The following table sets forth certain information known to us with respect to beneficial ownership of our common stock as of March 31, 2021 by (1) each person known by us to be the beneficial owner of more than 5% of our common stock; (2) each member of the Board and each of our director nominees; (3) our Chief Executive Officer, our Chief Financial Officer and each of our other named executive officers in the Summary Compensation Table on page 66 in this proxy statement; and (4) all directors and executive officers as a group. The percentage of shares owned is based on 41,050,923 shares outstanding as of March 31, 2021.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) describes our 2020 executive officer compensation program, provides information about the goals and the key elements of the program and explains the reasons behind the Compensation Committee’s executive officer compensation decisions. For 2020, our “named executive officers” (“NEOs”) were the following (titles are as of December 31, 2020):
|
Name
|
Title
|
Age*
|
Executive Officer Since
|
|
|
Glenn D. Fogel
|
Director, President and Chief Executive Officer
Chief Executive Officer, Booking.com
|
59
|
2011
|
|
|
David I. Goulden
|
Executive Vice President and Chief Financial Officer
|
61
|
2018
|
|
|
Peter J. Millones
|
Executive Vice President, General Counsel and Corporate Secretary
|
51
|
2001
|
|
*
Ages as of March 31, 2021.
|
|
The CD&A discusses the compensation program applicable to our named executive officers (who were our only executive officers for purposes of Exchange Act Rule 3b-7 during 2020).
Executive Summary
Our Response to COVID-19
Management and Company performance in 2020 are defined by and evaluated against the unprecedented impact of the COVID-19 pandemic on the Company, the travel industry and the world as a whole. While the Company had a strong start to the year in January and the beginning of February, the COVID-19 pandemic began to negatively impact our business, starting first in Asia in the middle of the first quarter of 2020. By the end of March 2020, COVID-19 had spread globally and our reported room nights (which includes the effect of cancellations) for the full month declined by over 100% compared to March 2019. Faced with the rapid and almost complete cessation of travel in the early weeks of the pandemic, management took numerous important steps to stabilize the Company, protect employees, reduce costs and address the immediate impacts of the pandemic on the business, which included:
●
Shifting almost all of our employees to work from home, including by quickly implementing plans for customer service agents to receive equipment and training to enable them to work from home and address the enormous volume of calls related to reservation cancellations, travel restrictions and similar matters in an effective way to help our customers and partners deal with the immediate impacts of the pandemic;
●
Raising $4.1 billion in debt and negotiating amendments to our revolving credit facility to ensure sufficient liquidity in the event the Company had to face a prolonged period of little to no revenue and/or unprofitability;
●
Participating in certain government aid programs designed to maintain employment or delay employee dismissals longer than would have otherwise been likely;
●
Suspending general share repurchases;
●
Significantly reducing marketing expenditures worldwide;
●
Eliminating non-essential business travel and cancelling Company events and offsites; and
●
Implementing a general company-wide hiring freeze.
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Financial and Operating Performance
As shown in the following graphs, the Company was severely and negatively impacted in 2020 by the COVID-19 pandemic.
|
GROSS TRAVEL BOOKINGS
(BILLIONS)
|
|
|
|
|
ROOM NIGHTS
(MILLIONS)
|
|
|
|
|
REVENUE*
(BILLIONS)
|
|
|
|
|
ADJUSTED EBITDA**
(BILLIONS)
|
|
|
|
*
As a result of the revenue recognition accounting standard that began in 2018, total revenues reported in 2018, 2019 and 2020 are comparable to gross profit reported in previous years. For more information, see Note 2 to the Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2018.
**
See Appendix A to this proxy statement for a reconciliation of non-GAAP financial measures and the rationale for the use of non-GAAP financial measures.
As it became clear during 2020 that the pandemic was not a short-term issue and that the recovery of the travel business to 2019 levels would take years rather than quarters, management formulated a strategy to optimize the business for the reduced travel demand and to prepare the Company to emerge from the pandemic in a stronger position. Our optimization efforts included evaluating personnel needs in the near- to medium-term, particularly in areas that are highly dependent on business volumes, such as customer service. While necessary, this process led to the unfortunate outcome of needing to undertake restructuring activities at each of our brands, resulting in a 23% year-over-year reduction in our workforce as of December 31, 2020, including through attrition. Throughout this process, management consulted with works councils, unions and employee representatives, as applicable, and worked to provide termination benefits, including severance payments, job placement services and counseling services. While our restructuring actions were completed at all brands except Booking.com by mid-summer, because of the complex nature of employee reductions in certain jurisdictions, like the Netherlands, our restructuring actions at Booking.com were not completed until after year-end 2020. The pandemic greatly impacted our employees’ overall morale, as concerns about personal and family physical health were compounded by concerns for the travel industry’s future and one’s own financial health. However, management successfully guided the Company through these difficult decisions as shown by the results of our employee engagement surveys which demonstrate a committed and engaged workforce.
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Our efforts to emerge from the pandemic in a stronger position include, among other things, continued investments in the business, including our services, websites and apps, IT systems and cybersecurity, sustainability initiatives, collaboration and cooperation among our brands, and preparing new marketing plans to launch as appropriate. We continued to expand our payments platform at Booking.com with 22% of its 2020 gross bookings processed on its platform, which was up from over 15% in 2019. We continued to build towards our Connected Trip vision with Booking.com launching its flight product in the United States in the fourth quarter of 2020. We continued working to improve our offering in North America as we pursued our strategic priority to gain share in this important travel market. Although 2020 was a difficult year for the Company, the travel industry and the world, we are optimistic about the future and the Company’s long-term prospects for success, significantly because of management’s performance in response to the pandemic.
Stock Price
While our financial results were negatively impacted by the COVID-19 pandemic, during 2020, our stock price rebounded from the low price of $1,152 on March 23, 2020 to end the year with a closing price of $2,227 (an all-time high as of December 31, 2020), representing a 93% increase from the low point during the year and an 8% increase compared to the closing price of $2,054 on December 31, 2019. Further, our stock price increased 28% over the preceding three-year period from a closing price of $1,738 on December 31, 2017.
|
STOCK PRICE AS OF DECEMBER 31,
|
Stockholder Engagement
Through our stockholder engagement efforts and communications from our stockholders, we receive stockholder feedback on our compensation programs and practices and communicate that information to the Compensation Committee. During our fall 2020 stockholder outreach campaign, management engaged stockholders on several governance, sustainability, diversity, equity and inclusion and executive compensation topics, including soliciting input on the views of our stockholders on various compensation practices, the structure of our historical compensation program and potential modifications in light of the impact of the COVID-19 pandemic on our business. Stockholders generally expressed support for the following:
●
Customized 2020 compensation programs that balance the need to reward, motivate and retain executives with a recognition of the hardship faced by other stakeholders, including stockholders and employees as a result of the COVID-19 pandemic;
●
Flexibility in the metrics used in our compensation plans given how difficult forecasting has become, particularly in the travel industry;
●
The use of relative metrics such as relative TSR, especially to address the current unpredictability in our business; and
●
Detailed disclosure of the considerations and alternatives evaluated by the Compensation Committee in making 2020 compensation decisions to better understand the rationale for these decisions in light of the COVID-19 pandemic.
After engaging with approximately 20 of the Company’s largest stockholders (which represented approximately 37% of our total shares outstanding) as of September 30, 2020, management communicated the results of the engagement to the Compensation Committee as it was making its remaining 2020 executive compensation decisions in the fourth quarter of 2020 and first quarter of 2021.
2020 COVID-19 Pandemic Related Compensation Decisions
When the
long-term impact of the COVID-19 pandemic on the Company became apparent and it was clear that the Company’s typical
compensation plans would not serve to incentivize management performance, provide certain key
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elements
of compensation or serve as a useful retention tool, the Compensation Committee embarked on an extensive process to develop a
compensation program for our executive officers that would accomplish the objectives we aim to achieve with our compensation
programs. See the Philosophy and Objectives section below. The process and reasoning that
the Compensation Committee used to arrive at the 2020 compensation decisions for our NEOs is described in the Executive Summary - Stockholder Engagement, 2020 Executive Officer Compensation Program
and 2020 Named Executive Officer Performance sections. In
summary, this process resulted in 2020 compensation for our NEOs as follows:
●
Mr. Fogel voluntarily declined his salary beginning in March through the end of 2020 and Messrs. Goulden and Millones voluntarily reduced their salaries by 20% from June through the end of 2020;
●
Mr. Fogel received no bonus for 2020 and Messrs. Goulden and Millones received bonuses of 70% of their targets;
●
Mr.
Fogel was awarded $7 million of RSUs and Mr. Millones was awarded $2.25 million of RSUs to constitute Messrs. Fogel’s
and Millones’ long-term incentives for 2020 (which were both based on 50% of the grant date value of their respective 2019 PSU awards); and
●
In
recognition of Mr. Goulden’s critical and expanding role in the Company’s strategy and finance transformation and his
oversight of significant COVID-19-related efforts, Mr. Goulden was awarded a Strategic PSU (defined below) award with a
nominal value of $10 million primarily for retention purposes and a Strategic PSU award with a nominal value of $7 million to
constitute Mr. Goulden’s long-term incentive for 2020.
For a summary of certain compensation decisions taken in 2021 that may be useful for an understanding of the 2020 compensation decisions, see Certain 2021 Compensation Decisions - 2021 Equity Awards.
Philosophy and Objectives
For many years, the Compensation Committee has used the following guiding principles when setting executive compensation and establishing our executive compensation programs:
●
Performance-based: executive officers should be compensated primarily on performance.
●
Alignment with interests of stockholders: the programs should align the interests of executives with those of stockholders by incentivizing management through performance metrics that are likely to increase long-term stockholder value.
●
Retention: the programs should help us attract and retain key management talent.
●
Consistency: the programs should be consistent over time to enable executive officers to implement a long-term strategy and reward them if they achieve long-term results.
●
Business focused: the programs aim to compensate executive officers primarily for their management of the business and try to mitigate the impact of external factors, such as currency fluctuations.
●
Risk management: the programs should incentivize appropriate risk taking while deterring excessive or inappropriate risk taking.
Although the Company’s compensation programs were necessarily altered to address the extreme and unusual circumstances resulting from the COVID-19 pandemic, the Compensation Committee continued to look to these principles when determining executive compensation for 2020.
The Compensation Committee generally believes that our compensation program should provide an appropriate balance between short-term and long-term performance, with an emphasis on long-term performance. As a result, historically our senior executive compensation program has been designed to be weighted such that most of an executive’s potential compensation is delivered through our long-term equity incentive awards, which have been generally in the form of three-year performance share units (“PSUs”). The Compensation Committee believes that this approach focuses executives on long-term performance while encouraging responsible short-term decision-making to achieve sustainable revenue and earnings growth over time. However, as more fully explained below, due to our inability during 2020 to reasonably project future business performance (especially over a long-period such as three years) and thereby set appropriate financial performance goals for three-year PSUs, the Compensation Committee had to rethink the structure of our executive officer compensation programs for 2020.
Further, with the loss of value in the 2018 PSUs (as defined below) and the 2019 PSUs (as defined below) and the urgency of managing the Company through the pandemic, the Compensation Committee recognized that retention incentives were particularly important in 2020. This was especially true with respect to Mr. Goulden who joined the Company in 2018 and therefore had not yet experienced any PSU vesting.
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In addition, the Compensation Committee and management recognized and considered the extreme impacts of the pandemic on the Company’s stakeholders, including stockholders, employees, partners and customers. For example, although the Company’s stock price recovered and ended 2020 8% higher for the year, for much of 2020 the Company’s stock price was significantly below 2019 levels, which negatively impacted our stockholders. Further, the Company’s restructuring activities resulted in many lost jobs and other difficult circumstances for our employees. As a result, although the Compensation Committee recognized the strong performance of our executive officers, particularly in navigating the Company through the worst year for the travel industry in the jet-travel era, when making executive compensation decisions it had to balance that performance, market pay rates and retention incentives against the realities being experienced by many of our stakeholders.
Key Compensation Policies
The Compensation Committee continually reviews our executive officer compensation program and seeks the advice of Mercer, its independent compensation consultant, to ensure that it maintains compensation practices that are in the best interests of our stockholders. Although we changed certain aspects of our compensation programs as a result of the COVID-19 pandemic as described in this CD&A, our key compensation policies remained unchanged.
|
We do:
|
|
We do not:
|
|
Tie pay to performance.
|
|
|
Provide change in control severance tax gross-ups and do have a policy against future such arrangements.
|
|
|
Use “double triggers” in our severance agreements and equity awards.
|
|
|
Permit stock option repricing without stockholder approval.
|
|
|
Have significant stock ownership guidelines.
|
|
|
Provide significant executive-only perquisites.
|
|
|
Have a clawback policy.
|
|
|
Permit hedging or pledging of our stock by our directors and executive officers.
|
|
|
Conduct an annual risk assessment of our executive officer compensation program.
|
|
|
|
|
|
Cap the bonus pool from which senior executives’ individual cash bonuses are paid.
|
|
|
|
|
|
Conduct an annual stockholder engagement process.
|
|
|
|
|
|
Conduct formal executive succession planning.
|
|
|
|
Pay Elements
Under normal circumstances, we use different elements of our senior executive compensation program to serve different objectives and drive different behaviors, which thereby work together to achieve the objectives described above, as noted in the table below. While in general these principles continued to guide the Compensation Committee in its decision-making process in 2020, the Compensation Committee acted prudently to ensure the retention and appropriate compensation of the NEOs and therefore the 2020 pay elements were altered as described in 2020 Executive Officer Compensation Program.
|
Element
|
Purpose
|
Key Characteristics
|
|
Base Salary
|
Provide a level of economic security and stability so that executives can focus on meeting our objectives.
|
Determined by:
●
Information from the Compensation Peer Group described below;
●
Individual performance of the executive, including level of responsibility and breadth of knowledge; and
●
Internal review of the executive’s total compensation, both individually and relative to other senior executives.
|
|
Annual Cash Incentive Bonus Plan
|
Provide a meaningful annual cash bonus opportunity for meeting short-term objectives.
|
●
Bonus pool determined by Company financial performance.
●
Individual bonuses determined by a combination of Company financial performance and individual performance.
|
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|
Element
|
Purpose
|
Key Characteristics
|
|
Long-term Equity Incentives
|
Provide a significant compensation opportunity tied to long-term
financial performance and increases
in our stock price over a three-year period.
|
PSUs
●
Tied to our financial performance;
●
Number of shares ranges from zero to 2x the “target” grant, depending on our financial performance over the three-year period; and
●
Vest, subject to continued employment by us, on the three-year anniversary of the grant date.
RSUs
●
Generally used in connection with new hires or promotions to provide an additional retention incentive until the individual’s PSUs begin to vest.
|
Measuring Performance
At the beginning of 2020, prior to the global outbreak of COVID-19, we expected to measure NEO performance based on two financial metrics:
●
Compensation EBITDA is a non-GAAP financial measure based on our adjusted EBITDA, or adjusted earnings before interest, taxes, depreciation and amortization, as publicly reported in our earnings press releases (“Adjusted EBITDA”), further adjusted in various ways to ensure performance is measured on a basis consistent with how the performance targets were set and to reduce the risk that our compensation plan could incentivize inappropriate decision-making by management to achieve Compensation EBITDA targets.
●
Compensation Revenue is a non-GAAP financial measure that is the non-GAAP revenue included in the calculation of Compensation EBITDA.
For 2020, we had intended to use both of these metrics as the basis for our planned 2020 PSUs and 2020 senior management bonus plan. However, we ultimately did not grant the originally planned 2020 PSUs and the targets set for the 2020 senior management bonus plan prior to the COVID-19 outbreak became irrelevant shortly after they were set. In addition, the extreme impact of the COVID-19 pandemic on our business and the travel industry and the uncertainty of the speed and timing of any recovery from the pandemic made it impractical to set 2020 or long-term performance goals based on financial performance. As a result, these performance measures did not factor into the 2020 compensation of our named executive officers. Instead, 2020 performance of our named executive officers was evaluated by the Compensation Committee based on their individual performance managing the Company through the difficulties of 2020, which included an evaluation of financial performance in light of the COVID-19 pandemic, as well as the Company’s non-financial goals. These non-financial goals included, among other things, various cooperative goals among our brands, certain capital management goals and executive retention and succession planning objectives.
In addition, special PSU awards (the “Strategic PSUs”) were designed for Mr. Goulden due to the particularly critical role he plays in managing certain key initiatives of the Company and the need to successfully navigate through the pandemic while succeeding at these initiatives, as well as to provide important retention incentives for Mr. Goulden. The Compensation Committee established performance criteria for the Strategic PSUs based on achievement of the strategic goals. See below in section 2020 Executive Officer Compensation Program - Equity Incentives - Performance Share Units (PSUs) for a detailed explanation of the Strategic PSU vesting and stock price appreciation factor terms.
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2020 Executive Officer Compensation Program
Under normal circumstances, each year’s executive officer compensation program is established by March 4, when the year’s annual equity awards are typically granted. As part of establishing each annual program, the Compensation Committee reviews all compensation elements, including each executive officer’s base salary, annual cash incentive bonus plan opportunity and equity incentives, as well as payments that would be required under various severance and change in control scenarios. Given the unprecedented issues presented by the COVID-19 pandemic, the Compensation Committee made various 2020 compensation decisions throughout the year after having devoted significant time and effort deliberating the appropriate compensation decisions for the named executive officers. Management also conducted an outreach campaign with many of the Company’s largest stockholders in order to understand stockholder perspectives on executive compensation in this environment. Management gathered this input throughout the fall of 2020, shared this with the Compensation Committee and the Compensation Committee considered these perspectives when forming the compensation decisions for 2020. See Executive Summary - Stockholder Engagement for further details on what we heard from stockholders in 2020.
In making annual compensation decisions and recommendations, the Compensation Committee considers historical compensation, including the value of outstanding unvested equity awards, as well as information about market compensation from the Compensation Peer Group analysis described below and individual performance of the executive, including level of responsibility, potential for individual contribution and breadth of knowledge and expertise. Before giving final approval of the annual compensation of executive officers, the Compensation Committee and, with respect to our Chief Executive Officer, the Board, generally reviews a presentation of total compensation, a “tally sheet,” prepared by Mercer. The tally sheet summarizes each executive officer’s total “target” compensation for the applicable year and, using a year-end stock price, estimates the payments to be made to the executive officer under certain termination of employment and change in control scenarios. For 2020, as a result of the tally sheet analysis, the Compensation Committee did not make any adjustments to its recommendations. The relative importance of these factors varies depending on the individual executive, as well as the results of the annual review process and any promotion or other change in responsibility. The Compensation Committee ultimately exercises judgment and discretion when setting or recommending the compensation of our executive officers.
Due to the extreme impact of the COVID-19 pandemic on the Company’s business in 2020, the Compensation Committee believed it was prudent to adjust the 2020 executive compensation program. The compensation program that had originally been planned for 2020 quickly became obsolete and ineffective to support the purposes for which it was designed as discussed above.
Some of the unique issues faced by the travel industry and the Company in 2020 included:
●
World-wide travel restrictions;
●
Greater than 100% cancellation rates at times;
●
Unprecedented volumes of refund requests and the inability of many partners to provide those refunds;
●
Global change to a work-from-home environment in an extremely short time period, with attendant equipment, network and security issues and needs;
●
Unknown liquidity needs and uncertain financial market conditions and access to capital;
●
Employee morale and well-being issues resulting from isolation and personal challenges resulting from the pandemic, such as child-care issues;
●
Employee health issues, such as employees contracting the COVID-19 virus;
●
Undertaking large-scale restructurings amid all the other issues;
●
Dealing with resurgences of the virus and their effects on business activities; and
●
Higher level of employee attrition as technology companies that benefited from the pandemic, plus favorable capital markets in the second half of the year which benefited technology start-ups, led to increased efforts to attract away our best talent who were concerned about the future of the travel industry and ongoing restructuring efforts at the Company.
Management guided the Company through all of these issues and more, all while continuing to undertake product development, pursue strategic initiatives and prepare the Company for an uncertain recovery in one of the industries hit the hardest by the COVID-19 pandemic. Management’s tireless work and effective leadership during 2020 was taken into account by the Compensation Committee and the Board, as applicable, when making 2020 executive compensation decisions.
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2020 Base Salaries
Prior to the onset of the COVID-19 pandemic, the Compensation Committee made no changes to the base salaries of Messrs. Fogel, Goulden and Millones for 2020. However, in March 2020, when it was clear that the COVID-19 pandemic would severely disrupt the travel industry and our Company for the foreseeable future, our Board and our executive officers decided to take several cost-cutting measures, which included Mr. Fogel voluntarily declining his salary (subject to certain minimal amounts to cover benefit contributions and similar items) and the Board voluntarily declining their salary and cash retainers, in each case beginning in March 2020 for the remainder of 2020. Additionally, beginning on June 1, 2020, Messrs. Goulden and Millones voluntarily reduced their salaries by 20% for the remainder of 2020.
2020 Bonus Plan
In typical circumstances, the annual cash incentive bonus plan applicable to our executive officers provides for an aggregate “pool” based on our Compensation EBITDA and Compensation Revenue. The amount in the pool increases as our Compensation EBITDA and/or Compensation Revenue increase (until the cap on the pool is reached), and current executive officer individual cash bonuses are paid from this pool. However, although Company performance is a key factor in individual bonus payments for our executive officers, the Compensation Committee maintains discretion to adjust the aggregate pool and/or individual bonuses upwards or downwards as it deems appropriate.
The fundamental principle underlying our typical annual senior management bonus plan is that the bonus pool for senior executives, including our executive officers, would be meaningfully funded only if we had significant year-over-year earnings and/or revenue growth on a fixed currency basis, taking into account the size of our business, market expectations regarding our growth and our expectations regarding the growth of our markets. Further, our typical annual senior management bonus plan provides that the funding factor increases as Compensation EBITDA and Compensation Revenue, as applicable, increases. As a result, it would typically be unlikely that there would be meaningful funding for the bonus pool unless the Compensation EBITDA and Compensation Revenue performance demonstrate meaningful growth. Generally, in order for our senior executives to achieve their target annual bonus amounts, we must achieve a combination of Compensation EBITDA and Compensation Revenue growth that corresponds to a 1x bonus pool.
At the time of the outbreak, a 2020 senior management bonus plan had been established with Compensation EBITDA and Compensation Revenue targets.
However, soon after this plan was adopted, it quickly became apparent that the bonus plan funding would be significantly below target due to the impact of the pandemic on the Company’s results and operations. Therefore, the plan would no longer incentivize management performance or serve as a useful retention tool. As a result, the Compensation Committee determined to fund the senior management bonus pool at 70% of target (to provide funds for potential bonuses), without regard to the outcome of the bonus plan that was initially adopted and to determine whether to pay bonuses at all or in some degree in early 2021 after the Committee could evaluate management performance during 2020. The Compensation Committee believed that the 70% funding reflected the appropriate balance of the recognition of significant efforts and contributions during an unprecedented year and overall financial outcomes. It also enhanced retention at a time when the stock price had fallen precipitously, significantly reducing the ability of outstanding long-term incentives to retain top talent.
2020 Bonus Outcomes
|
Named Executive
Officer
|
Base Salary
|
Bonus Target as a % of Base Salary
|
Actual 2020 Bonus Awarded
|
|
Glenn D. Fogel
|
$750,000
|
250%
|
$0
|
|
David I. Goulden
|
$600,000
|
210%
|
$882,000
|
|
Peter J. Millones
|
$530,000
|
190%
|
$704,900
|
The Compensation Committee made no changes to the target bonus percentages of the named executive officers for 2020. The 2020 bonus plan pool was funded at 70% of target, and Mr. Fogel recommended that he not receive a bonus for 2020, but that Messrs. Goulden and Millones receive 2020 bonuses. The Compensation Committee accepted Mr. Fogel’s recommendation and awarded Mr. Goulden a 2020 bonus of $882,000 and Mr. Millones a 2020 bonus of $704,900, in each case, representing 70% of their target bonus for the year. These bonuses were awarded after the Compensation Committee reviewed the performance of Messrs. Goulden and Millones, including a review of their contributions to the execution of the business priorities to address the pandemic and other non-financial goals and priorities. Although the Committee recognized
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the substantial contributions and leadership of Mr. Fogel during this challenging time, they decided no bonus was appropriate for Mr. Fogel in recognition of the hardship faced by other stakeholders, including stockholders and employees, as a result of the COVID-19 pandemic. See 2020 Named Executive Officer Performance for additional information on the NEOs’ contributions during 2020.
Equity Incentives
Under normal circumstances our long-term incentive program for our executive officers primarily consists of a three-year PSU award for each executive officer. As we began 2020, our intention was to continue this approach, and to measure performance over the three-year period from January 1, 2020 to December 31, 2022 based on a 50/50 weighting of Compensation EBITDA and Compensation Revenue targets. When the COVID-19 outbreak began to affect the global travel industry, the severity and duration of the pandemic were not immediately known. We first decided to temporarily delay granting our planned PSUs until we had a better sense of what the impacts of the COVID-19 outbreak might be and to potentially give us time to revisit the proposed performance targets. However, it then quickly became clear that the impacts of the COVID-19 pandemic would be severe and would likely persist for a significant time, and therefore it was not possible to set meaningful, three-year financial performance targets.
As a result, the Compensation Committee, management and Mercer immediately began exploring various alternatives to the planned PSUs for our executive officers. This process continued throughout 2020. Some of the alternatives considered by the Compensation Committee included:
●
PSUs subject to total shareholder return (TSR) or relative total shareholder return (rTSR) metrics;
●
PSUs based on strategic goals;
●
MSUs (market stock units);
●
Restricted Stock Units;
●
A combination of the above.
The various alternatives had positive and negative aspects. For example, certain potential alternatives, such as the rTSR PSUs, stock options and MSUs, would have resulted in significant financial costs to the Company due to the accounting treatment of such awards. Further, the Compensation Committee considered various potential award design details in addition to generally evaluating different award types, including the use of qualitative goals, widening performance bands, shortening performance periods and adding relative performance metrics.
In addition, the Company undertook an extensive stockholder engagement effort among the Company’s larger stockholders during the fall of 2020 with the specific objective of understanding the views of our stockholders with respect to executive compensation under the circumstances of COVID-19 and its impact on the Company. The feedback obtained, discussed above in Executive Summary - Stockholder Engagement, informed subsequent compensation decisions. Ultimately the Compensation Committee determined to proceed as described below.
Performance Share Units (PSUs)
The Compensation Committee engaged in robust and prolonged discussions to establish a 2020 long-term incentive program for all of the NEOs. During this process, the Compensation Committee determined to create a different structure for Messrs. Fogel and Millones than for Mr. Goulden.
Messrs. Fogel and Millones were not granted PSUs in 2020. Their 2020 long-term equity awards and the rationale for these decisions are described below under the section Restricted Stock Units (RSUs).
In 2020, the Compensation Committee granted Mr. Goulden Strategic PSUs based on the accomplishment of strategic goals unique to Mr. Goulden and stock price appreciation. Except for the Strategic PSUs granted to Mr. Goulden, the Company did not award PSUs to its executive officers in 2020 due to the inability to predict long-term financial results during the COVID-19 pandemic. Mr. Goulden received two Strategic PSU awards: one with a nominal value of $10 million in August 2020 (the “August PSU”) and one with a nominal value of $7 million in November 2020 (the “November PSU”). The Compensation Committee awarded the August PSU to Mr. Goulden primarily for retention purposes. At the time of the award of the Strategic PSUs, Mr. Goulden’s outstanding 2018 PSUs and 2019 PSUs (his first two PSU awards he was granted at the Company) were expected to result in the issuance of zero shares to Mr. Goulden. Further, Mr. Goulden (and Messrs. Fogel and Millones) had voluntarily refused to receive a bonus for 2019 as described in last year’s proxy statement notwithstanding the solid
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performance of the Company in 2019. As a result, the Compensation Committee felt that it was important to provide a strong retention incentive for Mr. Goulden given his importance to the organization, especially in the middle of the pandemic.
Mr. Goulden
was awarded the November PSU as his annual 2020 long-term equity award. The Compensation Committee felt that these Strategic
PSUs were appropriate for Mr. Goulden because (a) Mr. Goulden’s responsibilities within the organization had expanded
as he plays a critical role in crafting the Company’s strategy, both before and after the onset of the COVID-19
pandemic and has specific responsibility for key Company initiatives designed to prepare the Company for emergence from the
pandemic in a strong position; (b) he was overseeing the critical and complex global restructuring efforts resulting from the
COVID-19 pandemic in addition to the Company’s global finance transformation efforts to strengthen our internal
systems; (c) Mr. Goulden is a newer executive officer who has not been with the Company for long enough to have benefited
from any long-term incentive payout, which is typically the vast majority of executive pay; (d) without these special awards,
because of factors outside of his control, his projected compensation was well below what his outstanding performance should
have yielded; and (e) we compete for leading finance talent with industries and other technology companies that have not been
severely and negatively impacted by the COVID-19 pandemic and retention of Mr. Goulden, who has over 35 years of experience
in the technology industry across a number of additional functions including Operations, Marketing, Strategy, Product
Development and Corporate Development, is critically important during this time. The Compensation Committee therefore
designed the Strategic PSUs to tie pay to performance by incentivizing achievement of the identified key Company initiatives
and providing significant retention incentives and value for Mr. Goulden. Such a structure is consistent with the
Company’s long-term practices of emphasizing long-term performance awards as the bulk of our executives’
potential pay. The Compensation Committee believes that achievement of all of the performance goals relating to the Strategic
PSUs will result in significant financial and operational value to the Company and position the Company well for future
success.
Mr. Goulden’s 2020 Strategic PSU performance goals relate to improvements and specific milestones in the areas of Real Estate (e.g., reduce the number of non-headquarters locations
by at least 15%), Procurement (e.g., implement at least 10 company-wide purchase agreements that cover at least $5 million
of annual spend), Restructuring, Talent-sourcing and Payments that can be objectively measured. Each 2020 Strategic PSU performance goal is designed so it can be measured at the end of 2022 as achieved or not, with the exception of the Payments goal which can be achieved partially or fully.
The performance goal thresholds for Mr. Goulden’s 2020 Strategic PSU awards are as follows:
The 2020 Strategic PSUs granted to Mr. Goulden are forfeitable if certain minimum performance thresholds are not achieved and have a maximum payout of 2x the number of “target” shares. The number of “target” shares was determined by taking the stated U.S. Dollar amount of the award established by the Compensation Committee and dividing that amount by the closing price of our common stock on the trading day immediately preceding the date of grant.
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Restricted Stock Units (RSUs)
Although for a
number of years the primary equity component of our compensation program for senior executives has been PSUs, from time to time
we have granted other equity awards to senior executives. In some cases, different kinds of equity awards have been used together
with PSUs. For example, RSUs have been used in connection with the hiring of a new senior executive to provide retention incentives
during the first years of employment to balance the uncertainty associated with the typical three-year cliff vesting and performance
terms of the PSUs.
However, in 2020, after months of analysis and discussion of alternatives among the Compensation Committee, Mercer and management and following our fall 2020 stockholder engagement efforts, in December 2020 the Board and the Compensation Committee determined to award RSUs to Messrs. Fogel and Millones as the equity incentive component of their 2020 compensation. When making this decision, the Compensation Committee and the Board were guided by the compensation philosophy and other issues described above, including the impact of the COVID-19 pandemic on our stakeholders. Taking all of the circumstances into account, including wanting to provide meaningful compensation to Messrs. Fogel and Millones for their strong leadership during the pandemic, the Board determined that Messrs. Fogel and Millones would receive an amount of RSUs based on 50% of the grant date value of their 2019 PSU awards. As a result, Mr. Fogel was awarded $7 million of RSUs and Mr. Millones was awarded $2.25 million of RSUs. Subject to continued service to the Company, these awards will vest in three equal annual installments on the first, second and third anniversary of the December 2020 grant date.
Stock Options
We did not grant any stock options to our named executive officers in 2020.
Stockholder Dilution
Each year, in connection with the administration of our equity incentive plans and making equity award decisions for our named executive officers, the Compensation Committee reviews and considers the dilutive impact of such awards and all equity awards granted by the Company on our stockholders. This review has shown that stockholder dilution from our equity incentive programs, including our stock-based compensation expense as a percentage of year-end market capitalization, is consistently at or below the 25th percentile of the Compensation Peer Group.
2020 Named Executive Officer Performance
Mr. Fogel
For Mr. Fogel’s 2020 performance assessment, the Board and the Compensation Committee primarily considered his leadership during the pandemic. They also considered, among other things:
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Leadership through the COVID-19 pandemic, including the development and execution of the three-phase plan for the Company: Stabilize, Optimize and Position (for future growth);
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Our financial and operating performance, including industry-leading room nights, revenue and Adjusted EBITDA;
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Our progress on increased collaboration, cooperation and integration among our brands, in particular as Mr. Fogel performed the dual roles of Chief Executive Officer of the Company and Chief Executive Officer of Booking.com;
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His work with government leaders to ensure the Company is best positioned as the regulatory environment for digital commerce evolves;
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His strategic leadership and vision, including the continued development of our long-term Connected Trip strategy and progress against other strategic goals and initiatives;
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His strong working relationship with the management teams of our brands; and
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His healthy, open and constructive relationship with employees and the Board.
The Board and the Compensation Committee also considered a number of other subjective and qualitative factors in their evaluations of Mr. Fogel, such as his integrity, ethics, commitment, people management skills and investor and Board communication skills.
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Other Named Executive Officers
In evaluating Mr. Goulden’s 2020 performance, the Compensation Committee and Mr. Fogel primarily considered Mr. Goulden’s exceptional leadership and performance as Chief Financial Officer during the pandemic, as well as his strategic insight and advice throughout the COVID-19 pandemic crisis; his leadership of the successful debt offering in the second quarter; his leadership of the restructuring actions across the company; his oversight, management and strengthening of our finance department; his efforts to improve our systems and processes; his effective management of our liquidity and oversight of our treasury activities; his communications with the financial community; and his leadership in developing our financial plans during the COVID-19 pandemic crisis and our annual financial plan.
In evaluating Mr. Millones’ 2020 performance, the Compensation Committee and Mr. Fogel primarily considered Mr. Millones’ exceptional leadership and performance as General Counsel during the pandemic, as well as his management of our legal department, which included his oversight of the company’s successful appeal before the United States Supreme Court and oversight of the complex and time-sensitive legal decisions involving customer refund and cancellation requests around the globe during the early months of the pandemic; his contributions to improving our systems and processes, including global legal coordination and collaboration among our different brands on key issues; his oversight of our compliance department and efforts with ever-increasing regulatory and other legal requirements; his oversight of the Booking Holdings Human Resources function and its strong support and contributions to our brands in key areas; his strategic insight and advice; his oversight of our corporate governance practices; and his efforts to organize and assist with the Board’s activities.
Other Components of Executive Compensation
Change in Control Benefits
Our equity grants do not provide for “single trigger” accelerated vesting solely upon the occurrence of a change in control. Rather, acceleration will occur with respect to those grants only upon certain terminations of employment that occur coincident with or following a change in control or upon certain terminations of employment that occur independently from a change in control. As a general matter, upon a termination of employment by us “without cause” or by the employee on account of his death or disability (and in some circumstances, for “good reason”) that occurs coincident with or following a change in control, the vesting of outstanding equity will be accelerated to occur on the date on which the employee is terminated coincident with or following such change in control (on a pro-rata basis based on the portion of the performance period that has expired, except that in the case of death, full vesting will occur). Other than in the case of a termination due to death, our award agreements do not provide for full acceleration of the entire award in the event of a termination coincident with or following a change in control.
No excess parachute payment tax gross-ups
Section 4999 of the U.S. Internal Revenue Code provides that certain individuals may be subject to additional taxes if they receive certain payments of compensation or benefits in connection with a change of control (“excess parachute payments”), and Section 280G of the Internal Revenue Code provides that we may forfeit a tax deduction on the amounts subject to this additional tax. We have not provided for tax gross-ups in respect of Section 4999 in any new or materially modified compensatory arrangements with our executive officers for many years and none of our executive officers are entitled to tax gross-ups in respect of Section 4999. Further, the Compensation Committee has formally adopted a policy not to approve any Section 4999 tax gross-ups or similar tax reimbursement arrangements related to excess parachute payments in any new or materially modified compensatory arrangements with our directors or executive officers.
With respect to each of Messrs. Fogel, Goulden and Millones, if any payment made pursuant to his employment agreement would be an excess parachute payment, we will reduce the amount of such payment to the extent necessary so that no portion of the payment, so reduced, would constitute an excess parachute payment if such reduction would result in an increase in the aggregate payments and benefits to be provided to him, determined on an after-tax basis. See Potential Payments Upon a Change in Control and/or Termination beginning on page 75 for additional details.
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Severance Benefits
Severance arrangements and change-in-control provisions in our equity awards are designed to:
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encourage executives to remain focused on our business in the event of rumored or actual fundamental corporate change or changes in the organization or its employment needs and, if required, to provide assistance during any transition, and
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manage compensation-related risks and align the interests of executives and stockholders by incentivizing executives to manage the business and evaluate potential change in control transactions from the perspective of a stockholder.
Each of our NEOs is entitled to receive severance benefits upon, among other things, a termination “without cause” or, “for good reason.” The arrangements with our NEOs provide severance payments in an amount that the Compensation Committee believes is appropriate, taking into account, among other things, the time it is expected to take a separated employee to find another job and marketplace practices as well as the duration of non-competition agreements between us and our executive officers. The payments and other benefits are provided because the Compensation Committee considers a termination “without cause” or for “good reason,” not to be employee-initiated, that under different circumstances would not have occurred and which are beyond the control of the separated individual. The severance and other benefits are intended to ease the consequences to an executive of an unexpected termination of employment. See Employment Contracts, Termination of Employment and Change in Control Arrangements beginning on page 70 for additional details.
Employee Benefits
Our health care and other insurance programs are generally the same for all eligible employees, including the named executive officers, depending on their geographic location. For all eligible U.S.-based employees and certain eligible employees based outside the United States, we maintain a 401(k) plan. The 401(k) plan in which our eligible named executive officers participate allows all eligible employees to contribute up to 75% of their eligible pay (generally base salary and bonus), up to limits imposed by the U.S. Internal Revenue Code, as pre-tax and/or Roth contributions. We make a cash matching contribution to this 401(k) plan for all participants, including those named executive officers who participate in the plan, of 50 cents on the dollar on the first 6% of eligible pay contributed to the plan. The 401(k) match made to each of the participating named executive officers is reflected in the All Other Compensation column of the Summary Compensation Table.
Perquisites
We do not maintain any material perquisites or personal benefits for any of the named executive officers, such as company planes, cars, security, financial services or country club memberships.
In connection with Mr. Fogel taking on the role of CEO of Booking.com in the Netherlands in 2019 in addition to his role as Chief Executive Officer of the Company, the Company agreed to provide certain benefits to Mr. Fogel to ensure that Mr. Fogel is not subject to adverse tax consequences and does not incur additional expenses as a result of serving as CEO of Booking.com. These benefits include tax equalization for any Dutch taxes owed as a result of performing his new role in the Netherlands, a housing allowance of €6,100 per month for accommodations in the Netherlands, supplemental international medical insurance, payments of legal fees incurred in connection with entering into a letter agreement that sets forth the terms of this arrangement and payment of costs for the preparation of his Dutch and U.S. tax returns. In 2020, Mr. Fogel received certain of these benefits only for the portion of the year prior to the outbreak of the COVID-19 pandemic, which prevented travel to the Netherlands for most of the year.
Certain 2021 Compensation Decisions
2018 and 2019 PSUs
The Company’s long-term incentive plans are the primary source of compensation for the Company’s executive officers. A key component of the structure of our long-term incentive plan is the layering of long-term equity awards so that our executive officers have the possibility of vesting each year in an award granted three years before based on meeting three-year performance goals. This structure provides a critical retention incentive for our executive officers. Before the
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outset of the pandemic in early March 2020, the Company’s long-term incentive plans, which are the primary source of compensation for the Company’s senior business leaders, including the NEOs, established in 2018 (consisting entirely of performance share units, the “2018 PSUs”) and in 2019 (consisting entirely of performance share units, the “2019 PSUs”) were projected to payout at 2x the number of “target” shares and 1x the number of “target” shares, respectively. Consistent with our historical practice, the 2018 PSUs and 2019 PSUs granted to the NEOs had a three-year performance period tied to Compensation EBITDA and were fully forfeitable if minimum performance targets were not met. Due to the impact of the pandemic on the travel industry and the Company’s business - specifically, the impact on Compensation EBITDA, the sole performance metric in the 2018 PSUs and 2019 PSUs - it became clear early in 2020 that the 2018 PSUs and 2019 PSUs would pay out at zero percent of their “target” values for the NEOs.
As part of the 2020 and 2021 compensation planning processes and as a result of the significant impact of the pandemic on the Company’s business and compensation programs, the Compensation Committee and management re-evaluated the Company’s executive officer compensation programs and considered numerous alternatives with respect to 2020 and 2021 executive officer compensation, as well as whether to make any adjustments to the 2018 PSUs and 2019 PSUs. As part of these efforts, management spoke with many of its largest stockholders to understand their views with respect to executive compensation under such unusual and difficult circumstances. Management gathered this input throughout the fall of 2020, shared this with the Compensation Committee and the Compensation Committee considered these perspectives when they evaluated the appropriate outcome for the 2018 PSUs and 2019 PSUs.
The Committee also considered the following:
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The extraordinary leadership of the NEOs in managing the Company through the unprecedented and extremely challenging year of the pandemic;
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The strong financial and operating performance of the Company prior to the pandemic and subsequent stock price recovery;
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The Company’s performance during 2020 amid and in response to the pandemic;
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The pay program disruptions resulting from the pandemic; and
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The critical retention incentives inherent in the Company’s PSU awards.
On January 28, 2021 the Board of Directors, on the recommendation of the Compensation Committee:
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Adjusted the terms of the NEOs’ 2018 PSU awards to set their payout at 1.33x the number of “target” shares underlying the grants, and
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Adjusted the terms of the NEOs’ 2019 PSU awards to set their payout at 0.33x the number of “target” shares underlying the grants.
In making the determination to fix the payout of the 2018 PSUs, the Board considered that there had been two years and two months of strong performance during the three-year performance period applicable to the 2018 PSUs, which had resulted in a projected payout of 2x the “target” number of shares prior to the pandemic. The Board believed that setting the 2018 PSUs payout at 1.33x was fair and appropriate under the circumstances because it represented two-thirds of the pre-COVID-19 projected payout (2 years of performance at 2x and 1 year at 0x). Similarly, in fixing the payout of the 2019 PSUs, the Board considered that there had been one year and two months of solid performance during the three-year performance period applicable to the 2019 PSUs, which had resulted in a projected payout of 1x the “target” number of shares prior to the pandemic. The Board believed that setting the 2019 PSUs payout at 0.33x was fair and appropriate under the circumstances because it represented one-third of the pre-COVID-19 projected payout (1 year of performance at 1x and 2 years at 0x).
In addition to the other reasons discussed in this proxy statement and the need to realign the compensation programs in light of the impact of the COVID-19 pandemic that were beyond management’s control, in making the decision to adjust the 2018 and 2019 PSUs, the Board and the Compensation Committee considered:
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The Company’s compensation philosophy of tying most of executive pay to performance and trying to design programs that compensate the NEOs based on management performance and not external factors;
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The fact that the NEOs elected not to receive 2019 bonuses to provide additional funding for bonuses for other employees;
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Executive retention risk and the expected length of the recovery of the Company’s business following the pandemic;
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The impact of COVID-19 on the Company’s employees, including the resulting reductions in force and other restructuring activities carried out by the Company; and
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The Company’s stock price performance and the desire to maintain alignment between management and stockholder interests.
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The vesting dates of the 2018 PSUs and the 2019 PSUs remained unchanged at March 2021 and March 2022, respectively, so that the NEOs must continue in service to the Company until those dates to receive shares under the awards, which helps address retention risk during the remaining vesting periods. Assuming the NEOs satisfy the foregoing service requirements (which they did with respect to the 2018 PSUs on March 4, 2021), the number of shares delivered (in the case of the 2018 PSUs) or to be delivered (in the case of the 2019 PSUs) to each of the NEOs under the 2018 PSUs and 2019 PSUs, respectively, are as follows: Mr. Fogel - 9,156 shares and 2,695 shares; Mr. Goulden - 2,943 shares and 866 shares; and Mr. Millones - 2,943 shares and 866 shares. While these actions did not completely address retention concerns because other industries and companies had not been hurt as hard by the pandemic as we were, the Board felt these decisions were an important step toward addressing retention and continuity risk. The Board also felt that fixing the vesting factors was an appropriate risk management decision to avoid any possibility that executives might be incentivized to take excessive business risks in an effort to create some value for these awards.
2021 Equity Awards
Unlike most companies, which typically grant executives service-based awards as well as performance-based awards (e.g. a mixture of RSUs and PSUs), the Company’s historical long-term incentive programs were based solely on PSUs (other than RSUs awarded in connection with promotions and new-hires), which were forfeitable if certain performance targets were not met, and so all of the long-term incentive awards were at risk for our executives. This issue, while understood previously, had not been considered a likely outcome and the Compensation Committee had focused more on its principle of tying pay to performance in structuring the program. With the outbreak of the COVID-19 pandemic, the extremely unlikely scenario that all of our NEOs’ long-term incentive awards would fail to pay out came to pass. In considering and making 2021 equity awards to our NEOs, which will be described in more detail in our 2022 proxy statement, the Compensation Committee modified the program to include a mix of RSUs and PSUs, in part to change this design feature of our historical long-term equity incentive program, as well as provide significant retention value as we continue to work through the extreme impact of the pandemic on our business. In addition, on a one-time basis, the Compensation Committee provided for certain additional shorter-term PSUs (1-year and 2-year PSUs) designed to increase the retention incentives for the NEOs during the period before the 3-year PSUs granted in 2021 vest in 2024 and to make it easier to set appropriate performance targets given the continued uncertainty resulting from the pandemic. The 2021 PSUs are structured with annual performance targets, and the 3-year PSUs with a relative Total Shareholder Return modifier, and the targets for years after 2021 will be set at the beginning of those years by the Compensation Committee. Collectively, the 2021 equity awards are meaningfully larger than our annual equity awards would have been without the issues resulting from the pandemic. Under all the circumstances, including the potential risk to stockholders if we were to lose the services of our NEOs during the remainder of the pandemic and the recovery, the Company’s industry being among the hardest hit and likely among the last to recover fully and the high demand our executives would be in should they decide to leave our service, the Board and the Compensation Committee, after receiving the advice of Mercer and taking into account the feedback of our stockholder engagement efforts, decided that these larger performance-based awards were appropriate and in the best interests of stockholders.
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How We Make Compensation Decisions
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THE ROLE OF THE BOARD
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THE ROLE OF MANAGEMENT
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The Board meets at the beginning of each year with our Chief Executive Officer to agree upon his performance objectives (which generally are stated in terms of Company objectives) for the year. Generally and as deemed necessary or appropriate, our Chief Executive Officer and the Board review these objectives and the Company’s performance against them from time to time during the year.
At the beginning of the following year, our Chief Executive Officer presents to the Compensation Committee a summary of his and the Company’s performance over the past year. The Compensation Committee then meets in executive session without any members of management to review our Chief Executive Officer’s performance and develop recommendations for his compensation. The Compensation Committee chair also discusses our Chief Executive Officer’s performance with each member of the Board. The Board then meets in executive session (without our Chief Executive Officer) to discuss our Chief Executive Officer’s performance and the Compensation Committee’s compensation recommendations. The Board determines the review to be given to our Chief Executive Officer, the actual payout amount of his bonus for the prior fiscal year, and the target total compensation he will receive for the current year.
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Our Chief Executive Officer, Chief Financial Officer and General Counsel provide significant input to help the Compensation Committee develop the structure of, and set performance metrics for, our annual performance-based bonus plan and annual equity grants. In particular, our Chief Executive Officer provides performance assessments and detailed compensation recommendations regarding our executive officers other than himself in executive session without other executive officers present. The Compensation Committee gives significant weight to our Chief Executive Officer’s judgment in these matters because he is in a unique position to assess the other executive officers’ performance and contributions to our business. The Compensation Committee is responsible for setting the Chief Executive Officer’s pay and assessing the performance of the Chief Executive Officer.
The Compensation Committee has delegated limited authority to the Chief Executive Officer, the Chief Financial Officer and the General Counsel to determine whether and to what extent certain equity awards held by non-executive officers may be settled, vested, canceled, forfeited, or surrendered pursuant to their terms. For instance, the Chief Executive Officer is authorized to determine whether an employee’s termination was, pursuant to the terms of the relevant agreement, “with cause” or “without cause.”
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THE ROLE OF THE COMPENSATION CONSULTANT
The Compensation Committee engaged Mercer LLC, an outside global human resources consulting firm, to advise the Compensation Committee on our compensation program for the named executive officers. Mercer has been working with the Compensation Committee for approximately nineteen years in this capacity.
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In addition to providing compensation program advice, Mercer has at times provided services to certain of our subsidiaries, including employee benefit plan consulting services and compensation benchmarking. An affiliate of Mercer provides insurance brokerage services to us, and another affiliate of Mercer has provided commercial consulting services to one of our subsidiaries. The aggregate fees paid by us and our subsidiaries to Mercer and its affiliates in 2020 are as follows:
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for advice regarding executive compensation, approximately $544,000
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for other services and compensation products, approximately $129,000
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for insurance brokerage services and consulting services to Mercer’s affiliates, approximately $4,332,000
Mercer’s affiliate was engaged to provide insurance brokerage services by the NCG Committee after the NCG Committee evaluated the relationship of Mercer’s affiliate with us and the Compensation Committee’s engagement of Mercer. The decision to engage Mercer’s other affiliate for consulting services was made by management of the relevant subsidiary. After reviewing information provided by Mercer regarding its independence and considering the independence factors prescribed by SEC rules, the Compensation Committee determined that Mercer was independent and did not find that any conflicts of interest existed in connection with the services Mercer performed for the Compensation Committee in 2020.
At the Compensation Committee’s direction, management generally provides Compensation Committee materials to Mercer and discusses materials and recommendations with Mercer in advance of each Compensation Committee meeting. Mercer
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generally attends Compensation Committee meetings to discuss these matters and, at the end of most meetings, meets in executive session with the Compensation Committee without management present.
With the support of the Compensation Committee, management regularly asks Mercer to provide calculations and market data to inform the Compensation Committee’s decision-making process. The Compensation Committee periodically requests management to seek Mercer’s input, analysis or recommendation with respect to a specific compensation practice, program or arrangement being considered by the Compensation Committee. The chair of the Compensation Committee and/or management may also independently seek Mercer’s advice on compensation-related matters.
During 2020, among other things, Mercer assisted the Compensation Committee on the following matters:
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Advised on the composition of the Compensation Peer Group;
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Prepared analyses of executive officer compensation levels as compared to the Compensation Peer Group, and made compensation recommendations;
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Evaluated the design and provided advice on the appropriateness of our 2020 Bonus Plan and long-term incentives
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Reviewed our non-employee director compensation program;
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Prepared tally sheets and IRC Section 280G analyses to determine “excess parachute payments;”
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Conducted our gender and racial pay equity analyses and our living-wage analysis; and
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Provided assistance in determining the “CEO Pay Ratio” that appears in this proxy statement.
Benchmarking and Target Compensation
In making compensation decisions, the Compensation Committee asked Mercer to compare each element of total compensation against a peer group of publicly-traded companies. The Compensation Committee reviews annually the appropriateness of the companies comprising the peer group. When determining the appropriate compensation peer group for 2020, the Compensation Committee looked closely at, among other things, companies included in the prior year’s peer group, as well as companies identified as peers by those companies. The primary characteristics used to evaluate which companies to include in the peer group were: industry, revenues and peers identified by our peers. In particular, the Compensation Committee sought to include internet merchandisers, online travel companies and other technology companies with revenues between one-half and two times our annual revenues. The Compensation Committee also included Alphabet, Amazon.com, Facebook and Microsoft because, although their revenues were more than two times our revenues, there were relatively few companies that otherwise met our criteria, we compete with them for executive talent and they, like us, are leading e-commerce or technology companies.
The Compensation Committee determined that the sixteen companies listed below, which are primarily internet services, technology, travel services and/or e-commerce companies and are the same companies used in 2019, would comprise the 2020 peer group (the “Compensation Peer Group”):
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Activision Blizzard, Inc.
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Expedia Group, Inc.
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Microsoft Corporation
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Adobe Inc.
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Facebook, Inc.
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Netflix, Inc.
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Alphabet Inc.
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IAC/InterActiveCorp
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PayPal Holdings, Inc.
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Amazon.com, Inc.
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Intuit Inc.
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salesforce.com, inc.
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eBay Inc.
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Qurate Retail Group
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TripAdvisor, Inc.
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Electronic Arts Inc.
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Based on
the four most recent quarters of data that were available at the time the Compensation Committee initiated its review (for
most, but not all companies, the last three quarters of 2019 through the first quarter of 2020), our revenues ranked
at approximately the 55th percentile of the Compensation Peer Group. The Compensation
Committee generally considered “market” compensation to be between the 50th and
the 75th percentile of executive pay for the Compensation Peer Group. In arriving at
“market” compensation for the Compensation Peer Group, Mercer adjusted the competitive market data from the
Compensation Peer Group to account for projected pay increases at those companies over the 2019-2020 time frame. The
Compensation Committee uses the Compensation Peer Group data primarily to ensure that our executive compensation
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program as a whole is competitive. While the Compensation Peer Group provides the Compensation Committee with guidance and information, it does not dictate the named executive officers’ compensation and is not a substitute for the Compensation Committee’s own business judgment in establishing compensation for the named executive officers.
In general,
we believe that target total compensation for our named executive officers approximates the market median. However, under
normal circumstances we structure our compensation programs to be heavily performance-based, with below-market salaries,
above-market target bonuses as a percentage of base salary and equity incentive awards (PSUs) that provide an opportunity to
achieve above-market total compensation. As a result, we believe our compensation programs have been well-designed to reward
our executive officers with above-market total compensation when we exceed our goals and below-market compensation when we
underperform. Notwithstanding the foregoing, as described in more detail above, in 2020 our executive officer compensation
programs were structured differently and ultimately did not target any particular market rate (though market data was
considered when making compensation decisions), but rather were designed to address the unusual circumstances, risks and
needs of the Company resulting from the COVID-19 pandemic and what the Compensation Committee and the Board felt was
appropriate for our executive officers under such circumstances. For example, the Compensation Committee considered that we compete for executive talent with industries and other technology
companies that were not as severely and negatively impacted by the COVID-19 pandemic.
2020 Say-on-Pay Advisory Vote on Executive Compensation Results and Consideration
We provide our stockholders with the opportunity to cast an annual advisory vote on executive compensation (a “say-on-pay” proposal). At our annual meeting of stockholders held in June 2020, 94.8% of shares present and entitled to vote (which includes abstentions but not broker non-votes) were voted in favor of approving the executive compensation described in our 2020 proxy statement. The Compensation Committee regards the results of the stockholder vote as an indication that our executive compensation practices effectively align executive compensation with stockholder interests and therefore did not implement any changes as a direct result of the vote. The Compensation Committee will continue to consider the outcome of our say-on-pay votes when structuring and implementing compensation programs for executive officers.
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Executive Officers
Set forth below is biographical information as of March 31, 2021 for our current executive officers, other than Mr. Fogel, our Chief Executive Officer and President, whose biographical information can be found under Proposal 1 Election of Directors - Nominees for Election as Directors.
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DAVID I. GOULDEN
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Mr.
Goulden has been our Executive Vice President and Chief Financial Officer since March 1, 2018 and has over 35 years of
experience in the technology industry across a number of additional functions including Operations, Marketing, Strategy,
Product Development and Corporate Development. Mr. Goulden joined us
after leaving Dell Technologies in February 2018. Mr. Goulden also brings a significant amount of global management
experience. He was previously President, Infrastructure Solutions Group at Dell
Technologies, a position he held starting in 2016 when Dell acquired EMC Corporation. From January 2014 until EMC’s
acquisition by Dell, Mr. Goulden was Chief Executive Officer of the EMC Information Infrastructure business, EMC’s
largest business by revenue and employees, and where he was closely involved in the successful acquisition of EMC by Dell. Prior to his service in that role, he was President and Chief Operating Officer
of EMC, responsible for
overseeing engineering and product development, sales and customer operations, services, marketing, and
G&A functions, since 2012. Mr. Goulden served as Chief Financial Officer of EMC from 2006 to 2014, responsible for
financial operations of EMC’s consolidated businesses. Earlier in his career at EMC, Mr. Goulden led the
company’s Sales and Customer Operations worldwide, including global sales in all theaters as well as global channels,
alliance, and partners, and prior to that service he oversaw Marketing and New Business Development at EMC. Prior to joining
EMC in 2002, Mr. Goulden served in various capacities at Getronics N.V., an information technology services company, most
recently as a member of the board of management and President and Chief Operating Officer for the Americas and Asia Pacific.
Mr. Goulden served on the board of directors of VMWare, a cloud infrastructure and business mobility company, from 2007 to
2014.
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PETER J. MILLONES
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Mr. Millones has been our General Counsel since January 2001, our Executive Vice President since April 2003 and our Corporate Secretary since March 2021. He previously served as our Vice President and Associate General Counsel from March 2000 to January 2001 and as our Corporate Secretary from January 2001 to April 2018. Prior to that, Mr. Millones was with the law firm of Latham & Watkins LLP. As part of his responsibilities, Mr. Millones oversees our executive compensation programs.
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Key Governance Matters
Stock Ownership Guidelines
Under our stock ownership guidelines, each current executive officer is required to own the number of shares of our common stock indicated below. For purposes of calculating stock owned under the stock ownership guidelines, shares owned outright by the executive officer are included, but unvested stock options, vested stock options that have not been exercised and unvested stock-based equity awards are not eligible to be considered. If an executive officer’s stock ownership does not meet the stock ownership guidelines, they are required to retain a minimum of 50% of the shares received on an after-tax basis from the exercise of stock options, the vesting of restricted shares or restricted stock units, performance share units or the settlement of any other stock-based equity award until the ownership target is reached. As of March 31, 2021, each current executive officer listed below was in compliance with the guidelines.
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Number of Shares Required to be Owned under
our Stock Ownership Guidelines – the Lesser of:
|
Number of Shares
Owned as of
March 31, 2021
|
(1)
|
Value of Shares
Owned as of
March 31, 2021
|
(2)
|
|
Glenn D. Fogel,
President and
Chief Executive Officer
|
15,000 shares or shares valued at $5 million
|
40,005
|
|
$93,205,249
|
|
|
David I. Goulden,
Executive Vice President and
Chief Financial Officer
|
5,000 shares or shares valued at three times
base salary
|
3,356
|
|
$7,818,943
|
|
|
Peter J. Millones,
Executive Vice President, General Counsel and Corporate Secretary
|
5,000 shares or shares valued at three times
base salary
|
11,047
|
|
$25,737,742
|
|
(1)
See Corporate Governance - Security Ownership of Certain Beneficial Owners and Management on page 40 for certain details relating to beneficial stock ownership, calculated in accordance with SEC rules.
(2)
Based on the closing share price of $2,329.84 on March 31, 2021.
|
Our stock ownership guidelines also establish requirements for non-employee members of the Board, which are set forth under Non-Employee Director Compensation and Benefits on page 79. Our stock ownership guidelines are detailed in our Corporate Governance Principles, a copy of which is available on our corporate website (www.bookingholdings.com) under the tab “For Investors.”
Short-Selling, Hedging and Pledging Prohibitions
It has been our long-standing policy to prohibit our executive officers, directors and employees from entering into hedging transactions with respect to our stock, speculating in our stock or engaging in short-term trading in our stock such as “day trading.” Such prohibited activity includes, but is not limited to, short selling (profiting if the market price of the securities decreases), buying or selling publicly traded options, including writing covered calls, buying our stock on margin (unless arrangements are made to cover any margin calls in cash) or arbitrage trading. We also do not permit our executive officers or directors to pledge any of our securities.
Pre-arranged Trading Plans
We encourage, but do not require, our executive officers to effect any disposal of shares of our common stock pursuant to a pre-arranged trading plan adopted in compliance with Rule 10b5-1 under the Exchange Act (a “10b5-1 Plan”) and our internal guidelines. We have established guidelines for the adoption and implementation of 10b5-1 Plans by our directors and executive officers, including the following:
●
A 10b5-1 Plan must be adopted during an open trading window.
●
The first proposed sale under a 10b5-1 Plan generally cannot occur until the second trading day following the filing of the Form 10-Q or Form 10-K with the SEC, as applicable, during the first fiscal quarter following the fiscal quarter in which the plan is adopted.
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HOLDINGS INC. │ 2021 PROXY STATEMENT 63
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●
A 10b5-1 Plan must generally have a minimum of a one-year term. A 10b5-1 Plan may not be terminated earlier than the date provided for in the plan, except as approved by the chair of our Compensation Committee or, if such chair is unavailable, the chair of our Audit Committee.
●
Sales under a 10b5-1 Plan may occur during a closed trading window.
We reserve the right to modify the terms of our 10b5-1 guidelines at any time.
The following table summarizes the 10b5-1 Plans adopted by each of the named executive officers and directors that were in existence on March 31, 2021. The number of shares that are reflected as eligible for future sale in the table below reflects share amounts as of March 31, 2021 and excludes shares that may have been previously sold. It is provided as a summary only and does not set forth all the material terms and conditions of such 10b5-1 Plans.
|
Name and Principal Position
|
Total Shares Subject to Plan
|
Date of
Adoption
|
End Date
|
|
Jeffery Boyd, Director
|
10,000
|
12/07/20
|
The earlier of the sale of all of the shares or May 12, 2022
|
|
Glenn D. Fogel, President and Chief Executive Officer
|
9,000
|
03/09/21
|
The earlier of the sale of all of the shares or July 15, 2022
|
|
David I. Goulden, Executive Vice President and Chief Financial Officer
|
2,196
|
03/09/21
|
The earlier of the sale of all of the shares or April 15, 2022
|
|
Peter J. Millones, Executive Vice President, General Counsel and Corporate Secretary
|
4,098
|
03/10/21
|
The earlier of the sale of all of the shares or November 15, 2022
|
|
100% of the total “net” number (net amounts associated with any tax withholdings) of shares underlying restricted stock units granted in December 2020, and are issued at vesting in December 2021
|
03/10/21
|
The earlier of the sale of all of the shares or November 15, 2022
|
|
100% of the total “net” number (net amounts associated with any tax withholdings) of shares underlying restricted stock units and performance share units granted in March 2019 and March 2021, and are issued at vesting in March 2022
|
03/10/21
|
The earlier of the sale of all of the shares or November 15, 2022
|
Consistent with our past practices, we intend to continue to provide a list of 10b5-1 Plans in existence for our named executive officers and directors on a quarterly basis following the closing of our trading window on our corporate website (www.bookingholdings.com) under the tab “For Investors.” We will also file a Current Report on Form 8-K promptly after the adoption of any 10b5-1 Plan by our Chief Executive Officer or Chief Financial Officer.
Equity Award Dates
The Compensation Committee selected March 4, May 12, August 12 and November 12 as the dates of grant for equity awards (to the extent the Compensation Committee authorizes any awards) to executive officers and other employees in 2021. In addition, the Board granted RSUs to Messrs. Fogel and Millones on December 18, 2020, as described above. The Compensation Committee (or the Board) reserves the right to adjust dates in advance or select additional grant dates in its sole discretion. All grants are or will be, as applicable, approved in advance by the Compensation Committee (or the Board) or, on an exception basis, the chair of the Compensation Committee.
Clawbacks
Effective as of February 7, 2013, we adopted a policy with respect to the “clawback” of executive compensation pending adoption by the SEC and The Nasdaq Stock Market of final rules on the matter. In general and subject to the terms and conditions of the policy, the policy provides that under certain circumstances where an executive officer has engaged in misconduct that has resulted in the executive receiving excessive incentive-based compensation, the Board may seek recovery of such excessive incentive-based compensation.
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HOLDINGS INC. │ 2021 PROXY STATEMENT 64
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