|
|
|
|
|
|
|
|
|
Shares Beneficially Owned(1)
|
|
Name of Beneficial Owner
|
|
Amount and Nature
of Ownership
|
|
Percent of
Class
|
|
Denny Marie Post(2)
|
|
|
61,421
|
|
*
|
|
Guy J. Constant(3)
|
|
|
13,249
|
|
*
|
|
Carin L. Stutz(4)
|
|
|
12,102
|
|
*
|
|
Jonathan A. Muhtar(5)
|
|
|
18,991
|
|
*
|
|
Michael L. Kaplan(6)
|
|
|
11,837
|
|
*
|
|
Cambria W. Dunaway(7)
|
|
|
10,006
|
|
*
|
|
Kalen F. Holmes(8)
|
|
|
6,156
|
|
*
|
|
Richard J. Howell(9)
|
|
|
17,352
|
|
*
|
|
Glenn B. Kaufman(10)
|
|
|
21,440
|
|
*
|
|
Aylwin B. Lewis
|
|
|
—
|
|
*
|
|
Steven K. Lumpkin(11)
|
|
|
6,156
|
|
*
|
|
Pattye L. Moore(12)
|
|
|
24,848
|
|
*
|
|
Stuart I. Oran(13)
|
|
|
11,123
|
|
*
|
|
Directors and executive officers as a group (13 persons)(14)
|
|
|
214,681
|
|
1.64%
|
-
*
-
Represents
beneficial ownership of less than one percent (1.0%) of the outstanding shares of our common stock.
-
(1)
-
If
a stockholder holds options, restricted stock units, or other securities that are currently vested or exercisable or that vest or become exercisable within
60 days of March 16, 2018, in accordance with the rules of the SEC, we treat the common stock underlying those securities as owned by that stockholder and as outstanding shares when we
calculate the stockholder's percentage ownership of our common stock, and we do not consider that common stock to be outstanding when we calculate the percentage ownership of any other stockholder.
-
(2)
-
Consists
of 6,661 shares of common stock held directly by Ms. Post and 54,760 shares of common stock subject to options that are currently exercisable or
exercisable within 60 days of March 16, 2018.
-
(3)
-
Consists
of 8,076 shares of common stock held directly by Mr. Constant and 5,173 shares of common stock subject to options that are currently exercisable or
exercisable within 60 days of March 16, 2018.
-
(4)
-
Consists
of 1,342 shares of common stock held directly by Ms. Stutz, 4,830 shares held indirectly by Ms. Stutz in a trust of which Ms. Stutz is
a trustee and 5,930 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 16, 2018.
-
(5)
-
Consists
of 2,697 shares of common stock held directly by Mr. Muhtar and 16,294 shares of common stock subject to options that are currently exercisable or
exercisable within 60 days of March 16, 2018.
-
(6)
-
Consists
of 1,526 shares of common stock held directly by Mr. Kaplan and 10,311 shares of common stock subject to options that are currently exercisable or
exercisable within 60 days of March 16, 2018.
23
Table of Contents
-
(7)
-
Consists
of 5,006 shares of common stock held directly by Ms. Dunaway and 5,000 shares of common stock subject to options that are currently exercisable or
exercisable within 60 days of March 16, 2018.
-
(8)
-
Consists
of 1,781 shares of common stock held directly by Ms. Holmes and 4,375 shares of common stock subject to options that are currently exercisable or
exercisable within 60 days of March 16, 2018.
-
(9)
-
Consists
of 17,352 shares of common stock held directly by Mr. Howell.
-
(10)
-
Consists
of 21,440 shares of common stock held directly by Mr. Kaufman.
-
(11)
-
Consists
of 1,781 shares of common stock held directly by Mr. Lumpkin and 4,375 shares of common stock subject to options that are currently exercisable or
exercisable within 60 days of March 16, 2018.
-
(12)
-
Consists
of 24,848 shares of common stock held indirectly by an entity owned and managed by Ms. Moore and her husband.
-
(13)
-
Consists
of 4,123 shares of common stock held directly by Mr. Oran, 2,000 shares of common stock held indirectly by Mr. Oran in two trusts of which
Mr. Oran is co-trustee, and 5,000 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 16, 2018.
-
(14)
-
Includes
111,218 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 16, 2018.
Equity Compensation Plan Information
We maintain three equity-based compensation plans—the Second Amended and Restated 2007 Performance Incentive Plan (the "2007
Plan"), the 2017 Performance Incentive Plan (the "2017 Plan") and the Amended and Restated Employee Stock Purchase Plan (the "ESPP"). Our stockholders have approved each of these plans.
The
following table sets forth our equity compensation plans in the aggregate, the number of shares of our common stock subject to outstanding options and rights under these plans, the
weighted
24
Table of Contents
average
exercise price of outstanding options, and the number of shares remaining available for future award grants under these plans as of December 31, 2017:
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
(a)
|
|
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
|
|
Number of securities
remaining available
for issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
|
|
|
|
|
2007 Plan
|
|
468,657
|
|
$54.60
|
|
-
|
|
2017 Plan (1)
|
|
3,591
|
|
–
|
|
663,688
|
|
Equity compensation plans not approved by security holders
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Total
|
|
472,248
|
|
$54.60
|
|
663,688(2)
|
(1) Shares
reported in column (a) under the 2017 plan include shares underlying performance share units (PSUs) awarded to our chief executive office and chief
financial officer in 2017. The PSU awards cliff-vest at the end of a three-year performance cycle, generally subject to executive's continued employment through the applicable vesting date, with the
number of PSUs determined based on achievement of performance goals as approved by the compensation committee. Column (b) does not take such shares into account.
(2) Of
the aggregate number of shares that remained available for future issuance as of December 31, 2017, 92,393 shares were available for issuance under the ESPP
and 571,295 shares were available for issuance under the 2017 Plan. No new awards will be granted under the 2007 Plan.
25
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
In this Compensation Discussion and Analysis, we provide an analysis and explanation of our executive compensation program and the compensation
derived from this program by our executive officers, including our "named executive officers." For 2017, our named executive officers were:
-
•
-
Denny Marie Post, President and Chief Executive Officer
-
•
-
Guy J. Constant, Executive Vice President and Chief Financial Officer
-
•
-
Jonathan A. Muhtar, Executive Vice President and Chief Concept Officer(1)
-
•
-
Carin L. Stutz, Executive Vice President and
Chief Operating Officer
-
•
-
Michael L. Kaplan, Senior Vice President and Chief Legal Officer
-
(1)
-
Mr. Muhtar served as Senior Vice President and Chief Marketing Officer of the Company during 2017. He was promoted to
Executive Vice President and Chief Concept Officer of the Company, effective January 1, 2018.
Overview
Red Robin Gourmet Burgers, Inc., together with its subsidiaries, primarily develops, operates, and franchises full-service restaurants
in North America and focuses on serving an imaginative selection of high quality gourmet burgers in a fun environment welcoming to guests of all ages. Red Robin's goal is to differentiate itself from
typical casual dining establishments based on quality, service, and value. To differentiate on quality, we offer a large and varied selection of highly craveable and customizable burgers. To
differentiate on service, our goal is to be highly attentive to
guests of all ages, serving food and beverages quickly so they can spend more time enjoying their food and less time waiting. We also strive to deliver tremendous value by providing delicious food at
a range of price points, accompanied with our bottomless steak fries and other sides with every meal. Red Robin guests give us credit for these key points of differentiation and we seek to build on
them every day by living our B.U.R.G.E.R. values: Bottomless Fun, Unwavering Integrity, Relentless Focus on Improvement, Genuine Spirit of Service, Extraordinary People, and Recognized Burger
Authority.
To
ensure the continued success of Red Robin in a rapidly evolving marketplace, we focus on five strategic areas:
-
•
-
Building Team Member engagement.
We emphasize and support
Team Member engagement, retention, and culture that will foster the development of great leaders. Our goal is to enhance clarity with our Team Members by consistently communicating our strategy and
ensuring we remain narrowly focused on our strategic initiatives. We continually strive to develop extraordinary people and encourage Team Member performance through appreciation, recognition, and
respect. In an effort to continue to develop leadership strength, we are focused on expanding our School of Leadership, executing dynamic succession planning, and innovative recruiting and talent
development.
-
•
-
Regaining operational edge.
Our strategy in regaining
operational edge includes delivering consistently great burgers, accurately customized, and served quickly by our caring Team Members whether the guest chooses to dine in the restaurant or off
premise. Our goal is to deliver exceptional service to our guests through promoting a "Better for Being Here" environment and we continually strive to enhance our guest's experience with a focus on
guests of all ages and their occasions. We respect our guests' need for the "gift of time" and remain committed to improving both speed of service and order accuracy.
-
•
-
Becoming our guests' go-to for great burgers.
We continue to
focus on being our guests' go-to for great burgers by offering craveable burgers and "bottomless" side options at
26
Table of Contents
attractive
prices wherever and however our guests want. We actively seek to enhance value through a balance of quality, quantity, price, and experience. This includes providing high quality core menu
items, as well as delivering value through new products at everyday value prices and abundance through bottomless sides and beverages. We are enhancing loyalty offerings via our Red Robin
Royalty™ program to drive Guest traffic. Additionally, we are focused on driving guest preference by offering our products through alternate modes of access. As part of this strategy, we
offer online ordering for carry-out, delivery access in limited locations via multiple third-party services, and catering. We are also currently testing self-delivery for potential deployment in
future years.
-
•
-
Rapidly reinventing Red Robin.
Facing rapidly increasing
labor costs and changing guest needs, we are also working to transform our existing assets as needed with new service models and to craft entirely new Red Robin prototypes which will enable future
unit growth. We are dedicating resources to defining the "Red Robin of the Future."
-
•
-
Delivering great stockholder value.
We are committed to
delivering stockholder value by improving profitability and investing capital wisely. Our goal is to optimize our capital structure, pace development activities, and improve our EBITDA margin through
revenue growth and targeted cost savings.
We
believe these strategic initiatives will provide the foundations for scalable and sustainable long-term growth, profitability, and increased stockholder value.
Our
executive compensation program supports this focus through several key objectives:
-
•
-
Attracting, retaining, and motivating
the best possible executive talent who have the
experience and leadership skills capable of driving performance and top-line growth in sales;
-
•
-
Creating value for our stockholders
by linking executive compensation to the achievement of
measurable corporate objectives and the minimization of unreasonable or excessive risk-taking; and
-
•
-
Paying for superior results
through a program that incentivizes and rewards achievement of both
short-term and long-term organizational and functional objectives with a mix of compensation elements that place a significant portion of cash and equity compensation at risk.
27
Table of Contents
2017 EXECUTIVE SUMMARY
Following is an executive summary of our 2017 executive compensation program:
Compensation Philosophy
-
✓
-
Our executive compensation program is designed to pay for performance and
link incentives to current and long-term sustained achievement of Company strategic goals. It encourages our executive officers to think and act like owners, because they are owners and as such are
compensated in significant part based on the performance of the Company.
Pay Elements
-
✓
-
Our 2017 executive compensation program was comprised of three primary
elements: base salaries, annual performance-based cash bonus incentive, and long-term incentives that include performance share units (PSUs) or cash awards (depending on position) based on three-year
performance cycles and equity awards (stock options and restricted stock units). Financial metrics used for the annual performance-based cash bonus incentive and long-term cash and PSU incentive
grants are linked to the Company's strategic business plans.
-
✓
-
Approximately 80% of our CEO's and 68% of our named executive officers'
target total compensation is made up of either annual cash incentives or long-term incentives.
-
✓
-
In 2017, our chief executive officer and chief financial officer compensation
shifted to increase the portion of compensation paid in equity and based on performance. These executives received equity grants in the form of PSUs, instead of cash for that portion of the long-term
incentive program. This change will be effective for all executive officers beginning in 2018.
Setting Compensation
-
✓
-
Executive compensation decisions are made by our independent compensation
committee, which is currently comprised solely of independent directors.
-
✓
-
When making compensation decisions, our compensation committee receives input
from its independent compensation consultant and receives recommendations from our CEO for her direct reports. Our compensation committee also reviews benchmarking data of the compensation paid by a
peer group of restaurant companies selected by the compensation committee.
Company Performance in 2017
-
✓
-
Our 2017 performance improved year-over-year with total revenues of
$1.4 billion in 2017, an increase of 6.5% over 2016, and we achieved some of our expectations and performance goals, including pre-set company EBITDA goals for 2017 for both our annual bonus
and long-term incentive programs. We achieved these results while making considerable progress on the critical changes we believe will make Red Robin successful in 2018 and beyond.
-
✓
-
Net income increased to $30.0 million in 2017 from
$11.7 million in 2016.
-
✓
-
Comparable restaurant revenue increased 0.6% (using constant currency rates).
28
Table of Contents
-
✓
-
Comparable restaurant guest counts increased 0.4%.
-
✓
-
GAAP earnings per diluted share increased to $2.31 in 2017 from $0.87 in
2016.
-
✓
-
In our fiscal fourth quarter 2017, we outperformed the casual dining industry
on Guest traffic for the sixth consecutive quarter and ended 2017 with positive same store sales. We outperformed the casual dining industry in Guest traffic for the 2017 fiscal year by approximately
310 basis points, making it the sixth consecutive year of outperformance as reported by Black Box Intelligence, a financial benchmarking report for the restaurant industry.
2017 Compensation Highlights
-
✓
-
The compensation committee did not make significant structural changes to our
executive compensation program for 2017. We believe this is consistent with the wishes of our stockholders, who have expressed overwhelming support (greater than 98% of votes cast) for our executive
compensation program at each of our last three annual "say-on-pay" advisory votes.
-
✓
-
Based on our total compensation philosophy and peer compensation levels as
well as successful individual performance, the compensation committee chose to increase salary levels for certain named executive officers in 2017.
-
o
-
Ms. Post's salary increased from $700,000 to $750,000.
-
o
-
Ms. Stutz's salary increased from $400,000 to $475,000.
-
o
-
Mr. Muhtar's salary increased from $375,000 to $385,000.
-
o
-
Mr. Kaplan's salary increased from $345,000 to $355,000.
-
✓
-
The structure and primary metric of our annual performance-based cash bonus
incentive program remained the same in 2017.
-
o
-
Based on the achievement of pre-set company EBITDA goals for 2017, our named executive
officers received a payout of their annual performance-based cash incentive at 72.64% of target (compared to no payout received in 2016).
-
✓
-
The structure of our long-term incentive program opportunities remained the
same in 2017 for executives other than the CEO and CFO, with 40% of long-term incentives delivered in the form of stock options, 20% delivered in the form of restricted stock units, and 40% delivered
in the form of long-term cash incentives. For our CEO and CFO, 40% of the long-term incentives were payable in PSUs instead of long-term cash incentives. Ms. Post received additional PSUs
pursuant to her employment agreement related to her promotion to CEO in 2016.
-
o
-
Certain of our executive officers' long-term incentive targets as a percent of salary
were increased based on updated market information and individual performance. Ms. Post's long-term incentive target was increased from 250% to approximately 275%. Ms. Stutz's long-term
incentive target was increased from 100% to 150%.
29
Table of Contents
-
o
-
Because we did not meet threshold performance measures for the three-year EBITDA and
ROIC targets for the 2015-2017 long-term incentive cash award, our named executive officers did not receive a payout for that award (compared to payout at 29.75% of target for long-term cash
incentives for the 2014-2016 performance period).
Governance Standards and Compensation Best Practices Currently in Effect
-
✓
-
Pay for performance focused executive compensation structure, with a
significant portion of executive pay "at-risk"
-
✓
-
Independent compensation committee setting executive compensation advised by
an independent compensation consultant
-
✓
-
Annual evaluation of potential risks of our executive compensation program
-
✓
-
No excise tax gross ups
-
✓
-
Double trigger required for equity vesting upon change in control (other than
certain performance awards)
-
✓
-
No repricing of underwater options without stockholder approval
-
✓
-
Meaningful stock ownership guidelines for executives and board members
-
✓
-
Formal policy prohibiting hedging and pledging of Company securities by
executive officers and directors
-
✓
-
Clawback policy for the return of certain executive incentive compensation in
the event of a financial restatement
-
✓
-
Limited number of perquisites offered to our executives
2017 Performance and Impact on Pay
Under Ms. Post's leadership, the Company continues to pursue improvement in performance designed to drive top-line growth in sales and
lay the foundation for scalable and sustainable long-term growth, profitability, and increased stockholder value. Our compensation objectives are designed to link incentives and rewards with current
and long-term sustained achievement of these goals.
Our
2017 performance improved year-over-year and we were able to achieve some of our expectations and performance goals. Based on this performance, our named executive officers met the
performance goals necessary to achieve partial payout of the annual cash incentive. The long-term incentive program that covered the last three fiscal years did not pay out because the long-term
performance goals were not met.
Executive Compensation Decision-making
The compensation committee determines target total direct compensation for named executive officers by establishing base salaries and setting
annual and long-term incentive compensation targets.
30
Table of Contents
When
appropriate, the committee also approves special awards and relatively modest perquisites. When determining target total direct compensation, the committee considers the
following:
-
•
-
Company performance and our pay for performance compensation program design.
-
•
-
Company strategy and alignment of incentives.
-
•
-
Benchmarking data for our restaurant peer group for target total direct compensation (base salaries, short-term incentives, and long-term
incentives), based on disclosure in peer proxies and other applicable survey data.
-
•
-
Individual performance and areas of responsibility relative to the market data.
-
•
-
Compensation relative to other executive officers in the Company.
-
•
-
Advice from the committee's independent compensation consultant.
-
•
-
The CEO's recommendations with respect to the compensation of the executives who report directly to her, including the other named executive
officers.
-
•
-
Whether our compensation program encourages unnecessary or excessive risk taking.
-
•
-
Results of the Company's
say-on-pay advisory votes in prior years.
-
•
-
Management succession planning and retention.
Pay for Performance Alignment
Our compensation program is designed to pay for performance and link incentives to current and long-term sustained achievement of Company
strategic goals. Accordingly, a significant portion of our named executive officers' compensation, excluding base salary, is incentive based, and is comprised of performance-based short-term and
long-term awards. Such compensation therefore varies in value and is at-risk of forfeiture or reduced payout if performance goals are not achieved for cash-based incentives, or loss of value if our
performance does not drive increases in our stock price. Financial measures such as EBITDA (earnings before interest, taxes, depreciation, and amortization) and ROIC (return on invested capital) used
for the annual bonus and cash incentive grants are linked to the Company's strategic business plans that are reviewed and approved by our board of directors. Minimum financial targets must be achieved
for any payouts of cash to be made under both the annual bonus and long-term incentive grants. Restricted stock units and stock options vest ratably over four years, the value of which is dependent,
in whole or in part, on an increase in the Company's stock price.
The
annual cash incentives and the long-term incentives place a large portion of the executive's pay at risk because such pay will fluctuate or vary in value based upon the level of
performance achieved by the Company. Because incentive awards are performance-based, they are at risk of forfeiture or reduced payout if performance goals are not achieved. Moreover, long-term equity
awards are at risk of forfeiture if the executive does not remain with the Company until the equity vests and are at risk of reduced realized value based upon Company stock price at the date of
exercise.
2017 Named Executive Officer At-Risk Compensation.
In 2017, "at-risk" or "variable" pay (subject to
forfeiture or partial or complete loss of value)
comprised 80% of total target compensation for CEO compensation and 68% of total target compensation for the other named executive officers as a group and included short-term and long-term incentives.
The charts below reflect the portion of our named executive officers' 2017 total target compensation that is considered at risk or variable.
31
Table of Contents
CEO
Other Named Executive Officers
Benchmarking
Restaurant Peer Group.
Restaurant peer group companies were selected and approved by the compensation committee upon the recommendation
of management and its compensation consultant, Aon Hewitt, and are based on their similarity to us with respect to several criteria, including revenue, size, and scope. Specifically, peers include
U.S. public companies within the restaurant industry that have similar revenue and market value. The peer group used for 2017 compensation benchmarking consists of the 20 restaurant companies
identified in the chart below. The Company ranked in the 54th percentile for its peer group in sales and 40th percentile in market value based on Aon Hewitt compensation analysis
conducted in 2017.
In
2017, the compensation committee evaluated and updated its peers to the "New Peer Group" identified in the chart below. Bob Evans Farms, Inc. was removed from the Company's
peer group because it is no longer a public reporting company. Ignite Restaurant Group, Inc. was also removed due to bankruptcy. Jack in the Box, Inc. was added based on similarities to
the Company's
32
Table of Contents
peer
group revenue and market capitalization criteria. No other changes were made to the Company's peer group in 2017. The New Peer Group will be used for setting 2018 compensation.
|
|
|
|
|
2017 Peer Group
|
|
New Peer Group
|
|
Bob Evans Farms, Inc.
|
|
Biglari Holdings, Inc.
|
|
Biglari Holdings, Inc.
|
|
BJ's Restaurants, Inc.
|
|
BJ's Restaurants, Inc.
|
|
Brinker International, Inc.
|
|
Brinker International, Inc.
|
|
Buffalo Wild Wings, Inc.
|
|
Buffalo Wild Wings, Inc.
|
|
Carrols Restaurant Group, Inc.
|
|
Carrols Restaurant Group, Inc.
|
|
The Cheesecake Factory, Inc.
|
|
The Cheesecake Factory, Inc.
|
|
Cracker Barrel Old Country Store, Inc.
|
|
Cracker Barrel Old Country Store, Inc.
|
|
Denny's Corporation
|
|
Denny's Corporation
|
|
DineEquity, Inc.
|
|
DineEquity, Inc.
|
|
Domino's Pizza, Inc.
|
|
Domino's Pizza, Inc.
|
|
Fiesta Restaurant Group, Inc.
|
|
Fiesta Restaurant Group, Inc.
|
|
Jack in the Box, Inc.
|
|
Ignite Restaurant Group, Inc.
|
|
Noodles & Company
|
|
Noodles & Company
|
|
Papa John's International, Inc.
|
|
Papa John's International, Inc.
|
|
Ruby Tuesday, Inc.
|
|
Ruby Tuesday, Inc.
|
|
Ruth's Hospitality Group, Inc.
|
|
Ruth's Hospitality Group, Inc.
|
|
Sonic Corp.
|
|
Sonic Corp.
|
|
Texas Roadhouse, Inc.
|
|
Texas Roadhouse, Inc.
|
|
The Wendy's Company
|
|
The Wendy's Company
|
|
|
2017 Compensation Setting.
The compensation committee uses competitive compensation data from the
annual total compensation study of peer and other
restaurant companies and other relevant survey sources to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the compensation committee
uses multiple reference points when establishing targeted compensation levels. The committee applies judgment and discretion in establishing targeted pay levels, considering not only competitive
market data, but also factors such as company, business unit, and individual performance, scope of responsibility, critical needs and skill sets, leadership potential, and succession planning.
Independent Compensation Consultant
In 2017, the compensation committee retained Aon Hewitt as its independent compensation consultant. The independent compensation consultant
assists with the compensation committee's annual review of our executive compensation program, cash and equity compensation practices, ongoing development of our executive compensation philosophy, and
acts as an advisor to the compensation committee on compensation matters as they arise. The compensation consultant also advises the compensation committee on compensation for the board of directors.
The compensation committee evaluated Aon Hewitt's independence as its compensation consultant by considering each of the independence factors adopted by Nasdaq and the SEC. Based on such evaluation,
the compensation committee believes that no conflict of interest exists that would prevent Aon Hewitt from independently representing the compensation committee. The compensation committee has
retained Meridian Compensation Partners, LLC as its new independent compensation consultant in 2018. The compensation committee determined Meridian's independence pursuant to the Nasdaq and SEC
requirements.
33
Table of Contents
Risk Mitigation
The compensation committee considers, in establishing and reviewing our executive compensation program, whether the program encourages
unnecessary or excessive risk taking. The factors considered by the committee include:
-
•
-
the general design philosophy of our compensation policies and practices for employees whose behavior would be most affected by the incentives
established by our compensation policies and practices, as such policies and practices relate to or affect risk taking by employees on our behalf, and the manner of their implementation;
-
•
-
our risk assessment and incentive considerations in structuring our compensation policies and practices or in awarding and paying compensation;
-
•
-
how our compensation policies and
practices relate to the realization of risks resulting from the actions of employees in both the short term
and the long term;
-
•
-
our policies regarding adjustments to our compensation programs and practices to address changes in our risk profile; and
-
•
-
material adjustments that we have made to our compensation policies and practices as a result of changes in our risk profile.
The
compensation committee believes that it has mitigated unnecessary risk taking in both the design of the compensation plans and the controls placed upon them
because:
-
•
-
payouts under our annual and long-term incentive compensation plans are capped;
-
•
-
the compensation committee has the ability to reduce
payouts under our annual incentive compensation plans in its discretion;
-
•
-
executives are subject to robust stock ownership guidelines;
-
•
-
executives are subject to anti-hedging policies with respect to our common stock;
-
•
-
the performance goals under our incentive programs relate
directly to the business plan approved by the board of directors; and
-
•
-
there is an appropriate balance between our annual operating achievements and longer-term value creation, with a particular emphasis on
longer-term value creation for our executives.
The
compensation committee completes this evaluation annually. Accordingly, based upon the foregoing, the Company believes that the risks arising from its compensation policies and
practices are not reasonably likely to have a material adverse effect on the Company.
Consideration of Prior Say-on-Pay Advisory Votes
At our 2017 annual meeting of stockholders, holders of approximately 98.5% of the votes cast on such proposal approved the advisory vote
("say-on-pay") on the 2016 compensation of our named executive officers, which was consistent with the level of support we received in 2016 and 2015, when 98.2% and 99.0% of stockholders voted for our
"say-on-pay" proposal.
We
believe the level of support we received from stockholders for the last three years was driven in part by our continued improvement in performance and our commitment to pay for
performance and link incentives to current and long-term sustained achievement of Company strategic goals. The compensation committee did not make significant structural changes to our executive
compensation program for 2017. The compensation committee considered the results of the advisory vote when setting executive compensation for 2017 and will continue to do so in future executive
compensation policies and decisions.
34
Table of Contents
Key Components of our Executive Compensation Program
Base Salary
Base salary provides a minimum level of remuneration to our named executive officers for their efforts. The compensation committee sets base
salaries for our executives to reflect the scope of each executive's responsibilities, experience, and performance. The compensation committee reviews base salaries annually and adjusts them from time
to time to account for relevant factors such as market changes, as documented by the compensation consultant. The compensation committee also considers the CEO's evaluation of each executive's
performance and reviews her salary recommendations for our executives.
Incentive-Based Compensation
For our incentive-based compensation, the compensation committee utilizes a mix of performance metrics and time and tenure. Each type of metric
serves a different purpose. The short-term (annual bonus) and the cash (and PSU) component of the long-term incentive awards are performance-based and require achievement of certain financial targets,
measured over either one or three years. If the financial metrics are not achieved at a minimum threshold level at the end of the performance period, no payment (or shares) is earned or made. The
equity portion of the grants vests ratably over four years. The time-based vesting of the restricted stock units, a comparatively lesser portion of the total long-term incentive awards, is used
primarily for retention purposes and to encourage stock ownership by executives, thereby aligning their interests with our stockholders. The stock options vest over time but require improved stock
price performance to realize value.
Annual Performance-Based Incentive (Cash Bonus).
Annual performance-based cash bonuses are
intended to reward achievement of short-term operating goals and financial performance that are incremental to long-term, sustained creation of stockholder value. Our annual bonuses are established
with reference to the annual portion of our multi-year strategic plan and, although measured in one-year increments, are designed to tie each year's results into a long-term target. As the Company's
business evolves and develops, the long-term targets may be revised with concurrent impact on each year's annual planning. The annual performance metrics are financial-based measures that the
compensation committee believes are aligned with our strategic goals described above. The compensation committee continually evaluates the measures against which we gauge our performance and may
incorporate additional or alternative metrics to incentivize executives to achieve appropriate performance targets and respond to industry changes or market forces.
Each
of our executives is eligible to receive an annual cash bonus based on achievement of certain performance objectives, based on annual EBITDA. The EBITDA measure was selected
because we believe it best captures our operating results without reflecting the impact of decisions related to our growth, non-operating factors, and other matters. The EBITDA goal is intended to be
a "stretch" goal, or challenging target, and is meant to encourage superior performance.
The
2017 Plan and the Cash Incentive Plan permit the compensation committee to adjust, in its discretion, EBITDA for non-cash, non-recurring, or unusual items. The compensation
committee approves the annual bonus program based on achievement of a predetermined range of minimum threshold, target, and maximum-level EBITDA and approves payout of the bonuses, if any, following
review of actual results. Bonuses are based on a percentage of the executive's salary and are set based on market and peer comparisons, and internal equity among other factors. The corresponding
dollar payout value varies up or down depending on the actual EBITDA performance level. Bonuses are not payable at all if the minimum threshold of EBITDA is not achieved. The compensation committee
sets the EBITDA ranges each year based on performance expectations and other factors. The compensation
35
Table of Contents
committee
may add or substitute performance measures in future years. The compensation committee may also use various factors to exercise negative discretion when evaluating performance for purposes
of awarding annual incentive compensation. Through fiscal year 2017, cash incentive awards were awarded and paid pursuant to the Cash Incentive Plan. Beginning in fiscal year 2018, the Company intends
to grant all cash incentive awards, including annual bonus awards, under the 2017 Plan.
In
addition, the compensation committee may approve special bonuses on an individual or group basis in recognition of extraordinary achievements, or to address other special situations.
No such awards were made in 2017.
Long-Term Performance-Based Incentives.
The compensation committee determines the long-term incentive grants for the
executive officers, including
the named executive officers, by referencing to peer group and market data and analysis from its compensation consultant and recommendations from the CEO. The compensation committee believes that a
mix of performance and time-based incentives provides an element of performance risk for executives and encourages equity ownership, thereby aligning the interests of executive officers with our
stockholders.
Long-term
incentive grants consist of equity awards, typically in the form of restricted stock units and stock options, and a long-term performance-based incentive component (the
"LTIP"), payable in cash for participants other than the CEO or CFO or in PSUs in the case of the CEO and CFO. They are designed to focus management on our strategy of driving consistent, sustainable
achievement of long-term goals, both incrementally and over long performance periods. The annual granting of multi-year performance compensation (including performance targets measured annually over a
three-year period) is designed to ensure that the execution of our evolving strategic plan considers appropriate risks and returns and allows for initiatives that span several fiscal years.
Currently,
except as described below, the long-term incentive awards for executives consist of an equity component comprised of 40% stock options and 20% restricted stock units (both of
which vest ratably over four years), and a 40% LTIP. 2017 was the first year our LTIP component was payable in shares as PSUs for the CEO and CFO. We use stock options to align the interests of our
executive officers with stockholders because value is realized only if the stock price appreciates (stock price performance) from the grant date. We use restricted stock units to help retain our
executives and further align their interests with our stockholders.
The
LTIP component is payable if annual EBITDA or ROIC targets are achieved each year within a three-year performance period. When the performance measure has been met and approved by
the compensation committee for a particular fiscal year during the three-year period of the award, that portion of units is determined or "banked," but is not considered "earned" or vested and will
not be delivered until the three-year period has concluded. The annual EBITDA and ROIC LTIP metrics are independent of each other. The compensation committee selected an earnings metric (EBITDA) and a
return on investment metric (ROIC) in the design of the LTIP to achieve a balance between earnings, growth, and return on investment and to effectively reward both. Both the EBITDA goal and the ROIC
goal are intended to be "stretch" goals, or challenging targets, and are meant to encourage superior performance.
The
transition to annual goals measured and assessed over a three-year period reflects the challenges of multi-year forecasting in the current volatile restaurant operating environment,
which continues to be impacted by changes in traditional consumer dining behavior, including a shift from traditional dine-in consumption to increased off-premise dining activity and the use of
technology-based food ordering systems. The 2007 Plan, 2017 Plan, and the Cash Incentive Plan permit the compensation committee to adjust, in its discretion, EBITDA or ROIC for non-cash,
non-recurring, or unusual items. While there is overlap with one of the metrics in our annual performance-based cash bonuses and LTIP
36
Table of Contents
awards
(EBITDA), the compensation committee believed this was appropriate because the annual performance-based cash bonus is focused on earnings in a particular year, whereas the individual annual
EBITDA targets within LTIP are focused on year-to-year progress over the three-year performance period. The compensation committee believes that the longer-term nature of the LTIP links performance to
our multi-year strategic plan and growth objectives while encouraging management's collaboration on strategic initiatives. In 2017, equity incentive awards were granted under the terms of the Second
Amended and Restated 2007 Performance Incentive Plan and the 2017 Performance Incentive Plan. In 2017, cash incentive awards payable under the LTIP were awarded pursuant to the terms of the Cash
Incentive Plan. As noted above, beginning in fiscal year 2018, the Company intends to grant all incentive awards, including LTIP awards, under the 2017 Plan.
Employee Benefits
We also provide certain other customary retirement and health and welfare benefits and other ancillary compensation to executives, which are in
line with those offered to other groups of our employees, and which comprise a modest portion of our named executive officer compensation.
Modest Perquisites
We offer a limited number of modest perquisites to our named executive officers, which include a car allowance, phone allowance and
in-restaurant meal discounts. In addition, where appropriate, we offer usual and customary relocation expense reimbursements including related tax reimbursements on relocation.
Summary of 2017 Compensation Activity
Base Salary
Named executive officer salaries for 2017, along with any corresponding increases from their 2016 salaries, are set forth below. The
compensation committee considers various factors when setting base salaries including peer compensation practices, the Company's performance, individual contributions, CEO recommendations for her
direct reports, and other relevant matters.
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
2016 Salary
|
|
2017 Salary
|
|
% Change
|
|
|
Denny Marie Post, President and Chief Executive Officer
|
|
$
|
700,000
|
|
$
|
750,000
|
|
|
7.14
|
%
|
|
Guy J. Constant, Executive Vice President and Chief Financial Officer
|
|
$
|
500,000
|
|
$
|
500,000
|
|
|
-
|
|
|
Carin L. Stutz, Executive Vice President and Chief Operating Officer
|
|
$
|
400,000
|
|
$
|
475,000
|
|
|
18.75
|
%
|
|
Jonathan A. Muhtar, Executive Vice President and Chief Concept Officer
|
|
$
|
375,000
|
|
$
|
385,000
|
|
|
2.67
|
%
|
|
Michael L. Kaplan, Senior Vice President and Chief Legal Officer
|
|
$
|
345,000
|
|
$
|
355,000
|
|
|
2.90
|
%
|
Each
of Ms. Post, Mr. Constant, Ms. Stutz, Mr. Muhtar, and Mr. Kaplan has an employment agreement with the Company, the terms of which are discussed
below under "Executive Employment Agreements."
Incentive-Based Compensation
2017 Annual Performance-Based Cash Incentives.
For 2017, annual performance-based cash bonuses were contingent upon
achievement of an annual Company
EBITDA target to focus our efforts on continuing to improve performance and maximizing stockholder returns. In fiscal year 2017, we continued to realize significant progress toward these goals,
reporting increased revenues and sustainable cost reductions. We view these achievements as progress toward establishing best in class operations, profitability, and brand value.
37
Table of Contents
Target
bonus opportunities under our annual performance-based cash incentive program are equal to a pre-established percentage of the employee's base salary. Actual bonuses are
determined by comparing the Company's fiscal year EBITDA to a target level of EBITDA for the year established by our compensation committee. Actual bonus amounts can range from 0% to 200% of the
executive's target bonus opportunity based on achievement of EBITDA ranging from 90% to 120% of the target level of EBITDA for the year. For 2017, the EBITDA target was $149.0 million, and we
achieved 94.5% of the EBITDA target based on our 2017 EBITDA of approximately $140.9 million which resulted in a payout of 72.6% of each named executive officer target bonus opportunity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Target and Preliminary Bonus %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Target Achieved
|
|
|
|
Bonus Payout as a
% of Target
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
90%
|
|
|
|
50%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
|
94.5%
|
|
|
|
72.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
³
120%
|
|
|
|
200%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
actual amounts of our 2017 annual performance-based cash incentives paid to our named executive officers in March 2018 for fiscal 2017 performance are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
2017
Annualized
Salary
|
|
Bonus at
Target (%
of Actual
Salary)
|
|
$ Bonus at
Target
|
|
2017
Actual
Bonus
|
|
|
D. Post
|
|
$
|
750,000
|
|
|
120
|
%
|
$
|
900,000
|
|
$
|
653,777
|
|
|
G. Constant
|
|
$
|
500,000
|
|
|
70
|
%
|
$
|
350,000
|
|
$
|
254,247
|
|
|
C. Stutz.
|
|
$
|
475,000
|
|
|
75
|
%
|
$
|
356,250
|
|
$
|
258,787
|
|
|
J. Muhtar
|
|
$
|
385,000
|
|
|
70
|
%
|
$
|
269,500
|
|
$
|
195,770
|
|
|
M. Kaplan
|
|
$
|
355,000
|
|
|
70
|
%
|
$
|
248,500
|
|
$
|
180,515
|
|
2017 Long-Term Incentive ("LTI") Program.
The 2017 LTI grants made to named and other executive officers followed the
same program mix implemented
in 2011 and used through 2016. For our executives, the program consists of an equity component comprised of 40% stock options and 20% restricted stock units (both of which vest ratably over four
years), and a 40% LTIP component (payable in cash or PSUs, depending on executive, as described further below) measured by annual company performance periods over three-years.
2017
Incentive Grants
. In February 2017, the Company made the following annual grants to our named executive officers in the form of LTIP awards, options,
and restricted stock units under the 2007 Plan and the Cash Incentive Plan. As described above, an executive's total target incentive is
38
Table of Contents
comprised
of 40% long-term performance-based cash or PSUs (depending on the executive), 40% stock options, and 20% restricted stock units.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Total Long-Term
Incentive
Target Value ($)
|
|
Long-Term
Incentive
PSUs
($)
|
|
Long-Term
Incentive
Cash
($)
|
|
Non-Qualified
Stock Options
($)
|
|
Time-Based
Restricted
Stock Units
($)
|
|
|
D. Post
|
|
|
2,205,000
|
|
|
1,050,000
|
|
|
-
|
|
|
770,000
|
|
|
385,000
|
|
|
G. Constant
|
|
|
1,000,000
|
|
|
400,000
|
|
|
-
|
|
|
400,000
|
|
|
200,000
|
|
|
C. Stutz
|
|
|
600,000
|
|
|
-
|
|
|
240,000
|
|
|
240,000
|
|
|
120,000
|
|
|
J. Muhtar
|
|
|
525,000
|
|
|
-
|
|
|
210,000
|
|
|
210,000
|
|
|
105,000
|
|
|
M. Kaplan
|
|
|
310,500
|
|
|
-
|
|
|
124,200
|
|
|
124,200
|
|
|
62,100
|
|
-
(1)
-
Ms. Post
received additional PSUs pursuant to her employment agreement related to her promotion to CEO in 2016.
The
estimated fair value of each option granted is calculated using the Black-Scholes multiple option-pricing model. The fair value of the restricted stock units is based on the grant
date market value of the common shares.
Long-Term
Cash Portion (for Executive Officers other than CEO and CFO)
. In 2017, for our executive officers other than our chief executive officer and chief
financial officer, the LTIP portion of the performance plan is focused on the achievement of important operational metrics over a three-year period. The awards consist of three distinct tranches
measured annually over a three-year performance cycle. Performance is measured annually based on a range of minimum threshold, target, and maximum level. In 2017, there are two independent metrics
used that provide an appropriate balance between capital efficiency and operational results. The first metric is EBITDA, which allows progress toward the EBITDA goal to be established and measured
annually over a three-year performance period. The second metric is ROIC, which recognizes that capital-related returns may take time to manifest. The goals are equally weighted, and the payouts will
depend upon the achievement level of each metric. When the performance measure has been met and approved by the compensation committee for a particular fiscal year during the three-year period of the
award, that portion of units is determined or "banked," but is not considered "earned" or vested and will not be delivered until the three-year period has concluded. The move towards annual measures
over the three-year performance period provides flexibility for the compensation committee in establishing appropriate goals during uncertain times as the industry continues to adapt to changing
consumer habits.
The
same LTI cash award metrics and methodology were implemented for years 2011 through 2017. In 2018, the compensation committee shifted the structure of the long-term incentive
component for the
remainder of our named and other executive officers to include more equity and less cash, similar to the approach adopted for our chief executive officer and chief financial officer. See
"—2018 Compensation Program" below.
Long-Term
Performance-Based Equity Portion (for CEO and CFO)
. In 2017, we shifted the 40% long-term incentive component for our chief executive officer and
chief financial officer compensation from cash to equity grants in the form of PSUs, with the other components otherwise remaining the same, as follows:
-
•
-
Ms. Post, our chief executive officer received a PSU grant representing 22,340 shares of the Company's common stock (at target), which
had a grant date fair value (at target) of $1,050,000. Ms. Post received additional PSUs pursuant to her employment agreement related to her promotion to CEO in 2016.
39
Table of Contents
-
•
-
Mr. Constant, our chief financial officer received a PSU grant representing 7,332 shares of the Company's common stock (at target),
which had a grant date fair value (at target) of $400,000.
The
PSU awards cliff-vest at the end of a three-year performance cycle, generally subject to executive's continued employment through the applicable vesting date, with the number of
PSUs determined based on achievement of threshold, target or maximum performance objectives approved by the compensation committee and that are consistent with the long-term cash program for executive
officers described below. In 2017 the metrics were EBITDA and ROIC. The CEO and CFO will earn no PSUs if threshold performance objectives are not met and will earn 200% of the target number of PSUs if
maximum performance objectives are achieved.
2015-2017
LTI Cash Incentives
. At the end of 2017, the Company completed a three-year performance cycle for the long-term cash incentive portion of the LTI
plan. The performance period covered fiscal 2015 through fiscal 2017. The 2015 LTI cash awards represented 40% of the executive's total 2015 LTI award. Based on EBITDA and ROIC performance, our
executive officers did not earn an LTI cash payout, as reflected in the tables below.
For
the 2015-2017 LTI cash incentive, our target (100%) level EBITDA objective was approximately $484.9 million. The range of EBITDA objectives to achieve a LTI cash payout based
on EBITDA was 90% of target EBITDA for the minimum threshold level, and 120% of target EBITDA for the maximum level (which corresponds to a 50% to 200% target payout range). Our EBITDA achievement for
2015-2017 was $415.9 million, which was 85.8% of the target EBITDA level, which was below minimum of the target EBITDA level, and therefore generated no corresponding payout.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Target and Preliminary Payout %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Target Achieved
|
|
|
|
Payout as a % of Target
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
|
85.8%
|
|
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
90%
|
|
|
|
50%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
³
120%
|
|
|
|
200%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our
target (100%) level ROIC objective for the 2015-2017 performance period was approximately 12.1%. The range of ROIC objectives to achieve a LTI cash payout based on ROIC was 87.7% of
target ROIC for the minimum threshold level, and 109.9% of target ROIC for the maximum level, with a corresponding multiple range that decreased or increased the payout of the executive's target LTI
cash incentive. Our ROIC achievement for 2015-2017 was 70.5%, which was below minimum of the target ROIC level, and therefore generated no corresponding payout.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROIC Target and Preliminary Payout %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROIC Target Achieved
|
|
|
|
Payout as a % of Target
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
|
70.5%
|
|
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
87.7%
|
|
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
³
109.9%
|
|
|
|
180%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
Table of Contents
Stock
Options
. The stock options that were granted in 2017 vest ratably over four years on each anniversary date of the grant, which is designed to align
incentives with longer-term achievement of objectives. The exercise price of the stock options was set at our closing share price on the date of grant. This means the stock options will have no value
unless our share price on the date the option is exercised is greater than the exercise price.
Restricted
Stock Units
. The restricted stock units granted in 2017 vest ratably over four years on each anniversary date of the grant.
2018 Compensation Program
Our 2018 compensation program has substantially the same key components as our 2017 program except for the shift to increase the portion of
compensation paid in equity and based on performance to all executive officers by making equity grants in the form of PSUs instead of cash for that portion of the long-term incentive program, as
described above.
Deductibility of Executive Compensation
The compensation committee considers the tax impacts of material elements of our executive compensation program. These factors alone do not
drive our compensation decisions, but rather they are considered along with other factors such as the cash and non-cash impact of the program, and whether the program is consistent with our
compensation objectives.
The
compensation committee has historically generally intended to structure our executive compensation in a manner designed to qualify for deductibility under Section 162(m) of
the Internal Revenue Code, provided additional requirements are satisfied. The exemption from Section 162(m)'s deduction limit for performance-based compensation has been repealed, effective
for taxable years beginning after December 31, 2017, such that compensation paid to our named executive officers in excess of $1 million will not be deductible unless it qualifies for
transition relief applicable to certain arrangements in place as of November 2, 2017.
Despite
the compensation committee's efforts in the past to structure our executive compensation in a manner designed to qualify for deductibility under Section 162(m), because
of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under
the legislation repealing Section 162(m)'s exemption from the deduction limit, no assurance can be given that compensation intended to satisfy the requirements for exemption from
Section 162(m) in fact will. Further, while we consider deductibility as one factor in determining executive compensation, in some cases we may decide that it is either not possible or
desirable to satisfy all of the conditions of Section 162(m) for deductibility and still meet our compensation needs. Accordingly, we may pay compensation that is not deductible under
Section 162(m) from time to time.
Executive Compensation Policies and Guidelines
Executive Employment Agreements
Each of Ms. Post, Mr. Constant, Mr. Muhtar, Ms. Stutz, and Mr. Kaplan has an employment agreement with the
Company, described below under "Executive Employment Agreements." The employment agreements have indefinite terms, terminating on discontinuance of employment in accordance with the terms of the
agreements. The agreements provide for severance payments upon certain terminations of employment (both before and after a change in control of the Company). The compensation committee believes that
the terms of these agreements are in line with market standards
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and
are an important means to allow management to continue to focus on running the business of the Company in the event of a pending or actual change in control event or other event potentially
affecting their employment. More detailed information concerning these severance payments appears below under the caption "Potential Payments upon Termination or Change in Control."
Executive Stock Ownership Guidelines
Stock ownership guidelines have been in effect for the Company's executive officers and directors since March 2009. (See "Corporate Governance
and Board Matters—Director Stock Ownership Guidelines" in this proxy statement for ownership guidelines for directors). The compensation committee believes that executive stock ownership
requirements increase alignment of executive interests with those of stockholders with respect to long-term ownership risk. The guidelines require executive officers to achieve and maintain during the
term of the executive's employment a dollar value of Company's securities based on a multiple of base salary. In 2017, the ownership guideline values were adjusted to five times base salary for our
CEO, three times base salary for executive vice presidents, and two times base salary for senior vice presidents. Pursuant to the guidelines, the value of the executive's holdings is based on the
cumulative cost basis of Company securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially,
including vested in-the-money options, are credited toward the guidelines. The executive officers have five years to achieve the guidelines from their effective date of employment or promotion date.
An executive officer
may receive additional time to achieve his or her minimum requirement if the officer's requirement is increased, calculated based on the additional incremental amount. The compensation committee
periodically reviews the guidelines and receives guidance and market data from its advisors.
The
following table sets forth the ownership guidelines and the holdings of the named executive officers as of March 16, 2018, valued at the acquisition dates pursuant to our
executive stock ownership guidelines:
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Ownership
Guideline
|
|
Current Dollar
Value of
Guideline
|
|
Cumulative
Cost Basis
|
|
|
D. Post
|
|
5x salary
|
|
$
|
3,750,000
|
|
$
|
2,086,959(1
|
)
|
|
G. Constant
|
|
3x salary
|
|
$
|
1,500,000
|
|
$
|
763,672(2
|
)
|
|
C. Stutz
|
|
3x salary
|
|
$
|
1,425,000
|
|
$
|
703,902(3
|
)
|
|
J. Muhtar
|
|
3x salary
|
|
$
|
1,155,000
|
|
$
|
534,554(4
|
)
|
|
M. Kaplan
|
|
2x salary
|
|
$
|
710,000
|
|
$
|
284,803(5
|
)
|
-
(1)
-
To
be achieved by August 2021.
-
(2)
-
To
be achieved by December 2021.
-
(3)
-
To
be achieved by May 2021.
-
(4)
-
To
be achieved by December 2020.
-
(5)
-
To
be achieved by October 2018.
Compensation Clawback Policy
In March 2012, the Company's board of directors adopted a compensation clawback policy for its executive officers that provides for the
recoupment by the Company of certain excess incentive compensation paid to the officers under certain circumstances. In the event of a restatement of the Company's previously issued financial
statements as a result of either (i) material non-compliance with financial reporting requirements under the securities law or (ii) intentional misconduct by an executive,
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the
Company may recover, to the extent permitted by law, certain incentive compensation received by the executive that was in excess of what would have been paid in the absence of the incorrect
financial statements. If additional clawback rules are approved by the SEC, the Company would be required to review and revise its clawback policy to comply with the new rules.
Pledging and Hedging Transactions in Company Securities
In 2014, the board adopted a formal policy prohibiting hedging and pledging of Company securities by executive officers and directors. The
policy is set forth in the Company's Insider Trading Policy. All directors and executive officers have confirmed that they are currently in compliance with the policy.