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.           )

 

 

 

 

 

 

 

 

April 11, 2018

Chicago, Illinois

 

Dear Shareholder:

 

It is with great pleasure that we invite you to our 2018 Annual Meeting of Shareholders. The meeting will be held on May 10, 2018 at 35 East Wacker Drive, Suite 260, Chicago, Illinois at 10:00 a.m. Central Time.

 

Our formal agenda for this year’s meeting is to vote on the election of directors; to vote, on an advisory basis, on 2017 executive compensation; and to ratify the selection of independent auditors for 2018. In addition, we will report to you the highlights of 2017 and discuss the outlook for our business in 2018.

 

Whether or not you plan to attend the meeting, your vote on these matters is important to us. Shareholders of record can vote their shares via the Internet, by using a toll‑free telephone number or by requesting and completing a proxy card and mailing it in the return envelope provided. If you hold shares through your broker or other intermediary, that person or institution will provide you with instructions on how to vote your shares.

 

If you are a beneficial holder of our shares, we urge you to give voting instructions to your broker so that your vote can be counted. This is especially important since the New York Stock Exchange does not allow brokers to cast votes with respect to the election of directors or the advisory vote on executive compensation unless they have received instructions from the beneficial owner of shares.

 

We look forward to seeing you at the meeting.

 

 

 

NOTICE OF ANNUAL MEETING

 

April 11, 2018

Chicago, Illinois

 

TO THE SHAREHOLDERS OF ENVESTNET, INC.:

 

The 2018 Annual Meeting of Shareholders of Envestnet, Inc. will be held on May 10, 2018, at 10:00 a.m. Central Time at 35 East Wacker Drive, Suite 260, Chicago, Illinois, for the following purposes:

 

 

 

 

 

Only shareholders of record, as shown by the transfer books of Envestnet, at the close of business on March 16, 2018, are entitled to notice of, and to vote at, the Annual Meeting.

 

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE VOTE AS PROMPTLY AS POSSIBLE VIA THE INTERNET OR BY TELEPHONE IN ACCORDANCE WITH THE INSTRUCTIONS IN YOUR PROXY MATERIALS. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. FOR FURTHER INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ATTACHED PROXY STATEMENT.

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

ENVESTNET, INC.

35 East Wacker Drive

Suite 2400

Chicago, Illinois 60601

April 11, 2018

 

 

PROXY STATEMENT

 

 

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

 

Why has this proxy statement been made available?

 

Our Board of Directors (the “Board”) is soliciting proxies for use at our Annual Meeting of Shareholders to be held on May 10, 2018, and any adjournments or postponements of the meeting. The meeting will be held at 10:00 a.m. Central Time at 35 East Wacker Drive, Suite 260, Chicago, Illinois. This proxy statement and the accompanying form of proxy are being mailed to shareholders on or about April 11, 2018.

 

This proxy statement summarizes the information you need to vote at the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares.

 

What proposals will be voted on at the Annual Meeting?

 

The following proposals are scheduled to be voted on at the Annual Meeting:

 

 

 

 

Envestnet’s Board recommends that you vote your shares “FOR” each of the nominees to the Board, “FOR” the advisory vote on executive compensation and “FOR” the ratification of the selection of KPMG LLP as our independent auditors for 2018.

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting

To Be Held on May 10, 2018

 

Are proxy materials available on the Internet?

 

Yes. Our proxy statement for the 2018 Annual Meeting, form of proxy card and 2017 Annual Report are available at www.envestnet.com.

 

Who is entitled to vote?

 

March 16, 2018 is the record date for the Annual Meeting. If you owned our common stock at the close of business on March 16, 2018, you are entitled to vote. On that date, we had 45,381,615 shares of our common stock outstanding and entitled to vote at the Annual Meeting. Our common stock is our only outstanding class of stock. The closing price of our common stock on March 16, 2018 on the New York Stock Exchange was $57.50.

 

How many votes do I have?

 

You have one vote for each share of our common stock that you owned at the close of business on March 16, 2018.

 

The proxy card indicates the number of shares of common stock you are entitled to vote.

 

What is the difference between holding shares as a shareholder of record and as a beneficial owner?

 

Many of our shareholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially.

 

Shareholder of Record

 

If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares, the shareholder of record and these proxy materials are being sent to you directly. As the shareholder of record, you have the right to grant your voting proxy directly or to vote in person at the Annual Meeting. You may also vote by telephone or via the Internet as described below under the heading “Information About the Annual Meeting and Voting—May I vote by telephone or via the Internet?” or you may vote your proxy card by mail.

 

Beneficial Owner

 

If your shares are held in a brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and our proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your broker or nominee on how to vote your shares and are also invited to attend the Annual Meeting. However, since you are not the shareholder of record, you may only vote these shares in person at the Annual Meeting if you follow the instructions described below under the heading “Information About the Annual Meeting and Voting—How do I vote in person at the Annual Meeting?” and your broker or nominee has provided a voting instruction card for you to use in directing your broker or nominee as to how to vote your shares. If you would like to vote by telephone or on the Internet, you should read the information described below under the heading “Information About the Annual Meeting and Voting—May I vote by telephone or via the Internet?”

 

How do I vote by proxy if I am a shareholder of record?

 

If you are a shareholder of record, you must properly submit your proxy card (by telephone, via the Internet or by mail) so that it is received by us in time to vote. Your “proxy” (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card (including electronic signatures in the case of Internet or telephonic voting) but do not make specific choices, your proxy will vote your shares as recommended by the Board:

 

 

 

 

If any other matter is presented, your proxy will be voted in accordance with the best judgment of the individuals named on the proxy card. As of the date of printing this proxy statement, we knew of no matters that needed to be acted on at the Annual Meeting, other than those discussed in this proxy statement.

 

How do I give voting instructions if I am a beneficial owner?

 

If you are a beneficial owner of shares, the broker will ask you how you want your shares to be voted. If you give the broker instructions, the broker will vote your shares as you direct. If your broker does not receive instructions from you about how your shares are to be voted, one of two things can happen, depending on the type of proposal. Pursuant to rules of the New York Stock Exchange, which we refer to as the NYSE, brokers have discretionary power to vote your shares with respect to “routine” matters, but they do not have discretionary power to vote your shares on “non‑routine” matters. Brokers holding shares beneficially owned by their clients do not have the ability to cast votes with respect to the election of directors unless they have received instructions from the beneficial owner of the shares. It is therefore important that you provide instructions to your broker if your shares are beneficially held by a broker so that your vote with respect to directors and on the advisory vote on executive compensation, and any other matters treated as non‑routine by the NYSE, is counted.

 

May I vote by telephone or via the Internet?

 

Yes. If you are a shareholder of record, you have a choice of voting over the Internet, voting by telephone using a toll‑free telephone number or voting by requesting and completing a proxy card and mailing it in the return envelope provided. We encourage you to vote by telephone or over the Internet because your vote is then tabulated faster than if you mailed it. Please note that there are separate telephone and Internet arrangements depending on whether you are a shareholder of record (that is, if you hold your stock in your own name), or whether you are a beneficial owner and hold your shares in “street name” (that is, if your stock is held in the name of your broker or bank).

 

If you are a shareholder of record, you may vote by telephone, or electronically via the Internet, or by following the instructions provided on the proxy card.

 

If you are a beneficial owner and hold your shares in “street name,” you will need to contact your bank or broker to determine whether you will be able to vote by telephone or electronically through the Internet.

 

The telephone and Internet voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to give their voting instructions and to confirm that shareholders’ instructions have been recorded properly. If you vote via the Internet, you may incur costs, such as usage charges from Internet access providers and telephone companies. You will be responsible for those costs.

 

Whether or not you plan to attend the Annual Meeting, we urge you to vote. Voting by telephone or over the Internet or returning your proxy card by mail will not affect your right to attend the Annual Meeting and vote.

 

May I revoke my proxy or my voting instructions?

 

Yes. If you change your mind after you vote, if you are a shareholder of record, you may revoke your proxy by following any of the procedures described below. To revoke your proxy:

 

 

 

 

If you are a beneficial owner and hold your shares in “street name,” you will need to contact your bank or broker to determine how to revoke your voting instructions.

 

If you wish to revoke your proxy or voting instructions, you must do so in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the vote is taken.

 

How do I vote in person at the Annual Meeting?

 

You may vote shares held directly in your name as the shareholder of record in person at the Annual Meeting. If you choose to vote your shares in person at the Annual Meeting, please bring proof of identification. Shares held in “street name” may be voted in person by you only if you obtain a signed proxy from the shareholder of record giving you the right to vote the shares. If your shares are held in the name of your broker, bank or other nominee, you must bring to the Annual Meeting an account statement or letter from the broker, bank or other nominee indicating that you are the owner of the shares and a signed proxy from the shareholder of record giving you the right to vote the shares. The account statement or letter must show that you were the beneficial owner of the shares on March 16, 2018.

 

Even if you plan to attend the Annual Meeting, Envestnet recommends that you vote your shares in advance as described above so that your vote will be counted if you later decide not to attend the Annual Meeting.

 

What votes need to be present to hold the Annual Meeting?

 

To have a quorum for our Annual Meeting, the holders of a majority of our shares of common stock outstanding as of March 16, 2018 must be present in person or represented by proxy at the Annual Meeting.

 

What vote is required to approve each proposal?

 

Directors are elected by a plurality vote, which means that the two nominees for Class I directors receiving the most affirmative votes will be elected. However, if the majority of the votes cast for a director are withheld, then notwithstanding the valid election of such director, our by‑laws provide that such director will voluntarily tender his resignation for consideration by our Board. Our Board will determine whether to accept the resignation of such director. All other matters submitted for shareholder approval require the affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote.

 

How are votes counted?

 

In the election of Envestnet directors, your vote may be cast “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees. Your vote may be cast “FOR” or “AGAINST” or you may “ABSTAIN” with respect to the proposals relating to the advisory vote on executive compensation and the ratification of Envestnet’s independent auditors. If you sign (including electronic signatures in the case of Internet or telephonic voting) your proxy card with no further instructions, your shares will be voted in accordance with the recommendations of the Board. If you sign (including electronic signatures in the case of Internet or telephonic voting) your broker voting instruction card with no further instructions, your shares will be voted in the broker’s discretion with respect to routine matters but will not be voted with respect to non‑routine matters. As described in “How do I give voting instructions if I am a beneficial holder?” the election of directors and the advisory vote on executive compensation are considered non‑routine matters. We will appoint one or more inspectors of election to count votes cast in person or by proxy.

 

What is the effect of broker non‑votes and abstentions?

 

A broker “non‑vote” occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.

 

Common stock owned by shareholders electing to abstain from voting with respect to any proposal will be counted towards the presence of a quorum. Common stock that is beneficially owned and is voted by the beneficiary through a broker will be counted towards the presence of a quorum, even if there are broker non‑votes with respect to some proposals, as long as the broker votes on at least one proposal. Broker “non‑votes” will not be considered present and voting with respect to elections of directors or other matters to be voted upon at the Annual Meeting. Therefore, broker “non‑votes” will have no direct effect on the outcome of any of the proposals. Abstentions will be considered present and voting and will have the impact of a vote against a proposal.

 

Are there any voting agreements with respect to our common stock?

 

No.

 

What are the costs of soliciting these proxies and who will pay them?

 

Envestnet will pay all the costs of soliciting these proxies. Our directors and employees may also solicit proxies by telephone, by fax or other electronic means of communication, or in person. We will reimburse banks, brokers, nominees and other fiduciaries for the expenses they incur in forwarding the proxy materials to you.

 

Where can I find the voting results?

 

We will publish the voting results in a Form 8‑K that we will file with the U.S. Securities and Exchange Commission (“SEC”), within four business days after the Annual Meeting. You can find the Form 8‑K on our website at www.envestnet.com.

 

Will Envestnet’s independent auditors attend the Annual Meeting?

 

Representatives of KPMG LLP will attend the Annual Meeting and will have the opportunity to make a statement if they wish and will be available to respond to questions from shareholders.

 

Do directors attend the Annual Meeting?

 

Directors are encouraged to attend all meetings of shareholders called by Envestnet. All seven of our independent directors, who were members of our Board at the time, attended the 2017 Annual Meeting.

 

Can a shareholder, employee or other interested party communicate directly with our Board? If so, how?

 

Our Board provides a process for shareholders, employees or other interested parties to send communications to our Board. Shareholders, employees or other interested parties wanting to contact the Board, the independent directors, the Chairman of the Board, the chairperson of any Board committee or any other director, as to accounting or auditing matters or any other matters may send an email to corpsecy@envestnet.com. Alternatively, shareholders, employees or other interested parties may send written communications to the Board c/o Corporate Secretary, 35 East Wacker Drive, Suite 2400, Chicago, Illinois, 60601, although mail is not as prompt as e‑mail. Communication with the Board may be anonymous. The Secretary will forward all communications to the Board, to the Chairperson of the Audit Committee or the Chairperson of the Nominating and Governance Committee, who will then determine when it is appropriate to distribute such communications to other members of the Board or to management.

 

Whom should I call if I have any questions?

 

If you have any questions about the Annual Meeting or voting, please contact Shelly O’Brien, our Corporate Secretary, at (312) 827‑2800 or at corpsecy@envestnet.com. If you have any questions about your ownership of Envestnet common stock, please contact Investor Relations at (312) 827‑3940 or by email at investor.relations@envestnet.com.

 

 

CORPORATE GOVERNANCE

 

Overview

 

 

The Board of Directors

 

Our Board oversees our business and monitors the performance of management. The directors keep themselves up‑to‑date on the Company by discussing matters with the CEO, other key executives and our principal external advisors, such as outside legal counsel, outside auditors, investment bankers and other consultants, by reading the reports and other materials that we send them regularly and by participating in Board and committee meetings.

 

The Board usually meets six times per year in regularly scheduled meetings, but will meet more often if necessary. From time to time, the Board has telephonic information sessions on various topics. The Board met twelve times, including these telephonic conferences, during 2017. All of our directors attended at least 75% of the aggregate number of meetings of the Board and committees of the Board of which they were a member held while they were in office during the year ended December 31, 2017.

 

Director Independence

 

In January 2018, our Board determined that the following directors are independent under the listing standards of the NYSE: Luis Aguilar, Ross Chapin, Gayle Crowell, James Fox, James Johnson, Charles Roame, and Gregory Smith. These independent directors constitute substantially more than a majority of Envestnet’s Board. In making its determination of independence, the Board applied the categorical standards for director independence set forth in the NYSE’s rules and therefore determined that no other material relationships existed between us and these directors. The Board also considered the other directorships held by the independent directors and determined that none of these directorships constituted a material relationship with us.

 

The Committees of the Board

 

During 2017, we had an Audit Committee, a Compensation Committee, a Compliance and Information Security Committee and a Nominating and Governance Committee.

 

 

How are directors compensated?

 

Effective for the third quarter in 2017, we adopted an updated compensation policy for our non-employee directors. For periods prior to the updated policy, each non-employee director received an annual retainer of $100,000, a meeting attendance stipend of $5,000 for each board meeting attended in person, including all coinciding committee meetings and an additional meeting attendance stipend of $1,000 for each telephonic meeting, including all coinciding committee meetings. The Chairperson of our Audit Committee receives an additional annual retainer of $25,000. The Chairpersons of our other committees receive an additional annual retainer of $15,000. The lead independent director receives an additional annual retainer of $25,000. All non-chairperson committee members receive an additional annual retainer of $10,000 for each committee on which they serve. Directors receive twenty-five percent (25%) of the annual retainer in cash, twenty-five percent (25%) in options to acquire shares of our common stock, and fifty percent (50%) in restricted stock units.

 

For the updated compensation policy for non-employee directors effective for the third quarter in 2017, each non-employee director received an annual retainer of $170,000. Directors receive $50,000 of the annual retainer in cash and the remaining $120,000 in restricted stock units. Meeting attendance stipends have been eliminated. The Chairperson of our Audit Committee receives an additional annual retainer of $25,000. The Chairpersons of our other committees receive an additional annual retainer of $20,000. The lead independent director receives an additional annual retainer of $30,000. All non-chairperson committee members receive an additional annual retainer of $10,000 for each committee on which they serve. Any such additional annual retainer amounts paid to a director for serving on a committee as a Chairperson or as a member are paid twenty-five percent (25%) in cash and seventy-five percent (75%) in restricted stock units.

 

Cash amounts paid to directors are paid quarterly with respect to the pro rata portion of fees earned during that quarter. Equity amounts paid to directors are granted once a year no later than March 31 for the amounts earned during the previous year. With respect to equity awards granted in 2017:

 

 

 

With respect to equity awards granted in 2018 pursuant to the updated policy:

 

 

In addition, all directors who joined the Board after July 29, 2010 received an initial equity grant of $100,000 of restricted stock units.

 

Each of the directors who joined the Board between July 29, 2010 and February 28, 2015 received a grant of 4,876 restricted stock units on February 29, 2016 which vested over a two-year period. Forty percent (40%) of the total amount vested on February 29, 2016. Thirty percent (30%) of the total amount vested on February 28, 2017 and the remaining thirty percent (30%) vested on February 28, 2018. Each of the directors who joined the Board on March 25, 2016, received a grant of 3,204 restricted stock units on April 26, 2016 which vests over a three-year period. Twenty-five percent (25%) of the total amount vested on April 26, 2016 and an additional twenty-five percent (25%) vested on April 26, 2017. The remaining unvested restricted stock units will vest in equal installments on each of the subsequent two anniversaries of the grant date. All equity grants to our non‑employee directors are made pursuant to our 2010 Long‑Term Incentive Plan.

 

We also reimburse all of our directors for their reasonable expenses incurred in attending meetings of our Board or committees.

 

Do we have stock ownership guidelines and an anti-hedging policy?

In order to align the interests of the non-employee members of the Board with the long-term interests of the Corporation’s shareholders, all non-employee directors must maintain an ownership level in our common stock equal to or greater than $300,000. Directors have four years to come into compliance with the ownership guidelines. For those persons who were directors when the guidelines were adopted, they need to be in compliance by October 28, 2019. For directors appointed after that time, they have four years from their date of appointment to the Board to come into compliance with the ownership guideline.

In addition, our insider trading policy prohibits our directors, officers, employees, consultants and temporary contract workers from hedging the economic risk of ownership of our common stock as well as engaging in short sales of our securities and transactions in publicly traded options of our securities.

Director Compensation 

 

The following table sets forth the compensation paid to our directors in 2017:  

 

*Restricted stock unit awards were granted on March 28, 2017 with a fair market value of $31.70. The amounts reported represent the aggregate grant date fair value during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our Common Stock on the date of grant, which is then recognized, subject to market value changes, over the requisite service period of the award.

 

 

 

Outstanding Unvested Awards

 

As of December 31, 2017, the following unvested awards were outstanding for each director.

 

 

What is our Board leadership structure?

 

The Nominating and Governance Committee of our Board evaluates the Board’s leadership structure on a regular basis.

 

While the Board does not have a policy with respect to combining or separating the Chairman and Chief Executive Officer positions, under the current Board leadership structure, the positions of Chairman and Chief Executive Officer are combined into one role. Mr. Bergman has served as our Chairman and Chief Executive Officer since 1999. Effective as of November 19, 2015, Anil Arora was appointed Vice Chairman. The independent directors of the Board have designated one lead director. The lead director’s responsibilities include, among other things, presiding over all executive sessions of the non‑employee directors, where non‑employee directors meet outside the presence of the management directors, presiding at all other meetings of the Board at which the Chairman is not present, serves as a liaison between the Chairman and the independent directors, discusses with the Chairman all information sent to the

Board and discusses with the Chairman the meeting agendas of the Board. The other responsibilities of the lead director are determined by the Board from time to time. Ross Chapin has been designated the lead director.

 

In considering its leadership structure, the Board takes a number of factors into account. Based on its most recent review of the leadership structure, the Board believes that the current structure is appropriate for our Company because it allows for effective evaluation and execution of our strategies and operations management. In addition, a number of Board and Committee processes and procedures, including regular executive sessions of non‑employee directors and annual performance evaluations, provide substantial independent oversight of our Chairman and Chief Executive Officer’s performance.

 

How does the Board oversee risk?

 

Envestnet’s policies and procedures relating to risk assessment and risk management are overseen by our Board. The Board takes an enterprise‑wide approach to risk management that is designed to support our business plans at a reasonable level of risk. A fundamental part of risk assessment and risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for our Company. The Board annually approves our business plan, giving consideration to risk management. The involvement of the Board in setting our business strategy is a key part of its assessment of management’s risk tolerance and also a determination of what constitutes an appropriate level of risk for our Company.

 

The Audit Committee of the Board reviews our policies and practices with respect to risk assessment and risk management, and discusses with management our major financial risk exposures and the steps that have been taken to monitor and control such exposures.

 

The Compensation Committee reviews compensation risk. The Compensation Committee assesses our executive compensation programs to ascertain any potential material risks that may be created by the compensation program.

 

In conducting this assessment, the Compensation Committee focused on our incentive compensation programs in order to identify any general areas of risk or potential for unintended consequences that exist in the design of our compensation programs and to evaluate our incentive plans relative to our enterprise risks to identify potential areas of concern, if any.

 

The Compensation Committee considered the findings of this assessment of compensation policies and practices and determined that our compensation programs are designed and administered with the appropriate balance of risk and reward in relation to our overall business strategy. Envestnet’s policies and practices are not structured to encourage executives to take unnecessary or excessive risks, and therefore do not create risks reasonably likely to have a material adverse effect on our Company.

 

The Compliance and Information Security Committee reviews potential risk related to regulatory compliance requirements and reviews and assesses our regulatory compliance programs. The Compliance and Information Security Committee also reviews potential risk related to our information technology systems, including cybersecurity risk, and reviews and assesses our information technology security framework.

 

How do directors evaluate their performance?

 

The Board and each committee of the Board conduct annual self‑evaluations to assess the business skills, experience and background represented on the Board and to determine whether the Board and its committees are functioning effectively. During the year, the Nominating and Governance Committee receives input on the Board’s performance from directors and discusses the input with the full Board and oversees the full Board’s review of its performance. Each committee also discusses the input with respect to the committee and the review of its performance. The self‑assessments focus on whether the Board is operating effectively and on areas in which the Board or management believes that the Board or any of its committees could improve.

 

How are directors nominated?

 

In accordance with its charter, the Nominating and Governance Committee identifies potential nominees for directors from various sources. The Nominating and Governance Committee reviews the qualifications of these persons to determine whether they might be a good candidate for membership on the Board. The Nominating and Governance Committee includes a review of the person’s judgment, experience, independence, understanding of our business or other related industries and such other factors as the Nominating and Governance Committee determines are relevant in light of the needs of the Board and our Company. The Nominating and Governance Committee will select qualified candidates and review its recommendations with the Board, which will decide whether to nominate the person for election to the Board at an annual meeting. Between annual meetings, the Board, upon the recommendation of the Nominating and Governance Committee, can approve additions to the Board.

 

Envestnet does not have a formal Board diversity policy. However, the Board considers diversity in professional experience and professional training in recommending nominees. The Nominating and Governance Committee works with the Board on an annual basis to determine the appropriate characteristics, skills and experience for the Board as a whole and its individual members. In evaluating the suitability of individual Board members, the Board and the Nominating and Governance Committee take into account factors such as the individual’s general understanding of marketing, finance and other disciplines relevant to the success of a publicly traded company; understanding of our business; education and professional background, including current employment and other Board memberships; reputation for integrity; and any other factors they consider to be relevant. The Board evaluates each individual in the context of the Board as a whole, with the objective of recommending a group that can best perpetuate the success of the business and represent shareholder interest through the exercise of sound judgment, using its diversity of experience. In determining whether to recommend a director for re‑election, the Nominating and Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board. The Nominating and Governance Committee annually reviews its own performance. In connection with such self‑evaluation, the Nominating and Governance Committee assesses whether it effectively nominates candidates for director in accordance with the above described standards specified by the corporate governance guidelines. See each nominee’s and director’s biography appearing later in this proxy statement for a description of the specific experiences that each such individual brings to our Board.

 

The Nominating and Governance Committee will consider a shareholder’s recommendation for directors, but the Nominating and Governance Committee has no obligation to recommend such candidates for nomination by the Board. Assuming that appropriate biographical and background material is provided for candidates recommended by shareholders, the Nominating and Governance Committee will evaluate those candidates by following substantially the same process and applying substantially the same criteria as for candidates recommended by other sources. If a shareholder has a suggestion for candidates for election, the shareholder should mail it to: Corporate Secretary, Envestnet, Inc., 35 East Wacker Drive, Suite 2400, Chicago, Illinois, 60601. No person recommended by a shareholder will become a nominee for director and be included in a proxy statement unless the Nominating and Governance Committee recommends, and the Board approves, such person.

 

If a shareholder desires to nominate a person for election as director at a shareholders’ meeting, that shareholder must comply with Section 5.2 of our By‑laws, which requires notice not more than 120 days nor less than 90 days in advance of the anniversary of the date of the proxy statement provided in connection with the previous year’s annual meeting of shareholders. This time period has passed with respect to the 2018 Annual Meeting. With respect to the 2019 Annual Meeting, Envestnet must receive such written notice between December 12, 2018 and January 11, 2019. Such notice must describe the nomination in sufficient detail to be summarized on the agenda for the meeting and must set forth:

 

 

 

 

 

 

 

 

 

 

 

Compensation Committee interlock and insider participation

 

The Compensation Committee of Envestnet’s Board has responsibility for determining the compensation of our executive officers. None of the members of the Compensation Committee is a current or former officer or employee of our Company. None of our executive officers serves on the compensation committee of any company that employs any member of the Compensation Committee.

 

What is our Related Party transactions approval policy and what procedures do we use to implement it?

 

Our Board has adopted a written Related Party transactions policy. This policy applies to any transaction, arrangement or relationship, which we refer to as a Related Party Transaction, in which we (including any of our subsidiaries) were, are, or will be a participant, the amount involved exceeds $120,000 annually and in which any director, officer, 5% or greater shareholder or certain other related parties or entities, each of which we refer to as a Related Party, has a direct or indirect material interest. We refer to these transactions as Related Party Transactions. Under the policy, the Audit Committee considers all of the relevant facts and circumstances in determining whether to approve a Related Party Transaction, including:

 

 

 

 

 

 

 

 

The Audit Committee will approve only those Related Party Transactions that are in, or are not inconsistent with, the best interests of our Company and our shareholders, as the Audit Committee determines in good faith.

 

The following types of transactions do not require approval or ratification under this policy:

 

 

 

 

 

 

 

What Related Party transactions do we have?

 

Registration Rights

 

On March 22, 2004, we entered into a registration rights agreement with certain holders of our common stock, or the registration rights agreement, pursuant to which these holders of our common stock are entitled to demand registration rights, Form S‑3 registration rights and piggyback registration rights with respect to the registration of their shares of our common stock under the Securities Act of 1933, as amended, or the Securities Act. We refer to shares of our common stock that are subject to the registration rights agreement as “registrable securities.”

 

In connection with our 2010 initial public offering, which we refer to as our IPO, The EnvestNet Group, Inc., Envestnet’s 41% shareholder prior to the IPO (the “Envestnet Shareholder”), merged with and into Envestnet, with Envestnet being the surviving entity. Upon consummation of the merger of the Envestnet Shareholder with and into Envestnet, certain shareholders of the Envestnet Shareholder are entitled to become a party to the registration rights agreement and to receive each of the registration rights described below.

 

Demand Registration Rights. The holders of registrable securities have rights, at their request, to have their shares registered for resale under the Securities Act. Holders of at least 50% of registrable securities may demand the registration of their shares on up to two occasions within any 12‑month period if the gross proceeds from the registration of their shares would exceed $15,000,000.

 

Registration on Form S‑3. In addition to the demand registration rights discussed above, holders of at least 20% of the registrable securities may require that we register their shares of our common stock for public resale on Form S‑3 or similar short‑form registration statement if the gross proceeds from the registration of their shares of our common stock would exceed $5,000,000 and our Company is eligible to use Form S‑3.

 

Piggyback Registration Rights. The holders of approximately 2.5 million shares of registrable securities have rights to have their shares of our common stock registered for resale under the Securities Act if we register any of our

securities, either for our own account or for the account of other shareholders, subject to the right of the underwriters involved in any such transaction to limit the number of shares of our common stock included in an underwritten offering.

 

The following Related Parties are currently party to the registration rights agreement: Judson Bergman (our Chairman and Chief Executive Officer and one of our directors), William Crager (our President), Scott Grinis (our Chief Technology Officer), Brandon Thomas (our Chief Investment Officer), and James Johnson, a current director. Holders of our registrable securities are entitled to the registration rights described above. Collectively, these Related Parties hold approximately 1.5 million shares covered by the registration rights agreement as of March 16, 2018. 

 

Indemnification of Directors and Executive Officers

 

We have entered into agreements to indemnify our directors and certain of our officers in addition to the right to indemnification provided to such persons in our certificate of incorporation and by‑laws. These agreements will, among other things, require us to indemnify these individuals to the fullest extent permitted under Delaware law, including for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including any action by or in our right, on account of services by any such person as a director or officer of our Company or as a director or officer of any of our subsidiaries, or as a director or officer of any other company or enterprise if any such person serves in such capacity at our request. We also intend to enter into indemnification agreements with our future directors and executive officers.

 

Did our insiders comply with Section 16(a) beneficial ownership reporting in 2017?

 

Our executive officers and directors are subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. Except as disclosed in the next sentence, we believe that all of our executive officers and directors complied with all filing requirements imposed by Section 16(a) of the Exchange Act on a timely basis during fiscal year 2017. Due to an administrative error, Mr. Bergman was late in reporting an option exercise and related acquisition of stock on Form 4, and Mr. Crager and Ms. O’Brien were each late in reporting two option exercises and related acquisitions of stock on Form 4; the sales of stock associated with the cashless exercise of such options were timely filed on Form 4s and such Form 4s were promptly amended to report the option exercises and related acquisition of stock.

 

PROPOSAL NO. 1: ELECTION OF DIRECTORS

 

General

 

Our by‑laws divide our Board into three classes with the terms of office of each class ending in successive years. Our by‑laws provide for a minimum of 5 and a maximum of 11 directors and empower our Board to fix the exact number of directors and appoint persons to fill any vacancies on the Board until the next Annual Meeting.

 

Following the recommendation of the Nominating and Governance Committee, our Board has nominated Charles Roame and Gregory Smith as directors of Envestnet to each serve a three‑year term to expire at the Annual Meeting in 2021 or, in each case, until their respective successors shall have been elected and shall have qualified. Each nominee is currently serving as a director of Envestnet. Our Nominating and Governance Committee has been working with our directors and management over the last few years to identify qualified individuals to serve on our Board. Ms. Crowell and Messrs. Aguilar, and Fox were identified through this process. Mr. Johnson, currently a Class I director is not standing for re-election, and will retire from the Board at the expiration of his term, which will occur immediately prior to the Annual Meeting of Shareholders.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THESE NOMINEES AS DIRECTORS OF ENVESTNET.

 

It is the intention of the persons named as proxies, subject to any direction to the contrary, to vote in favor of the candidates nominated by the Board. We know of no reason why any nominee may be unable to serve as a director. If any nominee is unable to serve, your proxy may vote for another nominee proposed by the Board, or the Board may

reduce the number of directors to be elected. If any director resigns, dies or is otherwise unable to serve out his or her term, or the Board increases the number of directors, the Board may fill the vacancy until the Annual Meeting.

 

We have set forth below information with respect to the nominees for election as directors and the other directors whose terms of office as directors will continue after the Annual Meeting. There are no arrangements or understandings between any director and any other person pursuant to which any director was or is selected as a director or nominee.

 

Directors whose terms of office will continue after this meeting

 

 

Directors whose terms expire in 2019 (Class III)

 

 

 

 

INFORMATION ABOUT OUR COMMON SHARE OWNERSHIP 

 

How much stock is owned by directors and executive officers? 

 

The following table sets forth information, as of March 16, 2018, regarding the beneficial ownership of our common stock by our current directors and executive officers whose compensation is reported in the compensation tables that appear later in this proxy statement, to whom we refer as our named executive officers, and by our directors and executive officers as a group. Unless otherwise indicated, the named individual has sole voting and investment power over the common stock under the column “Shares Held.”

 

*Denotes beneficial ownership of less than one percent.

 

 

 

 

 

 

 

 

Which shareholders own more than 5% of our common stock? 

 

The following table shows all persons we know to be direct or indirect owners of more than 5% of our common stock as of the close of business on March 16, 2018, unless otherwise indicated. Our information is based on reports filed with the SEC by each of the firms listed in the table below. You may obtain these reports from the SEC.

 

 

 

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis (“CD&A”)

 

This section describes the compensation program for the 2017 Named Executive Officers (“NEOs”) and the compensation changes implemented by the Compensation Committee for fiscal year 2018. The NEOs for 2017 include:

 

 

This CD&A section includes the following topics:

 

 

Company Overview

 

Envestnet is a leading provider of intelligent systems for wealth management and financial wellness. Envestnet’s unified technology enhances advisor productivity and strengthens the wealth management process. Envestnet empowers enterprises and advisors to more fully understand their clients and deliver better outcomes.

 

Founded in 1999, Envestnet has been a leader in helping transform wealth management, working towards its goal of building a holistic financial wellness network that supports enterprises, advisors and their clients.

 

Through a combination of platform enhancements, partnerships and acquisitions, Envestnet uniquely provides a financial network connecting software, services and data, delivering better intelligence and enabling its customers to drive better outcomes.

 

Shareholder Feedback and Compensation Committee Response

 

In 2017 Envestnet’s compensation program received support from 64% of votes cast. During the prior three years, shareholders overwhelmingly supported our say-on-pay advisory resolutions with 98% support of votes cast. In response to the lower than expected 2017 say-on-pay results, the Compensation Committee and management evaluated our executive compensation programs with input from the Board’s independent compensation consultant. This evaluation included engagement with shareholders to gather their perspectives and feedback, which was incorporated into Board and Compensation Committee discussions and determinations regarding compensation programs. Discussions with shareholders took place in July 2017 and then again in February 2018.

 

Our shareholder engagement in February 2018 was led by our lead independent director (Mr. Chapin) and our Compensation Committee Chairperson (Mr. Fox) and included senior executives from Envestnet’s legal, finance, and human resources departments.  We reached out to shareholders representing approximately 75% of our outstanding shares, and received feedback from shareholders representing approximately 25% of our outstanding shares; these shareholders typically represented larger shareholders and included some investors who voted in favor of our executive compensation program last year and some who voted against. Outreach occurred in the form of conference calls with a shareholder driven agenda, enabling shareholders to offer their perspective and ask questions directly to the Company representatives participating on the calls. Each discussion with our shareholders was interactive and constructive.  We engaged with proxy advisory firms to gain insight into their views on our executive compensation programs.

While shareholders generally were consistent in desiring compensation programs tied to metrics and corporate performance, a number of our shareholders noted the value in having a discretionary component to the evaluation of executives’ performance, and that determination of their variable compensation should not always be solely tied to numbers. Based on the feedback we received from our shareholders and our internal review of our programs, we have implemented several changes to our program and processes for fiscal year 2018 and enhanced disclosure related to compensation decisions made for fiscal year 2017. The Compensation Committee is committed to engaging with shareholders on executive compensation and making pay program changes that are directly responsive to shareholder feedback and that enhance alignment of our program with the Envestnet business strategy.

 

 

Additionally, to enhance our governance practices, in January 2018, the Compensation Committee adopted a clawback policy on incentive awards for all Section 16 officers. The policy is described in more detail in the Compensation Recoupment ("Clawback") Policy section of this proxy on page 34.

 

The Compensation Committee also undertook a review of competitive total compensation for Envestnet NEOs relative to market. The market was defined as a peer group of 14 companies in similar businesses as Envestnet that were also of a relevant size based on revenue and market capitalization.  See pages 29-30 for a more detailed description of the peer group.  Published data from nationally recognized compensation surveys was also reviewed for companies in the technology sector of a relevant revenue size. Compared to both these market reference points, our CEO’s total compensation was well below market median. The Compensation Committee uses market data as one input when determining pay levels and also considers company and individual performance, individual contributions, and role criticality in their deliberations.

 

Highlights of 2017 and Long-Term Performance

 

Overall Envestnet achieved solid performance in 2017 demonstrated by strong growth in revenue (18%). GAAP net loss of $3.3 million and GAAP loss per share of $0.07 improved significantly from 2016 due to the strong revenue growth and management of operating expenses. Adjusted EBITDA and adjusted net income per diluted share grew at 30% and 34%, respectively. These results exceeded our long-term growth targets and were supported by the accomplishment of key strategic objectives critical to our future growth. Revenue and adjusted EBITDA are important value drivers for our business as we look to grow while maintaining profitability.

Our results were strong across our business, with the Envestnet segment, which includes our Enterprise and Tamarac wealth management offerings, growing revenue 18% over the prior year. The Yodlee segment performed equally well, growing revenue 19%. Both segments also expanded profit margins meaningfully.

 

Financial Performance 2017 vs. 2016

 

 

Adjusted EBITDA and adjusted net income per diluted share are non-GAAP measures. Please see Appendix A for a discussion and reconciliation to the most directly comparable GAAP measure.

 

Strategic Accomplishments

 

 

5 Year Performance

In 2017, we continued to build on our proven record of innovation and growth. We experienced robust revenue growth, and increased our market share in the growing $18 trillion advisor marketplace. We now serve 27 percent of

independent advisors and 30 percent of large RIAs (those with over $1 billion in assets under management). Envestnet’s 2017 performance continues to demonstrate our ability to build sustained core growth across all our key metrics and to achieve our long-term strategic goals. Additionally, our cumulative total shareholder return for the last 5 years was 257% and has exceeded that of the Russell 2000 Index of 94%.

While our GAAP Net Income (Loss) varied from year-to-year, our non-GAAP performance, which adjusts primarily for non-cash and non-recurring expenses, was strong and continued to improve, as illustrated below.

 

 

 

Adjusted EBITDA and adjusted net income per diluted share are non-GAAP measures. Please see Appendix A for a discussion and reconciliation to the most directly comparable GAAP measure.

 

Envestnet’s Compensation Philosophy and Guiding Principles

 

Envestnet believes compensation should be transparent, understandable and effectively communicated, consistent with our risk profile and reflect good governance practices. The following principles are the basis for our executive compensation program and our philosophy to align pay with performance and shareholder interests:

 

 

Compensation Decision Process and Decisions for 2017

 

In the first quarter of each year, the Compensation Committee and management consider the performance for the prior fiscal year when determining annual cash bonuses as well as equity awards for the NEOs. The stock-based awards granted in the first quarter of each year are made for performance in the prior year and therefore the stock-based awards granted in 2018 are considered part of 2017 compensation and the stock-based awards granted in 2017 are considered part of 2016 compensation.

 

As discussed above, overall Envestnet performance was strong in 2017 as reflected in our above expectations revenue and adjusted EBITDA performance relative to our long-term strategic plan. Individual contributions by each of our NEOs were also significant, as further described in the Annual Incentive Plan section of this CD&A. Incentive compensation decisions for 2017 are reflective of strong corporate performance and significant individual contributions.

 

To manage the total potential dilution from stock-based awards to executives and other employees, the number of shares granted each year are adjusted up or down based on prior year performance. The actual grant date value of such award will vary depending on the stock price on the date of grant. As discussed further below, the company had a strong year in 2017 and therefore increased the number of shares granted to NEOs on average by 8%.  Our stock price since the last grant in 2017 increased significantly, approximately 75%, and therefore the value of the 2018 equity grants made for 2017 performance is higher than the increase to the number of shares granted. The Compensation Committee and management believe that managing to a share pool to ensure appropriate levels of share dilution is a  key shareholder consideration.

For equity awards granted in 2018 for 2017 performance, the Committee and CEO continued to grant restriced stock units (“RSU”) and introduced a new performance share unit (“PSU”) award that measures performance over a three-year period. PSUs may be earned based on performance results for the 2018-2020 performance period and actual payouts may vary between 0% and 150% of the target share units depending on the level of performance achieved. As a new program, the Committee determined that a 25% weighting on PSUs would be appropriate in the year of introduction The Committee will continue to evaluate the weighting of PSUs in the overall program for future years.

 

The Compensation Committee also considered market data for relevant positions. Total compensation decisions for the CEO and other NEOs were compared to the proxy peer group (described in detail on page 30) for relevant positions.  Overall, the total compensation for the CEO and on average for other NEOs was between the 25th percentile and the median of the peer group, with variation by position.

 

Based on this process, the Committee approved the following compensation decisions in 2018 for 2017 performance. This table reflects how the Compensation Committee makes compensation decisions and is not intended to replace the Summary Compensation Table information provided on page 36:

 

 

Role of Compensation Committee and Management

 

The Compensation Committee has responsibility to oversee and approve executive compensation programs at Envestnet. At the beginning of each year, the Compensation Committee approves the components of compensation for the NEOs, the individual performance goals for the Chief Executive Officer, and sets the performance goals for any related compensation programs.

 

At the end of the year, the Compensation Committee conducts an in-depth review of overall Company results and the CEO’s performance relative to the identified goals. The CEO provides an overview of the performance of each of the other NEOs to the Compensation Committee and presents his compensation recommendations. The Compensation Committee exercises its discretion to make changes to any recommendations made by the CEO and approves all compensation decisions for the NEOs with the objective of ensuring that compensation delivered is aligned with the achieved performance results. Compensation decisions for the CEO are made by the Compensation Committee based on its assessment of Company results and his individual performance.

 

In 2017, the Compensation Committee retained Compensation Advisory Partners (“CAP”) to assist the Compensation Committee with the review of the executive compensation programs. CAP worked with the Compensation Committee to develop a peer group and provided the data on executive compensation design practices and pay levels among those peer companies.

What We Do and What We Don’t Do

 

Our Compensation Committee believes that our compensation practices are key to furthering our compensation principles and ensuring sound governance practices.

 

 

Executive Compensation Program Enhancements

 

 

Peer Group

 

In 2017 the Compensation Committee adopted a 14-company peer group to provide a market reference point on executive compensation practices and pay levels. The peer group was developed with the assistance of the Committee’s independent consultant based on the following criteria:

 

 

 

 

The Compensation Committee uses peer group data as one input when determing pay levels and also considers company and individual performance, individual contributions, and role criticality in their deliberations. Envestnet’s revenue and market capitalization is between the 25th percentile and median of the peer group listed below and the Compensation Committee took the size positioning into account when reviewing compensation levels for NEOs.

 

 

The Compensation Committee used the peer group to review executive compensation design practices and pay levels for its NEOs. In addition, it also reviewed data from third party surveys, particularly technology firms, to obtain a broad view of the competitive marketplace for talent. A summary of the data was provided to the Compensation Committee by it independent consultants as a reference in evaluating compensation for Envestnet positions.

 

2017 Components of Executive Compensation

 

The following table provides a description of each compensation component offered to our NEOs

 

 

Base Salary. In 2017, only one NEO received a salary increase. Mr. Arora’s salary increased 3% or $12,750 based on a legacy Yodlee compensation program practice that will not apply to Mr. Arora in the future. Salaries for other NEOs remained flat. 2017 NEO salaries are summarized in the table below:

 

Annual Incentive Program (“AIP”).  Annually, the Company funds an annual incentive pool based on a percentage of the revenues and adjusted EBITDA which is distributed to all eligible employees, including NEOs. At the beginning of each year, the Compensation Committee approves the formula used to determine the total amount of the annual incentives. Revenue and adjusted EBITDA, may be adjusted for certain items1 as defined by the Compensation Committee. The Compensation Committee established the following incentive pool formula for the 2017 program:

 

The 2017 pool for AIP awards would not fund if both revenue and adjusted EBITDA thresholds of $530 million and $87 million, respectively, were not achieved. The total AIP pool allows the Company to provide awards to eligible employees, consisting of any full-time employees with three months of service, and is funded based on a percentage of actual revenue and adjusted EBITDA. Based on the actual revenue of $684 million and adjusted EBITDA before AIP payouts of $153 million, the Compensation Committee approved approximately $24 million to be paid under the AIP. The plan formula allocates the following amounts to the total AIP pool:

 

 

 

In determining the CEO’s AIP award, the Compensation Committee annually evaluates the CEO’s performance against his accomplishments for the year and results relative to certain goals established at the beginning of the year in a Performance Evaluation Framework described below. The framework includes a review of accomplishments on financial performance, strategic priorities, and leadership and culture.

1.The Compensation Committee may exercise its discretion to adjust for revenues and expenses attributable to acquisitions, as well as extraordinary or non-recurring gains or losses. Additionally, EBITDA is based on amounts prior to the payment of any amount paid pursuant to the Annual Incentive Program and certain extraordinary non-cash or non-recurring general and administrative expenses.

 

Based on the strong 2017 financial results that exceeded expectations and the significant progress in achieving milestones supporting the long term strategic vision, the Compensation Committee approved an annual incentive cash payment of $600,000 for Mr. Bergman. Highlights of 2017 accomplishments from the Performance Evaluation Framework are summarized below:

 

 

 

For NEOs other than the CEO, the CEO makes initial AIP award recommendations to the Compensation Committee based on his review of their individual performance and accomplishments. The Compensation Committee has final authority to exercise its discretion in approving final compensation amounts or awards for NEOs. In approving final awards, the Compensation Committee agreed with the CEO’s recommendations based on a review of the other NEO accomplishments and contributions that supported the results summarized above.

 

The 2017 AIP payouts for all NEOs are summarized below:

 

 

Short-Term Incentive Compensation. We also maintain a compensation program with amounts paid to eligible employees as incentive compensation based on a percentage of gross sales. For purposes of determining the total amount available for incentive compensation, we estimate our new fee revenue based on gross sales by calculating the average fee paid on all of our products, taking into account differing fee rates on the various products we sell and various fee schedules related to different client programs. In 2017, we targeted 12.0% of such estimated fee revenue to be used for total incentive compensation, with discretion to award total incentive compensation of up to an additional 1.5% of estimated fee revenue. Mr. Crager is the only NEO participating in this plan. His incentive was based on our total gross sales and the CEO’s assessment of Mr. Crager’s leadership and overall results of the sales organization. For Mr. Crager, the award under this program paid in 2017 was $231,750.

 

Equity Awards. It has been our practice to annually grant equity awards to employees, including NEOs, in recognition of performance as well as to align their interests with the interests of our shareholders. Long-term equity incentive awards represent a significant portion of the NEOs total compensation. For CEO and on average for other NEOs, equity awards represented approximately 50% and 40% respectively, of annual compensation. In 2017, NEOs generally received stock options and restricted stock units as part of their equity awards. Mr. Arora received all his equity compensation in restricted stock units. Equity grants are awarded under the Envestnet shareholder approved plans.

 

Our practice is to grant equity awards annually to eligible employees, including NEOs, to recognize performance, to align equity participants with the interests of our shareholders, and to retain top talent.  Of the total number of shares and options granted to most NEOs in 2017, 75% were delivered in restricted stock units and 25% in stock options. Stock options and restricted stock units vest over three years, with one third (1/3) of the award vesting on the first anniversary of the grant date and one twelfth (1/12) of the option award vesting on each three-month anniversary for the following two years. Mr. Arora received all his equity compensation in restricted stock units with the same

vesting schedule as other NEOs. Mr. Arora only receives restricted stock awards as part of the legacy Yodlee program; going forward, Mr. Arora will also receive PSUs.

 

The size of equity grants for NEOs is based on a number of factors, including our analysis of competitive practices, individual performance as determined by the Compensation Committee, changes in the scope of the individual’s position, internal equity and retention potential. The equity grants to our NEOs on March 28, 2017 were as follows:

 

 

Benefits and Perquisites

 

We provide the following benefits to our executives on the same basis as provided to all of our employees:

 

 

We believe our benefits package is consistent with companies with which we compete for talent.  In addition to the benefits described above, our NEOs receive certain limited perquisites. Perquisites available to NEOs include an allowance for parking and car and an allowance for health-related activities, such as gym memberships.

 

Compensation Recoupment ("Clawback") Policy

 

In January 2018, the Compensation Committee has adopted a compensation clawback policy, which provides that in the event a Covered Officer engages in fraud or other intentional misconduct that is materially related to a restatement of our financial statements or that results in material financial or reputational harm to the Corporation, the Compensation Committee would determine, in its discretion, whether any unsettled incentive awards held by the Covered Officer would be forfeited or any previously settled incentive awards held by such person would be required to be repaid to the Company. For purposes of the clawback policy, a Covered Person is any person who is an officer as that term is defined in Section 16 of the Securities Exchange Act of 1934, as well any other officer of the Corporation designated by the Compensation Committee.

 

Impact of Tax Treatments on Compensation

 

Code Section 162(m) limits the deductibility of annual compensation in excess of $1 million paid to "covered employees" (as defined by Code) of the Company, unless the compensation satisfied an exception, such as the exception for performance-based compensation. Performance-based compensation generally includes only payments that are contingent on achievement of performance objectives, and excludes fixed or guaranteed payments.

 

On December 22, 2017, the Tax Cuts and Jobs Act (the Act) was enacted, which, among other things, repealed the performance-based compensation exception and expanded the definition of covered employee. The changes to Section 162(m) are effective for taxable years beginning after December 31, 2017. The Act includes a transition rule so

that these changes do not apply to compensation paid pursuant to a "binding written contract" that was in effect on November 2, 2017 and that was not materially modified on or after such date.

 

Because of the performance-based compensation exception repeal, amounts paid pursuant to a contract effective after November 2, 2017 will not be deductible as performance-based compensation, and the Compensation Committee will not need to consider the requirements of the performance-based compensation exception when considering the design of any such future contracts as part of our compensation program. For amounts paid under contracts in effect on November 2, 2017 that were intended to constitute performance-based compensation, the Compensation Committee will continue to consider the performance-based compensation exception when making determinations of performance under those contracts.

 

The Act also expands the definition of covered employee. For 2017, our covered employees included the CEO and other NEOs (but not the CFO) who were executive officers as of the last day of our fiscal year. For 2018 and after, our covered employees will generally include anyone who (i) was the CEO or CFO at any time during the year, (ii) was one of the other NEOs who was an executive officer as of the last day of the fiscal year, and (iii) was a covered employee for any previous year after 2016.

 

As with prior years, although the Compensation Committee will consider deductibility under Section 162(m) with respect to the compensation arrangements for executive officers, deductibility will not be the sole factor used in determining levels or methods of compensation. Since our compensation objectives may not always be consistent with the requirements for full deductibility, we and our subsidiaries may enter into compensation arrangements under which payments would not be deductible under Section 162(m).

 

 

2017 Summary Compensation 

 

The following table contains compensation information for our Chief Executive Officer, our Chief Financial Officer, and the three other most highly compensated executive officers. We refer to these individuals as our “named executive officers” or NEOs in other parts of this proxy statement. The information included in this table reflects compensation paid to our NEOs for services rendered to us.