting? In addition, our by-laws provide notice procedures for stockholders to nominate a person as a director and to propose business to be considered by stockholders at a meeting (but not for inclusion in the proxy statement). Notice of nomination or proposal must set forth the information required by the by-laws (including information required under Rule 14a-19) and must be delivered to our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050, not later than the close of business on February 6, 2025 and not earlier than the close of business on January 7, 2025. If the date of the 2025 Annual Meeting is more than 30 days before or after May 7, 2025, notice of any such matter must be delivered not earlier than the |
| close of business on the 120th day prior to the date of the 2025 Annual Meeting and not later than the close of business on the later of the 90th day prior to the 2025 Annual Meeting or the 10th day following the date the 2025 Annual Meeting date is publicly announced. For these purposes, “close of business” means 5:00 p.m. CDT. We will not entertain any nominations or other items of business at the 2025 Annual Meeting that do not meet the requirements in our by-laws. If we do not receive notice of a matter within the above-mentioned window (or the applicable deadline if the 2025 Annual Meeting is more than 30 days before or after May 7, 2025), SEC rules permit the people named as proxy holders on the proxy card to vote proxies in their discretion if the matter is raised at the 2025 Annual Meeting. How do I recommend a proposed director nominee to the Board for consideration? Any stockholder who wishes to propose director nominees for consideration by the Board’s Nominating/Governance Committee, but does not wish to present such proposal at an annual meeting, may do so at any time by directing a description of each nominee’s name and qualifications for Board membership to the Chair of the Nominating/Governance Committee, c/o our Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050. The recommendation should contain all of the information regarding the nominee described in the question and answer above and in our by-laws relating to director nominations brought before an annual meeting. The Nominating/Governance Committee evaluates nominee proposals submitted by stockholders in the same manner in which it evaluates other nominees. Where can I find the voting results of the Annual Meeting? An automated system administered by Broadridge will tabulate the votes. Voting results will be reported in a Current Report on Form 8-K that we will file with the SEC within four business days following the Annual Meeting. Any stockholder who would like a copy of our Annual Report on Form 10-K, including the related financial statements and financial statement schedules, may obtain one, without charge, by addressing a request to the attention of the Corporate Secretary at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050. Our copying costs will be charged if copies of exhibits to the Annual Report are requested. You may also obtain a copy of the Annual Report, including exhibits, from our website, investor.ajg.com, by clicking on “Financials.” |
EXHIBIT A: ARTHUR J. GALLAGHER & CO. 2022 LONG-TERM INCENTIVE PLAN
“Nonqualified Stock Option” shall mean an Option which is not an Incentive Stock Option.
“Option” shall mean a right to purchase shares of Common Stock at a specified exercise price, and includes both Incentive Stock Options and Nonqualified Stock Options.
“Participant” shall mean a person who has been granted an Award.
“Performance Measures” shall mean the criteria and objectives, established by the Committee, which shall be satisfied or met (i) as a condition to the grant or exercisability of all or a portion of an Option or SAR or (ii) during the applicable Restriction Period or Performance Period as a condition to the vesting of the holder’s interest, in the case of a Restricted Stock Award, of the shares of Common Stock subject to such Award, or, in the case of a Restricted Stock Unit Award, to the holder’s receipt of the shares of Common Stock subject to such Award or of payment with respect to such Award.
Such criteria and objectives shall include one or more of the following (or a derivation of the following) objective corporate-wide or subsidiary, division, operating unit or individual measures, stated in either absolute terms, per-share or relative terms, such as rates of growth or improvement, compared to a previous year’s results or to a designated comparison group, either based upon United States Generally Accepted Accounting Principles (“GAAP”) or non-GAAP financial results, individually or in combination, measured annually or cumulatively over a period of years: (i) the attainment by a share of Common Stock of a specified Fair Market Value for a specified period of time, (ii) earnings per share, (iii) return to stockholders, (iv) return on assets, (v) return on equity, (vi) revenue (organic or otherwise), (vii) cash flow, (viii) operating expense reduction, (ix) return on investment, (x) return on capital, (xi) operating margin, (xii) net income, (xiii) earnings before interest, taxes, depreciation, amortization and/or change in estimated earnout payables or net earnings (either before or after interest, taxes, depreciation, amortization and/or change in estimated earnout payables), (xiv) operating earnings, (xv) net cash provided by operations, and (xvi) strategic business criteria, consisting of one or more objectives such as (A) geographic business expansion goals, (B) cost targets, (C) customer satisfaction ratings, (D) reductions in errors and omissions, (E) reductions in lost business, (F) management of employment practices and employee benefits, (G) supervision of litigation, (H) satisfactory audit scores, (I) productivity, (J) efficiency, (K) ESG-related goals or objectives and (L) goals relating to acquisitions or divestitures, or any combination of the foregoing or any other performance criteria that the Committee deems appropriate. The Committee shall certify the extent to which any Performance Measure has been satisfied, and the amount payable as a result thereof.
In the sole discretion of the Committee, the Committee may provide that one or more adjustments shall be made to one or more of the Performance Measures. Such adjustments may include one or more of the following: (i) items related to a change in accounting principles or applicable law; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under GAAP; (ix) items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments if such adjustment is timely approved in connection with the establishment of such Performance Measures; (xi) items relating to infrequently occurring corporate transactions, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; (xiv) items relating to any other infrequently occurring events or changes in applicable laws, accounting principles or business conditions; (xv) items relating to foreign currency impacts; or (xvi) items relating to such other events as the Committee shall deem appropriate.
“Performance Period” shall mean any period designated by the Committee during which (i) the Performance Measures applicable to an Award shall be measured and (ii) the conditions to vesting applicable to an Award shall remain in effect.
“Prior Plans” shall mean the Company’s 2014 Long-Term Incentive Plan and the Company’s 2017 Long-Term Incentive Plan.
“Restricted Stock” shall mean shares of Common Stock which are subject to a Restriction Period and which may, in addition thereto, be subject to the attainment of specified Performance Measures within a specified Performance Period.
“Restricted Stock Award” shall mean an Award of Restricted Stock under this Plan.
“Restricted Stock Unit” shall mean a right to receive one share of Common Stock or, in lieu thereof, the Fair Market Value of such share of Common Stock in cash, which shall be contingent upon the expiration of a specified Restriction Period and which may, in addition thereto, be contingent upon the attainment of specified Performance Measures within a specified Performance Period.
“Restricted Stock Unit Award” shall mean an Award of Restricted Stock Units under this Plan.
“Restriction Period” shall mean any period designated by the Committee during which (i) the Common Stock subject to a Restricted Stock Award may not be sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or disposed of, except as provided in this Plan or the Agreement relating to such Award, and (ii) the conditions to vesting applicable to a Restricted Stock Unit Award shall remain in effect.
“SAR” shall mean a stock appreciation right which may be a Free-Standing SAR or a Tandem SAR.
“Stock Award” shall mean a Restricted Stock Award or a Restricted Stock Unit Award.
“Subsidiary” shall mean any corporation, limited liability company, partnership, joint venture or similar entity in which the Company owns, directly or indirectly, an equity interest possessing more than 50% of the combined voting power of the total outstanding equity interests of such entity.
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EXHIBIT A: ARTHUR J. GALLAGHER & CO. 2022 LONG-TERM INCENTIVE PLAN
“Substitute Award” shall mean an Award granted under the Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an Option or SAR.
“Tandem SAR” shall mean a SAR which is granted in tandem with, or by reference to, an Option (including a Nonqualified Stock Option granted prior to the date of grant of the SAR), which entitles the holder thereof to receive, upon exercise of such SAR and surrender for cancellation of all or a portion of such Option, shares of Common Stock (which may be Restricted Stock) or cash with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of shares of Common Stock subject to such Option, or portion thereof, which is surrendered.
“Ten Percent Holder” shall have the meaning set forth in Section 2.1(a).
1.3 Administration. This Plan shall be administered by the Committee. Any one or a combination of the following Awards may be made under this Plan to eligible persons: (i) Options to purchase shares of Common Stock in the form of Incentive Stock Options or Nonqualified Stock Options, (ii) SARs in the form of Tandem SARs or Free-Standing SARs, and (iii) Stock Awards in the form of Restricted Stock Awards or Restricted Stock Unit Awards. The Committee shall, subject to the terms of this Plan, select eligible persons for participation in this Plan and determine the form, amount and timing of each Award to such persons and, if applicable, the number of shares of Common Stock, the number of SARs, the number of Restricted Stock Units subject to such an Award, the exercise price or base price associated with the Award, the time and conditions of exercise or settlement of the Award and all other terms and conditions of the Award, including, without limitation, the form of the Agreement evidencing the Award. Subject to the minimum vesting criteria set forth in Section 1.5(h), the Committee may, in its sole discretion and for any reason at any time, take action such that (i) any or all outstanding Options and SARs shall become exercisable in part or in full, (ii) all or a portion of the Restriction Period applicable to any outstanding Restricted Stock or Restricted Stock Units shall lapse, (iii) all or a portion of the Performance Period applicable to any outstanding Restricted Stock, Restricted Stock Units, Options shall lapse and (iv) the Performance Measures (if any) applicable to any outstanding Award shall be deemed to be satisfied at the maximum or any other level. The Committee shall have the authority, subject to the terms of this Plan: (x) to interpret this Plan and the application thereof, establish rules and regulations it deems necessary or desirable for the administration of this Plan and to make exceptions to the Plan or any such rules and regulations if the Committee determines, in good faith, that it is necessary to do so in light of extraordinary circumstances and for the benefit of the Company and so as to avoid unanticipated consequences or to address unanticipated events (including any temporary closure of an applicable stock exchange, disruption of communications or natural catastrophe); (y) to impose, incidental to the grant of an Award, conditions with respect to the Award, such as limiting competitive employment or other activities or applying the Company’s compensation recovery policy, as amended from time to time; and (z) subject to Section 4.2, to amend any outstanding Awards; provided, however, that if any such amendment materially impairs a Participant’s rights with respect to such Award, such amendment shall also be subject to the Participant’s consent. All such interpretations, rules, regulations and conditions shall be conclusive and binding on all parties.
Subject to applicable law and applicable rules and regulations of the New York Stock Exchange, the Committee may delegate some or all of its power and authority hereunder to the Board or to the President and Chief Executive Officer or other executive officer of the Company as the Committee deems appropriate; provided, however, that the Committee may not delegate its power and authority to the President and Chief Executive Officer or other executive officer of the Company with regard to the selection for participation in this Plan of an officer, non-management director or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an Award to such an officer, non-management director or other person. In addition, the Committee may delegate any or all aspects of day to day administration of the Plan to one or more officers or employees of the Company or any Subsidiary, and/or to any one or more agents.
No member of the Board or Committee, and neither the President and Chief Executive Officer nor any other executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board and the Committee and the President and Chief Executive Officer or other executive officer shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s Certificate of Incorporation and/or By-laws) and under any directors’ and officers’ liability insurance that may be in effect from time to time. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company or the Committee to assist in the administration of the Plan.
1.4 Eligibility. Participants in this Plan shall consist of such officers, other employees and non-management directors of the Company and its Subsidiaries as the Committee in its sole discretion may select from time to time. The Committee’s selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. For purposes of this Plan, references to employment by the Company shall also mean employment by a Subsidiary.
1.5 Shares Available.
(a) Share Reserve. Subject to adjustment as provided in Section 4.7 and to all other limits set forth in this Section 1.5, the maximum aggregate number of shares of Common Stock that shall be available for issuance under this Plan is equal to the sum of: (i) 13,500,000; plus (ii) the number of shares of Common Stock subject to any awards granted under the Prior Plans that are outstanding as of the effective date of this Plan that are subsequently settled for cash, forfeited, expired, or for any reason are cancelled or terminated, without resulting in the issuance of shares of Common Stock.
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Exhibit A: Information Regarding Non-GAAP Measures |
EXHIBIT A: ARTHUR J. GALLAGHER & CO. 2022 LONG-TERM INCENTIVE PLAN
Subject to adjustment as provided in Section 4.7 only to the extent that such calculation or adjustment will not affect the status of any Option intended to qualify as an Incentive Stock Option under Section 422 of the Code, the number of shares of Common Stock authorized for grant as Incentive Stock Options shall be no more than the total number of shares of Common Stock authorized for grant under the Plan under Section 1.5(a)(i).
(b) Counting Shares Against the Share Reserve. In general, any shares of Common Stock that are issued pursuant to Awards shall be counted against the share reserve limit in Section 1.5 as one (1) share of Common Stock for every one (1) share of Common Stock granted; provided, however, that any Shares in excess of 3,500,000 Shares issued pursuant to Full Value Awards shall be counted against the shares of Common Stock authorized for issuance under this Plan as 3.8 Shares for every one Share issued pursuant to such Award.
(c) Substitute Awards. Substitute Awards shall not reduce the shares of Common Stock authorized for grant under the Plan; nor shall shares of Common Stock subject to Substitute Awards be added to the shares available for Awards under the Plan as provided in Section 1.5(d) below. Additionally, to the extent permitted by NYSE Listed Company Manual Section 303A.08 or other applicable stock exchange rules, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio of formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the shares of Common Stock authorized for grant under the Plan (and shares of Common Stock subject to such Awards shall not be added to the shares available for Awards under the Plan as provided in Section 1.5(d) below); provided, that Awards using such available shares shall not be made after the date awards could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employed by or providing services to the Company or its Subsidiaries immediately prior to such acquisition or combination.
(d) Shares Available for Subsequent Issuance. If any shares of Common Stock subject to an Award are forfeited, canceled, terminated or expire, or an Award is settled for cash (in whole or in part), the shares of Common Stock subject to such Award shall, to the extent of such forfeiture, cancelation, termination, expiration or cash settlement, again be available for Awards under the Plan (and shall not be counted against the limit set forth in the second paragraph of Section 1.5(a)).
(e) Shares Not Available for Subsequent Issuance. Notwithstanding anything in this Section 1.5 to the contrary, shares of Common Stock subject to an Award under this Plan (or the Prior Plans) may not be made available for issuance under this Plan if such shares are: (i) shares that were subject to a stock-settled SAR (or stock appreciation right granted under the Prior Plans) and were not issued upon the net settlement or net exercise of such SAR (or stock appreciation right granted under the Prior Plans); (ii) shares delivered to or withheld by the Company to pay the exercise price of an Option (or option granted under the Prior Plans); (iii) shares delivered to or withheld by the Company to pay withholding taxes related to an Award (or award granted under the Prior Plans); or (iv) shares repurchased on the open market with the proceeds of an Option (or option granted under the Prior Plans) exercise.
(f) Source of Shares. Shares of Common Stock to be delivered under this Plan shall be made available from authorized and unissued shares of Common Stock, or authorized and issued shares of Common Stock reacquired and held as treasury shares or otherwise or a combination thereof.
(g) Non-Management Director Awards. The aggregate dollar value of equity-based (based on the grant date fair value of equity-based Awards) and cash compensation granted under this Plan or otherwise during any calendar year to any one non-management director shall not exceed $500,000; provided, however, that in the calendar year in which a non-management director first joins the Board of Directors or is first designated as Chairman of the Board of Directors or Lead Director, the maximum aggregate dollar value of equity-based and cash compensation granted to the Participant may be up to two hundred percent (200%) of the foregoing limit and the foregoing limit shall not count any Tandem SARs.
(h) Minimum Vesting. Further, and notwithstanding anything in the Plan to the contrary, (i) Restricted Stock and Restricted Stock Units granted under the Plan may not vest or be settled, in whole or in part, for Board members, prior to the one-year anniversary, and for all other participants, prior to the three-year anniversary, of the date of grant, except that the Committee may provide that Restricted Stock or Restricted Stock Units may vest or settle prior to such date in the event of the Participant’s death or disability or in the event of a Change in Control; (ii) Options granted under the Plan may not become exercisable, vest or be settled, in whole or in part, prior to the one-year anniversary of the date of grant, except that the Committee may provide that Options become exercisable, vest or settle prior to such date in the event of the Participant’s death or disability or in the event of a Change in Control; and (iii) SARs granted under the Plan may not become exercisable, vest or be settled, in whole or in part, prior to the one-year anniversary of the date of grant, except that the Committee may provide that SARs become exercisable, vest or settle prior to such date in the event of the Participant’s death or disability or in the event of a Change in Control. Notwithstanding the foregoing, up to 5% of the aggregate number of shares of Common Stock authorized for issuance under this Plan (as described in Section 1.5(a)) may be issued pursuant to Awards subject to any, or no, vesting conditions, as the Committee determines appropriate.
II. Stock Options and Stock Appreciation Rights
2.1 Stock Options. The Committee may, in its discretion, grant Options to purchase shares of Common Stock to such eligible persons as may be selected by the Committee. Each Option, or portion thereof, that is not an Incentive Stock Option shall be a Nonqualified Stock Option. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock with respect to which Options designated as Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under this Plan or any other plan of the Company, or any parent or Subsidiary) exceeds the amount (currently $100,000) established by the Code, such Options shall constitute Nonqualified Stock Options.
EXHIBIT A: ARTHUR J. GALLAGHER & CO. 2022 LONG-TERM INCENTIVE PLAN
Options may be granted in addition to, or in lieu of, any other compensation payable to officers, other employees and non-management directors, and in all cases shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common Stock subject to an Option and the purchase price per share of Common Stock purchasable upon exercise of the Option shall be determined by the Committee; provided, however, that the purchase price per share of Common Stock purchasable upon exercise of a Nonqualified Stock Option or an Incentive Stock Option shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such Option; provided further, that if an Incentive Stock Option shall be granted to any person who, at the time such Option is granted, owns capital stock possessing more than 10 percent of the total combined voting power of all classes of capital stock of the Company (or of any parent or Subsidiary) (a “Ten Percent Holder”), the purchase price per share of Common Stock shall not be less than the price (currently 110% of Fair Market Value) required by the Code in order to constitute an Incentive Stock Option. Notwithstanding the foregoing, the purchase price per share of Common Stock purchasable upon exercise of an Option granted pursuant to a Substitute Award may be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant, provided, that such purchase price complies with the requirements of Sections 409A and 422 of the Code, as applicable.
(b) Option Period and Exercisability. The period during which an Option may be exercised shall be determined by the Committee; provided, however, that no Incentive Stock Option or Nonqualified Stock Option shall be exercised later than seven years after its date of grant; provided further, that if an Incentive Stock Option shall be granted to a Ten Percent Holder, such Option shall not be exercised later than five years after its date of grant. The Committee may, in its discretion, determine that an Option is to be granted subject to performance criteria and may establish an applicable Performance Period and Performance Measures which shall be satisfied or met as a condition to the grant of such Option or to the exercisability of all or a portion of such Option. The Committee shall determine whether an Option shall become exercisable in cumulative or non-cumulative installments and in part or in full at any time. Each Option granted under the Plan shall become vested and exercisable, in whole or in part, at such time or times during its term as set forth in the Agreement and subject to the terms of this Plan. An exercisable Option, or portion thereof, may be exercised only with respect to whole shares of Common Stock.
(c) Method of Exercise. An Option may be exercised, to the extent then exercisable, (i) by delivering a written or electronic notice to the Company’s stock plan administrator in a form satisfactory to the Committee specifying the number of whole shares of Common Stock to be purchased and accompanying such notice with payment therefor in full (or arrangement made for such payment to the Company’s satisfaction) either (A) in cash or check, (B) by delivery (either actual delivery or by attestation procedures established by the Company) of shares of Common Stock having a Fair Market Value equal to the aggregate purchase price payable by reason of such exercise, (C) authorizing the Company or stock plan administrator to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value equal to the amount necessary to satisfy such obligation, (D) except as may be prohibited by applicable law, in cash by a broker-dealer acceptable to the Company to whom the optionee has submitted an irrevocable notice of exercise or (E) a combination of (A), (B) and (C), in each case to the extent set forth in the Agreement relating to the Option, (ii) if applicable, by surrendering to the Company any Tandem SARs which are cancelled by reason of the exercise of the Option and (iii) by executing such documents as the Company may reasonably request. Any fraction of a share of Common Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the optionee. No shares of Common Stock shall be issued and no certificate representing Common Stock shall be delivered until the full purchase price therefor and any withholding taxes thereon, as described in Section 4.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).
(d) Automatic Exercise of In-the-Money Options. The Committee, in its sole discretion, may provide in an Award Agreement or otherwise that any Option outstanding on the Automatic Exercise Date with an exercise price per share of Common Stock that is less than the Fair Market Value per share of Common Stock as of such date shall automatically and without further action by any Participant (or, in the event of Participant’s death, Participant’s personal representative or estate) or the Company be exercised on the Automatic Exercise Date if the Committee, in its sole discretion, determines that such exercise would provide economic benefit to the Participant after payment of the exercise price, applicable taxes and any expenses to effect the exercise. In the sole discretion of the Committee, payment of the exercise price of any Option may be made pursuant to Section 2.1(c)(i)(C) or (D), and the Company may deduct or withhold an amount sufficient to satisfy all taxes associated with such exercise in accordance with Section 4.5(ii)(C) or (D). Unless otherwise determined by the Committee, this Section 2.1(d) shall not apply to an Option if the Participant of such Option incurs a termination of employment or service on or before the Automatic Exercise Date.
(e) No Stockholder Rights. Participants shall have no voting rights and will have no rights to receive dividends or dividend equivalents in respect of an Option or any shares of Common Stock subject to an Option until the Participant has become the holder of record of such shares of Common Stock.
2.2 Stock Appreciation Rights. The Committee may, in its discretion, grant SARs to such eligible persons as may be selected by the Committee. The Agreement relating to a SAR shall specify whether the SAR is a Tandem SAR or a Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of SARs and Base Price. The number of SARs subject to an Award shall be determined by the Committee. Any Tandem SAR related to an Incentive Stock Option shall be granted at the same time that such Incentive Stock Option is granted. The base price
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EXHIBIT A: ARTHUR J. GALLAGHER & CO. 2022 LONG-TERM INCENTIVE PLAN
of a Tandem SAR shall be the purchase price per share of Common Stock of the related Option. The base price of a Free-Standing SAR shall be determined by the Committee; provided, however, that such base price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such SAR. Notwithstanding the foregoing, the base price of a SAR granted pursuant to a Substitute Award may be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant, provided, that such base price complies with the requirements of Section 409A of the Code.
(b) Exercise Period and Exercisability. The period for the exercise of a SAR shall be determined by the Committee; provided, however, that no Tandem SAR shall be exercised later than the expiration, cancellation, forfeiture or other termination of the related Option and no Free-Standing SAR shall be exercised later than 7 years after its date of grant. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of a SAR or to the exercisability of all or a portion of a SAR. The Committee shall determine whether a SAR may be exercised in cumulative or non-cumulative installments and in part or in full at any time. Each SAR granted under the Plan shall become vested and exercisable, in whole or in part, at such time or times during its term as set forth in the Agreement and subject to the terms of this Plan. An exercisable SAR, or portion thereof, may be exercised, in the case of a Tandem SAR, only with respect to whole shares of Common Stock and, in the case of a Free-Standing SAR, only with respect to a whole number of SARs. If a SAR is exercised for shares of Restricted Stock, a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c), or such shares shall be transferred to the holder in book entry form with restrictions on the Shares duly noted, and the holder of such Restricted Stock shall have such rights of a stockholder of the Company as determined pursuant to Section 3.2(d).
(c) Method of Exercise. A Tandem SAR may be exercised, to the extent then exercisable, (i) by delivering a written or electronic notice to the Company’s stock plan administrator in a form satisfactory to the Committee specifying the number of whole SARs which are being exercised, (ii) by surrendering to the Company any Options which are cancelled by reason of the exercise of the Tandem SAR and (iii) by executing such documents as the Company may reasonably request. A Free-Standing SAR may be exercised, to the extent then exercisable, (A) by delivering a written or electronic notice to the Company’s stock plan administrator in a form satisfactory to the Committee specifying the whole number of SARs which are being exercised and (B) by executing such documents as the Company may reasonably request.
(d) Automatic Exercise of In-the-Money SARs. The Committee, in its sole discretion, may provide in an Award Agreement or otherwise that any SAR outstanding on the Automatic Exercise Date with a base price per share of Common Stock that is less than the Fair Market Value per share of Common Stock as of such date shall automatically and without further action by any Participant (or, in the event of Participant’s death, Participant’s personal representative or estate) or the Company be exercised on the Automatic Exercise Date if the Committee, in its sole discretion, determines that such exercise would provide economic benefit to the Participant after payment of the applicable taxes and any expenses to effect the exercise. In the sole discretion of the Committee, the Company may deduct or withhold an amount sufficient to satisfy all taxes associated with such exercise in accordance with Section 4.5(ii)(C) or (D). Unless otherwise determined by the Committee, this Section 2.2(d) shall not apply to a SAR if the Participant of such SAR incurs a termination of employment or service on or before the Automatic Exercise Date.
(e) No Stockholder Rights. Participants shall have no voting rights and will have no rights to receive dividends or dividend equivalents in respect of a SAR or any shares of Common Stock subject to a SAR until the Participant has become the holder of record of such shares of Common Stock.
2.3 Termination of Employment or Service. All of the terms relating to the exercise, cancellation or other disposition of an Option or SAR upon a termination of employment or service with the Company of the holder of such Option or SAR, as the case may be, whether by reason of disability, retirement, death or any other reason, shall be determined by the Committee, subject to the terms of the Plan.
2.4 Limitations.
(a) No Repricing. Notwithstanding anything in this Plan to the contrary and subject to Section 4.7, without the prior approval of the stockholders of the Company, the Committee will not amend or replace any previously granted Option or SAR in a transaction that constitutes a “repricing,” including, but not limited to: (i) the reduction, directly or indirectly, in the per-share price of an outstanding Option or SAR by amendment, cancellation or substitution; (ii) any action that is treated as a repricing under generally accepted accounting principles; (iii) at any time when the per-share price of an outstanding Option or SAR is above the Fair Market Value of a share of Common Stock, canceling (or accepting the surrender of) an Option or SAR in exchange for another Option, SAR or other equity security or cash (unless the cancellation and exchange occurs in connection with a merger, acquisition, or similar transaction); and (iv) any other action that is treated as a repricing by the rules or regulations of the New York Stock Exchange.
III. Stock Awards
3.1 Stock Awards. The Committee may, in its discretion, grant Stock Awards to such eligible persons as may be selected by the Committee. The Agreement relating to a Stock Award shall specify whether the Stock Award is a Restricted Stock Award or a Restricted Stock Unit Award.
3.2 Terms of Restricted Stock Awards. Restricted Stock Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Award and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable to a Restricted Stock Award shall be determined by the Committee.
EXHIBIT A: ARTHUR J. GALLAGHER & CO. 2022 LONG-TERM INCENTIVE PLAN
(b) Vesting and Forfeiture. The Agreement relating to a Restricted Stock Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of the shares of Common Stock subject to such Award (i) if the holder of such Award remains continuously in the employment or service of the Company during the specified Restriction Period and (ii) if specified Performance Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the shares of Common Stock subject to such Award (x) if the holder of such Award does not remain continuously in the employment or service of the Company during the specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
(c) Stock Issuance. During the Restriction Period, the shares of Restricted Stock shall be held by a custodian in book entry form with restrictions on such shares duly noted or, alternatively, a certificate or certificates representing a Restricted Stock Award shall be registered in the holder’s name and may bear a legend, in addition to any legend which may be required pursuant to Section 4.6, indicating that the ownership of the shares of Common Stock represented by such certificate is subject to the restrictions, terms and conditions of this Plan and the Agreement relating to the Restricted Stock Award. All such certificates shall be deposited with the Company, together with stock powers or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate, which would permit transfer to the Company of all or a portion of the shares of Common Stock subject to the Restricted Stock Award in the event such Award is forfeited in whole or in part. Upon termination of any applicable Restriction Period (and the satisfaction or attainment of applicable Performance Measures), subject to the Company’s right to require payment of any taxes in accordance with Section 4.5, the restrictions shall be removed from the requisite number of any shares of Common Stock that are held in book entry form, and all certificates evidencing ownership of the requisite number of shares of Common Stock shall be delivered to the holder of such Award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise set forth in the Agreement relating to a Restricted Stock Award, and subject to the terms and conditions of a Restricted Stock Award, the holder of such Award shall have all rights as a stockholder of the Company, including, but not limited to, voting rights, the right to receive dividends and the right to participate in any capital adjustment applicable to all holders of Common Stock. Notwithstanding the foregoing, dividends credited/payable in connection with a Restricted Stock Award that is not yet vested shall be subject to the same restrictions and risk of forfeiture as the underlying Restricted Stock Award and shall not be paid until the underlying Restricted Stock Award vests.
3.3 Terms of Restricted Stock Unit Awards. Restricted Stock Unit Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Unit Award and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable to a Restricted Stock Unit Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted Stock Unit Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such Restricted Stock Unit Award (i) if the holder of such Award remains continuously in the employment or service of the Company during the specified Restriction Period and (ii) if specified Performance Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the shares of Common Stock subject to such Award (x) if the holder of such Award does not remain continuously in the employment or service of the Company during the specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
(c) Settlement of Vested Restricted Stock Unit Awards. The Agreement relating to a Restricted Stock Unit Award shall specify (i) whether such Award may be settled in shares of Common Stock or cash or a combination thereof and (ii) whether the holder thereof shall be entitled to receive dividend equivalents with respect to the number of shares of Common Stock subject to such Award. Prior to the settlement of a Restricted Stock Unit Award, the holder of such Award shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such Award. Notwithstanding the foregoing, any dividend equivalents credited/payable in connection with a Restricted Stock Unit Award that is not yet vested shall be subject to the same restrictions and risk of forfeiture as the underlying Restricted Stock Unit Award and shall not be paid until the underlying Restricted Stock Unit Award vests.
3.4 Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Restriction Period or Performance Period relating to a Stock Award, or any forfeiture and cancellation of such Award upon a termination of employment or service with the Company of the holder of such Award, whether by reason of disability, retirement, death or any other reason, shall be determined by the Committee.
IV. General
4.1 Effective Date and Term of Plan. This Plan shall be submitted to the stockholders of the Company for approval at the Company’s 2022 annual meeting of stockholders and, if approved by the stockholders of the Company shall become effective as of the date of such approval. This Plan shall terminate as of the annual meeting of the Company’s stockholders that occurs during the year of the tenth anniversary of its effective date, unless terminated earlier by the Board, and Awards hereunder may be made at any time prior to the termination of this Plan; provided, however, that Incentive Stock Options may not be granted under the Plan after the tenth anniversary of the date of the Board’s original approval of this Plan (March 10, 2022). Termination of this Plan shall not affect the terms or conditions of any Award granted prior to termination. Upon the effective date of this Plan, no further Awards shall be granted under the Prior Plans.
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| | 2022 PROXY STATEMENT
| | A-7
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EXHIBIT A: ARTHUR J. GALLAGHER & CO. 2022 LONG-TERM INCENTIVE PLAN
4.2 Amendment or Termination. The Board may amend or terminate this Plan as it shall deem advisable, subject to any requirement of stockholder approval required by applicable law, rule or regulation, including any rule of the New York Stock Exchange, or, if the Common Stock is not listed on the New York Stock Exchange, any rule of the principal national stock exchange on which the Common Stock is then traded; provided, however, that no amendment or termination may impair in any material way the rights of a holder of an outstanding Award without the consent of such holder; provided that no such consent shall be required if the Committee determines in its sole discretion and prior to the date of any Change in Control that such amendment either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard, or is not reasonably likely to significantly diminish the benefits provided under such Award, or that any such diminishment has been adequately compensated.
4.3 Agreement. Each Award under this Plan shall be evidenced by a written or electronic Agreement setting forth the terms and conditions applicable to such Award. An Agreement may be in the form of an agreement to be executed by both the Participant and the Company (or an authorized representative of the Company) or certificates, memoranda, notices or similar instruments as approved by the Committee. The Committee may provide that an Award shall not be valid until an Agreement is executed by the Company and the recipient of such Award (for clarity, electronic acceptance of an agreement in accordance with the procedures of the Company’s stock plan administrator shall be deemed to be execution) and, upon execution by each party and delivery of the Agreement to the Company within the time period specified by the Company, such Award shall be effective as of the effective date set forth in the Agreement.
4.4 Non-Transferability. Each Award may not be sold, transferred for value, pledged, assigned, or otherwise alienated or hypothecated by a Participant other than by will or the laws of descent and distribution, and each Option or SAR shall be exercisable only by the Participant during his or her lifetime. Notwithstanding the foregoing, outstanding Options may be exercised following the Participant’s death by the Participant’s beneficiaries or as permitted by the Committee. Further, and notwithstanding the foregoing, to the extent permitted by the Committee, the person to whom an Award is initially granted (the “Grantee”) may transfer an Award to any “family member” of the Grantee (as such term is defined in Section A.1(a)(5) of the General Instructions to Form S-8 under the Securities Act of 1933, as amended (“Form S-8”)), to trusts solely for the benefit of such family members and to partnerships in which such family members and/or trusts are the only partners; provided that, (i) as a condition thereof, the transferor and the transferee must execute a written agreement containing such terms as specified by the Administrator, and (ii) the transfer is pursuant to a gift or a domestic relations order to the extent permitted under the General Instructions to Form S-8. Except to the extent specified otherwise in the agreement the Administrator provides for the Grantee and transferee to execute, all vesting, exercisability and forfeiture provisions that are conditioned on the Grantee’s continued employment or service shall continue to be determined with reference to the Grantee’s employment or service (and not to the status of the transferee) after any transfer of an Award pursuant to this Section 4.4, and the responsibility to pay any taxes in connection with an Award shall remain with the Grantee notwithstanding any transfer other than by will or intestate succession.
4.5 Tax Withholding. The Company shall have the right to require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash pursuant to an Award made hereunder, payment by the holder of such Award of any federal, state, local or other taxes which may be required to be withheld or paid in connection with such Award. An Agreement may provide that (i) the Company shall withhold or direct the withholding of whole shares of Common Stock which would otherwise be delivered to a holder, having an aggregate Fair Market Value equal to the amount necessary to satisfy any such obligation, or withhold or direct the withholding of an amount of cash which would otherwise be payable to a holder, in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation by any of the following means: (A) a cash payment to the Company, (B) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously owned whole shares of Common Stock having an aggregate Fair Market Value equal to the amount necessary to satisfy any such obligation, (C) authorizing the Company or its stock plan administrator to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value or withhold an amount of cash which would otherwise be payable to a holder, equal to the amount necessary to satisfy any such obligation, (D) in the case of the exercise of an Option or a SAR and except as may be prohibited by applicable law, a cash payment by a broker-dealer acceptable to the Company to whom the optionee has submitted an irrevocable notice of exercise or (E) any combination of (A), (B) and (C), in each case to the extent set forth in the Agreement relating to the Award.
4.6 Restrictions on Shares. Each Award made hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the shares of Common Stock subject to such Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing shares of Common Stock delivered pursuant to any Award made hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder.
4.7 Adjustment. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a regular cash dividend, the number and class of securities available under this Plan, the number and class of securities subject to each outstanding Option and the purchase price per security, the terms of each outstanding SAR, the terms of each outstanding Restricted Stock Award and Restricted Stock Unit Award, including the number and class of securities subject thereto, the maximum number of securities with respect to which Options or SARs may be granted during any fiscal year of the Company to any one grantee, and the maximum number of shares of Common Stock that may be awarded during any fiscal year of the Company to any one grantee pursuant to a Stock Award that is subject to Performance Measures granted during any fiscal year of the Company to any one grantee shall be equitably adjusted by the Committee. The decision of the Committee regarding any such adjustment shall be final, binding and
EXHIBIT A: ARTHUR J. GALLAGHER & CO. 2022 LONG-TERM INCENTIVE PLAN
conclusive. Adjustments need not be uniform between different Awards or different types of Awards. If any such adjustment would result in a fractional security being (a) available under this Plan, such fractional security shall be disregarded, or (b) subject to an Award under this Plan, the Company shall pay the holder of such Award, in connection with the first vesting, exercise or settlement of such Award, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the vesting, exercise or settlement date over (B) the exercise or base price, if any, of such Award.
4.8 Change in Control.
(a) The Committee may through the terms of the Award or otherwise provide that any or all of the following shall occur, either immediately upon the Change in Control, or upon termination or constructive termination of the Participant’s employment or service within six (6) months prior to or twenty-four (24) months following a Change in Control: (a) all outstanding Options and SARs shall immediately become exercisable in full, (b) the Restriction Period applicable to any outstanding Restricted Stock Award or Restricted Stock Unit Award shall lapse, (c) the Performance Period applicable to any outstanding Award shall lapse, and/or (d) the Performance Measures applicable to any outstanding Award shall be deemed to be satisfied at their target levels or, if greater, on a pro rata basis based on actual achievement as of the date of the Change in Control; provided, however, that notwithstanding anything herein to the contrary, in no event shall any accelerated vesting of an award in connection with a Change in Control be effective unless the Change in Control is consummated. The Board (as constituted prior to such Change in Control) may, in its discretion: (1) require that shares of stock of the corporation resulting from such Change in Control, or a parent corporation thereof, be substituted for some or all of the shares of Common Stock subject to an outstanding Award, with an appropriate and equitable adjustment to such Award as shall be determined by the Board in accordance with Section 4.7; and/or (2) require outstanding Awards, in whole or in part, to be surrendered to the Company by the holder, and to be immediately cancelled by the Company, and to provide for the holder to receive (A) a cash payment in an amount equal to (i) in the case of an Option or a SAR, the number of shares of Common Stock then subject to the portion of such Option or SAR surrendered multiplied by the excess, if any, of the highest per share price offered to holders of Common Stock in any transaction whereby the Change in Control takes place, over the purchase price or base price per share of Common Stock subject to such Option or SAR, and (ii) in the case of a Stock Award, the number of shares of Common Stock then subject to the portion of such award surrendered multiplied by the highest per share price offered to holders of Common Stock in any transaction whereby the Change in Control takes place; (B) shares of capital stock of the corporation resulting from such Change in Control, or a parent corporation thereof, having a fair market value not less than the amount determined under clause (A) above; or (C) a combination of the payment of cash pursuant to clause (A) above and the issuance of shares pursuant to clause (B) above. The Board need not take the same action or actions with respect to all Awards or portions of Awards with respect to all participants. If, in connection with a Change in Control, no provision is made for the exercise, payment or lapse of conditions or restrictions on an Award, or other procedure whereby a Participant may realize the full benefit of the Award, the Committee may, through the terms of the Award or otherwise, provide for a conditional exercise, payment or lapse of conditions or restrictions on an Award, which shall only be effective if such Change in Control is consummated.
(b) For purposes of this Plan, a “Change in Control” shall occur (a) upon the consummation of any transaction pursuant to which any person or group, as defined in Sections 13(d) and 14(d)(2) of the Exchange Act, as amended, is or becomes the beneficial owner, directly or indirectly of securities of the Company representing 50 percent or more of the combined voting power of the Company’s outstanding securities then entitled to vote for the election of directors; or (b) if during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election was previously so approved cease for any reason to constitute at least a majority thereof.
If and to the extent that any Award is determined by the Company to constitute “non-qualified deferred compensation” subject to Section 409A of the Code and such Award is payable to a participant upon a Change in Control, then no payment shall be made pursuant to such Award unless such Change in Control constitutes a “change in the ownership of the corporation,” “a change in effective control of the corporation,” or “a change in the ownership of a substantial portion of the assets of the corporation” within the meaning of Section 409A of the Code; provided that if such Change in Control does not constitute a “change in the ownership of the corporation,” “a change in effective control of the corporation,” or “a change in the ownership of a substantial portion of the assets of the corporation” within the meaning of Section 409A of the Code, then the Award shall still fully vest upon such Change in Control, but shall be payable upon the original schedule contained in the Award.
4.9 Deferrals. The Committee may determine that the delivery of shares of Common Stock or the payment of cash, or a combination thereof, upon the exercise or settlement of all or a portion of any Award (other than Awards of Incentive Stock Options, Nonqualified Stock Options and SARs) made hereunder shall be deferred, or the Committee may, in its sole discretion, approve deferral elections made by holders of Awards. Deferrals shall be for such periods and upon such terms as the Committee may determine in its sole discretion, subject to the requirements of Section 409A of the Code.
4.10 No Right of Participation, Employment or Service. Unless otherwise set forth in an employment agreement, no person shall have any right to participate in this Plan. Neither this Plan nor any Award made hereunder shall confer upon any person any right to continued employment by or service with the Company, any Subsidiary or any affiliate of the Company or affect in any manner the right of the Company, any Subsidiary or any affiliate of the Company to terminate the employment or service of any person at any time without liability hereunder.
4.11 Designation of Beneficiary. To the extent permitted by the Committee, a participant may, by completing and returning the appropriate form provided by the Company or its stock plan administrator, name a beneficiary or beneficiaries to receive any payment to which
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| | 2022 PROXY STATEMENT
| | A-9
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EXHIBIT A: ARTHUR J. GALLAGHER & CO. 2022 LONG-TERM INCENTIVE PLAN
such participant may become entitled under this Plan in the event of his or her death. To the extent permitted by the Committee, a participant may change his or her beneficiary or beneficiaries from time to time by submitting a new form in accordance with the procedures established by the Company and/or its stock plan administrator. If a participant does not or is not permitted to designate a beneficiary, or if no designated beneficiary is living on the date any amount becomes payable under this Plan, such payment will be made to the legal representatives of his or her estate, which will be deemed to be his or her designated beneficiary under this Agreement.
4.12 Recovery Policy. Notwithstanding any other provisions in the Plan, any Award which is subject to a recovery policy under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any recovery policy adopted by the Company, including a policy adopted by the Company in response to any such law, government regulation or stock exchange listing requirement). To the extent any such recovery policy requires the repayment of incentive-based compensation received by a Participant, whether paid pursuant to an Award granted under this Plan or any other plan of incentive-based compensation maintained in the past or adopted in the future by the Company, by accepting an Award under this Plan, the Participant agrees to the repayment of such amounts to the extent required by such policy and applicable law.
4.13 Section 409A. (a) The Plan and Awards granted under the Plan are intended to be exempt from the requirements of Section 409A of the Code to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation 1.409A-1(b)(4), the exclusion applicable to stock options, stock appreciation rights and certain other equity-based compensation under Treasury Regulation 1.409A-1(b)(5), or otherwise. To the extent Section 409A of the Code is applicable to the Plan or any Award granted under the Plan, it is intended that the Plan and any Awards granted under the Plan comply with the requirements of Section 409A of the Code. Notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, the Plan and any Award granted under the Plan shall be interpreted, operated and administered in a manner consistent with such intentions.
(b) Notwithstanding any other provision of the Plan to the contrary, the Board, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan pursuant to Section 4.2 and any Award granted under the Plan so that the Award qualifies for exemption from or complies with Section 409A of the Code; provided, however, that the Committee makes no representations that Awards granted under the Plan shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to Awards granted under the Plan.
(c) To the extent any payment under this Plan is considered deferred compensation subject to the restrictions contained in Section 409A of the Code, and to the extent necessary to avoid the imposition of taxes under Section 409A of the Code, such payment may not be made to a specified employee (as determined in accordance with a uniform policy adopted by the Company with respect to all arrangements subject to Section 409A of the Code) upon separation from service (within the meaning of Section 409A of the Code) before the date that is six months after the specified employee’s separation from service (or, if earlier, the specified employee’s death). Any payment that would otherwise be made during this period of delay shall be accumulated and paid on the sixth month plus one day following the specified employee’s separation from service (or, if earlier, as soon as administratively practicable after the specified employee’s death).
4.14 Governing Law. This Plan, each Award hereunder and the related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.
4.15 Non-U.S. Employees. Without amending this Plan, the Committee may grant Awards to eligible persons who are non-U.S. nationals on such terms and conditions different from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Committee may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or its Subsidiaries operates or has employees.
4.16 Data Protection. By participating in the Plan, a Participant consents to the collection, processing, transmission and storage by the Company in any form whatsoever, of any data of a professional or personal nature which is necessary for the purposes of introducing and administering the Plan. The Company may share such information with any Subsidiary, the trustee of any employee benefit trust, its registrars, trustees, brokers, other third-party administrator or any Person who obtains control of the Company or acquires the Company or a Subsidiary which employs the Participant.
Exhibit B:A: Information Regarding Non-GAAP Measures For 2021,2023, the executive compensation performance measures used by the Compensation Committee were adjusted EBITDAC, adjusted EBITDAC per share, and adjusted revenue, in each case for our combined brokerage and risk management segments. The Committee believes that these measures align with the key components of our long-term strategy and drive our long-term stock price performance. Please see page 2725 in the body of this Proxy Statement for detailed information regarding these measures.adjusted EBITDAC as used by the Committee for executive compensation purposes. In the context of 20212023 compensation decisions, the Committee also considered our adjusted EBITDAC margin and organic revenue performance. For these measures, definitions and GAAP reconciliations are set forth below. The measures discussed below are not in accordance with, or are an alternative to, the GAAP information provided in this Proxy Statement. We believe that these presentations provide useful information to management, analysts and investors regarding financial and business trends relating to Gallagher’s results of operations and financial condition. Our industry peers may provide similar supplemental non-GAAP information related to adjusted EBITDAC margin and organic revenues, although they may not use the same or comparable terminology and may not make identical adjustments. For example, our organic revenue is calculated differently than some of our industry peers. The non-GAAP information we provide should be used in addition to, but not as a substitute for, the GAAP information provided in this Proxy Statement. Certain reclassifications have been made to the prior year amounts in order to conform them to the current year presentation. Adjusted EBITDAC Margin – adjusted EBITDAC margin is presented to improve the comparability of our results between periods by eliminating the impact of items that have a high degree of variability.
• EBITDAC – We define this measure as net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables. • Adjusted EBITDAC – We define this measure as EBITDAC adjusted to exclude net gains or losses on divestitures, acquisition integration costs, workforce and lease termination related charges, acquisition-related adjustments and the period-over-period impact of foreign currency translation, as applicable. The amounts excluded with respect to foreign currency translation are calculated by applying current year foreign exchange rates to the same periods in the prior year. Please note that “adjusted EBITDAC” as defined on page 2725 in the context of annual cash incentives and performance share unitsPSUs and as used throughout this proxy statement and the letter from our CEO is the same as this definition, except that it does not exclude acquisition integration costs and other acquisition-related adjustments. than de minimis amounts included therein related to severance costs. • Adjusted EBITDAC margin – We define this measure as adjusted EBITDAC divided by total adjusted revenues (for the brokerage segment) and total adjusted revenues before reimbursements (for the risk management segment). See table on the next page.page A-3. Organic Revenues – For the brokerage segment, organic change in base commission and fee revenues, supplemental revenues and contingent revenues exclude the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations and program repricing in each year presented. These revenues are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of Gallagher in both the current and prior periods. In addition, organic change in base commission and fee revenues, supplemental revenues and contingent revenues excludes the period-over-period impact of foreign currency translation.translation to improve the comparability of its results between periods. For the risk management segment, organic change in fee revenues excludes the first twelve months of fee revenues generated from acquisitions and the fee revenues related to divested operations disposed of in each year presented. In addition, change in organic growth excludes the period-over-period impact of foreign currency translation to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability or are due to the limited-time nature of these revenue sources.periods. These revenue items are excluded from organic revenues in order to determine a comparable, but non-GAAP, measurement of revenue growth that is associated with the revenue sources that are expected to continue in the current year and beyond.beyond, as well as eliminating the impact of the items that have a high degree of variability. We have historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of our brokerage and risk management segments. We also believe that using this non-GAAP measure allows readers of our financial statements to measure, analyze and compare the growth from our brokerage and risk management segments in a meaningful and consistent manner.
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A-1 | | 2022 PROXY STATEMENT
| | B-1
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EXHIBIT B: INFORMATION REGARDING NON-GAAP MEASURES
| Exhibit A: Information Regarding Non-GAAP Measures |
All figures are unaudited and in millions except percentages ADJUSTED REVENUE AND ADJUSTEDAdjusted Revenue and Adjusted EBITDAC MARGINMargin
| | | | | | | | | | | | | | | | ADJUSTED REVENUE | | 2021 | | 2020 | | 2023 | | 2022 | | | | | | | | | | | | | | | | | | | Brokerage – Revenue | | | | $5,967.5 | | | | | $5,167.1 | | | $ | 8,637.2 | | | | $ | 7,303.8 | | | | | | | | | | | | Net gains (losses) on divestitures | | | | (18.8 | ) | | | | 5.8 | | | | (9.6 | ) | | | | (12.1 | ) | | | | | | | | | | | Levelized foreign currency translation | | | | — | | | | | 110.1 | | | | | | | | (25.1 | ) | | | | | | | | | | | Brokerage – Adjusted Revenue | | | | $5,948.7 | | | | | $5,283.0 | | | $ | 8,627.6 | | | | $ | 7,266.6 | | | | | | | | | | | | Risk Management – Revenue | | | | $ 967.6 | | | | | $ 821.7 | | | | | | | | | | | Risk Management – Revenue before Reimbursements | | | $ | 1,287.6 | | | | $ | 1,092.6 | | | | | | | | | | | | Net gains (losses) on divestitures | | | | (0.1 | ) | | | | — | | | | (0.4 | ) | | | | (0.9 | ) | | | | | | | | | | | Levelized foreign currency translation | | | | — | | | | | 11.4 | | | | — | | | | | (4.9 | ) | | | | | | | | | | | Risk Management – Adjusted Revenue | | | | $ 967.5 | | | | | $ 833.1 | | | $ | 1,287.2 | | | | $ | 1,086.8 | | | | | | | | | | | | | | | | | | | | | Brokerage and Risk Management – Adjusted Revenue | | | | $6,916.2 | | | | | $6,116.1 | | | $ | 9,914.8 | | | | $ | 8,353.4 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | EBITDAC – Brokerage | | | 2023 | | 2022 | | | | | | | | | | | | | | | | | | | | | Net earnings | | | $ | 1,169.4 | | | | $ | 1,201.8 | | | | | | | | | | | | Provision for income taxes | | | | 401.6 | | | | | 394.7 | | | | | | | | | | | | Depreciation | | | | 124.4 | | | | | 103.6 | | | | | | | | | | | | Amortization | | | | 523.6 | | | | | 448.7 | | | | | | | | | | | | Change in estimated acquisition earnout payables | | | | 376.8 | | | | | 90.4 | | | | | | | | | | | | EBITDAC | | | $ | 2,595.8 | | | | $ | 2,239.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | EBITDAC – Risk Management | | | 2023 | | 2022 | | | | | | | | | | | | | | | | | | | Net earnings | | | $ | 154.0 | | | | $ | 115.8 | | | | | | | | | | | | Provision for income taxes | | | | 55.3 | | | | | 41.4 | | | | | | | | | | | | Depreciation | | | | 35.9 | | | | | 37.8 | | | | | | | | | | | | Amortization | | | | 7.7 | | | | | 6.2 | | | | | | | | | | | | Change in estimated acquisition earnout payables | | | | 0.5 | | | | | (7.4 | ) | | | | | | | | | | | EBITDAC | | | $ | 253.4 | | | | $ | 193.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | EBITDAC – Brokerage and Risk Management | | | 2023 | | 2022 | | | | | | | | | | | | | | | | | | | Net earnings | | | $ | 1,323.4 | | | | $ | 1,317.6 | | | | | | | | | | | | Provision for income taxes | | | | 456.9 | | | | | 436.1 | | | | | | | | | | | | Depreciation | | | | 160.3 | | | | | 141.4 | | | | | | | | | | | | Amortization | | | | 531.3 | | | | | 454.9 | | | | | | | | | | | | Change in estimated acquisition earnout payables | | | | 377.3 | | | | | 83.0 | | | | | | | | | | | | EBITDAC | | | $ | 2,849.2 | | | | $ | 2,433.0 | | | | | | | | | | | |
| | | | | | | | | | | EBITDAC – Brokerage | | 2021 | | 2020 | | | | Net earnings | | | | $1,016.6 | | | | | $ 866.0 | | Provision for income taxes | | | | 328.9 | | | | | 276.3 | | Depreciation | | | | 87.8 | | | | | 73.5 | | Amortization | | | | 407.6 | | | | | 411.3 | | Change in estimated acquisition earnout payables | | | | 116.3 | | | | | (29.7 | ) | | | | EBITDAC | | | | $1,957.2 | | | | | $1,597.4 | |
| | | | | | | | | | | EBITDAC – Risk Management | | 2021 | | 2020 | | | | Net earnings | | | | $ 89.5 | | | | | $ 66.9 | | Provision for income taxes | | | | 30.6 | | | | | 22.5 | | Depreciation | | | | 46.2 | | | | | 49.4 | | Amortization | | | | 7.5 | | | | | 6.0 | | Change in estimated acquisition estimated payables | | | | 3.3 | | | | | (3.2 | ) | | | | EBITDAC | | | | $177.1 | | | | | $141.6 | |
| | | | | | | | | | | EBITDAC – Brokerage and Risk Management | | 2021 | | 2020 | | | | Net earnings | | | | $1,106.1 | | | | | $ 932.9 | | Provision for income taxes | | | | 359.5 | | | | | 298.8 | | Depreciation | | | | 134.0 | | | | | 122.9 | | Amortization | | | | 415.1 | | | | | 417.3 | | Change in estimated acquisition estimated payables | | | | 119.6 | | | | | (32.9 | ) | | | | EBITDAC | | | | $2,134.3 | | | | | $1,739.0 | |
| Exhibit A: Information Regarding Non-GAAP Measures |
| | | | | | | | | | | | ADJUSTED EBITDAC | | | 2023 | | 2022 | | | | | | | | | | | | | | | | | | | | | Brokerage – EBITDAC | | | $ | 2,595.8 | | | | $ | 2,239.2 | | | | | | | | | | | | | Net gains (losses) on divestitures | | | | (9.6 | ) | | | | (12.1 | ) | | | | | | | | | | | | Acquisition integration | | | | 243.7 | | | | | 167.9 | | | Workforce and lease termination | | | | 63.4 | | | | | 48.9 | | | Acquisition related adjustments | | | | 69.3 | | | | | 46.8 | | | Levelized foreign currency translation | | | | — | | | | | (18 | ) | | | | | | | | | | | | Brokerage – Adjusted EBITDAC | | | $ | 2,962.6 | | | | $ | 2,472.5 | | | | | | | | | | | | | Risk Management – EBITDAC | | | $ | 253.4 | | | | $ | 193.8 | | | | | | | | | | | | | Net gains (losses) on divestitures | | | | (0.4 | ) | | | | (0.9 | ) | | | | | | | | | | | | Acquisition integration | | | | 1.0 | | | | | 6.4 | | | Workforce and lease termination | | | | 3.4 | | | | | 0.4 | | | Acquisition related adjustments | | | | 0.5 | | | | | 1.8 | | | Levelized foreign currency translation | | | | — | | | | | (0.9 | ) | | | | | | | | | | | | Risk Management – Adjusted EBITDAC | | | $ | 257.9 | | | | $ | 200.6 | | | | | | | | | | | | | Brokerage and Risk Management – Adjusted EBITDAC | | | $ | 3,220.5 | | | | $ | 2,673.1 | | | | | | | | | | | | | Brokerage and Risk Management – Adjusted Revenue | | | $ | 9,914.8 | | | | $ | 8,353.4 | | | | | | | | | | | | | Brokerage and Risk Management – Adjusted EBITDAC Margin | | | | 32.5 | % | | | | 32.0 | % | | | | | | | | | | | |
| | | | | | | | | | | | ADJUSTED EBITDAC (as defined for Annual Cash Incentives and PSUs) | | | 2023 | | 2022 | | | | | | | | | | | | | | | | | | | | | Brokerage – ADJUSTED EBITDAC | | | $ | 2,962.6 | | | | $ | 2,472.5 | | | | | | | | | | | | | Acquisition integration (other than de minimis amounts included therein related to severance costs) | | | | (241.5 | ) | | | | (167.7 | ) | | | | | | | | | | | | | | | | | | | | | | Levelized foreign currency translation | | | | 4.6 | | | | | 3.7 | | | | | | | | | | | | | Brokerage – Adjusted EBITDAC (as defined for Annual Cash Incentives and PSUs) | | | $ | 2,725.7 | | | | $ | 2,308.5 | | | | | | | | | | | | | Risk Management – ADJUSTED EBITDAC | | | $ | 257.9 | | | | $ | 200.6 | | | | | | | | | | | | | Acquisition integration (other than de minimis amounts included therein related to severance costs) | | | | (1.0 | ) | | | | (1.8 | ) | | | | | | | | | | | | Levelized foreign currency translation | | | | — | | | | | — | | | | | | | | | | | | | Risk Management – Adjusted EBITDAC (as defined for Annual Cash Incentives and PSUs) | | | $ | 256.9 | | | | $ | 198.8 | | | | | | | | | | | | | Brokerage and Risk Management – Adjusted EBITDAC (as defined for Annual Cash Incentives and PSUs) | | | $ | 2,982.6 | | | | $ | 2,507.3 | | | | | | | | | | | | |
| | | A-3 | |
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| Exhibit A: Information Regarding Non-GAAP Measures |
Organic Revenue Growth
| | | | | | | | | | | | Brokerage – Organic Revenue Growth | | | 2023 | | 2022 | | | | | | | | | | | Commissions and fees, as reported | | | $ | 7,750.0 | | | | $ | 6,664.3 | | | | | | | | | | | | | Less commission and fees from acquisitions | | | | (531.8 | ) | | | | — | | | | | | | | | | | | | Less divested operations | | | | — | | | | | (10.5 | ) | | | | | | | | | | | | Levelized foreign currency translation | | | | — | | | | | (21.8 | ) | | | | | | | | | | | | Organic base commissions and fees | | | $ | 7,218.2 | | | | $ | 6,632.0 | | | | | | | | | | | | | Supplemental revenues, as reported | | | $ | 314.2 | | | | $ | 284.7 | | | | | | | | | | | | | Less supplemental revenues from acquisitions | | | | (4.9 | ) | | | | — | | | | | | | | | | | | | Levelized foreign currency translation | | | | — | | | | | (0.4 | ) | | | | | | | | | | | | Organic supplemental revenues | | | $ | 309.3 | | | | $ | 284.3 | | | | | | | | | | | | | Contingent revenues, as reported | | | $ | 235.3 | | | | $ | 207.3 | | | | | | | | | | | | | Less contingent revenues from acquisitions | | | | (8.9 | ) | | | | — | | | | | | | | | | | | | Levelized foreign currency translation | | | | — | | | | | (1.0 | ) | | | | | | | | | | | | Organic contingent revenues | | | $ | 226.4 | | | | $ | 206.3 | | | | | | | | | | | | | Organic base commissions and fees, supplemental revenues and contingent revenues | | | $ | 7,753.9 | | | | $ | 7,122.6 | | | | | | | | | | | | | Organic change in base commissions and fees, supplemental revenues and contingent revenues | | | | 8.9 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Risk Management – Organic Revenue Growth | | | 2023 | | 2022 | | | | | | | | | | | Fees | | | $ | 1,246.1 | | | | $ | 1,075.8 | | | | | | | | | | | | | International performance bonus fees | | | | 2.2 | | | | | 15.0 | | | | | | | | | | | | | Fees as reported | | | $ | 1,259.7 | | | | $ | 1,090.8 | | | | | | | | | | | | | Less fees from acquisitions | | | | (5.5 | ) | | | | — | | | | | | | | | | | | | Less divested operations | | | | — | | | | | (3.2 | ) | | | | | | | | | | | | Levelized foreign currency translation | | | | — | | | | | (4.8 | ) | | | | | | | | | | | | Organic fees | | | $ | 1,254.2 | | | | $ | 1,082.8 | | | | | | | | | | | | | Organic change in fees | | | | 15.8 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Combined Brokerage and Risk Management – Organic Revenue Growth | | | 2023 | | 2022 | | | | | | | | | | | Combined organic revenue | | | $ | 9,008.1 | | | | $ | 8,205.4 | | | | | | | | | | | | | Organic change in revenue | | | | 9.8 | % | | | | | | | | | | | | | | | |
Exhibit B: Resources*
| | Annual Meeting |
| B-2
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2022 PROXY STATEMENT
| | |
EXHIBIT B: INFORMATION REGARDING NON-GAAP MEASURES
| | | | | | | | | | | ADJUSTED EBITDAC | | 2021 | | 2020 | | | | Brokerage – EBITDAC | | | | $1,957.2 | | | | | $1,597.4 | | Net gains (loss) on divestitures | | | | (18.8 | ) | | | | 5.8 | | Acquisition integration | | | | 31.7 | | | | | 25.1 | | Workforce and lease termination | | | | 20.6 | | | | | 43.9 | | Acquisition related adjustments | | | | 27.4 | | | | | 19.2 | | Levelized foreign currency translation | | | | — | | | | | 36.2 | | | | | Brokerage – Adjusted EBITDAC | | | | $2,018.1 | | | | | $1,727.6 | | | | | Risk Management – EBITDAC | | | | $ 177.1 | | | | | $ 141.6 | | Net gains (losses) on divestitures | | | | (0.1 | ) | | | | — | | Workforce and lease termination | | | | 7.1 | | | | | 7.9 | | Acquisition related adjustments | | | | 0.4 | | | | | — | | Levelized foreign currency translation | | | | — | | | | | 2.0 | | | | | Risk Management – Adjusted EBITDAC | | | | $ 184.5 | | | | | $ 151.5 | | | | | Brokerage and Risk Management – Adjusted EBITDAC | | | | $2,202.6 | | | | | $1,879.1 | | | | | Brokerage and Risk Management – Adjusted Revenue | | | | $6,916.2 | | | | | $6,116.1 | | | | | Brokerage and Risk Management – Adjusted EBITDAC Margin | | | | 31.8% | | | | | 30.7% | |
ORGANIC REVENUE GROWTH
| | | | | | | | | | | Brokerage – Organic Revenue Growth | | 2021 | | 2020 | Commissions and fees, as reported | | | | $5,429.2 | | | | | $4,728.8 | | Less commission and fees from acquisitions | | | | (255.9 | ) | | | | — | | Less divested operations | | | | — | | | | | (13.7 | ) | Levelized foreign currency translation | | | | — | | | | | 97.3 | | Organic base commissions and fees | | | | $5,173.3 | | | | | $4,812.4 | | | | | Supplemental revenues, as reported | | | | $ 248.7 | | | | | $ 221.9 | | Less supplemental revenues from acquisitions | | | | (3.1 | ) | | | | — | | Levelized foreign currency translation | | | | — | | | | | 5.5 | | Organic supplemental revenues | | | | $ 245.6 | | | | | $ 227.4 | | | | | Contingent revenues, as reported | | | | $ 188.0 | | | | | $ 147.0 | | Less contingent revenues from acquisitions | | | | (3.3 | ) | | | | — | | Levelized foreign currency translation | | | | — | | | | | 1.6 | | Organic contingent revenues | | | | $ 184.7 | | | | | $ 148.6 | | | | | Organic base commissions and fees, supplemental revenues and contingent revenues | | | | $5,603.6 | | | | | $5,188.4 | | | | | Organic change in base commissions and fees, supplemental revenues and contingent revenues | | | | 8.0% | | | | | | |
| | | | | | | | | | | Risk Management – Organic Revenue Growth | | 2021 | | 2020 | | | | Fees | | | | $954.0 | | | | | $815.3 | | International performance bonus fees | | | | 13.2 | | | | | 5.7 | | Fees as reported | | | | 967.2 | | | | | 821.0 | | Less fees from acquisitions | | | | (33.3 | ) | | | | — | | Levelized foreign currency translation | | | | — | | | | | 11.4 | | Organic fees | | | | $933.9 | | | | | $832.4 | | | | | Organic change in fees | | | | 12.2% | | | | | | |
| | | | | | | | | | | Combined Brokerage and Risk Management – Organic Revenue Growth | | 2021 | | 2020 | | | | Combined organic revenue | | | | $6,537.5 | | | | | $6,020.8 | | | | | Organic change in revenue | | | | 8.6% | | | | | | |
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Proxy Statement | | 2022 PROXY STATEMENT
| | B-3
|
Exhibit C: Resources*
| | | Annual Meeting
| | | | | Proxy Statement
| | www.ajg.com/ir > Financial Reports > 20222024 Proxy Statement | | |
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| Annual Report | | www.ajg.com/ir > Financial Reports > 20212023 Annual Report |
| | Board of Directors | | | |
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| Board of Directors | | www.ajg.com/ir > Corporate Governance > Board of Directors | | |
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| Board Committee Members | | www.ajg.com/ir > Corporate Governance > Board Committee Members | | Composition |
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| Audit Committee Charter | | www.ajg.com/ir > Corporate Governance > Audit Committee Charter | | |
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| Compensation Committee Charter | | www.ajg.com/ir > Corporate Governance > Compensation Committee Charter | | |
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| Nominating/Governance Committee Charter | | www.ajg.com/ir > Corporate Governance > Nominating/Governance Committee Charter | | |
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| Risk and Compliance Committee Charter | | www.ajg.com/ir > Corporate Governance > Risk and Compliance Committee Charter |
| | Governance Documents | | | |
| By-laws
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| By-Laws | www.ajg.com/ir > Corporate Governance > By-laws | | By-Laws |
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| Governance Guidelines | | www.ajg.com/ir > Corporate Governance > Governance Guidelines | | |
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| Global Standards of Business Conduct | | www.ajg.com/ir > Corporate Governance > Global Standards of Business Conduct |
| | Other Resources | | | |
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| The Gallagher Way | | www.ajg.com/about-us/the-gallagher-way/ | | | Sustainability Report
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| Impact Report | www.ajg.com/ir > ESG > SustainabilityImpact Report | | | Climate Disclosure Report
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| SASB Disclosures | www.ajg.com/ir > ESG> Climate Disclosure Report ESG > SASB Disclosures |
*
| The inclusion of our website address in this Proxy Statement does not include or incorporate by reference the information on our website, including the documents referenced above, into this Proxy Statement.
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* The inclusion of our website address in this Proxy Statement does not include or incorporate by reference the information on our website, including the documents referenced above, into this Proxy Statement.
| | | | |
B-1 | | 2022 PROXY STATEMENT
| | C-1
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GGallagher ARTHUR J. GALLAGHER & CO. 2850 GOLF ROAD ROLLING MEADOWS, IL 60008-4050 SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. Eastern Daylight Time on May 9, 20226, 2024 (other than with respect to shares held in The Arthur J. Gallagher & Co. Employees’Employees' 401(k) Savings and Thrift Plan). Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/AJG2022AJG2024 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. Eastern Daylight Time on May 9, 20226, 2024 (other than with respect to shares held in The Arthur J. Gallagher & Co. Employees’Employees' 401(k) Savings and Thrift Plan). Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. The Arthur J. Gallagher & Co. Employees’ 401(k) Savings and Thrift Plan Vote by 5:00 P.M. Eastern Daylight Time on May 5, 2022 for shares held in The Arthur J. Gallagher & Co. Employees’ 401(k) Savings and Thrift Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D72621-P66078 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY ARTHUR J. GALLAGHER & CO. Company Proposals The Board of Directors recommends you vote FOR each of the nominees listed in proposal 1 below: 1. Election of Directors For Against Abstain 1a. Sherry S. Barrat 1b. William L. Bax 1c. Teresa H. Clarke 1d. D. John Coldman 1e. J. Patrick Gallagher, Jr. 1f. David S. Johnson 1g. Kay W. McCurdy 1h. Christopher C. Miskel 1i. Ralph J. Nicoletti 1j. Norman L. Rosenthal The Board of Directors recommends you vote FORR proposals 2 3 and 4. For Against Abstain 2. Approval of the Arthur J. Gallagher & Co. 2022 Long-Term Incentive Plan, Including Approval of 13,500,000 Shares Authorized for Issuance Thereunder. 3. Ratification of the Appointment of Ernst & Young LLP as our Independent Auditor for the fiscal year ending December 31, 2022. 4.2024. For Against Abstain 0 0 0 1d. John Coldman O 0 3. Approval, on an Advisory Basis, of the Compensation of our Named Executive Officers. 0 0 0 1e. Pat Gallagher 0 0 1f. David Johnson 0 0 1g. Chris Miskel 0 0 1h. Ralph Nicoletti O 0 1i. Norman Rosenthal 0 0 0 Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice of 20222024 Annual Meeting and Proxy Statement and 20212023 Annual Report are available at www.materials.proxyvote.com/363576.www.proxyvote.com. We will be conducting our 20222024 Annual Meeting of Stockholders virtually at www.virtualshareholdermeeting.com/AJG2022. D72622-P66078AJG2024. V34947-P05189 ARTHUR J. GALLAGHER & CO. Annual Meeting of Stockholders May 10, 20227, 2024 9:00 AM CDT This proxy is solicited by the Board of Directors The undersigned hereby appoints J. Patrick (Pat) Gallagher, Jr. and Walter D. Bay, each of whom is an officer of Arthur J. Gallagher & Co., or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote all of the shares of Common Stock of ARTHUR J. GALLAGHER & CO. that the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 AM, CDT on May 10, 2022,7, 2024, virtually at www.virtualshareholdermeeting.com/AJG2022,AJG2024, and any adjournment or postponement thereof. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting of Stockholders or any adjournment or postponement thereof (including, if applicable, on any matter which the Board of Directors did not know would be presented at the Annual Meeting of Stockholders by a reasonable time before the proxy solicitation was made or for the election of a person to the Board of Directors if any nominee named in Proposal 1 becomes unable to serve or for good cause will not serve). This proxy, when properly executed, will be voted in the manner directed herein. If the proxy is properly executed but no such direction is made, this proxy will be voted in accordance with the Board of Directors’Directors' recommendations. For participants in The Arthur J. Gallagher & Co. Employees’Employees' 401(k) Savings and Thrift Plan, if you do not provide voting instructions, the trustee will vote the shares that are deemed to be in the account in The Arthur J. Gallagher & Co. Employees’Employees' 401(k) Savings and Thrift Plan in the same proportion as The Arthur J. Gallagher & Co. Employees’Employees' 401(k) Savings and Thrift Plan shares of other participants for which the trustee has received proper voting instructions. The votes by The Arthur J. Gallagher & Co. Employees’Employees' 401(k) Savings and Thrift Plan participants must be received no later than by 5:00 P.M. Eastern Daylight Time on May 5, 2022.2, 2024. Continued and to be signed on reverse side
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