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NOTICE OF 2016 ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the 2016 Annual Meeting of Shareholders (“Annual Meeting”) of Hecla Mining Company (“we,” “our,” “us,” “Hecla,” or the “Company”) will be held in the Eric A. Johnston Auditorium at the Northwest Museum of Arts & Culture, located at 2316 W. 1st Avenue, Spokane, Washington, on Thursday, May 19, 2016, at 10:00 a.m., Pacific Daylight Time, for the following purposes:
The Board of Directors (“Board”) has fixed the close of business on March 23, 2016 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and at any adjournment or postponement thereof (“Record Date”).
On or about April 4, 2016, we began mailing our shareholders of record as of the Record Date, either a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access this Proxy Statement and our 2015 Annual Report (“Proxy Materials”) online, or a printed copy of these Proxy Materials.
By Order of the Board of Directors
Michael B. WhiteCorporate Secretary
April 4, 2016
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PROXY STATEMENTANNUAL MEETING OF SHAREHOLDERSMAY 19, 2016
A MESSAGE FROM YOUROUR
INDEPENDENT CHAIRMAN
The Board shareholders. Ted Crumley, Chairman |
Dear Fellow Shareholder:
It is the responsibility of the Board to maintain sound corporate governance practices and to oversee the Company’sHecla’s strategic and operational activities in a manner that protects and creates long-term shareholder value. YourThe Board is committed to fulfilling these duties and to keeping the interests of our shareholders and employees at the center of our priorities.
Corporate Strategy
Hecla’s Board operates under the premise that we are elected by you, the shareholders, to oversee the long-term success of our Company. Our Board engages in active discussion and oversight of the strategy behind Hecla’s actions, including the process of capturing opportunities and leading with innovation while balancing possible risks with returns for our shareholders. The Company has made progress seeking opportunities in areas such as autonomous machines, sustainability, and environmental stewardship. We oversee and evaluate a very capable management team that is focused on the growth of the Company.
We are also committedShareholder Outreach
As always, a priority for this Board is listening to the Company’s strategic approachviews of our shareholders and considering them as we make decisions in the boardroom. We accomplish this through ongoing outreach and engagement with our shareholders. Due to creatingour shareholder outreach program over the years, in 2017, we achieved a 96% favorable vote from our shareholders on our executive compensation program. In the fall of 2017, we engaged with shareholders on a variety of topics, including governance and environmental and social issues. Based on the insights of our shareholders, we have enhanced disclosures regarding our practices with respect to Board oversight, director orientation and education, as well as our sustainability efforts and giving back to the communities where we operate.
Leadership in Corporate Responsibility and Sustainability
The Board believes Hecla’s focus on corporate responsibility creates value - consistent, long-lived production that increases and improves over time. This means we need long-life assets to profit from higher metals prices, strong geological understanding to increase reserves, and operating expertise to reduce costs and lower risks.
As the Company weathers the current decline of metals prices, our strong financial position should enable us to continue to growfor the Company and we are confident that we are well positionedour shareholders; identifying ways for technology and expertise to create long-term shareholder value.benefit the environment and society, whilealso helping mitigate risks, reduce costs, protecting employees, and identifying new opportunities in innovation. Our approach is built on a strong foundation of ethics, governance, and transparency, and a commitment to driving improvements in environmental sustainability and social impact.
Governance
The Board, directly and through its Corporate Governance and Directors’Directors Nominating Committee (“Governance Committee”), seeks to maintain corporate governance practices that are aligned with our strategic, financial and operational goals. We do this by conducting processes at least annually to evaluate, optimize and update governance and practice guidelines.
Shareholder Outreach
The Recently, the Board places great value on the feedback it receives fromupdated our currentCode of Business Conduct and potential shareholders, particularly with respectEthics to our executive compensation program,include issues such as we believe in maintaining a high level of transparency in that area. One of the primary sources of feedback is through our shareholder outreach efforts pursuant to which we elicit the viewpoints of large shareholdersharassment, computer and certain proxy advisory firms. In part because of the feedback we have received through our shareholder outreach efforts, we have implemented certain changes in our executive compensation program. We believe those changes helped us obtain a favorable vote of 83% on our say-on-pay proposal in 2015, which was 30% more favorable than our 2013 say-on-pay vote.
Our shareholder outreach program also seeks to identify corporate governance matters that are of concern to our shareholders, as well as the major proxy advisory firms.
During our shareholder outreach in 2015, two corporate governance issues were discussed with our shareholders: (i) the ability of shareholders to call special meetings,information systems and (ii) the 80% supermajority voting requirement on certain amendments to our Certificate of Incorporation and Bylaws impacting special meetings. At our 2014 Annual Meeting, we asked shareholders to vote on a proposal to amend our Certificate of Incorporation and Bylaws to permit shareholders to call special meetings under certain circumstances. Under our Certificate of Incorporation, this change required the approval by holders of 80% of our outstanding shares of common stock, yet we only received approval from 41%. We are again including this proposal on the ballot for the Annual Meeting. In addition, we are including another proposal to amend our Certificate of Incorporation and Bylaws to change the required approval of amendments to the Certificate of Incorporation and Bylaws relating to the calling of special meetings from 80% to a two-thirds voting standard.social media, among others.
Board Composition and Refreshment
In December 2015, we were saddened to announce the passing of John H. Bowles, a director of the Company. John served on the Board of Hecla for over nine years following his retirement as a partner at PricewaterhouseCoopers LLP. He chaired the Audit Committee, and was also a member of the Executive Committee and Health, Safety, Environmental and Technical Committee. He leaves a long, distinguished legacy in our industry and as a member of our Board for which we are eternally grateful.
Shareholders continue to express a genuine and legitimate interest in finding effective ways to ensure thatboardsthat
2018 Proxy Statementi
boards of directors are comprised of the right people, with the right skills and qualifications, to effectively represent their interests. The issue of Board composition and refreshment is a priority of our shareholders, and we agree that refreshing the Board with new perspectives and new ideas is critical to a well-functioningforward-looking and strategic Board. Accordingly, we have been actively pursuing new members.
In seeking newAt the same time, it is also important to benefit from the valuable experience and familiarity that longer-serving directors bring to the boardroom. The Board is also very conscious of the benefits of diversity on the Board. Ensuring diverse perspectives, including a mix of skills, experience and backgrounds, is key toeffectively representing the long-term interests of shareholders. Doing so is a top priority of the Board. In the last two years, three new directors have been appointed to our Board. As a result, the average tenure for our directors has been reduced and our Board now includes a female director.
We have soughtremain committed to ensuring the Board is composed of a highly capable and diverse group of directors, well-equipped to oversee the success of the business and effectively represent the interests of our shareholders. As some of our Board members move closer to reaching the mandatory retirementage, we will continue to seek qualified candidates that wouldwill further enhance our Board’s diversity.
Your participation and your votes are important to the future of our Company. We encourage you to vote your shares in accordance with the Board’s recommendations. Details of the items to be voted upon are provided throughout this Proxy Statement.
Ted Crumley
Chairman
iiwww.hecla-mining.com
A MESSAGE FROM THEOUR PRESIDENT
AND
CHIEF EXECUTIVE OFFICER
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We strive to be the | ||
Phillips S. Baker, Jr., President and Chief Executive Officer | ||
Dear Fellow Shareholder:
On behalf of your entire Board and the management team, I deeply appreciate your support and faith in our Company. I also want to express my gratitude to our Board for its guidance and support as we execute our strategy, which we expect to yield long-term shareholder value. To all our employees, please accept my appreciation for your readiness to adapt, your responsiveness, creativity and willingness to work together towards attaining that success.
Our Corporate Responsibility
At Hecla, the foundation of our Integrated Corporate Responsibility Policy (“ICR”) begins with the belief that a safe minecorporate responsibility is a productive mine – each day, each shift, home safely. We will strive to guard thebuilt on three key areas: health and safety programs, environmental stewardship, and community engagement.This triad is how we manage our business. It’s who we are and how we will continue to build upon our accomplishments. Our belief in corporate responsibility allows us to establish long-term relationships and partnerships with the communities in which we operate. We believe this is one of Hecla’s attractions for our committed and talented workforce.
Our goal is to continually improve our health and safety performance, so that at the end of each shift our workers go home safely – every day. In 2016, Hecla was recognized by the NationalMining Association (NMA) as the first hardrock mining company to receive an independent certification under the NMA CORESafety system. We also strive to be better environmental stewards by using advanced mining technologies to minimize our impact on the landscape.
Our philosophy of continuous improvement also applies to technological innovation. New technology, much of it adopted from other industries, is already reshaping the way underground mines operate. Hecla is a leader among companies our size at adopting these new technologies to increase productivity, improve safety, and reduce our environmental footprint. For example, improvements to work environments in our mines result from battery-operated loaders and trucks, which are now available for underground work. These vehicles produce no diesel particulates, reduce heat output, and generate significantly lower levels of noise.
Looking forward, I see opportunities to reduce our water use and energy intensity demand. Our nation will likely continue to deploy alternative energy production from wind and solar power sources. The minerals we produce – silver and gold, along with our prospective move into copper production – are key supply-chainingredients for alternative energy systems, and future demand growth is promising.
Another part of our employees and the community. Second, we will be responsible environmental stewards and strive to minimize environmental effects during exploration, development and operations, and then reclaim our projects to productive post-mining land uses. Third, we believe that by being responsive to community needs, the Company builds trust and relationships that foster our social license to operate. This encompasses taking a mutually-beneficial approach to issues affecting the community, treating others with respect, and engaging in open and honest communication. Each of these aspectscorporate responsibility is fully integrated into our business planning as they are considered key to our core business strategy.
Our Strategy and 2015 Accomplishments
Our simple strategy is to explore, develop and operate properties that have consistent, long-lived production that grows and whose margins improve over time.
Despite lower metals prices in 2015, we finished the year strongly,creating partnerships with the most silverlocal communities in which we operate. One result of this community engagement approach is the Hecla Charitable Foundation. Created in 2007 to ensure consistency in corporate philanthropic giving, the Hecla Charitable Foundation has provided several million dollars in support of youth, education, health services, and silver equivalent productioncommunity infrastructure projects in our history. The Company also, for the 10th consecutive year, grew silver reserves to the most in our history, despite using lower price assumptions. We ended the year with $155 million of cash on the balance sheet, which was consistent with our expectations and using our balance sheet strength to invest in expanding mine life and increasing production.communities where we do business.
In 2015, our key achievements included the following:
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Into the Future
2016 marks Hecla’s 125th anniversary. We believe our strategy and accomplishments have provided our shareholders with substantial value, and will give shareholders valuecontinue to do so in all price environments, both compared to peers and when metals prices increase, and for what we hope is another 125 years.the future.
We sincerely hope you will be able to attend and participate in our Annual Meeting. We welcome the opportunity to meet with many of you and give you a firsthand report on our progress, as well as express our appreciation for your confidence and support.
Phillips S. Baker, Jr.
President and Chief Executive Officer
2018 Proxy Statementiii
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 24, 2018
ivwww.hecla-mining.com
2018 Proxy Statementv
viwww.hecla-mining.com
NOTICE OF 2018 ANNUAL MEETING
OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the 2018 Annual Meeting of Shareholders (“Annual Meeting”) of Hecla Mining Company (“we,” “our,” “us,” “Hecla,” or the “Company”) will be held on Thursday, May 24, 2018, at 10:00 a.m., Eastern Daylight Time, at the offices of Lavery, de Billy, L.L.P., located at 1 Place Ville Marie, Suite 4000, Montreal, Quebec, Canada, for the following purposes:
1. | Elect three nominees to the Board of Directors, to serve for a three-year term or until their respective successors are elected; |
2. | Ratify the Audit Committee’s appointment of BDO USA, LLP as our independent registered public accounting firm for 2018; |
3. | Approve, on an advisory basis, the compensation of our named executive officers; |
4. | Approve amendments to our Certificate of Incorporation and Bylaws to remove certain 80% supermajority voting provisions; |
5. | Approve amendments to our Certificate of Incorporation and Bylaws to permit shareholders to call special meetings of shareholders under certain circumstances; |
6. | To vote on a shareholder proposal regarding declassification of our Board of Directors; and |
7. | Transact such other business as may properly come before the meeting. |
The Board of Directors (“Board”) has fixed the close of business on March 28, 2018, as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and at any adjournment or postponement thereof (“Record Date”). A list of shareholders eligible to vote at the meeting will be available for examination by any shareholder for any purpose relevant to the meeting during ordinary business hours for at least 10 days prior to May 24, 2018, at Hecla’s corporate offices, located at 6500 N. Mineral Dr., Suite 200, Coeur d’Alene, Idaho, and at the offices of Lavery, de Billy, L.L.P., located at 1 Place Ville Marie, Suite 4000, Montreal, Quebec, Canada. The list will also be available at the Annual Meeting for examination by any shareholders of record present at the Annual Meeting.
On or about April 9, 2018, we began mailing to our shareholders of record as of the Record Date, either a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access this Proxy Statement and our 2017 Annual Report (“Proxy Materials”) online, or a printed copy of these Proxy Materials.
Driving directions to the offices of Lavery, de Billy can be found in the back of this document.
By Order of the Board of Directors
Michael B. White
Corporate Secretary
April 9, 2018
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on |
2018 Proxy Statementvii
PROXY STATEMENT SUMMARY |
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all Only record or beneficial owners of Hecla’s common stock as of the Record Date, or a valid proxy or representative of such a shareholder, or an invited guest of management, may attend the Annual Meeting in person. Any shareholder, proxy or representative who wishes to attend the Annual Meeting must present the documentation described under “General Information about the Meeting – Rules for Attending the Annual Meeting” on page _____.of the information that you should consider and you should read the entire Proxy Statement before voting. For more complete information regarding the Company’s 2017 performance, please review our Annual Report on Form 10-K.Proposals Board Vote
RecommendationPage Reference For
More InformationProposal 1 – Election of Three Class II Directors FOReach Director Nominee Proposal 2 – Advisory Vote and Ratification of BDO USA, LLP as our Independent Registered Public Accounting Firm for 2018 FOR Proposal 3 – Advisory Vote on Executive Compensation FOR Proposal 4 – Approval of Amendments to our Certificate of Incorporation and Bylaws to Remove Certain 80% Supermajority Voting Provisions FOR Proposal 5 – Approval of Amendments to our Certificate of Incorporation and Bylaws to Permit Shareholders to Call Special Meetings of Shareholders Under Certain Circumstances FOR Proposal 6 – Shareholder Proposal to Declassify our Board of Directors No Recommendation
Table of Directors (page 10)Contents
PROXY STATEMENT SUMMARY |
Our Board is currently composed of eight members divided into three classes, with each class serving a term of three years. In May 2017, our director, Dr. Anthony P. Taylor, reached the mandatory retirement age of 75 and did not stand for re-election at the Annual Meeting. The size of the Board was reduced to eight at the 2017 Annual Meeting.
The Board and the Corporate Governance and Directors’ Nominating Committee believe that the three director nominees (Crumley, Rogers(Nethercutt, Ralbovsky and Stanley)Boggs) possess the necessary qualifications to provide effective oversight of our business and quality advice and counsel to the Company’s management.
Director Nominees Recommended byThe following table summarizes important information about each director nominee standing for re-election to the Board of Directorsfor a three-year term expiring in 2021.
Name | Age | Director Since | Experience/Qualification | Independent (Yes/No) | Committee Memberships | Other Current Public Directorships | ||||||||
Ted Crumley Board Chairman | 71 | 1995 | Former Executive Vice President and Chief Financial Officer of OfficeMax Incorporated | Yes | EC CC | None | ||||||||
Terry V. Rogers | 69 | 2007 | Former Senior Vice President and Chief Operating Officer of Cameco Corporation | Yes | HSET (Chair) AC CC EC | Centerra Gold Inc. | ||||||||
Charles B. Stanley | 57 | 2007 | Chief Executive Officer, President and Chairman of the Board of QEP Resources, Inc. | Yes | AC (Chair) HSET CG&DNC | QEP Resources, Inc. | ||||||||
Continuing Members of the Board | ||||||||||||||
Name | Age | Director Since | Experience/Qualification | Independent (Yes/No) | Committee Memberships | Other Current Public Directorships | ||||||||
Term Ending at the 2017 Annual Meeting | ||||||||||||||
Phillips S. Baker, Jr. | 56 | 2001 | President and Chief Executive Officer of Hecla Mining Company | No | EC (Chair) | QEP Resources, Inc. | ||||||||
Dr. Anthony P. Taylor | 74 | 2002 | President, Chief Executive Officer and Director of Selex Resources Ltd. | Yes | CG&DNC (Chair) HSET CC | None | ||||||||
George R. Johnson | 67 | 2016 | Former Senior Vice President of Operations of B2Gold Corporation | Yes | AC HSET | None | ||||||||
Term Ending at the 2018 Annual Meeting | ||||||||||||||
George R. Nethercutt, Jr. | 71 | 2005 | Chairman of The George Nethercutt Foundation and Of Counsel for Lee & Hayes PLLC | Yes | CC (Chair) CG&DNC | ARCADIS Corporation | ||||||||
Stephen F. Ralbovsky | 62 | 2016 | Former Partner with PricewaterhouseCoopers LLP | Yes | AC CG&DNC | None |
EC: Executive CommitteeAC: Audit CommitteeCC: Compensation CommitteeCG&DNC: Corporate Governance and Directors’ Nominating CommitteeHSET: Health, Safety, Environmental and Technical Committee
George R. Nethercutt, Jr. Director since 2005 Chairman of the Corporate Governance and Directors Nominating Committee | ●Public company board service ●Corporate governance ●Industry and mining experience ●International business experience ●Leadership ●Legal and compliance ●Risk management | |||
Stephen F. Ralbovsky(age 64) Director since 2016 Founder and Principal of Wolf Sky Consulting LLC Chairman of the Audit Committee | ●Audit Committee financial expert ●Corporate governance ●Finance ●Industry and mining experience ●Industry association participation ●International business ●Leadership ●Legal and compliance ●Reputation in the industry ●Risk management | |||
Catherine “Cassie” J. Boggs(age 63) Director since 2017 General Counsel at Resource Capital Funds | ●Corporate governance ●Finance ●Industry and mining ●Industry association participation ●International business ●Leadership ●Legal and compliance ●Reputation in the industry ●Risk management |
PROXY STATEMENT SUMMARY |
Our Certificate of Incorporation currently requires the approval of 80% of shares outstanding in order to make certain amendments to our Certificate of Incorporation and Bylaws affecting the ability to call special meetings of shareholders. This provision would be revised downward to a two-thirds vote requirement. If approved, the Companyintends to take the remaining steps required to implement the proposed amendments.
Proposal 3 – Approval of Amendments to the Company’s Certificate of Incorporation and Bylaws to Permit Shareholders to Call Special Meetings of Shareholders Under Certain Circumstances (page 29)
We are seeking the approval of our shareholders to amend our Certificate of Incorporation and Bylaws to add a right permitting shareholders who have held at least a 25% “net long position” in our outstanding common stock for at least 120 days to call special meetings of shareholders, subject to the conditions set forth in our Bylaws. Establishing a 25% “net long position” threshold for the right to call a special meeting would ensure that matters proposedfor consideration have significant support among our shareholders. If approved, the Company intends to take the remaining steps required to implement the proposed amendments.
Proposal 4 – Ratification of the Appointment of BDO USA, LLP as the Company’s Independent Registered Public Accounting Firm (page 31)
The Audit Committee and the Board believe that the continued retention of BDO USA, LLP to serve as the independent registered public accounting firm for the calendar year ending December 31, 2016, is in the best interests of the Company and its shareholders. As a matter of good corporate governance, shareholders are beingasked to ratify the Audit Committee’s selection of the independent auditor.
Proposal 5 – Approval of Named Executive Officer Compensation (page 77)
The Company seeks a non-binding advisory vote from its shareholders to approve the compensation of its named executive officers (“NEOs”) as described in theCompensation Discussion and Analysis section beginning on page 34 and the compensation tables beginning on page 62. The Board values shareholders’ opinions and the Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions.
We are committed to good corporate governance practices and believe that Proposals 24 and 35 are in the best interests of our shareholders. We believe that if passed they would enhance Board and management accountability and help build public trust in the Company. In addition to Proposals 2Proposals4 and 35 described beginning on pages 26___ and 29,____, respectively, theCorporate Governance and Related Matterssection beginning on page 18____ further describes our current governance framework, which includes the following highlights:
Shareholder Rights
Policy | Directors who receive more “Against” votes than “For” votes must tender their resignation to the Board for consideration. | |
No Poison Pill | We do not have a shareholder rights plan (commonly referred to as a “poison pill”). | |
Majority Voting for Director Elections | Directors are elected by a majority of |
Board Structure
Governance Policies | Our Corporate Governance Guidelines provide shareholders with information regarding the best practice principles of our corporate governance program and Board framework. | |
Board Refreshment and Tenure | One long-tenured director retired in 2017; we added two new directors in 2016, and one new director in 2017, thereby reducing the average tenure of the Board. | |
87% Independent | Seven of eight directors are independent, | |
of the Board | The positions of CEO and Chairman of the Board are held by separate persons. The Board believes this structure is optimal for the Company at this time because it allows the CEO to focus on leading the Company’s business and operations, and the Chairman to focus on broader strategies and leading the activities of the Board. | |
Sessions of Independent Directors | Executive sessions of | |
With the exception of our Executive Committee, our Board committees have written charters that clearly establish their respective roles and responsibilities, and are comprised exclusively of independent directors. Committee composition and charters are reviewed annually by our Board. | ||
Mandatory Retirement | We have a mandatory director retirement age of 75. | |
Annual Performance Evaluations | The Governance Committee oversees an annual performance evaluation of our Board, while the Committees perform their own self-evaluations on an annual basis. | |
Access to Management and Experts | Our Board and | |
The Compensation Committee and/or our full Board reviews potential CEO and |
PROXY STATEMENT SUMMARY |
Stock Ownership Guidelines | We have stockownership guidelines for our executive officers and our directors. | ||
Vote | Our shareholders have the opportunity annually to cast an advisory vote on our executive compensation. | ||
At-Risk, Performance- Based Compensation | 89.1% of CEO and 77.3% of the other NEO’s pay is at-risk.1Over 67.7% of total compensation for the CEO is performance-based and 57.1% of total compensation for the other NEOs is performance-based. | ||
Stock Awards | We grant restricted stock units to retain our senior executives and align their interests with long-term interests of our shareholders. The restricted stock units vest annually in equal amounts over a three-year period. | ||
Change in Control Agreements | Our change in control agreements are double-trigger and contain no excise tax gross-up provision. | ||
Insider Trading Policy | |||
Our Insider Trading Policy prohibits all directors, executive officers and | |||
pledging policies | Our Insider Trading Policy provides that directors and | ||
Clawback Policy | Each of the Company’s incentive plans (Annual Incentive Plan, Long-term Incentive Plan, Key Employee Deferred Compensation Plan, and 2010 Stock Incentive Plan) have clawback provisions. |
1 | Pay at-risk refers to |
Over the last fewseveral years we have undertaken significant shareholder outreach efforts in order to elicit and understand the concerns of our shareholders. In advance of our 2015 Annual Meeting, a management team (excluding NEOs) held one-on-one discussions with shareholders holding over 15% of our common stock and obtained constructive feedback on our executive compensation program. The Compensation Committee, with assistance from management and its compensation consultant, considered the opinions and specific requests expressed during these meetings, as well as the analysis provided by proxy advisory firms. After implementing certain changes in 2014 and 2015 to our 2015executive compensation program, our 2016 say-on-pay vote received 83%81% support, and our 2017 say-on-pay vote received 96% support. The Compensation Committee believes the changes made in 2014 and 2015, and the Company’s continued shareholder outreach, have impacted the vote because they werethe Company has remained responsive to the feedback from investors and proxy advisory firms, and enhanced the performance orientation ofdisclosures on our executive compensation program. The current frequency of shareholder advisory votes on executive compensation is every year.
Once again, in advance of our 20162018 Annual Meeting, we engaged with our shareholders and others to seek their feedback. Our management team (excluding NEOs) againWe held one-on-one discussions with shareholders holding over 10%26 million shares of our common stock, as well as one-on-one discussionsa discussion with twoone of the major proxy advisory firms. The response was overwhelmingly supportive of the changes we made to our executive compensation program, in 2014 and 2015. The results of this engagement andcomplimentary on our disclosures about the Compensation Committee’s ongoing efforts to ensure a strong alignment between executive pay and Company performance, led the committee to make no substantivechanges to its executive compensation program. However, in December 2015, due to budget reductions for 2016, our Chief Executive Officer’s (“CEO”) base salary was reduced by 20%, and base salary for all other NEO’s was reduced by 10% effective through all of calendar year 2016. In addition, our Board’s annual cash payments were reduced by 10% through all of calendar year 2016.
In addition to seeking input on our compensation practices, our shareholder outreach program seeks to identify corporate governance matters that are of concern primarily to our shareholders, but also to the major proxy advisory firms.
During our shareholder outreach in 2014, 2015 twoand 2016, three corporate governance issues were discussed with our shareholders: (i) the ability of shareholders to call special meetings, and (ii) the 80% supermajority voting requirement to amend provisions in our Certificate of Incorporation and Bylaws impacting special meetings. meetings, and (iii) the absence of a director resignation policy.
At our 2014 Annual Meeting,Meetings held in 2015, 2016 and 2017, we asked shareholders to vote on a proposal to amend our Certificate of Incorporation and Bylaws to permit shareholders to call special meetings under certain circumstances. Under our Certificate of Incorporation, this change required the approval by holders of 80% of our outstanding shares of common stock, yet we only received approval from 41%. We are again submitting this proposal at this year’s Annual Meeting., 47% and 55%, respectively. In addition, in 2016 and 2017, we are addingadded another proposal to amend our Certificate of Incorporation and Bylaws to change the required approval of certain amendments to the Certificate of Incorporation and Bylawsthose documents relating to the ability to call a special meeting from 80% to a two-thirds voting standard. This change also required the approval by holders of 80% of our outstanding shares of common stock, and we only received approval from 46% and 54%, respectively. In a continued effort to show our support of shareholder feedback, we are again adding these two proposals to the ballot for shareholders to approve at the 2018 Annual Shareholder Meeting.
PROXY STATEMENT SUMMARY |
During our shareholder outreach in the fall of 2017, we were asked to include more disclosure in our Proxy Statement under areas such as risk management, board quality/refreshment, and social responsibility/ESG (environment, social and governance criteria). As requested, we have undertaken to provide more disclosure on these issues throughout this Proxy Statement.
Key Compensation Actions Taken in 2015 and 20162017
Below is a brief summary of actions taken by the Compensation Committee in 2015 and 2016.2017. The compensation of our NEOsnamed executive officers for 20152017 is more fully described in theCompensation Discussion and Analysissection of this Proxy Statement, starting on page 34____ and in the compensation tables starting on page 62._____.
Adoption of Clawback Provisions in our IncentiveAmendments to Compensation Plans (page 53). In February 2013,2017, we made amendments to two of our incentive plans, and another amendment was made to how unvested restricted stock units are treated at the time of retirement.
Annual Incentive Plan | Amended the Annual Incentive Plan to include a provision that in the event a plan participant’s employment with the Company terminates before the payment date, the participant will not be eligible to receive an Annual Incentive Plan award. | |
Long-term Incentive Plan | Amended the Long-term Incentive Plan to include a provision that in the event a plan participant’s employment with the Company terminates for any reason before the end of a performance cycle other than due to death, disability, retirement or involuntary separation from service without cause, the participant will not be eligible to receive a Long-term Incentive Plan award for such performance cycle. Also, if a participant has an involuntary separation from service for cause after the end of the performance cycle and before the award payment date, the participant will not be eligible to receive any award. Further, if participants retire from the Company, the participants will only be eligible to receive their Long-term Incentive Plan award that otherwise becomes payable if they are at least age: (i) 60 and have 15 or more years of service with the Company; (ii) 65 and have 7 or more years of service with the Company; or (iii) 68. If the participant meets these age and years of service requirements, their prorated portion for outstanding plan periods will be paid after the completion of those plan periods. | |
Restricted Stock Unit Awards | Amended the vesting schedule for restricted stock units in the event of retirement. Employees who retire before their restricted stock units have vested must meet one of the following requirements in order for their restricted stock units to continue to vest based on the applicable vesting schedule: the employee must at least be age: (i) 60 and have 15 or more years of service with the Company; (ii) 65 and have 7 or more years of service with the Company; or (iii) 68. |
CEO Compensation. In June 2017, the Compensation Committee adopted a clawback policyreviewed the Company’s peers and survey data on CEO compensation and found Mr. Baker’s targeted total direct compensation to be below the 50thpercentile. The committee determined that increasing Mr. Baker’s base salary by 5% and increasing his Long-term Incentive Plan units and performance-based shares would bring his targeted total direct compensation in alignment with respectthe Company’s peers. Specifically, the committee approved the following adjustments to incentive awardsMr. Baker’s compensation: (i) base salary increased from $605,000 to executive officers.$635,000, (ii) Long-term Incentive Plan units increased from 9,500 units to 11,400 units (starting with the 2017-2019 Long-term Incentive Plan period), and (iii) grant date value of performance-based shares increased from $500,000 to $600,000.
PROXY STATEMENT SUMMARY |
Reduction in Base Salariesnot increase base salaries for the CEO and other NEOs, (page 55). Effective January 1, 2016, the Compensation Committee approved base salary reductions for our NEOs. Our CEO’s base salary was reduced by 20%,but to increase long-term incentive grant levels and all other NEOs’ base salaries were reduced by 10%.add performance-based share grants as follows:
NEO | Prior Long-term Incentive Plan Units1 (#) | Current Long-term Incentive Plan Units2 (#) | Performance-based Shares3 ($) | |||
Lawrence P. Radford | 4,200 | 5,000 | 120,000 | |||
Lindsay A. Hall | 4,200 | 5,000 | 120,000 | |||
Dean W.A. McDonald | 3,000 | 3,600 | 80,000 | |||
David C. Sienko | 2,400 | 3,000 | 50,000 |
1 | For Long-term Incentive Plan period 2016-2018. |
2 | For Long-term Incentive Plan period 2017-2019. |
3 | Based on a 3-year TSR from January 1, 2017 through December 31, 2019. See further disclosure onPerformance-based Shareson page _____, and in theGrants of Plan-Based Awards for 2017table on page _____. |
Reduction in Annual Cash Compensation for our Board (page 17). The Compensation Committee recommended and the Board approved a 10% reduction in our Board’s annual cash compensation in 2016.
Annual Incentive Plan (“AIP”) (page 44). For 2015,2017 was a strong year for Hecla, even with our Lucky Friday Mine’s unionized workforce on strike. Hecla achieved positive results for 2017, and set the quantitative corporate performance factors (generally weightedCompany up for future performance. Silver production achieved 12.5 million ounces (the second highest in the aggregateCompany’s history) and gold production achieved over 233,000 ounces. When lead and zinc production are included, the overall silver equivalent production achieved 40.9 million ounces, the second highest in the Company’s history. We also had significant advances in innovation, with the 40-ton autonomous truck beginning to operate at 50%Casa Berardi, and the ventilation on demand testing beginning at Greens Creek,both of which should help lower costs going forward. We had record high reserves for silver, gold and lead, and despite the award) were divided proportionally into three factors: production (20%), adjusted EBITDA (20%) and cash (10%). Lucky Friday Mine being closed, we still added $20 million to our balance sheet. Importantly, we achieved these results with a 19% reduction in the All Injury Frequency Rate.
For 2015, based on the assessment2017, Company performance for AIP purposes was determined by the Compensation Committee to be 108% of target. This result was comprised of 38% for quantitative measures (listed below); 30% for qualitative factors; and 40% was discretionary.
2017 AIP Quantitative Measure Results | Target | Actual | Performance Value | |||
Production (Silver equivalent ounces) | 46.5 mm ozs. | 40.9 mm ozs. | 0% | |||
EBITDA Less Capital1 | $100 mm | $108.7 mm | 26% | |||
Work-related injury reduction | 2.91 (15% reduction from 2016 rate) | 2.76 (19% reduction from 2016 rate) | 12% | |||
Total Quantitative | 38% |
The Compensation Committee approved payout of the Company’s overall performance on both qualitative and quantitative measures under the AIP the committee determined Company performanceawards to be at 115% of target.100% in cash. The 115% was measured by quantitative achievement at 50%, qualitative achievement at 35%,AIP (qualitative and discretionary at 30%.factors) is more fully described in theCompensation Discussion and Analysissection of this Proxy Statement, starting on page _____.
2013 – 20152015-2017 Long-term Incentive Plan (“LTIP”) (page 47). The 2013-20152015-2017 LTIP hashad a maximum potential unit value of $300.$375. The Compensation Committee assessed performance under the 2013-20152015-2017 LTIP as follows:
Performance Measure | Target | Actual Performance | % of Target | Value Earned Per Unit | ||||||
Silver Reserve Growth | 30.0 silver oz. added (millions) | 25.4 silver oz. added (millions) | 85% | $20.50 | ||||||
Production Growth | 54.1 silver oz. (millions) | 59.2 silver oz. (millions) | 109% | $43.50 | ||||||
Cash Flow | $848.49 cash flow (millions) | $884.98 cash flow (millions) | 104% | $31.50 | ||||||
Total Shareholder Return | 50% Hecla ranking vs. peers | 69.2% Hecla ranking vs. peers | 138% | $34.50 | ||||||
#4 Shaft Completion | Shaft Completed by 2/15/16 | 10/26/16 completion date | 0% | No Payout | ||||||
Total Earned Per Unit | $130.00 |
Performance Measure | Target | Actual Performance | % of Target | Value Earned Per Unit | ||||
Silver Reserve Growth | 30.0 silver oz. added (millions) | 17.3 silver oz. added (millions) | 58% | $16.50 | ||||
Production Growth | 77.0 silver equivalent oz. (millions) | 87.8 silver equivalent oz. (millions) | 114% | $75.00 | ||||
Cash Flow | $627.8 Cash Flow (millions) | $779.5 Cash Flow (millions) | 124% | $100.00 | ||||
Total Shareholder Return | 60% Hecla ranking vs. peers | 53.8% Hecla ranking vs. peers | 90% | $18.75 | ||||
Total Earned Per Unit | $210.25 |
1 | The non-GAAP measurement of EBITDA less capital is calculated as the GAAP measure of net loss plus/less the following items: interest expense, income tax provision, depreciation, depletion and amortization expense, interest and other income, acquisition costs, loss on investments, loss on derivatives contracts, provision for environmental matters, provisional price gains, foreign exchange loss, stock-based compensation, Lucky Friday suspension costs, and capital expenditures at our operating mines. A reconciliation of EBITDA less capital to the most comparable GAAP measure of net loss for the year ended December 31, 2017, is included in Appendix E of this Proxy Statement. |
PROXY STATEMENT SUMMARY |
✓ |
|
✓ | Annual Incentive Plan Payout– |
✓ | Long-term Incentive Plan Payout– |
✓ | Restricted Stock Units– In |
✓ | Performance-based Shares: In |
Set forth on the following page is the 2015 compensation for each NEO as determined under Securities and Exchange Commission (“SEC”) rules. Total compensation, as reported in theSummary Compensation Table and calculated under SEC rules, includes several items that are driven by accounting and actuarial assumptions. Accordingly, it is not necessarily reflective of the compensation our NEOs actually realized in 2015. To supplement that disclosure we have added the “W-2/T4 Realized Comp.” column to the right of the table below to compare our NEOs’ 2015 compensation as determined under SEC rules with W-2/T4 income for 2015, which is the federally taxable compensation our NEOs received in 2015 inclusive of vested stock and exercised stock options, if any.
This supplemental table is not designed to replace theSummary Compensation Table for 2015 found on page 62, but rather to provide additional, supplemental compensation disclosure.
The differences between this supplemental table and theSummary Compensation Table are (i) the supplemental table includes compensation related to stock awards that became fully vested in 2015, whereas theSummary Compensation Table includes compensation for stock awards as it is expensed for financial accounting purposes; (ii) the supplemental table does not reflect the FASB ASC Topic 718 expense associated with equity awards; (iii) the supplemental table includes compensation related to bonuses that were paid in 2015, whereas theSummary Compensation Table includes bonuses as they are expensed for financial accounting purposes; and (iv) the supplemental table does not include the change in pension value and the Company matching contribution for individual 401(k) deferral. For more information on total compensation as calculated under SEC rules, see the narrative and footnotes accompanying theSummary Compensation Table for 2015 on page 62.
2015 Summary Compensation and Realized Compensation | |||||||||||||||||||
Name and Principal Position | Salary ($) | Stock Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | SEC Total ($) | SEC Total Without Change in Pension Value ($) | W-2/T4 Realized Comp.1 ($) | |||||||||||
Phillips S. Baker, Jr. | 605,000 | 1,727,174 | 1,768,250 | 599,477 | 15,900 | 4,715,801 | 4,116,324 | 2,777,810 | |||||||||||
President and CEO | |||||||||||||||||||
James A. Sabala | 380,000 | 583,700 | 822,000 | 174,075 | 15,900 | 1,975,675 | 1,801,600 | 1,585,582 | |||||||||||
Senior Vice President | |||||||||||||||||||
and CFO | |||||||||||||||||||
Lawrence P. Radford | 380,000 | 556,694 | 890,000 | 105,114 | 15,900 | 1,947,708 | 1,842,594 | 1,480,083 | |||||||||||
Senior Vice President – | |||||||||||||||||||
Operations | |||||||||||||||||||
Dr. Dean W. A. McDonald | 275,000 | 480,468 | 580,000 | 110,743 | 15,900 | 1,462,111 | 1,351,368 | 1,504,5582 | |||||||||||
Senior Vice President – | |||||||||||||||||||
Exploration | |||||||||||||||||||
David C. Sienko | 250,000 | 289,933 | 397,000 | 36,365 | 15,900 | 989,198 | 952,833 | 900,897 | |||||||||||
Vice President – | |||||||||||||||||||
General Counsel | |||||||||||||||||||
Don Poirier* | 226,000 | 314,950 | 401,500 | 82,950 | 15,900 | 1,041,300 | 958,350 | 1,036,9022 | |||||||||||
Former Vice President – | |||||||||||||||||||
Corporate Development |
PROXY STATEMENT |
Board of Directors Selection Process
Our current Bylaws require the Board to have not less than five nor more than nine members. The size of the Board may be increased or decreased within that range from time-to-time by resolution approved by the affirmative vote of a majority of the Board. On May 25, 2017, the Board decreased the size of the Board from nine members to eight members due to the retirement of Dr. Anthony P. Taylor.
Identifying and Evaluating Nominees for |
Director Selection Process
Candidate Recommendations | 1 | Governance Committee | 2 | Board of Directors | 3 | Shareholders | 4 | |||
From shareholders, management, directors and search firms | ●Evaluates the Board’s needs and screens and interviews candidates ●Reviews qualifications and expertise, tenure, regulatory requirements and diversity ●Recommends nominees | Discusses, analyzes independence and selects nominees | Votes on nominees at annual meeting |
The Corporate Governance and Directors’ Nominating Committee uses a variety of methods for identifying and evaluating nominees for director. The committeeGovernance Committee is responsible for ensuring that the composition of the Board accurately addresses the needs of our business. In the event vacancies are anticipated, or arise, the committeeGovernance Committee considers various potential candidates for director. Candidates may come to the attention of the committeeGovernance Committee through current Board members, professional search firms, shareholders or other persons. Consideration of new director nominee candidates typically involves a series of internal discussions, review of information concerning candidates and interviews with selected candidates. The committeeGovernance Committee then determines the best qualified candidates based on the established criteria and recommends those candidates to the Board for election atelection.
While the next annual meetingGovernance Committee and our Board prioritize maintaining a board that is comprised of shareholders (or sooner when appropriate).directors with a diverse set of skills, experiences, and perspectives, they also recognize the importance of balancing these qualifications with the overall tenure of directors in their long-term approach to board refreshment. The fresh viewpoints and philosophies newer directors bring, coupled with the valuable experience and institutional knowledge the longer-tenured directors possess, benefits the Board and its overall contribution to the Company.
The Board has appointed three highly-qualified directors since 2016 that bring insight to areas such as: mining, international business, acquisitions, operations, legal, risk management, geology, engineering, finance and tax. To supplement our newer directors, our longer-tenured directors have extensive knowledge of our operations and have the perspective of overseeing our business activities through economic cycles and across differing competitive environments.
We hold the view that the continuing service of qualified incumbents promotes stability and continuity in the boardroom, contributing to the Board’s ability to work as a collective body, while giving us the benefit of familiarity and insight into our affairs that our directors have accumulated during their tenure. Recent additions to the Board provide new perspectives, while directors who have served for a number of years bring experience, continuity, institutional knowledge, and insight into the Company’s business and industry. Directors with relevant business and leadership experience provide the Board a useful perspective on business strategy and significant risks and an understanding of the challenges facing the business. Accordingly, the process for identifying nominees reflects our practice of re-nominating incumbent directors who (i) continue to satisfy the committee’sGovernance Committee’s criteria for membership on the Board, (ii) the committeeGovernance
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PROXY STATEMENT |
Committee believes continue to make important contributions to the Board, and (iii) consent to continue their service on the Board. Directors should also be able to commit the requisite time for preparation and attendance at regularly scheduled Board and committee meetings, as well as be able to participate in other matters necessary to ensure good corporate governance is practiced.
The committeeGovernance Committee reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures to be taken so that the Board reflects thereflectsthe appropriate balance of knowledge, experience, skills, expertise and diversity required for the Board as a whole and contains at least the minimum number of independent directors required by applicable laws and regulations.
Board members should possess such attributes and experience as are necessary for the Board as a whole and contain a broad range of personal characteristics, including diversity of backgrounds, management skills, mining, accounting, finance and business experience. Directors should be able to commit the requisite time for preparation
Summary of Director Qualifications and attendance at regularly scheduled Board and committee meetings, as well as be able to participate in other matters necessary to ensure good corporate governance is practiced.Experience
Director Qualifications and Experience | Baker | Boggs | Crumley | Johnson | Nethercutt | Ralbovsky | Rogers | Stanley |
Audit Committee Financial Expert | ● | ● | ● | ● | ||||
Board Service on Public Companies | ● | ● | ● | ● | ● | |||
CEO/Administration and Operations | ● | ● | ● | ● | ● | |||
Corporate Governance | ● | ● | ● | ● | ● | |||
Finance | ● | ● | ● | ● | ● | ● | ● | |
Geology, Mining and Engineering | ● | ● | ● | |||||
Industry and Mining | ● | ● | ● | ● | ● | ● | ● | ● |
Industry Association Participation | ● | ● | ● | ● | ● | ● | ||
International Business | ● | ● | ● | ● | ● | ● | ● | |
Leadership | ● | ● | ● | ● | ● | ● | ● | ● |
Legal and Compliance | ● | ● | ● | ● | ||||
Reputation in the Industry | ● | ● | ● | ● | ● | ● | ||
Risk Management | ● | ● | ● | ● | ● | ● | ● | ● |
In general, and as more fully outlined in our Bylaws and Corporate Governance Guidelines, in evaluating director candidates for election to our Board, the committeeGovernance Committee will: (i) consider if the candidate satisfies the minimum qualifications for director candidates as set forth in the Corporate Governance Guidelines; (ii) consider factors that are in the best interests of the Company and its shareholders, including the knowledge, experience, integrity and judgment of each candidate; (iii) consider the contribution of each candidate to the diversity of backgrounds, experience and competencies which the Board desires to have represented, with such diversity being considered among the other desirable attributes of theofthe Board; (iv) assess the performance of an incumbent director during the preceding term; (v) consider each candidate’s ability to devote sufficient time and effort to his or her duties as a director; (vi) consider a candidate’s independence and willingness to consider all strategic proposals; (vii) consider any other criteria established by the Board and any core competencies or technical expertise necessary to manage and direct the affairs and business of the Company, including, when applicable, to enhance the ability of committees of the Board to fulfill their duties; and (viii) determine whether there exists any special, countervailing considerations against nomination of the candidate.
The committeeGovernance Committee will consider persons recommended by shareholders as nominees for election as directors. Our Bylaws provide that any shareholder who is entitled to vote for the election of directors at a meeting called for such purpose may nominate persons for election to the Board by following the procedures set forth on page 87.__. Shareholders who wish to submit a proposed nomineeproposednominee to the committeeGovernance Committee should send written notice to the Corporate Governance and Directors’Directors Nominating Committee Chairman, c/o Corporate Secretary, Hecla Mining Company, 6500 N. Mineral Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408, within the time period set forth on page 87.__. The notification should set forth all information relating to the nominee that is required to be
2018 Proxy Statement9
PROXY STATEMENT |
disclosed in solicitations of proxies for elections of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (“Exchange Act”), including the nominee’s written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected; the name and address of the shareholder or beneficial owner making the nomination or on whose behalf the nomination is being made; and the class and number of shares of stock of the Company owned beneficially andbeneficiallyand of record by such shareholder or beneficial owner. The committeeGovernance Committee will consider shareholder nominees on the same terms as nominees selected by the committee.Governance Committee.
Regardless of how a candidate is brought to the committee,Governance Committee, qualified candidates are subjected to one or more interviews with appropriate members of the Board. Chosen candidates are extended invitations to join the Board. If a candidate accepts, he or she is formally nominated.
Director Qualifications, Evaluation, and Nomination |
The committeeGovernance Committee believes that nominees for election to the Board should also possess certain minimum qualifications and attributes. The nominee must: (i) exhibit strong personal integrity, character and ethics, and a commitment to ethical business and accounting practices; (ii) not be involved in ongoing litigation with the Company or be employed by an entity that is engaged in such litigation; and (iii) not be the subject of any ongoing criminal investigations in the jurisdiction of the United States or any state thereof, including investigations for fraud or financial misconduct. Our Bylaws and Corporate Governance Guidelines provide that directors will not be nominated for re-election after their 72nd birthday.
In connection with the director nominees who are up for re-election at the Annual Meeting, the committeeGovernance Committee also considered the nominees’ roles in: (i) overseeing the Company’s efforts in complying with its SEC disclosure requirements; (ii) assisting in improving the Company’s internal controls and disclosure controls; (iii) assisting with the development of the strategic plan of the Company; and (iv) working with management to implement the strategicplan and mission statement. Directors are expected to exemplify high standards of personal and professional integrity and to constructively challenge management through their active participation and questioning. Our Bylaws and Corporate Governance Guidelines provide that directors will not be nominated for re-election after their 75thbirthday.
In addition to fulfilling the above criteria, each nominee for election to the Board at the upcoming Annual Meeting brings a strong and unique background and set of skills to the Board, giving the Board as a whole competence and experience in a wide variety of areas, including corporate governance, executive management, legal, accounting, finance, mining, and board service. The committeeGovernance Committee has reviewed the nominees’ overall service to the Company during their terms, including the number of meetings attended, level of participation and quality of performance.
Selection of New |
In December 2015, we were saddened to announceJanuary 2017, upon the passing of one of our directors, John H. Bowles. After Mr. Bowles’ passing, we reduced the sizerecommendation of the Board to six. After many discussions with potential director candidates, and careful consideration, on March 1, 2016, the Corporate Governance and Directors’ Nominating Committee, recommended and the Board approved an increase in the size of the Board from six to eight and appointed two new directors to our Board.
Mr. Stephen F. Ralbovsky was appointedCatherine “Cassie” J. Boggs as a Class II director (standing for election in 2018), filling a vacancy created by the death of John H. Bowles. Mr. Ralbovskyto our Board. Ms. Boggs is a certified public accountantan attorney and was a partner with PricewaterhouseCoopers, LLP from February 1987 until his retirement in June 2014. Hehas served as General Counsel at Resource Capital Funds since January 2011. She has over 36 years’ experience as a mining and natural resources lawyer with experience in taxation, auditing and accounting, where he specialized in thedomestic andinternational mining industry.projects. The Corporate Governance and Directors’ Nominating Committee and Board determined that Mr. RalbovskyMs. Boggs was independent under the New York Stock Exchange (“NYSE”) listing standards. The Board alsoinitially appointed Mr. RalbovskyMs. Boggs to serve on the Audit Committee and Governance Committee, and in May 2017, she was also appointed to the Corporate Governance and Directors’ NominatingCompensation Committee.
Mr. George R. Johnson was appointed as a Class I director (standing for election in 2017), to fill a resulting vacancy when the Board increased the size of the Board from six to eight directors. Mr. Johnson is a mining engineer and most recently served as Senior Vice President of Operations at B2Gold Corporation from August 2009 until his retirement in May 2015. Mr. Johnson also held many positions with Hecla in the early 1980’s through 1999 and is very familiar with the Company’s operations. He has over 45 years of foreign and domestic experience in underground and open-pit mine construction and operations management. The Corporate Governance and Directors’ Nominating Committee and Board determined that Mr. Johnson was independent under the New York Stock Exchange listing standards. The Board also appointed Mr. Johnson to serve on the Audit Committee and the Health, Safety, Environmental and Technical Committee.10www.hecla-mining.com
PROPOSAL 1 – ELECTION OF CLASS II DIRECTORS |
PROPOSAL 1 – ELECTION OF CLASS II DIRECTORS
In accordance with our Certificate of Incorporation, the Board is divided into three classes. The terms of office of the directors in each class expire at different times. There are three Class II directors whose terms will expire at the 20162018 Annual Meeting: Ted Crumley, Terry V. RogersGeorge R. Nethercutt, Jr., Stephen F. Ralbovsky and Charles B. Stanley.Catherine J. Boggs.
At a meeting held by the Corporate Governance and Directors’ Nominating Committee in February 2016,2018, the committeeGovernance Committee determined that the three directors whose terms are expiring - Messrs. Crumley, RogersMr. Nethercutt, Mr. Ralbovsky and StanleyMs. Boggs - were qualified candidates to stand for re-election at the Annual Meeting, and the Board designated Messrs. Crumley, RogersMr. Nethercutt, Mr. Ralbovsky and StanleyMs. Boggs as nominees for re-election as directors of the Company,each for a three-year term expiring in 2019.2021. Each nominee has accepted the nomination and agreed to serve as a director if elected by the Company’s shareholders.
It is intended that the proxies solicited hereby from our shareholders that do not provide voting instructions will be votedFORthe election of Ted Crumley, Terry V. RogersGeorge R. Nethercutt, Jr., Stephen F. Ralbovsky and Charles B. Stanley.Catherine J. Boggs. The Board knows of no reason why the nominees will be unable or unwilling to accept election. However, if any nominee becomes unable or is unwilling to accept election, the Board will either reduce the number of directors to be elected or select substitute nominees submitted by the Corporate Governance and Directors’ Nominating Committee. If substitute nominees are selected, proxies that do not provide voting instructions will be voted in favor of such nominees.
Director Qualifications and Biographical Information
Biographical Information |
Set forth below is biographical information for each of the director nominees, including the key qualifications, experience, attributes, and skills that led our Board to the conclusion that each of the director nominees should serve as a director. There are no family relationships among any of our directors or executive officers.
Our Board includes individuals with strong backgrounds in executive leadership and management, legal, accounting and finance, and Company and industry knowledge, and we believe that, as a group, they work effectively together in overseeing our business.
2018 Proxy Statement11
PROPOSAL 1 – ELECTION OF CLASS II DIRECTORS |
Current Class II Nominees for Election to the Board – Term Ending at the |
If elected, the nominees will each serve for a three-year term ending in 2019.2021. The nominees are as follows:
George R. Nethercutt, Jr. Chairman of The George Nethercutt Foundation and Of Counsel for Lee & Hayes PLLC Director since:2005 Age:73 Other Directorships: Washington Policy Center, Juvenile Diabetes Research Foundation International (Board of Chancellors) Hecla Committees: ●Corporate Governance and Directors Nominating (Chair) ●Compensation |
Mr. Nethercutt has served as Chairman of The George Nethercutt Foundation, a non-profit student leadership and civics education charity, since 2005, and was appointed Of Counsel at Lee & Hayes PLLC, a law firm, in September 2010. He has been a board member of Washington Policy Center, a public policy organization providing analysis on issues relating to the free market and government regulation, since January 2005; and Board of Chancellors, Juvenile Diabetes Research Foundation International, a charity and advocate of juvenile diabetes research worldwide, since June 2011. He was a board member of ARCADIS Corporation, an international company providing consultancy, engineering and management services, from May 2005 to April 2017; a Principal of Nethercutt Consulting LLC, a strategic planning and consulting firm, from January 2007 to January 2012, and a member of the board of IP Street, a software company, from May 2011 to January 2015.
Board Qualification and Skills:
Extensive Knowledge of the Company’s Business and Industry: Served as a U.S. Congressman and focused on natural resource policies, mining legislation and environmental policies on public lands.
Extensive Government Leadership Experience: Has extensive political background, including working as a staff member in the U.S. Senate in Washington, D.C., where he focused on issues relating to oil and gas, natural resources, mining and commerce. Served as chief of staff to a U.S. Senator from Alaska, working on such issues as agriculture, fisheries, timber and mining. He had his own consulting business which consisted of representing clients with mining and natural resource issues.
Significant Public Company Board Experience: Over 12 years of service on Hecla’s Board, as well as serving on the board of ARCADIS Corporation for 12 years.
Designations: Mr. Nethercutt received his Bachelor of Arts in English from Washington State University in 1967, and a law degree from Gonzaga University Law School in 1971. He has been a member of the Washington State Bar Association since 1972.
Stephen F. Ralbovsky Founder and Principal of Wolf Sky Consulting LLC Director since:2016 Age:64 Other Directorships: None Hecla Committees: ●Audit (Chair) ●Corporate Governance and Directors Nominating ●Health, Safety, Environmental and Technical |
Mr. Ralbovsky has been the Founder and Principal of Wolf Sky Consulting LLC, a tax consulting firm, since June 2014. Prior to that, he was a partner with PricewaterhouseCoopers LLP, an accounting firm, from February 1987 until his retirement in June 2014, where he concentrated his practice on public companies operating in the mining industry. He is a part-time Professor of Practice at the University of Arizona’s James E. Rogers College of Law.Mr. Ralbovsky is also a member of several organizations, including AICPA, Arizona Society of CPAs, National Mining Association, and Society for Mining, Metallurgy and Exploration.
Board Qualification and Skills:
High Level of Financial Experience: Over 38 years’ experience in taxation, auditing and accounting.
Extensive Knowledge of the Company’s Business and Industry: Over 38 years’ experience in accounting, where he was heavily involved in the mining industry with emphasis in global mining tax and royalty policy.
Extensive Senior Leadership Experience: Has extensive experience in leadership in the accounting industry. Served in numerous senior leadership positions, including US Mining Leader, USMining Tax Leader, Global Mining Tax Leader and Tax Partner for PricewaterhouseCoopers LLP.
Designations: Mr. Ralbovsky received a Bachelor of Business Administration with a major in Accounting from Siena College in 1975. He also received a law degree from Albany Law School in 1978. He is licensed in D.C. and Arizona as a Certified Public Accountant.
12www.hecla-mining.com
PROPOSAL 1 – ELECTION OF CLASS II DIRECTORS |
Catherine “Cassie” J. Boggs General Counsel at Resource Capital Funds Director since:2017 Age:63 Other Directorships: Funzeleo Hecla Committees: ●Audit ●Corporate Governance and Directors Nominating ●Compensation |
Ms. Boggs has been the General Counsel at Resource Capital Funds, a mining-focused private equity firm, since January 2011. She has been a board member of Funzeleo, a non-profit organization that inspires and prepares youth for high-demand science and math-based careers, since January 2016, as well as serving as President of the Rocky Mountain Mineral Law Foundation, a non-profit organization dedicated to the study of laws and regulations relating to mining, oil and gas, energy, public lands, water, environmental and international law, from July 2012 to July 2013, and a board member of the Rocky Mountain Mineral Law Foundation, from July 2011 to July 2015.
Board Qualification and Skills:
High Level of Legal Experience: Over 36 years’ experience as an attorney, having practiced law in several U.S. and overseas jurisdictions.
Extensive Knowledge of the Company’s Business and Industry: Over 36 years’ experience as a mining and natural resources lawyer with experience in domestic and international mining projects.
Extensive Knowledge of Risk Assessment: In addition to managing all legal affairs of Resource Capital Funds, she is responsible for legal due diligence, country and political risk assessments, and participates in the structuring and implementation of risk mitigation strategies.
Extensive Senior Leadership Experience: Has extensive experience in leadership in the mining industry, having worked for Barrick Gold Company, serving in a variety of leadership roles, including serving as the CEO of Tethyan Copper Company, a gold and copper development project in Pakistan, interim President of the African Business Unit, and as interim General Counsel of African Barrick Gold (now known as Acacia Mining) in its formation and initial public offering.
Designations: Ms. Boggs received a Bachelor of Arts with a major in Economics from University of Denver in May 1976. She received a Master of Science in Resource Development from Michigan State University in December 1977, and a law degree from the University of Denver College of Law in 1981.
The Board recommends that shareholders vote “FOR” the election of George R. Nethercutt, Jr., Stephen F. Ralbovsky and Catherine J. Boggs. |
2018 Proxy Statement13
PROPOSAL 1 – ELECTION OF CLASS II DIRECTORS |
Our directors whose terms are not expiring this year follow. They will continue to serve as directors for the remainder of their terms or until their respective successors are appointed or elected.
Continuing Class III Members of the Board – Term Ending at the 2019 Annual Meeting |
Ted Crumley Former Executive Vice President and OfficeMax Incorporated Director since:1995 Board Chairman Age: Other Directorships: None Hecla Committees: | |||||
● | Executive | ||||
● | Compensation |
Mr. Crumley served as the Executive Vice President and Chief Financial Officer of OfficeMax Incorporated, a distributor of office products, from January 2005 until his retirement in December 2005. He was also Senior Vice President of OfficeMax Incorporated from November 2004 to January 2005, and Senior Vice President and Chief Financial Officer of Boise Cascade Corporation, a manufacturer of paper and forest products, from 1994 to 2004.2005.
Board Qualification and Skills:
High Level of Financial Experience: Substantial financial experience gained from a long career with OfficeMax Incorporated and Boise Cascade Corporation.
Senior Leadership/Executive Officer Experience: Has over 30 years’ experience in management, finance and accounting in the natural resources industry. Served in numerous senior leadership positions, including Executive Vice President and Chief Financial Officer of OfficeMax Incorporated and Senior Vice President and Chief Financial Officer of Boise Cascade Corporation.
Significant Public Company Board Experience: Over 20 years of22 years’ service on Hecla’s Board, including as Chairman since 2006.
Extensive Knowledge of the Company’s Business and Industry: With over 20 years’22 years of service on Hecla’s Board, Mr. Crumley understands all aspects of our business, including the mining elements.
Designations: Mr. Crumley received his Bachelor of Business Administration with a major in Accounting from Idaho State University College of Business in 1969.
Terry V. Rogers, C. Dir., H.R.C.C.C. Former Senior Vice President and Chief Operating Officer Director since:2007 Age: Other Directorships: Centerra Gold Inc. Hecla Committees: | |||||
● | Compensation (Chair) ●Health, Safety, Environmental and Technical | ||||
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Executive |
Mr. Rogers served as Senior Vice President and Chief Operating Officer of Cameco Corporation, a uranium producer, from February 2003 until his retirement in June 2007. He is a former President of Kumtor Operating Company, a gold producing company and a subsidiary of Cameco Corporation, where he served from 1999 to 2003 and has served on the Board of Directors of Centerra Gold Inc., a Canadian gold mining company, and its predecessor company, Cameco Gold, since February 2003.
Board Qualification and Skills:
High Level of Financial Experience: Financial experience gained from his senior leadership/executive officer experience with Cameco Corporation and Kumtor Operating Company.prior companies.
Senior Leadership/Executive Officer Experience: Has experience in management in the mining industry. Served in numerous senior leadership positions, including Senior Vice President and Chief Operating Officer of Cameco Corporation, and former President of Kumtor Operating Company (a subsidiary of Cameco Corporation).
Significant Public Company Board Experience: In addition to serving on the Board of Hecla, has over 1214 years of service on the Board of Centerra Gold Inc., including serving as independent lead director, chairman of the human resources and compensation committee, and as a member of the audit committee.
Extensive Knowledge of the Company’s Business and Industry: Over 30 years’ experience in the mining industry, including, opencast,open-cast, open-pit and underground operations in coal, gold, and uranium mines around the world.
Designations: Mr. Rogers received an Associate degree in Applied Science from the Superior Technical Institute in Wisconsin in 1972. He also obtained a Chartered Director (C. Dir.) designation from The Directors College in 2011, as well as a Human Resources and Compensation Committee Certified (H.R.C.C.C.) designation from The Directors College in 2013.
14www.hecla-mining.com
PROPOSAL 1 – ELECTION OF CLASS II DIRECTORS |
Charles B. Stanley Chief Executive Officer, President and Chairman of the Board Director since:2007 Age: Other Directorships: QEP Resources, Inc. Hecla Committees: | |||||
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Health, Safety, Environmental and Technical | |||||
(Chair) ● | Audit ●Corporate Governance and |
Mr. Stanley has been Chief Executive Officer and President of QEP Resources, Inc., an independent natural gas and oil exploration and production company, since May 2010. He was appointed Chairman of the Board of QEP Resources, Inc. in May 2012. He also served as Chairman, Chief Executive Officer, President and Director of QEP Midstream Partners, LP, a master limited partnership that owns, operates, acquires and develops midstream energy assets, from May 2013 to December 2014. He served as Chief Operating Officer of Questar Corporation, a Western U.S. natural gas-focused exploration and production, interstate pipeline and local distribution company, from March 2008 to June 2010; and Executive Vice President and Director of Questar Corporation from February 2002 to June 2010.
Board Qualification and Skills:
High Level of Financial Experience: Substantial financial experience gained from a long career with QEP Resources, Inc. and Questar Corporation.prior companies.
Extensive Senior Leadership/Executive Officer Experience: In addition to his current position as Chief Executive Officer and President of QEP Resources, Inc., Mr. Stanley served in numerous other senior leadership positions, including Chief Executive Officer and President of QEP Midstream Partners, LP, and Chief Operating Officer of Questar Corporation.
Significant Public Company Board Experience: In addition to serving on the Board of Hecla, has served on the board of QEP Resources, Inc. the past 57 years and as Chairman of the Board since 2012. Prior to serving on QEP’s board, Mr. Stanley served on the board of Questar Corporation.Corporation for 8 years. He also serveshas served on the boards of various natural gas industry trade organizations, including the American Exploration and Production Council and America’s Natural Gas Alliance.organizations.
Extensive Knowledge of the Company’s Business and Industry: Over 3234 years’ experience in the international and domestic upstream and midstream oil and gas industry. He is a geologist with an extensive background in natural resources.
Designations: Mr. Stanley received a Bachelor of Science degree in Geology in 1981, as well as a Master of Science degree in Geology in 1983, from Virginia Tech.
2018 Proxy Statement15 |
PROPOSAL 1 – ELECTION OF CLASS II DIRECTORS |
Our directors whose terms are not expiring this year follow. They will continue to serve as directors for the remainder of their terms or until their respective successors are appointed or elected.
Continuing Class I Members of the Board – Term Ending at the |
Phillips S. Baker, Jr. President and Chief Executive Officer Director since:2001 Age: Other Directorships: QEP Resources, Inc. Hecla Committees: | |||||
● | Executive (Chair) |
Mr. Baker has been our CEO since May 2003 and has served as our President since November 2001. He has served as a Director of QEP Resources, Inc., an independent natural gas and oil exploration and production company, since May 2010,2010. Mr. Baker has served as wellChairman of the Board for the National Mining Association, a U.S. mining advocate and national trade organization that represents the interests of mining businesses, since October 2017, and has been a Board member since September 2010. He also served as servingVice Chairman of the Board for the National Mining Association from October 2015 to October 2017. He has also served as a Director for Questar Corporation,Board member of the National Mining Hall of Fame and Museum, a Western U.S. natural gas-focused exploration and production, interstate pipeline and local distribution company, fromfederally-chartered non-profit national mining museum, since February 2004 through June 2010.2012.
Board Qualification and Skills:
High Level of Financial Experience: Substantial financial experience gained in his roles of President, CEO, and previously as Chief Financial Officer and Chief Operating Officer of the Company.Company and other companies.
Extensive Senior Leadership/Executive Officer Experience: In addition to servingHas served as Hecla’s President for 17 years and as CEO served as Chief Financial Officerfor 15 years. Has 23 years of executive and Chief Operating Officer. Has 18 years’ management experience in the mining industry.
Significant Public Company Board Experience: In addition to serving on the Board of Hecla, has served on the board of QEP Resources, Inc. for 118 years. He serves as chair of the audit committee and as a member of the governance committee for QEP Resources, Inc.
Extensive Knowledge of the Company’s Business and Industry: Over 2931 years’ experience in the mining industry.
Designations: Mr. Baker received a Bachelor of Business Administration in Accounting from Texas A & M&M University in 1981, and a law degree and Master of Business Administration from the University of Houston in 1985. He became a member of the State Bar of Texas in 1985, and received his Certified Public Accountant designation in 1986 from the Texas State Board of Public Accounting.
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Dr. Taylor has served as President, Chief Executive Officer and Director of Selex Resources Ltd., a private Ontario Corporation engaged in mineral exploration, since January 2012. Since October 2001, he has served as President and Director of Caughlin Preschool Co., a private Nevada corporation that operates a preschool, which he co-founded. He previously served as Executive Chairman of Crown Gold Corporation, a public Canadian minerals exploration company, from August 2010 to August 2012, after serving as Chief Executive Officer and Director of Gold Summit Corporation, a public Canadian minerals exploration company, from October 2003 to August 2010.
Board Qualification and Skills:
Extensive Knowledge of the Company’s Business and Industry: Over 51 years’ experience in the mining industry in all levels of exploration from a field geologist to senior management. Has extensive experience in lead, zinc, nickel, copper, diamond, gold and silver exploration from his work in Europe, Australia, South Africa, and North and South America.
Extensive Senior Leadership/Executive Officer Experience: Has extensive experience in management in the mining industry. Served in numerous senior leadership positions, including Executive Chairman of Crown Gold Corporation and Chief Executive Officer and Director of Gold Summit Corporation.
Significant Public Company Board Experience: Over 13 years of service on Hecla’s Board.
Designations: Dr. Taylor received his Bachelor of Science (with honors) in Geology from Durham University (U.K.) in 1964, and his Ph.D in Geology from Manchester University (U.K.) in 1974.
George R. Johnson Former Senior Vice President of Operations Director since:2016 Age: Other Directorships: B2Gold Corporation Hecla Committees: | |||||
● | Health, Safety, Environmental and Technical | ||||
● | Audit |
Mr. Johnson served as Senior Vice President of Operations of B2Gold Corporation, a Canadian-basedCanadian gold producingmining company, from August 2009 until his retirement in MayApril 2015. He is a former Senior Vice Presidenthas served on the Board of Russian OperationsDirectors of Kinross GoldB2Gold Corporation a senior gold mining company, fromsince March 2007 to August 2009, and Senior Vice President of Operations of Bema Gold Corporation, a gold producing company, from October 1999 to March 2007.2016.
Board Qualification and Skills:
Extensive Knowledge of the Company’s Business and Industry: Over 45 years of foreign and domestic experience in underground and open-pit mine construction and operations management. Served as Vice President – Metal Mining for Hecla from May 1996 to 1999 where he was responsible for performance of Hecla’s metals division, including mines operated by Hecla and joint ventures with other companies, exploration programs, business development, capital projects and corporate technical services. He held various other positions with Hecla from 1983 to 1990, including as general manager of Hecla’s Lucky Friday mine from July 1986 to February 1989; mine superintendent from November 1984 to June 1986, and development foreman from October 1983 to 1984.
Senior Leadership/Executive Officer Experience: Has extensive experience in management in the mining industry. Served in numerous senior leadership positionsindustry, including as Senior Vice President of Operations for B2Gold Corporation, Senior Vice President of Russian Operations for Kinross Gold Corporation, and Senior Vice President of Operations for Bema Gold Corporation.Operations.
Designations: Mr. Johnson received a Bachelor of Science with a major in Mining Engineering from the University of Washington in 1972.
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Mr. Nethercutt has served as Chairman of The George Nethercutt Foundation, a non-profit student leadership and civics education charity, since 2007, and was appointed Of Counsel for Lee & Hayes PLLC, a law firm, in September 2010. He has been a board member of Washington Policy Center, a public policy organization providing analysis on issues relating to the free market and government regulation, since January 2005; board member of ARCADIS Corporation, an international company providing consultancy, engineering and management services, since May 2005; and Board of Chancellors, Juvenile Diabetes Research Foundation International, a charity and advocate of juvenile diabetes research worldwide, since June 2011. He was a Principal of Nethercutt Consulting LLC, a strategic planning and consulting firm, from January 2007 to January 2012, and served as a member on the board of IP Street, a software company, from May 2011 to January 2015. He also served as U.S. Chairman of the Permanent Joint Board on Defense - U.S./Canada from April 2005 to December 2009; Member, U.S. House of Representatives from 1995 to 2005; Member, Subcommittee on Interior, Agriculture and Defense Appropriations from 1995 to 2005; Member, Committee on Science and Energy from 1998 to 2005; and Vice Chairman, Defense Subcommittee on Appropriations from 2000 to 2004.
Board Qualification and Skills:
Extensive Knowledge of the Company’s Business and Industry: Served as a U.S. Congressman and focused on natural resource policies, mining legislation and environmental policies on public lands.
Extensive Government Leadership Experience: Has extensive political background, including working as a staff member in the U.S. Senate in Washington, D.C., where he focused on issues relating to oil and gas, natural resources, mining and commerce. Served as chief of staff to a U.S. Senator from Alaska, working on such issues as agriculture, fisheries, timber and mining. He had his own consulting business which consisted of representing clients with mining and natural resource issues.
Significant Public Company Board Experience: Over 10 years of service on Hecla’s Board.
Designations: Mr. Nethercutt received his Bachelor of Arts in English from Washington State University in 1967, and a law degree from Gonzaga University Law School in 1971. He has been a member of the Washington State Bar Association since 1972.
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Mr. Ralbovsky was a partner with PricewaterhouseCoopers LLP, an accounting firm, from February 1987 until his retirement in June 2014, where he concentrated his practice on public companies operating in the mining industry. He previously served on the Board and as Treasurer of the American Heart Association – Arizona Affiliate, a non-profit organization dedicated to fighting heart disease, from July 1991 to June 1995; Board member (and President for one year) of Southwest Human Development, a non-profit dedicated to early childhood development, from June 1990 to June 1996; and Advisory Board member of Diocese of Phoenix Catholic Cemeteries and Mortuaries, a non-profit organization, from July 2009 to July 2012. Mr. Ralbovsky is also a member of several organizations, including: AICPA, Arizona Society of CPAs, National Mining Association, and Society for Mining, Metallurgy and Exploration.
Board Qualification and Skills:
High Level of Financial Experience: Over 36 years’ experience in taxation, auditing and accounting.
Extensive Knowledge of the Company’s Business and Industry: Over 36 years’ experience in accounting, where he was heavily involved in the mining industry with emphasis in global mining tax and royalty policy.
Extensive Senior Leadership Experience: Has extensive experience in leadership in the accounting industry. Served in numerous senior leadership positions, including US Mining Leader, US Mining Tax Leader, Global Mining Tax Leader and Tax Partner for PricewaterhouseCoopers LLP.
Designations: Mr. Ralbovsky received a Bachelor of Business Administration with a major in Accounting from Siena College in 1975. He also received a law degree from Albany Law School in 1978. He is licensed in D.C. and Arizona as a Certified Public Accountant.
COMPENSATION OF NON-MANAGEMENT DIRECTORS
The Compensation Committee of the Board is responsible for recommending to the Board the form and amount of compensation for our non-management directors. The compensation program is designed to provide pay that is competitive with directors in the Company’s peer group, which is described on page 38 of this Proxy Statement in theCompensation Discussion and Analysis. It consists of a combination of cash retainers and equity awards.
The committee periodically engages its compensation consultant to review compensation of the Company’s Board compared to the Company’s peer group. The following discussion of compensation applies only to our non-management directors, and does not apply to Mr. Baker who, as an employee of the Company, is compensated as an executive officer and does not receive additional compensation for his service as a director.
2015 Compensation Changes for Non-Management Directors
As a result of its periodic review of Board compensation, in 2015, the Compensation Committee recommended and the Board approved an increase in the annual equity award under the 2010 Stock Incentive Plan from $61,000 to $76,000.
Each non-management director receives an annual cash retainer for his service on the Board in the amount of $66,000. The Chairman of the Board receives an additional annual cash retainer in the amount of $90,000. For service on Board committees or as chair of the committees: (i) each non-management member of the Audit and Compensation Committees receives an annual fee of $12,000; (ii) each non-management member of the Executive, Corporate Governance and Directors’ Nominating, and Health Safety, Environmental and Technical Committees receives an annual fee of $8,000; (iii) the committee chair for each of the Audit andCompensation Committees receives an additional annual fee of $12,000; and (iv) the committee chair for each of the Health, Safety, Environmental and Technical and Corporate Governance and Directors’ Nominating Committees receives an additional annual fee of $8,000.
All of the above annual fees are paid in quarterly installments. No other attendance fees are paid to the non-management directors. The non-management directors do not receive stock options, non-equity incentive plan compensation, or any other compensation, except as described below.
In March 1995, we adopted the Hecla Mining Company Stock Plan for Nonemployee Directors, which became effective following shareholder approval on May 5, 1995. The plan was amended July 18, 2002, February 25, 2004, May 6, 2005, December 10, 2007, and May 24, 2012. The plan terminates July 17, 2017, and is subject to termination by the Board at any time. Pursuant to the plan, on May 30 of each year, each non-management director is credited with a number of shares determined by dividing $24,000 by the average closing price for Hecla’s common stock on the New York Stock Exchange (“NYSE”) for the prior calendar year. Non-management directors joining the Board after May 30 of any year are credited with a pro rata number of shares based upon the date they join the Board. These shares are held in a grantor trust, the assets of which are subject to the claims of our creditors, until delivered under the terms of the plan. Delivery of the shares from the trust occurs upon the earliest of: (i) death or disability; (ii) retirement from the Board; (iii) a cessation of the director’sservice for any other reason; (iv) a change in control of the Company (as defined in the plan); or (v) at the election of the director at any time, provided, however, that shares must be held in the trust for at least two years prior to delivery. Subject to certain restrictions, directors may elect delivery of the shares on such date or in annual installments thereafter over 5, 10 or 15 years. The maximum number of shares of common stock which may be credited pursuant to the plan is 1,000,000. As of December 31, 2015, there were 506,921 shares remaining under the plan.
In February 2010, we adopted the 2010 Stock Incentive Plan for executive officers, employees, directors, and certain consultants, which was approved by shareholders in June 2010, and became effective on August 25, 2010. Pursuant to the 2010 Stock Incentive Plan, directors may be awarded grants of stock options, restricted stock units, restricted stock, or stock. In July 2015, the Compensation Committee recommended that the Board award $76,000
of additional stock to the directors as part of their compensation. The Board approved the additional award, and each of the directors received 31,148 additional shares under the 2010 Stock Incentive Plan in July 2015.
As described more fully above, the following chart summarizes the annual cash and equity compensation for our non-management directors during 2015.
Non-Management Director Compensation for 2015
Fees | ||||||||||||||||
Director | Annual Retainer ($) | Committee Meeting Fees ($) | Committee Chairman Fees ($) | Totals Fees Paid in Cash ($) | Stock Awards1 ($) | All Other Compensation ($) | Total ($) | |||||||||
Ted Crumley, | 156,000 | 20,000 | 0 | 176,000 | 25,0072 | 0 | 277,008 | |||||||||
Chairman | 76,0013 | |||||||||||||||
John H. Bowles | 66,000 | 28,000 | 12,000 | 106,000 | 25,0072 | 0 | 207,008 | |||||||||
76,0013 | ||||||||||||||||
George R. Nethercutt, Jr. | 66,000 | 20,000 | 12,000 | 98,000 | 25,0072 | 0 | 199,008 | |||||||||
76,0013 | ||||||||||||||||
Terry V. Rogers | 66,000 | 32,000 | 8,000 | 106,000 | 25,0072 | 0 | 207,008 | |||||||||
76,0013 | ||||||||||||||||
Charles B. Stanley | 66,000 | 28,000 | 0 | 94,000 | 25,0072 | 0 | 195,008 | |||||||||
76,0013 | ||||||||||||||||
Dr. Anthony P. Taylor | 66,000 | 28,000 | 8,000 | 102,000 | 25,0072 | 0 | 203,008 | |||||||||
76,0013 |
2016 Compensation Changes for Non-Management DirectorsCORPORATE RESPONSIBILITY AND
COMMUNITY ENGAGEMENT
Effective January 1, 2016, the Compensation Committee recommended and the Board approved a 10% reduction in the annual cash compensation paidHecla’s Commitment to non-management directors in 2016.Corporate Responsibility
OtherEnvironmental Stewardship
Community Engagement
2018 Proxy Statement17
The Company covers directors under its overall director and officer liability insurance policies, as well as reimbursing them for travel, lodging, and meal expenses incurred in connection with their attendance at Board and committee meetings, meetings of shareholders, and for traveling to visit our operations. Directors are eligible, on the same basis as Company employees, to participate in the Company’s matching gift program, pursuant to which the Company matches contributions made to qualifying nonprofit organizations. The aggregate annual limit per participant is $5,000. Beyond these items, no other cash compensation was paid to any non-management director.
The Company has no current retirement plan for non-management directors. Our Bylaws and Corporate Governance Guidelines provide that directors will not be nominated for re-election after their 72nd birthday (this policy was waived in 2014 when Dr. Anthony P. Taylor was nominated for re-election after his 72nd birthday). As of December 31, 2015, the average age of members of our Board was approximately 68 and the average tenure of our Board was approximately 11 years. With the addition of two new members to the Board in February 2016, the average age of members of our Board is now approximately 67 and the average tenure of our Board is approximately 8 years.
CORPORATE GOVERNANCE AND RELATED MATTERS |
CORPORATE GOVERNANCE AND
RELATED MATTERS
We believe that good corporate governance practices reflect our values and support our strong strategic and financial objectives and performance. Our corporate governance practices are generally reflected in our Bylaws, Corporate Governance Guidelines, and committee charters, which can be found at http://www.hecla-mining.com. The charters of each committee spell out the committees’ roles and responsibilities assigned to each by the Board. In addition, the Board has established policiesestablishedpolicies and procedures that address matters such as chief executive officer succession planning, transactions with related persons, risk oversight, communications with the Board by shareholders and other interested parties, as well as the independence and qualifications of our directors. This corporate governance section provides insights into how the Board has implemented these policies and procedures to benefit Hecla and our shareholders.
The Board’s Role and Activities in 20152017
Hecla’s Board acts as the ultimate decision-making body of the Company on certain fundamental matters and advises and oversees senior management, who arewhich is responsible for the day-to-day operations and management of the Company. In carrying out its responsibilities, the Board reviews and assesses Hecla’s long-term strategy. During 2015,2017, there were four meetings of the Board. Directors areDirectorsare expected to make every efforttoeffort to attend the Annual Meeting, all Board meetings and the meetings of the committees on which they serve. All members of the Board attended last year’s Annual Meeting of Shareholders, which was held in May 2015.2017. In 2015,2017, each director attended over 95% of the meetings of the Board and the committees of which he wasthey are a member.
Role of Board in Risk Oversight
Our management is responsible for identifying and reviewing risks facing the Company, including, without limitation, strategic, operational, financial, compensation and regulatory risks, and meets regularly as part of such responsibility to review and discuss the Company’s risk exposure. The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various standing committees of the Board that address risks inherent in their respective areas of oversight. In particular, the Board is responsible for monitoringoverseeing Hecla’s risk management practices related to our business strategies and assessingoperations. In performing this oversight role, our Board is responsible for ensuring that the risk management processes designed and implemented by management are functioning, and that necessary steps are taken to foster a culture of risk-adjusted decision-making with Hecla. Throughout the year, our Board receives reports on strategic plans and risks facing each of our operations and Company as a whole. These risks may include financial risks, political risks, legal and regulatory risks, competitive risks, information technology risks, and other risks related to the manner in which we do business. Our management is accountable for day-to-day risk exposure. management efforts. Employees who lead various risk areas, such asinformation technology, environmental, health and safety, tax, sustainability, and corporate social responsibility, report periodically to Board committees and occasionally to our full Board.
18www.hecla-mining.com
CORPORATE GOVERNANCE AND RELATED MATTERS |
The Board and its committees periodically receivecommittees’ risk oversight, and management’s responsibility for risk, are foundational components of our risk management updates throughprogram. This program is designed to provide comprehensive, integrated oversight and management of risk and to facilitate transparent identification and reporting of key business reports fromissues to senior management provided at meetings ofand the Board orand its committees. The following are the key risk oversight and management responsibilities of our Board, its committees throughout the year. and management:
Board of Directors | ||
Monitors (including through committee reports) and assesses risk exposure: | ||
●Operational ●Strategic | ●Legal and regulatory ●Reputational | ●Financing, including borrowing, liquidity, capital allocation and pension plan funding |
Management ●Business units identify and manage business risks. ●Risk management updates provided through business reports from management provided at meetings of the Board and its committees throughout the year. | Audit Committee ●Financial statement integrity and reporting. ●Monitors internal controls. ●Oversees audit work. ●Monitors compliance with securities and financial regulations. ●Major financing and other business risk exposures. ●Information security, technology, and privacy and data protection. | Governance Committee ●Monitors governance structure, policies and processes. ●Legal and policy matters with potential significant reputational impact. ●Shareholder concerns. | Compensation Committee ●Oversees executive compensation policies and practices. ●Independent compensation consultant assesses the Company’s compensation arrangements to determine if their provisions and operations create undesired or unintentional risks of a material nature. | Health, Safety, Environmental and Technical Committee ●Oversees operational, reserves, and other technical risks, environment, health and safety compliance, as well as risks relating to public policy initiatives. |
Following consideration of the information provided by management, the Board provides feedback and makes recommendations, as needed, to help minimize the Company’s risk exposure. We also believe that our leadership structure and the use of executive sessions aids the Board in risk oversight.
The Audit Committee is responsible for considering and discussing major financial risk exposures and the steps management has taken to monitor and control these exposures. The committee regularly reviews and monitors compliance with securities and financial regulations, in addition to overseeing the audit work performed on behalf of the Company in the area of internal audit for compliance with the Sarbanes-Oxley Act. The committee meets at least quarterly to review the major financial risk exposures in connection with various matters, including the filing of quarterly reports with the SEC.
The Corporate Governance and Directors’ Nominating Committee monitors the effectiveness of the Company’s Corporate Governance Guidelines and other corporate governance matters.
The Compensation Committee assesses and monitors whether any of the Company’s compensation policies and programs have the potential to encourage excessive risk-taking. In 2015, with the assistance of Mercer (US) Inc. (“Mercer”), a wholly owned subsidiary of Marsh & McLennan Companies, Inc. (a compensation consulting firm engaged by the committee), the committee assessed the Company’s compensation arrangements to determine if their provisions and operation create undesired or unintentional risks of a material nature. The committee found that our compensation policies and practices do not create inappropriate or unintended significant risk to the Company as a whole.
To the extent any risks identified by each standing committee of the Board are material or otherwise merit discussion by the whole Board, the respective committee chair will raise such risks at the next scheduled meeting of the Board, or sooner if merited.
For the foregoing reasons, we have determined that our risk oversight is appropriate in the context of our specific circumstances, risk management efforts, and the Board’s administration of its oversight function.
Our Corporate Governance Guidelines provide, among other things, that the Board will have a majority of directors who meet the criteria for independence required by the NYSE. In determining independence each year, the Corporate Governance and Directors’ Nominating Committee affirmatively determines whether directors have any “material relationship” with the Company. When assessing the “materiality” of a director’s relationship with the Company, the committee
2018 Proxy Statement19
CORPORATE GOVERNANCE AND RELATED MATTERS |
Governance Committee considers all relevant facts and circumstances, not merely from the director’s standpoint, but from that of the persons or organizations with which the director has an affiliation. The committeeGovernance Committee also reviews the frequency or regularity of services or transactions between the Company and directors, whether the services or transactions are being carried out at arm’s length in the ordinary course of business and whether the services or transactions are being provided substantially on the same terms to the Company as those prevailing at the time from unrelated parties for comparable services or transactions. Material relationships can include commercial, banking, industrial, consulting, legal, accounting, charitable and familial relationships. To guide its determination of whether a director is independent, the Board has adopted the following NYSE listing standards:
A director will not be independent if:
● | the director is, or has been, within the last three years, our employee, or an immediate family member |
● | the director or an immediate family member has received, during any twelve-month period within the last three years, more than $120,000 in directcompensation from us, other than director and committee fees and pension and other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); |
● | the director is: (i) a current partner or employee of a firm that is our internal or external auditor; (ii) the director has an immediate family member who is a current partner of a firm that is our internal or external auditor and who personally works on the Company’s audit; (iii) the director has an immediate family member who is a current employee of a firm that is our internal or external auditor and who personally works on the Company’s audit; or (iv) the director or an immediate family member was within the last three years a partner or employee of a firm that is our internal or external auditor and personally worked on our audit within that time; |
● | the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company’s compensation committee; or |
● | the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, us for property or services in an amount which, in any of the last three calendar years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues. |
Pursuant to our Corporate Governance Guidelines, the committee undertook its annual review of director independence in February 2016.2018. During this review, the committee considered transactions and relationships between each director or any member of his immediate family and Hecla and our subsidiaries and affiliates, including relationships described below and any reported on page 25______ underCertain Relationships and Related Transactions.Transactions. The committee also examined transactions and relationships between directors or their affiliates and members of our senior management or their affiliates. As provided in the Corporate Governance Guidelines, the purpose of this review was to determine whether any such relationships or transactions were inconsistent with a determination that the director is independent.
Based upon an assessment of all facts and circumstances known to the committee, including, among other things, a review of questionnaires submitted by our directors, the committee and the Board affirmatively determined that the following directors are independent of the Company and its management under the standards set forth by the NYSE:
Ted Crumley | Stephen F. Ralbovsky |
Catherine J. Boggs | Terry V. Rogers |
George R. Johnson | Charles B. Stanley |
George R. Nethercutt, Jr. |
Messrs. Stanley and Baker both serve as members of the board of directors of QEP Resources, Inc., of which Mr. Stanley is also the chief executive officer. The committee reviewed this relationship with the Board, and the Board made the affirmative decision that this relationship did not disqualify Mr. Stanley from being independent. Neither Mr. Baker nor Mr. Stanley serves on the Compensation Committee of either Hecla or QEP Resources, Inc.
Mr. Baker is our President and CEO. As such, he cannot be deemed independent under the NYSE listing standards.
Directors are expected to immediately inform the Board of any material change in their circumstances or relationships that may impact their independence.
2 | An “immediate family member” includes a person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home. |
3 | The term “executive officer” has the same meaning specified for the term “officer” in Rule 16a-1(f) under the Exchange Act, or any successor rule. |
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CORPORATE GOVERNANCE AND RELATED MATTERS |
The Company has no current retirement plan for non-management directors. Our Bylaws and Corporate Governance Guidelines provide that directors will not be nominated for re-election after their 75thbirthday.
As of December 31, 2017, the average age of members of our Board was approximately 66 and the average tenure of our Board was approximately 10 years.
There are currently no family relationships between the directors or executive officers of Hecla.
Board Leadership and Executive Sessions
Currently, the positions of CEO and Chairman of the Board (“Chairman”) are held by separate persons. The Board believes this structure is optimal for the Company at this time because it allows the CEO to focus on leading the Company’s business and operations, and the Chairman to serve as a sounding board and advisor to the CEO, and to lead the activities of the Board. The Board has also determined that having a non-management director serve as Chairman is in the best interest of shareholders. This structure ensures a greater role for the independent directors in the oversight of the Company and it enhances the Board’s independence and, we believe, senior management’s accountability to the Board.
If the individual elected as Chairman is the CEO, the independent directors will elect an Independent Lead Director for a one-year term. This would help ensure continued robust independent leadership of the Board.
Currently, our Chairman, Mr. Ted Crumley, chairs meetings of the Board, as well as the executive sessions with independent members of the Board. His duties include chairingincludechairing annual meetings of shareholders, overseeing the preparation of agendas forBoardfor Board meetings, preparing for executive sessions of the Board and providing feedback to the CEO, staying current on developments to determine when it may be appropriate to alert the Board to significant pending developments, serving as a liaison between independent directors and the CEO with respect to sensitive issues, and other matters. Executive sessions of non-managementindependent directors are included on the agenda for every regularly scheduled Board meeting and during 2015,2017, executive sessions were held at each regularly scheduled Board meeting. The executive sessions are chaired by the Chairman. Our non-managementindependent directors meet in executive sessions without management present, unless the non-managementindependent directors request their attendance.
For the foregoing reasons, we have determined that our leadership structure is appropriate in the context of our specific circumstances.
Director Orientation and Continuing Education
Upon joining the Board, new directors undergo a comprehensive orientation program that introduces them to the Company, including our business operations, strategy, financial position, key members of management and corporate governance. This program is considered a valuable part of the director onboarding process. Directors also are encouraged to enroll in director education programs. To enhance the Board’s understanding of someof the unique issues affecting our mining operations, directors are regularly invited to visit our mine sites, where they tour the facilities and interact directly with the personnel responsible for our day-to-day operations. These activities collectively help to ensure that the Board remains knowledgeable about the most important issues affecting our Company and its business.
2018 Proxy Statement21
CORPORATE GOVERNANCE AND RELATED MATTERS |
Our Board’s Commitment to Shareholder Engagement
Why and how we engage. Our Board and management team recognize the benefits of regular engagement with our shareholders in order to remain attuned to their different perspectives on matters affecting Hecla. Dialogue and engagement efforts allow our Board and management the opportunity to:
● | discuss developments in our business and provide transparency and insight about our strategy and performance; and |
● | assess issues that may affect our business, corporate responsibility and governance practices. |
1 | Investor Relations and Senior | 2 | Shareholder | |
●We provide institutional investors, proxy advisors and equity analysts with opportunities and events to engage with and provide feedback to our senior management. ●Our senior management participates in formal industry conferences, analyst conferences and non-deal roadshows. ●To learn more about our engagement with institutional investors, please visit our website at http://ir.hecla-mining.com/Presentations. | ●During October and November 2017, we engaged with investors representing nearly 15% of our shareholder base. | |||
4 | Outcome from | 3 | Board | |
Some tangible examples of the results of our shareholder outreach activities include: ●Enhanced our proxy statement disclosures to provide more detail on our: ●executive compensation program; ●board/committee evaluation process; ●environmental, social and governance responsibilities; and ●Board’s risk oversight. | ●Because of this outreach, we deliver our shareholders’ views and specific feedback to the Board and respective committees. |
Board Self-Evaluationand Committee Evaluations
EachOur Board recognizes that a thorough, constructive evaluation process enhances our Board’s effectiveness and is an essential element of good corporate governance. Accordingly, every year, our Board and each committee of the Board conducts a self-evaluation of its performance and effectiveness. As partOur Board and committee evaluations cover the following topics:
● | Board and committee composition, including skills, background and experience; |
● | Review of key areas of focus for the Board and committees, and effectiveness in overseeing those responsibilities; |
● | Satisfaction of director performance, including that of the Board chair; |
● | Board and committee information needs and quality of materials presented; |
● | Areas where the Board should increase their focus; |
● | Satisfaction with the Board and committee schedules, agendas, time allocated for topics and encouragement of open communication and discussion; |
● | Access to management, experts and internal and external resources; |
● | Oversight of financial reporting process and internal control procedures; |
● | Ethics and compliance; |
● | Company’s strategic direction and annual operating plan; |
● | Succession planning; |
● | Selection and evaluation process of Board candidates; and |
● | Understanding risks. |
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CORPORATE GOVERNANCE AND RELATED MATTERS |
1 | Corporate | 2 | Annual Board | 3 | Summary of | 4 | Board and | |||
During 2017, we re-examined our evaluation process to ensure that the process allows directors the opportunity to provide actionable feedback on the functioning of the Board as a whole. As a result, the evaluation process was conducted on an anonymous basis, using our board portal. | The Board and each committee conduct annual evaluations through the use of an electronic questionnaire that covers the topics discussed above. | Hecla’s Secretary aggregates and summarizes our directors’ responses to the questionnaires, highlighting comments. Responses are not attributed to specific Board or committee members to promote candor. | Using the questionnaires and summaries as guides, our chairperson of the Governance Committee reviews the results of the Board evaluation and each committee chairperson reviews the results of each committee evaluation. The evaluations and summaries are shared and discussed with the full Board and each committee. The Board and committees assess the progress in the areas targeted for improvement a year earlier, and develop actions to take to enhance the Board and committee’s effectiveness over the next year. |
Committees of the Board and Committee Assignments
The Board has five standing committees: Audit; Compensation; Corporate Governance and Directors’Directors Nominating; Health, Safety, Environmental &and Technical; and Executive. Information regarding these committees is provided below. With the exception ofExcept for the Executive Committee, all committees are composed entirely of independent directors. With the exception of the Executive Committee, theThe charters of each of the other committeescommittee (other than Executive) are available on the Company’sour website at http://www.hecla-mining.com under “Investors” by selecting “Corporate Governance.” You may also obtain copies of these charters by contacting the Company’s Investor Relations Department. The members of the Board on the date of this Proxy Statement, and the committees of the Board on which they serve, are identified below, along with the number of meetings held in 2015.
In 2015, the Audit Committee consisted of John H. Bowles (Chair), Charles B. Stanley, and Terry V. Rogers. After the death of Mr. Bowles in December 2015, the Corporate Governance and Directors’ Nominating Committee recommended and the Board approved the appointment of Charles B. Stanley as the Chair and also appointed Ted Crumley to the Audit Committee. As of the filing of our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2015, on February 23, 2016, the committee members consisted of Charles B. Stanley (Chair), Ted Crumley and Terry V. Rogers.
At a meeting held in February 2016, the Corporate Governance and Directors’ Nominating Committee recommended and the Board approved the appointment of George R. Johnson and Stephen F. Ralbovsky to the Audit Committee, effective March 1, 2016. Mr. Johnson was also appointed to the Health, Safety, Environmental and Technical Committee, effective March 1, 2016. Mr. Ralbovsky was also appointed to the Corporate Governance and Directors’ Nominating Committee, effective March 1, 2016.
At the effective time of the appointments of Messrs. Johnson and Ralbovsky to the Audit Committee on March 1, 2016, Mr. Crumley withdrew as a member of the Audit Committee.2017.
Executive Committee Members | Functions of the Committee | Meetings in | ||||||
Phillips S. Baker, Jr., Chair | ●empowered with the same authority as the Board in the management of our business, except for certain matters enumerated in our Bylaws |
| ||||||
Audit Committee Members1, 2, 3 | Functions of the Committee | Meetings | ||||||
Stephen F. Ralbovsky, Chair | ●assist the Board in fulfilling its oversight responsibilities ●review the integrity of our financial statements ●review the independent auditor’s qualifications and independence ●review the performance of our internal auditor and the independent auditor ●review our compliance with laws and regulations, including disclosure controls and procedures ●please refer to |
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CORPORATE GOVERNANCE AND RELATED MATTERS |
Compensation Committee Members2 | Functions of the Committee | Meetings in | ||||||
Terry V. Rogers, Chair | ●approve compensation levels and programs for the executive officers, including the CEO ●administer our stock-based plans ●please refer to the “Compensation Discussion and Analysis” on page | 5 | ||||||
Corporate Governance and | Functions of the Committee | Meetings | ||||||
| ●consider matters of corporate governance ●periodically review our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and other corporate procedures to ensure compliance with laws and regulations ●review any director candidates, including those nominated or recommended by shareholders ●identify individuals qualified to become directors consistent with criteria approved by the Board ●recommend to the Board the director nominees for the next annual meeting of shareholders, any special meeting of shareholders, or to fill any vacancy on the Board ●review the appropriateness of the size of the Board relative to its various responsibilities ●recommend committee assignments and committee chairpersons for the standing committees for consideration by the Board |
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Health, Safety, Environmental Technical Committee Members | Functions of the Committee | Meetings | ||||||
Charles B. Stanley, Chair | ●review the operational and exploration performance ●review the operational, reserve and other technical risks ●review and monitor health, safety and environmental policies ●review the implementation and effectiveness of compliance systems ●review the effectiveness of health, safety and environmental policies, systems and monitoring processes ●review audit results and updates from management with respect to health, safety and environmental performance ●review emerging health, safety and environmental trends in legislation and proposed regulations affecting the Company ●review the technical activities of the Company ●make recommendations to the Board concerning the advisability of proceeding with the exploration, development, acquisition or divestiture of mineral properties and/or operations | 4 |
1 | The Board has determined that each of the members of the Audit Committee is financially literate and Messrs. |
2 | Each member of the Audit, Compensation, and Corporate Governance and |
3 | No members on the Audit Committee |
While the Board has not adopted a formal policy on diversity, the Company’s Corporate Governance Guidelines provide that, as a whole, the Board should include individuals with a diverse range of experience to give the Board depth and breadth in the mix of skills represented. The Board seeks to include an array of skills and experience in its overall composition ratherthanrather than requiring every director to possess the same skills, perspective, and interests. This guideline is implemented by seeking to identify candidates who bring diverse skill sets, backgrounds, and experiences, including ethnic and gender diversity, to the Board when director candidates are needed.
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CORPORATE GOVERNANCE AND RELATED MATTERS |
Shareholders or other interested parties wishing to communicate with the Chairman or with the independent directors as a group may do so by delivering or mailing the communication in writing to: Chairman of the Board, c/o Corporate Secretary, Hecla Mining Company, 6500 N. Mineral Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408. Concerns relating to accounting, internal controls or auditing matters are immediately brought to theattention ofthe attentionof our internal auditor and handled in accordance with procedures established by the Audit Committee with respect to such matters. From time to time, the Board may change the process by which shareholders may communicate with the Board or its members. Please refer to our website at http://www.hecla-mining.com under the tab entitled “Investors” and then select the tab entitled “Corporate Governance” for any changes in this process.
In light ofConsidering the critical importance of executive leadership to the Company’s success, the Compensation Committee is charged with the responsibility of developing a process for identifying and evaluating candidates to succeed our CEO and to report annually to the Board on the status of the succession plan, includingplan. As part of the annual report, the committee may also address issues related to the preparedness for the possibility of an emergency situation involving senior management and an assessment of the long-term growth and development of the senior management team.
The CEO and Director of Human Resources make a formal succession planning presentation tocommunicate with the Compensation Committee annually.annually regarding succession planning. The Compensation Committee reviews recommended candidates for senior management positions as part of the process to identify and gauge the availability of qualified candidates for those positions and receives reports concerning development plans that are utilized to strengthen the skills and qualifications of the candidates. The criteria used when assessing the qualifications of potential CEO successors include, among others, strategic vision and leadership, operational excellence, financial management, executive officer leadershipofficerleadership development, ability to motivate employees, and an ability to develop an effective working relationship with the Board.
In 2015, the Compensation Committee conducted a full executive talent review of all NEOs, with an emphasis on CEO succession. In connection with that review, the Compensation Committee identified potential successors to the CEO.
In conjunction with theour succession review,reviews, management also reviewedreviews potential successors for the top management roles across Hecla. In connection with that review,those reviews, we concludedcan conclude that “ready now” potential successors exist for approximately one-third of those roles, which represents an increase in the level of readiness of our talent compared to previous years.exist. We createdcreate development plans for the potential successors who wereare identified as being ready in one to two years or three to five years. By the end of 2015, we had greater visibility into our talent poolThose potential successors are then sent to specific leadership classes and we used that information to build the succession plansseminars for the next tier of critical roles.further training.
Our Corporate Governance Guidelines also provide that in the event of the death, resignation, removal or incapacitation of the President and CEO, the Chairman will act as the President and CEO until a successor is duly elected. In addition, our Corporate Governance Guidelines and Bylaws provide that in the event of the death, resignation, removal or incapacitation of our current Chairman, the President and CEO will act as Chairman until his successor is duly elected.
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Electronic Access to Corporate Governance Documents
Our corporate governance documents are available by accessing our website at http://www.hecla-mining.com under the tab entitled “Investors” and then selecting the tab entitled “Corporate Governance.” These include:
● | Corporate Governance Guidelines; |
● | Whistleblower Policy; |
● | Charters of the Audit, Compensation, Corporate Governance and |
● | Code of Ethics for our Chief Executive Officer and Senior Financial Officers; and |
● | Code of Business Conduct and Ethics for Directors, Officers and Employees. |
Shareholders may also request a free copy of these documents from: Investor Relations, Hecla Mining Company, 6500 N. Mineral Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408; (208) 769-4100.
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CORPORATE GOVERNANCE AND RELATED MATTERS |
Corporate Governance Guidelines
The Corporate Governance Guidelines were adopted by the Board to ensure that the Board is independent from management, that the Board adequately performs its function as the overseer of management, and to help ensure that the interests of the Board and management align with the interests of our shareholders. In December 2014,February 2017, the Corporate Governance and Directors’ Nominating Committee recommended and the Board amendedapproved amendments to the Corporate Governance Guidelines to more precisely track statutory requirementsinclude a director resignation policy. The policy provides that any director who is not elected by a majority of votes cast shall tender his or her resignation to improvethe Governance Committee. The Governance Committee will recommend to the Board whether to accept or reject the resignation offer, or whether other action should be taken. In determining whether to recommend that the Board accept any resignation offer, the Governance Committee will be entitled to consider all factors believed relevant by the Governance Committee’s members. The Board will act on the Governance Committee’s recommendation within ninety (90) days following certification of the election results. In deciding whether to accept the resignation offer, the Board will consider the factors considered by the Governance Committee and any additional information and factors that the Board believes to be relevant. If the Board accepts a director’s resignation offer pursuant to this process, the Governance Committee will recommend to the Board and the Board will thereafter determine whether to fill such vacancy or reduce the size of the Board. Any director who tenders his or her resignation pursuant to this provision will not participate in the proceedings of either the Governance Committee or the Board with respect to his or her own resignation offer. If a director’s resignation is not accepted by the Board, the director shall continue to serve until the next annual meeting of shareholders or until his or her successor is duly elected and qualified, or his or her earlier resignation or removal. If a director’s resignation is accepted by the Board, then the Board, in its clarity and functionality, as well as to more closely matchsole discretion, shall fill any resulting vacancy or decrease the Company’s evolving practices.size of the Board.
Code of Business Conduct and Ethics
We believe that operating with honesty and integrity has earned trust from our shareholders, credibility within our community, and dedication from our employees. Our directors, officers and employees are required to abide by our Code of Business Conduct and Ethics (“Code of Conduct”) to promote the conduct of our business in a consistently legal and ethical manner. Our Code of Business Conduct and Ethics covers many topics, including conflicts of interest, confidentiality, fair dealing, proper use of the Company’s assets, and compliance with laws, rules and regulations. In addition to the Code of Business Conduct and Ethics for directors, officers and employees, our CEO, Chief Financial Officer and Controller are also bound by a Code of Ethics for the Chief Executive Officer and Senior Financial Officers.
The Corporate Governance and Directors’ Nominating Committee has adopted procedures to receive, retain, and react to complaints received regarding possible violations of the Code of Business Conduct, and Ethics, and to allow for the confidential and anonymous submission by employees of concerns regarding possible violations of the Code of Business Conduct and Ethics.Conduct. Our employees may submit any concerns regarding apparent violations of the Code of Business Conduct and Ethics to their supervisor, our General Counsel, the Chair of the Corporate Governance and Directors’ Nominating Committee, or through an anonymous telephone hotline.
In December 2017, the Governance Committee recommended and the Board approved certain amendments to the Code of Conduct. The amendments included new sections to the Code of Conduct (i.e., conflicts of interest, harassment, accounting policies, computer and information systems, disclosure and public communications, community engagement, safety, health and security, environmental, and record retention).
We have a Whistleblower Policy adopted by our Audit Committee that encourages our employees to report to appropriate Company representatives, without fear of retaliation, certain accounting information relating to possible fraud. Our employees may submit any concerns regarding financial statement disclosures, accounting, internal accounting controls or auditing matters to the Audit Committee, our General Counsel, or through an anonymous telephone hotline.hotline or website. The goal of this policy is to discourage illegal activity and business conduct that damages Hecla’s reputation, business interests, and our relationship with shareholders.
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CORPORATE GOVERNANCE AND RELATED MATTERS |
Certain Relationships and Related Transactions
We review all relationships and transactions with related persons to determine whether such persons have a direct or indirect material interest. Transactions with related persons are those that involve our directors, executive officers, director nominees, greater than 5% shareholders, immediate family members of these persons, or entities in which one of these persons has a direct or indirect material interest. Transactions that are reviewed as related party transactions by us are transactions that involve amounts that would exceed $120,000 (the current threshold required to be disclosed in the Proxy Statement under SEC regulations) and certain other transactions. Pursuant to our Code of Business Conduct, and Ethics, employees and directors have a duty to report any potential conflicts of interest to the appropriate level of management or to the Corporate Governance and Directors’ Nominating Committee. We evaluate these reports along with responses to our annual director and officer questionnaires for any indication of possible related party transactions. Our legal staff is primarily responsible for the development and implementation of processes and controls to obtain information from the directors and executive officers with respect to related party transactions. If a transaction is deemed by us to be a related party transaction, the information regarding the transaction is discussed with the Board. As required under the SEC rules, transactions that are determined to be directly or indirectly material to Hecla or a related party are disclosed in our Proxy Statement.
In December 2007, we created the Hecla Charitable Foundation (the “Foundation”“HCF”). We have made and intend to continue to make charitable contributions to the Foundation,HCF, which in turn has provided and intends to continue to provide grants to other organizations for charitable and educational purposes. James A. SabalaMessrs. Phillips S. Baker, Jr. and Dr. Dean W.A. McDonald (our Senior Vice PresidentChief Executive Officer and Chief Financial Officer andour Senior Vice President – Exploration, respectively) serve as directors of the Foundation.HCF, and Luther J. Russell (our Vice President – External Affairs) serves as President and as a director of the HCF. In December 2007, our Board madeapproved a contribution of 550,000 shares of our common stock to the Foundation.HCF. Since 2007, the FoundationHCF has sold 279,860 shares of our common stock. Cash contributions totaling $2.0 million and $1.5 million were made by the Company to the FoundationHCF during 2011 and 2010, respectively. The funds from the sale of the shares and the additional cash were put into various investment accounts. The FoundationHCF is currently operating in a self-sufficient manner. The CompanyWe gave no additional funds to the FoundationHCF during 2015.2017. The FoundationHCF holds 270,140 shares of our common stock as of December 31, 2015.2017. The value of those shares based on the closing price of our common stock on the NYSE on December 31, 201529, 2017 ($1.89)3.97), was $510,565.$1,072,456. In 2015,2017, the FoundationHCF gave $331,575.13$343,678 in donations.
In 2015,2017, we did not make any contribution to any charitable organization, of which a director served as an executive officer, which exceeded the greater of $1 million or 2% of the charitable organization’s consolidated gross revenues.
It is Hecla’s policy that Company funds or assets will not be used to make a political contribution to any political party or candidate. The Hecla Mining Company Political Action Committee (“Hecla PAC”) is a forum for employees to voluntarily contribute to a fund that supports the election of candidates to Congress that support the principles of free enterprise, good government, and a fair and reasonable business environment for the natural resources industry. Decisions about contributions to specific federal candidates are made by members of the Hecla PAC. In total, Hecla employees, through the Hecla PAC, contributed less than $1 million in 2017 to political parties and candidates.
2018 Proxy Statement27
COMPENSATION OF NON-MANAGEMENT DIRECTORS
The Compensation Committee of the Board is responsible for recommending to the independent members of the Board the form and amount of compensation for our non-management directors. The independent members of the Board consider the committee’s recommendation and make final determination of non-management director compensation.
Compensation for non-management directors is designed to reflect current market trends and developments with respect to compensation of board members. It consists of a combination of cash retainers and equity awards.
The Compensation Committee periodically engages its independent compensation consultant to benchmark director compensation against the Company-selected peer group, which is the same group of companies the committee uses to benchmark executive compensation (see page ___ for a list of these companies). When considering non-management director compensation for calendar year 2017, the committee reviewed and considered the results of a benchmarking report prepared by the Compensation Committee’s independent compensation consultant. The report reviewed the Company’s calendar year annual cash retainers, fees for Board and committee chairmanships, and the annualized present value of equity compensation for the Company-selected peer group (primarily based on reported calendar year 2016 compensation or calendar year 2017 compensation, if disclosed). The following discussion of compensation applies only to our non-management directors, and does not apply to Mr. Baker who, as an employee of the Company, is compensated as an executive officer and does not receive additional compensation for his service as a director.
Components of Non-Management Director Compensation
Compensation Element | Value | |
Annual Board Retainer | $ | 66,000 |
Annual Board Chairman Retainer | $ | 90,000 |
Annual Committee Retainer for: | $ | 12,000 |
●Health, Safety, Environmental & Technical Committee ●Audit Committee ●Compensation Committee | ||
Annual Committee Chairman Retainer for: | $ | 12,000 |
●Health, Safety, Environmental & Technical Committee ●Audit Committee ●Compensation Committee | ||
Annual Committee Retainer for: | $ | 8,000 |
●Corporate Governance and Directors Nominating Committee ●Executive Committee | ||
Annual Committee Chairman Retainer for: | $ | 8,000 |
●Corporate Governance and Directors Nominating Committee | ||
Annual Equity | $ | 100,000 |
Annual cash retainers are paid in quarterly installments. No other attendance fees are paid to the non-management directors.
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COMPENSATION OF NON-MANAGEMENT DIRECTORS |
On May 25, 2017, our shareholders approved the amended and restated Hecla Mining Company Stock Plan for Nonemployee Directors (“Director Stock Plan”). The plan is currently scheduled to terminate May 15, 2027, and is subject to termination by the Board at any time. Pursuant to the current plan, before September 30 each year, each non-management director is credited with a number of shares determined by dividing $100,000 by the average closing price for Hecla’s common stock on the NYSE for the prior calendar year. A minimum of 25% of the annual stock retainer under the Director Stock Plan will be contributed to a grantor trust established by the Company. Each director may elect, prior to the first day of the applicable year, to have a greater percentage contributed to the grantor trust for that year. The remaining portion of the stock retainer will be transferred to the non-management director as soon as practicable.
Non-management directors joining the Board after September 30 of any year will be credited with a pro rata grant of shares when they join the Board. A minimum of25% of their stock retainer for that year will be contributed to the trust. Each director may elect, within 30 days after becoming a participant in the Director Stock Plan, to have a greater percentage contributed to the grantor trust for that year. The remaining portion will be transferred to these directors as soon as practicable after they become members of the Board.
The shares held in the grantor trust are subject to the claims of our creditors until delivered under the terms of the Director Stock Plan. Delivery of the shares from the trust occurs upon the earliest of: (i) death or disability; (ii) retirement from the Board; (iii) a cessation of the director’s service for any other reason; (iv) a change in control of the Company (as defined in the Director Stock Plan); or (v) a time elected by the director, except that shares must be held in the trust for at least two years prior to delivery. As of December 31, 2017, there were 3,282,337 shares remaining available for issuance under the Director Stock Plan.
The following chart summarizes the annual cash and equity compensation for our non-management directors during 2017.
Non-Management Director Compensation for 2017
Director | Fees Earned or Paid in Cash ($) | Stock Awards1 ($) | All Other Compensation2 ($) | Total ($) | ||||
Catherine J. Boggs | 92,000 | 108,667 | 3 | 0 | 221,181 | |||
20,514 | 4 | |||||||
Ted Crumley, Chairman | 176,000 | 108,667 | 3 | 0 | 284,667 | |||
George R. Johnson | 90,000 | 108,667 | 3 | 7,500 | 206,167 | |||
George R. Nethercutt, Jr. | 96,000 | 108,667 | 3 | 0 | 204,667 | |||
Stephen F. Ralbovsky | 98,000 | 108,667 | 3 | 0 | 206,667 | |||
Terry V. Rogers | 116,000 | 108,667 | 3 | 3,750 | 228,417 | |||
Charles B. Stanley | 110,000 | 108,667 | 3 | 0 | 218,667 | |||
Dr. Anthony P. Taylor5 | 42,516 | 0 | 0 | 42,516 |
1 | The amounts shown in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. For a description of the assumptions used in valuing the awards please see Note 9 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. |
2 | Amounts in this column reflect matching contributions under the Company’s charitable matching gift program. |
3 | On July 5, 2017, each non-management director received 21,777 shares of our common stock under the terms of the Director Stock Plan. Based on our closing stock price on the NYSE on July 5, 2017 ($4.99), the grant date fair value for each grant of 21,777 shares credited to Ms. Boggs and Messrs. Crumley, Johnson, Nethercutt, Ralbovsky, Rogers and Stanley, was $108,667. (This amount does not reflect the actual amount that may be realized by each director). |
4 | On January 4, 2017, Ms. Boggs received a prorated award of 3,683 shares of our common stock under the terms of the Director Stock Plan. Based on our closing stock price on the NYSE on January 4, 2017 ($5.57), the grant date fair value for the grant of 3,683 shares credited to Ms. Boggs on January 4, 2017, was $20,514. (This amount does not reflect the actual amount that may be realized by Ms. Boggs). |
5 | Dr. Taylor retired from the Board on May 25, 2017. |
2018 Proxy Statement29
COMPENSATION OF NON-MANAGEMENT DIRECTORS |
The Company covers directors under its overall director and officer liability insurance policies, as well as reimbursing them for travel, lodging, and meal expenses incurred in connection with their attendance at Board and committee meetings, meetings of shareholders, and for traveling to visit our operations. Directors are eligible, on the samebasis as Company employees, to participate in the Company’s matching gift program, pursuant to which the Hecla Charitable Foundation matches contributions made to qualifying nonprofit organizations. Beyond these items, no other cash compensation was paid to any non-management director.
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PROPOSAL 2 – |
PROPOSAL 2 – APPROVAL OF AMENDMENTS TO THE COMPANY’S CERTIFICATE OF INCORPORATION AND BYLAWS TO REMOVE CERTAIN 80% SUPERMAJORITY VOTING PROVISIONS
There are certain provisions in our Certificate of Incorporation (the “Certificate”) and Bylaws that can only be revised through the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of our capital stock entitled to vote generally in the election of directors. We refer to these shares as “Voting Stock” and to this voting requirement as “80% supermajority” throughout this Proposal 2 and Proposal 3. Certain of these provisions relate to the authority to call special meetings of shareholders, and currently, only our Board has such authority.
We are seeking the approval of our shareholders to amend our Certificate and Bylaws to remove those 80% supermajority voting requirements that impact who may call special meetings of shareholders, and replace them with two-thirds voting standards. We refer to this lower voting requirement as “two-thirds vote” throughout this Proposal 2 and Proposal 3. If approved, this proposal would become effective upon the filing of an amendment to our Certificate with the Secretary of State of Delaware, which we intend to do promptly after the required shareholder approval is obtained, at which time the related amendment to our Bylaws would also become effective.
As described more fully below under Proposal 3, in 2014, we sought the approval of our shareholders to amend the Certificate and Bylaws to add a right permittingshareholders who have held at least a 25% “net long position” in our outstanding common stock for at least 120 days to call special meetings of shareholders, subject to the conditions set forth in our Bylaws (we refer to this as the “Special Meeting Proposal”). In order to implement the Special Meeting Proposal, an 80% supermajority vote of our shareholders was required. The 80% supermajority vote was not obtained in 2014 and as a result we were unable to implement the Special Meeting Proposal.
We are again proposing the Special Meeting Proposal at our 2016 Annual Meeting of Shareholders. It is described in Proposal 3 below.
We believe that the 80% supermajority vote requirement is an impediment to implementing the Special Meeting Proposal because of the difficulty in getting the holders of that many shares to vote at a shareholders meeting. If instead of the 80% supermajority provisions, the required vote to implement the Special Meeting Proposal was two-thirds of the Voting Stock, we believe the Special Meeting Proposal would have a better chance to be approved by our shareholders. However, even with the change to the lower two-thirds vote requirement, there is no assurance that the Special Meeting Proposal will be approved by the required vote of our shareholders. SeeRequired Vote, Our Board’s Recommendation and Additional Informationon page 28.
Current Provisions in Certificate and Bylaws
Currently, the Certificate states that shareholders can alter, amend or repeal certain Bylaws relating to calling a special meeting of shareholders, only if that action is approved by at least 80% supermajority rate (this supermajority voting provision is in Article V of the Certificate). Likewise, the Certificate currently states that at least 80% supermajority vote is necessary to alter, amend or repeal Article VII of the Certificate, which provides that special meetings of shareholders can only be called by our Board. Finally, the Bylaws also contain a similar provision regarding amending the provision therein concerning calling special meetings of shareholders.
Set forth below are the relevant provisions of the Certificate and Bylaws:
ARTICLE V.
Bylaws
In furtherance and not in limitation of the powers conferred by law, the Board is expressly authorized to make, repeal, alter, amend and rescind the bylaws of the Corporation by a majority vote of the entire Board at any regular or special meeting of the Board;provided, however that, notwithstanding anything contained in this Certificate of Incorporation or the Bylaws of the Corporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to (i) alter, amend or repeal any provision of the Bylaws which is substantially identical to and/or implements the last sentence of Article IV or Articles VI, VII or VIII, of this Certificate of Incorporation, or (ii) alter, amend or repeal any provision of this proviso to Article V.
ARTICLE VII.
Actions by Shareholders
Any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of shareholders of the Corporation and may not be effected by any consent in writing by such shareholders.Special meetings of shareholders of the Corporation may be called only by the Board pursuant to a resolution approved by a majority of the entire Board. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to alter, amend or repeal this Article VII.
ARTICLE VI.
Amendments
These Bylaws may be altered or repealed and Bylaws may be made at any annual meeting of the shareholders or at any special meeting thereof if notice of the proposed alteration or repeal of Bylaws to be made be contained in the notice of such meeting, by the affirmative vote of the holders of a majority of the total voting power of all outstanding shares of the voting stock of the Corporation. These Bylaws may also be altered or repealed and Bylaws may be made by the affirmative vote of a majority of the Board of Directors, at any annual or regular meeting of the Board of Directors, or at any special meeting of the Board of Directors if notice of the proposed alteration or repeal, or Bylaws or Bylaws to be made, be contained in the notice of such special meeting.
Notwithstanding anything contained in these Bylaws to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Section 4 or 6 of Article II, or Section 1, 2 or 3 of Article III, of these Bylaws.
Proposed Amendments to Certificate and Bylaws
This Proposal 2 proposes to amend the Certificate and Bylaws so that future amendments to certain provisions within the Certificate and the Bylaws can be approved by a two-thirds vote of the outstanding shares rather than an 80% supermajority vote. Specifically, in this Proposal 2, we propose:
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Required Vote, Our Board’s Recommendation and Additional Information
Our Board is committed to good governance practices and this Proposal 2 is the result of our Board’s ongoing review of our corporate governance principles. As part of that review, our Board recognizes that the chances of obtaining shareholder approval of the Shareholder Meeting Proposal described below in Proposal 3 in the future (if it is not approved at the 2016 Annual Meeting) may be improved if the changes to the Certificate and Bylaws described in this Proposal 2 are approved by our shareholders. Although Proposal 2 and Proposal 3 will each require the affirmative vote of holders of at least 80% of our outstanding shares of common stock, the approval of one of these proposals is not conditioned on the other, and if Proposal 2 is passed but Proposal 3 is not, then if in the future we again seek approval of the Special Meeting Proposal, it would only need to be approved by the lower two-thirds vote rather than the current 80% supermajority vote.
After receiving shareholder input and the advice of management and outside advisors, our Board considered the relative weight of the arguments in favor of and opposed to maintaining the 80% supermajority voting requirements described herein. As a result, and based upon the recommendation of the Corporate Governance and Directors’ Nominating Committee, our Board, at its meeting on February 20, 2016, approved and declaredadvisable and in our shareholders’ best interests, the amendments to the Certificate and Bylaws described in this Proposal 2.
The above description is a summary, and is qualified by and subject to the full text of the proposed amendments to our Certificate and Bylaws, which are set forth inAppendix A andAppendix B, respectively. Additions of text contained in the appendices are indicated by underlining and deletions of text are indicated by strikeouts.
According to our current Certificate and Bylaws, approval of this proposal requires the affirmative vote of holders of at least 80% of our outstanding shares of common stock.
PROPOSAL 3 – APPROVAL OF AMENDMENTS TO THE COMPANY’S CERTIFICATE OF INCORPORATION AND BYLAWS TO PERMIT SHAREHOLDERS TO CALL SPECIAL MEETINGS OF SHAREHOLDERS UNDER CERTAIN CIRCUMSTANCES
We are seeking the approval of our shareholders to amend our Certificate and Bylaws to add a right permitting shareholders who have held at least a 25% “net long position” in our outstanding common stock for at least 120 days to call special meetings of shareholders, subject to the conditions set forth in our Bylaws, as described below. Currently, shareholders do not have the right to call special shareholder meetings; only our Board can call such meetings. If approved, this proposal would become effective upon the filing of an amendment to our Certificate with the Secretary of State of Delaware, which we intend to do promptly after the required shareholder approval is obtained, at which time the related amendment to our Bylaws would also become effective.
We proposed these same amendments for shareholder approval at our 2014 Annual Shareholder Meeting. While shareholders owning almost 41% of our Voting Stock voted in favor of these amendments in 2014, the level of support was not sufficient to approve the amendments. SeeRequired Vote, Our Board’s Recommendation andAdditional Information below. Because our Board continues to believe that these amendments are appropriate, we are again asking shareholders to vote “For” these proposed amendments. In addition, under Proposal 2, we are seeking the approval of our shareholders to amend our Certificate and Bylaws to remove all 80% supermajority voting requirements that impact who may call special meetings of shareholders (other 80% supermajority voting requirements will be unaffected), and replace them with two-thirds voting standards. If Proposal 2 is passed, we believe it will improve the chances that an amendment permitting shareholders to call special meetings of shareholders under certain circumstances, if proposed in the future, would be adopted (if Proposal 3 is not adopted at the 2016 Annual Meeting). However, even if Proposal 2 is approved by the required vote of our shareholders, there is no assurance that this Proposal 3 will be approved by the required vote of our shareholders. SeeRequired Vote, Our Board’s Recommendation and Additional Informationon page 30.
Proposed Amendments to Certificate and Bylaws
This Proposal 3 proposes to amend the Certificate and Bylaws to implement the right of shareholders who have held at least a 25% “net long position” in our outstanding common stock for at least 120 days to call special meetings of shareholders, subject to compliance with the requirements set forth in our Bylaws, as proposed to be amended.
Our Board believes that establishing an ownership threshold of at least 25% in order for a shareholder (or group of shareholders) to request a special meeting strikes an appropriate balance between enhancing shareholder rights and avoiding the situations that could arise if the threshold were set so low that a small minority of shareholders, including shareholders with special interests, could force the Company to incur the time and expense of convening a special meeting to consider a matter of little or no interest to other shareholders. Organizing and preparing for a special meeting involves significant attention of our Board and management, which could divert their attention from performing their primary functions: to oversee and operate our business in the best interests of
our shareholders. In addition, for every special meeting of shareholders, the Company incurs significant costs. We will continue to maintain our existing governance mechanisms that afford management and our Board the ability to respond to proposals and concerns of all shareholders, regardless of the level of share ownership.
Establishing a 25% “net long position” threshold for the right to call a special meeting would ensure that matters proposed for consideration have significant support among our shareholders. A shareholder’s “net long position” is generally defined as the amount of common stock in which the shareholder holds a positive (also known as “long”) economic interest, reduced by the amount of common stock in which the shareholder holds a negative (also known as “short”) economic interest. In addition, requiring that shareholders must have held their stock for at least 120 days helps to ensure that their economic interest in the Company’s affairs is more than transitory. Also during the required 120 day holding period, the Company will continue to make disclosure through its statutory filings, which may provide shareholders with information that might avoid an unnecessary call for special meetings of shareholders.
The proposed amendment to our Bylaws contains procedural and information requirements for shareholders to call a special meeting, including, without limitation, that (i) no business may be conducted at the special meeting except as set forth in the Company’s notice of meeting, (ii) a special meeting will not be held if similar business is to be covered at an annual or special meeting called by the Board to be held within 90 days after the special meeting request is received by the Secretary, (iii) no shareholder special meeting request may be made during the period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the date of the next annual meeting, (iv) a special meeting request cannot cover business substantially similar to what was covered at an annual or special meeting held not more than 120 days before the special meeting request was received by the Secretary, (v) any shares beneficially owned or held of record as of the date of the request and sold by the requesting holder prior to the meeting will be treated as a revocation of the request to the extent of the shares sold, and (vi) the requesting shareholder’s notice must include information (as specified in the amendment to the Bylaws) as to the business proposed to be conducted, as to each nominee (if applicable), and as to the shareholder giving notice and the beneficial owner, if any, on whose behalf the proposal is made.
Required Vote, Our Board’s Recommendation and Additional Information
Our Board is committed to good governance practices and this Proposal 3 is the result of our Board’s ongoing review of our corporate governance principles. After receiving shareholder input and the advice of management and outside advisors, our Board considered the relative weight of the arguments in favor of and opposed to the ability of shareholders, under certain circumstances, to call special meetings as described herein. As a result, and based upon the recommendation of the Corporate Governance and Director’s Nominating Committee, our Board, at its meeting on February 20, 2016, approved and declared advisable and in our shareholders’ best interests the amendments to the Certificate and Bylaws described in this Proposal 3.
The above description is a summary, and is qualified by and subject to the full text of the proposed amendments to our Certificate and Bylaws, which are set forth inAppendix C andAppendix D, respectively. Additions of text contained in the appendices are indicated by underlining and deletions of text are indicated by strikeouts.
Our Board has approved this proposal, and according to our current Certificate and Bylaws, approval of this proposal requires the affirmative vote of holders of at least 80% of our outstanding shares of common stock.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR |
PROPOSAL 42 – RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS THE COMPANY’SOUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 20162018
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our financial statements. The committee appointed BDO USA, LLP (“BDO”) as the independent registered public accounting firm for Hecla for the calendar year ending December 31, 2016.2018. BDO has been retained in that capacity since 2001. The committeeAudit Committee is aware that a long-tenured auditor may be believed by some to pose an independence risk. To address these concerns, our committee:Audit Committee:
● | reviews all non-audit services and engagements provided by BDO, specifically with regard to the impact on the firm’s independence; |
● | conducts a quarterly assessment of BDO’s service quality, and its working relationship with our management; |
● | conducts regular private meetings separately with each of BDO and our management; |
● | interviews, and approves the selection of, BDO’s new lead engagement partner with each rotation; and |
● | at least annually obtains and reviews a report from BDO describing all relationships between the independent auditor and Hecla. |
The members of the committeeAudit Committee believe that the continued retention of BDO to serve as our independent registered public accounting firm is in the best interests of Hecla and its shareholders.
Although ratification is not required, the Board is submitting the appointment of BDO to our shareholders for ratification because we value our shareholders’ views on the Company’sour independent registered public accounting firm, and as a matter of good corporategovernance practice. In the event that our shareholders fail to ratify the appointment, it will be considered as a direction to the Board and to the committeeAudit Committee to consider the appointment of a different firm. Even if the appointment is ratified, the committeeAudit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interest of the Company and our shareholders.
Representatives of BDO are expected towill be present at the Annual Meeting with the opportunity to make statements and respond to appropriate questions from shareholders present at the meeting.
The Audit Committee and Board recommend |
2018 Proxy Statement31
PROPOSAL INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR |
The committee’sAudit Committee’s principal functions are to assist the Board in fulfilling its oversight responsibilities, and to specifically review: (i) the integrity of our financial statements; (ii) the independent auditor’s qualifications and independence; (iii) the performance of our internal auditor and the independent auditor; and (iv) our compliance with laws and regulations, including disclosure controls and procedures. During 2015,2017, the committeeAudit Committee worked with management, our internal auditor and our independent auditor to address Sarbanes-Oxley Section 404 internal control requirements. The committeeAudit Committee met eightfive times in 2015.2017.
The committeeAudit Committee acts under a written charter as amended on December 1, 2015.12, 2017. You may obtain a copy of the charter in the “Investors” section of http://www.hecla-mining.com under “Corporate Governance.”
In performing its functions, the Audit Committee:
● | met with our internal auditor and independent registered public accounting firm, with and without management present, to discuss the overall scope and plans for their respective audits, the results of their examinations and their evaluations of Hecla’s internal controls; |
● | reviewed and discussed with management the audited financial statements included in our Annual Report; |
● | discussed with our independent registered public accounting firm the matters required to be discussed by the applicable Public Company Accounting Oversight Board (“PCAOB”) standards; and |
● | received the written disclosures and the letter from our independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered accountant’s communication with the Audit Committee concerning independence, and discussed with them matters relating to their independence. |
Based on the review and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in the Audit Committee Charter, the committeeAudit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the calendar year ended December 31, 2015,2017, for filing with the SEC.
Respectfully submitted by
The Audit Committee of the
Board of Directors
Stephen F. Ralbovsky, Chair
Catherine J. Boggs
George R. Johnson
Charles B. Stanley Chairman6Terry V. RogersTed Crumley7
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PROPOSAL INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR |
The following table represents fees for professional audit services rendered by BDO for the audit of our annual financial statements for the years ended December 31, 20152016 and December 31, 2014,2017, and fees for other services rendered by BDO during those periods.
2015 | 2014 | ||||||
Audit Fees1 | $698,500 | $577,700 | |||||
Audit Related Fees2 | 87,000 | 87,000 | |||||
Tax Fees3 | 3,600 | 17,800 | |||||
All Other Fees | — | — | |||||
Total | $789,100 | $682,500 |
2017 | 2016 | |||
Audit Fees1 | $ | 894,550 | $ | 762,425 |
Audit Related Fees2 | 87,000 | 87,000 | ||
Tax Fees | — | — | ||
All Other Fees | — | — | ||
Total | $ | 981,550 | $ | 849,425 |
1 | Relates to services rendered in connection with the annual audit of our consolidated financial statements, quarterly reviews of financial statements included in our quarterly report on Form 10-Q, |
2 | Consisted principally of fees for audits of financial statements of employee benefit plans. |
The committee’s current practiceAudit Committee requires pre-approval of all audit services and permissible non-audit services to be provided by the independent registered public accounting firm. The committeeAudit Committee reviews each non-audit service to be provided and assesses the impact of the service on the firm’s independence. On a periodic basis, management reports toreportsto the committee regardingAudit Committee the actual spending forprojectsfor projects and services compared to the approved amounts. In addition, the committeeAudit Committee has delegated authority to grant certain pre-approvals to the committeeAudit Committee chair. Pre-approvals granted by the committeeAudit Committee chair are reported to the full committeeAudit Committee at its next regularly scheduled meeting.
2018 Proxy Statement33
COMPENSATION DISCUSSION AND ANALYSIS |
COMPENSATION DISCUSSION AND ANALYSIS
Our Compensation Committee (hereinafter referred to as the “committee”) strives to design a fair and competitive compensation program for executive officers that will attract, motivate and retain highly qualified and experienced executives, reward performance and provide incentives that are based on our performance, with an overall emphasis to maximize our long-term shareholder value. Our executive compensation program consists of several components, including base salary, annual and long-term performance awardsperformanceawards (paid in cash or equity), equity awards, a deferred compensation plan and retirement benefits. ThisCompensation Discussion and Analysis(“CD&A”) provides information regarding our compensation objectives, the relationship between the components of our compensation program and our objectives and factors considered by the committee in establishing compensation levels for our NEOs. The NEOs who are discussed throughout this CD&A and in the compensation tables are:
Name | Age | Principal Position | ||||
Phillips S. Baker, Jr. | President and CEO | |||||
Lindsay A. Hall | Senior Vice President and Chief Financial Officer | |||||
Lawrence P. Radford | Senior Vice President – Operations | |||||
Dr. Dean W.A. McDonald | Senior Vice President – Exploration | |||||
David C. Sienko | Vice President – General Counsel | |||||
Hecla is a leading primary low-cost silver producer with operating silver mines in Alaska (Greens Creek), Idaho (Lucky Friday), and Mexico (San Sebastian) and is a gold producer with an operating mine in Quebec, Canada (Casa Berardi). We also produce lead and zinc. In addition to our diversified silver and gold operating cash-flow generating base,mines, we have a number of exploration properties and pre-development projects in six world-classseven silver and gold mining districts in North America. With an active exploration and pre-development program, we have consistentlygenerally grown our reserve base for future production.
Our stock pricephilosophy is heavily influencedto operate mines safely by silverpromoting a deeply-rooted value-based culture, leveraging mining skills developed over the Company’s long history and gold prices, which fluctuate widelyby innovating new practices. We strive to achieve excellent mine safety and health performance. We implemented this goal by training employees in safe work practices; establishing, following and improving safety standards; investigating accidents, incidents and losses to avoid recurrence; involving employees in the establishment of safety standards, and participating in the National Mining Association’s CORESafety program. In 2016, we were proud to be the first hardrock mine to be certified under the National Mining Association’s CORESafety system.Because of our implementation of these safety standards, in 2017, we achieved an overall 19% reduction in All Injury Frequency Rate across all four of our operations.
We believe very strongly that the future of mining lies in productivity increases, and one of the best ways to increase productivity and safety is by automating the mining tasks allowing the miners to move away from the mining face, and in some cases, operate the machinery from surface, or have machinery that operates by itself. In 2017, we began work with a third-party equipment manufacturer to develop a remote vein miner (“RVM”), a disc-cutting, continuous-mining machine. We believe RVMs could be used to eliminate the current drill-and-blast method and increase safety and productivity at the Lucky Friday mine. We have begun introducing automated drilling, tele-remote mucking, automated hauling trucks and battery powered equipment in some of our operations. Although mostly on a trial basis, we can see the benefits that this innovation brings and are primarily driven by economic, political and regulatory factors that are difficult to predict and outside of our control. Silver, gold, and lead prices declined to annual averages of $15.70, $1,160, and $0.81, respectively in 2015, from average prices of $19.08excited for silver, $1,266 for gold, and $0.95 for lead in 2014, and $23.79 for silver, $1,410 for gold, and $0.97 for lead in 2013. Average prices of zinc in 2015 decreased to $0.88 from $0.98 in 2014, and were slightly higher than the average of $0.87 in 2013. The decrease in metals prices negatively impacted our operating results in spite of increased production of silver, gold, and zinc in 2015 compared to 2014.
We believe the droppotential transformation they will enable in the prices was largely related to macroeconomic forces such as interest rates (actual and anticipated), strength of the U.S. dollar and the lack of realized or anticipated inflation. As the U.S.future. In addition, we invested in mill improvements and other economies displayed signs of improvement, investor preference appears to have trended away from commodity-based silver and gold mining stocks toward potentially higher yields, furtheringinnovations that we expect will yield significant returns over the decline in silver and gold industry market capitalization. As Hecla’s stock price is highly correlated and dependent on silver and gold prices, we were not immune to the industry shift. However, relative to our peers, we performed slightly above average (54th percentile). The chart on the next page shows the change in our share price in 2015 compared to each of the companies in our peer group.long-term for relatively modest investments.
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COMPENSATION DISCUSSION AND ANALYSIS |
2015 Stock Price ChangeOne of our biggest successes in 2017 was investing in exploration, which resulted in record silver, gold, lead and zinc reserves. Our operating and strategic framework is based on expanding our production and locating and developing new resource potential. In 2017:
● | we produced the most gold at our Casa Berardi mine since its acquisition in 2013, primarily due to record ore throughput; |
● | Casa Berardi surface drilling increased reserves almost 250,000 ounces from two new proposed pits, part of a 14% increase in reserves; |
● | San Sebastian’s gold reserves increased 17% while maintaining silver reserves of more than 5 million ounces; |
● | Greens Creek increased gold reserves 8% and zinc 7%; |
● | we continued to realize excellent operating results and substantially completed underground development at our San Sebastian mine, allowing us to begin underground production there in January 2018; and |
● | we increased overall proven and probable reserves at December 31, 2017, with reserves for silver, gold, zinc and lead increasing by 3%, 12%, 15% and 8%, respectively, compared to their levels in 2016. The reserves for all metals except zinc, represent the highest levels in our history. |
Key Operating and Financial Results
In 2015, our business faced a challenging silver and gold price environment. We aggressively reduced costs while continuing to focus on safety and sustainability. During the year, we delivered on our production targets, improved operational efficiencies and kept all key projects on target and on budget.
The mining business requires long-term planning and implementation of operating strategies over several years to deliver successful operating and financial results.
Accordingly, in the table below and summary that follows, we set forth our key operating and financial results for years 2015, 20142017, 2016 and 2013.2015.
As of and for the Year Ended December 31, | |||||||||||||
Key Results | 2015 | 2014 | 2013 | ||||||||||
Silver (ounces) produced | 11,591,603 | 11,090,506 | 8,919,728 | ||||||||||
Gold (ounces) produced | 189,327 | 186,997 | 119,989 | ||||||||||
Lead (tons) produced | 39,965 | 40,255 | 30,374 | ||||||||||
Zinc (tons) produced | 70,073 | 67,969 | 61,406 | ||||||||||
Sales of products | $ | 443,567 | $ | 500,781 | $ | 382,589 | |||||||
Net income (loss) | $ | (86,968 | ) | $ | 17,824 | $ | (25,130 | ) | |||||
Basic income (loss) per common share | $ | (0.23 | ) | $ | 0.05 | $ | (0.08 | ) | |||||
EBITDA8 | $ | 107,316 | $ | 151,532 | $ | 69,130 | |||||||
Cash from operating activities (in millions) | $ | 106.4 | $ | 83.1 | $ | 26.6 | |||||||
Cash and cash equivalents (in millions) | $ | 155.2 | $ | 209.7 | $ | 212.2 |
As of and for the Year Ended December 31, | ||||||||
Key Results | 2017 | 2016 | 2015 | |||||
Silver (ounces) produced | 12,484,844 | 17,177,317 | 11,591,603 | |||||
Gold (ounces) produced | 232,684 | 233,929 | 189,327 | |||||
Lead (tons) produced | 22,733 | 42,472 | 39,965 | |||||
Zinc (tons) produced | 55,107 | 68,516 | 70,073 | |||||
Sales of products | $ | 577,775 | $ | 645,957 | $ | 443,567 | ||
Net income (loss) | $ | (23,519 | ) | $ | 69,547 | $ | (86,968 | ) |
Basic income (loss) per common share | $ | (0.06 | ) | $ | 0.18 | $ | (0.23 | ) |
EBITDA4 | $ | 156,302 | $ | 236,184 | $ | 107,316 | ||
Cash from operating activities (in millions) | $ | 115.9 | $ | 225.3 | $ | 106.4 | ||
Cash, cash equivalents and short-term investments (in millions) | $ | 219.9 | $ | 198.9 | $ | 155.2 |
Our overall operating and financial results are more fully described inManagement’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K filed with the SEC on February 15, 2018. In 2017, we achieved the following:
● | revenues of $577.8 million, the second highest in Company history after our record set in 2016, in spite of a strike at our Lucky Friday mine during most of 2017; |
● | cash flows from operations of $115.9 million; |
● | total cash cost, after by-product credit, per silver ounce of ($0.01), the lowest in 7 years;5 |
● | all in sustaining cost (“AISC”), after by-product credits, per silver ounce of $7.86, down 33%;6 |
Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) is a measurement that is not in accordance with GAAP. EBITDA is used by management, and we believe is useful to investors, for evaluating our operational performance. A reconciliation of this non-GAAP measure to net income (loss), the most comparable GAAP measure, can be found in Appendix E underReconciliation of | |
5 | Cash cost, after by-product credits, per silver and gold ounce is a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, is included in Appendix E to this Proxy Statement. |
6 | All in sustaining cost (AISC), after by-product credits, is a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, and depletion and amortization, the most comparable GAAP measure, is included in Appendix E to this Proxy Statement. AISC, after by-product credits, includes cost of sales and other direct production costs, expenses for reclamation and exploration at the mines sites, corporate exploration related to sustaining operations, and all site sustaining capital costs. AISC, after by-product credits, is calculated net of depreciation, depletion, and amortization and by-product credits. |
2018 Proxy Statement35
COMPENSATION DISCUSSION AND ANALYSIS |
Despite lower metals prices in 2015 compared to 2014, we significantly improved our operating performance. Our overall operating and financial results are more fully described inManagement’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K filed with the SEC on February 23, 2016. Our 2015 results were strong relative to our 2014 results. In 2015, we achieved the following:
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Shareholder Outreach and 20152017 Advisory Vote on Executive Compensation
Over the last threeseveral years we have undertaken significant shareholder outreach efforts in an effort to elicit and understand the concerns of our shareholders. In response to shareholder concerns gleaned from our shareholder outreach, we made changes to our executive compensation program in 2014 and 2015, and we believe as a result of those changes, last year’s say-on-pay vote achieved 83%96% support. We believe that open dialogue with our shareholders and reflecting their feedback in our compensation decisions was critical to our success in achieving such a high percentage of support.
In 2015,2017, and in advance of our 2016upcoming 2018 Annual Meeting, we continued to reach out to our shareholders. We contacted investors that collectively held over 45% of our commonstock. We also held one-on-one discussions with the two major proxy advisory firms. The purpose of these meetings was to gain feedback on the changes we made to ourany further executive compensation in 2014 and 2015 and to discuss any further concerns. A management team (excluding NEOs) held one-on-one discussions with shareholders holding over 10% of our common stock.concerns they had. During our discussions, all of the changes madeshareholders we spoke to, as well as a proxy advisory firm, were complimentary to our past changes in executive compensation, program in 2014 and 2015 were well-received. The one common issue raised during our conversations was to see more pay-for-performance disclosurepleased with the disclosures in our Proxy Statement. We are constantly trying to improve our compensation disclosures, including with respect to pay-for-performance.proxy statement.
Oversight and Determination of the Executive Compensation Program
Role of the Compensation Committee.The committee, consisting entirely of independent members (Nethercutt,(Rogers, Crumley, RogersNethercutt and Taylor)Boggs), has primary responsibility for executive compensation decisions. The committee carries out its responsibilities under a charter approved by the Board. In 2014, theThe committee and the Board amended the committee’s charter to provide that the committeehashas the authority to approve all executive compensation, including our CEO’s (but not that of our independent directors, which remains decided by the full Board). The committee receives assistance from its independent executive compensation consultant, Mercer, and uses this information in making decisions and conducting its annual review of the Company’s executive compensation program. In 2017, with the assistance of Mercer, the committee assessed the Company’s compensation arrangements to determine if their provisions and operation create undesired or unintentional risks of a material nature. The committee found that our compensation policies and practices do not create inappropriate or unintended significant risk to the Company as a whole.
Role of Independent Compensation ConsultantConsultant. . Mercer performs executive compensation services solely on behalf of the committee, is engaged by and reports directly to the committee, meets separately with the committee with no members of management present, and consults with the committee chair between meetings.
The committee has assessed Mercer’s independence in light of SEC rules and NYSE listing standards, and has determined that Mercer’s work does not raise any conflicts of interest or independence concerns. The Mercer consultants thatwho worked with the committee wereare both principals of Mercer, and include Tracy Bean, project manager, who was assisted byand Raphael Katsman, a principal of Mercer.Katzman.
Pursuant to a written agreement dated January 7, 2015,24, 2017 between Mercer and the Compensation Committee, below are the material aspects of the committee’s instructions to Mercer concerning the services the committee asked itMercer to perform with respect to executive compensation and related matters in 2015:2017:
● | evaluate the competitiveness of the total direct compensation package provided to Hecla’s executive officers; and specifically, to compare Hecla’s current executive officer compensation with compensation provided to executives in similar roles in comparable organizations; |
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COMPENSATION DISCUSSION AND ANALYSIS |
● | review updated information regarding Hecla’s executive compensation program and the positions to be benchmarked, including organization charts, position descriptions, current total compensation and other relevant data; |
● | review last year’s peer group to determine if the included companies continue to be appropriate and if any additional companies should be considered for inclusion; |
● | collect and analyze compensation data |
● | analyze the year-over-year change in compensation levels for Hecla compared to each market data source; |
● | analyze Hecla’s long-term incentive and equity practices compared to peers; |
● | prepare a report to the |
● | assist the committee in meeting its obligation to issue a Compensation Committee Report recommending inclusion of the CD&A in the proxy statement; and |
● | provide ongoing advice and consultation throughout the year to assist the committee, including attendance at committee meetings, if needed. |
In addition to providing technical support and input on market practices, the committee’s goal in using a compensation and benefits consultantsconsultant is to provide external benchmark information for assessing compensation relative to our compensation philosophy. As described on page 38 underBenchmarking Using Compensation Peer Groups,, Mercer assisted the committee in identifying the appropriate companies to be included in our peer group for executive and director compensation and pay practices, and in benchmarking our executive and director pay against the peer group.
In July 2015,June 2017, Mercer performed a competitive analysis and presented its findings and recommendations to the committee. The competitive analysis provided detailed comparative data for each executive officer position and assessed each component of pay, including base salary, short- and long-term incentives and total target compensation, as well as the mix of compensation among these pay elements. We compared this information to our executives’ compensation by similarity of position. The committee also reviewed our performance and carefully evaluated each executive’s performance during theduringthe year against established goals, leadership qualities, operational performance, business responsibilities, career with Hecla, current compensation arrangements and longtermlong-term potential.
The committee has established procedures that it considers adequate to ensure that Mercer’s advice to the committee remains objective and is not influenced by Company management. These procedures include: a direct reporting relationship between the Mercer consultant and the committee; a provision in the committee’s engagement letter with Mercer specifying the information and recommendations that can and cannot be shared with management; an annual update to the committee on Mercer’s financial relationship with Hecla, including a summary of the work performed for Hecla during the preceding 12 months; and written assurances from Mercer that within the Mercer organization, the Mercer consultants who perform services for Hecla hashave a reporting relationship determined separately from Mercer’s other lines of business and from its other work for Hecla.
The total amount of fees for executive compensation consulting services Mercer provided to the committee in 20152017 was $108,688.$47,162.
During 2015,2017, management hired Mercer or its affiliates to provide consulting services on our benefit plans, including support under the Affordable Care Act. The total amount of fees for these additional consulting services in 20152017 was $150,011.$149,933. The decision to engage Mercer or its affiliates for these additional consulting services was made by management, and neither the committee nor the Board approved these other services.
Role of Management.The committee considers input from the CEO in making determinations regarding our executive compensation program and the individual compensation of each executive officerNEO (other than himself)the CEO). As part of our annual review process, the CEO reviews the performance of each member of the executive teamNEO (other than the CEO), and their contribution to the overall performance of the Company. Approximately mid-year, the CEO presents recommendations to the committee regarding base salary adjustments, target annual incentive awards, stock-based grants, and long-term performance unit grants, based on a thorough analysis of relevant market compensation data comparing Hecla with an applicable peer group within the mining industry. The CEO and senior management also make recommendations to the committee regarding our annual quantitative and long-term quantitativequalitative goals, and annual qualitativelong-term goals for the executive officersNEOs (other than the CEO), as well as recommendations regarding the participation in our stock-based compensation plans and amendments to the plans, as necessary.
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COMPENSATION DISCUSSION AND ANALYSIS |
Benchmarking Using Compensation Peer Groups.To attract and retain key executives, our goal is to provide competitive compensation. We generally align our NEO base compensation to the 25th percentile and total compensation to the median75thpercentile of our peer companies and survey composite data. However, we allow total compensation tocan exceed the median75thpercentile when our Company performance and individual experience, responsibilities and performance warrant.
Central to the pay review process is the selection of a relevant peer group. Because we operate in a global business that is dominated by Canadian companies, ourpeer group reflects this with only five U.S. companies among our peer group. In addition, our co-headquarters is in Vancouver, British Columbia, where some of our NEOs work. The committee reviews and determines the composition of our peer group on an annual basis, based on recommendations from Mercer. In 2015,May 2017, the committee assistedadded Eldorado Gold as a peer, and removed Thompson Creek Metals due to it being acquired by Mercer, removed one peer from the 2014 peer group (Allied Nevada Gold), and identified two new peers (B2Gold and Primero). For 2015,Centerra Gold in 2016.
In 2017, Hecla’s peer group was made up of the following 1716 companies, whose aggregate profile was comparable to Hecla in terms of size, industry and competition for executive talent.
Company | Annual Revenue1 ($ millions US) | Market Cap1 ($ millions US) | Total Assets1 ($ millions US) | Corporate Location | ||||||
IAMGOLD Corporation | 1,008 | 1,019 | 4,223 | Canada | ||||||
AuRico Gold Inc. | 291 | 828 | 2,282 | Canada | ||||||
Centerra Gold Inc. | 763 | 1,229 | 1,629 | Canada | ||||||
Pan American Silver Corporation | 752 | 1,400 | 2,018 | Canada | ||||||
New Gold Inc. | 726 | 2,168 | 3,882 | Canada | ||||||
Coeur Mining Inc. | 636 | 528 | 1,333 | United States | ||||||
Stillwater Mining Company | 944 | 726 | 1,399 | United States | ||||||
B2Gold Corp. | 487 | 1,501 | 2,119 | Canada | ||||||
Alamos Gold Inc. | 170 | 910 | 880 | Canada | ||||||
Detour Gold Corporation | 536 | 1,290 | 2,517 | Canada | ||||||
Tahoe Resources Inc. | 350 | 2,053 | 976 | United States | ||||||
Primero Mining | 275 | 622 | 915 | Canada | ||||||
Silver Standard Resources Inc. | 300 | 405 | 986 | Canada | ||||||
Thompson Creek Metals Company | 807 | 356 | 2,846 | United States | ||||||
Royal Gold, Inc. | 237 | 4,916 | 2,892 | United States | ||||||
Endeavour Silver Corp. | 197 | 223 | 266 | Canada | ||||||
First Majestic Silver Corp. | 246 | 590 | 771 | Canada | ||||||
Median | 487 | 910 | 1,629 | |||||||
Hecla Mining Company | 501 | 1,025 | 2,262 | United States |
Annual Revenue1 | Market Cap1 | Total Assets1 | Corporate | |
Company | ($millions US) | ($millions US) | ($millions US) | Location |
IAMGOLD Corporation | 987 | 1,801 | 3,401 | Canada |
Centerra Gold Inc. | 761 | 1,367 | 2,655 | Canada |
Pan American Silver Corporation | 775 | 2,312 | 1,898 | Canada |
New Gold Inc. | 684 | 2,030 | 3,948 | Canada |
Coeur Mining Inc. | 666 | 1,687 | 1,319 | United States |
Stillwater Mining Company2 | 711 | 1,956 | 1,327 | United States |
B2Gold Corp. | 683 | 2,321 | 2,336 | Canada |
Alamos Gold Inc. | 482 | 2,703 | 2,492 | Canada |
Detour Gold Corporation | 658 | 2,382 | 2,370 | Canada |
Tahoe Resources Inc. | 785 | 2,946 | 3,071 | United States |
Primero Mining | 219 | 152 | 678 | Canada |
Silver Standard Resources Inc. | 491 | 1,072 | 1,439 | Canada |
Royal Gold, Inc. | 360 | 4,147 | 3,160 | United States |
Endeavour Silver Corp. | 157 | 451 | 181 | Canada |
Eldorado Gold | 433 | 2,555 | 4,798 | Canada |
First Majestic Silver Corp. | 278 | 1,267 | 857 | Canada |
Median | 662 | 1,993 | 2,353 | |
Hecla Mining Company | 646 | 2,091 | 2,372 | United States |
1 | In $US millions as of year-end |
2 | In May 2017, Stillwater Mining Company was acquired by Sibanye Gold Limited. |
The peer group is composed entirely of publicly held companies, most of which are engaged in the business of mining precious metals with revenue, market capitalization and total assets within a reasonable range of Hecla’s. We believe these peer companies are appropriate because they are in the same industry, compete with us for executive talent, have executives in positions similar to ours, and are considered by the committee to be in an acceptable range of revenue, market capitalization and/or total assets compared to Hecla.
During our shareholder outreach, many of our largest shareholders have informed us that, compared to peer groups selected by proxy advisory firms, they consider our peer group to be the most relevant and appropriate for compensation and performance benchmarking purposes. The peer group selected last year by Glass-Lewis included 14 of our 16 selected peers. The peer group selected by Institutional Shareholder Services (“ISS”) included only 3 of our 16 selected peers. The rest of the peer group selected by ISS contained U.S.-based companies in the agricultural product, forest products, industrial and specialty chemicals, metal powders, coatings, paper and other industries – companies and industries whose market
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COMPENSATION DISCUSSION AND ANALYSIS |
fundamentals are different from the precious metals mining industry. We understand that ISS’s internal policies prohibit its selection of Canadian companies (which account for 11 of our peers), and require that Hecla be compared to companies having only similar revenue instead of similar market capitalization or total assets. We believe that a fair compensation peer group, in terms of both industry profile and size, should not be selected for Hecla without including Canadian companies.
In making compensation decisions, and taking into consideration recommendations made by Mercer, the committee also reviews survey data provided by Mercer from the following mining and general industry survey sources:
● | Mercer US Mining Industry Compensation Survey |
● | Mercer Canadian Mining Industry Compensation Survey |
● | Mercer U.S. Premium Executive Remuneration Suite (general industry) |
BaseOur program targets base salaries are targeted between the 25thpercentile and median (50thpercentile), with incentive opportunities that can provide above-median total compensation based on performance. Compensation for NEOs within this group may be positioned higher or lower than market medianthe 75thpercentile where the committee believes appropriate, considering each executive’s roles and responsibilities and experience in their position within Hecla.
Mercer provided the committee with a report summarizing executive compensation levels at the 25th, 50thand 75thpercentiles of the peer group and the survey data forpositions comparable to those held by each of our NEOs. The committee also received an analysis from Mercer comparing the target total cash compensation (base salary plus target annual incentive) and target total direct compensation (base salary plus target annual incentive plus the value of long-term target incentives) for each of the NEOs against these benchmarks. For retention and competitive considerations, in comparison to the peer group data or survey data applicable to each NEO’s position, we target each NEO’s total cash compensation at the median level and the total target direct compensation at or above the median level, and deliver compensation above or below these levels when warranted by performance.
In 2015,2017, target total direct compensation (base salary, short- and long-term incentives) for our NEOs was between the median and the 75thpercentile of both the peer group and survey data.
The committee suggests that the following consideration be kept in mind regarding comparisons of our NEO compensation and Company performance against external benchmarks:
| |
|
In 2015,2017, the committee also approved a separate peer group to be used specifically with regard to TSR. The TSR peer group is as follows:
IAMGOLD Corporation | |
First Majestic Silver Corp. | |
Silver Standard Resources Inc. | |
| |
Pan American Silver Corporation | |
New Gold Inc. | |
Centerra Gold | Coeur Mining Inc. |
B2Gold Corp. | Alamos Gold Inc. |
Primero Mining | Endeavour Silver Corp. |
Tahoe Resources Inc. |
Compensation Philosophy and Objectives
We operate in a competitive and challenging industry. Over the past decade, a worldwide mining boom has significantly increased the demand for executives with mining-related skills and experience. In addition, the supply of mining executives is very limited, particularly in the United States. As a result, having a viable compensation strategy is critical to our success.
Our compensation philosophy is to pay our NEOs competitive levels of compensation that best reflect their individual responsibilities and contributions to the Company, while providing incentives to achieve our business and financial objectives. While comparisons to compensation levels at companies in our peer group are helpful in assessing the overall competitiveness of our compensationourcompensation program, we believe that our executive compensation program also must be internally consistent and equitable in order for the Company to achieve our corporate objectives.
The pay-for-performance philosophy of our executive compensation programs described in this Proxy Statement plays a significant role in our ability to produce strong operating, exploration, strategic, and financial results. Itresults.It enables us to attract and retain a highly experienced and successful team to manage our business. Our paycompensation programs strongly support our business objectives and are aligned with the value provided to our shareholders. Further, as an executive’s level of responsibility within our organization increases, so does
2018 Proxy Statement39
COMPENSATION DISCUSSION AND ANALYSIS |
the percentage of totalcompensationtotal compensation that we link to performance – through the annual incentive and long-term incentive programs, as well as share performance.
In setting policies and practices regarding compensation, the guiding philosophy of the committee is to:
● | have compensation that is primarily at-risk and based on strategic objectives and tactical activities; and |
● | acquire, retain and motivate talented executives. |
The committee believes that a mix of both cash and equity incentives is appropriate, as annual cash incentives reward executives for achieving both short- and long-term quantitative and qualitative goals, while equity incentives align the interests of our executives with those of otherour shareholders. In determining the amount of the cash and equity incentives, the committee considers each officer’s total compensation on both a short- and long-term basis to assess the retention and incentive value of his or her overall compensation.
The committee conducts its annual review process near the end of each calendar year in order to align each executive’s compensation awards with the Company’s operational, financial and strategic results for the calendar year.
We also maintain (or avoid) the following pay practices that we believe enhance our pay-for-performance philosophy and further align our NEOs’ interests with those of shareholders:
We DO Have these Practices |
✓ | Incentive award metrics that are objective and tied to Company performance | ||
✓ | 81.9% of CEO and | ||
✓ | Over 67.7% of total compensation for the CEO is performance-based | ||
✓ | 57.1% of total compensation for NEOs other than the CEO is performance-based | ||
✓ | 100%of the CEO’s annual incentive compensation is tied solely to Company performance | ||
✓ | Rigorous stock ownership requirements for our NEOs and directors | ||
✓ | Compensation recoupment “clawback” policy | ||
✓ | |||
Double-trigger change in control severance for NEOs | |||
✓ | Equity awards that vest over a three-year period to promote retention | ||
✓ | Anti-hedging and anti-pledging policies | ||
✓ | Our NEOs, including our CEO, must remain employed with the Company through the payment date of their AIP awards, or the awards are forfeited | ||
✓ | Our NEOs, including our CEO, must remain employed with the Company through the payment date of their LTIP awards, or the awards are forfeited, except in the case of retirement |
✗ | Repricing of stock options |
✗ | Perquisites |
✗ | Excise tax gross-ups |
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COMPENSATION DISCUSSION AND ANALYSIS |
Elements of Total Compensation
We have a multifaceted compensation program. For the year ended December 31, 2015,2017, our executive compensation program consisted of the following elements:
BASE SALARY | ||
Objective:Provide a fixed level of cash compensation for performing day-to-day
Terms:Paid semi-monthly. |
INCENTIVE PAY | ||
Annual Incentive Plan Objective:Focus executives on achieving Company’s short-term goals, and the performance steps necessary to achieve longer-term objectives. Key Features:Based on achievement of the Company goals and individual performance. Some goals are quantitative, such as EBITDA, production, and cash position, while others are qualitative. Weighting is 50% quantitative corporate performance goals, 25% qualitative/other goals, Terms:Determined by the committee and paid in a single payment following the performance year. Awarded in the first Long-term Incentive Plan Objective:Focus executives on longer-term value creation as determined by the specific targets of the plan. Key Features:Based on corporate goals achieved over a three-year performance period. A new three-year performance period begins each calendar year and performance units are granted in the first half of each year. Each three-year plan identifies key long-term objectives that are expected to create long-term value for shareholders such as operating performance, increasing production and resources, increasing shareholder return, and developing significant capital programs.
|
2018 Proxy Statement41
COMPENSATION DISCUSSION AND ANALYSIS |
EQUITY | ||
Restricted Stock Units Objectives:Align management’s interests with those of shareholders and provide incentive for NEOs to remain with the Company for the long term. Key Features:Restricted stock unit awards are denominated in shares and delivered in stock with a vesting schedule of three years for NEOs. Terms:Restricted stock units are granted Performance-based Shares Objectives:Provide incentive for Key Features:Performance-based shares realize more value the higher the TSR ranks within the selected peer group and have no value if the share performance doesn’t exceed the 50th percentile in the peer group. Terms:Performance-based shares are granted to the |
KEY EMPLOYEE DEFERRED COMPENSATION PLAN | ||
Objective:Increased exposure to the Company to the extent deferred compensation is tied to the value of Hecla stock, while also providing a tax deferral opportunity and encouraging financial planning. Key Features:Allows for the voluntary deferral of base salary, annual incentive pay, long-term incentive pay and restricted stock unit payouts. Terms:Generally, employee must make election in the previous year to defer in the coming year. |
BENEFITS | ||
Objectives:Attract and retain highly qualified executives. Key Features:Participation in retirement plans, partial company-paid health, dental and vision insurance, life insurance, and accidental death and dismemberment insurance. Terms:Same terms for all U.S. permanent full-time salaried employees. Non-U.S. employees receive similar benefits. |
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COMPENSATION DISCUSSION AND ANALYSIS |
Our executive compensation program – composed primarily of base salary, short- and long-term incentives, and equity awards – is intended to align the interests of our NEOs with the long-term interests of our shareholders. The program is designed to accomplish this by rewarding performance that results in an increase in the value of our shareholders’ourshareholders’ investment in Hecla. We believe that the proportion of at-risk, performance-based compensation should comprise a significant portion of executive pay.
The mix of compensation for our CEO and other NEOs, which we believe is similar to our peer group, is shown below.
2015 Target Compensation Structure. The following table lists total 2015 target compensation for the NEOs.
CEO Mix of Target Pay
Other NEO Mix of Target Pay
NEO | Base Salary ($) | Annual Incentive Target Award ($) | Long-term Incentive Plan Target Award ($) | Equity ($) | Total ($) | |||||||
Baker | 605,000 | 605,000 | 950,000 | 1,000,0001 | 3,160,000 | |||||||
Sabala | 380,000 | 304,000 | 340,000 | 345,000 | 1,369,000 | |||||||
Radford | 380,000 | 304,000 | 340,000 | 335,000 | 1,369,000 | |||||||
McDonald | 275,000 | 220,000 | 260,000 | 300,000 | 1,055,000 | |||||||
Sienko | 250,000 | 150,000 | 190,000 | 154,000 | 744,000 | |||||||
Poirier | 226,000 | 135,600 | 205,000 | 200,000 | 766,600 |
2017 Target Compensation Structure. The following table lists total 2017 target compensation for the NEOs.
NEO | Base Salary1 ($) | Annual Incentive Target Award ($) | Long-term Incentive Plan Target Award ($) | Equity2 ($) | Total ($) | |||||
Baker | 635,000 | 635,000 | 1,140,000 | 1,100,000 | 3,510,000 | |||||
Hall | 380,000 | 380,000 | 500,000 | 465,000 | 1,725,000 | |||||
Radford | 380,000 | 380,000 | 500,000 | 465,000 | 1,725,000 | |||||
McDonald | 275,000 | 275,000 | 360,000 | 380,000 | 1,290,000 | |||||
Sienko | 250,000 | 175,000 | 300,000 | 204,000 | 929,000 |
1 | Base salaries for calendar year 2017. For Mr. Baker, his base salary was increased from $605,000 to $635,000, effective July 1, 2017. |
2 | Consists of |
NEO | Restricted Stock Units ($) | Performance-based Shares ($) | Total Equity Award Grant Date Fair Value ($) | ||||
Baker | 500,000 | 600,000 | 1,100,000 | ||||
Hall | 345,000 | 120,000 | 465,000 | ||||
Radford | 345,000 | 120,000 | 465,000 | ||||
McDonald | 300,000 | 80,000 | 380,000 | ||||
Sienko | 154,000 | 50,000 | 204,000 |
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COMPENSATION DISCUSSION AND ANALYSIS |
Individual base salaries and annual incentive targets for the NEOs are based on the scope of each NEO’s responsibilities, individual performance and market data. At theAtthe beginning of each year, we also define the keystrategickey strategic objectives each NEO is expected to achieve during that year, which are evaluated and approved by the committee.
Overview of our Compensation Decisions and Results for 20152017
Base Salary |
Design. Design. Pursuant to our market positioning policy, the committee targets base salaries between the 25thpercentile and median of Hecla’s peer group for our NEOs. An individual NEO’s base salary may be set above or below this market range for that particular position, depending on the committee’s subjective assessment of the individual NEO’s experience, recent performance and expected future contribution, retention concerns, and the recommendation of our CEO (other than for himself). The committee does not use any type of quantitative formula to determine the base salary level of any of the NEOs. The committee reviews NEO salaries at least annually as partof its overall competitive market assessment, as described above.previously described. Typically, the committee makes annual salary adjustments in the middle of each year for the 12-month period from July 1 to June 30.
Analysis and DecisionDecision. . In July 2015,June 2017, the committee reviewed a market analysis prepared by Mercer. The base salaries for all of our NEOs remained unchanged as their salaries were comparable to the base salaries of other executives in our peer group. Our NEOs base salaries have remained unchanged since July 1, 2014.2014 (except for 2016, when our CEO took a 20% base salary reduction, and each of the other NEOs took a 10% base salary reduction; these reductions were reversed for 2017). The committee found Mr. Baker’s base salary to be below the 25th percentile, and increased his base salary from $605,000 to $635,000. The committee also reviewed the base salaries for the other NEOs and determined no adjustments were needed.
The following table shows base salaries for all NEO’sNEOs from July 1, 2014 through December 31, 2015:2017:
Base Salary for NEOs July 1, 2014 through December 31, 20152017
NEO | 7/1/14 to 6/30/15 Salary ($) | 7/1/15 to 12/31/15 Salary ($) | Percentage Increase (%) | |||||
Phillips S. Baker, Jr. | 605,000 | 605,000 | 0 | |||||
James A. Sabala | 380,000 | 380,000 | 0 | |||||
Lawrence P. Radford | 380,000 | 380,000 | 0 | |||||
Dr. Dean W.A. McDonald | 275,000 | 275,000 | 0 | |||||
David C. Sienko | 250,000 | 250,000 | 0 | |||||
Don Poirier | 226,000 | 226,000 | 0 |
NEO | 7/1/14 to 12/31/15 Salary ($) | 1/1/16 to 12/31/16 Salary1 ($) | 1/1/17 to 6/30/17 Salary ($) | 7/1/17 to 12/31/17 Salary ($) | Percentage Increase In 2017 (%) | |||||
Baker | 605,000 | 484,000 | 605,000 | 635,000 | 5 | |||||
Hall | N/A | 342,000 | 380,000 | 380,000 | 0 | |||||
Radford | 380,000 | 342,000 | 380,000 | 380,000 | 0 | |||||
McDonald | 275,000 | 247,500 | 275,000 | 275,000 | 0 | |||||
Sienko | 250,000 | 225,000 | 250,000 | 250,000 | 0 |
1 | In calendar year 2016, Mr. Baker took a 20% reduction in base salary, and all other NEOs took a 10% reduction; these reductions were reversed for 2017. |
Incentive Plans |
Company Performance and Relationship to NEO CompensationCompensation. Our incentive compensation plans include the Hecla Mining Company Annual Incentive Plan and the Hecla Mining Company Executive and Senior Management Long-Term Performance Payment Plan. The plans include performance measures of the most important factorsthat we believe contribute to Hecla’s sustained long-term success and that can lead to improved stock price performance. In February 2017, the Compensation Committee and the Board approved amendments to the incentive compensation plans to include a provision in each plan that if any employee participating in the plans leave the Company, either voluntarily or involuntarily (other than retirement), before the payment date of the award, such employee shall forfeit his or her award. The Compensation Committee also approved a provision under the Executive and
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COMPENSATION DISCUSSION AND ANALYSIS |
Senior Management Long-Term Performance Payment Plan pertaining to the retirement of a participant. The amendment provided that in order to qualify for vesting of long-term incentive award benefits, the employee must retire under the Hecla Mining Company Retirement Plan, and be at least age: (i) 60 and have 15 or more years of service with the Company; (ii) 65 and have 7 or more years of service with the Company; or (iii) 68, in order to receive their incentive award.
Hecla Mining Company Annual Incentive Plan (“AIP”). Consistent with Hecla’s pay-for-performance philosophy, substantially all salaried employees, including our NEOs, are eligible to participate in the AIP. Late in the prior year, or earlyEarly in the current year, the committee approves a company-wide, short-term incentive pool that is available for payment to salaried employees, including the NEOs, the amount of which is based on Company performance during the prior year.
AIP Components. In 2014, the AIP was amended to use a more formulaic approach to awards, with less committee discretion. The AIP includes the following components and relative weights:
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While each component can achieve two and a half times the target (250%) with respect to the component, the maximum total payout is limited to two times the target award level (200%).
For 2015, the quantitative corporate performance factors were divided into three factors (including weighting): production (20%), adjusted EBITDA (20%) and cash (10%).
The production factor converts gold, lead and zinc to silver equivalent at a ratio of 71 oz. silver to 1 oz. gold, 19.2 lb. lead to 1 oz. silver, and 17.25 lb. zinc to 1 oz.silver. Our production target requires that we achieve 35 million silver equivalent ounces. Maximum payout is attained if production achieves 37 million ounces. The minimum payout requires 32 million ounces. To achieve targeted payout a 2% increase over 2014 silver equivalent production levels was necessary, while the maximum payout requires a 7% increase.
Production Goal Metrics
The adjusted EBITDA target was $155 million. Maximum payout is achieved if adjusted EDITDA is $170 million, which is $15 million more than target or approximately a 10% improvement in adjusted EBITDA. There is no payout if EBITDA is less than $130 million.
Adjusted EBITDA Goal Metrics
The cash position target is $175 million, adjusted for acquisitions at year-end. Maximum payout is achieved if our cash position at year-end is at or above $200 million, which was the cash position at the beginning of 2015. The threshold payout level is $160 million, below which no payout is earned.
Cash Goal Metrics
Target Opportunities. Each NEO has a target AIP award opportunity expressed as a percentage of base salary, along with minimumthreshold and maximum award levels. The target award opportunities are determined based on the following: market assessments and the committee’s market positioning policy; the individual NEO’s organization level, scope of responsibility and ability to impact Hecla’s overall performance; and internal equity among the NEOs. ActualawardsActual awards are paid after the end of each annual performance period and can range from 0% to 200% of the target awards, based on the committee’s assessment of our actual performance and the achievement of an individual NEO’s goals. Having a limit on our maximum awardAIP awards reduces the likelihood of windfalls to executives and encourages financial discipline. It is also competitive with typical peer group practice.
For 2015,2017, target AIP award opportunities for the NEOs were as follows:
NEO | Target Annual Incentive (% of base salary) | ||||
Phillips S. Baker, Jr. | 100% | ||||
100% | |||||
Lawrence P. Radford | 100% | ||||
Dr. Dean W.A. McDonald | 100% | ||||
David C. Sienko | |||||
70% |
The market analysis prepared by Mercer in July 2015June 2017 indicated that our target annual incentives were generally at the median of peers.
Performance Measures. Our management develops proposed targets for each Company performance measure based on a variety of factors, including historical corporate performance, internal budgets, forecasts and growth targets, market expectations and strategic objectives. The committee reviews the targets and adjusts them, as it deems appropriate. The committee believes that linking annual incentive awards to pre-established goals creates a performance-based compensation strategy consistent with shareholder interests. The committee also believesthatbelieves that incentive compensation targets should be established to drive real and sustainable improvements in operating performance and the strategic position of the Company.
2015 AIP – Analysis and DecisionsComponents. The committee reviewed the performance versusIn 2014, the AIP goals onwas amended to use a quarterly basis.more formulaic approach to awards, with less committee discretion. The AIP includes the following components and relative weights:
● | quantitative corporate performance factors comprising 50% of the targeted award; |
● | qualitative/other goals, normally comprising 25% of the targeted award; and |
● | a discretionary factor as determined by the committee, normally comprising 25% of the targeted award. |
Each component can achieve two times the target (200%) with respect to the component, with the maximum total payout limited to two times the target award level (200%).
Quantitative Corporate Performance Factors. For 2015, based on2017, the assessment by the committee of the Company’s overallquantitative corporate performance on both qualitative and quantitative measures as well as relevant discretionary factors under the AIP the committee determined Company performancewere divided into three factors (including weighting): production (20%), EBITDA less capital (20%), and All Injury Frequency Rate reduction (10%).
The production factor converts gold, lead and zinc to besilver equivalent at 115%ratios of 71 oz. silver to 1 oz. gold, 16.4 lbs. of lead, and 13.3 lbs. of zinc. Our production target (outrequired that we achieve 46.5 million silver equivalent ounces. Maximum payout is attained if production achieves 48.5 million ounces. The minimum payout is achieved if production is greater than 43.5 million ounces.
2018 Proxy Statement45
For 2015, Company performance for quantitative AIP purposes was as follows:
COMPENSATION DISCUSSION AND ANALYSIS |
Production Goal Metrics
2017 Production in Silver Equivalent Ounces (includes all metals) | ||||||
2017 Production Metrics | ||||||
48.5 mm | Maximum | 40% | ||||
47.5 mm | 30% | |||||
46.5 mm | Target | |||||
10% | ||||||
<43.5 mm | 0% |
The EBITDA less capital7target was $100 million. Maximum payout is achieved if EBITDA less capital is $135 million. There is no payout if EBITDA less capital is less than $60 million.
EBITDA Less Capital Goal Metrics
2017 EBITDA Less Capital Metrics | | % | Performance Value | |||||||
$ | 40% | |||||||||
30% | ||||||||||
$ | Target | 20% | ||||||||
$60 mm | 10% | |||||||||
<$60 mm | 0% |
As reflected in the table above, only the production portion of the AIP wasThe work-related injury rate reduction target is 15% at year-end, which achieves a long-term goal. Maximum payout is achieved and it exceeded theif our work-related injury rate reduction is met at 35%. The threshold required for the maximum level. The adjusted EBITDA and cash performance factors were bothpayout level is 5% reduction, below threshold level. Therefore, the committee determined that the quantitative factor accounted for 50% of the target 2015 AIP award (out of a possible 0 to 125% of the target 2015 award).which no payout is earned.
Work-Related Injury Rate Reduction
2017 AIFR Goal Metrics | Factor Value | |||
35% | Maximum | 20% | ||
25% | 15% | |||
15% | Target | 10% | ||
5% | 5% | |||
<5% | 0% |
Qualitative Corporate Performance Factors. In addition to quantitative corporate performance factors, our AIP has a component that is based on qualitative and other goals relating not only to Hecla as a whole, but also to each NEO. This component is targeted to account for 25% of the total AIP target award, but can account for 0 to 62.5%50% of the target award.
For our 20152017 AIP, qualitative objectives for NEOs included those related to (i) safety and health, (ii) environmental, (iii) technology and environment, (ii) processinnovation, (iv) continuous improvement, (iii)(v) operations, (iv) financial condition, (v)(vi) finance/accounting/IT, (vii) employee development, (viii) acquisitions, (ix) mine life extension, exploration and reserve growth, (vi) development projects, (vii) exploration, (viii) legal, (ix)(x) investor relations, (x) human capital development, and (xi) government and community relations – with quantifiable targets within those categories where applicable. The specific objectives for each NEO are chosen to reflect each NEO’s individual responsibilities, with shared goals where appropriate.affairs, and (xii) legal. While
7 | The non-GAAP measurement of EBITDA less capital is calculated as the GAAP measure of net loss plus/less the following items: interest expense, income tax provision, depreciation, depletion and amortization expense, interest and other income, acquisition costs, loss on investments, loss on derivatives contracts, provision for environmental matters, provisional price gains, foreign exchange loss, stock-based compensation, Lucky Friday suspension costs, and capital expenditures at our operating mines. A reconciliation of EBITDA less capital to the most comparable GAAP measure of net loss for the year ended December 31, 2017, is included in Appendix E of this Proxy Statement. |
46www.hecla-mining.com
COMPENSATION DISCUSSION AND ANALYSIS |
most of the goals are subjective in nature, to the extent possible, objective and quantifiable targets are set in order to improve accountability for results.
For 2015,2017, the committee assessed qualitative performance under this component at 35% of the target award (above the 25% target and within the possible range of 0-62.5%)30%. The committee based its assessment on the following factors:
✓ |
|
✓ | each mine site demonstrated progress in technology and innovation; |
✓ | mine sites established benchmarks and targets for improvement; |
✓ | began underground development at |
✓ | completed contract for milling access at San Sebastian through 2020; |
✓ |
|
✓ | completed front-line supervisor training at the mine sites; |
✓ | drilling success at San Sebastian; |
✓ | added two new analysts covering Hecla; |
✓ | successfully settled multiple environmental lawsuits; |
✓ | installed various technology upgrades in the corporate office; and |
✓ | improved safety performance at Greens Creek, |
| |
| |
| |
| |
| |
|
Discretionary Factor. The final component of our AIP is at the discretion of the committee and it is targeted to account for 25% of the total AIP target award, but can account for 0 to 62.5%50% of the target award. For 2015, the committee2017, thecommittee determined the discretionary factor performance value to be at 30% of the target award (above the 25% target and within the possible range of 0-62.5%)40%. The committee based its assessment primarily on the following significant performance results by Hecla in 2015:2017:
✓ | Hecla |
✓ |
|
✓ |
|
✓ |
|
✓ |
|
✓ | success at recovering insurance proceeds related to environmental lawsuits; |
✓ | successfully executed succession plans for key positions; |
✓ | safe work by the Lucky Friday salaried staff; |
✓ | positioned Hecla as a leader in innovation; |
✓ | negotiated improved smelter treatment charges; |
✓ | increased production at the Casa Berardi mill; and |
✓ | increased reserves at Casa Berardi. |
The 2017 individual goals for each of our NEOs were set in February 2017. The committee believes that our NEOs’ performance goals should support and help achieve the Company’s strategic objectives and be tied to their areas of responsibility. Individual performance goals for each NEO, except the CEO, were proposed by the CEO and reviewed and approved by the committee. The CEO’s goals are based 100% on corporate performance.
2018 Proxy Statement47
COMPENSATION DISCUSSION AND ANALYSIS |
After the end of the year, the committee, based on each NEO’s self-assessment and our CEO’s input, reviews each NEO’s progress against his individual performance goals. When making its award determinations the committee did not assign a specific weighting to any of the individual goals, but instead reviewed each NEO’s progress against his individual goals in the aggregate. The following is a summary description of the performance goal results for each of the NEOs for 2017, except our CEO, who is discussed separately below.
Mr. Hall | Goal Results | |
Year-end 2017 Performance Results | ●instrumental in managing Hecla’s cash position in 2017; ●extended the term of Hecla’s revolving credit facility; ●continuous improvement to the financial team’s performance; ●managing a growing finance and accounting function commensurate with the Company’s growth; ●appropriate risk management and successful improvement of internal controls; and ●finalized a value and vision business model that is integrated with the corporate acquisition model. |
Mr. Radford | Goal Results | |
Year-end 2017 Performance Results | ●instrumental in continuing the strong ●successfully advancing the technological innovations to achieve improved production and recoveries in the future; ●improved safety performance at ●met goal of a 10% reduction in citations and a 24% reduction in significant and substantial citations; and ●extending underground mine life and adding additional years for Casa Berardi, San Sebastian and Greens Creek; ●began underground development at ●improved recoveries at Greens | |
●revised seismic protocols and | ||
| ||
| ||
|
In addition to the strong performance realized by our NEOs within their functional area and as part of the executive team, each NEO made significant contributions to Hecla’s 2015 performance.48www.hecla-mining.com
Messrs. Baker, Radford and McDonald were instrumental in getting the San Sabastian mine into production by fourth quarter 2015. The committee believes that the startup of the San Sebastian mine was a tremendous accomplishment for the Company.
Mr. Radford’s leadership was also instrumental in developing the organization and acquiring the work force needed to get the San Sebastian mine into production, achieving higher recoveries at Greens Creek, reducing geotechnical risk in underground operations, advancing the open-pit project at Casa Berardi, and combined operations achieving higher production.
Dr. McDonald oversees the exploration program that helped the Company make the decision to start up the San Sebastian mine and continued to increase reserves.
Mr. Sabala was instrumental in managing Hecla’s cash position in 2015, effectively managing working capital, implementing creative methods for pension funding, taking a lead role in the acquisition of Revett Mining Company, negotiating credit agreements and improving capital market relationships.
COMPENSATION DISCUSSION AND ANALYSIS |
Dr. McDonald | Goal Results | |
Year-end 2017 Performance Results | ●increasing confidence in mine resources; ●increasing the Company’s reserves, while using among the lowest metal prices in the industry; ●leading the exploration department and meeting or exceeding drilling goals; ●identifying and analyzing potential new business opportunities; ●continued drilling success at San Sebastian; found more resources, developed mine plans and negotiated milling access at San Sebastian; ●found more resources and reserves at Casa Berardi to extend mine life; ●developed near-term exploration plans to increase resources and reserves at Greens Creek to extend its mine life; ●enhanced the ability to estimate resources and reserves, including training of new resource modelers; ●replaced production and added an additional 21 million ounces of silver equivalent (including silver and gold) to reserves; ●advanced technology study at San Sebastian to drill deep targets based on the information from the study; and ●completed mine plans and financial models for our Montana properties. |
Mr. Sienko | Goal Results | |
Year-end 2017 Performance Results | ●successful in resolving several significant regulatory and legal matters involving environmental, health and safety, and other civil litigation issues; ●monitoring, enhancing and reporting on corporate governance; and ●reviewed company-wide policies and made changes to certain policies, including the Code of Conduct. |
Based on each NEO’s performance in managing their function and the progress they made towards the Company’s AIP components and their individual goals as discussed above, the committee, in its discretion, determined that the NEO’s advanced important objectives and created long and short-term value for Hecla. Dr. McDonald’s performance was both above target and more than 2016, while Mr. Radford was above target. Mr. Sienko was successfulat target and Mr. Hall was below target.
CEO Performance for 2017. Mr. Baker’s annual incentive is based 100% on corporate performance. Although overall metal production decreased from the historic highs achieved in resolving several2016, Mr. Baker’s leadership led to achieving significant regulatorystrategic goals and legal cases involving environmental, healthobjectives for the year, including increased reserves, advancing the strategic planning process for the Company, increased cash balance, improved safety metrics, and safety, and litigation issues, while also supporting acquisition activities related to Revett Mining Company, and the funding of pension plans.
Mr. Poirier was instrumentalassuring growth in skills andperformance in the acquisitionCompany’s management team. However, share performance, the Lucky Friday mine strike, and other factors caused, the Compensation Committee to award Mr. Baker 75% of Revett Mining Company,his targeted annual incentive award.
2017 AIP – Analysis and Decisions. The committee reviewed the performance versus the AIP goals on a quarterly basis. For 2017, based on the assessment by the committee of the Company’s overall performance on both quantitative and qualitative measures as well as relevant discretionary factors under the assessmentAIP, the committee determined Company performance to be at 108% of several potential large scale acquisitions.target (out of a possible range of 0-200%). This was comprised of 38% related to the quantitative factors (0% for Production, 26% for EBITDA less capital, and 12% for Work-related injury reduction); 30% for qualitative factors; and 40% for discretionary.
2018 Proxy Statement49
COMPENSATION DISCUSSION AND ANALYSIS |
2017 AIP Quantitative Measure Results | Maximum | Target | Minimum | Actual | Performance Value | |||||
Production | ||||||||||
Silver equivalent ounces | 48.5 mm ozs. | 46.5 mm ozs. | 44.5 mm ozs. | 40.9 mm ozs. | 0% | |||||
EBITDA less capital8 | $135 mm | $100 mm | $60 mm | $108.7 mm | 26% | |||||
Work-related injury reduction | 35% | 15% | 5% | 20% | 12% | |||||
Total Quantitative | 38% |
As reflected in the table above, EBITDA less capital and work-related injury reduction exceeded target levels, while the production target was less than minimum.
Set forth in the table below is each NEO’s target award and actual award, which was paid 50%100% in cash and 50% in Hecla common stock issued under the 2010 Stock Incentive Plan.cash.
Name | Base Salary (12/31/15) ($) | Base Salary Factor (%) | Target Annual Incentive ($) | % to Target1 (%) | Actual Award2 ($) | Cash Received ($) | Equity Received3 (#) | ||||||||
Phillips S. Baker, Jr. | 605,000 | 100 | 605,000 | 115 | 695,750 | 347,875 | 147,404 | ||||||||
James A. Sabala | 380,000 | 80 | 304,000 | 125 | 380,000 | 190,000 | 80,508 | ||||||||
Lawrence P. Radford | 380,000 | 80 | 304,000 | 165 | 500,000 | 250,000 | 105,932 | ||||||||
Dr. Dean W.A. McDonald | 275,000 | 80 | 220,000 | 110 | 242,000 | 121,000 | 51,271 | ||||||||
David C. Sienko | 250,000 | 60 | 150,000 | 100 | 150,000 | 75,000 | 31,780 | ||||||||
Don Poirier | 226,000 | 60 | 135,600 | 99.56 | 135,000 | 67,500 | 28,602 |
Name | Base Salary ($) | Base Salary Factor (%) | Target Annual Incentive ($) | % to Target1 (%) | Actual Award2 ($) | |||||
Phillips S. Baker, Jr. | 635,000 | 100 | 635,000 | 75 | 476,250 | |||||
Lindsay A. Hall | 380,000 | 100 | 380,000 | 75 | 285,000 | |||||
Lawrence P. Radford | 380,000 | 100 | 380,000 | 120 | 456,000 | |||||
Dr. Dean W.A. McDonald | 275,000 | 100 | 275,000 | 135 | 371,250 | |||||
David C. Sienko | 250,000 | 70 | 175,000 | 70 | 175,000 |
1 | The percentages listed for each of the NEOs includes corporate achievement of goals and individual performance. |
2 | The amount reported in this column was paid in cash |
Hecla Mining Company Executive and Senior Management Long-Term Performance Payment Plan (“LTIP”). We use the LTIP to focus executives on meeting long-term (three-year) corporate performance goals. The LTIP is also designed to attract and retain executives in a highly competitive talent market. The committee takes into accountconsiders mining and general industry market practices, as well as the objectives of the LTIP, when determining the terms and conditions of long-term incentive goals, such as resource additions and cash flow generation.
Under the LTIP, a new performance period begins each calendar year and runs for three years. The three-year performance period recognizes that some value-creating activities require a significant period of time to be implemented and for measurable results to accrue. Starting a new performance period each year also gives the committee flexibility to adjust for new business conditions, circumstances or priorities in setting the performance metrics and goals for each three-year cycle. Performance unitsPerformanceunits are assigned to each NEO at the beginning of each three-year period, and provide the basis for the amount of awards made to each NEO under the LTIP. Performance units are designed to encourage management to deliver long-term value. Performance units reinforce Hecla’s business strategy by clearly establishing our key performance elements (e.g., reserve and resource growth, production growth, cash flow, #4 Shaft completion, and relative TSR) and the associated long-term performanceobjectivesperformance objectives that must be met for us to be successful and create value for shareholders.
2015-2017 LTIP. In March 2015, the committee approved the 2015-2017 LTIP, which has a target unit value of $100. The 2013-20152015-2017 LTIP units have a target value of $125 each, and a maximum potential value of $300 each.$375. Performance units are paid out as soon as practicable after the end of each performance period, upon approval by the committee. At the discretion of the committee, the payouts may be in the form of cash, common stock, restricted stock units, or a combination of these forms.
8 | The non-GAAP measurement of EBITDA less capital is calculated as the GAAP measure of net loss plus/less the following items: interest expense, income tax provision, depreciation, depletion and amortization expense, interest and other income, acquisition costs, loss on investments, loss on derivatives contracts, provision for environmental matters, provisional price gains, foreign exchange loss, stock-based compensation, Lucky Friday suspension costs, and capital expenditures at our operating mines. A reconciliation of EBITDA less capital to the most comparable GAAP measure of net loss for the year ended December 31, 2017, is included in Appendix E of this Proxy Statement. |
2013-2015 LTIP.50www.hecla-mining.com
COMPENSATION DISCUSSION AND ANALYSIS |
The tables below summarize the performance unit valuation ranges for silver equivalent reserve growth, production growth, cash flow, #4 Shaft completion,contribution, and TSR for the 2013-20152015-2017 plan period – the fivefour performance goals approved by the committee in February 2013.March 2015. These are important goals for the following reasons:
● | Silver equivalent reserve |
● | Cash |
cash cost, after by-product credits multiplied by actual silver/gold production versus (ii) budgeted cash cost, after by-product credits multiplied by the budgeted silver/gold production over a three-year period. “Cash cost, after by-product credits,” | |
● | Silver production |
● | |
2013-20152015-2017 Performance Unit Valuation
Silver Reserve Growth | ||||||
Ounce Target (millions) | Additional Reserve (millions) | Unit Value | ||||
250 | 100 | $ | 100.00 | |||
200 | 50 | $ | 50.00 | |||
180 | 30 | $ | 25.00 | |||
160 | 10 | $ | 5.00 |
Cash Flow | |||||
% of Target | Unit Value | ||||
115% | $ | 50.00 | |||
110% | $ | 42.50 | |||
105% | $ | 32.50 | |||
100% | $ | 25.00 | |||
95% | $ | 22.50 | |||
90% | $ | 20.00 | |||
85% | $ | 17.50 | |||
80% | $ | 15.00 | |||
75% | $ | 12.50 | |||
70% | $ | 10.00 | |||
65% | $ | 7.50 | |||
60% | $ | 0.00 |
Silver Equivalent (includes Gold) Reserve Growth | |||||
Ounce Target (millions) | Additional Reserve (millions) (replacement in situ) | Unit Value | |||
420 | 100 (175) | $ | 100.00 | ||
360 | 40 (115) | $ | 50.00 | ||
350 | 30 (105) | $ | 25.00 | ||
320 | 0 (75) | $ | 5.00 | ||
Cash Flow | |||||
% of Target | Unit Value | ||||
115% | $ | 100.00 | |||
110% | $ | 50.00 | |||
105% | $ | 35.00 | |||
100% | $ | 25.00 | |||
95% | $ | 22.50 | |||
90% | $ | 20.00 | |||
85% | $ | 17.50 | |||
80% | $ | 15.00 |
Silver Production Growth | |||||
Target (in mm ozs.) | Average Annual Target (in mm ozs.) | Performance Unit Value | |||
65.1 | 21.7 | $50.00 | |||
56.1 | 18.7 | $40.00 | |||
24.1 | 18.0 | $25.00 | |||
51.6 | 17.2 | $10.00 |
Total Shareholder Return | |||||
%ile rank within Peer Group Companies | Unit Value | ||||
100% | $ | 50.00 | |||
90% | $ | 45.00 | |||
80% | $ | 40.00 | |||
70% | $ | 35.00 | |||
60% | $ | 30.00 | |||
50% | $ | 25.00 | |||
25% | $ | 15.00 | |||
<25% | $ | 0.00 |
Silver Equivalent (includes Gold) Production Growth | |||||
Target (in mm ozs.) | Average Annual Target (in mm ozs.) | Unit Value | |||
82.5 | 27.5 | $ | 75.00 | ||
78.5 | 26.2 | $ | 50.00 | ||
77.0 | 25.7 | $ | 25.00 | ||
74.5 | 24.8 | $ | 10.00 | ||
Total Shareholder Return | |||||
%ile rank within Peer Group Companies | Unit Value | ||||
100% | $ | 100.00 | |||
90% | $ | 75.00 | |||
80% | $ | 50.00 | |||
70% | $ | 35.00 | |||
60% | $ | 25.00 | |||
50% | $ | 15.00 | |||
<50% | $ | 0.00 |
2018 Proxy Statement51
COMPENSATION DISCUSSION AND ANALYSIS |
2013-20152015-2017 LTIP – Analysis and Decisions. The committee assessed performance under the 2013-20152015-2017 LTIP as follows:
Performance Measure | Target | Actual Performance | % of Target | Value Earned Per Unit | ||||||
Silver Reserve Growth | 30.0 silver oz. | 25.4 silver oz. | 85% | $20.50 | ||||||
added (millions) | added (millions) | |||||||||
Production Growth | 54.1 silver oz. | 59.2 silver oz. | 109% | $43.50 | ||||||
(millions) | (millions) | |||||||||
Cash Flow | $848.49 cash | $884.98 cash | 104% | $31.50 | ||||||
flow (millions) | flow (millions) | |||||||||
Total Shareholder Return | 50% Hecla | 69.2% Hecla | 138% | $34.50 | ||||||
ranking vs. peers | ranking vs. peers | |||||||||
#4 Shaft Completion | Shaft Completed | 10/26/16 | 0% | No Payout | ||||||
by 2/15/16 | completion date | |||||||||
Total Earned Per Unit | $130.00 |
Performance Measure | Target | Actual Performance | % of Target | Value Earned Per Unit | |||||
Silver Reserve Growth | 30.0 silver equivalent oz. added (millions) | 17.3 silver equivalent oz. added (millions) | 58% | $ | 16.50 | ||||
Production Growth | 77.0 silver equivalent oz. added (millions) | 87.8 silver equivalent oz. added (millions) | 114% | $ | 75.00 | ||||
Cash Flow | $627.8 cash flow (millions) | $779.5 cash flow (millions) | 124% | $ | 100.00 | ||||
Total Shareholder Return | 60% Hecla ranking vs. peers | 53.8% Hecla ranking vs. peers | 90% | $ | 18.75 | ||||
Total Earned Per Unit | $ | 210.25 |
During this three-year period, performance in production, cash flow generation and TSRproduction growth exceeded the target and silverlevels. Performance in reserve growth exceeded the threshold, but wasand TSR were below target, while #4 Shaft completion was below the threshold.but above minimum threshold levels. As a result, with a range in potential value per unit of $0 to $300,$375, in February 2016,2018, the committeedeterminedcommittee determined that the total 2013-20152015-2017 LTIP payout was $130.00$210.25 per unit. The committee and theandthe Board further approved payout of the LTIP awards to be 50% in cash and 50% in Hecla common stock issued under the 2010 Stock Incentive Plan.
The following chart shows the number of performance units awarded in 20132015 to each NEO, the unit value achieved, the total amount of the award (number of units x $130.00$210.25 = amount received), and the amount of cash and number of shares received.
Name | 2013-2015 Performance Units (#) | Unit Value ($) | Total Amount of Award1 ($) | Cash Received ($) | Equity Received2 (#) | |||||||
Phillips S. Baker, Jr. | 8,250 | 130.00 | 1,072,500 | 536,250 | 227,225 | |||||||
James A. Sabala | 3,400 | 130.00 | 442,000 | 221,000 | 93,644 | |||||||
Lawrence P. Radford | 3,000 | 130.00 | 390,000 | 195,000 | 82,627 | |||||||
Dr. Dean W.A. McDonald | 2,600 | 130.00 | 338,000 | 169,000 | 71,610 | |||||||
David C. Sienko | 1,900 | 130.00 | 247,000 | 123,500 | 52,331 | |||||||
Don Poirier | 2,050 | 130.00 | 266,500 | 133,250 | 56,462 |
Name | 2015-2017 Performance Units (#) | Unit Value ($) | Total Amount of Award1 ($) | Cash Received ($) | Equity Received2 (#) | |||||
Phillips S. Baker, Jr. | 9,500 | 210.25 | 1,997,375 | 998,688 | 254,119 | |||||
Lindsay A. Hall | 1,983 | 3 | 210.25 | 416,926 | 208,463 | 53,044 | ||||
Lawrence P. Radford | 3,400 | 210.25 | 714,850 | 357,425 | 90,948 | |||||
Dr. Dean W.A. McDonald | 2,600 | 210.25 | 546,650 | 273,325 | 69,548 | |||||
David C. Sienko | 1,900 | 210.25 | 399,475 | 199,738 | 50,824 |
1 | The amount reported in this column was paid in cash and equity to the NEO and is also reported in theSummary Compensation Table for 2017on page |
2 | The equity portion of the |
3 | Mr. Hall’s 2015-2017 LTIP units were prorated because he joined the Company in July 2016. |
Restricted Stock Units. Restricted stock units (“RSUs”) are granted to the NEOs under the Key Employee Deferred Compensation Plan and/or the 2010 Stock Incentive Plan. RSUs are used to retain our NEOs and align their interests with the long-term interests of our shareholders. The committee awarded RSUs to each NEO RSUs in July 2015.June 2017. The RSUs vest in three equal amounts with vesting dates of June 21, 2016,2018, June 21, 2017,2019, and June 21, 2018.2020. SeeGrants of Plan-Based Awards for 20152017on page 64.______.
In December 2014, the committee amended the 2010 Stock Incentive Plan and Key Employee Deferred Compensation Plan so that any RSUs vesting after 2014 would no longer be credited with dividend equivalents.
In 2015, we granted RSUs to 96 employees, including all NEOs, underFebruary 2017, the committee amended the 2010 Stock Incentive Plan.Plan so unvested RSUs are forfeited byparticipants upon termination of employment in advance of vesting, with the exception of termination due to retirement if certain criteria are met. In the case of an employee retiring before the amendment, RSU recipients aged 55 or above, and who had at least 10 years of service, were eligible to receive their unvested RSUs. For 2017, and future awards, in order to incentivize RSU recipients to continue working for the Company, the committee amended the RSU awards to require both an age and years of service trigger in order to qualify for vesting of the RSUs as of the employee’s retirement. The amendment provides that for purposes of the RSU awards, RSU recipients who retire under Hecla Mining Company’s Retirement Plan must be at least age: (i) 60 and have 15 or more years of service with the Company; (ii) 65 and have
52www.hecla-mining.com
COMPENSATION DISCUSSION AND ANALYSIS |
7 or more years of service with the Company; or (iii) 68, in order to receive their unvested RSUs after retirement. If one of the above requirements are met, the recipient will receive their RSUs on the original vesting dates.
In June 2017, we granted RSUs to 91 employees, including all NEOs, under the 2010 Stock Incentive Plan.
Performance-based Shares. We grant performance-based share awards to certain executive officers, including our NEOs. The value of the awards is based on the ranking of the market performance of our common stock relative to the performance of the common stock of a group of peer companies over a three-year measurement period. The number of shares to be issued is based on the value of the awards divided by the share price at grant date. The compensation cost is measured using a Monte Carlo simulation to estimate their value at grant date.
In July 2015,June 2017, the committee and the independent Board members granted 204,918 performance-based shares to our CEO,NEOs, with a grant date fair value of $500,000, comprising one-half of his total equity awards in 2015.listed below. The value of these performance-basedsharesperformance-based shares will be based on the TSR of our common stock for the three-year period from January 1, 20152017 through December 31, 2017,2019, based on the following percentile rank listed below within a group of peer companies:companies.
NEO | Grant Date Value of Performance-based Shares | Target Number of Shares1 | ||
Phillips S. Baker, Jr. | $ | 600,000 | 102,215 | |
Lawrence P. Radford | $ | 120,000 | 20,443 | |
Lindsay A. Hall | $ | 120,000 | 20,443 | |
Dr. Dean W.A. McDonald | $ | 80,000 | 13,629 | |
David C. Sienko | $ | 50,000 | 8,518 |
1 | Target number of shares is determined by dividing the grant date fair value of the performance-based shares by the closing price of our common stock on the NYSE on June 7, 2017 ($5.87). |
Company TSR Rank Among Peers | TSR Performance Multiplier |
50thpercentile | Threshold award at 50% of target |
60thpercentile | Target award at grant value |
100thpercentile | Maximum award at 200% of target |
If Hecla’s performance is below the 50thpercentile, the award is zero. If Hecla’s performance is between the 50thand 100thpercentile, the award is prorated. For any award, the number of shares issued in 2018 at the conclusion of the three-year performance period (December 31, 2019) will be based on the grant date share price (July 1, 2015)(June 7, 2017) of $2.44.$5.87.
Hecla’s TSR performance versus that of our peer group will be based on the average closing share price over the last sixty (60) calendar days prior to January 1, 2015,2017, as the base price and average closing share price over the last sixty (60) calendar days of the three-year performance period to determine relative share value performance and ranking among peers.
For 2015, the industry peer group used for purposes of the 2017-2019 TSR performance-based award discussed above is listed on page 39._____.
20132015 – 20152017 Performance-based Shares – Analysis and Decision.Decision. On June 21, 2013,July 1, 2015, the committee and independent members of the Board of Directors granted 170,648204,918 performance-based shares of Hecla’s common stock which had a target value of $500,000 with the potential of up to 200% of this target value (subject to specific performance terms and conditions established for these shares) to our CEO under the Key Employee Deferred Compensation Plan. These performance-based shares were awarded based on the TSR of Hecla common stock for the three-year period from January 1, 2013 through December 31, 2015, using the following percentile rank within peer group companies:CEO.
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| |
|
To determine the relative share performance, Hecla’s TSR performance versus that of peer group companies was based on the average closing share price over the last sixty (60) calendar days prior to January 1, 2013,2015, as the base price, compared with the average closing share price over the last sixty (60) calendar days of the three-year performance period (ending December 31, 2015)2017).
2018 Proxy Statement53
COMPENSATION DISCUSSION AND ANALYSIS |
The following table shows the calculation of the performance-based share results at the end of the three-year performance period on December 31, 2015.2017. Hecla’s TSR ranked 56thamong the 1314 companies in the peer group based on TSR from 20132015 through 2015,2017, including dividends paid during that period. Ranking 56thplaces Hecla at 69.2%61.5% among the peer companies, which equates to an award value of $692,000$518,750 or 236,177212,602 shares at the $2.93$2.44 closing price of Hecla’s common stock on June 21, 2013.July 1, 2015.
TOTAL SHAREHOLDER RETURN – January 1, 2013 through December 31, 2015 | ||||||||||||||
Peer Name | Average Stock Price over 60-day period leading up to 1/1/2013 ($) | Average Stock Price over 60-day period leading up to 12/31/15 ($) | Dividends Paid (1/1/13 thru 12/31/15) ($) | TSR thru 12/31/15 (%) | Rank (#) | Payout ($) | ||||||||
Centerra Gold | 9.33 | 7.69 | 0.48 | -17.58 | 1 | 1,000,000 | ||||||||
Stillwater Mining | 11.48 | 8.98 | -21.78 | 2 | 923,000 | |||||||||
Pan American Silver | 19.16 | 8.16 | 1.28 | -57.44 | 3 | 846,000 | ||||||||
Silver Standard | 14.23 | 5.39 | -62.12 | 4 | 769,000 | |||||||||
Hecla | 5.79 | 2.00 | 0.04 | -65.46 | 5 | 692,000 | ||||||||
New Gold | 10.57 | 3.12 | -70.48 | 6 | 615,000 | |||||||||
Endeavour Silver | 8.25 | 1.95 | -76.36 | 7 | 538,000 | |||||||||
TARGET PAYOUT | 500,000 | |||||||||||||
Eldorado Gold | 13.99 | 3.30 | 0.16 | -76.44 | 8 | 462,000 | ||||||||
First Majestic Silver | 22.01 | 4.36 | -80.19 | 9 | 385,000 | |||||||||
Alamos Gold | 18.52 | 3.50 | 0.26 | -81.10 | 10 | 308,000 | ||||||||
THRESHOLD PAYOUT | 250,000 | |||||||||||||
IAMGOLD | 12.31 | 1.62 | 0.13 | -86.88 | 11 | |||||||||
Coeur d’Alene Mines | 24.09 | 2.59 | -89.25 | 12 | ||||||||||
Golden Star Resources | 1.79 | 0.19 | -89.39 | 13 | ||||||||||
Allied Nevada Gold | 30.30 | 0.00 | -100.00 | 14 |
TOTAL SHAREHOLDER RETURN – January 1, 2015 through December 31, 2017 | ||||||||||||
Peer Name | Average Stock Price over 60-day period leading up to 1/1/2015 ($) | Average Stock Price over 60-day period leading up to 12/31/17 ($) | Dividends Paid (1/1/14 thru 12/31/17) ($) | TSR thru 12/31/17 (%) | Rank (#) | Payout ($) | ||||||
IAMGOLD | 2.27 | 5.60 | 0.00 | 146.70 | 1 | 1,000,000 | ||||||
B2 Gold | 1.93 | 3.44 | 0.00 | 78.24 | 2 | 903,750 | ||||||
SSR Mining* | 5.12 | 8.61 | 0.00 | 68.16 | 3 | 807,500 | ||||||
Coeur Mining | 4.40 | 7.39 | 0.00 | 67.95 | 4 | 711,250 | ||||||
Pan American Silver | 9.69 | 15.23 | 0.43 | 61.56 | 5 | 615,000 | ||||||
Hecla | 2.51 | 3.95 | 0.03 | 58.57 | 6 | 518,750 | ||||||
TARGET PAYOUT | 500,000 | |||||||||||
Detour Gold | 8.83 | 13.51 | 0.00 | 53.00 | 7 | 345,000 | ||||||
THRESHOLD PAYOUT | 250,000 | |||||||||||
First Majestic Silver | 4.77 | 6.84 | 0.00 | 43.40 | 8 | 0 | ||||||
Centerra Gold | 5.37 | 7.33 | 0.28 | 41.71 | 9 | 0 | ||||||
Alamos Gold | 7.25 | 6.34 | 0.08 | -11.45 | 10 | 0 | ||||||
Endeavour Silver | 2.54 | 2.19 | 0.00 | -13.78 | 11 | 0 | ||||||
New Gold | 4.14 | 3.20 | 0.00 | -22.71 | 12 | 0 | ||||||
Tahoe Resources | 14.88 | 4.51 | 0.61 | -65.59 | 13 | 0 | ||||||
Primero Mining | 3.82 | 0.07 | 0.00 | -98.17 | 14 | 0 | ||||||
AuRico Gold** |
* | SSR Mining was previously called Silver Standard Resources. |
** | AuRico gold merged into Alamos gold in 2015. |
Stock Options.OptionsThe ability to grant. In the past six years, we have not issued any stock options under the 1995 Stock Incentive Plan expired in May 2010. All outstanding stock options granted under that plan expired on May 5, 2015. In June 2010,to our shareholders approved the 2010 Stock Incentive Plan.NEOs (or any other employee). Any stock options granted under this planthe 2010 Stock Incentive Plan will be issued with an exercise price based on the fair market value (the closing sales price of our common stock on the NYSE on the date of grant).
In the past five years, we have not issued any stock options to our NEOs (or any other employee). Before that time, we granted stock options to key employees during the second quarter of the calendar year and made occasional grants to new employees upon hire.
Nonqualified Deferred Compensation Plan.We maintain the Key Employee Deferred Compensation Plan (the “KEDCP”), a nonqualified deferred compensation plan, under which participants may defer all or a portion of their annual base salary, performance-based compensation awarded under our AIP and LTIP, and RSUs granted under the 2010 Stock Incentive Plan. Participants may elect to have their deferred base salary and AIP or LTIP awards valued based on Hecla common stock and credited to a stock account. Deferred RSUs are credited to a stock account. The KEDCP provides for discretionary matching contributions on base salary, AIP and LTIP amounts deferred to a stock account and discretionary company contributions that are credited to a participant’s stock account. The deferral features promote alignment of the interests of participants with those of our shareholders. Investment accounts are credited monthly with an amount based on the prime rate for corporate borrowers. Participants receive distributions from their accounts only upon separation from service with us, a fixed date or schedule selected by the participant, death, disability, an unforeseeable emergency or a change in control, as these events are defined under Section 409A of the Internal Revenue Code. The amounts deferred are unfunded and unsecured obligations of Hecla, receive
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COMPENSATION DISCUSSION AND ANALYSIS |
no preferential standing, and are subject to the same risks as any of our other general obligations. Additional details about the KEDCP are described in the narrative accompanying theNonqualified Deferred Compensation for 20152017table on page 67._______.
Benefits.We provide our employees with a benefits package that is designed to attract and retain the talent needed to manage Hecla. As part of that, all U.S. salaried employees, including the NEOs, are eligible to participate in the Hecla Mining Company Retirement Plan (the “Retirement Plan”), the Capital Accumulation Plan (a 401(k) plan, which includes matching contributions by Hecla up to 6%), health, vision, and dental coverage, and paid time off, including vacations and holidays. All Canadian salaried employees, including NEOs, are eligible to participate in a similar benefits package. NEOs are eligible to receive certain additional benefits, as described below. The committee intends for the type and value of such benefits offered to be competitive with general market practices.
Other Qualified and Nonqualified Benefit Plans.Plans. Under the Retirement Plan, upon normal retirement, each participant is eligible to receive a monthly benefit equal to a certain percentage of final average annual earnings for each year of credited service. Additional details about the Retirement Plan are in the narrative accompanying thePension Benefits table on page 76.______. Under Hecla’s unfunded Supplemental Excess Retirement Plan, the amount of any benefits not payable under the Retirement Plan by reasonbecause of the limitations imposed by the Internal Revenue Code and/or the Employee Retirement Income Security Act, and the reduction of benefits, if any, due to a deferral of salary made under our KEDCP, will be paid out of our general funds to any employee who may be adversely affected. The Retirement Plan and Supplemental Excess Retirement Plan define earnings for purposes of the plans to include base salary plus any other cash incentives up until July 1, 2013, after which only base salary plus one-half of AIP compensation is included (no LTIP compensation is included).
Personal Benefits.Benefits. We do not provide company-paid cars, country club memberships, or other similar perquisites to our executives. The only material personal benefit provided by Hecla is a relocation benefit, which is offered as needed to meet specific recruitment needs.
At its February 2013 meeting, the Compensation Committee adopted a clawback policy with respect to incentive awards to executive officers. The policy provides that in the event of a restatement of our financial results as a result of material non-compliance with financial reporting requirements, the Board will review incentive compensation that was paid to our current and former executive officers under the Company’s AIP and LTIP (or any successor plans) based solely on the achievement of specific corporate financial goals (“Incentive Award”) during the period of the restatement. If any Incentive Award would have been lower had it been calculated based on the Company’s restated financial results, the Board will, as and to the extent it deems appropriate, including with respect to intent or level of culpability of the relevant individual(s), seek to recover from any executive whose conduct is determined by the Board to be the cause or partial cause of the restatement,officer, any portion of an Incentive Award paid in excess of what would have been paid based on the restated financial results. The policy does not apply in any situation where a restatement is not the result of material non-compliance with financial reporting requirements, such as any restatement due to a change in applicable accounting rules, standards or interpretations, a change in segment designations or the discontinuance of an operation.
In December 2015, the Compensation Committee amended each of itsour incentive plans (AIP, LTIP, KEDCP, and 2010 Stock Incentive Plan) to include a clawback provision consistent with the Clawback Policy.clawback policy described above.
Our insider trading policy prohibits all directors, executive officers (as defined under Section 16 of the Exchange Act) and certain other employees designated as insiders from purchasing or selling any Company securities three weeks before through two days after the public release of any of our periodic results (including the filing of any Form 10-Q or Form 10-K), or at any other time during the year while in possession of material non-public information about the Company. In addition, directors and officers are prohibited from short-term trading, short sales, options trading, trading on margin, hedging or pledging any securities of the Company.
2018 Proxy Statement55
COMPENSATION DISCUSSION AND ANALYSIS |
We have entered into a change in control agreementagreements (“CIC Agreement”Agreements”) with each of our NEOs. Under the terms of our CIC Agreements, the CEO and the other NEOs are entitled to payments and benefits upon the occurrence of specified events, including termination of employment (with or without cause) following a change in control of the Company. The specific terms of these arrangements, as well as an estimate of the compensation that would have been payable had they been triggered as of fiscal year-end, are described in detail in the section entitledChange in Control and Terminationon page 68._____.
The termination of employment provisions of the CIC Agreements were entered into to address competitive concerns when the NEOs were recruited to Hecla by providing these individuals with a fixed amount of compensation that would offset the risk of leaving their prior employer or foregoing other opportunities to join the Company. At the time of entering into these arrangements, the committee considered the aggregate potential obligations of the Company in the context of the desirability of hiring the individual and the expected compensation upon joining Hecla.
In March 2015, the committee approved an amendment to the CIC Agreement with each of our NEOs to eliminate the excise tax gross-up provision and to include a provision for a “Best Net After Tax Payment,” which reduces the amount received by the NEO upon a change in control if the NEO would receive a greater after-tax benefit than he would receive if full several benefits were paid, taking into account all applicable taxes including any excise tax.
The committee believes that these CIC Agreements are important for a number of reasons, including providing reasonable compensation opportunities in the unique circumstances of a change in control that are not provided by other elements of our compensation program. Further, change in control benefits, if structured appropriately, serve to minimize the distraction caused by a potential transaction and reduce the risk that key executives will leave Hecla before a transaction closes. The committee also believes that these agreements motivate the executives to make decisions that are in the best interests of our shareholders in the event of a pending change in control. These agreements provide executives with the necessary job stability and financial security during a change in control transaction and the subsequent period of uncertainty to help them stay focused on managing Hecla rather than on their own personal employment situation. The committee believes that all of these objectives serve our shareholders’ interests. The committee also believes that change in control provisions are an essential component of the executive compensation program and are necessary to attract and retain senior talent in the highly competitive talent market in which we compete.
The change in control provisions were developed by the Company and the committee based on market and industry competitive practices. The Company and the committee periodically review the benefits provided under the CIC Agreements to ensure that they serve our interests in retaining our key executives, are consistent with market and industry practice, and are reasonable.
Tax and Accounting Considerations
Our compensation programs are affected by each of the following:
Accounting for Stock-Based Compensation. We take into account certain requirements of GAAP in determining changes to policies and practices for our stock-based compensation programs.
Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal Revenue Code of 1986, as amended (“Code Section 162(m)”), generally provides generally that compensation in excess of $1 million paid to the CEO or to anyand certain other NEO (other than the chief financial officer)NEOs (“covered employees”) of a public company will not be deductible for U.S. federal income tax purposes unless such compensation is paid pursuant to one of the enumerated exceptions set forth in Code Section 162(m).purposes.
Our primary objective in designing and administering our compensation policies is to support and encourage the achievement of our strategic goals and to enhance long-term shareholder value. We also believe that it is important to preserve flexibility in administering compensation programs. For these and other reasons, the committee has determined that it will not necessarily seek to limit executive compensation to the amount that would be fully deductible under Code Section 162(m). Further, although we received shareholder approval
Effective for our 2010 Stock Incentive Plan at our 2010 Annual Meeting, there is no assurance that such approval satisfied or continues to satisfytaxable years beginning after December 31, 2017, the shareholder approval requirements underexemption from Code Section 162(m) necessary for amounts awarded underperformance-based compensation was repealed in the tax reform legislation signed into law on December 22, 2017. Thus, it is anticipated that planfuture compensation in excess of $1 million paid to covered employees will not be fully deductible by Hecla. As a result of the foregoing, amounts awarded or paid under any of our compensation programs,for U.S. federal income tax purposes.
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COMPENSATION DISCUSSION AND ANALYSIS |
including salaries, annual incentive awards, performance awards, stock options and RSUs, may not qualify as performance-based compensation that is excluded from the limitation on deductibility.
The committee will continue to monitor developments and assess alternatives for preservingmanaging the deductibility of compensation payments and benefits to the extent reasonably practicable, as determined by the committee to be consistent with our compensation policies and in the best interests of the Company and our shareholders.
In 2015, Mr. Baker, our President and CEO, and Mr. Radford, our Senior Vice President – Operations, earned amounts subject to Section 162(m) in excess of $1 million, therefore a portion of each of those officer’s total compensation is not deductible by Hecla.
Section 409A of the Internal Revenue Code.Code. Section 409A imposes additional significant taxes in the event that an executive officer or director receives “deferred compensation” that does not satisfy the requirements of Section 409A. We believe that we have designed and operated our plans appropriately to comply with Section 409A.
In DecemberDue to the low prices of metals in 2015, due to budgetthe Compensation Committee approved salary reductions for 2016, ourcalendar year 2016. Our CEO’s base salary was reduced by 20%, and allour other NEO’sNEOs’ base salaries were reduced by 10%. Effective January 1, 2017, base salaries were restored to pre-2016 levels. Base salaries are reviewed mid-year, and in June 2017, Mr. Baker’s base salary was reduced by 10%, effective through all of calendar year 2016.
NEO | 1/1/16 to 12/31/16 Salary ($) | Percentage Decrease (%) | |||
Phillips S. Baker, Jr. | 484,000 | 20 | |||
James A. Sabala | 342,000 | 10 | |||
Lawrence P. Radford | 342,000 | 10 | |||
Dr. Dean W.A. McDonald | 247,500 | 10 | |||
David C. Sienko | 225,000 | 10 | |||
Don Poirier* | 0 | — |
* Mr. Poirier departedincreased from $605,000 to $635,000. All other NEOs’ base salaries remained the Company at the end of 2015.same.
1/1/18 to 6/30/18 Salary ($) | |
Phillips S. Baker, Jr. | 635,000 |
Lindsay A. Hall | 380,000 |
Lawrence P. Radford | 380,000 |
Dr. Dean W.A. McDonald | 275,000 |
David C. Sienko | 250,000 |
2018 AIP |
In February 2016, theThe committee has not yet approved the 2016 AIP goals. The AIP factors were divided intogoals for the following components, which may be modified by the committee from time to time, including with respect to the relative weights:
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While each component can achieve two and a half times the target (250%), the maximum total payout is limited to two times the target award level (200%).2018 AIP.
For the 2016 AIP, the quantitative corporate performance factors are divided into four factors (including weighting): adjusted EBITDA (15%), production (15%), cash (15%) and work-related injury rate reduction (5%).2018 Proxy Statement57
COMPENSATION DISCUSSION AND ANALYSIS |
The adjusted EBITDA target is $150 million. Maximum payout is achieved if adjusted EBITDA is $225 million, which is $75 million more than target. There is no payout if adjusted EBITDA is less than $100 million. Further, this component of the AIP does not assume fixed metals prices. For AIP purposes, “adjusted EBITDA” is defined as our earnings before interest, taxes, depreciation, and amortization, with additional adjustments for items which we believe are not indicative of the Company’s ongoing operations.
Adjusted EBITDA Goal Metrics
The production factor converts gold, lead and zinc to silver equivalent at a ratio of 78 oz. silver to 1 oz. gold, 19.0 lb. lead to 1 oz. silver, and 20.7 lb. zinc to 1 oz. silver. Our production target requires that we achieve 42.6 million silver equivalent ounces. Maximum payout is attained if production achieves 44 million ounces. The threshold payout requires production of 39 million ounces, below which no payout is earned. Achievement of target requires a 9% increase over 2015 silver equivalent production, while achievement of the maximum payout requires a 15% increase.
Production Goal Metrics
The cash target is $100 million in cash on hand at December 31, 2016. Maximum payout is achieved if our cash position at year-end is at or above $155 million, which is the cash position at the beginning of 2016. The threshold payout level is $75 million, below which no payout is earned.
Cash Goal Metrics
Table of ContentsOutstanding LTIP Periods
The work-related injury rate reduction target is a reduction in injury rates of 15% at year-end 2016 from 2015 results. Maximum payout is achieved if there is a 35% reduction in injury rates at year-end. The threshold payout level is 5%, below which no payout is earned.
Work-Related Injury Rate Reduction Metrics
2016 AIFR Metrics | % Performance Value | ||||||
35% | Maximum | 10 | % | ||||
25% | 7.5 | % | |||||
15% | Target | 5 | % | ||||
5% | Minimum | 2.5 | % | ||||
<5% | 0 | % |
The qualitative/other goalsBelow we provide the current three-year LTIP periods that are recommended by management, approved by the committee, and cover the areas of safety and health, operations, financial and cost controls, development projects, exploration, growth, legal, investor relations, industry visibility, human capital development and government and community affairs.outstanding.
In February 2014, the committee approved the 2014-2016 LTIP, which has a target unit value of $125. The 2014-2016 LTIP has three major changes from the 2013-2015 LTIP:
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Except as noted, the 2014-2016 LTIP includes the same components as the 2013-2015 LTIP, and increases the maximum potential payout from $300 to $375 per unit.
2014-2016 Performance Unit Valuation
Silver Equivalent Reserve Growth | ||||||
Ounce Target (millions) | Additional Reserve (millions) (replacement in situ) | Unit Value | ||||
400 | 103 (191) | $ | 100.00 | |||
337 | 40 (128) | $ | 50.00 | |||
327 | 30 (118) | $ | 25.00 | |||
307 | 10 (98) | $ | 5.00 |
Silver Equivalent Production Growth | ||||||
Target (in mm ozs.) | Average Annual Target (in mm ozs.) | Unit Value | ||||
75.0 | 25.0 | $ | 50.00 | |||
72.0 | 24.0 | $ | 40.00 | |||
70.5 | 23.5 | $ | 25.00 | |||
68.0 | 22.6 | $ | 10.00 |
Cash Flow | |||||
% of Target | Unit Value | ||||
115% | $ | 75.00 | |||
110% | $ | 50.00 | |||
105% | $ | 35.00 | |||
100% | $ | 25.00 | |||
95% | $ | 22.50 | |||
90% | $ | 20.00 | |||
85% | $ | 17.50 | |||
80% | $ | 15.00 | |||
#4 Shaft Completion | |||||
100% Completion Date | Unit Value | ||||
12/31/15 | $ | 50.00 | |||
5/1/16 | $ | 25.00 | |||
After 8/1/16 | $ | 0.00 |
Total Shareholder Return | |||||
%ile rank within Peer Group Companies | Unit Value | ||||
100% | $ | 100.00 | |||
90% | $ | 75.00 | |||
80% | $ | 50.00 | |||
70% | $ | 35.00 | |||
60% | $ | 25.00 | |||
50% | $ | 15.00 | |||
<50% | $ | 0.00 |
In March 2015, the committee approved the 2015-2017 LTIP, which has a target unit value of $100. The 2015-2017 LTIP has the same factors as the 2014-2016 LTIP, with the exception of the #4 Shaft completion metric, which was removed as the project nears completion. The only other factor that is different from the 2014-2016 LTIP is as follows:
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Except as noted, the 2015-2017 LTIP includes the same components as the 2014-2016 LTIP, with a maximum potential payout of $375 per unit.
2015-2017 Performance Unit Valuation
Silver Equivalent (includes Gold) Reserve Growth | |||||||
Ounce Target (millions) | Additional Reserve (millions) (replacement in situ) | Unit Value | |||||
420 | 100 (175) | $ | 100.00 | ||||
360 | 40 (115) | $ | 50.00 | ||||
350 | 30 (105) | $ | 25.00 | ||||
320 | 0 (75) | $ | 5.00 |
Silver Equivalent (includes Gold) Production Growth | ||||||
Target (in mm ozs.) | Average Annual Target (in mm ozs.) | Unit Value | ||||
82.5 | 27.5 | $ | 75.00 | |||
78.5 | 26.2 | $ | 50.00 | |||
77.0 | 25.7 | $ | 25.00 | |||
74.5 | 24.8 | $ | 10.00 |
Cash Flow | |||||
% of Target | Unit Value | ||||
115% | $ | 100.00 | |||
110% | $ | 50.00 | |||
105% | $ | 35.00 | |||
100% | $ | 25.00 | |||
95% | $ | 22.50 | |||
90% | $ | 20.00 | |||
85% | $ | 17.50 | |||
80% | $ | 15.00 |
Total Shareholder Return | |||||
%ile rank within Peer Group Companies | Unit Value | ||||
100% | $ | 100.00 | |||
90% | $ | 75.00 | |||
80% | $ | 50.00 | |||
70% | $ | 35.00 | |||
60% | $ | 25.00 | |||
50% | $ | 15.00 | |||
<50% | $ | 0.00 |
2016-2018 LTIP |
In February 2016, the committee approved the 2016-2018 LTIP, which has a target unit value of $100. The 2016-2018 LTIP has the same factors as the 2015-2017 LTIP, with a maximum potential payout of $375 per unit.
2016-2018 Performance Unit Valuation
Silver Equivalent (includes Gold) Reserve Growth | |||||||
Ounce Target (millions) | Additional Reserve (millions) (replacement in situ) | Unit Value | |||||
423 | 100 (184) | $ | 100.00 | ||||
363 | 40 (124) | $ | 50.00 | ||||
353 | 30 (114) | $ | 25.00 | ||||
323 | 0 (84) | $ | 5.00 | ||||
Cash Flow | |||||||
% of Target | Unit Value | ||||||
115% | $ | 100.00 | |||||
110% | $ | 50.00 | |||||
105% | $ | 35.00 | |||||
100% | $ | 25.00 | |||||
90% | $ | 15.00 |
Silver Equivalent (includes Gold) Reserve Growth | |||||
Ounce Target (millions) | Additional Reserve (millions) (replacement in situ) | Unit Value | |||
423 | 100 (184) | $ | 100.00 | ||
363 | 40 (124) | $ | 50.00 | ||
353 | 30 (114) | $ | 25.00 | ||
323 | 0 (84) | $ | 5.00 |
Cash Flow | |||
% of Target | Unit Value | ||
115% | $ | 100.00 | |
110% | $ | 50.00 | |
105% | $ | 35.00 | |
100% | $ | 25.00 | |
90% | $ | 15.00 |
Silver Equivalent (includes Gold) Production Growth | |||||||
Target (in mm ozs.) | Average Annual Target (in mm ozs.) | Unit Value | |||||
93.0 | 31.0 | $ | 75.00 | ||||
89.5 | 29.5 | $ | 50.00 | ||||
87.0 | 29.0 | $ | 25.00 | ||||
84.0 | 28.0 | $ | 10.00 |
Silver Equivalent (includes Gold) Production Growth | |||||
Target (in mm ozs.) | Average Annual Target (in mm ozs.) | Unit Value | |||
93.0 | 31.0 | $ | 75.00 | ||
89.5 | 29.5 | $ | 50.00 | ||
87.0 | 29.0 | $ | 25.00 | ||
84.0 | 28.0 | $ | 10.00 |
Total Shareholder Return | |||
%ile rank within Peer Group Companies | Unit Value | ||
100% | $ | 100.00 | |
90% | $ | 75.00 | |
80% | $ | 50.00 | |
70% | $ | 35.00 | |
60% | $ | 25.00 | |
50% | $ | 15.00 | |
<50% | $ | 0.00 |
2017-2019 LTIP |
In February 2017, the committee approved the 2017-2019 LTIP, which has a target unit value of $100. The 2017-2019 LTIP has four factors, three of which are repeat factors from the 2016-2018 LTIP, with a maximum potential payout of $375 per unit. The three factors include: silver equivalent reserve growth (gold is converted into silver equivalent at a ratio of 71 to 1), silver equivalent production growth (includes silver and gold, but not base metals), and total shareholder return. The fourth factor is mine site operating cash flow less capital, which replaces the cash flow goal from previous plans. This goal also includes the impact associated with any acquisitions (or dispositions) of operating mine sites.
58www.hecla-mining.com
2017-2019 Performance Unit Valuation
Silver Equivalent (includes Gold) Reserve Growth | ||||
Ounce Target (millions) | Additional Reserve (millions) (replacement in situ) | Unit Value | ||
405.6 | 90 (175) | $ | 75.00 | |
375.6 | 60 (145) | $ | 50.00 | |
345.6 | 30 (115) | $ | 25.00 | |
315.6 | 0 (85) | $ | 5.00 |
Silver Equivalent (includes Gold) Production Growth | |||||
Target (in mm ozs.) | Average Annual Target (in mm ozs.) | Unit Value | |||
100.0 | 33.3 | $ | 100.00 | ||
96.0 | 32.0 | $ | 75.00 | ||
93.0 | 31.0 | $ | 50.00 | ||
90.0 | 30.0 | $ | 25.00 | ||
85.0 | 28.3 | $ | 10.00 |
Mine Site Operating Cash Flow Less Capital | ||||
Cash Target (millions) | Unit Value | |||
$375 | $ | 100.00 | ||
$350 | $ | 50.00 | ||
$300 | $ | 25.00 | ||
$250 | $ | 5.00 |
Total Shareholder Return | |||
%ile rank within Peer Group Companies | Unit Value | ||
100% | $ | 100.00 | |
90% | $ | 90.00 | |
80% | $ | 75.00 | |
70% | $ | 50.00 | |
60% | $ | 30.00 | |
50% | $ | 25.00 | |
<50% | $ | 0.00 |
2018 Proxy Statement59
COMPENSATION DISCUSSION AND ANALYSIS |
2018-2020 LTIP |
In February 2018, the committee approved the 2018-2020 LTIP, which has a target unit value of $100. The 2018-2020 LTIP has four factors, which are repeat factors from the 2017-2019 LTIP, with a maximum potential payout of $375 per unit. The four factors include: silver equivalent reserve growth (gold is converted into silver equivalent at a ratio of 71 to 1), silver equivalent production growth (includes silver and gold, but not base metals), total shareholder return and mine site operating cash flow less capital.
2018-2020 Performance Unit Valuation
Silver Equivalent (includes Gold) Reserve Growth | ||||
Silver Equivalent Ounce Target (millions) | Additional Reserve (millions) (replacement in situ) | Unit Value | ||
427.6 | 90 (170) | $ | 75.00 | |
397.6 | 60 (140) | $ | 50.00 | |
367.6 | 30 (110) | $ | 25.00 | |
337.6 | 0 (80) | $ | 10.00 |
Silver Equivalent (includes Gold) Production Growth | ||||
Target (in mm ozs.) | Average Annual Target (in mm ozs.) | Unit Value | ||
105.0 | 35.0 | $ | 100.00 | |
96.0 | 32.0 | $ | 75.00 | |
90.0 | 30.0 | $ | 50.00 | |
86.0 | 28.7 | $ | 25.00 | |
80.0 | 26.7 | $ | 10.00 |
Mine Site Operating Cash Flow Less Capital | |||
Cash Target (millions) | Unit Value | ||
$425 | $ | 100.00 | |
$375 | $ | 50.00 | |
$350 | $ | 25.00 | |
$330 | $ | 10.00 |
Total Shareholder Return | |||
Ranking within Peer Group Companies | Unit Value | ||
Top 2 | $ | 100.00 | |
Top 4 | $ | 75.00 | |
Top 6 | $ | 50.00 | |
Top 8 | $ | 25.00 | |
<Top 8 | $ | 0.00 |
60www.hecla-mining.com
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are set forth in theCompensation Committee Report.Report. There are no members of the Compensation Committee who were officers or employees of Hecla or any of our subsidiaries during the fiscal year, formerly were officers of Hecla or any of our subsidiaries, or had any relationship otherwise requiring disclosure under the proxy rules promulgated by the SEC or the NYSE.
The Compensation Committee has reviewed and discussed theCompensation Discussion and Analysiswith Hecla’s management and its independent compensation consultant. Based on its review and discussions, the committee recommended to the Board, and the Board has approved, theCompensation Discussion and Analysisincluded in this Proxy Statement and incorporated by reference in Hecla’s Annual Report on Form 10-K for the year ended December 31, 2015.2017.
Respectfully submitted by | |
The Compensation Committee of the | |
Board of Directors | |
Terry V. Rogers, Chair | |
2018 Proxy Statement61
COMPENSATION OF NAMED EXECUTIVE OFFICERS |
COMPENSATION OF NAMED EXECUTIVE OFFICERS
Summary Compensation Table for 20152017
The following compensation tables provide information regarding the compensation of our CEO, CFO, and fourthree other NEOs who were the most highly compensated inofficers for the calendar year ended December 31, 2015.2017.
Name and Principal Position | Year | Salary1 ($) | Bonus2 ($) | Stock Awards3 ($) | Option Awards3 ($) | Non-Equity Incentive Plan Compensation4 ($) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings5 ($) | All Other Compensation ($) | Total ($) | |||||||||||||
Phillips S. Baker, Jr. | 2015 | 605,000 | — | 1,727,174 | 6 | — | 1,768,250 | 599,477 | 15,900 | 7 | 4,715,801 | |||||||||||
President and CEO | 2014 | 605,000 | — | 1,438,288 | — | 2,303,538 | 164,099 | 15,600 | 4,526,525 | |||||||||||||
2013 | 575,208 | — | 1,073,874 | — | 1,497,375 | 692,922 | 15,300 | 3,854,679 | ||||||||||||||
James A. Sabala | 2015 | 380,000 | — | 583,700 | — | 822,000 | 174,075 | 15,900 | 7 | 1,975,675 | ||||||||||||
Senior Vice President | 2014 | 366,458 | — | 887,623 | — | 954,800 | 279,690 | 15,600 | 2,504,171 | |||||||||||||
and CFO | 2013 | 341,458 | — | 344,999 | — | 825,750 | 268,474 | 15,300 | 1,795,981 | |||||||||||||
Lawrence P. Radford | 2015 | 380,000 | — | 556,694 | — | 890,000 | 105,114 | 15,900 | 7 | 1,947,708 | ||||||||||||
Senior Vice President – | 2014 | 366,458 | — | 709,326 | — | 886,775 | 98,277 | 15,600 | 2,076,436 | |||||||||||||
Operations | 2013 | 341,458 | — | 300,000 | — | 589,950 | 91,197 | 15,300 | 1,337,905 | |||||||||||||
Dr. Dean W. A. McDonald9 | 2015 | 275,000 | — | 480,468 | — | 580,000 | 110,743 | 15,900 | 8 | 1,462,111 | ||||||||||||
Senior Vice President - | 2014 | 275,000 | — | 562,276 | — | 721,875 | 214,384 | 15,600 | 1,789,135 | |||||||||||||
Exploration | 2013 | 279,443 | — | 300,000 | — | 455,400 | 183,417 | 16,210 | 1,234,470 | |||||||||||||
David C. Sienko | 2015 | 250,000 | — | 289,933 | — | 397,000 | 36,365 | 15,900 | 7 | 989,198 | ||||||||||||
Vice President and | 2014 | 250,000 | — | 376,900 | — | 543,725 | 78,318 | 15,600 | 1,264,543 | |||||||||||||
General Counsel | 2013 | 241,875 | — | 154,001 | — | 387,900 | 60,693 | 15,300 | 859,769 | |||||||||||||
Don Poirier9 | 2015 | 226,000 | — | 314,950 | — | 401,500 | 82,950 | 15,900 | 8 | 1,041,300 | ||||||||||||
Vice President – | 2014 | 226,000 | — | 412,820 | — | 459,800 | 165,348 | 15,600 | 1,279,568 | |||||||||||||
Corporate Development | 2013 | 233,080 | — | 199,999 | — | 370,620 | 130,940 | 16,210 | 950,849 |
Name and Principal Position | Year | Salary1 ($) | Stock Awards2 ($) | Non-Equity Incentive Plan Compensation3 ($) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings4 ($) | All Other Compensation ($) | Total ($) | |||||||
Phillips S. Baker, Jr. | 2017 | 618,750 | 842,802 | 5 | 2,473,625 | 1,017,111 | 18,306 | 7 | 4,970,594 | |||||
President and CEO | 2016 | 484,000 | 1,190,811 | 2,876,375 | 924,335 | 15,900 | 5,491,421 | |||||||
2015 | 605,000 | 1,151,290 | 1,768,250 | 599,477 | 15,900 | 4,139,917 | ||||||||
Lindsay A. Hall8 | 2017 | 380,000 | 413,558 | 5 | 701,926 | 143,281 | 6 | 17,790 | 7 | 1,656,555 | ||||
Senior Vice President | 2016 | 156,750 | 344,999 | 326,027 | 13,146 | 9,200 | 850,122 | |||||||
and CFO | 2015 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Lawrence P. Radford | 2017 | 380,000 | 413,558 | 5 | 1,170,850 | 160,820 | 18,306 | 7 | 2,143,534 | |||||
Senior Vice President – Operations | 2016 | 342,000 | 345,000 | 1,388,650 | 125,898 | 15,900 | 2,217,448 | |||||||
2015 | 380,000 | 335,000 | 890,000 | 105,114 | 15,900 | 1,726,014 | ||||||||
Dr. Dean W. A. McDonald8 | 2017 | 275,000 | 345,705 | 5 | 917,900 | 241,254 | 6 | 17,402 | 7 | 1,797,261 | ||||
Senior Vice President – Exploration | 2016 | 247,500 | 300,000 | 882,600 | 196,766 | 15,900 | 1,642,766 | |||||||
2015 | 275,000 | 300,000 | 580,000 | 110,743 | 15,900 | 1,281,643 | ||||||||
David C. Sienko | 2017 | 250,000 | 182,566 | 5 | 574,475 | 95,618 | 62,394 | 7 | 1,165,053 | |||||
Vice President and General Counsel | 2016 | 225,000 | 154,000 | 723,775 | 82,310 | 15,900 | 1,200,985 | |||||||
2015 | 250,000 | 154,001 | 397,000 | 36,365 | 15,900 | 853,266 |
1 | Salary amounts include |
2 | Represents RSUs awarded and performance-based shares granted in each of |
2015. The amounts |
62www.hecla-mining.com
COMPENSATION OF NAMED EXECUTIVE OFFICERS |
This column represents the | |
Name | Year | AIP Award ($) | LTIP Plan Period | LTIP Units (#) | Unit Value ($) | LTIP Award ($) | Total AIP and LTIP ($) | Total AIP and LTIP Paid in Cash ($) | Total AIP and LTIP Paid in Shares (#) | ||||||||||||||
Baker | 2015 | 695,750 | 2013-2015 | 8,250 | 130.00 | 1,072,500 | 1,768,250 | 884,125 | 374,629 | * | |||||||||||||
2014 | 919,600 | 2012-2014 | 8,250 | 167.75 | 1,383,938 | 2,303,538 | 1,727,653 | 173,983 | |||||||||||||||
2013 | 544,500 | 2011-2013 | 8,250 | 115.50 | 952,875 | 1,497,375 | 684,750 | 237,610 | |||||||||||||||
Sabala | 2015 | 380,000 | 2013-2015 | 3,400 | 130.00 | 442,000 | 822,000 | 411,000 | 174,153 | * | |||||||||||||
2014 | 418,000 | 2012-2014 | 3,200 | 167.75 | 536,800 | 954,800 | 716,100 | 72,115 | |||||||||||||||
2013 | 479,250 | 2011-2013 | 3,000 | 115.50 | 346,500 | 825,750 | 283,125 | 158,662 | |||||||||||||||
Radford | 2015 | 500,000 | 2013-2015 | 3,000 | 130.00 | 390,000 | 890,000 | 445,000 | 188,559 | * | |||||||||||||
2014 | 467,400 | 2012-2014 | 2,500 | 167.75 | 419,375 | 886,775 | 665,081 | 66,977 | |||||||||||||||
2013 | 399,375 | 2011-2013 | 1,650 | 115.50 | 190,575 | 589,950 | 215,625 | 109,452 | |||||||||||||||
McDonald | 2015 | 242,000 | 2013-2015 | 2,600 | 130.00 | 338,000 | 580,000 | 290,000 | 122,881 | * | |||||||||||||
2014 | 302,500 | 2012-2014 | 2,500 | 167.75 | 419,375 | 721.875 | 541,406 | 54,522 | |||||||||||||||
2013 | 247,500 | 2011-2013 | 1,800 | 115.50 | 207,900 | 455,400 | 193,125 | 76,689 | |||||||||||||||
Sienko | 2015 | 150,000 | 2013-2015 | 1,900 | 130.00 | 247,000 | 397,000 | 198,500 | 84,110 | * | |||||||||||||
2014 | 225,000 | 2012-2014 | 1,900 | 167.75 | 318,725 | 543,725 | 407,794 | 41,067 | |||||||||||||||
2013 | 180,000 | 2011-2013 | 1,800 | 115.50 | 207,900 | 387,900 | 165,000 | 65,175 | |||||||||||||||
Poirier | 2015 | 135,000 | 2013-2015 | 2,050 | 130.00 | 266,500 | 401,500 | 200,750 | 85,064 | * | |||||||||||||
2014 | 124,300 | 2012-2014 | 2,000 | 167.75 | 335,500 | 459,800 | 344,850 | 34,728 | |||||||||||||||
2013 | 162,720 | 2011-2013 | 1,800 | 115.50 | 207,900 | 370,620 | 157,800 | 62,228 | |||||||||||||||
*Shares were valued based on the closing price of Hecla’s common stock on the NYSE on February 19, 2016 ($2.36). |
Name | Year | AIP Award ($) | LTIP Plan Period | LTIP Units (#) | Unit Value ($) | LTIP Award ($) | Total AIP and LTIP ($) | Total AIP and LTIP Paid in Cash ($) | Total AIP and LTIP Paid in Shares (#) | ||
Baker | 2017 | 476,250 | 2015-2017 | 9,500 | 210.25 | 1,997,375 | 2,473,625 | 1,475,238 | 254,119 | * | |
2016 | 907,500 | 2014-2016 | 9,500 | 207.25 | 1,968,875 | 2,876,375 | 2,157,281 | 108,789 | |||
2015 | 695,750 | 2013-2015 | 8,250 | 130.00 | 1,072,500 | 1,768,250 | 884,125 | 374,629 | |||
Hall | 2017 | 285,000 | 2015-2017 | 1,983 | (i) | 210.25 | 416,926 | 701,926 | 493,463 | 53,044 | * |
2016 | 205,200 | 2014-2016 | 583 | (i) | 207.25 | 120,827 | 326,027 | 244,520 | 12,331 | ||
2015 | 0 | 2013-2015 | 0 | 0 | 0 | 0 | 0 | 0 | |||
Radford | 2017 | 456,000 | 2015-2017 | 3,400 | 210.25 | 714,850 | 1,170,850 | 813,425 | 90,948 | * | |
2016 | 684,000 | 2014-2016 | 3,400 | 207.25 | 704,650 | 1,388,650 | 1,041,486 | 52,521 | |||
2015 | 500,000 | 2013-2015 | 3,000 | 130.00 | 390,000 | 890,000 | 445,000 | 188,559 | |||
McDonald | 2017 | 371,250 | 2015-2017 | 2,600 | 210.25 | 546,650 | 917,900 | 644,575 | 69,548 | * | |
2016 | 343,750 | 2014-2016 | 2,600 | 207.25 | 538,850 | 882,600 | 661,950 | 33,381 | |||
2015 | 242,000 | 2013-2015 | 2,600 | 130.00 | 338,000 | 580,000 | 290,000 | 122,881 | |||
Sienko | 2017 | 175,000 | 2015-2017 | 1,900 | 210.25 | 399,475 | 574,475 | 374,738 | 50,824 | * | |
2016 | 330,000 | 2014-2016 | 1,900 | 207.25 | 393,775 | 723,775 | 542,831 | 27,374 | |||
2015 | 150,000 | 2013-2015 | 1,900 | 130.00 | 247,000 | 397,000 | 198,500 | 84,110 |
Consists only of LTIP awards, which were paid 50% in common stock. The number of shares was determined based on the closing price of Hecla’s common stock on the NYSE on March 12, 2018 ($3.93). | ||
(i) | Mr. Hall’s 2014-2016 and 2015-2017 LTIP units were prorated due to Mr. Hall joining the Company in July 2016. | |
4 | The amounts reported in this column for | |
Includes: (i) restricted stock units | ||
6 | As non-U.S. citizens, Mr. Hall and Dr. McDonald are not participants in the Hecla Mining Company Retirement Plan, or the unfunded SERP. In lieu of participation in these plans, Mr. Hall and Dr. McDonald are expected to receive a similar benefit as if they had participated in these plans. See Retirement Plan on page _____ for a description of non-U.S. employee’s retirement benefits. | |
7 | Includes the following: |
NEO | Matching 401(k) Contribution ($) | Annual Life Insurance Premium ($) | Other ($) | Total ($) | ||
Baker | 16,200 | 2,106 | 18,306 | |||
Hall | 16,200 | (i) | 1,590 | 17,790 | ||
Radford | 16,200 | 2,106 | 18,306 | |||
McDonald | 16,200 | (i) | 1,202 | 17,402 | ||
Sienko | 16,200 | 1,626 | 44,568 | (ii) | 62,394 |
(i) | These amounts are | |
(ii) | Commission and closing costs paid on the sale of Mr. Sienko’s home in Chicago. | |
Mr. Hall and Dr. McDonald |
2018 Proxy Statement63
COMPENSATION OF NAMED EXECUTIVE OFFICERS |
The following table shows all plan-based awards granted to the NEOs during 2015.2017.
Grants of Plan-Based Awards for 20152017
Long-Term Performance Plan Units (#) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | Other Stock Awards: Number of Shares of Stock or Units (#) | Closing Market Price on Date of Grant ($) | Grant Date Fair Value of Stock and Option Awards1 ($) | ||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||
Phillips S. Baker, Jr. | |||||||||||||||||||||||||
Common Shares2 | 3/5/15 | 173,983 | 3.31 | 575,884 | |||||||||||||||||||||
Restricted Stock3 | 7/1/15 | 204,918 | 2.44 | 500,000 | |||||||||||||||||||||
Performance Shares | 7/1/15 | 102,4594 | 204,9184 | 409,8364 | 2.44 | 651,290 | |||||||||||||||||||
LTIP5 | 9,500 | 0 | 1,187,500 | 3,562,500 | |||||||||||||||||||||
AIP6 | 0 | 605,000 | 1,210,000 | ||||||||||||||||||||||
James A. Sabala | |||||||||||||||||||||||||
Common Shares2 | 3/5/15 | 72,115 | 3.31 | 238,701 | |||||||||||||||||||||
Restricted Stock3 | 7/1/15 | 141,393 | 2.44 | 344,999 | |||||||||||||||||||||
LTIP5 | 3,400 | 0 | 425,000 | 1,275,000 | |||||||||||||||||||||
AIP6 | 0 | 304,000 | 608,500 | ||||||||||||||||||||||
Lawrence P. Radford | |||||||||||||||||||||||||
Common Shares2 | 3/5/15 | 66,977 | 3.31 | 221,694 | |||||||||||||||||||||
Restricted Stock3 | 7/1/15 | 137,295 | 2.44 | 335,000 | |||||||||||||||||||||
LTIP5 | 3,400 | 0 | 425,000 | 1,275,000 | |||||||||||||||||||||
AIP6 | 0 | 304,000 | 608,500 | ||||||||||||||||||||||
Dr. Dean W.A. McDonald | |||||||||||||||||||||||||
Common Shares2 | 3/5/15 | 54,522 | 3.31 | 180,468 | |||||||||||||||||||||
Restricted Stock3 | 7/1/15 | 122,950 | 2.44 | 300,000 | |||||||||||||||||||||
LTIP5 | 2,600 | 0 | 325,000 | 975,000 | |||||||||||||||||||||
AIP6 | 0 | 300,000 | 600,000 | ||||||||||||||||||||||
David C. Sienko | |||||||||||||||||||||||||
Common Shares2 | 3/5/15 | 41,067 | 3.31 | 135,932 | |||||||||||||||||||||
Restricted Stock3 | 7/1/15 | 63,115 | 2.44 | 154,001 | |||||||||||||||||||||
LTIP5 | 1,900 | 0 | 237,500 | 712,500 | |||||||||||||||||||||
AIP6 | 0 | 150,000 | 300,000 | ||||||||||||||||||||||
Don Poirier | |||||||||||||||||||||||||
Common Shares2 | 3/5/15 | 34,728 | 3.31 | 114,950 | |||||||||||||||||||||
Restricted Stock3 | 7/1/15 | 81,967 | 2.44 | 200,000 | |||||||||||||||||||||
LTIP5 | 2,050 | 0 | 256,250 | 768,750 | |||||||||||||||||||||
AIP6 | 0 | 135,600 | 271,200 |
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 (#) | Grant Date Fair Value of Stock and Option Awards1 ($) | ||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||
Phillips S. Baker, Jr. | |||||||||
Restricted Stock Units2 | 6/7/17 | 85,179 | 500,001 | ||||||
Performance-based Shares3 | 6/7/17 | 51,108 | 102,215 | 204,430 | 102,215 | 342,801 | |||
LTIP4 | 0 | 1,140,000 | 4,275,000 | ||||||
AIP5 | 0 | 635,000 | 1,270,000 | ||||||
Lindsay A. Hall | |||||||||
Restricted Stock Units2 | 6/7/17 | 58,773 | 344,998 | ||||||
Performance-based Shares3 | 6/7/17 | 10,222 | 20,443 | 40,886 | 20,443 | 68,560 | |||
LTIP4 | 0 | 500,000 | 1,875,000 | ||||||
AIP5 | 0 | 380,000 | 760,000 | ||||||
Lawrence P. Radford | |||||||||
Restricted Stock Units2 | 6/7/17 | 58,773 | 344,998 | ||||||
Performance-based Shares3 | 6/7/17 | 10,222 | 20,443 | 40,886 | 20,443 | 68,560 | |||
LTIP4 | 0 | 500,000 | 1,875,000 | ||||||
AIP5 | 0 | 380,000 | 760,000 | ||||||
Dr. Dean W.A. McDonald | |||||||||
Restricted Stock Units2 | 6/7/17 | 51,107 | 299,998 | ||||||
Performance-based Shares3 | 6/7/17 | 6,815 | 13,629 | 27,258 | 13,629 | 45,707 | |||
LTIP4 | 0 | 360,000 | 1,350,000 | ||||||
AIP5 | 0 | 275,000 | 550,000 | ||||||
David C. Sienko | |||||||||
Restricted Stock Units2 | 6/7/17 | 26,235 | 153,999 | ||||||
Performance-based Shares3 | 6/7/17 | 4,259 | 8,518 | 17,036 | 8,518 | 28,567 | |||
LTIP4 | 0 | 300,000 | 1,125,000 | ||||||
AIP5 | 0 | 175,000 | 350,000 |
1 | The restricted stock unit amounts represent the aggregate grant date fair value of the awards granted to each NEO computed in accordance with stock-based accounting rules (Financial Standards Accounting Board (“FASB”) ASC Topic 718). Assumptions used in the calculation of these amounts are included inNote 9 – Stockholders’ Equity to our calendar year 2017 consolidated financial statements, which is included in our Annual Report on Form 10-K filed with the SEC on February 15, 2018 (the “Form 10-K”). Annual RSUs vest in three substantially equal annual installments beginning on June 21 in the following year from the date they are granted. Consistent with the requirements of ASC Topic 718, the value of performance-based shares is based on the estimated outcome as of the date of grant. In accordance with FASB ASC Topic 718, |
2 | |
Represents the number of RSUs granted on | |
Represents the number of performance-based shares of Hecla common stock, having a target value |
● | |
● | 60thpercentile rank = target award at grant value; |
● | 50thpercentile rank = threshold award at 50% of target. |
Hecla’s TSR performance versus that of peer group companies will be based on a comparison of the average share price over the last 60 calendar days prior to January 1, |
64www.hecla-mining.com
COMPENSATION OF NAMED EXECUTIVE OFFICERS |
Represents the potential value of the payout for each NEO under the |
NEO | 2017-2019 LTIP Units (#) |
Baker | 11,400 |
Hall | 5,000 |
Radford | 5,000 |
McDonald | 3,600 |
Sienko | 3,000 |
Represents the potential value of the payout for each NEO under the |
The following table provides information on the current holdings of stock awards by the NEOs. This table includes unvested RSUs, and unvested performance-based shares. There were no unexercised stock options held by any NEO at year-end.
Outstanding Equity Awards at CalendarFiscal Year-End for 20152017
Option Awards | Stock Awards | |||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Grant Date | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested1 (#) | Market Value of Shares or Units of Stock That Have Not Vested as of 12/31/152 ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested3 ($) | |||||||||||||
Phillips S. Baker, Jr. | — | 362,811 | 685,713 | |||||||||||||||||||
151,515 | 4 | 286,363 | ||||||||||||||||||||
204,918 | 5 | 387,295 | ||||||||||||||||||||
James A. Sabala | — | 121,228 | 229,121 | |||||||||||||||||||
Lawrence P. Radford | — | 265,101 | 501,041 | |||||||||||||||||||
Dr. Dean W. A. McDonald | — | 217,686 | 411,427 | |||||||||||||||||||
David C. Sienko | — | 111,747 | 211,202 | |||||||||||||||||||
Don Poirier | — | 145,124 | 274,284 |
Stock Awards | |||||||||
Name | Number of Shares or Units of Stock That Have Not Vested1 (#) | Market Value of Shares or Units of Stock That Have Not Vested2 ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested3 ($) | |||||
Phillips S. Baker, Jr. | 229,243 | 910,095 | |||||||
113,636 | 4 | 451,135 | |||||||
102,215 | 5 | 405,794 | |||||||
Lindsay A. Hall | 95,691 | 379,893 | 20,443 | 5 | 81,159 | ||||
Lawrence P. Radford | 156,810 | 622,536 | 20,443 | 5 | 81,159 | ||||
Dr. Dean W. A. McDonald | 137,544 | 546,050 | 13,629 | 5 | 54,107 | ||||
David C. Sienko | 70,607 | 280,310 | 8,518 | 5 | 33,816 |
1 | The following table shows the dates on which the restricted stock units in the outstanding equity awards table vest and the corresponding number of shares, subject to continued employment through the vest date. |
Number of Unvested Restricted Stock Units | |||||||||||||||
Vesting Date | Baker | Sabala* | Radford | McDonald | Sienko | Poirier | |||||||||
6/21/16 | 56,883 | 39,249 | 34,130 | 34,130 | 17,520 | 22,753 | |||||||||
6/21/16 | 68,306 | 47,131 | 45,765 | 40,983 | 21,038 | 27,322 | |||||||||
6/25/16 | 50,505 | 34,848 | 33,838 | 30,303 | 15,556 | 20,202 | |||||||||
8/5/16 | — | — | 26,000 | — | — | — | |||||||||
6/21/17 | 68,306 | — | 45,765 | 40,983 | 21,038 | 27,322 | |||||||||
6/25/17 | 50,505 | — | 33,838 | 30,303 | 15,556 | 20,202 | |||||||||
6/21/18 | 68,306 | — | 45,765 | 40,984 | 21,039 | 27,323 | |||||||||
Total | 362,811 | 121,228 | 265,101 | 217,686 | 111,747 | 145,124 |
Number of Unvested Restricted Stock Units | |||||
Vesting Date | Baker | Hall | Radford | McDonald | Sienko |
6/21/18 | 134,578 | 38,050 | 91,492 | 80,745 | 41,450 |
6/21/19 | 66,272 | 38,050 | 45,727 | 39,763 | 20,412 |
6/21/20 | 28,393 | 19,591 | 19,591 | 17,036 | 8,745 |
Total | 229,243 | 95,691 | 156,810 | 137,544 | 70,607 |
2 | The market value of the RSUs is based on the closing market price of our common stock on the NYSE as of December |
3 | The market value of the performance-based shares is based on the closing market price of our common stock on the NYSE as of December |
4 | Award of performance-based shares, the value of which will be determined based on |
5 | Award of performance-based shares, the value of which will be determined based on |
2018 Proxy Statement65
COMPENSATION OF NAMED EXECUTIVE OFFICERS |
The following table shows information concerning the exercise of stock options and the number of stock awards that vested during calendar year 20152017 for each of the NEOs, and the value realized on the exercise of options and vesting of stock awards during calendar year 2015.2017.
Option Exercises1and Stock Vested for 20152017
Option Awards1 | Stock Awards | ||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | |||||||
Phillips S. Baker, Jr. | — | — | 173,983 | 2,7 | — | ||||||
137,069 | 3 | 636,000 | |||||||||
56,883 | 4,7 | — | |||||||||
35,920 | 5 | 101,294 | |||||||||
50,505 | 6,7 | — | |||||||||
James A. Sabala | — | — | 72,115 | 2 | 238,701 | ||||||
39,249 | 4 | 112,645 | |||||||||
23,491 | 5 | 66,245 | |||||||||
34,849 | 6 | 98,274 | |||||||||
Lawrence P. Radford | — | — | 66,977 | 2 | 221,694 | ||||||
34,130 | 4 | 97,953 | |||||||||
15,948 | 5 | 44,973 | |||||||||
33,839 | 6 | 95,426 | |||||||||
Dr. Dean W.A. McDonald | — | — | 54,522 | 2 | 180,468 | ||||||
34,130 | 4 | 97,953 | |||||||||
21,121 | 5 | 59,561 | |||||||||
30,303 | 6 | 85,454 | |||||||||
David C. Sienko | — | — | 41,067 | 2 | 135,932 | ||||||
17,520 | 4 | 50,282 | |||||||||
11,063 | 5 | 31,198 | |||||||||
15,555 | 6 | 43,865 | |||||||||
Don Poirier | — | — | 34,728 | 2 | 114,950 | ||||||
22,753 | 4 | 65,301 | |||||||||
13,865 | 5 | 39,099 | |||||||||
20,202 | 6 | 56,970 |
Stock Awards | ||||
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||
Phillips S. Baker, Jr. | 212,602 | 3 | 0 | 2 |
68,306 | 4 | 0 | 2 | |
37,878 | 5 | 0 | 2 | |
50,505 | 6 | 0 | 2 | |
Lindsay A. Hall | 18,459 | 5 | 95,802 | |
Lawrence P. Radford | 45,765 | 4 | 237,520 | |
26,137 | 5 | 135,651 | ||
33,838 | 6 | 179,680 | ||
Dr. Dean W.A. McDonald | 40,983 | 4 | 212,702 | |
22,728 | 5 | 117,958 | ||
30,303 | 6 | 160,909 | ||
David C. Sienko | 21,038 | 4 | 109,187 | |
11,666 | 5 | 60,547 | ||
15,556 | 6 | 82,602 |
1 | There were no stock options |
2 | |
| |
Mr. Baker deferred the shares into his stock account under the terms of the KEDCP. He may not receive the shares until a “Distributable Event,” as defined under the KEDCP, and will not realize value until the shares are distributed to him. The shares are included in theNonqualified Deferred Compensation for 2017 table on page ____. | |
3 | Performance-based shares received in March 2018 based on the TSR of Hecla common stock for the three-year period from January 1, 2015 through December 31, 2017. The share price was determined by using the closing price of Hecla’s common stock on the NYSE on July 1, 2015 ($2.44), the date of grant of the performance-based shares. See 2015-2017Performance-based Shares – Analysis and Decision on page _____, for further discussion. |
4 | The NEOs were granted these RSUs on July 1, 2015. On June 21, 2017, the restrictions lapsed and each NEO received his units in the form of shares of our common stock. The shares vested at the price of $5.19, which was the closing sales price of our common stock on the NYSE on June 21, 2017. |
5 | The NEOs were granted these RSUs on June 7, 2016. On June 21, 2017, the restrictions lapsed and each NEO received his units in the form of shares of our common stock. The shares vested at the price of $5.19, which was the closing sales price of our common stock on the NYSE on June 21, 2017. |
6 | The NEOs were granted these RSUs on June 23, 2014. On June 25, 2017, the restrictions lapsed and each NEO received his units in the form of shares of our common stock. The shares vested at the price of $5.31, which was the closing sales price of our common stock on the NYSE on June 26, 2017. |
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COMPENSATION OF NAMED EXECUTIVE OFFICERS |
The following table shows pension information under the Hecla Mining Company Retirement Plan and the SERP for the NEOs as of December 31, 2017. The terms and conditions for participation in, and payments from, these plans are described above under “Retirement Plan.” The actuarial present value of accumulated benefit is determined using the same assumptions used for financial reporting purposes except that retirement age is assumed to be the normal retirement age of 65, or the current age if eligible for early retirement. These assumptions are described in the pension footnotes to our financial statements included in our Annual Report on Form 10-K.
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Calendar Year ($) | ||||
Phillips S. Baker, Jr. | Hecla Mining Company Retirement Plan | 16 | 626,541 | 0 | ||||
Hecla Mining Company Supplemental | ||||||||
Excess Retirement Plan | 5,446,346 | 0 | ||||||
Lindsay A. Hall1 | Hecla Mining Company Retirement Plan | 1 | 58,078 | 0 | ||||
Hecla Mining Company Supplemental | ||||||||
Excess Retirement Plan | 98,349 | 0 | ||||||
Lawrence P. Radford | Hecla Mining Company Retirement Plan | 6 | 232,116 | 0 | ||||
Hecla Mining Company Supplemental | ||||||||
Excess Retirement Plan | 390,830 | 0 | ||||||
Dr. Dean W.A. McDonald1 | Hecla Mining Company Retirement Plan | 11 | 505,545 | 0 | ||||
Hecla Mining Company Supplemental | ||||||||
Excess Retirement Plan | 922,746 | 0 | ||||||
David C. Sienko | Hecla Mining Company Retirement Plan | 7 | 211,910 | 0 | ||||
Hecla Mining Company Supplemental | ||||||||
Excess Retirement Plan | 218,816 | 0 |
1 | As non-U.S. citizens, Mr. Hall and Dr. McDonald are not participants in the Retirement Plan, or the unfunded SERP. In lieu of participation in these plans, Mr. Hall and Dr. McDonald are expected to receive a similar benefit. |
The table below provides information on the nonqualified deferred compensation of the NEOs in 2015.2017. None of the NEOs, including our CEO has deferred any cash under our KEDCP. The only deferrals under the KEDCP have been from our CEO, who has deferred vested common stock awards.
Nonqualified Deferred Compensation for 201512017
Name | Executive Stock Contributions in Last FYE2 (#) | Registrant Contributions in Last FYE ($) | Aggregate Earnings in Last FYE ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance of Stock at Last FYE (#) | |||||||
Phillips S. Baker, Jr. | 299,488 | — | — | — | 299,488 | |||||||
James A. Sabala | — | — | — | — | — | |||||||
Lawrence P. Radford | — | — | — | — | — | |||||||
Dr. Dean W. A. McDonald3 | — | — | — | — | — | |||||||
David C. Sienko | — | — | — | — | — | |||||||
Don Poirier3 | — | — | — | — | — |
Name | Executive Stock Contributions in Last FY (#) | Registrant Contributions in Last FY (#) | Aggregate Earnings in Last FY (#) | Aggregate Withdrawals/ Distributions (#) | Aggregate Balance of Stock at Last FYE (#) | |||||
Phillips S. Baker, Jr. | 541,6141 | 8,775 | — | — | 1,439,2982 | |||||
Lindsay A. Hall3 | — | — | — | — | — | |||||
Lawrence P. Radford | — | — | — | — | — | |||||
Dr. Dean W. A. McDonald3 | — | — | — | — | — | |||||
David C. Sienko | — | — | — | — | — |
1 | |
Vested stock deferred into the KEDCP in | |
2 | Total amount of deferred shares held under the KEDCP as of December 31, 2017. |
3 | Canadian employees are not eligible to participate in our deferred compensation plan. |
2018 Proxy Statement67
COMPENSATION OF NAMED EXECUTIVE OFFICERS |
Pursuant to the Company’s KEDCP, executives and key employees, including the NEOs, may defer all or a portion of their base salary, andcash or equity awards earned under the LTIP and AIP, (including common stock), and any vested RSUs or vested performance-based shares granted under the 2010 Stock Incentive Plan. Deferral elections are made by the individual generally in the year prior to the beginning of the plan year for amounts to be earned or granted in the following year. Base salary, AIP and LTIP amounts deferred under the KEDCP are credited to either an investment account or a stock account at the participant’s election. Amounts credited to an investment account are valued in cash, credited with deemed interest, and distributed with deemed interest in cash upon a distributable event. RSUs and other common stock awarded (performance-based shares) under the 2010 Stock Incentive Plan and deferred by a participant are credited to a stock account. Amounts credited to the stock account of a participant are valued based upon our common stock and are delivered to the participant in shares of our common stock upon a distributable event.
The KEDCP also provides for corporate matching amounts where the participants elect to have their base salary, AIP or LTIP awards credited to a stock account. Matching contributions are also valued based on our common stock and distributed upon a distributable event in stock. The ability to defer compensation into a company stock account promotes alignment of the interests of participants with those of our common shareholders. It also provides for corporate discretionary allocations of amounts valued based upon our common stock and credited to a stock account.
As of the end of the last day of each calendar month, an additional amount is credited to the investment account of the participant equal to the product of (i) the average dailybalance of the investment account for the month, multiplied by (ii) the annual prime rate for corporate borrowers quoted at the beginning of the quarter byThe Wall Street Journal(or such other comparable interest rate as the Compensation Committee may designate from time to time).
The amounts credited to the investment or stock account of a participant under the KEDCP are distributable or payable within 75 days of the earliest to occur of the following distribution events: (i) the date on which the participant separates from service with us, with the distribution delayed for six months for certain “specified employees”; (ii) “disability” as defined in Section 409A of the Internal Revenue Code; (iii) the participant’s death; (iv) a fixed date or fixed schedule selected by the participant at the time the deferral election was made; (v) an “unforeseeable emergency,” as defined in Section 409A of the Internal Revenue Code; (vi) a “change in control” of the Company, as defined in regulations issued by the Internal Revenue Service; and (vii) termination of the KEDCP.
The KEDCP is at all times considered to be entirely unfunded both for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended, and no provision will at any time be made with respect to segregating our assets for the payment of any amounts under the KEDCP. Any funds that may be invested for purposes of fulfilling our promises under the KEDCP are for all purposes to be part of our general assets and available to general creditors in the event of a bankruptcy or insolvency of the Company. Nothing contained in the KEDCP will constitute a guarantee by us that any funds or assets will be sufficient to pay any benefit under the KEDCP.
Potential Payments Upon Termination or Change in Control and Termination
We have a change in control agreement (“CIC Agreement”) with each of our NEOs (Messrs. Baker, Sabala,Hall, McDonald, Poirier, Radford and Sienko).
In March 2015, the Compensation Committee approved an amendment to each CIC Agreement eliminating the excise tax gross-up provision and adding a “Best Net After Tax Payment,” which reduces the amount received by the NEO upon a change in control if the NEO would receive a greater after-tax benefit than he would if full severance benefits were paid, taking into account all applicable taxes including any excise tax. SeePayments Made Upon a Change in Control on next page.
The CIC Agreements provide that each of the NEOs shall serve in such executive position as the Board may direct. The CIC Agreements become effective only upon a change in control of the Company (the date of such change in control is referred to as the “Effective Date”). The term of employment under the CIC Agreements is three years from the Effective Date (except for Mr.Messrs. Radford and Hall who haseach have a term of two years from the Effective Date). Any CIC Agreements entered into with newly hired executives will contain an employment term of two years fromyearsfrom the Effective Date. The CIC Agreements automatically extend for an additional year on each anniversary date of the agreements unless we give notice of nonrenewal 60 days prior to the anniversary date. Under the CIC Agreements, a change in control is, with certain limitations, deemed to occur if: (i) an individual or entity (including a “group” under Section 13(d)(3) of the Exchange Act) becomes the beneficial owner of 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; (ii) as the result of a tender offer, merger, proxy fight or similar transaction, the persons who were previously directors of the Company cease to
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COMPENSATION OF NAMED EXECUTIVE OFFICERS |
constitute a majority of the Board; (iii) consummation of the sale of all, or substantially all, of the assets of the Company (with certain limitations) occurs; or (iv) the approval of a plan of dissolution or liquidation.
The CIC Agreements are intended to ensure, among other things that, in the event of a change in control, each NEO will continue to focus on adding shareholder value. We seek to accomplish this by assuring that each NEO continues to receive payments and other benefits equivalent to those he was receiving at the time of a change in control for the duration of the employment term under of the CIC Agreement. The CIC AgreementsalsoAgreements also provide that should an NEO’s employment be terminated either (i) by the NEO for good reason, or (ii) by the Company (other than for cause or disability) after the Effective Date of the CIC Agreement, he would receive from us a lump-sum defined amount generally equivalent to three times the aggregate of his then annual base salary rate and his highest annual incentive prior to the Effective Date. For Mr.Messrs. Radford and Hall, and any other CIC Agreements entered into hereafter, the lump-sum defined amount is generally equivalent to two times.
The NEOs would also be entitled to lump-sum payments representing the difference in pension and supplemental retirement benefits to which they would be entitled on (i) the date of actual termination, and (ii) the end of the three-year (or two-year where applicable) employment period under the CIC Agreements. We would also maintain such NEO’s participation in all benefit plans and programs (or provide equivalent benefits if such continued participation was not possible under the terms of such plans and programs).
An NEO whose employment has terminated would not be required to seek other employment in order to receive the defined benefits.
The following table starting on page 70 reflectssummarizes the amount of compensation payable to each of thecircumstances under which our NEOs in the event ofreceive severance benefits upon termination of such NEO’s employment under the terms of the NEO’s CIC Agreement. That table also shows the amount of compensation payable to each NEO upon voluntary termination; involuntary not for cause termination; for cause termination; termination followingor a change in control; andcontrol.
Summary of Potential Payments Upon Termination or Change in the event of disability or death of the NEO. The amounts shown assume that such termination was effective as of December 31, 2015, and thus include amounts earned through such time, and are estimates of the amounts which would be paid out to the NEOs upon their termination. The actual amounts to be paid out can only be determined at the time of such NEO’s separation from Hecla.
Payments Made Upon Termination. For voluntary and involuntary not for cause terminations, NEOs may receive: (i) a prorated portion of short-term performance compensation; (ii) any amounts due under matured long-term performance compensation plans; (iii) one month of health and welfare benefits; and (iv) any earned, but unused vacation. Neither of these terminations would impact their vested retirement plans and the 401(k) match would be deposited in their accounts.Control
Element | Change in Control | Termination due to Death or Disability | Involuntary Not For Cause or Voluntary Termination | For Cause Termination | Retirement | |||||
Base Salary | Messrs. Baker, McDonald and Sienko receive 3x their annual base salary. Messrs. Hall and Radford receive 2x their annual base salary. | N/A | N/A | N/A | N/A | |||||
Annual Incentive (AIP) | Messrs. Baker, McDonald and Sienko receive 3x the highest AIP paid in the last three years. Messrs. Hall and Radford receive 2x the highest AIP paid in the last three years. | N/A | N/A | N/A | N/A |
2018 Proxy Statement69
COMPENSATION OF NAMED EXECUTIVE OFFICERS |
Payments Made Upon Retirement. The NEOs could receive a prorated portion of any short-term performance compensation and a prorated portion of any long-term compensation in effect at the time of their retirement. They would also receive one month of health and welfare benefits and any earned but unused vacation, and the 401(k) match would be deposited in their accounts. As of December 31, 2015, Mr. Baker was the only NEO that qualified for early or regular retirement from
Compensation Element | Change in Control | Termination due to Death or Disability | Involuntary Not For Cause or Voluntary Termination | For Cause Termination | Retirement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Incentive (LTIP) | Messrs. Baker, McDonald and Sienko receive 3x the highest LTIP paid in the last three years. Messrs. Hall and Radford receive 2x the highest LTIP paid in the last three years. | Each NEO would receive a prorated portion of any LTIP plan in which the NEO was a participant. The surviving spouse or other beneficiary would receive the payment. | N/A | N/A | In order to qualify for vesting of long-term award benefits, the employee must retire under the Hecla Mining Company
Termination Payments
2018 Proxy Statement71
Termination Payments and Benefits for Lawrence P. Radford
72www.hecla-mining.com Termination Payments and Benefits for David C. Sienko
2018 Proxy Statement73
We determined our median employee by ranking employees from highest to lowest, excluding our CEO, based on W-2 earning statements or comparable annual earnings statements for non-U.S. employees. The total compensation
The total compensation of our CEO was $4,968,488 for 2017, and the median of the 74www.hecla-mining.com
Contributions to the Retirement Plan, and the related expense or income, are based on general actuarial calculations and, accordingly, no portion of our contributions, and related expenses or income, is specifically attributable to our officers. We also have an unfunded Supplemental Excess Retirement Plan adopted in November 1985 (the “SERP”) under which the amount of any benefits not payable under the Retirement Plan by reason of the limitations imposed by the Internal Revenue Code and/or the Employee Retirement Income Security Act, as amended (the “Acts”), and the loss, if any, due to a deferral of salary made under our KEDCP and/or our 401(k) Plan will be paid out of our general funds to any employee who may be adversely affected. Under the Acts,the current maximum annual pension benefit payable by the Retirement Plan to any employee is 2018 Proxy Statement75
The following table shows estimated aggregate annual benefits under our Retirement Plan and the SERP payable upon retirement to a participant who retires in Estimated Annual Retirement Benefits
Benefits listed in the pension table are not subject to any deduction for Social Security or other offset amounts. As of December 31, 76www.hecla-mining.com
PROPOSAL Our Board, pursuant to Section 14A of the Securities Exchange Act of 1934, seeks your vote to approve, on an advisory basis, the compensation of our NEOs as set forth under the headingCompensation Discussion and Analysisbeginning on page Underlying these incentives is a strong philosophy of “pay-for-performance” that forms the foundation of decisions regarding the compensation of our NEOs. This compensation philosophy, which has been consistent over many years, is designed to align the interests of our NEOs with the interests of our shareholders and is central to our ability to attract, retain and motivate executive leaders to guide the Company through market challenges over the long-term.
The Board strongly believes in the effectiveness and appropriateness The vote is advisory and therefore not binding on the Company, the Compensation Committee or the Board. However, the Board and the Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the NEO compensation as disclosed in this Proxy Statement, the Compensation Committee will carefully review and consider the voting results when evaluating our executive compensation program. We are asking shareholders to approve the following resolution at the “RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, described in the Compensation Discussion and Analysis, Summary Compensation Table for
2018 Proxy Statement77
PROPOSAL 4 – APPROVAL OF AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION AND BYLAWS TO REMOVE CERTAIN 80% SUPERMAJORITY VOTING PROVISIONS Overview There are certain provisions in our Certificate of Incorporation (the “Certificate”) and Bylaws that can only be revised through the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of our capital stock entitled to vote generally in the election of directors. We refer to these shares as “Voting Stock” and to this voting requirement as “80% supermajority” throughout this Proposal 4 and Proposal 5. Certain of these provisions relate to the authority to call special meetings of shareholders, and currently, only our Board has such authority. We are seeking the approval of our shareholders to amend our Certificate and Bylaws to remove those 80% supermajority voting requirements that impact who may call special meetings of shareholders, and replace them with two-thirds voting standards. We refer to this lower voting requirement as “two-thirds vote” throughout this Proposal 4 and Proposal 5. If approved, this proposal would become effective upon the filing of an amendment to our Certificate with the Secretary of State of Delaware, which we intend to do promptly after the required shareholder approval is obtained, at which time the related amendment to our Bylaws would also become effective. We proposed these same amendments for shareholder approval at our 2017 Annual Shareholder Meeting. While shareholders owning almost 55% of our Voting Stock voted in favor of these amendments in 2017, the level of support was not sufficient to approve the amendments. SeeRequired Vote, Our Board’s Recommendation and Additional Informationon page _____. Because our Board continues to believe that these amendments are appropriate, we are again asking shareholders to vote “For” these proposed amendments. As described more fully under Proposal 5 on page _____, in 2014, 2016 and 2017, we sought the approval of our shareholders to amend the Certificate and Bylaws to add a right permitting shareholders who have held at least a 25% “net long position” in our outstanding common stock for at least 120 days to call special meetings of shareholders, subject to the conditions set forth in our Bylaws (we refer to this as the “Special Meeting Proposal”). In order to implement the Special Meeting Proposal, an 80% supermajority vote of our shareholders was required. The 80% supermajority vote was not obtained in 2014, 2016 or 2017, and as a result, we were unable to implement the Special Meeting Proposal. We are again proposing the Special Meeting Proposal at our 2018 Annual Meeting of Shareholders. It is described in Proposal 5 on page _____. We believe that the 80% supermajority vote requirement is an impediment to implementing the Special Meeting Proposal because of the difficulty in getting the holders of that many shares to vote at a shareholders meeting. If instead of the 80% supermajority provisions, the required vote to implement the Special Meeting Proposal was two-thirds of the Voting Stock, we believe the Special Meeting Proposal would have a better chance to be approved by our shareholders. However, even with the change to the lower two-thirds vote requirement, there is no assurance that the Special Meeting Proposal will be approved by the required vote of our shareholders. SeeRequired Vote, Our Board’s Recommendation and Additional Informationon page ______. 78 www.hecla-mining.com
Current Provisions in Certificate and Bylaws Currently, the Certificate states that shareholders can alter, amend or repeal certain Bylaws relating to calling a special meeting of shareholders, only if that action is approved by at least an 80% supermajority vote (this supermajority voting provision is in Article V of the Certificate). Likewise, the Certificate currently states that at least an 80%supermajority vote is necessary to alter, amend or repeal Article VII of the Certificate, which provides that special meetings of shareholders can only be called by our Board. Finally, the Bylaws also contain a similar provision regarding amending the provision therein concerning calling special meetings of shareholders. Set forth below are the relevant provisions of theCertificate and Bylaws:
ARTICLE V. Bylaws In furtherance and not in limitation of the powers conferred by law, the Board is expressly authorized to make, repeal, alter, amend and rescind the bylaws of the Corporation by a majority vote of the entire Board at any regular or special meeting of the Board;provided, however that, notwithstanding anything contained in this Certificate of Incorporation or the Bylaws of the Corporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to (i) alter, amend or repeal any provision of the Bylaws which is substantially identical to and/or implements the last sentence of Article IV or Articles VI, VII or VIII, of this Certificate of Incorporation, or (ii) alter, amend or repeal any provision of this proviso to Article V. ARTICLE VII. Actions by Shareholders Any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of shareholders of the Corporation and may not be effected by any consent in writing by such shareholders.Special meetings of shareholders of the Corporation may be called only by the Board pursuant to a resolution approved by a majority of the entire Board. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to alter, amend or repeal this Article VII. 2018 Proxy Statement79
ARTICLE VI. Amendments These Bylaws may be altered or repealed and Bylaws may be made at any annual meeting of the shareholders or at any special meeting thereof if notice of the proposed alteration or repeal of Bylaws to be made be contained in the notice of such meeting, by the affirmative vote of the holders of a majority of the total voting power of all outstanding shares of the voting stock of the Corporation. These Bylaws may also be altered or repealed and Bylaws may be made by the affirmative vote of a majority of the Board of Directors, at any annual or regular meeting of the Board of Directors, or at any special meeting of the Board of Directors if notice of the proposed alteration or repeal, or Bylaws or Bylaws to be made, be contained in the notice of such special meeting. Notwithstanding anything contained in these Bylaws to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Section 4 or 6 of Article II, or Section 1, 2 or 3 of Article III, of these Bylaws. Proposed Amendments to Certificate and Bylaws This Proposal 4 proposes to amend the Certificate and Bylaws so that future amendments to certain provisions within the Certificate and the Bylaws can be approved by a two-thirds vote of the outstanding shares rather than an 80% supermajority vote. Specifically, in this Proposal 4, we propose:
Required Vote, Our Board’s Recommendation and Additional Information Our Board is committed to good governance practices and this Proposal 4 is the result of our Board’s ongoing review of our corporate governance principles. As part of that review, our Board recognizes that the chances of obtaining shareholder approval of the Shareholder Meeting Proposal described on page _____ in Proposal 5 in the future (if it is not approved at the 2018 Annual Meeting) may be improved if the changes to the Certificate and Bylaws described in this Proposal 4 are approved by ourshareholders. Although Proposal 4 and Proposal 5 will each require the affirmative vote of holders of at least 80% of our outstanding shares of common stock, the approval of one of these proposals is not conditioned on the other, and if Proposal 4 is passed but Proposal 5 is not, then if in the future we again seek approval of the Special Meeting Proposal, it would only need to be approved by the lower two-thirds vote rather than the current 80% supermajority vote. 80 www.hecla-mining.com
After receiving shareholder input and the advice of management and outside advisors, our Board considered the relative weight of the arguments in favor of and opposed to maintaining the 80% supermajority voting requirements described herein. As a result, and based upon the recommendation of the Governance Committee, our Board, at its meeting on February 21, 2018, approved and declared advisable and in our shareholders’ best interests the amendments to the Certificate and Bylaws described in this Proposal 4. The above description is a summary, and is qualified by and subject to the full text of the proposed amendments to our Certificate and Bylaws, which are set forth inAppendix A andAppendix B, respectively. Additions of text contained in the appendices are indicated by underlining and deletions of text are indicated by strikeouts. According to our current Certificate and Bylaws, approval of this proposal requires the affirmative vote of holders of at least 80% of our outstanding shares of common stock.
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PROPOSAL 5 – APPROVAL OF AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION AND BYLAWS TO PERMIT SHAREHOLDERS TO CALL SPECIAL MEETINGS OF SHAREHOLDERS UNDER CERTAIN CIRCUMSTANCES Overview We are seeking the approval of our shareholders to amend our Certificate and Bylaws to add a right permitting shareholders who have held at least a 25% “net long position” in our outstanding common stock for at least 120 days to call special meetings of shareholders, subject to the conditions set forth in our Bylaws, as described below. Currently, shareholders do not have the right to call special shareholder meetings; only our Board can call such meetings. If approved, this proposal would become effective upon the filing of an amendment to our Certificate with the Secretary of State of Delaware, which we intend to do promptly after the required shareholder approval is obtained, at which time the related amendment to our Bylaws would also become effective. We proposed these same amendments for shareholder approval at our 2014, 2016 and 2017 Annual Shareholder Meetings. While shareholders owning almost 41%, 47% and 55% of our Voting Stock voted in favor of these amendments in 2014, 2016 and 2017, respectively, the level of support was not sufficient to approvethe amendments. SeeRequired Vote, Our Board’s Recommendation and Additional Informationon page ____. Because our Board continues to believe that these amendments are appropriate, we are again asking shareholders to vote “For” these proposed amendments. In addition, under Proposal 4, we are seeking the approval of our shareholders to amend our Certificate and Bylaws to remove all 80% supermajority voting requirements that impact who may call special meetings of shareholders (other 80% supermajority voting requirements will be unaffected), and replace them with two-thirds voting standards. If Proposal 4 is passed, we believe it will improve the chances that an amendment permitting shareholders to call special meetings of shareholders under certain circumstances, if proposed in the future, would be adopted (if Proposal 5 is not adopted at the 2018 Annual Meeting). However, even if Proposal 4 is approved by the required vote of our shareholders, there is no assurance that this Proposal 5 will be approved by the required vote of our shareholders. SeeRequired Vote, Our Board’s Recommendation and Additional Informationon page ____. Proposed Amendments to Certificate and Bylaws This Proposal 5 proposes to amend the Certificate and Bylaws to implement the right of shareholders who have held at least a 25% “net long position” in our outstanding common stock for at least 120 days to call special meetings of shareholders, subject to compliance with the requirements set forth in our Bylaws, as proposed to be amended. Our Board believes that establishing an ownership threshold of at least 25% in order for a shareholder (or group of shareholders) to request a special meeting strikesan appropriate balance between enhancing shareholder rights and avoiding the situations that could arise if the threshold were set so low that a small minority of shareholders, including shareholders with special interests, could force the Company to incur the time and expense of convening a special meeting to consider a matter of little or no interest to other shareholders. Organizing and preparing for a special meeting involves significant attention of our Board and management, which could divert their attention from performing their primary functions: to oversee and operate our business in the best interests of 82www.hecla-mining.com
our shareholders. In addition, for every special meeting of shareholders, the Company incurs significant costs. We will continue to maintain our existing governance mechanisms that afford management and our Board the ability to respond to proposals and concerns of all shareholders, regardless of the level of share ownership. Establishing a 25% “net long position” threshold for the right to call a special meeting would ensure that matters proposed for consideration have significant support among our shareholders. A shareholder’s “net long position” is generally defined as the amount of common stock in which the shareholder holds a positive (also known as “long”) economic interest, reduced by the amount of common stock in which the shareholder holds a negative (also known as “short”) economic interest. In addition, requiring that shareholders must have held their stock for at least 120 days helps to ensure that their economic interest in the Company’s affairs is more than transitory. Also during the required 120 day holding period, the Company will continue to make disclosure through its statutory filings, which may provide shareholders with information that might avoid an unnecessary call for special meetings of shareholders. The proposed amendment to our Bylaws contains procedural and information requirements for shareholders to call a special meeting, including, without limitation, that (i) no business may be conducted at the special meeting except as set forth in the Company’s notice of meeting, (ii) a special meeting will not be held if similar business is to be covered at an annual or special meeting called by the Board to be held within 90 days after the special meeting request is received by the Secretary, (iii) no shareholder special meeting request may be made during the period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the date of the next annual meeting, (iv) a special meeting request cannot cover business substantially similar to what was covered at an annual or special meeting held not more than 120 days before the special meeting request was received by the Secretary, (v) any shares beneficially owned or held of record as of the date of the request and sold by the requesting holder prior to the meeting will be treated as a revocation of the request to the extent of the shares sold, and (vi) the requesting shareholder’s notice must include information (as specified in the amendment to the Bylaws) as to the business proposed to be conducted, as to each nominee (if applicable), and as to the shareholder giving notice and the beneficial owner, if any, on whose behalf the proposal is made. Required Vote, Our Board’s Recommendation and Additional Information Our Board is committed to good governance practices and this Proposal 5 is the result of our Board’s ongoing review of our corporate governance principles. After receiving shareholder input and the advice of management and outside advisors, our Board considered the relative weight of the arguments in favor of and opposed to the ability of shareholders to call special meetings under certain circumstances as described herein. As a result, and based upon the recommendation of the Governance Committee, our Board, at its meeting on February 21, 2018, approved and declared advisable and in our shareholders’ best interests the amendments to the Certificate and Bylaws described in this Proposal 5. The above description is a summary, and is qualified by and subject to the full text of the proposed amendments to our Certificate and Bylaws, which are set forth inAppendix CandAppendix D, respectively. Additions of text contained in the appendices are indicated by underlining and deletions of text are indicated by strikeouts. Our Board has approved this proposal, and according to our current Certificate and Bylaws, approval of this proposal requires the affirmative vote of holders of at least 80% of our outstanding shares of common stock.
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PROPOSAL 6 – SHAREHOLDER PROPOSAL REGARDING BOARD DECLASSIFICATION Paul and Lisa Sala, PO Box 72, Cataldo, Idaho 83810, owners of 1,000 shares of Hecla Mining Company common stock, advised the Company that they intend to present the following resolution at the Annual Meeting for action by the shareholders: RESOLVED, that the shareholders of Hecla Mining Company (the “Company”) urge the Board of Directors (the “Board”) to take the necessary steps to eliminate the classification of the Board of the Company to require that all directors stand for election annually. The Board declassification shall be completed in a manner that does not affect the unexpired terms of directors previously elected. Supporting Statement of Shareholder We believe the election of directors is the most powerful way that our Company’s shareholders can influence the corporate governance and strategic direction of our Company. Currently, the Board is divided into three classes of directors. Each class of directors serves staggered three-year terms. Because of this structure, shareholders may only vote on roughly one-third of the Company’s directors each year. In our view, the staggered term structure of the Company’s Board is not in the best interest of shareholders because it reduces management accountability to shareholders. We believe that shareholders should have the opportunity to vote on the performance of the entire Board each year. We feel that such annual accountability helps focus directors on the performance of top executives and on increasing shareholder value. Annual elections of all directors give shareholders the power to either completely replace the Board or replace any individual director on the Board, if a situation arises that warrants such drastic action. We do not believe that annual director elections will be destabilizing to our Company’s Board or negatively impact the continuity of director service. Our directors, like the directors of the overwhelming majority of other public companies, are routinely elected by a wide margin of shareholder votes. In our opinion, annual director elections will increase the responsiveness of directors to shareholder concerns without limiting the Company’s ability to attract highly qualified directors who are willing to oversee the Company continuously for several years. There are indications from academic studies that classified boards have an adverse impact on shareholder value. For instance, a study by Harvard Law School professors Lucian Bebchuk and Alma Cohen concludes that “staggered boards are associated with a reduced firm value” (The Costs of Entrenched Boards,Journal of Financial Economics, Vol. 78, pp. 409-433, 2005). Moreover, this study finds that the reduction in firm value is most significant at companies, such as ours, where classified boards have been established through their corporate charters. We urge shareholders to vote FOR this proposal. Statement of Board of Directors Our Company’s Board has considered the shareholder proposal relating to declassification of the Board, and has decided not to oppose the proposal and to make no voting recommendation to shareholders. The proposal, which is advisory in nature, would constitute a recommendation to the Board if approved by shareholders. The Board recognizes that board classification is a controversial topic and believes that there are valid arguments in favor of, andin opposition to, classified boards. The Board wants to use this proposal to provide an opportunity for shareholders to express their views on this subject without being influenced by any recommendation the Board might take. Supporters of classified boards contend, among other things, that a classified board can promote stability and continuity of leadership and enhance a board’s ability to 84www.hecla-mining.com
respond to takeover bids by making it more difficult for an unsolicited bidder to gain control of a company. There is also research concluding differently than that which is cited in the proponent’s supporting statement, i.e. that classified boards are associated with an increase in firm value, seee.g.Staggered Boards and Long-Term ValueRevisited, Journal of Financial Economics, Vol. 126. Issue 2. pp. 288-306, 2017). Opponents of classified boards often make arguments such as those set forth in the proponent’s supporting statement. Vote Needed for Passage of Proposal This proposal will be approved if it receives the affirmative vote of the majority of the votes cast at the Annual Meeting, whether present in person or by proxy. If shareholders return a validly executed proxy solicited by the Board, the shares presented by the proxy will be voted on this proposal in the manner specified by the shareholder. Abstentions and broker non-votes are not counted as votes cast, and this will have no effect on the outcome of the vote. If shareholders do not specify the manner in which their shares represented by a validlyexecuted proxy solicited by the Board are to be voted on this proposal, such shares will not be voted, will not be included in the vote totals and accordingly will not have any effect on the outcome of the vote. Shareholder approval of this proposal would not, by itself, eliminate the classified board. In order to eliminate the classified board, Hecla’s Certificate of Incorporation requires a supermajority vote of 80% of the issued and outstanding capital stock. Board Recommendation The Board of Directors makes no recommendation on this proposal. 2018 Proxy Statement85
Guidelines and Timing of Equity Awards. We have no program, plan or practice to time the grant of stock-based awards relative to the release of material non-public information or other corporate events. All equity grants to executive officers are approved by the Compensation Committee at regularly scheduled meetings or, in limited cases involving key recruits or promotions, by a special meeting or unanimous written consent. The grant
In the event a non-management director’s cash retainer increases, he or she will have three years from the date of the increase to acquire any additional shares needed to meet these guidelines. Similarly, we believe that it is important to encourage our executive officers to hold a material amount of our common stock and to link their long-term economic interest directly to that of our shareholders. To achieve this goal, in June 2012, the Compensation Committee and Board established stock ownership guidelines for the Company’s senior management. The guidelines for the CEO are six times base salary, Because of fluctuations in the Company’s stock price, in February 2016, the Compensation Committee and the Board The following tables summarize the non-management
Non-Management Director Stock Ownership as of December 31,
Additional information regarding shares held by the non-management directors and our NEOs is included in theSecurity Ownership of Certain Beneficial Owners and Managementtable Security Ownership of Certain Beneficial Owners and Management The following table shows the number and percentage of the shares of common stock beneficially owned by each current director and each 2018 Proxy Statement87
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To our knowledge, as of March
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires our directors, executive officers and holders of more than 10% of our common stock to file with the SEC reports regarding their ownership and changes in their ownership of our stock. These persons are required by the SEC to furnish us with copies of all Section 16(a) forms they file.
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GENERAL INFORMATION ABOUT THE MEETING Record Date, Shares Outstanding and Quorum If you were a holder of Hecla common stock either as a“ A quorum must be present in order for business to be conducted at the Annual Meeting. A quorum consists of the presence at the Annual Meeting, in person or represented by proxy, of a majority of the outstanding shares of our common stock as of the Record Date. Shares represented by proxies marked “Abstain” and “broker non-votes” are counted in determining whether a quorum is present for the transaction of business at the Annual Meeting. A “broker non-vote” occurs when a broker or other nominee Votes Required for the Proposals Under NYSE rules, if our shares are held in “street name” and you do not indicate how you wish to vote, your broker is only permitted to exercise its discretion to vote your shares on certain “routine” matters. Proposal 2 (Ratification of Appointment of BDO USA, LLP) is a “routine” matter. Proposal 1 (Election of Directors), Proposal Proposal 1 – Election of Directors.Pursuant to our Bylaws, each director will be elected by
You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the nominees for election as directors. Proposal 2 – Ratification of the Appointment of BDO USA, LLP as Independent Auditors.Under the Sarbanes-Oxley Act of 2002, the Audit Committee has the sole authority to appoint the independent registered public accounting firm for the Company. However, the Board feels that it is important for the shareholders to approve the selection of BDO USA, LLP. This proposal requires the affirmative 2018 Proxy Statement91
vote of a majority of votes cast at the Annual Meeting, whether in person or by proxy. Abstentions and broker non-votes are not counted as votes cast, and thus will have no effect on the outcome of the vote. Votes marked “against” will have an effect on the outcome of the vote. The appointment of our independent registered public accounting firm for calendar year You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the proposal to ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for Proposal purpose and will have no effect on the outcome of the vote. Votes marked “against” will have an effect on the outcome of the vote. Even though your vote is advisory and therefore will not be binding on the Company, the Board’s Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation. You may vote “FOR,” “AGAINST” OR “ABSTAIN” on the proposal to approve the compensation of our named executive officers. Proposal 4 – Approval of Amendments to our Certificate of Incorporation and Bylaws to Remove Certain 80% Supermajority Voting Provisions.Approval of this proposal requires the affirmative vote of 80% of our outstanding shares of common stock. Abstentions and broker non-votes have the effect of a vote against this proposal. You may vote “FOR,” “AGAINST” OR “ABSTAIN” on the proposal to approve the amendments to our Certificate of Incorporation and Bylaws to Remove Certain 80% Supermajority Voting Provisions. Proposal 5 – Approval of Amendments to our Certificate of Incorporation and Bylaws to Permit Shareholders to Call Special Meetings of Shareholders Under Certain Circumstances.Approval of this proposal requires the affirmative vote of 80% of our outstanding shares of common stock. Abstentions and broker non-votes have the effect of a vote against this proposal. You may vote “FOR,” “AGAINST” OR “ABSTAIN” on the proposal to approve the amendments to our Certificate of Incorporation and Bylaws to Permit Shareholders to Call Special Meetings of Shareholders Under Certain Circumstances. Proposal 6 – Shareholder Proposal.Approval of the advisory shareholder proposal requires the affirmative vote of a majority of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote on the matter. For purposes of determining whether the proposal has received a majority vote, abstentions will be included in the vote totals, therefore, an abstention has the same effect as a negative vote. Broker non-votes will not be included in the vote totals, and therefore, will have no effect on the vote. You may vote “FOR,” “AGAINST” OR “ABSTAIN” on the shareholder proposal to declassify the Board. Discretionary voting by proxies on other matters.Aside from the: (i) election of three directors; (ii) ratification of the appointment of BDO USA, LLP; (iii) approval of executive compensation; (iv) approval of amendments to our Certificate of Incorporation and Bylaws to remove certain 80% supermajority voting provisions; (v) approval of amendments to our Certificate of Incorporation and Bylaws to permit shareholders to call special meetings of shareholders under certain circumstances; and (vi) shareholder proposal to declassify the Board, we do not know of any other proposal that may be presented at the Annual Meeting. However, if any other business is properly presented at the Annual Meeting, your proxy gives authority to Phillips S. Baker, Jr. and Michael B. White to vote on such matters at their discretion. No other proposals have been timely submitted in accordance with our Bylaws and we are not aware of any matters other than those described in this Proxy Statement that will be acted upon at the Annual Meeting. 92www.hecla-mining.com
A “proxy” is your legal appointment in a written document of another person to vote the shares that you own in accordance with your instructions. The persons you appoint to vote your shares are also called proxies. We have designated Phillips S. Baker, Jr., our President and CEO, and Michael B. White, our Corporate Secretary, Proxies Submitted but not Voted If you properly sign and return your proxy card or complete your proxy via the telephone or Internet, your shares will be voted as you direct. If you sign and return your proxy but do not specify how you want your shares voted they will be voted FOR (i) the election of all nominees for Director as set forth under “Election of If your shares are held in your name, you have the right to vote in person at the Annual Meeting. If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name. Since a beneficial owner is not the shareholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from your broker or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting. Whether you hold shares directly as a shareholder of record or beneficially in street name, you may vote without attending the Annual Meeting. You may vote by granting a proxy or, for shares held beneficially in street name, by submitting voting instructions to your broker or nominee. In most cases, you will be able to do this by using the Internet, by telephone, or by mail if you received a printed set of the Proxy Materials.
To vote by mail:
To vote by proxy over the Internet:
To vote by proxy by telephone:
To vote in person if you are a registered shareholder of record:
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To vote in person if you hold your shares in “street name” (through a broker, financial institution or other nominee):
To vote your 401(k) Plan shares: If you participate in the Hecla Mining Company Capital Accumulation Plan and hold shares of our common stock in your plan account as of the Record Date, you will receive a request for voting instructions from the plan trustee (“Vanguard”) with respect to your plan shares. You are entitled to direct Vanguard how to vote your plan shares. If you do not provide voting instructions to Vanguard by 11:59 p.m., Eastern Daylight Time, on May The deadline for voting by telephone or electronically is 11:59 p.m., Eastern Daylight Time, on May If you are a shareholder of record, you may revoke your proxy and change your vote at any time before your proxy is voted at the Annual Meeting, in any of the following ways:
Hecla Mining Company
If you hold your shares in street name, you should contact your broker for information on how to revoke your voting instructions and provide new voting instructions. If you hold your shares in the Hecla Mining Company Capital Accumulation Plan, you may revoke your previously provided voting instructions by filing with Vanguard either a written notice of revocation or a properly executed proxy bearing a later date prior to the deadline for voting plan shares. If you hold your Hecla shares outside of the plan, you may vote those shares separately. 94 www.hecla-mining.com
Rules for Attending the Annual Meeting Only a record or beneficial owner of Hecla’s common stock as of the Record Date, the close of business on March 28, 2018, or a valid proxy or representative of such shareholder, may attend the Annual Meeting in person, and they must comply with the admission requirements below. Guests of shareholders will not be admitted to the Annual Meeting.If you do not comply with the requirements set forth below you will not be admitted to the Annual Meeting. All attendees must register at the registration desk and present appropriate documentation at the registration desk prior to being admitted to the meeting, which includes:
For the safety of attendees, all boxes, handbags and briefcases are subject to inspection upon registration. Cameras (including cell phones with photographic capabilities), audio/video recording devices and other electronic devices are not permitted at the meeting. We will bear all costs and expenses relating to the solicitation of proxies, including the costs of preparing, assembling, printing, mailing and distributing these Proxy Materials. We have hired Broadridge to assist us in mailing these Proxy Materials. Additionally, we have retained Morrow 2018 Proxy Statement95
Preliminary voting results will be announced at the Annual Meeting. We will publish final results in a Current Report on Form 8-K that we expect to file with the SEC within four business days of the Annual Meeting. After the Form 8-K is filed, you may obtain a copy by visiting the SEC’s website at www.sec.gov, visiting our Our Annual Report to Shareholders, consisting of our Form 10-K for the year ended December 31, Hecla Mining Company You can also access our SEC filings, including our Annual Reports on Form 10-K, and all amendments thereto, on the SEC website at https://www.sec.gov/edgar.shtml or on our website at http://www.hecla-mining.com. Householding of Proxy Materials Many brokerage firms, financial institutions and transfer agents have instituted “householding” procedures for beneficial owners and shareholders of record. Householding is when a single copy of our Proxy Materials is sent to a household in which two or more shareholders reside if they appear to be members of the same family. This practice is designed to reduce duplicate mailings and save significant printing and postage costs, as well as natural resources. If you are a beneficial owner, you may have received householding information from your broker, financial institution or other nominee shareholder in the past. Please contact the shareholder of record directly if you have questions, require additional copies of our Proxy Materials,or wish to revoke your decision to household and thereby receive multiple copies. You should also contact the shareholder of record if you wish to institute householding. These options are available to you at any time. Shareholders of record who share an address and would like to receive a separate copy of our Proxy Materials for future annual meetings, or have questions regarding the householding process, may contact our transfer agent, American Stock Transfer & Trust Company, either by written request or by telephone at the address and telephone number listed 96 www.hecla-mining.com
Electronic Delivery of Proxy Materials, Annual Reports, News Releases and Documents Filed with the Securities and Exchange Commission We want to communicate with you in the way that is most convenient for you. You may choose to receive either a full set of printed materials – which will include an Annual Report, Proxy Statement, and proxy card (“Proxy Materials”) – or an email with instructions for how to view the materials and vote online. If you are a shareholder of record, you may request and consent to electronic delivery of future Proxy Materials by following the instructions on your proxy card or by visiting our website at http://www.hecla-mining.com under “Investors,” selecting “Annual Reports,” and then selecting “Electronic Proxy Request.” If your shares are held in street name, please contact your broker and ask about the availability of electronic delivery. If you select electronic delivery, we will discontinue mailing the Proxy Materials to you beginning next year and you will be sent an email Shareholders may also elect to receive notice of our filings with the SEC, annual reports and news releases by email. You may sign up for this service by visiting our website at http://www.hecla-mining.com under “Investors” and selecting “Subscribe for Updates”. A list of shareholders eligible to vote at the meeting will be available for examination by any shareholder for any purpose relevant to the meeting during ordinary business hours for at least ten days prior to May 2018 Proxy Statement97
PROVISIONS OF You may submit proposals for consideration at future annual shareholder meetings, including director nominations, as follows: Shareholder proposals at the Our Bylaws establish procedures governing the eligibility of nominees for election to our Board, and the proposal of business to be considered by our shareholders at an Annual Meeting of Shareholders. For nominations or other business to be properly brought before an Annual Meeting of Shareholders by a shareholder, the shareholder must have given timely notice thereof in writing to our Corporate Secretary. To be timely, a shareholder’s notice shall be delivered to our Corporate Secretary at our principal executive offices located at 6500 N. Mineral Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408, not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s Annual Meeting of Shareholders;provided,however, that in the event the date of the Annual Meeting of Shareholders is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be delivered not earlier than the 120thday prior to such Annual Meeting of Shareholders and not later than the close of business on the later of the 90thday prior to such Annual Meeting of Shareholders or the 10thday following the day on which public announcement of the date of such meeting is first made. Adjournment of a meeting shall not commence a new time period for giving shareholder’s notice as described above. Such shareholder’s notice shall set forth:
The applicable time period for timely shareholder submissions pursuant to the above provisions for the The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in the Bylaws and, if any proposed nomination or business is not in compliance with the Bylaws, to declare that such defective proposal shall be disregarded. The foregoing time limits also apply in determining whether notice is timely for purposes of rules adopted by the SEC relating to the exercise of discretionary voting authority. 98 www.hecla-mining.com
Shareholder proposals to be included in next year’s Proxy Statement In addition to the foregoing section, we will comply with Rule 14a-8 under the Exchange Act with respect to any shareholder proposals that meet that rule’s requirements. We will review shareholder proposals intended to be included in our Proxy Statement for the You may contact the Corporate Secretary at our principal executive offices for a copy of the relevant Bylaw provisions regarding the requirements for making shareholder proposals and nominating director candidates. As of the date of this Proxy Statement, the Board is not aware of any matters that will be presented for action at the Annual Meeting other than those described above. However, should other business properly be brought before the Annual Meeting, the proxies will be voted thereon at the discretion of the persons acting thereunder.
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ARTICLE V Bylaws In furtherance and not in limitation of the powers conferred by law, the Board is expressly authorized to make, repeal, alter, amend and rescind the Bylaws of the Corporation by a majority vote of the entire Board at any regular or special meeting of the Board; provided, however that, notwithstanding anything contained in this Certificate of Incorporation or the Bylaws of the Corporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to (i) alter, amend or repeal any provision of the Bylaws which is substantially identical to and/or implements the last sentence inSection 4 of Article IV, or Articles VI, VII (subject to the proviso at the end of this sentence) or VIII, of this Certificate of Incorporation, or (ii) alter, amend or repeal any provision of this proviso to Article V;further provided that, notwithstanding anything contained in this Certificate of Incorporation or the Bylaws of the Corporation to the contrary, the affirmative vote of the holders of at least 66.67% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to (i) alter, amend or repeal any provision of the Bylaws which is substantially identical to and/or implements the last sentence of Article VII of this Certificate of Incorporation, or (ii) alter, amend or repeal this further proviso to Article ARTICLE VII. Actions by Shareholders Any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of shareholders of the Corporation and may not be effected by any consent in writing by such shareholders. Special meetings of shareholders of the Corporation may be called only by the Board pursuant to a resolution approved by a majority of the entire Board.Except as set forth in the final sentence of this Article VII, and
BYLAWS ARTICLE VI. Amendments These Bylaws may be altered or repealed and Bylaws may be made at any annual meeting of shareholders or at any special meeting thereof if notice of the proposed alteration or repeal of Bylaws to be made be contained in the notice of such meeting, by the affirmative vote of the holders of a majority of the total voting power of all outstanding shares of the voting stock of the Corporation. These bylaws may also be altered or repealed and Bylaws may be made by the affirmative vote of a majority of the Board of Directors, at any annual or regular meeting of the Board of Directors, or at any special meeting of the Board of Directors if notice of the proposed alteration or repeal, or Bylaw or Bylaws to be made, Notwithstanding anything contained in these Bylaws to the contrary,(i)the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Section 4, (subject to clause (ii) below) or 6 of Article II, Section 1, 2 or 3 of Article III, of these Bylaws,and (ii) notwithstanding the foregoing, the affirmative vote of the holders of at least 66.67% of the voting power of all of the shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal the first sentence of Section 4 of Article II of these Bylaws. 2018 Proxy StatementB-1
CERTIFICATE OF INCORPORATION ARTICLE VII. Actions by Shareholders Any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of shareholders of the Corporation and may not be effected by any consent in writing by such shareholders. Special meetings of shareholders of the Corporation may be called only by the Board pursuant to a resolution approved by a majority of the entire Board,except as otherwise permitted by the Bylaws of the Corporation. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to alter, amend or repeal this Article VII.
BYLAWS ARTICLE II. Meetings of Shareholders Section 1.Annual Meetings. Annual meetings of shareholders for the election of directors and for such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors by resolution, shall determine and as set forth in the notice of the meeting. In the event the Board of Directors fails so to determine the time, date and place of meeting, the annual meeting of shareholders shall be held at the principal executive office of the Corporation at 10:00 a.m. on the first Wednesday in May. If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. The annual meeting may be adjourned by the chairman of the meeting from time to time and place to place. At any adjourned annual meeting the Corporation may transact any business which might have been transacted at the original annual meeting. The Board of Directors acting by resolution may postpone and reschedule any previously scheduled annual meeting of shareholders upon public notice or disclosure given prior to the date previously scheduled for such meeting of shareholders. Section 2.Voting. Each shareholder who is entitled to vote pursuant to the terms of the Certificate of Incorporation and these Bylaws, or who is entitled to vote pursuant to the laws of the State of Delaware, shall be entitled to vote in person or by proxy, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. All elections for directors and all other questions shall be decided by majority vote except as otherwise provided by the Certificate of Incorporation, these Bylaws or the laws of the State of Delaware. A complete list of the shareholders entitled to vote at any meeting of shareholders at which directors are to be elected, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present. The CEO shall appoint three Inspectors of Election prior to each meeting of shareholders. Upon his or her appointment, each such Inspector shall take and sign an oath faithfully to execute the duties of Inspector at such meeting with strict impartiality and to the best of his or her ability. Such Inspectors shall determine the number of shares outstanding, the voting power of each such share, the number of shares present at the meeting and whether a quorum is present at such meeting. The Inspectors shall receive votes and ballots and shall determine all challenges and questions as to the right to vote and shall thereafter count and tabulate all votes and ballots and determine the result. Such Inspectors shall do such further acts as are proper to conduct the elections of directors and the vote on other matters with fairness to all shareholders. The Inspectors shall make a certificate of the results of the elections of directors and the vote on other matters. No Inspector shall be a candidate for election as a director of the Corporation nor shall any such candidate be appointed an Inspector. Section 3.Quorum. Except as otherwise required by law, by the Certificate of Incorporation or by these Bylaws, the presence, in person or by proxy, of shareholders holding a majority of the voting power of the outstanding stock of the Corporation shall constitute a quorum at all meetings of the shareholders. In case a quorum shall not be present at any meeting, a majority in interest of the shareholders entitled to vote thereat, present in person or by proxy or the chairman of the meeting, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present; provided, however, that if such adjournment is for more than thirty days, or if after such adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at 2018 Proxy StatementD-1
such adjourned meeting. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those shareholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof unless the Board of Directors shall have fixed a new record date for such adjournment or adjournments pursuant to Section 4 of Article V of these Bylaws. Section 4.Special Meetings. (A) General. Special meetings of shareholders may be called only by(i)the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors, or (ii) solely to the extent required by Section 4(B), the Secretary of the Corporation. Special meetings of shareholders may be held at such place, either within or without the State of Delaware, and at such time and date as shall be stated in the notice of the meeting. The special meeting may be adjourned by the chairman of the special meeting from time to tie and place to place. At any adjourned special meeting the Corporation may transact any business which might have been transacted at the original special meeting. The Board of Directors acting by resolution approved by a majority of the entire Board of Directors may postpone and reschedule any previously scheduled special meeting of shareholders upon public notice or disclosure given prior to the date previously scheduled for such meeting of shareholders.
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2018 Proxy StatementD-3
Section 5.Notice of Meetings. Written notice, stating the place, date and time of any annual or special meeting of shareholders, and the general nature of the business to be considered thereat, shall be given to each shareholder entitled to vote at such meeting at his address as it appears on the records of the Corporation, not less than ten nor more than sixty days before the date of the meeting. Section 6.Shareholder Action. Any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of shareholders of the Corporation and may not be effected by any consent in writing by such shareholders. Section 7.Chairman of a Meeting. At each meeting of the shareholders the Chairman of the Board, or if he shall be absent therefrom, the President, or if he shall be absent therefrom, another officer of the Corporation chosen by the Board of Directors, shall act as chairman of the meeting or preside thereat. Section 8.
delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the 10thday following the day on which such public announcement is first made by the Corporation. (B)Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) by or at the direction of the Board of Directors or (2) (C) Only such persons who are nominated in accordance with the procedures set forth in this By-Law shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this By-Law. The Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this By-Law and, if any proposed nomination or business is not in compliance with this By-Law, to declare that such defective proposal shall be disregarded. For purposes of this By-Law, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act. Notwithstanding the foregoing provision of this By-Law, a shareholder shall also comply with all applicable requirements of the Exchange Act with respect to the matters set forth in this By-Law. Nothing in this By-Law shall be deemed to affect any rights of (i) shareholders to request inclusion of the proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) the holders of any series of Preferred Stock to elect directors under specified circumstances. 2018 Proxy StatementD-5 Reconciliation of Non-GAAP Measures to GAAP The non-GAAP measure of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) is calculated as net income (loss) before the following items: interest expense, income tax provision (benefit), and depreciation, depletion, and amortization expense. Management believes that, when presented in conjunction with comparable GAAP measures, EBITDA is useful to investors in evaluating our operating performance. The table below presents reconciliations between the On April 12, 2013, we completed an offering of $500 million in aggregate principal amount of our Senior Notes due May 1, 2021 (the “Notes”), and issued additional Notes in 2014 to fund one of our defined benefit pension plans.
The non-GAAP measure of
The tables below present reconciliations between Cash Cost, After By-product Credits 2018 Proxy StatementE-2
of other primary silver mining companies. Similarly, the statistic is useful in identifying acquisition and investment opportunities as it provides a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics. Cash Cost, Before By-product Credits of operating cash flow, after consideration of the average price, received from production. Management also uses this measurement for the comparative monitoring of performance of our mining operations period-to-period from a cash flow perspective. Cash Cost, After By-product Credits, per Silver/Gold Ounce is a measure developed by precious metals companies (including the Silver Institute) in an effort to provide a uniform standard for comparison purposes. There can be no assurance, however, that our reporting of this non-GAAP measure is the same as that reported by other mining companies. The Casa Berardi section below reports Cash Cost, After By-product Credits, per Gold Ounce for the production of gold, its primary product, and by-product revenues earned from silver, which is a by-product at Casa Berardi. Only costs and ounces produced relating to units with As depicted in the Total, Greens Creek, Lucky Friday and San Sebastian Unit tables below, by-product credits comprise an essential element of our silver unit cost structure distinguishing our silver operations due to the polymetallic nature of their orebodies. By-product credits included in our presentation of Cash Cost, After
By-product credits included in our presentation of Cash Cost, After By-product Credits, per Gold Ounce for our Casa Berardi Unit include:
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Cost of sales and other direct production costs and depreciation, depletion and amortization is the most comparable financial measure calculated in accordance with GAAP to Cash Cost, After By-product Credits. The sum of the cost of sales and other direct production costs and depreciation, depletion and amortization
2018 Proxy StatementE-4
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2018 Proxy StatementE-6 MEETING TO BE HELD AT:
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: HECLA MINING COMPANY ANNUAL MEETING OF SHAREHOLDERS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES FOR DIRECTOR LISTED IN ITEM 1 AND "FOR" PROPOSALS 2, 3, 4 AND 5 The undersigned, revoking any previous proxies, hereby appoints PHILLIPS S. BAKER, JR. and MICHAEL B. WHITE, and each of them, proxies of the undersigned, with full power of substitution, to attend the Company's Annual Meeting of Shareholders on May This Proxy will be voted as specified. If no specification is made, this Proxy will be voted FOR the election of the three nominees for Director, Continued and to be signed on reverse side |