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TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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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 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 under §240.14a-12
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IRONWOOD PHARMACEUTICALS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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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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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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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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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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Table of Contents
301 Binney Street
Cambridge, Massachusetts 02142
NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS OF
IRONWOOD PHARMACEUTICALS, INC.
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Date:
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Wednesday, May 31, 2017
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Time:
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9 a.m. - 10 a.m. Eastern Time
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Place:
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Ironwood Pharmaceuticals, Inc.
301 Binney Street
Cambridge, MA 02142
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Purpose:
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We are holding the annual meeting for stockholders to consider four company sponsored proposals as follows:
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1.
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To elect our Class I directors, each for a three-year term;
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2.
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To hold an advisory vote on named executive officer compensation;
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3.
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To hold an advisory vote on the frequency of the advisory vote on named executive officer compensation; and
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4.
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To ratify our audit committee's selection of Ernst & Young LLP as our auditors for 2017.
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We will also consider action on any other matter that may be properly brought before the meeting or any postponement(s) or adjournment(s) thereof.
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Our board of directors recommends you vote "for" each of the nominees for Class I director (proposal no. 1), "for" on an advisory vote on named
executive officer compensation (proposal no. 2), "one year" for the frequency of the advisory vote on named executive officer compensation (proposal no. 3), and "for" ratification of our
selection of auditors (proposal no. 4).
Only stockholders of record at the close of business on April 7, 2017 are entitled to notice of and to vote at the
meeting.
We
are pleased to take advantage of the Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the internet. We believe these rules
allow us to provide you with the information that you need while lowering the costs of delivery and reducing the environmental impact of the annual meeting.
You
are cordially invited to attend the annual meeting in person. To ensure that your vote is counted at the annual meeting, however, please vote as promptly as possible.
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Proxy Material Mailing Date:
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Sincerely,
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April 18, 2017
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Senior Vice President, Chief Legal Officer, and Secretary
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Table of Contents
TABLE OF CONTENTS
Table of Contents
301 Binney Street
Cambridge, Massachusetts 02142
PROXY STATEMENT FOR 2017 ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
Our board of directors is soliciting proxies for the 2017 annual meeting of stockholders. This proxy statement explains the agenda, voting
information and procedures for the meeting. Please read it carefully. This proxy statement and related materials are first being made available to stockholders on or about April 18, 2017, and
the notice of internet availability of proxy materials is first being sent to our stockholders on the same day.
In
this proxy statement, references to "the company" or "Ironwood" and, except within the Audit Committee Report and the Compensation Committee Report, references to "we", "us" or "our"
mean Ironwood Pharmaceuticals, Inc. LINZESS® is a trademark of Ironwood Pharmaceuticals, Inc. ZURAMPIC® and DUZALLO
TM
are trademarks of AstraZeneca
AB. Any other trademarks referred to in this proxy statement are the property of their respective owners. All rights reserved.
The
contents of our website are not incorporated into this document and you should not consider information provided on our website to be part of this document.
Who can vote.
Only stockholders of record of either of our two series of common stock, our Class A common stock and our
Class B common
stock, at the close of business on April 7, 2017 can vote at the meeting.
Quorum.
In order to hold and complete the business of the annual meeting, we must have a majority of the votes entitled to be cast
represented in
person or by proxy at the meeting. On our record date, April 7, 2017, we had 148,489,452 shares of our common stock outstanding and entitled to vote (133,937,146 shares of our Class A
common stock and 14,552,306 shares of our Class B common stock).
With
respect to all matters that will come before the meeting, each share is entitled to one vote, and holders of shares of our Class A common stock and of our Class B
common stock will vote together as a single class.
Notice of internet availability of proxy materials.
Pursuant to rules adopted by the Securities and Exchange Commission, or the SEC, we
have elected
to provide access to our proxy materials via the internet. Accordingly, we are sending a notice of internet availability of proxy materials to our stockholders. All stockholders will have the ability
to access the proxy materials on the website referenced in the notice and to request to receive a printed set of the proxy materials by mail. Instructions on how to access the proxy materials over the
internet and how to request a printed copy may be found in the notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing
basis. We encourage stockholders to take advantage of the availability of the proxy materials on the internet or through email to help reduce the environmental impact of our annual meetings.
Voting proceduresstockholders of record and beneficial owners.
You are a stockholder of record if your shares of our stock are
registered directly in your own name with our transfer agent, Computershare Trust Company, N.A., or Computershare. You are a beneficial owner if a brokerage
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firm,
bank, trustee or other agent, called a "nominee", holds your stock. This is often called ownership in "street name" because your name does not appear in the records of Computershare. If you hold
your shares in street name, you should receive a voting instruction form from your broker nominee.
If you are a stockholder of record, there are four ways to vote:
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In person.
You may vote in person
at the annual meeting. We will give you a ballot when you arrive. Directions to the annual meeting, which is being held at our corporate headquarters located at 301 Binney Street, Cambridge, MA 02142,
are available through the About Us section of our website at
www.ironwoodpharma.com
, under the heading Contact Us.
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Via the Internet.
You may vote by
proxy via the internet by following the instructions provided on the notice of internet availability of proxy materials or the proxy card. You must have the control number that is on either the notice
or the proxy card when voting.
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By Telephone.
If you request
printed copies of the proxy materials by mail and you live in the United States or Canada, you may vote by proxy by calling the toll-free number found on the proxy card. You must have the control
number that is on the proxy card when voting.
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By Mail.
If you request printed
copies of the proxy materials by mail, you may vote by proxy by filling out the proxy card and sending it back in the envelope provided.
If
you are a beneficial owner of shares held in street name, there are four ways to provide voting instructions:
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In person.
If you wish to vote in
person at the annual meeting, you must obtain a legal proxy from the nominee that holds your shares. Please contact that nominee for instructions regarding obtaining a legal proxy. Directions to the
annual meeting, which is being held at our corporate headquarters located at 301 Binney Street, Cambridge, MA 02142, are available through the About Us section of our website at
www.ironwoodpharma.com
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under the heading Contact Us.
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Via the Internet.
You may provide
voting instructions via the internet by following the instructions provided on your voting instruction form.
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By Telephone.
If it is allowed by
your nominee, you may provide voting instructions by calling the toll-free number found on your voting instruction form.
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By Mail.
You may provide voting
instructions by filling out the voting instruction form and sending it back in the envelope provided.
How you may revoke your proxy or voting instructions.
If you are a stockholder of record, you may revoke or amend your proxy at any
time before it is
voted at the annual meeting by writing to us directly "revoking" your earlier proxy, submitting a new proxy with a later date by mail, over the telephone or on the internet, or by attending the
meeting and voting in person. Your last dated proxy timely received prior to or vote cast at the annual meeting will be counted. If you hold your shares in street name, you must follow the
instructions on your voting instruction form to revoke or amend any prior voting instructions.
What if you receive more than one notice of internet availability of proxy materials, proxy card or voting instruction form?
This means
that you may
have more than one account at Computershare and/or with a nominee. Your notice of internet availability of proxy materials, proxy card or voting instruction form lists the number of shares you are
voting. Please vote the shares on all notices of internet availability of proxy materials, proxy cards and voting instruction forms that you receive.
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We
recommend you consolidate your holdings under the same name, address and tax identification number, if possible. This will eliminate some duplication of mailings and reduce costs.
Please contact your nominee to consolidate accounts, or our transfer agent, Computershare, at (800) 662-7232, as applicable.
Abstentions and "broker non-votes".
If you are a stockholder of record and you vote "abstain" or "withhold" on any matter, your shares
will not be
voted on that matter and will not be counted as votes cast in the final tally of votes on that matter. However, your shares will be counted for purposes of determining whether a quorum is present. If
you are a beneficial owner holding through a broker nominee, you may instruct your nominee that you wish to abstain from voting on a proposal or withhold authority to vote for one or more nominees for
director.
A
broker nominee generally may not vote on "non-routine" matters without receiving your specific voting instructions. This is called a "broker non-vote." Like abstentions, broker
non-votes are counted as present and entitled to vote for quorum purposes, but are not counted as votes cast. At the annual meeting, your broker nominee will not be able to submit a vote on the
election of directors or the advisory votes on named executive officer compensation and the frequency of advisory votes on named executive officer compensation unless it receives your specific
instructions. If your nominee does not receive your specific instructions for these proposals, it will submit a broker non-vote. The broker nominee will, however, be able to vote on the ratification
of the selection of our independent auditors even if it does not receive your instructions, so we do not expect any broker non-votes will exist in connection with this proposal.
Discretionary authority.
If you are a stockholder of record and you properly submit your proxy without making any specific selections,
your shares
will be voted on each matter before the annual meeting in the manner recommended by our board. If other matters not included in this proxy statement properly come before the annual meeting, the
persons named on the proxy card, or otherwise designated, will have the authority to vote on those matters for you as they determine. At this time, we are not aware of any matters that will come
before the annual meeting other than those disclosed in this proxy statement. If you are a beneficial owner of shares held in street name, please see the discussion above regarding broker non-votes
and the rules related to voting by nominees.
Vote required.
The required vote for each of the proposals expected to be acted upon at the annual meeting is described below.
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1.
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Proposal No. 1Election of Class I Directors
: the three nominees for director
with the highest number of affirmative votes will be elected as directors to serve for three-year terms and until their successors are duly elected and qualified or until their death, resignation or
removal. Because there is no minimum vote required, abstentions and broker non-votes will not affect the outcome of this proposal.
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2.
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Proposal No. 2Advisory (non-binding) Vote on Named Executive Officer Compensation, or
"Say-on-Pay"
: because this proposal calls for a non-binding, advisory vote, there is no "required vote" that would constitute approval. However, our board,
including our compensation and HR committee, values the opinions of our stockholders and, to the extent there are a substantial number of votes cast against the named executive officer compensation
disclosed in this proxy statement, we will consider our stockholders' concerns and evaluate what actions may be appropriate to address those concerns. Broker nominees do not have discretion to vote on
this proposal without your instruction; if you do not instruct your nominee how to vote on this proposal, your nominee will deliver a non-vote. Any shares that are not voted, whether by abstention,
broker non-votes or otherwise, will not affect the outcome of this proposal.
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3.
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Proposal No. 3Advisory (non-binding) Vote on Frequency of Say-on-Pay Votes
: this
proposal also calls for a non-binding, advisory vote. This proposal provides a choice among three frequency periods for future advisory say-on-pay votes. The frequency period that receives the most
votes (every one, two or three years) will be deemed to be the recommendation of our stockholders. However, because this vote is advisory and not binding on our board, we may decide that it is in the
best interests of our stockholders and Ironwood to hold a say-on-pay vote more or less frequently than the option selected by a plurality of our stockholders. Broker nominees do not have discretion to
vote on this proposal without your instruction; if you do not instruct your nominee how to vote on this proposal, your nominee will deliver a non-vote. Any shares that are not voted, whether by
abstention, broker non-votes or otherwise, will not affect the outcome of this proposal, except to the extent that the failure to vote for a particular frequency period may result in another frequency
period receiving a larger proportion of the votes cast.
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4.
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Proposal No. 4Ratification of Auditors
: the approval of this proposal requires a
majority of the votes cast for or against the proposal. Abstentions will not affect the outcome of this proposal. Further, because we believe this matter to be routine, a broker nominee may vote on
your behalf if you do not otherwise provide instructions. As a result, we do not expect there will be any broker non-votes on this matter.
Results of the voting.
We expect to announce the preliminary voting results at the annual meeting. The final voting results will be
tallied by the
inspector of election and published in a Current Report on Form 8-K, which we are required to file with the SEC within four business days following the annual meeting.
Costs of solicitation.
We will pay the costs of soliciting proxies. We will solicit proxies by email from stockholders who are our
employees or who
previously requested to receive proxy materials electronically. Our directors, our officers and our employees also may solicit proxies on our behalf, personally, electronically or by telephone or
other means, without additional compensation. We may also utilize the assistance of third parties in connection with our proxy solicitation efforts, and we would compensate such third parties for
their efforts. We have engaged one such third party, The Proxy Advisory Group, LLC, to assist in the solicitation of proxies and provide related advice and
informational support, for a services fee and the reimbursement of expenses that are not expected to exceed $10,000 in the aggregate.
Audio of annual meeting to be broadcast on our website.
The audio portion of our annual meeting will be broadcast live over the
internet through a
webcast that will be accessible through the Investors section of our website at
www.ironwoodpharma.com
. The contents of our website are not incorporated
into this document and you should not consider information provided on our website to be part of this document.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock at March 31, 2017
for:
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each person whom we know beneficially owns more than five percent of our common stock;
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each of our directors;
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each of our named executive officers; and
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all of our directors and executive officers as a group.
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The
number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which the
individual or entity has sole or shared voting power or investment power. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the
stockholder unless noted otherwise, subject to community property laws where applicable.
The
percentage of common stock beneficially owned by each person is based on 148,489,452 shares of common stock outstanding on March 31, 2017 (133,937,146 shares of Class A
common stock and 14,552,306 shares of Class B common stock). Each share of Class B common stock is convertible at any time into one share of Class A common stock. Shares of common
stock that may be acquired within 60 days following March 31, 2017 pursuant to the exercise of options or the vesting of restricted stock units, or RSUs, are included in the holdings of
each stockholder, as applicable, and are deemed to be outstanding for the purpose of computing the percentage ownership of such holder. Such amounts, however, are not included in the holdings of any
other stockholder in the table and are not deemed to be outstanding for computing the percentage ownership of any other holder shown in the table. Beneficial ownership representing less than one
percent is denoted with an "*."
Unless
otherwise indicated, the address for each of the stockholders in the table below is c/o Ironwood Pharmaceuticals, Inc., 301 Binney Street, Cambridge, Massachusetts
02142.
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Shares Beneficially Owned
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Class A Common
Stock
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Class B Common
Stock
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% Total Voting
Power(1)
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Name of Beneficial Owner
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Shares
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%
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Shares
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%
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Officers and Directors
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Peter M. Hecht(2)
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1,935,415
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1.4
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4,940,322
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33.3
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4.6
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Tom Graney(3)
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260,653
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*
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*
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*
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Mark G. Currie(4)
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802,818
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*
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1,030,000
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7.0
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1.2
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Halley E. Gilbert(5)
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458,824
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*
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105,000
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*
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*
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Thomas A. McCourt(6)
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569,298
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*
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280,000
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1.9
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*
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Andrew Dreyfus
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26,259
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*
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*
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*
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Marsha H. Fanucci
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60,008
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*
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44,863
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*
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*
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Terrance G. McGuire(7)
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75,299
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*
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40,000
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*
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*
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Julie H. McHugh
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66,783
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*
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*
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*
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Lawrence S. Olanoff
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22,905
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*
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*
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*
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Edward P. Owens
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167,680
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*
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*
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*
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Amy W. Shulman(8)
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9,793
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*
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*
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Christopher T. Walsh
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71,499
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*
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303,026
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2.1
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*
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Douglas E. Williams
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60,008
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*
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*
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*
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All executive officers and directors as a group (14 persons)(9)
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4,587,242
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3.3
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6,743,211
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43.6
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7.4
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5% Security Holders
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FMR LLC (Fidelity)(10)
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19,674,160
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14.7
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*
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13.3
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Wellington Management Group LLP(11)
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18,363,862
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13.7
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*
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12.4
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T. Rowe Price(12)
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15,529,367
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11.6
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*
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10.5
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Janus Capital Management(13)
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12,432,928
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9.3
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*
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8.4
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BlackRock, Inc.(14)
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11,069,900
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8.3
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*
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7.5
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The Vanguard Group(15)
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9,943,282
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7.4
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*
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6.7
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(1)
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Percentage
total voting power represents voting power with respect to all shares of our Class A common stock and Class B common stock, as a single
class, on matters in which holders of our
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Class B
common stock are entitled to one vote per share. Each share of Class A common stock and each share of Class B common stock has one vote per share, except (a) on the
following matters (on which each share of Class A common stock has one vote per share and each share of Class B common stock has ten votes per share), if submitted to a vote of
stockholders: (i) adoption of a merger or consolidation agreement involving Ironwood; (ii) a sale of all or substantially all of Ironwood's assets; or (iii) a dissolution or
liquidation of Ironwood; and (b) on every matter if and when any individual, entity or "group" (as such term is used in Regulation 13D of the Securities Exchange Act of 1934, as amended,
or the Exchange Act) has, or has publicly disclosed (through a press release or a filing with the SEC) an intent to have, beneficial ownership of 30% or more of the number of outstanding shares of
Class A common stock and Class B common stock, combined. Holders of shares of Class A common
stock and Class B common stock vote together as a single class on all matters (including those set forth in this proxy statement) submitted to a vote of stockholders, unless otherwise required
by our certificate of incorporation or bylaws. The Class B common stock is convertible at any time by the holder into shares of Class A common stock on a share-for-share basis.
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(2)
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Includes
1,935,415 shares of Class A common stock and 270,000 shares of Class B common stock issuable to Dr. Hecht upon the exercise of options
that are exercisable within 60 days following March 31, 2017.
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(3)
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Includes
218,640 shares of Class A common stock issuable to Mr. Graney upon the exercise of options that are exercisable within 60 days
following March 31, 2017.
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(4)
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Includes
781,560 shares of Class A common stock and 255,000 shares of Class B common stock issuable to Dr. Currie upon the exercise of options
that are exercisable within 60 days following March 31, 2017.
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(5)
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Includes
358,017 shares of Class A common stock and 105,000 shares of Class B common stock issuable to Ms. Gilbert upon the exercise of options
that are exercisable within 60 days following March 31, 2017.
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(6)
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Includes
514,998 shares of Class A common stock and 280,000 shares of Class B common stock issuable to Mr. McCourt upon the exercise of options
that are exercisable within 60 days following March 31, 2017.
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(7)
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Includes
1,626 shares of Class A common stock held by Polaris Venture Management Co. II, L.L.C. and 29,117 shares of Class A common stock and
40,000 shares of Class B common stock held by Bartlett Partners, LLC. Mr. McGuire is a managing member of Bartlett Partners, LLC and Polaris Venture Management Co.
II, L.L.C. and has shared voting and investment authority over these shares.
-
(8)
-
Ms. Schulman
was elected a director effective January 1, 2017.
-
(9)
-
Includes
3,808,630 shares of Class A common stock and 910,000 shares of Class B common stock issuable upon the exercise of options that are exercisable
within 60 days following March 31, 2017.
-
(10)
-
Based
upon the information provided by FMR LLC ("FMR") and Abigail P. Johnson in a Schedule 13G/A filed on February 14, 2017, reporting as of
December 31, 2016. According to this Schedule 13G/A, (i) FMR has sole voting power with respect to 2,696,655 of these shares, sole dispositive power with respect to all of these
shares, and shared voting and dispositive power with respect to none of these shares, and (ii) Ms. Johnson has neither sole nor shared voting power with respect to these shares and sole
dispositive power with respect to all of these shares and shared dispositive power with respect to none of these shares. The address of FMR and Ms. Johnson is 245 Summer Street, Boston, MA
02210.
6
Table of Contents
-
(11)
-
Based
upon the information provided by Wellington Management Group LLP ("Wellington"), Wellington Group Holdings LLP ("Wellington Group"), Wellington
Investment Advisors Holdings LLP ("Wellington Investment") and Wellington Management Company LLP ("Wellington Management," collectively with Wellington, Wellington Group and Wellington
Investment, the "Wellington Entities") in a Schedule 13G/A filed on February 9, 2017, reporting as of December 31, 2016. According to this Schedule 13G/A,
(i) Wellington has sole voting and dispositive power with respect to none of these shares, shared voting power with respect to 11,535,619 of these shares, and shared dispositive power with
respect to all of these shares, (ii) Wellington Group has sole voting and dispositive power with respect to none of these shares, shared voting power with respect to 11,535,619 of these shares,
and shared dispositive power with respect to all of these shares, (iii) Wellington Investment has sole voting and dispositive power with respect to none of these shares, shared voting power
with respect to 11,535,619 of these shares, and shared dispositive power with respect to all of these shares, and (iv) Wellington Management has sole voting and dispositive power with respect
to none of these shares, shared voting power with respect to 11,107,398 of these shares, and shared dispositive power with respect to 17,454,405 of these shares. The address of the Wellington Entities
is c/o Wellington Management Company LLP, 280 Congress Street, Boston, MA 02210.
-
(12)
-
Based
upon the information provided by T. Rowe Price Associates, Inc. ("T. Rowe Price") in a Schedule 13G/A filed on January 10, 2017,
reporting as of December 31, 2016. According to this Schedule 13G/A, T. Rowe Price has sole voting power with respect to 2,178,457 of these shares, sole dispositive power with respect to
15,529,367 shares, and shared voting and dispositive power with respect to none of these shares. The address of T. Rowe Price is 100 E. Pratt Street, Baltimore, MD 21202.
-
(13)
-
Based
upon the information provided by Janus Capital Management LLC ("Janus Capital") in a Schedule 13G/A filed on February 13, 2017, reporting
as of December 31, 2016. According to this Schedule 13G/A, Janus Capital has sole voting and sole dispositive power with respect to all of these shares, and shared voting and dispositive
power with respect to none of these shares. The address of Janus Capital is 151 Detroit Street, Denver, CO 80206.
-
(14)
-
Based
upon the information provided by BlackRock, Inc. ("BlackRock") in a Schedule 13G/A filed on January 25, 2017, reporting as of
December 31, 2016. According to this Schedule 13G/A, Blackrock has sole voting power with respect to 10,729,100 of these shares, sole dispositive power with respect to 11,010,850 of
these shares, and shared voting and dispositive power with respect to 59,050 of these shares. The address of BlackRock is 55 East 52
nd
Street, New York, NY 10055.
-
(15)
-
Based
upon the information provided by The Vanguard Group ("Vanguard") in a Schedule 13G/A filed on February 10, 2017, reporting as of
December 31, 2016. According to this Schedule 13G/A, Vanguard has sole voting power with respect to 257,363 of these shares, sole dispositive power with respect to 9,675,090 of these
shares, shared voting power with respect to 17,206 of these shares and shared dispositive power with respect to 268,192 of these shares. The address of Vanguard is 100 Vanguard Blvd., Malvern, PA
19355.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 2016, except as described below, there has not been, nor is there currently proposed, any transaction or series of
similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any
class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest, other than compensation arrangements
with directors and executive officers, which are described under the caption
Executive and Director Compensation
appearing elsewhere in this proxy
statement.
7
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Indemnification Agreements
We have entered into indemnification agreements with each of our current directors and certain of our officers. These agreements require us to
indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any
proceeding against them as to which they could be indemnified. We intend to enter into indemnification agreements with our future directors and executive officers.
Procedures for Related Party Transactions
Under our code of business conduct and ethics, our employees, officers and directors are discouraged from entering into any transaction that may
create or give the appearance of a conflict of interest. In addition, they must report any potential conflict of interest, including related party transactions, to certain members of our management or
the chair of our audit committee. Pursuant to its charter, our audit committee must approve any related party transactions, including those transactions involving our directors. In approving or
rejecting a proposed transaction, the audit committee considers the relevant facts and circumstances available to and deemed relevant by the audit committee, including the material terms of the
transaction, risks, benefits, costs, availability of other comparable services or products and, if applicable, the impact on a director's independence. Our audit committee will approve only those
transactions that, in light of known circumstances, are in, or are not inconsistent with, our best interests, as our audit committee determines in the good faith exercise of its discretion. A copy of
our code of business conduct and ethics and our audit committee charter are available through the Investors section of our website at
www.ironwoodpharma.com
, under the heading Corporate Governance.
DIRECTORS AND CORPORATE GOVERNANCE
Board Composition and Structure
Our certificate of incorporation states that our board shall consist of between one and 15 members, and the precise number of directors
shall be fixed by a resolution of our board. Each director holds office until his or her successor is duly elected and qualified or until his or her death, resignation or removal. Our certificate of
incorporation provides that our directors may be removed only for cause by a majority of the stockholders entitled to vote on such removal. Any vacancy in the board, including a vacancy that results
from an increase in the number of directors, may be filled by a vote of the majority of the directors then in office. Any additional directorships resulting from an increase in the number of directors
will be apportioned by our board among the three classes.
Our
board of directors currently consists of ten members, nine of whom are non-employee members. In accordance with the terms of our certificate of incorporation, our board of directors
is divided into three classes, and the directors in each class serve for three-year terms. Upon the expiration of the
term of a class of directors, directors in that class will be eligible to be nominated and elected for a new three-year term at the annual meeting in the year in which their term expires. The current
members of each class are set forth in the table below under
Directors
. In April 2017, Dr. Walsh announced his intention to transition off of our
board effective as of the 2017 annual meeting.
We
separate the roles of chair of the board and chief executive officer and rotate the chairperson approximately every five years. Our board believes that this structure enhances the
board's oversight of, and independence from, management, and enables the board to carry out its responsibilities on behalf of our stockholders. This leadership structure also allows Dr. Hecht,
our chief executive officer, to focus his time and energy on operating and managing the company, while leveraging the experience and perspective of Mr. McGuire, the chair of our board. As set
forth in our corporate governance guidelines, our board of directors currently anticipates that its chairperson shall rotate approximately
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every
five years, unless the governance and nominating committee recommends otherwise. We expect this rotation will take place in approximately 2020.
Directors
We believe that our board of directors should be comprised of individuals with sophistication and experience in many substantive areas that will
help us achieve our goals of creating and commercializing medicines that make a difference for patients, building value for our fellow stockholders, and empowering our passionate team.
The
core criteria that we use in evaluating each nominee to our board consists of the following: (a) an owner-oriented attitude and a commitment to represent the interests of our
stockholders, demonstrated, in part, through ownership of our capital stock; (b) strong personal and professional ethics, integrity and values; (c) strong business acumen and savvy;
(d) a deep, genuine passion for our business and the patients whom we serve; (e) demonstrated achievement in the nominee's field of expertise; (f) the absence of conflicts of
interest that would impair the nominee's ability to represent the interests of our stockholders; (g) the ability to dedicate the time necessary to regularly participate in meetings of the board
and committees of our board; and (h) the potential to contribute to the diversity of our board of directors, as a result of the nominee's professional background, expertise, gender, age or
ethnicity. We believe that all current members of our board of directors possess the professional and personal qualifications necessary to serve on our board of directors.
Our
governance and nominating committee identifies potential candidates through referrals and recommendations, including by incumbent directors, management and stockholders, as well as
through business and other organizational networks. To date, our governance and nominating committee has not retained or paid any third party to identify or evaluate, or assist in identifying or
evaluating, potential director nominees, although it reserves the right to engage executive search firms and other third parties to assist in finding suitable candidates. Stockholders who wish to
recommend candidates may contact the governance and nominating committee in the manner described in
Stockholder Communications, Proposals and Nominations for
DirectorshipsCommunications
. Stockholder-recommended candidates whose recommendations comply with these procedures will be evaluated by the governance and
nominating committee in the same manner as candidates identified by the governance and nominating committee.
The
following table sets forth certain information, as of April 18, 2017, with respect to each of our directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Class
|
|
Year
term
expires
|
|
Audit
committee
|
|
Governance
and Nominating
committee
|
|
Compensation
and HR
committee
|
Andrew Dreyfus
|
|
|
58
|
|
I
|
|
|
2017
|
|
ü
|
|
|
|
|
Peter M. Hecht, Ph.D., Chief Executive Officer
|
|
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53
|
|
I
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|
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2017
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|
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|
|
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|
Julie H. McHugh
|
|
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52
|
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I
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2017
|
|
ü
|
|
|
|
|
Lawrence S. Olanoff, M.D., Ph.D.
|
|
|
65
|
|
II
|
|
|
2018
|
|
|
|
ü
|
|
|
Amy W. Schulman
|
|
|
56
|
|
II
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2018
|
|
|
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ü
|
Douglas E. Williams, Ph.D.
|
|
|
59
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|
II
|
|
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2018
|
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|
|
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ü
|
Marsha H. Fanucci
|
|
|
63
|
|
III
|
|
|
2019
|
|
C
|
|
|
|
|
Terrance G. McGuire, Chair
|
|
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61
|
|
III
|
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2019
|
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ü
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|
Edward P. Owens
|
|
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70
|
|
III
|
|
|
2019
|
|
|
|
|
|
C
|
Christopher T. Walsh, Ph.D.(1)
|
|
|
73
|
|
III
|
|
|
2019
|
|
|
|
C
|
|
|
-
(1)
-
Dr. Walsh
will be transitioning off of our board at the 2017 annual meeting.
-
"C"
-
indicates
chair of the committee.
9
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Class I Directors (accepted nomination for election at the 2017 annual
meeting)
Andrew Dreyfus
joined our board of directors in April 2016. Mr. Dreyfus has served as
president and chief executive officer for Blue Cross Blue Shield of Massachusetts, or BCBSMA, one of the largest independent, not-for-profit Blue Cross Blue Shield plans in the country, since
September 2010. From July 2005 to September 2010, Mr. Dreyfus served as the executive vice president of health care services of BCBSMA. Prior to joining BCBSMA, he served as the first president
of the Blue Cross
Blue Shield of Massachusetts Foundation. Mr. Dreyfus also previously served as executive vice president of the Massachusetts Hospital Association and held a number of senior positions in
Massachusetts state government, including undersecretary of consumer affairs and business regulation. Mr. Dreyfus serves on the board of directors of BCBSMA, Blue Cross Blue Shield Association,
the United Way of Massachusetts Bay and Merrimack Valley, the National Institute for Health Care Management, Jobs for Massachusetts, and the advisory board of Ariadne Labs. Mr. Dreyfus received
a B.A. in English from Connecticut College. Mr. Dreyfus brings to our board of directors significant expertise in the healthcare payer and reimbursement market, and broad management and
executive leadership experience, providing valuable insight as we continue to develop and commercialize medicines in an evolving healthcare landscape.
Peter M. Hecht
has served as our chief executive officer and a director since our founding in 1998. Under his leadership, Ironwood has
grown from nine Ph.D. scientists to a commercial biotechnology company. Prior to founding Ironwood, Dr. Hecht was a research fellow at Whitehead Institute for Biomedical Research.
Dr. Hecht earned a B.S. in mathematics and an M.S. in biology from Stanford University, and holds a Ph.D. in molecular biology from the University of California at Berkeley. Dr. Hecht's
experiences as one of our founders and his tenure as our chief executive officer make him a valuable member of our board of directors.
Julie H. McHugh
joined our board of directors in February 2014. Ms. McHugh most recently served as chief operating officer for Endo
Health Solutions, Inc., from March 2010 through May 2013, where she was responsible for the specialty pharmaceutical and generic drug businesses. Prior to joining Endo, Ms. McHugh was
the chief executive officer of Nora Therapeutics, Inc., a venture capital backed biotech start-up company focused on developing novel therapies for the treatment of infertility disorders.
Before that she served as company group chairman for Johnson & Johnson's (J&J) worldwide virology business unit, and previously she was president of Centocor, Inc., a J&J subsidiary.
While at J&J, Ms. McHugh oversaw the development and launches of several products, including Remicade® (infliximab), Prezista® (darunavir) and Intelence®
(etravirine), and she was responsible for oversight of a research and development portfolio including compounds for HIV, hepatitis C, and tuberculosis. Prior to joining Centocor, Ms. McHugh led
the marketing communications for gastrointestinal drug Prilosec® (omeprazole) at Astra-Merck Inc. She currently serves on the board of visitors for the Smeal College of Business of
the Pennsylvania State University as well as on the board of directors of Aerie Pharmaceuticals, Inc., Lantheus Holdings, Inc. and Trevena, Inc., all publicly held companies, and
The New Xellia Group, a privately held company. She previously served on the board of directors for ViroPharma Inc., Epirus Biopharmaceuticals, Inc., the Biotechnology Industry
Organization (BIO), the Pennsylvania Biotechnology Association and the New England Healthcare Institute (NEHI). Ms. McHugh received her masters of business administration degree from
St. Joseph's University and her Bachelor of Science degree from Pennsylvania State University. Ms. McHugh's experience as a chief executive officer and a chief operating officer at large
multinational pharmaceutical companies make her a valuable member of our board of directors, particularly as we evolve as a company and seek to maximize our current product and execute on our
corporate strategy and associated pipeline.
10
Table of Contents
Class II Directors (term expires at the 2018 annual meeting)
Lawrence S. Olanoff, M.D., Ph.D.
joined our board of directors in April 2015. Dr. Olanoff
most recently served as chief operating officer for Forest Laboratories, Inc. (acquired by Allergan plc) from October 2006 to December 2010. Dr. Olanoff also served as a director
of Forest from October 2006 to July 2014. From July 2005 to October 2006, Dr. Olanoff was president and chief executive officer at Celsion Corporation. He also served as executive vice
president and chief scientific officer of Forest from 1995 to 2005. Prior to joining Forest in 1995, Dr. Olanoff served as senior vice president of clinical research and development at Sandoz
Pharmaceutical Corporation (now a division of the Novartis Group) and at the Upjohn Company in a number of positions including corporate vice president of clinical development and medical affairs. In
addition, he is currently an adjunct assistant professor and special advisor to the president for corporate relations at the Medical University of South Carolina (MUSC), an ex-officio director of the
MUSC Foundation for Research Development, chairman of the board of the Clinical Biotechnology Research Institute at Roper St. Francis Hospital and a board member of Axovant
Sciences Ltd., the Horizon Project and the Zucker Institute for Applied Neurosciences. Dr. Olanoff received his Ph.D. in biomedical engineering and M.D. degree from Case Western Reserve
University. Dr. Olanoff's detailed knowledge of the pharmaceutical industry, his broad operational experience and his research and development leadership over the course of his career make him
an important asset to our board of directors.
Douglas E. Williams, Ph.D.
joined our board of directors in June 2014. Dr. Williams has been the founding president and chief
executive officer of Codiak Biosciences Inc. since August 2015; previously he served as executive vice president, research and development at Biogen Inc. from January 2011 to July 2015.
Before joining Biogen, Dr. Williams held several senior executive positions at ZymoGenetics Inc., a biopharmaceutical company, including chief executive officer and a director from
January 2009 to October 2010, president and chief scientific officer from July 2007 to January 2009 and executive vice president, research and development and chief scientific officer from 2004 to
July 2007. Previously, he held leadership positions within the biotechnology industry, including chief scientific officer and executive vice president of research and development at Seattle
Genetics Inc., and senior vice president and Washington site leader at Amgen Inc. Dr. Williams also served in a series of scientific and senior leadership positions over a decade
at Immunex Corp., including as executive vice president and chief technology officer and senior vice president of discovery research, as well as previously serving as a director of the company. Prior
to that, Dr. Williams served on the faculty of the Indiana University School of Medicine and the Department of Laboratory Medicine at the Roswell Park Memorial Institute in Buffalo, New York.
Dr. Williams serves on the board of directors of Regulus Therapeutics Inc. and Ovid Therapeutics, Inc., and previously served on the board of directors of Oncothyreon Inc.
Dr. Williams received his B.S. in Biological Sciences from the University of Massachusetts Lowell and Ph.D. in Physiology from the State University of New York at Buffalo, Roswell Park Memorial
Institute Division. Dr. Williams brings to our board of directors significant
senior management and scientific experience at biotechnology companies, which we believe is important to our goal of maximizing our current product and executing on our corporate strategy and
associated pipeline.
Amy W. Schulman
joined our board of directors in January 2017. In July 2015 Ms. Schulman co-founded and joined Lyndra, Inc.
as chief executive officer. Ms. Schulman is also a senior lecturer at Harvard Business School, where she was appointed to the faculty in July 2014, and has been a venture partner at Polaris
Partners since August 2014. Ms. Schulman served as chief executive officer of Arsia Therapeutics, Inc. from August 2014 to November 2016 when Arsia was acquired by Eagle
Pharmaceuticals, Inc. Ms. Schulman was previously the executive vice president and general counsel of Pfizer Inc. from May 2008 to July 2014, where she also served as the business
unit lead for Pfizer's consumer healthcare business from April 2012 to December 2013. Before joining Pfizer, she was a partner at the law firm DLA Piper, where she was a member of the board and
executive policy
11
Table of Contents
committees.
Ms. Schulman also serves as a director of Alnylam Pharmaceuticals, Inc. and Blue Buffalo Pet Products, Inc., and previously served as a director of BIND
Therapeutics, Inc. Ms. Schulman graduated with honors with B.A. degrees in philosophy and English from Wesleyan University, where she was elected to Phi Beta Kappa, and earned her J.D.
from Yale Law School in 1989. Ms. Schulman brings to our board of directors extensive leadership experience in the biotechnology industry in areas of great importance to the success of our
business as we execute on our corporate objectives, including commercial strategy, corporate development and capability building.
Class III Directors (term expires at the 2019 annual meeting)
Marsha H. Fanucci
has served as a director since 2009. Ms. Fanucci served as senior vice
president and chief financial officer of Millennium Pharmaceuticals, Inc. from July 2004 through January 2009, where she was responsible for corporate strategy, treasury, financial planning and
reporting and operations. While at Millennium, she also served as vice president, finance and corporate strategy and vice president, corporate development and strategy. Previously, she was vice
president of corporate development and strategy at Genzyme Corporation, a biotechnology company, from 1998 to 2000. From 1987 to 1998, Ms. Fanucci was employed at Arthur D. Little, Inc.
where she most recently served as vice president and director. Ms. Fanucci presently serves on the board of directors of Alnylam Pharmaceuticals, Inc. and Syros
Pharmaceuticals, Inc., and previously served on the board of directors of Momenta Pharmaceuticals, Inc. She received her B.S. in pharmacy from West Virginia University and her M.B.A.
from Northeastern University. Because of her extensive financial experiences at Millennium Pharmaceuticals and Genzyme in addition to her current and former directorships at Syros Pharmaceuticals,
Alnylam Pharmaceuticals and Momenta Pharmaceuticals, we
believe that Ms. Fanucci provides valuable industry insight and essential financial expertise as we execute our corporate objectives.
Terrance G. McGuire
has served as a director since 1998 and as chair of our board since 2015. Mr. McGuire was a co-founder and is
currently a general partner of Polaris Partners. Prior to starting Polaris Partners in 1996, Mr. McGuire spent seven years at Burr, Egan, Deleage & Co., investing in early stage
medical and information technology companies. He serves on the board of directors of Acceleron Pharma Inc. and Pulmatrix, Inc. and several private companies and has served on the boards
of Akamai Technologies, Inc., Aspect Medical Systems, Inc., Cubist Pharmaceuticals, Inc., deCODE genetics, Inc., Trevena, Inc. and various private companies.
Mr. McGuire is the former chairman of the National Venture Capital Association, which represents ninety percent of the venture capitalists in the U.S., chairman of the board of the Thayer
School of Engineering at Dartmouth College, and a member of the boards of The David H. Koch Institute for Integrative Cancer Research at the Massachusetts Institute of Technology and The Arthur Rock
Center for Entrepreneurship at Harvard Business School. Mr. McGuire earned a B.S. in physics and economics from Hobart College, an M.S. in engineering from The Thayer School at Dartmouth
College, and an M.B.A from Harvard Business School. Mr. McGuire brings to our board extensive experience as a venture capitalist focused on the biotechnology industry, as well as many years of
experience as a director of biotechnology companies guiding them in the execution of their corporate strategy and objectives.
Edward P. Owens
has served as a director since 2013. Mr. Owens was previously partner, portfolio manager and global industry
analyst with Wellington Management Company, LLP where he worked in investment management since 1974. He was the portfolio manager of the Vanguard Health Care Fund for 28 years from its
inception in May 1984 until his retirement from Wellington in December 2012. Mr. Owens has a B.S. in physics from the University of Virginia and an M.B.A. from Harvard Business School. He
brings to our board extensive experience in evaluating and investing in life sciences companies, providing valuable insight as we continue to strive towards our goal of maximizing long-term
shareholder value.
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Table of Contents
Christopher T. Walsh
has served as a director since 2003. Since October 2013, Dr. Walsh has been a consulting professor in
Chemistry at Stanford University. Dr. Walsh was the Hamilton Kuhn Professor of Biological Chemistry and Molecular Pharmacology at Harvard Medical School from 1991 to July 2013 and formerly was
president of the Dana-Farber Cancer Institute and chairman of the Department of Biological Chemistry and Molecular Pharmacology at Harvard Medical School. He has performed extensive research in enzyme
stereochemistry, reaction mechanisms and the mechanisms of action of anti-infective and immunosuppressive agents. Dr. Walsh serves on the Scientific Advisory Board for Abide
Therapeutics Inc., Hua Medicine Ltd., Leap Therapeutics, Inc., Cidara Therapeutics, Inc., the Bioventures Group of Health Care Ventures LLC and Flex
Pharma, Inc. Dr. Walsh is also a board member of Proteostasis Therapeutics, Inc., and was a board member of Achaogen, Inc. from 2008 to 2016. He is also on the boards of
directors of the nonprofit California Institute for Biomedical Research and the Scripps Research Institute. Dr. Walsh received an A.B. in biology from Harvard
University and a Ph.D. in life sciences from The Rockefeller University, New York. Based on his expertise in biological chemistry and molecular pharmacology, Dr. Walsh continues to be
instrumental as we discover, develop and commercialize innovative medicines targeting important therapeutic needs.
Director Independence
Under NASDAQ Rule 5605, a majority of a listed company's board of directors must be comprised of independent directors. In addition,
NASDAQ rules require that, subject to specified exceptions, each member of a listed company's audit, compensation and governance and nominating committees be independent and that audit and
compensation committee members satisfy the additional independence criteria set forth in Rule 10A-3 and 10C-1, respectively, under the Exchange Act. Under NASDAQ Rule 5605(a)(2), a
director will only qualify as an "independent director" if, in the opinion of that company's board of directors, that person does not have a relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director.
Our
governance and nominating committee determined that none of Messrs. Dreyfus, McGuire and Owens, Mses. Fanucci, McHugh and Schulman, and Drs. Olanoff, Walsh and Williams,
representing nine of our ten current directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of
these directors is "independent" as that term is defined under NASDAQ Rule 5605(a)(2). Our governance and nominating committee also determined that each of the current members of our audit
committee, our governance and nominating committee, and our compensation and HR committee satisfies the independence standards for such committee established by Rule 10A-3 and 10C-1 under the
Exchange Act, the SEC rules and the NASDAQ rules, as applicable. In making such determinations, our governance and nominating committee considered the information requested from and provided by each
director concerning their background, employment and affiliations, including family relationships, the relationships that each such non-employee director has with Ironwood, including Drs. Olanoff's
and Walsh's service on our Pharmaceutical Advisory Committee and any payments for such services, the volume of business between BCBSMA, the company in which Mr. Dreyfus serves as president and
chief executive officer, and Ironwood, which amounted to less than 1% of the annual revenues of each company, Ms. Schulman's position with a biotechnology company with which Ironwood has a
research and collaboration agreement and any payments made pursuant to such arrangements, and all other facts and circumstances our governance and nominating committee deemed relevant in determining
their independence.
Risk Oversight
Our board retains ultimate responsibility for risk oversight, and our management retains the responsibility for risk management. In carrying out
its risk oversight responsibilities, our board reviews the long- and short-term internal and external risks facing the company through its participation in
13
Table of Contents
long-range
strategic planning, and the annual review and evaluation of corporate risks that the audit committee reports. Our board also believes that separating the roles of chair of the board and
chief executive officer enhances the board's ability to oversee risk in an objective manner.
We
have implemented and continue to refine a formalized enterprise risk management process. On an ongoing basis, we identify key risks, assess their potential impact and likelihood, and,
where appropriate, implement operational measures and controls or purchase insurance coverage in order to help ensure adequate risk mitigation. On a quarterly basis, key risks, status of mitigation
activities, and potential new or emerging risks are reported to and discussed with senior management and further addressed with our board, as necessary. On at least an annual basis, a long-term
comprehensive enterprise risk management update is provided to our board. The long-term goal of our enterprise risk management process is to ingrain a culture of risk awareness and mitigation
throughout the organization that can be applied to our current business activities as well as our assessment and pursuit of future business opportunities.
As
set forth in its charter, our audit committee discusses with management and our independent registered public accounting firm any significant risks or exposures facing Ironwood,
evaluates the steps management has taken or proposes to take to mitigate such risks, and reviews our compliance with such mitigation plans. As part of fulfilling these responsibilities, the audit
committee meets regularly with Ernst & Young LLP, our independent registered public accounting firm, and members of our management, including our chief executive officer, chief financial
officer, chief accounting officer, and chief legal officer. In addition, our audit committee reviews the risk factors presented in our annual reports on Form 10-K and our quarterly reports on
Form 10-Q that we file with the SEC.
As
part of our board's risk oversight role, our compensation and HR committee reviews and evaluates the risks associated with our compensation programs and succession plans, as it is
responsible under its charter for approving the compensation of all of our executive officers and overseeing succession planning for members of our senior management. Likewise, our governance and
nominating committee
is responsible for evaluating the performance, operations and composition of our board and the sufficiency of our corporate governance guidelines, either of which may impact our risk profile from a
governance perspective.
In
performing their risk oversight functions, each committee of our board has full access to management, as well as the ability to engage outside advisors.
Hedging Policy
As part of our insider trading prevention policy, our directors and executive officers are prohibited from engaging in any hedging or
monetization transactions of our common stock, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds.
Corporate Governance Guidelines
We have adopted corporate governance guidelines which are accessible through the Investors section of our website at
www.ironwoodpharma.com
, under the heading Corporate Governance, and which also are available in print to any stockholder who requests them from our
Secretary. Our board believes that sound governance practices and policies provide an important framework to assist it in fulfilling its duties to stockholders, and relies on these guidelines to
provide that framework. Among other things, the guidelines help to ensure that our board is independent from management, that our board adequately performs its oversight functions, and that the
interests of our board and management align with the interests of our stockholders.
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Dual Class Voting Structure
Since our initial public offering, or IPO, we have had a dual class equity voting structure (which provides holders of our Class B common
stock with significant influence over certain matters requiring stockholder approval, including a merger involving Ironwood, a sale of substantially all Ironwood assets and a dissolution or
liquidation of Ironwood). This structure was designed to concentrate change of control decisions in the hands of long-term focused owners who have a history of experience with us. Under the terms of
our current certificate of incorporation, this dual class structure is expected to cease and each share of Class B Common Stock will automatically convert into one share of Class A
Common Stock on December 31, 2018.
Board Meetings
Our board of directors held eight meetings during 2016. As stated in our corporate governance guidelines, we expect our board members to
rigorously prepare for, attend and participate in all board and applicable committee meetings. Each board member is expected to ensure that other existing and planned future commitments do not
materially interfere with his or her service as a director. We also expect that all of our board members up for election at, or who have a term that continues after, an annual meeting of stockholders
will attend such annual meeting. In 2016, each incumbent director attended at least 75% of all meetings of the board and all committees of the board on which he or she served that were held during the
period that such director was a member of the board or the applicable committee, except Mr. Owens and Dr. Olanoff who attended at least 70% of such meetings due to conflicts with the
timing of four non-regularly scheduled meetings. Each of Mr. Owens and Dr. Olanoff attended all regularly scheduled meetings of the board and all committees of the board on which each
sits. Mr. Dreyfus was elected to our board effective April 6, 2016 and Ms. Schulman was elected to our board effective January 1, 2017. Neither Mr. Dreyfus nor
Ms. Schulman attended any meetings of our board prior to their respective election date. Eight of our 11 directors at the time of our 2016 annual meeting of stockholders attended such meeting.
Mr. Conrades and Dr. Roberts did not attend our 2016 annual meeting of stockholders, as their terms on our board ended effective at such meeting, and Dr. Williams did not attend
our 2016 annual meeting of stockholders due to illness.
Committees
Our board of directors has established an audit committee, a governance and nominating committee and a compensation and HR committee. Each
committee operates under a
charter that has been approved by our board. Copies of each charter are accessible through the Investors section of our website at
www.ironwoodpharma.com
, under the heading Corporate Governance, and are
also available in print to any stockholder who requests them from our Secretary.
The chair of each of our committees is expected to rotate approximately every three to five years, unless the governance and nominating committee recommends otherwise.
Audit Committee.
We have a separately designated standing audit committee established by our board for the purpose of overseeing
our accounting and
financial reporting processes and audits of our financial statements. The members of our audit committee are Mses. Fanucci and McHugh and Mr. Dreyfus. Mr. McGuire served on this
committee through April 2016 when Mr. Dreyfus joined our board and this committee. At that time, Mr. McGuire rotated off the audit committee to the governance and nominating committee.
Ms. Fanucci chairs the audit committee. Our audit committee met five times during 2016. Our audit committee assists our board of directors in its oversight of significant risks facing Ironwood,
the integrity of our financial statements and our independent registered public accounting firm's qualifications, independence and performance.
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Our audit committee's responsibilities include:
-
-
reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements,
earnings releases and related disclosures;
-
-
reviewing and discussing with management and our independent registered public accounting firm our internal controls and internal auditing
procedures, including any material weaknesses in either;
-
-
discussing our accounting policies and all material correcting adjustments with our management and our independent registered public accounting
firm;
-
-
discussing with our management and our independent registered public accounting firm any significant risks facing the company and the related
mitigation plans, as well as monitoring our internal control over financial reporting and disclosure controls and procedures;
-
-
appointing, overseeing, and approving the compensation for and, when necessary, terminating our independent registered public accounting firm;
-
-
approving all audit services and all permitted non-audit, tax and other services to be performed by our independent registered public
accounting firm, in each case, in accordance with the audit committee's pre-approval policy;
-
-
discussing with the independent registered public accounting firm its independence and ensuring that it receives the written disclosures
regarding these communications required by the Public Company Accounting Oversight Board;
-
-
reviewing and approving all transactions or series of similar transactions to which we were or are a party in which the amount involved
exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities, or any member of the immediate family of any of the
foregoing persons, had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers;
-
-
recommending whether the audited financial statements should be included in our annual report and preparing the audit committee report required
by SEC rules;
-
-
reviewing all material communications between our management and our independent registered public accounting firm;
-
-
reviewing, updating and recommending to our board approval of our code of business conduct and ethics; and
-
-
establishing procedures for the receipt, retention, investigation and treatment of accounting related complaints and concerns.
Ms. Fanucci
is an audit committee financial expert, as defined in Item 407(d)(5) of Regulation S-K.
In the course of our oversight of Ironwood's financial reporting process, we have (i) reviewed and discussed with management the
company's audited financial statements for the fiscal year ended December 31, 2016, (ii) discussed with Ernst & Young LLP, the company's independent registered public
accounting firm, the matters and communications required to be discussed pursuant to applicable auditing standards, and (iii) received the written disclosures and the letter from the company's
independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting
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firm's
communications with us concerning independence, discussed with the independent registered public accounting firm its independence, and considered whether the provision of non-audit services by
the independent registered public accounting firm is compatible with maintaining its independence.
Based
on the foregoing review and discussions, we recommended to the board of directors of the company that the audited financial statements be included in the company's Annual Report on
Form 10-K for the year ended December 31, 2016 for filing with the SEC.
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By the Audit Committee,
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Marsha H. Fanucci, Chair
Andrew Dreyfus
Julie H. McHugh
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Governance and Nominating Committee.
The members of our governance and nominating committee are Drs. Olanoff and Walsh and
Mr. McGuire.
Mr. McGuire joined this committee in April 2016 in connection with his rotation off of the audit committee. Dr. Walsh chairs the governance and nominating committee. Our
governance and nominating committee met two times during 2016.
Our
governance and nominating committee's responsibilities include:
-
-
identifying individuals qualified to become members of our board of directors;
-
-
recommending to our board of directors the persons to be nominated for election as directors;
-
-
assisting our board of directors in recruiting such nominees;
-
-
recommending to our board of directors qualified individuals to serve as committee members;
-
-
performing an annual evaluation of our board of directors;
-
-
evaluating the need and, if necessary, creating a plan for the continuing education of our directors;
-
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assessing and reviewing our corporate governance guidelines and recommending any changes to our board of directors; and
-
-
evaluating and approving any requests from our executives to serve on the board of directors of another for-profit company.
Compensation and HR Committee.
The members of our compensation and HR committee are Mr. Owens, Ms. Schulman and
Dr. Williams.
Mr. Owens chairs our compensation and HR committee. Ms. Schulman joined this committee when she joined our board in January 2017. Our compensation and HR committee met three times during
2016. Our compensation and HR committee assists our board in fulfilling its responsibilities relating to the compensation of our board and our executive officers.
Our
compensation and HR committee's responsibilities include:
-
-
reviewing and approving corporate goals and objectives relevant to executive officer compensation and evaluating the performance of executive
officers in light of those goals and objectives;
-
-
reviewing and approving executive officer compensation, including salary, bonus and incentive compensation, deferred compensation, perquisites,
equity compensation, benefits provided upon retirement, severance or other termination of employment, and any other forms of executive compensation;
-
-
reviewing and approving our chief executive officer's compensation based on its evaluation of the chief executive officer's performance;
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-
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overseeing and administering our incentive compensation plans and equity based plans and recommending the adoption of new incentive
compensation plans and equity based plans to our board of directors;
-
-
making recommendations to our board of directors with respect to director compensation;
-
-
reviewing and discussing with management the compensation discussion and analysis required to be included in our filings with the SEC and
recommending whether the compensation discussion and analysis should be included in such filings;
-
-
preparing the compensation and HR committee report required by the SEC; and
-
-
making recommendations to our board of directors with respect to management succession planning, including planning with respect to our chief
executive officer.
None of the members of our compensation and HR committee is or has at any time during the past fiscal year been an officer or employee of
Ironwood. None of the members of our compensation and HR committee has formerly been an officer of Ironwood. None of our executive officers serve, or in the past fiscal year has served, as a member of
the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our board of directors or compensation and HR committee. None of the
members of our compensation and HR committee had any relationship with us that requires disclosure under any paragraph of Item 404 of Regulation S-K under the Exchange Act.
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PROPOSAL NO. 1ELECTION OF DIRECTORS
Our board recommends that you vote for each of the
Class I directors up for election.
Our
board has nominated each of our current class I directorsMr. Dreyfus, Dr. Hecht and Ms. McHughfor election at the 2017 annual
meeting. Each of Mr. Dreyfus, Dr. Hecht and Ms. McHugh has indicated his or her willingness to serve if elected. Should any nominee become unavailable for election at the annual
meeting, the persons named on the enclosed proxy as proxy holders may vote all proxies given in response to this solicitation for the election of a substitute nominee chosen by our board.
Vote Required
The three nominees for director with the highest number of affirmative votes will be elected as directors to serve for three years and until
their successors are duly elected and qualified or until their death, resignation or removal. Because there is no minimum vote required, abstentions and broker non-votes will not affect the outcome of
this proposal.
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EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
This section discusses the principles underlying our policies and decisions with respect to the compensation of our executive officers who are
named in the
Summary Compensation Table
, or our "named executive officers". Provided below are all material factors we believe are relevant to an
analysis of these policies and decisions. Our named executive officers are:
-
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Peter M. Hecht, Ph.D., chief executive officer;
-
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Tom Graney, chief financial officer and senior vice president, finance and corporate strategy;
-
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Mark G. Currie, Ph.D., senior vice president, chief scientific officer, and president of research and development;
-
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Halley E. Gilbert, senior vice president, chief legal officer, and secretary; and
-
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Thomas A. McCourt, senior vice president, marketing and sales, and chief commercial officer.
Executive Summary
We are a commercial biotechnology company, and
we and our named executive officers are committed to our
mission
of creating and commercializing medicines that make a difference for patients, building value for our fellow stockholders, and empowering our passionate team.
In
2016, we demonstrated strong commercial and research and development, or R&D, performance with select achievements from the year provided
below:
-
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Irritable Bowel Syndrome with Constipation, or IBS-C / Chronic Idiopathic Constipation, or CIC
-
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Grew LINZESS® (linaclotide) U.S. net sales, as provided by Ironwood's U.S. collaboration partner Allergan plc,
to $625.6 million for the full year 2016, an increase of 38% compared to the full year 2015.
-
-
Submitted a supplemental new drug application with the U.S. Food and Drug Administration, or FDA, for a 72 mcg dose of LINZESS for
the treatment of CIC in adult patients, enabling its subsequent approval in early 2017.
-
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Reported positive topline data from a Phase IIb clinical trial evaluating two investigational linaclotide delayed release
formulations, linaclotide delayed release-1 and linaclotide delayed release-2.
-
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Uncontrolled Gout
-
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In-licensed from AstraZeneca AB the exclusive U.S. rights to all products containing lesinurad, including ZURAMPIC®
(lesinurad 200mg tablets) and DUZALLO (lesinurad-allopurinol fixed-dose combination).
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Began commercializing ZURAMPIC in the U.S. in late 2016 for the treatment of hyperuricemia in adult patients with uncontrolled
gout who are already taking a xanthine oxidase inhibitor.
-
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Submitted an NDA to the FDA for DUZALLO. If approved, DUZALLO would be the first fixed-dose, dual-mechanism treatment for patients
with uncontrolled gout.
-
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Uncontrolled Gastroesophageal Reflux Disease, or uGERD
-
-
Completed enrollment in the Phase IIb dose-ranging clinical trial of IW-3718, a potential treatment for uGERD.
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-
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Vascular and Fibrotic Diseases
-
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Initiated two Phase IIa clinical studies for IW-1973 in patients with diabetes and hypertension.
-
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Initiated a Phase IIa clinical study for IW-1701 in patients with Type II achalasia.
-
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Financial Highlights
-
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Recorded Ironwood collaborative arrangements revenue of $273.9 million for the full year 2016, an increase of 83% compared
to the full year 2015.
-
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Used $25.4 million in cash for operations for the full year 2016, below our guidance of using less than $50 million
in cash for operations in 2016.
Our
executive officer compensation program is designed to
attract and motivate the owner-oriented employees we seek and align their interests with those of our
fellow stockholders and the creation of long-term stockholder value
. The three primary elements of our executive officer compensation program are base salary, cash bonus and
long term equity incentive compensation. Long term equity incentive compensation represents a significant percentage of each named executive officer's total direct compensation. By linking the
ultimate value of their compensation to our stockholders' returns, we believe this emphasis on equity strongly reinforces the concept of "pay for performance."
Our
current named executive officers have also modeled this owner-oriented mentality through their own actions. Combined, during the five-year period between 2012 and 2016, they
exercised and held more than 85% of their total vested stock options. Further, nearly all options exercised by our named executive officers during this period were exercised because the options were
expiring.
In
addition, the pay opportunity of our chief executive officer, Dr. Hecht,
over the last five years was approximately two and a half times larger than his
realizable pay
in this same time frame, demonstrating the strong alignment of our compensation program with our stock's performance. Pay opportunity includes base salary,
target bonuses and grant-date fair value of stock options awarded in this time frame, while realizable pay includes actual salary received, bonuses paid and in-the-money value of stock options granted
during the period. Dr. Hecht has also consistently declined annual cash bonuses and increases in his base salary, including for 2016, and continues to earn the salary of $100,000 per year that
he was first awarded almost 20 years ago in 1998.
In
determining compensation for our named executive officers, our compensation and HR committee emphasizes the achievement of our corporate goals designed to drive and maximize
shareholder value. During 2016, we demonstrated strong execution against these goals. As a result,
the compensation and HR committee determined that we achieved 123% of our
2016 corporate goals, including certain of our stretch goals
.
There
are two compensation-related votes for our stockholders this year:
1. Our
stockholders have an opportunity to cast an advisory (non-binding) vote on named executive officer compensation, or a "say-on-pay" vote.
2. Our
stockholders also have an opportunity to express their preference for the frequency of future say-on-pay votes.
The
last time we sought stockholder input with the say-on-pay vote was at our 2014 annual meeting of stockholders, and
over 99% of votes cast by our stockholders
voted in support
.
Based
on the 2011 recommendation of our stockholders, our board determined to provide our stockholders the opportunity to vote on say-on-pay once every three years.
In 2017, our board is recommending that our stockholders vote in
favor of say-on-pay votes once every year
. We believe this
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will
allow our stockholders to provide us with regular, timely and direct input on executive compensation philosophy, policies and practices in order to further align our compensation programs with
our stockholders' interests, and to enhance our ability to take timely stockholder feedback into consideration as part of our compensation review process.
Compensation Philosophy
The objective of our compensation policies is to provide compensation and incentives that align employee actions and motivations with the
interests of our stockholders; attract, motivate and reward outstanding talent across Ironwood through well-communicated programs that are aligned with our core values and business mission; and
support a positive company culture.
Our
core values are:
-
-
Ownership
: drive outstanding long-term value.
-
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Collaboration
: achieve more together.
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Innovation
: make a difference for patients.
-
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Excellence
: foster greatness in each other.
-
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Humanity
: act with honesty, integrity and respect.
-
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Have fun
.
In
addition, we have incorporated the concept of "critical success factors" into our performance management and compensation philosophy that we believe provide a useful framework for
being a productive and successful member of our team. Among other uses, these success factors enable managers to use a common language of expected behaviors upon which individual performance can be
managed and evaluated.
We
are guided by the following principles with respect to our compensation determinations:
-
-
design compensation and incentive programs that align employee actions and motivations with the interests of our stockholders, support our
business objectives and reward the achievement of key goals and milestones;
-
-
foster and support our performance-driven culture by setting clear, high-value, aggressive goals, rewarding outstanding performers, and making
sure our best performers know clearly that we value their contributions;
-
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as with all spending, serve as careful stewards of our stockholders' assets when making decisions to increase compensation or to make equity
awards;
-
-
maximize our employees' sense of ownership so that they have a long-term owner's perspective, can see the impact of their efforts on our
success, and can share in the benefits of that success through the opportunity to become stockholders of Ironwood via stock options, RSUs and other equity awards;
-
-
recognize that compensation is one of a number of tools to stimulate and reward productivity and great drug making, together with recognizing
individual growth potential, providing a great workplace culture, and sharing in our success;
-
-
foster a strong team culture, focused on our principles of great drug making and commercializing those drugs that we discover or in-license and
develop, which is reinforced through our compensation and incentive programs;
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-
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design compensation and incentive programs that are fair, equitable and competitive; and
-
-
design compensation and incentive programs that are simple and understandable.
Highlighted
procedures and tools that we use to ensure effective governance of compensation plans and decisions include:
-
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our compensation and HR committee has the authority to hire independent counsel and other advisors;
-
-
our compensation and HR committee conducts a regular review and assessment of risk as it relates to our compensation policies and practices;
-
-
as part of our insider trading prevention policy, our executive officers are prohibited from engaging in any hedging or monetization
transactions of our common stock, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds;
-
-
we have no perquisites other than broad-based health, transportation, relocation, 401(k) plan and insurance-related benefits that we make
available to all of our employees;
-
-
our Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan, or our 2010 Plan, prohibits options' repricing (absent
stockholder approval) and options' backdating;
-
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our executive severance arrangements and our change of control severance benefit plan, which applies to all of our employees including our
executive officers, do not provide for tax gross-ups;
-
-
our change of control severance benefit plan contains double-trigger requirements for equity acceleration and other benefits in the event of a
change of control;
-
-
nine of our ten directors are independent, including all members of our compensation and HR committee, and, subject to certain limited
exceptions, no director may transfer any shares of restricted stock while such person is a director of Ironwood; and
-
-
if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the
federal securities laws as a result of misconduct, our chief executive officer and chief financial officer may be legally required to reimburse us for any bonus or other incentive-based or
equity-based compensation they receive in accordance with the provisions of section 304 of the Sarbanes-Oxley Act of 2002. Additionally, we intend to implement a Dodd-Frank Wall Street Reform
and Consumer Protection Act-compliant clawback policy after the SEC issues final rules regarding such requirements.
Basis for Our Compensation Policies and Decisions
Our compensation policies and individual compensation determinations are based on an annual evaluation, and we take into consideration our
results of operations, our long- and short-term goals, individual goals, market data, the competitive market for our executive officers and general economic factors. As set forth in our compensation
and HR committee's written charter, our compensation and HR committee has the responsibility of reviewing and approving the compensation of our executive officers; annually reviewing and determining
our chief executive officer's compensation based on the committee's evaluation of his performance; recommending to the full board the adoption of new compensation plans; administering our existing
plans; recommending director and committee compensation to the full board; and overseeing succession planning for our senior management. In addition, our compensation and HR committee is responsible
for ensuring that our compensation policies are aligned with our compensation philosophy and guiding principles.
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Our
compensation and HR committee makes all of the compensation determinations with respect to each of our executive officers. In making its determinations with respect to
Dr. Hecht, our compensation and HR committee takes into account the feedback from the other members of our
board, as well as the feedback from each of our other executive officers, each of whom is Dr. Hecht's direct report, and a number of other members of our management team. In making its
determinations with respect to each of our executive officers other than Dr. Hecht, our compensation and HR committee takes into account the feedback and recommendations from Dr. Hecht,
each of the executive officer's direct reports and other members of our management team.
Each
component of each of our executive officer's initial compensation package was based on numerous factors, including:
-
-
the individual's particular background and circumstances, including prior relevant work experience and compensation paid prior to joining us;
-
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the individual's role with us and the compensation paid to similar persons in the companies represented in the compensation data that we
reviewed;
-
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the demand for people with the individual's specific expertise and experience at the time of hire;
-
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performance goals and other expectations for the position;
-
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comparison to other executive officers within Ironwood having similar levels of expertise and experience; and
-
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uniqueness of industry skills.
Our
compensation and HR committee has the authority to select and retain independent advisors and consultants to assist it with carrying out its responsibilities, and we are required to
pay any related expenses approved by the committee. For 2016, our compensation and HR committee exercised its authority to engage Pearl Meyer, or PM, as a compensation consultant. PM reported directly
to our compensation and HR committee and did not provide us with any services other than those requested by our compensation and HR committee and the review of this
Compensation Discussion and Analysis
for conformance with best practices. Based on the scope of our compensation and HR committee's engagements with PM,
it was determined that PM does not have a conflict of interest in its role as compensation consultant under applicable rules.
In
order to assist us in setting 2016 compensation, PM conducted a competitive assessment of 2015 compensation for our executive officers, reflecting that Dr. Hecht's target total
cash compensation was well below market, while his target total direct compensation was 10% below the market median, driven by his equity-based compensation. The assessment also reflected that all
assessed elements of compensation for other executive officers was well-aligned with the market median in aggregate. PM's assessment analyzed:
-
-
base salary;
-
-
actual total cash compensation (which is base salary plus the last bonus paid);
-
-
target total cash compensation (which is base salary plus the target bonus);
-
-
long-term equity incentives (which are valued based on grant date fair value);
-
-
actual total direct compensation (which is actual total cash compensation plus the value of the most recent long-term incentive grant); and
-
-
target total direct compensation (which is target total cash compensation plus the value of the most recent long-term incentive grant).
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The
table below reflects our 2015 target compensation in comparison to the competitive assessment data.
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2015 Target Compensation vs.
Composite Competitive Market
Positioning (pay as percent of
median)
|
|
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|
Chief Executive
Officer
|
|
Average for Other
Executive Officers
|
|
Base Salary
|
|
|
14
|
%
|
|
102
|
%
|
Target Total Cash Compensation
|
|
|
11
|
%
|
|
104
|
%
|
Equity
|
|
|
117
|
%
|
|
98
|
%
|
Target Total Direct Compensation
|
|
|
90
|
%
|
|
99
|
%
|
In
performing this competitive assessment, PM used two data sourcesour peer group and data from the Radford Global Life Sciences Survey employing the appropriate industry,
headcount and executive role perspectives. Our peer group is comprised of publicly traded companies in the pharmaceutical, biotechnology and life sciences industries that represent competitors for
executive talent and capital. In recognition that our peer group companies tend to be larger than us (including with respect to revenues), while the Radford Global Life Sciences Survey includes
companies that represent a broader market perspective and may not share our growth prospects, PM combined peer group data and broad industry data for companies our size weighing each source equally,
to enable a composite competitive assessment of executive compensation. Our compensation and HR committee reviewed the 25th, 50th and 75th percentiles for these market composite pay
positions to better understand how competitive pay varied with company size and other factors. PM also prepared an analysis of incentive program market trends, including analyses of the short- and
long-term elements of compensation as compared to those in our peer group, and a detailed equity usage and dilution analysis of Ironwood as compared with the companies in our peer group.
Our
compensation and HR committee considered the results of PM's competitive assessment in evaluating compensation for 2016, and determined that no significant changes to the
design of our executive officers' compensation were warranted. The results of PM's assessment have been, and will continue to be, taken into consideration when making compensation decisions,
but will not be used to mandate any specific actions.
Our
peer group, which was compiled by PM with input from our management team, our board, and our compensation and HR committee, is reviewed annually by our compensation and HR committee
for composition and appropriateness. We take a rules-based approach in reviewing and setting our peer group and apply a qualitative lens to the result to help focus the group on the companies with
which we are competing for talent. We first identify a potential pool of peer companies from a number of sources, including the companies listing Ironwood in their peer groups and the other companies
listed in such peer companies' peer groups, as well as companies included in third-party peer group assessments. We then apply certain size filters including revenue, number of employees and research
and development expense, as well as certain business model filters including product focus, market capitalization and growth.
As
a result of the 2016 peer group assessment, our compensation and HR committee, with input from our management team and PM, removed NPS Pharmaceuticals, Inc. because it was
acquired and was no longer a stand-alone public company, in addition to Regeneron Pharmaceuticals, Inc. because it was determined to be different in size or business model from Ironwood. Our
compensation and HR committee added Merrimack Pharmaceuticals, Inc. and Momenta Pharmaceuticals, Inc., both of which met all or most of the business model and size filters at the time of
our review. As a result, our peer group is composed of the following 15 companies, which at the time of our review had a median
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market
capitalization of approximately $2.5 billion, a median of approximately 552 employees, and a commercial drug or drug candidate in later stage development:
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Acorda Therapeutics, Inc.
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Medivation, Inc.
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Alkermes plc
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Merrimack Pharmaceuticals, Inc.
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Alnylam Pharmaceuticals, Inc.
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Momenta Pharmaceuticals, Inc.
|
AMAG Pharmaceuticals, Inc.
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Nektar Therapeutics
|
Arena Pharmaceuticals, Inc.
|
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Seattle Genetics, Inc.
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Depomed, Inc.
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United Therapeutics Corporation
|
Horizon Pharma plc
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Vertex Pharmaceuticals Incorporated
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Incyte Corporation
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Process for Determining Individual Compensation and Role of Executive Officers
Each January, our compensation and HR committee, in conjunction with our senior management, finalizes its assessment of our corporate
performance for the prior year. Upon completion of our goal assessment, our bonus and equity pools are calibrated for corporate performance and approved by our compensation and HR committee. Our
compensation and HR committee assigns a portion of each of these pools to all of our employees other than our executive officers, and delegates the allocation of these portions to our chief executive
officer and our chief financial officer. Our compensation and HR committee also approves any salary increase, cash bonus and equity awards for our chief executive officer and, in consultation with our
chief executive officer, for each of our other executive officers. In making these compensation-related decisions for 2016, our compensation and HR committee and senior management considered the
competitive assessment prepared by PM and described in more detail above, as well as the other factors described in this
Compensation Discussion and
Analysis
.
Additionally,
our compensation and HR committee may decide, as appropriate, to modify the mix or amount of base salary, bonus, and long-term incentives to best fit an executive officer's
specific circumstances or, if required by competitive market conditions, to attract and motivate skilled personnel. For example, our compensation and HR committee may decide to grant additional equity
awards to an executive officer if that officer receives a base salary or cash bonus award significantly below that of his or her counterparts in our peer group or other market data reviewed by our
compensation and HR committee, despite successful attainment of our corporate or his or her individual goals. We believe that this discretion and flexibility allows our compensation and HR committee
to better achieve our compensation objectives.
Corporate and Individual Goals for 2016
For 2016, allocations of cash and equity awards were, in large part, dependent upon us meeting certain weighted corporate performance goals. We
work thoughtfully with our compensation and HR committee and other members of our board of directors to establish what we believe are challenging corporate goals. In early 2016, our compensation and
HR committee approved the following corporate performance goals for 2016:
-
-
maximizing linaclotide, including successfully driving appropriate LINZESS growth in the United States according to certain financial and
commercial performance metrics, and advancing efforts to broaden its utility by strengthening the LINZESS label and progressing clinical programs in new indications, populations and formulations;
-
-
accessing value-creating assets;
26
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-
-
advancing our pipeline programs, including for uGERD, and vascular/fibrotic diseases, by achieving clinical and other milestones;
-
-
meeting certain financial and business development goals; and
-
-
leveraging our talent, team and culture by implementing cross-functional collaboration goals, improving capabilities, ensuring connectedness
among leaders and teams, and enhancing value through communications.
In
addition to the foregoing corporate performance goals, our compensation and HR committee also approved certain challenging stretch goals directly related to our corporate goals, and
which were intended to inspire innovation, creativity and strong performance. Dr. Hecht's performance evaluation was based primarily on the achievement of our corporate goals. Our other
executive officers were evaluated on the achievement of corporate goals and additional individual goals which contribute toward, and relate directly to, the accomplishment of our corporate goals.
Our
performance against 2016 corporate goals was used to determine compensation awards and adjustments in early 2017. In January 2017, our compensation and HR committee determined that
we achieved 123% of our 2016 corporate goals, including several of our stretch goals. Certain of the drivers resulting in achievement of our stretch goals included delivering LINZESS U.S. net sales of
$626 million, closing the lesinurad transaction with AstraZeneca, and using $25.4 million in cash for operations for the full year 2016. These goals, which were refreshed following the
lesinurad transaction, and our actual level of achievement of these goals in 2016, are as follows:
|
|
|
|
|
|
Corporate Goal
|
|
Target
Percentage (%)
|
|
Actual Level of
Achievement (%)
|
Maximize linaclotide: successfully drive appropriate LINZESS growth in the United States according to certain financial and commercial
metrics, and advance efforts to broaden its utility by strengthening its label and progress clinical programs in new indications, populations and formulations
|
|
|
35
|
%
|
35% + 4% for
stretch goals
|
Access value-creating assets
|
|
|
10
|
%
|
10% + 10% for
stretch goals
|
Advance our pipeline programs, including for uGERD and vascular/fibrotic diseases, by achieving clinical and other milestones
|
|
|
30
|
%
|
30%
|
Meet certain financial and business development goals
|
|
|
15
|
%
|
15% + 10% for
stretch goals
|
Leverage our talent, team and culture
|
|
|
10
|
%
|
9% + 0% for
stretch goals
|
|
|
|
|
|
|
Totals
|
|
|
100
|
%
|
123%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
addition to the 2016 corporate goals identified above, for which each of our executive officers was directly accountable, the following is a summary of the 2016 individual goals for
our executive officers set in early 2016, other than Dr. Hecht, who is compensated primarily on the basis of the achievement of our corporate goals.
27
Table of Contents
|
|
|
Executive Officer
|
|
Summary of Individual Goals
|
Tom Graney
|
|
Serve as an enterprise
leader and strategic partner to the chief executive officer in all parts of our business
|
|
|
Lead and guide the company
on all financial decisions, including managing a strong balance sheet to enable the company to meet its objectives and be positioned to achieve its long-term goals
|
|
|
Lead corporate strategy and
business development functions to drive Ironwood's growth and long-term success
|
|
|
Drive value creation in the
evaluation and, when appropriate, pursuit of business development opportunities for the organization through effective cross-functional collaboration and strategic guidance
|
|
|
Increase ownership,
engagement and productivity through strategic performance management
|
|
|
Evolve our culture of
collaboration and passionate engagement to drive incremental value for the company
|
Mark G. Currie, Ph.D.
|
|
Serve as an enterprise
leader and strategic partner to the chief executive officer in all parts of our business
|
|
|
Serve as strategic leader
on all research and development decisions and manage investments and expenses to enable the company to meet its objectives and be positioned to achieve its long-term goals
|
|
|
Advance our products and
product candidates and further our discovery efforts through pipeline investments in the key value drivers of our business, including with respect to our mid- to late-stage pipeline
|
|
|
Enhance the clinical
profile of LINZESS and drive linaclotide development programs to advance in additional indications, populations and formulations
|
|
|
Leverage internal research
and development capability to support the advancement of our uncontrolled gout program
|
|
|
Drive value creation in the
evaluation and, when appropriate, pursuit of business development opportunities for the organization through effective cross-functional collaboration and strategic guidance
|
|
|
Increase ownership,
engagement and productivity through strategic performance management
|
|
|
Evolve our culture of
collaboration and passionate engagement to drive incremental value for the company
|
Halley E. Gilbert
|
|
Serve as an enterprise
leader and strategic partner to the chief executive officer in all parts of our business
|
|
|
Lead and guide the company
on all legal decisions and appropriately manage investments and expenses to enable the company to meet its objectives and be positioned to achieve its long-term goals
|
|
|
Provide the highest quality
advice on all legal, intellectual property and compliance matters, serving the company's priority business objectives while ensuring financial management and discipline and managing and mitigating risk
|
|
|
Ensure legal preparedness
for the in-license of ZURAMPIC and for the advancement of the gout franchise
|
|
|
Drive value creation in the
evaluation and, when appropriate, pursuit of business development opportunities for the organization through effective cross-functional collaboration and strategic guidance
|
|
|
Increase ownership,
engagement and productivity through strategic performance management
|
|
|
Evolve our culture of
collaboration and passionate engagement to drive incremental value for the company
|
Thomas A. McCourt
|
|
Serve as an enterprise
leader and strategic partner to the chief executive officer in all parts of our business
|
|
|
Serve as strategic leader
on all commercial decisions and appropriately manage investments and expenses to enable the company to meet its objectives and be positioned to achieve its long-term goals
|
28
Table of Contents
|
|
|
Executive Officer
|
|
Summary of Individual Goals
|
|
|
Build brand awareness and
appropriate growth, while enhancing the global brand for linaclotide through close collaboration with partners and other members of senior management
|
|
|
Launch ZURAMPIC in the U.S.
market and ensure we have the commercial capabilities and plan to appropriately advance and grow our gout franchise
|
|
|
Lead the commercial field
sales force in successfully commercializing our products, while maintaining a culture of compliant, patient-centered care
|
|
|
Drive value creation in the
evaluation and, when appropriate, pursuit of business development opportunities for the organization through effective cross-functional collaboration and strategic guidance
|
|
|
Increase ownership,
engagement and productivity through strategic performance management
|
|
|
Evolve our culture of
collaboration and passionate engagement to drive incremental value for the company
|
In
early 2017, Dr. Hecht evaluated each executive officer's individual performance and provided feedback and made recommendations to our compensation and HR committee, which
approved the executive officers' compensation, taking into account that each executive officer met or exceeded all or substantially all of his or her respective individual goals for 2016.
Compensation Actions in 2016 and 2017
The following table summarizes the compensation actions taken by our compensation and HR committee for each of our executive officers in
recognition of the company's and his or her performance in 2016 and to motivate him or her toward achievement of our goals in 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Peter M. Hecht, Ph.D.
|
|
Tom Graney
|
|
Mark G. Currie, Ph.D.
|
|
Halley E. Gilbert
|
|
Thomas A. McCourt
|
|
Title
|
|
Chief Executive
Officer
|
|
Chief
Financial
Officer
and Senior
Vice President,
Finance and
Corporate
Strategy
|
|
Senior
Vice President,
Chief Scientific
Officer,
and President of R&D
|
|
Senior
Vice President,
Chief Legal
Officer,
and Secretary
|
|
Senior
Vice President,
Marketing and
Sales, and Chief
Commercial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary increase
|
|
|
|
(1)
|
$
|
10,000
|
|
$
|
16,000
|
|
$
|
17,000
|
|
$
|
15,000
|
|
2016 base salary
|
|
$
|
100,000
|
|
$
|
435,000
|
|
$
|
454,000
|
|
$
|
423,000
|
|
$
|
435,000
|
|
2017 base salary
|
|
$
|
100,000
|
|
$
|
445,000
|
|
$
|
470,000
|
|
$
|
440,000
|
|
$
|
450,000
|
|
Cash bonus(2)
|
|
|
|
(1)
|
$
|
257,000
|
|
$
|
301,000
|
|
$
|
280,000
|
|
$
|
288,000
|
|
Annual restricted stock units awarded(3)
|
|
|
|
|
|
21,250
|
|
|
|
|
|
40,000
|
|
|
26,250
|
|
Annual stock options awarded(4)
|
|
|
530,000
|
|
|
127,500
|
|
|
250,000
|
|
|
80,000
|
|
|
157,500
|
|
Stock options awarded in lieu of base salary increase and cash bonus(4)
|
|
|
230,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Our
compensation and HR committee recommended a salary increase and a cash bonus for Dr. Hecht, but he declined to accept either.
-
(2)
-
Consists
of payments made under our annual cash bonus program in 2017 for performance in 2016.
-
(3)
-
These
RSUs for shares of our Class A common stock were awarded on February 27, 2017 under our 2010 Plan and vest over four years as to 25% of the award
on each approximate anniversary of the grant thereof.
-
(4)
-
These
stock options for shares of our Class A common stock were granted under our 2010 Plan and have an exercise price of $16.77 per share (the closing price
of our Class A common stock on the NASDAQ Global Select Market on the grant date of February 27, 2017). Such stock options vest over four years as to 1/48th of the award on each
monthly anniversary of January 1, 2017.
-
(5)
-
Our
compensation and HR committee consulted with PM to understand competitive market trends for chief executive officer total direct compensation and elected to
grant Dr. Hecht an additional annual stock option award, which is discussed further below, in order to keep his overall compensation competitive with that of our peers while accounting for his
declination of a salary increase or a cash bonus.
29
Table of Contents
Dr. Hecht's salary of $100,000 represents the salary that he has been receiving since he began serving as chief executive officer in
1998, and his compensation is reviewed and approved annually by our compensation and HR committee. In January 2017, our compensation and HR committee recommended an increase to Dr. Hecht's base
salary to be market competitive with his peers, as well as a bonus based on our achievement of 123% of our corporate goals, but Dr. Hecht declined to accept either. Since co-founding Ironwood
in 1998, Dr. Hecht has declined both cash bonuses and increases to base salary each year. Dr. Hecht has further indicated to our compensation and HR committee that he would not expect or
desire his cash compensation to increase in the future.
We
recognize that Dr. Hecht's cash compensation is well below his market peers, but believe that the emphasis on stock ownership significantly aligns his interests with those of
our fellow stockholders' and the creation of long-term stockholder value. In lieu of cash bonuses or salary increases, our compensation and HR committee has granted Dr. Hecht stock options to
keep his overall compensation competitive with that of our peers. In January 2016, Dr. Hecht was granted an annual stock option award of 640,000 shares based primarily on 110% achievement of
our 2015 corporate goals, and an additional stock option award of 250,000 shares in lieu of a cash bonus or salary increase. In January 2017, Dr. Hecht was granted an annual stock option award
of 530,000 shares based primarily on the achievement of 123% of our 2016 corporate goals, as well as an additional stock option award of 230,000 shares in lieu of a cash bonus or salary increase. We
expect that Dr. Hecht's total compensation mix will continue to be focused more heavily on equity than our other executive officers.
We
believe that time-based stock options are inherently performance-based, as they provide value to the recipient only if there is future stock price appreciation and do not provide any
value if the stock price declines below the exercise price. This results in a close alignment of chief executive officer compensation with the value of our long-term shareholders' investment in
Ironwood. Dr. Hecht has long been a substantial stockholder in the company, currently beneficially owning nearly 5% of our total outstanding stock as of March 31, 2017 (as calculated in
the beneficial ownership table beginning on
page 4). In addition, in the five-year period between 2012 and 2016, Dr. Hecht exercised and held approximately 90% of his total vested stock options, demonstrating his commitment to
Ironwood and his alignment with our stockholders. Further, nearly all stock options exercised by Dr. Hecht during this period were exercised because they were expiring and all stock options
exercised and sold during this period were to cover the tax liabilities arising out of the exercises of such stock options as well as prior exercises in which Dr. Hecht paid the exercise price
and held the underlying shares at the time of exercise.
In the past five years, applying a Black-Scholes valuation methodology of the stock option grants issued to Dr. Hecht, because of our
stock price performance, Dr. Hecht's realizable pay has significantly trailed his disclosed pay opportunities as shown in the chart below. Dr. Hecht's realizable
30
Table of Contents
pay
is approximately 40% of the pay opportunity provided from 2012 through 2016, significantly driven by the value of the stock options granted to him during this period.
-
-
Pay opportunity
is defined as planned base salary, target bonuses and grant-date fair value of
stock options granted from 2012 through 2016.
-
-
Realizable pay
is defined as actual salary received, bonuses paid and in-the-money value of
stock options granted from 2012 through 2016 calculated by determining the difference between the December 30, 2016 closing price of our Class A common stock on the NASDAQ Global Select
Market and the exercise price of each stock option.
Three-year Realizable Pay vs. Three-year Total Shareholder Return
Further, Dr. Hecht's total realizable pay from 2014 through 2016 shows a strong connection to our total shareholder return, or TSR,
relative to our peer group, as shown in the graph below. Data points that are within the shaded area designate peer group companies that exhibit pay-for-performance alignment (meaning less than
25 percentage point difference between CEO realizable pay percentile and company TSR percentile).
-
-
Realizable pay percentile rank
was determined using Dr. Hecht's realizable pay for 2014
through 2016 and comparing it to realizable pay for the CEOs of our peer group companies for 2013 through 2015, which is the most recent period for which data was available as of December 31,
2016, in each case as reported by the applicable company in its proxy statement.
31
Table of Contents
-
-
TSR percentile rank
was determined using the actual TSR for Ironwood from 2014 through 2016 and
for each of the companies in our peer group for the period from 2013 through 2015.
This
analysis shows appropriate alignment of Dr. Hecht's compensation with our TSR for 2014 through 2016. We believe this is a complete depiction of pay and performance alignment
for the following reasons:
-
-
The analysis is based on the peer group set by the compensation and HR committee and described above;
-
-
It takes into account stock price movement after the grant date (as opposed to grant date fair value reported in the Summary Compensation
Table);
-
-
For performance-based equity, the number of shares or units actually vesting is used for time periods where the performance period has been
completed; and
-
-
It excludes Other Compensation reported in the Summary Compensation Table which includes items that are not part of total direct compensation.
For Ironwood, All Other Compensation is typically a small portion (
i.e.
, 2-3% for) of Summary Compensation Table pay for Dr. Hecht for the entire
year. However, at our peer group companies, items related to executive turnover such as severance payments, vacation payouts to former executives and relocation payments are reported as All Other
Compensation, which can be significant and can skew pay levels.
Other Executive Officers
Base Salary
In January 2016, our compensation and HR committee reviewed and approved the following base salaries for 2016 for our executive officers other
than Dr. Hecht: Mr. Graney received a $15,000 increase in base salary from $420,000 to $435,000, Dr. Currie received a $14,000 increase in base salary from $440,000 to $454,000,
Ms. Gilbert received a $13,000 increase in base salary from $410,000 to $423,000 and Mr. McCourt received a $15,000 increase in base salary from $420,000 to $435,000. The increase in
base salary for each of Mr. Graney, Dr. Currie, Ms. Gilbert and Mr. McCourt was in recognition of their meeting or exceeding all or substantially all of their respective
individual
performance goals in 2015, and taking into account peer group and other market data from the PM competitive assessment discussed above.
In
January 2017, our compensation and HR committee reviewed and approved the following base salaries for 2017 for our executive officers other than Dr. Hecht: Mr. Graney
received a $10,000 increase in base salary from $435,000 to $445,000, Dr. Currie received a $16,000 increase in base salary from $454,000 to $470,000, Ms. Gilbert received a $17,000
increase in base salary from $423,000 to $440,000 and Mr. McCourt received a $15,000 increase in base salary from $435,000 to $450,000. The increase in base salary for each of
Mr. Graney, Dr. Currie, Ms. Gilbert and Mr. McCourt was in recognition of their meeting or exceeding all or substantially all of their respective individual performance
goals in 2016, and taking into account peer group and other market data.
In January 2017, our compensation and HR committee reviewed and approved the following bonuses for 2016 performance for our executive officers
other than Dr. Hecht: Mr. Graney$257,000, Dr. Currie$301,000, Ms. Gilbert$280,000 and Mr. McCourt$288,000.
Seventy percent of such bonus amounts for Mr. Graney, Dr. Currie, Ms. Gilbert and Mr. McCourt was tied solely to the achievement of 123% of our corporate goals (as
described above), and 30% of such amounts was tied to corporate and individual goal achievement. Each of Mr. Graney, Dr. Currie, Ms. Gilbert and Mr. McCourt met or exceeded
all or substantially all of their respective individual goals for 2016.
32
Table of Contents
Our compensation and HR committee has set the equity pool each year based on achievement of our corporate goals. Individual equity award amounts
are then determined based on peer group and market data, and our compensation and HR committee has adjusted these amounts after considering relative company performance and, in the case of our
executive officers other than Dr. Hecht, individual performance.
Our
compensation and HR committee determined that we achieved 110% of our 2015 corporate goals. Mr. Graney, Dr. Currie, Ms. Gilbert and Mr. McCourt met or
exceeded all or substantially all of their respective individual goals in 2015. Accordingly, in January 2016, each of our executive officers other than Dr. Hecht was awarded the following stock
option and RSU awards for Class A common stock based on performance during 2015:
|
|
|
|
|
|
|
|
Executive Officer
|
|
2016 Annual Stock Option
Grant for 2015
Performance
(# of Shares of Class A
Common Stock
Subject to Stock
Options)
|
|
2016 Annual RSU
Grant for 2015
Performance
(# of Shares of Class A
Common Stock
Subject to RSUs)
|
|
Tom Graney
|
|
|
105,000
|
|
|
17,500
|
|
Mark G. Currie, Ph.D.
|
|
|
235,000
|
|
|
|
|
Halley E. Gilbert
|
|
|
65,000
|
|
|
32,500
|
|
Thomas A. McCourt
|
|
|
175,000
|
|
|
|
|
These
RSUs and stock options were granted on March 1, 2016 under our 2010 Plan. The stock options have an exercise price of $10.24 per share (the closing price of our
Class A common stock on the NASDAQ Global Select Market on the grant date).
Our
compensation and HR committee determined that we achieved 123% of our 2016 corporate goals. Mr. Graney, Dr. Currie, Ms. Gilbert and Mr. McCourt met or
exceeded all or substantially all of their respective individual goals in 2016. Accordingly, in January 2017, each of our executive officers other than Dr. Hecht was awarded the following stock
option and RSU awards for Class A common stock based on performance during 2016:
|
|
|
|
|
|
|
|
Executive Officer
|
|
2017 Annual Stock Option
Grant for 2016
Performance
(# of Shares of Class A
Common Stock
Subject to Stock
Options)
|
|
2017 Annual RSU
Grant for 2016
Performance
(# of Shares of Class A
Common Stock
Subject to RSUs)
|
|
Tom Graney
|
|
|
127,500
|
|
|
21,250
|
|
Mark G. Currie, Ph.D.
|
|
|
250,000
|
|
|
|
|
Halley E. Gilbert
|
|
|
80,000
|
|
|
40,000
|
|
Thomas A. McCourt
|
|
|
157,500
|
|
|
26,250
|
|
These
RSUs and stock options were granted on February 27, 2017 under our 2010 Plan. The stock options have an exercise price of $16.77 per share (the closing price of our
Class A common stock on the NASDAQ Global Select Market on the grant date).
We maintain broad-based benefits that are provided to all employees. We also maintain a relocation policy under which we make certain benefits
available to newly hired and existing employees, including executive officers, who are relocating to accept a new position with Ironwood. In connection with Mr. Graney's appointment as our
chief financial officer and senior vice president of finance and
33
Table of Contents
corporate
strategy in August 2014, he was eligible for temporary living coverage for two years from his start date in an aggregate amount not to exceed $70,000 per year. This benefit was intended to
facilitate Mr. Graney's transition to the Boston, Massachusetts area and continued through August 2016. Such allowance for housing and transportation was subject to Mr. Graney's
continued employment with us and was provided to Mr. Graney net of applicable taxes. This temporary living coverage was in lieu of any comparable benefits Mr. Graney would have otherwise
been eligible for under our relocation policy described above for such two-year period. After such two-year period ended in 2016, Mr. Graney became entitled to reimbursement under our
relocation policy for broker's fees related to the sale of his house and certain other relocation expenses.
Elements of Executive Compensation and Determination of Amounts
Our base salaries serve to provide our executive officers with a stable source of income, are determined at commencement of employment and are
generally re-evaluated annually and
adjusted, if warranted, to realign salaries with market levels and to reflect the performance of the executive officer. In determining whether to adjust an executive officer's base salary, our
compensation and HR committee takes into consideration factors such as our performance in prior years, general economic factors and compensation parity among our executive officers, as well as the
abilities, performance and experience of our executive officers. Our compensation and HR committee also reviews our executive officers' past compensation and market data.
Our cash bonus program is designed to reward the achievement of our annual corporate goals and, in the case of our executive officers other than
Dr. Hecht, individual goals, and to foster and support our performance-driven culture by setting clear, high-value goals, rewarding outstanding performers, and making sure our employees know
clearly that we value their contributions. Each cash bonus award is made annually, and is based on whether and to what extent we achieved our corporate goals for the preceding year as well as the
employee's individual performance in that year against his or her individual goals. In 2016, and consistent with 2015, each of our executive officers had an individual bonus target of 50% of his or
her base salary. We believe that these target bonus percentages align the compensation of our executive officers with that of our peers, place appropriate emphasis on achievement of our annual
performance objectives and facilitate both recruiting and motivating executive officers.
Additionally,
we refined our goal-weighting formula in 2016 for each of our executive officers, other than Dr. Hecht, weighting 70% of cash bonus awards paid in 2017 for 2016
performance solely to the achievement of our corporate goals and 30% to the achievement of our corporate goals and our executive officers' individual goals. Therefore, to calculate the bonus amount
payable, the bonus target was multiplied by the achievement multiplier of our corporate goals, and 30% of that figure was further modified by multiplying such amount by the executive officers'
individual achievement multiplier. This refinement was intended to closely align cash bonus awards to the achievement of our corporate goals, while taking into account individual performance and
providing structure and clarity to the calculation of our executive bonuses. As in 2015, in 2016 the individual performance achievement multiplier was
34
Table of Contents
between
zero and two. The following summarizes the calculation of our executive officers' cash bonus awards paid in 2017 for 2016 performance, other than Dr. Hecht:
|
|
|
|
|
|
|
|
|
50% Bonus Target
×
Actual Corporate Goals
Achievement Multiplier
×
70% Weighting
|
|
+
|
|
50% Bonus Target
×
Actual Corporate Goals
Achievement Multiplier
×
30% Weighting
×
Actual Individual Goals
Achievement Multiplier
|
|
=
|
|
Actual Bonus Payout
|
We use equity awards as our incentive vehicle for long-term compensation to attract, reward and motivate our executive officers in a manner that
best aligns their interests with our stockholders' interests. We believe that equity awards are an effective tool for meeting our compensation goal of increasing long-term stockholder value by tying
the value of this compensation to our future performance. By linking the ultimate value of the award to the performance of our stock price, we believe equity awards strongly reinforce the concept of
"pay for performance." Our equity awards, in the form of stock options and RSUs, generally have either long-term vesting schedules, typically over four years, or vest upon the achievement of major
value-creating milestones. If an employee leaves the company before the completion of the vesting period or the achievement of the milestone, as applicable, then that employee generally does not
receive any benefit from the non-vested portion of his or her award. Because employees are able to profit from stock options only if our stock price increases relative to the stock option's exercise
price, we believe that stock options provide strong incentives to employees to increase the value of our stock over time. While stock options continue to represent a significant percentage of our
equity awards, our compensation and HR committee believes that offering a portfolio of equity instruments that includes both stock options and RSUs is important
to attract top talent to our commercial-stage biotechnology company, to foster our performance-driven culture aimed at setting and achieving high-value, aggressive goals and to best align our
employees' actions and motivations with the interests of our stockholders.
We
do not currently have any security ownership requirements for our executive officers. In addition, we have never had a program or policy in place to coordinate equity grants with the
release of material non-public information. However, as part of our insider trading prevention policy, our executive officers are prohibited from engaging in any hedging or monetization transactions
of our common stock, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds.
We make an initial equity award to all new employees, including our executive officers, in connection with the commencement of their employment.
These initial grants are intended to provide the employee with the incentive to build value in the organization over an extended period of time and to maintain competitive levels of total
compensation. In 2016, and consistent with 2015, these initial grants were in the form of stock options and RSUs, with stock options continuing to make up a significant percentage of such grants.
Since our IPO in February 2010, these awards were for shares of our Class A common stock, and awards made prior to our IPO were for shares of our Class B common stock. Such stock options
have an exercise price equal to the fair market value of our common stock on the grant date and typically vest over four years as to 25% of the shares on the first anniversary of the
35
Table of Contents
date
of hire and as to 1/48th of the total shares each month thereafter for the next 36 months. Such RSUs typically vest over four years as to 25% on each approximate anniversary of the
date of grant.
Our practice is to make annual, performance-based equity awards to all employees, including our executive officers, as part of our annual
compensation program, and historically we have granted such awards in February or March of each year based on our performance in the prior year. Our executive officers have a choice of the mix for
their annual equity awards and can select from the following choices: 100% stock options, 75% stock options and 25% RSUs or 50% stock options and 50% RSUs, with the balance of our employees being
provided this or greater equity choice. We believe this equity choice model allows our employees to balance the overall risk profile of their annual equity grants by providing them with the
opportunity to diversify their portfolio of equity awards, and also keeps our compensation practices competitive with our peers with whom we compete for talent, while continuing to align the interests
of our employees with those of our stockholders. Since our IPO in February 2010, these grants were for shares of our Class A common stock, and awards made prior to our IPO were for shares of
our Class B common stock. Such stock option grants have an exercise price equal to the fair market value of our common stock on the grant date and typically vest over four years as to
1/48th of the award on each monthly anniversary of the vesting commencement date, which is January 1 of the applicable year. Such RSUs typically vest over four years as to 25% on each
approximate anniversary of the date of grant.
Our
compensation and HR committee does not apply a rigid formula in allocating equity awards to our executive officers as a group or to any particular executive officer, but does
emphasize the achievement of corporate goals in determining each annual performance award for our executive officers, other than Dr. Hecht. Substantially all of Dr. Hecht's annual
performance award is based on the achievement of our corporate goals. In addition, our compensation and HR committee leverages its experience, exercising its judgment and discretion, and considers,
among other things, the role and responsibility of the executive officer, the executive officer's performance, competitive factors, input from PM and market data, the amount of stock-based equity
compensation already held by the executive officer, the mix of total direct compensation received by the executive officer and the total number of awards to be made to all participants during the
year. Based upon these factors, our compensation and HR committee determines the size of the long-term equity incentives at levels it considers appropriate to create a meaningful opportunity for
reward predicated on the creation of long-term stockholder value. Throughout the year, our compensation and HR committee may award additional grants as circumstances warrant.
Our executive officers and a number of our employees have a portion of their incentive compensation in periodic grants of milestone-based equity
awards that vest upon the achievement of major value-creating events which may occur many years from the date of grant. We believe milestone-based equity awards align our employees with our
stockholders' best interests and
motivate our employees to apply their best efforts toward the accomplishment of these long-term value-creating events.
Our board, through our compensation and HR committee, periodically assesses our executive severance and change of control arrangements to, among
other things, ensure that such benefits are competitive with those of our peers. As approved by our compensation and HR committee we have entered into severance arrangements with each of our executive
officers. We believe these arrangements serve to better align our executive severance practices with those of our peers, which is
36
Table of Contents
particularly
important as we seek out top talent from companies like our peers and to foster our performance-driven culture aimed at setting and achieving high-value, aggressive goals. Our executive
severance arrangements and change of control plan are described in more detail below.
We have entered into severance arrangements with each of our executive officers. Under the severance arrangements, our executive officers are
eligible to receive certain benefits in the event of an involuntary termination without "cause" or a "constructive termination" (each as defined below under the caption
Potential Payments Upon Termination or Change of
ControlExecutive Severance Arrangements
), including an amount equal to his or her base
salary and target bonus for the current year, a pro rata amount of his or her target bonus for the current year (pro-rated based on the percentage of the year worked prior to the triggering event),
his or her actual bonus for the prior year if not yet paid and 12 months of benefit continuation. These benefits are only payable if the executive officer has complied with all of our rules and
policies, executed a separation agreement that includes a release of claims and complies with his or her post-employment obligations of non-disclosure, non-competition and non-solicitation to
Ironwood. If the triggering event occurs in connection with a change of control of Ironwood, the severance arrangements provide that the executive officer will be entitled to receive the greater of
the benefits under his or her severance arrangement and the benefits under the change of control plan in effect at the time of such termination, on a payment-by-payment and benefit-by-benefit basis.
The severance
arrangements further provide that in connection with the sale of all or substantially all of the assets of Ironwood we will cause the acquirer of such assets to assume the arrangements.
We
believe that offering our executive officers these payments and benefits facilitates the operation of our business, allows them to better focus their time, attention and capabilities
on our business, assists us in recruiting and motivating key executive officers, and provides for a clear and consistent approach to managing involuntary departures with mutually understood separation
benefits. A further description of the severance arrangements is set forth below under the caption
Potential Payments Upon Termination or Change of
ControlExecutive Severance Arrangements
.
We have a change of control plan that applies to all of our employees regardless of title or role, including our executive officers, and
provides for certain payments and benefits in connection with or following a termination of employment associated with a "change of control" (as defined below under the caption
Potential Payments Upon Termination or Change of
ControlChange of Control Severance Benefit Plan
). We maintain this change of control plan
on the premise that innovative ideas and the associated intellectual property generated from these ideas are the basis upon which economic value is created in the biopharmaceutical industry and that
our employees are the source of these value-creating ideas. The potential for a change of control or other event that could substantially change the nature and structure of Ironwood could therefore
adversely affect our ability to recruit and motivate employees. The change of control plan is designed to encourage employees to bring forward their best ideas by providing them with the knowledge
that if a change of control occurs, and their employment is terminated as a result thereof, they will have an opportunity to share in the value that they helped create for our stockholders, regardless
of their employment status at Ironwood after the change of control. The key goals of our change of control plan are to recognize the value of employees' contributions to us through the acceleration of
equity awards solely with time-based vesting, and to ensure employees have a reasonable period of time within which to locate suitable employment without undue financial hardship. We believe that our
change of control plan is a positive recruitment tool in attracting top talent to Ironwood and enhances our ability to recruit and motivate management-level employees.
37
Table of Contents
A
further description of the change of control plan and the potential payments to our executive officers pursuant to the plan is set forth below under the captions
Potential Payments Upon Termination or Change of
ControlChange of Control Severance Benefit Plan
and
Potential Payments Upon Termination or Change of Control
.
We maintain broad-based benefits that are provided to all employees, including health insurance, life and disability insurance, dental
insurance, fitness and transportation stipends, and a 401(k) plan with a 75% matching company contribution on the first $8,000 of an employee's annual contribution.
We
also maintain a relocation policy under which we make certain benefits available to newly hired and existing employees, including executive officers, who are relocating to accept a
new position with Ironwood. Our relocation policy covers reasonable expenses associated with the move and certain relocation services, including as applicable, temporary housing assistance payments
and a lump sum relocation allowance, departure home sale assistance, rental assistance, new home search assistance, home purchase assistance, moving of household goods and vehicles assistance, and
reimbursement of final trip expenses to the new area. We also provide tax assistance to our relocating employees to cover the costs associated with certain non-deductible relocation expenses, as we
believe that this benefit is important to our ability to attract and motivate employees. Under our relocation policy, participants are required to pay back the full amount of all relocation
reimbursements in the event that they voluntarily terminate their employment or are terminated for "cause" within 12 months following the payment date of their last relocation reimbursement.
Other
than our broad-based benefits, or as otherwise described herein, none of our executive officers receive perquisites of any nature.
Tax and Accounting Considerations
While our compensation and HR committee generally considers the tax and accounting implications of its executive compensation decisions, neither
element was a material consideration in the compensation awarded to our executive officers in 2016.
Compensation Practices and Risk
Our compensation and HR committee has reviewed our compensation policies as generally applicable to our employees and believes that our policies
do not encourage excessive and unnecessary risk-taking, and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on Ironwood. In making this
determination, our compensation and HR committee considered the following:
-
-
our use of different types of compensation vehicles provides a balance of long- and short-term incentives with fixed and variable components;
-
-
we grant equity-based awards with time-based vesting and milestone-based vesting, both of which encourage participants to look to long-term
appreciation in equity values;
-
-
our annual bonus determinations for each employee are dependent on achievement of company goals, which we believe promote long-term value; and
-
-
our system of internal control over financial reporting and code of business conduct and ethics, among other things, reduce the likelihood of
manipulation of our financial performance to enhance payments under any of our incentive plans.
38
Table of Contents
Summary Compensation Table
The following table sets forth information regarding the compensation paid or accrued to, or earned by, each of our named executive officers
during the years ended December 31, 2016, 2015 and 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)(1)
|
|
Stock
Awards
($)(2)
|
|
Option
Awards
($)(2)
|
|
Non-Equity
Incentive Plan
Compensation
($)(3)
|
|
All Other
Compensation
($)(4)
|
|
Total
($)
|
|
Peter M. Hecht, Ph.D.
|
|
|
2016
|
|
|
100,000
|
|
|
|
|
|
|
|
|
4,135,830
|
|
|
|
|
|
8,065
|
|
|
4,243,895
|
|
Chief Executive Officer
|
|
|
2015
|
|
|
100,000
|
|
|
|
|
|
|
|
|
4,017,546
|
|
|
|
|
|
7,440
|
|
|
4,124,986
|
|
|
|
|
2014
|
|
|
100,000
|
|
|
|
|
|
|
|
|
2,144,708
|
|
|
|
|
|
7,421
|
|
|
2,252,129
|
|
Tom Graney
|
|
|
2016
|
|
|
435,000
|
|
|
|
|
|
179,200
|
|
|
487,935
|
|
|
257,000
|
|
|
145,577
|
|
|
1,504,712
|
|
Chief Financial Officer and Senior
|
|
|
2015
|
|
|
420,000
|
|
|
|
|
|
89,034
|
(5)
|
|
242,475
|
(5)
|
|
231,000
|
|
|
113,880
|
|
|
1,096,389
|
|
Vice President, Finance and Corporate Strategy
|
|
|
2014
|
|
|
131,250
|
|
|
200,000
|
(6)
|
|
|
|
|
1,895,620
|
|
|
37,406
|
|
|
43,748
|
|
|
2,308,024
|
|
Mark G. Currie, Ph.D.
|
|
|
2016
|
|
|
454,000
|
|
|
|
|
|
|
|
|
1,092,045
|
|
|
301,000
|
|
|
8,040
|
|
|
1,855,085
|
|
Senior Vice President, Chief
|
|
|
2015
|
|
|
440,000
|
|
|
|
|
|
341,688
|
|
|
1,380,394
|
|
|
255,200
|
|
|
7,440
|
|
|
2,424,722
|
|
Scientific Officer and President of R&D
|
|
|
2014
|
|
|
388,100
|
|
|
|
|
|
|
|
|
560,924
|
|
|
159,321
|
|
|
7,421
|
|
|
1,115,766
|
|
Halley E. Gilbert
|
|
|
2016
|
|
|
423,000
|
|
|
|
|
|
332,800
|
|
|
302,055
|
|
|
280,000
|
|
|
8,040
|
|
|
1,345,895
|
|
Senior Vice President, Chief Legal
|
|
|
2015
|
|
|
410,000
|
|
|
|
|
|
499,075
|
|
|
408,865
|
|
|
225,500
|
|
|
7,440
|
|
|
1,550,880
|
|
Officer and Secretary
|
|
|
2014
|
|
|
371,000
|
|
|
|
|
|
|
|
|
428,942
|
|
|
131,595
|
|
|
7,421
|
|
|
938,958
|
|
Thomas A. McCourt
|
|
|
2016
|
|
|
435,000
|
|
|
|
|
|
|
|
|
813,225
|
|
|
288,000
|
|
|
8,040
|
|
|
1,544,265
|
|
Senior Vice President, Marketing
|
|
|
2015
|
|
|
420,000
|
|
|
|
|
|
253,825
|
|
|
693,293
|
|
|
243,600
|
|
|
7,440
|
|
|
1,618,158
|
|
and Sales and Chief Commercial Officer
|
|
|
2014
|
|
|
377,600
|
|
|
|
|
|
|
|
|
527,928
|
|
|
133,758
|
|
|
7,421
|
|
|
1,046,707
|
|
-
(1)
-
Reflects
cash bonuses paid to our executive officers other than pursuant to our annual cash bonus program.
-
(2)
-
For
2016, reflects the fair value of time-based RSU and stock option awards on the date of grant calculated in accordance with Financial Accounting Standards Board
issued Accounting Standards Codification 718,
CompensationStock Compensation
, or ASC 718. For a discussion of the assumptions used in the
valuation of awards made in 2016, see Note 14 to our consolidated financial statements for the year ended December 31, 2016 included in our Annual Report on Form 10-K that we
filed with the SEC on February 22, 2017, or our 2016 Form 10-K, and that accompanies this proxy statement. All values reported exclude the effects of potential forfeitures.
-
(3)
-
Consists
of payments made under our annual cash bonus program in the following year for performance in the identified year, as described above under the caption
Compensation Actions in 2016 and 2017
.
-
(4)
-
For
each executive officer, $6,000 of such amount consists of matching contributions made under our 401(k) plan, as well as an amount attributable to a
transportation stipend and a fitness stipend. Includes $46,667 Mr. Graney received for temporary living coverage pursuant to his new hire arrangements and intended to facilitate his transition
to the Boston, Massachusetts area in 2016, as well as $24,646 Mr. Graney received during 2016 for reimbursement of taxes owed on this allowance for housing and transportation. Also includes
reimbursements of $35,000 in broker's fees related to the sale of Mr. Graney's house and $6,225 in relocation allowance, as well as $25,000 for reimbursement of taxes owed on such amounts for
which Mr. Graney became entitled to payment in 2016 under our relocation policy.
-
(5)
-
Reflects
a prorated equity award granted to Mr. Graney in 2015 for performance during the portion of 2014 that he was employed by Ironwood, after joining the
company in August 2014.
-
(6)
-
Represents
a new hire bonus Mr. Graney received in connection with his joining our company in August 2014.
39
Table of Contents
Grants of Plan-Based Awards (2016)
The following table sets forth information regarding non-equity and equity awards granted to each of our named executive officers during the
year ended December 31, 2016. All non-equity incentive plan awards were made pursuant to our cash bonus program described in more detail above under the caption
Elements
of Executive Compensation and Determination of AmountsBonus
. We granted RSUs and stock option awards to our executive officers in 2016 in recognition of
performance in 2015. All RSUs granted in 2016 represented the right to receive shares of our Class A common stock and all stock options granted in 2016 consisted of options to purchase shares
of our Class A common stock with an exercise price equal to the fair market value of our Class A common stock on the date of grant. All such equity awards were granted under our 2010
Plan. The vesting schedule of each RSU and each option included in the following table is described in the footnotes to the
Outstanding Equity Awards at Fiscal Year-End
(2016)
table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Future
Payouts
Under
Non-Equity
Incentive
Plan
Awards(1)
|
|
Estimated
Future
Payouts
Under
Equity
Incentive
Plan
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
and HR
Committee
Approval
Date (if
different
than
Grant Date)
|
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
|
|
|
|
|
|
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(#)
|
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
|
Grant Date
Fair Value
of Stock
and Option
Awards
($)(2)
|
|
|
|
Grant
Date
|
|
Name
|
|
Target ($)
|
|
Target (#)
|
|
Peter M. Hecht, Ph.D.
|
|
|
3/1/2016
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
890,000
|
|
|
10.24
|
|
|
4,135,830
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tom Graney
|
|
|
3/1/2016
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
|
10.24
|
|
|
487,935
|
|
|
|
|
3/1/2016
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
17,500
|
|
|
|
|
|
|
|
|
179,200
|
|
|
|
|
|
|
|
|
|
|
217,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark G. Currie, Ph.D.
|
|
|
3/1/2016
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
235,000
|
|
|
10.24
|
|
|
1,092,045
|
|
|
|
|
|
|
|
|
|
|
227,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Halley E. Gilbert
|
|
|
3/1/2016
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
|
|
10.24
|
|
|
302,055
|
|
|
|
|
3/1/2016
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
32,500
|
|
|
|
|
|
|
|
|
332,800
|
|
|
|
|
|
|
|
|
|
|
211,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas A. McCourt
|
|
|
3/1/2016
|
|
|
1/25/2016
|
|
|
|
|
|
|
|
|
|
|
|
175,000
|
|
|
10.24
|
|
|
813,225
|
|
|
|
|
|
|
|
|
|
|
217,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Consists
of the target cash bonus payment for 2016 performance under our cash bonus program. As described in more detail above under the caption
Elements of Executive Compensation and Determination of AmountsBonus
, in 2016 each of our executive officers, other than Dr. Hecht,
had an individual bonus target of 50% of his or her base salary, 70% of which was tied solely to the achievement of our corporate goals for 2016 (which was not determined as of December 31,
2016) and 30% of which was tied to the achievement of corporate and individual performance goals (the range of which was not determined as of December 31, 2016). Dr. Hecht's bonus, with
an individual bonus target of 50% of his base salary, was to be determined based on the achievement of our corporate goals. Actual bonus payments for 2016 performance are set forth in the
Summary Compensation
Table
above.
-
(2)
-
Reflects
the fair value of time-based RSU and stock option awards on the date of grant calculated in accordance with ASC 718.
For
a discussion of the assumptions used in the valuation of the time-based RSU awards and stock option awards granted to our executive officers in 2016, see footnote 2 to the
Summary Compensation Table
above.
40
Table of Contents
Outstanding Equity Awards at Fiscal Year-End (2016)
The following table sets forth information regarding outstanding equity awards held by each of our named executive officers on
December 31, 2016 the last day of our last fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
Option
Exercise
Price ($)
|
|
Option to
Purchase
Class
Common Stock
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(1)
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(2)
|
|
Peter M. Hecht, Ph.D.
|
|
|
65,987
|
|
|
|
|
|
|
|
|
2.94
|
|
B
|
|
|
1/22/2017
|
(3)
|
|
|
|
|
|
|
|
|
|
140,000
|
|
|
|
|
|
|
|
|
3.76
|
|
B
|
|
|
1/31/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
4.89
|
|
B
|
|
|
2/11/2019
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
5.48
|
|
B
|
|
|
7/28/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
11.25
|
|
A
|
|
|
2/2/2020
|
(3)
|
|
|
|
|
|
|
|
|
|
175,000
|
|
|
|
|
|
|
|
|
11.11
|
|
A
|
|
|
2/1/2021
|
(3)
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
14.72
|
|
A
|
|
|
2/1/2022
|
(3)
|
|
|
|
|
|
|
|
|
|
357,813
|
|
|
17,187
|
|
|
|
|
|
13.08
|
|
A
|
|
|
2/1/2023
|
(3)
|
|
|
|
|
|
|
|
|
|
236,979
|
|
|
88,021
|
|
|
|
|
|
14.11
|
|
A
|
|
|
3/3/2024
|
(5)
|
|
|
|
|
|
|
|
|
|
270,729
|
|
|
294,271
|
|
|
|
|
|
15.62
|
|
A
|
|
|
3/16/2025
|
(5)
|
|
|
|
|
|
|
|
|
|
203,958
|
|
|
686,042
|
|
|
|
|
|
10.24
|
|
A
|
|
|
3/1/2026
|
(5)
|
|
|
|
|
|
|
Tom Graney
|
|
|
87,500
|
|
|
62,500
|
|
|
|
|
|
13.11
|
|
A
|
|
|
9/2/2024
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
13.11
|
|
A
|
|
|
9/2/2024
|
(7)
|
|
|
|
|
|
|
|
|
|
16,339
|
|
|
17,761
|
|
|
|
|
|
15.62
|
|
A
|
|
|
3/16/2025
|
(5)
|
|
|
|
|
|
|
|
|
|
24,062
|
|
|
80,938
|
|
|
|
|
|
10.24
|
|
A
|
|
|
3/1/2026
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,775
|
|
|
332,940
|
|
Mark G. Currie, Ph.D.
|
|
|
90,000
|
|
|
|
|
|
|
|
|
2.94
|
|
B
|
|
|
1/22/2017
|
(3)
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
3.76
|
|
B
|
|
|
1/31/2018
|
(3)
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
4.89
|
|
B
|
|
|
2/11/2019
|
(8)
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
4.89
|
|
B
|
|
|
2/11/2019
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
5.48
|
|
B
|
|
|
7/28/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
11.25
|
|
A
|
|
|
2/2/2020
|
(3)
|
|
|
|
|
|
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
11.11
|
|
A
|
|
|
2/1/2021
|
(3)
|
|
|
|
|
|
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
14.72
|
|
A
|
|
|
2/1/2022
|
(3)
|
|
|
|
|
|
|
|
|
|
190,834
|
|
|
9,166
|
|
|
|
|
|
13.08
|
|
A
|
|
|
2/1/2023
|
(3)
|
|
|
|
|
|
|
|
|
|
61,979
|
|
|
23,021
|
|
|
|
|
|
14.11
|
|
A
|
|
|
3/3/2024
|
(5)
|
|
|
|
|
|
|
|
|
|
62,889
|
|
|
68,361
|
|
|
|
|
|
15.62
|
|
A
|
|
|
3/16/2025
|
(5)
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
25,000
|
|
|
15.62
|
|
A
|
|
|
3/16/2025
|
(9)
|
|
|
|
|
|
|
|
|
|
53,854
|
|
|
181,146
|
|
|
|
|
|
10.24
|
|
A
|
|
|
3/1/2026
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
316,406
|
(10)
|
|
4,837,848
|
|
Halley E. Gilbert
|
|
|
37,385
|
|
|
|
|
|
|
|
|
3.76
|
|
B
|
|
|
1/31/2018
|
(6)
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
3.76
|
|
B
|
|
|
1/31/2018
|
(11)
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
4.89
|
|
B
|
|
|
2/11/2019
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
5.48
|
|
B
|
|
|
7/28/2019
|
(4)
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
11.25
|
|
A
|
|
|
2/2/2020
|
(3)
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
11.11
|
|
A
|
|
|
2/1/2021
|
(3)
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
11.83
|
|
A
|
|
|
12/12/2021
|
(3)
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
14.72
|
|
A
|
|
|
2/1/2022
|
(3)
|
|
|
|
|
|
|
|
|
|
28,625
|
|
|
1,375
|
|
|
|
|
|
13.08
|
|
A
|
|
|
2/1/2023
|
(3)
|
|
|
|
|
|
|
|
|
|
11,250
|
|
|
13,750
|
|
|
|
|
|
11.51
|
|
A
|
|
|
12/2/2023
|
(3)
|
|
|
|
|
|
|
|
|
|
47,396
|
|
|
17,604
|
|
|
|
|
|
14.11
|
|
A
|
|
|
3/3/2024
|
(5)
|
|
|
|
|
|
|
|
|
|
27,552
|
|
|
29,948
|
|
|
|
|
|
15.62
|
|
A
|
|
|
3/16/2025
|
(5)
|
|
|
|
|
|
|
|
|
|
14,895
|
|
|
50,105
|
|
|
|
|
|
10.24
|
|
A
|
|
|
3/1/2026
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,062
|
|
|
826,608
|
|
Thomas A. McCourt
|
|
|
160,000
|
|
|
|
|
|
|
|
|
5.48
|
|
B
|
|
|
9/7/2019
|
(6)
|
|
|
|
|
|
|
|
|
|
80,000
|
|
|
|
|
|
80,000
|
|
|
5.48
|
|
B
|
|
|
9/7/2019
|
(12)
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
11.25
|
|
A
|
|
|
2/2/2020
|
(3)
|
|
|
|
|
|
|
|
|
|
95,000
|
|
|
|
|
|
|
|
|
11.11
|
|
A
|
|
|
2/1/2021
|
(3)
|
|
|
|
|
|
|
|
|
|
95,000
|
|
|
|
|
|
|
|
|
14.72
|
|
A
|
|
|
2/1/2022
|
(3)
|
|
|
|
|
|
|
|
|
|
104,959
|
|
|
5,041
|
|
|
|
|
|
13.08
|
|
A
|
|
|
2/1/2023
|
(3)
|
|
|
|
|
|
|
|
|
|
58,333
|
|
|
21,667
|
|
|
|
|
|
14.11
|
|
A
|
|
|
3/3/2024
|
(5)
|
|
|
|
|
|
|
|
|
|
46,718
|
|
|
50,782
|
|
|
|
|
|
15.62
|
|
A
|
|
|
3/16/2025
|
(5)
|
|
|
|
|
|
|
|
|
|
40,104
|
|
|
134,896
|
|
|
|
|
|
10.24
|
|
A
|
|
|
3/1/20226
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,187
|
|
|
186,339
|
|
-
(1)
-
The
RSUs vest over four years as to 25% of the award on each approximate anniversary of the grant thereof.
-
(2)
-
Market
value is calculated by multiplying the number of RSUs that have not vested by the closing price of our common stock on the NASDAQ Global Select Market on
December 30, 2016, which was $15.29.
-
(3)
-
The
options vest as to 1.25% on each monthly anniversary of the vesting commencement date for the first 36 months, and as to 4.5833% of the award on each
monthly anniversary thereafter until fully vested.
41
Table of Contents
-
(4)
-
The
options vest as to (a) 50% of the shares upon the achievement of $1 billion in annual (calendar year) net global pharmaceutical product sales
(including partnered or licensed product revenue) and (b) 50% of the shares upon acceptance by the FDA of a second NDA for a product from an internal or external development program (excluding
supplemental NDAs for linaclotide, but including NDAs for linaclotide combination products). External development programs shall be pre-qualified for milestone vesting eligibility by our compensation
and HR committee as of the time of program initiation at Ironwood.
-
(5)
-
The
options vest as to 1/48th of the shares on each monthly anniversary of the vesting commencement date until fully vested.
-
(6)
-
The
options vest as to 25% of the shares on the first anniversary of the vesting commencement date and 1/48th of the shares each month thereafter for the next
36 months.
-
(7)
-
The
options vest as to (a) 50,000 shares immediately upon our achievement of an average market capitalization of at least $20.00 per share of Class A
common stock for forty-five days out of any sixty day period on a split-adjusted basis, (b) 50,000 shares immediately upon the achievement of $1 billion in annual (calendar year) net
global pharmaceutical product sales (including partnered or licensed product revenue) and (c) 50,000 shares immediately upon acceptance by the FDA of a second NDA for a product from an internal
or external development program (excluding supplemental NDAs for linaclotide, but including NDAs for linaclotide combination products). External development programs shall be pre-qualified for
milestone vesting eligibility by our compensation and HR committee as of the time of program initiation at Ironwood.
-
(8)
-
The
option vested as to 100% of the shares on the grant date.
-
(9)
-
The
options vest in two equal installments of 25,000 options each. The option vested as to 25,000 shares upon the first-dosing in the first clinical study of the
next phase following achievement of proof of concept for the first internally derived or externally accessed product (other than linaclotide) qualified by our compensation and HR committee as
targeting a new indication, category or market. The option vests as to the remaining 25,000 shares upon the first-dosing in the first clinical study of the next phase following achievement of proof of
concept for the second internally derived or externally accessed product (other than linaclotide) qualified by our compensation and HR committee as targeting a new indication, category or market.
-
(10)
-
Includes
300,000 shares which Dr. Currie obtained on October 31, 2016 pursuant to an early exercise provision. The right to acquire the shares will
vest as to (a) 25% of the shares immediately upon the entry of a novel Ironwood drug candidate (other than certain Ironwood compounds or linaclotide for gastrointestinal indications) into
Phase 3 clinical studies; (b) 50% of the shares immediately upon the first acceptance by the FDA of an NDA filed by us for a novel Ironwood-derived drug candidate (other than certain
Ironwood compounds or linaclotide for gastrointestinal indications); (c) 25% of the shares immediately upon our achievement of an average market capitalization of at least $20.00 per share of
Class A common stock for forty-five days out of any sixty day period on a split-adjusted basis; and (d) all unvested shares remaining on January 22, 2017.
-
(11)
-
The
option vested as to (a) 50% of the shares immediately upon the first acceptance by the FDA of an NDA filed by us and (b) 50% of the shares
immediately upon the first commercial sale of our first product.
-
(12)
-
The
option vested as to (a) 25% of the shares immediately upon the first acceptance by the FDA of an NDA filed by us; (b) 25% of the shares upon the
first commercial sale of linaclotide; and the remaining portion of the option vests as to (c) 25% of the shares upon the achievement of $1 billion in annual (calendar year) net global
pharmaceutical product sales (including partnered or licensed product revenue); and (d) 25% of the shares upon acceptance by the FDA of a second NDA for a product from an internal or external
development program (excluding supplemental NDAs for linaclotide, but including NDAs for linaclotide combination products). External development programs shall be pre-qualified for milestone vesting
eligibility by our compensation and HR committee as of the time of program initiation at Ironwood.
Options Exercised and Stock Vested Table
The following table sets forth certain information regarding the exercise of options to purchase our common stock and the vesting of RSUs that
were held by our named executive officers during the year ended December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of Shares
Acquired on
Exercise
(#)
|
|
Value Realized
on Exercise
($)(1)
|
|
Number of Shares
Acquired
on Vesting
(#)
|
|
Value Realized
on Vesting
($)(2)
|
|
Peter M. Hecht, Ph.D.
|
|
|
300,790
|
(3)
|
|
2,762,468
|
|
|
|
|
|
|
|
Tom Graney
|
|
|
|
|
|
|
|
|
1,425
|
|
|
12,597
|
|
Mark G. Currie, Ph.D.
|
|
|
675,000
|
(4)
|
|
6,084,372
|
|
|
5,469
|
|
|
48,346
|
|
Halley E. Gilbert
|
|
|
29,865
|
(5)
|
|
315,602
|
|
|
7,188
|
|
|
63,542
|
|
Thomas A. McCourt
|
|
|
|
|
|
|
|
|
4,063
|
|
|
35,917
|
|
-
(1)
-
Computed
by determining the difference between the market price of our Class A common stock upon exercise and the exercise price of the exercised stock
option.
-
(2)
-
Computed
by multiplying the number of shares of Class A common stock underlying the vested RSUs by the market price of our Class A stock on the vesting
date. This amount represents the total number of shares that vested; however, a portion of such shares were sold to satisfy tax withholding obligations.
-
(3)
-
Includes
180,790 shares of our Class B common stock that Dr. Hecht acquired through option exercises, as such stock options were expiring, and then
held, thereby increasing his ownership of
42
Table of Contents
our
Class B common stock by such amount. As of the date hereof, Dr. Hecht continues to hold these shares. Also includes 120,000 shares of our Class B common stock that
Dr. Hecht acquired through option exercises and then sold on the open market. Such sales were effected to cover the tax liabilities arising out of the exercises of stock options. In order to
effect the sales, the shares of Class B common stock were converted into shares of Class A common stock in accordance with our certificate of incorporation.
-
(4)
-
Includes
375,000 shares of our Class B common stock that Dr. Currie acquired through option exercises, as such stock options were expiring, and then
held, thereby increasing his ownership of our Class B common stock by such amount. As of the date hereof, Dr. Currie continues to hold these shares. Also includes 300,000 shares of our
Class B common stock that Dr. Currie acquired through an option exercise, as such stock options were expiring, and then sold on the open market. In order to effect these sales, the
shares of Class B common stock were converted into shares of Class A common stock in accordance with our certificate of incorporation.
-
(5)
-
Represents
29,865 shares of our Class B common stock that Ms. Gilbert acquired through option exercises and then sold on the open market. In order to
effect these sales, the shares of Class B common stock were converted into shares of Class A common stock in accordance with our certificate of incorporation.
Potential Payments Upon Termination or Change of Control
Except as described below, there are currently no other agreements or arrangements pursuant to which our executive officers would receive
severance benefits in the event of a separation from Ironwood.
We have entered into severance arrangements with each of our executive officers. Under the severance arrangements, our executive officers are
eligible to receive the following benefits in the event of an involuntary termination without Cause or a Constructive Termination (each as defined below), provided the executive officer has complied
with all of our rules and policies, executed
a separation agreement that includes a release of claims and complies with his or her post-employment obligations of non-disclosure, non-competition and non-solicitation to
Ironwood:
-
-
an amount equal to 12 months of his or her current base salary, a pro rata amount of his or her target annual cash incentive award for
the current year (pro-rated based on the percentage of the year worked prior to the triggering event), an amount equal to his or her full target annual cash incentive award for the current year, and
an amount equal to his or her actual annual cash incentive award for the prior year if such amount has not already been paid to him or her; and
-
-
benefit continuation under the Consolidated Omnibus Budget Reconciliation Act, or COBRA, with Ironwood contributing to the cost of such
coverage in the same amount as if the executive officer was actively employed, plus COBRA administrative fees, for 12 months following the triggering event. The executive officers are also
eligible to receive outplacement assistance consistent with industry standards.
If
the triggering event occurs in connection with a change of control of Ironwood, the severance arrangements provide that the executive officer will be entitled to receive the greater
of the benefits under his or her severance arrangement and the benefits under the change of control plan in effect at the time of such termination, on a payment-by-payment and benefit-by-benefit
basis. The severance arrangements further provide that in connection with the sale of all or substantially all of the assets of Ironwood we will cause the acquirer of such assets to assume the
arrangements.
43
Table of Contents
For purposes of the severance arrangements, "Constructive Termination" means termination of employment by the executive officer for Good Reason (as defined
below); provided that Constructive Termination shall not include any termination of employment (i) by Ironwood for Cause; (ii) by Ironwood as a result of the permanent disability of the
executive officer; (iii) as a result of the death of the executive officer; or (iv) as a result of the voluntary termination of employment by the executive officer for any reason other
than Good Reason. "Good Reason" means the occurrence of any of the following conditions: (a) a material diminution in the executive officer's authority, duties or responsibilities; (b) a
material diminution in the executive officer's total target cash compensation unless such diminution is in connection with a proportional reduction in compensation for all or substantially all
executive officers; or (c) the relocation of the executive officer's work place for Ironwood to a location more than 60 miles from the location of the work place prior to the Constructive
Termination. The severance arrangements provide that "Cause" has the same meaning as ascribed to the term in our 2010 Plan, as most recently in effect prior to the time of termination; provided,
however, that this definition of Cause shall be superseded by (I) the definition of Cause contained in an agreement between a participant and Ironwood in effect at the time of such termination,
and (II) the definition of "Cause" contained in the change of control plan to the extent such termination is covered by such plan. Our 2010 Plan defines "Cause" as (A) dishonesty with
respect to Ironwood, (B) insubordination, substantial malfeasance or non-feasance of duty, (C) unauthorized disclosure of confidential information, (D) breach of any provision of
any employment, consulting, advisory, nondisclosure, non-competition or similar agreement with Ironwood, and (E) conduct substantially prejudicial to Ironwood's business. See
Elements of Executive Compensation and
Determination of
AmountsSeverance or Change of Control ArrangementsExecutive Severance Arrangements
for more information about our executive severance arrangements.
We have a change of control plan that applies to all of our employees regardless of title or role, including our executive officers, and
provides for certain payments and benefits in connection with or following a termination of employment associated with a change of control. Pursuant to this plan, in the event of a Covered Termination
(as defined below), our executive officers are entitled to receive the following from Ironwood or its successor:
-
-
a lump-sum payment in an amount equal to 12 months of base salary as of the time of termination;
-
-
a lump-sum payment in an amount equal to the target bonus for the year in which the termination occurred, prorated for the portion of the year
during which the employee was employed;
-
-
acceleration of all outstanding equity awards subject solely to time-based vesting as of the date of termination; and
-
-
continuation of medical, dental and vision benefits for the individual and his or her dependents for 12 months following termination;
provided that if the individual dies or becomes covered by another employer's group health plans during the continuation period, Ironwood is no longer required to provide such group health plans.
A
Covered Termination consists of a "Termination Upon Change of Control" or a "Constructive Termination" in connection with a "Change of Control" of Ironwood. Under the change of control
plan, a Change of Control occurs when:
-
-
any person becomes, pursuant to a transaction or a series of transactions not approved by our board, the beneficial owner, directly or
indirectly, of Ironwood securities representing more than 50% of the total voting power;
44
Table of Contents
-
-
a merger or consolidation of Ironwood, whether or not approved by our board, which results in the holders of our voting securities holding less
50% of the combined voting power of the surviving entity immediately after such merger or consolidation;
-
-
the sale or disposition of more than two-thirds of the assets of Ironwood; or
-
-
the date a majority of members of our board is replaced during any 12-month period by directors whose appointment or election is not endorsed
by a majority of members of our board before the date of the appointment or election.
For
purposes of the change of control plan, "Termination Upon Change of Control" means the actual termination of the employee without Cause (as defined below) by Ironwood during the
period commencing 30 days prior to the earlier of (i) the date that Ironwood first publicly announces that it is conducting negotiations leading to a Change of Control or (ii) the
date that Ironwood enters into a definitive agreement that would result in a Change of Control, and ending on the earlier of (a) the date on which Ironwood announces the definitive agreement
has been terminated or that Ironwood's efforts
to consummate the Change of Control have been abandoned or (b) the date that is twenty-four months after the Change of Control, and "Constructive Termination" means the termination of
employment by the employee for Good Reason (as defined below) within twenty-four months after the occurrence of any Change of Control; provided that a Termination Upon Change of Control or a
Constructive Termination shall not include any termination of employment (A) by Ironwood for Cause; (B) by Ironwood as a result of the permanent disability of the employee; (C) as
a result of the death of the employee; or (D) as a result of the voluntary termination of employment by the employee for any reason other than Good Reason. "Good Reason" means the occurrence of
any of the following conditions following a Change of Control: (I) a material diminution in the employee's authority, duties and responsibilities; (II) a material diminution in the
employee's total target cash compensation unless such diminution is in connection with a proportional reduction in compensation for all or substantially all similarly situated employees;
(III) the relocation of the employee's work place for Ironwood to a location more than 60 miles from the location of the work place prior to the Change of Control; or (IV) any other
action or inaction that constitutes a material breach by such employee's employer (after the Change of Control) of any agreement with the employee under which the employee is then providing services.
"Cause" means (aa) theft, a material act of fraud, intentional falsification of employment or Ironwood records or the commission of any criminal act; (bb) improper disclosure or use of Ironwood's
confidential, business or property information; (cc) gross negligence or willful misconduct in the performance of assigned duties that causes demonstrable harm to Ironwood; or (dd) repeated failure to
perform job responsibilities in accordance with written instructions from a supervisor.
We
will require any successor to assume and agree to perform the change of control plan. Receipt of any payments or benefits under the change of control plan at the time of termination
will be conditioned on the employee executing a written release of Ironwood from any and all claims arising in connection with his or her employment. See
Elements of Executive
Compensation and Determination of AmountsSeverance or Change of Control ArrangementsChange of Control Severance Benefit Plan
for more information
about our change of control plan.
For all employees, including our executive officers, outstanding stock option and RSU awards subject solely to time-based vesting accelerate in
full in the event of the death of the award holder. This term applies to all outstanding time-based stock option and RSU awards made under our equity incentive plans, including the 2010 Plan. Further,
our current form of stock option and RSU agreements for awards issued under our 2010 Plan include similar provision for the acceleration of unvested time-based awards upon the death of an award
holder, including our executive officers.
45
Table of Contents
The following table presents our estimate of the amount of severance benefits to which each of our named executive officers would be entitled if
a termination occurred on December 30, 2016 under the circumstances set forth in the column headings. The closing price of our common stock as listed on the NASDAQ Global Select Market on
December 30, 2016 was $15.29 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive Payments
and Benefits
upon Termination
|
|
Involuntary
Termination
without Cause or a
Constructive
Termination(1)
|
|
Termination
Following
Change of
Control(2)
|
|
Death(3)
|
|
Peter M. Hecht, Ph.D.
|
|
Cash Severance
|
|
$
|
100,000
|
|
$
|
100,000
|
|
$
|
|
|
|
|
Non-Equity Incentive Plan Compensation
|
|
$
|
100,000
|
|
$
|
100,000
|
|
$
|
|
|
|
|
Equity Acceleration(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
$
|
|
|
$
|
3,606,360
|
|
$
|
3,606,360
|
|
|
|
RSUs
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
Continuation of Health Benefits
|
|
$
|
19,218
|
|
$
|
19,218
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
219,218
|
|
$
|
3,825,578
|
|
$
|
3,606,360
|
|
Tom Graney
|
|
Cash Severance
|
|
$
|
435,000
|
|
$
|
435,000
|
|
$
|
|
|
|
|
Non-Equity Incentive Plan Compensation
|
|
$
|
435,000
|
|
$
|
435,000
|
|
$
|
|
|
|
|
Equity Acceleration(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
$
|
|
|
$
|
544,987
|
|
$
|
544,987
|
|
|
|
RSUs
|
|
$
|
|
|
$
|
332,940
|
|
$
|
332,940
|
|
|
|
Continuation of Health Benefits
|
|
$
|
19,218
|
|
$
|
19,218
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
889,218
|
|
$
|
1,767,145
|
|
$
|
877,927
|
|
Mark G. Currie, Ph.D.
|
|
Cash Severance
|
|
$
|
454,000
|
|
$
|
454,000
|
|
$
|
|
|
|
|
Non-Equity Incentive Plan Compensation
|
|
$
|
454,000
|
|
$
|
454,000
|
|
$
|
|
|
|
|
Equity Acceleration(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
$
|
|
|
$
|
962,209
|
|
$
|
962,209
|
|
|
|
RSUs
|
|
$
|
|
|
$
|
250,848
|
|
$
|
250,848
|
|
|
|
Continuation of Health Benefits
|
|
$
|
7,112
|
|
$
|
7,112
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
915,112
|
|
$
|
2,128,169
|
|
$
|
1,213,057
|
|
Halley E. Gilbert
|
|
Cash Severance
|
|
$
|
423,000
|
|
$
|
423,000
|
|
$
|
|
|
|
|
Non-Equity Incentive Plan Compensation
|
|
$
|
423,000
|
|
$
|
423,000
|
|
$
|
|
|
|
|
Equity Acceleration(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
$
|
|
|
$
|
328,817
|
|
$
|
328,817
|
|
|
|
RSUs
|
|
$
|
|
|
$
|
826,608
|
|
$
|
826,608
|
|
|
|
Continuation of Health Benefits
|
|
$
|
19,218
|
|
$
|
19,218
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
865,218
|
|
$
|
2,020,643
|
|
$
|
1,155,425
|
|
Thomas A. McCourt
|
|
Cash Severance
|
|
$
|
435,000
|
|
$
|
435,000
|
|
$
|
|
|
|
|
Non-Equity Incentive Plan Compensation
|
|
$
|
435,000
|
|
$
|
435,000
|
|
$
|
|
|
|
|
Equity Acceleration(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
$
|
|
|
$
|
717,932
|
|
$
|
717,932
|
|
|
|
RSUs
|
|
$
|
|
|
$
|
186,339
|
|
$
|
186,339
|
|
|
|
Continuation of Health Benefits
|
|
$
|
7,543
|
|
$
|
7,543
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
877,543
|
|
$
|
1,781,814
|
|
$
|
904,721
|
|
-
(1)
-
Represents
amounts payable under the terms of the executive severance arrangements. Non-equity incentive plan compensation payment amount assumes no bonus amounts
for 2016 have been paid to the executive as of December 31, 2016, and that all 2015 bonus amounts have been paid as of such date, in each case, as would be consistent with Ironwood's historical
practice.
46
Table of Contents
-
(2)
-
As
provided under the terms of the executive severance arrangements, represents the greater of the amount payable under the executive severance arrangements and the
change of control plan on a payment-by-payment and benefit-by-benefit basis.
-
(3)
-
Represents
the value of the accelerated time-based stock option and RSU awards for each executive officer.
-
(4)
-
With
respect to options, reflects the in-the-money value of the unvested portion of such executive officer's options that have vesting provisions based solely on
time, and not performance milestones. The value is calculated by multiplying the amount (if any) by which $15.29, the closing price of our Class A common stock on the NASDAQ Global Select
Market on December 30, 2016, exceeds the exercise price of the option by the number of shares subject to the accelerated portion of the option. With respect to RSUs, the value is calculated by
multiplying the number of unvested RSUs with vesting provisions based solely on time (if any) by $15.29, the closing price of our Class A common stock on the NASDAQ Global Select Market on
December 30, 2016.
Director Compensation
Our director compensation plan, effective January 1, 2014, provides that at each annual meeting of stockholders our non-employee
directors will receive an annual grant of the number of restricted shares of our Class A common stock calculated by dividing (i) the dollar amount for total director compensation
approximating the 25th percentile of our current peer group on the date of grant, by (ii) the average closing price of our Class A common stock on the NASDAQ Global Select Market
for the six months preceding the month in which the applicable annual meeting of stockholders occurs. Such restricted shares vest 25% on each three-month anniversary of the grant date over a
nine-month period and the remaining 25% on the day before the date of the annual meeting of stockholders for the next calendar year. For 2016, our compensation and HR committee determined that the
25
th
percentile for total director compensation for our peer group was approximately $250,000. Accordingly, on June 1, 2016, the date of our 2016 annual meeting of
stockholders, each of our non-employee directors received a grant of restricted stock consistent with the foregoing terms and valuation. Vesting is contingent on each non-employee director continuing
to serve as a member of the board on the last day of each applicable vesting period. Subject to certain limited exceptions, and whether the shares of restricted stock are vested or not, no director
may transfer any shares of restricted stock while such person is a director of Ironwood.
The
vast majority of the compensation that our non-employee directors receive for service on our board is paid in the form of restricted stock, which such shares are subject to
forfeiture and transfer restrictions as described in detail above. We believe these forfeiture and transfer restrictions under our director compensation plan effectively create stock ownership
guidelines for our directors in that they ensure that the interests of our directors, each of whom has equity in the business, are aligned with those of our stockholders and they focus our directors
on maximizing long-term value.
In
addition, pursuant to our director compensation plan, the chair of our board and each of the committee chairs receives annual compensation of $10,000, payable quarterly in
unrestricted stock or cash at the individual director's election. Shares of our Class A common stock issued to our directors under our director compensation plan are granted under our 2010
Plan, in which our directors are eligible to participate. Further, non-employee directors are reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of the
board of directors and its committees.
The
following table sets forth information regarding the compensation earned during the year ended December 31, 2016 by each of our directors other than Dr. Hecht, who does
not receive compensation for his service as a director. Dr. Hecht's compensation for his service as our chief
47
Table of Contents
executive
officer is described in our
Compensation Discussion and Analysis
and in the
Summary Compensation
Table
and related footnotes included elsewhere in this proxy statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
Stock Awards
($)(1)
|
|
All Other
Compensation ($)
|
|
Total ($)
|
|
George H. Conrades
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew Dreyfus
|
|
|
|
|
|
330,771
|
(2)
|
|
|
|
|
330,771
|
|
Marsha H. Fanucci
|
|
|
10,000
|
(3)
|
|
300,423
|
|
|
|
|
|
310,423
|
|
Terrance G. McGuire
|
|
|
9,988
|
(4)
|
|
300,423
|
|
|
|
|
|
310,411
|
|
Julie H. McHugh
|
|
|
|
|
|
300,423
|
|
|
|
|
|
300,423
|
|
Lawrence S. Olanoff, M.D., Ph.D.
|
|
|
|
|
|
300,423
|
|
|
18,750
|
(5)
|
|
319,173
|
|
Edward P. Owens
|
|
|
10,000
|
(6)
|
|
300,423
|
|
|
|
|
|
310,423
|
|
Amy W. Schulman(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryan E. Roberts, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher T. Walsh, Ph.D.
|
|
|
9,988
|
(8)
|
|
300,423
|
|
|
12,500
|
(9)
|
|
322,911
|
|
Douglas E. Williams, Ph.D.
|
|
|
|
|
|
300,423
|
|
|
|
|
|
300,423
|
|
-
(1)
-
On
June 1, 2016, each non-employee member of our board of directors, except Mr. Conrades and Dr. Roberts who transitioned off of our board of
directors on such date and Ms. Schulman who had not yet joined our board of directors as of such date, received a restricted stock grant in the amount of 23,674 shares of Class A common
stock for service to Ironwood from the date of our 2016 annual meeting of stockholders to the date of our 2017 annual meeting of stockholders. Such award of restricted stock had a grant date fair
value of $12.69 per share and was granted pursuant to the terms of our director compensation plan. As of December 31, 2016, 11,837 shares from each such restricted stock award remained
unvested.
-
(2)
-
Mr. Dreyfus
was elected a director effective April 6, 2016. On such date, and in connection with his election, Mr. Dreyfus received an award of
2,585 restricted shares of our Class A common stock, which award represented a prorated portion of the award of restricted shares made to our other non-employee directors on June 3,
2015, our 2015 annual meeting date. Such award of restricted stock had a grant date fair value of $11.74 and was granted pursuant to the terms of our director compensation plan. As of
December 31, 2016, all of such restricted shares had vested.
-
(3)
-
Ms. Fanucci
received this compensation for her services as the chair of our audit committee in 2016.
-
(4)
-
Mr. McGuire
received this compensation for his service as the chair of our board for 2016. Pursuant to our director compensation plan, Mr. McGuire
elected to receive this compensation in unrestricted shares of our Class A common stock. Mr. McGuire received a total of 762 shares of our Class A common stock for such chair
service in 2016.
-
(5)
-
Dr. Olanoff
received this compensation for his service as a member of our Pharmaceutical Advisory Committee for 2016, including one payment made in 2016 for
services as a member of the Pharmaceutical Advisory Committee during the year 2015.
-
(6)
-
Mr. Owens
received this compensation for his services as the chair of our compensation and HR committee for 2016.
-
(7)
-
Ms. Schulman
was elected a director effective January 1, 2017.
-
(8)
-
Dr. Walsh
received this compensation for his service as the chair of our governance and nominating committee in 2016. Pursuant to our director compensation
plan, Dr. Walsh elected to receive this compensation in unrestricted shares of our Class A common stock. Dr. Walsh received a total of 762 shares of our Class A common
stock for such chair service in 2016.
-
(9)
-
Dr. Walsh
received this compensation for his service as chair of our Pharmaceutical Advisory Committee in 2016.
48
Table of Contents
Compensation Committee Report
We have:
-
1.
-
reviewed
and discussed with management the Compensation Discussion and Analysis found herein; and
-
2.
-
based
on the review and discussions referred to in paragraph (1) above, we recommended to the board of directors that the Compensation Discussion and Analysis
be included in the company's proxy statement on Schedule 14A for filing with the SEC.
|
|
|
|
|
By the Compensation and HR Committee,
|
|
|
Edward P. Owens, Chair
Amy W. Schulman
Douglas E. Williams
|
49
Table of Contents
PROPOSAL NO. 2ADVISORY VOTE ON NAMED
EXECUTIVE OFFICER
COMPENSATION
Our board recommends that you approve the
compensation of our named executive officers as
disclosed in this proxy statement.
Background
At our 2017 annual meeting, we are providing our stockholders with the opportunity to cast an advisory (non-binding) vote on named executive
officer compensation, or a "say-on-pay" vote. This is a non-binding vote on the compensation of our "named executive officers," as described in the
Compensation Discussion and
Analysis
section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure, all as set forth in this proxy statement.
Our
previous say-on-pay vote was at our 2014 annual meeting and was approved by more than 99% of the votes cast on such matter. Under the Dodd-Frank Wall Street Reform and Consumer
Protection Act, as well as the provisions of Section 14A of the Exchange Act, we must hold the advisory (non-binding) vote on named executive officer compensation at least once every three
years. Based on the recommendation of our stockholders in 2011, our board determined to provide our stockholders the opportunity to vote (on an advisory basis) on named executive officer compensation
on this schedule. However, as discussed below in Proposal No. 3, our board is recommending an annual advisory say-on-pay vote.
The
objective of our compensation policies is to provide compensation and incentives which align employee actions and motivations with the interests of our stockholders, attract,
motivate and reward outstanding talent across our company through well-communicated programs that are aligned with our core values and business mission, and support a positive company culture. In
2016, the compensation program for our named executive officers consisted principally of base salary, cash bonus and long-term equity incentive compensation in the form of stock options and RSUs.
While we offer reasonably competitive base salaries and cash bonuses, our compensation program is weighted toward long-term equity incentive compensation as opposed to short-term or cash-based
compensation as we believe this better aligns our executives with our fellow stockholders' interests and the creation of long-term stockholder value. If we achieve our corporate goals over the long
term, we expect our stock price to reflect our performance and the equity awards currently held by our named executive officers to become an even more significant component of overall compensation.
Our compensation and HR committee believes that this approach to executive compensation links compensation directly to continuous improvements in corporate performance and, ultimately our stock price,
or "pay for performance."
Vote Required
Because this proposal seeks a non-binding, advisory vote, there is no "required vote" that would constitute approval. However, our board,
including our compensation and HR committee, values the opinions of our stockholders and, to the extent there are a substantial number of votes cast against the executive officer compensation as
disclosed in this proxy statement, we will consider our stockholders' concerns and evaluate which actions may be appropriate to address those concerns. Broker nominees do not have discretion to vote
on this proposal without your instruction; if you do not instruct your nominee how to vote on this proposal, your nominee will deliver a non-vote. Any shares that are not voted, whether by abstention,
broker non-votes or otherwise, will not affect the outcome of this proposal.
50
Table of Contents
PROPOSAL NO. 3ADVISORY VOTE ON FREQUENCY
OF SAY-ON-PAY VOTE
Our board recommends that you vote
for a say-on-pay vote once every year.
Background
As previously mentioned in Proposal No. 2, we are providing our stockholders with a separate advisory (non-binding) vote for the purpose
of expressing their preference for the frequency of future say-on-pay votes. Stockholders may indicate whether they would prefer an advisory vote on executive compensation once every one, two or
three-years. We are required, under Section 14A of the Exchange Act, to solicit stockholder votes on the frequency of future say-on-pay proposals at least once every six years, although we may
seek stockholder input more frequently.
Our
board recommends an annual advisory say-on-pay vote, primarily because it will allow our stockholders to provide us with regular, timely and direct input on our executive
compensation
philosophy, policies and practices as disclosed in the proxy statement each year in order to further align our compensation programs with our stockholders' interests, and so that timely stockholder
feedback may be taken into consideration as part of the compensation review process. In making a recommendation for an annual advisory say-on-pay vote, our board considered how an advisory vote at
this frequency might over-emphasize short-term variations in compensation and business results, particularly in our industry, where a long-term focus for our executive compensation program is required
because it can take over a decade to bring a drug to the market. Overall, however, our board has determined that the advantages of receiving regular, timely and direct input from our stockholders on
our executive compensation philosophy, policies and practices outweigh this concern at this time.
For
many years, our senior management has consulted with our major stockholders with respect to our compensation program and philosophy. We plan to continue to engage major stockholders
on the topic of compensation, and believe that the data we obtain during this dialogue will be a substantial consideration for our compensation and HR committee during its ongoing review of our
compensation program.
Vote Required
The advisory proposal on the frequency of say-on-pay votes provides a choice among three frequency periods for future advisory say-on-pay votes.
The frequency period that receives the most votes (every one, two or three-years) will be deemed to be the recommendation of the stockholders. However, because this vote is advisory and not binding,
our board may decide that it is in the best interests of our stockholders and Ironwood to hold an advisory vote on executive compensation more or less frequently than the option selected by a
plurality of our stockholders. Broker nominees do not have discretion to vote on this proposal without your instruction; if you do not instruct your nominee how to vote on this proposal, your nominee
will deliver a non-vote. Any shares that are not voted, whether by abstentions, broker non-votes or otherwise, will not affect the outcome of this proposal, except to the extent that the failure to
vote for a particular frequency period may result in another frequency period receiving a larger proportion of the votes cast.
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PROPOSAL NO. 4RATIFICATION OF OUR SELECTION OF AUDITORS
Our board recommends that you ratify the selection of
Ernst & Young LLP as our auditors for fiscal year 2017.
Our
audit committee has appointed Ernst & Young LLP to serve as our auditors for the fiscal year ending December 31, 2017. The firm of Ernst &
Young LLP, an independent registered public accounting firm, has audited the books and accounts of Ironwood since 1998 and has audited our financial statements for the years ended
December 31, 2016, 2015 and 2014. Detailed disclosure of the audit, audit-related and tax fees we paid to Ernst & Young LLP in 2016 and 2015 are set forth below. Based on these
disclosures and information in the audit committee report beginning on page 16 of this proxy statement, our audit committee is satisfied that our auditors are sufficiently independent of
management to perform their duties properly. Although not legally required to do so, our board considers it desirable to seek, and recommends, stockholder ratification of its selection of auditors for
fiscal year 2017.
Representatives
of Ernst & Young LLP are expected to attend the annual meeting to answer any questions and they will have the opportunity to make a statement if they wish.
The
table below presents aggregate fees for professional audit services rendered by Ernst & Young LLP for the years ended December 31, 2016 and 2015 for the audits
of our annual financial statements, and fees billed for other services rendered by Ernst & Young LLP during those periods. It is the audit committee's policy that all audit and non-audit
services to be performed by Ernst & Young LLP be pre-approved. The audit committee annually reviews and pre-approves the permissible services that may be provided by Ernst &
Young LLP to assure the provision of such services does not impair the auditor's independence. In accordance with the pre-approval policy, our management informs the audit committee of each
service performed by Ernst & Young LLP pursuant to the pre-approval policy. Requests to provide services that require separate approval by the audit committee are submitted to the audit
committee or its designee by both our chief financial officer or chief accounting officer and Ernst & Young LLP. All of the services described in the following fee table were approved in
conformity with the audit committee's pre-approval policy.
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2016
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2015
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|
Audit
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$
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1,456,362
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$
|
886,500
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|
Audit-related
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$
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$
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100,000
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Tax
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$
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3,412
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$
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5,000
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All other
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$
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$
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|
|
|
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|
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|
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$
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1,459,774
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|
$
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991,500
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|
|
|
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Audit
fees for 2016 and 2015 were for professional services rendered for the audits of our financial statements, including accounting consultation, and reviews of quarterly financial
statements, as well as for services that are normally provided in connection with regulatory filings or engagements, including comfort letters.
Audit-related
fees were for accounting consultations associated with our June 2015 offering of the 2.25% Convertible Senior Notes due 2022. All audit-related fees were approved by the
audit committee.
Tax
fees for 2016 and 2015 were for professional services, including the preparation of our federal and state tax returns and tax advice.
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Table of Contents
Other
than the foregoing, Ernst & Young LLP did not provide any other services to us in 2016 or 2015.
Vote Required
The approval of the proposal to ratify the selection of Ernst & Young LLP as our auditors requires a majority of the votes cast
for or against the proposal. Because we believe this matter to be routine, a broker nominee may vote on your behalf if you do not otherwise provide instructions. As a result, we do not expect there
will be any broker non-votes on this matter. Abstentions will not affect the outcome of this proposal.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors, executive officers and beneficial owners of more than 10% of our Class A common stock and Class B common stock,
combined, are required under Section 16(a) of the Exchange Act to file reports of ownership and changes in ownership of our securities with the SEC.
Our staff assists our directors and executive officers in preparing ownership reports and reporting ownership changes, and typically files these reports on their behalf. Based on a review of the
copies of reports filed by us or by our 10% stockholders and representations that no other reports were required, we believe that during 2016, our directors, executive officers and 10% stockholders
complied with all Section 16(a) filing requirements.
STOCKHOLDER COMMUNICATIONS, PROPOSALS AND NOMINATIONS FOR DIRECTORSHIPS
Communications
A stockholder may send general communications to our board, any committee of our board or any individual director by directing such
communication to Chief Legal Officer, Ironwood Pharmaceuticals, Inc., 301 Binney Street, Cambridge, Massachusetts 02142. All communications will be reviewed by our chief legal officer and, if
requested by the stockholder, forwarded to our board or an individual director, as applicable. Our chief legal officer reserves the right not to forward to our board or any individual director any
abusive, threatening or otherwise inappropriate materials.
Any
request for materials or other communications directed to our Secretary should be sent to: Secretary, Ironwood Pharmaceuticals, Inc., 301 Binney Street, Cambridge,
Massachusetts 02142.
Proposals and Nominations
Stockholders who wish to present a proposal for inclusion in our proxy materials for our 2018 annual meeting should follow the procedures
prescribed in Rule 14a-8 under the Exchange Act and our bylaws. Those procedures require that we receive a stockholder proposal in writing no later than December 19, 2017 in order for
such proposal to be included in our proxy materials.
Under
our bylaws, stockholders who wish to nominate a director or include a proposal in our 2018 annual meeting of stockholders (but do not wish to include such proposal in our proxy
materials) must
give us timely notice. To be timely, a notice of director nomination or other proposal for the 2018 annual meeting of stockholders must be received by us no earlier than March 2, 2018 and no
later than April 1, 2018, unless the date of the 2018 annual meeting of stockholders is more than 30 days from the anniversary date of the 2017 annual meeting of stockholders, in which
event the notice must be received by us on or before 15 days after the day on which the date of the 2018 annual meeting of stockholders is first disclosed in a public announcement. The notice
must contain specified information that is prescribed in our bylaws about you and the director nominee or the proposal, as applicable. If any director nomination or stockholder proposal is submitted
after April 1, 2018, our bylaws provide that the nomination or the proposal shall be disregarded.
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Table of Contents
SEC FILINGS
We file annual, quarterly and current reports, as well as other information with the SEC. You can obtain any of them from the SEC at its website
at
www.sec.gov
or at its Public Reference Room at 100 F Street, N.E., Washington, DC 20549. The documents are also available from us without
charge by requesting them in writing or by telephone from Ironwood Pharmaceuticals, Inc., 301 Binney Street, Cambridge, Massachusetts 02142, Attention: Corporate Communications, telephone:
(617) 621-7722.
54
IRONWOOD PHARMACEUTICALS, INC. 301 BINNEY STREET CAMBRIDGE, MA 02142 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E22596-P90680 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY IRONWOOD PHARMACEUTICALS, INC. The Board of Directors recommends you vote FOR the following: For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark For All Except and write the number(s) of the nominee(s) on the line below. 1.Election of Directors Nominees: 01) Andrew Dreyfus 02) Peter M. Hecht 03) Julie H. McHugh !!! The Board of Directors recommends you vote FOR the following proposal: For Against Abstain 2.Approval, by non-binding advisory vote, of the compensation paid to the named executive officers. !!! The Board of Directors recommends you vote 1 year on the following proposal: 1 Year 2 Years 3 Years Abstain 3.To recommend, by non-binding advisory vote, the frequency of future advisory votes on the compensation paid to the named executive officers. !!!! The Board of Directors recommends you vote FOR the following proposal: For Against Abstain 4.Ratification of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for 2017.!!! NOTE: In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof. For address changes and/or comments, please check this box! and write them on the back where indicated. Please indicate if you plan to attend this meeting.!! YesNo Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX]DateSignature (Joint Owners)Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice, Proxy Statement and Form 10-K are available at www.proxyvote.com. E22597-P90680 IRONWOOD PHARMACEUTICALS, INC. Annual Meeting of Stockholders May 31, 2017 9:00 AM Eastern Time This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) Peter M. Hecht and Thomas Graney, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of IRONWOOD PHARMACEUTICALS, INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 AM, Eastern Time on May 31, 2017 at Ironwood Pharmaceuticals, Inc., 301 Binney Street, Cambridge, MA 02142, and any adjournment or postponement thereof. The stockholder(s) hereby revoke(s) any proxy previously given and acknowledge(s) receipt of the notice and proxy statement for the Annual Meeting of Stockholders. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the recommendations of the Board of Directors. Address Changes/Comments: (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side
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