NON-EMPLOYEE DIRECTOR COMPENSATION
We compensate non-employee directors for their service on the Board with a combination of cash and equity awards that we believe
are commensurate with their role and involvement, and consistent with peer company practices. We intend to compensate our non-employee directors in a way that is competitive, attracts and retains a high
caliber of directors, and aligns their interests to our stakeholders. The NGC annually reviews and makes recommendations to the Board regarding the level and form of compensation paid to non-employee
directors, including our director compensation program’s underlying principles. As part of this analysis, the independent compensation consultant also provides guidance to the NGC with respect to director compensation trends and data from peer
companies. Pursuant to the review, and in consideration of the independent compensation consultant’s advice, the NGC recommended no changes to the non-employee director compensation program for 2021.
Mr. Rajagopalan, who is a director and is also our President and CEO, does not receive any additional compensation for his service on our Board.
Directors may
elect to defer up to one hundred percent of their cash compensation per year pursuant to our Voluntary Deferred Compensation Plan (the “VDC
Plan”). All directors are reimbursed for their out-of-pocket expenses incurred in connection with their duties as
directors.
Each non-employee director receives an annual equity award of either restricted stock units (“RSUs”) or shares of common stock with a value of approximately $115,000, awarded on the date of each annual meeting of stockholders. The RSUs remain
unvested until the director retires from the Board. Additionally, non-employee directors receive a cash retainer of $75,000 each per year, payable quarterly in arrears. In addition, the Board chairperson and
committee chairpersons and members receive compensation for their service as outlined below.
|
|
|
|
|
|
| |
|
|
Role |
|
Cash Retainer
|
| |
|
|
AFC Member |
|
|
$ |
10,000 |
|
| |
|
|
AFC Chair (in addition to the AFC member retainer) |
|
|
$ |
30,000 |
|
| |
|
|
HRCC Chair |
|
|
$ |
30,000 |
|
| |
|
|
NGC Chair |
|
|
$ |
10,000 |
|
| |
|
|
Chairman of the Board of Directors |
|
|
$ |
100,000 |
|
| GOVERNANCE
25
The compensation of our non-employee directors, including all RSUs or shares
of common stock, for the 2021 fiscal year is set forth in the table below and described in the accompanying footnotes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Name |
|
Fees Earned or
Paid
in
Cash
($)1 |
|
Stock Award
($)2 |
|
All Other
Compensation ($) |
|
Total
($) |
| |
|
|
|
|
| Elizabeth L. Axelrod |
|
|
$ |
85,000 |
3 |
|
|
$ |
115,019 |
11 |
|
|
$ |
0 |
|
|
|
$ |
200,019 |
|
| |
|
|
|
|
| Mary E. G. Bear |
|
|
$ |
20,380 |
4 |
|
|
$ |
0 |
|
|
|
$ |
0 |
|
|
|
$ |
20,380 |
|
| |
|
|
|
|
| Laszlo Bock |
|
|
$ |
92,885 |
5 |
|
|
$ |
115,019 |
12 |
|
|
$ |
0 |
|
|
|
$ |
207,904 |
|
| |
|
|
|
|
| Clare M. Chapman |
|
|
$ |
42,693 |
6 |
|
|
$ |
0 |
|
|
|
$ |
0 |
|
|
|
$ |
42,693 |
|
| |
|
|
|
|
| Lyle Logan |
|
|
$ |
85,000 |
7 |
|
|
$ |
115,019 |
11 |
|
|
$ |
0 |
|
|
|
$ |
200,019 |
|
| |
|
|
|
|
| T. Willem Mesdag |
|
|
$ |
115,000 |
8 |
|
|
$ |
115,019 |
12 |
|
|
$ |
0 |
|
|
|
$ |
230,019 |
|
| |
|
|
|
|
| Stacey Rauch |
|
|
$ |
85,000 |
9 |
|
|
$ |
115,019 |
11 |
|
|
$ |
0 |
|
|
|
$ |
200,019 |
|
| |
|
|
|
|
| Adam Warby |
|
|
$ |
175,000 |
10 |
|
|
$ |
115,019 |
12 |
|
|
$ |
0 |
|
|
|
$ |
290,019 |
|
| 1 |
Reflects cash compensation earned by each director in 2021 and includes any amounts deferred at the director’s
election under our VDC Plan, described above. |
| 2 |
Reflects the grant date fair value for financial reporting purposes in accordance with Financial Accounting Standards
Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“ASC Topic 718”) for shares of common stock or RSUs granted under the Third Amended and Restated Heidrick & Struggles 2012 GlobalShare Plan (the
“GlobalShare Plan”). |
| 3 |
Ms. Axelrod earned an additional cash retainer of $10,000 as Chair of the NGC. |
| 4 |
Ms. Bear was appointed to the Board on September 23, 2021. This amount reflects the prorated cash retainer
Ms. Bear earned as a member of the Board. |
| 5 |
Mr. Bock was appointed Chair of the HRCC, effective May 27, 2021. Mr. Bock earned an additional prorated
cash retainer of $17,885 as Chair of the HRCC. All of Mr. Bock’s fees were deferred pursuant to our VDC Plan. |
| 6 |
Ms. Chapman retired from the Board on May 27, 2021. This amount includes the prorated cash retainer
Ms. Chapman earned as a member of the Board. Ms. Chapman earned an additional prorated cash retainer of $12,198 as the Chair of the HRCC. |
| 7 |
Mr. Logan earned an additional cash retainer of $10,000 as a member of the AFC. |
| 8 |
Mr. Mesdag earned an additional cash retainer of $30,000 as Chair of the AFC and $10,000 as a member of the AFC. All
of Mr. Mesdag’s fees were deferred pursuant to our VDC Plan. |
| 9 |
Ms. Rauch earned an additional cash retainer of $10,000 for being a member of the AFC. |
| 10 |
Mr. Warby earned an additional cash retainer of $100,000 as Chairman of the Board. All of the $175,000 in fees earned
were paid to Warby Ltd., a company in which Mr. Warby is the controlling shareholder. |
| 11 |
The amount reflects the aggregate grant date fair value of shares of common stock granted on May 27, 2021 (the date
of the 2021 annual stockholders’ meeting). The award was equal to the annual equity retainer of $115,000 divided by the closing stock price on the date of grant of $43.85 rounded to nearest whole share, resulting in 2,623 shares of common
stock. |
| 12 |
The amount reflects an award of RSUs granted on May 27, 2021 (the date of the 2021 annual stockholder meeting) with
the same value as the award of common stock described in footnote 11 above. The amount reflects the aggregate grant date fair value of RSUs granted on May 27, 2021, calculated in accordance with ASC Topic 718. The value of the award was
$115,000 divided by the closing stock price on the date of grant of $43.85 rounded to nearest whole share, resulting in 2,623 RSUs. As of December 31, 2021, the aggregate RSUs granted and outstanding were as follows: 7,623 for Mr. Bock, 0 for
Ms. Bear, 25,343 for Mr. Mesdag, and 14,144 for Mr. Warby. |
The Company’s stock ownership guidelines for directors require each non-employee director to own three times their annual cash retainer in Company common stock within three years of joining the Board. As of March 31, 2022, each of the
non-employee directors has either satisfied the stock ownership guidelines or is on track to do so in compliance with the guidelines.
26 GOVERNANCE |
EXECUTIVE OFFICERS
All of the Executive Officers have been appointed by and serve at the pleasure of the Board of Directors. Below is the name, age, present title, principal occupation
and certain biographical information for each of the Company’s Executive Officers as of April 1, 2022.
|
|
|
|
Krishnan
Rajagopalan |
|
Mr. Rajagopalan, 62, has been our President and Chief Executive Officer since July 6, 2017. He served as acting President and CEO from April 3, 2017 until July 6, 2017. Prior to becoming President and CEO,
Mr. Rajagopalan served as Executive Vice President and Managing Partner – Executive Search since January 2016. Previously, he served as Head of Global Practices beginning in April 2014 and was appointed an Executive Vice President on
January 1, 2015. Mr. Rajagopalan has served in other leadership roles with Heidrick, including Global Practice Managing Partner, Technology & Services from 2010 to 2014 and Global Practice Managing Partner, Business/Professional
Services from 2007 to 2010. Mr. Rajagopalan joined the firm in 2001 in executive search. He has served on the Board of the Company since July 6, 2017. |
|
|
|
Michael Cullen |
|
Mr. Cullen, 56, was appointed Chief Operating Officer on January 1, 2019. Mr. Cullen joined Heidrick in April 2008 and served as the Managing Partner – Americas Technology & Services through April 2014.
Mr. Cullen then served as Global Practice Managing Partner – Technology and Services from April 2014 through December 2017. From January 2018 to January 2019 he was Group Chief Operating Officer. In his current role as Chief Operating
Officer, he is responsible for global field operations, client operations, and practice management, across all lines of business and all industry practices. His team has full P&L responsibility and all field resources under their management. He
also oversees information technology and shared services. Prior to joining Heidrick, Mr. Cullen was the Head of the Office of Executive Talent at EMC Corporation (now Dell EMC). |
|
|
|
Mark Harris |
|
Mr. Harris, 51, was appointed Chief Financial Officer of the Company on March 19, 2018. He had been serving as the Deputy Chief Financial Officer of the Company since February 2018. Before then, since 2015, Mr. Harris
had been CFO at Hercules Capital, Inc. a publicly traded business development company, where he was responsible for finance, accounting, operations, legal and investor relations, as well as a voting member of the Investment Committee. Prior to that,
Mr. Harris worked at Avenue Capital Group for over nine years, where he served as their Senior Managing Director/Head of Asia, in which he led the entire Asian investment strategy and before that, their Chief Financial Officer. Prior to working
at Avenue Capital Group, from 2004 to 2006 Mr. Harris served as Corporate Financial Controller and Chief Accounting Officer at Hutchinson Telecommunications, a publicly traded telecommunications company based in Hong Kong. Prior to Hutchinson
Telecommunications, Mr. Harris was a Manager at PricewaterhouseCoopers in their Global Capital Markets Group. |
| GOVERNANCE
27
|
|
|
|
|
|
Sarah Payne |
|
Ms. Payne, 51, was appointed Chief Human Resources Officer on January 1, 2019. She is responsible for working closely with leaders within the firm and in setting and executing a global talent strategy that supports the
near and long-term business objectives for Heidrick. Ms. Payne joined Heidrick in 2015, serving as Vice President – Global Compensation and Human Resources, America until 2017 when she led global total rewards strategy and design, in
addition to leading HR for the Americas Region. From 2017 until her appointment as CHRO in 2019, Ms. Payne served as Vice President – Human Resources, Global Executive Search where she served as a business partner to Heidrick’s global
Executive Search leaders. Prior to joining Heidrick, Sarah held human resources leadership positions within Executive Compensation, Total Rewards, Talent Acquisition and as a Human Resources Director within global agribusiness and satellite
communications firms. |
|
|
|
Tracey Heaton |
|
Ms. Heaton, 52, was appointed Chief Legal Officer and Corporate Secretary on November 15, 2021. Most recently, from February 2015 to July 2020 Tracey served as Senior Vice President and Chief Corporate Counsel for Visa
Inc. and was a key member of the company’s senior legal leadership team. She advised Visa’s board of directors and C-suite executives and managed a team of more than 20 lawyers and legal
professionals. Under her leadership, her team provided legal support for a wide variety of commercial and corporate areas, including: mergers, acquisitions and strategic venture investments; securities and public company reporting; ESG; treasury and
finance; marketing and sponsorships; trademark portfolio and global entity management; and employment and executive compensation. Previously, Tracey served as Executive Vice President and Deputy General Counsel at NYSE Euronext Inc. and as Associate
General Counsel at United Technologies Corporation. Tracey also held roles as an associate in the corporate group of Milbank, Tweed, Hadley & McCloy, LLP, while based in New York and Hong Kong, and in the corporate department of Dechert
LLP. |
Each of our Executive Officers has entered into an employment agreement with the Company, which contain customary restrictive covenants
in favor of the Company. Each Executive Officer also participates in the Company’s MIP, CIC Plan, Severance Plan, equity programs and vacation and benefit plans at the same level as other senior executives, as outlined below in further
detail.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Various Company policies and procedures and annual questionnaires completed by all Company directors and Executive Officers require disclosure of transactions or
relationships that may constitute conflict of interest or otherwise require disclosure under applicable SEC and Nasdaq Rules. Pursuant to the Related Party Transaction Policy and committee charters, the NGC—in consultation with the
AFC—reviews and approves related party transactions.
The process for reviewing certain relationships and related party transactions are outlined in the
Company’s Related Party Transaction Policy, Director Independence Standards and Policy on Resolution of Conflicts of Interest for Directors and Executive Officers. Depending on the particular transaction or relationship, the Company’s
review processes vary. When such a transaction or relationship is identified at the Chief Executive Officer or Board level, the NGC and/or its Chair, or in the instance of a potential conflict with the Chair of the NGC, the Board as whole, evaluates
the transaction or relationship and approves or ratifies it (without the vote of any interested person) only if it is judged to be fair and in the best interests of the Company.
The Company’s Related Party Transaction Policy, Director Independence Standards and Policy on Resolution of Conflicts of Interest for Directors and Executive
Officers can be found at: https://investors.heidrick.com/corporate-governance. In addition, it is the practice of the NGC, although not part of a written policy, to review each transaction specifically disclosed as a potential related party
transaction in connection with its review of the proxy statement for the annual meetings of stockholders, to the extent any such transaction has not previously been reviewed, applying the same standard.
Pursuant to our Related Party Transaction Policy, on a semi-annual basis, as requested by the NGC or the Company’s Chief Legal Office, each director and Executive
Officer is required to disclose in writing to the Company all pertinent information regarding their related parties and each charitable or non-profit organization for which such director or Executive Officer
(or any of his or her related parties) is actively involved in fundraising or otherwise serves as a director, trustee or in a similar capacity.
There were no
related party transactions since January 1, 2021 that required approval under the Company’s policies and procedures or the rules and regulations of the SEC.
28 GOVERNANCE |
ADDITIONAL GOVERNANCE MATTERS
COMMUNICATION WITH THE BOARD
Stockholders may
communicate directly with the Board. All communications should be directed to:
Corporate Secretary
Heidrick & Struggles International, Inc.
233 South Wacker Drive, Suite 4900
Chicago, Illinois
60606
Any such communication should prominently indicate on the outside of the envelope that it is intended for the Board or a particular committee, or director.
All appropriate communication intended for the Board or a particular committee or director and received by the Corporate Secretary will be forwarded to the specified party following its clearance through normal security procedures.
| GOVERNANCE
29
Executive Compensation
PROPOSAL 2
Advisory
Vote to Approve Named Executive Officer Compensation
|
|
|
|
|
|
The Board and HRCC value the views of our stockholders, and currently conduct an annual advisory vote
to approve the compensation of our Named Executive Officers. The Say-on-Pay vote is advisory, and therefore not binding on the Company, the HRCC or our
Board. |
|
|
|
Pursuant to
Section 14A of the Securities Exchange Act, the Company seeks your advisory vote on our executive compensation programs. The Company asks that you support the compensation of our Named Executive Officers as disclosed in the Compensation
Discussion & Analysis (“CD&A”) section and the accompanying executive compensation tables and narratives contained in this proxy statement.
The CD&A section of this proxy statement discusses
our executive compensation philosophy, policies and structure during the most recently completed fiscal year. The HRCC and the Board believe that these policies and procedures are effective in implementing our executive compensation philosophy and
in achieving its goals. As an advisory vote, your
vote will not be binding on the Company or the Board. However, our Board and our HRCC, which is responsible for designing and administering the Company’s executive compensation program, value the opinions of our stockholders and to the extent
there is any significant vote against the compensation paid to our Named Executive Officers, we will consider our stockholders’ concerns and the HRCC will evaluate whether any actions are necessary to address those concerns. |
The Board and the HRCC recommend that our stockholders vote “FOR” the approval, on an advisory
basis, the compensation paid to our Named Executive Officers, as disclosed in this proxy statement, including the following CD&A section, the executive compensation tables, and the related narrative discussion, and adopt the following resolution
at the Annual Meeting: “RESOLVED, that approval, on an advisory basis, of the compensation paid to our named executive officers as disclosed in this proxy statement is hereby RATIFIED.”.
30 EXECUTIVE COMPENSATION |
Compensation Discussion & Analysis
INTRODUCTION
Heidrick is a leadership advisory
firm, assisting a broad range of clients across the globe in achieving their long-term business objectives by helping them to improve the effectiveness of their leadership teams. More specifically, the Company provides executive search, leadership
consulting and on-demand talent services through the expertise of its experienced consultants located in major cities around the world. The Human Resources and Compensation Committee (“HRCC”) seeks to ensure that the Company’s executive compensation program attracts, retains and rewards the best talent, while at the same time
maintaining a strong link between pay and performance and aligning the interests of the Company’s executives and stockholders. Heidrick’s executive compensation philosophy emphasizes and rewards both Company and individual performance. The
Company believes this approach promotes sustained long-term performance by rewarding not only the achievement of financial and operational goals, but also the accomplishment of individual strategic objectives. Further, this approach enables
profitable growth and advances our high-performance organization by using culture as a strategic differentiator to attract, develop, and retain the highest-performing talent, and to build a more diverse and inclusive Company.
Through our HRCC, the Company has implemented strong governance practices for considering and making decisions with respect to the compensation of the Company’s
Named Executive Officers. Management, the HRCC and the full Board all play active roles in executive compensation decisions.
|
|
|
|
|
|
|
|
|
|
|
This Compensation Discussion & Analysis
describes and explains the Company’s
compensation philosophy and
executive
compensation program, as well as
compensation awarded to and earned by
the following persons who were our
Named Executive Officers1
(“Executive
Officers” or “NEOs”) for 2021: |
|
|
|
Name |
|
Title |
| |
|
|
Krishnan
Rajagopalan |
|
President & Chief Executive Officer |
| |
|
|
Michael
Cullen |
|
Chief Operating Officer |
| |
|
|
Mark Harris |
|
Chief Financial Officer |
| |
|
|
Sarah
Payne |
|
Chief Human Resources Officer |
| |
|
|
Tracey Heaton |
|
Chief Legal Officer & Corporate
Secretary2 |
| |
|
|
Kamau
Coar |
|
Former Chief Legal Officer & Chief Inclusion Officer3 |
THE CD&A IS ORGANIZED INTO FOUR SECTIONS:
|
|
|
| 2. |
|
Executive Compensation Philosophy
|
|
|
|
| 3. |
|
2021
Compensation Program
|
|
|
|
| 4. |
|
Other
Compensation
Policies
and
Information |
| 1 |
This term does not include Mr. Kamau Coar other than when referring to the named executive officers of the Company for
2021. |
| 2 |
Ms. Heaton was appointed as the Company’s Chief Legal Officer and Corporate Secretary on November 15, 2021.
|
| 3 |
Mr. Coar’s employment with the Company was terminated on June 18, 2021. |
| EXECUTIVE
COMPENSATION 31
The CD&A is followed by the Compensation Tables and Narrative Disclosures, which report and describe the
compensation and benefit amounts paid to the NEOs for 2021.
2021 YEAR IN REVIEW
2021 was a record year for revenues and profitability.
| |
• |
|
Consolidated net revenue was $1,003.0 million compared to $621.6 million in 2020, an increase of 61.4%
|
| |
• |
|
Operating income in 2021 was $98.3 million and operating margin was 9.8% |
| |
• |
|
Adjusted operating income in 2021 was $113.4 million and adjusted operating margin was 11.3% |
| |
• |
|
General and administrative expenses in 2021 declined to 13.0% of net revenues, from 18.8% in 2020 |
| |
• |
|
Diluted earnings per share were $3.58 compared to a loss per share of ($1.95) in 2020 |
| |
• |
|
Adjusted diluted earnings per share were $4.11 compared to $1.77 in 2020 |
32 EXECUTIVE COMPENSATION |
Adjusted Operating Income and Adjusted Diluted Earnings Per Share are Non-GAAP financial
measures and include adjustments to Operating Income and Earnings Per Diluted Share in 2017 to exclude expense associated with the settlement with Her Majesty’s Revenue and Customs related to the taxation of a legacy U.K. benefit trust
obligation in Q1 2017, impairment charges, and restructuring charges. 2016 and 2019 also included restructuring-related adjustments. The adjustments in 2020 excluded expense associated with goodwill impairment charges and restructuring charges. The
adjustments in 2021 exclude restructuring charges and one-time expenses for increases to earnout payouts related to the Business Talent Group (“BTG”) acquisition in April 2021. BTG is a market leader
in providing clients access to on-demand top independent talent for leadership roles and critical projects. Adjusted Operating Margin refers to Adjusted Operating Income as a percentage of Net Revenue.
Total Shareholder Return is the value of $100 invested in shares of our common stock on December 31, 2016, assuming the reinvestment of dividends
during the following five-year period. The stock price performance depicted in the above graph is not necessarily indicative of future price performance. This graph will not be deemed to be filed as part of this proxy statement, and will not be
deemed to be incorporated by reference by any general statement incorporating this proxy statement into any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate this
information by reference. The annualized return represents the compounded annual growth rate of the Total Shareholder Return for the period beginning on December 31, 2016 and ending December 31, 2021.
A reconciliation of these Non-GAAP financial measures to the most directly comparable GAAP financial measures can be found on
Annexes A and B.
EXECUTIVE COMPENSATION PHILOSOPHY
The HRCC strives to design compensation programs for the Company’s executives that are competitive with firms in the executive search, leadership consulting and
management consulting space, both public and private, with which the Company competes for executive talent.
|
|
|
| |
|
This discussion explains: |
| |
|
| The objectives of
the Company’s compensation program for its NEOs. |
|
How the Company determines the amount to pay for each compensation element. |
| |
|
| What the
compensation program is designed to reward, each element of compensation within the program and why the Company chooses to pay each element. |
|
How each compensation element and the Company’s decisions regarding that element fit into the Company’s
overall compensation objectives and affect decisions regarding other elements. |
Pay-for-performance guides executive compensation for
Heidrick. The Company expects its NEOs to initiate and carry out sustainable growth strategies and to create long-term value for both the Company and its stockholders. Company performance,
| EXECUTIVE
COMPENSATION 33
incentives and retention are the primary factors in our executive incentive compensation program design. When measuring Company performance, the HRCC considers both qualitative and quantitative
factors relating to the Company’s business strategies and objectives. In assessing the individual performance of the NEOs, the HRCC considers, among other things, the NEO’s achievement of individual and shared performance objectives,
contributions to the Company’s strategic initiatives and demonstrated leadership qualities.
The HRCC regularly reviews the compensation program for the
Company’s executives to ensure that the program continues to meet the needs of the business, is competitive in the executive search and leadership consulting industry, and aligns the interests of the Company’s executives with those of the
Company’s stockholders. The Company’s executive compensation program may change from time to time based on the review and input of the HRCC.
Compensation Best Practices
|
| |
|
The Company’s compensation policies and practices include: |
| |
|
Independent HRCC. All of the members of the HRCC are independent. |
| |
|
Independent Compensation Consultant. The HRCC receives objective advice from an independent compensation
consultant. |
| |
|
Annual Assessment. The HRCC conducts an annual assessment of compensation policies to ensure that they
are aligned with the Company’s performance objectives, are competitive in the executive search and leadership consulting industry, and do not encourage undue risk. |
| |
|
Stock Ownership Guidelines. The CEO is required to own five times his or her annual base salary in
Company common stock, and all other NEOs are required to own two times their annual base salary. Effective February 2022, the HRCC approved revisions to the stock ownership guidelines which added share retention requirements, whereby the CEO or
other NEO must retain ownership of Company shares in an amount equal to 50% of the net after-tax value of any newly-vested RSUs, performance shares and/or PSUs until the applicable multiple requirement is met,
as further described on page 44. |
| |
|
Reward for Performance. A majority of each Executive Officer’s total direct compensation is tied to
the achievement of certain Company and individual performance goals. |
| |
|
Annual Payout Limits. The potential annual payout on incentive compensation elements is limited to 200%
of target, further described on page 38. |
| |
|
Long-Term Vesting. The Company encourages retention and long-term value creation by providing for equity
awards that vest over three years, commencing on the grant date anniversary. |
| |
|
No Excise Tax Gross-Ups. The Company does not provide excise tax
gross-ups to the Executive Officers. |
Strong Governance Practices Utilized in Determining Executive Compensation
Role of the HRCC. With respect to the Company’s NEOs, the HRCC
engages in a rigorous process in determining total compensation. This process involves setting Company performance and strategic and operational goals for the NEOs at the beginning of each year and evaluating the performance of the Company and NEOs
against those pre-established goals. The HRCC considers various additional factors in making its decisions regarding each NEO’s target total compensation opportunity. The specific factors include:
| |
• |
|
Company performance and relative stockholder return; |
| |
• |
|
Individual performance against pre-set goals and objectives for the year;
|
| |
• |
|
An individual’s experience and expertise; |
| |
• |
|
An individual’s position and scope of responsibilities; |
| |
• |
|
Retention considerations; |
34 EXECUTIVE COMPENSATION |
| |
• |
|
An individual’s compensation relative to other NEOs; |
| |
• |
|
The value of similar awards to NEOs at peer companies; |
| |
• |
|
An individual’s future potential with the Company; and |
| |
• |
|
The new total compensation that would result from any change and how the new total compensation compares to market data and
impacts the Company’s compensation expense. |
The HRCC determines and approves the compensation of the NEOs based on this evaluation. In
making its decisions, the HRCC does not apply formulaic weighting to any of the above factors.
To assist in evaluating the NEOs’ compensation, the HRCC has
retained the services of an independent compensation consultant, Pay Governance LLC, and considers recommendations from the CEO. The CEO does not provide such input as to his own compensation. The HRCC assesses the information it receives in
accordance with its business judgment. The HRCC is also guided by its independent compensation consultant with respect to compensation decisions.
Role of the Board. The HRCC, with input from the full Board, independently reviews the CEO’s performance and recommends the CEO’s compensation
to the Board. Based upon the recommendation of the HRCC, the full Board considers and determines the compensation of the CEO.
Role of the CEO. The CEO annually reviews the performance of each of the NEOs other than himself. Following these performance reviews, the CEO presents
compensation recommendations to the HRCC for consideration. The HRCC has full discretion to adopt, modify or reject any such recommendations.
Role of the Independent Consultant. The HRCC has retained an independent compensation consultant which reports directly to the HRCC and does no other work
for management. During 2021, the independent compensation consultant’s representatives participated in the HRCC meetings and provided guidance to the HRCC with respect to executive compensation, comparative peer group data, annual incentive
compensation and consultant pay programs. In supporting the HRCC, the independent compensation consultant provides the HRCC with an independent assessment of the CEO’s recommendations for compensation, reviews and confirms the peer group used
by the Company to prepare market compensation data, and provides ad hoc support to the HRCC, including discussing executive compensation and related corporate governance trends. In 2021, the HRCC determined that its compensation consulting
firm was independent and without conflicts of interest. This determination was reached after reviewing the independence factors set out in the Nasdaq Rules.
Use of a Peer Group. The HRCC evaluates the Company’s
executive compensation programs in comparison to those of a selected peer group, which in 2021 consisted of 12 similarly-sized public professional services companies. The HRCC reviews and approves peer group
composition each year. Navigant Consulting was removed from the 2021 peer group, as it was acquired by another company. TrueBlue, Inc. was added to the peer group in 2021, as a comparable company in the staffing and recruiting industry. The HRCC
uses the peer group to compare total direct compensation and each of the compensation elements for each NEO against those for positions at peer group companies with similar responsibilities. The HRCC also uses the peer group to review executive pay
programs and practices at those companies.
For 2021, the peer group consisted of the following companies:
|
|
|
| |
|
Peer Group |
| |
|
| Barrett Business
Services, Inc. |
|
ICF International, Inc. |
| |
|
| CBIZ, Inc. |
|
Kforce, Inc. |
| |
|
| CRA International,
Inc. |
|
Korn/Ferry International |
| |
|
| Cross Country
Healthcare, Inc. |
|
Resources Connection, Inc. |
| |
|
| FTI Consulting,
Inc. |
|
TrueBlue, Inc. |
| |
|
| Huron Consulting
Group, Inc. |
|
Volt Information Sciences, Inc. |
| EXECUTIVE
COMPENSATION 35
In determining compensation, the HRCC considers the peer group companies with which the Company directly competes for
executive talent. However, most of the Company’s executive search and leadership advisory competitors, from which executive talent is often recruited, are privately held and are not included in the above list of publicly traded companies. The
HRCC therefore also relies on its general knowledge of executive compensation levels and practices in the executive search and leadership consulting industry.
The
Company does not set a specific, relative percentile positioning for total direct compensation, or the elements of total direct compensation, as a target for NEO pay levels. Rather, the Company reviews the total direct compensation range for each
position and the mix of elements to ensure that compensation is adequate to attract and retain key executive talent. To ensure that compensation is linked to performance, the NEO compensation program is designed to deliver at least 65% of total
target compensation through variable pay. The NEO compensation program is also designed to ensure that a significant proportion of NEO compensation is delivered in the form of equity and thus aligns compensation with the interests of the
Company’s stockholders.
Stockholder Vote and Engagement on Executive Compensation
The Company held its annual non-binding stockholder advisory vote to approve executive compensation (“say-on-pay”) at the 2021 Annual Meeting of Stockholders. The stockholders
indicated their strong support for our 2020 executive compensation, with approximately 96.6% of voting stockholders casting their vote in favor of the say-on-pay
resolution.
The Company had regular and active discussions with its major stockholders on various topics throughout 2021 and, during those conversations,
stockholders did not raise any specific issues relating to the design of the Company’s executive compensation program. The Company did not make any changes to the executive compensation program as a result of the 2021 say-on-pay vote or its stockholder outreach efforts during 2021. The HRCC is dedicated to continuous improvement of the executive compensation program to reflect an
appropriate alignment of pay and performance, and will continue to seek and review stockholder perspectives when designing and implementing the Company’s executive compensation program.
2021 COMPENSATION PROGRAM
2021 Executive Total Target Direct Compensation Mix
The majority of total target direct compensation for the NEOs was variable compensation.
|
|
|
|
|
| 2021 Target Compensation Mix:
CEO |
|
2021 Target Compensation Mix: Other
NEOs |
36 EXECUTIVE COMPENSATION |
Consistent with the Company’s
pay-for-performance philosophy, the majority of direct compensation for the NEOs is variable. Our NEO compensation mix is generally split into three principal
components:
|
|
|
|
|
|
|
| |
|
|
|
|
Component |
|
Average
% Mix |
|
Objective |
|
What it Rewards |
| |
|
|
|
| Base Salary |
|
|
|
Pay competitive salaries to attract and retain executive talent necessary to develop, implement and execute Heidrick’s business strategy, and to reflect
responsibilities of the position, experience of the executive and the marketplace in which Heidrick competes for talent. |
|
Accomplishment of day-to-day job
responsibilities, taking into account individual performance and retention considerations. |
| |
|
|
|
| Annual Incentives (Cash Compensation) |
|
|
|
Motivate executives to generate outstanding performance and achieve or exceed the operating plan over a one-year
period and align annual compensation with annual performance and financial results. |
|
Achievement of specific pre-set performance thresholds related
to financial, operational and strategic objectives. |
| |
|
|
|
| Long-Term Incentive Equity Compensation |
|
|
|
Encourage achievement of long-term performance goals, align executive rewards with the interests of Heidrick’s stockholders through long-term stock price exposure, and
facilitate the accumulation of Heidrick shares by executives, thereby enhancing ownership and promoting retention. |
|
Share price growth and attainment of long-term financial goals, as well as retention. |
As discussed in greater detail below, total target direct compensation for each NEO in 2021 was as follows:
|
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|
|
|
|
|
|
|
|
|
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|
|
|
| |
|
|
|
|
Name |
|
Base Salary ($) |
|
Annual Incentives
MIP Target
(% of Base Salary)
|
|
Long-Term
Incentives
Equity Target ($)
(for March 2021
Awards) |
| |
|
|
|
| Krishnan Rajagopalan |
|
|
$ |
850,000 |
|
|
|
|
150 |
% |
|
|
$ |
1,600,000 |
|
| |
|
|
|
| Michael Cullen |
|
|
$ |
650,000 |
|
|
|
|
100 |
% |
|
|
$ |
800,000 |
|
| |
|
|
|
| Mark Harris |
|
|
$ |
450,000 |
|
|
|
|
100 |
% |
|
|
$ |
750,000 |
|
| |
|
|
|
| Sarah Payne |
|
|
$ |
300,000 |
|
|
|
|
75 |
% |
|
|
$ |
300,000 |
|
| |
|
|
|
| Tracey Heaton |
|
|
$ |
400,000 |
|
|
|
|
(1 |
) |
|
|
|
(1 |
) |
| |
|
|
|
| Kamau Coar |
|
|
$ |
350,000 |
|
|
|
|
75 |
% |
|
|
$ |
300,000 |
|
| 1 |
Ms. Heaton was appointed as the Company’s Chief Legal Officer and Corporate Secretary on November 15, 2021
and was not eligible for a 2021 performance bonus or annual equity award. |
| EXECUTIVE
COMPENSATION 37
Base Salary
Base salaries are reviewed annually by the HRCC against levels for positions with similar responsibilities at peer companies, using the comparative data prepared by the
HRCC’s independent compensation consultant. The HRCC then considers individual performance, internal pay equity, functional expertise, experience and scope of responsibilities. In 2021, Ms. Payne’s base salary increased from $275,000
to $300,000 and Mr. Coar’s base salary increased from $275,000 to $350,000. Both were increased to reflect a better alignment to the external market for their respective roles.
Annual Incentives
The Management
Incentive Plan (“MIP”) is the vehicle through which NEOs are rewarded with an annual cash bonus for achieving specific short-term performance
goals over a one-year period. The MIP rewards our NEOs for achieving key annual non-GAAP financial metrics and personal objectives.
The HRCC sets Company and individual performance goals for the NEOs during each year. These goals consist of both quantitative and qualitative performance objectives.
The HRCC considers the reviews conducted by the CEO of the other NEOs and conducts its own review of the CEO’s performance against those pre-established performance objectives, as well as Company
performance milestones achieved during the year. With respect to the CFO, the HRCC also considers input from the AFC Chair.
Historically, 15% of the NEOs’
earned annual bonus amounts were deferred each year and paid out equally over the following three years. A review of competitive data for the Company and its peer group confirmed the deferral feature was not competitive market practice, nor was it
deemed to be retentive. As a result, the HRCC approved the removal of this element of the MIP effective in 2021 and on a go-forward basis, such that all of the NEOs’ earned annual bonus amounts are paid
after the end of the fiscal year in which they were earned.
2021 MIP Metrics
The MIP metrics and targets that the HRCC selected for 2021 tie directly to our operational and strategic goals. Under the MIP, determination of the payout level (if
any) for each NEO award is based upon the achievement of a combination of Company performance metrics (weighted at 70%) and non-financial, strategic performance factors (weighted at 30%). For the latter, there
is a combination of shared and individual objectives. The objectives and rationale for selecting the MIP performance metrics for the year ended December 31, 2021, and the relative weight of each metric were as follows:
|
|
|
|
|
|
|
|
| |
|
|
|
Performance Metric |
|
Rationale for Using Performance Metric |
|
Weight |
| |
|
|
| Adjusted
Operating Income |
|
Measures the ability of the Company to efficiently translate revenues
to profits, which allows the Company to invest for the future and enhance stockholder returns. |
|
|
|
30 |
% |
| |
|
|
| Search Net
Revenues |
|
Coupled with profitability (above), focuses the NEOs on growing the
top line revenues of the Company while managing profitability. |
|
|
|
30 |
% |
| |
|
|
| Non-Search Net Revenues |
|
Aligns the NEOs to critical strategic objectives of diversifying the
Company’s revenues. |
|
|
|
10 |
% |
| |
|
|
| Non-Financial Strategic Goals |
|
Measures achievement of critical strategic objectives, both shared
and individual. |
|
|
|
30 |
% |
| |
|
|
| TOTAL |
|
|
|
|
|
100 |
% |
In 2021, after a review of competitive data for the Company and its peer group, the HRCC increased the maximum payouts available under
the plan from 150% to 200% of target to better align with the external market. The performance required to achieve maximum payouts was increased to be commensurate with the payout.
Payout amounts under the MIP were set for each metric based on “Minimum,” “Target” and “Maximum” performance levels and corresponding
award levels based on the Company’s business plan and other operational and environmental factors, specifically: Adjusted Operating Income, Search Net Revenues, Non-Search Net Revenues, and non-financial strategic goals. “Target”
38 EXECUTIVE COMPENSATION |
performance is the level at which a participant will earn 100% of his or her target award. Depending upon the relationship of the Company’s actual financial performance and the
individual’s annual evaluation, final payouts under the MIP may be as little as zero (at or below “Minimum” performance) and as high as 200%
of Target (at “Maximum” performance). The HRCC has discretion to modify any payouts (upwards or downwards) under the MIP as appropriate to
ensure plan objectives are met, taking into consideration a variety of Company specific or environmental factors.
These financial metrics were set taking
into account the Company’s strategic initiatives, historical financial performance, internal budgeting for the relevant year, external guidance and expected market conditions. In 2021, multi-year investments were expected to adversely affect
operating income. Further, emergence from 2020 economic conditions and the Company’s restructuring announced in August 2020 presented additional reasons for conservative targets. Consequently, the Adjusted Operating Income target for 2021 was
lower than the 2020 actual and 2020 target Adjusted Operating Income. As discussed above, the maximum bonus opportunity was increased to 200% of target in 2021. The performance required to achieve maximum performance for Adjusted Operating Income,
Search Net Revenues and Non-Search Revenues was 180%, 110% and 116% of target, respectively. In 2020, the comparable maximum performance required was 115%, 105% and 110% of target for these measures.
As demonstrated on page 32, the Company’s actual 2021 financial results were very strong, with a record year in terms of profitability (Operating Income: $98.3M;
Net Income: $72.6M) and revenues ($1.0B).
Each NEO also had non-financial strategic goals that were reviewed and approved
by the HRCC in early 2021, and were aimed at focusing each NEO’s attention in areas where they have the most potential for impacting the Company’s performance. Minimum, Target and Maximum Performance Levels for 2021, as well as the actual
performance results for both Company performance metrics and non-financial strategic metrics, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Operating
Income |
|
|
|
Search Net
Revenue |
|
|
|
Non-Search
Revenues |
|
|
|
Non-Financial
Strategic
Goals |
|
|
|
Total |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Performance
Minimum
Target
Maximum |
|
$17.2 million
$28.6 million $51.4 million |
|
|
|
$537.7 million
$566.0 million $622.6 million |
|
|
|
$56.0 million
$61.0 million $71.0 million |
|
|
|
|
|
|
|
|
|
|
| |
|
|
Target
Weighting:
% of Total
Bonus |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Actual
Performance |
|
$121.6 million1 425% of Target |
|
|
|
$867.7 million
153% of Target |
|
|
|
$67.6 million
111% of Target |
|
|
|
See below |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Bonus Result |
|
200% x 30% weight
60% |
|
|
|
200% x 30% weight
60% |
|
|
|
166% x 10% weight
16.6% |
|
|
|
200% x 30% weight
60% |
|
|
|
196.6% |
|
|
|
Results: All
NEOs |
|
|
| 1 |
For purposes of the MIP, Adjusted Operating Income includes adjustments of $23.3M to the Operating Income of $98.3M, which
the HRCC reviewed and approved. The adjustments are as follows: restructuring expenses of $3.8M, acquisition-related expenses of $8.8M, adjustments for mark-to-market
expenses on non-qualified deferred compensation plan and phantom stock of $5.1M, and adjustments of $5.6M related to the Company’s technology-driven offerings. |
| EXECUTIVE
COMPENSATION 39
NEO NON-FINANCIAL PERFORMANCE
As discussed above, for 2021, 30% of MIP performance was contingent on achieving non-financial strategic goals. These goals
include a combination of shared and individual objectives. Results for the objectives are quantified and reviewed with the HRCC. However, due to the nature of the objectives, all results are not publicly disclosed for competitive market reasons.
In 2022, the HRCC reviewed each NEO’s achievements relative to their non-financial strategic objectives and, in its
discretion, determined that such accomplishments exceeded expectations, resulting in a payout of 200% of target with respect to the non-financial portion of the bonus for each of the NEOs. Certain considerations of the HRCC when reviewing 2021 non-financial performance follows.
2021 was a unique year that presented new and unexpected challenges. The Company emerged from
2020 with expectations of a moderated market and slow recovery, but instead experienced a year of unprecedented growth in financial performance. Notably, the Company achieved 61% growth in revenues and record consultant productivity, with average
revenue per executive search consultant increasing from $1.5M in 2020 to $2.4M in 2021. The NEO team balanced year two of the global pandemic, which included another round of adjustments and adaptations to remote work and virtual delivery of its
services, as dictated by the COVID-19 pandemic. The team continued to lead with employee safety and well-being as the guiding principle. During this period of unexpected demand and growth, the team continued to drive the Company’s
transformation strategy and growth in all segments of the business, which included the acquisition of a new on-demand talent business and acquisitions within other geographies.
As a team, and in addition to the goals set in March 2021, the NEOs built on the foundations laid in 2020 with the following highlights:
| |
• |
|
Completed the acquisition of and many facets of integration with BTG, our newly acquired, on-demand talent business;
|
| |
• |
|
Built a new growth markets segment which included expanding and opening new markets in the Nordic region and Israel, and
pursuing growth through inorganic M&A opportunities; |
| |
• |
|
Re-envisioned office space which included reducing real estate footprint and
redesigning space in multiple offices to support the future of work; |
| |
• |
|
Extended and expanded credit facility from $175M to $200M in July 2021 for an extended term with a maturity in 2026;
|
| |
• |
|
Expanded key internal reporting and connectivity on key financial dashboards across multiple service lines;
|
| |
• |
|
Built new talent acquisition teams to support a record number of new hires in 2021, as a result of business demand and
growth; |
| |
• |
|
In a mainly remote environment, developed and deployed multiple learning and development frameworks to support skills and
action planning essential to support future business growth and development across multiple roles and functions; |
| |
• |
|
Advanced operational and policy-related decisions to support our new hybrid workplace model; |
| |
• |
|
Continued to keep safety of employees front and center when developing actions and policies around return to office,
actions to support employee well-being and psychological safety in year two of the global pandemic and in a year of record productivity within our Executive Search business; and |
| |
• |
|
Continued to advance internal and external philanthropic efforts and ESG internally and externally through client work.
|
|
| |
| 2021 Shared Objectives and
Accomplishments for all NEOs3 |
| |
| Strengthened a high performance, diverse and inclusive culture
measured through below-target attrition rates and through the number of diverse promotions and hires at Principal and Partner levels in 2021. |
| |
| Continued to build new digital products and
capabilities by launching strategy, hiring and aligning resources and go to market framework. |
| |
| Drove internal organizational understanding of the long-term
strategic plan through communication and development of quarterly and annual metrics. |
| 3 |
Ms. Heaton and Mr. Coar’s performance is excluded from the
NEO performance goals for 2021, because they were not respectively eligible for 2021 performance bonuses. Ms. Heaton was not eligible for a 2021 performance bonus pursuant to the terms of her joining the Company in November 2021.
Mr. Coar’s 2021 performance bonus was forfeited in connection with the termination of his employment in 2021. |
40 EXECUTIVE COMPENSATION |
KRISHNAN RAJAGOPALAN’S INDIVIDUAL PERFORMANCE
|
| |
| 2021
Accomplishments |
| |
| Created and implemented a new organizational structure to support
the long-term strategic plan. Further implemented metrics and a roadmap to achieve this plan. |
| |
| Enabled and refined Heidrick Consulting’s go-to-market strategy and revenue growth. |
| |
| Implemented broad organizational and leadership changes in support
of the strategic plan and go to market strategy. Continued to enhance the Company brand and build market presence and differentiation. |
MICHAEL CULLEN’S INDIVIDUAL PERFORMANCE
|
| |
| 2021
Accomplishments |
| |
| Achieved revenue growth and profitability in selected geographical
regions. Implemented a new leader of Growth Markets to expand markets in Poland, Israel, Russia and Ukraine (deals exited in 2022 due to current crisis and war); continued to build out our Nordics region with acquisitions in Finland and building in
Sweden. |
| |
| Continued growth and expansion of shared service
model. Expansion of shared services center across service lines and with key focus of on-boarding Project Administrators to support Principals, Partners and other leaders across Executive Search, Heidrick
Consulting, and Corporate segments. |
| |
| Improved margin within Europe and Heidrick Consulting. |
MARK HARRIS’ INDIVIDUAL PERFORMANCE
|
| |
| 2021
Accomplishments |
| |
| Completed inorganic expansion within Finland and new On-Demand business segment. |
| |
| Continued engagement and growth of stockholder
base. |
| |
| Created and implemented a real estate strategy to both reduce
operating costs and to support our hybrid workplace strategy with fluid office space and more spaces for teams to collaborate. |
| |
| Enhanced tools and efficiency within financial
reporting and operating processes. Built infrastructure to support new segments and growth. |
SARAH PAYNE’S INDIVIDUAL PERFORMANCE
|
| |
| 2021
Accomplishments |
| |
| Evolved talent acquisition strategies across regions and service
lines to support record hiring and growth in 2021 in alignment with our diversity, equity and inclusion aspirations. |
| |
| Advanced talent and internal development
capabilities by creating and implementing a new talent review process and by introducing a number of key new learning and development offerings to support account growth and development within multiple business segments and roles in support of
employee development, diversity, equity and inclusion goals, and overall employee engagement. |
| |
| Comprehensive review of, and changes to, key executive compensation
programs to implement market best practices in order to attract and retain top talent. |
| EXECUTIVE
COMPENSATION 41
The table below details the resulting payout under the MIP compared to target for each of our continuing NEOs other
than Ms. Heaton, who was not eligible for a 2021 performance bonus. Mr. Coar did not receive a 2021 bonus due to his departure from the Company in 2021:
Long-Term Incentives
Long-term incentives (“LTIs”) are the vehicle through which NEOs
are awarded the Company’s common stock for continued service and for achieving specific performance goals over a three-year period. These awards vest over a three-year period after the grant date. LTIs are designed to focus the NEOs on the
strategic goals necessary to increase stockholder value and further position the Company to succeed in a changing environment.
The LTI award targets are
based on the HRCC’s review of publicly disclosed data for the Company’s applicable peer group for each NEO position and internal pay equity considerations, as well as the CEO’s recommendations (other than with respect to himself) and
a review of individual performance and potential.
LTI awards issued to the NEOs in 2021 consist of:
|
|
|
| Performance Stock Units (“PSUs”) |
|
PSU awards are based on
performance over a three-year period, which provides greater focus on sustained long-term results. Each PSU represents a right to receive one share of the Company’s common stock upon vesting.
|
| Restricted Stock Units (“RSUs”) |
|
RSUs are service-based and vest in three equal
installments (specifically, on the first, second and third anniversaries of the date of grant). Each RSU represents a right to receive one share of the Company’s common stock upon vesting.
|
When issuing LTI awards, the Company calculates the number of RSUs and PSUs awarded to the NEOs by dividing the total dollar value of
the LTI award by the closing price of the Company’s common stock on the grant date (usually in March of the grant year). All outstanding RSUs and PSUs are credited with dividend equivalents that are payable in cash when and if the related units
vest. The primary purpose of crediting dividend equivalents on LTI awards is to align the participant with the value of being a stockholder over the course of the vesting period, but only to the extent the award vests.
In March 2021, LTI awards were issued to Messrs. Rajagopalan, Cullen, Harris and Coar and Ms. Payne, with 50% of the target value issued as PSUs and 50% of the
target value issued as RSUs. See the 2021 Grants of Plan-Based Awards Table on page 47 for more details on the equity grants that the HRCC approved.
42 EXECUTIVE COMPENSATION |
The following is a summary of the LTI awards issued in 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
NEO |
|
PSUs (Target) |
|
RSUs |
|
Award
Value1 |
| |
|
|
|
| Award
Date |
|
|
|
3/30/2021 |
|
|
|
|
3/9/2021 |
|
|
|
|
|
|
| |
|
|
|
| Award
Price |
|
|
$ |
35.15 |
|
|
|
$ |
36.95 |
|
|
|
|
|
|
| |
|
|
|
|
Krishnan Rajagopalan |
|
|
|
26,316 |
|
|
|
|
25,034 |
|
|
|
$ |
1,850,014 |
|
| |
|
|
|
| Michael Cullen |
|
|
|
11,380 |
|
|
|
|
10,825 |
(2) |
|
|
$ |
799,991 |
|
| |
|
|
|
|
Mark Harris |
|
|
|
11,380 |
|
|
|
|
10,825 |
|
|
|
$ |
799,991 |
|
| |
|
|
|
| Sarah Payne |
|
|
|
4,979 |
|
|
|
|
4,736 |
|
|
|
$ |
350,007 |
|
| |
|
|
|
|
Kamau Coar |
|
|
|
4,979 |
|
|
|
|
4,736 |
|
|
|
$ |
350,007 |
|
| 1 |
Value based upon number of RSUs and PSUs (at target) awarded multiplied by the closing share price on the date of the
award. |
| 2 |
Mr. Cullen received an additional award of 27,064 RSUs as described below. |
2019, 2020 and 2021 PSU Awards. The 2019 PSU awards for the
performance period 2019 – 2021, the 2020 PSU awards for the performance period 2020 – 2022 and the 2021 PSU awards for the performance period 2021 – 2023 were issued to Messrs. Rajagopalan, Cullen, Harris, and Coar and Ms. Payne.
The awards are subject to target goals for the Company’s three-year Adjusted Operating Margin, as established by the HRCC at the beginning of the three-year PSU performance period, and three-year Relative Total Shareholder Return (“R-TSR”) for the 2019 – 2021, 2020– 2022 and 2021 – 2023 performance periods, respectively. Vesting
for the awards will be weighted equally based upon the outcome of Adjusted Operating Margin and R-TSR. The peer group for the R-TSR metric consists of the constituents
of the S&P Human Resources and Employment Services Index. The HRCC will review the performance for the 2020 and 2021 PSU awards, and the vesting of the awards will be determined in early 2023 and 2024, respectively. The 2019 PSU vesting outcome
is as follows.
2019 PSU Awards. The table below
illustrates the structure of the 2019 – 2021 PSU awards with an equal weighting placed on each of the performance targets. For the three-year performance period of 2019 – 2021, the Adjusted Operating Margin was 11.4% ($257.3M of Adjusted
Operating Income, $2,261.4M of Adjusted Revenues) and the three-year R-TSR performance placed the Company at the 46th percentile of the applicable peer
group. As a result of the performance achieved, the HRCC approved a vesting percentage of 139% of the target number of PSUs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
Performance Target
3-year
Adjusted
Operating Margin |
|
Performance Target
Relative TSR
Ranking |
|
Percentage of Target PSUs Vesting |
| |
|
|
|
| Maximum |
|
>12.0% |
|
>75th %ile |
|
200% |
| |
|
|
|
|
Target |
|
8.0% |
|
50th %ile |
|
100% |
| |
|
|
|
| Threshold |
|
4.0% |
|
25th %ile |
|
50% |
| |
|
|
|
| |
|
<4.0% |
|
<25th %ile |
|
0% |
| EXECUTIVE
COMPENSATION 43
The PSUs issued to Messrs. Rajagopalan, Cullen and Harris and Ms. Payne in 2019 vested in 2022 at 139% of target
as follows. Mr. Coar’s employment terminated in 2021 and he accordingly forfeited his 2019 award of PSUs.
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Name |
|
Target PSUs
|
|
PSUs Vested
|
| |
|
|
|
Krishnan Rajagopalan |
|
23,455 |
|
32,602 |
| |
|
|
|
Michael Cullen |
|
9,964 |
|
13,850 |
| |
|
|
|
Mark Harris |
|
9,198 |
|
12,785 |
| |
|
|
|
Sarah Payne |
|
2,529 |
|
3,515 |
Special RSU Award to Mr. Cullen.
In March 2021, Mr. Cullen was awarded a special, one-time RSU award with a grant date value of $1,000,000. The award will vest ratably on an annual basis over a three-year period. The award was
provided to recognize Mr. Cullen’s contributions to continued improvements in the Company’s operating structure, commercial contributions within the market, and to further align Mr. Cullen with interests of the Company’s
stockholders.
Ms. Heaton’s Sign-On Awards. In connection with the commencement of her employment with the Company in November 2021, Ms. Heaton received a sign-on bonus of $125,000 and an RSU award with a grant date fair
value of $125,000, which vests in three equal installments on each of the first three anniversaries of the grant date for the RSUs. In the event that Ms. Heaton resigns from the Company for any reason or is terminated for cause (as defined in
her employment agreement), within two years of the sign-on award payment dates, Ms. Heaton will be required to reimburse the Company the amount of such payment, reduced on a
pro-rated basis by one twenty fourth (1/24th) per full month from the date of payment within 30 business days following the termination date.
Mr. Coar’s Separation Agreement. In connection with his
employment terminating in June 2021, Mr. Coar and the Company entered into a Separation Agreement and General Release (the “Coar Separation Agreement”), pursuant to which he received a cash payment in the amount of $87,500,
representing three months’ base salary, and three months of continued health coverage at active employee rates. These payments and benefits are included in the “All Other Compensation” column of the 2021 Summary Compensation Table
below.
OTHER COMPENSATION POLICIES AND INFORMATION
Stock Ownership Guidelines
To
enhance the alignment of NEOs’ interests with those of stockholders, the Company maintains stock ownership guidelines. The CEO is required to own five times his annual base salary in Company common stock, and all other NEOs are required to own
two times their annual base salary. Effective February 2022, the HRCC approved revisions to the stock ownership guidelines which added share retention requirements, and removed the previously required five-year timeframe for meeting the ownership
requirement. To the extent a covered employee becomes subject to these stock ownership guidelines and at that time does not own qualifying shares in an amount equal to or in excess of the relevant ownership multiple requirement, or falls below the
relevant ownership multiple requirement, the employee must retain ownership of Company common stock issued upon the vesting of Company RSUs or performance shares/PSUs, in an amount equal to 50% of the net
after-tax value of the newly vested RSUs, performance shares and/or PSUs until the applicable multiple requirement is met.
Equity interests that count toward the satisfaction of the ownership guidelines include HSII shares owned outright by the employee, HSII shares jointly owned, vested or
unvested restricted HSII shares, and unvested RSUs payable in HSII shares. Outstanding HSII stock options and performance shares/PSUs are not counted toward the guidelines. As of December 31, 2021, the NEOs all were on target to meet their
ownership guidelines within five years of appointment to their roles.
Hedging and Pledging Policy
Since 2013, the Company has had policies prohibiting hedging or pledging of Heidrick stock. Pursuant to our Insider Trading Policy, our officers, directors, and
employees shall not hold Heidrick securities in a margin account, pledge Heidrick securities as collateral
44 EXECUTIVE COMPENSATION |
for a loan, purchase financial instruments or otherwise engage in transactions that either hedge or offset any decrease in value of Heidrick securities. The full text of our Insider Trading
Policy, which includes details on our restrictions on hedging and pledging of Heidrick securities can be located on our website at: https://investors.heidrick.com/corporate-governance.
Clawback Policy
In December
2021 the Company amended its Clawback Policy whereby the HRCC on behalf of the Company may seek the recoupment of any incentive awards (cash or equity) given to: (1) any executive officer in the event of a financial restatement and/or
(2) any incentive plan participant in situations of fraud, bribery, or other intentional, illegal misconduct impacting the Company or which results in a breach of the Company’s Code of Ethics or knowing failure to report such acts of any
employee over whom such person had direct supervisory authority during the three-year period preceding the date the restatement is filed with the SEC or the date the HRCC determines a clawback is appropriate for misconduct. The full text of our
Clawback Policy can be found at: https://investors.heidrick.com/corporate-governance.
Tax Deductibility of
Executive Compensation
Section 162(m) of the Internal Revenue Code (“Section
162(m)”) limits the federal income tax deduction for annual individual compensation to $1 million for the current or former covered employees. In the past, Section 162(m)’s deduction
limit included an exception for “performance-based” compensation. This exception for “performance-based” compensation was eliminated in 2018. Although tax deductibility is one of many factors the Company considers when
determining executive compensation, the Company believes that the tax deduction limitation should not compromise its ability to design and maintain executive compensation arrangements that will attract and retain executive talent to compete
successfully.
Perquisites and Other Personal Benefits
Heidrick provides its NEOs with the same benefits that are provided to all employees generally, including medical, dental and vision benefits, group term life insurance
and participation in a 401(k) plan. The NEOs are also reimbursed for expenses incurred for an annual physical examination, financial planning services (maximum reimbursement for financial planning is $1,080 per year, or $3,150 if expenses are
incurred for the first time) and approved business club memberships.
Severance Arrangements
The Company has adopted other executive compensation arrangements, including a Change in Control Severance Plan (as described below) designed to retain executives in the
event of a change of ownership of the Company and a Management Severance Pay Plan designed to provide financial assistance to executives following termination of employment. The material terms and conditions of these plans are described in the
“Potential Payments Upon Termination or a Change in Control” section below.
Employment Agreements
Each of our continuing NEOs has entered into an employment agreement with the Company, which contains general employment
terms (including base salary and eligibility to participate in various incentive and benefit plans) and customary restrictive covenants in favor of the Company. These restrictive covenants contain
non-competition and non-solicitation restrictions for a period of 12 months after certain terminations of employment. Severance protection for our NEOs is generally
covered by our Management Severance Pay Plan and our Change in Control Severance Plan (described below) instead of by their employment agreements. However, our CEO’s employment agreement does provide for the following enhanced benefits:
(i) if he is entitled to receive severance payments under the Management Severance Pay Plan, he will also be entitled to a pro-rata bonus for the year of termination and (ii) he will receive the
benefits described in the Management Severance Pay Plan upon his resignation of employment for Good Reason (as defined in his employment agreement) instead of only upon a termination by the Company without Cause.
| EXECUTIVE
COMPENSATION 45
COMPENSATION TABLES AND NARRATIVE DISCLOSURES
2021 SUMMARY COMPENSATION TABLE
The table below
summarizes the total direct compensation paid or earned by each of the NEOs for the last three fiscal years, and only reflects information for those years in which the NEO was determined to be an NEO of the Company. The amounts in the Stock Awards
column indicate the fair value on the grant date associated with all grants awarded in the corresponding year and may not correspond with the amounts that the NEO will eventually realize with respect to these awards. The benefit, if any, actually
received from these awards will depend upon the future value of our common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Name & Principal
Position |
|
Year |
|
Salary
($)1 |
|
Bonus
($)2 |
|
Stock
Awards
($)3 |
|
Non-Equity
Incentive Plan
Compensation4 |
|
All Other
Compensation5 |
|
Total
($) |
|
|
|
|
|
|
|
|
| Krishnan
Rajagopalan President & Chief Executive Officer |
|
|
|
2021
2020
2019 |
|
|
|
|
850,000
850,000
850,000 |
|
|
|
|
—
—
— |
|
|
|
|
2,144,226
2,171,252
2,197,147 |
|
|
|
|
2,506,650
1,105,808
1,243,125 |
|
|
|
|
17,400
17,100
16,800 |
|
|
|
|
5,518,276
4,144,160
4,307,072 |
|
|
|
|
|
|
|
|
|
| Michael
Cullen Chief Operating Officer |
|
|
|
2021
2020
2019 |
|
|
|
|
650,000
650,000
650,000 |
|
|
|
|
—
—
— |
|
|
|
|
1,927,234
1,021,760
933,377 |
|
|
|
|
1,277,900
563,745
633,750 |
|
|
|
|
17,400
17,100
16,800 |
|
|
|
|
3,872,534
2,252,605
2,233,927 |
|
|
|
|
|
|
|
|
|
| Mark Harris
Chief Financial Officer |
|
|
|
2021
2020
2019 |
|
|
|
|
450,000
450,000
450,000 |
|
|
|
|
—
—
— |
|
|
|
|
927,219
851,466
861,622 |
|
|
|
|
884,700
390,285
438,750 |
|
|
|
|
17,400
17,100
16,800 |
|
|
|
|
2,279,319
1,708,851
1,767,172 |
|
|
|
|
|
|
|
|
|
| Sarah Payne
Chief Human Resources Officer |
|
|
|
2021
2020
2019 |
|
|
|
|
300,000
275,000
275,000 |
|
|
|
|
—
—
— |
|
|
|
|
405,672
340,587
236,904 |
|
|
|
|
442,350
178,881
201,094 |
|
|
|
|
17,103
11,000
15,125 |
|
|
|
|
1,165,125
805,468
728,123 |
|
|
|
|
|
|
|
|
|
| Tracey
Heaton Chief Legal Officer and Corporate Secretary 6 |
|
|
|
2021 |
|
|
|
|
51,795 |
|
|
|
|
125,000 |
|
|
|
|
125,021 |
|
|
|
|
0 |
|
|
|
|
2,000 |
|
|
|
|
303,816 |
|
|
|
|
|
|
|
|
|
| Kamau Coar
Former Chief Legal Officer & Chief Inclusion Officer 7 |
|
|
|
2021
2020
2019 |
|
|
|
|
175,000
275,000
275,000 |
|
|
|
|
—
—
— |
|
|
|
|
405,672
340,587
236,904 |
|
|
|
|
0
178,881
201,094 |
|
|
|
|
87,500
17,100
16,800 |
|
|
|
|
668,172
811,568
729,798 |
|
| 1 |
Amounts reflect base salary paid in the year pursuant to employment agreements. Mr. Cullen and Ms. Payne became
NEOs in 2019; Ms. Heaton started on November 15th with an annualized base salary rate of $400,000. |
| 2 |
The amount reported in this column for Ms. Heaton represents a sign-on bonus
paid to her in connection with the commencement of her employment in November 2021. |
| 3 |
Amounts reflect annual LTI awards granted under the GlobalShare Plan in a combination of PSUs and RSUs. The grant date
fair value of RSUs and PSUs was calculated in accordance with ASC Topic 718. The fair values of the RSUs were based on the closing price of the common stock on the grant date ($36.95). The PSUs are earned based 50% upon the Adjusted Operating Income
of the Company and 50% based upon the total shareholder return performance of the Company relative to a peer group. The fair value of the awards based on total shareholder return was determined using the Monte-Carlo simulation model. A Monte Carlo
simulation model uses stock price volatility and other variables to estimate the probability of satisfying the performance conditions and the resulting fair value of the award. The grant date fair value of the PSUs is $46.33 per share. The grant
date fair value of the PSU awards assuming achievement of maximum performance would be: Mr. Rajagopalan – $2,438,441; Messrs. Cullen and Harris – $1,054,471; Ms. Payne and Mr. Coar – $461,354. |
| 4 |
The Non-Equity Incentive Plan Compensation amounts in this column reflect
our annual Short-Term Incentive MIP awards for 2021. The performance goals were established by the HRCC in 2021, final evaluation of those performance goals was determined on February 3, 2022, and awards were paid in March 2022. These awards
are discussed in further detail beginning on page 38. |
| 5 |
The amounts reported in the All Other Compensation column for 2021 include a 401(k) employer matching contribution of
$17,400 for Messrs. Rajagopalan, Cullen, and Harris, $17,103 for Ms. Payne, and $2,000 for Ms. Heaton. For Mr. Coar, the amounts reflect $87,500 in base salary continuation payments made in accordance with his Separation Agreement and
General Release dated June 30th, 2021. |
| 6 |
Ms. Heaton was appointed as the Company’s Chief Legal Officer and Corporate Secretary on November 15, 2021.
|
| 7 |
Mr. Coar served as Chief Legal Officer & Chief Inclusion Officer until his employment terminated in June
2021. |
46 EXECUTIVE COMPENSATION |
2021 GRANTS OF PLAN-BASED AWARDS TABLE
The table below sets forth certain information with respect to awards that were granted during the fiscal year ended December 31, 2021 for each NEO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name &
Principal Position |
|
Grant
Date |
|
Date
of
HRCC
Action |
|
Estimated Future Payouts
Under
Non-Equity Incentive
Plan Awards3 |
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards4 |
|
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)5 |
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) |
|
Exercise
or Base
Price of
Option
Awards
($/Sh) |
|
Grant
Date
Fair
Value of
Stock
and
Option
Awards ($)6 |
|
Threshold
($) |
|
Target
($) |
|
Maximum
($) |
|
Threshold
(#) |
|
Target
(#) |
|
Maximum
(#) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Krishnan
Rajagopalan
President & Chief Executive Officer |
|
|
|
1
3/9/212
3/30/212 |
|
|
|
|
2/3/21
2/3/21
2/3/21 |
|
|
|
|
637,500
—
— |
|
|
|
|
1,275,000
—
— |
|
|
|
|
2,550,000
—
— |
|
|
|
|
—
—
13,158 |
|
|
|
|
—
—
26,316 |
|
|
|
|
—
—
52,632 |
|
|
|
|
—
25,034
— |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
0
925,006
1,219,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Michael
Cullen Chief Operating Officer |
|
|
|
1
3/9/212
3/30/212 |
|
|
|
|
2/3/21
2/3/21
2/3/21 |
|
|
|
|
325,000
—
— |
|
|
|
|
650,000
—
— |
|
|
|
|
1,300,000
—
— |
|
|
|
|
—
—
5,690 |
|
|
|
|
—
—
11,380 |
|
|
|
|
—
—
22,760 |
|
|
|
|
—
37,889
— |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
0
1,399,999
527,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mark Harris
Chief Financial Officer |
|
|
|
1
3/9/212
3/30/212 |
|
|
|
|
2/3/21
2/3/21
2/3/21 |
|
|
|
|
225,000
—
— |
|
|
|
|
450,000
—
— |
|
|
|
|
900,000
—
— |
|
|
|
|
—
—
5,690 |
|
|
|
|
—
—
11,380 |
|
|
|
|
—
—
22,760 |
|
|
|
|
—
10,825
— |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
0
399,984
527,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sarah Payne
Chief Human Resources Officer |
|
|
|
1
3/9/212
3/30/212 |
|
|
|
|
2/3/21
2/3/21
2/3/21 |
|
|
|
|
112,500
—
— |
|
|
|
|
225,000
—
— |
|
|
|
|
450,000
—
— |
|
|
|
|
—
—
2,490 |
|
|
|
|
—
—
4,979 |
|
|
|
|
—
—
9,958 |
|
|
|
|
—
4,736
— |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
0
174,995
230,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tracey
Heaton Chief Legal Officer and Corporate Secretary |
|
|
|
12/21/217 |
|
|
|
|
11/3/21 |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
2,894
—
— |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
125,021
0
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Kamau Coar
Former Chief Legal Officer & Chief Inclusion Officer 8 |
|
|
|
1
3/9/212
3/30/212 |
|
|
|
|
2/3/21
2/3/21
2/3/21 |
|
|
|
|
131,250
—
— |
|
|
|
|
262,500
—
— |
|
|
|
|
525,000
—
— |
|
|
|
|
—
—
2,490 |
|
|
|
|
—
—
4,979 |
|
|
|
|
—
—
9,958 |
|
|
|
|
—
4,736
— |
|
|
|
|
—
—
— |
|
|
|
|
—
—
— |
|
|
|
|
0
174,995
230,677 |
|
| 1 |
The amounts in this row reflect (i) a Non-Equity Incentive Plan Award
representing our annual Short-Term Incentive MIP awards for 2021 as established by the HRCC at the beginning of 2021. |
| 2 |
The amounts in this row include awards granted on March 9, 2021 consisting of: (i) an Equity Incentive Plan
Award representing an annual LTI PSU award issued under the GlobalShare Plan that will vest (if at all) after a three-year performance period; and (ii) an All Other Stock Award representing an annual LTI RSU award under our GlobalShare
Plan that will vest in three equal installments on each grant date anniversary subject to continued employment with the Company. |
| 3 |
With respect to our Non-Equity Incentive Plan Awards representing our annual
Short-Term Incentive MIP awards, the performance goals were established by the HRCC in 2021, the final evaluation of those performance goals was determined on February 3, 2022 and the payments for those awards were made in March 2022. The
amounts in the table reflect the range of potential MIP award payouts which may be as little as zero and as high as 200% of target. The amounts actually paid under the MIP for 2021 appear in the Non-Equity
Incentive Plan Compensation column of the 2021 Summary Compensation Table on page 46. |
| 4 |
With respect to our Equity Incentive Plan Awards representing our annual LTI PSU award issued under the GlobalShare
Plan, the awards are target-based equity grants that vest three years from the grant date, and are subject to the achievement of certain performance measures. The PSUs are stated at their target number of shares. Upon vesting, the recipients will
receive anywhere from 0% to 200% of the target number of shares based on actual Company performance over the performance period. The unvested PSUs are credited with dividend equivalents which are payable in cash to the extent the shares subject to
the PSUs vest. |
| 5 |
With respect to our All Other Stock Awards representing our annual LTI RSU award issued under the GlobalShare Plan,
the awards are service-based equity awards that vest in three equal installments on the first, second and third anniversaries of the date of grant, generally subject to the executive’s continued employment with the Company. All unvested RSUs
are credited with dividend equivalents which are payable in cash to the extent the shares subject to the RSUs vest. |
| 6 |
Reflects the grant date fair value of RSUs and PSUs calculated in accordance with ASC Topic 718. The grant date fair value
of RSUs and PSUs was calculated in accordance with ASC Topic 718. The fair values of the RSUs were based on the closing price of the common stock on the grant date ($36.95). The PSUs are earned based 50% upon the Adjusted Operating Income of the
Company and 50% based upon the total shareholder return performance of the Company relative to a peer group. The fair value of the awards based on total shareholder return was determined using the Monte-Carlo simulation model. A Monte Carlo
simulation model uses stock price volatility and other variables to estimate the probability of satisfying the performance conditions and the resulting fair value of the award. The grant date fair value of the PSUs is $46.33 per share.
|
| 7 |
Upon joining the Company, Ms. Heaton received an award of 2,894 RSUs, which vests in three equal installments on each
of the first three anniversaries of the grant date, subject to continued employment with the Company. |
| 8 |
Mr. Coar served as Chief Legal Officer & Chief Inclusion Officer until his employment terminated in June
2021. Outstanding, unvested RSUs and PSUs were forfeited effective June 2021. |
| EXECUTIVE
COMPENSATION 47
2021 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE
The table below includes certain information with respect to RSUs and PSUs previously awarded under our GlobalShare Plan to the NEOs that were outstanding as of
December 31, 2021. The market value of each award was determined using our closing stock price on December 31, 2021 (the last trading day of 2021), of $43.73. No stock options were outstanding as of December 31, 2021.
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| Name &
Principal
Position |
|
Number of Shares or
Units of Stock that
Have Not Vested
(#) |
|
Market Value of Shares
or Units of Stock that
Have Not Vested
($)1 |
|
Equity Incentive
Plan
Awards: Number of
Unearned Shares, Units,
or Other Rights that
Have Not Vested (#) |
|
Equity Incentive Plan
Awards: Market or Payout
Value of Unearned Shares,
Units or
Other Rights that
Have Not Vested ($)1 |
|
|
|
|
|
| Krishnan
Rajagopalan President & Chief Executive Officer |
|
|
|
7,819
27,209
25,034 |
2
3
4 |
|
|
|
341,925
1,189,850
1,094,737 |
|
|
|
|
32,602
81,626
52,632 |
5
6
7 |
|
|
|
1,425,685
3,569,505
2,301,597 |
|
|
|
|
|
|
| Michael
Cullen Chief Operating Officer |
|
|
|
3,322
12,804
37,889 |
2
3
4 |
|
|
|
145,271
559,919
1,656,886 |
|
|
|
|
13,850
38,412
22,760 |
5
6
7 |
|
|
|
605,661
1,679,757
995,295 |
|
|
|
|
|
|
| Mark Harris
Chief Financial Officer |
|
|
|
3,066
10,670
10,825 |
2
3
4 |
|
|
|
134,076
466,599
473,377 |
|
|
|
|
12,785
32,010
22,760 |
5
6
7 |
|
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|
559,088
1,399,797
995,295 |
|
|
|
|
|
|
| Sarah Payne
Chief Human Resources Officer |
|
|
|
843
4,268
4,736 |
2
3
4 |
|
|
|
36,864
186,640
207,105 |
|
|
|
|
3,515
12,804
9,958 |
5
6
7 |
|
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|
153,725
559,919
435,463 |
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| Tracey Heaton
Chief Legal Officer & Corporate Secretary |
|
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2,894 |
8 |
|
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126,555 |
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0 |
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0 |
|
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| Kamau Coar
Former Chief Legal Officer & Chief Inclusion Officer 9 |
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0 |
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0 |
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|
0 |
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|
|
|
0 |
|
| 1 |
The market value of the stock awards and equity incentive plan awards was determined using our closing stock price on
December 31, 2021: $43.73. |
| 2 |
Consists of RSUs granted on March 8, 2019. The remaining RSUs vest on March 8, 2022. |
| 3 |
Consists of RSUs granted on March 9, 2020. The remaining RSUs vest one-half
each on March 9, 2022 and March 8, 2023. |
| 4 |
Consists of RSUs granted on March 9, 2021. The remaining RSUs vest ratably on March 9, 2022, March 9, 2023,
and March 9, 2024. |
| 5 |
Consists of the unvested portion of PSUs granted on March 8, 2019 for Messrs. Rajagopalan, Cullen, Harris, and Payne,
which are performance-based equity grants that vest three years from the grant date, and are subject to the achievement of certain performance measures. The PSUs vested on March 8, 2022 at 139% of target as per the terms of the PSU program.
|
| 6 |
Consists of the unvested portion of PSUs granted on March 9, 2020, which are performance-based equity grants that
vest three years from the grant date, and are subject to the achievement of certain performance measures. The number of shares that vest will range from 0% to 200% of target based on actual Company performance over the performance period. In
accordance with SEC Rules, the value is calculated at 200% of target based upon performance to date, which has trended above target. |
| 7 |
Consists of the unvested portion of PSUs granted on March 9, 2021, which are performance-based equity grants that
vest three years from the grant date, and are subject to the achievement of certain performance measures. The number of shares that vest will range from 0% to 200% of target based on actual Company performance over the performance period. In
accordance with SEC Rules, the value is calculated at 200% of target based upon performance to date, which has trended above target. |
| 8 |
Consists of the unvested portion of RSUs relating to the award of 2,894 RSUs provided to Ms. Heaton in December 2021
upon joining the Company and which vest ratably on December 21, 2022, December 21, 2023 and December 21, 2024. |
| 9 |
Mr. Coar forfeited his outstanding equity awards in connection with the termination of his employment in June 2021.
|
48 EXECUTIVE COMPENSATION |
2021 OPTION EXERCISES AND STOCK VESTED TABLE
The table below includes certain information with respect to the vesting of RSUs and PSUs for the NEOs during the fiscal year ended December 31, 2021. There are no
outstanding stock options for our NEOs. The Company has not issued stock options since September 2008. The options granted in September 2008 had a ten-year term and have expired.
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| |
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Stock Awards |
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| Name & Principal
Position |
|
# of Shares Acquired
on Vesting (#)1 |
|
Value Realized on
Vesting
($)2 |
|
|
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| Krishnan
Rajagopalan Chief Executive Officer & President |
|
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|
73,413 |
|
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2,629,929 |
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| Michael
Cullen Chief Operating Officer |
|
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25,397 |
|
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|
941,773 |
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| Mark Harris
Chief Financial Officer |
|
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|
25,307 |
|
|
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|
907,813 |
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| Sarah Payne
Chief Human Resources Officer |
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|
4,015 |
|
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|
149,206 |
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| Tracey Heaton
Chief Legal Officer & Corporate Secretary |
|
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0 |
|
|
|
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0 |
|
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|
|
| Kamau
Coar Former Chief Legal Officer & Chief Inclusion Officer |
|
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|
8,106 |
|
|
|
|
291,154 |
|
| 1 |
The amounts reflect the number of units converted into common shares on a one-for-one basis from grants issued as follows: Mr. Rajagopalan: RSUs issued in 2018, 2019, and 2020, PSUs issued in 2018, and PRSUs issued in 2017; Messrs. Cullen, Harris, and Coar: RSUs issued in 2018,
2019 and 2020 and PSUs issued in 2018; Ms. Payne: RSUs issued in 2018, 2019, and 2020. In connection with the vesting of shares in this column, related dividend equivalents were paid to each Executive Officer of $109,181 to Mr. Rajagopalan, $35,597
to Mr. Cullen, $36,757 to Mr. Harris, $4,225 to Ms. Payne, and $11,343 to Mr. Coar. |
| 2 |
The amounts reflect the pre-tax value of the number of RSUs and PSUs vesting
multiplied by the closing market price of our stock on the date of vesting. In those cases where the date of vesting falls on a weekend or holiday, the closing market price of the stock on the next business day is used. |
PENSION BENEFITS
Pension benefits are not
provided to any of the NEOs.
NONQUALIFIED DEFERRED COMPENSATION
Pursuant to Heidrick’s U.S. Employee Deferred Compensation Plan (the “EDC Plan”), each NEO (based in the U.S. only) may defer up to 25% of his or her base salary and up to 25% of his or her cash incentive compensation not to exceed $500,000 per year. The purpose of the EDC Plan is to facilitate
future wealth creation and individual financial planning by deferring payments earned today to the future.
A participant completes an election form at the
time he or she enrolls in the EDC Plan and chooses from investment funds offered by the EDC Plan Administrator. The Company does not contribute to the amount deferred nor does it provide above market rates on the investment funds. The Administrator
calculates the earnings for the funds selected for each participant’s account. A participant makes distribution elections on the enrollment form and can elect to receive his or her distributions on either a date specified in the future (as long
as it is at least three years from the effective date that contributions begin) or upon termination. A participant can also elect to receive his or her distributions in either a lump sum or in installments (over five, ten or fifteen years) paid
quarterly on a declining balance approach.
| EXECUTIVE
COMPENSATION 49
In 2021, the only NEO who participated in, or had an account balance under, the EDC Plan was Mr. Cullen.
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| |
|
Nonqualified Deferred Compensation for 2021 |
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| Name & Principal
Position |
|
Executive
Contributions
in Last FY
($) |
|
Registrant
Contributions
in Last FY
($) |
|
Aggregate
Earnings
in Last FY
($)1 |
|
Aggregate
Withdrawals/
Distributions
($) |
|
Aggregate
Balance at
Last FYE
($) |
|
|
|
|
|
|
| Michael
Cullen Chief Operating Officer |
|
0 |
|
0 |
|
273,043 |
|
0 |
|
2,059,232 |
| 1 |
Aggregate earnings were not included in the 2021 Summary Compensation Table. There are no above-market or preferential
earnings provided. |
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
Heidrick provides certain benefits to eligible employees upon certain types of termination of employment, including a termination of employment following a change in
control of the Company. Certain benefits are in addition to the benefits to which the employee would be entitled upon a termination of employment generally (i.e., vested retirement benefits accrued as of the date of termination, equity-based awards
that are vested as of the date of termination, and the right to continued medical coverage pursuant to COBRA). These incremental benefits as they pertain to the continuing NEOs are described below.
CHANGE IN CONTROL SEVERANCE PLAN (“CIC PLAN”)
All continuing NEOs are participants under the CIC Plan. The CIC Plan provides severance benefits to the executive if they are terminated by the Company without
“Cause,” or if the executive terminates their employment with us for “Good Reason,” within two years of a “Change in Control” of the Company (or within six months prior to a Change in Control of the Company if such
termination is prior to, but in anticipation of, the Change in Control). The following benefits are to be provided under the CIC Plan to a participant upon a qualifying termination of employment:
| |
• |
|
Salary and other compensation earned but not paid as of the termination date, including any unpaid bonus and earned but
unused vacation time. |
| |
• |
|
A prorated bonus payment equal to the participant’s annual target bonus under the MIP as of the date immediately prior
to the Change in Control (the “bonus amount”). |
| |
• |
|
A lump sum payment equal to the sum of the participant’s base salary (the highest annual rate during the preceding 12
months) and annual target bonus amount multiplied by a factor of: |
| |
• |
|
2.0 for all other continuing NEOs. |
| |
• |
|
Double trigger accelerated vesting of unvested stock awards (PSUs vest at the number that would be achieved based on
performance as of the date of the Change of Control) after a Change in Control if the CIC Plan participant’s employment is terminated for certain reasons within the two-year period beginning on the date
of a Change in Control. |
| |
• |
|
Continuation of health, dental and/or vision benefits for up to one year at no additional cost to the participant with the
same terms in effect immediately prior to the termination date. |
| |
• |
|
Reimbursement of reasonable legal fees incurred by the participant in enforcing in good faith his or her rights under the
CIC Plan (unless the participant was terminated for Cause). |
| |
• |
|
The CIC Plan does not provide an excise tax gross-up, but instead permits all
participants to either elect to have their parachute payments reduced to ensure no excise tax liability or to receive the full amount of parachute payments and be responsible for paying all related excise taxes, interest and penalties.
|
The CIC Plan contains restrictive covenants that prohibit the participant, for a period of time, from working on the accounts of certain clients,
with respect to which he or she had significant involvement, providing services to competitors, or soliciting or hiring employees or employee candidates of the Company. In order to receive benefits under the CIC Plan, the participant must waive his
or her right to receive any severance benefits he or she is entitled to receive under any other Company severance plan or employment agreement to which we are a party.
50 EXECUTIVE COMPENSATION |
For purposes of the CIC Plan:
| |
• |
|
“Cause” means the executive’s (i) willful and continued failure to substantially perform his or her
duties that is not cured after notice from us (other than a failure due to a physical or mental condition), or (ii) willful misconduct that is materially injurious to us. |
| |
• |
|
“Good Reason” means the occurrence of one of the following events without the executive’s written consent:
(i) the assignment to the executive of duties inconsistent with, or a reduction in his or her responsibilities or functions associated with, his or her position immediately prior to the change in control; (ii) a reduction in the
executive’s base salary or any failure to pay the executive any compensation within seven days of the due date for such payment; (iii) a change by 50 miles or more of the executive’s principal work location; (iv) a substantial
change in the executive’s required business travel; (v) our failure to continue substantially similar benefits under our welfare and fringe benefit plans, taking any action that adversely affects or reduces the executive’s benefits
under such plans, or our failure to provide the executive with his or her accrued vacation days in accordance with our policy in effect immediately prior to the change in control; (vi) the failure to provide the executive with the bonus and
long term incentive opportunity available immediately prior to the change in control; (vii) a material increase in the executive’s working hours; or (viii) the failure of any successor to the Company to assume the obligations under
the CIC Plan. |
| |
• |
|
“Change in Control” means (i) a person’s acquisition of more than 30% of the voting power of our
outstanding securities; (ii) during any 24 month period, the incumbent board members, and generally any new directors elected by at least
2/3 of the incumbent or previously approved board members, cease to constitute a majority of the board; (iii) a merger or consolidation
of the Company (other than a merger or consolidation that (A) results in our outstanding voting securities continuing to represent more than 66 2/3% of the combined voting power of the outstanding securities immediately after the transaction, or (B) after which no person holds 30% or more of the combined voting power of the outstanding
securities immediately after the transaction); (iv) a complete liquidation, or a sale of substantially all of the assets, of the Company; or (v) any other event that the Board determines to be a change in control. A change in control does
not include any of the above events if after such event we cease to be subject to Section 13 or 15(d) of the Securities Exchange Act and no more than 50% of the outstanding stock is owned by any entity subject to such requirements, or our
Executive Officers own 25% or more of the then outstanding common stock or 25% or more of the combined voting power of the outstanding voting securities. |
MANAGEMENT SEVERANCE PAY PLAN (THE “SEVERANCE PLAN”)
The Severance Plan provides severance benefits to select employees. Benefits are available if an employee is terminated without Cause as defined in the Severance Plan
(and, in the case of Mr. Rajagopalan, upon his resignation for Good Reason per the terms of and as defined in his employment agreement). Benefits are not available if the termination is for Cause or due to voluntary resignation, leave of
absence, retirement, death or disability. If the termination is due to the employee’s transfer to an unaffiliated business, the sale of the stock or assets of the Company or the outsourcing of a division, department, business unit or function,
severance benefits will be provided only if the employee has not been offered employment with the successor entity. An employee’s receipt of severance benefits is conditioned on his or her execution of a release. The severance benefit payable
to a participant is equal to the sum of the participant’s base salary rate in effect on the date of termination and target bonus amount multiplied by a factor of:
| |
• |
|
1.5 for other continuing NEOs. |
As per the terms of his employment agreement and consistent with the Company’s discretion to award the same under the Severance Plan, Mr. Rajagopalan is also
entitled to receive a pro-rata annual bonus for the year during which his employment is terminated. The severance benefits will be paid to the participant in equal installments over the severance period in
accordance with applicable payroll procedures, beginning no later than 30 days after the participant delivers an executed release. Until the earliest of one year following the participant’s termination of employment, the end of the applicable
severance period, or the date on which the participant becomes employed and covered under another employer’s benefit plan, Heidrick shall maintain and pay the full cost of the participant’s health benefits. The Company may, in its
discretion, pay to the employee an amount equal to the employee’s target bonus amount for the performance period in which the termination occurs, subject to any ordinary course adjustments applicable to all participants in the applicable bonus
plan. Finally, the Severance Plan includes six-month non-solicitation and non-competition provisions that apply to the extent the
participant is not already subject to such restrictions pursuant to another agreement with us.
| EXECUTIVE
COMPENSATION 51
In April 2022, after a review of competitive data for the Company and its peer group, the Board approved an amendment
to the Severance Plan which provides for the partial acceleration of a prorated portion of unvested RSUs upon a termination without cause for the CEO and other NEOs. Additionally, the six-month non-solicitation and non-competition provisions of the Severance Plan were increased from six to 12 months for the CEO and NEOs, which aligns with the restrictive covenants
contained in their pre-existing employment agreements.
BONUS, RSU, PSU AND BONUS CASH DEFERRAL
RETIREMENT POLICY (“RETIREMENT POLICY”)
Under the Retirement Policy that was in effect during 2021, an employee was eligible for retirement if
all three of the following criteria were met:
| |
• |
|
Age 55 or older on the date of retirement, provided they are age 50 or older as of March 23, 2018, or alternatively
age 62 on the date of retirement; |
| |
• |
|
Combined age and years of service add up to at least 70 on the date of retirement; and |
| |
• |
|
Notification of the intent to retire is made no later than October 15th
of the year before the year of actual retirement. |
The Company’s Retirement Policy allows for the continued vesting of RSUs, PSUs and
the payment of the annual incentive, if any, that would have been payable in the year of retirement even if the employee retires prior to the actual date of payment. For PSUs granted after March 22, 2019, an employee is eligible to receive
continued vesting of the PSUs, subject to performance, prorated based on the percentage of the three-year performance period worked. The award will be forfeited for those with greater than two years remaining in the vesting period and prorated for
all others. Restrictive covenants will extend to the end of the vesting period for all equity awards upon retirement. Mr. Rajagopalan was eligible for retirement under the Retirement Policy as of December 31, 2021. In March 2022, after a
review of competitive data for the Company and its peer group, the HRCC approved an amendment to the Retirement Policy which provides for continued vesting of PSUs upon retirement, provided the NEO has met the “Career Vesting” provisions
of the Retirement Policy, which require the NEO to be 62 years of age and have a minimum of five years of tenure on the date of retirement.
CONTINGENT PAYMENTS
The tables below show the
additional benefits and payments to be made to each of our continuing NEOs in the event of a termination by the Company without cause, resignation by the executive for good reason (applicable only to Mr. Rajagopalan), termination by reason of
death or long-term disability, or termination following a change in control of the Company, on December 31, 2021. The tables assume the exercise of discretion under the Severance Plan to pay out bonus amounts in respect of the year of
termination. As described above, Mr. Coar and the Company entered into the Coar Separation Agreement in connection with his termination of employment in June 2021, pursuant to which he received a cash payment in the amount of $87,500,
representing three months’ base salary, and three months of continued health coverage at active employee rates.
52 EXECUTIVE COMPENSATION |
Krishnan Rajagopalan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
|
Involuntary Termination
Without Cause
($)1 |
|
Resignation for
Good Reason |
|
Death or
Long-Term
Disability
($) |
|
Termination
Following a Change
in Control
($)2 |
|
|
|
|
|
| Base Salary |
|
|
|
1,700,000 |
|
|
|
|
1,700,000 |
|
|
|
|
— |
|
|
|
|
2,125,000 |
|
|
|
|
|
|
| Management Bonus |
|
|
|
2,550,000 |
|
|
|
|
2,550,000 |
|
|
|
|
— |
|
|
|
|
3,187,500 |
|
|
|
|
|
|
| Prorated Bonus |
|
|
|
1,275,000 |
|
|
|
|
1,275,000 |
|
|
|
|
— |
|
|
|
|
1,275,000 |
|
|
|
|
|
|
| Continued Health Coverage3 |
|
|
|
21,469 |
|
|
|
|
21,469 |
|
|
|
|
— |
|
|
|
|
17,097 |
|
|
|
|
|
|
| Vesting of Unexercisable Stock Options |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
| Vesting of Outstanding RSUs and PSUs4 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
6,587,750 |
|
|
|
|
5,225,633 |
|
|
|
|
|
|
| Vesting of Deferred Bonus |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
385,809 |
|
|
|
|
385,809 |
|
|
|
|
|
|
| Total |
|
|
|
5,546,469 |
|
|
|
|
5,546,469 |
|
|
|
|
6,973,559 |
|
|
|
|
12,216,039 |
|
Michael Cullen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
Involuntary Termination
Without Cause
($)1 |
|
Death or
Long-Term
Disability
($) |
|
Termination Following
a
Change in Control
($)2 |
| |
|
|
|
|
Base Salary |
|
|
|
975,000 |
|
|
|
|
— |
|
|
|
|
1,300,000 |
|
| |
|
|
|
|
Management Bonus |
|
|
|
975,000 |
|
|
|
|
— |
|
|
|
|
1,300,000 |
|
| |
|
|
|
|
Prorated Bonus |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
650,000 |
|
| |
|
|
|
|
Discretionary Severance Bonus |
|
|
|
650,000 |
|
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
|
Continued Health Coverage3 |
|
|
|
12,600 |
|
|
|
|
— |
|
|
|
|
8,688 |
|
| |
|
|
|
|
Vesting of Unexercisable Stock Options |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
|
Vesting of Outstanding RSUs and PSUs4 |
|
|
|
— |
|
|
|
|
4,135,327 |
|
|
|
|
3,523,603 |
|
| |
|
|
|
|
Vesting of Deferred Bonus |
|
|
|
— |
|
|
|
|
189,264 |
|
|
|
|
189,264 |
|
| |
|
|
|
|
Total |
|
|
|
2,612,600 |
|
|
|
|
4,324,591 |
|
|
|
|
6,971,555 |
|
| EXECUTIVE
COMPENSATION 53
Mark Harris
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
Involuntary Termination
Without Cause
($)1 |
|
Death or
Long-Term
Disability
($) |
|
Termination Following
a
Change in Control
($)2 |
| |
|
|
|
|
Base Salary |
|
|
|
675,000 |
|
|
|
|
— |
|
|
|
|
900,000 |
|
| |
|
|
|
|
Management Bonus |
|
|
|
675,000 |
|
|
|
|
— |
|
|
|
|
900,000 |
|
| |
|
|
|
|
Prorated Bonus |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
450,000 |
|
| |
|
|
|
|
Discretionary Severance Bonus |
|
|
|
450,000 |
|
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
|
Continued Health Coverage3 |
|
|
|
35,254 |
|
|
|
|
— |
|
|
|
|
25,777 |
|
| |
|
|
|
|
Vesting of Unexercisable Stock Options |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
|
Vesting of Outstanding RSUs and PSUs4 |
|
|
|
— |
|
|
|
|
2,673,827 |
|
|
|
|
2,108,763 |
|
| |
|
|
|
|
Vesting of Deferred Bonus |
|
|
|
— |
|
|
|
|
133,356 |
|
|
|
|
133,356 |
|
| |
|
|
|
|
Total |
|
|
|
1,835,254 |
|
|
|
|
2,807,183 |
|
|
|
|
4,517,895 |
|
Sarah Payne
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
Involuntary Termination
Without Cause
($)1 |
|
Death or
Long-Term
Disability
($) |
|
Termination Following
a Change in
Control
($)2 |
| |
|
|
|
|
Base Salary |
|
|
|
450,000 |
|
|
|
|
— |
|
|
|
|
600,000 |
|
| |
|
|
|
|
Management Bonus |
|
|
|
337,500 |
|
|
|
|
— |
|
|
|
|
450,000 |
|
| |
|
|
|
|
Prorated Bonus |
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000 |
|
| |
|
|
|
|
Discretionary Severance Bonus |
|
|
|
225,000 |
|
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
|
Continued Health Coverage3 |
|
|
|
35,254 |
|
|
|
|
— |
|
|
|
|
25,777 |
|
| |
|
|
|
|
Vesting of Unexercisable Stock Options |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
|
Vesting of Outstanding RSUs and PSUs4 |
|
|
|
— |
|
|
|
|
1,038,894 |
|
|
|
|
800,419 |
|
| |
|
|
|
|
Vesting of Deferred Bonus |
|
|
|
— |
|
|
|
|
46,942 |
|
|
|
|
46,942 |
|
| |
|
|
|
|
Total |
|
|
|
1,047,754 |
|
|
|
|
1,085,836 |
|
|
|
|
2,148,138 |
|
54 EXECUTIVE COMPENSATION |
Tracey Heaton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
Involuntary Termination
Without Cause
($)1 |
|
Death or
Long-Term
Disability
($) |
|
Termination Following
a
Change in Control
($)2 |
| |
|
|
|
|
Base Salary |
|
|
|
600,000 |
|
|
|
|
— |
|
|
|
|
800,000 |
|
| |
|
|
|
|
Management Bonus |
|
|
|
450,000 |
|
|
|
|
— |
|
|
|
|
600,000 |
|
| |
|
|
|
|
Prorated Bonus |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
300,000 |
|
| |
|
|
|
|
Discretionary Severance Bonus |
|
|
|
300,000 |
|
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
|
Continued Health Coverage3 |
|
|
|
35,254 |
|
|
|
|
— |
|
|
|
|
25,777 |
|
| |
|
|
|
|
Vesting of Unexercisable Stock Options |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
|
Vesting of Outstanding RSUs and PSUs4 |
|
|
|
— |
|
|
|
|
126,555 |
|
|
|
|
126,555 |
|
| |
|
|
|
|
Vesting of Deferred Bonus |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
|
Total |
|
|
|
1,385,254 |
|
|
|
|
126,555 |
|
|
|
|
1,852,331 |
|
| 1 |
Reflects amounts payable under the Severance Plan. |
| 2 |
As per the terms of the CIC Plan and the GlobalShare Plan. |
| 3 |
Under the Severance Plan, the costs of continuation of coverage are fully covered by the Company. Reflects both the
individual and the Company-paid premiums for such coverage. Under the CIC Plan, the Company and the Participant share the costs of the continuation of such coverage. |
| 4 |
As per the terms of the GlobalShare Plan. Values calculated using the closing stock price on December 31, 2021 of
$43.73. |
CEO PAY RATIO
As
required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, the Company is providing the following information about the relationship of
the annual total compensation of its employees and the annual total compensation of Mr. Krishnan Rajagopalan, President and CEO.
For our 2021 fiscal year:
| |
• |
|
the annual total compensation of the median employee (defined below) was $117,138 (the individual with such median
compensation, the “median employee”); and |
| |
• |
|
the annual total compensation of the CEO was $5,518,276, which is the same amount reported for 2021 as total compensation
in the 2021 Summary Compensation Table. |
Based on this information, for 2021, the ratio of the annual total compensation of Mr. Rajagopalan,
the Chief Executive Officer, to the median employee was estimated to be 47:1.
The pay ratio is a reasonable estimate calculated in a manner consistent with SEC
rules based on payroll and employment records and the method described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allows companies to
adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices.
The
Company re-identified the median employee in 2021 by examining the 2021 compensation for all individuals, excluding the CEO, who were employed by the Company on December 31, 2021, the last day of the
payroll year. For this purpose, compensation included base salary, cash bonus, overtime wages, and long-term incentives awarded in 2021. The Company included all employees, whether employed on a full-time or part-time basis. The Company annualized
the base compensation for full-time employees that were not employed by the Company for all of 2021.
| EXECUTIVE
COMPENSATION 55
The Company calculated the median employee’s total annual compensation using the same methodology it uses for its
NEOs as set forth in the 2021 Summary Compensation Table in this proxy statement.
REPORT OF THE HRCC
The HRCC has reviewed and discussed the CD&A as required by Item 402(b) of Regulation S-K with Management and, based on such
review and discussion, the HRCC recommended to the Board of Directors that the CD&A be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and this
proxy statement.
THE HUMAN RESOURCES AND COMPENSATION COMMITTEE
Laszlo Bock, Chair
Elizabeth L. Axelrod
Mary E. G. Bear
T. Willem Mesdag
56 EXECUTIVE COMPENSATION |
Audit Matters
The AFC is responsible for providing general oversight of the Company’s financial accounting and reporting processes, selection of critical accounting policies,
and the Company’s system of internal controls.
The AFC is directly responsible for the appointment, compensation and oversight of our independent registered
public accounting firm, RSM US LLP (“RSM”); approval of the engagement letter describing the scope of the annual audit; approval of fees for
audit and non-audit services; providing an open avenue of communication among the independent registered public accounting firm, the risk and Internal Audit functions, management and the Board; and preparing
the Audit Committee Report required by the SEC and included in this proxy statement below. These and other aspects of the AFC’s authority are more particularly described in the AFC Charter which can be accessed at:
https://investors.heidrick.com/corporate-governance.
The AFC is currently comprised of three directors, Messrs. Mesdag and Logan, and Ms. Rauch,
each of whom is independent within the meaning of the Company’s Corporate Governance Guidelines, Director Independence Standards and applicable Nasdaq Rules. Additionally, Mr. Warby, who is also independent within the meaning of the
Company’s Corporate Governance Guidelines, Director Independence Standards and applicable Nasdaq Rules is an ex officio member of the AFC based on his status as Chairman of the Board. The Board has determined that Messrs. Logan and
Mesdag are “audit committee financial experts” as defined in the SEC Rules. During 2021, the AFC met seven times.
AUDIT & FINANCE COMMITTEE REPORT
As part of its oversight of the Company’s financial statements, the AFC reviews and discusses with
both management and RSM all annual and quarterly financial statements prior to their issuance. The AFC reviews key initiatives and programs aimed at strengthening the effectiveness of the Company’s disclosure control structures, including its
internal controls, and provides oversight of the Company’s risk management protocols.
The AFC reviewed and discussed with RSM the matters required to be
discussed by the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The AFC has also received the written disclosures and the
letter from RSM, required by applicable requirements of the PCAOB, regarding RSM’s communications with the AFC concerning independence, and has discussed with RSM the firm’s independence from the Company.
The AFC’s meetings included executive sessions with RSM and with the Company’s Internal Audit function (which has been partially outsourced to
PricewaterhouseCoopers), in each case without the presence of management during which members of the AFC raised and discussed any issues they may have had about the financial statements and the adequacy and proper functioning of the Company’s
internal and disclosure control systems and procedures.
In performing these functions, the AFC acted and continues to act only in an oversight capacity on behalf
of the Board. Management has primary responsibility for the Company’s financial statements and the overall reporting process, including its systems of internal and disclosure controls. In its oversight role, the AFC necessarily relies on the
procedures, work and assurances of management. RSM has audited the annual financial statements prepared by Management, expressed an opinion as to whether those financial statements fairly present the Company’s financial position, results of
operation and cash flows in conformity with generally accepted accounting principles in the U.S., and discussed any issues they believe should be raised with the AFC.
During 2021, management documented, tested and evaluated the Company’s internal controls pursuant to the requirements of the Sarbanes-Oxley Act of 2002 and the
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management and RSM kept the AFC apprised of the Company’s progress at each
regularly scheduled AFC meeting. Management and RSM have each provided the AFC with a report on the effectiveness of the Company’s internal controls. The AFC has reviewed management’s and RSM’s assessment of the effectiveness of the
Company’s internal controls included in the Annual Report on Form 10-K for the year ended December 31, 2021.
Based on the above mentioned reviews and discussions with Management and RSM, the undersigned AFC members recommended to the Board that the audited financial statements
be included in the Annual Report on Form 10-K for the year ended December 31, 2021. The AFC has also appointed RSM as the Company’s independent registered public accounting firm for 2022.
| AUDIT
MATTERS 57
THE AUDIT & FINANCE COMMITTEE
T. Willem Mesdag, Chair
Lyle Logan
Stacey Rauch
AUDIT & FINANCE COMMITTEE POLICY AND
PROCEDURES
The AFC has established a policy governing the engagement of the Company’s independent registered public accounting firm for audit and non-audit services. Under this policy, the AFC is required to pre-approve all audit and non-audit services performed by the
Company’s independent auditors to assure that the provision of such services does not impair the auditor’s independence. The AFC has delegated the authority to evaluate and approve audit and permissible
non-audit fees and engagements up to $100,000 to the AFC Chair. In this event, the Chair then presents a summary of the fees and services to the AFC at its next meeting. The independent registered public
accounting firm may not perform any non-audit service which independent auditors are prohibited from performing under the SEC Rules or the rules of the PCAOB. RSM did not perform any non-audit services in 2021.
At the beginning of each fiscal year, the AFC reviews with Management and the independent registered
public accounting firm the types of services that are likely to be required throughout the year. For each proposed service, the independent auditor provides documentation regarding the specific services to be provided. At that time, the AFC pre-approves a list of specific audit-related services that may be provided and sets fee limits for each specific service or project. Management is then authorized to engage the independent auditor to perform the pre-approved services as needed throughout the year, subject to providing the AFC with regular updates. The AFC must review and approve in advance, on a case-by-case basis, all other projects, services and fees to be performed by or paid to the independent auditor. The AFC also must approve in advance any fees for
pre-approved services that exceed the pre-established limits, as described above.
All services provided by RSM were approved in accordance with the AFC’s policy in 2021.
FEES PAID TO AUDITOR
The aggregate fees billed for services provided by RSM, the Company’s independent registered public accounting firm, in 2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Fee
Category |
|
2021 |
|
2020 |
| |
|
|
|
Audit Fees1 |
|
|
$ |
1,318,600 |
|
|
|
$ |
1,250,000 |
|
| |
|
|
|
Audit-Related Fees |
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
Tax Fees |
|
|
|
— |
|
|
|
|
— |
|
| |
|
|
|
All Other Fees2,3 |
|
|
$ |
66,700 |
|
|
|
$ |
280,000 |
|
| |
|
|
|
Total Fees |
|
|
$ |
1,385,300 |
|
|
|
$ |
1,530,000 |
|
| 1 |
Fees for professional services rendered for the audit of the Company’s annual consolidated financial statements,
reviews of the consolidated financial statements included in its Quarterly Reports on Form 10-Q, statutory audits required internationally, and the audit of the Company’s internal control over financial
reporting. |
| 2 |
For year 2021, all other fees related to due diligence in connection with the acquisition of On-Demand Talent. |
| 3 |
For year 2020, all other fees related to a review of goodwill impairment, a restructuring plan, a Peoplesoft upgrade, the
filing a registration statement on Form S-8 and the adoption of a critical matters audit report. |
58 AUDIT MATTERS |
PROPOSAL 3
Ratification of Appointment of Auditor
The Board and the AFC
recommend a vote “FOR” ratification of the appointment of RSM US LLP (“RSM”) as our independent registered public accountants for the 2022 fiscal year.
The AFC appointed RSM, an independent registered public accounting firm, as the auditor to audit and report to stockholders on the consolidated financial statements for
the Company and its subsidiaries for the fiscal year ending December 31, 2022. Although stockholder approval is not required for the appointment of RSM, the Board and the AFC has determined that it would be desirable as a good corporate
governance practice to request stockholder ratification of the appointment of RSM as the Company’s independent registered public accounting firm.
The AFC has
concluded that the continued retention of RSM is in the best interests of the Company and its stockholders and appointed RSM as the Company’s independent registered public accountants for the fiscal year ending December 31, 2022. Services
provided to the Company by RSM in fiscal 2021 are described in the Fees Paid to Auditor section above. The AFC evaluates the independent registered public accountant’s qualifications, performance, audit plan and independence each year. In
addition to assuring regular rotation of the lead audit partner every five years as required by the SEC Rules, one or more of the members of the AFC will meet with candidates for the lead audit partner and the committee will discuss the appointment
before the rotation occurs.
We are asking our stockholders to ratify the selection of RSM as our independent registered public accountants for the fiscal year
ending December 31, 2022. In the event stockholders fail to ratify the appointment, the Board may reconsider this appointment. Even if the appointment is ratified, the Board, in its discretion may direct the appointment of a different independent
registered public accounting firm at any time during the year if the Board determines that such a change would be in the Company’s and stockholders’ best interests.
Representatives of RSM will attend the Annual Meeting virtually and be given an opportunity to make a statement and/or respond to appropriate questions.
The Board and the AFC recommend that the stockholders ratify the appointment of RSM and adopt the following resolution at the Annual Meeting:
“RESOLVED, that the appointment of RSM as the independent auditor of this Company for the fiscal year 2022 is hereby RATIFIED.”
In the event the
stockholders do not ratify the appointment of RSM, the AFC will consider whether it should appoint an alternative firm.
| AUDIT
MATTERS 59
Additional Matters
STOCK OWNERSHIP INFORMATION
DIRECTORS AND EXECUTIVE OFFICERS
The following
table sets forth information regarding beneficial ownership of Company common stock by each director, each NEO, and the Directors and Executive Officers as a group, all as of March 31, 2022. Unless otherwise indicated, each person has sole
voting and investment power with respect to the shares set forth in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Name1 |
|
Shares of Common Stock
Beneficially
Owned2,3 |
|
% |
|
|
|
| Elizabeth L.
Axelrod |
|
|
|
25,343 |
|
|
|
|
* |
|
|
|
|
| Mary E. G.
Bear |
|
|
|
0 |
|
|
|
|
* |
|
|
|
|
| Laszlo Bock |
|
|
|
7,623 |
|
|
|
|
* |
|
|
|
|
| Lyle Logan |
|
|
|
25,343 |
|
|
|
|
* |
|
|
|
|
| T. Willem
Mesdag |
|
|
|
35,343 |
|
|
|
|
* |
|
|
|
|
| Stacey Rauch |
|
|
|
11,248 |
|
|
|
|
* |
|
|
|
|
| Adam Warby |
|
|
|
19,144 |
|
|
|
|
* |
|
|
|
|
| Krishnan
Rajagopalan |
|
|
|
151,092 |
|
|
|
|
* |
|
|
|
|
| Michael
Cullen |
|
|
|
25,503 |
|
|
|
|
* |
|
|
|
|
| Mark Harris |
|
|
|
26,881 |
|
|
|
|
* |
|
|
|
|
| Tracey Heaton |
|
|
|
0 |
|
|
|
|
* |
|
|
|
|
| Sarah Payne |
|
|
|
6,691 |
|
|
|
|
* |
|
|
|
|
| Kamau Coar |
|
|
|
3,155 |
|
|
|
|
* |
|
|
|
|
| All Directors and Executive Officers as a
group |
|
|
|
334,211 |
|
|
|
|
1.69 |
% |
| * |
Represents holdings of less than 1%. |
| 1 |
The mailing address for each NEO and Director of the Company is 233 South Wacker Drive, Suite 4900, Chicago, Illinois
60606. |
| 2 |
In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of
fully owned or earned Company common stock and RSUs as well as shares of Company common stock issued pursuant to RSUs and stock options that are exercisable on March 31, 2022, or which will become exercisable within 60 days following that date
or upon termination of a director’s service to the Board, are deemed issued and outstanding. These shares, however, are not deemed outstanding for purposes of computing the percentage ownership of any other stockholder. |
| 3 |
The calculation of shares of Company common stock beneficially owned by the Directors includes Company common stock
equivalents in the form of fully-earned RSUs that are owned by the Director for which full consideration has been received by the Company and for which there are no additional outstanding conditions. All RSUs will be converted into shares of Company
common stock upon the Director’s termination of service to the Board. This includes 7,623 RSUs owned by Mr. Bock; 25,343 RSUs owned by Mr. Mesdag; and 14,144 RSUs owned by Mr. Warby. |
60 ADDITIONAL MATTERS |
PRINCIPAL STOCKHOLDERS
Set forth in the table below is information about the number of shares held by persons the Company knows to be the beneficial owners of more than 5% of the issued and
outstanding Company common stock as of March 31, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Name and Address |
|
Shares of Common Stock
Beneficially Owned |
|
% of
Class1 |
|
|
|
| BlackRock, Inc.2 55 East 52nd Street
New York, New York 10055 |
|
|
|
3,217,782 |
|
|
|
|
16.32 |
% |
|
|
|
| The Vanguard Group3 100 Vanguard Blvd.
Malvern, Pennsylvania 19355 |
|
|
|
1,446,987 |
|
|
|
|
7.34 |
% |
|
|
|
| Renaissance Technologies LLC4 800 Third Avenue
New York, New York 10022 |
|
|
|
1,241,802 |
|
|
|
|
6.30 |
% |
|
|
|
| Dimensional Fund Advisors LP5 Building One
6300 Bee Cave Road Austin, Texas
78746 |
|
|
|
1,190,438 |
|
|
|
|
6.04 |
% |
|
|
|
| Royce & Associates, LP6 745 Fifth Avenue
New York, NY 10151 |
|
|
|
1,025,868 |
|
|
|
|
5.20 |
% |
| 1 |
The ownership percentages set forth in this column are based on the assumption that each of the principal stockholders
continued to own the number of shares reflected in the table above on March 31, 2022. Percentages are calculated using the shares outstanding on the Record Date. |
| 2 |
The information is based on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on February 7, 2022 reporting
beneficial ownership as of December 31, 2021. BlackRock, Inc. reported that it has sole dispositive power over 3,217,782 shares and sole voting power over 3,167,223 shares. |
| 3 |
The information is based on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 10, 2022 reporting
beneficial ownership as of December 31, 2021. The Vanguard Group reported that it has sole dispositive power over 1,403,308 shares; shared dispositive power over 43,679 shares; and shared voting power over 32,434 shares. |
| 4 |
The information is based on a Schedule 13G/A filed by Renaissance Technologies LLC and Renaissance Technologies Holdings
Corporation with the SEC on February 11, 2022 reporting beneficial ownership as of December 31, 2021. Renaissance Technologies LLC reported that it has sole dispositive power over 1,241,802 shares and sole voting power over 1,198,500
shares. |
| 5 |
The information is based on a Schedule 13G/A filed by Dimensional Fund Advisors LP with the SEC on February 8, 2022
reporting beneficial ownership as of December 31, 2021. Dimensional Fund Advisors LP reported that it has sole dispositive power over 1,190,438 shares and sole voting power over 1,163,814 shares. |
| 6 |
The information is based on a Schedule 13G/A filed by Royce & Associates, LP with the SEC on January 21,
2022 reporting beneficial ownership as of December 31, 2021. Royce & Associates, LP reported that it has sole voting power over 1,025,868 shares; and sole dispositive power over 1,025,868 shares. |
| ADDITIONAL
MATTERS 61
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING
WHO IS ASKING FOR MY VOTE AND WHY?
The Board is soliciting proxies for use at the Company’s Annual Meeting to be held on May 26, 2022, or any adjournment or postponement of the meeting.
The Annual Meeting will be held entirely online at www.virtualshareholdermeeting.com/HSII2022 due to the continued health and safety concerns surrounding COVID-19, and to support the health and well-being of our employees, directors and stockholders. The Board encourages you to vote before the meeting to ensure that your shares are represented at the Annual Meeting.
This proxy statement provides you with information related to the matters upon which you are asked to vote as a stockholder to assist you in voting your shares.
WHAT DOES IT MEAN TO VOTE BY PROXY?
It means that you give someone else the right to vote your shares in accordance with your
instructions. The Company is asking you to give your proxy to Tracey Heaton, Chief Legal Officer & Corporate Secretary. This way, you ensure that your vote will be counted even if you are unable to attend the Annual Meeting online.
If you sign and submit your proxy or voting instruction form without giving specific instructions on how to vote your shares, in accordance with the recommendation of
the Board, Ms. Heaton will vote your shares in the following manner:
| |
• |
|
FOR the election of each of the nominees for director; |
| |
• |
|
FOR the advisory vote approving our executive compensation; and |
| |
• |
|
FOR the ratification of the appointment of RSM US LLP as our independent registered
public accountants for the 2022 fiscal year. |
WHAT HAPPENS IF OTHER MATTERS ARE PRESENTED AT THE ANNUAL MEETING?
If other matters are properly presented at the Annual Meeting, Ms. Heaton will have discretion to vote your shares for you on those matters in
accordance with their best judgment if you have granted a proxy. However, the Company has not received timely notice from any stockholder of any other matter to be presented at the Annual Meeting.
HOW DO I ATTEND THE ANNUAL MEETING?
To join the
Annual Meeting, log in at www.virtualshareholdermeeting.com/HSII2022. You will need the 16-digit control number included on your proxy card or on any additional voting instructions accompanying these
proxy materials.
The Annual Meeting will begin at 8:00 a.m. Central Time. Online check-in will be available beginning at
7:45 a.m. Central Time to allow time for stockholders to log in and test the computer audio system.
Please allow ample time for the online check-in process. A replay of the Annual Meeting will also be posted on our website at https://investors.heidrick.com/investor-overview for at least thirty (30) days after the meeting concludes.
WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?
Holders of the Company’s common stock as of the close of business on March 31, 2022 (the “Record
Date”), are entitled to vote at the Annual Meeting.
HOW MANY VOTES IS EACH SHARE OF
COMMON STOCK ENTITLED TO?
Each share of Company common stock outstanding as of the Record Date is entitled to one vote. As of the Record Date, there were
19,722,202 shares of common stock outstanding.
62 ADDITIONAL MATTERS |
WHO CAN ATTEND THE ANNUAL MEETING ONLINE?
Stockholders as of the Record Date are entitled to attend and participate in the Annual Meeting. Others are able to access the Annual Meeting as a guest through the
virtual meeting website, but are not able to ask questions or vote during the meeting.
HOW DO I SUBMIT A QUESTION AT THE ANNUAL MEETING?
You may submit a question during the meeting via our virtual stockholder meeting website, www.virtualshareholdermeeting.com/HSII2022. If your
question is properly submitted, we intend to respond to your question during the Annual Meeting as time permits. Questions on similar topics will be combined and answered together.
A replay of the Annual Meeting, including the Q&A session, will also be posted on our website at https://investors.heidrick.com/investor-overview under
“Proxy Materials” for at least thirty (30) days after the meeting concludes. Rules of Conduct for the meeting will be posted on the virtual meeting website and our website and will provide additional details regarding our procedures
for answering questions.
WHAT IF THE COMPANY OR I ENCOUNTER TECHNICAL DIFFICULTIES DURING THE ANNUAL MEETING?
If we experience technical difficulties during the Annual Meeting (e.g., a temporary or prolonged power outage), our Chairman will determine whether the meeting can be
promptly reconvened (if the technical difficulty is temporary) or whether the meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify stockholders of the decision
via www.virtualshareholdermeeting.com/HSII2022.
If you encounter technical difficulties accessing our Annual Meeting or asking questions during the Annual
Meeting, a support line will be available on the login page of the virtual stockholder meeting website: www.virtualshareholdermeeting.com/HSII2022.
WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A STOCKHOLDER OF RECORD AND AS A BENEFICIAL OWNER?
If your shares are registered
directly in your name with the Company’s transfer agent (Computershare Trust Company, N.A.), you are considered a stockholder of record with respect to those shares. If your shares are held in a bank or brokerage account, you are considered a
“beneficial owner” of those shares.
HOW DO I VOTE MY SHARES?
Beneficial Stockholders – If you own shares through a broker, bank or other holder of record, you must instruct the holder of record how to vote your shares, or you
can vote during the Annual Meeting. In order to provide voting instructions to the holder of record of your shares, please refer to the materials forwarded by your broker, bank, or other holder of record. Proxies submitted by internet or telephone
must be received by 11:59 p.m. Eastern Time, on May 25, 2022. You are also invited to attend the Annual Meeting online at www.virtualshareholdermeeting.com/HSII2022. To participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card or on any additional voting instructions accompanying these proxy materials. Even if you plan to attend the Annual Meeting, we encourage you to submit your voting
instructions to your broker, bank or other holder of record in advance of the Annual Meeting.
Registered Stockholders – If you own shares that are registered
in your name, you may vote by proxy before the Annual Meeting by internet at www.proxyvote.com, by calling 1-800-690-6903
or by signing and returning your proxy card by mail. To vote by internet or telephone, you will need your 16-digit voting control number, which can be found on your proxy card. Proxies submitted by internet or
telephone must be received by 11:59 p.m. Eastern Time, on May 25, 2022. If you return a signed proxy card but do not provide voting instructions for some or all of the matters to be voted on, your shares will be voted on all uninstructed
matters in accordance with the recommendations of the Board of Directors. You may also vote at the Annual Meeting by attending the Annual Meeting online and following the instructions posted at www.virtualshareholdermeeting.com/HSII2022, or
you may vote by proxy. To participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card or on any additional voting instructions accompanying these proxy materials.
Even if you plan to attend the Annual Meeting, we encourage you to submit your proxy in advance of the Annual Meeting.
| ADDITIONAL
MATTERS 63
MAY I REVOKE A PROXY OR CHANGE MY VOTE?
Beneficial Stockholders – Beneficial stockholders should contact their broker, bank or other holder of record for instructions on how to revoke their proxies or
change their vote. You may also revoke your proxy or previously submitted voting instructions by attending the Annual Meeting online and voting during the meeting.
Registered Stockholders – Registered stockholders may revoke their proxies or change their voting instructions at any time before 11:59 p.m. Eastern Time, on
May 25, 2022, by submitting a proxy via internet, telephone or mail that is dated later than the original proxy or by delivering written notice of revocation to the Corporate Secretary at Heidrick & Struggles International, Inc., Attn:
Corporate Secretary, 233 S. Wacker Drive, Suite 4900, Chicago, Illinois 60606-6303. You may also revoke your proxy by attending the Annual Meeting online and voting during the meeting. Your attendance at the Annual Meeting online will not, by
itself, constitute revocation of your proxy.
HOW MANY VOTES MUST BE PRESENT IN ORDER TO HOLD THE ANNUAL MEETING?
A quorum must be present to transact business at the Annual Meeting. A quorum consists of the holders of a majority of the outstanding shares of common stock entitled to
vote at the meeting.
Shares of Heidrick & Struggles stock present in person or duly authorized by proxy (including any abstentions and “broker non-votes”) will be counted for purposes of establishing a quorum at the meeting. Attendance at our Annual
Meeting online constitutes presence in person for purposes of quorum at the meeting.
WHAT ARE BROKER
NON-VOTES?
If a broker or other financial institution holds your shares in its name and you do not provide voting
instructions, that firm may only vote your shares on routine matters. Proposal 3, the ratification of the appointment of our independent auditor for 2022, is the only matter for consideration deemed to be routine. For all matters other than
Proposal 3, you must submit voting instructions to the firm that holds your shares if you want your vote to count. When a firm votes a client’s shares on some but not all of the proposals, the missing votes on the non-routine proposals are referred to as “broker non-votes.”
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
Election of Directors (Item 1)
A plurality of the voting power present in person or represented by proxy and entitled to vote is required for the election of directors. This means that
the seven director nominees receiving the highest number of votes cast “FOR” will be elected. Only votes “FOR” will affect the outcome. Broker non-votes are not counted for purposes of the
election of directors.
Pursuant to our Corporate Governance Guidelines, in an uncontested election of directors (i.e. an election in which the only nominees
are those recommended by the Board), any nominee for director who receives a greater number of votes “WITHHELD” from his or her election than votes “FOR” his or her election will tender his or her resignation to the Chair of the
NGC following certification of the stockholder vote. The NGC will consider the tendered resignation and recommend to the Board whether to accept or reject the tendered resignation no later than 60 days following the date of the stockholders’
meeting at which the election occurred. The Board will act on the NGC’s recommendation no later than 120 days following the stockholders’ meeting. The Company will publicly disclose the Board’s decision whether to accept the
resignation as tendered (providing an explanation of the process by which the decision was reached and, if applicable, the reasons for rejecting the tendered resignation).
Brokers holding shares beneficially owned by their clients do not have the ability to cast votes with respect to the election of directors unless they have received
instructions from the beneficial owner of the shares. It is therefore important that you provide instructions to your broker if your shares are held by a broker so that your vote with respect to directors is counted.
All Other Proposals (Items 2 and 3)
Stockholders may vote “FOR” or “AGAINST” each of the other proposals, or may abstain from voting. Heidrick’s Amended and Restated By-laws require the affirmative vote of a majority in voting power of the stock present in person or by proxy and entitled to vote on the matter for the approval of Proposals 2 and 3. A stockholder who signs and
submits a proxy is “present,” so an abstention will have the same effect as a vote “Against” Proposals 2 and 3. “Broker non-votes,” if any, will have no effect on Proposals 2 and
3.
64 ADDITIONAL MATTERS |
WHO COUNTS THE VOTES?
Representatives of Broadridge Financial Solutions, Inc. will count the votes and will act as the independent inspector of election for the Annual Meeting.
WHEN WILL THE COMPANY ANNOUNCE THE VOTING RESULTS?
The Company will announce the preliminary voting results at the Annual Meeting and will report the final results on the Company’s website and in a Current Report on
Form 8-K filed with the SEC after the Annual Meeting in accordance with SEC Rules.
HOW ARE PROXIES
SOLICITED, AND WHAT IS THE COST?
The Company will bear the entire cost of the proxy solicitation. Heidrick has engaged Alliance Advisors, L.L.C. to
assist with the solicitation of proxies for an estimated fee of $11,000 plus expenses. The Company will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of common stock. The
Company’s officers and employees may also solicit proxies. They will not receive any additional compensation for these activities.
WILL THE COMPANY MAKE A LIST OF STOCKHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING AVAILABLE?
Yes. A stockholder list will be available for inspection electronically by stockholders for any purpose germane to the meeting, upon request, starting May 16, 2022
by contacting the Company’s Investor Relations Department via email at InvestorRelations@heidrick.com. In addition, a stockholder list will be posted on the virtual stockholder meeting website during the Annual Meeting.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE SET OF PRINTED PROXY MATERIALS?
If you hold your shares in more than one account, you may receive a separate set of printed proxy materials, including a separate proxy card or voting instruction card,
for each account. To ensure that all of your shares are voted, please vote by telephone or internet or sign, date, and return a proxy card or voting card for each account.
MORE THAN ONE STOCKHOLDER LIVES AT MY ADDRESS. WHY DID WE RECEIVE ONLY ONE SET OF PROXY MATERIALS?
The Company delivers only one Annual Report and one proxy statement to multiple stockholders sharing the same address unless it has received different instructions from
one or more of them. This method of delivery is known as “householding”. Householding reduces the number of mailings you receive, saves on printing and postage costs and helps the environment. The Company will, upon written or oral
request, promptly deliver a separate copy of the Annual Report or proxy statement to a stockholder at a shared address. If you would like to change your householding election, request that a single copy of this or future proxy materials be sent to
your address, or request a separate copy of this or future proxy materials, you should submit this request by writing Broadridge Householding Department, 51 Mercedes Way, Edgewood, NY 11717 or calling 1-866-540-7095.
OTHER MATTERS
Management is not aware of any other matters that will be presented at the Annual Meeting. If any other matter that requires a vote is properly presented at the meeting,
the proxy holders will vote as recommended by the Board or, if no recommendation is given, in their best judgment.
STOCKHOLDER PROPOSALS
– 2023 ANNUAL MEETING OF STOCKHOLDERS
If you wish to submit a proposal for inclusion in Heidrick’s proxy statement for its 2023 annual
stockholders’ meeting, you must follow the procedures set forth in Rule 14a-8 of the Securities Exchange Act of 1934. To be eligible for inclusion, the Company must receive your proposal at the address
below no later than December 16, 2022. Under Heidrick’s Amended and Restated By-laws, other proposals and director nominations by stockholders that are not included in the 2023 proxy statement may be
eligible for presentation at the 2023 annual stockholders’ meeting only if they are received by the Company in the form of a written notice, directed to the attention of Heidrick’s Corporate Secretary at the address below, no earlier than
February 25, 2023 and no later than March 27, 2023. The notice must contain the information required by the Amended and Restated By-laws and must otherwise comply with the requirements specified in
the Amended and Restated By-laws.
| ADDITIONAL
MATTERS 65
In addition to satisfying the foregoing requirements under Heidrick’s Amended and Restated By-laws, to comply with the universal proxy rules (once effective), stockholders who intend to solicit proxies in support of director nominees other than Heidrick’s nominees must provide notice that sets forth
the information required by Rule 14a-19 under the Securities Exchange Act of 1934, as amended, no later than March 27, 2023.
WHERE TO SEND ALL PROPOSALS AND NOMINATIONS:
Heidrick & Struggles International, Inc.
Attn: Corporate Secretary
233 S. Wacker Drive, Suite 4900
Chicago, Illinois 60606-6303
66 ADDITIONAL MATTERS |
ANNEX A
Heidrick & Struggles International, Inc.
Reconciliation of Operating Income (Loss) and Adjusted Operating Income (Non-GAAP)
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended
December 31, |
|
|
|
|
| |
|
2021 |
|
|
|
2020 |
|
|
|
|
| Revenue before reimbursements (net revenue) |
|
|
$ |
1,003,001 |
|
|
|
|
|
$ |
621,615 |
|
|
|
|
|
| Operating income (loss) |
|
|
|
98,264 |
|
|
|
|
|
|
(35,529 |
) |
|
|
|
|
| Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnout obligation fair value adjustments1 |
|
|
|
11,368 |
|
|
|
|
|
|
— |
|
|
|
|
|
| Impairment charges2 |
|
|
|
— |
|
|
|
|
|
|
32,970 |
|
|
|
|
|
| Restructuring charges3 |
|
|
|
3,792 |
|
|
|
|
|
|
52,372 |
|
| Total adjustments |
|
|
|
15,160 |
|
|
|
|
|
|
85,342 |
|
|
|
|
|
| Adjusted operating income |
|
|
$ |
113,424 |
|
|
|
|
|
$ |
49,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating margin |
|
|
|
9.8 |
% |
|
|
|
|
|
(5.7 |
)% |
|
|
|
|
| Adjusted operating margin |
|
|
|
11.3 |
% |
|
|
|
|
|
8.0 |
% |
| 1 |
The Company incurred a one-time earnout obligation adjustment of
$11.4 million for the three months and year ended December 31, 2021 in the On-Demand Talent operating segment. |
| 2 |
The Company incurred goodwill impairment charges of approximately $33.0 million in the Europe and Asia Pacific
operating segments for the year ended December 31, 2020. |
| 3 |
The Company incurred restructuring charges of $4.3 million for the three months ended December 31, 2020. The
Company incurred restructuring charges of $3.8 million and $52.4 million for the years ended December 31, 2021 and 2020, respectively. |
| ANNEX A
A-1
Heidrick & Struggles International, Inc.
Reconciliation of Net Income (Loss) and Adjusted Net Income (Non-GAAP)
(In thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended
December 31, |
|
|
|
|
| |
|
2021 |
|
|
|
2020 |
|
|
|
|
| Net income (loss) |
|
|
$ |
72,572 |
|
|
|
|
|
$ |
(37,707) |
|
|
|
|
|
| Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnout obligation fair value adjustments1 |
|
|
|
8,282 |
|
|
|
|
|
|
— |
|
|
|
|
|
| Impairment charges, net of tax2 |
|
|
|
— |
|
|
|
|
|
|
32,970 |
|
|
|
|
|
| Restructuring charges, net of tax3 |
|
|
|
2,642 |
|
|
|
|
|
|
39,956 |
|
| Total adjustments |
|
|
|
10,924 |
|
|
|
|
|
|
72,926 |
|
|
|
|
|
| Adjusted net income |
|
|
$ |
83,496 |
|
|
|
|
|
$ |
35,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
|
19,515 |
|
|
|
|
|
|
19,301 |
|
|
|
|
|
| Diluted |
|
|
|
20,296 |
|
|
|
|
|
|
19,893 |
|
|
|
|
|
| Earnings (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
$ |
3.72 |
|
|
|
|
|
$ |
(1.95 |
) |
|
|
|
|
| Diluted |
|
|
$ |
3.58 |
|
|
|
|
|
$ |
(1.95 |
) |
|
|
|
|
| Adjusted earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
$ |
4.28 |
|
|
|
|
|
$ |
1.82 |
|
|
|
|
|
| Diluted |
|
|
$ |
4.11 |
|
|
|
|
|
$ |
1.77 |
|
| 1 |
The Company incurred a one-time earnout obligation adjustment of
$11.4 million for the three months and year ended December 31, 2021 in the On-Demand Talent operating segment. |
| 2 |
The Company incurred goodwill impairment charges of approximately $33.0 million in the Europe and Asia Pacific
operating segments for the year ended December 31, 2020. |
| 3 |
The Company incurred restructuring charges of $4.3 million for the three months ended December 31, 2020. The
Company incurred restructuring charges of $3.8 million and $52.4 million for the years ended December 31, 2021 and 2020, respectively. |
A-2 ANNEX A |
ANNEX B
Heidrick & Struggles International, Inc.
Reconciliation of Net Income (Loss) and Operating Income (Loss) to
Adjusted EBITDA (Non-GAAP)
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended
December 31, |
|
|
|
|
| |
|
2021 |
|
|
|
2020 |
|
|
|
|
| Revenue before reimbursements (net revenue) |
|
|
$ |
1,003,001 |
|
|
|
|
|
$ |
621,615 |
|
|
|
|
|
| Net income (loss) |
|
|
|
72,572 |
|
|
|
|
|
|
(37,707 |
) |
|
|
|
|
| Interest, net |
|
|
|
(302 |
) |
|
|
|
|
|
(204 |
) |
|
|
|
|
| Other, net |
|
|
|
(7,463 |
) |
|
|
|
|
|
(3,927 |
) |
|
|
|
|
| Provision for (benefit from) income taxes |
|
|
|
33,457 |
|
|
|
|
|
|
6,309 |
|
|
|
|
|
| Operating income (loss) |
|
|
|
98,264 |
|
|
|
|
|
|
(35,529 |
) |
|
|
|
|
| Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation expense |
|
|
|
12,325 |
|
|
|
|
|
|
9,679 |
|
|
|
|
|
| Depreciation |
|
|
|
7,150 |
|
|
|
|
|
|
8,100 |
|
|
|
|
|
| Intangible amortization |
|
|
|
2,898 |
|
|
|
|
|
|
738 |
|
|
|
|
|
| Earnout accretion |
|
|
|
486 |
|
|
|
|
|
|
— |
|
|
|
|
|
| Earnout obligation fair value adjustments |
|
|
|
11,368 |
|
|
|
|
|
|
— |
|
|
|
|
|
| Acquisition contingent consideration |
|
|
|
1,973 |
|
|
|
|
|
|
1,942 |
|
|
|
|
|
| Restructuring charges |
|
|
|
3,792 |
|
|
|
|
|
|
52,372 |
|
|
|
|
|
| Impairment charges |
|
|
|
— |
|
|
|
|
|
|
32,970 |
|
|
|
|
|
| Deferred compensation plan |
|
|
|
3,057 |
|
|
|
|
|
|
4,495 |
|
| Total adjustments |
|
|
|
43,049 |
|
|
|
|
|
|
110,296 |
|
|
|
|
|
| Adjusted EBITDA |
|
|
$ |
141,313 |
|
|
|
|
|
$ |
74,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA margin |
|
|
|
14.1 |
% |
|
|
|
|
|
12.0 |
% |
| ANNEX B
B-1
|
|
|
|
|
| HEIDRICK & STRUGGLES INTERNATIONAL,
INC. 233 S. WACKER DR., SUITE 4900
CHICAGO, IL 60606 |
|
|
|
VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the
meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During the Meeting - Go to www.virtualshareholdermeeting.com/HSII2022
You may attend the meeting via the internet and vote during the meeting. Have your proxy card in hand when you access the website and follow the
instructions to join the meeting and vote. VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card
in hand when you call and then follow the instructions. VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51
Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
— — — — — — — — — — — —
— — — — — — — — — — — — — — — — — — — —
— — — — — — — — — — — — — —
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS
VALID ONLY WHEN SIGNED AND DATED.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For |
|
Withhold |
|
For All |
|
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To withhold authority to vote for any |
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individual nominee(s), mark “For All |
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Except” and write the number(s) of the |
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| The Board of Directors recommends you vote FOR |
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nominee(s) on the line below. |
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| the following: |
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☐ |
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| 1. Election of Directors |
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Nominees |
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Elizabeth L. Axelrod |
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02) Mary E.G. Bear |
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03) Lyle Logan |
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04) T. Willem Mesdag |
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05) Krishnan Rajagopalan |
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Stacey Rauch |
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07) Adam Warby |
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| The Board of Directors recommends you vote FOR proposals 2 and 3. |
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Abstain |
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| 2. |
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Advisory vote to approve Named Executive Officer compensation. |
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Ratification of the appointment of RSM US LLP as the Company’s independent registered public accounting firm for 2022. |
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| NOTE: Such other business as may properly come before the Annual Meeting or any adjournment thereof. |
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Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
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Signature [PLEASE SIGN WITHIN BOX] |
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Signature (Joint Owners) |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual
Report are available at www.proxyvote.com
— — — — — — — — — — —
— — — — — — — — — — — — — — — — — — — —
— — — — — — — — — — — — — — — —
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HEIDRICK & STRUGGLES INTERNATIONAL, INC.
Annual Meeting of Stockholders May 26, 2022
8:00 A.M. Central Daylight Time Via live webcast at www.virtualshareholdermeeting.com/HSII2022
This proxy is solicited by the Board of Directors
The undersigned hereby appoints Tracey Heaton as proxy, with full power of substitution, to vote, as directed, all the shares of
common stock of Heidrick & Struggles International, Inc. held of record as of March 31, 2022, at the Annual Meeting of Stockholders to be held on May 26, 2022, or any adjournment of the meeting. This proxy authorizes Ms. Heaton to vote in her
discretion on any matter that may properly come before the Annual Meeting or any adjournment of the meeting. You can virtually attend the meeting online by visiting www.virtualshareholdermeeting.com/HSII2022.
This proxy, when properly executed, will be
voted in the manner directed by you. If you sign and return this proxy but do not give any direction, this proxy will be voted “FOR” the election of all nominees for directors listed on the reverse side; “FOR” Proposals 2 and 3;
and in the discretion of the proxy holders on any other matters that may properly come before the Annual Meeting and at any adjournment or postponement thereof.
Unless otherwise specified, in order for your vote to be submitted by proxy, you must (i) properly complete the Internet or telephone
voting instructions or (ii) properly complete and return this proxy in order that, in either case, your vote is received no later than 11:59 P.M. Eastern Time on May 25, 2022.
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Continued and to be signed on reverse side |
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