sec
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrant ☒ | Filed by a Party other than the Registrant ☐ |
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Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material Pursuant to § 240.14a-12 |
MarketAxess Holdings Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)all boxes that apply):
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☐ | Fee paid previously with preliminary materials. |
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Market Axess® 2021 2022 Proxy Statement and Notice of Annual Meeting of Stockholders
MarketAxess Holdings Inc.
55 Hudson Yards, 15th Floor
New York, New York 10001
April 28, 202127, 2022
TO THE STOCKHOLDERS OF MARKETAXESS HOLDINGS INC.:
You are invited to attend the 20212022 Annual Meeting of Stockholders (the “Annual Meeting”) of MarketAxess Holdings Inc. (the “Company”) scheduled for Wednesday, June 9, 20218, 2022 at 10:00 a.m., Eastern Daylight Time. The Annual Meeting will be a virtual meeting of stockholders. You will be able to participate in the Annual Meeting, vote and submit your questions via live webcast by visiting www.virtualshareholdermeeting.com/MKTX2021MKTX2022. The Company’s Board of Directors and management look forward to your participation.
Details of the business to be conducted at the Annual Meeting are given in the attached Notice of Annual Meeting and Proxy Statement, which you are urged to read carefully.
We are pleased to take advantage of the U.S. Securities and Exchange Commission (“SEC”) rules that allow issuers to furnish proxy materials to their stockholders on the Internet. We believe these rules allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. On April 28, 2021,27, 2022, we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access our Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 20202021 online and vote online.how to vote. The Notice contains instructions on how you can receive a paper copy of the Proxy Statement, proxy card and Annual Report if you only received a Notice by mail.
Your vote is important to us. Whether or not you plan to attend the Annual Meeting, your shares should be represented and voted. After reading the enclosed Proxy Statement, please cast your vote via the Internet or telephone or complete, sign, date and return the proxy card in the pre-addressed envelope that we have included for your convenience.convenience if you received paper copies. If you hold your shares in a stock brokerage account, please check your proxy card or contact your broker or nominee to determine whether you will be able to vote via the Internet or by telephone.telephone or how to instruct your broker to vote on your behalf.
On behalf of the Board of Directors, thank you for your continued support.
Sincerely, |
Richard M. McVey |
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Attend the Annual Meeting at:
www.virtualshareholdermeeting.com/
| Your vote is very important, regardless of the number of shares you own. Please read the attached |
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These items are more fully described in the Company’s Proxy Statement accompanying this Notice.notice.
The record date for the determination of the stockholders entitled to notice of, and to vote at, the Annual Meeting, or any adjournment or postponement thereof, was the close of business on April 12, 2021.11, 2022. You have the right to receive this Notice and vote at the Annual Meeting if you were a stockholder of record at the close of business on April 12, 2021.11, 2022. Please remember that your shares cannot be voted unless you cast your vote by one of the following methods: (1) vote via the Internet or call the toll-free number as indicated on the Notice or proxy card; (2) sign and return a paper proxy card; or (3) vote during the Annual Meeting at www.virtualshareholdermeeting.com/MKTX2021MKTX2022.
By Order of the Board of Directors, |
Scott Pintoff |
General Counsel and Corporate Secretary |
New York, New York
April 28, 202127, 2022
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Code of Conduct, Code of Ethics and other governance documents |
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE STRATEGY AND INITIATIVES |
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PROPOSAL 2 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
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REPORT OF THE COMPENSATION AND TALENT COMMITTEE OF THE BOARD OF DIRECTORS |
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Employment agreements and severance arrangements with our Named Executive Officers |
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Potential termination or change in control payments and benefits |
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U.S. federal income tax consequences relating to the 2022 ESPP | 86 | ||
Non-U.S. federal income tax consequences relating to the 2022 ESPP | 87 | ||
Securities authorized for issuance under equity compensation plans | 87 | ||
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A-1 | |||
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B-1 |
This summary contains highlights about MarketAxess Holdings Inc. (“MarketAxess”, the “Company”, “we” or “our”) and the upcoming 20212022 Annual Meeting of Stockholders (the “Annual Meeting”). This summary does not contain all of the information you should consider in advance of the Annual Meeting and we encourage you to read the entire Proxy Statement before voting.
This Proxy Statement, the accompanying Notice of Annual Meeting of Stockholders and proxy card are first being mailed to stockholders on or about April 28, 2021.27, 2022. Whenever we refer in this Proxy Statement to the “Annual Meeting,” we are also referring to any meeting that results from any postponement or adjournment of the June 9, 20218, 2022 meeting.
Date and Time: | Wednesday, June |
Virtual Meeting: | www.virtualshareholdermeeting.com/ |
Record Date: | Monday, April |
Due to the continuing public health impact of the coronavirus outbreak (COVID-19) (the “Pandemic”) and to support the health and well-being of our stockholders and other participants at the Annual Meeting, the Annual Meeting will be held in virtual format only.
The following table summarizes the items that we are asking our stockholders to vote on at the Annual Meeting, along with the voting recommendations of our Board of Directors (the “Board” or “Board of Directors”).
Item | Board Recommendation | Required Approval | Page Reference |
1. Election of Directors | FOR | Majority of votes cast for each nominee | 2 |
2. Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, | FOR | Majority of shares of Common Stock having voting power present |
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3. Advisory vote to approve the compensation of the Company’s named executive officers as disclosed in the attached Proxy Statement | FOR | Majority of shares of Common Stock having voting power present |
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4. Approval of the 2022 ESPP | FOR | Majority of shares of Common Stock having voting power present in person or represented by proxy | 82 |
Your vote is important. Stockholders of record as of the Record Date are entitled to vote through one of the following options:
By Mail: |
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Via the Internet: | To vote before the meeting, visit www.proxyvote.com. To vote at the meeting, visit www.virtualshareholdermeeting.com/ |
By Telephone: | Call the phone number located on your Notice or proxy card. |
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PROPOSAL 1 — ELECTION OF DIRECTORS
The first proposal to be voted on at the Annual Meeting is the election of directors. Our Board currently consists of 13 directors, 11 of whom are not our employees.employees, and all of whom are nominees for election at the Annual Meeting. Each of the nominees for director was elected by the Company’s stockholders on June 10, 2020,9, 2021, except for Kourtney Gibson,Xiaojia Charles Li, who was appointed to the Board as of July 16, 2020.13, 2021. The directors are nominated for a term that begins at the Annual Meeting and ends at the 20222023 Annual Meeting of Stockholders. Each director will hold office until such director’s successor has been elected and qualified, or until such director’s earlier resignation, retirement or removal. The Board will continue to evaluate its composition as part of its focus on self-assessment and board refreshment.
John Steinhardt, who has been a director since April 2000, has not been re-nominated and will not stand for reelection. Mr. Steinhardt’s service as a director on the Board will cease as of the date of the Annual Meeting. Following the Annual Meeting, and assuming the election of each director nominee, our Board will consist of 12 directors, 10 of whom are not our employees. The Company thanks Mr. Steinhardt for his twenty-one years of service.
If you sign the attached or enclosed proxy card and return it to the Company, your proxy will be voted FOR all directors, for terms expiring at the 20222023 Annual Meeting of Stockholders, unless you specifically indicate on the proxy card that you are casting a vote against one or more of the nominees or abstaining from such vote.
A vote of the majority of the votes cast by stockholders entitled to vote at the Annual Meeting is required for the election of each director. Abstentions and broker non-votes are not treated as votes cast and will therefore have no effect on the outcome of the vote.
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| BOARD RECOMMENDATION | |||
The board unanimously recommends that you vote “FOR” the election of each of the following nominees: | |||||
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| • Richard M. McVey • Nancy Altobello • Steven L. Begleiter • Stephen P. Casper • Jane Chwick • Christopher R. Concannon | • William F. Cruger | • Kourtney Gibson • Justin G. Gmelich • Richard G. Ketchum •Xiaojia Charles Li • Emily H. Portney • Richard L. Prager
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Each of these nominees is currently serving as a director on our Board, and each nominee has agreed to continue to serve on the Board if he or shesuch nominee is elected at the Annual Meeting. If any nominee is unable (or for good cause declines) to serve as a director at any time before the Annual Meeting, proxies may be voted for the election of a qualified substitute designated by the current Board, or else the size of the Board will be reduced accordingly. Biographical information about each of the nominees is included below under “Director information.”
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PROPOSAL 1 — ELECTION OF DIRECTORS
Qualifications for director nominees
Our Board has adopted minimum qualifications for our directors:
substantial experience working as an executive officer for, or serving on the board of, a public company;
significant accomplishment in another field of endeavor related to the strategic running of our business;endeavor; or
an ability to make a meaningful contribution to the oversight and governance of a company having a scope and size similar to our Company.
A director must have an exemplary reputation and record for honesty in his or her personal dealings and business or professional activity. All directors must demonstrate strong leadership skills and should possess a basic understanding of financial matters; have an ability to review and understand the Company’s financial and other reports; and be able to discuss such matters intelligently and effectively. He or sheA director also needs to exhibit qualities of independence in thought and action. A candidate should be committed first and foremost to the interests of the stockholders of the Company. The key experience, qualifications and skills each of our directors brings to the Board that are important in light of our business are included in their individual biographies below.
Board of Directors skills and expertise
The Company’s directors are selected on the basis of specific criteria set forth in our Corporate Governance Guidelines. All of our directors possess financial industry experience and a history of strategic leadership. In addition to those qualifications, listed below are the skills and experience that we consider important for our director nominees. More detailed information is provided in each director nominee’s biography.
| Corporate Governance | Fixed Income/ Electronic Trading | Regulatory | Technology/ Cybersecurity | Mergers and Acquisitions | Finance / Accounting | Risk Management | Other Public Company Board Experience | Talent Management |
Richard M. McVey | ● | ● | ● | ● | ● |
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Nancy Altobello | ● |
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Steven L. Begleiter | ● |
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Stephen P. Casper | ● | ● | ● |
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Jane Chwick | ● | ● |
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Christopher R. Concannon | ● | ● | ● | ● | ● |
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William F. Cruger | ● | ● |
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Kourtney Gibson |
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Justin G. Gmelich |
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Richard G. Ketchum | ● | ● | ● |
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Xiaojia Charles Li | ● | ● | ● | ● | ● | ● | |||
Emily H. Portney | ● |
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Richard L. Prager | ● | ● |
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PROPOSAL 1 — ELECTION OF DIRECTORS
The Company recognizes and embraces that having a diverse Board enhances both the Board’s effectiveness in fulfilling its oversight role and the Company’s performance. See “Corporate Governance and Board Matters – Board Diversity Policy” for more information. Listed below are the number of director nominees that self-identify as female or as a racial minority as well as the number of director nominees by tenure and age:
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The Company recognizes and embraces that having a diverse Board enhances both the Board’s effectiveness in fulfilling its oversight role and the Company’s performance. See “Corporate governance and Board matters — Board diversity policy” for more information. Shown below are the number of director nominees that self-identify as diverse directors (four women directors and two underrepresented minority directors). |
| We are subject to the new Nasdaq Listing Rule 5605(f), which after a transition period, will require us to have, or explain why we do not have, at least two members of our Board who are diverse, including at least one diverse director who self-identifies as female and at least one director who self-identifies as an underrepresented minority or LGBTQ+. We welcome this important step in diversifying corporate boards and we currently meet the diversity objectives of this requirement.
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In addition, we are also subject to the new Nasdaq Listing Rule 5606, which requires each Nasdaq-listed company, subject to certain exceptions, to provide statistical information about the company’s board of directors, related to each director’s self-identified gender, race, and self-identification as LGBTQ+. Below, please find the board diversity matrix for the Company:
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| Female | Male |
Part I: Gender Identity | ||
Directors | 4 | 9 |
Part II: Demographic Background | ||
African American or Black | 1 | 0 |
Asian | 0 | 1 |
White | 3 | 8 |
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PROPOSAL 1 — ELECTION OF DIRECTORS
Listed below is the tenure and age of our director nominees:
TENURE | AGE |
2022 Proxy Statement | 5 |
PROPOSAL 1 — ELECTION OF DIRECTORS
At the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the persons named below to serve as directors of the Company for a term beginning at the Annual Meeting and ending at the 20222023 Annual Meeting of Stockholders.
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PROPOSAL 1 — ELECTION OF DIRECTORS
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PROPOSAL 1 — ELECTION OF DIRECTORS
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PROPOSAL 1 — ELECTION OF DIRECTORS
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PROPOSAL 1 — ELECTION OF DIRECTORS
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PROPOSAL 1 — ELECTION OF DIRECTORS
Age: Director since: July 2021 Board Committees: •None Public Company Directorships: •MarketAxess (NASDAQ: MKTX) | |
Qualifications and Career Highlights: | |
Xiaojia Charles Li has been Founder and Chairman of Micro Connect, a Hong Kong-based exchange group, since January 2021. Previously, he was Chief Executive of Hong Kong Exchanges and Clearing Limited (“HKEX”) from January 2010 to December 2020. During this time, he orchestrated some of the most significant strategic initiatives in HKEX's history, including the launch of the Shanghai-Hong Kong Stock Connect cross-border trading scheme in 2014, Shenzhen-Hong Kong Stock Connect in 2016 and Bond Connect in 2017. Prior to joining HKEX in 2009, Mr. Li served as Chairman of JP Morgan China from 2003 to 2009 and worked at Merrill Lynch from 1994 to 2003, where he served as President of Merrill Lynch China from 1999 to 2003. Earlier in his career, Mr. Li practiced law in New York as an Associate at Brown & Wood LLP from 1993 to 1994 and Davis Polk & Wardwell LLP from 1991 to 1993. He currently serves on the Council of the University of Hong Kong and the Board of Trustees of Asia Business Council. Mr. Li received a B.A. in English Literature from Xiamen University in China, an M.A. in Journalism from the University of Alabama and a J.D. from Columbia Law School. Mr. Li brings to the Board his international leadership experience in the financial services sector, in particular his expertise in market infrastructure development in Asia. Mr. Li also provides key insights into the evolving financial regulatory landscape in China. |
2022 Proxy Statement | 11 |
PROPOSAL 1 — ELECTION OF DIRECTORS
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CORPORATE GOVERNANCEGOVERNANCE AND BOARD MATTERS
Director independence and tenure
The Board of Directors has determined that each of our current directors, other than Messrs.Mr. McVey, our Chief Executive Officer (“CEO”) and Chairman of the Board of Directors (“Chairman”) and Mr. Concannon, our President and Chief Operating Officer (“President & COO”), currently meet the independence requirements contained in the NASDAQ listing standards and applicable securities rules and regulations. In determining the independence of each of our non-employee directors, the Board considered the transactions described under “Certain relationships and related person transactions – Other transactions.” None of our non-employee directors has a relationship with the Company or its subsidiaries that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
We do not have director age or term limits, as we believe our efforts to regularly refresh the Board with new directors, as well as natural turnover, have achieved the appropriate balance between maintaining longer-term directors with deep institutional knowledge and new directors who bring new perspectives and diversity to our Board. Our Board reviews director tenure every year in connection with its director independence determinations. We plan to continue to refresh our Board of Directors to ensure that it is composed of high functioning, qualified and diverse members.
Currently, 7 of our 13 directors have served for less than five years. See “Proposal 1 — Election of Directors — Director Diversity” for more information.
In addition, on an annual basis, the Nominating and Governance Committee reviews and makes recommendations to the Board related to the size, structure and composition of the Board and its Committees.
The Company recognizes and embraces that having a diverse Board enhances both the Board’s effectiveness in fulfilling its oversight role and the Company’s performance. The Company’s Board Diversity Statement, included in our Corporate Governance Guidelines, cites diversity at the Board level as an essential element in the attainment of its strategic objectives and in achieving sustainable and balanced development. In designing the Board’s composition, diversity is considered fromin a number of aspects,respects, including but not limited to diversity of gender, age, race, ethnicity, nationality, cultural and educational background, professional experience, skills, knowledge and length of service. In any formal search for Board candidates, the Nominating and Corporate Governance Committee includes, and requests that any search firm that it engages include, qualified candidates with a diversity of race/ethnicity and gender in the initial pool from which the Committee selects director candidates. The ultimate decision on all Board nominations is based on merit and the contributions that the selected candidates will bring to the Board, having due regard for the benefits of diversity.
The Nominating and Corporate Governance Committee annually reviews the approval criteria for the selection of new directors and the evaluation and renomination of existing directors, including with regard to the Board Diversity Statement. This annual evaluation enables the Board and the Nominating and Corporate Governance Committee to update the skills and experience they seek in the Board as a whole, and in individual directors, as the Company’s needs evolve and change over time, and to assess the effectiveness of efforts at promoting diversity.
2022 Proxy Statement | 13 |
CORPORATE GOVERNANCE AND BOARD MATTERS
We are subject to the new Nasdaq Listing Rule 5605(f), which, after a transition period, will require us to have, or explain why we do not have, at least two members of our Board who are diverse, including at least one diverse director who self-identifies as female and at least one director who self-identifies as an underrepresented minority or LGBTQ+. We welcome this important step in diversifying corporate boards and we currently meet the diversity objectives of this requirement. See “Proposal 1—1 — Election of Directors—Directors — Director DiversityDiversity” for more information.
How nominees to our Board are selected
Candidates for election to our Board of Directors are nominated by our Nominating and Corporate Governance Committee and ratified by our full Board of Directors for election by the stockholders. The Nominating and Corporate Governance Committee operates under a charter, which is available in the Investor Relations — Corporate Governance section of our corporate website at www.marketaxess.com.
The Nominating and Corporate Governance Committee will give duethe same consideration to properly submitted candidates recommended by stockholders.stockholders as they do candidates suggested by other parties. Stockholders may recommend candidates for the Nominating and Corporate Governance Committee’s consideration by submitting such recommendations directly to the Nominating and Corporate Governance Committee as described below under “— Communicating with our Board members.” In making recommendations, stockholders should be mindful of the discussion of minimum qualifications set forth above under “— Qualifications for director nomineesnominees” though meeting such minimum qualification standards does not imply that the Nominating and Corporate Governance Committee will necessarily nominate the person recommended by a stockholder. The Nominating and Corporate Governance Committee may also engage outside search firms to assist in identifying or evaluating potential nominees.
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CORPORATE GOVERNANCE AND BOARD MATTERS
Board leadershipleadership structure
Our Chief Executive Officer (“CEO”)CEO also serves as the Chairman of theour Board, (the “Chairman”), and we have a Lead Independent Director who is responsible for, among other things, for consulting with the Chairman regarding the agenda and meeting schedules for each Board meeting, coordinating the activities of the non-employee directors, including presiding over the executive sessions of non-employee directors, and serving as a liaison between the Chairman and the non-employee directors. We believe that this structure is appropriate for the Company because it allows one person to speak for and lead the Company and the Board, while also providing for effective oversight by an independent Board through a Lead Independent Director. Our CEO, as the individual with primary responsibility for managing the Company’s strategic direction and day-to-day operations, is in the best position to provide Board leadership that is aligned with our stockholders’ interests, as well as the Company’s needs. Our overall corporate governance policies and practices, combined with the strength of our independent directors, serve to minimize any potential conflicts that may result from combining the roles of CEO and Chairman.
Mr. Casper has been appointed by our independent directors to serve as our Lead Independent Director. Our Corporate Governance Guidelines provide that the Chairman of the Nominating and Corporate Governance Committee shall act as the Lead Independent Director, unless otherwise determined by a majority vote of the independent directors of the Board.
The Board has established other structural safeguards that serve to preserve the Board’s independent oversight of management. The Board is comprised almost entirely of independent directors who are highly qualified and experienced, and who exercise a strong, independent oversight function. The Board’s Audit Committee, Compensation and Talent Committee, Nominating and Corporate Governance Committee, Risk Committee and Finance Committee are comprised entirely of, and are chaired by, independent directors. Independent oversight of our CEO’s performance is provided through a number of Board and committee processes and procedures, including regular executive sessions of non-employee directors and annual evaluations of our CEO’s performance against pre-determined goals. The Board believes that these safeguards preserve the Board’s
14 | 2022 Proxy Statement |
CORPORATE GOVERNANCE AND BOARD MATTERS
independent oversight of management and provide a balance between the authority of those who oversee the Company and those who manage it on a day-to-day basis.
Audit Committee
The Audit Committee of the Board of Directors oversees the accounting and financial reporting process of the Company and the audits of the financial statements of the Company. The Audit Committee is also responsible for preparing the audit committee report required to be included in this proxy statement,Proxy Statement, and the Audit Committee is directly responsible for the appointment, retention, compensation and oversight of the Company’s outside auditor. The Audit Committee currently consists of Ms. Altobello (Chair), Mr. Cruger, Ms. Gibson and Mr. Gmelich.
The Board of Directors has determined that each member of the Audit Committee is an independent director in accordance with NASDAQ listing standards and Rule 10A-3 of the Securities Exchange Act of 1934, as amended.amended (the “Exchange Act”). The Board has determined that each member of the Audit Committee is able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement and cash flow statement, as required by NASDAQ rules. In addition, the Board has determined that each member of the Audit Committee satisfies the NASDAQ rule requiring that at least one member of our Board’s Audit Committee have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background that results in the member’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. The Board has also determined that each member of the Audit Committee is an “audit committee financial expert” as defined by the SEC. For information regarding the experience and qualifications of our Audit Committee members, see the information in this Proxy Statement under the section heading “Proposal 1 —– Election of Directors — Director informationinformation.”.
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CORPORATE GOVERNANCE AND BOARD MATTERS
Compensation and Talent Committee
The Compensation and Talent Committee of the Board of Directors (the “Compensation Committee”) is responsible for reviewing and approving, and, as applicable, recommending to the full Board for approval, the compensation of the CEO and all other officers of the Company, as well as the Company’s compensation philosophy, strategy, program design and administrative practices. The compensation programs reviewed and approved by the Compensation Committee consist of all forms of compensation, including salaries, cash incentives, and stock-based awards and benefits. The Compensation Committee is also responsible for oversight of the Company’s talent management processes, including talent acquisition, leadership development and succession planning for key roles, reviewing the Company’s diversity, equity and inclusion programs, and reviewing the Company’s corporate culture. The Compensation Committee currently consists of Mr. BegleiterPrager (Chair), Ms. Altobello Mr. Prager and Mr. Steinhardt.Ms. Gibson. The Board of Directors has determined that each member of the Compensation Committee is an “independent director” in accordance with NASDAQ listing standards and a “non-employee director” under the applicable SEC rules and regulations.
Finance Committee
The Finance Committee assists the Board with its oversight of the Company’s global treasury activities, mergers, acquisitions, divestitures, strategic investments, capital structure and capital allocation strategy, financing and liquidity requirements, dividends, stock repurchase authorizations, investor relations activities and insurance and self-insurance programs. The Finance Committee currently consists of Messrs. Begleiter (Chair), Cruger and Gmelich.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board of Directors identifies individuals qualified to become Board members and recommends for selection by the Board the director nominees to stand for
2022 Proxy Statement | 15 |
CORPORATE GOVERNANCE AND BOARD MATTERS
election at each annual meeting of the Company’s stockholders. In connection therewith, the Nominating and Corporate Governance Committee reviews certain policies regarding the nomination of directors and recommends any changes in such policies to the Board for its approval; identifies individuals qualified to become directors; evaluates and recommends for the Board’s selection nominees to fill positions on the Board; and recommends changes in the Company’s corporate governance policies, including the Corporate Governance Guidelines, to the Board for its approval. The Nominating and Corporate Governance Committee oversees the annual review of the performance of the Board of Directors, each director and each committee. The Nominating and Corporate Governance Committee also oversees the Company’s environmental, social and governance strategy and initiatives. See “Environmental, Socialsocial and Governance Strategygovernance strategy and Initiativesinitiatives.”. The Nominating and Corporate Governance Committee currently consists of Mr. Cruger (Chair), Mr. Casper and Ms. Chwick. The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is an independent director in accordance with NASDAQ listing standards.
Risk Committee
The Risk Committee assists the Board with its oversight of the Company’s risk management activities, with particular responsibility for overseeing designated areas of risk that are not the primary responsibility of another committee of the Board or retained for the Board’s direct oversight. Items delegated to the Risk Committee by the Board include technology and cyber-security risk, credit risk, clearing risk and regulatory risk. The Risk Committee also oversees and receives reports related to the Company’s cyber-security insurance policies and data security policies and procedures. The Risk Committee currently consists of Ms. Chwick (Chair), Mr. Ketchum, Ms. Portney and Mr. Prager.
Finance Committee
The Finance Committee assists the Board with its oversight of the Company’s global treasury activities, mergers, acquisitions, divestitures, and strategic investments, capital structure and capital allocation strategy, financing and liquidity requirements, dividends, stock repurchase authorizations, investor relations activities and insurance and self-insurance programs. The Finance Committee currently consists of Messrs. Steinhardt (Chair), Begleiter and Cruger. Prior to April 2021, the Finance Committee was known as the Investment Committee and assisted the Board in monitoring whether the Company had adopted and adheres to a rational and prudent investment and capital management policy; whether management’s investment and capital management actions were consistent with attainment of the Company’s investment policy, financial objectives and business goals; the Company’s compliance with legal and regulatory requirements pertaining to investment and capital management; the competence, performance and compensation of the Company’s external money managers; and such other matters as the Board or Investment Committee deemed appropriate.
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CORPORATE GOVERNANCE AND BOARD MATTERS
The following table sets forth the chairs and membership structure of the Board and each standing Board committee as of April 28, 2021,27, 2022, and the number of Board and Board committee meetings held during 2020.2021.
The non-management directors met in executive session without management directors or employees at each of the meetings of the Board during 2020.2021. We expect each director to attend each meeting of the full Board and of the committees on which he or shesuch director serves and to attend the annual meeting of stockholders. All directors, except Xiaojia Charles Li, attended at least 75% of the meetings of the full Board and the meetings of the committees on which they served,served. Mr. Li joined the Board in July 2021 and allattended two of the three Board meetings held during 2021 during the time he was serving as a director. He missed the October 2021 meeting due to the time difference and travel restrictions imposed on travel between the Unites States and China during the Pandemic. Twelve of the thirteen directors who were serving on our Board at the time attended our 20202021 annual meeting of stockholders (not counting Ms. Gibson, who was not a director at the time of our 2020 annual meeting)(the “2021 Annual Meeting”).
16 | 2022 Proxy Statement |
CORPORATE GOVERNANCE AND BOARD MATTERS
Board involvement in risk oversight
The Company’s management is responsible for defining the various risks facing the Company, formulating risk management policies and procedures, and managing the Company’s risk exposures on a day-to-day basis. The Board’s responsibility is to monitoroversee the Company’s risk management processes by informing itself of the Company’s material risks and evaluating whether management has reasonable controls in place to address the material risks. The Board is not responsible, however, for defining or managing the Company’s various risks.
The Board of Directors monitors management’s responsibility forand its committees oversee risk oversight through regular reports from management to the Risk and Audit Committees and the full Board. Furthermore, the Risk and Audit Committeesmanagement. The Board’s committees report on the matters discussed at the committee level to the full Board. The Risk Committee assists the Board with its oversight of the Company’s risk management activities, including operational risks, technology risks relating to information security, business resiliency and Audit Committeescontinuity, software change management and the full Board focus on the materialdeployment and system capacity, credit and settlement risks facing the Company, including strategic, operational, market, technology and cyber-security, credit, liquidity, legal and regulatory risks, to assess whether management has reasonable controlsrisks. The Audit Committee assists the Board in place to address these risks.its oversight of the Company’s significant financial risk exposures. In addition, the Compensation Committee is charged with reviewing and discussing with management whetherassessing risks arising from the Company’s compensation arrangements are consistent with effective controls and sound risk management.policies. Risk management is a factor that the Board and the Nominating and Corporate Governance Committee consider when determining who to nominate for election as a director of the Company and which directors serve on the Risk and Audit Committees.each Committee. In addition, the Nominating and Corporate Governance Committee is charged with overseeing risk related to the Company’s environmental, social and governance strategy and initiatives. The Board believes this division of responsibilities provides an effective and efficient approach for addressing risk management.
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CORPORATE GOVERNANCE AND BOARD MATTERS
The Company’s Global Management Team assists management’s efforts to assess and manage risk. The Global Management Team is chaired by the CEO and is comprised of the Company’s senior managers with global oversight. The Global Management Team assesses the Company’s business strategies and plans and ensures that appropriate policies and procedures are in place for identifying, evaluating, monitoring, managing and measuring significant risks. The Chief Risk Officer regularly prepares updates and reports for the Global Management Team, Risk Committee Audit Committee and the Board of Directors.
We have assembled a cross-functional team, which includes several of our executive officers, for continuously monitoring the impact of the Pandemic on our employee base and business operations. Throughout the Pandemic, the Board has overseen this risk management initiative, working closely with management to maintain information flow and timely review of issues arising from the Pandemic. For information on the effect of the Pandemic on our business, see “Management’s Discussion and Analysis—Analysis — Critical Factors Affecting our Industry and our Company—Company — Economic, Political and Market FactorsFactors” in the Company’s Annual Report on
Form 10-K.10-K.
2022 Proxy Statement | 17 |
CORPORATE GOVERNANCE AND BOARD MATTERS
Board evaluations, succession planning and talent managementevaluations
Each year, the members of the Board of Directors conduct a confidential written assessment of the Board’s performance that is reviewed and summarized by the Company’s Lead Independent Director and the Chair of the Nominating and Corporate Governance Committee. As part of the evaluation process, the Board reviews its overall composition, including director tenure, board leadership structure, diversity, including the effectiveness of its diversity policy, and individual skill sets, to ensure it serves the best interests of stockholders and positions the Company for future success. Each Board committee also conducts an annual written self-assessment of its performance during the prior year. The results of the assessments are then summarized and communicated back to the appropriate committee chairpersons and our Lead Independent Director. After the evaluations, the Board and management work to improve upon any issues or focus points disclosed during the evaluation process. As part of the evaluation process, each committee reviews its charter annually.
Succession planning and talent management
The Board is committed to positioning MarketAxess for further growth through ongoing talent management, succession planning and the deepening of our leadership bench. Management facilitates a formal talent management and leadership development review on an annual basis for the Board. The review is focused on both immediate, short-term coverage plans for all executives in the event of an unforeseen situation, as well as longer-term, strategic succession planning. A critical element of the review is an evaluation of the Company’s formal leadership development and talent acquisition initiatives in order to ensure that our leadership team has the skills, capabilities and experience to effectively lead our existing, and future, global business. The review also focuses on the retention of key managers. The annual talent management and leadership development review is supplemented by an additional year-end review by the Board of the individual performance and year-end compensation proposals for the executive management team and other key staff.
The Board values diversity among the management team and strives to increase the diversity of the executive management team, as well as the management teams reporting to them. The Board considers formal and informal initiatives to promote diversity as part of their annual talent management review. In addition, in any external searches for executive management team candidates in which the Company considers candidates that are not employees of the Company, the Company will request that any search firm that it engages include qualified candidates with a diversity of race/ethnicity and gender in the initial pool from which the Company selects such executive management team candidates.
The Board has formal exposure to the executive team at Board meetings, as well as at Board committee meetings and other discussions. There are other opportunities for more informal interaction with employees across the organization throughout the year through various events and collaborative experiences.
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CORPORATE GOVERNANCE AND BOARD MATTERS
Code of Conduct, Code of Ethics and other governance documents
The Board has adopted a Code of Conduct that applies to all officers, directors and employees, and a Code of Ethics for the CEO and Senior Financial Officers, which includes Mr. DeLise,Gerosa, our Chief Financial Officer.Officer (“CFO”). Both the Code of Conduct and the Code of Ethics for the CEO and Senior Financial Officers can be accessed in the Investor Relations — Corporate Governance section of our website at www.marketaxess.com. We intend to satisfy any disclosure obligations regarding waivers of or amendments to our Code of Conduct and Code of Ethics for the CEO and Senior Financial Officers by posting such information on our website at www.marketaxess.com.
You may also obtain a copy of these documents without charge by writing to MarketAxess Holdings Inc., 55 Hudson Yards, 15th Floor, New York, New York 10001, Attention: Investor Relations.
18 | 2022 Proxy Statement |
CORPORATE GOVERNANCE AND BOARD MATTERS
Copies of the charters of our Board’s Audit Committee, Compensation Committee, Finance Committee, Risk Committee and Nominating and Corporate Governance Committee, as well as a copy of the Company’s Corporate Governance Guidelines, can be accessed in the Investor Relations — Corporate Governance section of our website.
Communicating with our Board members
Although our Board of Directors has not adopted a formal process for stockholder communications with the Board, we make every effort to ensure that the views of stockholders are heard by the Board or by individual directors, as applicable, and we believe that this has been an effective process to date. Stockholders may communicate with the Board by sending a letter to the MarketAxess Holdings Inc. Board of Directors, c/o General Counsel, 55 Hudson Yards, 15th Floor, New York, New York 10001. The General Counsel will review the correspondence and forward it to our CEO and Chairman of the Board and the Lead Independent Director, or to any individual director or directors to whom the communication is directed, as appropriate. Notwithstanding the above, the General Counsel has the authority to discard or disregard any communication that is unduly hostile, threatening, illegal or otherwise inappropriate or to take any other appropriate actions with respect to such communications.
In addition, any person, whether or not an employee, who has a concern regarding the conduct of the Company or our employees, including with respect to our accounting, internal accounting controls or auditing issues, may, in a confidential or anonymous manner, communicate that concern in writing by addressing a letter to the Chairman of the Audit Committee, c/o Corporate Secretary, at our corporate headquarters address, which is 55 Hudson Yards, 15th Floor, New York, New York 10001, or electronically, at our corporate website, www.marketaxess.com under the heading “Investor Relations — Corporate Governance,” by clicking the “Confidential Ethics Web FormForm” link.
OurFor 2021, our Compensation Committee has retained the services of Grahall, LLC (“Grahall”) as its independent compensation consultant for purposes of advising on non-employee director compensation. Grahall reports directly to the Compensation Committee and conductsprepares an annual review of director compensation levels and a bi-annual review of director pay structure and practices, and in each event, shares the results of those reviews withfor the Compensation Committee. The Compensation Committee then submits any proposed changes in pay level or program structure of our non-employee director compensation to the full Board for its consideration, and if appropriate, approval.
Grahall reviews and recommends compensation structure and adjustments based on the board compensation of the following:
Proxy peer group (see “Compensation Discussiondiscussion and Analysis –analysis — How We Determine Pay Levels –we determine pay levels — Peer Groupgroup”);
ISS peer group (updated by ISS annually); and
Industry data sources, including the National Association of Corporate Directors.
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CORPORATE GOVERNANCE AND BOARD MATTERS
All directors, other than Mr. McVey and Mr. Concannon, are regarded as non-employee and independent directors. Mr. McVey and Mr. Concannon receive no additional compensation for service as a director.
In 2020,2021, (i) the value of the Board member equity retainer was increased from $115,000$120,000 to $120,000$140,000 per year, (ii) the Lead Independent Director fee was increased from $45,000 to $50,000, per year; (iii) committee chair fees (other than for audit) were increased to $20,000 per year; and (iv) committee member fees (other than for audit) were increased to $10,000 per year, in each case, as recommended by Grahall. This change wasThe changes were effective June 10, 2020.as of
2022 Proxy Statement | 19 |
CORPORATE GOVERNANCE AND BOARD MATTERS
July 1, 2021. The change waschanges were made to better align director compensation with the above-referenced market data provided by Grahall. The director pay recommendations resulted in pay levels between the projected medians of our proxy peers and ISS’s peer group.
A summary of the structure of our director pay program that is in effect as of June 2020July 2021 is as follows:
Director Compensation Pay Structure - Effective June 2020 |
| |||||||||||||||||||||||||||||||
Director Compensation Pay Structure - Effective July 2021 | Director Compensation Pay Structure - Effective July 2021 |
| ||||||||||||||||||||||||||||||
|
| Cash Board Retainer ($) |
|
| Cash Chair Retainer ($) |
|
| Cash Committee Retainer ($) |
|
| Restricted Stock ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Annual Retainer – All |
|
| 85,000 |
|
|
| — |
|
|
| — |
|
|
| 120,000 |
| ||||||||||||||||
|
| Board Cash Retainer |
|
| Cash Committee Chair / LID Fee 1 |
|
| Cash Committee Membership Fee 1 |
|
| Board Equity Retainer |
| ||||||||||||||||||||
Annual Retainer - All |
| $ | 85,000 |
|
| - |
|
| - |
|
| $ | 140,000 |
| ||||||||||||||||||
Audit Committee |
|
| — |
|
|
| 25,000 |
|
|
| 12,500 |
|
|
| — |
|
| - |
|
| $ | 25,000 |
|
| $ | 12,500 |
|
| - |
| ||
Compensation / Talent Committee |
|
| — |
|
|
| 20,000 |
|
|
| 7,500 |
|
|
| — |
|
| - |
|
| $ | 20,000 |
|
| $ | 10,000 |
|
| - |
| ||
Governance / Nominating Committee |
|
| — |
|
|
| 15,000 |
|
|
| 7,500 |
|
|
| — |
|
| - |
|
| $ | 20,000 |
|
| $ | 10,000 |
|
| - |
| ||
Finance Committee (1) |
|
| — |
|
|
| 10,000 |
|
|
| 2,500 |
|
|
| — |
| ||||||||||||||||
Finance Committee |
| - |
|
| $ | 20,000 |
|
| $ | 10,000 |
|
| - |
| ||||||||||||||||||
Risk Committee |
|
| — |
|
|
| 20,000 |
|
|
| 7,500 |
|
|
| — |
|
| - |
|
| $ | 20,000 |
|
| $ | 10,000 |
|
| - |
| ||
Lead Independent Director (2) |
|
| — |
|
|
| 22,500 |
|
|
| — |
|
|
| 22,500 |
| ||||||||||||||||
Lead Independent Director2 |
| - |
|
| $ | 25,000 |
|
| - |
|
| $ | 25,000 |
|
(1) |
|
(2) | The Lead Independent Director |
In June 2020,August 2021, we granted 238300 shares of restricted stock or restricted stock units (“RSUs”) to each non-employee director except for Ms. Gibson,Mr. Li, who was granted a prorated amount of 209 shares on271 RSUs in August 1, 20202021 after joining the Board in July 2020.2021. Mr. Casper, as Lead Director, received 4553 additional shares of restricted stock, equating to half of his applicable retainer.Lead Independent Director Fee. All shares are scheduled to vest on May 31, 2021.the date of the next annual stockholders’ meeting. The number of shares of restricted stock or RSUs granted was determined on the grant date by dividing the equity grant value of $120,000$140,000 (or $126,575 for Mr. Li) by the average of the closing price of our Common Stock for the ten trading days up to and including the grant date. We expect to continue to compensate our non-employee directors with a combination of cash and equity awards. All equity awards to non-employee directors are made under the Company’s 2020 Equity Incentive Plan.
20 |
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CORPORATE GOVERNANCE AND BOARD MATTERS
Below is a summary of the amount and form of actual compensation received by each non-employee director in 2020:
2021:
Director Compensation for Fiscal 2020 |
| |||||||||||||||||||||||||||||||
Director Compensation for Fiscal 2021 | Director Compensation for Fiscal 2021 |
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Name |
| Fees Earned or Paid in Cash (1) |
|
| Stock Awards ($)(2)(4) |
|
| All Other Compensation ($)(3) |
|
| Total($) |
|
| Fees Earned or Paid in Cash 1 |
|
| Stock Awards 2,4 |
|
| All Other Compensation 3 |
|
| Total |
| ||||||||
Stephen P. Casper, Lead Independent Director |
|
| 116,250 |
|
|
| 136,423 |
|
|
| 422 |
|
|
| 253,095 |
| ||||||||||||||||
|
| (S) |
|
| (S) |
|
| (S) |
|
| (S) |
| ||||||||||||||||||||
Stephen P. Casper |
|
| 117,500 |
|
|
| 167,735 |
|
|
| 713 |
|
|
| 285,948 |
| ||||||||||||||||
Nancy Altobello |
|
| 117,077 |
|
|
| 114,730 |
|
|
| 408 |
|
|
| 232,215 |
|
|
| 118,750 |
|
|
| 142,551 |
|
|
| 0 |
|
|
| 261,301 |
|
Steven L. Begleiter |
|
| 106,794 |
|
|
| 114,730 |
|
|
| 360 |
|
|
| 221,884 |
|
|
| 110,948 |
|
|
| 142,551 |
|
|
| 0 |
|
|
| 253,499 |
|
Jane Chwick |
|
| 112,500 |
|
|
| 114,730 |
|
|
| 360 |
|
|
| 227,590 |
|
|
| 113,750 |
|
|
| 142,551 |
|
|
| 5,557 |
|
|
| 261,858 |
|
William F. Cruger |
|
| 115,000 |
|
|
| 114,730 |
|
|
| 360 |
|
|
| 230,090 |
|
|
| 121,250 |
|
|
| 142,551 |
|
|
| 600 |
|
|
| 264,401 |
|
Kourtney Gibson |
|
| 44,819 |
|
|
| 107,990 |
|
|
| — |
|
|
| 152,809 |
|
|
| 102,953 |
|
|
| 142,551 |
|
|
| 527 |
|
|
| 246,031 |
|
Justin Gmelich |
|
| 97,500 |
|
|
| 114,730 |
|
|
| 356 |
|
|
| 212,586 |
|
|
| 102,651 |
|
|
| 142,551 |
|
|
| 0 |
|
|
| 245,202 |
|
Richard Ketchum |
|
| 92,500 |
|
|
| 114,730 |
|
|
| 360 |
|
|
| 207,590 |
|
|
| 93,750 |
|
|
| 142,551 |
|
|
| 600 |
|
|
| 236,901 |
|
Xiaojia Charles Li |
|
| 39,728 |
|
|
| 128,771 |
|
|
| 0 |
|
|
| 168,499 |
| ||||||||||||||||
Emily Portney |
|
| 103,299 |
|
|
| 114,730 |
|
|
| 360 |
|
|
| 218,389 |
|
|
| 93,750 |
|
|
| 142,551 |
|
|
| 600 |
|
|
| 236,901 |
|
Richard Prager |
|
| 100,000 |
|
|
| 114,730 |
|
|
| 320 |
|
|
| 215,050 |
|
|
| 108,255 |
|
|
| 142,551 |
|
|
| 600 |
|
|
| 251,406 |
|
John Steinhardt |
|
| 103,206 |
|
|
| 114,730 |
|
|
| 360 |
|
|
| 218,296 |
|
|
| 45,337 |
|
|
| 0 |
|
|
| 600 |
|
|
| 45,936 |
|
(1) | The amounts represent Board, Committee, Committee Chair and Lead Independent Director cash retainers earned in |
(2) | The amounts represent the aggregate grant date fair value of stock awards granted by the Company in |
(3) | Represents accrued dividends paid on restricted |
(4) | The table below sets forth information regarding the aggregate number of unvested stock awards outstanding at the end of fiscal year |
Equity Awards Outstanding | |||||
|
| ||||
Name | Aggregate Number of Stock Awards Outstanding at Fiscal Year End | ||||
Stephen P. Casper |
| 353 | |||
Nancy Altobello |
| 538 | |||
Steven L. Begleiter |
| 1,056 | |||
Jane Chwick |
| 300 | |||
William F. Cruger |
| 1,272 | |||
Kourtney Gibson |
| 300 | |||
Justin Gmelich |
| 538 | |||
Richard Ketchum | 300 | ||||
Xiaojia Charles Li |
| 271 | |||
Emily Portney |
| 300 | |||
Richard Prager |
| 300 | |||
John Steinhardt |
| 0 |
|
| 21 |
CORPORATE GOVERNANCE AND BOARD MATTERS
Share Ownershipownership & Holding Guidelinesholding guidelines
To keep the interests of non-employee directors and stockholders aligned, the Board of Directors has adopted stock ownership guidelines for our non-employee directors. Non-employee directors are required to hold not less than the number of shares of Common Stock equal in value to five times the annual base cash retainer payable to a director, or $425,000. As of April 2021, the holding requirement was equal to 834 shares, calculated using a price of $509.46 per share, which was the average of the daily closing price of our Common Stock for the twelve-month period ended on March 31, 2021. The holding requirement must be achieved within five years after the director has become a Board member and maintained throughout the non-employee director’s service with the Company. All shares of Common Stock beneficially owned by the director, including shares purchased and held personally, vested and unvested restricted shares, vested and unvested restricted stock units, settled performance shares, and shares deferred under a non-qualified deferred compensation arrangement, count toward the minimum ownership requirement. Vested and unvested stock options and unearned performance shares are excluded.
In addition to the ownership guidelines, all non-employee directors must hold all shares granted for service for a minimum of five years from the date of grant. Directors are also required, for a period of six months following his or her departure from the Board, to comply with the Company’s Insider Trading Policy that, among other things, prohibits trading in the Company’s securities during specified blackout periods.
As of April 1, 2022, the holding requirement was equal to 1,004 shares, calculated using a price of $423.21 per share, which was the average of the daily closing price of our Common Stock for the twelve-month period ended on March 31, 2022. All of our non-employee directors have either achieved the designated level of ownership or are in the five-year period following their appointment or election to the Board during which they are expected to achieve compliance:
Directors' Stock Ownership | ||||||
|
|
|
|
| ||
Name |
|
|
| Requirement | (multiple of cash retainer) | Current Holdings (multiple of cash retainer) |
Stephen P. Casper |
| April 2004 |
|
|
| |
Nancy Altobello |
| April 2019 |
|
|
| |
Steven L. Begleiter |
| April 2012 |
|
|
| |
Jane Chwick |
| October 2013 |
|
|
| |
William F. Cruger |
| November 2013 |
|
|
| |
Kourtney Gibson |
| July 2020 |
|
|
| |
Justin |
| October 2019 |
|
|
| |
Richard Ketchum |
| April 2017 |
|
| 10.3x | |
Xiaojia Charles Li |
|
| 5.0x | 1.4x | ||
Emily Portney |
| October 2017 |
|
|
| |
Richard Prager |
| July 2019 |
|
|
| |
|
|
|
|
Our equity plan provides for the accrual of dividends (or dividend equivalents) on unvested shares. However, dividends are not paid and are subject to forfeiture until all restrictions on the shares have lapsed.
We do not provide any retirement benefits or other perquisites to our non-employee directors.
22 | 2022 Proxy Statement |
CORPORATE GOVERNANCE AND BOARD MATTERS
Certain relationships and related partyperson transactions
Review and approval of related partyRelated person transactions
Our related partiespersons include our directors, director nominees, executive officers, holders of more than five percent of the outstanding shares of our Common Stock and the foregoing persons’ immediate family members. We review relationships and transactions in which the Company and our related parties are or will be participants to determine
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CORPORATE GOVERNANCE AND BOARD MATTERS
whether such related persons have a direct or indirect material interest. As required under SEC rules, related person transactions that involve in excess of $120,000 and are determined to be directly or indirectly material to a related partyperson are disclosed in this Proxy Statement. In addition, the Audit Committee reviews and, if appropriate, approves andor ratifies any related partyperson transaction that is required to be disclosed.
ThoughSince January 1, 2021, there has not been, nor is there currently proposed, any related person transaction in which the Company was a participant, the amount involved exceeded or will exceed $120,000 and in which any related person had or will have a direct or indirect material interest.
Other transactions
Although not considered related partyperson transactions that are required to be disclosed under SEC rules, each of the 5% stockholders that are listed under “Security Ownershipownership of Certain Beneficial Ownerscertain beneficial owners and Managementmanagement” or their affiliated entities is a party to a user agreement, dealer agreement or dealerdata agreement that governs their access to, and activity on, our electronic trading platforms. Theseplatforms and access to our data products.
In addition, certain entities for which some of our directors serve as employees or officers have entered into transactions with the company, including user agreements, dealer agreements and data agreements that govern their access to, and activity on, our electronic trading platforms and access to our data products. Each of these agreements were each entered into in the ordinary course of business and, subject to our usual trade terms, provide for the fees and expenses to be paid by such entities for the use of the platform.platform or access to data. For example, in May 2021, we launched the Diversity Dealer Initiative, a series of technology enhancements that enable leading buy-side institutions and minority-, women- and veteran-owned broker dealers to more easily trade with one another on our platforms. One of our directors, Kourtney Gibson, serves as the President of Loop Capital Markets LLC, a minority-owned broker dealer that is a participating Diversity Dealer in the program. While these transactions are not considered related person transactions that are required to be disclosed under SEC rules, our Audit Committee reviews and approves such transactions on an annual basis.
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| 23 |
ENVIRONMENTAL, SOCIAL AND GOVERNANCE STRATEGY AND INITIATIVES
MarketAxess is committed to integrating sustainability intoWe are focused on growing our everyday actions to help createbusiness sustainably by delivering long-term value for our customers, suppliers, stockholders, employees and the communities in whichwhere we operate.live and work. At MarketAxess, we think of our environmental, social and governance (“ESG”) strategy as one that encompasses both corporate and commercial objectives. We aim to operate the companyCompany responsibly while managing risks and using our resources wisely. The Company’s environmental, social and governance (“ESG”) strategy and initiatives are overseen by the Board’s Nominating and Corporate Governance Committee. We have also established an ESG Working Group comprised of employees from across the Company, including members of senior management. As further described in the Company’s 20202021 ESG Report, MarketAxess demonstrated its ESG commitment in 20202021 by practicing sustainability, advocating volunteerismcompleting its first ESG non-financial materiality and philanthropyprioritization assessment and actively partnering withcontinuing our employees, clientsefforts to implement our effective diversity, equity and others on environmental, socialinclusion and governance initiatives.human capital management strategies. The report also details other topics identified by the assessment, including customer privacy, data security, ethical conduct of business and employee health and wellbeing. Our 20202021 ESG Report, including the results of the non-financial ESG materiality and prioritization assessment, can be accessed in the Investor Relations — Corporate Governance section of our website.
We believe that our growing role in making the global credit markets work better brings with it the obligationwebsite, but is not, and will not be deemed to be, a responsible corporate citizen. MarketAxess’ visionpart of corporate citizenship has four pillars:this Proxy Statement or incorporated by reference into any of our filings with the SEC.
Board and management oversight of ESG matters
An enduring commitment to high standardsThe Company’s ESG strategy and initiatives are generally overseen by the Board’s Nominating and Corporate Governance Committee. In addition, other Board committees have oversight of governance.We believe the touchstones of responsible leadership are integrity and fairness. In 2020, we continued to strengthen our Board of Directors with new members who value the interests of all our stakeholders – clients, employees, investors and business partners. We benefit greatly from having board members who bring proven leadership tospecific topics that fall within our ESG efforts.
Helping communities become more resilient. We expanded our support in 2020umbrella. For example, the Compensation Committee oversees the Company’s efforts with respect to organizations that are on the frontline of addressing the impact of the Pandemic, particularly the immediate challenge of food insecurity. To address community resilience over the long term, we established the MarketAxess Charitable Foundation, whose mission is to work with organizations that support underserved communities, with an emphasis on youth education, diversity, equity and inclusion.
Building a strong, diverse workforce. We believe a strong culture built on accountabilityinclusion and mutual respect has been a significant factorthe Risk Committee oversees the Company’s cybersecurity policies and procedures. Our President & COO and General Counsel & Corporate Secretary share management oversight over our ESG strategy and initiatives.
During 2021, the Nominating and Governance Committee received presentations from management and discussed our ESG strategy, including the non-financial materiality and prioritization assessment. The results of this assessment are discussed in our success, and will continue to2021 ESG Report, which can be even more soaccessed in the future. This year’sInvestor Relations — Corporate Governance section of our website.
We support the Paris Agreement Under the United Nations Framework Convention on Climate Change. Part of our support is developing an understanding of how our Company’s operations contribute to global carbon emissions. For that reason, in January 2022, we began measuring our Scope 1, 2 and some of our 3 emissions and, once measured, we plan to put measurable environmental goals in place. More information can be found in our 2021 ESG Report, detailswhich can be accessed in the initiatives we have taken to sustain our culture and ensure its continued vitality as we grow. Diversity, equity and inclusion must remain a priority if we are to continue to be prosperous over the long term, and our management team is working hard to strengthen this important partInvestor Relations — Corporate Governance section of our website.
Adopting sound sustainability practices across
In 2021, we launched the Diversity Dealer Initiative (DDI) to enable buy side firms to trade more easily with minority-, women- and veteran-owned broker-dealers, while still achieving best execution. The DDI leverages our business operations. We are in the process of improving our abilityanonymous all-to-all Open Trading marketplace and provides enhanced trading connections by allowing institutional investor clients to measure our Company’s impact in areas such as climate, waste, and water use. Asselect a diversity dealer to intermediate an initial part of that effort, we are reporting for 2020 against metrics outlined by the Sustainability Accounting Standards Board (SASB) for the first time for the following sectors: Security & Commodity Exchanges, Professional & Commercial Services and Software and IT.Open Trading transaction.
24 |
|
|
ENVIRONMENTAL,ENVIORNMENTAL, SOCIAL AND GOVERNANCE STRATEGY AND INITIATIVES
How MarketAxess defines sustainability
We define sustainability as a business’ commitment to advancing economic prosperity while improving the world in which we operate. Our commitment to sustainability and corporate responsibility is in line with our goal of applying our ingenuity, innovative technology and electronic network to make global credit markets work better for the people who depend on them. In pursuing this commitment, we embrace our responsibility as a corporate citizen to ensure that our global activities positively impact our communities and our environment.
TradingIn addition, in 2019 we launched our “Trading for Trees
Trees” program, under which five trees are planted by One Tree Planted, our partner charitable organization, for every $1 million of green bond trades executed on our platforms.
Green bonds are fixed income instruments designed to fund projects that have positive environmental and/or climate benefits. In 2020, $272021, $51.1 billion in corporate and municipal green bond trading volume was executed globally on the MarketAxess platforms, an increase of 42%89.3% from 2019.2020. In the U.S., where public data is available, MarketAxess ranks as the largest corporatemunicipal and municipalcorporate green bond marketplace with an estimated market share of 20.3%20.9% in municipal and TRACE-reported corporate and municipal green bond volume.
The secondthird year of our “Trading for Trees” initiative with our partner, One Tree Planted, a 501(c)(3) non-profit that focuses on global reforestation, proved successful. Our clients’ green bond trading on the MarketAxess platform resulted in over 130,000255,000 trees being planted across five continents and eightsix countries, including India, Papua New Guinea, CanadaCôte d’Ivoire, Rwanda, and New Zealand. In 2020, One Tree Planted created 1,498 jobsCanada. The impact of our projects was focused on wildfire restoration and planted over 2 million fruit treesenhanced biodiversity, and provided local communities with resources to support almost 30,000 families in critical regions around the world.
fight hunger and climate change.
|
| 25 |
PROPOSAL 2 — RATIFICATION OF SELECTION OF INDEPENDENTINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of our Board has appointed PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 20212022 and to audit the Company’s internal control over financial reporting as of December 31, 2021,2022, and the Board is asking stockholders to ratify that selection. PwC has audited our consolidated financial statements each year since our formation in 2000. The Audit Committee periodically considers whether there should be a rotation of independent registered public accounting firms and the Audit Committee currently believes that the continued retention of PwC is in the best interests of the Company and our stockholders. Although current law, rules and regulations, as well as the charter of the Audit Committee, require our independent registered public accounting firm to be engaged, retained and supervised by the Audit Committee, the Board considers the selection of our independent registered public accounting firm to be an important matter of stockholder concern and considers a proposal for stockholders to ratify such selection to be an important opportunity for stockholders to provide direct feedback to the Board on an important issue of corporate governance. In the event that stockholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to retain PwC, but may ultimately determine to retain PwC as our independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee, in its sole discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and its stockholders.
In 2011, the Company, in the ordinary course of its business, entered into a bulk data agreement with PwC for the purpose of supporting valuation conclusions reached by PwC in the normal course of PwC’s audit and other work for its clients, which has been amended from time to time. Pursuant to the agreement, the Company provides bond pricing data to PwC on terms consistent with the terms of similar data sales agreements entered into by the Company. The aggregate annual revenue to the Company from the data agreement is $295,000. On an annual basis, the Audit Committee evaluates the effect of such agreement on the independence of PwC and has concurred with the opinion of the Company’s management and PwC that the arrangement constitutes an “arm’s-length” transaction that would not affect PwC’s independence.
Representatives of PwC will be present at our Annual Meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions from stockholders.
Unless proxy cards are otherwise marked, the persons named as proxies will vote FOR the ratification of PwC as the Company’s independent registered public accounting firm for the year ending December 31, 2021.2022. Approval of this proposal requires the affirmative vote of the holders of a majority of the shares of Common Stock having voting power present in person or represented by proxy and entitledproxy. Abstentions will have the same effect as a vote AGAINST this proposal. Brokers have discretionary authority to vote on the proposal.
Proposal 2 and, therefore, there will be no broker non-votes on Proposal 2.
| BOARD RECOMMENDATION | |
| The board unanimously recommends that you vote “FOR” ratification of PwC as the Company’s independent registered public accounting firm for the year ending December 31, |
26 |
|
|
PROPOSAL 2 —– RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The aggregate fees billed by our independent registered public accounting firm for professional services rendered in connection with the audit of our annual financial statements set forth in our Annual Report on Form 10-K for the years ended December 31, 20202021 and 20192020 and the audit of our broker-dealer subsidiaries’ annual financial statements, as well as fees paid to PwC for tax compliance and planning, if any, and other services, are set forth below.
Except as set forth in the following sentence, the Audit Committee, or a designated member thereof, pre-approves 100% of all audit, audit-related, tax and other services rendered by PwC to the Company or its subsidiaries. The Audit Committee has authorized the CEO and the Chief Financial OfficerCFO to purchase permitted non-audit services rendered by PwC to the Company or its subsidiaries up to, and including, a limit of $10,000 per service and an annual aggregate limit of $20,000 for all such services.
Immediately following the completion of each fiscal year, the Company’s independent registered public accounting firm submits to the Audit Committee (and the Audit Committee requests from the independent registered public accounting firm), as soon as possible, the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board (“(���PCAOB”) regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence.
Immediately following the completion of each fiscal year, the independent registered public accounting firm also submits to the Audit Committee (and the Audit Committee requests from the independent registered public accounting firm), a formal written statement of the fees billed by the independent registered public accounting firm to the Company in each of the last two fiscal years for each of the following categories of services rendered by the independent registered public accounting firm: (i) the audit of the Company’s annual financial statements and the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q or services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements; (ii) assurance and related services not included in clause (i) that are reasonably related to the performance of the audit or review of the Company’s financial statements, in the aggregate and by each service; (iii) tax compliance, tax advice and tax planning services, in the aggregate and by each service; and (iv) all other products and services rendered by the independent registered public accounting firm, in the aggregate and by each service.
Set forth below is information regarding fees paid by the Company to PwC during the fiscal years ended December 31, 20202021 and 2019.
2020.
Fee Category |
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Audit Fees(1) |
| $ | 2,765,478 |
|
| $ | 2,261,404 |
|
| $ | 2,690,747 |
|
| $ | 2,765,478 |
|
All Other Fees(2) |
|
| 4,460 |
|
|
| 4,838 |
|
|
| 1,720 |
|
|
| 4,460 |
|
Total |
| $ | 2,769,938 |
|
| $ | 2,266,242 |
|
| $ | 2,692,467 |
|
| $ | 2,769,938 |
|
(1) | The aggregate fees incurred include amounts for the audit of the Company’s consolidated financial statements (including fees for the audit of our internal |
(2) | Other Fees are comprised of annual subscription fees for accounting related research and service fees related to XBRL conversion services. |
|
| 27 |
REPORT OF THE AUDIT COMMITTEECOMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee currently consists of Ms. Altobello (Chair), Mr. Cruger, Ms. Gibson and Mr. Gmelich. Each member of the Audit Committee is independent, as independence is defined for purposes of Audit Committee membership by the listing standards of NASDAQ and the applicable rules and regulations of the SEC.
The Audit Committee appoints our independent registered public accounting firm, reviews the plan for and the results of the independent audit, approves the fees of our independent registered public accounting firm, reviews with management and the independent registered public accounting firm our quarterly and annual financial statements and our internal accounting, financial and disclosure controls, reviews and approves transactions between the Company and its officers, directors and affiliates, and performs other duties and responsibilities as set forth in a charter approved by the Board of Directors.
During fiscal year 2020,2021, the Audit Committee met sixfive times. The Company’s senior financial management and independent registered public accounting firm were in attendance at such meetings. Following each quarterly meeting during 2020,2021, the Audit Committee conducted a private session with the independent registered public accounting firm, without the presence of management. The Audit Committee also had one joint meeting with the Risk Committee during 2020.2021.
The management of the Company is responsible for the preparation and integrity of the financial reporting information and related systems of internal controls. The Audit Committee, in carrying out its role, relies on the Company’s senior management, including particularly its senior financial management, to prepare financial statements with integrity and objectivity and in accordance with generally accepted accounting principles, and relies upon the Company’s independent registered public accounting firm to review or audit, as applicable, such financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”).
We have reviewed and discussed with senior management the Company’s audited financial statements for the year ended December 31, 20202021 which are included in the Company’s 20202021 Annual Report on Form 10-K. Management has confirmed to us that such financial statements (i) have been prepared with integrity and objectivity and are the responsibility of management and (ii) have been prepared in conformity with generally accepted accounting principles.
In discharging our oversight responsibility as to the audit process, we have discussed with PwC, the Company’s independent registered public accounting firm, the matters required to be discussed by the applicable requirements of the PCAOB and the SEC.
We have received the written disclosures and the letter from PwC concerning their communications with us concerning independence, as required by applicable requirements of the PCAOB, and we have discussed with PwC their independence.
Based upon the foregoing review and discussions with our independent registered public accounting firm and senior management of the Company, we recommended to our Board that the financial statements prepared by the Company’s management and audited by its independent registered public accounting firm be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020,2021, that was filed with the SEC.
Submitted by the Audit Committee of the |
Board of Directors: |
|
Nancy Altobello — Chair |
William F. Cruger |
Kourtney Gibson |
Justin G. Gmelich |
28 |
|
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of April 12, 202111, 2022 by (i) each person or group of persons known by us to beneficially own more than five percent of our Common Stock, (ii) each of our named executive officers (“NEOs”), (iii) each of our directors and nominees for director and (iv) all of our directors and executive officers as a group.
The following table gives effect to the shares of Common Stock issuable within 60 days of April 12, 202111, 2022 upon the exercise of all options and other rights beneficially owned by the indicated stockholders on that date. Beneficial ownership is determined in accordance with Rule 13d-3 promulgated under Section 13 of the Securities Exchange Act of 1934, as amended, and includes voting and investment power with respect to shares. The percentage of beneficial ownership is based on 37,607,10837,451,233 shares of Common Stock outstanding at the close of business on April 12, 2021.11, 2022. Except as otherwise noted below, each person or entity named in the following table has sole voting and investment power with respect to all shares of our Common Stock that he, shesuch person or itentity beneficially owns.
Unless otherwise indicated, the address of each beneficial owner listed below is c/o MarketAxess Holdings Inc., 55 Hudson Yards, 15th Floor, New York, New York 10001.
|
| Number of Shares Beneficially Owned |
|
| Percentage of Stock Owned |
| ||
5% Stockholders |
|
|
|
|
|
|
|
|
The Vanguard Group (1) |
|
| 4,165,820 |
|
|
| 11.08 | % |
BlackRock, Inc. (2) |
|
| 3,435,510 |
|
|
| 9.14 | % |
Named Executive Officers and Directors |
|
|
|
|
|
|
|
|
Richard M. McVey (3) |
|
| 545,992 |
|
|
| 1.45 | % |
Nancy Altobello (4) |
|
| 606 |
|
| * |
| |
Steven Begleiter (5) |
|
| 8,223 |
|
| * |
| |
Stephen P. Casper (6) |
|
| 53,408 |
|
| * |
| |
Jane Chwick (7) |
|
| 5,877 |
|
| * |
| |
Christopher Concannon (8) |
|
| 27,454 |
|
| * |
| |
William F. Cruger (9) |
|
| 4,892 |
|
| * |
| |
Kourtney Gibson (10) |
|
| 209 |
|
| * |
| |
Justin Gmelich (11) |
|
| 446 |
|
| * |
| |
Richard G. Ketchum (12) |
|
| 1,760 |
|
| * |
| |
Emily H. Portney (13) |
|
| 1,497 |
|
| * |
| |
Richard Prager (14) |
|
| 1,526 |
|
| * |
| |
John Steinhardt (15) |
|
| 21,313 |
|
| * |
| |
Antonio L. DeLise (16) |
|
| 17,041 |
|
| * |
| |
Kevin McPherson (17) |
|
| 91,265 |
|
| * |
| |
Scott Pintoff (18) |
|
| 4,979 |
|
| * |
| |
Christophe Roupie (19) |
|
| 8,331 |
|
| * |
| |
Nicholas Themelis (20) |
|
| 28,362 |
|
| * |
| |
All Executive Officers and Directors as a Group (18 persons) (21) |
|
| 823,181 |
|
|
| 2.19 | % |
|
| Number of Shares Beneficially Owned |
| Percentage of Stock Owned |
5% Stockholders |
|
|
|
|
The Vanguard Group 1 |
| 4,159,090 |
| 11.11% |
T. Rowe Price Associates, Inc. 2 |
| 3,668,968 |
| 9.80% |
BlackRock, Inc. 3 |
| 3,563,993 |
| 9.52% |
NEOs and Directors |
|
|
|
|
Richard M. McVey 4 |
| 528,929 |
| 1.41% |
Nancy Altobello 5 |
| 668 |
| * |
Steven Begleiter 6 |
| 8,285 |
| * |
Stephen P. Casper 7 |
| 53,761 |
| * |
Jane Chwick 8 |
| 6,177 |
| * |
Christopher Concannon 9 |
| 35,668 |
| * |
William F. Cruger 10 |
| 5,192 |
| * |
Kourtney Gibson 11 |
| 509 |
| * |
Justin Gmelich 12 |
| 508 |
| * |
Richard G. Ketchum 13 |
| 2,060 |
| * |
Xiaojia Charles Li 14 |
| 271 |
| * |
Emily H. Portney 15 |
| 1,797 |
| * |
Richard Prager 16 |
| 1,826 |
| * |
Antonio L. DeLise 17 |
| 8,482 |
| * |
Christopher N. Gerosa 18 |
| 802 |
| * |
Kevin McPherson 19 |
| 69,232 |
| * |
Naineshkumar Shantilal Panchal 20 |
| — |
| * |
Scott Pintoff 21 |
| 4,661 |
| * |
Christophe Roupie 22 |
| 5,815 |
| * |
Nicholas Themelis 23 |
| 5,355 |
| * |
All Executive Officers and Directors as a Group (18 persons) 24 |
| 726,161 |
| 1.94% |
* | Less than 1%. |
(1) | Information regarding the number of shares beneficially owned by The Vanguard Group was obtained from a Schedule 13G filed by The Vanguard Group with the SEC on February 10, |
2022 Proxy Statement | 29 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(3) | Information regarding the number of shares beneficially owned by BlackRock, Inc. was obtained from a Schedule 13G filed by BlackRock, Inc. with the SEC on |
|
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
| Consists of (i) |
| Consists of (i) 368 shares of Common Stock owned individually; and (ii) |
| Consists of (i) 7,985 shares of Common Stock owned individually; and (ii) |
| Consists of (i) |
|
|
(8) | Consists of (i) |
(9) | Consists of (i) 15,273 shares of Common Stock owned individually; (ii) 18,914 shares of unvested restricted |
| Consists of (i) |
|
|
(11) | Consists of (i) |
(12) | Consists of (i) |
(13) | Consists of (i) |
(14) | Consists of |
(15) | Consists of (i) |
(16) | Consists of (i) |
(17) | Consists of (i) 8,482 shares of Common Stock owned individually. Does not include (i) 2,251 unvested restricted stock units; (ii) 16,260 deferred restricted stock units or (iii) 3,125 performance shares and performance stock units. |
(18) | Consists of (i) 722 shares of Common Stock owned individually; and (ii) 80 shares of unvested restricted stock. Does not include (i) 2,455 shares of Common Stock issuable pursuant to stock options that are not exercisable within 60 days; (ii) 1,073 unvested restricted stock units or (ii) 1,381 performance stock units. |
(19) | Consists of (i) 69,232 shares of Common Stock owned individually. Does not include (i) 3,032 unvested restricted stock units or (ii) 4,014 performance shares and performance stock units. |
(20) | Does not include (i) 5,821 unvested restricted stock units; or (ii) 3,986 performance shares and performance stock units. |
(21) | Consists of (i) 4,661 shares of Common Stock owned individually. Does not include (i) 1,658 unvested restricted stock units or (ii) 2,316 performance shares and performance stock units. |
(22) | Consists of (i) 5,374 shares of Common Stock owned individually; and (ii) 441 shares of unvested restricted stock. Does not include (i) 1,243 unvested restricted stock units or (ii) 2,128 performance shares and performance stock units. |
(23) | Consists of (i) 5,355 shares of Common Stock owned individually. Does not include (i) 3,189 unvested restricted stock units or (ii) 4,355 performance shares and performance stock units. |
(24) | Consists of (i) 615,265 shares of Common Stock owned individually; (ii) 57,177 shares of unvested restricted stock; (iii) 3,324 shares of restricted stock units that vest or deliver within 60 days; and |
|
|
|
|
|
|
|
|
|
|
30 |
|
|
Set forth below is information concerning our executive officers as of the date hereof.
Name |
| Age |
| Position |
Richard M. McVey |
|
|
| Chief Executive Officer and Chairman of the Board of Directors |
Christopher R. Concannon |
|
|
| President, |
|
|
|
| Chief Financial Officer |
Kevin McPherson |
|
|
| Global Head of Sales |
Naineshkumar Shantilal Panchal | 50 | Chief Information Officer | ||
Scott Pintoff |
|
|
| General Counsel and Corporate Secretary |
Christophe Roupie |
|
|
| Head of EMEA and APAC |
|
|
|
Richard M. McVey has been Chief Executive OfficerCEO and Chairman of our Board of Directors since our inception. See “Proposal 1 —– Election of Directors — Director informationinformation” for a discussion of Mr. McVey’s business experience.
Christopher R. Concannon has been President and Chief Operating Officer,& COO, and a member of the Board of Directors, since January 2019. See “Proposal 1 —– Election of Directors — Director informationinformation” for a discussion of Mr. Concannon’s business experience.
Antonio L. DeLiseChristopher N. Gerosa has been Chief Financial OfficerCFO since March 2010. From July 2006 until March 2010,August 2021. Prior to his current role, Mr. DeLiseGerosa was the Company’s Head of Accounting and Finance of the Company from April 2015 to August 2021, with global responsibility for accounting, tax, treasury management and Accounting, where he was responsible for financial regulatory complianceplanning and oversight of all controllership and accountinganalysis functions. Prior to joining us,the Company, Mr. DeLiseGerosa was Chief Financial Officer of PubliCard, Inc., a designer of smart card solutions for educationalPrimus Guaranty, Ltd. (“Primus”) from 2010 to 2014 and corporate sites,Corporate Treasurer from April 19952007 to July 2006.2014. Prior to these roles, Mr. DeLise alsoGerosa held the position of Corporate Controller and served as Chief Executive Officerthe Director of PubliCard from August 2002 to July 2006, PresidentInvestor Relations of PubliCard from February 2002 to July 2006,Primus. Mr. Gerosa joined Primus in 2003 and a directorwas an integral part of PubliCard from July 2001 to July 2006. Prior to PubliCard,taking Primus public in 2004. Before joining Primus, he worked in the product controller areas of Deutsche Bank and Goldman Sachs. Mr. DeLise was employedGerosa began his professional career at Arthur Andersen. He served as a senior manager withU.S. Army National Guard Infantry Officer after receiving his B.B.A. from the firmUniversity of Arthur Andersen LLP from July 1983 through March 1995. Mr. DeLise received a B.S. in accounting from Fairfield University, from which he graduated magna cum laude.Notre Dame.
Kevin McPhersonhas been Global Head of Sales since June 2014. From January 2008 to June 2014, Mr. McPherson was the Company’s U.S. Sales Manager. From March 1999 to December 2007, Mr. McPherson was a Sales Representative for the Company, running the Company’s West Coast sales and distribution effort. From June 1996 to March 1999, Mr. McPherson worked within the Emerging Markets Fixed Income Group of Scudder Stevens & Clark, where he traded emerging market fixed income securities and supported portfolio administration. Mr. McPherson began his career at State Street Bank & Trust, where he worked from June 1994 to June 1996 as an accountant and auditor for fixed income and equities portfolios. Mr. McPherson received a B.A. in business administration from the University of Maine.
Naineshkumar Shantilal Panchal has been Chief Information Officer since March 2022. Prior to his current role, Mr. Panchal served as a Managing Director of Goldman Sachs Asset Management Technology from November 2014 to February 2022. In that role, he served in various capacities, including a Global Co-Head of Technology, Asset Management Division from 2020 to 2021, Global Head of Goldman Sachs Asset Management Portfolio Management and Trading Technology from 2019 to 2020, Global Co-Head of Goldman Sachs Asset Management Portfolio Management and Trading Technology from 2018 to 2019 and Global Head of Fixed Income and Sales Technology, Asset Management Division from 2014 to 2018. Prior to this role, he was a Managing Director, Technology of Goldman Sachs Securities Division, serving in various capacities from 1996 to 2014. Mr. Panchal began his career as a Consultant, Financial Services at Andersen Consulting prior to his tenure at Goldman Sachs. He holds a B.A. and an M.A., each in Computer Science, from Cambridge University.
2022 Proxy Statement | 31 |
EXECUTIVE OFFICERS
Scott Pintoff has been General Counsel and Corporate Secretary since February 2014. Prior to joining us, Mr. Pintoff was General Counsel and Corporate Secretary at GFI Group, a position he held since 2003. At GFI, Mr. Pintoff was responsible for all legal, regulatory and compliance matters, including their IPO, all acquisitions and implementation of the Dodd-Frank Act. Mr. Pintoff joined GFI Group in 2000 as Associate General Counsel. Prior to GFI, Mr. Pintoff was at Dewey Ballantine LLP from 1996 to 2000 within the mergers and acquisitions group. Mr. Pintoff received a B.A. (Honors) from Wesleyan University and a J.D. from the New York University School of Law.
|
|
EXECUTIVE OFFICERS
Christophe Roupiehas been Head of EMEA and APAC since May 2020. From March 2017 through May 2020, Mr. Roupie was the Company’s Head of Europe and Asia. Prior to joining us, from October 2015 until October 2016, Mr. Roupie was the CEO of HiRock AG, a family office in Switzerland. From May 2005 to October 2015, Mr. Roupie was Global Head of Trading and Securities Financing at AXA Investment Managers. While at AXA Investment Managers, he managed trading teams in Paris, London, Hong Kong and Greenwich, Connecticut across equities, fixed income, FX, derivatives, repo and stock lending. Prior to this, Mr. Roupie was the Global Head of Fixed Income Trading at IXIS AM (now Natixis Asset Management) from October 2000 to March 2005.
Nicholas Themelis has been Chief Information Officer since March 2005. From June 2004 through February 2005, Mr. Themelis was the Company’s Head of Technology and Product Delivery. From March 2004 to June 2004, Mr. Themelis was the Company’s Head of Product Delivery. Prior to joining us, Mr. Themelis was a Principal at Promontory Group, an investment and advisory firm focused on the financial services sector, from November 2003 to March 2004. From March 2001 to August 2003, Mr. Themelis was a Managing Director, Chief Information Officer for North America and Global Head of Fixed-Income Technology at Barclays Capital. From March 2000 to March 2001, Mr. Themelis was the Chief Technology Officer and a member of the Board of Directors of AuthentiDate Holdings Corp., a start-up focused on developing leading-edge content and encryption technology. Prior to his tenure at AuthentiDate, Mr. Themelis spent nine years with Lehman Brothers, ultimately as Senior Vice President and Global Head of the E-Commerce Technology Group.
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A LETTER FROM OUR COMPENSATIONCOMPENSATION AND TALENT COMMITTEE
As members of MarketAxess’ Compensation and Talent Committee (the “Compensation Committee”), we endeavor to create an executive compensation program that is performance-based, directly correlated with business and financial results, and designed to attract, reward and retain high caliber executives.
2020 wasAs detailed in the Compensation Discussion and Analysis, in 2021, the Company made significant strides in executing against its long-term growth strategy against a challenging yearmarket backdrop. Credit spreads and credit spread volatility were at historically low levels throughout most of 2021, adversely impacting the Company’s financial results relative to record levels achieved in 2020. Because of difficult market conditions for credit trading, our 2021 results were below our budget and the global economycompensation of our employees, including the NEOs, fell as a result of the Pandemic. During this time, despite the volatility caused by the Pandemic, MarketAxess maintainedresult.
In 2021, we received strong financial performance and deliveredpositive feedback from stockholders on our operating expectations.compensation program. The Compensation Committee took into account the Company’s performance, in addition to the direct feedback we heard from our stockholders, as we implemented the 2020 compensation program and structured the compensation program for 2021. In consideration of the Company’s strong financial and operating performance, we did not make any changes or adjustments to our executive compensation program as a result of the Pandemic.
In 2020, following a thorough review of the compensation program and significant stockholder engagement, the Committee implemented a number of substantive enhancements that both responded to stockholder feedback and continued to support our core compensation principles. These changes were designed to enhance the performance-based nature of the program, while retaining the key elements of the program that have been highly successful for both our executives and our stockholders for many years. Stockholder feedback since these changes were implemented, through the 20202021 say-on-pay proposal which received 93.7%96.2% support, and subsequent stockholder engagement in late 20202021 and early 2021,2022, has generally been positive.
The Compensation Committee seeks to include the input of our stockholders in the regular evaluation of our programs and welcomes continued stockholder feedback regarding our executive compensation practices. The Company’s management reached out to stockholders who collectively represented over 65% of our outstanding common stock and had conversations with 6 stockholders who requested engagement representing approximately 25% percent of our outstanding common stock. The feedback from our stockholders, including the welcomed evolution of our executive compensation programs over the last few years, was conveyed to our Compensation Committee. We remain determined to understand your perspectives and committed to considering constructive changes in response to your feedback.
Our compensation program is designed to reward the short-term and long-term success of the Company. 2021 NEO cash incentives were tied to both 2021 Adjusted Operating Income and the executive’s individual performance, including contributions to the Company’s growth strategy. 2021 equity incentives, granted in January 2022, were comprised 50% of performance stock units, which measure a combination of market share, revenue growth, and operating margin, over a subsequent three-year performance period.
Our Compensation Committee is and will remain committed to the ongoing evaluation and improvement of our executive compensation program. We look forward to continuing the dialogue and encourage you to reach out with any questions or concerns related to our program before making your voting decision. Thank you for your investment in MarketAxess.
Submitted by the Compensation and Talent Committee of the Board of Directors:
StevenRichard L. BegleiterPrager – Chair
Nancy Altobello
Richard L. Prager
John SteinhardtKourtney Gibson
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COMPENSATION DISCUSSIONDISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) describes the Company’s executive compensation program and provides an overview of the Company’s pay for performance methodology and compensation decisions for our CEO, CFO and our three other mostly highly compensated executive officers (collectively, our Named Executive Officers (“NEOs”)). For fiscal year 2020, our NEOs and their respective titles were as follows:the following NEOs:
Name | Title |
Richard M. McVey | Chief Executive Officer and Chairman of the Board |
Christopher R. Concannon | President and Chief Operating Officer |
| Chief Financial Officer |
Kevin McPherson | Global Head of Sales |
Antonio L. DeLise | Former Global Head of |
Nicholas Themelis | Former Chief Information Officer |
Effective August 1, 2021, Mr. Gerosa succeeded Mr. DeLise as the Company’s CFO. Mr. DeLise is a NEO for 2021 because he was the CFO of the Company for a portion of the year. Effective March 1, 2022, Mr. Panchal succeeded Mr. Themelis as Chief Information Officer. Mr. Themelis is a NEO for 2021 because Mr. Themelis was one of the Company’s three most highly compensated executive officers as of December 31, 2021. Both Mr. DeLise and Mr. Themelis have retired from their respective positions as of the date of this Proxy Statement. See “Executive compensation — Employment agreements and severance arrangements with our Named Executive Officers.”
We didhave not makemade any changes or adjustments to our executive compensation program as a result of the Pandemic. Any consideration given to the impact of the Pandemic by the Compensation Committee in their evaluation of a NEO’s performance during 20202021 is described below in “How We Determine Pay Levels—2021 compensation detail – Annual Cash Incentives – 2021 Individual PerformancePerformance.”.
Responding to stockholders; evolving pay practices
Say-on-Pay Supportsupport & 2021 stockholder engagement
Our annual say-on-pay vote (“Say-on-Pay”) is one of our opportunities to receive feedback from stockholders regarding our executive compensation program. At the 20202021 Annual Meeting, of Stockholders (the “2020 Meeting”), approximately 93.7%96.2% of the votes cast approved the Say-on-Pay proposal, an increase from 93.7% and 73% in 2019. Management2020 and 2019, respectively. Since 2019, management and the Board hadhave conducted extensiveannual outreach with our stockholders before and following our 2019 Annual Meeting of Stockholders to better understand investors’ perspectives on our compensation program. As a result of investor feedback,program and incorporate their feedback. Following the Compensation Committee approved several changes to our compensation program for 2020 in an effort to enhance the performance-based nature of the program, while retaining the key elements of the program that have been highly successful for both our executives and our stockholders for many years.
2020 Stockholder Engagement
Since the 20202021 Annual Meeting, we reachedcontinued this dialogue by reaching out to stockholders who collectively represented over 60%65% of our outstanding common stock and had conversations with eightsix stockholders who requested engagement representing more than 21%25% percent of our outstanding common stock. During our outreach, we discussed a range of relevant topics with stockholders, including the changes toevolution of our executive compensation programs, that were put into place in 2020, for which we received consistently positive feedback. Most of the meetings also covered a variety of ESG matters. Stockholder feedback was relayed directly to the Board of Directors.
During our meetings with stockholders, we heard strong support for the performance of the Company, our CEO and senior management team, as well as appreciation of our outreach efforts. Stockholders also generally reacted positively to our decision to directly tie 50% of each NEO’s target annual cash incentive award to the Company’s operating income goals and 50% to the NEO’s delivery against individual goals and key strategic initiatives for the Company. In general, stockholders preferred that we disclose more details, and provide more transparency around the use of individual performance metrics for each NEO, including how such metrics are determined and how they relate to the Company’s strategic goals. We also received positive feedback on the implementation of a three-year measuring period for performance equity awards beginning with the performance shares awarded in 2020.
With regard to non-compensation matters, the stockholders with whom we spoke welcomed the continued refreshment of the Board, the publication of our first Sustainabilitysecond ESG Report, our decision to begin measuring the Company’s carbon emissions in 2022 and the success of our Trading-for-Trees initiative. As our ESG program evolves, certain stockholders also requested that the Company implement a formal ESG disclosure framework and provide more disclosure relatingDiversity Dealer initiatives.
Stockholder feedback was relayed directly to the diversityBoard of our Board.
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COMPENSATION DISCUSSION AND ANALYSISDirectors, including to relevant Board committees that oversee various ESG Topics. See “Environmental, social and governance strategy and initiatives — Board and management oversight of ESG matters” for more information.
Actions in 2020Compensation highlights
We took the following actions and implemented the following changes toBelow are key elements of our executive compensation program for performance year 2020:
NEO’s Annual Cash Incentive Compensation Program – Beginning in 2020, 50% of the NEO’s targeted annual cash incentive is tied to the Company’s Adjusted Operating Income performance for the fiscal year based on the 2020 budget, while 50% is tied to the executive’s delivery against individual goals and key strategic initiatives for the Company.
Annual Equity Award Performance Share Metrics– Beginning in 2020, the performance shares granted in January, representing 50% of our NEOs’ annual equity award in relation to prior year performance, are awarded with a three-year performance period based on a combination of operating margin and market share metrics. Performance targets for years two and three will be based off of previous years’ actual results.
Continued Committee Refreshment –In January 2020, the Chair of the Compensation Committee was rotated to Mr. Begleiter, and Ms. Altobello joined the Compensation Committee. In addition, as a result of updating its responsibilities and charter to include talent management and succession planning, the Committee also formally changed its name to the Compensation and Talent Committee (although referred to as the Compensation Committee in this CD&A).�� In addition, the Compensation Committee updated its charter.
Business and financial performance
MarketAxess 2020 Performance
Performance year 2020 marked our 12th consecutive year of record financial results driven by estimated market share gains across all of our global credit products and a healthy increase in U.S. credit market volumes. The 2020 results reflect record volume and revenue in U.S. high-grade, U.S. high-yield, emerging market corporate and sovereign bonds, European credit, U.S. municipal bonds and U.S. treasuries. In 2020, we continued to invest in new protocols, technology and platform functionality, new product areas and expanding our geographic reach. To support our investment agenda, our global staff count increased to 606 at year end 2020, a 15% increase year-over-year. The headcount growth was largely concentrated in technology, customer facing and business support areas. We also completed the acquisition of Regulatory Reporting Hub in November 2020, which further expands and enhances our transaction and trade reporting services across a broader European client base, particularly in Germany, France and the Nordics.
How COVID-19 Impacted Performance
As a result of the Pandemic, we experienced significant changes in our daily operations in 2020. In mid-March 2020, we successfully implemented a global work from home mandate for all our employees and we were able to continue to provide our trading platforms and other services to our clients without interruption. In particular, we believe that Open Trading liquidity has been increasingly essential to the functioning of credit markets during the Pandemic, and MarketAxess has played a valuable role keeping our clients connected to the market as traders moved from their centralized trading floors to home offices. During the first several months of the Pandemic, we helped over 10,000 individual users connect to our trading platforms from their homes. Although we have reprioritized certain technology projects due to the changing needs of our clients in the current market environment, we have largely continued with our hiring plans, capital expenditures and the expansion of our trading platforms and services into new jurisdictions.
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COMPENSATION DISCUSSION AND ANALYSIS
Our performance in key metrics include:
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COMPENSATION DISCUSSION AND ANALYSIS
Relative Performance
For 2020, we evaluated our year-over-year financial growth as compared to our Peer Group (as defined below under How We Determine Pay Levels – Peer Group). For the period ending December 31, 2020, our operating income growth outperformed all of our 18 peers in the Peer Group. We ranked third out of 18 in year-over-year revenue growth, fifth in EPS growth, fourth in year-over-year stock price growth and third in three- and five-year stock price growth.
Our share price growth as compared to the following indices for the one-, three-, and five-year periods ended December 31, 2020 was as follows:
Share Price Growth | |||||||||||||||||||||||||||||
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| Russell 1000 |
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| NASDAQ Comp. |
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| MKTX Outperformance |
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| Stock Return |
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| MKTX Outperformance |
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| Stock Return |
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1-year |
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| 50.5 | % |
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| 18.9 | % |
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| 31.6 | % |
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| 43.6 | % |
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| 6.9 | % |
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| 16.3 | % |
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| 34.2 | % |
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3-year |
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| 182.8 | % |
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| 43.1 | % |
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| 139.7 | % |
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| 86.7 | % |
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| 96.1 | % |
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| 40.5 | % |
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| 142.3 | % |
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5-year |
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| 411.3 | % |
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| 87.4 | % |
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| 323.9 | % |
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| 157.4 | % |
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| 253.9 | % |
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| 83.8 | % |
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| 327.5 | % |
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10-year |
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| 2641.8 | % |
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| 204.3 | % |
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| 2437.4 | % |
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| 385.8 | % |
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| 2255.9 | % |
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| 198.7 | % |
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| 2443.1 | % |
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In 2020, we continued to deliver long-term value for our stockholders as evidenced by ranking 188th in five-year total stockholder return (“TSR”) (approximately 89th percentile) and 12nd in ten-year TSR (approximately 99th percentile) of all 2,236 U.S. public companies with over $1 billion in market capitalization (as reported by FactSet).
How 2020 Performance Affected Executive Compensation
A significant portion of each NEO’s compensation is dependent on our financial performance. The Company generated $423.6 million of Adjusted Operating Income in 2020, which was above our 2020 internal target Adjusted Operating Income goal of $334.3 million. Accordingly, the accrual under our cash incentive plan was higher than budgeted, resulting in higher cash incentive compensation for our NEOs. Further details about how the Adjusted Operating Income affected the NEO’s cash incentive can be found in Annual Cash Incentive Awards below.
The Compensation Committee considered the Company’s relative outperformance in determining the size of the equity awards granted in January 2021 for 2020 performance.
The chart below shows the change in base salary, total cash (which includes base salary and incentive cash) and total direct compensation (“TDC”) (which includes cash payments, annual equity awards made in relation to prior year performance (e.g., January 2021 awards for 2020 performance) and the annualized value of multi-year equity awards) for each NEO (see Annual Cash Incentive Awards and Total Direct Compensation below). The figures in the chart below differ from those shown in the Summary Compensation Table in Executive Compensation, as the Summary Compensation Table (“SCT”) reflects the full grant date value of any multi-year performance equity award received by the NEOs in the year actually granted (as required by the SEC). Additionally, the SCT includes equity awards granted in January 2020 for 2019 performance, which are included in the 2019 data in the below chart. 2021:
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COMPENSATION DISCUSSION AND ANALYSIS
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| Base Salary |
| Total Cash Compensation |
| Total Direct Compensation | ||||||||||||
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| 2020 |
| 2019 |
| Change |
| 2020 |
| 2019 |
| Change |
| 2020 |
| 2019 |
| Change |
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| ($ in thousands) | ||||||||||||||||
Richard M. McVey, CEO (1) |
| 500 |
| 500 |
| 0% |
| 2,750 |
| 500 |
| 450% |
| 8,500 |
| 7,750 |
| 10% |
Christopher R. Concannon, President |
| 500 |
| 500 |
| 0% |
| 2,000 |
| 2,000 |
| 0% |
| 5,500 |
| 5,250 |
| 5% |
Antonio L. DeLise, CFO |
| 300 |
| 300 |
| 0% |
| 1,200 |
| 1,175 |
| 2% |
| 2,400 |
| 2,085 |
| 15% |
Kevin McPherson, Head of Sales |
| 300 |
| 300 |
| 0% |
| 1,500 |
| 1,400 |
| 7% |
| 2,850 |
| 2,500 |
| 14% |
Nicholas Themelis, CIO |
| 300 |
| 300 |
| 0% |
| 1,500 |
| 1,500 |
| 0% |
| 3,200 |
| 2,800 |
| 14% |
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How we make compensation decisions
Executive Compensation Principles and Strategy
Our executive compensation program is designed to promote the following core principles that are aligned with our Company’s business strategy:
Alignment: we align and reward Company and individual performance and decision-making with long-term stockholder value creation;
Retention:attract, reward and retain high caliber executives;
Motivation: motivate high performance from our NEOs by offering greater incentives for superior performance and reduced awards for underperformance;
Prudence:discourage imprudent risk taking by avoiding undue emphasis on any one metric or short-term goals; and
Fairness: be transparent and fair to both our NEOs and our stockholders.
We believe these principles have served us well for many years, and we are continuing to refine them in response to input from our stockholders.
Our compensation principles place a majority of our executive officers’ compensation at risk and emphasize incentives tied to individual and Company performance, as well as continued service. As a result, the only fixed compensation paid is base salary, which represented 6% of our CEO’s total compensation and no more than 12% of the other NEO’s total compensation in 2020. We also seek to promote long-term commitments from our NEOs because we believe that continuity of the Company’s leadership team benefits both the Company and our stockholders. As such, we utilize long-term (three- to five-year) equity incentives in conjunction with short-term incentives (performance-based annual cash awards). Ultimately, the value realized by our NEOs from our equity incentive awards will depend on our financial performance, changes in our Common Stock price, and satisfaction of an award’s vesting schedule. Taken together, we believe these factors help create a comprehensive scheme that both reinforces our long-term performance-based orientation and is aligned with the interests of our stockholders.
To assess the financial impact of our compensation programs and ensure alignment with the interests of our stockholders, we focus on managing our aggregate compensation and benefits expense expressed as a percentage of our total annual revenues (“C&B Ratio”). We believe that monitoring this measure improves our overall profitability. The NEOs’ annual incentive payments are a component of aggregate compensation expense. Additionally, the C&B Ratio provides a normalized efficiency measure by which we can compare our compensation structure to those maintained by our peers and other financial and technology industry companies. Since 2012, our C&B Ratio has been below 30%, which we believe is an appropriate target given our current revenues, employee base and strategic plans.
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COMPENSATION DISCUSSION AND ANALYSIS
Best Practices in Compensation Governance
Our pay practices align with our compensation principles and facilitate our implementation of those principles. They also demonstrate our commitment to sound compensation and governance policies.
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Role of the Compensation Committee
The Compensation Committee administers the compensation program for our NEOs. The Compensation Committee reviews all components of remuneration (both cash and equity) and decides which elements of compensation, if any, should be adjusted or paid based on corporate and individual performance results and competitive benchmark data. The Compensation Committee also determines performance award payouts for the prior fiscal year based on actual results against performance goals.
In performing its duties, the Compensation Committee:
annually reviews competitive compensation data, recent compensation trends and any other relevant market data obtained by its compensation consultants and considers the impact on our compensation architecture, policies and strategies;
reviews all compensation, including equity holdings (both vested and unvested amounts) earned by each NEO, including each NEO’s past wealth realization and future equity incentive opportunities as well as a sensitivity analysis to help assess the Company’s ability to retain and motivate each NEO;
consults with the compensation consultants and full Board regarding market and performance data when considering decisions concerning the structure and amount of our CEO’s compensation;
considers the recommendations of our CEO relating to the performance of our NEOs (other than himself) and the recommendations of its compensation consultants relating to market data and compensation trends when considering decisions concerning the structure and amount of compensation of our NEOs.
The Compensation Committee’s function is fully described in its charter, which is available on our corporate website at www.marketaxess.com under Investor Relations – Corporate Governance. In performing its duties, the Compensation Committee receives assistance from management and our independent compensation consultants. The Compensation Committee’s decisions relating to compensation for our NEOs are reviewed by our full Board of Directors.
Role of Independent Compensation Consultants
Pursuant to its charter, the Compensation Committee may retain and terminate any consultant or other advisor, as well as approve the advisor’s fees and other engagement terms. For fiscal year 2020, the Compensation Committee retained FW Cook (“FW Cook”) as its independent compensation consultant for purposes of advising on executive
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COMPENSATION DISCUSSION AND ANALYSIS
compensation. Representatives from FW Cook attended Compensation Committee meetings, participated in executive sessions and communicated directly with the Compensation Committee. During 2020, FW Cook provided the following services to the Compensation Committee:
Executive Compensation Design – Provided the Compensation Committee with executive compensation design suggestions and alternatives;
Pay Analysis– Reviewed and benchmarked competitive market pay levels and conducted retention analyses with respect to 2020 compensation for our NEOs;
Peer Group Construction – Reviewed and recommended changes to the Company’s peer group composition (as discussed below in Peer Group);
Equity Plan – Advised on the structure and terms of the MarketAxess Holdings Inc. 2020 Equity Incentive Plan (the “Equity Incentive Plan”) that was approved by the Company’s stockholders at the 2020 Meeting, as well as the Company’s usage of authorized shares (i.e., “burn rate”); and
General Advice/Compliance – Provided general compensation-related recommendations to the Compensation Committee and performed other services, including providing advice regarding regulatory and advisory compliance issues, and other governance issues.
Grahall Partners LLC advised the Compensation Committee with regard to the compensation for our Board of Directors and our non-executive employee population.
Each compensation consultant reported directly, and is directly accountable, to the Compensation Committee. The Compensation Committee assessed the independence of Grahall and FW Cook pursuant to SEC rules and determined that their work did not raise any conflicts of interest. The Compensation Committee will continue to monitor the independence of its compensation consultants on an annual basis.
Role of Senior Management
Senior management, including the CEO, President, and Head of Human Resources, set the agendas and prepare the materials for Compensation Committee meetings and attend those meetings, other than during executive session. Other senior managers, such as the CFO and General Counsel, may also assist in the preparation or presentation of relevant material. The CEO recommends annual compensation for the NEOs, other than himself, to the Compensation Committee for consideration, but the Compensation Committee is responsible for the final recommendations. No member of management is present in the Compensation Committee meetings when matters related to their individual compensation are under discussion.
Compensation Risk Assessment
The Compensation Committee is responsible for reviewing and assessing potential risk arising from the Company’s compensation policies and practices. The Compensation Committee regularly reviews the Company’s compensation policies and practices to ascertain any potential material risks that may be created by the Company’s compensation programs. FW Cook provided the Compensation Committee an assessment of the effectiveness of all major components of the Company’s compensation programs, including the mix between annual and long-term compensation; short and long-term incentive program design; incentive plan performance criteria and corresponding objectives; the Company’s severance and change-in-control policies; its claw-back policy; and its stock ownership guidelines. The Compensation Committee’s review includes the compensation practices for our entire employee base to ensure that our pay practices, compensation programs and business strategies do not motivate imprudent risk-taking by any employee.
The Compensation Committee considered these items in determining the appropriate compensation programs for the Company. The Company utilizes many design features that mitigate the likelihood of encouraging excessive risk-taking behavior. Among these design features are:
Significant use of equity compensation with long-term vesting (three to five years);
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COMPENSATION DISCUSSION AND ANALYSIS
Use of holding periods or cliff vesting for long-term equity awards;
Strong compensation recoupment policy;
Stock ownership and retention guidelines that meet market standards;
The Compensation Committee’s ability to exercise downward discretion in determining payouts, including after consideration of regulatory, compliance and legal issues; and
Training on our Code of Conduct and other policies that educate our employees on appropriate behaviors and the consequences of taking inappropriate actions.
Based on the foregoing, the Compensation Committee and management agree that our compensation policies and practices do not encourage excessive risk-taking or create risks that are reasonably likely to have a material adverse effect on the Company. We believe that our compensation programs do not provide incentives that encourage risk-taking beyond the Company’s ability to effectively identify and manage significant risks and is compatible with the internal controls and the risk management practices of the Company.
Peer Group
The Compensation Committee assesses the Company’s financial performance and executive compensation competitiveness against a group of peer companies that it selects based on input from FW Cook. A key objective of our executive compensation program is to ensure that the total compensation package and structure that we provide to our NEOs is competitive with the companies with whom we compete for executive talent. The 2020 peer group consisted of companies that are similar to the Company in terms of competitive positioning, financial size, operating characteristics, market sector or industry classification. FW Cook engages with the Compensation Committee to review the peer group annually and periodically make changes.
In 2020, FW Cook completed an annual review of the composition of our peer group. Factors considered in determining the peer group (“Peer Group”) included:
financial size – market cap and revenues, generally based on a methodology similar to the method used by Institutional Shareholder Services (“ISS”) of +/- 2.5 times the Company’s most recent annual revenues and +/- 5 times the Company’s most recent market capitalization;
whether companies compete with us for clients, executives or other employee talent;
market sector, asset class or product offering;
peers of peers, as well as peers designated by ISS in its annual review; and
reviewing the broader market for additional firms in financial services, IT services and software industries, based on relative revenue, market capitalization and operating income similarity.
For the 2020, our Peer Group was comprised of the following firms:
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COMPENSATION DISCUSSION AND ANALYSIS
In 2020, we added Aspen Technologies, Inc., Nasdaq Inc., SEI Investments Company and Verisk Analytics to our Peer Group. We removed GAMCO Investors, Hercules Technology Growth Capital, Main Street Capital, Virtus Investment Partners, and Wisdom Tree Investments.
Benchmarking – Importance and Process
In addition to the peer group, FW Cook also used leading industry compensation surveys for the financial services and financial technology sectors for benchmarking purposes. The surveys provide a broader view of compensation levels and trends, which is useful in combination with the Peer Group data. The Compensation Committee considered this data, in conjunction with the Company’s performance and each NEO’s individual performance, contribution and expertise in determining how each NEO is paid vis-à-vis the recommended pay range role. The Compensation Committee is presented summary statistics and does not review the list of individual companies that participate in the surveys.
It is important to note that the Company’s upper quartile TSR over multiple years has resulted in our market capitalization being significantly higher than most of the companies in the Peer Group and surveys. From a benchmarking perspective, we note that market long-term incentive grant levels (and total compensation) will therefore be inherently lower than a performance-adjusted market rate for MarketAxess. While it would be helpful to introduce more peer companies with a comparable market capitalization, there are a limited number of such companies in our industry. Therefore, the differences in market capitalization should be kept in mind when selecting peer companies and interpreting the results of the benchmarking.
Individual Performance
The Compensation Committee assesses the individual performance of the Company’s NEOs in connection with the determination of each NEO’s annual cash incentive award, annual equity award and TDC. In addition to the specific objectives for each NEO that support our strategic initiatives that are set at the beginning of the performance year, we measure the performance of all of our NEOs against the following criteria that we believe are paramount to our success in a highly competitive market:
Innovation: we are leading the ‘electronification’ of the corporate bond market, which is resulting in significant market structure changes. This market evolution requires our NEOs to be innovative as they help set the Company’s direction and determine the role it plays in the financial markets;
Ability to deliver technology-driven market solutions:we are a financial technology company whose NEOs must combine an expertise of the fixed-income securities market with the knowledge and ability to conceptualize, create, implement and deliver technology-driven market solutions; and
Strategic decision making and execution:we are a relatively flat organization with approximately 600 employees globally; therefore, our NEOs must have the ability to balance strategic decision making with tactical execution, and they must be able to effectively communicate with, and lead, broad teams of employees across all levels of the organization.
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COMPENSATION DISCUSSION AND ANALYSIS
As described below under Determination of NEO Annual Cash Incentives – 2020, in 2020, the Company adopted several changes to the design of the Company’s executive compensation program that introduce objective performance criteria and target payouts tied to both corporate results and individual performance. In 2020, the Compensation Committee also assessed the individual performance of our NEOs based on our strategic corporate objectives:
In addition to achieving a 12th year of record financial results, the NEOs were credited with the following contributions to our key imperatives:
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COMPENSATION DISCUSSION AND ANALYSIS
Annual Equity Award Performance Share Metrics– the performance stock units granted in January 2022, representing 50% of our NEOs’ annual equity award in relation to prior year performance, were awarded with a three-year performance period based on a combination of market share, revenue growth and operating margin metrics. Performance targets for years two and three are based off of the previous year’s actual results.
Continued Committee Refreshment –In July 2021, the Chair of the Compensation Committee was rotated to Mr. Prager and Ms. Gibson joined the Compensation Committee. Following the 2021 compensation process, Mr. Begleiter was rotated off the Compensation Committee.
MarketAxess 2021 performance overview
In 2021, the Company made significant strides in executing against its long-term growth strategy. In terms of our core business, we maintained our strong leadership position in the U.S. credit institutional client e-trading space, and we registered very strong growth in our international credit businesses, including Eurobonds and emerging markets, reflecting the benefit of our global product diversification efforts. Open Trading continues to be a key differentiator in terms of our liquidity offering, with approximately 1,700 counterparties driving significant transaction cost savings for our clients. Beyond our core business, we made significant progress expanding our growth cylinders. Our U.S. Treasury bond platform recorded a record $4.1 trillion of volume in 2021 and we made key technology enhancements to enable investor clients to leverage our all-to-all Live Markets order book. In municipal bonds, we integrated our acquisition of MuniBrokers, a central electronic trading venue serving municipal bond inter-dealer brokers and dealers, in order to expand our existing municipal bond trading solution. And on the data and post-trade side, we significantly enhanced our service offering, with the addition of Regulatory Reporting Hub increasing combined post-trade and data revenue by 43% in 2021. We continued to grow our total active client base to nearly 1,900 active clients, with approximately 1,000 clients trading three or more products on our platform. These number of clients records enhance the network effect on our platforms.
We believe that the Company improved its strategic positioning in 2021 against a challenging market backdrop. Credit spreads and credit spread volatility were at historically low levels throughout most of 2021, adversely impacting our financial results relative to record levels achieved in 2020. Because of difficult market conditions for credit trading, our 2021 results were below our budget and the compensation of our employees, including the NEOs, fell as a result.
For reference, we have included compound annual growth rates (“CAGR”), where appropriate, for the key performance metrics discussed below.
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COMPENSATION DISCUSSION AND ANALYSIS
Our key performance metrics include:
Total Revenues: A 32% increase in revenue in 2020, driven by a significant increase in volatility during the year, made for tough year-over-year comparisons in 2021, as credit spreads and credit spread volatility decreased significantly, and estimated U.S. credit market TRACE volumes declined 7%. While market conditions were more challenging in 2021, the Company reported a record $699 million in revenue, the 13th consecutive year of record revenue. Partially offsetting the weaker U.S. credit environment was a strong performance in our international growth cylinders, Eurobond trading and emerging markets trading as well as higher post-trade revenue with the acquisition of Regulatory Reporting Hub, which closed at the end of 2020. Furthermore, revenue growth over the combined 2020-2021 period grew at a CAGR of 17%, above our 5-year revenue growth rate, and in line with the long-term revenue growth trajectory for the Company. |
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COMPENSATION DISCUSSION AND ANALYSIS
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In 2021, the Company maintained its strong leadership position in the |
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Market conditions were more challenging in 2021, dampening earnings relative to elevated 2020 levels, resulting in a decline in the |
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Alignment of CEO TDC andRelative Stock Performance
The charts below compare the growthAll of the CEO’s TDCmajor product areas trading on the Company’s platforms are in early stages of electronification. Given this, the Company’s focus is on investing and innovating to capture the long-term opportunity over the next decade. We believe that the differentiated liquidity pool on our platforms and the trading efficiency and transaction cost savings that we provide to investors and dealers globally, will lead to greater electronification in the global fixed income market. Despite our one-year underperformance relative to the Company’s Common Stock price appreciation,S&P 500 and our Peer Group Median, our long-term track record is reflected in the performance of various indices andsuperior returns for stockholders generated over the growth of the Company’s operating income for the six-year period ended December 31, 2020 on an indexed basis: five-to-ten-year periods noted below.
| 10-Year Return | 5-Year Return | 3-Year Return | 1-Year Return |
MKTX | 1,448.0 | 189.5 | 98.2 | -27.5 |
S&P 500 | 362.6 | 133.4 | 100.4 | 28.7 |
Peer Group Median | 524.4 | 178.3 | 85.2 | 17.9 |
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COMPENSATION DISCUSSION AND ANALYSIS
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As illustrated in the above graphs, the CEO’s annual TDC has increased 27% in the aggregate during the six-year period ending December 31, 2020 (representing an approximately 4% compound annual growth rate (“CAGR”)). During this same period, the Company’s operating income under U.S. generally accepted accounting principles (GAAP) has increased 215% (approximately 21% CAGR over 6 years) and TSR has increased 708% (almost 42% CAGR over 6 years), while the 6-year CAGR for the NASDAQ and S&P 500 for this period increased by approximately 18% and 10.5%, respectively. In addition, over $18 billion in stockholder value (as measured by increased market capitalization) has been created during the six-year period ended December 31, 2020.
We believe the CEO’s compensation has consistently reflected our pay for performance philosophy during this period. However, because the Summary Compensation Table requires multi-year equity awards to be reported in full in the year received, our use of such awards can make an NEO’s compensation appear to be volatile. The chart below illustrates and contrasts TDC levels for the CEO over the past six years as reported in the Summary Compensation Table (pursuant to SEC rules) versus the TDC calculated by the Company as a result of annualizing multi-year equity awards over the term of each such award:
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COMPENSATION DISCUSSION AND ANALYSIS
Elements of executive compensation
The compensation structure for our NEOs is comprised of base salaries, annual cash incentive compensation and various forms of equity which, for 2020, was granted under our 2020 Equity Incentive Plan. The combination of these elements enables us to offer a competitive, cost effectivecost-effective compensation program that balances variable, or at-risk, compensation with prudent risk takingrisk-taking and stockholder interests.the interests of our stockholders. Equity awards may be granted on an annual basis or as specialone-time awards, including multi-year awards that are attributed over multiple years of compensation. We believe that equity awards serve as an important part of an NEO’s compensation in that they further ensure alignment of the NEO’s interests with those of our stockholders.
Annual variable cash and equity compensation gives the Compensation Committee the flexibility to tie NEO compensation to individual and corporate performance, which is an important element of our pay philosophy and each NEO’s compensation.
NEOs also receive standard employee benefits.
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COMPENSATION DISCUSSION AND ANALYSIS
Pay Mix
We believe that lower base salaries and higher levelsThe table below summarizes the elements of variable performance awards motivate our NEOs, facilitate the achievement of our growth objectives and promote decision-making that is aligned with our stockholders’ interests. A lower base of fixed costs (including base salary) also allows us to better manage expenses, which helps improve profitability. We also believe that the balance among pay components in our compensation program design mitigates against a focus on short-term results and decreases the potential for excessive or inappropriate risk taking (see Compensation Risk Assessment above). An overview of the elements of pay provided to the CEO and, on average, to the other NEOsas in effect for fiscal year 2020 is as follows:
2021, and how each element supports the Company’s compensation objectives:
| Performance Link | Description | ||
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In 2020, all NEOs received over 40% of their annual TDC in equity, which was intended to align each NEO’s interests with the interests of our stockholders. Our CEO received 42% of his 2020 annual TDC through a new equity award and an additional 26% of his 2020 TDC was attributed to a portion of his 2018 multi-year equity award. All other NEOs received over 45% of their annual TDC in the form of new equity awards. The percentage of TDC attributed to annual equity awards was higher than in previous years for Messrs. DeLise, Themelis and McPherson because they no longer had the value of their previously granted multi-year equity awards attributed to their compensation, and as such, the Compensation Committee determined to increase their annual equity awards in lieu of a portion of their annual cash award so that they would have a greater amount of unvested equity in the Company. This is further detailed below in Determination of NEO Annual Cash Incentives.
Base Salary
Base salary is the only fixed component of our NEO’s total cash consideration and is intended to provideCash
N/A
• Provides a consistent minimum consistent level of compensation that is paid throughout the year. We avoid automatic base salary increases and target our NEO’s base salaries below applicable median base pay levels to manage our fixed compensation costs and reinforce our pay-for-performance philosophy.
While most ofyear at a cost-effective level for the NEOs’ base salaries were at or below the 25th percentile of base salaries reported by our Peer Group, we did not adjust base salaries in 2020. Instead, we provided our NEOs with the opportunity for higher compensation through improved variable and long-term incentive opportunities as described below. Our CEO’s base salary has remained unchanged since 2011.Company
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COMPENSATION DISCUSSION AND ANALYSIS
Determination of NEO Annual Cash IncentivesIncentive
Cash
Starting with performance year 2020, 50% of the targetAdjusted operating income (50%)
• Performance-based cash incentive for our executive officers was directly linkedopportunity
• Rewards short-term performance in a framework that discourages excessive risk-taking
Individual performance and contributions to the Company’s Adjusted Operating Income results and 50% was based on the executive’s delivery against individual goals and key strategic initiatives for the Company. For 2020, the NEOs cash incentives were paid out of the 2009 Employee Performance Incentive Plan (the “Employee Cash Incentive Plan”).
| Target Cash Incentive | |||||||||
| Target |
| Portion Tied to Adjusted Operating Income |
| Actual Earned on Adjusted Operating Income |
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Richard M. McVey, CEO |
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Christopher R. Concannon, President |
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Antonio L. DeLise, CFO |
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Kevin McPherson, Head of Sales |
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Nicholas Themelis, CIO |
| 1,200 |
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As our Adjusted Operating Income was almost $424 million, 27% greater than the target of $334 million, the portion of each executive officer’s cash award payable based on Adjusted Operating Income was paid out at 125% in accordance with the table below.
Payout on Adjusted Operating Income |
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Performance | Adjusted Operating Income |
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125% of Target or Higher | 417,936+ |
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110% of Target |
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100% of Target |
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90% of Target |
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75% of Target |
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Less Than 75% of Target | <250,762 |
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The remainder of each NEO’s annual cash incentive awards for 2020 was determined by the Compensation Committee’s assessment of the following:
The Company’s financial results for 2020;
The benchmark data for each position;
The individual performance of each NEO and his contribution to our corporate objectives for 2020 as summarized in the Individual(50%)
Long-Term Annual Equity Incentive 1
50% Performance section above; andstock units (PSUs)
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COMPENSATION DISCUSSION AND ANALYSIS
A summary of the total cash incentives paid to our NEOs for 2020 based on both measures is set forth below. The Compensation Committee then reviewed the summary of the payouts against the 2019 payouts and in the context of the year-over-year growth of some key financial performance indicators:
Cash Incentive Paid Compared to Financial Metrics |
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Revenues (in millions) |
| $ | 689.1 |
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Operating Income (in millions) |
| $ | 374.7 |
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Diluted EPS |
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Richard M. McVey, CEO (1) |
| $ | 2,250 |
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Christopher R. Concannon, President |
| $ | 1,500 |
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Antonio L. DeLise, CFO |
| $ | 900 |
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Kevin McPherson, Head of Sales |
| $ | 1,200 |
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Nicholas Themelis, CIO |
| $ | 1,200 |
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(1) In 2020, the CEO received equity in lieu of a cash incentive for 2019 performance.
Non-Qualified Deferred Cash Plan
The Company offers a voluntary non-qualified deferred cash plan that allows U.S.-based NEOs and other select participants to defer all or part of their cash bonus. For the cash bonus paidGranted in 2021 for 2020
Granted in
2022 for 2021
• Financial performance our President deferred 20% of his $1,500,000 cash incentive bonus or $300,000, and our CFO deferred 50% of his $900,000 cash incentive bonus or $450,000. Please see Nonqualified Deferred Compensation in the Executive Compensation Section of this Proxy.
Long-term Equity Incentives
We grant equity awards to our NEO’s annually as part of our on-going compensation program. In addition, special equity awards have historically been granted to our NEOs at the time of hire (“new hire” awards) or, for the CEO, upon renewal of his employment agreement. We did not make any such awards in 2020.
We grant annual equity awards on January 15 using the average closing price of our Common Stock for the ten consecutive trading days leading up to and including the date of grant. This helps to ensure that the timing of any award will not be subject to manipulation and reduces the impact of any significant short-term swings in stock price. All annual equity awards vest over a minimum of three years, and the first vesting date is at least one year from the date of grant.
The value of the annual equity awarded to each NEO is consideredtargets are pre-determined by the Compensation Committee in determining TDCand reflect our financial and strategic long-term goals
• Three-year performance periods with one- year calculation periods
• Targets for each NEO. The amount awarded is based upon benchmark data, the Company’s desire for our NEOsyears two and three are tied to maintain appropriate upside leverage in our annual incentive program while managing risk, stock ownership guidelines, and our desire to retain our NEOs.prior year’s results
SEC rules require that we report all equity granted during the applicable reporting year in our executive compensation tables (see Executive Compensation• below). As such, we are providing an overview of all equity awards granted in January 2020 for 2019 performance. However, in calculating TDC for performance year 2020, we used the value of equity granted in January 2021 in recognition of performance during 2020. Accordingly, we have also included an overview of equity awards granted in 2021.
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| Cliff-vest after three years |
Market share (50%)
COMPENSATION DISCUSSION AND ANALYSISUS credit market share (33.3%)
Revenue growth excluding US credit (33.3%)
Operating margin (50%)
Operating margin (33.3%)
50% Time vested equity
(RSUs and
Stock price performance
Flex Share• ProgramShare-based awards establish direct alignment with our stock price performance and stockholder interests
Annual• Messrs. McVey and Concannon receive the portion of their annual long-term equity awards are made pursuant toaward that is time-based half in restricted stock units (“RSUs”) and half in stock options
• Under our “Flex Share” program, that permits ourthe other NEOs may choose to have some input into the formreceive this portion of their equity compensation, subject toaward in all RSUs or a general frameworkcombination of RSUs and limitations imposed by the Compensation Committee. The Flex Share program allowsstock options, allowing the Company to deliver more individualized awards without incurring additional expense
• Vest ratably over three years
(1) | In connection with his appointment as CFO, Mr. Gerosa also received a one-time multi-year equity grant. See “— 2021 compensation detail —Multi-year awards” below. |
2022 Proxy Statement | 39 |
COMPENSATION DISCUSSION AND ANALYSIS
The NEOs also receive standard employee benefits, including healthcare, life insurance, disability and retirement savings plans. The NEOs do not receive any perquisites.
2021 compensation decisions
A significant portion of each NEO’s compensation is dependent on our financial performance, with firm-wide annual cash incentives impacted by adjusted operating income. The Company generated $379.6 million of adjusted operating income in 2021, which was below our 2021 internal target goal of $474.7 million. See Appendix A for a reconciliation of adjusted operating income to operating income. Accordingly, the cash incentive plan pool funding was lower than budgeted, resulting in lower cash incentive compensation for our NEOs. Further details about how the adjusted operating income affected the NEO’s cash incentive can be found under “— 2021 compensation detail — Annual cash incentives” below.
The remainder of each NEO’s annual cash incentive awards for 2021 was determined by the Compensation Committee’s assessment of the performance of each NEO and his contribution to our corporate objectives for 2021.
The Compensation Committee considered the Company’s relative underperformance in 2021 when determining to decrease the annual cash incentives and reduce the size of the equity awards granted in January 2022 for 2021 performance.
As compared to 2020, annual cash incentives, annual long-term equity incentives and total direct compensation (“TDC”), which includes cash payments, annual equity awards made in relation to prior year performance (e.g., January 2022 awards for 2021 performance) and the annualized value of multi-year equity awards, decreased for each NEO.
2021 Total Compensation Summary (000's) | |||||||||
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| 2021 Incentive |
| Total Compensation 2 | ||||
| Salary |
| Cash | Equity 1 | Total |
| 2021 | vs. 2020 ($) | vs. 2020 (%) |
Richard M. McVey | $500 |
| $1,800 | $5,450 | $7,250 |
| $7,750 | -$750 | -9% |
Christopher R. Concannon | $500 |
| $1,200 | $3,550 | $4,750 |
| $5,250 | -$250 | -5% |
Christopher N. Gerosa 3 | $277 |
| $370 | $553 | $923 |
| $1,200 | - | - |
Kevin McPherson | $300 |
| $1,000 | $1,350 | $2,350 |
| $2,650 | -$250 | -9% |
Antonio L. DeLise | $300 |
| $700 | $900 | $1,600 |
| $1,900 | -$500 | -21% |
Nicholas Themelis | $300 |
| $1,000 | $1,300 | $2,300 |
| $2,600 | -$600 | -19% |
(1) | Represents equity awards attributable to 2021 performance. Messrs. McVey’s, Concannon’s and Gerosa’s equity incentive column include $2,200,000, $1,000,000 and $333,333 in attributed multi-year compensation from previously granted multi-year equity awards. See “—Multi-Year Awards” below. |
(2) | “2021 Total Compensation” differs from the
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(3) | Mr. Gerosa’s base salary column shows the amount he received, reflecting a salary change from $260,000 per year to |
Executive compensation practices and governance
Principles and strategy
Our executive compensation program is designed to promote the following core principles that are aligned with our Company’s business strategy:
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COMPENSATION DISCUSSION AND ANALYSIS
• | Alignment: we align Company and individual performance and |
Retention:attract, reward and retain high caliber executives;
Motivation: motivate high performance from our NEOs by offering greater incentives for superior performance and reduced awards for underperformance;
Prudence:discourage imprudent risk-taking by avoiding undue emphasis on any one metric or short-term goals; and
Fairness: be transparent and fair to both our NEOs and our stockholders.
We believe these principles have served us well for many years, and we are continuing to refine them in response to input from our stockholders.
Our compensation principles place a majority of our executive officers’ compensation at risk and emphasize incentives tied to individual and Company performance, as well as continued service. As a result, the only fixed compensation paid is base salary, which represented 6% of our CEO’s total compensation and no more than 23% of the other NEO’s total compensation in 2021. We also seek to promote long-term commitments from our NEOs because we believe that continuity of the Company’s leadership team benefits both the Company and our stockholders. As such, we utilize long-term (three- to five-year) equity incentives in conjunction with short-term incentives (performance-based annual cash awards). Ultimately, the value realized by our NEOs from our equity incentive awards will depend on our financial performance, changes in our Common Stock price, and satisfaction of an award’s vesting schedule. Taken together, we believe these factors help create a comprehensive scheme that both reinforces our long-term performance-based orientation and is aligned with the interests of our stockholders.
Best practices
Our pay practices align with our compensation principles and facilitate our implementation of those principles. They also demonstrate our commitment to sound compensation and governance policies.
Compensation Policies and Practices | |
What We Do | What We Avoid |
✓Emphasis on performance-based compensation ✓Use of clawbacks ✓Stock ownership guidelines ✓Use of long-term equity awards that align with stockholder interests ✓Automatic reduction of severance payments subject to §280G excise tax ✓Engage with investors ✓Dividends and dividend equivalents on restricted stock and RSUs are paid only when the awards vest ✓Engage independent compensation consultants | X No guaranteed bonuses except for new hires X No pension / SERP plans X No single-trigger change in control benefits X No §280G excise tax “gross-up” benefits X No recycling of options or stock appreciation rights X No "repricing" underwater options without stockholder approval X No hedging or pledging of MarketAxess stock X No perquisites for NEOs |
Role of the Compensation Committee
The Compensation Committee administers the compensation program for our NEOs. The Compensation Committee reviews all components of remuneration (both cash and equity) and decides which elements of compensation, if any, should be adjusted or paid based on corporate and individual performance results and competitive benchmark data. The Compensation Committee also determines performance award payouts for the prior fiscal year based on actual results against performance goals.
2022 Proxy Statement | 41 |
COMPENSATION DISCUSSION AND ANALYSIS
In performing its duties, the Compensation Committee:
annually reviews competitive compensation data, recent compensation trends and any other relevant market data obtained by its compensation consultants and considers the impact on our compensation architecture, policies and strategies;
reviews all compensation earned by each NEO, including each NEO’s past wealth realization and future equity incentive opportunities;
consults with the compensation consultants and full Board regarding market and performance data when considering decisions concerning the structure and amount of our CEO’s compensation;
considers the recommendations of our CEO relating to the performance of our NEOs (other than himself) and the recommendations of its compensation consultants relating to market data and compensation trends when considering decisions concerning the structure and amount of compensation of our NEOs.
The Compensation Committee’s function is fully described in its charter, which is available on our corporate website at www.marketaxess.com under “Investor Relations – Corporate Governance.” In performing its duties, the Compensation Committee receives assistance from management and our independent compensation consultants. The Compensation Committee’s decisions relating to compensation for our NEOs are reviewed by our full Board of Directors.
Role of independent compensation consultants
Pursuant to its charter, the Compensation Committee may retain and terminate any consultant or other advisor, as well as approve the advisor’s fees and other engagement terms. For fiscal year 2021, the Compensation Committee retained FW Cook (“FW Cook”) as its independent compensation consultant for purposes of advising on executive compensation. Representatives from FW Cook attended Compensation Committee meetings, participated in executive sessions and communicated directly with the Compensation Committee. During 2021, FW Cook provided the following services to the Compensation Committee:
Executive Compensation Design – Provided the Compensation Committee with executive compensation design suggestions and alternatives;
Pay Analysis– Reviewed and benchmarked competitive market pay levels with respect to 2021 compensation for our global management team, including the NEOs;
Peer Group Construction – Reviewed and recommended changes to the Company’s peer group composition (as discussed below in Peer Group);and
General Advice/Compliance – Provided general compensation-related recommendations to the Compensation Committee and performed other services, including providing advice regarding regulatory and advisory compliance issues, and other governance issues.
Grahall advised the Compensation Committee with regard to the compensation for our Board of Directors. See “Corporate governance and board matters — Director compensation" for more information.
Each compensation consultant reported directly, and is directly accountable, to the Compensation Committee. The Compensation Committee assessed the independence of Grahall and FW Cook pursuant to SEC rules and determined that their work did not raise any conflicts of interest. The Compensation Committee will continue to monitor the independence of its compensation consultants on an annual basis.
Role of senior management
Senior management, including the CEO, President and Chief Human Resources Officer, make recommendations for the meeting agendas and prepare the materials for Compensation Committee meetings and attend those meetings, other than during executive session. Other senior managers, such as the CFO and General Counsel, may also assist in the preparation or presentation of relevant material. The CEO recommends annual
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COMPENSATION DISCUSSION AND ANALYSIS
compensation for the NEOs, other than himself, to the Compensation Committee for consideration, but the Compensation Committee is responsible for the final recommendations. No member of management is present in the Compensation Committee meetings when matters related to their individual compensation are under discussion.
Compensation risk assessment
The Compensation Committee is responsible for reviewing and assessing potential risk arising from the Company’s compensation policies and practices. The Compensation Committee regularly reviews the Company’s compensation policies and practices to ascertain any potential material risks that may be created by the Company’s compensation programs. FW Cook provided the Compensation Committee an assessment of the effectiveness of all major components of the Company’s compensation programs, including the mix between annual and long-term compensation; short and long-term incentive program design; incentive plan performance criteria and corresponding objectives; the Company’s severance and change-in-control policies; its clawback policy; and its stock ownership guidelines. The Compensation Committee’s review includes the compensation practices for our entire employee base to ensure that our pay practices, compensation programs and business strategies do not motivate imprudent risk-taking by any employee.
The Compensation Committee considered these items in determining the appropriate compensation programs for the Company. The Company utilizes many design features that mitigate the likelihood of encouraging excessive risk-taking behavior. Among these design features are the use of:
Equity compensation with long-term vesting (three to five years);
Holding periods or cliff-vesting for certain long-term equity awards;
Compensation recoupment policies;
Stock ownership and retention guidelines that meet market standards;
The Compensation Committee’s ability to exercise downward discretion in determining payouts, including after consideration of regulatory, compliance and legal issues; and
Training on our Code of Conduct and other policies that educate our employees on appropriate behaviors and the consequences of taking inappropriate actions.
Based on the foregoing, the Compensation Committee and management agree that our compensation policies and practices do not encourage excessive risk-taking or create risks that are reasonably likely to have a material adverse effect on the Company. We believe that our compensation programs do not provide incentives that encourage risk-taking beyond the Company’s ability to effectively identify and manage significant risks and is compatible with the internal controls and the risk management practices of the Company.
2022 Proxy Statement | 43 |
COMPENSATION DISCUSSION AND ANALYSIS
Peer group
The Compensation Committee assesses the Company’s financial performance and executive compensation competitiveness against a group of peer companies that it selects based on input from FW Cook. A key objective of our executive compensation program is to ensure that the total compensation package and structure that we provide to our NEOs is competitive with the companies with whom we compete for executive talent. The 2021 peer group consisted of companies that are similar to the Company in terms of competitive positioning, financial size, operating characteristics, market sector or industry classification. FW Cook engages with the Compensation Committee to review the peer group annually and periodically make changes.
In 2021, FW Cook completed an annual review of the composition of our peer group. Factors considered in determining the peer group (“Peer Group”) included:
financial size – market cap and revenues, generally +/- 2.5 times the Company’s most recent annual revenues and +/- 5 times the Company’s most recent market capitalization;
whether companies compete with us for clients, executives or other employee talent;
market sector, asset class or product offering;
peers of peers, as well as peers designated by shareholder advisory firms in their annual reviews; and
reviewing the broader market for additional firms in financial services, IT services and software industries, based on relative revenue, market capitalization and operating income similarity.
For the 2021, our Peer Group was comprised of the following firms:
2021 Peer Group | ||
ACI Worldwide, Inc. | Envestnet, Inc. | Nasdaq Inc. |
Aspen Technologies, Inc. | Factset Research Systems, Inc. | SEI Investments Company |
BGC Partners, Inc. | Fair Isaac Corporation | Tradeweb Markets Inc. |
Black Knight, Inc. | Guidewire Software, Inc. | TransUnion |
Cboe Global Markets, Inc. | Morningstar, Inc. | Verisk Analytics, Inc. |
Cohen & Steers, Inc. | MSCI Inc. | Virtu Financial, Inc. |
In 2021, we added TransUnion to, and removed Alliance Bernstein Holding L.P. from, our Peer Group. We made these changes because they result in a Peer Group that is more representative of the Company’s performance, size and business operations and improves the Company’s market capitalization positioning.
Benchmarking — importance and process
In addition to the peer group, FW Cook also used leading industry compensation surveys for the financial services and financial technology sectors for benchmarking purposes. The surveys provide a broader view of compensation levels and trends, which is useful in combination with the Peer Group data. The Compensation Committee considered this data, in conjunction with the Company’s performance and each NEO’s individual performance, contribution and expertise in determining how each NEO is paid vis-à-vis the recommended market data. The Compensation Committee is presented summary statistics and does not review the list of individual companies that participate in the surveys.
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COMPENSATION DISCUSSION AND ANALYSIS
Elements of executive compensation
The compensation structure for our NEOs is comprised of base salaries, annual cash incentive compensation and various forms of equity granted under our 2020 Equity Incentive Plan. The combination of these elements enables us to offer a competitive, cost-effective compensation program that balances variable, or at-risk, compensation with prudent risk-taking and stockholder interests. Equity awards may be granted on an annual basis or as one-time awards, including multi-year awards, that are attributed over multiple years of compensation. We believe that equity awards serve as an important part of an NEO’s compensation in that they further ensure alignment of the NEO’s interests with those of our stockholders.
Annual variable cash and equity compensation gives the Compensation Committee the flexibility to tie NEO compensation to individual and corporate performance, which is an important element of our pay philosophy and each NEO’s compensation.
The NEOs also receive standard employee benefits including healthcare, life insurance, disability and retirement savings plans. The NEOs do not receive any perquisites.
Pay mix
We believe that lower base salaries and higher levels of variable incentive awards motivate our NEOs, facilitate the achievement of our growth objectives and promote decision-making that is aligned with our stockholders’ interests. A lower base of fixed costs (including base salary) also allows us to better manage expenses, which helps improve profitability. We also believe that the balance among pay components in our compensation program design mitigates against a focus on short-term results and decreases the potential for excessive or inappropriate risk-taking (see “Executive compensation practices and governance — Compensation risk assessment” above). An overview of the elements of pay provided to Mr. McVey and, on average, to the other NEOs for fiscal year 2021 is as follows:
2022 Proxy Statement | 45 |
COMPENSATION DISCUSSION AND ANALYSIS
Base salary is the only fixed component of our NEOs’ total cash consideration and is intended to provide a minimum consistent level of compensation throughout the year at a cost-effective level for the Company. We avoid automatic base salary increases and target our NEO’s base salaries below applicable median base pay levels to manage our fixed compensation costs and reinforce our pay-for-performance philosophy.
While most of the NEOs’ base salaries were at or below the 25th percentile of base salaries reported by our Peer Group, we did not adjust base salaries in 2021. Instead, we provided our NEOs with increased compensation opportunities through variable and long-term incentive awards, as described below. Mr. McVey’s base salary has remained unchanged since 2011.
Annual cash incentives
The NEO’s annual cash incentives are designed to reward short-term performance in a framework that discourages excessive risk-taking.
The chart below summarizes each NEO’s target annual cash incentive, along with the funding as a percentage of target for both the adjusted operating income and individual performance portions and the actual payout amounts for the year ended December 31, 2021.
2021 Cash Incentive Summary (000's) | |||||||
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| Target Cash |
| Funding as a Percentage of Target |
| 2021 Cash | ||
| Incentive |
| Adjusted Operating Income 1 | Individual | Total 2 |
| Incentive |
Richard M. McVey | $2,250 |
| 80% | 80% | 80% |
| $1,800 |
Christopher R. Concannon | $1,500 |
| 80% | 80% | 80% |
| $1,200 |
Christopher N. Gerosa 3 | $400 |
| 80% | 105% | 93% |
| $370 |
Kevin McPherson | $1,200 |
| 80% | 87% | 83% |
| $1,000 |
Antonio L. DeLise 3 | $725 |
| 80% | 113% | 97% |
| $700 |
Nicholas Themelis | $1,200 |
| 80% | 87% | 83% |
| $1,000 |
(1) | Adjusted operating income excludes unplanned inorganic activity and the impact of cash incentives. See “Appendix A – Reconciliation OF Non-GAAP Amounts” for a reconciliation of adjusted operating income to operating income. |
(2) | Funding as a percentage of target is equally weighted between adjusted operating income (50%) and the NEO’s individual performance and contributions to strategic corporate objectives (50%). |
(3) | Messrs. DeLise’s and Gerosa’s target cash incentives represent blended targets based on the August 2021 transition of the CFO role. |
In 2021, 50% of the annual cash incentive for our NEOs was directly linked to the Company’s adjusted operating income results. This performance metric is different than the performance metrics used for the Company’s annual long-term equity incentive awards. The other 50% of the annual cash incentive for our NEOs was based on the executive’s individual performance and contributions to the Company’s growth strategy. For 2021, the NEOs’ cash incentives were paid out of the 2009 Employee Performance Incentive Plan (the “Employee Cash Incentive Plan”).
46 | 2022 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
2021 adjusted operating income performance
As our adjusted operating income was approximately $379.6 million, 20% lower than the target of $474.7 million, the portion of each executive officer’s cash award payable based on adjusted operating income was paid out at 80% in accordance with the table below.
Adjusted Operating Income Performance Grid (millions) | ||
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Performance | Adjusted Operating Income 1 | Payout |
125% of Target or Higher | ≥ $593.4 | 125% |
110% of Target | $522.2 | 110% |
100% of Target | $474.7 | 100% |
90% of Target | $427.2 | 90% |
2021 Actual | $379.6 | 80% |
75% of Target | $356.0 | 75% |
Less Than 75% of Target | < $356.0 | 0% |
2021 individual performance
The Compensation Committee assesses the individual performance and contributions to the Company’s growth strategy of the NEOs in connection with the determination of each NEO’s annual cash incentive award. The Compensation Committee believes that including this component provides an opportunity to evaluate the quality of individual results on an annual basis.
The Compensation Committee assessed the individual performance and contributions to the Company’s growth strategy of our NEOs based on our strategic corporate objectives:
Strategic Corporate Objectives 1 | |
Growth through Market Share Gains in Core Products | Best in Post Trade and Regulatory Reporting |
Growth through Product Expansion and Innovation | Growth through Corporate Development and M&A |
Growth through Global Client/Dealer Relationships | Build a Scalable and Resilient Business |
Growth through International Expansion | Best Place to Work |
(1) | For 2022, the Compensation Committee will introduce pre-defined diversity and human capital goals that will be among the factors considered when determining our global management team’s, including the NEOs, individual performance. See “--Change to individual performance for 2022” below. |
2022 Proxy Statement | 47 |
COMPENSATION DISCUSSION AND ANALYSIS
These goals are intended to ensure the long-term stability of the Company and alignment between NEO’s compensation and the Company’s long-term strategic goals. Specifically, the NEOs were credited with the following contributions to our key imperatives:
2021 Individual Performance Considerations | |
Richard M. McVey | •Delivered record firm-wide revenues •Executed our long-term growth strategy, including product and geographic expansion efforts •Delivered record volumes in emerging markets, Eurobonds, and trading automation •Expanded our client network by growing our client base •Maintained a leadership position in US Credit Market Share •Oversaw transformative talent acquisition and organizational development initiatives |
Christopher R. Concannon | •Shaped significant portions of our long-term growth strategy •Led transformative talent acquisition and organizational development initiatives •Orchestrated and completed the acquisition of MuniBrokers •Initiated a new business unit for ETF and index products •Maintains key client relationships and expanded client base •Drove strategy and execution for DE&I, ESG and return to office initiatives |
Christopher N. Gerosa | •Maintained a strong track record of regulatory compliance and financial controls •Supported the development of our self-clearing enhancements and the conversion of our clearing business in the UK •Managed our capital and operational controls to support growth of Open Trading globally •Successfully transitioned to CFO |
Kevin McPherson | •Grew Municipal Bonds and Emerging Markets businesses •Launched RFQ for Treasuries •Grew Portfolio Trading •Delivered record growth in trading automation •Expanded our client network by growing our institutional client base •Grew Emerging Markets business |
Antonio L. DeLise | •Maintained strong track record of financial controls •Completed acquisition of MuniBrokers •Delivered on expense synergies across M&A acquisitions, Reg Reporting Hub and MuniBrokers •Supported the development of our self-clearing enhancements and the conversion of our clearing business in the UK •Managed our capital and operational controls to support growth of Open Trading globally •Executed succession plan for several key positions, including the new CFO and Chief Audit Officer |
48 | 2022 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
•Launched connectivity to China Bond Connect •Launched RFQ for Treasuries •Delivered Portfolio Trading enhancements •Delivered record growth in trading automation •Expanded Post Trade technology enhancements that resulted in an increase in Post Trade revenue •Completed the integration of MuniBrokers |
Change to weighting of annual cash incentives for 2022
The Compensation Committee believes that tying annual cash incentives to financial performance is an important aspect of our executive compensation program. For that reason, the Compensation Committee increased the weighting of adjusted operating income to 60% of Messrs. McVey’s and Concannon’s annual cash incentive for 2022. The remaining 40% will continue to be based on Messrs. McVey’s and Concannon’s individual performance and contributions to the Company’s growth strategy. No change was made to the weighting of the other executive officers’ annual cash incentive components for whom the weighting will continue to be 50% adjusted operating income and 50% individual performance and contributions to the Company’s growth strategy.
Change to individual performance for 2022
Recognizing the increasing importance of ESG, and diversity and human capital management specifically, to the Company’s business, the Compensation Committee will introduce pre-defined diversity and human capital goals that will be among the factors considered when determining our global management team’s, including the NEOs, individual performance payouts for their 2022 annual cash incentives. The Compensation Committee believes that having our diversity and human capital goals impact NEO compensation reinforces the achievement of such goals.
Non-qualified deferred cash plan
The Company offers a voluntary non-qualified deferred cash plan that allows U.S.-based NEOs and other select participants to defer all or part of their cash bonus. For the cash bonus paid in 2022 for 2021 performance, (a) Mr. DeLise deferred 50% of his $700,000 cash incentive or $350,000 and (b) Mr. Gerosa deferred 15% of his $370,000 cash incentive or $55,500. Please see “Executive compensation — Nonqualified Deferred Compensation.”
Annual long-term equity incentives
We grant equity awards to our NEO’s annually as part of our on-going compensation program. In 2021, in connection with Mr. Gerosa’s appointment as CFO, our Board also approved an equity award valued at $1 million, comprised of 50% performance stock units, 25% restricted stock units and 25% stock options. See “—Multi-year awards” below.
SEC rules require that we report all equity granted during the applicable reporting year in our executive compensation tables (see “Executive compensation” below). As such, in this CD&A, we provide an overview of all equity awards granted in January 2021 for 2020 performance. However, in calculating TDC for performance year 2021, we used the value of equity granted in January 2022 in recognition of performance during 2021. Accordingly, we have also included an overview of equity awards granted in 2022.
2022 Proxy Statement | 49 |
COMPENSATION DISCUSSION AND ANALYSIS
Our annual long-term equity incentives are share-based awards that establish direct alignment with our stock price performance and stockholder interests. The amount awarded to each of the NEOs is based upon the NEO’s individual performance and contributions to our growth strategy and may be further informed by our stock ownership guidelines and benchmark data. For information on how the Compensation Committee determines the NEO’s individual performance and contributions to our growth strategy, please refer to the factors described under “2021 compensation detail – Annual Cash Incentives – 2021 Individual Performance.” The number of shares awarded is based on the average closing price of our Common Stock for the ten consecutive trading days leading up to and including the date of grant, helping to ensure that the timing of any award will not be subject to manipulation and reducing the impact of any significant short-term swings in stock price. The awards vest over a minimum of three years, and the first vesting date is at least one year from the date of grant.
The composition of our NEO’s annual equity awards granted in January 2021 and 2022 were as follows:
Component | Performance Link | Description | |
50% Performance stock units (PSUs) | Granted in 2021 for 2020 | Granted in 2022 for 2021 | •Financial performance targets are pre-determined by the Compensation Committee and reflect our financial and strategic long-term goals •Three-year performance periods with one-year calculation periods •Targets for years two and three are tied to prior year’s results •Cliff-vest after three years |
Market share (50%) | US credit market share (33.3%) | ||
Revenue growth excluding US credit (33.3%) | |||
Operating margin (50%) | |||
Operating margin (33.3%) | |||
50% Time vested equity (RSUs and stock options) | Stock price performance | •Share-based award establishes direct alignment with our stock price performance and stockholder interests •Messrs. McVey and Concannon receive the portion of their annual long-term equity award that is time-based half in RSUs and half in stock options •Under our “Flex Share” program, the other NEOs may choose to receive this portion of their award •Vest ratably over three years |
50 | 2022 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
The chart below shows the annual equity award value granted to our NEOs in January 2021 to reward their performance in 2020 and the value of any multi-year awards included in their TDC for 2020.
2020 Equity Incentive Summary (000's) | ||||||||
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| Multi-Year |
| Granted January 2021 for 2020 |
| 2020 Equity | |||
| Attribution 1 |
| PSUs | RSUs | Options | Total |
| Incentive |
Richard M. McVey | $2,200 |
| $1,775 | $888 | $888 | $3,550 |
| $5,750 |
Christopher R. Concannon | $1,000 |
| $1,250 | $625 | $625 | $2,500 |
| $3,500 |
Christopher N. Gerosa | - |
| - | $313 | - | $313 |
| $313 |
Kevin McPherson | - |
| $700 | $700 | - | $1,400 |
| $1,400 |
Antonio L. DeLise | - |
| $600 | $600 | - | $1,200 |
| $1,200 |
Nicholas Themelis | - |
| $850 | $850 | - | $1,700 |
| $1,700 |
(1) | See “—Multi-year awards” below. |
The chart below shows the annual equity award value granted to our NEOs in January 2022 to reward their performance in 2021 and the value of any multi-year awards included in their TDC for 2021.
2021 Equity Incentive Summary (000's) | ||||||||
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| Multi-Year |
| Granted January 2022 for 2021 |
| 2021 Equity | |||
| Attribution 1 |
| PSUs | RSUs | Options | Total |
| Incentive |
Richard M. McVey | $2,200 |
| $1,625 | $813 | $813 | $3,250 |
| $5,450 |
Christopher R. Concannon | $1,000 |
| $1,275 | $638 | $638 | $2,550 |
| $3,550 |
Christopher N. Gerosa | $333 |
| $110 | $55 | $55 | $220 |
| $553 |
Kevin McPherson | - |
| $675 | $675 | - | $1,350 |
| $1,350 |
Antonio L. DeLise | - |
| $450 | $450 | - | $900 |
| $900 |
Nicholas Themelis | - |
| $650 | $650 | - | $1,300 |
| $1,300 |
(1) | See “—Multi-year awards” below. |
2022 Proxy Statement | 51 |
COMPENSATION DISCUSSION AND ANALYSIS
PSUs are intended to align our employees’ interests, including the NEOs, with those of our stockholders, with a focus on long-term financial results. PSUs are granted to the NEOs and other employees pursuant to the 2020 Equity Incentive Plan.
The Compensation Committee approved the following awards of PSUs in 2022 and 2021:
2020 and 2021 Performance Share Unit Summary | |||||||
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| Granted January 2021 for 2020 |
| Granted January 2022 for 2021 | ||||
| Grant Date | Units Granted at Target | Grant Date Fair Value 1 |
| Grant Date | Units Granted at Target | Grant Date Fair Value 1 |
Richard M. McVey | 1/15/2021 | 3,283 | $1,717,009 |
| 1/31/2022 | 4,601 | $1,584,952 |
Christopher R. Concannon | 1/15/2021 | 2,312 | $1,209,176 |
| 1/31/2022 | 3,610 | $1,243,573 |
Christopher N. Gerosa | - | - | - |
| 1/31/2022 | 311 | $107,133 |
Kevin McPherson | 1/15/2021 | 1,295 | $677,285 |
| 1/31/2022 | 1,911 | $658,301 |
Antonio L. DeLise | 1/15/2021 | 1,110 | $580,530 |
| 1/31/2022 | 1,274 | $438,868 |
Nicholas Themelis | 1/15/2021 | 1,572 | $822,156 |
| 1/31/2022 | 1,840 | $633,843 |
(1) | The grant date fair value listed above is calculated in accordance with FASB ASC Topic 718. The Company determines the number of performance stock units to grant by dividing the target grant value by the 10-trading day average up to and including the date of grant. |
The PSUs granted to the NEOs cliff-vest after three years and have three-year performance periods with one-year calculation periods. Targets for years two and three are based on prior year’s results.
For the awards granted in January 2021 for 2020 performance, the Compensation Committee established market share (50%) and operating income (50%) as the two financial metrics applicable to the awards. Market share is a relative metric that measures the composite market share of our revenues based on our performance in US high grade bonds, US high yield bonds, Eurobonds and emerging market bonds.
For the awards granted in January 2022 for 2021 performance, the Compensation Committee established US credit market share (33.3%), revenue growth excluding US credit (33.3%), and operating margin (33.3%) as the three financial metrics applicable to the awards. US credit market share is a relative metric that captures our market share performance in US high grade and US high yield bonds. Our performance with respect to Eurobonds and emerging markets bonds were shifted to revenue growth excluding US credit, along with other products, including US treasuries, municipal bonds, data and post-trade services, among our other revenue streams. The Compensation Committee believes that this change in metrics for awards granted in 2022 captures our full revenue stream opportunity in our financial performance metrics and further emphasizes long-term value creation through growth in new product areas and markets.
52 | 2022 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
The performance metrics used in 2021 and 2022 are different than the performance metric used for the Company’s annual cash incentive plan. Goals were set at the beginning of the fiscal year based on prior actual results and the Company’s budget, which is subject to review by the Board. The Compensation Committee seeks to make target goals ambitious, requiring meaningful growth over the performance period, while threshold goals are expected to be achievable. The Company intends to disclose the performance metric payout results as a percentage of target, as well as the resulting payout for the PSUs as a percentage, following the Compensation Committee’s certification of the Company’s results against such targets at the end of each applicable three-year performance period.
The performance stock unit payout opportunity ranges from 0 to 150% or from 0 to 200% of target, based on performance and subject to continued service and employment agreement, severance protection agreements and award agreement terms, each as applicable. The chart below summarizes the performance metrics for the PSUs held by our NEOs that are currently outstanding:
Performance Metrics for Outstanding PSUs | |||
Grant Date | Metrics | Metric Weightings | Performance Range |
1/15/2020 | Market Share Operating Margin | 1/2 1/2 | 0% - 150% |
1/15/2021 | Market Share Operating Margin | 1/2 1/2 | 0% - 200% |
1/31/2022 | US Credit Market Share Revenue Growth Excluding US Credit Operating Margin | 1/3 1/3 1/3 | 0% - 200% |
Restricted stock units and stock options
RSUs and stock options are intended to align our employees’ interests, including the NEOs, with those of our stockholders, and promote retention. RSUs and stock options are granted to the NEOs and other employees pursuant to the 2020 Equity Incentive Plan.
Messrs. McVey and Concannon receive the portion of the annual long-term equity award that is time-based half in RSUs and half in stock options. Under our “Flex Share” program, the other NEOs may choose to receive this portion of their award in all RSUs or a combination of RSUs and stock options, allowing the Company to deliver more individualized awards without incurring additional expense to the Company. The ratio of stock options to RSUs granted was 3.47 and 3.77 for the awards granted in January 2022 and 2021, respectively, in each case, based on the relative accounting cost of each award component on the award date.
In addition, settlement of RSU grants may be deferred at the NEO’s election, which provides an added benefit of allowing the NEO to maintain additional upside leverage in our shares of Common Stock through delayed taxation. Generally, deferring RSUs has no impact on an RSU’s vesting schedule, except that the initial vesting date for an RSU deferred in the year of grant must occur at least 13 months after the grant date in accordance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
2022 Proxy Statement | 53 |
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee approved the following awards of RSUs and stock options in 2021 and 2022 for 2020 and 2021 performance, respectively:
2020 and 2021 Restricted Stock Unit Summary | |||||||
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| Granted January 2021 for 2020 |
| Granted January 2022 for 2021 | ||||
| Grant Date | Units Granted | Grant Date Fair Value 1 |
| Grant Date | Units Granted | Grant Date Fair Value 1 |
Richard M. McVey | 1/15/2021 | 1,641 | $858,243 |
| 1/31/2022 | 2,300 | $792,304 |
Christopher R. Concannon | 1/15/2021 | 1,156 | $604,588 |
| 1/31/2022 | 1,805 | $621,786 |
Christopher N. Gerosa | - | - | - |
| 1/31/2022 | 156 | $53,739 |
Kevin McPherson | 1/15/2021 | 1,295 | $677,285 |
| 1/31/2022 | 1,911 | $658,301 |
Antonio L. DeLise | 1/15/2021 | 1,110 | $580,530 |
| 1/31/2022 | 1,274 | $438,868 |
Nicholas Themelis | 1/15/2021 | 1,572 | $822,156 |
| 1/31/2022 | 1,840 | $633,843 |
(1) | The grant date fair value listed above is calculated in accordance with FASB ASC Topic 718. The Company determines the number of restricted stock units to grant by dividing the target grant value by the 10-trading day average up to and including the date of grant. |
2020 and 2021 Stock Option Summary | |||||||||
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| Granted January 2021 for 2020 |
| Granted January 2022 for 2021 | ||||||
| Grant Date | Units Granted | Strike Price | Grant Date Fair Value 1 |
| Grant Date | Units Granted | Strike Price | Grant Date Fair Value 1 |
Richard M. McVey | 1/15/2021 | 6,187 | $523.00 | $856,932 |
| 1/31/2022 | 7,982 | $344.48 | $791,577 |
Christopher R. Concannon | 1/15/2021 | 4,358 | $523.00 | $603,606 |
| 1/31/2022 | 6,263 | $344.48 | $621,103 |
Christopher N. Gerosa | - | - | - | - |
| 1/31/2022 | 540 | $344.48 | $53,552 |
(1) | The grant date fair value listed above is calculated in accordance with FASB ASC Topic 718. The Company determines the number of stock options |
The RSUs and stock options granted to the NEOs vest ratably over three years.
The exercise price of the stock options granted to the NEOs is the closing market price of our Common Stock on the date of grant.
Multi-year awards
One-time awards are not a regular part of the Company’s annual compensation program for existing NEOs. In alignment with the feedback we received from our stockholders, we expect that the use of multi-year and other one-time equity awards will be limited to circumstances such as the hiring of new executives or the retention of key executives. In all past cases, multi-year awards granted by the Company have been attributed to three or more years of future compensation and reduce the annual compensation awarded to the NEOs for those years of attribution. Importantly, these awards act as dollar for dollar offset against future equity awards.
The multi-year awards that are currently outstanding were awarded: (a) in 2018 to Mr. McVey in relation to the extension of his employment agreement for an additional five-year term in order to secure his employment (the “CEO Multi-year Award”), (b) in 2019 to Mr. Concannon in relation to his appointment as President & Chief Operating Officer and to offset unvested, forfeited equity compensation from his previous employer and in lieu of a 2018 cash bonus payment from his previous employer (the “COO Multi-year Award”) and (c) in 2021 to Mr. Gerosa in relation to his appointment as CFO (the “CFO Multi-year Award”).
54 | 2022 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
The CEO Multi-year Award had a grant date fair value of $11 million. The Compensation Committee designed the CEO Multi-year Award such that the aggregate $11 million is spread over five years of annual compensation and reduces the amount of the annual equity award that Mr. McVey receives for each of those performance years by $2.2 million on a dollar-for-dollar basis (the first and last years are partial year attributions). The CEO Multi-year Award consists of stock options and performance shares that cliff vest in November 2023 that are contingent upon the Company meeting certain stock price thresholds and tenure requirements for Mr. McVey. The stock price performance criteria for the CEO Multi-year Award were met in 2019. Mr. McVey must remain either employed by the Company or a director of the Company throughout the vesting period, except in the event of certain involuntary termination scenarios. Mr. McVey may not dispose of the stock options or performance shares prior to their vesting to capitalize on any increase in stock price, short-term or otherwise.
The COO Multi-year Award had a grant date fair value of $5 million. It was a portion of an overall $11.75 million award. The Compensation Committee designed the COO Multi-year Award such that $5 million is spread over five years of annual compensation and reduces the amount of the annual equity award that Mr. Concannon receives for each of those performance years by $1 million on a dollar-for-dollar basis. The COO Multi-year Award consists of stock options and performance shares that cliff vest in January 2024 and are contingent upon the Company meeting certain stock price thresholds and tenure requirements for Mr. Concannon. The stock price performance criteria for the COO Multi-year Award were met in 2019.
The CFO Multi-year Award had a grant date fair value of $1 million. The Compensation Committee designed the CFO Multi-year Award such that $1 million is spread over three years of annual compensation and reduces the amount of the annual equity award that Mr. Gerosa receives for each of those performance years by $333,333 on a dollar-for-dollar basis. The CFO Multi-year Award consists of performance stock units that will cliff vest in August 2024 and restricted stock units and stock options that will vest ratably over three years. The performance criteria for the performance stock units are the same as those granted as part of the NEOs’ annual awards granted in 2021 (market share and operating margin).
Other benefits
We provide our NEOs with the same benefits offered to all other employees. The cost of these benefits constitutes a small percentage of each NEO’s total compensation. In the U.S. and the U.K., key benefits include paid vacation time, premiums paid for group life insurance and disability policies, employer contributions to the NEO’s retirement account, and the payment of all or some of the NEO’s healthcare premiums in fiscal year 2021. We review these other benefits on an annual basis and make adjustments as warranted based on competitive practices and our performance. Comparable benefits are offered to employees in other geographic locations in which we operate.
The NEOs do not receive any perquisites.
2022 Proxy Statement | 55 |
COMPENSATION DISCUSSION AND ANALYSIS
Our compensation decisions for year-end 2021 were a balance between the Company’s financial results for the year and its performance in light of its peers, individual performance, benchmarking data, and the impact and value of any long-term retention incentives previously awarded to each NEO. A summary of each NEO’s 2021 TDC and year-over year change in TDC can be found below:
2021 Total Compensation Summary (000's) | |||||||||
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| 2021 Base |
| 2021 Incentive |
| Total Compensation 2 | ||||
| Salary |
| Cash | Equity 1 | Total |
| 2021 | vs. 2020 ($) | vs. 2020 (%) |
Richard M. McVey | $500 |
| $1,800 | $5,450 | $7,250 |
| $7,750 | -$750 | -9% |
Christopher R. Concannon | $500 |
| $1,200 | $3,550 | $4,750 |
| $5,250 | -$250 | -5% |
Christopher N. Gerosa 3 | $277 |
| $370 | $553 | $923 |
| $1,200 | - | - |
Kevin McPherson | $300 |
| $1,000 | $1,350 | $2,350 |
| $2,650 | -$250 | -9% |
Antonio L. DeLise | $300 |
| $700 | $900 | $1,600 |
| $1,900 | -$500 | -21% |
Nicholas Themelis | $300 |
| $1,000 | $1,300 | $2,300 |
| $2,600 | -$600 | -19% |
(1) | Represents equity awards attributable to 2021 performance. Messrs. McVey’s, Concannon’s and Gerosa’s equity incentive column include $2,200,000, $1,000,000 and $333,333 in attributed multi-year compensation from previously granted multi-year equity awards. See “—Multi-Year Awards” above. |
(3) | Mr. Gerosa’s base salary |
Additional compensation information
Common Stock ownership guidelines
We believe that equity-based awards are an important factor in aligning the long-term financial interest of our NEOs and our stockholders. As such, we maintain stock ownership guidelines for our NEOs. Generally, under the guidelines, Mr. McVey is required to own not less than a number of shares of Common Stock equal in value to ten times his base salary using a price of $423.21 per share, which was the average of the daily closing price of our Common Stock for the twelve-month period ending March 31, 2022 (the “Calculation Price”). At his current base salary of $500,000, Mr. McVey’s required ownership level is not less than 11,815 shares. Additionally, effective April 2016, for the remainder of the time Mr. McVey holds the title of CEO and for the twelve months thereafter, he will be required to maintain beneficial ownership of at least 50% of the shares that he received as equity compensation as of the date of the guideline or thereafter. All of his vested and unvested restricted shares, vested and unvested restricted stock units, settled performance shares, and shares deferred under a non-qualified deferred compensation arrangement will be counted for the post-termination holding requirement; vested and unvested stock options are excluded from the requirement.
56 | 2022 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
Mr. Concannon is required to own not less than five times his base salary using the Calculation Price. The Company’s other NEOs are required to own not less than three times their base salary using the Calculation Price. At their current base salaries, Mr. Concannon’s required ownership is not less than 5,907 shares and the other NEOs required ownership is not less than 2,127 shares. New NEOs will be subject to the same guidelines and will be required to be in compliance within five years of becoming an NEO. Under our ownership guidelines, shares purchased and held beneficially, vested and unvested RSUs and restricted shares and settled performance shares count toward the minimum ownership requirement. Vested and unvested options and unsettled performance shares are not counted toward the ownership requirement. Compliance with the Common Stock ownership guidelines is reviewed by our Board’s Nominating and Corporate Governance Committee every year or more often at the discretion of the Board or Nominating and Corporate Governance Committee. All of our NEOs are currently in compliance with the guidelines.
NEO Stock Ownership Requirements (Multiple of Base Salary) | ||
Requirement | Current Holdings | |
Richard M. McVey | 10.0x | 598.6x |
Christopher R. Concannon | 5.0x | 32.0x |
Christopher N. Gerosa | 3.0x | 2.7x |
Kevin McPherson | 3.0x | 101.9x |
Incentive compensation clawback
The Board is dedicated to maintaining and enhancing a culture focused on integrity and accountability which discourages conduct detrimental to the Company’s sustainable growth. Each of our incentive plans therefore contain a clawback provision that allows the Company to recoup all or part of the year-end incentive compensation paid to NEOs in the event of a misstatement of financial results (whether through mistake or wrongdoing) discovered within 12 months of December 31st of the respective performance year. The clawback provisions apply to all cash and equity incentive awards for our NEOs. In addition, Messrs. McVey’s and Concannon’s employment agreements provide the Company with the right to recapture all compensation paid, whether in the form of cash, Common Stock or any other form of property, to the extent required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the related rules of the SEC (the “Dodd-Frank Act”) and the Remuneration Code published by the U.K. Financial Conduct Authority.
Prohibition of employee and Director hedging and pledging
The Company’s insider trading policy prohibits directors, employees (including officers), consultants, representatives or independent contractors or other persons in a special relationship with the Company from engaging in any hedging transaction with respect to Company securities or transactions of a speculative nature at any time. Hedging includes the purchase of financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) and other transactions designed to hedge or offset, or that have the effect of hedging or offsetting, any decrease in the market value of Company securities or limit the ability to profit from an increase in the value of Company securities. All such persons are prohibited from short-selling Company securities or engaging in transactions involving Company-based derivative securities (which include options, warrants, stock appreciation rights or similar rights whose value is derived from the value of Company securities). This prohibition includes, but is not limited to, trading in Company-based put and call option contracts, transacting in straddles, and similar transactions. These individuals are also prohibited from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan.
2022 Proxy Statement | 57 |
COMPENSATION DISCUSSION AND ANALYSIS
Severance and change in control arrangements
In hiring and retaining executive level talent, the Compensation Committee believes that providing the executive with a level of security in the event of an involuntary termination of employment or in the event of a change in control is an important and competitive part of the executive’s compensation package. We entered into employment agreements with Messrs. McVey and Concannon that provide for severance payments and benefits in the event of the termination of their employment under certain circumstances. The other NEOs are entitled to severance payments and benefits in the event of termination of their employment under certain circumstances pursuant to the terms of severance protection agreements. The severance protection agreements also provide for the accelerated vesting of some or all outstanding equity awards in the event of termination of their employment under certain circumstances or upon a change in control of the Company.
While the agreements with our NEOs are designed to protect them in the event of a change in control, they do not provide for “single-trigger” protection, nor does the Company provide any 280G protection or “gross-up” for excise taxes that may be imposed under Code Section 4999. The agreements do provide that if any payments or benefits paid or provided to the executive would be subject to, or result in, the imposition of the excise tax imposed by Code Section 4999, then the amount of such payments will be automatically reduced to one dollar less than the amount that subjects such payment to the excise tax, unless they would, on a net after-tax basis, receive less compensation than if the payment were not so reduced.
See “Executive Compensation — Potential termination or change in control payments and benefits” for additional information regarding these arrangements, payments and benefits.
58 | 2022 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
As a general matter, the Compensation Committee reviews and considers the tax and accounting implications of using the various forms of compensation employed by the Company.
When determining the size of grants to our NEOs and other employees under the Company’s 2020 Equity Incentive Plan, the Compensation Committee examines the accounting cost associated with the grants. Under FASB ASC Topic 718, grants of stock options, restricted stock, RSUs, performance shares and other share-based payments result in an accounting charge for the Company. The accounting charge is equal to the fair value of the instruments being issued. For restricted stock, RSUs and performance shares, the cost is equal to the fair value of the Common Stock on the date of grant times the number of shares or units granted, with adjustments made proportionally for the number of performance shares and performance stock units expected to vest at the end of each accounting period until final certification of the award. For stock options, the cost is equal to the fair value determined using an option pricing model. This expense is recognized over the requisite service or performance period.
Code Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”) generally prohibited any publicly-held corporation from taking a Federal income tax deduction for compensation paid in excess of $1 million in any taxable year to certain executive officers and certain other individuals. Exceptions to this rule had historically included qualified performance-based compensation. However, this performance-based exception from the deduction limit has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our U.S. NEOs in excess of $1 million is not deductible unless it qualifies for the limited transition relief applicable to certain arrangements in place as of November 2, 2017. While the Compensation Committee considers tax deductibility as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions, as noted above, and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not deductible by us for tax purposes. There can be no assurance that any compensation will in fact be deductible.
2022 Proxy Statement | 59 |
REPORT OF THE COMPENSATION AND TALENT COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation and Talent Committee (the “Compensation Committee”) has reviewed and discussed with management the Compensation Discussion and Analysis to be included in this Proxy Statement. Based on the reviews and discussions referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Submitted by the Compensation and Talent Committee of the Board of Directors: |
Richard L. Prager — Chair |
Nancy Altobello |
Kourtney Gibson |
60 | 2022 Proxy Statement |
The following table sets forth all compensation received during fiscal years 2019, 2020 and 2021 by (i) Richard M. McVey, our CEO, (ii) Christopher M. Concannon, our President & COO, (iii) Christopher N. Gerosa, our CFO, (iv) Kevin McPherson, our Global Head of Sales, (v) Antonio L. DeLise, our former Global Head of Corporate Development and former Chief Financial Officer, and (vi) Nicholas Themelis, our former Chief Information Officer. These executives are referred to as our “named executive officers” or “NEOs” elsewhere in this Proxy Statement.
2021 Summary Compensation Table |
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Name and Principal Position |
| Year |
| Salary 1 |
|
| Bonus 2 |
|
| Stock Awards 3,4 |
|
| Option Awards 3,4 |
|
| Non- Equity Incentive Plan Compensation 5 |
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| All Other Compensation 6 |
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| Total |
| |||||||
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|
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
| |||||||
Richard M. McVey |
| 2021 |
|
| 500,000 |
|
|
| — |
|
|
| 2,575,252 |
|
|
| 856,932 |
|
|
| 1,800,000 |
|
|
| 10,000 |
|
|
| 5,742,184 |
|
Chief Executive Officer |
| 2020 |
|
| 500,000 |
|
|
| — |
|
|
| 2,532,567 |
|
|
| 854,119 |
|
|
| 2,250,000 |
|
|
| 7,000 |
|
|
| 6,143,686 |
|
|
| 2019 |
|
| 500,000 |
|
|
| — |
|
|
| 2,715,708 |
|
|
| — |
|
|
| — |
|
|
| 7,000 |
|
|
| 3,222,708 |
|
Christopher R. Concannon |
| 2021 |
|
| 500,000 |
|
|
| — |
|
|
| 1,813,764 |
|
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| 603,606 |
|
|
| 1,200,000 |
|
|
| 10,000 |
|
|
| 4,127,370 |
|
President & COO |
| 2020 |
|
| 500,000 |
|
|
| — |
|
|
| 2,209,599 |
|
|
| — |
|
|
| 1,500,000 |
|
|
| 7,000 |
|
|
| 4,216,599 |
|
|
| 2019 |
|
| 473,717 |
|
|
| 1,500,000 |
|
|
| 8,986,309 |
|
|
| 2,875,003 |
|
|
| — |
|
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| 7,000 |
|
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| 13,842,029 |
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Christopher N. Gerosa |
| 2021 |
|
| 276,667 |
|
|
| — |
|
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| 1,066,021 |
|
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| 250,098 |
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| 370,000 |
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| 10,000 |
|
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| 1,972,786 |
|
CFO |
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|
|
|
|
|
|
|
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|
|
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|
Kevin McPherson |
| 2021 |
|
| 300,000 |
|
|
| — |
|
|
| 1,354,570 |
|
|
|
|
|
|
| 1,000,000 |
|
|
| 10,000 |
|
|
| 2,664,570 |
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Global Head of Sales |
| 2020 |
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| 300,000 |
|
|
| — |
|
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| 589,032 |
|
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| — |
|
|
| 1,200,000 |
|
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| 7,000 |
|
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| 2,096,032 |
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|
| 2019 |
|
| 300,000 |
|
|
| 1,100,000 |
|
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| 346,942 |
|
|
| — |
|
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| — |
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| 7,000 |
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| 1,753,942 |
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Antonio L. DeLise |
| 2021 |
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| 300,000 |
|
|
| — |
|
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| 1,161,060 |
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| 700,000 |
|
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| 10,000 |
|
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| 2,171,060 |
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Former Head of Corporate Development and Former Chief Financial Officer |
| 2020 |
|
| 300,000 |
|
|
| — |
|
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| 540,189 |
|
|
| — |
|
|
| 900,000 |
|
|
| 7,000 |
|
|
| 1,747,189 |
|
|
| 2019 |
|
| 300,000 |
|
|
| 875,000 |
|
|
| 386,473 |
|
|
| — |
|
|
| — |
|
|
| 7,000 |
|
|
| 1,568,473 |
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Nicholas Themelis |
| 2021 |
|
| 300,000 |
|
|
| — |
|
|
| 1,644,312 |
|
|
|
|
|
|
| 1,000,000 |
|
|
| 10,000 |
|
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| 2,954,312 |
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Former Chief Information Officer |
| 2020 |
|
| 300,000 |
|
|
| — |
|
|
| 687,447 |
|
|
| — |
|
|
| 1,200,000 |
|
|
| 7,000 |
|
|
| 2,194,447 |
|
|
| 2019 |
|
| 300,000 |
|
|
| 1,200,000 |
|
|
| 411,128 |
|
|
| — |
|
|
| — |
|
|
| 7,000 |
|
|
| 1,918,128 |
|
(1) | Mr. Gerosa’s 2021 salary reflects an August 1, 2021 base salary increase related to his promotion to CFO. Mr. Concannon’s 2019 salary represented a partial year of service. |
(2) | As determined by the Compensation Committee, Mr. McVey received additional equity in lieu of a cash incentive for performance year 2019, which is reflected in the Stock Awards column. |
(3) | The amounts represent the aggregate grant date fair value of stock and option awards granted by the Company in 2019, 2020 and 2021, computed in accordance with FASB ASC Topic 718. For further information on how we account for stock-based compensation and certain assumptions made, see Note 11 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 23, 2022. These amounts reflect the Company’s accounting expense for these awards and do not correspond to the actual |
For 2021, the grant date fair value of the performance stock units is $1,717,009, $1,209,176, $677,285, $580,530 and $822,156 for Messrs. McVey, Concannon, McPherson, DeLise and Themelis, respectively. The grant date fair value of the performance shares is reported based on achievement of 100% of the target performance goals, which represents the probable outcome of the performance goals as of the grant date. If the Company achieves the maximum performance goals, as measured at the end of the three-year performance period ending December 2023, then the fair value of the performance stock units granted in 2021 would be $3,434,018, $2,418,352, $1,354,570, $1,161,060 and $1,644,312 for Messrs. McVey, Concannon, McPherson, DeLise and Themelis, respectively. See “2021 compensation detail – Annual long-term equity incentives – Performance stock units” in the CD&A for additional detail.
2022 Proxy Statement | 61 |
EXECUTIVE COMPENSATION
(5) | These amounts represent annual cash incentive compensation earned under the Employee Cash Incentive Plan. See “2021 compensation detail – Annual cash incentive” in the CD&A for additional detail. |
(6) | These amounts represent employer matching contributions |
|
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EXECUTIVE COMPENSATION
The following table summarizes the grants of performance shares, performance awards, restricted stock units and stock options we made to the named executive officers in 2020,Company’s 401(k) defined contribution plan for each NEO for each year reported.
The following table summarizes the grants of performance stock units, restricted stock units and stock options we made to the NEOs in 2021, as well as potential payouts pursuant to certain performance-based compensation arrangements. There can be no assurance that the grant date fair value of stock awards will ever be realized.
2021 Grants of Plan-Based Awards Table |
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| Grant |
| Approval |
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
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| Estimated Future Payouts Under Equity Incentive Plan Awards |
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| All Other Stock Awards: Number of Shares of Stock or |
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| All Other Option Awards: Number of Securities Underlying |
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| Exercise or Base Price of Option |
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| Grant Date Fair Value of Stock and Option |
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Name/Award Type |
| Date |
| Date |
| Threshold |
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| Target |
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| Maximum |
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| Threshold |
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| Target |
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| Maximum |
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| Units |
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| Options |
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| Awards |
|
| Awards1 |
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| ($) |
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| ($) |
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| ($) |
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| (#) |
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| (#) |
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| (#) |
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| (#) |
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| (#) |
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| ($ / Sh) |
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| ($) |
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Richard M. McVey |
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Annual Cash Incentive2 |
|
|
|
|
|
| — |
|
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| 2,250,000 |
|
|
| — |
|
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|
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Restricted Stock Units3 |
| 1/15/2021 |
| 12/11/2020 |
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|
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| 1,641 |
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| 858,243 |
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Performance Stock Units4 |
| 1/15/2021 |
| 12/11/2020 |
|
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| 1,642 |
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| 3,283 |
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| 6,566 |
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| 1,717,009 |
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Stock Options6 |
| 1/15/2021 |
| 12/11/2020 |
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| 6,187 |
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| 523.00 |
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| 856,932 |
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Christopher R. Concannon |
|
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Annual Cash Incentive2 |
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| — |
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| 1,500,000 |
|
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| — |
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Restricted Stock Units3 |
| 1/15/2021 |
| 12/11/2020 |
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| 1,156 |
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| 604,588 |
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Performance Stock Units4 |
| 1/15/2021 |
| 12/11/2020 |
|
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| 1,156 |
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| 2,312 |
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| 4,624 |
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| 1,209,176 |
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Stock Options6 |
| 1/15/2021 |
| 12/11/2020 |
|
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| 4,358 |
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| 523.00 |
|
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| 603,606 |
|
Christopher N. Gerosa |
|
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Annual Cash Incentive2 |
|
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| — |
|
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| 400,000 |
|
|
| — |
|
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|
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Restricted Stock Units3 |
| 1/15/2021 |
| 1/8/2021 |
|
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|
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|
|
|
|
|
|
|
|
|
|
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|
|
| 579 |
|
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|
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|
|
|
|
|
| 302,817 |
|
Restricted Stock Units3 |
| 8/1/2021 |
| 7/13/2021 |
|
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| 535 |
|
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| 254,216 |
|
Performance Stock Units5 |
| 8/1/2021 |
| 7/13/2021 |
|
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| 535 |
|
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| 1,070 |
|
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| 2,140 |
|
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|
| 508,432 |
|
Stock Options6 |
| 8/1/2021 |
| 7/13/2021 |
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| 1,915 |
|
|
| 475.17 |
|
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| 250,098 |
|
Kevin McPherson |
|
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Annual Cash Incentive2 |
|
|
|
|
|
| — |
|
|
| 1,200,000 |
|
|
| — |
|
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Restricted Stock Units3 |
| 1/15/2021 |
| 12/11/2020 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,295 |
|
|
|
|
|
|
|
|
|
|
| 677,285 |
|
Performance Stock Units4 |
| 1/15/2021 |
| 12/11/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 648 |
|
|
| 1,295 |
|
|
| 2,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 677,285 |
|
Antonio L. DeLise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive2 |
|
|
|
|
|
| — |
|
|
| 725,000 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units3 |
| 1/15/2021 |
| 12/11/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,110 |
|
|
|
|
|
|
|
|
|
|
| 580,530 |
|
Performance Stock Units |
| 1/15/2021 |
| 12/11/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 555 |
|
|
| 1,110 |
|
|
| 2,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 580,530 |
|
Nicholas Themelis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive2 |
|
|
|
|
|
| — |
|
|
| 1,200,000 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units3 |
| 1/15/2021 |
| 12/11/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,572 |
|
|
|
|
|
|
|
|
|
|
| 822,156 |
|
Performance Stock Units4 |
| 1/15/2021 |
| 12/11/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 786 |
|
|
| 1,572 |
|
|
| 3,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 822,156 |
|
(1) | The value of a restricted stock unit and stock option is based on the fair value of such award, computed in accordance with FASB ASC Topic 718. The value of a performance stock unit is based on the grant date fair value of |
62 | 2022 Proxy Statement |
EXECUTIVE COMPENSATION
2020 Grants of Plan-Based Awards Table |
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| Estimated Future Payouts Under Equity Incentive Plan Awards |
|
| All Other Stock Awards: Number of Shares of Stock or |
|
| All Other Option Awards: Number of Securities Underlying |
|
| Exercise or Base Price of Option |
|
| Grant Date Fair Value of Stock and Option |
| |||||||||||||
Name |
| Approval Date |
| Grant Date |
|
| Threshold (#) |
|
| Target (#) |
|
| Maximum (#) |
|
| Units (#) |
|
| Options (#) |
|
| Awards ($ / Sh) |
|
| Awards ($) (1) |
| |||||||
Richard M. McVey |
| 1/14/2020 |
| 1/15/2020 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,324 |
|
|
| — |
|
|
| — |
|
|
| 855,464 |
|
|
| 1/14/2020 |
| 1/15/2020 | (2) |
|
| 2,324 |
|
|
| 4,647 |
|
|
| 6,971 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,677,102 |
|
|
| 1/14/2020 |
| 1/15/2020 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,342 |
|
|
| 368 |
|
|
| 854,119 |
|
Christopher R. Concannon |
| 1/14/2020 |
| 1/15/2020 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,031 |
|
|
| — |
|
|
| — |
|
|
| 1,115,711 |
|
|
| 1/14/2020 |
| 1/15/2020 | (2) |
|
| 1,516 |
|
|
| 3,031 |
|
|
| 4,547 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,093,888 |
|
Antonio L. DeLise |
| 1/14/2020 |
| 1/15/2020 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 741 |
|
|
| — |
|
|
| — |
|
|
| 272,762 |
|
|
| 1/14/2020 |
| 1/15/2020 | (2) |
|
| 371 |
|
|
| 741 |
|
|
| 1,112 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 267,427 |
|
Kevin McPherson |
| 1/14/2020 |
| 1/15/2020 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 808 |
|
|
| — |
|
|
| — |
|
|
| 297,425 |
|
|
| 1/14/2020 |
| 1/15/2020 | (2) |
|
| 404 |
|
|
| 808 |
|
|
| 1,212 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 291,607 |
|
Nicholas Themelis |
| 1/14/2020 |
| 1/15/2020 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 943 |
|
|
| — |
|
|
| — |
|
|
| 347,118 |
|
|
| 1/14/2020 |
| 1/15/2020 | (2) |
|
| 472 |
|
|
| 943 |
|
|
| 1,415 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 340,329 |
|
|
|
|
|
|
|
a
EXECUTIVE COMPENSATION
Outstanding equity awards at fiscal year-end
The following table summarizes unexercised stock options, shares of restricted stock and restricted stock units that had not vested, and related information for each of our named executive officers, as of December 31, 2020. The market value of restricted stock awards and restricted stock units is based on the closing price of the Company’s Common Stock on December 31, 2020 of $570.56.
Outstanding Equity Awards - Year End 2020 |
| |||||||||||||||||||||||||||||
| Option Awards |
|
| Stock Awards |
| |||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
|
| Number of Securities Underlying Unexercised Options (#) Unexercisable(1) |
|
| Option Exercise Price ($) |
|
| Option Expiration Date |
|
| Number of Shares or Units of Stock That Have Not Vested (#)(2) |
|
| Market Value of Shares or Units of Stock That Have Not Vested ($) |
|
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
|
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| |||||||
Richard M. McVey |
| 27,020 |
|
|
|
|
|
|
| 101.77 |
|
| 1/15/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 24,515 |
|
|
|
|
|
|
| 156.85 |
|
| 1/15/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,744 |
|
|
|
|
|
|
| 203.72 |
|
| 1/15/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,293 |
|
|
| 203.72 |
|
| 1/15/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 69,113 |
|
|
| 257.78 |
|
| 5/8/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 79,411 |
|
|
| 278.40 |
|
| 5/8/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,342 |
|
|
| 368.10 |
|
| 1/15/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 2,946 |
|
|
| 1,680,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 1,458 |
|
|
| 831,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5) |
| 37,742 |
|
|
| 21,534,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4) |
| 7,142 |
|
|
| 4,074,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4) |
| 5,120 |
|
|
| 2,921,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (6) |
| 2,324 |
|
|
| 1,325,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7) |
|
|
|
|
|
|
|
|
| 4,647 |
|
|
| 2,651,392 |
|
Christopher R. Concannon |
|
|
|
|
| 35,679 |
|
|
| 272.88 |
|
| 7/22/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 41,189 |
|
|
| 294.71 |
|
| 7/22/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (8) |
| 18,914 |
|
|
| 10,791,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (9) |
| 15,398 |
|
|
| 8,785,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10) |
| 4,666 |
|
|
| 2,662,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (6) |
| 3,031 |
|
|
| 1,729,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7) |
|
|
|
|
|
|
|
|
| 3,031 |
|
|
| 1,729,367 |
|
Antonio L. DeLise |
| 1,547 |
|
|
|
|
|
|
| 156.85 |
|
| 1/15/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,060 |
|
|
| 103.30 |
|
| 1/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 3,692 |
|
|
| 2,106,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 2,600 |
|
|
| 1,483,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 357 |
|
|
| 203,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 291 |
|
|
| 166,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4) |
| 850 |
|
|
| 484,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4) |
| 761 |
|
|
| 434,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (6) |
| 741 |
|
|
| 422,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7) |
|
|
|
|
|
|
|
|
| 741 |
|
|
| 422,785 |
|
Kevin McPherson |
| 11,194 |
|
|
|
|
|
|
| 103.30 |
|
| 1/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,194 |
|
|
| 103.30 |
|
| 1/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 5,128 |
|
|
| 2,925,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 3,611 |
|
|
| 2,060,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 368 |
|
|
| 209,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 300 |
|
|
| 171,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4) |
| 763 |
|
|
| 435,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4) |
| 684 |
|
|
| 390,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (6) |
| 808 |
|
|
| 461,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7) |
|
|
|
|
|
|
|
|
| 808 |
|
|
| 461,012 |
|
Nicholas Themelis |
|
|
|
|
| 12,465 |
|
|
| 103.30 |
|
| 1/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 6,153 |
|
|
| 3,510,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 4,333 |
|
|
| 2,472,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 461 |
|
|
| 263,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3) |
| 465 |
|
|
| 265,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4) |
| 926 |
|
|
| 528,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4) |
| 830 |
|
|
| 473,565 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (6) |
| 943 |
|
|
| 538,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7) |
|
|
|
|
|
|
|
|
| 943 |
|
|
| 538,038 |
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EXECUTIVE COMPENSATION
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Option exercises and stock vested
The following table summarizes each exercise of stock options, each vesting of restricted stock and related information for each of our named executive officers on an aggregated basis during 2020.
2020 Option Exercises and Stock Vesting |
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| Option Awards |
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| Stock Awards |
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Name |
| Number of Shares Acquired on Exercise (#) |
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| Value Realized on Exercise ($)(1) |
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| Number of Shares Acquired on Vesting (#) |
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| Value Realized on Vesting ($)(2) |
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Richard M. McVey |
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| 143,361 |
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| 62,612,979 |
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| 80,069 |
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| 29,396,366 |
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Christopher R. Concannon |
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| — |
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| — |
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| 7,931 |
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| 2,937,642 |
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Antonio L. DeLise |
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| 9,334 |
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| 3,098,650 |
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| 9,821 |
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| 3,461,693 |
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Kevin McPherson |
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| — |
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| — |
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| 10,109 |
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| 3,580,406 |
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Nicholas Themelis |
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| 17,262 |
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| 7,587,119 |
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| 12,611 |
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| 4,466,564 |
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a
EXECUTIVE COMPENSATION
Nonqualified deferred compensation
All U.S.-based NEOs were eligible to elect to defer the settlement of the RSUs awarded in whole or in part (see Compensation Discussion and Analysis — 2020 Compensation — Long-term incentives — Flex Share Program above). The following table sets forth information with respect to vested RSUs held by Messrs. McVey and DeLise as of December 31, 2020, for which they have elected to defer the delivery of the underlying shares until the earlier of (i) separation of service (within the meaning of Code Section 409A), subject to the six-month delay required under Code Section 409A, (ii) a change of control of the Company and (iii) the calendar year in which the applicable anniversary following vesting occurs:
Deferral Elections |
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Name |
| Award / Deferral Date |
| Amount Deferred (#) |
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| Re-deferral Date |
| Deferral Period (Years) |
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Richard M. McVey |
| 1/14/2011 |
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| 67,961 |
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| 12/01/2015 |
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| 10 |
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| 1/19/2011 |
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| 119,565 |
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| 12/01/2015 |
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| 10 |
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| 1/15/2013 |
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| 44,882 |
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| N/A (1) |
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| 7 |
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| 1/15/2014 |
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| 26,087 |
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| 11/18/2019 |
| separation of service |
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| 1/15/2015 |
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| 25,084 |
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| N/A (1) |
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| 5 |
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| 1/15/2016 |
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| 9,033 |
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| 5 |
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| 1/15/2017 |
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| 6,222 |
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| separation of service |
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| 1/15/2018 |
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| 4,418 |
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| 3 |
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| 1/15/2019 |
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| 7,757 |
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| separation of service |
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| 1/15/2020 |
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| 2,324 |
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| separation of service |
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Antonio L. DeLise |
| 1/13/2012 |
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| 16,260 |
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| 10/18/2016 |
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| 10 |
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| 1/15/2014 |
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| 1,999 |
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| N/A (2) |
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| 5 |
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| 1/15/2015 |
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| 1,824 |
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| N/A (2) |
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| 4 |
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The table below shows (i) the contributions made by each NEO during the fiscal year ended December 31, 2020, (ii) aggregate earnings2021.
(2) | Amounts reflect the threshold, target, and maximum annual cash incentive compensation amounts that could have been earned during 2021 our Employee Cash Incentive Plan. Messrs. DeLise’s and Gerosa’s target cash incentives represent blended targets based on |
(3)
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(5) | Reflects the threshold, target and maximum number of performance stock units, that were awarded under the
EXECUTIVE COMPENSATION Outstanding equity awards at fiscal year-end The following table summarizes unexercised stock options, shares of restricted stock and restricted stock units that had not vested, and related information for each of our NEOs, as of December 31, 2021. The market value of restricted stock awards and restricted stock units is based on the closing price of the Company’s Common Stock on December 31, 2021 of $411.27.
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