UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by
the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as
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permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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The Corporate Executive Board Company
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(3) Per unit price or other underlying value of transaction computed pursuant to Exchange
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule and the date of its filing.
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THE
CORPORATE EXECUTIVE BOARD COMPANY
1919 North Lynn Street
Arlington, Virginia 22209
(571) 303-4080
Dear Stockholder:
On behalf of the Board of Directors and management, I invite you
to attend the Annual Meeting of Stockholders of The Corporate
Executive Board Company (the Company) to be held at
our offices at 1919 North Lynn Street, Arlington,
Virginia, 22209 on June 10, 2010, at 9:00 a.m. local
time.
The Notice of Annual Meeting and Proxy Statement accompanying
this letter describe the specific business to be acted upon at
the meeting.
In addition to the specific matters to be acted upon, there will
be a report on the progress of the Company and an opportunity
for questions of general interest to the stockholders.
Your vote is important. Whether or not you plan to attend this
meeting in person, you are requested to complete, sign, date,
and promptly return the enclosed proxy card in the envelope
provided. Your proxy will be voted at the Annual Meeting in
accordance with your instructions. If you do not specify a
choice on one of the proposals described in this proxy
statement, your proxy will be voted as recommended by the Board
of Directors. If you hold your shares through an account with a
brokerage firm or other nominee or fiduciary such as a bank,
please follow the instructions you receive from such brokerage
firm or other nominee or fiduciary to vote your shares.
If you plan to attend the meeting in person, please respond
affirmatively to the request for that information by marking the
box on the proxy card. You will be asked to present valid
picture identification. Cameras, recording devices, and other
electronic devices will not be permitted at the meeting.
Sincerely,
Thomas L. Monahan III
Chairman and Chief Executive Officer
THE
CORPORATE EXECUTIVE BOARD COMPANY
1919 North Lynn Street
Arlington, Virginia 22209
(571) 303-4080
NOTICE OF
2010 ANNUAL MEETING OF STOCKHOLDERS
April 30, 2010
Dear Stockholder:
At the Annual Meeting, we will ask you to:
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Elect as directors the nominees named in the proxy statement.
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Ratify the retention of Ernst & Young LLP as our
independent registered public accounting firm for the year ended
December 31, 2010; and
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Transact any other business that may properly come before the
Meeting.
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The Board of Directors unanimously recommends a vote
FOR
the election of each of the nominees for director named in
the proxy statement, and
FOR
the ratification of the
retention of Ernst & Young LLP as our independent
registered public accounting firm for the year ended
December 31, 2010.
Stockholders of record at the close of business on
April 16, 2010, will be entitled to notice of and to vote
at the 2010 Annual Meeting and any adjournment or postponement
of the Meeting.
By Order of the Board of Directors,
Sincerely,
Pamela J. Auerbach
Corporate Secretary
YOUR VOTE
AT THE ANNUAL MEETING IS IMPORTANT
Please vote as promptly as possible even if you plan to
attend the Meeting. For information on how to vote your shares,
see the instruction form from your broker or other fiduciary, as
applicable, and under Information About the 2010 Meeting
and Voting. Alternatively, we encourage you to vote by
completing, signing, and dating the proxy card, and returning it
in the enclosed envelope. If you have questions about voting
your shares, please contact our Corporate Secretary at The
Corporate Executive Board Company, 1919 North Lynn Street,
Arlington, Virginia 22209, telephone number
(571) 303-6824.
If you decide to change your vote, you may revoke your proxy in
the manner described in the proxy statement, at any time before
it is voted.
THE PROXY STATEMENT AND ANNUAL REPORT TO STOCKHOLDERS ARE
AVAILABLE AT
http://www.exbd.com/proxy
TABLE OF
CONTENTS
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PROXY
STATEMENT FOR ANNUAL MEETING
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
JUNE 10, 2010:
THE PROXY STATEMENT AND ANNUAL REPORT TO SHAREHOLDERS ARE
AVAILABLE AT:
http://www.exbd.com/proxy
This proxy statement provides information that you should read
before you vote on the proposals that will be presented to you
at the 2010 Annual Meeting of Stockholders of The Corporate
Executive Board Company. The 2010 Annual Meeting will be held on
June 10, 2010, at 9:00 a.m., local time, at the
principal executive offices of The Corporate Executive Board
Company, located at 1919 North Lynn Street, Arlington, Virginia
22209.
On or about April 30, 2010, we mailed this proxy statement
and our 2009 Annual Report to Stockholders in paper copy. For
information on how to vote your shares of our common stock, see
the instructions included on the proxy card, or the instruction
form you receive from your broker or other fiduciary, and the
information under Information About the 2010 Annual
Meeting and Voting. Stockholders who, according to our
records, owned shares of the Companys common stock at the
close of business on April 16, 2010, will be entitled to
vote at the 2010 Annual Meeting.
Information
About the 2010 Annual Meeting and Voting
Why am I
receiving these proxy materials?
The Board of Directors of The Corporate Executive Board Company
(the Company) is asking for your proxy for use at
the Annual Meeting of Stockholders (the Meeting) of
the Company, to be held at our principal executive offices at
1919 North Lynn Street, Arlington, Virginia 22209 on
June 10, 2010, at 9:00 a.m. local time, and at any
adjournment or postponement of the Meeting. As a stockholder,
you are invited to attend the Meeting and are entitled to and
requested to vote on the items of business described in this
proxy statement.
Who is
soliciting my vote?
The Board of Directors of the Company is soliciting your vote.
When were
the enclosed solicitation materials first given to
stockholders?
We initially mailed to stockholders of the Company this proxy
statement, proxy card and Annual Report to Stockholders on or
about April 30, 2010.
What is
the purpose of the Meeting?
You will be voting on:
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election of directors;
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ratification of the retention of Ernst & Young LLP as
our independent registered accounting firm for the year ended
December 31, 2010; and
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any other business that is properly presented at the Meeting.
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What are
the Board of Directors recommendations?
The Board recommends a vote:
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FOR
the election of the director
nominees named in this proxy statement;
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FOR
the ratification of the
appointment of Ernst & Young LLP as our independent
registered accounting firm for the year ended December 31,
2010; and
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FOR or AGAINST
other
business that is properly presented at the Meeting, as the proxy
holders deem advisable.
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Who is
entitled to vote at the Meeting, and how many votes do they
have?
Only holders of record of our common stock at the close of
business on April 16, 2010 (the Record Date)
will be entitled to vote at the Meeting. Each share has one
vote. There were 34,163,374 shares of common stock
outstanding on the Record Date.
What is a
quorum of stockholders?
If a majority of the shares outstanding and entitled to vote on
the Record Date are present, either in person or by proxy, we
will have a quorum at the Meeting. Any shares represented by
proxies that are marked for, against, withhold, or abstain from
voting on a proposal will be counted as present in determining
whether we have a quorum. If a broker, bank, custodian, nominee,
or other record holder of the Companys common stock
indicates on a proxy card that it does not have discretionary
authority to vote certain shares on a particular matter, and if
it has not received instructions from the beneficial owners of
such shares as to how to vote on such matters, the shares held
by that record holder will not be voted on such matter (referred
to as broker non-votes) but will be counted as
present for purposes of determining whether we have a quorum.
Since there were 34,163,374 shares of common stock
outstanding on April 16, 2010, the presence of holders of
17,081,688 shares is a quorum. We must have a quorum to
conduct the Meeting.
How many
votes does it take to pass each matter?
If a quorum is present at the Meeting, the approval of each
proposal requires the number of votes described below:
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The nominees for election as directors of the Company who
receive the highest number of
FOR
votes cast
at the Meeting (either in person or by proxy) will be elected as
directors. This is referred to as plurality approval.
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Ratification of the retention of Ernst & Young LLP as
our independent registered accounting firm for the year ended
December 31, 2010 requires that a majority of the votes
cast at the Meeting (either in person or by proxy) be voted
FOR
this proposal.
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Who can
attend the Meeting?
All stockholders as of April 16, 2010, or their duly
appointed proxies, may attend the Meeting.
What do I
need to attend the Meeting?
In order to be admitted to the Meeting, a stockholder must
present proof of ownership of Company stock on the Record Date.
If your shares are held in the name of a broker, bank,
custodian, nominee, or other record holder (street
name), you must obtain a proxy, executed in your favor,
from the holder of record (that is, your broker, bank,
custodian, or nominee) to be able to vote at the Meeting. You
will also be required to present a form of photo identification,
such as a drivers license.
What is a
proxy?
A proxy is another person you authorize to vote on your behalf.
We ask stockholders to instruct the proxy how to vote so that
all common shares may be voted at the Meeting even if the
holders do not attend the Meeting.
2
How are
abstentions and broker non-votes treated?
Abstentions and broker non-votes count for purposes of
determining the presence of a quorum. Abstentions and broker
non-votes will not be counted as votes cast either for or
against Proposal 1 (election of directors) or
Proposal 2 (ratification of independent registered public
accounting firm) and will have no impact on the result of the
vote for these proposals.
How do I
vote?
You must be present, or represented by proxy, at the Meeting in
order to vote your shares. You can submit your proxy by
completing, signing, and dating your proxy card and mailing it
in the accompanying pre-addressed envelope.
YOUR PROXY CARD
WILL BE VALID ONLY IF YOU COMPLETE, SIGN, DATE, AND RETURN IT
BEFORE THE MEETING DATE.
How will
my proxy vote my shares?
If your proxy card is properly completed and received, and if it
is not revoked, before the Meeting, your shares will be voted at
the Meeting according to the instructions indicated on your
proxy card. If you sign and return your proxy card but do not
give any voting instructions, your shares will be voted
FOR the election of each of the director nominees
listed in Proposal 1 and FOR ratification of
our independent registered public accounting firm in
Proposal 2. To our knowledge, no other matters will be
presented at the Meeting. However, if any other matters of
business are properly presented, the proxy holders named on the
proxy card are authorized to vote the shares represented by
proxies according to their judgment.
If my
shares are held in street name by my broker, will my
broker vote my shares for me?
If your shares are held in a brokerage account, you will receive
a full meeting package including a voting instructions form to
vote your shares. Your brokerage firm may permit you to provide
voting instructions by telephone or the Internet. Without your
instructions, your broker or nominee is permitted to use its own
discretion to vote your shares on certain routine matters, such
as ratification of our independent registered public accounting
firm (Proposal 2). Prior to 2010, the election of directors
was considered a routine matter for which brokers could vote
your shares in their discretion. Beginning with this years
Meeting, brokers are not permitted to vote your shares in the
election of directors (Proposal 1) unless you provide
instructions to your broker on how to vote your shares.
Therefore, if you do not provide voting instructions on
Proposal 1, your shares will remain unvoted on that
proposal.
We urge you to provide voting instructions to
your brokerage firm so that your vote will be cast in the
election of directors.
What does
it mean if I receive more than one proxy card or instruction
form?
If you receive more than one proxy card or instruction form, it
means that you have multiple accounts with our transfer agent
and/or
a
broker or other nominee or fiduciary or you may hold your shares
in different ways or in multiple names (
e.g
., joint
tenancy, trusts, and custodial accounts). Please vote all of
your shares.
How do I
revoke my proxy and change my vote prior to the
Meeting?
If you submit the enclosed proxy card, you may change your vote
at any time before voting takes place at the Meeting. You may
change your vote in one of four ways:
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You may deliver to the Secretary of The Corporate Executive
Board Company, Pamela J. Auerbach, 1919 North Lynn Street,
Arlington, Virginia 22209, a written notice dated later than the
proxy you want to revoke, stating that the proxy is revoked.
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You may complete and send in another proxy card or voting
instruction form with a later date.
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You may attend the Meeting and vote in person.
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For shares you hold beneficially or in street name,
you may change your vote by submitting a later dated voting
instruction form to your broker or other nominee or fiduciary,
or if you obtained a legal proxy form giving you the right to
vote your shares, by attending the Meeting and voting in person.
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Who pays
for the proxy solicitation and how will the Company solicit
votes?
We will pay the costs of preparing, printing, and mailing this
Notice of Annual Meeting of Stockholders and Proxy Statement,
the enclosed proxy card, and our 2009 Annual Report. We will
also reimburse brokerage firms and others for reasonable
expenses incurred by them in connection with their forwarding of
proxy solicitation materials to beneficial owners. The
solicitation of proxies will be conducted primarily by mail, but
may also include telephone, facsimile, or oral communications by
directors, officers, or regular employees of the Company acting
without special compensation.
Proposals to
be Presented at the Annual Meeting
We will present two proposals at the 2010 Annual Meeting of
Stockholders. We have described in this proxy statement all the
proposals that we expect will be made at the Annual Meeting. If
we or a stockholder properly presents any other proposal at the
Meeting, we will, to the extent permitted by applicable law, use
your proxy to vote your shares of common stock on the proposal
in our best judgment.
4
PROPOSAL NUMBER
1 ELECT AS DIRECTORS THE NOMINEES NAMED
IN THE PROXY STATEMENT
Our Board currently consists of seven members. The Nominating
and Corporate Governance Committee has recommended for election
to the Board each of the seven current directors. The Board has
unanimously approved this recommended slate.
The following table shows the Companys nominees for
election to the Board. Each nominee, if elected, will serve
until the next Annual Meeting of Stockholders or until a
successor is named and qualified. We have no reason to believe
that any of the nominees is unable or will decline to serve as a
director if elected.
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Director
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Name of Director/Nominee
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Age
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Principal Occupation
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Since
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Thomas L. Monahan III
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Chairman and Chief Executive Officer of the Company
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2001
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Gregor S. Bailar
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46
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Former Chief Information Officer of Capital One Financial
Corporation
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2007
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Stephen M. Carter
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Chief Executive Officer and President of Superior Essex, Inc.
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2007
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Gordon J. Coburn
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Chief Financial and Operating Officer of Cognizant Technology
Solutions Corporation
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2007
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Nancy J. Karch
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Director Emeritus, McKinsey & Company
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2001
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David W. Kenny
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Managing Partner of VivaKi
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1999
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Daniel O. Leemon
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Retired Executive Vice President and Chief Strategy Officer of
Charles Schwab Corporation
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2003
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The Nominating and Corporate Governance Committee and the Board
seek, and the Board is comprised of, individuals whose
characteristics, skills, expertise, and experience complement
those of other Board members. We have set out below biographical
and professional information about each of the nominees, along
with a brief discussion of the experience, qualifications, and
skills that the Board considered important in concluding that
the individual should serve as a current director and as a
nominee for re-election as a member of our Board.
Thomas L. Monahan III
has been Chairman of the Board
since 2008, Chief Executive Officer since 2005, a director since
2001, and a member of the Companys leadership team since
1999. From 2001 until 2005, Mr. Monahan served as the
Companys General Manager, Corporate Practice; from 1998
until 2001, Mr. Monahan served as Executive Director,
Research; and from 1996 until 1997, Mr. Monahan served in
similar capacities with The Advisory Board Company, from which
the Company spun-off in 1998. Prior to 1996, Mr. Monahan
served as a senior consultant for the Deloitte &
Touche Consulting Group, a director at the Committee for
Economic Development, and a staff consultant at Andersen
Consulting. Mr. Monahan also serves as a director of
Convergys Corporation, a global relationship management company.
Mr. Monahan received a B.A. from Harvard University and an
M.B.A. from New York University. The Board selected
Mr. Monahan because of the breadth of his knowledge and
experience in all aspects of the Companys activities,
including its products and services, customers, operations, and
strategic interests; his role currently as the Companys
CEO and formerly in key management positions at the Company; and
his nearly ten years of experience in the consulting and
information services fields prior to joining the Company.
Gregor S. Bailar
has been a director since 2007. Since
2007, Mr. Bailar has been an independent investor, advisor,
and philanthropist. From 2001 until 2007, Mr. Bailar was
the Chief Information Officer of Capital One Financial
Corporation (Capital One), a global financial
services company, where he was responsible for the
companys technology activities. Prior to joining Capital
One, Mr. Bailar served as Chief Information Officer and
Executive Vice President for Operations and Technology for the
National Association of Securities Dealers/The NASDAQ Stock
Market, from 1998 until 2001. Mr. Bailar has served as a
director for Endurance Specialty Holdings, Inc. and as a
director and member of the audit committee of Digitas, Inc.
(until its acquisition by Publicis Groupe in 2007).
Mr. Bailar received a degree in electrical engineering and
computer science from Dartmouth College. The Board selected
Mr. Bailar because of his robust knowledge and experience
in information technology innovation over nearly 20 years
as an operating executive, as well as his experience in
enterprise risk management and audit committee matters.
Stephen M. Carter
has been a director since 2007.
Mr. Carter has been the Chief Executive Officer of Superior
Essex Inc., a wire and cable manufacturer, since 2003, and
President since 2004. Mr. Carter was a consultant from 2002
until 2003. From 2000 until 2002, Mr. Carter was President
and Chief Executive Officer of Cingular Wireless,
5
a provider of network wireless services. Mr. Carter served
in various positions with SBC Communications (now AT&T
Inc.) and its predecessor company, Southwestern Bell, including
President and Chief Executive Officer of SBC Wireless, President
of SBC Strategic and Special Markets, and President and Chief
Executive Officer of Southwestern Bell Telecom. Mr. Carter,
who received a Masters degree from the City University, London,
is qualified as a Fellow of the Chartered Institute of
Management Accountants. The Board selected Mr. Carter
because of his broad knowledge and experience as a CEO in
business-to-business
operating companies, including in his current role as CEO of a
global business, as well as his experience in key human capital
issues such as succession planning and executive compensation.
Gordon J. Coburn
has been a director since 2007.
Mr. Coburn is the Chief Financial and Operating Officer and
Treasurer of Cognizant Technology Solutions Corporation
(Cognizant), a global provider of information
technology and business process outsourcing services.
Mr. Coburn has been Chief Operating Officer of Cognizant
since 2007, and Chief Financial Officer and Treasurer since
1998. From 1990 to 1996, Mr. Coburn held key financial
positions with The Dun & Bradstreet Corporation.
Mr. Coburn, who serves on the board and audit committee of
ICT Group, Inc., received a B.A. from Wesleyan University and an
M.B.A degree from the Amos Tuck School at Dartmouth College.
Mr. Coburn is qualified as a financial expert. The Board
selected Mr. Coburn because of his extensive knowledge and
experience in accounting, finance, and audit issues over more
than a decade as a public company CFO, as well as his global
management experience in the
business-to-business
services segment as a COO.
Nancy J. Karch
has been a director since 2001.
Ms. Karch was elected lead director of the Board in 2010,
has served as a member of each of the standing committees of the
Board, and currently serves as chair of the nominating and
corporate governance committee. Ms. Karch is Director
Emeritus of McKinsey & Company (McKinsey),
where she served as a senior partner from 1988 until her
retirement in 2000, and in various executive capacities since
1974. Ms. Karch serves as a director and audit committee
chair of Liz Claiborne, Inc., apparel marketers; director and
compensation committee member of Genworth Financial, Inc. a
provider of insurance and investment services; and director and
member of the audit committee and the nominating and corporate
governance committee of MasterCard Incorporated, a global
payment-solutions company. Previously and until 2005,
Ms. Karch also served as a director of Toy R
Us, Inc. and Gillette Co. Ms. Karch received a B.A. from
Cornell University, an M.S. from Northeastern University, and an
M.B.A. from Harvard Business School. The Board selected
Ms. Karch because of her extensive knowledge and experience
over more than 25 years as a strategic and marketing
consultant, often addressing issues similar to those addressed
by the Company in providing best practice research and
information, as well as her decade of experience in the full
range of board and corporate governance functions as a member of
various public company boards.
David W. Kenny
has been a director since 1999.
Mr. Kenny is Managing Partner of VivaKi, the digital and
media assets entity of Publicis Groupe, a global communication
services company, where he also serves as a member of the
Management Board (the
Directoire
) and the Executive
Committee. Prior to his current role, Mr. Kenny was the
Chairman and Chief Executive Officer of Digitas, Inc. from 1997
to 2007, when it was acquired by Publicis Groupe. From 1988 to
1997, Mr. Kenny held a number of executive positions with
Bain & Company, an independent consulting firm.
Mr. Kenny, who also serves as a director of Akamai
Technologies, Inc., received a B.S. from the General Motors
Institute and an M.B.A. from Harvard Business School. The Board
selected Mr. Kenny because of his robust knowledge and
experience in marketing issues and in the innovative use of
digital assets over more than 15 years, as well as his
global, operational, and leadership experience as a corporate
CEO and Chairman for a decade, including in talent management
issues.
Daniel O. Leemon
has been a director since 2003. From
1995 until his retirement in 2004, Mr. Leemon was Executive
Vice President and Chief Strategy Officer of the Charles Schwab
Corporation (Schwab), a financial services provider,
as well as a member of that companys Executive Committee.
Prior to Schwab, Mr. Leemon held numerous executive
positions with The Boston Consulting Group, an independent
consulting firm; and senior management positions with several
consumer goods and retail companies. Mr. Leemon received a
B.S. from the Massachusetts Institute of Technology and an
M.B.A. from Stanford University. The Board selected
Mr. Leemon because of his experience as a member of the
Companys programs, his expertise in business strategy and
internal communications, and his particular knowledge and
experience in evaluating new opportunities and growth
initiatives.
The Board of Directors Unanimously Recommends That You Vote
FOR the Election of All of the Nominees For Director.
6
PROPOSAL NUMBER
2 RATIFY THE RETENTION OF ERNST & YOUNG
LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE YEAR ENDED DECEMBER 31, 2010
The Audit Committee has retained Ernst & Young LLP as
the Companys independent registered public accounting firm
to perform the audit of the Companys consolidated
financial statements and the audit of the Companys
internal control over financial reporting for the year ended
December 31, 2010. Ernst & Young has served as
the Companys independent registered public accounting firm
since 2002. Ernst & Young has confirmed to the Audit
Committee and us that it complies with all rules, standards, and
policies of the Public Company Accounting Oversight Board
(PCAOB) and the Securities and Exchanges Commission
(SEC) rules governing auditor independence.
Representatives of Ernst & Young LLP will be present
at the Meeting and will have the opportunity to make a statement
at the Meeting if they wish to do so and to respond to
appropriate questions asked by stockholders. See
Independent Registered Public Accounting Firms Fees
and Services for a description of the fees paid to
Ernst & Young for the years ended December 31,
2009 and 2008, and other matters relating to the procurement of
services.
We are seeking stockholder ratification of the retention of
Ernst & Young. Although stockholder ratification of
the retention of our independent registered public accounting
firm is not required, we are submitting the selection of
Ernst & Young for ratification as a matter of good
corporate governance. Even if the selection is ratified, the
Audit Committee in its discretion may appoint an alternative
independent registered public accounting firm if it deems such
action appropriate. If the Audit Committees selection is
not ratified, the Audit Committee will take that fact into
consideration, together with such other factors it deems
relevant, in determining its selection of an independent
registered public accounting firm.
The Board of Directors Unanimously Recommends a Vote FOR
Ratification of the Retention of Ernst & Young LLP as
Independent Registered Public Accounting Firm for the Year Ended
December 31, 2010
Information
About the Board of Directors and Committees
Independence
of Directors
Our Board is comprised of seven members, six of whom are
independent directors. Mr. Monahan is not considered an
independent director in light of his employment as Chief
Executive Officer of the Company.
The Board, upon the recommendation of the Nominating and
Corporate Governance Committee, unanimously determined that each
of the Companys six non-employee directors is an
independent director as such term is defined in the
Listing Rules of the Nasdaq Stock Market. The Board also
affirmatively determined that Mr. Robert Hall, who retired
from the Board in 2009, was an independent director
pursuant to these standards.
The definition of independent director included in
the Nasdaq Stock Market Listing Rules includes a series of
objective tests, such as that the director is not an employee of
the Company, has not engaged in various types of specified
business dealings with the Company, and does not have an
affiliation with an organization that has had specified business
dealings with the Company. Consistent with the Companys
Corporate Governance Principles, the Boards determination
of independence is made in accordance with the Nasdaq Stock
Market Listing Rules, as the Board has not adopted any
supplemental independence standards. As required by the Listing
Rules, the Board also has made a subjective determination with
respect to each director that such director has no relationships
that, in the opinion of the Board, would interfere with the
exercise of independent judgment by that director in carrying
out the responsibilities of a director, even if the director
otherwise satisfies the objective independence tests included in
the definition of an independent director included
in the Listing Rules.
In determining that each individual who served as a member of
the Board in 2009 (other than Mr. Monahan) is or was
independent, the Board considered that, in the ordinary course
of business, transactions may occur between the Company and
entities with which some of our directors are affiliated. The
Board unanimously determined that the relationships discussed
below did not impair any non-employee directors ability to
exercise independent judgment.
As part of its review, the Board considered that
Messrs. Carter, Coburn, and Kenny are executive officers of
organizations that have memberships with the Company, but each
of those organizations paid significantly less than the greater
of $200,000 or 5% of the Companys consolidated gross
revenues to the Company during any of the past three years. The
Board also determined that those organizations membership
relationships with the Company would not interfere with the
exercise of independent judgment by the involved directors in
carrying out their
7
respective responsibilities as directors. Specifically, the
Board considered that Mr. Carter is an executive officer of
Superior Essex, which is one of the Companys members. In
2007, 2008, and 2009, sales to Superior Essex amounted to
significantly less than the greater of $200,000 or 5% of the
Companys consolidated gross revenues. The Board also
considered that Mr. Coburn is an executive officer of
Cognizant Technology, which is one of the Companys
members. In 2007, 2008, and 2009, sales to Cognizant Technology
amounted to significantly less than the greater of $200,000 or
5% of the Companys consolidated gross revenues. In the
case of Mr. Kenny, the Board considered that Mr. Kenny
is Managing Partner of VivaKi, a director of Publicis Groupe, a
former director of Digitas (which was acquired by Publicis
Groupe in 2007), and a director of Akamai Technology, each of
which is or was a member of the Company. In 2007, 2008, and
2009, sales to each of these companies amounted to significantly
less than the greater of $200,000 or 5% of the Companys
consolidated gross revenues.
The Committee also determined that the relationships between
organizations for which Mr. Bailar and Ms. Karch serve
as directors, and the Company, were not prohibited by any of the
objective independence standards included in the Nasdaq Stock
Market Marketplace Rules and do not constitute relationships
with the Company that would interfere with the exercise of
independent judgment by the involved directors in carrying out
their respective responsibilities as directors. The fees
received from each of these companies represented significantly
less than the greater of $200,000 or 5% of the Companys
revenues for the year ended December 31, 2009.
Mr. Bailar formerly served as a director of Endurance
Specialty Holdings and as a director of Digitas (which was
acquired by Publicis Groupe in 2007), both of which are or were
members of the Company. In 2007, 2008, and 2009, sales to
Endurance Specialty Holdings, and in 2007 sales to Digitas,
amounted to significantly less than the greater of $200,000 or
5% of the Companys consolidated gross revenues.
Ms. Karch serves as a director of Liz Claiborne, Genworth
Financial, and MasterCard, each of which is a member of the
Company. In 2007, 2008, and 2009, sales to each of those
companies amounted to significantly less than the greater of
$200,000 or 5% of the Companys consolidated gross
revenues. Mr. Leemon does not serve as director of a
company that is a member of the Company; and Mr. Hall, who
retired from the Board in 2009, did not serve as director of a
company that was a member of the Company during the period of
2009 that he served on the Board.
Leadership
Structure
The Board believes that the Companys stockholders are best
served if the Board retains the flexibility to adapt its
leadership structure to applicable facts and circumstances,
which necessarily change over time. Accordingly, the
Companys Corporate Governance Principles provide that the
Board may combine or separate the roles of the CEO and Chairman,
as it deems advisable and in the best interests of the Company
and its stockholders.
The independent directors have concluded that the most effective
leadership structure for the Company at the present time is for
Mr. Monahan to serve as both our Chief Executive Officer
and as Chairman of the Board. The Board made this determination
in light of Mr. Monahans long service to, and varied
experiences within, the Company, which allow him to bring to the
Board a broad and uniquely well-informed perspective on the
Companys business, as well as substantial insight into the
trends and opportunities that can affect the Companys
future. In adopting the structure, the Board also concluded that
the strong independent membership of the Board and its standing
committees ensures robust and effective communication between
the directors and members of management, and that the overall
leadership structure is effective in providing the Board with a
well-informed and current view of the Companys business
that enhances its ability to address strategic considerations,
as well as focus on the opportunities and risks that are of
greatest importance to the Company and its stockholders. The
Board believes this structure has served the Company well for
the past two years.
Under our Corporate Governance Principles, our Board has the
flexibility to modify or continue the leadership structure, as
it deems appropriate. Until 2010, the Board operated with a
presiding director who, among other
responsibilities, chaired the executive sessions of the Board.
As part of its ongoing evaluation of the most effective
leadership structure for the Company, in 2010 the independent
directors decided to replace the presiding director position
with the position of lead director. The independent
directors believe that having a lead director will enhance the
Boards independent oversight of management, by further
providing for strong independent leadership; independent
discussion among directors; and independent evaluation of, and
communication with, senior management of the Company. The
independent directors unanimously elected Ms. Karch to fill
the position of lead director based on her long-standing service
on various public company boards, including her tenure on the
Companys Board and committees, which provides her with a
robust knowledge of best governance practices.
Specific duties of the lead director include:
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presiding at meetings of the independent directors;
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serving as a liaison between the Chairman and the independent
directors;
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8
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consulting on meeting agendas;
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working with management to assure that meeting materials are
fulfilling the needs of directors;
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consulting on the meeting calendar and schedules to assure there
is sufficient time to discuss all agenda items;
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calling meetings of the independent directors, including at the
request of such directors;
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presiding at Board meetings when the Chairman is not present;
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working with the independent directors to respond to
stockholders inquiries involving the Board; and
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performing such other duties as the Board may from time to time
delegate.
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Director
Attendance at Board, Committee, and Other Meetings
Directors are expected to attend Board meetings and meetings of
the committees on which they serve, with the understanding that
on occasion a director may be unable to attend a meeting. The
Board does not have a policy on director attendance at the
Companys Annual Meeting of Stockholders.
The independent directors of the Board meet in regularly
scheduled executive sessions in connection with each regularly
scheduled Board meeting and at such other times as the
independent directors deem appropriate. In 2009, these sessions
were led by the presiding director who is chair of
the Nominating and Corporate Governance Committee and is now the
lead director. The lead director is now responsible for chairing
these sessions.
During 2009, the Board held ten regular and special meetings,
the independent directors held seven regular and special
executive sessions, the Audit Committee held nine regular and
special meetings, the Compensation Committee held seven regular
and special meetings, and the Nominating and Corporate
Governance Committee held six regular and special meetings. Each
director attended 75% or more of the regular and special
meetings of the Board and of the committees on which he or she
served that were held during his or her term of office. Each of
the independent directors attended 75% or more of the regular
and special executive sessions that were held during his or her
term of office.
Committees
of the Board
Our Board has three standing committees: Audit, Compensation,
and Nominating and Corporate Governance. Each of the committees
is solely comprised of and chaired by independent directors,
each of whom the Board has affirmatively determined is
independent pursuant to the Nasdaq Stock Market Listing Rules.
Each of the Committees operates pursuant to its Charter. The
Committee Charters are reviewed annually by the Nominating and
Corporate Governance Committee. If appropriate, and in
consultation with the Chairs of the other committees, the
Nominating and Corporate Governance Committee proposes revisions
to the Charters. In 2010, the Board unanimously adopted, upon
the recommendation of the Nominating and Corporate Governance
Committee, revised Committee Charters. The revised Charters take
account of recent developments in corporate governance and
current best practices, including in the areas of board
leadership and risk management. The responsibilities of each
Committee are described in more detail below. The Charters for
the three committees are available on the Companys website
at
http//www.executiveboard.com/
by following the link to
Investors and then to Corporate
Governance.
Audit
Committee
The Audit Committee, among other things, is responsible for:
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appointing, approving the compensation of, overseeing the work
of, and assessing the independence, qualifications, and
performance of the independent auditor;
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reviewing the internal audit function, including its
independence, plans, and budget;
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approving, in advance, audit and any permissible non-audit
services performed by our independent auditor;
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reviewing our internal controls with the independent auditor,
the internal auditor, and management;
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reviewing the adequacy of our accounting and financial controls
as reported by the independent auditor, the internal auditor,
and management;
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9
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overseeing our financial compliance system; and
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overseeing our major risk exposures regarding the Companys
accounting and financial reporting policies, and related to the
activities of our Internal Audit function.
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The Board has affirmatively determined that each member of the
Audit Committee meets the additional independence criteria
applicable to audit committee members under SEC rules and the
Listing Rules of the Nasdaq Stock Market. The Board has
affirmatively determined that each member of the Audit Committee
is financially literate, and that Mr. Coburn meets the
qualifications of an Audit Committee Financial Expert under the
SEC rules. (See Directors/Nominees for a description
of Mr. Coburns qualifications as an Audit Committee
Financial Expert.) In 2009, members of the Audit Committee
consisted of Mr. Bailar, Mr. Coburn, Ms. Karch,
and Robert Hall (who retired from the Board in June 2009 at the
conclusion of his term). Mr. Hall served as chair of the
Audit Committee through February 2009, at which time the Board
unanimously elected Mr. Bailar to serve as Audit Committee
chair.
Compensation
Committee
The Compensation Committee, among other things, is responsible
for:
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reviewing and making recommendations to the Board with respect
to the compensation of our officers and directors, including the
Chief Executive Officer;
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overseeing and administering the Companys executive
compensation plans, including equity-based awards;
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negotiating and overseeing employment agreements with officers
and directors; and
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overseeing how the Companys compensation policies and
practices may affect the Companys risk management
practices
and/or
risk-taking incentives.
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For additional information regarding the Compensation
Committees procedures for setting compensation of our
executive officers see Compensation Discussion and
Analysis. In 2009, members consisted of Mr. Carter,
Mr. Kenny, and Mr. Leemon. Mr. Leemon served as
chair of the Committee in 2009.
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee, among other
things, is responsible for:
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reviewing and assessing the development of the executive
officers, and considering and making recommendations to the
Board regarding promotion and succession issues;
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evaluating and reporting to the Board on the performance and
effectiveness of the directors, committees, and the Board as a
whole;
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working with the Board to determine the appropriate and
desirable mix of characteristics, skills, expertise, and
experience, including diversity considerations, for the full
Board and each committee;
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annually presenting to the Board a list of individuals
recommended to be nominated for election to the Board;
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reviewing, evaluating, and recommending changes to the
Companys Corporate Governance Principles and Committee
Charters;
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recommending to the Board individuals to be elected to fill
vacancies and newly created directorships;
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overseeing the Companys compliance program, including the
Code of Conduct; and
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overseeing and evaluating how the Companys corporate
governance and legal and regulatory compliance policies and
practices, including leadership, structure, and succession
planning, may affect the Companys major risk exposures.
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In 2009, membership of the Nominating and Corporate Governance
Committee consisted of Mr. Coburn, Ms. Karch,
Mr. Leemon, and Mr. Hall (who retired from the Board
in June 2009 at the conclusion of his term). Ms. Karch
served as chair of the committee in 2009.
10
Consideration
of Director Nominees
As specified in our Corporate Governance Principles, we seek
directors with the highest standards of ethics and integrity,
sound business judgment, and the willingness to make a strong
commitment to the Company and its success. The Nominating and
Corporate Governance Committee works with the Board on an annual
basis to determine the appropriate and desirable mix of
characteristics, skills, expertise, and experience for the full
Board and each committee, taking into account both existing
directors and all nominees for election as directors, as well as
any diversity considerations and the membership criteria
reflected in the Corporate Governance Principles. The Nominating
and Corporate Governance Committee and the Board, which do not
have a formal diversity policy, consider diversity in a broad
sense when evaluating board composition and nominations; and
they seek to include directors with a diversity of experience,
professions, viewpoints, skills, and backgrounds that will
enable them to make significant contributions to the Board and
the Company, both as individuals and as part of a group of
directors. The Board evaluates each individual in the context of
the Board as a whole, with the objective of recommending a group
that can best contribute to the success of the business and
represent stockholder interests through the exercise of sound
judgment. In determining whether to recommend a director for
re-election, the Nominating and Corporate Governance Committee
also considers the directors past attendance at meetings
and participation in and contributions to the activities of the
Board and its Committees.
The Nominating and Corporate Governance Committee will consider
director candidates recommended by stockholders, and its process
for considering such recommendations is no different than its
process for screening and evaluating candidates suggested by
directors, management of the Company, or third parties. The
Companys bylaws require that any such recommendation
should be submitted in writing to the Secretary of the Company
not less than 45 days nor more than 100 days prior to
the first anniversary of the preceding years Annual
Meeting of Stockholders, except that if the date of the Annual
Meeting of Stockholders is advanced by more than 30 days or
delayed (other than as a result of adjournment) by more than
60 days from the anniversary of the previous years
Annual Meeting of Stockholders, then to be timely, a
stockholders recommendation must be delivered to the
Secretary not later than the close of business on the tenth day
following the day on which a public announcement with respect to
the date of such meeting is first made by the Company. If
mailed, such notice shall be deemed to have been given when
received by the Secretary. A stockholders recommendation
of a nominee for election as a director also must include the
information specified in our bylaws.
Compensation
of Non-Employee Directors and Stock Ownership
Guidelines
Non-employee directors receive compensation for their service in
our Board, which compensates them for their Board
responsibilities while aligning their interests with the
long-term interests of our stockholders. The Compensation
Committee makes recommendations to the Board concerning director
compensation under the Companys equity compensation plans
and determines other director compensation arrangements, as
appropriate. Under our Corporate Governance Principles, each
member of our Board is required to beneficially own at least
1,000 shares of our common stock. New directors have two
years from the date they are first elected to the Board to be in
compliance with this stock ownership requirement. Each member of
our Board is currently in compliance with this requirement.
Directors who are employees of the Company do not receive
additional compensation for Board service. Compensation paid to
Mr. Monahan in his capacity as Chief Executive Officer in
2009 is described in the Summary Compensation Table.
The following table sets forth information regarding 2009
compensation for each of our non-employee directors.
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Fees Earned
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or Paid
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in Cash
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Stock Awards
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Option Awards
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Total
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Name
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($)
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($)(1)
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($)(2)
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($)
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Gregor S. Bailar
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25,000
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100,000
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125,000
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Stephen M. Carter
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25,000
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100,000
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125,000
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Gordon J. Coburn
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25,000
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100,000
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125,000
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Robert C. Hall(3)
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12,500
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100,000
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112,500
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Nancy J. Karch
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25,000
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100,000
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125,000
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David W. Kenny
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25,000
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100,000
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125,000
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Daniel O. Leemon
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25,000
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100,000
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125,000
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11
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(1)
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Each non-employee director received a grant of 9,569 restricted
stock units (RSUs) on March 25, 2009 with a
grant date fair value of $10.45 per share. The aggregate number
of nonvested RSUs at December 31, 2009 was as follows:
Mr. Bailar (10,645), Mr. Carter (10,645),
Mr. Coburn (10,645), Ms. Karch (11,141),
Mr. Kenny (11,141), and Mr. Leemon (11,141).
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(2)
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The aggregate number of stock appreciation rights
(SARs) and common stock options outstanding at
December 31, 2009 was as follows: Mr. Bailar (37,251),
Mr. Carter (37,251), Mr. Coburn (37,251),
Ms. Karch (53,065), Mr. Kenny (68,065), and
Mr. Leemon (96,305).
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(3)
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Mr. Hall did not stand for reelection at the June 2009
Annual Meeting of Stockholders and retired from the Board.
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Corporate
Governance Matters
We are committed to maintaining strong corporate governance
practices that benefit the long-term interests of the
Companys stockholders by providing for effective oversight
and management of the Company. Our governance policies,
including our Corporate Governance Principles; Code of Conduct
for Directors, Officers, and Employees; and Committee Charters
can be found on our website at
http//www.executiveboard.com/
by following the link to
Investors and then to Corporate
Governance.
The Nominating and Corporate Governance Committee regularly
reviews our Corporate Governance Principles and Charters to
ensure that they take into account developments at the Company,
changes in regulations and listing requirements, and the
continuing evolution of best practices in the area of corporate
governance. In 2010, the Board unanimously adopted, upon the
recommendation of the Nominating and Corporate Governance
Committee, revised Corporate Governance Principles and amended
Charters for each of its three standing committees. These
governance materials establish the central role that the Board
and its committees play in the Companys corporate
governance and business strategy efforts, including in the areas
of board leadership and risk oversight.
The Board conducts an annual self-evaluation in order to
determine whether the directors, the committees, and the Board
are functioning effectively.
Code of
Conduct
Our Code of Conduct, which was restated as of May 1, 2008,
applies to all officers, directors, and employees of the
Company, including financial professionals, including our Chief
Financial Officer, and Controller and Treasurer, as well as our
Chairman and CEO. We require that they avoid conflicts of
interest, comply with applicable laws, protect Company assets,
and conduct business in an ethical and responsible manner, and
in accordance with the Code of Conduct. The Code prohibits
insiders from taking unfair advantage of our business
associates, competitors, and employees through manipulation,
concealment, abuse of privileged information, misrepresentation
of material facts, or any other practice of unfair dealing. Our
Code is publicly available and can be found on our website at
http//www.executiveboard.com/
by following the link to
Investors and then to Corporate
Governance.
If we make substantive amendments to the Code, or grant any
waiver, including any implicit waiver, from a provision of the
Code to our Chairman and CEO, CFO, Controller and Treasurer and
any of our other officers, financial professionals, and persons
performing similar functions, we will disclose the nature of
such amendment or waiver on our website or in a report filed
with the Securities and Exchange Commission on
Form 8-K.
Communications
with the Non-Employee Directors
The Board recognizes the importance of providing stockholders
with a means to communicate with both individual directors and
with the Board generally. Stockholders may communicate with the
members of the Board individually, with the lead director or all
independent directors, or with the Board as a group by writing
to The Corporate Executive Board Company, Attn: Corporate
Secretary, 1919 North Lynn Street, Arlington,
Virginia 22209. Stockholders are requested to mark the
envelope BOARD COMMUNICATION and indicate the
director(s) or group of directors for which the communication is
intended. The Secretary promptly forwards shareholder
communications that she determines to be significant to the
directors, and keeps a record of all shareholder communications
that she deems not to be significant and reports such
communications to the Board on a periodic basis, but not less
frequently than quarterly. Any communication specifically
directed to the lead director shall be promptly forwarded by the
Secretary to the lead director.
12
Communications
with the Audit Committee
The Audit Committee has established procedures for the receipt,
retention, and treatment of communications regarding accounting,
internal accounting controls, or auditing matters. A
communication to the Audit Committee regarding such matters may
be submitted by writing to The Corporate Executive Board
Company, Attn: Corporate Secretary, 1919 North Lynn Street,
Arlington, Virginia 22209. Please mark the outside of the
envelope AUDIT COMMITTEE COMMUNICATION.
In addition, interested persons can alert the Audit Committee to
conduct that raises concerns about financial or audit matters by
leaving a voicemail on the Companys Global Ethics Hotline
at
1-800-863-2614.
Risk
Oversight
Company management is responsible for the
day-to-day
management of risk to the Company and its business. As the focal
point for these efforts, management has formed a Risk Committee,
which includes those members of the Companys senior
management, including the Companys Internal Auditor, who
supervise
day-to-day
risk management efforts at the Company. The Risk Committee has
responsibility for the identification of all potential material
risks, as well as the implementation of appropriate and
reasonable risk mitigation efforts. This includes identifying,
evaluating, and addressing potential risks that may exist at the
enterprise, strategic, financial, operational, and compliance
levels. The Risk Committee reports periodically (and not less
than quarterly) to the Board or to committees of the Board, and
members of the Risk Committee also meet with Board committees
when requested.
Our Board oversees the Companys overall risk management
process. The Board and its committees receive input and periodic
reports from the Risk Committee and from other members of
management, as well as from outside advisors to the Company and
to the committees, as appropriate, all as part of the risk
oversight process. The Board considers risks broadly, including
those related to the Companys operations, strategy and
mergers and acquisitions, finance, human resources activities,
legal and compliance, and information technology activities, and
any other activities that in the judgment of the Board or its
committees may create a material risk to the Company.
The Board considers the adequacy and effectiveness of the
Companys general risk management strategy, the most
significant risks facing the Company, and whether the Company is
implementing appropriate risk mitigation strategies. The Board
also considers risk concerns in connection with its oversight
and approval of matters that regularly come before the Board,
such as acquisitions.
The Board has delegated to each of its standing committees the
responsibility for overseeing specific areas of potential risk,
as described below and set forth in the Corporate Governance
Principles and the Committee Charters. Each committee is
responsible for reporting promptly to the Board any risk that it
concludes is reasonably likely to be material to the Company:
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The Audit Committee is responsible for overseeing risk
management related to the Companys accounting and
financial reporting policies and procedures, the Internal Audit
function, and information technology.
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The Nominating and Corporate Governance Committee is responsible
for overseeing risk management related to the Companys
corporate governance and legal and regulatory compliance
policies and procedures, including leadership, structure, and
succession planning.
|
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|
The Compensation Committee is responsible for overseeing risk
management related to the Companys compensation policies
and practices.
|
We believe that this division of risk oversight between the
Board and the Committees, with Company management having primary
and
day-to-day
responsibility for risk management, is an effective approach for
overseeing, managing, and addressing the risks that the Company
faces.
Report of
the Audit Committee of the Board of Directors
The Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the
accounting and reporting practices of the Company, the
qualifications and independence of the registered public
accounting firm engaged to prepare or issue an audit report on
the consolidated financial statements of the Company and an
audit report on the Companys internal control over
financial reporting, and such other duties as directed by the
Board. The Audit Committee also meets periodically with the
Companys independent registered public accounting firm,
separately, without members of management present. Management
has the primary
13
responsibility for preparing the consolidated financial
statements and implementing the Companys financial
reporting process. Management also has the primary
responsibility for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness
of internal control over financial reporting. The Companys
independent registered public accounting firm is responsible for
expressing an opinion on the conformity of the Companys
audited consolidated financial statements to accounting
principles generally accepted in the United States of America.
The Companys independent registered public accounting firm
also is responsible for expressing an opinion on the
effectiveness of the Companys internal control over
financial reporting. The Audit Committee members do not serve as
professional accountants or auditors, and their functions are
not intended to duplicate or to certify the activities of
management and the independent registered public accounting firm
or to verify the independence of the independent registered
public accounting firm under applicable rules.
The Audit Committee has reviewed and discussed with management
and the independent registered public accounting firm the
audited consolidated financial statements for the year ended
December 31, 2009 and managements maintenance of, and
its assessment of the effectiveness of, internal control over
financial reporting as of December 31, 2009. The Audit
Committee has discussed with the independent registered public
accounting firm the matters required to be discussed by
Statement on Auditing Standards No. 61, as modified or
superseded (Communication with Audit Committees). In addition,
the Audit Committee has received from the independent registered
public accounting firm the written disclosures and letter
required by the applicable requirements of the Public Company
Accounting Oversight Board regarding the Independent Registered
Public Accounting Firms communications with the Audit
Committee concerning independence and has discussed with the
Independent Registered Public Accounting Firm its independence.
Based on the reviews and discussions referred to above, the
Audit Committee recommended to the Board that the audited
consolidated financial statements be included in the
Companys Annual Report on SEC
Form 10-K
for the year ended December 31, 2009 for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE MEMBERS
Gregor S. Bailar, Chair
Gordon J. Coburn
Nancy J. Karch
Independent
Registered Public Accounting Firm Fees and Services
Fees paid to our independent registered public accounting firm
for each of the past two years are set forth below:
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Year Ended December 31,
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2009
|
|
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2008
|
|
|
Audit fees
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$
|
535,000
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|
|
$
|
467,000
|
|
Audit-related fees
|
|
|
26,000
|
|
|
|
23,000
|
|
Tax fees
|
|
|
384,000
|
|
|
|
114,000
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All other fees
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
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$
|
945,000
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|
|
$
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604,000
|
|
|
|
|
|
|
|
|
|
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Audit Fees:
Audit fees were for professional
services associated with the annual audit, including the audit
of internal control over financial reporting, the reviews of the
Companys quarterly reports on
Form 10-Q,
statutory audits required internationally, consultations
concerning financial accounting and reporting standards, and
regulatory filings.
Audit-Related Fees:
Audit-related fees
principally include audits for a benefit plan.
Tax Fees:
Tax fees include tax compliance,
including amended tax returns filed in 2009; tax advice; and tax
planning services.
All Other Fees:
We did not incur fees for any
services other than those in the above three categories.
Under the Audit and Non-Audit Service Pre-Approval Policy
adopted by the Audit Committee, all audit and non-audit services
to be performed by the independent registered public accounting
firm for the Company require pre-approval by the Audit
Committee. In some cases, pre-approval relates to audit or
non-audit services that fall
14
within certain established categories and budgets, and in other
cases a particular defined task or scope of work may be
pre-approved subject to a specific budget. Pre-approvals may be
granted by either the full Audit Committee or, subject to a
$50,000 limitation per engagement, by any member of the Audit
Committee pursuant to delegated authority. Any pre-approvals by
an Audit Committee member pursuant to this delegated authority
shall be reported to the Audit Committee at its next scheduled
meeting. The Audit Committee cannot delegate pre-approval
authority to management.
Related
Party Transactions
The Audit Committee has responsibility for reviewing and, if
appropriate, for approving any related party
transactions, as that term is defined in the SECs
rules. This includes current or proposed transactions in which
the Company was or is to be a participant, the amount involved
exceeds $120,000, and in which any of the Companys
executive officers, directors, or greater than five percent
stockholders, or any members of their immediate families, has a
direct or indirect material interest. As of the date of this
Proxy Statement, there was one related party transaction since
January 1, 2009, and the Audit Committee reviewed and
approved that transaction. The transaction was the purchase of
memberships in certain programs of the Company by Cognizant, a
company where Mr. Coburn serves as an executive officer.
The purchased memberships had a total value of $227,904. No
unusual discounts or other terms were extended to Cognizant as a
part of these transactions.
Security
Ownership of Certain Beneficial Owners and Management
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Amount and Nature of
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Beneficial Ownership(1)(2)(3)
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Total Equity Stake(4)
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Name of Beneficial Owner
|
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Number
|
|
|
Percent
|
|
|
Number
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|
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Percent
|
|
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Thomas L. Monahan III
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339,533
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1.0
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%
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402,201
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1.2
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%
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Gregor S. Bailar
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3,752
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*
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15,563
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|
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*
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Stephen M. Carter
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|
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4,111
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|
|
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*
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15,922
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|
|
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*
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|
Gordon J. Coburn
|
|
|
3,811
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|
|
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*
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15,622
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|
|
|
*
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|
Nancy J. Karch
|
|
|
46,194
|
|
|
|
*
|
|
|
|
58,186
|
|
|
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*
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|
David W. Kenny
|
|
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60,658
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|
|
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*
|
|
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72,650
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|
|
|
*
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Daniel O. Leemon
|
|
|
89,434
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|
|
*
|
|
|
|
101,426
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|
|
|
*
|
|
Richard S. Lindahl
|
|
|
|
|
|
|
|
|
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22,547
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|
|
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*
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Melody L. Jones
|
|
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48,036
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|
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*
|
|
|
|
85,072
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|
|
|
*
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|
Joyce Liu(5)
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|
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2,903
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|
|
|
*
|
|
|
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15,267
|
|
|
|
*
|
|
All current directors and executive officers as a group
(10 people)
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598,432
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1.7
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%
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804,456
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2.3
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%
|
|
|
|
*
|
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Indicates ownership of less than 1%.
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(1)
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Unless indicated, each stockholder has sole voting and
investment power for all shares shown, subject to community
property laws that may apply to create shared voting and
investment power.
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(2)
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Beneficial ownership includes all stock options, SARs and RSUs
held by a stockholder that are currently exercisable or
exercisable within 60 days of April 16, 2010 (which
would be June 15, 2010) as follows: Mr. Monahan,
275,766 shares; Mr. Bailar, 2,393 shares;
Mr. Carter, 2,393 shares; Mr. Coburn,
2,393 shares; Ms. Karch, 43,393 shares;
Mr. Kenny, 48,393 shares; Mr. Leemon,
86,633 shares; Mr. Lindahl, 0 shares;
Ms. Liu, 2,393 shares; Ms. Jones,
42,177 shares; and all current directors and executive
officers as a group, 505,934 shares.
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(3)
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Beneficial ownership for SARs is calculated as the number of
shares for which the SAR could be settled based on the common
stock price on April 16, 2010.
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(4)
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The Total Equity Stake column indicates the number of shares
owned assuming the exercise of all stock options, SARs and RSUs,
whether vested or unvested, without regard to whether or not the
stock options, SARs and RSUs are exercisable within
60 days. Percentages in the percent column are calculated
on a diluted basis, assuming that all shares subject to stock
options, SARs and RSUs are deemed to be outstanding, whether
vested
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15
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or unvested and without regard to whether or not the stock
options, SARs and RSUs are exercisable within 60 days.
Total Equity Stake for SARs is calculated as the number of
shares for which the SAR would be settled if fully exercisable
based on the common stocks price on April 16, 2010.
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(5)
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Ms. Liu was the Companys Interim Chief Financial
Officer until May 2009.
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The following table sets forth certain information regarding the
beneficial ownership of the Companys common stock at
December 31, 2009 by each person known to the Company to
own more than 5% of the Companys common stock.
Beneficial
Owners
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Amount and Nature of
|
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Beneficial Ownership
|
Name of Beneficial Owner
|
|
Number
|
|
Percent
|
|
Morgan Stanley(1)
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4,864,081
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14.2
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%
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Kornitzer Capital Management, Inc.(2)
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|
2,847,917
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|
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8.3
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%
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Capital World Investors(3)
|
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2,802,232
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|
|
|
8.2
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%
|
BlackRock Inc.(4)
|
|
|
2,531,832
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|
|
|
7.4
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%
|
|
|
|
(1)
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Based solely upon Amendment No. 6 to Schedule 13G
filed on January 11, 2010. This holder has sole voting
power and sole dispositive power over 4,739,340 and 4,864,081 of
these shares, respectively; and shared voting power and shared
dispositive power over 0 shares. The address of Morgan
Stanley is 1585 Broadway, New York, NY 10036.
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(2)
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|
Based solely upon Schedule 13G filed on January 22,
2010. This holder has sole voting power and sole dispositive
power over 2,847,917 and 2,719,967 of these shares,
respectively; and shared voting power and shared dispositive
power over 0 and 127,950 of these shares, respectively. The
address of Kornitzer Capital Management, Inc. is 5420 West
61st Place, Shawnee Mission, KS, 66205.
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|
(3)
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Based solely upon Amendment No. 3 to Schedule 13G
filed on February 11, 2010. This holder has sole voting
power and sole dispositive power over 498,032 and 2,802,232 of
these shares, respectively; and shared voting power and shared
dispositive power over 0 shares. The address of Capital
World Investors is 333 South Hope Street, Los Angeles, CA 90071.
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|
(4)
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Based solely upon Schedule 13G filed on January 29,
2010. This holder has sole voting power and sole dispositive
power over 2,531,832 shares; and shared voting power and
shared dispositive power over 0 shares. The address of
BlackRock, Inc. is 40 East 52nd Street, New York, NY 10022.
|
Information
About Executive Officers and Compensation
Executive
Officers
The following table shows the Companys named executive
officers at April 30, 2010:
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Officer
|
Name of Officer
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Age
|
|
Position
|
|
Since
|
|
Thomas L. Monahan III
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|
|
43
|
|
|
Chief Executive Officer
|
|
|
2001
|
|
Richard S. Lindahl
|
|
|
46
|
|
|
Chief Financial Officer
|
|
|
2009
|
|
Melody L. Jones
|
|
|
50
|
|
|
Chief Human Resources Officer
|
|
|
2005
|
|
Thomas L. Monahan III
s business experience,
including his term in office, is listed in the section titled
Proposal Number 1 Elect As Directors the
Nominees Named in the Proxy Statement.
Richard S. Lindahl
has served as our Chief Financial
Officer since May 2009. From 2006 until 2008, Mr. Lindahl
served as Senior Vice President and Treasurer, and from 2005 to
2006, he served as Vice President and Treasurer, of Sprint
Nextel Corporation. From 1997 until 2005, Mr. Lindahl
served in various positions, including as Treasurer and in
planning and analysis roles, at Nextel Communications, Inc.
Prior to joining Nextel Communications, from 1995 until 1997,
Mr. Lindahl held the position of Vice President, Finance,
at Pocket Communications, Inc. Before 1995, Mr. Lindahl
held various positions at MCI Communications,
Deloitte & Touche, and
16
Casher Associates. Mr. Lindahl holds a B.A. in computer
science from Dartmouth College and an M.B.A. from the University
of Virginia.
Melody L. Jones
has been our Chief Human Resources
Officer since joining the Company in December 2005. From 2002 to
December 2005, Ms. Jones served as Vice President and
Global Director of Human Resources at T. Rowe Price, an
investment management firm. From 1997 to 2002, Ms. Jones
held various positions of increasing responsibility at Aon
Corporation, including as Aons Chief Human Resources
Officer. Prior to that, Ms. Jones held management positions
at Organizational Dynamics, Inc., The Hawthorne Group, and
Citigroup Mortgage, Inc. Ms. Jones received a B.A. and
M.F.A. from Southern Illinois University.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Companys directors, executive officers, and
stockholders who own more than 10% of the Companys stock,
to file forms with the SEC to report their ownership of the
Companys stock and any changes in ownership. The Company
assists its directors and executives by identifying reportable
transactions of which it is aware and preparing and filing the
forms on their behalf. All persons required to file forms with
the SEC must also send copies of the forms to the Company. We
have reviewed all forms provided to us. Based on that review and
on written information given to us by our executive officers and
directors, we believe that all Section 16(a) filings in
2009 were filed on a timely basis.
Compensation
Discussion and Analysis
Overview
This section provides information regarding the compensation and
benefit programs for our Chief Executive Officer
(CEO), the two individuals who held the position of
Chief Financial Officer during 2009, one other executive officer
who served throughout 2009, and one executive officer whose
employment terminated in March 2009. Together, these individuals
comprise the Companys named executive officers
(NEOs). We have included a discussion and analysis
of information regarding, among other things, our compensation
philosophy, the overall objectives of our compensation program,
and each element of compensation.
Compensation
Philosophy
Our compensation philosophy is designed to support our key
objective of creating value for our stockholders by increasing
both revenue and profit over the long term. The Compensation
Committee of our Board (the Committee), comprised of
independent directors, is responsible for guiding and overseeing
the formulation and application of the compensation and benefit
programs for our NEOs. The Committee acts pursuant to a charter
that has been approved by our Board.
The Committee has worked with our CEO and Chief Human Resources
Officer (CHRO) to design compensation programs that
encourage high performance, promote accountability, and ensure
that executive interests are aligned with the interests of our
stockholders.
The primary objectives of our executive compensation programs
are to:
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Create shareholder value by aligning executive compensation to
long-term Company performance;
|
|
|
|
Attract, retain, and motivate highly-qualified executives by
offering market-competitive total compensation packages; and
|
|
|
|
Balance the focus on short- vs. longer-term performance
objectives through an appropriate mix of annual incentive (cash
bonus) and longer-term (equity participation) compensation.
|
Guiding
Principles
The design of our specific programs is based upon the following
guiding principles:
Performance
We believe that the best way to accomplish alignment of
compensation plans with the interests of the executives who
participate in them is to link compensation directly to both
individual and Company performance. Equity-based compensation
has regularly represented a significant portion of total
compensation. Additionally, our
17
annual bonus plan rewards the achievement of specific financial
and strategic objectives that are tied to individual and Company
performance and are critical to our ongoing success.
In February 2009, at the direction of the Compensation
Committee, Watson Wyatt prepared a
pay-for-performance
analysis in which it compared the Companys NEOs
compensation in the 2005 to 2007 period to a comparator group of
companies established in 2008, which is discussed below in
Competitiveness and Comparator Group. Based upon
four operational measures (earnings per share growth, free cash
flow growth, return on invested capital, and operating income
after depreciation growth) and on total shareholder return,
Watson Wyatt concluded that the Companys overall
performance was at the 30th percentile of the peer group
(with the operational measures in total and the shareholder
return each weighted 50%). The Companys operational
performance was at the 45th percentile of the peer group,
while its total shareholder return over this period was at the
15th percentile of the peer group. Despite the
Companys operating performance in the middle of the peer
group, the NEOs level of realizable compensation compared
to the compensation opportunity was the lowest of all seventeen
companies in the peer group. We believe that this result
demonstrates the Companys commitment to align the
compensation program for our executives with the interests of
our stockholders. However, we also recognize the importance of
retaining superior talent to achieve our objectives. As a
result, we continued to enhance our annual bonus plan for the
2009 performance year; these changes are discussed below in
Elements of Total Compensation Annual Cash
Bonus (Non-Equity Incentive Compensation) and in our
long-term incentive awards, which are discussed below in
Elements of Total Compensation Share-Based
Compensation.
In February 2010, at the direction of the Compensation
Committee, Watson Wyatt updated its
pay-for-performance
analysis by examining the Companys pay and performance in
the period from 2006 to 2008 against its comparator group.
Similar to its findings in February 2009, Watson Wyatt
determined that, based upon the same four operational measures
noted above and on total shareholder return, the Company
performed at the
23
rd
percentile of the peer group (with the operational measures in
total and the shareholder return each weighted 50%). The
Companys operating performance was at the 44th percentile
of the peer group, while its total shareholder return was at the
6th percentile of the peer group. For the period from 2006 to
2008, the NEOs level of realizable compensation compared
to the compensation opportunity was at the 6th percentile of the
peer group. This updated analysis continues to demonstrate
alignment between the Companys performance and executive
compensation.
Competitiveness
and Comparator Group
In 2008, the Committee, in conjunction with Watson Wyatt and the
CHRO, identified a peer group of companies in the consulting,
professional services, and information services industries whose
business characteristics are closely aligned to those of the
Company and with whom the Company competes for talent. These
companies have revenue between 50% and 300% of the
Companys revenue. The peer group consists of the Advisory
Board Company, FactSet Research Systems Inc., First Advantage
Corp., Forrester Research Inc., FTI Consulting Inc., Gartner
Inc., Heidrick & Struggles International Inc., Huron
Consulting Group Inc., ICF International Inc., IHS Inc.,
Interactive Data Corp., Inventiv Health Inc., LECG Corporation,
Maximus Inc., Morningstar Inc., Navigant Consulting Inc., and
Watson Wyatt Worldwide Inc. The Committee confirmed that these
companies constituted the appropriate peer group for comparison
purposes for the 2009 performance year.
In February 2009, at the direction of the Compensation
Committee, Watson Wyatt examined base salary, total cash
compensation, and total direct compensation, which includes
equity-based components of compensation. These market
assessments confirmed that, in the aggregate, the Companys
total direct compensation opportunity for its NEOs is generally
competitive with the 50th percentile of the peer group.
Although the Committee does not use benchmarking data to target
a specific pay-out for any element of compensation or for
overall compensation, market data is used by the Committee to
confirm that the Companys compensation program is
competitive with its peers in order to attract superior talent.
Cost
Compensation and benefit programs are designed to be
cost-effective while still ensuring that the interests of our
employees are maintained. While paying competitive cash and
stock-based compensation, we do not offer expensive
post-employment programs and provide few perquisites or other
personal benefits.
The
Annual Compensation Process
In conducting its annual compensation review in February 2010,
the Committee considered quantitative and qualitative
performance results; the Companys overall need to attract,
retain, and motivate its executive team; and
18
the total cost of compensation programs. The Committee reviews
performance results presented by management in determining
annual bonus awards for the prior year, as well as in
establishing the appropriate aggregate and individual
compensation levels for the current year.
In 2009, the Committee worked with management in the
compensation review process as follows:
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|
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|
|
Develop performance measures:
Our CEO and CHRO identified
appropriate performance measures and recommended performance
objectives that were used to determine annual and long-term
awards.
|
|
|
|
Compile benchmark data:
With the approval of the
Committee, we engaged Watson Wyatt to prepare benchmarking and
competitive data with respect to 2009 compensation. The
Committee used this information in connection with establishing
NEO compensation plans and parameters at its February 2009
meeting.
|
|
|
|
Develop compensation recommendations:
Based upon Company
and individual performance data, the CEO and CHRO prepared
specific compensation recommendations for the NEOs (other than
the CEO and CHRO) regarding base salary, annual incentive bonus,
and equity grants, and presented these recommendations to the
Committee. The CEO prepared recommendations for the CHRO. The
Committee reviewed these recommendations against Company and
individual performance, and made modifications as deemed
appropriate. For CEO compensation, the Committee met in closed
session to determine recommendations for base salary, annual
incentive bonus, and equity award grant. These recommendations
were developed with no input from the CEO, and took into account
overall Company performance, personal performance against
objectives, Board and staff member feedback, and compensation
benchmarking data provided by external sources. Committee
recommendations were then reviewed and approved by all
independent directors of the Board, in closed session without
the CEO present.
|
Elements
of Total Compensation
The compensation package for our NEOs in 2009 consisted
primarily of four components: base salary, a potential cash
bonus under our annual bonus plan, equity participation in the
form of RSUs, and other benefits. Each component is designed to
achieve a specific purpose and to contribute to a total
compensation package that is competitive, performance-based, and
valued by our executives.
Base
Salary
Base salaries are designed to attract and retain
highly-qualified executives, as well as to reward them based
upon their performance at levels competitive with peer
companies. The CEO recommends NEO salary levels (other than for
himself) to the Committee for approval based upon responsibility
and individual performance, market salary data, and internal
equity considerations. The Committee makes CEO salary
recommendations to the independent members of the Board for
approval based upon Company and individual performance and
market salary data.
When determining base salary increases or decreases, the
Committee or the independent members of the Board (in the case
of the CEO) consider these recommendations and its own
evaluation of overall Company performance, the individuals
scope of responsibility, relevant career experience, past and
future contributions to the Companys success, and
competitive compensation data for peer group companies provided
by Watson Wyatt. The Committee does not use a scientific formula
or methodology to determine increases and decreases, and no one
factor is weighted more heavily than another. Although the
Committee does not have a specific benchmark, the goal of the
CEO and Committee is to ensure that total compensation packages
(including base salaries of the NEOs) generally remain
competitive with at least the 50th percentile when compared
to peer group companies. The Watson Wyatt analysis prepared in
February 2009 showed that base pay for the NEOs overall was
generally in the range of the 50th to 75th percentile
of the peer group, based upon proxy data. Because this
assessment demonstrated that the base salaries offered by the
Company were competitive, the Committee determined that NEOs
would not receive a base salary increase in 2009.
Annual
Cash Bonus (Non-Equity Incentive Compensation)
The Committee reviews and approves annual performance goals for
the CEO, CFO, and CHRO. Annual Company-level performance goals
serve both to motivate executives, as well as to increase
shareholder returns, by focusing executive performance on the
attainment of those goals identified as having a positive impact
on our short- and long-term business results.
19
In 2009, the Committee established an annual bonus plan for NEOs
based upon pre-determined financial, operational, and human
capital objectives for the Company overall and for the
executives area of responsibility. Each executive had an
assortment of objectives that were established at the beginning
of the year and reviewed with the executive.
Financial objectives are defined as those that are
related to financial outcomes, and include both overall firm
financial outcomes (in the case of the CEO and CFO) as well as
individual financial outcomes in specific areas of
responsibility (in the case of the CHRO). Representative
objectives in the financial category include: revenue; Contract
Value (the aggregate annualized revenues attributed to all
member agreements in effect at a given date without regard to
the remaining duration of any such agreement); non-GAAP diluted
earnings per share (EPS) (net income per diluted
share excluding the after-tax per share effects of impairment
loss, costs associated with exit activities, restructuring
costs, and gain on acquisition); effective budget forecasting
and planning processes; and cost reduction efforts.
Operational objectives are defined as those that are
related to core operational processes of the Company, and
include both current business processes as well as strategic
acquisition and integration objectives. Representative
objectives in the operational category include: increase in
customer loyalty; specific new business development, strategic
initiative, and restructuring objectives; and successful
implementation of certain technology platforms.
Human capital objectives are defined as those that
are related to the effective management of the talent base of
the Company. Representative objectives in the category of human
capital objectives include: succession planning for certain key
management positions, recruiting and retention goals, and
preparing certain key employees for leadership positions in
specific business lines.
The Committee assesses how each NEO has performed, relative to
the NEOs individual performance goals, to determine the
amount of
his/her
incentive pay-out. The performance assessment of each NEO
includes a qualitative and quantitative review. For 2009, the
Committee designed the annual bonus plan for NEOs to provide
competitive incentive compensation at a target incentive payout
percentage of 110% of base salary for the CEO and of 75% of base
salary for the other NEOs. Although all of our NEOs have
substantial compensation at risk based upon performance, the
CEOs at-risk pay is the highest based upon the
Boards view that the CEOs responsibilities and
decisions have the greatest impact upon Company performance and,
as a result, shareholder value.
In 2009, the Committee continued the enhancement of the
Companys annual bonus program for executives and other
staff. For 2009, the principal operational adjustment made to
the incentive component of executive compensation involved
increasing the target bonuses for the NEOs other than the CEO
from 50% to 75% as a percentage of base salary. Historically,
total cash compensation was a less significant component of
overall compensation for our executives (compared to equity).
The Committee determined that it was in the best interests of
the stockholders, in order to appropriately retain and motivate
our leadership group, to shift the mix of total compensation so
that a greater proportion of the total is represented by cash
(as compared to equity). First, we believe that this shift
improves the balance between short-term performance goals
(achieved through annual cash bonus awards) and long-term
performance goals (achieved through equity-based awards).
Second, because the Companys stock price has declined in
recent years, the total compensation actually realized by
executives has similarly declined, as highlighted by the Watson
Wyatt analysis. As a result, the increase in potential cash
compensation provides the executives with a more direct
opportunity to achieve total compensation that is competitive
with the 50th percentile of the Companys peer group. As
compared to the Companys stock price, which may be
uncertain during particularly challenging economic environments
and impacted by events outside of the control of the executives,
the annual cash bonus awards are tied to financial, operational,
and human capital objectives, many of which can be directly
impacted by the performance of the executives.
20
For the CEO, the Committee makes the recommendation for the
annual bonus award to the independent members of the Board for
approval. For the NEOs and other executives, the CEO recommends
annual bonus awards to the Committee for approval. The following
table summarizes the number of specific individual objectives
and a breakdown of the percentage contribution to the overall
individual bonus used by the Committee to evaluate individual
performance for each NEO in 2009:
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Financial
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|
Operational
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|
Human Capital
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|
Objectives (# and
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|
Objectives (# and
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|
Objectives (# and
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|
Percentage
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|
Percentage
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|
Percentage
|
Name
|
|
Weighting)
|
|
Weighting)
|
|
Weighting)
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Thomas L. Monahan III
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7 and 50
|
%
|
|
|
5 and 25
|
%
|
|
|
3 and 25
|
%
|
Richard S. Lindahl
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|
|
4 and 60
|
%
|
|
|
4 and 25
|
%
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|
|
2 and 15
|
%
|
Melody L. Jones
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|
|
3 and 30
|
%
|
|
|
3 and 30
|
%
|
|
|
2 and 40
|
%
|
Joyce Liu
|
|
|
3 and 60
|
%
|
|
|
3 and 30
|
%
|
|
|
1 and 10
|
%
|
Based upon each NEOs salary and the maximum bonus he or
she could earn, the aggregate maximum amount of annual bonuses
that could be earned by the Companys NEOs in 2009 was
approximately $1.8 million. This compared to a maximum
bonus pool for the 2008 NEOs of approximately $2.2 million
in 2008. Actual bonus payouts for the NEOs, and particularly the
CEO, were impacted by the Companys overall financial
results. Original targets for revenue, non-GAAP diluted EPS, and
Contract Value were adjusted downward in the second quarter of
2009 due to challenging economic conditions, which the Committee
viewed as outside the executives direct control. While the
company achieved its revised revenue and non-GAAP diluted EPS
targets, it did not achieve the revised year-end Contract Value
target, all of which is shown below.
2009
Financial Metrics
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Metric
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Target
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2009 Result
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|
Revenue
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|
$415-$445 million
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|
$442.9 million
|
Non-GAAP diluted earnings per share
|
|
$1.40 - $1.50
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|
$1.68
|
Year-end Contract Value
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|
$410 million
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|
$393.8 million
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In 2008 and 2009, the target and actual bonus awards for the CEO
and other NEOs were as follows (in dollars):
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2008
|
|
2008
|
|
2009
|
|
2009
|
|
|
Target Bonus
|
|
Actual Bonus
|
|
Target Bonus
|
|
Actual Bonus
|
|
Thomas L. Monahan III
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|
|
693,000
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|
|
|
315,000
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|
|
|
693,000
|
|
|
|
400,000
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|
Joyce Liu(1)
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|
|
137,500
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|
|
|
137,500
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|
|
|
125,000
|
|
|
|
125,000
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|
Richard Lindahl(1)
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|
|
|
|
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|
|
|
|
|
200,000
|
|
|
|
200,000
|
|
Melody L. Jones
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|
|
225,000
|
|
|
|
337,500
|
|
|
|
337,500
|
|
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|
405,000
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|
(1)
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|
Ms. Lius role as interim CFO concluded in May 2009.
Mr. Lindahl became CFO in May 2009. Target bonus amounts
for Mr. Lindahl and Ms. Liu are adjusted to take into
account their service as CFO for only a portion of 2009.
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Each NEOs actual 2009 bonus represented the following
percentage of base salary: Mr. Monahan 64%
(target 110%) and Ms. Jones 90% (target 75%).
Each of Ms. Liu and Mr. Lindahl received their target
bonus amounts, adjusted for their time in role as interim CFO
and CFO, respectively, in 2009.
Although the revenue and EPS components of
Mr. Monahans Financial objectives were achieved, the
Company missed its revised Contract Value target. On Operational
and Human Capital objectives, Mr. Monahan achieved
above-target performance. Specifically, this over-performance
was related to the institution of the integrated Account
Management member management approach, focusing of resources on
key product lines, upgrades to the member experience,
implementation of substantial changes to the Companys
senior management team, and aggressive cost management. Taken
together, performance on these objectives resulted in a bonus
pay-out of 58% of target bonus.
Ms. Jones achieved over-performance in the Human Capital
and Operational components of her objectives. Specifically, this
over-performance was related to the design and implementation of
the Companys rightsizing initiatives; implementation of
the personnel-related components of the Account Management
go-to-market
21
redesign; and the hiring, retention, and training of key revenue
and advisory positions for the firm. Performance on these
objectives resulted in a bonus payout of 120% of target bonus.
Each of Mr. Lindahl and Ms. Liu met their respective
overall objectives and, as a result, received at-target bonus
pay-outs for their roles as CFO and interim CFO, respectively.
In addition, Mr. Lindahl received a signing bonus of
$50,000 in connection with assuming his position as Chief
Financial Officer.
Equity
Participation
Our equity participation programs are designed to align
executives financial interests with increasing shareholder
value. Each equity program creates a direct linkage between
executive wealth creation and shareholder gains. We do not
currently have a formal policy regarding equity or other
security ownership requirements for officers.
Share-Based
Compensation
The use of share-based compensation has been a significant
component of our overall compensation philosophy and is one that
we plan to continue. Our philosophy is built on the principles
that equity compensation should seek to align employees
actions with shareholder interests; attract, retain, and
motivate highly qualified executives; and balance the focus on
short- and longer-term performance objectives. We believe that
we have been successful in achieving this alignment through the
use of share-based compensation which, in 2008, included the use
of SARs and RSUs; and, in 2009, included only RSUs.
A RSU is a promise to deliver a share of common stock at a
specific time in the future, subject to vesting requirements.
The fair value of a RSU is determined by multiplying the number
of RSUs by the price of our stock on the grant date (reduced by
the present value of dividends expected to be paid over the
vesting period). As the price of our stock fluctuates, so does
the fair value of the RSU; this allows for employee and
stockholder alignment with both increases and decreases in our
stock price. RSUs also provide for more stable value than SARs;
RSUs provide value to employees with both increases and
decreases in our stock price.
The size (and, prior to 2009, the relative mix between SARs and
RSUs) of an annual share-based compensation award granted to an
employee has been determined by
his/her
respective position and underlying responsibilities, recognizing
the different levels of contribution to the achievement of
performance goals.
The Company does not use a formula that ties the amount of
equity awards to be granted to each NEO to the achievement of
specific in-year performance goals. Rather, the Committee
reviews an assortment of factors in determining the appropriate
level of equity awards to be granted to NEOs, including
comparative market data, individual contributions over time, the
need to retain that individual, and an assessment of the
individuals relative equity position. The Committee
utilizes the Watson Wyatt comparator group study in order to
understand the total compensation, including equity
compensation, earned by comparable executives in the
Companys peer group. The Committees goal is to
generally maintain total compensation (including base, bonus,
and long-term incentives) for its NEOs competitive with the
50
th
percentile
when compared to peer group companies. The Watson Wyatt analysis
prepared in February 2009 indicated that the 2009 equity grants
awarded by the Committee would maintain an overall total
compensation opportunity level that was generally competitive
with the
50
th
percentile
for the NEOs when compared with its peer group. Keeping the
comparative market data in mind, the Committee reviewed and
considered all of these factors for each NEO and, based upon its
experience and this review, approved the specific levels of
equity awards for each NEO described in the Grants of
Plan-Based Awards in 2009 table. The Watson Wyatt analysis
prepared in February 2010 demonstrated that the total
compensation opportunity for the NEOs in 2009, including equity
awards, was generally competitive with the
50
th
percentile
of the peer group.
Our equity-based awards generally vest 25% per year beginning
one year (RSUs are 13 months) from the date of grant. With
vesting over four years, a RSU provides the holder with a
valuable award that may only be retained by the executive so
long as the executives employment with the Company
continues. In the event of a change in control of the Company,
the RSU award agreements only accelerate vesting upon a
so-called double trigger. This means that
accelerated vesting only occurs if the NEOs employment
terminates other than for cause or voluntary resignation within
one year after a change in control.
In 2009, the Committee made the decision to grant only RSUs to
the NEOs. As of the date of this decision, the strike price of
all of the outstanding SARs held by the NEOs was in excess of
the fair value of our common stock. Equity ownership has been a
core principle in our compensation program. The Committee
believed that, in light of the current stock market volatility,
the most effective way to promote equity ownership by the
executives, reward
22
them for solid operating performance, and retain them during a
tumultuous economic period was to award only RSUs as the vehicle
for 2009 equity-based compensation.
The overall funding levels are ultimately subject to the
judgment and approval of the Committee to ensure appropriate
alignment with the interests of our stockholders. As a general
rule, the Committee believes it is important to ensure that
overall annual burn rate from equity grants averages
approximately 3% annually. From this available pool, equity
awards have been granted each year based upon the competitive
long-term incentive value for each executives position.
Individual contribution to longer-term Company objectives, as
well as potential to contribute further over time, is considered
when determining eligibility to participate in annual grants and
the amount awarded. The CEO recommends award grants for the
NEOs, other executives, and senior managers to the Committee,
which has final approval authority for these recommendations.
Additionally, when determining individual compensation actions
for the CEO and other NEOs, the Committee considers the total
compensation to be delivered to individual executives, and as
such may exercise discretion in determining the portion
allocated to annual versus long-term incentives. We believe that
this total compensation approach provides the
ability to balance compensation decisions between the short- and
longer-term needs of the business. It also allows for the
flexibility required to recognize differences in performance by
providing differentiated compensation.
Annual
Grants of Equity-Based Awards
Equity-based awards are granted on the last Wednesday of March
each year, following the regularly-scheduled Committee meeting
in February. Grants are determined during the same meeting at
which the Committee determines all elements of the NEOs
compensation for the year. This meeting date follows the
issuance of the release reporting our earnings for the previous
fiscal year. The Committee believes that it is appropriate that
annual awards be made at a time when material information
regarding our performance for the preceding year has been
disclosed. We do not otherwise have any program, plan, or
practice to time annual grants to our executives in coordination
with the release of material non-public information.
Approval of grants for any newly-hired or promoted executives
during the course of the year occurs through a committee of
management appointed by the Committee. For newly-hired or
newly-promoted employees, grants are awarded on the
10th day, or first business day thereafter, of the month
following the employment start or promotion date unless the
employment start or promotion date occurs on the first business
day of a given month, then the grant shall be awarded on the
10th day, or first business day thereafter, of the current
month. All grants to NEOs are made by the Committee itself and
not pursuant to delegated authority.
All equity-based awards made to our NEOs, or to any of our other
employees or directors, are made pursuant to our 2004 Stock
Incentive Plan. All awards under our equity compensation plans
are granted with an exercise price equal to the fair market
value of our common stock on the date of the grant. Fair market
value is determined to be the closing market price of a share of
our common stock on the date of grant. We do not have any
program, plan, or practice of awarding options and setting the
exercise price based upon the stocks price on a date other
than the grant date. We do not have a practice of determining
the exercise price of grants by using average prices or lowest
prices of our common stock in a method preceding, surrounding,
or following the grant date.
Allocation
between annual cash compensation and long-term non-cash
compensation
We believe that both cash compensation and non-cash compensation
are appropriate mechanisms for driving executive performance in
support of stockholder value. Cash compensation rewards annual
(short-term) performance, while non-cash compensation is
generally used to reinforce sustained performance over a longer
period of time. The allocation between annual cash compensation
and long-term equity compensation is based primarily on an
evaluation of an executives overall role and contributions
to the Company, taking into account competitive concerns
regarding attracting and retaining superior talent, as opposed
to a targeted allocation between annual and long-term
compensation. We also consider certain internal factors that may
cause it to target a particular element of an executives
compensation for unique treatment. These internal factors may
include the executives operating responsibilities,
management level, and unique contribution for the time period in
question. We have attempted to build compelling three-and
five-year wealth creation runs for all levels of the executive
ranks, to ensure that the most leveraged talent in our model,
including members of senior management and those with other
specialized skills, are paid accordingly.
Additionally, as discussed in the Annual Cash Bonus
(Non-Equity Incentive Compensation) section, the Committee
has over the last two years shifted the total compensation mix
towards a higher proportion of total cash,
23
in order to ensure that the Companys executive
compensation program remains aligned with the structure of
executive compensation plans for the peer-group companies.
While there is no specific targeted mix between annual and
long-term compensation by individual executive position, we vary
annual and long-term compensation mix by level. In general, as
base salary levels increase, more weight is placed on long-term
compensation. In 2009, the allocation breakdown for the NEOs is
as follows (based upon the valuation methodology used and
described in the Summary Compensation Table):
The CEO received 70% of total compensation (per the Summary
Compensation Table) in the form of cash compensation and the
remaining 30% in non-cash compensation. All other NEOs received
62% to 78% of total compensation in the form of cash
compensation and the remaining 22% to 38% in non-cash
compensation.
Other
Benefits
The NEOs participate in the same Company-wide benefit plans
designed for all of our full time U.S. employees.
Additionally, we provide a limited number of Company-sponsored
insurance, retirement, and other benefit plans to executives. We
believe that it is more cost-effective to pay our executives a
highly competitive salary, bonus, and long-term incentive than
to maintain expensive retirement programs. We do not maintain a
defined benefit plan.
Executive
Perquisites and Other Compensation
Perquisites and other personal benefits do not comprise a
significant aspect of our executive compensation program.
Historically, we have kept the number and value of executive
perquisites to a minimum. The perquisites that are provided to
our NEOs are limited to 401(k) match, reimbursement of parking
expenses, and supplemental life insurance.
The NEOs are eligible to participate in our Company-wide
personal medical, dental, life, disability insurance plans, and
other broad-based benefit plans. Under certain broad-based
benefit plans, participants, including a NEO, may purchase
higher levels of coverage.
We believe that providing these limited perquisites is
appropriate. The Committee reviews the perquisites provided to
its NEOs on a regular basis, in an attempt to ensure that they
continue to be appropriate in light of the Committees
overall goal of designing a compensation program for NEOs that
maximizes the interests of our stockholders.
Insurance
Plans
The core insurance package includes health, dental, disability,
and basic group life insurance coverage generally available to
all employees.
Retirement
Plans
We provide retirement benefits to executives through a 401(k)
plan, which gives employees the opportunity to save for
retirement on a tax-favored basis. Executives may elect to
participate in the 401(k) plan on the same basis as all other
employees. In recognition of the 401(k) as a central element of
our employees retirement planning process, we provide a
discretionary contribution of 50% of an employees
contribution up to a maximum of 6% of base salary.
Additionally, we provide an executive retiree medical benefit
that allows executives to continue medical coverage upon
retirement by assuming 100% of the premium costs associated with
that coverage.
Deferred
Compensation Plan
We provide a deferred compensation plan (the Plan)
for certain employees and members of the Board to provide an
opportunity to defer compensation on a pre-tax basis.
Employees and directors who elect to participate in the Plan may
defer up to 100% of annual base salary; up to 100% of incentive
compensation and other compensation, fees, and retainers; and up
to 100% of any RSUs awarded. In addition, we will make up any
401(k) match that is not credited to the participants
401(k) account due to his or her participation in the Plan.
Participants in the Plan specify one or more benchmark fund(s)
in which their deferrals will be invested.
24
We may also make discretionary contributions at any time based
upon individual or overall corporate performance, which may be
subject to a different vesting schedule than elective deferrals.
We did not make any contributions to the Plan in 2009.
Each Plan years deferral balance may have a separate
distribution schedule determined by the Plan participant.
Distributions are taxable as ordinary income when received. Plan
participants may elect to receive a Plan year deferral balance
at a specified future date while employed (scheduled in-service
withdrawal)
and/or
at
termination, as defined in the Plan.
We provide this benefit because the Committee wishes to permit
our employees to defer the obligation to pay taxes on certain
elements of the compensation that they are entitled to receive.
The Plan permits them to do this while also receiving a
market-based return on deferred amounts. We believe that
provision of this benefit is important as a retention and
recruitment tool as many if not all of the companies with which
we compete for executive talent provide a similar plan to their
senior employees.
Impact of
Accounting and Tax Issues on Executive Compensation
In establishing individual executives compensation levels,
we do not explicitly consider accounting and tax issues.
However, we do analyze the overall expense arising from
aggregate executive compensation levels and awards and the
components of our compensation programs.
Additionally, we have addressed the impact of
Section 162(m) of the Internal Revenue Code (the
Code). The 2004 Stock Incentive Plan has been
approved by stockholders; as a result, we believe that certain
awards under this plan (options and SARs) are qualified for a
performance-based deduction and are not subject to
Section 162(m) of the Code. However, the Committee believes
that it must maintain flexibility in its approach in order to
structure a program that is effective in attracting, motivating,
and retaining the Companys key executives.
Employment
Agreement with the CEO
We have entered into an employment agreement with the CEO, which
is described in more detail under the heading Employment
Agreements and Potential Termination and Change in Control
Payments in this Proxy Statement. The employment agreement
with our CEO sets forth the material terms of his employment
relationship and also provides for payments and other benefits
if his employment terminates for a qualifying event or
circumstance, such as being terminated without cause
or leaving employment for good reason.
The Company may terminate Mr. Monahans employment
without cause at any time, including by non-extension of the
term, in which event he will receive an amount equal to 200% of
one years base salary, the prorated target annual
incentive bonus for the year in which termination occurs, all
the options and stock appreciation rights granted to him will
vest and remain exercisable for a period of ninety days, and all
restricted stock units and other equity or deferred compensation
will vest. The Company will also provide, for two years
following the date of termination, the same welfare benefits
that Mr. Monahan received immediately prior to his
termination, at the same cost charged to executives.
Mr. Monahan receives these same benefits if he voluntarily
terminates his employment for good reason.
In the event of a change of control of the Company,
Mr. Monahan may voluntarily terminate his employment upon
thirty days written notice during the first year following the
change of control. Upon such termination, Mr. Monahan will
generally receive the same payments and benefits described in
the preceding paragraph. Additionally, in the event that any
compensation Mr. Monahan receives from the Company become
subject to the excise tax on golden parachute
payments, Mr. Monahan will be entitled to receive a
gross-up
payment on such amounts and on the
gross-up
payments themselves in an amount sufficient to put him in the
same after-tax position that he would have been in had no excise
tax been imposed on the payments.
In return for the post-termination arrangements described above,
Mr. Monahan covenants not to compete or solicit our
employees for two years. Severance is stopped if the executive
violates these covenants during the period. This arrangement
with Mr. Monahan is consistent with the agreement that was
in place with his predecessor and, at 200% of base salary, the
Company believes this arrangement is well within market practice
for CEOs at comparable companies.
Change in
Control and Severance Agreements
We have entered into change in control agreements with our CHRO,
our CFO, and our former interim CFO. In the event of a change in
control of the Company, these agreements only provide benefits
upon a so-called double
25
trigger. This means that severance benefits are triggered
only when the executive is involuntarily terminated by the
Company without cause or the executive terminates employment for
good reason within 24 months after the date of
the change in control. The severance benefits consist of
12 months of base pay plus a pro rata target bonus for the
year of termination, payable over 12 months, and
12 months of health continuation coverage at active
employee rates.
In January 2010, the Company approved a severance program for
its Corporate Leadership Team for which all members of the
Corporate Leadership Team other than our CEO may be eligible.
Our CHRO is eligible, and our CFO will become eligible in May
2010. This program provides the same benefits to executives that
are described in the preceding paragraph if the executive is
terminated without cause.
The Committee believes that these change in control and
severance arrangements are well within market practice for
similarly situated executives and are an important part of the
overall compensation program designed to retain our executives.
Severance
Agreement with General Manager
In connection with Glenn Tobins resignation on
March 31, 2009, the Company agreed to pay Mr. Tobin
salary continuation for twelve months. In return for this
benefit, he entered into a one-year non-competition agreement
with the Company.
Report of
the Compensation Committee of the Board of Directors
The Compensation Committee has reviewed and discussed the above
Compensation Discussion and Analysis (CD&A)
with the Companys management. Based upon the review and
discussions, the Compensation Committee recommended to the
Companys Board that the CD&A be included in the Proxy
Statement and the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009.
COMPENSATION COMMITTEE MEMBERS
Daniel O. Leemon, Chair
Stephen M. Carter
David W. Kenny
Compensation
and Risk
We believe that our compensation programs appropriately reward
prudent business judgment and risk-taking over the long term.
The Compensation Committee provides oversight with respect to
any risks that may be created by our compensation programs.
Management has evaluated the risks that are created by our
compensation programs for all employees, including non-executive
officers, and the Compensation Committee has reviewed this
evaluation. Based on our review, we have concluded that our
compensation programs do not create risks that are reasonably
likely to have a material adverse effect on the Company.
26
Executive
Compensation
Summary
Compensation Table for 2009, 2008, and 2007
The following table summarizes the compensation earned by or
awarded to our Principal Executive Officer (PEO),
Principal Financial Officers (PFO), and our other
executive officers (the NEOs):
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|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
|
|
Salary(1)
|
|
Bonus
|
|
Stock Awards(2)
|
|
Awards(2)
|
|
Compensation
|
|
Compensation(3)
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Thomas L. Monahan III,
|
|
2009
|
|
|
630,000
|
|
|
|
|
|
|
|
450,000
|
|
|
|
|
|
|
|
400,000
|
|
|
|
13,422
|
|
|
|
1,493,422
|
|
Chief Executive Officer (PEO)
|
|
2008
|
|
|
622,500
|
|
|
|
|
|
|
|
525,981
|
|
|
|
416,300
|
|
|
|
315,000
|
|
|
|
7,050
|
|
|
|
1,886,831
|
|
|
|
2007
|
|
|
595,932
|
|
|
|
|
|
|
|
1,039,025
|
|
|
|
1,070,075
|
|
|
|
150,000
|
|
|
|
8,043
|
|
|
|
2,863,075
|
|
Richard S. Lindahl,
|
|
2009
|
|
|
265,625
|
|
|
|
50,000
|
|
|
|
300,000
|
|
|
|
|
|
|
|
200,000
|
|
|
|
10,927
|
|
|
|
826,552
|
|
Chief Financial Officer (PFO)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joyce Liu,
|
|
2009
|
|
|
251,667
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
125,000
|
|
|
|
6,111
|
|
|
|
482,778
|
|
Former Interim Chief Financial Officer (PFO)(5)
|
|
2008
|
|
|
237,917
|
|
|
|
|
|
|
|
94,500
|
|
|
|
36,200
|
|
|
|
137,500
|
|
|
|
4,901
|
|
|
|
511,018
|
|
Melody L. Jones,
|
|
2009
|
|
|
450,000
|
|
|
|
|
|
|
|
300,000
|
|
|
|
|
|
|
|
405,000
|
|
|
|
14,034
|
|
|
|
1,169,034
|
|
Chief Human Resources Officer
|
|
2008
|
|
|
445,000
|
|
|
|
|
|
|
|
182,950
|
|
|
|
144,800
|
|
|
|
337,500
|
|
|
|
7,100
|
|
|
|
1,117,350
|
|
|
|
2007
|
|
|
429,363
|
|
|
|
|
|
|
|
361,400
|
|
|
|
372,200
|
|
|
|
100,000
|
|
|
|
8,209
|
|
|
|
1,271,172
|
|
Glenn P. Tobin,
|
|
2009
|
|
|
118,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
359,669
|
|
|
|
478,419
|
|
General Manager(6)
|
|
2008
|
|
|
475,000
|
|
|
|
|
|
|
|
114,344
|
|
|
|
90,500
|
|
|
|
120,000
|
|
|
|
7,200
|
|
|
|
807,044
|
|
|
|
2007
|
|
|
471,437
|
|
|
|
|
|
|
|
451,750
|
|
|
|
465,250
|
|
|
|
45,000
|
|
|
|
7,019
|
|
|
|
1,440,456
|
|
|
|
|
(1)
|
|
Amounts reflect the dollar amount of base salary paid in the
year, before deferrals and including salary increases effective
during the year.
|
|
(2)
|
|
Amounts reflect the aggregate grant date fair value. These are
not amounts paid to or realized by the NEO. Assumptions used in
the calculation of these amounts are included in Notes 2
and 13 to our audited consolidated financial statements included
in our 2009
Form 10-K.
Amounts for 2008 and 2007 have been restated to reflect the
aggregate grant date fair value in accordance with new SEC rules.
|
|
(3)
|
|
Amounts reflect the value of other compensation items, including
401(k) matching contributions and Company payments for
supplemental life insurance premiums. Perquisites and other
personal benefits for NEOs were less than $10,000.
Mr. Tobins 2009 all other compensation
includes $356,250 paid under a severance agreement in connection
with his resignation in March 2009. The remaining $118,750 will
be paid in 2010.
|
|
(4)
|
|
Mr. Lindahl began employment with the Company as the CFO in
May 2009 and received a $50,000 signing bonus.
|
|
(5)
|
|
Ms. Liu served as our interim CFO from September 2008 until
May 2009, when she resumed the position she previously held as
Managing Director, Financial Planning and Analysis.
|
|
(6)
|
|
Mr. Tobin was a NEO until his departure from the Company in
March 2009.
|
Employment Agreements.
Certain of the elements
of compensation set forth in the Summary Compensation Table
above and in the Grants of Plan-Based Awards table below reflect
the terms of employment agreements between the Company and the
CEO.
Thomas L. Monahan III.
The Company is party to
an employment agreement with Mr. Monahan effective
January 1, 2006, pursuant to which Mr. Monahan serves
as our CEO. Under the employment agreement, Mr. Monahan is
entitled to an annual salary of at least $550,000, which may be
increased from time to time. The employment agreement provides
that Mr. Monahans target annual bonus each year will
be at least 110% of his base salary. Mr. Monahan is also
entitled to participate in all benefit plans generally made
available to similarly situated executive employees of the
Company and such equity-based compensation that may be granted
by the Board
and/or
the
Compensation Committee from time to time.
27
Grants of
Plan-Based Awards in 2009
The following table sets forth information regarding possible
payments of non-equity incentive plan compensation and grants of
RSUs to the NEOs in 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
Option
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Estimated Future
|
|
Stock
|
|
Awards:
|
|
|
|
Fair Value
|
|
|
|
|
|
|
Payouts Under
|
|
Awards:
|
|
Number of
|
|
Exercise or
|
|
of Stock and
|
|
|
|
|
Board/
|
|
Non-Equity Incentive
|
|
Number of
|
|
Securities
|
|
Base Price
|
|
Option
|
|
|
|
|
Committee
|
|
Plan Awards(2)
|
|
Shares of
|
|
Underlying
|
|
of Option
|
|
Awards
|
|
|
Grant
|
|
Action
|
|
Target
|
|
Maximum
|
|
Stock or
|
|
Options
|
|
Awards
|
|
($)
|
Name
|
|
Date(1)
|
|
Date
|
|
($)
|
|
($)
|
|
Units (#)(3)
|
|
(#)
|
|
($/Sh)
|
|
(4)
|
|
Thomas L. Monahan III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash bonus
|
|
|
|
|
|
|
|
|
|
|
693,000
|
|
|
|
945,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU grant
|
|
|
3/25/2009
|
|
|
|
3/4/2009
|
|
|
|
|
|
|
|
|
|
|
|
43,062
|
|
|
|
|
|
|
|
|
|
|
|
450,000
|
|
Richard S. Lindahl
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash bonus
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
425,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU grant
|
|
|
6/10/2009
|
|
|
|
4/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
14,711
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
Joyce Liu
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash bonus
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
183,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU grant
|
|
|
3/25/2009
|
|
|
|
2/20/2009
|
|
|
|
|
|
|
|
|
|
|
|
9,569
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
Melody L. Jones
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash bonus
|
|
|
|
|
|
|
|
|
|
|
337,500
|
|
|
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU grant
|
|
|
3/25/2009
|
|
|
|
2/20/2009
|
|
|
|
|
|
|
|
|
|
|
|
28,708
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
Glenn P. Tobin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash bonus
|
|
|
|
|
|
|
|
|
|
|
356,250
|
|
|
|
475,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Grant date was determined in accordance with the Companys
policy for the timing of granting equity awards.
|
|
(2)
|
|
Amounts set forth in these columns represent the annual cash
incentive compensation amounts that potentially could have been
earned in 2009 for each of the NEOs, including for
Mr. Tobin if he had been employed with the Company for the
entire year, based upon the achievement of performance goals as
previously described in Annual Cash Bonus (Non-Equity
Incentive Compensation). With the exception of
Mr. Tobin, the amounts of annual cash incentive
compensation earned in 2009 by our NEOs have been determined and
were paid on March 31, 2010. The amounts paid are included
in the Non-Equity Incentive Plan Compensation column
of the 2009 Summary Compensation Table. Mr. Tobins
employment with the Company concluded in March 2009, and he was
not paid an annual bonus for 2009.
|
|
(3)
|
|
Stock awards consist of RSUs that vest over 4 years: 25%
after 13 months from the grant date, 25% 11 months
later, 25% 12 months later, and 25% 12 months later.
The Company does not pay dividend equivalents on unvested RSUs.
|
|
(4)
|
|
Amounts reflect the aggregate grant date fair value. These are
not amounts paid to or realized by the NEO. Assumptions used in
the calculation of these amounts are included in Notes 2
and 13 to our audited consolidated financial statements included
in our 2009
Form 10-K.
|
28
Outstanding
Equity Awards at December 31, 2009
The following table sets forth information regarding the number
of shares of unexercised stock options and SARs and the number
of shares and the value of unvested RSUs held by the NEOs at
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
Market Value
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Number of
|
|
of Shares
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Shares or Units
|
|
or Units of
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
of Stock
|
|
Stock That
|
|
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
That Have
|
|
Have Not
|
|
|
|
|
(#)
|
|
(#)
|
|
Price
|
|
Expiration
|
|
Not Vested
|
|
Vested(1)
|
Name
|
|
Grant Year
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
Thomas L. Monahan III
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,062
|
(2)
|
|
|
982,675
|
|
|
|
|
2008
|
|
|
|
14,375
|
|
|
|
43,125
|
(3)
|
|
|
40.78
|
|
|
|
3/5/2015
|
|
|
|
10,781
|
(3)
|
|
|
246,022
|
|
|
|
|
2007
|
|
|
|
28,750
|
|
|
|
28,750
|
(4)
|
|
|
76.00
|
|
|
|
3/7/2014
|
|
|
|
7,187
|
(4)
|
|
|
164,007
|
|
|
|
|
2006
|
|
|
|
43,125
|
|
|
|
14,375
|
(5)
|
|
|
97.56
|
|
|
|
3/14/2013
|
|
|
|
3,593
|
(5)
|
|
|
81,992
|
|
|
|
|
2005
|
|
|
|
150,000
|
|
|
|
|
|
|
|
64.88
|
|
|
|
3/11/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
65,000
|
|
|
|
|
|
|
|
45.10
|
|
|
|
3/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
|
50,000
|
|
|
|
|
|
|
|
32.30
|
|
|
|
3/11/2013
|
|
|
|
|
|
|
|
|
|
Richard S. Lindahl
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,711
|
(6)
|
|
|
335,705
|
|
Joyce Liu
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,569
|
(2)
|
|
|
218,365
|
|
|
|
|
2008
|
|
|
|
1,250
|
|
|
|
3,750
|
(3)
|
|
|
40.78
|
|
|
|
3/5/2015
|
|
|
|
2,250
|
(7)
|
|
|
51,345
|
|
|
|
|
2007
|
|
|
|
1,250
|
|
|
|
1,250
|
(8)
|
|
|
66.60
|
|
|
|
11/12/2014
|
|
|
|
|
|
|
|
|
|
Melody L. Jones
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,708
|
(2)
|
|
|
655,117
|
|
|
|
|
2008
|
|
|
|
5,000
|
|
|
|
15,000
|
(3)
|
|
|
40.78
|
|
|
|
3/5/2015
|
|
|
|
3,750
|
(3)
|
|
|
85,575
|
|
|
|
|
2007
|
|
|
|
10,000
|
|
|
|
10,000
|
(4)
|
|
|
76.00
|
|
|
|
3/7/2014
|
|
|
|
2,500
|
(4)
|
|
|
57,050
|
|
|
|
|
2006
|
|
|
|
7,500
|
|
|
|
2,500
|
(5)
|
|
|
97.56
|
|
|
|
3/14/2013
|
|
|
|
625
|
(5)
|
|
|
14,263
|
|
|
|
|
2005
|
|
|
|
35,000
|
|
|
|
|
|
|
|
89.70
|
|
|
|
12/30/2012
|
|
|
|
|
|
|
|
|
|
Glenn P. Tobin(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Based on the closing market price of $22.82 on December 31, 2009.
|
|
(2)
|
|
RSUs vest in equal increments on April 25, 2010; and March 25,
2011, 2012, and 2013.
|
|
(3)
|
|
Unexercisable SARs and RSUs vest in equal increments on March 5,
2010, 2011, and 2012.
|
|
(4)
|
|
Unexercisable SARs and RSUs vest in equal increments on March 7,
2010 and 2011.
|
|
(5)
|
|
Unexercisable SARs and RSUs vest on March 14, 2010.
|
|
(6)
|
|
RSUs vest in equal increments on July 10, 2010; and June 10,
2011, 2012, and 2013.
|
|
(7)
|
|
RSUs vest in equal increments on September 10, 2010, 2011, and
2012.
|
|
(8)
|
|
Unexercisable SARs vest in equal increments on November 12, 2010
and 2011.
|
|
(9)
|
|
A total of 163,750 option awards with exercise prices between
$40.78 and $97.56, and 7,499 RSUs were forfeited by Mr. Tobin
effective June 29, 2009, 90 days after his departure from
the Company.
|
Option
Exercises and Stock Vested in 2009
The following table sets forth information regarding the number
and value of stock options exercised and stock awards vested for
each NEO in 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Shares
|
|
|
|
Shares
|
|
|
|
|
Acquired
|
|
Value Realized
|
|
Acquired
|
|
Value Realized
|
|
|
on Exercise
|
|
on Exercise(1)
|
|
on Vesting(2)
|
|
on Vesting(3)
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
Thomas L. Monahan III(4)
|
|
|
|
|
|
|
|
|
|
|
10,782
|
|
|
|
155,656
|
|
Richard S. Lindahl
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joyce Liu
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
|
19,245
|
|
Melody L. Jones
|
|
|
|
|
|
|
|
|
|
|
3,125
|
|
|
|
46,044
|
|
Glenn P. Tobin(4)
|
|
|
|
|
|
|
|
|
|
|
2,813
|
|
|
|
36,397
|
|
29
|
|
|
(1)
|
|
Value realized is determined based upon the number of shares
exercised multiplied by the difference between the strike price
of the award(s) and the market price on the date of exercise.
|
|
(2)
|
|
Number of shares acquired includes amounts surrendered by the
executive to us for payment of income tax withholding associated
with the vesting.
|
|
(3)
|
|
Value realized represents the closing value of the underlying
stock on the vesting date.
|
|
(4)
|
|
The following individuals elected to defer the recognition of
income upon vesting of certain RSUs by contributing such awards
to the Companys Deferred Compensation Plan:
Mr. Monahan (10,782 RSUs, Value $155,656), and
Mr. Tobin (1,563 RSUs, Value $20,210).
|
Nonqualified
Deferred Compensation for 2009
Effective July 1, 2005, the Company implemented a Deferred
Compensation Plan (the Plan) for certain employees
and members of the Board to provide an opportunity to defer
compensation on a pre-tax basis. The Plan provides for deferred
amounts to be credited with investment returns based upon
investment options selected by participants from alternatives
designated from time to time by the plan administrative
committee. To preserve the tax-deferred status of the deferred
compensation plan, the Internal Revenue Service requires that
the available investment options be deemed
investments, meaning that the participant has no ownership
interest in the fund selected; however, the funds are used to
measure the gains and losses attributed to the
participants account over time. The Plan also allows the
Company to make discretionary contributions at any time based on
individual or overall Company performance, which may be subject
to a different vesting schedule than elective deferrals, and
provides that the Company will make up any 401(k) plan match
that is not credited to the participants 401(k) account
due to his or her participation in the Plan. The Company has
established a trust to hold assets used by the Company to pay
benefits under the Plan. The Company did not make any
contributions to the Plan in 2009. Each Plan years
deferral balance may have a separate distribution schedule
determined by the Plan participant. Distributions are taxable as
ordinary income when received. Plan participants may elect to
receive a Plan year deferral balance at a specified future date
while employed (scheduled in-service withdrawal)
and/or
at
termination, as defined in the Plan.
We provide this benefit because the Compensation Committee
wishes to permit our employees to defer the obligation to pay
taxes on certain elements of the compensation that they are
entitled to receive. The Plan permits them to do this while also
receiving a market-based return on deferred amounts. We believe
that provision of this benefit is important as a retention and
recruitment tool as many, if not all of the companies with which
we compete for executive talent, provide a similar plan to their
senior employees. The following table sets forth information
regarding executive contributions, earnings and account balances
for NEOs participating in the Plan in 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions in
|
|
Contributions
|
|
Earnings
|
|
Withdrawals/
|
|
Balance
|
|
|
Last FY(1)
|
|
in Last FY
|
|
in Last FY(2)
|
|
Distributions
|
|
at Last FYE(3)
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Thomas L. Monahan III
|
|
|
335,387
|
|
|
|
|
|
|
|
227,786
|
|
|
|
|
|
|
|
1,102,012
|
|
Richard S. Lindahl
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joyce Liu
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Melody L. Jones
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn P. Tobin(4)
|
|
|
64,651
|
|
|
|
|
|
|
|
47,673
|
|
|
|
33,380
|
|
|
|
264,731
|
|
|
|
|
(1)
|
|
Amounts reported in this column reflect elective deferrals of
salary and RSUs and have been included in the Summary
Compensation Table. Dividend payments on vested RSUs are also
included in this column, but are not reflected in the Summary
Compensation Table.
|
|
(2)
|
|
Amounts reported in this column reflect appreciation or
depreciation in the market value of the underlying stock and
other investment holdings. Such amounts have not been reported
as compensation in the 2009 Summary Compensation Table as the
earnings do not represent preferential or above-market earnings.
|
|
(3)
|
|
The aggregate amount of executive contributions by
Mr. Monahan is $1,335,586 and Mr. Tobin is $411,146.
|
|
(4)
|
|
Mr. Tobin elected distribution events by plan year and
deferral source over annual periods up to 5 years
commencing after termination.
|
30
Employment
Agreements and Potential Termination and Change in Control
Payments
The Company has entered into an employment agreement with
Mr. Monahan. The Company also sponsors several equity
incentive compensation plans that provide the NEOs with
additional compensation in connection with a termination of
employment
and/or
change of control under certain circumstances. The information
below describes certain compensation that would be paid under
plans and contractual arrangements in effect at
December 31, 2009 to each of the NEOs in the event of a
termination of such executives employment with the Company
and/or
change of control of the Company as of that date.
The amounts shown below reflect the amount of compensation that
would become payable to each of the NEOs under existing plans
and arrangements if the NEOs employment had terminated
and/or
a
change in control had occurred on December 31, 2009, given
the NEOs compensation and service levels as of such date
and, if applicable, based on the Companys closing stock
price on that date. These benefits are in addition to benefits
available prior to the occurrence of any termination of
employment, including under then-exercisable stock options and
benefits available generally to salaried employees. In addition
to the benefits described below, upon any termination of
employment, each of the NEOs would also be entitled to the
amount shown in the Nonqualified Deferred Compensation table
above.
The table below sets forth information regarding the estimated
value of the potential payments to each of the NEOs, assuming
the executives employment terminated on December 31,
2009, and that a change of control of the Company also occurred
on that date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Change of Control
|
|
After Change of Control
|
|
|
|
|
|
|
|
|
Termination other
|
|
|
|
|
Termination
|
|
|
|
than for Cause or
|
|
|
|
|
Without
|
|
Termination For
|
|
Voluntary
|
Name/Benefit
|
|
Death/Disability
|
|
Cause
|
|
Good Reason
|
|
Resignation
|
|
Thomas L. Monahan III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination payment(1)
|
|
|
|
|
|
$
|
1,260,000
|
|
|
$
|
1,260,000
|
|
|
$
|
1,260,000
|
|
Vesting of stock options and SARs(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of RSUs(3)(4)
|
|
$
|
1,474,696
|
|
|
|
1,474,696
|
|
|
|
491,703
|
|
|
|
1,474,696
|
|
Health and welfare benefits
|
|
|
|
|
|
|
9,020
|
|
|
|
9,020
|
|
|
|
9,020
|
|
Excise tax and
gross-up
payment(5)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
Richard S. Lindahl
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination payment(1)
|
|
|
|
|
|
$
|
425,000
|
|
|
|
|
|
|
$
|
425,000
|
|
Vesting of RSUs(3)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
335,705
|
|
Health and welfare benefits
|
|
|
|
|
|
|
10,814
|
|
|
|
|
|
|
|
10,814
|
|
Joyce Liu
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination payment(1)
|
|
|
|
|
|
$
|
117,500
|
|
|
$
|
117,500
|
|
|
$
|
$235,000
|
|
Vesting of stock options and SARs(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of RSUs(3)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269,710
|
|
Health and welfare benefits
|
|
|
|
|
|
|
4,196
|
|
|
|
|
|
|
|
8,391
|
|
Melody L. Jones
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination payment(1)
|
|
|
|
|
|
$
|
450,000
|
|
|
|
|
|
|
$
|
450,000
|
|
Vesting of stock options and SARs(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of RSUs(3)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
812,005
|
|
Health and welfare benefits
|
|
|
|
|
|
|
9,875
|
|
|
|
|
|
|
|
9,875
|
|
Glenn P. Tobin
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts will also include a pro-rated bonus for the calendar
year in which the termination occurs pursuant to the terms of
the bonus plan, based on the number of days employed by the
Company during that year.
|
31
|
|
|
(2)
|
|
Amounts calculated assuming that the market price per share of
the underlying stock on the date of termination of employment
was equal to the closing price of the Companys common
stock on December 31, 2009 ($22.82) and are based upon the
difference between $22.82 and the exercise price of the option
awards held by the NEO.
|
|
(3)
|
|
Amounts calculated assuming that the market price per share of
the underlying stock on the date of termination of employment
was equal to the closing price of the Companys common
stock on December 31, 2009 ($22.82).
|
|
(4)
|
|
If, within one year after a change in control of the Company,
the participant incurs a termination of employment for any
reason other than for cause or voluntary resignation, the RSU
shall be deemed to have become fully vested immediately prior to
such termination of employment.
|
|
(5)
|
|
For purposes of computing the excise tax and
gross-up
payments, base amount calculations are based on taxable wages
for the years 2004 through 2008. In addition, Mr. Monahan
was assumed to be subject to the maximum federal income and
other payroll taxes, aggregating to a net combined effective
income tax rate of 43.5%.
|
|
(6)
|
|
Mr. Tobins employment with the Company terminated
effective March 31, 2009. In accordance with his severance
agreement, he was provided a benefit of $475,000 representing
one year of base salary continuation payable in installments
according to the Companys payroll cycle as well as twelve
months of health and welfare benefits (at the same cost to him
as is charged to active employees).
|
The actual amounts that would be paid upon a NEOs
termination of employment or in connection with a change in
control can be determined only at the time of any such event. In
addition, in connection with any actual termination of
employment or change in control transaction, the Company may
determine to enter into an agreement or to establish an
arrangement providing additional benefits or amounts, or
altering the terms of benefits described below, as the
Compensation Committee determines appropriate. Due to the number
of factors that affect the nature and amount of any benefits
provided upon the events discussed below, any actual amounts
paid or distributed may be higher or lower than reported below.
Factors that could affect these amounts include the timing
during the year of any such event, the Companys stock
price and the executives age.
Thomas L.
Monahan III Employment Agreement
The employment agreement with Mr. Monahan provides the
following severance benefits in the event
Mr. Monahans employment is terminated by the Company
without cause or by Mr. Monahan for good
reason: (i) a lump sum payment equal to two times
Mr. Monahans then current annual base salary,
(ii) a lump sum payment equal to a pro-rated portion of
Mr. Monahans target annual bonus for the year of
termination, (iii) full vesting acceleration with respect
to all stock-based awards and deferred compensation held by him
as of the date of termination (provided that such vesting
acceleration for RSUs and deferred compensation shall be limited
to those awards that would have vested within twelve months
following termination if Mr. Monahan resigns for good
reason) and (iv) continued health, life and
disability insurance benefits (at the same cost to him as is
charged to active employees) for a period of two years following
Mr. Monahans termination of employment. In addition,
the employment agreement with Mr. Monahan provides that he
will be entitled to reimbursement for any excise taxes imposed
under Sections 280G and 4999 of the Internal Revenue Code
as well as a
gross-up
payment equal to any income and excise taxes payable as a result
of the reimbursement for the excise taxes. The employment
agreement with Mr. Monahan also provides the following
benefits in the event that Mr. Monahans employment is
terminated by reason of his death or disability: (i) a lump
sum payment equal to a pro-rated portion of
Mr. Monahans target annual bonus for the year of
termination and (ii) full vesting acceleration with respect
to all stock-based awards held by the executive as of the date
of termination.
For purposes of Mr. Monahans employment agreement:
|
|
|
|
|
the term cause means: a material act of fraud, theft
or dishonesty against the Company, conviction for any felony, or
willful non-performance of material duties not cured within
sixty days after notice from the Company,
|
|
|
|
the term good reason means: a material reduction in
Mr. Monahans responsibility and authority, a
reduction in base salary or target annual incentive bonus
opportunity, a requirement to relocate more than thirty-five
miles, termination as CEO or a material breach of the employment
agreement by the Company, and any resignation by
Mr. Monahan within one year following a change of
control will be considered a resignation for good
reason for purposes of the severance provisions in the
employment agreement, and
|
|
|
|
the term change of control generally means: certain
acquisitions by any person or group of 50% or more of the
Companys voting securities, any change over a twelve-month
period in the composition of a majority of the
|
32
|
|
|
|
|
Board, not including directors who are nominated or named by
incumbent directors, approval by stockholders of a merger with a
third party unless the Companys stockholders hold at least
60% of the voting power of the securities of the resulting
company, approval by stockholders of a sale of a majority of the
Companys assets to a third party, or approval by
stockholders of a complete liquidation or dissolution of the
Company.
|
A non-competition agreement between the Company and
Mr. Monahan provides that Mr. Monahan may not directly
or indirectly compete with the Company for a period of three
years after his termination of employment if he voluntarily
resigns for any reason (including good reason) or is terminated
by the Company for cause. In addition, if
Mr. Monahans employment is terminated by the Company
without cause, (i) he has agreed not to directly or
indirectly compete with the Company for one year and
(ii) the Company may require him not to compete for up to
two additional one-year periods if the Company pays him 125% of
his annual base salary at the time of termination for each
additional one-year period. Mr. Monahan also agreed as part
of his non-competition agreement with the Company not to
disclose any of the Companys confidential or proprietary
information during the course of his employment or after
termination of his employment for any reason and not to solicit
the Companys employees for a period of three years after
the termination of his employment with the Company for any
reason.
Richard
Lindahl Employment Agreement
In May 2009, the Company appointed Richard Lindahl to serve as
its CFO. The Company agreed that if Mr. Lindahl was
terminated without cause within 12 months of his
appointment, the Company will provide him with twelve months of
base salary, a pro-rata target bonus for the year, and the
continuation of health benefits for 12 months. After the
one-year anniversary of his appointment, Mr. Lindahl will
be entitled to the equivalent amounts under the Companys
plans and arrangements for NEOs.
Joyce Liu
Employment Agreement
In August 2008, the Company appointed Joyce Liu to serve as its
interim CFO effective upon the departure of Timothy R. Yost from
the Company. The Company agreed that it will not terminate
Ms. Liu during the twelve months following her service as
interim CFO and that, if she leaves the Company more than six
but less than twelve months after a new CFO is named, the
Company will provide her six months salary as a retention
bonus.
Glenn P.
Tobin Severance Agreement
In connection with Glenn Tobins resignation on
March 31, 2009, the Company agreed to pay Mr. Tobin
salary continuation for twelve months. In return for this
benefit, he entered into a one-year non-competition agreement
with the Company.
Stock
Option, Stock Appreciation Right, and Restricted Stock Unit
Awards
In addition to severance and other benefits described above,
each of the NEOs holds outstanding awards granted pursuant to
the Companys stock incentive plans, which awards are
subject to the Companys standard terms and conditions
applicable to such awards. These standard terms and conditions
each provide for full vesting acceleration in the event that
within one year following a change of control the
award holders employment with the Company is terminated
for any reason other than cause or voluntary
resignation.
For purposes of the standard terms and conditions:
|
|
|
|
|
the term cause means: the commission of an act of
fraud or theft against the Company, conviction for any felony,
conviction for any misdemeanor involving moral turpitude which
might, in the Companys opinion, cause embarrassment to the
Company, significant violation of any material Company policy,
willful non-performance of material duties that is not cured
after notice from the Company, or violation of any material
District of Columbia, state or federal laws, rules or
regulations in connection with or during performance of his
duties which, if curable, is not cured within thirty days after
notice from the Company, and
|
|
|
|
the term change of control generally means: certain
acquisitions by any person or group of 50% or more of the
Companys voting securities, any change over a twelve-month
period in the composition of a majority of the Board, not
including directors who are nominated or named by incumbent
directors, approval by stockholders of a merger with a third
party unless the Companys stockholders hold at least 60%
of the voting power of the securities of the resulting company,
approval by stockholders of a sale of a majority of the
Companys assets to a third party, or approval by
stockholders of a complete liquidation or dissolution of the
Company.
|
33
Other
Matters
Stockholder
Proposals
Proposals of stockholders intended to be presented at the 2011
Annual Meeting of Stockholders must contain the information
specified in our bylaws and must be received at our principal
executive offices no later than December 31, 2010 to be
eligible for consideration for inclusion in the Proxy Statement
relating to that meeting. Such proposals must also comply with
SEC
Rule 14a-8
regarding the inclusion of stockholder proposals in
company-sponsored proxy materials. Proposals should be addressed
to the attention of the Companys Secretary, at the
Companys principal executive offices, 1919 North Lynn
Street, Arlington, Virginia 22209.
In addition, stockholder proposals submitted for consideration
at the 2011 Annual Meeting of Stockholders but not submitted for
inclusion in our 2011 proxy statement pursuant to
Rule 14a-8
must be submitted to the Company at our principal executive
offices and must contain the information specified in our
bylaws. To be timely, a stockholder proposal made pursuant to
the provisions of our bylaws (other than a proposal made
pursuant to
Rule 14a-8)
must be delivered to the Secretary at the principal executive
offices of the Company: (A) in the case of an Annual
Meeting of Stockholders, not less than 45 days nor more
than 100 days prior to the first anniversary of the
preceding years Annual Meeting of Stockholders, except
that if the date of the Annual Meeting of Stockholders is
advanced by more than 30 days or delayed (other than as a
result of adjournment) by more than 60 days from the
anniversary of the previous years Annual Meeting of
Stockholders, then to be timely a stockholders notice must
be delivered to the Secretary not later than the close of
business on the tenth day following the day on which a public
announcement with respect to such meeting is first made by the
Company. In addition, any such stockholders notice must
otherwise satisfy the requirements of our bylaws. If a
stockholder making such a proposal does not also satisfy the
requirements of SEC
Rule 14a-4(c),
the Company may exercise discretionary voting authority over
proxies it solicits in determining how to vote on the proposal.
For our 2011 Annual Meeting of Stockholders, unless we advance
or delay the 2011 Annual Meeting by more than the number of days
specified in the bylaws (in which case the alternative deadlines
set forth in the bylaws and summarized above will apply), we
must receive stockholder proposals submitted pursuant to the
provisions of our bylaws no earlier than March 2, 2011 and
no later than April 26, 2011. If a stockholder proposal
submitted pursuant to the provisions of our bylaws is received
before March 2, 2011 or after April 26, 2011, it will
be considered untimely and we will not be required to present it
at the 2011 Annual Meeting of Stockholders.
Procedures governing stockholder recommendations of director
nominees are discussed separately under Consideration of
Director Nominees.
Delivery
of Documents to Stockholders Sharing an Address
If you are a beneficial owner, but not the record holder, of
Company shares, your broker, bank or other nominee may deliver
only one copy of the Companys Proxy Statement and Annual
Report to multiple stockholders who share an address unless that
nominee has received contrary instructions from one or more of
the stockholders. The Company will deliver promptly, upon
written or oral request, a separate copy of the Proxy Statement
and Annual Report to a stockholder at a shared address to which
a single copy of the documents were delivered. A stockholder who
wishes to receive a separate copy of the Proxy Statement and
Annual Report, now or in the future, should submit their request
to the Company by telephone at
571-303-4080
or by submitting a written request to Pamela J. Auerbach,
Corporate Secretary, 1919 North Lynn Street, Arlington, VA,
22209. Beneficial owners sharing an address who are receiving
multiple copies of proxy materials and Annual Reports and wish
to receive a single copy of such materials in the future will
need to contact their broker, bank or other nominee to request
that only a single copy of each document be mailed to all
stockholders at the shared address in the future.
Other
Business
Our Board does not currently intend to bring any other business
before the Meeting, and is not aware of any other business to be
brought before the Meeting. If any other business is properly
brought before the Meeting, the proxies will be voted in
accordance with the judgment of the proxy holders.
Whether or not you plan to attend the Meeting, please
complete, sign, date and promptly return the accompanying proxy
card in the enclosed postage-paid envelope.
34
THE CORPORATE EXECUTIVE BOARD COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
June 10, 2010
The undersigned hereby appoints Thomas L. Monahan III and Pamela J. Auerbach, or either of
them, each with full power of substitution, to represent the undersigned at the Annual Meeting of
Stockholders of The Corporate Executive Board Company, which will be held at our offices at 1919
North Lynn Street, Arlington, VA, 22209, on June 10, 2010, at 9:00 a.m. local time, and at any
adjournments or postponements thereof, and to vote the number of shares the undersigned would be
entitled to vote if personally present at the meeting on the matters set forth on the reverse side
of this proxy card.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF ALL NOMINEES TO THE BOARD OF
DIRECTORS AND FOR PROPOSAL NUMBER 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATE EXECUTIVE BOARD
COMPANY. THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE
VOTED FOR THE NOMINEES FOR ELECTION AND FOR PROPOSAL NUMBER 2. IN THEIR DISCRETION, THE PROXY
HOLDERS ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF TO THE EXTENT AUTHORIZED BY RULE 14a-4(c) PROMULGATED BY THE SECURITIES AND
EXCHANGE COMMISSION AND BY APPLICABLE STATE LAWS (INCLUDING MATTERS THAT THE PROXY HOLDERS DO NOT
KNOW, A REASONABLE TIME BEFORE THIS SOLICITATION, ARE TO BE PRESENTED).
(
CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
THE CORPORATE EXECUTIVE BOARD COMPANY
June 10, 2010
þ
PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
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FOR
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WITHHOLD
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All nominees listed
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Authority
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(except as indicated
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to vote for all
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to the contrary)
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nominees listed
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1.
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Election of Directors
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Nominees:
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Thomas L. Monahan III
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Gregor S. Bailar
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Stephen M. Carter
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Gordon J. Coburn
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Nancy J. Karch
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David W. Kenny
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Daniel O. Leemon
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(Instructions: To withhold authority to vote for any named nominee(s), strike a line through the
nominees name in the list above.)
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FOR
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AGAINST
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ABSTAIN
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2.
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Ratification of the
Appointment of Ernst &
Young LLP as Independent
Registered Public
Accounting Firm for the
Year Ended December 31,
2010.
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Whether or not you plan to attend the meeting in person, you are urged to complete, date, sign and
promptly mail this proxy card in the enclosed return envelope so that your shares may be
represented at the meeting.
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Signature
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Dated:
, 2010.
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Signature (if held jointly)
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Dated:
, 2010.
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NOTE: Please sign exactly as your name(s) appear(s) on your stock certificate. If shares of stock
stand of record in the names of two or more persons or in the name of husband and wife, whether as
joint tenants or otherwise, both or all of such persons should sign the proxy card. If shares of
stock are held of record by a corporation, the proxy card should be executed by the president or
vice president and the secretary or assistant secretary. Executors, administrators or other
fiduciaries who execute the above proxy card for a stockholder should give their full title. Please
date the proxy card.
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