UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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LPL Financial Holdings Inc. |
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2019 Annual Meeting of Stockholders Notice and Proxy Statement
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Member FINRA/SIPC
March 29, 2019
Dear Fellow Stockholders:
It is my pleasure to invite you to attend the 2019 Annual Meeting of Stockholders of LPL Financial Holdings Inc. The meeting will be held on Wednesday, May 8, 2019, at 12:00 p.m., local time, at our offices located at 1055 LPL Way, Fort Mill, South Carolina 29715. Holders of record of our common stock as of March 11, 2019 are entitled to notice of and to vote at the 2019 Annual Meeting.
The Notice of Annual Meeting of Stockholders and the proxy statement that follow describe the business to be conducted at the meeting.
We are pleased to take advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders over the Internet. We believe this approach will allow us to provide you with the information you need while expediting your receipt of these materials, lowering our costs of delivery, and reducing the environmental impact of our annual meeting. If you would like us to send you printed copies of our proxy statement and accompanying materials, we will be happy to do so upon your request at no charge. For more information, please refer to the Notice of Internet Availability of Proxy Materials that we mailed to holders of record on or about March 29, 2019.
YOUR VOTE IS VERY IMPORTANT. PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
You are welcome to attend the annual meeting. However, even if you plan to attend, please vote your shares promptly to ensure they are represented at the meeting. You may submit your proxy through the Internet or by telephone, as described in the following materials, or if you request printed copies of these materials, by completing and signing the proxy card and returning it in the envelope provided. If you decide to attend the meeting and wish to change your proxy, you may do so automatically by voting in person at the meeting.
We ask you to RSVP if you intend to attend the annual meeting. Please refer to page 1 of the accompanying proxy statement for further information concerning attendance at the annual meeting.
On behalf of the Board of Directors, I thank you for your continued support of LPL Financial Holdings Inc.
Sincerely, |
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James S. Putnam Chair |
Notice of Annual Meeting of Stockholders
Time and Date | 12:00 p.m., local time, on Wednesday, May 8, 2019 | |
Location | LPL Financial Holdings Inc. 1055 LPL Way Fort Mill, South Carolina 29715 | |
Items of Business | (1) Elect the nine nominees named in the proxy statement to the Board of Directors of LPL Financial Holdings Inc. (the Company);
(2) Ratify the appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2019;
(3) Hold an advisory vote on named executive officer compensation; and
(4) Consider and act upon any other business properly coming before the 2019 annual meeting of stockholders (the Annual Meeting) and at any adjournment or postponement thereof. | |
Record Date | Stockholders of record as of 5:00 p.m. Eastern Time on March 11, 2019 (the Record Date) will be entitled to vote at the Annual Meeting and any postponements or adjournments thereof. |
Information relating to the matters to be considered and voted on at the Annual Meeting is set forth in the proxy statement accompanying this Notice.
Cameras and electronic recording devices are not permitted at the Annual Meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SUBMIT YOUR PROXY BY FOLLOWING THE INSTRUCTIONS SET FORTH IN THE FOLLOWING MATERIALS. YOU MAY VOTE YOUR SHARES AND SUBMIT A PROXY THROUGH THE INTERNET OR BY TELEPHONE AS DESCRIBED HEREIN OR, IF YOU REQUESTED PRINTED COPIES OF THESE MATERIALS, BY SIGNING AND RETURNING A PROXY CARD.
By Order of the Board of Directors, |
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Gregory M. Woods Secretary |
Boston, Massachusetts
March 29, 2019
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 8, 2019: THE PROXY STATEMENT, THE PROXY CARD, AND LPL FINANCIAL HOLDINGS INC.S 2018 ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT WWW.LPL.COM. ADDITIONALLY, IN ACCORDANCE WITH SECURITIES AND EXCHANGE COMMISSION RULES, YOU MAY ACCESS THESE MATERIALS ON THE WEBSITE INDICATED IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS.
Proxy Statement Summary
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
2019 Annual Meeting of Stockholders
Time and Date | 12:00 p.m., local time, on Wednesday, May 8, 2019 | |
Location | LPL Financial Holdings Inc. 1055 LPL Way Fort Mill, South Carolina 29715 | |
Record Date | 5:00 p.m. Eastern Time on March 11, 2019 | |
Voting | Stockholders as of the Record Date are entitled to one vote per share on each matter to be voted upon at the Annual Meeting. | |
Entry | We invite all stockholders to attend the Annual Meeting. If you attend the Annual Meeting, you will be required to present valid picture identification, such as a drivers license or passport. If your shares are held in street name, you will also need to bring a recent brokerage account statement or letter from your bank, broker or other holder reflecting stock ownership as of the Record Date in order to be admitted to the Annual Meeting. |
Voting Proposals
Proposal | Board Recommendation |
Page Reference | ||
Proposal 1: Election of Directors |
FOR all nominees | 6 | ||
FOR | 64 | |||
Proposal 3: Advisory Vote on Named Executive Officer Compensation |
FOR | 67 | ||
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Table of Contents |
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General Information |
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Items of Business to be Voted upon at Annual Meeting |
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◾ To elect each of the nine nominees named in this proxy statement to the Board of Directors of the Company (the Board of Directors or the Board) for a term to end at our annual meeting of stockholders in 2020; |
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◾ To ratify the appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as our independent registered public accounting firm for the fiscal year ending December 31, 2019; |
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◾ To hold an advisory vote on named executive officer compensation; and |
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◾ To consider and act upon any other business properly coming before the Annual Meeting and at any adjournment or postponement thereof. |
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Manner of Voting
If you are a record holder of our Common Stock as of the Record Date, you may vote in one of the following ways:
2 | 2019 Proxy Statement |
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General Information |
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Voting Requirements
Proposal OneElection of Directors |
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Our bylaws provide that a nominee for director will be elected if the number of votes properly cast for such nominees election exceeds the number of votes properly cast against such nominees election; however, if the number of persons properly nominated for election to the Board of Directors exceeds the number of directors to be elected, the directors will be elected by the plurality of the votes properly cast. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the election of directors.
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Proposal TwoRatification of Appointment of Deloitte & Touche LLP |
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The proposal to ratify the appointment of Deloitte & Touche LLP will be determined by a majority of the votes cast on the matter affirmatively or negatively in person or by proxy at the Annual Meeting. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.
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Proposal ThreeAdvisory Vote on Named Executive Officer Compensation |
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Because the proposal to approve, on an advisory basis, the compensation awarded to named executive officers for the fiscal year ended December 31, 2018 is a non-binding, advisory vote, there is no required vote that would constitute approval. Although the vote is advisory and non-binding in nature, the compensation and human resources committee (the Compensation Committee) will consider the outcome of the vote when considering future named executive officer compensation arrangements. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.
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2019 Proxy Statement |
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General Information |
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4 | 2019 Proxy Statement |
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General Information About Corporate Governance and the Board of Directors |
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General Information About Corporate Governance and the Board of Directors
We believe that good corporate governance is important to ensure that we are managed for the long-term benefit of our stockholders. In support of that philosophy, we have adopted many leading corporate governance practices, including those summarized below and elsewhere in this proxy statement.
BOARD PRACTICES | ||||||
Independence | A majority of our directors must be independent. Currently, all of our directors other than our chief executive officer are independent, and all of our committees are composed exclusively of independent directors. |
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Non-executive Chair | We currently separate the offices of chair of the Board and chief executive officer of the Company. The current chair of our Board, James S. Putnam, is an independent director. |
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Director Diversity | Our goal is a balanced and diverse Board, with members who bring a diversity of skills, expertise, experiences, perspectives, tenures and personal characteristics, including with respect to age, race, gender and ethnicity. |
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Board Refreshment | Our Boards composition represents a balanced approach to director tenure, allowing the Board to benefit from the experience of longer-serving directors as well as fresh perspectives from newer directors. The nominating and governance committee of the Board (the Nominating and Governance Committee) has developed a skills matrix to inform director searches and succession planning. |
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Director Overboarding | Any director who is not serving as chief executive officer of a public company is expected to serve on no more than four public company boards (including our Board), and any director serving as chief executive officer of a public company is expected to serve on no more than three public company boards (including the board of his or her own company). |
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Committee Membership | The Board appoints members of its committees on an annual basis, with the Nominating and Governance Committee reviewing and recommending committee membership based in part on the need to ensure a succession plan for each committee chair. |
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Board Self-evaluations | The Board conducts an annual evaluation of its performance, operations, size and composition, with the Nominating and Governance Committee overseeing the evaluation process, which also encompasses the Boards committees. |
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Strategy Oversight | The Board holds an annual two-day session focused on the Companys long-term strategy, which informs the Boards oversight and work plan for the following year. |
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Executive Succession Planning | The Compensation Committee conducts regular reviews of executive talent, development and succession planning, and our Board reviews the succession plans for the chief executive officer position annually. |
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STOCKHOLDER RIGHTS | ||||||
Annual Election of Directors | All directors are elected annually, which reinforces our Boards accountability to our stockholders. |
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Majority Voting Standard for Director Elections | Our bylaws mandate that directors be elected under a majority voting standard in uncontested elections. Any director who does not receive more votes for his or her election than votes against must tender his or her resignation and, if our Board accepts the resignation, step down from our Board. |
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Single Voting Class | LPL Financial Holdings Inc.s common stock is the only class of voting shares outstanding. |
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COMPENSATION PRACTICES | ||||||
Follow Leading Practices | See Compensation Discussion and AnalysisCompensation Governance. |
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2019 Proxy Statement |
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Proposal 1: Election of Directors |
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2019 Proxy Statement |
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Proposal 1: Election of Directors |
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Director Qualifications and Experience
The current members of the Board possess experience, skills and qualifications that are complementary and, together, cover the spectrum of areas that impact the Companys current and evolving business circumstances. The Board believes that the combination of backgrounds, skills and experiences has resulted in a Board that is well-equipped to exercise oversight responsibilities on behalf of the Companys stakeholders.
The table below provides a summary of the skills and qualifications of each director nominee:
Arnold | Eberhart | Glavin Jr. | Mnookin | Mulcahy | Putnam | Riepe | Schifter | Thomas | ||||||||||
CEO Experience |
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Digital Technology Experience |
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Mergers & Acquisitions |
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Corporate Governance |
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Financial Literacy |
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Law/Regulatory |
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Sales & Marketing |
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Human Resources |
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Risk Management |
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Entrepreneurial Experience |
8 | 2019 Proxy Statement |
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Proposal 1: Election of Directors |
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Board of Director Nominees
The name, age and a description of the business experience, principal occupation, and past employment and directorships of each of the nominees during at least the last five years are set forth below. In addition, we have summarized the particular experience, qualifications, attributes and skills that led the Board of Directors, including our Nominating and Governance Committee, to determine that each nominee should serve as a director.
Dan H. Arnold |
BACKGROUND
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Age 54
Director Since 2017 |
Mr. Arnold has served as our chief executive officer and a director since January 2017. Mr. Arnold has served as our president since March 2015, with responsibility for our primary client-facing functions and long-term strategy for growth. Mr. Arnold served as our chief financial officer from June 2012 to March 2015 and was responsible for formulating financial policy, leading our capital management efforts, and ensuring the effectiveness of the organizations financial functions. Prior to 2012, he was managing director, head of strategy, with responsibility for long-term strategic planning for the firm, product and platform development, and strategic investments, including acquisitions. He has also served as divisional president of our Institution Services. Mr. Arnold joined the Company in January 2007 following our acquisition of UVEST Financial Services Group, Inc. (UVEST), a broker-dealer and investment adviser that provided services to banks, credit unions, and other financial institutions. Prior to joining us, Mr. Arnold worked at UVEST for 13 years, serving most recently as president and chief operating officer. Mr. Arnold earned a B.S. in electrical engineering from Auburn University and holds an M.B.A. in finance from Georgia State University.
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QUALIFICATIONS
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Mr. Arnolds pertinent qualifications include his unique perspective and insights into our operations as our current president and chief executive officer, including knowledge of our business relationships, competitive and financial positioning, senior leadership, and strategic opportunities and challenges; operating, business and management experience as the chief financial officer, president, and now chief executive officer of a public company; and expertise in the financial industry and in particular brokerage and investment advisory services, including past service as a director of the Securities Industry and Financial Markets Association from April 2015 to July 2018.
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OTHER PUBLIC COMPANY BOARDS
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Current None |
Past 5 Years Optimum Fund Trust |
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2019 Proxy Statement |
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Proposal 1: Election of Directors |
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H. Paulett Eberhart | BACKGROUND
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Age 65
Director Since 2014
Independent
Committees:
Audit Committee
Compensation Committee |
Ms. Eberhart currently serves as chair and chief executive officer of HMS Ventures, a privately-held business involved with technology services and the acquisition and management of real estate. From 2011 through 2014, she served as president and chief executive officer of CDI Corp. (CDI), a provider of engineering and information technology outsourcing and professional staffing services that was then a public company. Ms. Eberhart also served as chair and chief executive officer of HMS Ventures from January 2009 until January 2011. She served as president and chief executive officer of Invensys Process Systems, Inc. (Invensys), a process automation company, from January 2007 to January 2009. From 1978 to 2004, she was an employee of Electronic Data Systems Corporation (EDS), an information technology and business process outsourcing company that was subsequently acquired by the Hewlett-Packard Company, and held roles of increasing responsibility over time, including senior level financial and operating roles at the company, including as president of Americas of EDS from 2003 until March 2004 and senior vice president of EDS and president of Solutions Consulting from 2002 to 2003. She is a Certified Public Accountant and received her B.S. from Bowling Green State University.
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QUALIFICATIONS
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Ms. Eberharts pertinent qualifications include her wealth of managerial and executive experience, gained through her leadership as the chief executive officer of CDI, formerly an NYSE-listed public company, and Invensys, as well as her numerous years of service as an executive officer of EDS, including president of Americas; financial and accounting expertise gained through various other operating and financial positions during her 26 years at EDS; strong knowledge of the intersection of technology, data and finance industries; and knowledge and experience gained through her service on the boards of other public companies, including risk oversight experience in chairing the governance and risk committee of the board of directors of Anadarko Petroleum Corporation.
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OTHER PUBLIC COMPANY BOARDS
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Current Anadarko Petroleum Corporation Valero Corporation |
Past 5 Years Cameron International Corporation Ciber Corporation |
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10 | 2019 Proxy Statement |
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Proposal 1: Election of Directors |
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William F. Glavin Jr. | BACKGROUND
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Age 60
Director Since 2017
Independent
Committees:
Audit Committee
Nominating and Governance Committee |
Mr. Glavin served as chair of OppenheimerFunds, Inc., a global asset management firm (OppenheimerFunds), from 2009 until 2015, as chief executive officer from 2009 until 2014, and as president from 2009 until 2013. OppenheimerFunds is a majority owned subsidiary of MassMutual Financial Group (MassMutual), a mutual life insurance company, at which Mr. Glavin held several senior executive positions prior to joining OppenheimerFunds. He served as co-chief operating officer of MassMutual from 2007 to 2008, executive vice president, U.S. Insurance Group of MassMutual from 2006 to 2008, president and chief executive officer of Babson Capital Management LLC (Babson), an asset management firm and subsidiary of MassMutual, from 2005 until 2006 and chief operating officer of Babson from 2003 to 2005. Prior to joining MassMutual, Mr. Glavin was president and chief operating officer of Scudder Investments, an asset management firm, from 2000 to 2003. Mr. Glavin serves as a director of MM Asset Management Holding LLC and Barings LLC, which are subsidiaries of MassMutual. Mr. Glavin received his B.A. in Economics and Accounting from the College of the Holy Cross.
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QUALIFICATIONS
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Mr. Glavins pertinent qualifications include his experience over the course of a 25-year career in the financial services industry, including as a chief executive officer and chief operating officer; extensive experience in strategic planning and talent management, in part based on his success in leading Oppenheimer through a period of significant market turbulence; a deep understanding of financial product distribution, compliance and operations, including technology demands in the financial services industry; and experience overseeing broker-dealers, including MassMutuals broker-dealer MML Investor Services, LLC.
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OTHER PUBLIC COMPANY BOARDS
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Current None |
Past 5 Years None |
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2019 Proxy Statement |
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Proposal 1: Election of Directors |
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Allison H. Mnookin | BACKGROUND
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Age 48
Director Since 2018
Independent
Committees:
Compensation Committee
Nominating and Governance Committee |
Ms. Mnookin is a senior lecturer of business administration in the technology and operations management unit at the Harvard Business School. From April 2016 to November 2016, Ms. Mnookin served as the chief executive officer of QuickBase, Inc. (QuickBase), a provider of online application software which was spun-off by Intuit, Inc., a business and financial software company, in 2016. Ms. Mnookin was an employee of Intuit from 1998 to 2016 and held roles of increasing responsibility over time, including vice president and general manager of Intuits QuickBase business from July 2010 to March 2016. Prior to joining Intuit, she held several sales and product marketing positions with Oracle Corporation. Ms. Mnookin has served as a director of Quartz Holding Company, the holding company of QuickBase, since November 2016 and served as a director of Fleetmatics Group PLC, a global provider of fleet management solutions for small and mid-sized businesses, from 2014 until its sale to Verizon Communications Inc. in 2016. Ms. Mnookin received her A.B. with honors from Harvard College and her M.B.A. from the Harvard Business School.
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QUALIFICATIONS
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Ms. Mnookins pertinent qualifications include her 20-year career in the technology industry, including executive leadership of high-growth cloud and business software companies. This experience, including general management in Intuits small business division where she was responsible for leading a portfolio of Intuits business products, shaped her understanding of how businesses have transformed their technologies to increase strategic advantage.
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OTHER PUBLIC COMPANY BOARDS
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Current None |
Past 5 Years Fleetmatics Group PLC |
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Anne M. Mulcahy | BACKGROUND
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Age 66
Director Since 2013
Independent
Committees:
Compensation Committee (Chair)
Nominating and Governance Committee |
Ms. Mulcahy served as chair of the board of trustees of Save The Children Federation, Inc., a non-profit organization dedicated to creating lasting change in the lives of children throughout the world, from March 2010 to February 2017. She previously served as chair of the board of Xerox Corporation (Xerox), a global business services and document technology provider, from January 2002 to May 2010, and chief executive officer of Xerox from August 2001 to July 2009. Prior to serving as a chief executive officer, Ms. Mulcahy was president and chief operating officer of Xerox. Ms. Mulcahy received a B.A. from Marymount College of Fordham University.
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QUALIFICATIONS
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Ms. Mulcahys pertinent qualifications include her extensive experience in all areas of business management and strategic execution as she led Xerox through a transformational turnaround; valuable insights into organizational and operational management issues, including business innovation, financial management and talent development; and leadership roles in business trade associations and public policy activities, which provide the Board with additional expertise in the area of organizational effectiveness.
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OTHER PUBLIC COMPANY BOARDS
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Current Graham Holdings Company Johnson & Johnson Williams-Sonoma, Inc. |
Past 5 Years Target Corporation |
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12 | 2019 Proxy Statement |
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Proposal 1: Election of Directors |
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James S. Putnam | BACKGROUND
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Age 64
Director Since 2005
Independent
Chair of the Board
Committee:
Audit Committee |
Mr. Putnam has served as chair of the Board of Directors since March 2017 and served as our lead director from June 2016 until March 2017. Mr. Putnam has been the chief executive officer of Global Portfolio Advisors (GPA), formerly a global brokerage clearing services provider that sold substantially all of its operations in 2014, since September of 2004. Mr. Putnam has served on the board of directors of GPA since 1998. Prior to his tenure with GPA, Mr. Putnam was employed by LPL Financial beginning in 1983 where he held several positions, culminating in managing director of national sales, responsible for branch development, recruitment, retention and management of LPL Financial advisors. He was also responsible for marketing and all product sales. He began his securities career as a retail representative with Dean Witter Reynolds in 1979. Mr. Putnam received a B.A. from Western Illinois University.
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QUALIFICATIONS
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Mr. Putnams pertinent qualifications include his unique historical perspective and insights into our operations as our former managing director of national sales; operating, business and management experience as the chief executive officer at GPA; and expertise in the financial industry and deep familiarity with our advisors.
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OTHER PUBLIC COMPANY BOARDS
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Current None |
Past 5 Years None |
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James S. Riepe | BACKGROUND
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Age 75
Director Since 2008
Independent
Committees:
Audit Committee (Chair)
Compensation Committee |
Mr. Riepe is a senior advisor and retired vice chair of the board of directors of T. Rowe Price Group, Inc. (TRP), a global investment management firm, where he worked for nearly 25 years. Previously, he served on TRPs management committee, oversaw TRPs mutual fund activities and served as chair of the T. Rowe Price Mutual Funds. He served as chair of the board of governors of the Investment Company Institute and was a member of the board of governors of the National Association of Securities Dealers (now FINRA) and chaired its Investment Companies Committee. Mr. Riepe is a member of the board of directors of UTI Asset Management Company of India and the Baltimore Equitable Society. He also served as chair of the board of trustees of the University of Pennsylvania from which he earned a B.S. and an M.B.A.
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QUALIFICATIONS
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Mr. Riepes pertinent qualifications include his high level of financial literacy and operating and management experience, gained through his executive management positions and role as vice chair of the board of directors of TRP; expertise in the financial industry, underscored by his over 35 years of experience in investment management and his prior roles as a member of the board of governors of FINRA and as chair of the board of governors of the Investment Company Institute; and knowledge and experience gained through service on the board of other public companies.
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OTHER PUBLIC COMPANY BOARDS
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Current Genworth Financial Inc. |
Past 5 Years The Nasdaq OMX Group, Inc. |
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2019 Proxy Statement |
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Proposal 1: Election of Directors |
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Richard P. Schifter | BACKGROUND
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Age 66
Director Since 2005
Independent
Committee:
Nominating and Governance Committee (Chair) |
Mr. Schifter is a senior advisor of TPG, a leading global private investment firm. He was a partner at TPG from 1994 through 2013. Prior to joining TPG, Mr. Schifter was a partner at the law firm of Arnold & Porter in Washington, D.C., where he specialized in bankruptcy law and corporate restructuring. He joined Arnold & Porter in 1979 and was a partner from 1986 through 1994. Mr. Schifter currently serves on the board of overseers of the University of Pennsylvania Law School. Mr. Schifter received a B.A. with distinction from George Washington University and a J.D. cum laude from the University of Pennsylvania Law School.
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QUALIFICATIONS
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Mr. Schifters pertinent qualifications include his high level of financial literacy gained through his investment experience as a TPG partner; experience on other company boards and board committees; and nearly 15 years of experience as a corporate attorney with an internationally-recognized law firm.
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OTHER PUBLIC COMPANY BOARDS
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Current Caesars Entertainment Corporation ProSight Global, Inc. |
Past 5 Years American Airlines Group American Beacon Advisors, Inc. EverBank Financial Corp. |
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Corey E. Thomas | BACKGROUND
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Age 43
Director Nominee
Independent
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Mr. Thomas has served as the president and chief executive officer, and as a member of the board of directors, of Rapid7, Inc. (Rapid7), a public company that provides analytics for security and information technology operations, since October 2012. From November 2008 to September 2012, Mr. Thomas held various other roles at Rapid7, including serving as chief operating officer. He currently serves on the board of directors of Blue Cross Blue Shield of Massachusetts, serving on its audit and health care quality and affordability committees. Mr. Thomas received a B.E. in electrical engineering and computer science from Vanderbilt University and an M.B.A. from the Harvard Business School.
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QUALIFICATIONS
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Mr. Thomas pertinent qualifications include his general management experience, including his top-level perspective on strategy and organization management as the chief executive officer of a public company; strategic insights with regard to information technology, cybersecurity and global sales and marketing gained through his career in the technology industry; an entrepreneurial mindset focused on solving the needs of clients ranging widely in size and industry; and experience leading operations involving multiple product delivery models, including his past role as a chief operating officer.
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OTHER PUBLIC COMPANY BOARDS
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Current Rapid7, Inc. |
Past 5 Years None |
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In the vote on the election of the director nominees, stockholders may:
◾ | Vote FOR any of the nominees; |
◾ | Vote AGAINST any of the nominees; or |
◾ | ABSTAIN from voting as to any of the nominees. |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE ABOVE-NAMED NOMINEES AS A DIRECTOR.
14 | 2019 Proxy Statement |
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Information Regarding Board and Committee Structure |
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Corporate Governance Highlights | ||||
We have implemented several important measures that are designed to promote long-term stockholder value: |
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◾ Our Board consists of a single class of directors elected on an annual basis who may be removed with or without cause. Accordingly, our stockholders are able to register their views on the performance of all directors on an annual basis, enhancing the accountability of our Board to our stockholders. |
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◾ We currently separate the offices of the chair of the Board and chief executive officer of the Company, although the Board maintains the flexibility to select the chair of the Board and its leadership structure, from time to time, based on the criteria that it deems to be in the best interests of the Company and its stockholders. |
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◾ Our bylaws provide for a majority voting standard in uncontested director elections. We also have adopted a director resignation policy in our Corporate Governance Guidelines pursuant to which a director who does not receive support from holders of a majority of shares voted in an uncontested election must tender his or her resignation and, if our Board accepts the resignation, step down from our Board. This makes director elections more meaningful for our stockholders and promotes accountability. |
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◾ We seek an advisory vote on the compensation of our named executive officers annually, which underscores the careful consideration we give to our stockholders views on our compensation practices. |
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◾ We have established a compensation claw-back policy that enables the Company to recoup cash and equity incentive compensation from executive officers in the event of certain financial restatements. |
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◾ Our executive officers are subject to equity ownership guidelines that set minimum ownership requirements based on a multiple of annual base salary, which aligns the interests of senior management with the interests of our stockholders. |
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◾ We have also adopted equity ownership guidelines for directors, which set minimum ownership requirements based on a multiple of the cash portion of the annual base retainer then in effect. |
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◾ Our Insider Trading Policy prohibits our executives and directors from pledging and hedging our Common Stock, in order to further the alignment between stockholders and our executives that our equity awards are designed to create.
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Information Regarding Board and Committee Structure |
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2019 Proxy Statement |
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Information Regarding Board and Committee Structure |
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18 | 2019 Proxy Statement |
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Information Regarding Board and Committee Structure |
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Community Involvement | We provide our employees with 16 paid hours per year to volunteer with an organization of their choice through our Volunteer Time Off (VTO) program. More than 1,300 employees recorded over 11,150 hours of VTO in 2018.
|
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Through support from the LPL Financial Foundation, our charitable arm, we foster economic empowerment through three core areas: education to empower youth, career skill cultivation and financial literacy. The LPL Financial Foundation provides grants and volunteer support to mission-aligned organizations to help them fulfill their goals.
|
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We offer our employees and advisors a matching gift program through the LPL Financial Foundation, which offers up to $500 in a dollar-for-dollar match. This program funded over $500,000 in 2018 to support organizations across the country that are important to our employees and advisors.
|
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We annually sponsor May Serve Days, which enable employees to participate in a wide array of volunteer activities, from fundraising walks and clothing drives to community clean-up events and mentoring programs.
|
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Diversity & Inclusion | We were ranked by Financial Planning magazine in the top 10 of independent broker/dealer firms with the highest percentage of women advisors, which for the Company was 17%.
|
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We have established an Advisor Inclusion Council, a diverse group of representatives from advisor firms and institutions that partners with our leaders to advance our vision of being the most diverse and inclusive place to do business.
|
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Our Employee Resource Groups (ERGs) bring together employees who share common interests and experiences; currently, over 30% of our employees belong to at least one ERG.
|
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More than one-third of our current directors are women, which places our Board among the top of our industry in gender diversity, and three of our ten executive officers are women.
|
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We scored 100% in a national benchmarking report on LGBTQ workplace equality practices.
|
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We launched our African American Advisor Business Community in February 2019, and plan to launch other diverse community groups in 2019 to enable advisors to learn, share and grow.
|
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Environment & Sustainability | We integrate environmentally friendly practices throughout our facilities and operations.
|
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Recycling and composting stations are located throughout our LEED-certified Carolinas campus; our LEED-certified San Diego facility employs single-stream waste management.
|
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18,000,000 gallons of rainwater have been collected each year at our Carolinas campus.
|
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We have established an Employee Action Committee, which promotes participation among employees in eco-friendly practices.
|
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Business Practices | Our business is dedicated exclusively to our advisors; we are not a market-maker nor do we offer investment banking or underwriting services or proprietary products of our own. Because we do not offer proprietary products, we enable our advisors to offer their clients lower-conflict advice.
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We have a strong corporate culture that promotes the highest standards of ethics and compliance for our business. Our advisors sign a Code of Ethics that covers disclosure of conflicts of interest, as well as compliance with securities laws and the protection of confidential client information, among other things.
|
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To protect the confidentiality of information entrusted to us, we employ extensive physical, technical and procedural security controls at all of our facilities. We actively monitor and enforce compliance with our security policies and procedures, and we regularly review and update our physical and technical controls, as well as our policies and procedures, to respond to new threats and to adapt to changing technology.
|
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Our Code of Conduct, which we updated in 2018, defines the standards of conduct that we expect from all employees and provides guidance in making the right decisions in performing our work.
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Information Regarding Board and Committee Structure |
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20 | 2019 Proxy Statement |
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Information Regarding Board and Committee Structure |
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The table below reflects the composition of the Boards three standing committees as of March 29, 2019:
Audit Committee
|
Nominating and Governance Committee
|
Compensation Committee
| ||||||
H. Paulett Eberhart
|
|
| ||||||
William F. Glavin, Jr. |
|
|
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Allison H. Mnookin |
|
| ||||||
Anne M. Mulcahy |
|
| ||||||
James S. Putnam |
|
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James S. Riepe |
|
| ||||||
Richard P. Schifter
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|
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|
Member |
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Chair |
Chair of the Board |
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Information Regarding Board and Committee Structure |
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22 | 2019 Proxy Statement |
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Information Regarding Board and Committee Structure |
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2019 Proxy Statement |
23 |
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Information Regarding Board and Committee Structure |
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24 | 2019 Proxy Statement |
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Information Regarding Board and Committee Structure |
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2019 Proxy Statement |
25 |
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Board of Director Compensation |
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The following table sets forth the compensation received from us by each non-employee director for service on the Board for the fiscal year ended December 31, 2018. In addition to the payments disclosed in the table below, our directors were reimbursed for reasonable out-of-pocket expenses incurred in connection with their attendance at Board and committee meetings.
(1) | The amounts shown in this column represent the aggregate grant date fair value of restricted stock awards granted to our non-employee directors in 2018. The aggregate grant date fair value of the restricted stock awards, as determined under FASB ASC Topic 718, was determined by multiplying the number of shares underlying the award by $70.47, which was the closing price per share of our Common Stock on the grant date, except for Allison Mnookin, who received her grant on June 1, 2018, on which date the closing price per share of our Common Stock was $69.78. For information regarding the number of shares of restricted stock held by each non-employee director as of December 31, 2018, see the table in footnote 2 below. The amounts shown in this column do not include the value of any fully vested shares of Common Stock that certain of our non-employee directors elected to receive in lieu of the cash portion of the annual service retainer. In accordance with SEC rules, such amounts are shown in the column Fees Earned or Paid in Cash. |
(2) | The following table shows the aggregate number of shares of restricted stock held by each of our non-employee directors as of December 31, 2018. All restricted stock awards reported in the table below will vest in full on May 7, 2019. |
Name
|
Restricted Stock Awards (#)
|
|||
H. Paulett Eberhart |
2,463 | |||
William F. Glavin, Jr. |
2,463 | |||
Allison Mnookin |
2,131 | |||
Anne M. Mulcahy |
2,463 | |||
James S. Putnam |
2,463 | |||
James S. Riepe |
2,463 | |||
Richard P. Schifter |
2,463 | |||
(3) | Mr. Dinh served as a director until September 15, 2018. This amount includes the prorated portion of his retainer for service during 2018 on the Nominating and Governance Committee, of which he served as chair until May 2018. |
(4) | This amount includes the value of fully vested shares of Common Stock that the director elected to receive in lieu of the cash portion of the directors annual service retainer. The aggregate grant date fair value of these shares, as determined under FASB ASC Topic 718, was determined by multiplying the number of shares underlying the award by $70.47, which was the closing price per share of our Common Stock on the grant date. Messrs. Dinh, Glavin, Riepe and Schifter delivered a written deferral election under the Deferred Plan pursuant to which the director elected to defer receipt of the fully vested shares of Common Stock in lieu of the cash portion of the annual service retainer. |
(5) | Ms. Eberhart and Messrs. Dinh, Glavin, Riepe and Schifter delivered a written deferral election under the Deferred Plan pursuant to which the director elected to defer receipt of the equity portion of his or her annual service retainer. |
(6) | This amount includes Mr. Glavins prorated retainer for service on the Nominating and Governance Committee following his appointment in May 2018. |
(7) | Mr. Hellman served as a director until May 17, 2018. This amount reflects the prorated portion of his retainer for service on the Nominating and Governance Committee during 2018. |
(8) | This amount represents the prorated portion of Ms. Mnookins annual service retainer and prorated retainer for service on the Compensation Committee following her election as a director and appointment to the Compensation Committee on June 1, 2018. |
(9) | Mr. Schifter succeeded Mr. Dinh as chair of the Nominating and Governance Committee in May 2018. This amount includes Mr. Schifters prorated retainer for such service. |
2019 Proxy Statement |
27 |
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Compensation Discussion and Analysis |
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Compensation Discussion and Analysis
Executive Summary
This Compensation Discussion and Analysis (CD&A) describes the actions taken by the Compensation Committee with respect to 2018 compensation for our executive officers, including our named executive officers (NEOs). Under SEC rules, our NEOs for 2018 were:
Executive
|
Title
| |
Dan H. Arnold |
President and Chief Executive Officer | |
Matthew J. Audette |
Chief Financial Officer | |
Scott Seese |
Managing Director, Chief Information Officer | |
Richard Steinmeier(1) |
Managing Director, Divisional President, Business Development | |
George B. White |
Managing Director, Investor and Investment Solutions and Chief Investment Officer | |
(1) | Mr. Steinmeier commenced employment with us as managing director, divisional president, business development, on August 13, 2018. |
Summary of 2018 Corporate Performance
The following summary of the Companys corporate performance is intended to provide additional context for the Compensation Committees evaluation of the Companys performance in 2018 for compensation-related purposes. As discussed below, the Compensation Committee established a bonus pool funding framework at the beginning of 2018 that assigned equal weighting to the Companys financial performance and achievement of its pre-established 2018 corporate goals.
Adjusted EBITDA was the primary metric used in the bonus pool funding framework to evaluate the Companys financial performance in 2018. The Compensation Committee also considered the Companys gross profit and expense management results, and their effect on the Companys Adjusted EBITDA results. EBITDA, Adjusted EBITDA, gross profit and core G&A are non-GAAP financial measures that are described below under Non-GAAP Financial Measures.
Under the bonus pool funding framework, the Compensation Committee assessed the achievement of the following five corporate goals for 2018, which were approved by the Board of Directors at the beginning of the year along with underlying key performance metrics and program deliverables:
| Drive profitable growth and complete the onboarding and assimilation of advisors from National Planning Holdings, Inc. (NPH), the broker-dealer network that the Company acquired in 2017 (the Growth Goal); |
| Enhance the service experience for advisors and their clients by making it easier for them to do business with the Company, which we refer to as our Ease of Doing Business initiative (the Ease of Doing Business Goal); |
| Foster a culture where engaged employees are empowered to execute with excellence; |
| Improve operating leverage, effectively deploy capital and maximize stockholder returns (the Operating Leverage Goal); and |
| Effectively manage firm risk. |
The Company generated strong financial results in 2018, including net income and earnings per share that grew year-over-year by 84% and 87%, respectively. The Companys gross profit of $1.9 billion in 2018 increased 25% from $1.6 billion in 2017, as a result of growth across all primary revenue lines. The Company maintained a focus on expense management while increasing investments in organic growth, which resulted in core general and administrative expense (Core G&A) of $817 million, an increase of 15% year-over-year prior to costs related to corporate acquisitions. As a result, the Companys EBITDA and Adjusted EBITDA each grew year-over-year by 40%. The Companys Adjusted EBITDA of $889 million in 2018 exceeded the Companys 2018 performance target of $777 million by $112 million, or 14%. For additional discussion and analysis of the Companys 2018 financial performance, please refer to the Annual Report.
28 | 2019 Proxy Statement |
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|
Compensation Discussion and Analysis |
|
As further discussed below, the Compensation Committee determined that the Company generally performed well against its 2018 corporate goals. The Company drove growth in its total brokerage and advisory assets through a combination of organic growth and the acquisition of assets from NPH. Organic growth was driven by recruited assets of $27.3 billion, compared to $25.0 billion in 2017, and production retention that increased to 96% from 95% year-over-year. In addition, the Companys advisors continued to shift their business mix from brokerage to advisory solutions, and increase their use of both the Companys corporate advisory and centrally managed platforms, which benefit the Companys gross profit return on assets over time. Although the Ease of Doing Business initiative is ongoing, the Company made progress in 2018 in positioning itself to better serve and support its advisors, including improvements to its ClientWorks platform, service model and corporate culture. In addition, the Companys expense discipline enabled it to make significant investments in organic growth and technology capabilities in 2018, including through the acquisition of AdvisoryWorld, while also returning capital to stockholders.
After taking into account the Companys overall performance against financial and non-financial goals for 2018, the Compensation Committee determined that the 2018 bonus pool would be funded at an above-target level, and the annual cash bonus awards to our NEOs (as well to our other executives and employees) would generally be paid at target, or above target level for high performing employees, including our NEOs. This approach is consistent with our compensation philosophy and past practice.
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Compensation Discussion and Analysis |
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30 | 2019 Proxy Statement |
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Compensation Discussion and Analysis |
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Compensation Philosophy
Under the oversight of the Compensation Committee, our executive compensation program rewards sustained positive financial and operating performance. Our executive compensation program is designed to align our executives compensation to the performance of the Company while avoiding practices that may create unwarranted risk.
The design and operation of our executive compensation program reflect the following basic objectives:
◾ aligning the interests of our executive officers with the interests of our Company and its stockholders;
◾ linking our executive officers compensation to the achievement of both short-term and long-term strategic and operational goals; and
◾ attracting, motivating, and retaining highly qualified executive officers who are passionate about the mission of our Company.
We seek to achieve these objectives through the following guiding compensation principles:
◾ paying compensation that is competitive with that offered for similar positions with our peer companies;
◾ striking an appropriate balance between current and long-term compensation as well as cash and equity compensation;
◾ linking short-term and long-term total compensation largely to objective and, to the extent possible, quantifiable performance measures;
◾ rewarding Company and business unit performance, as well as individual performance and potential; and
◾ using equity-based compensation for a significant portion of total compensation.
|
||||
Compensation Governance
In order to implement our compensation philosophy, and to promote strong governance and alignment with stockholder interests, we do the following: | ||||||
✓ | maintain a pay mix that is weighted more heavily on variable, performance-based compensation than fixed compensation; |
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✓ | maintain stock ownership guidelines for executives; |
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✓ | maintain a compensation claw-back policy that enables the Company to recoup cash and equity incentive compensation from executive officers in the event of certain financial restatements; |
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✓ | retain an independent compensation consultant engaged by, and reporting directly to, the Compensation Committee; |
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✓ | benchmark executive compensation against peers with which we compete for talent; |
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✓ | conduct annual risk assessments of our executive compensation policies and practices; |
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✓ | hold an annual stockholder say on pay vote; and |
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✓ | hold Compensation Committee executive sessions without management present. |
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In addition, we do not do the following: | ||||||
✘ |
re-price stock options without stockholder approval; |
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✘ |
permit hedging transactions or short sales by executives; |
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✘ |
permit pledging or holding company stock in a margin account by executives; |
|||||
✘ |
enter into individual employment agreements; or |
|||||
✘ |
provide excise tax gross-ups to executives.
|
We have designed our compensation practices to align with competitive market practices, strengthen the alignment between compensation paid and Company performance, and provide greater transparency for our employees and investors. These practices are discussed below.
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Compensation Discussion and Analysis |
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Base Salary
32 | 2019 Proxy Statement |
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Compensation Discussion and Analysis |
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2019 Proxy Statement |
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Compensation Discussion and Analysis |
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34 | 2019 Proxy Statement |
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Compensation Discussion and Analysis |
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The table and chart below show the target annual cash bonus award opportunity established for each of our NEOs at the beginning of 2018 (other than Mr. Steinmeier), as well as the actual cash bonus awarded to each of our NEOs for 2018, as determined by the Compensation Committee:
NEO
|
Target Award
|
Target Award
|
Cash Bonus
|
Cash Bonus
|
Cash Bonus Awarded as a Percentage of Target Award
|
|||||||||||||||||||
Dan H. Arnold |
$ | 1,800,000 | 225 | % | $ | 2,430,000 | 304 | % | 135 | % | ||||||||||||||
Matthew J. Audette |
$ | 1,050,000 | 175 | % | $ | 1,420,000 | 237 | % | 135 | % | ||||||||||||||
Scott Seese |
$ | 800,000 | 160 | % | $ | 1,120,000 | 224 | % | 140 | % | ||||||||||||||
Richard Steinmeier |
$ | 212,000 | (1) | 47 | % | $ | 265,000 | 59 | % | 125 | % | |||||||||||||
George B. White |
$ | 625,000 | 125 | % | $ | 875,000 | 175 | % | 140 | % | ||||||||||||||
(1) Mr. Steinmeiers annual target award is $549,000, or 122% of his base salary. Mr. Steinmeiers target award for 2018 was prorated for the portion of the year following the commencement of his employment with the Company. Mr. Steinmeier also received a $500,000 sign-on bonus in connection with his commencement of employment.
Annual Cash Bonus Awards
($ in thousands)
2019 Proxy Statement |
35 |
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Compensation Discussion and Analysis |
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36 | 2019 Proxy Statement |
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Compensation Discussion and Analysis |
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The table and chart below show the target LTI award established for each of our NEOs for 2018, as well as the actual LTI award granted to our NEOs for 2018 performance, as determined by the Compensation Committee:
Executive | 2018 Annual Base Salary |
LTI Target % of Base |
LTI Target $ | LTI $ Granted(1) |
||||||||||
Dan H. Arnold |
$ | 800,000 | 350% | $ | 2,800,000 | $ | 3,868,623 | |||||||
Matthew J. Audette |
$ | 600,000 | 175% | $ | 1,050,000 | $ | 1,274,947 | |||||||
Scott Seese |
$ | 500,000 | 160% | $ | 800,000 | $ | 1,032,055 | |||||||
Richard Steinmeier |
$ | 450,000 | 75% | $ | 598,500 | $ | 1,841,134 | |||||||
George B. White |
$ | 500,000 | 125% | $ | 625,000 | $ | 758,868 | |||||||
(1) | These LTI awards were granted on February 25, 2019 for services provided during fiscal year 2018. Mr. Arnold received 50% of his LTI award as PSUs and 50% as stock options. The remaining NEOs received 40% of their awards as PSUs, 30% as stock options and 30% as RSUs. PSUs are eligible to become earned and vested based on the achievement of performance criteria over a three-year period, as described above. Stock options and RSUs are scheduled to vest in equal annual installments over a three-year period. |
Long-Term Incentive Awards
($ in thousands)
2019 Proxy Statement |
37 |
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Compensation Discussion and Analysis |
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38 | 2019 Proxy Statement |
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Compensation Discussion and Analysis |
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The chart below shows the total 2018 compensation for our NEOs, by component.
NEO Compensation Mix
($ in thousands)
Goals, Objectives and Performance Evaluation
Our NEOs are primarily responsible for ensuring that the Company achieves its annual and long-term goals. At the beginning of 2018, our Board determined, with the input of the chief executive officer and the management team, the corporate goals for the year, including with regard to the Companys financial performance. In evaluating incentive compensation at the end of the year, the Compensation Committee considered the level of achievement of the Companys financial and non-financial performance goals.
The Compensation Committee determined that the Company generally performed well against its 2018 goals based on its strong financial results and the achievement of the non-financial performance goals listed below. See Executive SummarySummary of 2018 Corporate Performance and Annual Cash Bonus Awards-- Bonus Funding Framework for additional information about our 2018 performance and the 2018 bonus funding framework.
2019 Proxy Statement |
39 |
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|
Compensation Discussion and Analysis |
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2018 Corporate Goals | Performance Commentary | |
Drive profitable growth and complete the onboarding and assimilation of NPH advisors |
The Company successfully completed the onboarding of NPH advisors and assets. Recruited assets of $27.3 billion represented a record recruiting year, and production retention increased to 96% from 95%. Profitability metrics outperformed annual targets, as advisors increased their use of the Companys corporate advisory and centrally managed platforms. | |
Make it easier for advisors and their clients to do business with the Company |
The Company made progress on its multi-year Ease of Doing Business initiative. The Company delivered improvements to the functionality, performance and resiliency of its ClientWorks platform, and began introducing new capabilities for advisors. It also streamlined processes and modernized policies, which contributed to reduced service center escalation volume. The Company initiated a structured approach to a cultural transformation, including introduction of its new client-centric mission statement. Progress on program deliverables exceeded expectations in 2018 and resulted in improved advisor satisfaction scores year-over-year. | |
Foster a culture where engaged employees are empowered to execute with excellence |
The Company achieved an annualized retention rate of high performing employees of 93% in 2018. A 73.5% overall favorable score in the annual employee engagement survey indicated an upward trend in employee engagement across all business units and validated our employee-focused initiatives. | |
Improve operating leverage, effectively deploy capital and maximize stockholder returns |
The Company drove improved operating margin in 2018 through strong gross profit growth and disciplined expense management. The Company deployed capital to drive organic growth, including $122 million in technology-related investments, and completed the AdvisoryWorld acquisition. The Company also returned $506 million to stockholders, and its total stockholder return was in the top decile of the Comparator Group. | |
Effectively manage firm risk |
The Company reduced its technology operational risk through control improvements related to end of life software, technology infrastructure and cybersecurity. Compliance testing programs and execution of key controls and related initiatives were completed on time. The Company effectively managed its litigation and arbitration portfolio, as well as regulatory matters. |
As we look forward to 2019, the Board has recommitted our management team to goal categories that are generally consistent with those adopted in 2018.
Non-GAAP Financial Measures
We believe that presenting certain non-GAAP measures by excluding or including certain items can be helpful to investors and analysts who may wish to use some or all of this information to analyze the Companys current performance, prospects, and valuation. We use this non-GAAP information internally to evaluate operating performance and to formulate the budget for future periods. We believe that the non-GAAP measures and metrics discussed below are appropriate for evaluating the performance of the Company for compensation-related purposes.
40 | 2019 Proxy Statement |
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|
Compensation Discussion and Analysis |
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Set forth below is a reconciliation of Core G&A to the Companys total operating expenses for the twelve months ended December 31, 2018 (in thousands):
Core G&A |
$ 818,616 | |||
Regulatory charges |
31,775 | |||
Promotional |
208,603 | |||
Employee share-based compensation |
23,108 | |||
|
|
|||
Total G&A |
1,082,102 | |||
Commissions and advisory |
3,177,576 | |||
Depreciation & amortization |
87,656 | |||
Amortization of intangible assets |
60,252 | |||
Brokerage, clearing and exchange |
63,154 | |||
|
|
|||
Total operating expense |
$ 4,470,740 | |||
|
|
2019 Proxy Statement |
41 |
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|
Compensation Discussion and Analysis |
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Set forth below is a reconciliation of the Companys net income to EBITDA and Adjusted EBITDA for the twelve months ended December 31, 2018, 2017 and 2016 (in thousands):
2018 | 2017 | 2016 | ||||||||||||||||||
Net income |
$ | 439,459 | $ | 238,863 | $ | 191,931 | ||||||||||||||
Non-operating interest expense |
125,023 | 107,025 | 96,478 | |||||||||||||||||
Provision for income taxes |
153,178 | 125,707 | 105,585 | |||||||||||||||||
Loss on extinguishment of debt(1) |
| 22,407 | | |||||||||||||||||
Depreciation and amortization |
87,656 | 84,071 | 75,928 | |||||||||||||||||
Amortization of intangible assets |
60,252 | 38,293 | 38,035 | |||||||||||||||||
|
|
|||||||||||||||||||
EBITDA |
865,568 | 616,366 | 507,957 | |||||||||||||||||
Employee share-based compensation expense (2) |
23,108 | 19,413 | 20,352 | |||||||||||||||||
|
|
|||||||||||||||||||
Adjusted EBITDA |
$ | 888,676 | $ | 635,779 | $ | 528,309 | ||||||||||||||
|
|
(1) | Represents expenses incurred resulting from the early extinguishment and repayment of amounts outstanding on our prior senior secured credit facilities, including the accelerated recognition of unamortized debt issuance costs that had no future economic benefit, as well as various other charges incurred in connection with the repayment under prior senior secured credit facilities and the establishment of new or amended senior secured credit facilities. |
(2) | Represents share-based compensation expenses for equity awards granted to employees, officers, and directors. Such awards are measured based on the grant-date fair value and recognized over the requisite service period of the individual awards, which generally equals the vesting period. |
42 | 2019 Proxy Statement |
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|
Compensation Discussion and Analysis |
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2019 Proxy Statement |
43 |
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Compensation Discussion and Analysis |
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44 | 2019 Proxy Statement |
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Compensation Discussion and Analysis |
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2019 Proxy Statement |
45 |
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|
Report of the Compensation and Human Resources Committee of the Board of Directors |
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Report of the Compensation and Human Resources Committee of the Board of Directors
The following independent directors, who constitute the Compensation Committee, have reviewed the Compensation Discussion and Analysis with our management and recommended that it be included in this proxy statement.
Anne M. Mulcahy, Chair
H. Paulett Eberhart
Allison H. Mnookin
James S. Riepe
March 29, 2019
46 | 2019 Proxy Statement |
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Compensation of Named Executive Officers |
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Compensation of Named Executive Officers
Summary Compensation Table
The following table sets forth information concerning the total compensation for the years ended December 31, 2018, 2017 and 2016 for our NEOs:
Name and Principal Position |
Year | Salary ($) |
Bonus ($) |
Stock Awards ($)(1) |
Option Awards ($)(1) |
Non-Equity Incentive Plan Compensation ($)(2) |
All Other Compensation ($)(3) |
Total ($) |
||||||||||||||||||||||||||||||||||
Dan H. Arnold President, CEO |
2018 | 800,000 | | 2,328,641 | 1,539,982 | 2,430,000 | 29,728 | 7,128,351 | ||||||||||||||||||||||||||||||||||
2017 | 799,315 | (4) | | 3,136,842 | (5) | 1,309,252 | 2,160,000 | 14,040 | 7,419,449 | |||||||||||||||||||||||||||||||||
2016 | 666,120 | (6) | | 282,202 | (7) | 448,364 | 1,400,000 | 103,182 | 2,899,868 | |||||||||||||||||||||||||||||||||
Matthew J. Audette Chief Financial Officer |
2018 | 600,000 | | 959,950 | 314,997 | 1,420,000 | 26,207 | 3,321,154 | ||||||||||||||||||||||||||||||||||
2017 | 600,000 | | 809,395 | 294,577 | 1,420,000 | 14,400 | 3,138,372 | |||||||||||||||||||||||||||||||||||
2016 | 600,000 | | 273,192 | (7) | 430,431 | 1,218,000 | 80,417 | 2,602,040 | ||||||||||||||||||||||||||||||||||
Scott Seese (8) Managing Director, Chief Information Officer
|
2018 | 500,000 | 777,065 | 254,990 | 1,120,000 | 250,676 | 2,902,731 | |||||||||||||||||||||||||||||||||||
2017 | 239,726 | (9) | | 980,370 | (10) | | 960,000 | (11) | | 2,180,096 | ||||||||||||||||||||||||||||||||
Richard Steinmeier (12) Managing Director, Divisional President |
2018 | 173,836 | (13) | 500,000 | (14 | ) | 1,869,879 | (15) | | 265,000 | (16) | 234,643 | 3,043,358 | |||||||||||||||||||||||||||||
George B. White Managing Director, |
2018 | 500,000 | | 571,386 | 187,482 | 875,000 | 27,887 | 2,161,755 | ||||||||||||||||||||||||||||||||||
Investor and Investment |
2017 | 500,000 | | 465,408 | 169,384 | 845,000 | 16,968 | 1,996,760 | ||||||||||||||||||||||||||||||||||
Solutions, Chief Investment Officer |
2016 | 500,000 | | 206,201 | (7) | 297,199 | 640,000 | 255,878 | 1,899,278 |
(1) | Represents aggregate grant date fair value of PSUs, RSUs and stock options in each case, computed in accordance with FASB ASC Topic 718 and, in the case of PSUs, based on the probable outcome of the performance conditions associated with the awards. The aggregate grant date fair value of RSUs was determined using the closing price of the Common Stock on the grant date. The aggregate grant date fair value of stock option awards was determined using the Black-Scholes model. The underlying valuation assumptions for PSUs and stock option awards are further disclosed in Note 15, Share-Based Compensation, to our consolidated financial statements filed with our annual report on Form 10-K for the year ended December 31, 2018, and Note 14, Share-Based Compensation, to our consolidated financial statements filed with our annual reports on Form 10-K for the years ended December 31, 2017 and 2016. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The table below shows the grant date fair value of PSU awards granted in 2018 and 2017 assuming target and maximum levels of performance are achieved (amounts under the Stock Awards column represent the grant date fair value of PSUs based on the probable outcome of performance conditions, which for each of 2018 and 2017 assumed target level of performance was achieved). |
2018 | 2017 | |||||||||||||||
Name | Target($) | Maximum($) | Target($) | Maximum($) | ||||||||||||
Dan H. Arnold |
2,328,641 | 4,657,281 | 1,708,535 | 3,417,070 | ||||||||||||
Matthew J. Audette |
635,050 | 1,270,100 | 512,551 | 1,025,102 | ||||||||||||
Scott Seese |
514,093 | 1,028,185 | | | ||||||||||||
George B. White |
378,004 | 756,008 | 294,711 | 589,421 | ||||||||||||
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(2) | Represents the dollar value of annual cash bonus awards earned under the Bonus Plan by each NEO. |
(3) | See All Other Compensation table below for additional information. |
(4) | In 2017, Mr. Arnold began the year with a base salary of $675,000 but received an increase in salary to $800,000 in connection with his appointment as chief executive officer. |
(5) | Includes a one-time grant of 38,809 RSUs on February 13, 2017 in connection with Mr. Arnolds appointment as chief executive officer. |
(6) | Mr. Arnold began 2016 with a base salary of $625,000, but received an increase in salary to $675,000 during the year. |
(7) | Includes a one-time grant of 3,111 RSUs on February 25, 2016 in connection with the Compensation Committees decision to discontinue a perquisite in the form of either use of a leased automobile or an automobile allowance (Automobile Program). |
(8) | Mr. Seese joined the Company on July 10, 2017. |
(9) | Mr. Seeses base salary for the year was $500,000, but was prorated based on a start date of July 10, 2017. |
(10) | Includes a sign-on grant of 11,074 RSUs to Mr. Seese in connection with his commencement of employment. |
(11) | Pursuant to the terms of his employment offer with the Company, Mr. Seeses annual cash bonus was not prorated. |
(12) | Mr. Steinmeier joined the Company on August 13, 2018. |
(13) | Mr. Steinmeiers base salary for the year was $450,000, but was prorated based on a start date of August 13, 2018. |
(14) | Represents a signing bonus paid to Mr. Steinmeier in connection with his commencement of employment. |
(15) | Includes a sign-on grant of 30,143 RSUs to Mr. Steinmeier in connection with his commencement of employment. |
(16) | Mr. Steinmeiers bonus for 2018 was prorated based on a start date of August 13, 2018. |
All Other Compensation
The following table sets forth information concerning All Other Compensation in the table above for the years ended December 31, 2018, 2017 and 2016 for our NEOs:
Name | Year | Automobile ($)(1) |
Taxable ($) |
Taxable ($) |
Reimbursement for Certain Taxes and Tax Planning Services($)(2) |
401(k) ($) |
Other ($) |
Total ($) |
||||||||||||||||||||||||||||||||||||
Dan H. Arnold |
2018 | | | | 15,000 | 14,300 | 428 | (3 | ) | 29,728 | ||||||||||||||||||||||||||||||||||
2017 | | | | | 14,040 | | 14,040 | |||||||||||||||||||||||||||||||||||||
2016 | 28,692 | 60,710 | (4 | ) | | | 13,780 | | 103,182 | |||||||||||||||||||||||||||||||||||
Matthew J. Audette |
2018 | | | | 13,325 | 12,025 | 857 | (3 | ) | 26,207 | ||||||||||||||||||||||||||||||||||
2017 | | | | 2,700 | 11,700 | | 14,400 | |||||||||||||||||||||||||||||||||||||
2016 | 14,000 | | 62,917 | (5 | ) | 3,500 | | | 80,417 | |||||||||||||||||||||||||||||||||||
Scott Seese |
2018 | 249,814 | (6 | ) | 862 | (3 | ) | 250,676 | ||||||||||||||||||||||||||||||||||||
2017 | | | | | | | | |||||||||||||||||||||||||||||||||||||
Richard Steinmeier |
2018 | 233,786 | (7 | ) | | | 857 | (3 | ) | 234,643 | ||||||||||||||||||||||||||||||||||
George B. White |
2018 | 15,000 | 12,025 | 862 | (3 | ) | 27,887 | |||||||||||||||||||||||||||||||||||||
2017 | | | | 5,268 | 11,700 | | 16,968 | |||||||||||||||||||||||||||||||||||||
2016 | 14,000 | 22,851 | 207,327 | (8 | ) | | 11,700 | | 255,878 | |||||||||||||||||||||||||||||||||||
(1) | The Company determined to phase out its Automobile Program in 2016. Mr. Arnolds automobile perquisite terminated in October 2016, and Messrs. Audettes and Whites automobile perquisites terminated in May 2016. |
(2) | Consists of reimbursements received under the Companys executive financial services policy. |
(3) | Consists of the value of a year-end gift received by the named executive officer at the Companys expense. |
(4) | Includes $10,049 in tax gross-up payments for hotel, air travel, and conference expenses related to the attendance in 2016 of Mr. Arnold and his spouse at a conference hosted by the Company outside of the United States for its top-producing financial advisors. |
(5) | Includes tax gross-up payments of $29,936 made to Mr. Audette in 2016 related to relocation expenses. |
(6) | Includes tax gross-up payments of $109,814 made to Mr. Seese in 2018 related to relocation expenses. |
(7) | Includes tax gross-up payments of $72,356 made to Mr. Steinmeier in 2018 related to relocation expenses. |
(8) | Includes tax gross-up payments of $89,565 made to Mr. White in 2016 related to relocation expenses. |
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2018 Grants of Plan-Based Awards
The following table provides additional information about non-equity and equity-based awards granted to our NEOs during the year ended December 31, 2018:
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
All (#)(3) |
All
Other (#)(4) |
Exercise Base of ($) |
Grant Date ($)(5) |
|||||||||||||||||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||||||||||||||||||||
Dan H. Arnold |
$ | 1,800,000 | ||||||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 12,542 | 25,085 | 50,170 | $ | 2,328,641 | |||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 77,606 | $ | 65.50 | $ | 1,539,982 | |||||||||||||||||||||||||||||||||||||||||||
Matthew J. Audette |
$ | 1,050,000 | ||||||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 5,131 | $ | 324,900 | |||||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 3,420 | 6,841 | 13,682 | $ | 635,050 | |||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 15,874 | $ | 65.50 | $ | 314,997 | |||||||||||||||||||||||||||||||||||||||||||
Scott Seese |
$ | 800,000 | ||||||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 4,153 | $ | 262,972 | |||||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 2,769 | 5,538 | 11,076 | $ | 514,093 | |||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 12,850 | $ | 65.50 | $ | 254,990 | |||||||||||||||||||||||||||||||||||||||||||
Richard Steinmeier |
$ | 212,000 | ||||||||||||||||||||||||||||||||||||||||||||||
9/7/2018 | 30,143 | (6 | ) | $ | 1,869,879 | |||||||||||||||||||||||||||||||||||||||||||
George B. White |
$ | 625,000 | ||||||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 3,054 | $ | 193,382 | |||||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 2,036 | 4,072 | 8,144 | $ | 378,004 | |||||||||||||||||||||||||||||||||||||||||||
2/23/2018 | 9,448 | $ | 65.50 | $ | 187,482 |
(1) | Represents potential target payouts under awards pursuant to our Bonus Plan (prorated based on the start date for Mr. Steinmeier). |
(2) | Represents the number of threshold, target and maximum potential future payouts under the PSUs awarded under our 2010 Plan. PSUs are eligible to become earned PSUs based on the Companys TSR relative to the TSR of the Comparator Group over the Performance Period. The number of PSUs that is earned is determined based on the Companys relative ranking between the 25th and 80th percentile of the Comparator Groups TSR results. Amounts in the threshold column (50% of the target award) reflect the number of PSUs that would be earned if threshold performance were achieved (a TSR percentile rank at or above the 25% percentile); amounts in the target column (100% of the target award) reflect the number of PSUs that would be earned if target performance were achieved (a TSR percentile rank at or above 50%); and amounts in the maximum column (200% of the target awards) reflect the number of PSUs that would be earned if maximum performance were achieved (a TSR percentile rank at or above 80%). The number of PSUs earned is interpolated between threshold, target and maximum performance levels. The number of earned PSUs is capped at 100% of the target award if the Companys TSR is negative during the Performance Period. Earned PSUs become vested on the later of the third anniversary of the grant date and the date on which the Compensation Committee certifies achievement of the performance criteria associated with the award and determines the number of PSUs that have become earned under the award agreement. |
(3) | Represents the number of RSUs awarded under our 2010 Plan. Unless otherwise indicated, awards are scheduled to vest over a three-year period in equal tranches with the first tranche scheduled to vest on the first anniversary of the grant date. |
(4) | Represents the number of stock options awarded under our 2010 Plan. Unless otherwise indicated, awards are scheduled to vest over a three-year period in equal tranches with the first tranche scheduled to vest on the first anniversary of the grant date. |
(5) | Represents the grant date fair value of PSUs, RSUs and stock options, in each case computed in accordance with FASB ASC Topic 718. The aggregate grant date fair value of PSUs was determined based on the probable outcome of the performance conditions associated with such awards on the grant date. The aggregate grant date fair value of RSUs was determined using the closing price of the Common Stock on the grant date. The aggregate grant date value of stock option awards was determined using the Black-Scholes model. |
(6) | Represent the number of RSUs awarded under our 2010 Plan scheduled to vest over a four-year period in equal tranches with the first tranche scheduled to vest on the first anniversary of the grant date. |
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Outstanding Equity Awards at December 31, 2018
The following table sets forth information with respect to unexercised stock option awards, unvested RSUs and unearned PSUs as of December 31, 2018.
Option Awards |
Stock Awards | |||||||||||||||||||||||||||||||||||||||||||
Name | Number
of Underlying Unexercised Options Exercisable (#) |
Number
of Underlying Options (#) |
Option Exercise Price ($) |
Option Expiration Date |
Number of (#) |
Market value ($)(1) |
Equity Incentive Plan Awards: Number of unearned shares that have not vested (#) |
Equity Incentive Plan Awards: Market or payout value of unearned shares that have not vested ($)(2) |
||||||||||||||||||||||||||||||||||||
Dan H. Arnold |
36,774 | | (3) | $ | 34.61 | 12/22/2020 | | $ | | | $ | | ||||||||||||||||||||||||||||||||
27,167 | | (4) | $ | 32.26 | 2/9/2022 | | $ | | | $ | | |||||||||||||||||||||||||||||||||
48,159 | | (5) | $ | 31.60 | 2/22/2023 | | $ | | | $ | | |||||||||||||||||||||||||||||||||
20,232 | | (6) | $ | 54.81 | 2/24/2024 | | $ | | | $ | | |||||||||||||||||||||||||||||||||
25,362 | (7) | $ | 45.55 | 3/6/2025 | | $ | | | $ | | ||||||||||||||||||||||||||||||||||
65,354 | 32,677 | (8) | $ | 19.85 | 2/25/2026 | | $ | | | $ | | |||||||||||||||||||||||||||||||||
41,044 | 82,087 | (9) | $ | 39.48 | 3/13/2027 | | $ | | | $ | | |||||||||||||||||||||||||||||||||
| 77,606 | (10) | $ | 65.50 | 2/23/2028 | | $ | | | $ | | |||||||||||||||||||||||||||||||||
| | $ | | 3,111 | (11) | $ | 190,020 | | $ | | ||||||||||||||||||||||||||||||||||
| | $ | | 4,002 | (8) | $ | 244,442 | | $ | | ||||||||||||||||||||||||||||||||||
| | $ | | 38,809 | (12) | $ | 2,370,454 | | $ | | ||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 70,368 | (13 | ) | $ | 4,298,077 | |||||||||||||||||||||||||||||||||
| | $ | | | $ | | 50,170 | (13 | ) | $ | 3,064,384 | |||||||||||||||||||||||||||||||||
Matthew J. Audette |
17,605 | | (14) | $ | 42.60 | 10/30/2025 | | $ | | | $ | | ||||||||||||||||||||||||||||||||
62,740 | 31,370 | (8) | $ | 19.85 | 2/25/2026 | | $ | | | $ | | |||||||||||||||||||||||||||||||||
9,235 | 18,469 | (9) | $ | 39.48 | 3/13/2027 | | $ | | | $ | | |||||||||||||||||||||||||||||||||
| 15,874 | (10) | $ | 65.50 | 2/23/2028 | | $ | | | $ | | |||||||||||||||||||||||||||||||||
| | $ | | | $ | | | $ | | |||||||||||||||||||||||||||||||||||
| | $ | | 3,111 | (11) | $ | 190,020 | | $ | | ||||||||||||||||||||||||||||||||||
| | $ | | 3,842 | (8) | $ | 234,669 | | $ | | ||||||||||||||||||||||||||||||||||
| | $ | | 5,277 | (9) | $ | 322,319 | | $ | | ||||||||||||||||||||||||||||||||||
| | $ | | 5,131 | (10) | $ | 313,401 | | $ | | ||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 21,110 | (13 | ) | $ | 1,289,399 | |||||||||||||||||||||||||||||||||
| | $ | | | $ | | 13,682 | (13 | ) | $ | 835,697 | |||||||||||||||||||||||||||||||||
Scott Seese |
| 12,850 | (10) | $ | 65.50 | 2/23/2028 | | $ | | | $ | | ||||||||||||||||||||||||||||||||
| | $ | | 11,074 | (15) | $ | 676,400 | | $ | | ||||||||||||||||||||||||||||||||||
| | $ | | 4,153 | (10) | $ | 253,665 | | $ | | ||||||||||||||||||||||||||||||||||
| | $ | | | $ | | $ | 11,076 | (13 | ) | $ | 676,522 | ||||||||||||||||||||||||||||||||
Richard Steinmeier |
| | $ | | 30,143 | (16) | $ | 1,841,134 | $ | | $ | |
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Option Awards |
Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Underlying Unexercised Options Exercisable (#) |
Number of Underlying Options (#) |
Option Exercise Price ($) |
Option Expiration Date |
Number of (#) |
Market value ($)(1) |
Equity Incentive Plan Awards: Number of unearned shares that have not vested (#) |
Equity Incentive Plan Awards: Market or payout value of unearned shares that have not vested ($)(2) |
||||||||||||||||||||||||||||||||||||||||
George B. White |
23,892 | | (17) | $ | 22.08 | 9/14/2019 | | $ | | | $ | | ||||||||||||||||||||||||||||||||||||
15,000 | | (18) | $ | 23.41 | 3/15/2020 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
40,000 | | (3) | $ | 34.61 | 12/22/2020 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
26,901 | | (4) | $ | 32.26 | 2/9/2022 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
25,210 | | (5) | $ | 31.60 | 2/22/2023 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
16,017 | | (6) | $ | 54.81 | 2/24/2024 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
27,936 | | (7) | $ | 45.55 | 3/6/2025 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
6,341 | | (19) | $ | 47.30 | 6/10/2025 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
43,320 | 21,660 | (8) | $ | 19.85 | 2/25/2026 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
5,310 | 10,620 | (9) | $ | 39.48 | 3/13/2027 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
| 9,448 | (10) | $ | 65.50 | 2/23/2028 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
| | $ | | 3,111 | (11) | $ | 190,020 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 2,653 | (8) | $ | 162,045 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 3,034 | (9) | $ | 185,317 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 3,054 | (10) | $ | 186,538 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 12,138 | (13 | ) | $ | 741,389 | |||||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 8,144 | (13 | ) | $ | 497,436 | |||||||||||||||||||||||||||||||||||||
(1) | Amounts were determined by multiplying the number of RSUs by a price per share of our Common Stock of $61.08, the closing price per share of our Common Stock on December 31, 2018, the last business day of 2018. |
(2) | Amounts were determined by multiplying the number of PSUs that would be earned at threshold performance multiplied by the price per share of our Common Stock of $61.08 the closing price per share of our Common Stock on December 31, 2018, the last business day of 2018. |
(3) | These awards vested over a five-year period in equal tranches and became fully vested on December 22, 2015. |
(4) | These awards vested over a five-year period in equal tranches and became fully vested on February 9, 2017. |
(5) | These awards vested over a four-year period in equal tranches and became fully vested on February 22, 2017. |
(6) | These awards vested over a three-year period in equal tranches and became fully vested on February 24, 2017. |
(7) | These awards vested over a three-year period in equal tranches and became fully vested on March 6, 2018. |
(8) | These awards vest over a three-year period in equal tranches beginning on the first anniversary of the grant date. Two tranches of the award vested on the first and second anniversary of the grant date, and the third tranche is scheduled to vest on the third anniversary of the grant date. |
(9) | These awards vest over a three-year period in equal tranches beginning on the first anniversary of the grant date. One tranche of the award vested on the first anniversary of the grant date, and the second and third tranches are scheduled to vest on the second and third anniversaries of the grant date, respectively. |
(10) | These awards vest over a three-year period in three equal tranches beginning on the first anniversary of the grant date. |
(11) | These awards fully vest on the third anniversary of the grant date. |
(12) | These awards vest over a five-year period in three equal tranches beginning on the third anniversary of the grant date. |
(13) | Amounts represent PSUs and assume achievement of performance at maximum levels. PSUs are eligible to become earned PSUs based on the Companys TSR relative to the TSR of the Comparator Group over the Performance Period. The number of PSUs that is earned is determined based on the Companys relative ranking between the 25th and 80th percentile of the Comparator Groups TSR results, and can range from 0% of the target award (if the Companys TSR is less than the 25th percentile of the Comparator Groups TSR results) to 100% of the target award (if the Companys TSR is at the 50th percentile of the Comparator Groups TSR results) to a maximum of 200% of the target award (if the Companys TSR is at or greater than the 80th percentile of the Comparator Groups TSR results). The number of earned PSUs is capped at 100% of |
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Compensation of Named Executive Officers |
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the target award if the Companys TSR is negative during the Performance Period. Earned PSUs become vested on the later of the third anniversary of the grant date and the date on which the Compensation Committee certified achievement of the performance criteria associated with the award and determines the number of PSUs that have become earned under the award agreement. |
(14) | These awards vested over a three-year period in equal tranches and became fully vested on October 30, 2018. |
(15) | These awards vest over a two-year period in equal tranches beginning on the first anniversary of the grant date. One tranche of the award vested on the first anniversary of the grant date, and the second tranche is scheduled to vest on the second anniversary of the grant date. |
(16) | These awards vest over a four-year period in equal tranches beginning on the first anniversary of the grant date. |
(17) | These awards vested over a five-year period in equal tranches and became fully vested on September 14, 2014. |
(18) | These awards vested over a five-year period in equal tranches and became fully vested on March 15, 2015. |
(19) | These awards vested over a three-year period in equal tranches and became fully vested on June 10, 2018. |
2018 Option Exercises and Stock Vested
The following table sets forth the options exercised and stock vested during the year ended December 31, 2018:
Option Awards | Stock Awards | |||||||||||||||||||
Name |
Number of (#) |
Value on Exercise ($)(1) |
Number of (#) |
Value on Vesting ($)(2) |
||||||||||||||||
Dan H. Arnold |
10,000 | $ | 414,244 | (3) | 4,004 | $ | 262,262 | (6) | ||||||||||||
10,000 | $ | 176,840 | (4) | 1,206 | $ | 77,510 | (7) | |||||||||||||
3,226 | $ | 102,200 | (5) | | | |||||||||||||||
Matthew J. Audette |
| $ | | 3,844 | $ | 251,782 | (6) | |||||||||||||
| $ | | 2,639 | $ | 171,509 | (8) | ||||||||||||||
5,867 | $ | 344,041 | (9) | |||||||||||||||||
Scott Seese |
| $ | | 11,074 | $ | 735,092 | (10) | |||||||||||||
Richard Steinmeier |
| $ | | | | |||||||||||||||
George B. White |
25,000 | $ | 1,184,377 | (11) | 2,654 | $ | 173,837 | (6) | ||||||||||||
26,108 | $ | 1,146,663 | (12) | 1,330 | $ | 85,479 | (8) | |||||||||||||
1,518 | $ | 98,655 | (8) | |||||||||||||||||
| $ | | 704 | $ | 50,019 | (13) |
(1) | For purposes of calculating the value realized on the exercise of option awards, we use the market price of our Common Stock at the time the option was exercised. |
(2) | For purposes of calculating the value realized on the vesting of stock awards, we use the closing price of our Common Stock on the vesting date. |
(3) | These options were granted on September 14, 2009, with an exercise price of $22.08 per share and were exercised on March 7, 2018, when the market price was $63.50 per share. |
(4) | These options were granted September 14, 2009, with an exercise price of $22.08 and were exercised on August 1, 2018 at multiple market prices ranging from $66.29 to $66.90 per share. |
(5) | These options were granted on December 22, 2010, with an exercise price of $34.61 per share and were exercised on August 01, 2018, when the market price was $66.29 per share. |
(6) | These RSUs vested on February 25, 2018, on which date the closing price per share of our Common Stock was $65.50. |
(7) | These RSUs vested on March 6, 2018, on which date the closing price per share of our Common Stock was $64.27. |
(8) | These RSUs vested on March 13, 2018, on which date the closing price per share of our Common Stock was $64.99. |
(9) | These RSUs vested on October 30, 2018, on which date the closing price per share of our Common Stock was $58.64. |
(10) | These RSUs vested on August 21, 2018, on which date the closing price per share of our Common Stock was $66.38. |
(11) | These options were granted on February 12, 2009, with an exercise price of $18.04 per share and were exercised on March 13, 2018, when the market price was $65.42 per share. |
(12) | These options were granted on September 14, 2009, with an exercise price of $22.08 per share and were exercised on November 8, 2018, when the market price was $66.00 per share. |
(13) | These RSUs vested on June 10, 2018, on which date the closing price per share of our Common Stock was $71.05 |
52 | 2019 Proxy Statement |
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Compensation of Named Executive Officers |
|
Nonqualified Deferred Compensation for the Year Ended December 31, 2018
The following table sets forth information relating to nonqualified deferred compensation for each NEO for the year ended December 31, 2018:
Name | Executive Contributions Fiscal Year ($) |
Registrant ($) |
Aggregate Earnings Fiscal Year ($)(1) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at December 31, ($) |
|||||||||||||||
Dan H. Arnold(2) |
$ | 1,132,000 | $ | | $ | (267,246 | ) | $ | | $ | 3,121,993 | |||||||||
Matthew J. Audette |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Scott Seese |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Richard Steinmeier |
$ | | $ | | $ | | $ | | $ | | ||||||||||
George B. White |
$ | | $ | | $ | | $ | | $ | | ||||||||||
(1) | Amounts included herein do not constitute above-market or preferential earnings and therefore are not reported as compensation in the Summary Compensation Table above. |
(2) | Amounts included herein relate to Mr. Arnolds participation in the UVEST Plan. For a description of the material terms of the UVEST Plan, please see the discussion in the Compensation Discussion and Analysis under Additional Compensation ElementsNonqualified Deferred Compensation. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2018
Set forth below the table is a description of certain post-employment arrangements with our NEOs, including the severance benefits and change-in-control benefits to which they would have been entitled under the Executive Severance Plan as of December 31, 2018. Amounts reported for the accelerated vesting of stock options and RSUs and PSUs are based on a price per share of our Common Stock of $61.08, the closing price per share of our Common Stock on December 31, 2018, the last business day of 2018. In the case of stock options, amounts reported assume an exercise only if $61.08 per share is greater than the exercise price of the stock option.
Named Executive Officer |
Benefit |
Without Cause or For Good Reason ($) |
Disability, Death, ($) |
Double-Trigger Control ($)(1) |
||||||||||||||||||||||
Dan H. Arnold |
Severance | $ | 800,000 | (2) | $ | | $ | 1,200,000 | (3) | |||||||||||||||||
Bonus | $ | 2,430,000 | (4) | $ | | $ | 2,700,000 | (5) | ||||||||||||||||||
Accelerated Vesting of Stock Options | $ | 2,233,823 | (6) | $ | 3,120,352 | (7) | $ | 3,120,352 | (8) | |||||||||||||||||
Accelerated Vesting of RSUs | $ | 434,462 | (9) | $ | 2,804,916 | (10) | $ | 2,804,916 | (11) | |||||||||||||||||
Accelerated Vesting of PSUs | $ | 1,943,382 | (12) | $ | 1,943,382 | (13) | $ | 1,943,382 | (14) | |||||||||||||||||
Group Benefit Continuation | $ | 26,868 | (15) | $ | | $ | 40,302 | (16) | ||||||||||||||||||
Total | $ | 7,868,535 | $ | 7,868,650 | $ | 11,808,952 | ||||||||||||||||||||
Matthew J. Audette |
Severance | $ | 600,000 | (2) | $ | | $ | 900,000 | (3) | |||||||||||||||||
Bonus | $ | 1,420,000 | (4) | $ | | $ | 1,575,000 | (5) | ||||||||||||||||||
Accelerated Vesting of Stock Options | $ | 1,492,861 | (6) | $ | 1,692,315 | (7) | $ | 1,692,315 | (8) | |||||||||||||||||
Accelerated Vesting of RSUs | $ | 690,387 | (9) | $ | 1,060,410 | (10) | $ | 1,060,410 | (11) | |||||||||||||||||
Accelerated Vesting of PSUs | $ | 569,021 | (12) | $ | 569,021 | (13) | $ | 569,021 | (14) | |||||||||||||||||
Group Benefit Continuation | $ | 26,868 | (15) | $ | | $ | 40,302 | (16) | ||||||||||||||||||
Total | $ | 4,799,137 | $ | 3,321,746 | $ | 5,837,048 |
2019 Proxy Statement |
53 |
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Compensation of Named Executive Officers |
|
Named Executive Officer |
Benefit |
Without Cause or For Good Reason ($) |
Disability, Death, Retirement ($) |
Double-Trigger Control ($)(1) |
||||||||||||||||||||||
Scott Seese |
Severance | $ | 500,000 | (2) | $ | | $ | 750,000 | (3) | |||||||||||||||||
Bonus | $ | 1,120,000 | (4) | $ | | $ | 1,200,000 | (5) | ||||||||||||||||||
Accelerated Vesting of Stock Options | $ | | $ | | $ | | ||||||||||||||||||||
Accelerated Vesting of RSUs | $ | 760,996 | (9) | $ | 930,065 | (10) | $ | 930,065 | (11) | |||||||||||||||||
Accelerated Vesting of PSUs | $ | 112,754 | $ | 112,754 | $ | 112,754 | ||||||||||||||||||||
Group Benefit Continuation | $ | 26,868 | (15) | $ | | $ | 40,302 | (16) | ||||||||||||||||||
Total | $ | 2,520,618 | $ | 1,042,819 | $ | 3,033,121 | ||||||||||||||||||||
Richard Steinmeier |
Severance | $ | 450,000 | (2) | $ | | $ | 675,000 | (3) | |||||||||||||||||
Bonus | $ | 265,000 | (4) | $ | | $ | 318,000 | (5) | ||||||||||||||||||
Accelerated Vesting of Stock Options | $ | | $ | | $ | | ||||||||||||||||||||
Accelerated Vesting of RSUs | $ | 460,238 | (9) | $ | 1,841,134 | (10) | $ | 1,841,134 | (11) | |||||||||||||||||
Accelerated Vesting of PSUs | $ | | $ | | $ | | ||||||||||||||||||||
Group Benefit Continuation | $ | 13,152 | (15) | $ | | $ | 19,728 | (16) | ||||||||||||||||||
Total | $ | 1,188,390 | $ | 1,841,134 | $ | 2,853,862 | ||||||||||||||||||||
George B. White |
Severance | $ | 500,000 | (2) | $ | | $ | 750,000 | (3) | |||||||||||||||||
Bonus | $ | 875,000 | (4) | $ | | $ | 937,500 | (5) | ||||||||||||||||||
Accelerated Vesting of Stock Options | $ | 1,007,738 | (6) | $ | 1,122,434 | (7) | $ | 1,122,434 | (8) | |||||||||||||||||
Accelerated Vesting of RSUs | $ | 506,964 | (9) | $ | 723,920 | (10) | $ | 723,920 | (11) | |||||||||||||||||
Accelerated Vesting of PSUs | $ | 330,016 | (12) | $ | 330,016 | (13) | $ | 330,016 | (14) | |||||||||||||||||
Group Benefit Continuation | $ | 26,868 | (15) | $ | | $ | 40,302 | (16) | ||||||||||||||||||
Total | $ | 3,246,586 | $ | 2,176,370 | $ | 3,904,172 | ||||||||||||||||||||
(1) | Our Executive Severance Plan provides benefits on a double trigger basis, requiring a termination of employment by the Company without cause or a termination by the executive for good reason within 12 months following a change-in-control. All amounts reported in this column assume both that a change-in-control occurred on December 31, 2018 and that the executives employment was terminated by the Company without cause or by the executive for good reason on December 31, 2018. |
(2) | Represents continued payment under our Executive Severance Plan of the NEOs base salary in effect on the separation date for 12 months. |
(3) | Represents continued payment under our Executive Severance Plan of the NEOs base salary in effect on the separation date for 18 months. |
(4) | Represents payment under our Executive Severance Plan of an amount equal to the bonus paid (or payable) to the NEO for the most recently completed calendar year. |
(5) | Represents payment under our Executive Severance Plan of an amount equal to 150% of the target bonus amount for the calendar year in which the NEOs employment is terminated. |
(6) | Represents the value of the unvested portion of any outstanding stock options scheduled to vest based solely on the passage of time within 12 months following separation, the vesting of which would have been accelerated under our Executive Severance Plan. |
(7) | Represents the value of the unvested portion all stock options, the vesting of which would have been accelerated upon termination of employment due to death under the terms of the executives stock option agreement. |
(8) | Represents the value of the unvested portion of all stock options, the vesting of which would have been accelerated under the Executive Severance Plan. |
(9) | Represents the value of shares of Common Stock in respect of the unvested portion of any outstanding RSUs scheduled to vest based solely on the passage of time within 12 months following a termination of employment, the vesting of which would have been accelerated under our Executive Severance Plan. |
(10) | Represents the value of shares of Common Stock in respect of all unvested RSUs, the vesting of which would have been accelerated upon a termination of employment due to death (and, for RSUs granted subsequent to February 23, 2017, upon a termination of employment due to death or disability) under the terms of the executives RSU agreement. |
54 | 2019 Proxy Statement |
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Compensation of Named Executive Officers |
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(11) | Represents the value of shares of Common Stock in respect of all unvested RSUs, the vesting of which would have been accelerated under our Executive Severance Plan. |
(12) | Represents the value of unvested PSUs assuming the target number of shares of Common Stock in respect of such PSUs became earned and vested on December 31, 2018, with such amount pro-rated based on the number of days that the executive was employed during the Performance Period. Under our Executive Severance Plan, upon a qualifying termination of employment, the actual number of shares of Common Stock that will be earned and vested in respect of PSUs, if any, will be dependent on actual performance measured at the end of the Performance Period, and will be pro-rated based on the number of days that the executive was employed during the Performance Period. |
(13) | Represents the value of unvested PSUs assuming the target number of shares of Common Stock in respect of such PSUs became earned and vested on December 31, 2018, with such amount pro-rated based on the number of days that the executive was employed during the Performance Period. Under the executives PSU agreement, upon termination of employment due to death, disability or retirement, the actual number of shares of Common Stock that will be earned and vested in respect of PSUs, if any, will be dependent on actual performance measured at the end of the Performance Period, and will be pro-rated based on the number of days that the executive was employed during the Performance Period. |
(14) | Represents the value of unvested PSUs assuming the target number of shares of Common Stock in respect of such PSUs became earned and vested on December 31, 2018, with such amount pro-rated based on the number of days that the executive was employed during the Performance Period. |
(15) | Represents payments under our Executive Severance Plan of amounts equal to 100% of the employer portion of premiums for continued health and dental plan participation under COBRA for the NEO and his qualified beneficiaries for a one-year period. |
(16) | Represents payments under our Executive Severance Plan of an amount equal to 100% of the employer portion of premiums for continued health and dental plan participation under COBRA for the NEO and his qualified beneficiaries for an 18-month period. |
Executive Severance Plan
2019 Proxy Statement |
55 |
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Compensation of Named Executive Officers |
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56 | 2019 Proxy Statement |
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Compensation of Named Executive Officers |
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2019 Proxy Statement |
57 |
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Compensation of Named Executive Officers |
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58 | 2019 Proxy Statement |
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Compensation of Named Executive Officers |
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2019 Proxy Statement |
59 |
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Security Ownership of Certain Beneficial Owners and Management |
|
Security Ownership of Certain Beneficial Owners and Management
Name of Beneficial Owner
|
Directly
or (#)
|
Right
to (#)(1)
|
Other (#)
|
Total Amount and Nature of Beneficial (#)
|
Percentage of Common Stock (%)
|
|||||||||||||||||||||
5% Stockholders
|
||||||||||||||||||||||||||
|
Janus Henderson Group PLC(2) |
|
10,112,890
|
|
|
12.0%
|
| |||||||||||||||||||
The Vanguard Group, Inc.(3)
|
|
10,000,000
|
|
|
11.9%
|
| ||||||||||||||||||||
Officers and Directors
|
||||||||||||||||||||||||||
Dan H. Arnold
|
|
190,037
|
|
|
320,710
|
|
|
510,747
|
|
|
*
|
| ||||||||||||||
Matthew J. Audette
|
|
21,256
|
|
|
138,116
|
|
|
159,372
|
|
|
*
|
| ||||||||||||||
Scott Seese
|
|
6,860
|
|
|
4,284
|
|
|
11,144
|
|
|
*
|
| ||||||||||||||
Richard Steinmeier
|
|
|
|
|
|
|
||||||||||||||||||||
George B. White
|
|
21,475
|
|
|
234,673
|
|
|
256,148
|
|
|
*
|
| ||||||||||||||
H. Paulett Eberhart
|
|
11,262
|
|
|
2,489
|
|
|
13,751
|
|
|
*
|
| ||||||||||||||
William F. Glavin, Jr.
|
|
6,580
|
|
|
2,489
|
|
|
9,069
|
|
|
*
|
| ||||||||||||||
Allison H. Mnookin
|
|
2,131
|
|
|
|
|
|
2,131
|
|
|||||||||||||||||
Anne M. Mulcahy
|
|
22,803
|
|
|
|
|
|
22,803
|
|
|
*
|
| ||||||||||||||
James S. Putnam(4)
|
|
124,858
|
|
|
(4
|
)
|
|
|
|
|
124,858
|
|
|
*
|
| |||||||||||
James Riepe(5)
|
|
125,407
|
|
|
(5
|
)
|
|
2,489
|
|
|
127,896
|
|
|
*
|
| |||||||||||
Richard P. Schifter
|
|
38,892
|
|
|
2,489
|
|
|
41,381
|
|
|
*
|
| ||||||||||||||
Corey E. Thomas
|
|
|
|
|
|
|
||||||||||||||||||||
All current directors and executive officers as a group |
|
618,727 |
|
1,233,773 |
|
1,852,500 |
|
|
2.2%
|
| ||||||||||||||||
* Less than 1%
(1) | Consists of Common Stock which the named individual or group has the right to acquire through (i) the exercise of vested stock options and (ii) the vesting of RSUs, the vesting of deferred stock units and/or the vesting and exercise of stock options within 60 days of March 8, 2019. |
60 | 2019 Proxy Statement |
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|
Security Ownership of Certain Beneficial Owners and Management |
|
(2) | Consists of shares of Common Stock held by Janus Henderson Group PLC (Janus Henderson). Janus Henderson has an indirect 97.11% ownership stake in INTECH Investment Management LLC (INTECH) and a direct 100% ownership stake in Janus Capital Management LLC (Janus Capital), Perkins Investment Management LLC (Perkins), Geneva Capital Management LLC (Geneva), Henderson Global Investors Limited (HGIL), Janus Henderson Investors Australia Institutional Funds Management Limited (HGIAIFML) and Henderson Global Investors North America Inc.(HGINA), (each an Asset Manager and collectively as the Asset Managers). Due to the above ownership structure, holdings for the Asset Managers are aggregated. Each Asset Manager is an investment adviser registered or authorized in its relevant jurisdiction and each furnishes investment advice to various fund, individual and/or institutional clients (collectively, Managed Portfolios). As a result of its role as investment adviser or sub-adviser to the Managed Portfolios, Janus Capital may be deemed to be the beneficial owner of 9,895,227 shares held by such Managed Portfolios. However, Janus Capital does not have the right to receive any dividends from, or the proceeds from the sale of, the securities held in the Managed Portfolios and disclaims any ownership associated with such rights. As a result of its role as investment adviser or sub-adviser to the Managed Portfolios, INTECH may be deemed to be the beneficial owner of 146,441 shares held by such Managed Portfolios. However, INTECH does not have the right to receive any dividends from, or the proceeds from the sale of, the securities held in the Managed Portfolios and disclaims any ownership associated with such rights. As a result of its role as investment adviser or sub-adviser to the Managed Portfolios, JCIL may be deemed to be the beneficial owner of 71,222 shares held by such Managed Portfolios. However, JCIL does not have the right to receive any dividends from, or the proceeds from the sale of, the securities held in the Managed Portfolios and disclaims any ownership associated with such rights. This information is based on a Schedule 13G/A filed on February 11, 2019 with the SEC. The address of Janus Henderson is 201 Bishopsgate EC2M 3AE, United Kingdom. |
(3) | Consists of shares of Common Stock held by The Vanguard Group, Inc. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 39,000 shares, and Vanguard Investments Australia, LTD., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 18,702 shares. This information is based on a Schedule 13G/A filed on February 11, 2019 with the SEC. The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355. |
(4) | Mr. Putnam holds 111,697.5 shares of Common Stock through James S. Putnam TTEE for Putnam Family Trust Dated 1699 Separate Property Trust. |
(5) | Consists of (i) 89,436 shares of Common Stock held directly and (ii) 35,971 shares of Common Stock held through Stone Barn, LLC. |
2019 Proxy Statement |
61 |
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Section 16(a) Beneficial Ownership Reporting Compliance |
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by regulation of the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of the copies of such forms or written representations from certain reporting persons received by us with respect to 2018, we believe that our executive officers and directors and persons who own more than 10% of a registered class of our equity securities have complied with all applicable filing requirements.
62 | 2019 Proxy Statement |
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Proposal 2: Ratification of the Appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as Our Independent Registered Public Accounting Firm |
|
Proposal 2: Ratification of the Appointment of Deloitte & Touche LLP
by the Audit Committee of the Board of Directors as
Our Independent Registered Public Accounting Firm
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
Fees Paid to Independent Registered Public Accounting Firm
Aggregate fees for professional services rendered by Deloitte as of and for the years ended December 31, 2018 and 2017 were as follows:
Type of Services
|
2018
|
2017
|
||||||||||
Audit Fees(1) |
$ | 3,587,800 | $ | 3,637,908 | ||||||||
Audit Related Fees(2) |
328,000 | 225,526 | ||||||||||
Tax Fees(3) |
592,500 | 111,686 | ||||||||||
All Other Fees(4) |
| 411,330 | ||||||||||
Total |
$ | 4,508,300 | $ | 4,386,450 | ||||||||
(1) | These fees include services performed in connection with the audit of our annual consolidated financial statements included in our annual reports on Form 10-K; the review of our interim condensed consolidated financial statements as included in our quarterly reports on Form 10-Q; and services that are normally provided by Deloitte in connection with statutory and regulatory filings or engagements. The 2018 and 2017 columns include amounts billed in 2019 and 2018, respectively, related to 2018 and 2017 audit fees, respectively. |
(2) | These fees are for services provided such as accounting consultations and any other audit and attestation services. The fees include amounts incurred by the Company and paid to Deloitte for services in connection with our financial intermediary compliance and controls assessment and attest report. |
(3) | These fees include all services performed for non-audit related tax advice, planning, and compliance services. The fees include amounts incurred by the Company and paid to Deloitte for services, which in 2018 and 2017 consisted of tax compliance and advisory services. |
(4) | These fees include fees related to non-audit services regarding an assessment of the Companys consolidated audit trail program and its cyber security program and infrastructure. |
Pre-Approval Policies and Procedures
64 | 2019 Proxy Statement |
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|
Proposal 2: Ratification of the Appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as Our Independent Registered Public Accounting Firm |
|
2019 Proxy Statement |
65 |
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|
Report of the Audit Committee of the Board of Directors |
|
Report of the Audit Committee of the Board of Directors
The Audit Committee of the Board of Directors (the Audit Committee) is comprised of the four directors named below. Each member of the Audit Committee is an independent director (as independence is defined in the listing standards of the Nasdaq Global Select Market and Rule 10A-3 under the Exchange Act with respect to membership on audit committees).
The Audit Committee has adopted a written charter, which has been approved by the Board of Directors. The Audit Committee has reviewed and discussed the Companys audited consolidated financial statements with management, which has primary responsibility for the consolidated financial statements, and with the Companys independent registered public accounting firm. The Companys independent registered public accounting firm is responsible for expressing opinions on the conformity of the Companys audited consolidated financial statements with generally accepted accounting principles and on the Companys internal controls over financial reporting. The Audit Committee has discussed with the Companys independent registered public accounting firm, which was Deloitte & Touche LLP and the member firms of Deloitte Touche Tohmatsu (collectively referred to as Deloitte) for 2018 and 2017, the matters that are required to be discussed by applicable standards of the Public Company Accounting Oversight Board (PCAOB), including Auditing Standard 1301, Communications with Audit Committees, as adopted by the PCAOB, as well as Rule 2-07 of Regulation S-X of the SEC-- Communication with Audit Committees. Deloitte has also provided to the Audit Committee their communication required by PCAOB Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence, and the Audit Committee discussed with Deloitte the firms independence. The Audit Committee also considered and determined the provision by Deloitte of non-audit related services in 2017, which consisted of tax advisory services, an assessment of the Companys consolidated audit trail program and cyber incident response training, is compatible with the independence standard. Based on the foregoing review and discussions, the Audit Committee recommended to the Board of Directors that the consolidated financial statements audited by Deloitte for 2018 and 2017 be included in the Companys Annual Report on Form 10-K for 2018, and the Committee has appointed Deloitte as the Companys independent registered public accounting firm for 2019.
James S. Riepe, Chair H. Paulett Eberhart William F. Glavin, Jr. James S. Putnam |
March 29, 2019 |
66 | 2019 Proxy Statement |
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|
Proposal 3: Advisory Vote on Named Executive Officer Compensation |
|
Proposal 3: Advisory Vote on Named Executive Officer Compensation
The Compensation Discussion and Analysis beginning on page 28 of this proxy statement describes our executive compensation program and the compensation decisions that the Compensation Committee and Board of Directors made in 2018 with respect to the compensation of our named executive officers. The Board of Directors is asking stockholders to cast a non-binding, advisory vote FOR the following resolution:
RESOLVED, that the compensation paid to the Companys named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.
|
As we describe in the Compensation Discussion and Analysis, our named executive officer compensation is designed to closely align the interests of our named executive officers with those of our stockholders on both a short-term and long-term basis, and to attract and retain key executives critical to our success.
We urge stockholders to read the Compensation Discussion and Analysis beginning on page 28 of this proxy statement and to review the 2018 Summary Compensation table and related compensation tables and discussion, appearing on pages 47 through 55, which provide detailed information on the Companys compensation policies and practices. We believe stockholders should focus on the following areas when reviewing our named executive officer compensation:
Pay for Performance |
Annual Cash Bonus Opportunities. We provide annual cash bonus awards in order to tie a significant portion of the overall cash compensation of each of our NEOs to the achievement of annually-established, key short-term corporate objectives and financial goals of the Company, as well as individual performance goals. At the beginning of 2018, the Compensation Committee established a bonus funding framework based on an objective financial performance target and the collective achievement of the Companys five corporate goals for 2018. Each NEOs individual target award amount was set by the Compensation Committee by reference to market compensation for comparable positions within our peer group as well as the nature of the NEOs role and responsibilities. By emphasizing executives contributions to the Companys overall performance rather than focusing only on their individual business or function, we believe that these cash bonuses provided a significant incentive to our NEOs to work towards achieving our overall Company objectives. |
Long-Term Incentives. The purpose of our long-term equity incentive program is to promote achievement of goals that drive long-term stockholder value and retain key executives. We provide stock-based, long-term compensation to our NEOs through equity awards under our stockholder-approved equity plans. We believe this long-term incentive compensation motivates our NEOs to sustain longer-term financial operational performance and rewards them when such efforts lead to increases in stockholder value. |
Alignment with Long-Term Stockholder Interests |
Our executive compensation is weighted towards variable, at-risk pay in the form of annual and long-term incentives, with a large portion of executive compensation tied to long-term performance. In addition, we have adopted: |
Equity Ownership Guidelines. We focus our executives on long-term stockholder value by requiring that all executive officers own a significant amount of our equity.
|
2019 Proxy Statement |
67 |
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Proposal 3: Advisory Vote on Named Executive Officer Compensation |
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Performance-Based LTI Vehicles. In 2018, equity grants to our president and chief executive officer consisted of 50% PSUs and 50% stock options (by grant date value) and equity grants to our other NEOs (other than Mr. Steinmeier, who received a sign-on grant of RSUs after commencing employment with us in August 2018) consisted of 40% PSUs, 30% stock options and 30% RSUs. We believe that this blended approach aligns with our pay-for-performance principles and provides appropriate incentives for long-term stock value creation. The use of stock options is aligned with stock appreciation on an absolute basis and the use of PSUs puts appropriate focus on long-term alignment and pay relative both to market peers and stockholder returns. |
Recoupment Policy. We have adopted a recoupment policy that permits the Compensation Committee, in the event of a restatement of the Companys financial statements due to material noncompliance with financial reporting requirements under the securities laws, to review the annual cash bonuses, performance-based compensation and time-based equity and equity-based awards awarded or paid to executive officers during the three-year period preceding the announcement by the Company of its obligation to restate its financial statements. If the amount of the annual cash bonuses or performance-based compensation received would have been lower had the level of achievement of applicable financial performance goals been calculated based on such restated financial results, the Compensation Committee may seek reimbursement from any of the covered executives in the amount of the excess compensation awarded or paid. |
Anti-Hedging and Anti-Pledging Policy. We believe that hedging transactions may permit executives to own Company securities obtained through our executive compensation program or otherwise without the full risks and rewards of ownership. When that occurs, an executive may no longer have the same objectives as the Companys other stockholders. As a result, we have adopted a policy, included within our Insider Trading Policy, which prohibits hedging or monetization transactions by our executives, including through the use of puts and call options, collars, exchange funds, prepaid variable forwards, and equity swaps. We also prohibit executives from holding Company securities in a margin account, because a margin or foreclosure sale may occur when an executive is aware of material nonpublic information or otherwise not permitted to trade.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
68 | 2019 Proxy Statement |
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Other Information |
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Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including the financial statements and financial statement schedules, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available on our website at www.lpl.com or on the website maintained by the SEC at www.sec.gov. Printed copies of these materials are available free of charge (except for the costs of duplication and mailing in the case of exhibits to such documents) to stockholders who request them in writing from our corporate secretary at LPL Financial Holdings Inc., 75 State Street, 22nd Floor, Boston Massachusetts 02109, or by calling our offices at (617) 423-3644, extension 4574. Information on our website or hyperlinked to it is not incorporated by reference into this proxy statement.
70 | 2019 Proxy Statement |
Your vote matters - heres how to vote! You may vote online or by phone instead of mailing this card. | ||||||||
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Votes submitted electronically must be received by 11:59 p.m., Eastern Time, on May 7, 2019. | |||||||
Online | ||||||||
Go to www.envisionreports.com/LPLA or scan the QR code login details are located in the shaded bar below. | ||||||||
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Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada. | |||||||
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. |
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q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
A | Proposals The Board of Directors recommends a vote FOR all nominees in Proposal 1 and FOR Proposals 2 and 3. |
1. | Elect the nine nominees named in the proxy statement to the Board of Directors. |
For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||
01 - Dan H. Arnold | ☐ | ☐ | ☐ | 02 - H. Paulett Eberhart | ☐ | ☐ | ☐ | 03 - William F. Glavin, Jr. | ☐ | ☐ | ☐ | |||||||||||||||
04 - Allison H. Mnookin | ☐ | ☐ | ☐ | 05 - Anne M. Mulcahy | ☐ | ☐ | ☐ | 06 - James S. Putnam | ☐ | ☐ | ☐ | |||||||||||||||
07 - James S. Riepe | ☐ | ☐ | ☐ | 08 - Richard P. Schifter | ☐ | ☐ | ☐ | 09 - Corey E. Thomas | ☐ | ☐ | ☐ |
For | Against | Abstain | For | Against | Abstain | |||||||||||||||
2. | Ratify the appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2019. | ☐ | ☐ | ☐ | 3. | Approve, in an advisory vote, the compensation paid to the Companys named executive officers. | ☐ | ☐ | ☐ |
B | Authorized Signatures This section must be completed for your vote to count. Please date and sign below. |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian or custodian, please give full title.
Date (mm/dd/yyyy) Please print date below. | Signature 1 Please keep signature within the box. | Signature 2 Please keep signature within the box. | ||||||
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030MAE
If you plan to attend the 2019 Annual Meeting of Stockholders, please be sure to RSVP via email to lplfinancialannualmeeting@lpl.com. Please include your name and phone number in your email. A confirmation, including driving directions and additional meeting information, will be emailed to registered attendees.
Important notice regarding the Internet availability of proxy materials for the 2019 Annual Meeting of Stockholders:
The materials are available at: www.envisionreports.com/LPLA
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q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
Notice of 2019 Annual Meeting of Stockholders
Proxy Solicited by the Board of Directors for the 2019 Annual Meeting of Stockholders May 8, 2019
1055 LPL Way, Fort Mill, SC 29715
Matthew J. Audette, Michelle B. Oroschakoff and Gregory M. Woods, and each of them with power to act without the other and with power of substitution (the Proxies), are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the 2019 Annual Meeting of Stockholders (the Annual Meeting) of LPL Financial Holdings Inc. (the Company) to be held on May 8, 2019 or at any postponement or adjournment thereof.
Shares represented by this proxy will be voted as directed by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR all nominees in Proposal 1 and FOR Proposals 2 and 3.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting.
(Items to be voted appear on reverse side)
C | Non-Voting Items |
Change of Address Please print new address below.
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Comments Please print your comments below.
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Meeting Attendance | ||||||
Mark box to the right if you plan to attend the Annual Meeting. |
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