CDK CDK Global Inc

MESSAGE FROM OUR CHIEF EXECUTIVE OFFICER

DEAR FELLOW STOCKHOLDERS:

All of these have clear metrics and objectives, and we have world-class consultants working with us to supplement our internal expertise in scoping, planning, and executing against these opportunities.  Additionally, we announced a fundamental reorganization that will better align our business to meet our customers’ needs and to achieve our transformation targets.

Growing Market Share

CDK has grown its market share significantly since 2006, and that footprint represents both a hard-won asset and the foundation for our future. The quality of our platform is important to our customers and the rate of renewals demonstrates that our strategy is working. During the last quarter of fiscal 2016, we put a significant focus on renewing dealers’ contracts and the program has been successful beyond any prediction.  Specifically, 670 North American dealers have entered into new long-term contracts during the fourth quarter alone, including customers representing approximately 20% of CDK's automotive DMS sites and nearly 10% of all automotive and heavy truck DMS sites in North America. This is particularly impressive given all the changes that are occurring throughout our business and it is a testament to our improved levels of service that dealers want to work with us over the long term.

Delivering Market-Leading Solutions

We believe the breadth of our integrated solutions allows us to more comprehensively address the varied needs of automotive retailers and original equipment manufacturers than any other single competitor in our industry. That said, it is clear that we had too many different product versions, and over the past year we have reduced the number of versions by 20%, with much more to come. We are delivering market-leading solutions that help our clients better manage, analyze, and grow their businesses. We are a market leader, and through our transformation, we will expand this leadership position.

Returning Capital at Top of Peer Group

In addition to transforming our business, we have also significantly accelerated the pace of capital return to stockholders. We recently committed to returning $1 billion to stockholders by the end of 2016 – a full year earlier than our prior target. This rate of capital return as a percentage of market capitalization puts CDK at the very top of our peer group. At the end of this year, the Board will determine the right level of capital return for the coming years – we believe it is in stockholders’ best interests to have a balanced program that returns substantial capital to stockholders while providing us with the financial flexibility to continue investing in the future of the business.
 

We Are Building a Better CDK

We are on a course to change CDK for the better. I can assure you that everyone at CDK is focused on meeting our goals of continuing to improve and refine our customer offering while significantly increasing profitability, expanding margins, and growing revenues. I am immensely proud and grateful for the hard work of every employee who has helped, and who will continue to help, make this possible. If we achieve these goals, I am confident that we will be able to deliver significantly more value to our stockholders. I hope you share our enthusiasm for what is to come. Thank you for your investment in CDK.

SAFE HARBOR FOR FORWARD LOOKING STATEMENTS

This proxy statement, including the letter from our chief executive officer, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, including targeted adjusted results for the Company’s fiscal years ending June 30, 2018 and June 30, 2019, statements concerning the Company’s transformation plan, other plans, objectives, forecasts, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position and business outlook and business trends, and other information, may be forward-looking statements. Words such as “might,” “will,” “may,” “could,” “should,” “estimates,” “expects,” “continues,” “contemplates,” “anticipates,” “projects,” “plans,” “potential,” “predicts,” “intends,” “believes,” “forecasts,” “future,” “assumes,” and variations of such words or similar expressions are intended to identify forward-looking statements. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed, or implied by, these forward-looking statements.

The Company’s actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements. The Company gives no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on its results of operations and financial condition. You should carefully read the factors described in the Company’s reports filed with the Securities and Exchange Commission (“SEC”), including those discussed under “Part I, Item 1A. Risk Factors” in the Company’s most recent Annual Report on Form 10-K and its most recent Quarterly Report on Form 10-Q for a description of certain risks that could, among other things, cause the Company’s actual results to differ from any forward-looking statements contained herein. These filings can be found on the Company’s website at www.cdkglobal.com and the SEC’s website at www.sec.gov.

All forward-looking statements speak only as of the date of this proxy statement even if subsequently made available by the Company on its website or otherwise. The Company disclaims any obligation to update or revise any forward-looking statements that may be made to reflect new information or future events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

Non-GAAP Reconciliation

Please refer to the tables in Appendix A to this proxy statement for a reconciliation of the “As Reported” results to the “As Adjusted” results.

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all the information you should consider, and you should read the entire proxy statement carefully before voting.

CDK Global, Inc. (the “Company,” “CDK Global,” “us,” “our” or “we”) is holding its 2016 Annual Meeting of Stockholders (the “Annual Meeting”) on November 15, 2016. This proxy statement is furnished in connection with the solicitation by our Board of Directors (the “Board”) of proxies for use at the Annual Meeting and at any adjournment or postponement thereof.

A Notice of Internet Availability of Proxy Materials or the proxy statement for the Annual Meeting is first being mailed to stockholders on or about October 6, 2016. Only stockholders of record at the close of business on September 19, 2016 are entitled to receive notice of and to vote at the Annual Meeting.

Your vote is important, and we urge you to vote. The Notice of Internet Availability of Proxy Materials instructs you on how to access our proxy materials, including our proxy statement, our Annual Report on Form 10-K (which is not a part of the proxy soliciting material) and your proxy card to vote via the Internet or by telephone. If you receive a paper copy of the proxy materials, you may also vote by completing, signing, dating, and returning the accompanying printed proxy in the enclosed envelope, which requires no postage if mailed in the United States.

MANAGEMENT PROPOSALS

In addition to conducting any other business properly brought before the Annual Meeting, we have summarized the management proposals below. Please review this proxy statement for more information. Your vote is important.

ELECTION OF DIRECTORS (PROPOSAL 1)

The Board and the nominating and governance committee believe that the ten director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to our management. All of the nominees are currently serving as directors. The following table provides summary information about each director nominee.

ELECTION OF DIRECTORS (PROPOSAL 1)

BOARD SKILLS

GOVERNANCE HIGHLIGHTS

The Board is committed to strong corporate governance that we believe promotes the long-term interests of the business and those of our stockholders. During the past year the Board’s primary governance themes were:

APPROVAL OF EXECUTIVE COMPENSATION FOR FISCAL 2016 (PROPOSAL 2)

We are asking our stockholders to cast a non-binding vote, commonly referred to as “say on pay,” to approve our NEO compensation as described in the Compensation Discussion & Analysis (“CD&A”) section beginning on page 36 and the Compensation Tables section beginning on page 54. The Board believes that our compensation policies and practices are effective in achieving our goals of attracting, retaining and motivating our executive officers, rewarding financial and operating performance, and aligning our executives’ interests with those of our stockholders to create long-term value. The Board values stockholders’ opinions, and the compensation committee will take into account the outcome of the advisory vote when considering future executive compensation decisions.

RATIFY THE APPOINTMENT OF DELOITTE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2017 (PROPOSAL 3)

We are asking our stockholders to ratify the audit committee’s selection of Deloitte as our independent registered public accounting firm for fiscal 2017. While we are not required to have our stockholders ratify the selection of Deloitte, we are doing so because we believe it is good corporate practice. If our stockholders do not ratify the selection, the audit committee will reconsider the appointment, but may nevertheless retain Deloitte as our independent registered public accounting firm. Even if the selection is ratified, the audit committee may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of us and our stockholders.

Table of Contents

CORPORATE GOVERNANCE AT CDK GLOBAL

Proposal 1: Election of Directors

The Board has nominated ten directors for election at the Annual Meeting. Each nominee is currently serving as one of our directors. If you re-elect them, they will hold office until our next annual meeting of stockholders or until their successors have been elected and qualified.

In recognition of the fact that the selection of qualified directors is complex and crucial to our long-term success, the nominating and governance committee has established director qualification criteria for membership on the Board. Those criteria are included in this proxy statement beginning on page 21.

All of our nominees are seasoned leaders, the majority of whom are or were chief executive officers or other senior executives and who bring to the Board skills and qualifications gained during their tenure at a wide array of public companies, private companies, non-profits, and other organizations. We have indicated below for each nominee certain of the experience, qualifications, attributes, or skills that led the nominating and governance committee and the Board to conclude that the nominee should continue to serve as a director.

INFORMATION ABOUT THE NOMINEES

BIOGRAPHY

Mr. Brun has been the Chairman and Chief Executive Officer of SARR Group, LLC, an investment holding company, since 2006. In addition, he was formerly Managing Director and head of investor relations at CCMP Capital Advisors, LLC, a global private equity firm. He is also the founder and Chairman Emeritus of Hamilton Lane Advisors, a provider of asset management services for which he served as Chief Executive Officer and Chairman from 1991 until 2005. From 1988 to 1991, he was Managing Director and co-founder of the investment banking group of Fidelity Bank in Philadelphia. Mr. Brun served as a director of Automatic Data Processing, Inc. (“ADP”) from 2003 to 2015 and as ADP’s Chairman of the Board from 2007 to 2015. Mr. Brun has served as a director of Broadridge Financial Solutions, Inc. (“Broadridge”), an investor communications and business process outsourcing provider, since 2007 and as Broadridge’s Chairman of the Board since 2011. He has served as a director of Merck & Co., Inc. (“Merck”), a health care company, since 2009 and lead director since 2016, and Hewlett Packard Enterprise Company, a technology solutions provider, since 2015. He is also a director of NXT Capital, Inc., a private company. Mr. Brun is a former trustee of Widener University, the University at Buffalo Foundation, Inc. and The Episcopal Academy in Merion, Pennsylvania. Mr. Brun’s investment banking and leadership experience provide him with extensive financial and management expertise, and his directorships at other public companies have given him broad experience with governance and other issues facing public companies.

BIOGRAPHY

Mr. Deese has served as an independent director of DENTSPLY International Inc., a leading manufacturer and distributor of dental and other consumable healthcare products, since 2011 and Public Service Enterprise Group, a diversified energy company, since 2015. Mr. Deese served as an Executive Vice President of Merck from 2008 to 2016 and as President of the Merck Manufacturing Division from 2005 to 2016. Mr. Deese also served as Merck’s Senior Vice President of Global Procurement from 2004. Prior to joining Merck, Mr. Deese served as Senior Vice President of Global Procurement and Logistics at GlaxoSmithKline and as Vice President of Purchasing, at Kaiser Permanente. In addition to his experience as a director of a publicly traded company, Mr. Deese brings to the Board substantial experience and expertise in both business transformation and complex international operations and management from his roles at Merck and GlaxoSmithKline.

BIOGRAPHY

Since 2013, Ms. Hillman has served as the Dean of the W. P. Carey School of Business at Arizona State University, where she has taught as a Professor since 2006 and as an Associate Professor from 2001 to 2006. She holds a PhD in Strategic Management and is a fellow of the Academy of Management. In addition to her management skills gained as the leader of one of the largest U.S. business schools, Ms. Hillman brings to the Board expertise in the areas of business strategy and corporate governance, on which she has taught, consulted with major corporations on, and conducted research.

BIOGRAPHY

Mr. MacDonald has served as our Chief Executive Officer since March 2016, our President since January 2016, and as a director since June 2015. Mr. MacDonald served as Chief Executive Officer and President of Hertz Equipment Rental Corporation from June 2014 through June 2015 and as interim Chief Executive Officer of Hertz Corporation from September 2014 through November 2014. Prior to Hertz, Mr. MacDonald served as President and Chief Executive Officer of ETP Holdco Corp., an entity formed following Energy Transfer Partners’ $5.3 billion acquisition of Sunoco, Inc. in 2012, where Mr. MacDonald had served as Chairman, President and Chief Executive Officer prior to ETP’s acquisition of Sunoco. Mr. MacDonald has also held executive management roles at Dell, General Motors Corporation, and Isuzu Motors Limited.

Mr. MacDonald also serves on the board of directors of Computer Sciences Corporation and previously served on the board of directors of Sunoco and Sunoco Logistics from March 2012 to October 2012 and October 2009 to October 2012, respectively, and on the board of directors of Ally Financial, Inc. from May 2013 to July 2014 following his appointment by the U.S. Department of the Treasury.

In addition to his experience as a director of a publicly traded company, Mr. MacDonald brings to the Board substantial experience and expertise in management, business strategy, and capital markets from his roles at Hertz, Sunoco, and Ally Financial.

BIOGRAPHY

Ms. Martinson has been Chief Executive Officer of Sparta Systems, a leading provider of enterprise-quality management software solutions, since 2011. Prior to joining Sparta Systems, she served as the Chief Operating Officer at Allscripts. Before Allscripts, she served as Executive Vice President of global sales, services, and support at Misys and served in various management positions at Oracle, SAP, Siebel Systems, Gartner, Ariba and Accenture. She has served as a director at AdvancedMD since March 2016 and Chair of the Board of Trustees at Philadelphia University since 2013. As a result of her current executive position at Sparta Systems, as well as her former positions as a senior executive at other technology and consulting organizations, Ms. Martinson provides the Board with extensive and relevant executive leadership, software, sales and service and technology industry experience.

BIOGRAPHY

Since 2012, Mr. Miles has served as the founder and Chief Executive Officer of The Miles Group, a provider of global CEO and board consulting and advisory services (focused on the topics of succession, board and organizational effectiveness, and talent management). Previously, Mr. Miles served as Vice Chairman, Leadership Advisory at Heidrick & Struggles, a global executive search and executive leadership consulting firm from 2010 to 2012 and as Managing Partner and Head, Leadership Advisory for Heidrick & Struggles from 2005 to 2010, where he was responsible for managing its global Leadership Advisory Services business. Mr. Miles specializes in CEO succession and brings to the Board substantial expertise in leadership selection, succession planning and organizational effectiveness from his roles at Heidrick & Struggles and The Miles Group.

BIOGRAPHY

Since 2010, Mr. Radway has served as Founder, Chairman and Chief Executive Officer of NXT Capital, a privately held commercial finance company with approximately $6.5 billion in owned and managed assets. From 2001 to 2008, Mr. Radway served as Managing Director and President of Merrill Lynch Capital, the commercial finance unit of Merrill Lynch Bank USA that, prior to its sale in 2008, had owned and managed assets in excess of $30 billion and approximately 550 employees. Prior to his service with Merrill Lynch Capital, Mr. Radway held senior positions with Heller Financial, Inc., including Executive Vice President of Corporate Strategy and Development responsible for the company’s strategic planning, business development, and M&A worldwide. Mr. Radway’s roles as the chief executive of NXT Capital and as president of Merrill Lynch Capital have provided him with extensive executive management, operational, and business strategy experience. He brings to the board the ability to analyze and oversee financial reporting and performance, as well as expertise in capital markets and financing initiatives, corporate strategy, and human resource development and retention.

BIOGRAPHY

Mr. Schuckenbrock is the Chief Executive Officer of CROSSMARK Inc., a leading provider of sales, marketing and merchandising services for manufacturers and retailers. Prior to joining CROSSMARK in December of 2014, he was the CEO of Accretive Health, and prior to that held numerous leadership positions at Dell. His career also includes management positions at EDS, IBM, PepsiCo and Frito Lay. He is currently a director at Micro Focus International and has served on a number of boards, including Compuware, Staples, and AT Kearney. Mr. Schuckenbrock also serves on the advisory boards of Texas Christian University and Enactus, an international non-profit that enables entrepreneurial skills to students. As a result of his current executive position at CROSSMARK Inc., as well as his former positions as a senior executive at other technology organizations and his significant board experience, Mr. Schuckenbrock provides the Board with extensive and relevant board, executive leadership, sales and marketing, and technology industry experience.

BIOGRAPHY

Mr. Sowinski serves as the lead independent director and chair of the nominating and corporate governance committee of Buckeye GP LLC, general partner of Buckeye Partners, L.P., a publicly-traded master limited partnership that provides mid-stream energy logistics services. Since 2006, Mr. Sowinski has served as an operating executive for MidOcean Partners, a private equity firm that identifies, invests in, and manages portfolio companies focusing on business, information, and marketing services. In his capacity as an operating executive for MidOcean Partners, Mr. Sowinski previously served as Vice Chairman of The Allant Group, Inc. a marketing services group, and also previously served as Vice Chairman of Pre-Paid Legal Services, Inc. dba LegalShield, a specialized legal service products company. In 2002, he served as Chief Financial Officer of PricewaterhouseCoopers Consulting, a global consulting firm. Previously, Mr. Sowinski spent 17 years with the Dun & Bradstreet Corporation, where he served in numerous positions including Chief Financial Officer of the Dun & Bradstreet Corporation, as well as Executive Vice President of Global Marketing and President of the D&B Operating Company. Mr. Sowinski’s numerous operating roles have provided him with broad managerial and operational expertise and a proven

track record of achievement and business judgment. In addition, his extensive experience in financial management, including his roles as Chief Financial Officer of the Dun & Bradstreet Corporation and PricewaterhouseCoopers Consulting, provide him with expertise in enterprise risk management, corporate financial management, and financial reporting.

BIOGRAPHY

Mr. Tarkoff has been President and Chief Executive Officer of Lithium Technologies, a San Francisco-based computer software as a service (SaaS) platform leader in social customer solutions, since 2011. He was previously Senior Vice President and General Manager of Digital Enterprise Solutions at Adobe Systems, Inc., and prior to that served as Senior Vice President of Strategy, Ventures, and Mergers & Acquisitions. Prior to Adobe, he worked for EMC Corporation, serving as Senior Vice President and General Manager of the Input Management Software business, the Senior Vice President of Mergers and Acquisitions for EMC Software, and as the head of EMC's software outsourcing business. Prior to the acquisition of Documentum, Inc. by EMC, he was the Executive Vice President and Chief Strategy Officer of Documentum, where he was responsible for all strategic merger and acquisition activity, partner initiatives, indirect channel revenue, and product management. Before joining Documentum, Mr. Tarkoff was Executive Vice President at Commerce One, a business-to-business marketplace software solutions company. Prior to Commerce One, Mr. Tarkoff served as a securities associate at Wilson, Sonsini, Goodrich & Rosati. Mr. Tarkoff previously served on the boards of three publicly traded software companies; Onyx Software Corporation, Borland Software, and Advent Software. As a result of his current executive position at Lithium Technologies, as well as his former positions as a senior executive at other technology organizations, Mr. Tarkoff provides the Board with extensive and relevant executive leadership, worldwide operations and technology industry experience.

DIRECTOR NOMINATION PROCESS

When considering current directors for re-nomination to the Board, the nominating and governance committee assesses changes to any director’s qualifications, including their independence, and takes into account the performance of each director, which is part of the committee’s annual Board evaluation process. The nominating and governance committee then recommends actions for the Board to consider and adopt as it sees fit.

The nominating and governance committee has not established specific minimum age, education, experience, or skill requirements for potential members. Instead, the nominating and governance committee reviews the composition of the Board in light of the Company’s current challenges and needs and the current challenges and needs of the Board. Based on this review, the Board then determines whether it may be appropriate to add or remove individuals after considering, among other things, the need for audit committee expertise and issues of independence, diversity, judgment, character, reputation, age, skills, background, and experience. The nominating and governance committee values diversity as a factor in selecting nominees to serve on the Board and considers the criteria noted above in selecting nominees for directors, including members from diverse backgrounds who combine a broad spectrum of experience and expertise. The nominating and governance committee believes that the Board, as currently constituted, is well-balanced and that it fully and effectively addresses our needs.

When the Board decides to recruit a new member, or when the Board considers any director candidates submitted for consideration by our stockholders, it seeks strong candidates who, ideally, meet its standards of director independence, and who bring skills and capabilities that complement and enhance those of the Board as a whole. Additionally, all potential candidates should possess the following personal characteristics: (i) business community respect for his or her integrity, ethics, principles, insights, and analytical ability and (ii) ability and initiative to frame insightful questions, speak out, and challenge questionable assumptions and disagree without being disagreeable. In addition, the nominating and governance committee considers a wide range of other factors in determining the composition of the Board, including age, diversity of background, diversity of thought, and other individual qualities such as professional experience, skills, education, and training.

Nominations of candidates for the Board by our stockholders for consideration at our 2017 Annual Meeting of Stockholders are subject to the deadlines and other requirements described under “Stockholder Proposals” on page 77 of this proxy statement.

As part of the nominating and governance committee’s ongoing and active process for identifying and reviewing possible Board members, the nominating and governance committee considered a number of candidates in 2015-2016 to fill three vacancies on the Board. This process included extensive independent search efforts as well as consideration of candidates recommended by stockholders.

On June 19, 2016, following the Mr. Anenen's resignation as a director and as the Company's chief executive officer, and after a thorough evaluation of candidate qualifications in light of the Board’s criteria, the Board appointed Robert Tarkoff to fill the vacancy. Mr. Tarkoff was identified by a professional search firm retained by the nominating and governance committee and brings extensive software and technology experience to the Board.

On August 2, 2016, the Company entered into a letter agreement with Elliott Management, a stockholder. Under the agreement, the Company agreed to appoint two new Board members. Each of Ms. Martinson and Mr. Schuckenbrock were identified by the nominating and governance committee in consultation with Elliott Management, along with other potential candidates. The nominating and governance committee reviewed their candidacies, determined independently that they would each be an excellent fit for the Board, and recommended their appointment to the Board. On September 6, 2016, after a thorough evaluation of each candidate's qualifications in light of the Board’s criteria, Ms. Martinson and Mr.

Schuckenbrock were appointed to the Board. Ms.Martinson and Mr. Schuckenbrock both bring extensive software and technology experience to the Board.

In connection with the Board’s decision to add the two new Board members, Elliott Management has agreed to certain limited standstill and voting provisions through July 2017, including voting in favor of the Company’s proposed slate of directors at the Annual Meeting.

BOARD INDEPENDENCE

The Board is currently composed of nine non-employee directors and one employee director. The Board has established that ten directors will be the number that will constitute the full Board at the time of the Annual Meeting. Under our Corporate Governance Guidelines and the NASDAQ Stock Market (“NASDAQ”) listing standards, at least a majority of our Board must be independent. The Board’s standards of director independence are consistent with the NASDAQ listing standards. Directors meeting these standards are considered to be “independent.” The Board has affirmatively determined that all directors other than Mr. MacDonald meet these standards and are, therefore, considered to be independent directors. Mr. MacDonald does not meet these standards and is, therefore, not considered to be an independent director. Based on the these standards, all current members of the audit, compensation, and nominating and governance committees are independent.

THE BOARD'S ROLE AND RESPONSIBILITIES

We have robust policies and procedures for our directors and management and our commitment to good corporate governance is integral to our business. Our key governance practices are described below.

Corporate Governance Guidelines and Committee Charters

The Board has adopted Corporate Governance Guidelines. These guidelines address items such as the standards, qualifications, and responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us in general. The guidelines are subject to periodic review by the Board and to modification from time to time by the Board. The guidelines together with the charters of each of the Board’s audit, compensation, and nominating and governance committees are available under “Corporate Governance” in the “Investor Relations” section of our website at “http://www.cdkglobal.com”.

Corporate Hotline

We have established the independent CDK Global Ethics Hotline through Convercent, a global Internet and telephone information and reporting service, to allow any employee, director, or vendor to confidentially and anonymously (i) ask questions about our Code of Business Conduct and Ethics and other ethics and compliance issues and (ii) submit a report or complaint about any potential accounting, internal control, auditing, Code of Business Conduct and Ethics, or other violation or matter of concern (unless prohibited by local privacy laws in the jurisdiction of the reporting employee).

THE BOARD’S ROLE IN RISK OVERSIGHT

The Board provides oversight with respect to our enterprise risk assessment and risk management activities that are designed to identify, prioritize, assess, monitor, and mitigate the various risks we confront, including risks that are related to the execution of our business transformation plan and the achievement of other elements of our operational and financial strategy. The Board performs this oversight function periodically as part of its meetings and also through its committees, each of which examine various components of enterprise risk as part of its assigned responsibilities. The committees report on risk oversight matters directly to the Board on a regular basis. Management is responsible for implementing and supervising day-to-day risk management processes and reporting to the Board and its committees as necessary.

The audit committee focuses on financial risks, including reviewing with management, our internal auditors, and our Independent Auditor our major financial risk exposures, the adequacy and effectiveness of internal control over financial reporting, and the steps management has taken to monitor and control financial risk exposures. In addition, the audit committee reviews risks related to compliance with applicable laws, regulations, and ethical standards, and also operational risks related to information security and system disruption. The audit committee regularly receives, reviews, and discusses with management presentations and analyses on various risks we confront.

The nominating and governance committee oversees risks associated with Board structure and other governance policies and practices. The compensation committee oversees risks related to compensation matters.

STOCKHOLDER COMMUNICATIONS

Engagement and transparency with our stockholders provide us with useful feedback on a wide variety of topics, including governance, compensation, stockholder communication, Board composition, stockholder proposals, business performance, and operations. This information is shared regularly with our management and the Board and considered in the processes that set the governance practices and our strategic direction. We also focus on stockholder feedback to better tailor the public information we provide to address the interests and inquiries of our stockholders.

We interact and communicate with our stockholders through a number of forums, including quarterly earnings presentations, Securities and Exchange Commission (“SEC”) filings, annual meetings, investor conferences, and web communications.

In addition, the Board has endorsed the Shareholder-Director Exchange (SDX) Protocol as a guide for effective, mutually beneficial engagement between our stockholders and directors. The Board believes that management should speak for the Company and that the Chairman of the Board should speak for the Board. During fiscal 2016, the Chairman of the Board met with stockholders to discuss a variety of topics, including our strategy and performance.

In order to provide our stockholders and other interested parties with a direct and open line of communication to the Board, we have adopted the following procedures for communications to directors. Stockholders and other interested persons may communicate with the Board by written communications addressed in care of Lee J. Brunz, our Secretary, at CDK Global, Inc., 1950 Hassell Road, Hoffman Estates, IL 60169.

All communications received in accordance with these procedures will be reviewed initially by our Secretary who will relay all such communications to the appropriate director or directors unless it is determined that the communication (i) does not relate to our business or affairs or the functioning or constitution of the Board or any of its committees; (ii) relates to routine or insignificant matters that do not warrant the attention of the Board; (iii) is an advertisement or other commercial solicitation or communication; (iv) is frivolous or offensive; or (v) is otherwise not appropriate for delivery to directors.

The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board or one or more of its committees and whether any response to the person sending the communication is appropriate. Any such response will be made only in accordance with applicable laws and regulations relating to the disclosure of information.

The Secretary will retain copies of all communications received pursuant to these procedures for a period of at least one year. The Board will review the effectiveness of these procedures from time to time and, if appropriate, recommend changes.

In addition, anyone who has a concern about the Company’s conduct or about the Company's accounting, internal accounting controls or auditing matters may communicate those concerns directly to the audit committee. Such communications may be confidential or anonymous and may be submitted electronically, by phone or in writing to:

COMPLIANCE

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to our executive officers, directors, and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller, and persons performing similar functions. The Code of Ethics may be viewed on our website at www.cdkglobal.com under “Corporate Governance” in the “Investor Relations” section. In the event we amend or waive any of the provisions of the Code of Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer, controller, and persons performing similar functions that relates to any element of the definition of “code of ethics” enumerated in Item 406(b) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we intend to disclose these actions on our website within four business days following the date of the amendment or waiver.

Our credibility and reputation depend upon the good judgment, ethical standards, and personal integrity of each director, executive officer, and employee and we expect them to conduct themselves with the highest degree of integrity, ethics, and honesty. In order to better protect us and our stockholders, we regularly review our Code of Ethics and related policies to ensure that they provide clear guidance to our directors, executive officers, and employees.

CERTAIN RELATIONSHIPS AND RELATED PERSONS TRANSACTIONS

We have adopted a written Related Persons Transactions Policy (the “policy”), which sets forth our policy with respect to the review, approval, ratification, and disclosure of all related person transactions by our audit committee. In accordance with the policy, our audit committee has overall responsibility for implementation of and compliance with the policy. A “related person” means a director, executive officer, or beneficial holder of more than 5% of our outstanding common stock, or any immediate family member of the foregoing, as well as any entity at which any such person is employed, is a partner or principal (or holds a similar position), or is a beneficial owner of a 10% or greater direct or indirect equity interest. Our directors and executive officers must inform our general counsel at the earliest practicable time of any plan to engage in a potential related persons transaction. For purposes of the policy, a “related persons transaction” is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements or relationships) in which we were, are, or will be a participant and the amount involved exceeded, exceeds, or will exceed $120,000 and in which any related person (as defined in the policy) had, has, or will have a direct or indirect material interest. A “related persons transaction” does not include any employment relationship or transaction involving an executive officer and any related compensation resulting solely from that employment relationship that has been reviewed and approved by the Board, the compensation committee, or a group of independent directors performing a similar function. Further, we have determined that “related persons transactions” do not include transactions in which the related person’s interest derives solely from his or her service as a director of another entity that is a party to the transaction.

The policy requires that notice of a proposed related persons transaction be provided to our legal department prior to entry into such transaction. If our legal department determines that such transaction is a related persons transaction, the proposed transaction will be submitted to our audit committee for consideration at its next meeting or, in those instances in which the legal department, in consultation with the Chief Executive Officer or the Chief Financial Officer, determines that it is not practicable or desirable for us to wait until the next audit committee meeting, to the Chair of the audit committee. Under the policy, our audit committee or the Chair of the audit committee, as applicable, may approve only those related persons transactions (i) that are in our best interests or (ii) that are not inconsistent with our best interests. In the event that we become aware of a related persons transaction that has not been previously reviewed, approved, or ratified under the policy and that is ongoing or is completed, the transaction will be submitted to the audit committee or Chair of the audit committee so that it may determine whether to ratify, rescind, or terminate the related persons transaction.

The policy also provides that the audit committee will review certain previously approved or ratified related persons transactions that are ongoing to determine whether the related persons transaction remains in our best interests and the best interests of our stockholders.

Additionally, we make periodic inquiries of directors and executive officers with respect to any potential related persons transaction of which they, or any of their immediate family members, may be a party or of which they may be aware.

Agreements with ADP

We did not conduct any transactions with related persons in fiscal 2016 that would require disclosure in this proxy statement or approval by our audit committee; however, we have provided below a summary description of the separation and distribution agreement and other key related agreements we entered into with ADP prior to the spin-off. These agreements effected the spin-off and also provide a framework for our ongoing relationship with ADP. This description, which summarizes the material terms of these agreements, is not necessarily complete. You should read the full text of these agreements, which have

been filed with the SEC as exhibits to our Current Report on Form 8-K as filed with the SEC on October 1, 2014.

Because the spin-off involved the separation of ADP’s existing businesses, we negotiated these agreements with ADP while we were a wholly owned subsidiary of ADP. Accordingly, during this time our directors and officers were directors, officers, and employees of ADP and, as such, had an obligation to serve the interests of ADP. We believe our officers and officers of ADP negotiated these arrangements in good faith taking into account the interests of their respective companies in the spin-off.

Separation and Distribution Agreement

The separation and distribution agreement contains the key provisions relating to the spin-off. The separation and distribution agreement identifies the assets transferred, liabilities assumed, and contracts assigned to us by ADP and by us to ADP in the spin-off, and it describes when and how these transfers, assumptions, and assignments occur. In addition, it includes procedures by which ADP and we became separate and independent companies. It also contains the conditions that were satisfied, or waived by ADP, prior to completion of the spin-off.

In addition, we entered into certain ancillary agreements with ADP governing various interim and ongoing relationships between ADP and us following the spin-off. These ancillary agreements include the following:

Tax Matters Agreement

The tax matters agreement governs both our and ADP’s rights and obligations with respect to taxes for both pre and post spin-off periods. Under the tax matters agreement, ADP generally is required to indemnify us for any income taxes attributable to its operations or our operations and for any non-income taxes attributable to its operations, in each case for all pre spin-off periods as well as any taxes arising from transactions effected to consummate the spin-off, and we generally are required to indemnify ADP for any non-income taxes attributable to our operations for all pre spin-off periods and for any taxes attributable to our operations for post spin-off periods.

We are generally required to indemnify ADP against any tax resulting from the spin-off (and against any claims made against ADP in respect of any tax imposed on its stockholders), in each case if that tax results from (i) an issuance of a significant amount of our equity securities, a redemption of a significant amount of our equity securities or our involvement in other significant acquisitions of our equity securities (excluding the spin-off), (ii) other actions or failures to act by us (such as those described in the following paragraph), or (iii) any of our representations or undertakings referred to in the tax matters agreement being incorrect or violated. ADP will generally be required to indemnify us for any tax resulting from the spin-off if that tax results from (a) ADP’s issuance of its equity securities, redemption of its equity securities or involvement in other acquisitions of its equity securities, (b) other actions or failures to act by ADP or (c) any of ADP’s representations or undertakings referred to in the tax matters agreement being incorrect or violated.

In addition, to preserve the tax-free treatment to ADP of the spin-off, for specified periods of up to 24 months following the spin-off, we were generally prohibited, except in specified circumstances, from:

Though valid as between the parties, the tax matters agreement is not binding on the Internal Revenue Service (the “IRS”) and does not affect the several liability of ADP and us for all U.S. federal taxes of the consolidated group relating to periods before the spin-off.

Intellectual Property Transfer Agreement

We entered into an intellectual property transfer agreement with ADP. Under the agreement, ADP assigned to us certain patents, trademarks, copyrights, and other intellectual property developed or owned by ADP or certain of its subsidiaries and with respect to which we are the primary or exclusive user. The term of the agreement is perpetual after the spin-off date.

Employee Matters Agreement

We entered into an employee matters agreement with ADP prior to the spin-off pursuant to which certain employee benefits matters are addressed, such as the treatment of ADP options held by our employees after the spin-off and the treatment of benefits for our management employees who participated in and had accrued benefits under the ADP Supplemental Officers Retirement Plan. The agreement, to the extent provided therein, delineated the benefit plans and programs in which our employees participate following the spin-off.

Other Transactions with ADP

In addition to the transactions with ADP described above, we use human resources, payroll, and benefits administration services provided by ADP in the ordinary course of its business to third-party entities on terms and conditions that we believe are similar to those we could obtain from other providers of these services. We also use certain money movement services provided by ADP, act as a reseller of certain ADP payroll products, and provide certain equipment maintenance and installation services to ADP, in each case on what we believe to be arm’s length, commercially reasonable terms and conditions. In addition, we entered into arrangements with ADP relating to receivables ADP has previously financed for our clients, and related litigation, and to provide for a limited transition arrangement to transfer such financing arrangements to an independent third party.

BOARD STRUCTURE AND PROCESSES

Board Leadership Structure

Our corporate governance principles do not require the separation of the roles of Chairman of the Board and Chief Executive Officer because the Board believes that effective board leadership can depend on the skills and experience of, and personal interaction between, people in leadership roles. The Board is currently led by Mr. Brun, our independent non-executive Chairman of the Board. Mr. MacDonald, our President and Chief Executive Officer, serves as a member of the Board. The Board believes this leadership structure is in the best interests of our stockholders at this time. Separating these positions allows our Chief Executive Officer to focus on developing and implementing our business plans and supervising our day-to-day business operations, and allows our Chairman of the Board to lead the Board in its oversight, advisory, and risk management roles.

Board Self-Assessments

The nominating and governance committee oversees an annual self-assessment process, whereby each director is surveyed to obtain his or her evaluation of the Board as a whole and the committees on which he or she serves. The surveys solicit ideas from the directors about, among other things, improving quality of Board and committee discussions on key matters, and identifying specific issues which should be discussed in the future. After these evaluations are complete, our general counsel summarizes the results, provides a preview for the Chairman of the Board and the Chair of each committee and then submits the summaries for discussion by the nominating and governance committee. If necessary, action plans are developed by the nominating and governance committee and recommended for discussion by the full Board.

In addition, as part of the annual self-assessment process, the nominating and governance committee facilitates structural sessions in which directors are encouraged to provide feedback on the performance of their peers. The Chairman of the Board and/or the Chair of the nominating and governance committee communicate relevant feedback to each director and take further action as they deem appropriate.

Director Orientation and Continuing Education

The nominating and governance committee oversees our orientation programs for new directors and continuing education programs for directors.

Each new director, after joining the Board, is provided with orientation regarding the Board and our operations. As part of this orientation, each new director has an opportunity to meet with members of our senior management team.

Directors are also provided with continuing education on various subjects that will assist them in discharging their duties. Such continuing education may include presentations by our management or the Board’s advisors on our business, compliance efforts, applicable legal, regulatory or other developments or other matters as the Board, or the nominating and governance committee in its oversight of the Board’s continuing education program, may deem appropriate.

Outside Advisors

The Board and each of its principal committees may retain independent legal, financial, or other advisors of their choosing at our expense. The Board need not obtain management’s consent to retain outside advisors. In addition, the principal committees need not obtain either the Board’s or management’s consent to retain outside advisors.

BOARD COMMITTEES

The table below provides membership and meeting information for each of the committees of the Board. Green dots indicate that the member serves as the Chair of the committee.

All members of each committee satisfy the independence requirements of our Corporate Governance Guidelines, the applicable NASDAQ listing standards and any other applicable regulatory requirements currently in effect. Mr. Brun and Mr. Tarkoff are not members of any of these Board committees. Pursuant to the letter agreement with Elliott Management, the Board has agreed to appoint each of Ms. Martinson and Mr. Schuckenbrock to an appropriate committee of the Board, consistent with the Board’s normal course of operations, but no later than 150 days after their appointment to the Board. As of the date of this proxy statement no determination had been made as to either appointment.

Audit Committee

Compensation Committee

Nominating and Governance Committee

Board and Committee Meeting Attendance

During fiscal 2016, the Board held six meetings and committees of the Board held a total of 18 meetings. Overall attendance at such meetings was approximately 98%. Accordingly, all of our directors attended at least 75%, in the aggregate, of the meetings of the Board and the committees of which they were members during the periods that they served on the Board during fiscal 2016. It is also our policy that our directors attend the Annual Meeting. Last year all directors attended the Annual Meeting.

Executive Sessions of the Board

Executive sessions of the non-management directors are held during each Board meeting and the majority of committee meetings. Mr. Brun, our independent non-executive Chairman of the Board, presides at each executive session of the Board.

COMPENSATION OF NON-EMPLOYEE DIRECTORS

The compensation program for non-employee directors is designed to: (i) fairly pay directors for work required at a company of our size and scope; (ii) align directors’ interests with the long-term interests of our stockholders; and (iii) be simple, transparent, and easy for our stockholders to understand.

Overview

Our non-employee directors receive annual compensation as shown in the table below. There are no additional meeting fees. The Chairman of the Board and the Chairperson of each Board committee receive additional compensation due to the workload and broad responsibilities of these positions.

* In the event that our Chairman of the Board is a non-employee director, as is the case with Mr. Brun, he or she will receive both retainers.

Form of Payment

$145,000 of the $245,000 is paid in the form of restricted stock units (“RSUs”) and $100,000 may, at the election of each director, be paid in cash or in deferred stock units. One-half of the additional $150,000 paid to the Chairman of the board is paid in the form of deferred stock units and one-half may, at the election of the Chairman of the Board, be paid in cash or in deferred stock units. 100% of the committee Chair compensation is paid in cash or deferred stock units at the election of each committee Chair. All of our non-employee directors chose to receive the entire elective portion of their annual retainers in cash except for Ms. Hillman, who elected to receive the amount of her annual retainer in the form of deferred stock units.

Time of Payment

Equity awards, including mandatory and elective deferred stock units, are granted in full on or about the date of the Annual Meeting. Directors who elect to be paid in cash are paid the cash portion of their compensation quarterly in arrears beginning with the quarter following the effective date of appointment, and subsequently, beginning with the quarter following an Annual Meeting.

How Non-Employee Director RSUs Work

RSUs vest on the earlier of one year from the grant date and the date of our next annual meeting of stockholders. When a dividend is paid on our common stock, each director’s account is credited with a dividend equivalent in an amount equal to the cash dividend. When a director ceases to serve on the Board, such director will receive a number of shares of common stock equal to the number of RSUs in such director’s account and a cash payment equal to the dividend equivalents accrued, without interest. Non-employee directors do not have any voting rights with respect to their RSUs.

How Non-Employee Director Deferred Stock Units Work

Deferred stock units are fully vested when credited to a director’s account. When a dividend is paid on our common stock, each director’s account is credited with a dividend equivalent in an amount equal to the

cash dividend. When a director ceases to serve on the Board, such director will receive a number of shares of common stock equal to the number of deferred stock units in such director’s account and a cash payment equal to the dividend equivalents accrued, without interest. Non-employee directors do not have any voting rights with respect to their deferred stock units.

Other Compensation

One-Time RSU Award

On November 6, 2015, we also granted an additional one-time RSU award with a value of $150,000 to all non-employee directors, plus an additional (i) $50,000 RSU award to each committee Chair and (ii) $100,000 RSU award to the Chairman of the Board, in recognition of the additional work associated with engaging our significant stockholders and overseeing our business transformation plan. All such one-time RSU awards were granted under our 2014 Omnibus Award Plan (the “2014 Plan”), vest on the earlier of two years from the grant date and the second annual meeting of stockholders following the grant date, and were granted at the fair market value of the common stock as determined by the closing price of our common stock on the NASDAQ Global Select Market on the date of the grant.

Changes to Director Compensation

The nominating and governance committee periodically reviews director compensation, and in connection with the 2015 review, for the service year beginning immediately after the 2015 Annual Meeting, the Board increased the base non-employee director annual compensation from $205,000 to $245,000 with the elective cash portion increasing from $80,000 to $100,000 and the RSU portion increasing from $125,000 to $145,000. Factors bearing on this decision included the additional time, attention, and effort required of the directors in light of our transition to a stand-alone public company, our ongoing business transformation plan, and our ongoing engagement with certain significant stockholders.

Stock Ownership Requirements for Non-Employee Directors

The stock ownership requirements set forth in the Corporate Governance Guidelines are intended to promote ownership in our stock by our non-employee directors and to align their financial interests more closely with those of our other stockholders. Each non-employee director is required to hold a minimum level of ownership of our common stock and/or deferred stock units while serving as a director, equal to five times the annual cash retainer payable to each director. Directors will retain all shares of our common stock received pursuant to their service as a Board member until this minimum level is reached. Directors will have five years to attain this ownership threshold. In addition, non-employee directors are required to hold for at least one year the net shares obtained from exercising stock options after selling sufficient shares to cover the exercise price, taxes, and broker commissions. As of the end of fiscal 2016, the non-employee directors had satisfied, or progressed toward, the stock ownership guidelines as follows.

Anti-Hedging, Anti-Short Sale, and Anti-Pledging Policy

Our Insider Trading Policy prohibits directors, executive officers, and employees from purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of our common stock. Our directors, executive officers, and employees are also prohibited from engaging in short sales related to our common stock. The policy also prohibits any pledging of our common stock, including holding common stock in a margin account.

Director Compensation Table for Fiscal 2016

The following table presents compensation for our non-employee directors for fiscal 2016.

Footnotes:

Proposal 2: Advisory Vote to Approve Executive Compensation

As discussed in the Compensation Discussion & Analysis (“CD&A”) section of this proxy statement, the Board believes that our long-term success depends in large measure on the talents of our employees. Our compensation system plays a significant role in our ability to attract, retain, and motivate the highest quality workforce. The principal underpinnings of our compensation system are an acute focus on performance, stockholder alignment, sensitivity to the relevant marketplace, and a long-term orientation.

In accordance with Section 14A of the Exchange Act, we are asking our stockholders to vote on an advisory basis, commonly referred to as “say on pay,” to approve the compensation paid to our Named Executive Officers (“NEOs”) as disclosed in the CD&A, the compensation tables and the related narrative disclosure contained in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies, and practices described in this proxy statement.

This advisory proposal is not binding on the Board or us. Nevertheless, the views expressed by the stockholders, whether through this vote or otherwise, are important to management and the Board, and accordingly, the Board and the compensation committee intend to consider the results of this vote when making determinations in the future regarding NEO compensation arrangements.

Advisory approval of this proposal requires the vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

For fiscal 2016, the compensation committee consisted of Messrs. Deese, Miles, and Radway. No member of the compensation committee is an officer or employee of ours, and none of our executive officers serves as a director or member of a compensation committee of any entity that has one or more executive officers serving as a member of the Board or compensation committee.

RESULTS OF 2015 STOCKHOLDER ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

The compensation committee considers the outcome of prior stockholder advisory votes to approve executive compensation when making decisions relating to the compensation of the executive officers identified in the CD&A and our executive compensation programs and policies.

Stockholders expressed their support of our executive compensation programs with approximately 97% of the votes cast for approval of the “say on pay” proposal at the 2015 Annual Meeting. The compensation committee believes that the voting results conveyed our stockholders’ support for the philosophy, strategy and objectives of our executive compensation programs.

Furthermore, we continue to engage in direct dialogue with our stockholders regarding our executive compensation programs and policies to ensure that investors understand the manner in which our policies support our long-term strategic objectives. Through our proactive stockholder engagement process, we held discussions with 15 of our 20 largest stockholders during fiscal 2016 about various corporate governance and executive compensation-related issues.

COMPENSATION DISCUSSION & ANALYSIS

This CD&A section explains our compensation philosophy and summarizes the material components of our executive compensation program. Our NEOs for fiscal 2016 were:

The CD&A explains how our executive compensation programs are designed and operate with respect to our NEOs by discussing the following fundamental aspects of our compensation programs:

EXECUTIVE SUMMARY

During fiscal 2015, we initiated a three-year business transformation plan that is intended to increase operating efficiency and improve the cost structure of our global operations. When we announced our business transformation plan at the end of fiscal 2015, we communicated our intent to strengthen our financial profile and generate additional earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $250 to $275 million during a three-year period with a target adjusted EBITDA margin for fiscal 2018 of 35%. In pursuing this target, we expect to achieve a target adjusted EBITDA exit margin between 36-38% for the fourth quarter of fiscal 2018. In addition, we recently announced our goal to generate a target adjusted EBITDA exit margin of 40% or above for the fourth quarter of fiscal 2019.

We have not provided reconciliations of our fiscal 2018 and 2019 adjusted EBITDA targets to the most directly comparable GAAP measure of net earnings; however, the EBITDA reconciliation disclosed in Appendix A - GAAP to Non-GAAP Reconciliations is indicative of the reconciliations that will be prepared for the same fiscal 2018 and 2019 adjusted measures in the future.

To motivate our executive officers to achieve the adjusted EBITDA margin goal, the compensation committee tied the following CDK fiscal 2016 executive compensation elements directly to the target performance:

New Performance Stock Unit (“PSU”) Performance Criteria

New Annual Bonus Plan

Fiscal 2016 Executive Compensation Highlights

As described in more detail below with respect to fiscal 2016, the compensation committee took the following actions regarding compensation of our NEOs:

We granted PSUs to our executive officers that will be earned over a three-year performance cycle ending June 30, 2018, based on attainment of our targeted adjusted EBITDA margin goal for fiscal 2018 of 35% and total stockholder return relative to a performance peer group of companies (“fiscal 2016 PSUs”). If CDK’s CAGR is below 3%, final awards cannot exceed 100% of target. The payout percentage for these awards will be determined after the three-year performance period.

In addition, some of our executive officers (including the NEOs) were previously awarded PSUs in fiscal 2015 (“fiscal 2015 PSUs”) and fiscal 2014 (“fiscal 2014 PSUs”), which are measured over a three-year performance cycle consisting of three one-year performance periods. PSUs are deemed granted when the performance target is established. As such, we granted the second third of the fiscal 2015 PSUs and the final third of the fiscal 2014 PSUs during fiscal 2016. These tranches vest based on adjusted EBITDA margin for fiscal 2016 aligned with attainment of our business transformation plan and total stockholder return relative to a performance peer group of companies. If CDK’s CAGR is below 3%, final awards cannot exceed 100% of target. We achieved adjusted EBITDA margin of 26.6%, which was 169.9% of target in fiscal 2016, and total stockholder return was in the 59^th percentile of our performance peer group. Fiscal 2016 CAGR was 4.8%. As a result, the 2016 payout percentage earned for these PSUs was 185.2% of target. For a description of our PSU program, see “Performance-Based Stock Units” beginning on page 47 of this proxy statement.

A summary of fiscal 2016 total direct compensation for our NEOs is set forth in the following table, and additional detail is presented in the subsequent discussion as well as the tables and narratives that follow this CD&A.

Good Governance and Best Practices

We are committed to ensuring that our compensation programs reflect principles of good governance. The following practices are key aspects of our programs for fiscal 2016:

COMPENSATION PRINCIPLES

We believe that compensation should be designed to create a direct link between performance and stockholder value. Five principles that guide our decisions involving executive compensation are that an executive’s compensation should be:

Our compensation programs are designed so that target pay reflects the market for the executive’s skills and experience, and relative levels of responsibility among our key executives. In addition, the proportion of pay tied to operating performance and changes in stockholder value varies directly with executives’ levels of responsibility and accountability to stockholders. We assign all executives to pay grades by comparing their position-specific duties and responsibilities with market data and our internal management structure. Each pay grade has ranges for base salary, total annual cash compensation, and annual equity grants. Executives are positioned within these ranges based on a variety of factors, most notably their experience and skill set and their performance over time.

We design our performance-based compensation so that actual, realized compensation will vary relative to the target award opportunity based on performance. As such, actual compensation amounts may vary above or below targeted levels depending on the performance of a business unit and the achievement of individual performance goals. We have adopted this compensation design to provide meaningful incentives for our key executives to achieve superior results. We also believe that it is important for our executive

officers and other senior executives to have an ongoing long-term investment in us as outlined in this proxy statement under “Stock Ownership Guidelines.”

ELEMENTS OF COMPENSATION

The following table summarizes the major elements of our fiscal 2016 executive officer compensation programs.

Consistent with a pay for performance philosophy, compensation for Mr. MacDonald and the other NEOs is structured so that a significant portion of their total compensation is at-risk and paid based on meeting certain performance goals. The mix of target total direct compensation (base salary, cash bonus, and long-term incentive awards) for fiscal 2016 was designed to deliver the following approximate proportions

of total compensation to Mr. MacDonald, our Chief Executive Officer, and the other NEOs (on average) if company-wide and individual target levels of performance are achieved. Mr. MacDonald’s higher portion of at-risk compensation reflects his greater responsibility for overall Company performance.

¹ The fiscal 2016 performance-based pay for Mr. MacDonald is based on the terms of his employment agreement. Mr. MacDonald’s compensation mix excludes the Co-Invest RSUs included in his employment agreement.

COMPENSATION REVIEW AND DETERMINATION

Role of the Compensation Committee and Competitive Market Data

The compensation committee oversees and administers our executive compensation programs. Either before or near the beginning of the fiscal year the compensation committee reviews the executive compensation program and establishes base salaries, target annual cash bonus opportunities, and long-term incentive awards for executives and other eligible employees.

The compensation committee examines summary compensation sheets detailing the amounts and mix of base salary, cash bonus, and long-term equity incentives for each of the NEOs, which compare the amounts and mix to competitive compensation levels. We generally target base salary, annual cash bonus, and long-term equity incentives at the median of competitive compensation levels, but will set targets above or below the median when warranted in the judgment of the compensation committee. The degree to which target compensation ranges are above or below the median competitive rate is based on each executive’s skill set and experience relative to market peers. Executives who are new in their roles and therefore less experienced than market peers are typically positioned lower in the range, whereas executives with a long tenure in their role may be positioned higher in the range.

Role of the Compensation Consultant

Our compensation committee engaged Frederic W. Cook & Co. (“FW Cook”) to provide assistance with the design of our compensation programs regarding the amount and types of compensation that we provide our executives, and how these compare to peer company compensation practices. In June 2016, FW Cook examined the competitiveness of senior executive compensation levels and the Company’s aggregate share usage, dilution, and fair value cost of long-term incentives for all participants.

Representatives of FW Cook attend meetings of the compensation committee as requested and may also communicate with the Chair of the compensation committee outside of meetings. As part of its ongoing support to our compensation committee, FW Cook also reviews executive compensation disclosures, reviews and provides comments on changes to the committee’s charter, advises on emerging trends and

the implications of regulatory and governance developments, and reviews and provides commentary on materials and proposals prepared by management that are presented at the committee’s meetings.

Our compensation committee determined that the work of FW Cook did not raise any conflicts of interest in fiscal 2016. In making this assessment, the compensation committee considered the independence factors enumerated in Rule 10C-1(b) under the Exchange Act and applicable NASDAQ listing standards, including the fact that FW Cook does not provide any other services to us, the level of fees received from us as a percentage of FW Cook’s total revenue, policies and procedures employed by FW Cook to prevent conflicts of interest, and whether the individual FW Cook advisers to the compensation committee own any of our stock or have any business or personal relationships with members of the compensation committee or our executive officers.

Role of Competitive Market Data

Survey Market Data

With respect to the total cash and long-term incentive compensation for our Chief Executive Officer and other NEOs, the compensation committee reviews competitive compensation market data based on compensation surveys reflecting the pay practices of publicly traded companies and our compensation peer group, discussed below, as a second market reference. The surveys used were the Willis Towers Watson U.S. General Industry Executive Database, the Hewitt Associates Executive Total Compensation by Industry Survey, the Radford Global Technology Survey, and the Equilar Inc. Top 25 Database. In benchmarking compensation levels against the survey data, the compensation committee considered only the aggregated survey data and the identity of the companies included in the survey data is not disclosed to, or considered by, the compensation committee in its decision-making process. The companies included were based on a revenue range such that the median company revenue approximates the annual revenue for CDK Global or the executive’s business unit, as appropriate. The compensation committee also compared the aggregate level of each executive officer’s compensation and compared it against the executive’s previous year’s totals and against compensation of our other executive officers.

Peer Companies

For fiscal 2016 the compensation committee, in conjunction with FW Cook, reviewed and approved the use of a compensation peer group of 17 publicly traded companies in a variety of industries related to our business. The purpose of the compensation peer group is to generate competitive data together with the survey data discussed previously for the compensation committee’s review in connection with executive compensation decisions. FW Cook provided to the compensation committee a comparative analysis of the total compensation delivered to the Company’s executives compared to the compensation peer group and the survey data. The companies are selected based on GICS codes that are of a similar business model to CDK, and revenues that are 33% to 300% of CDK’s annual revenue. The fiscal 2016 peer group did not change from fiscal 2015 and includes:

Role of Executive Officers

The Chief Executive Officer provides recommendations to the compensation committee with respect to the NEOs’ overall performance and actual achievement against performance objectives, and in the determination of the NEOs' compensation, other than his own. The compensation committee takes the Chief Executive Officer’s general input into consideration when reviewing and approving compensation for NEOs other than the Chief Executive Officer.

The Chief Executive Officer and Chief Human Resources Officer participate in the development of the performance criteria measures and any plan design changes for CDK’s annual bonus and equity plans. The Chief Human Resources Officer presents the plan design changes to the compensation committee for their review and approval.

Cash Compensation

Base Salary

Base salaries represent fixed amounts paid to each executive for performing their normal duties and responsibilities. For fiscal 2016, the compensation committee determined the amount based on the executive’s overall performance in prior years, level of responsibility, pay grade, competitive compensation practices data, and comparison to our other executives. Based on these criteria, our NEOs received the following annual salary increases in fiscal 2016:

Annual Cash Bonus

Overview

For fiscal 2016, the compensation committee approved changes to the annual cash bonus plan that would further align our executives' incentives to our business transformation plan goals. The Committee increased the weight of financial objectives from 60% to 70%, and reduced the weight of individual strategic objectives from 40% to 30%. The fiscal 2016 financial objectives were: (i) adjusted revenue growth; (ii) adjusted EBITDA margin; and (iii) global sales growth. The compensation committee believes that the mix of financial and individual strategic goals motivates the NEOs to achieve critical growth objectives aligned with the business transformation plan, while also recognizing and rewarding individual contributions to CDK’s financial and strategic success.

The maximum bonus payout was 200% of target bonus levels. There was no minimum payment level, and the entire award opportunity would have been forfeited if threshold performance goals were not achieved.

At the beginning of fiscal 2016, the compensation committee established and approved the annual target bonus objectives and award opportunities for Mr. Anenen, our Chief Executive Officer at the time. The

compensation committee, with Mr. Anenen, set the annual target bonus objectives and award opportunities for the other NEOs based largely on the objectives and opportunities that were applicable to Mr. Anenen. The NEOs participate in the discussions regarding their bonus objectives so that they can provide their input and understand the expectations of each bonus plan component, but they do not participate in the actual establishment of the target award opportunities. In accordance with the terms of Mr. MacDonald’s employment agreement, his fiscal 2016 bonus was determined pursuant to the bonus plan and metrics already in effect for other senior executives of the Company when his employment began.

The compensation committee reviewed the performance of the NEOs relative to their annual fiscal year target bonus plan objectives at its regularly scheduled August meeting, which is the first meeting following the end of the fiscal year. Based on this review, the compensation committee determined and approved the annual cash bonuses for the NEOs.

NEOs’ Fiscal 2016 Bonuses

Following the conclusion of fiscal 2016, the compensation committee considered our performance and the performance of Mr. MacDonald, Mr. Anenen, and the other NEOs for fiscal 2016 against their bonus objectives, and assessed which of the individual bonus targets were met, exceeded, or not fully achieved. The chart below sets forth the approved annual cash bonuses for our NEOs:

Fiscal 2016 Target Bonus Objectives

The following table provides the fiscal 2016 targets and results for our annual bonus plan, and in the case of Mr. Karp the Automotive Retail North America (“ARNA”) division targets and results. Sales is an internal unit of measure that estimates the one-year value of sales transactions, and growth is determined by comparing fiscal 2016 measure sales to fiscal 2015. Client retention is an internal metric that measures the percentage of recurring revenue retained by ARNA. For purposes of our target bonus objectives, actual results include the impact of budgeted foreign currency exchange rates and will differ from externally reported results.

Each objective for our NEOs was satisfied as set forth below:

The bonus objectives were designed to reward the achievement of goals that are aligned with the key components of our operational and strategic success and the degree to which Mr. MacDonald, Mr. Anenen, and the other NEOs have responsibility for overall performance results and to provide a set of common objectives that facilitate collaborative engagement. The compensation committee established the financial goals for the NEOs defined above under “Fiscal 2016 Executive Compensation Highlights” within the “Executive Summary” as well as the following strategic objectives:

Strategic Objectives for Mr. MacDonald included:

Strategic Objectives for Mr. Nietzel included:

Strategic Objectives for Mr. Anenen included:

Strategic Objectives for Mr. Karp included:

Strategic Objectives for Mr. Brunz included:

Strategic Objectives for Mr. Thorne included:

Long-Term Incentive Compensation Programs

We believe that long-term incentive compensation is a significant factor in attracting and retaining key executives and in aligning their interests directly with the interests of our stockholders. For fiscal 2016, long-term incentives were awarded to the NEOs, other than Mr. MacDonald, in the form of PSU awards and stock option grants. The compensation committee selected these awards because they ensure that the overall long-term incentive program is tied closely to changes in stockholder value and the degree to which critical operating objectives are attained and they support our talent retention objectives. Mr. MacDonald received PSU awards and co-Invest RSUs in accordance with the terms of his employment agreement.

The compensation committee may also from time to time grant discretionary awards of time-based restricted stock. These awards are for special situations and are not considered in the target allocation of total long-term incentive compensation between PSU awards and stock option grants.

Each executive officer is awarded a target dollar value of stock options, PSUs, and, if applicable, restricted stock and RSUs. The target dollar value is converted into grants of the respective award based on the closing stock price on the date of grant.

As part of our annual market analysis of compensation data, we compare our long-term equity incentive grant values with competitive levels. We establish share grant target amounts or ranges of target amounts for each executive level by setting such target amounts, and the midpoints of such ranges of target amounts, at the market median levels. The compensation committee expects to review the share grant

targets and target ranges annually to ensure that the resulting awards based on current stock price and option fair value remain generally consistent with our median-based compensation philosophy.

Prior to the beginning of each fiscal year, we analyze the target PSU award and stock option grant levels to confirm that our desired target long-term incentive compensation values are appropriate in the context of the compensation studies referred to under “Compensation Review and Determination” above. When comparing our desired values to these compensation studies, we look at both equity elements in total.

At its September 2015 meeting, our compensation committee approved target awards for the fiscal 2016 PSUs for all NEOs. Additionally, to further drive delivery of significantly improved adjusted EBITDA margin results and value creation for stockholders, the compensation committee approved an additional one-time grant of PSUs, equal to the executive’s annual grant of PSUs. The fiscal 2016 PSUs were granted on November 6, 2015, when our stockholders approved the Plan. The fiscal 2016 PSUs will be earned in fiscal year 2019. Also at its September 2015 meeting, the compensation committee approved stock option grants for the named executive officers for fiscal 2016. The fiscal 2016 PSUs (inclusive of the annual and one-time grants), at target, stock options, restricted stock, and restricted stock units granted for fiscal 2016 are summarized in the table below (the fair market value of these awards can be found in the “Grants of Plan-Based Awards” Table on page 56 of this proxy statement):

Performance-Based Stock Units

For fiscal 2016, the compensation committee approved a PSU program based on financial objectives that are measured over a three-year performance period based on adjusted EBITDA margin. Potential payouts can range from 50% to 200% of target for threshold and maximum performance respectively. If threshold performance is not achieved, the PSUs will be forfeited. The number of PSUs earned is subject to further adjustment (increase or decrease) depending on the TSR of our common stock compared against a performance peer group of companies in similar GICS, as well as digital advertising/marketing companies. Lastly, if our CAGR over the three-year performance cycle is below 3%, awards are capped at 100% of target. The following table displays the adjusted EBITDA margin goals for the performance period, and the impact of relative TSR on the award payout:

We believe that this program is aligned to our business transformation plan to grow revenues and margin and furthers the Company’s long-term financial goals by aligning the compensation of our key executives with our long-term operating performance, to create commonality of interest between executives and stockholders, and to support talent retention objectives.

PSUs were awarded to our executive officers (including the NEOs) in fiscal 2015 and fiscal 2014. These awards consisted of three one-year performance periods as determined by the compensation committee. During fiscal 2016, the second third of the fiscal 2015 PSUs and the final third of the fiscal 2014 PSUs were granted when the compensation committee established a one-year adjusted EBITDA margin and TSR goals. The same performance peer group is used for the one-year TSR measurement period program as is used for the three-year program, and if CAGR over the one-year period is below 3%, awards are capped at 100% of target. The table below displays the one-year adjusted EBITDA margin goals, and the impact of relative TSR on the award payout:

For fiscal 2016, our adjusted EBITDA margin was 26.6%, TSR was in the 59^th percentile, and CAGR was 4.8%. As a result, the 2016 payout percentage earned for the fiscal 2016 performance period of outstanding PSUs was 185.2% of target.

After the conclusion of the three-year performance cycle for the fiscal 2016 PSUs, the compensation committee will confirm the adjusted EBITDA margin results to determine the percentage of target achieved based on such results by using straight-line interpolation between lower and upper bounds of the award range. The compensation committee will also confirm the three-year TSR and CAGR results. For the fiscal 2015 and fiscal 2014 PSU grants, after the end of the three-year performance period, the percentages for each of the individual three fiscal years in the performance period will be averaged to obtain the percentage of target award earned. The PSU award earned will also be credited with dividend equivalents from the grant date of the target award until the issuance date, assuming all dividends were reinvested in our stock at the time dividends are paid. The PSUs earned will be paid in the form of shares of our common stock in September following the conclusion of the three-year performance period.

The companies in our TSR performance peer group are:

Stock Options

We grant stock options to our officers annually based upon their pay grades and input from the Chief Executive Officer to the compensation committee for NEOs other than himself. Stock options have an exercise price equal to the closing market price of our common stock on the date of grant. Executives will realize value only if the market price of our common stock increases during the period the option is outstanding, which provides a strong incentive to our executives to increase stockholder value that can be sustained over time.

For fiscal 2016, the compensation committee approved the change to grant stock options in September 2015, the same time as our grant of PSUs. While the compensation committee can consider a stock option grant at any time, it expects to continue to make its regularly scheduled stock option grants at its September meeting of each calendar year. The compensation committee generally sets its calendar of meetings in November of each year, and does not coordinate the September meeting date, or any other meeting dates, with any regularly scheduled announcement or corporate event. Additional stock option grants may be made to assist us in recruiting, promoting, or retaining executives.

Time-Based Restricted Stock

The compensation committee may from time to time grant discretionary awards of restricted stock and RSUs to assist us in the recruitment, promotion, and retention of executives. During fiscal 2016, Mr. MacDonald was granted Co-Invest RSUs in accordance with the terms of his employment agreement. The compensation committee awarded Mr. Brunz a restricted stock award, granted in fiscal 2016, in recognition of the significant and unique time, attention and efforts associated with his responsibilities as our General Counsel and Secretary in connection with our transition to a stand-alone public company, our ongoing business transformation plan, and our engagement with certain significant stockholders during fiscal 2015.

Fiscal 2017 & 2018 Equity Grants

The compensation committee approved the continued use of PSUs and stock options for equity grants made in fiscal 2017. For fiscal 2017, in order to further align our executives' incentives to our business transformation plan goals, the compensation committee approved the “pull-forward” of all anticipated fiscal 2018 annual equity grants of PSUs and stock options. Such “pull-forward” grants were approved on September 8, 2016, along with the scheduled annual equity grants for fiscal 2017. As a result, it is not anticipated that the NEOs will receive fiscal 2018 annual equity grants in September 2017.

The fiscal 2017 portion of the PSU grant will vest at the end of fiscal 2019 and the fiscal 2018 “pull-forward” portion of the PSU grant will vest at the end of fiscal 2020. The fiscal 2017 portion will continue to be measured over the fiscal 2017-2019 performance period based on adjusted EBITDA margin, subject to adjustment based on relative TSR over the three-year performance period compared to our performance peer group, and revenue growth CAGR. The fiscal 2018 “pull-forward” portion will be measured over the fiscal 2018-2020 performance period based on a mix of adjusted EBITDA margin and adjusted EBITDA growth, subject to adjustment based on relative TSR over the three-year performance period compared to our performance peer group, and revenue growth CAGR.

Other Compensation Components and Considerations

In addition to the compensation components discussed above and the same health and welfare benefits and retirement benefits available to our U.S. associates generally, we offer the NEOs deferred compensation, limited perquisites, change in control protection, and severance benefits. We believe that these additional benefits are fair, competitive, and consistent with our overall compensation philosophy, and designed to ensure that we can effectively retain our NEOs and compete for executive talent.

Retirement Benefits

We do not provide a defined benefit plan to our employees. We do offer a non-elective contribution (“NEC”) that is deposited into 401(k) accounts of employees who, at the time of the spin-off from ADP, were age 50 with 10 years of service. This contribution was for the purpose of replacing value lost due to termination of associates’ participation in ADP’s Pension Retirement Plan. This plan will be in effect for 5 years following the spin-off from ADP.

Deferred Compensation

All of our executive officers are eligible to defer into a deferred compensation account all or a portion of their annual cash bonuses. We make this program available to our executive officers to be competitive, to facilitate the recruitment of new executives, and to provide our executive officers with a tax-efficient way to save for retirement. We do not match deferrals by these executive officers or otherwise contribute any amounts to the NEOs’ deferred compensation accounts. We generally do not consider the executive’s deferred account balances, or investment earnings or losses on such balances, when we make compensation decisions because the value of such accounts reflects voluntary contributions made by the individual executives and the earnings thereon. Cash bonus contributions are fully vested from the date of deferral. Participants can elect to have payment of deferred amounts commence on an in-service date or upon retirement, and the form of payment can either be in installments or lump sum. We also provide the CDK Global, Inc. Restoration Plan, which is designed to restore or replace company contributions that cannot be provided under the qualified 401(k) Plan due to IRS limits. Company contributions on eligible compensation above the IRS limits are deposited into the deferred compensation account.

Perquisites

We provide our NEOs with the use of automobiles leased by us. Consistent with our policy towards all attendees, we pay for the spouses of our executive officers to accompany them to our annual sales President’s Club event. As part of the Chief Executive Officer transition, we reimbursed the legal fees incurred by Mr. Anenen and Mr. MacDonald in connection with negotiating their agreements. The amounts were reported as additional income and taxed accordingly. Tax gross-ups were not made on these amounts.

Change in Control Severance Plan for Corporate Officers

Our Second Amended and Restated Change in Control Severance Plan for Corporate Officers is designed (i) to retain our corporate officers and (ii) to align their interests with our stockholders’ interests so that they can consider transactions that are in the best interests of our stockholders and maintain their focus without concern regarding how any such transaction might personally affect them. Each of our NEOs participates in this plan.

As described below under “Potential Payments To Named Executive Officers Upon Termination or Change in Control,” our Chief Executive Officer and the other participating executive officers have separation entitlements under the plan that differ from one another.

The severance formulas used for the Chief Executive Officer and the other participating executive officers are each designed to provide the level of temporary replacement income that we feel is appropriate for that office, but the compensation that our executive officers may receive after termination of employment or a change in control is not taken into account when current compensation levels are determined.

Our Second Amended and Restated Change in Control Severance Plan is described in more detail below under “Potential Payments To Named Executive Officers Upon Termination or Change in Control.”