UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.           )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

AFFILIATED MANAGERS GROUP, INC.

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check all boxes that apply):

 

No fee required

 

Fee paid previously with preliminary materials

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

 


 

 

 

AFFILIATED MANAGERS GROUP, INC.

777 South Flagler Drive

West Palm Beach, Florida 33401

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON May 27, 2022

 

NOTICE IS HEREBY GIVEN that the 2022 Annual Meeting of Stockholders (the “Annual Meeting”) of Affiliated Managers Group, Inc. (the “Company”) will be held on May 27, 2022, at 2:00 p.m. British Summer Time (9:00 a.m. Eastern Daylight Time) at the Company’s London office at 35 Park Lane, London W1K 1RB, United Kingdom, for the following purposes:

 

1.

To elect eight directors of the Company to serve until the 2023 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified.

 

2.

To approve, by a non‑binding advisory vote, the compensation of the Company’s named executive officers.

 

3.

To ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the current fiscal year.

 

4.

To consider and act upon any other matters that may properly be brought before the Annual Meeting and at any adjournments or postponements thereof.

This year, we have again reduced our environmental impact by providing proxy materials to you online pursuant to Securities and Exchange Commission rules. On or about April 15, 2022, we will mail to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access the Proxy Statement and our 2021 Annual Report on Form 10‑K online. The Notice, which cannot itself be used to vote your shares, also provides instructions on how to vote online and how to request a paper copy of the proxy materials, if you so desire. Whether you receive the Notice or paper copies of our proxy materials, the Proxy Statement and 2021 Annual Report on Form 10‑K are available to you at www.proxyvote.com.

The Company’s Board of Directors fixed the close of business on April 1, 2022 as the record date for determining the stockholders entitled to notice of, and to vote at, the Annual Meeting and at any adjournments or postponements thereof. Your vote is very important. Please carefully review the Proxy Statement and submit your proxy online, by telephone, or by mail, whether or not you plan to attend the Annual Meeting. If you hold your shares in street name through a broker, bank, or other nominee, please follow the instructions you receive from them to vote your shares.

 

 

 

By Order of the Board of Directors.

 

 

 

 

 

 

 

David M. Billings

 

 

General Counsel and Secretary

 

West Palm Beach, Florida

 

 

April 15, 2022

 

 

 

 

 

 

 

 


 

 

AFFILIATED MANAGERS GROUP, INC.

777 South Flagler Drive

West Palm Beach, Florida 33401

 

PROXY STATEMENT

 

FOR 2022 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 27, 2022

April 15, 2022

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Affiliated Managers Group, Inc. (“AMG”, the “Company”, “we”, or “us”) for use at our 2022 Annual Meeting of Stockholders to be held on May 27, 2022, at 2:00 p.m. British Summer Time (9:00 a.m. Eastern Daylight Time) at the Company’s London office at 35 Park Lane, London W1K 1RB, United Kingdom and at any adjournments or postponements thereof (the “Annual Meeting”). At the Annual Meeting, stockholders will be asked to elect eight directors, approve, by a non‑binding advisory vote, the compensation of the Company’s named executive officers (as defined in the “Executive Compensation Tables” section of this Proxy Statement), ratify the selection of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for the current fiscal year, and consider and act upon any other matters properly brought before them.

Important Notice Regarding the Availability of Proxy Materials. This year, we have again reduced our environmental impact by providing proxy materials to you online in accordance with Securities and Exchange Commission (“SEC”) rules. On or about April 15, 2022, we will mail to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access this Proxy Statement and our 2021 Annual Report on Form 10‑K online. The Notice, which cannot itself be used to vote your shares, also provides instructions on how to vote online and how to request a paper copy of the proxy materials, if you so desire. Whether you received the Notice or paper copies of our proxy materials, the Proxy Statement and 2021 Annual Report on Form 10‑K are available to you at www.proxyvote.com.

Stockholders of record of the Company’s common stock at the close of business on the record date of April 1, 2022 will be entitled to notice of the Annual Meeting and to one vote per share on each matter presented at the Annual Meeting. As of the record date, there were 38,976,359 shares of common stock outstanding and entitled to vote at the Annual Meeting.

The presence, in person or by proxy, of holders of at least a majority of the total number of shares of common stock outstanding and entitled to vote at the Annual Meeting is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non‑votes, if any, will be counted as present and entitled to vote for purposes of establishing a quorum.

A “broker non‑vote” is a proxy from a broker or other nominee indicating that such person has not received instructions from the beneficial owner on a particular matter with respect to which the broker or other nominee does not have discretionary voting power. Brokers have the discretion to vote their clients’ proxies only on matters deemed “routine” by the New York Stock Exchange (“NYSE”).

At this year’s Annual Meeting, the election of directors (Proposal 1) and the advisory vote on executive compensation (Proposal 2) are non‑routine matters, and only the ratification of our auditors (Proposal 3) is a routine matter. It is important that you instruct your broker as to how you wish to have your shares voted on these proposals, even if you wish to vote as recommended by the Board of Directors.

Stockholders are requested to submit a proxy online or by telephone, or by returning a completed, signed, and dated proxy card or voting instruction form. If you vote online or by telephone, you should not return a proxy card or voting instruction form. Shares represented by a properly submitted proxy received prior to the vote at the Annual Meeting and not revoked will be voted at the Annual Meeting as directed by the proxy. If a properly executed proxy or voting instruction form is submitted without any instructions indicated, the proxy will be voted FOR the election of each of the nominees for director, FOR the approval of the advisory vote on executive compensation, and FOR the ratification of the selection of PwC as our independent registered public accounting firm for the current fiscal year. If other matters are presented, proxies will be voted in accordance with the discretion of the proxy holders on such other matters.

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A stockholder of record may revoke a proxy at any time before it has been voted by filing a written revocation with the Secretary of the Company at the Company’s principal executive office at 777 South Flagler Drive, West Palm Beach, Florida 33401‑6152, by submitting a duly executed proxy bearing a later date, or by appearing in person and voting by ballot at the Annual Meeting. A stockholder of record who voted online or by telephone may also change his or her vote with a timely and valid later online or telephone vote. Any stockholder of record as of the record date may attend the Annual Meeting whether or not a proxy has previously been given, but the presence (without further action) of a stockholder at the Annual Meeting will not constitute revocation of a previously given proxy. If you hold your shares in street name and would like to change your voting instructions, please follow the instructions provided to you by your broker, bank, or other intermediary.

A stockholder may vote in person at the Annual Meeting upon presenting picture identification and any one of the following: an account statement, the Notice, or a proxy card. If you hold your shares in street name, you will need to obtain a proxy from your bank or broker in order to vote in person, and you must bring a brokerage statement or letter from your broker, bank, or other intermediary reflecting stock ownership, along with picture identification. The address of the Company’s office in London is set forth above for stockholders who plan to vote in person at the Annual Meeting.

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PROXY STATEMENT SUMMARY

This summary highlights certain information from our Proxy Statement for the 2022 Annual Meeting of Stockholders. You should read the entire Proxy Statement carefully before voting.

 

2022 Annual Meeting of Stockholders

Meeting Information

Agenda Items

Recommendation

Additional Detail  

 

May 27, 2022
2:00 p.m. British Summer Time

(9:00 a.m. Eastern Daylight Time)

 

Affiliated Managers Group Ltd.

35 Park Lane, London W1K 1RB

United Kingdom

 

Proposal 1Election of Directors

 

FOR each Nominee

 

 Page 12

 

Proposal 2Advisory Vote to Approve Executive Compensation (Say-on-Pay)

 

FOR

 

 Page 55

 

Proposal 3Ratification of Selection of Independent Registered Public Accounting Firm

 

FOR

 

 Page 56

 

Company Overview

 

 

AMG is a leading partner to independent active investment management firms globally. Our strategy is to generate long-term value by investing in a diverse array of high-quality independent partner-owned firms, referred to as “Affiliates,” through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth and return. AMG’s innovative partnership approach enables each Affiliate’s management team to own significant equity in their firm while maintaining operational and investment autonomy. In addition, AMG offers its Affiliates growth capital, global distribution, and other strategic value-added capabilities, which enhance the long-term growth of these independent businesses and enable them to align equity incentives across generations of principals to build enduring franchises.

 

 

Governance Highlights

Highly Independent and Diverse Board

•   All Board committees are composed entirely of independent directors

•   The CEO is the only non-independent director

•   Directors bring a wide array of qualifications, skills, and attributes to AMG’s Board; see Director Experience and Skills Overview on page 14

•   43% of independent directors are women, with three women serving on the Board, and two of three Board committees are chaired by women

•   29% of independent directors are ethnic minorities

Independent Board Chair

•   Transitioned to an independent Board Chair in 2020; structure provides effective checks and balances to ensure the exercise of independent judgment by the Board

•   Current Board Chair is an independent director serving on all Board committees; position has specified duties

Significant Board Refreshment

•   Four of the seven independent directors are new since 2020

•   New Chairs of all three Board committees, and new members placed on each committee, since 2020

•   Fully reconstituted Compensation Committee in 2020

•   Half of new directors are women or ethnically diverse

•   Average director age of 58; average tenure of 4 years

•   Long-tenured independent directors in leadership roles

Director Accountability, Development, and Engagement

•   100% director attendance rate at all Board and committee meetings in 2021

•   Comprehensive orientation for new directors; ongoing development programs, with additional training for directors in new leadership roles

•   Annual Board and committee self-evaluations and individual director assessments

•   Annual election of directors at majority vote standard (no staggered board)

No Overboarding

•   Nominating and Governance Committee assesses director time commitments in reviewing nominee candidates

•   Only two directors serve on additional public company boards (none serves on more than two other boards)

Active Shareholder Engagement

•   Active engagement, with regular shareholder outreach

•   Strong track record of integration of shareholder feedback into corporate governance practices and compensation program design over many years

•   In 2021 and 2022YTD, AMG held approximately 140 meetings with stockholders representing approximately 70% of our voting shares, on topics including corporate strategy, ESG, and executive compensation

Shareholder Alignment Policies and Initiatives

•   Equity Ownership Guidelines require 10x annual base salary for CEO (7x for other NEOs) and 5x annual base fees for independent directors; CEO and other NEOs are subject to an additional Equity Holding Policy described on page 31

•   Our directors and executives have collectively purchased over 100,000 shares in the open market since 2019, totaling over $10 million notional value at time of purchase

•   A majority of our current independent directors, including our Board Chair, have purchased shares in the open market; independent directors collectively purchased over 50,000 shares since 2019

•   CEO holds shares of AMG stock that significantly exceed the required level, having purchased 52,000 shares in the open market since appointment as CEO, across seven distinct purchases, totaling $4.2 million notional value at time of purchase

•   Over the past two years, other named executive officers have purchased over 7,000 shares, with an aggregate notional value of more than $1 million at the time of purchase

Demonstrated Success in Implementing Succession Plan across Management and Board

•   Nominating and Governance Committee has primary responsibility for executive succession planning

•   Demonstrated success of the Board’s long-term succession planning; full execution of transition to the next-generation leadership team under President & CEO Jay C. Horgen, appointed in 2019

Prioritization of ESG Factors

•   Board has oversight responsibility for corporate ESG practices (see ESG Highlights, pages 23-25) and principal responsibility for enterprise risk management, an area where AMG enhanced resources since 2020; a majority of directors have risk management experience

•   A cross‑functional Sustainability Committee is responsible for policies, controls, and practices around environmental, health and safety, and social risks and initiatives; reports to the Board at least annually and includes members of AMG’s senior management team

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2021 Performance Summary

Strong financial performance and business momentum reflect excellent performance by key Affiliates, and the positive impact of strategic investments and actions taken to position the business for growth

•  Strong stock performance since appointment of Jay C. Horgen as CEO in May 2019—an increase of approximately +90% from the 2019 appointment through year‑end 2021 and +62% in 2021

•  GAAP net income of $565.7 million for the year—an increase of +180% relative to the prior year, and a compound annual growth rate of +32% over the 3-year period

•  GAAP earnings per share (diluted) of $13.05 for the year—an increase of +201% relative to the prior year, and a compound annual growth rate of +42% over the 3-year period

•  Adjusted EBITDA of $1,058.6 million for the year—an increase of +33% relative to the prior year

•  Economic net income of $779.8 million for the year—an increase of +25% relative to the prior year

•  Record Economic earnings per share of $18.28 for the year—an increase of +37% relative to the prior year, to the highest level in AMG’s history

•  Outstanding results across all financial performance metrics—2021 results reflected increases across all key financial metrics

AMG achieved outstanding results in 2021 and created significant shareholder value through strong execution of its growth strategy, excellent Affiliate investment performance, and increasing momentum across the business. The impact of growth investments in new and existing Affiliates, and the active re-shaping of the Company’s strategic exposures in favor of growth areas, have together considerably increased the earnings power of AMG’s business. AMG’s 2021 results, set forth in the tables below, reflected these factors, which have created significant business performance and new investment tailwinds that we believe will further contribute to AMG’s earnings growth over the long term

 

 

 

 

 

Additional information on non-GAAP financial performance measures, including reconciliations to the most directly comparable GAAP measure, can be found in AMG’s Annual Report on Form 10-K under “Supplemental Financial Performance Measures.” AMG stock prices shown in the table above reflect the closing price reported on the NYSE on the referenced date.

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2021 Performance Summary (cont.)

Having renewed the organization’s focus on AMG’s foundational values of entrepreneurial spirit, ownership mindset, and disciplined execution, AMG’s executive team continued to advance the Company’s strategy and re-shape the business in favor of fast-growing areas in 2021, amid ongoing complexity in the operating environment

Growth Investments: New Affiliates

AMG was one of the most active investors in independent asset managers over the past 24 months, including significant new Affiliate investments in 2021 in areas of secular growth and client demand

•   Completed partnerships with four new Affiliates in 2021, enhancing AMG’s exposure in growth areas including ESG investing, private markets, and Asia; completed an additional investment in an existing Affiliate in January 2022

•   Elevated volume of new Affiliate investment activity continued through the COVID-19 pandemic, in a competitive environment, benefiting from the strength of AMG’s existing long-term proprietary relationships and three-decade track record of successful partnerships

•   Excellent return on growth investments over a 3-year period, with yield on investments and return on capital more than double AMG’s pre-set targets

Growth Investments: AMG Centralized Capabilities

Realigned AMG’s institutional and retail distribution platforms, and broadened our partnership solution offerings

•   Continued to reorganize and further align global distribution platforms and activities more directly with Affiliates; ongoing realignment of AMG’s global sales professionals to focus on asset owners with the greatest growth opportunities for Affiliates

•   Completed strategic evolution of U.S. wealth platform to fully align AMG’s resources with Affiliate growth and exclusively offer strategies managed by Affiliates; clients benefited from a streamlined platform wholly focused on AMG Affiliates’ high-conviction investment offerings, including fee reductions across all the strategies involved in the transition. Affiliate strategies that were previously unavailable to the U.S. wealth market were newly offered, as well as additional differentiated investment solutions. Over $4 billion in assets was converted to Affiliate strategies

•   AMG-led distribution generated net client cash flows in excess of pre-set target for 2021

•   Active engagement with numerous Affiliates on succession planning and long-term business strategy

•   Actively collaborating with Affiliates on product development, including invested seed and acceleration capital to support new products in areas of increasing client demand

Stockholder Return

Excellent absolute and relative annual stock performance

•   Stockholder return of +62% in 2021 reflected excellent growth of +37% in Economic earnings per share, strong investment performance, the positive impact of strategic repositioning and effective capital management, and ongoing business momentum, more than double the pre-set target over 1- and 3- year composite period

•   Significantly outperformed the Peer Group median stockholder return of +37% in 2021, exceeding the pre-set relative target over 1- and 3- year composite period

•   AMG’s stock price increased approximately +90% from May 2019 through year-end 2021, following the announcement of the appointment of new CEO Jay C. Horgen and transition to the new executive management team

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2021 Performance Summary (cont.)

Capital Management

Enhanced AMG’s capital position, while deploying over $1 billion across both growth investments and the return of significant excess capital to stockholders

•   Invested in four new Affiliates in 2021 and in growth initiatives across a number of existing Affiliates

•   Enhanced balance sheet by issuing $200 million in 40-year maturity bonds and amending the Company’s credit facility with a rate reduction

•   Approximately 8% of shares outstanding were repurchased during 2021 and over 20% of shares outstanding were repurchased during the last three years

•   Share repurchase authorization was expanded in 2021, demonstrating our ongoing commitment to returning capital to stockholders

Human Capital Management and ESG Initiatives

Advancement across a broad scope of human capital management and ESG initiatives

•   All employees were granted AMG stock in 2021, further affirming AMG’s core value of ownership mindset, and aligning 100% of AMG’s human capital base with shareholder value creation through stock ownership

•   Strong employee satisfaction (approximately 90%) measured through AMG’s annual formal engagement survey, despite working remotely for a substantial majority of the year

•   Focused on AMG’s position as a corporate citizen; corporate philanthropy initiatives included contributions to a variety of non-profit organizations, directly and through employee gift-matching; a majority of employees, and 100% of Directors and Executive Committee members, participated in corporate philanthropy initiatives in 2021

•   Completed fourth annual inventory and secured third-party attestation of AMG’s GhG emissions; achieved medium-term emissions reduction targets established in 2018

•   Efforts recognized in strong scores with multiple ESG ratings providers

AMG’s focus on sustainability extends to our capital allocation strategy, and was reflected in our 2021 Affiliate investments and our ongoing support of Affiliate ESG initiatives

•   $90+ billion in AUM in dedicated ESG strategies

•   23 Affiliates are UN PRI signatories

•   Recent new investments include Parnassus Investments, a pioneer in socially responsible investing for more than 35 years and the largest independent ESG-dedicated fund manager in the U.S.; Boston Common Asset Management, a women-owned and -led leader in sustainable and impact investing for more than 30 years; and Inclusive Capital Partners, a highly engaged impact investor focused on responsible capitalism

•   Supported existing Affiliates in developing, sourcing, and launching additional ESG strategies

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Recent Corporate Governance Enhancements & ESG Initiatives

AMG maintains an active engagement with our stockholders throughout the year, and has a demonstrated history of integrating shareholder feedback into our corporate governance practices. This investor outreach continued in 2021 and into 2022, including engagement prior to and following the 2021 Annual Meeting on a range of topics, including Board refreshment and independence, and our ESG initiatives; the collective feedback reflected the recent enhancements made to AMG’s corporate governance practices.

Stockholder Comments

AMG Response

Further increase focus on Board refreshment and expanding the diversity of skills and experience to enhance oversight of capital allocation decision-making and strategic execution

 

Our Board has evolved along with AMG, as we have refined and executed our strategy against the backdrop of organizational change

•   New Independent Directors: Four new independent directors have been appointed since 2020, with complementary skillsets and perspective across industries and disciplines, which have enhanced the Board’s strategic dialogue with management; half of these new directors are either women or ethnically diverse

•   Rotating Board Roles:

oNew independent Board Chair in 2020

oNew Chairs of all committees (each individual had not chaired a committee) since 2020

oNew members placed on each committee, including a fully reconstituted Compensation Committee

•   Shortened Average Board Tenure: Given the significant refreshment of 2020 and 2021, average tenure of AMG directors is now 4 years

Prioritize diversity when evaluating the composition of the Board and AMG’s employee base

 

We believe that diversity is essential to our success, and that philosophy is reflected in our governance practices

•   Gender and Ethnic Diversity on the Board:

oWomen represent 43% of our independent directors, with three women serving on the Board

o29% of our independent directors are ethnic minorities

oTwo female directors, including one ethnic minority, chairing committees

•   Expanding Employee Diversity: Achieved gender diversity of approximately 40% across management positions, and overall over 50% of our employees are women (in each case, excluding our U.S. wealth subsidiary)

The Board Chair should be a non-executive

 

Today, our leadership structure reflects best practices in corporate governance, with a non-executive, independent Board Chair, which provides for effective checks and balances to ensure the exercise of independent judgment by the Board

•   Transitioned to an Independent Board Chair in 2020: Provides leadership to the Board and to the independent directors, including in executive sessions, and serves as a key source of communication between the independent directors and the CEO. Current Board Chair, Dwight D. Churchill’s, extensive knowledge, and participation in the development, of AMG’s corporate strategy, as well as his extensive executive management experience outside of AMG, make him an effective Board Chair

Enhance AMG’s corporate ESG initiatives

 

We continue to focus on ESG initiatives, and believe that sound corporate citizenship and attention to governance and environmental principles are essential to AMG’s success

•   Achieved strong rankings by ESG rating providers

•   ESG factors added to compensation determination process, with specific disclosed targets

•   Completed fourth annual inventory and secured third-party attestation of AMG’s GhG emissions

•   Participation in CDP’s Climate Change Disclosure program for five years

•   Company-wide giving campaigns support charities in local communities, and are often enhanced by matching gifts incremental to individual limits from the employee gift-matching program

•   2021 annual employee engagement survey reported an employee satisfaction rating of approximately 90%, which we attribute to our focus and commitment to our employees

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2021 Compensation Program Enhancements and Program Overview

AMG meets with our stockholders extensively throughout the year as part of our investor outreach, and we have a demonstrated history of integrating shareholder feedback into our executive compensation program design. In 2021, 83% of stockholders voted in favor of our Say-on-Pay proposal, expressing strong support for our executive compensation program design and its demonstrated linkage of pay-for-performance, as well as the significant integration of shareholder feedback.

Following significant refreshment of the Board, our Compensation Committee was entirely reconstituted during the second half of 2020, with a new Chair and all new members. During the fourth quarter of 2020, the reconstituted Committee selected Semler Brossy Consulting Group, a national compensation consulting firm, as its new independent executive compensation consulting firm, following a formal search process. Given the reconstitution of the Compensation Committee and the transition to a new CEO, the new Committee undertook a comprehensive review of AMG’s incentive compensation determination program to be implemented for performance year 2021. As in previous years, shareholder feedback gathered throughout the year was carefully considered, along with input from our new compensation consultant, as well as commentary from proxy advisory firms. Following this review, the Committee determined to implement a number of significant enhancements to AMG’s compensation program, which were reflected in the Performance Assessment and the Committee’s final compensation determinations for the 2021 performance year.

Stockholder Comments

AMG Response

Simplify the compensation determination process

•   Streamlined into a single quantitative assessment scorecard, with scoring applied to pre-set target incentive amounts, and the payout allocated between cash bonus and equity awards using a pre-established tiered formula

Disclose compensation targets, in addition to maximum payout caps

•   New target payout amounts set annually based on peer benchmarking, where available, and reflecting input from our independent compensation consultant; ongoing use of caps on NEO incentive compensation

Performance Assessment should be more formulaic, with an emphasis on objective performance measures

 

Disclose additional objective targets used in the determination of incentive awards

•   Scorecard assessment is now weighted over 90% to pre-determined, objective metrics set in the first half of each year and aligned with AMG management’s ability to create shareholder value across capital allocation decision-making; overall, 13 distinct quantitative targets

•   Cap of 200% achievement set on each individual metric. Metrics have relatively uniform weightings, minimizing distortion in score result

•   Significantly Broadened Array of Financial Performance Targets:

-    Use of pre-set earnings targets has been expanded to include both annual targets as well as a 3-year relative earnings target measured against peers on a percentile-ranked basis, to focus management on generating long-term shareholder value

-    Added new capital deployment targets, measuring average yield and EBITDA acquired from new Affiliate investments, and weighted returns on share repurchases and new Affiliate investments – in each case over a 3-year period

•   New TSR Targets: Added pre-set Total Stockholder Return targets, based on 1- and 3-year returns on both an absolute and a relative basis, to further align the interests of management with those of our stockholders

•   New Performance Categories and Targets: Added pre-set targets for operational and organizational performance goals, enhancing the formulaic nature of the assessment and expanding the scope into additional areas, including ESG:

-    AMG Distribution Effectiveness – measuring results relative to gross sales targets relating to our AMG-led distribution business

-    Strategic and Organizational Initiatives – measuring organizational diversity, AMG’s participation in responsible investment, and employee engagement

Factor ESG-related activities into incentive determination in a more granular fashion

•   Introduced a new category of pre-set ESG-related targets that factor directly into the more formulaic and transparent process for compensation determination, measuring organizational diversity, participation in responsible investment, and employee engagement

Revise AMG’s Peer Group to better reflect AMG’s business model and the evolving industry

•   Expanded and evolved Peer Group, to include peers with market capitalizations and business scope (including alternative-focused investment firms) aligned with the ongoing evolution of AMG’s business, and to replace peers impacted by industry consolidation

ROE performance hurdle for performance RSUs is an appropriate metric, but targets should increase as the business grows

•   Overall, stockholders expressed support for our use of Return on Equity, which aligns management incentives with the strategic goals of growing earnings and the effective stewardship of shareholder capital, and incorporates the effect of share repurchases, new investments, cost containment, and reinvestment in the business

•   For the 2021 Long-Term Achievement Awards, the Committee raised the ROE target levels by over 10% compared to the 2020 awards, and widened the achievement level ranges

First $5 million in incentive compensation is split 45% cash and 55% equity

Next $5 million is split 40% cash and 60% equity

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2021 Annual Incentive Compensation Determination Process

Overview of Enhanced Performance Assessment Process

 

•   Below is a summary of the Compensation Committee’s new Performance Assessment process, simplified to five steps, to establish the Annual Incentive Compensation for our CEO and other NEOs

•   Three of these five steps are formulaic; the Compensation Committee sets the Peer Group and target metrics and caps:

(i) For 2021, our Peer Group was updated and broadened to include peers with market capitalizations and business scope (including alternative-focused investment firms) aligned with the ongoing evolution of AMG’s business, and to replace peers impacted by industry consolidation

(ii) The Target Payout was set at $9.6 million for our CEO in 2021, based on the median of Peer Group compensation

 

 

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2021 Annual Incentive Compensation Determination Results

2021 Performance Assessment Scorecard Results

 

•    With the Company’s excellent 2021 results, particularly in its new Affiliate investment strategy as well as strong shareholder return, achievement levels were strong relative to pre-set targets, generating a strong Overall Performance Assessment Score

 

 

Please refer to page 29 of the “Compensation Discussion and Analysis” section of this Proxy Statement for additional information.

 

 

 

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2021 Annual Incentive Compensation Determination Results (cont.)

Formulaic Derivation of Incentive Compensation and Mix of Incentive Awards

 

•  The Overall Performance Assessment Score of 147% was applied to the Target Payout, producing Total Formulaic Incentive Compensation of $13.4 million for the CEO, which was reduced by $1.7 million to $11.7 million, reflecting the Committee’s third and final year of impact related to the one-time 2019 Long-Term Equity Alignment Award, as part of its commitment to stockholders in 2019

•  Annual Incentive Compensation was then allocated between cash bonus and long-term equity awards using a pre-established tiered formula which caps cash awards at 45% of Annual Incentive Compensation, and in which the proportion of equity awards increases as Annual Incentive Compensation increases. The allocation resulted in a formulaic cash bonus of $4.8 million (41%) and a formulaic equity incentive award amount of $6.9 million (59%)

•  The formulaic equity incentive award amount was granted 40% in the form of Long-Term Deferred Equity Awards and 60% in the form of Long-Term Performance Achievement Awards, consistent with the Committee’s targeted allocations

 

 

(1)Cash determined via a tiered formula: First $5 million in incentive compensation is split 45% cash and 55% equity; next $5 million is split 40% cash and 60% equity; any incentive compensation thereafter is split 30% cash and 70% equity.

 

 

 

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PROPOSAL 1: ELECTION OF DIRECTORS

Introduction

Our Board of Directors currently consists of eight members, all of whom are expected to be elected at the Annual Meeting to serve until the 2023 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified. The Board of Directors, upon the recommendation of the Nominating and Governance Committee, has nominated Karen L. Alvingham, Tracy A. Atkinson, Dwight D. Churchill, Jay C. Horgen, Reuben Jeffery III, Félix V. Matos Rodríguez, Tracy P. Palandjian, and David C. Ryan (collectively, the “Nominees”) to serve as directors. Each of the Nominees is currently serving as a director of the Company. As more fully discussed below in the “Corporate Governance Matters and Meetings of the Board of Directors and Committees” section of this Proxy Statement, the Board of Directors has determined that seven of its eight Nominees, Lady Alvingham, Ms. Atkinson, Mr. Churchill, Mr. Jeffery, Dr. Matos Rodríguez, Ms. Palandjian, and Mr. Ryan have no material relationship with the Company and, therefore, are independent for purposes of NYSE listing standards. The Board of Directors expects that each of the Nominees will, if elected, serve as a director for the new term. However, if any person nominated by the Board of Directors is unable to accept election, the proxies will be voted for the election of such other person or persons as the Board of Directors may recommend.

The Company’s amended and restated by‑laws (the “By‑laws”) provide for majority voting in uncontested director elections. Under the majority voting standard, directors are elected by a majority of the votes cast, which means that the number of shares voted “for” a director must exceed the number of shares voted “against” that director. In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard for the election of directors will be a plurality of the votes cast. Abstentions and broker non‑votes will have no effect on the outcome of the vote on the election of directors.

Under our Corporate Governance Guidelines, the Nominating and Governance Committee has established procedures for any director who is not elected to tender his or her offer to resign. Upon receiving the director’s offer to resign, the Nominating and Governance Committee will recommend to the Board of Directors whether to accept or reject the offer to resign, or whether other action should be taken. The Nominating and Governance Committee and the Board of Directors, in making their decisions, may consider any factor or information that they deem relevant. The Board of Directors, taking into account the Nominating and Governance Committee’s recommendation, will act on the tendered resignation within ninety days following certification of the election results. A director whose resignation is under consideration must abstain from participating in any recommendation or decision regarding his or her resignation.

Recommendation of the Board of Directors

The Board of Directors believes that the election of each of the Nominees is in the best interests of the Company and its stockholders and, therefore, unanimously recommends that stockholders vote FOR the election of each of the Nominees.

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Information Regarding the Nominees

The following table sets forth the name, age (as of April 1, 2022), tenure, and other information of each Nominee, along with the committees of the Board of Directors on which each Nominee currently serves.

 

Director Nominee Information: Committee Memberships

Name

 

Age

 

Compensation

Committee

 

Nominating and

Governance

Committee

 

Audit

Committee

 

Independence

 

Tenure (Years)

 

 

Other

Public Company Boards

Karen L. Alvingham

 

59

 

 

 

 

 

 

 

 

4

 

Tracy A. Atkinson

 

57

 

 

 

 

 

(Chair)

 

 

1

 

2

Dwight D. Churchill

  Board Chair

 

68

 

 

 

 

 

12

 

 

Jay C. Horgen

  President and

  Chief Executive Officer

 

51

 

 

 

 

 

 

 

 

 

3

 

Reuben Jeffery III

 

68

 

(Chair)

 

 

 

 

 

2

 

Félix V. Matos Rodríguez

 

60

 

 

 

 

 

 

 

1

 

Tracy P. Palandjian

 

51

 

 

(Chair)

 

 

 

 

10

 

 

David C. Ryan

 

52

 

 

 

 

 

 

 

 

 

1

 

 

Average

Age of 58

 

100% Independent;

All New Members and

New Chair since 2020

 

100% Independent;

2 New Members and New Chair since 2020

 

100% Independent;

100% Financial Experts;

2 New Members and New Chair since 2020

 

7 of 8

Nominees are Independent

 

4 New Members since 2020

 

 

No Overboarding

 

 

 

 

 

 

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The Nominees bring a wide array of qualifications, skills, and attributes to our Board of Directors that support its oversight role on behalf of our stockholders. The most relevant of these qualifications and skills are summarized in the table below:

 

 

Director Experience and Skills Overview

Leadership

 

 Directors who have held significant leadership positions provide a practical understanding of organizations, processes, strategy, risk management, and other factors that promote growth

 

All
Directors

Capital allocation

 

Our continued success depends in large part on a disciplined approach to capital allocation, as we seek to deploy resources in the areas of highest growth and return in our business to capitalize on growth opportunities, before efficiently returning excess capital to our stockholders; directors with experience managing capital contribute to the advancement of this strategy to enhance long-term value creation 

 

6 of 8
Directors

Corporate governance

 

We place a high standard on strong corporate governance, and adopt best practices through the active monitoring of evolving trends and developments, and through routine Board self-assessments and enhancements to our governance policies, committee charters, and board practices, as well as through active shareholder engagement and ongoing board refreshment, and we seek directors with demonstrated knowledge and practical experience in corporate governance, fiduciary roles, and stakeholder engagement

 

All
Directors

Risk management and compliance

 

 Risk management is critical to the stability, security, and success of our business, and we seek directors with regulatory and compliance expertise, as well as experience managing and overseeing risk in public and private companies and in other contexts

 

All
Directors

Investment management

 

 Directors with investment management experience provide the Board with an enhanced understanding and assessment of our business strategy and bring valuable perspective on topics that are uniquely relevant to our industry

 

7 of 8
Directors

Financial, accounting, or financial reporting

 

 We use a broad set of financial metrics to measure our operating and strategic performance, and we seek directors with an understanding of finance and financial reporting processes

 

7 of 8

Directors

Operational, including human capital management

 

 Directors with experience in operations are able to assess and advise management on the formulation and execution of our business strategy, including the efficient allocation and utilization of our and our Affiliates’ human capital and other operating resources, and the re-allocation of those resources over time through all stages of market cycles

 

All
Directors

 

ESG

 

 Directors who have experience in managing environmental, social, and governance issues are able to assist the Board in overseeing and advising management to ensure that strategic business imperatives and long-term value creation for stockholders are achieved within a responsible, sustainable business plan

 

5 of 8
Directors

Public policy, regulatory, and government affairs

 

Directors with experience in governmental, regulatory, and related organizations provide valuable insight into governmental actions and socioeconomic trends, as well as the highly regulated industry in which we and our Affiliates operate

 

4 of 8
Directors

Other public board experience

 

 Directors with experience serving on other public company and publicly traded fund boards provide valuable operations and management perspectives, including insights on governance trends and practices and other issues affecting public companies generally

 

5 of 8
Directors

Global experience

 

Directors with global business experience, including managing and growing organizations worldwide, and investing and operating experience in international and emerging markets, provide valuable insights on growth trends in these markets

 

7 of 8
Directors

 

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The following biographical summaries provide additional information on the business experience, principal occupation and past employment, and directorships of each Nominee during at least the last five years.

 

 

Director Biographical Information

Karen L. Alvingham

Karen L. Alvingham has been a director of the Company since January 2018. She served until June 2017 as Managing Partner of Genesis Investment Management, LLP, a boutique investment management firm. Genesis is one of the leading emerging markets equities specialists in the world, and has been an AMG Affiliate since 2004. Lady Alvingham joined the firm in 1990 and was appointed Managing Partner in 2003. Prior to joining Genesis, she was a senior investment manager at Touche Remnant Investment Management Ltd and Lloyds Investment Management Ltd. She began her career at Grieveson Grant & Co. She currently serves on the board of directors of International Market Management Ltd. We believe Lady Alvingham’s qualifications to serve on our Board of Directors include her substantial experience in the investment management industry, including as a senior executive in a leading boutique investment management firm.

Tracy A. Atkinson

Audit Committee (Chair)

Tracy A. Atkinson has been a director of the Company since August 2020. Prior to her retirement in March 2020, Ms. Atkinson served as an executive vice president of State Street Corporation with a number of senior finance and risk management roles including Chief Administrative Officer, Chief Compliance Officer, and Treasurer. Prior to joining State Street Corporation, she held leadership positions at MFS Investment Management and was a Partner at PricewaterhouseCoopers. She currently serves on the boards of directors of the United States Steel Corporation and Raytheon Technologies. We believe Ms. Atkinson’s qualifications to serve on our Board of Directors include her significant leadership experience from her career in the accounting and asset management industries, as well as a track record of service on public company boards.

Dwight D. Churchill

Board Chair

Compensation Committee, Nominating and Governance Committee, & Audit Committee

Dwight D. Churchill has been a director of the Company since February 2010, and has served as independent Board Chair since August 2020. Mr. Churchill held a number of senior positions at Fidelity Investments before retiring from the firm in 2009. Having joined Fidelity in 1993, he served as the head of the Fixed Income Division, head of Equity Portfolio Management and President of Investment Services. While at Fidelity, Mr. Churchill also served as the elected chair of the Board of Governors for the CFA Institute, a 178,000-member association, and from June 2014 to January 2015, he served as interim President and Chief Executive Officer at the CFA Institute. Prior to joining Fidelity, Mr. Churchill served as a Managing Director of Prudential Financial, Inc., as President and Chief Executive Officer of CSI Asset Management, Inc., a subsidiary of Prudential Financial, Inc., and held senior roles at Loomis, Sayles & Company and the Ohio Public Employees Retirement System. Mr. Churchill currently serves on the Board of Trustees and as Chair of the Audit Committee of State Street Global Advisors SPDR ETF Mutual Funds and as a staff consultant at The Public Employees Retirement System of Idaho. We believe that Mr. Churchill’s qualifications to serve on our Board of Directors include his extensive experience in the investment management industry, including his oversight of internal controls, financial reporting, and accounting procedures.

Jay C. Horgen

President and Chief

Executive Officer

Jay C. Horgen is the President and Chief Executive Officer of the Company and joined the Board of Directors in May 2019. Mr. Horgen was appointed President and CEO in 2019, having previously served as Chief Financial Officer from 2011 to 2019. Previously, Mr. Horgen served as Executive Vice President of the Company in New Investments. Prior to joining AMG in 2007, Mr. Horgen was a founder and Managing Director of Eastside Partners, a private equity firm. Prior to that, Mr. Horgen served as a Managing Director in the Financial Institutions Group at Merrill Lynch, Pierce, Fenner & Smith Incorporated. From 1993 to 2000, he worked as an investment banker in the Financial Institutions Group at Goldman, Sachs & Co. Mr. Horgen received a B.A. from Yale University. We believe that Mr. Horgen’s qualifications to serve on our Board of Directors include his direct knowledge of the Company’s strategy and operations through his service as Chief Executive Officer and in other leadership positions at the Company, including President and Chief Financial Officer, and his extensive experience in the financial services, private equity, and investment management industries.

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Reuben Jeffery III

Audit Committee &

Compensation Committee (Chair)

Reuben Jeffery III has been a director of the Company since April 2020. Mr. Jeffery served as President and Chief Executive Officer and member of the board of Rockefeller & Co. and Rockefeller Financial Services, Inc. from 2010 to 2018. He previously served seven years in the U.S. government in a variety of positions, including as Under Secretary of State for Economic, Energy and Agricultural Affairs; Chairman of the U.S. Commodity Futures Trading Commission; and as Special Assistant to the President on the staff of the National Security Council (2002-2009). At Goldman, Sachs & Co., Mr. Jeffery was Managing Partner of the firm’s Paris office and of its European Financial Institutions Group in London. He began his career as a corporate attorney with Davis Polk & Wardwell LLP. Currently, Mr. Jeffery serves as an independent director and chairman of the board of SMBC Americas Holdings, Inc. Mr. Jeffery is also chairman of the board of Riverstone Credit Opportunities Income Plc (RCOI) and a board member of CSE Insurance Group, an indirect wholly-owned subsidiary of Covéa, a global insurer headquartered in France. He is also a board member of the Financial Services Volunteer Corps (FSVC), a not-for-profit that supports economic development by strengthening financial sectors in developing countries. Mr. Jeffery served as a non-executive director at Barclays Plc from 2010 to 2019. He received a B.A. in Political Science from Yale University and an M.B.A. and J.D. from Stanford University. We believe that Mr. Jeffery’s qualifications to serve on our Board of Directors include his extensive financial services experience, particularly within investment banking and wealth management, and his knowledge and experience with the U.S. and global political and regulatory environments.

Félix V. Matos Rodríguez

Nominating and Governance

Committee

Félix V. Matos Rodríguez has been a director of the Company since January 2021. Dr. Matos Rodríguez is the Chancellor of the City University of New York (CUNY). Prior to his appointment as Chancellor in May 2019, Dr. Matos Rodríguez was president of CUNY’s Queens College and of CUNY’s Eugenio María de Hostos Community College in the Bronx. Dr. Matos Rodríguez has served as a teacher, administrator, and former Cabinet secretary for the Commonwealth of Puerto Rico. He currently serves as board and executive committee chair of Research Foundation CUNY, and as co-chair of New York City Regional Economic Development Council. Additionally, he serves on the boards of Phipps Houses, the United Way of New York City, the American Council on Education, the Association for a Better New York (ABNY), and the Research Alliance for New York City Schools. Dr. Matos Rodríguez holds a B.A. from Yale University and received a doctorate in history from Columbia University. We believe that Dr. Matos Rodríguez’s qualifications to serve on our Board of Directors include his long track record as an innovator in both academia and the public sector and his leadership in a large, decentralized human-capital-based organization operating through a network of distinct institutions.

Tracy P. Palandjian

Compensation Committee &

Nominating and Governance Committee (Chair)

Tracy P. Palandjian has been a director of the Company since March 2012. Ms. Palandjian is the Chief Executive Officer, co-founder and a member of the Board of Directors of Social Finance, Inc., a nonprofit organization focused on developing and managing investments that generate social impact and financial return. Prior to establishing Social Finance, Ms. Palandjian served as a Managing Director at The Parthenon Group, a global strategy consulting firm. At Parthenon, she established and led the Nonprofit Practice and consulted to foundations and nonprofit organizations on strategy development, mission definition, corporate social responsibility, and knowledge and innovation in the U.S. and globally. Prior to Parthenon, Ms. Palandjian worked at McKinsey & Company and at Wellington Management Company, LLP. Ms. Palandjian is currently Vice-Chair of the United States Impact Investing Alliance and the Global Social Impact Investment Steering Group (successor to the G8 Social Impact Investment Taskforce). She serves on the Boards of Pershing Square Holdings, Ltd., The Boston Foundation, the Surdna Foundation (and chairs its Investment Committee) and Mass General Brigham. Ms. Palandjian is also a member of the Leadership Council of Facing History and Ourselves and the External Advisory Board of the McCance Center for Brain Health at Massachusetts General Hospital. We believe that Ms. Palandjian’s qualifications to serve on our Board of Directors include her extensive global financial management, consulting, and advisory experience.

David C. Ryan

David C. Ryan has been a director of the Company since July 2021. Mr. Ryan is a corporate advisor to Singapore-based Temasek Holdings, and serves on the boards of Mapletree Investments Pte Ltd., a Singapore-based real estate development, investment, capital and property management company, and Tiga Acquisition Corp., a Singapore-based special purpose acquisition company, and previously served on the board of ADT Inc. Mr. Ryan’s 22-year career at Goldman Sachs & Co., where he was a partner, spanned a variety of roles in Asia and the United States. From 2011 to 2013, he served as President of Goldman Sachs Asia (chairing its management committee) and was a member of the Management Committee of Goldman Sachs & Co. We believe that Mr. Ryan’s qualifications to serve on our Board of Directors include his substantial global financial services experience, particularly his extensive knowledge of the Asian region.

 


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Board Refreshment Since 2020

 

 

 

 

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Governance Highlights

 

 

Highly independent, diverse Board; world-class, experienced directors with a range of skills and backgrounds

 

Independent Board Chair

 

Women in Leadership Roles on the Board

 

No Overboarding

 

Policies to Promote Long-Term Director and Executive Equity Ownership

 

100% Director Attendance at Board and Committee Meetings in 2021

 

Significant Board Refreshment since 2020

 

Publicly-Disclosed Corporate Governance Guidelines

 

Majority Vote Standard in Uncontested Director Elections

 

No Staggered Board

 

No “Poison Pill”

 

“Double-Trigger” Equity Award Vesting Upon Change in Control

 

Annual Say-on-Pay Vote

 

Active Engagement with Shareholders

 

2021 Director Engagement

 

Board Meetings

 

Committee Meetings

9

Board Meetings

 

17

Committee Meetings

100%

Attendance rate at meetings of the full Board of Directors

100%

Attendance rate at Board committee meetings

 

Shareholder Engagement (2021-2022YTD)

 

Shareholder Outreach

 

Responsiveness

   Proactive outreach to stockholders representing approximately 90% of voting shares

   Held approximately 140 meetings with over 70 current and prospective stockholders, including three-fifths of our top 30 largest holders, representing approximately 70% of voting shares

 

   Demonstrated integration of shareholder feedback into corporate governance practices and compensation program design over multiple years

   Expanded shareholder engagement in recent years on topics including corporate strategy, ESG, and executive compensation; feedback reflected in our compensation program enhancements applied to performance year 2021 compensation

 

2021 Compensation Committee Actions in Response to Shareholder Feedback

   Adopted an enhanced, more formulaic five-step Performance Assessment process for determining executive incentive compensation; three of the five steps are entirely formulaic

   Disclosed performance targets used in the new five-step Performance Assessment process, which include a broadened array of pre-set financial targets, and new pre-set targets, along with achievement caps for each metric, for operational and organizational performance goals

   Factored four ESG-related activities into the formulaic process, with pre-set performance targets and achievement caps across a range of ESG initiatives

   Revised Peer Group to better reflect AMG’s business model and to address industry consolidation

   Increased the ROE performance hurdle used for performance RSUs, vs. the prior year, to reflect growth in the business


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Corporate Governance Matters and Meetings of the Board of Directors and Committees

Board of Directors: During 2021, the full Board of Directors met nine times. Each incumbent member of the Board of Directors in 2021 attended 100% of the total number of meetings of the full Board of Directors and all standing committees of the Board of Directors on which such director served. We do not have a formal policy regarding director attendance at our Annual Meeting of Stockholders. One director attended the 2021 Annual Meeting of Stockholders.

At least annually, the Board of Directors evaluates the independence of our directors in light of the standards established by NYSE. A majority of our Board of Directors must be independent within the meaning of NYSE listing standards. After its most recent evaluation of director independence, the Board of Directors affirmatively determined that seven of our eight current directors, Lady Alvingham, Ms. Atkinson, Mr. Churchill, Mr. Jeffery, Dr. Matos Rodríguez, Ms. Palandjian, and Mr. Ryan, are “independent” for purposes of NYSE listing standards. The Board of Directors made its determinations based upon individual evaluations of these directors’ employment or board of directors affiliations, compensation history, and any commercial, family, or other relationships with the Company. There were no transactions between any director and the Company for the Board of Directors’ consideration in determining the independence of any independent director. Members of the Board of Directors serve as directors, trustees, or in similar capacities (but not as executive officers or employees) for non-profit organizations to which we may make charitable contributions from time to time. Contributions to these organizations did not exceed either $120,000 or 1% of each of those organizations’ annual consolidated gross revenues during their last completed fiscal years.

The standing committees of the Board of Directors are the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee. Only independent directors within the meaning of NYSE listing standards serve on these committees. Other members of the Board of Directors may attend committee meetings from time to time at the invitation of the respective committee. Each committee acts pursuant to a written charter adopted by the respective committee. The members and chairs of each committee are set forth above in the table titled “Director Nominee Information: Committee Memberships,” and a description of each committee is set forth below.

Audit Committee: Each of the members meets the independence standards applicable to audit committees under the Sarbanes‑Oxley Act of 2002 and NYSE listing standards and is an audit committee financial expert, as defined by the SEC. The Audit Committee’s purpose is to assist the Board of Directors in oversight of our internal controls and financial statements and the audit process. The Audit Committee held eight meetings during 2021.

Compensation Committee: Each member meets the independence requirements applicable to compensation committees under NYSE listing standards. The Compensation Committee is responsible for overseeing our general compensation policies and establishing and reviewing the compensation plans and benefit programs applicable to our executive officers. In that capacity, the Compensation Committee also administers our incentive plans. The Compensation Committee held four meetings during 2021, and conferred on additional occasions throughout the year to discuss changes and enhancements to the executive compensation program.

Nominating and Governance Committee: The Nominating and Governance Committee is primarily responsible for recommending criteria to the Board of Directors for Board and committee membership, identifying and evaluating director candidates, overseeing the annual self‑assessment of the Board of Directors and its committees and of the Chief Executive Officer, overseeing Chief Executive Officer and other key executive succession planning, and maintaining our Corporate Governance Guidelines. The Nominating and Governance Committee held five meetings during 2021.

Board Composition and Refreshment Process: The Nominating and Governance Committee may solicit director candidate recommendations from a number of sources, including directors, executive officers, and third‑party search firms. The Nominating and Governance Committee will consider for nomination any director candidates, including director candidates recommended by our stockholders, who are deemed qualified by the Nominating and Governance Committee in light of the qualifications and criteria for Board of Directors membership described below, or such other criteria as approved by the Board of Directors or a committee thereof from time to time. Stockholder recommendations must be submitted to the Nominating and Governance Committee in accordance with the requirements set forth in the By‑laws, including those discussed in the “Other Matters—Stockholder Proposals” section of this Proxy Statement, and any procedures established from time to time by the Nominating and Governance Committee. The Nominating and Governance Committee does not have a specific policy regarding the consideration of stockholder recommendations for director candidates and considers this appropriate because it evaluates recommendations without regard to their source. The Nominating and Governance Committee evaluates any potential conflicts of interest on a case‑by‑case basis, to the extent they may arise.

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The Board of Directors believes that a diverse mix of perspectives and expertise enhances its overall effectiveness. When considering candidates for directorship, including nominees currently serving as directors of the Company, the Nominating and Governance Committee takes into account a number of factors, including the following qualifications: the nominee must have the highest personal and professional integrity and have demonstrated exceptional ability and judgment and the attributes necessary (in conjunction with the other members of the Board of Directors) to best serve the longterm interests of the Company and its stockholders. In addition, the Nominating and Governance Committee reviews from time to time the skills and characteristics necessary and appropriate for directors in light of the then-current composition of the Board of Directors, including the following factors:

Director Candidate Qualifications and Attributes

 

   Business and leadership experience, including experience managing and growing organizations worldwide

 

   Knowledge of the financial services industry and, in particular, the asset management industry

 

 

   Demonstrated experience with prudent and strategic capital allocation, as we seek to deploy resources to the areas of highest growth and return in our business

 

   Understanding of organizations, processes, strategy, risk management, and other factors that promote growth, including experience in managing ESG issues

 

 

   Understanding of finance and financial reporting processes

 

 

   Diversity, including ethnic, gender, geographic, and experiential diversity

In considering diversity, the Nominating and Governance Committee considers diversity of background and experience, as well as ethnicity, gender, and other forms of diversity. The Nominating and Governance Committee recognizes the importance of gender and ethnic diversity, in particular, as important factors to consider when evaluating the composition of the Board of Directors. The Nominating and Governance Committee does not have a formal policy regarding diversity in identifying nominees for a directorship, but rather considers it among the various factors relevant to the consideration of any particular nominee. Further, the Board of Directors considers diversity as part of the annual Board and committee self-assessments. The Nominating and Governance Committee reviews our Corporate Governance Guidelines at least annually to ensure that we continue to meet best corporate governance practice standards. Nominating practices are adjusted, as needed, to ensure that the Board of Directors reflects the appropriate mix of skills and experience, and that such practices promote diversity of background and experience, as well as ethnicity, gender, and other forms of diversity.  

Since 2020, the Board of Directors has had the opportunity for meaningful refreshment, with the retirement of five independent directors and the appointment of four new independent directors. These additions to the Board followed a process that included evaluating over 25 candidates since 2020, a number of whom met with members of the Nominating and Governance Committee and other directors, as well as members of management, as part of our nomination process. That process is led by the Nominating and Governance Committee and Board Chair, and includes an evaluation of the current composition of the Board in order to focus on candidates with diverse skills and experiences that would enhance the Board’s collective capabilities and bring new perspectives. The full Board of Directors considers each candidate’s qualifications, and determines whether to nominate the candidate to serve on our Board of Directors.

The current Board of Directors comprises individuals with a substantial variety of skills and expertise, as shown in the “Director Experience and Skills Overview” table above, including with respect to investment management and financial services; international business; government; and not-for-profit organizations. The Nominating and Governance Committee believes it is important to maintain a mix of experienced directors with a deep understanding of the Company and newer directors who bring a fresh perspective. The following are highlights on the composition of our current Board of Directors:

Board of Directors Composition

 

•  Women represent 43% of independent directors, with three women serving on the Board

 

 

•  29% of independent directors are ethnic minorities

 

 

•  Four new independent directors since 2020; half of these are women or ethnically diverse

 

 

•  Transitioned to an independent Board Chair in 2020

 

•  New Chairs of all Board committees since 2020; two of three committees chaired by women, including one ethnic minority

 

 

•  New members on all Committees since 2020, including a fully reconstituted Compensation Committee

 

 

•  Long-tenured independent directors in leadership roles

 

 

•  Average director nominee age of 58

 

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Succession Planning: The Nominating and Governance Committee has primary responsibility for Chief Executive Officer and other key executive succession planning. Succession planning and executive development are fundamental components of the Board of Directors’ governance responsibilities, and are regularly discussed by the Committee with management present as well as in executive sessions.

The Board has demonstrated the depth and effectiveness of its succession planning through a recent period of organizational evolution as the Company completed a transition to its current Chief Executive Officer, Jay C. Horgen. In May 2018, the Company announced that Sean M. Healey, the Company’s Chief Executive Officer and Chairman at the time, had been diagnosed with amyotrophic lateral sclerosis (a terminal motor neuron disease known as ALS), and initiated its long-term succession plan. In May 2019, the Board appointed Mr. Horgen, Chief Financial Officer at the time, as President and Chief Executive Officer. The Board’s advance planning put it in a position to provide continuity of leadership in a time of unexpected transition and drew on the strengths and experiences of the Company’s most senior executives. The directors continue to serve as a source of strategic strength for the Company and for Mr. Horgen and the balance of the executive management team, bringing significant diversity in skills, experiences, and perspectives. The Board and Mr. Horgen continue to focus on developing and expanding the senior management team, to maintain a breadth and depth of talent that ensures that AMG is well-positioned to continue to refine and execute against its strategy.

Board Size: The Nominating and Governance Committee assesses the size and composition of the Board of Directors each year. Consistent with our Corporate Governance Guidelines, the Nominating and Governance Committee believes that the current size of our Board of Directors of eight is appropriate, given the size and complexity of the Company and the markets in which we operate. The Nominating and Governance Committee will continue to assess the Board’s needs and other relevant circumstances, and may change the size or composition of the Board of Directors in the future if it believes that doing so would be in the best interests of the Company and its stockholders.

Executive Sessions of Independent Directors: Our independent directors regularly meet in scheduled executive sessions without management present. In accordance with the charter of the Nominating and Governance Committee and the By-laws, Mr. Churchill, the Board Chair, is responsible for calling and chairing the executive sessions, including during the annual Board of Directors offsite, and communicating with the Company’s Chief Executive Officer. Each committee of the Board also meets without management present, in sessions led by the Chair of the relevant committee.

Board and Committee Self‑Assessments and Individual Director Assessments: Regular evaluations of the committees and the full Board of Directors are critical in ensuring the effective functioning of our Board of Directors, including in assessing candidates for directorship. To this end, the Chair of the Nominating and Governance Committee, supported by the Committee, oversees the annual self-assessment of the Board of Directors and of each committee of the Board of Directors. Directors assess performance and consider various structural and procedural matters, including the annual selection process for director nominees and communications and interactions with management generally. The Nominating and Governance Committee periodically reviews the format of the Board of Directors and committee self-assessment processes to ensure that actionable feedback is solicited on the operation of the Board of Directors and director performance. The Nominating and Governance Committee also oversees annual individual director assessments as part of the recommendation process for director nominees. The table below provides a general overview of the annual self-assessment and director assessment processes.

Board and Committee Self-Assessments and Individual Director Assessments

 

Questionnaire

 

  Evaluation questionnaire solicits director feedback on a variety of procedural and substantive topics

 

 

Executive Session

  

  Executive session discussion of Board and committee self-assessments led by the Chair of the Nominating and Governance Committee

 

 

Individual Director Assessments

 

   Individual director assessments support an annual evaluation of the Board’s composition to ensure that our Board as a whole continues to reflect the appropriate mix of skills and experience

 

 

Board Summary

 

    Summary of Board and committee self-assessments results presented by the Chair of the Nominating and Governance Committee, followed by a discussion of the full Board

 

 

Feedback Incorporated

 

   Policies and practices updated as appropriate, as a result of director feedback

 

 


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Chief Executive Officer Evaluation: The Board Chair oversees an annual performance evaluation of our Chief Executive Officer. As part of this assessment, the Board Chair solicits director feedback on a variety of performance considerations. The Board Chair then synthesizes the directors’ feedback and discusses the results with our Chief Executive Officer in a one-on-one meeting. The Board Chair reports on the results of the evaluation at an executive session of the Board of Directors.

Director On‑Boarding and Training: When a new independent director joins the Board of Directors, we provide an orientation program that includes personal briefings by senior management on the Company’s operations, strategic plans, financial statements, governance, and key policies and practices. New directors also undergo in-depth training on the work of each committee of the Board of Directors. Throughout their tenure on the Board of Directors, each director is expected to maintain the necessary knowledge and information to perform his or her responsibilities as a director. To assist the directors in understanding the Company and its industry and maintaining the level of expertise required for directors, the Company may, from time to time, offer Company-sponsored continuing education programs or presentations, including sessions on select topics during the annual Board of Directors offsite. Additional training is also provided when a director assumes a leadership role, such as becoming the chair of a committee.

Leadership Structure: The Company follows best practices with respect to the Board’s leadership structure, reflecting collective feedback received from stockholders, as well as commentary from proxy advisory firms, over a multi-year period. While the Company does not have a fixed policy with respect to the independence of the Board Chair, the Company’s By-Laws provide that if at any time the Board Chair is not affirmatively determined to be independent, the Board must appoint a Lead Independent Director and provide for specific enumerated duties of the Lead Independent Director in that circumstance. In circumstances where the Board Chair is independent, the Lead Independent Director role is not required. This approach provides for effective checks and balances to ensure the exercise of independent judgment by the Board and the ability of the independent directors to work effectively in the board setting.

The Board regularly reviews the leadership structure, and believes that a non-executive, independent Board Chair is an appropriate and effective leadership structure for the Company at this time. The Board Chair’s principal responsibilities include: coordinating the agenda for and chairing Board meetings; serving as a key source of communication between the independent directors and the Chief Executive Officer; ensuring the flow of appropriate information to and among independent directors; leading the annual performance evaluation of the Chief Executive Officer; and coordinating the agenda for and leading executive sessions and meetings of the independent directors. Dwight D. Churchill was appointed Board Chair in 2020, given his excellent qualifications and extensive knowledge of the Company. Mr. Churchill has served as an independent director on our Board of Directors for over a decade, including service on each Board committee during his tenure. Mr. Churchill’s extensive knowledge and participation in the development of the Company’s corporate strategy over the long term, together with his extensive management experience outside of the Company, position him as an effective and strong independent Board Chair.

Responsibilities of the Independent Board Chair

 

 •  Board leadership: Provides leadership to the Board and to the independent directors, including in executive sessions

 

 

•  Board discussion items: Coordinates the agenda for and chairs Board meetings; works with the CEO and the committee Chairs to propose major discussion items for the Board’s approval

 

 •  Liaison between CEO and independent directors: Regularly meets with the CEO and serves as liaison between the CEO and the independent directors

 

 

•  Board governance processes: In coordination with the Nominating and Governance Committee, guides the Board’s governance processes, including identifying and resolving any potential conflicts of interest

 

 •  Executive sessions: Leads quarterly executive sessions of the Board

 

 

•  CEO evaluation: Leads the annual performance evaluation of the CEO

 

 •  Additional executive sessions: May call additional meetings of the independent directors as needed

 

 

 

•  Stockholder communications: Participates in direct communications with AMG’s stockholders

The Board of Directors will continue to review its leadership structure, and may change its structure in the future if it believes that doing so would be in the best interests of the Company and its stockholders.


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Risk Oversight: It is a key responsibility of our President and Chief Executive Officer, our Chief Financial Officer, our General Counsel, and other members of our senior management team to identify, assess, and manage the Company’s risk exposures. The Board of Directors plays an important role in overseeing management’s performance of these functions. The Board of Directors has approved the charter of the Audit Committee, which provides that one of the primary responsibilities of the Audit Committee is the discussion of the Company’s financial risks and steps management has taken to monitor and control such risks, including with respect to risk assessment and risk management policies. The Audit Committee regularly discusses with management and the Company’s independent auditors the Company’s risk assessment and risk management processes, including major risk exposures, risk mitigants, and the design and effectiveness of the Company’s processes and controls to prevent and detect fraudulent activity. Furthermore, the Audit Committee and the Board of Directors as a whole receive regular reports from management, the internal audit function, and our independent auditors on prevailing material risks and the actions being taken to mitigate them, including reports regarding the Company’s business and operations. Management also reports to the Audit Committee and the Board of Directors regarding enhancements made to our risk management processes and controls in light of evolving market, business, regulatory, and other conditions, including those related to environmental, social, and governance (“ESG”) factors.

Corporate Environmental, Social, and Governance Responsibility: We believe that sound corporate citizenship and attention to governance and environmental principles are essential to our success and that of our Affiliates. We are committed to operating with integrity, contributing to the local communities surrounding our global offices, promoting diversity and inclusion, developing our employees, and being thoughtful stewards of natural resources. We are also focused on the security of our data and safeguarding our clients’ privacy. Our Board of Directors provides oversight of these ESG topics, and is committed to supporting the Company’s efforts to operate as a sound corporate citizen. We have a cross-functional Sustainability Committee with oversight responsibility of our policies and operational controls of environmental, health and safety, and social risks. The Sustainability Committee includes members of our executive management team and reports to the Board of Directors at least annually. We believe that an integrated approach to business strategy, corporate governance, and corporate citizenship creates long-term value. The below table highlights certain of our policies and initiatives in these areas.

Environmental, Social, and Governance (ESG) Highlights

 

 

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Environmental, Social, and Governance (ESG) Highlights (continued)

 

Responsible Investing

 

Employee Engagement

 

 

 

  More than $90 billion in AUM in dedicated ESG strategies at year-end 2021, an increase of approximately 250% relative to 2020 due to strong execution of AMG’s strategy to partner with new Affiliates in secular growth areas, including ESG investment, and collaborating with existing Affiliates to enhance their participation in sustainable investment

  Sustainability factors and participation in responsible investing are incorporated into AMG's assessment process for prospective new Affiliates; recent new Affiliates include Parnassus Investments, the largest ESG-dedicated fund manager in the U.S.; Inclusive Capital Partners, AMG's first Affiliate entirely focused on responsible capitalism; and Boston Common Asset Management, a women-owned leader in sustainable and impact investing

 

►  All employees were granted AMG stock in 2021, further affirming the Company’s core value of ownership mindset

  AMG prioritizes employee engagement through a range of cross-functional, multi-level communication media, including small working group lunches, company-wide town halls, management offsites, and volunteer activities; 2021 employee engagement score of approximately 90%

  Company-supported time off and flexible work arrangements for professional development

  Charitable giving and volunteer opportunities offered to AMG employees throughout the year

  Leadership training and sponsored skills and career development programs, anchored on a comprehensive company-wide 360-degree performance review process

 

 

 

Work Environment

 

Diversity & Inclusion

 

 

 

  Equal employment opportunity hiring practices, policies, and management of AMG employees

  Anti-harassment policy applicable to AMG employees prohibits hostility or aversion towards individuals in protected categories, and prohibits sexual harassment in any form; the policy details how to report and respond to harassment issues and strictly prohibits retaliation

  AMG supports the health and wellness of employees, with on-site fitness facilities in multiple principal offices

 

  Committed to fostering and promoting an inclusive and globally diverse work environment; AMG partners with a variety of recruitment partners and community organizations to identify excellent diverse talent, and in 2021 launched a summer internship program for outstanding diverse students

  Formal policies that forbid discrimination based on protected classifications; annual diversity and bias training required for all employees

  Gender diversity of approximately 40% across management positions, and overall, over 50% of AMG's employees are women (in each case, excluding our U.S. wealth subsidiary); in 2021, approximately 45% of new hires were people of color, and more than 50% were women

  Three, or 43%, of AMG's independent directors are women, and two, or 29%, of AMG’s independent directors are ethnic minorities; in each case, above the S&P 500 average. Two women, including one ethnic minority, chair Board committees

►  AMG partners with organizations that support and advance diverse candidates for Company roles, and makes meaningful donations to organizations promoting social equity in the broader community

 

 

Privacy and Data Security

 

  AMG maintains privacy policies, management oversight, accountability structures, and technology design processes to protect privacy and personal data, as well as an incident response plan for use in the event of a data breach

  All employees participate in annual cybersecurity training

  AMG's data security program is governed by a senior management committee that meets regularly and reports to the Board quarterly

 

 

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Business Conduct and Ethics Codes

 

Business Continuity

 

 

 

 

  Strong corporate culture that promotes the highest standards of ethics and compliance for AMG's business

  AMG's Code of Business Conduct and Ethics applies to all AMG employees and directors and sets forth principles to guide employee and director conduct

 

Anti-Bribery and Corruption Policies

 

  Policies on political contributions and other restricted payments require AMG's full compliance     with all applicable political contribution and anti-corruption laws

  Whistleblower hotline for confidential reporting of any suspected violations

 

Governance

 

  Formal weighting of ESG factors included in AMG's compensation determination process, with more granular ESG-related metrics (across both participation in responsible investment as well as corporate measures related to diversity and employee satisfaction) incorporated for performance year 2021

  Strong focus on corporate governance since AMG's inception, with best practices in corporate governance (see Governance Highlights on page 18)

 

Climate Change and Environmental Sustainability

 

  AMG has participated in CDP's Climate Change Disclosure program for five years

  Completed annual inventory and secured third-party attestation of AMG's GhG emissions each year since 2018

  Achieved medium-term emissions reduction target of 5% in Scope 1 and 2 emissions

  Utilizing 100% renewable energy sources at multiple AMG office locations

  Programs to promote the procurement of products and materials that have high concentrations of recycled materials, and evaluation of vendor sustainability practices

 

  Business continuity policies are designed to ensure the safety of AMG's personnel, facilities, and critical business functions in case of natural disasters or other crises creating business disruption

 

Community Investment and Engagement

 

  AMG and The AMG Charitable Foundation donate to a variety of non-profit organizations and community programs globally, including more than $1 million to COVID-19 relief efforts around the world in 2020 and 2021; substantial contributions to social equity organizations, including the Equal Justice Initiative, NAACP Legal Defense and Education Fund, Sponsors for Educational Opportunity, Bottom Line, and others over the years; and ongoing support of the Sean M. Healey and AMG Center for ALS at Mass General Hospital, to which AMG was a cornerstone donor in 2018

In early 2022, AMG led its first-ever giving campaign encompassing both the AMG organization and AMG’s entire Affiliate group; ultimately, more than $1.7 million was raised in support of charitable organizations providing humanitarian aid in Ukraine or to Ukrainian refugees, across individual giving by AMG and Affiliate employees as well as gift-matching by The AMG Charitable Foundation and AMG

  Company-wide giving campaigns support many charities in local communities, and AMG encourages employees to volunteer for and serve on boards of non-profit organizations. AMG supports numerous organizations in which employees are meaningfully involved, through grants from The AMG Charitable Foundation

  Annual "AMG Day of Service," with employee participation across our offices globally in hands-on service projects benefiting non-profit organizations and individuals in the communities surrounding our principal offices; in 2021, we launched the inaugural “AMG Week of Service.” Virtual and in-person volunteering opportunities are offered to AMG employees and employees of Affiliates throughout the year

  Formal AMG employee gift-matching program; AMG and The AMG Charitable Foundation have donated to over 400 organizations worldwide. In 2021, AMG supported the launch of gift-matching programs at multiple Affiliate firms and extended its gift-matching program to Directors; for 2022, AMG has more than doubled the employee gift-matching maximum

  Approximately $2 million was disbursed or committed by The AMG Charitable Foundation in 2021

 

The statistics and descriptions of our workforce, policies, and cultural initiatives in respect of our human capital relate to AMG’s employees, and not those of our Affiliates, which are independent from AMG and operate autonomously. Through our innovative partnership approach with our Affiliates, each Affiliate’s management team retains operational autonomy in managing and operating their business on a day-to-day basis, including with respect to their human capital.

 

AUM in dedicated ESG strategies consists of assets managed by Affiliates specializing in ESG investing, investment strategies built on recognized ESG themes or that seek positive social or environmental outcomes alongside investment returns, and products where portfolio composition is altered through specific ESG considerations. AMG’s definition may not conform to classifications published by third parties.

 

To learn more, please see the “Responsibility” section of our website at www.amg.com/responsibility.html

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Cybersecurity and Data Privacy: We have a formal information security program, designed to develop and maintain privacy and data security practices to protect Company assets and sensitive third-party information (including personal information). This program is governed by a committee comprising members of senior management, including the Company’s Chief Information Officer, which meets regularly and reports to the Board of Directors quarterly.

We recognize the importance of protecting information assets such as personally identifiable information (PII) of our clients and employees, and have adopted policies, management oversight and accountability structures, and technology processes designed to safeguard this information. All AMG employees attest annually to information security policies, and are required to participate in regular security awareness training to protect themselves and the AMG data to which they have access. These trainings also instruct employees on how to report any potential privacy or data security issues.

Our information security organization comprises internal and external resources designed to identify, protect, detect, resolve, and recover from various threats and attacks of malicious actors. We leverage 24x7x365 monitoring tools and services to address the confidentiality, integrity, and availability of Company assets and data. Regular internal and third-party reviews are performed on processes and technologies to validate the effectiveness of privacy and data security controls. We monitor best practices and developments in data privacy and security, including increased scrutiny of third-party service providers with access to sensitive Company data. We work with key third-party service providers to monitor and support the control environment and breach notification processes. We also have our own fully documented proprietary security incident response plan, with defined roles and responsibilities that address notification obligations and procedures in the event of a data breach. We are dedicated to business continuity and resiliency, and we have documented strategies, policies, and procedures in place to protect employee, business, and client data in the event of an emergency or natural disaster.

Related Person Transaction and Conflicts of Interest Oversight: Pursuant to its charter, the Audit Committee is responsible for reviewing any related person transaction identified by management or other directors. In accordance with this authority, the Committee has determined that there have been no related person transactions requiring disclosure under Item 404(a) of Regulation S‑K other than those discussed below under the caption “Other Matters—Related Person Transactions.” Each director, officer, and employee of the Company is also subject to our Code of Business Conduct and Ethics, which sets forth guidelines that our directors, officers, and employees are expected to adhere to in the conduct of the Company’s business, including with respect to identifying, reporting, and resolving potential or actual conflicts of interest resulting from related person transactions or otherwise.

Policies and Procedures Regarding Related Person Transactions: The Audit Committee must approve all related person transactions under the Company’s written policy. A related person transaction is any transaction that is reportable by the Company under paragraph (a) of Item 404 of Regulation S‑K in which the Company or one of its wholly owned subsidiaries or majority‑owned Affiliates is or will be a participant and the amount involved exceeds $120,000 and in which any director, nominee for director, executive officer, any person known to the Company to be a beneficial owner of 5% or more of its voting securities, or an immediate family member of any of the foregoing has or will have a direct or indirect material interest. Pursuant to the policy, potential related person transactions are reported to the General Counsel who evaluates the potential transaction to determine whether it is a potential related person transaction. If it is, the General Counsel reports the potential transaction to the Audit Committee for review. The policy also authorizes the Chair of the Audit Committee to ratify, rescind, or take any such other action required with respect to any related person transaction not previously approved or ratified under the policy that comes to the General Counsel’s attention. The policy sets forth the standards of review to be considered in deciding whether to approve or ratify related person transactions.

In addition, the Audit Committee has considered and adopted standing pre‑approvals under the policy for limited transactions with related persons. Pre‑approved transactions include (i) employment as an executive officer, if the related compensation is approved (or recommended to the Board of Directors for approval) by the Compensation Committee; (ii) any compensation paid to a director if the compensation is consistent with the Company’s director compensation policies and is required to be reported in the Company’s proxy statement under applicable compensation disclosure requirements; (iii) any transaction with another company at which a related person’s only relationship is as an employee (other than an executive officer) or director or beneficial owner of less than 10% of that company’s equity, if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of that company’s total annual revenue; (iv) any charitable contribution, grant, or endowment by the Company or the Company’s charitable foundation to a charitable organization, foundation, or university at which a related person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of such charitable organization’s total annual receipts; (v) any transaction where the related person’s interest arises solely from the ownership of the Company’s common stock and all holders of the Company’s common stock received the same benefit on a pro rata basis, such as dividends; (vi) any transaction involving a related person where the rates or charges involved are determined by competitive bids; and (vii) any service provided by the Company to any related person, provided that such service is in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable services provided to non‑related persons.

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Prohibition Against Hedging and Pledging Transactions: Pursuant to the Company’s insider trading policy, all directors, officers, and employees of the Company and its subsidiaries, including spouses and immediate family members of such persons, are prohibited from engaging in short sales or any other form of hedging transaction involving Company securities, or other transactions resulting in net short exposures, as well as from purchasing Company securities on margin, pledging Company securities as collateral for a loan, or otherwise borrowing against Company securities. We believe our anti-hedging and anti-pledging policies further align our directors’ and our officers’ interests with those of our stockholders.

Compensation Committee Interlocks and Insider Participation: The members of the Compensation Committee during fiscal year 2021 include those individuals set forth above under “Compensation Committee.” No person who served as a member of the Compensation Committee during 2021 has been an officer or employee of the Company or has been involved in any related person transactions. No executive officer of the Company serves on the compensation committee or board of directors of another company that has an executive officer that serves (or served during 2021) on the Company’s Compensation Committee or Board of Directors.

Stockholder and Interested Party Communications: Stockholders and other interested parties may communicate directly with the Board of Directors and the Board Chair as follows:

Stockholder Communications

 

Board of Directors

 

Any communications to the full Board of Directors

may be directed to Mr. Billings, General Counsel

and Secretary of the Company, who would discuss

as appropriate with the Board of Directors

 

 

David M. Billings

Affiliated Managers Group, Inc.

777 South Flagler Drive

West Palm Beach, Florida 33401-6152

 

Board Chair

 

A stockholder or other interested party may

communicate directly with Mr. Churchill, the Board Chair, by sending a confidential letter addressed to his attention

 

 

Dwight D. Churchill, Board Chair

c/o Affiliated Managers Group, Inc.

777 South Flagler Drive

West Palm Beach, Florida 33401-6152

Availability of Corporate Governance Documents: We maintain a Company website that includes, among other items, the Corporate Governance Guidelines; the Code of Business Conduct and Ethics applicable to all directors, officers, and employees; the Code of Ethics applicable to our President and Chief Executive Officer, Chief Financial Officer, and other senior financial officers; and the charters for the Audit, Compensation, and Nominating and Governance Committees. This information is available on the “Investor Relations” section of our website, www.amg.com, under “Corporate Governance—Policies, Procedures and Guidelines,” or for the Committee charters under “Corporate Governance—Board of Directors,” but is not incorporated by reference into this Proxy Statement. If we make any substantive amendment to the Code of Ethics or grant any waiver, including any implicit waiver, from a provision of the Code of Ethics to certain executive officers, we are obligated to disclose the nature of such amendment or waiver, the name of the person to whom any waiver was granted, and the date of waiver on our website or in a report on Form 8‑K.

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Information Regarding Executive Officers of the Company

The name, age (as of April 1, 2022), and positions of each of our executive officers, as well as a description of their business experience and past employment during at least the last five years, are set forth below:

 

Current Executive Officer Information

Name

Age

Position

Biographical Information

Jay C. Horgen

51

President and

Chief Executive Officer

For the biographical information of Mr. Horgen, see “Information Regarding the Nominees” above.

Rizwan M. Jamal

47

Head of Affiliate Investments

Mr. Jamal is Head of Affiliate Investments, responsible for overseeing the Company’s investments in new Affiliates, including the identification of prospective Affiliates worldwide and the structuring and execution of the Company’s investments in its partner firms. Prior to joining AMG in 2004, Mr. Jamal worked in the investment banking groups of Goldman Sachs & Co. and Salomon Smith Barney. Mr. Jamal received a B.S. from Boston College and a J.D. from Harvard Law School.

Thomas M. Wojcik

41

Chief Financial Officer

Mr. Wojcik is the Chief Financial Officer of the Company, responsible for AMG’s finance, accounting, investor relations, and capital management functions. He joined AMG in 2019 from BlackRock, Inc., where he most recently served as Chief Financial Officer for Europe, Middle East, and Africa (EMEA), Head of EMEA Strategy, and Global Head of Investor Relations, subsequent to his role as Global Head of Corporate Development and Head of Americas Strategy. Previously, Mr. Wojcik worked as an investor at Hunter Global Investors, Durham Asset Management, and Nautic Partners, and as an investment banker in the Financial Institutions Group at Merrill Lynch & Co. He earned a B.A. in Economics magna cum laude from Duke University, and an M.B.A. from The Wharton School at the University of Pennsylvania, where he was a Palmer Scholar.

John R. Erickson

51

Head of Affiliate Engagement

Mr. Erickson is Head of Affiliate Engagement, working with Affiliates on strategic matters. Prior to joining the Company in 2014, Mr. Erickson worked as an investment banker at Merrill Lynch for 15 years, most recently serving as a managing director in the Financial Institutions Group where he advised asset management clients on M&A and capital raising. Mr. Erickson received a B.A. in Economics cum laude from Middlebury College and an M.B.A. from Northwestern University’s Kellogg School of Management.

David M. Billings

59

General Counsel

and Secretary

Mr. Billings has served as General Counsel and Secretary of the Company since June 2014. Prior to joining AMG, Mr. Billings was a partner at Akin Gump Strauss Hauer & Feld LLP, where he led the firm’s investment funds practice in London. Mr. Billings received a J.D. from Harvard Law School and a B.A. with high honors from the University of Virginia.

 

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Compensation Discussion and Analysis

This section provides discussion and analysis of our executive compensation program, including the elements of executive compensation, the 2021 compensation results, the rationale and process for reaching these results, and our compensation governance policies. The compensation results discussed are those of our President and Chief Executive Officer, Jay C. Horgen, and the other named executive officers.

The Compensation Committee designs the executive compensation program to align management incentives with long‑term stockholder interests, and we have a demonstrated history of integrating shareholder feedback into our executive compensation program over multiple years. Notwithstanding the strong stockholder support of the incentive compensation results for performance year 2020, the Committee decided to undertake a comprehensive review of AMG’s incentive compensation determination process in 2021. Given the Committee’s track record of incorporating shareholder feedback into our executive compensation program, the reconstitution of the Committee with a new Chair and entirely new members in the second half of 2020, and the counsel of a new independent compensation consultant, Semler Brossy Consulting Group (our “Compensation Consultant”), appointed in the fourth quarter of 2020 following a formal search process, the Committee determined to integrate shareholder feedback in an enhanced, more formulaic approach with numerous new financial and objective operational and organizational metrics, new payout targets, and higher hurdles attached to the vesting of performance-based equity, and incorporating a broader peer group more reflective of AMG’s evolving business – with an objective throughout the program re-design to further align pay with business performance, and increase program transparency.

The Compensation Committee determined 2021 variable performance‑based incentive awards for our named executive officers based on this enhanced executive compensation determination process, utilizing a formal assessment of AMG’s performance and accomplishments for the year and over the long term, measured against pre-established absolute and relative performance targets (the “Performance Assessment”). The results of the Performance Assessment reflect the Company’s excellent financial performance for the year, as well as the stockholder return of over +60% in 2021 and approximately +90% since the Chief Executive Officer transition in May 2019 through 2021 year-end. AMG achieved these results through the strong execution of our growth strategy, excellent Affiliate investment performance, and increasing momentum across the business. Further, the results of the Performance Assessment reflected that AMG was one of the most active investors in independent asset managers over the past twenty-four months, including significant new Affiliate investment activity in areas of secular growth and client demand in 2021.

Overview of Our Executive Compensation Program Philosophy

The Compensation Committee has structured our executive compensation program over the long term to further several core objectives, which include the following:

 

Attracting, retaining, and motivating key members of senior management

 

Closely aligning executive compensation with performance and accomplishments for the year and over the long term

 

Focusing executives on long‑term performance with equity incentive awards, with a majority of these awards subject to rigorous pre‑established performance targets measured over forward multi‑year periods

 

Compensating executives based on a combination of Company performance—on both a relative and absolute basis—and individual roles

 

Avoiding incentives that might encourage excessive risk‑taking

 

Routinely reviewing and evolving our compensation program to incorporate feedback from stockholders and best practices into our executive compensation program design

These objectives inform the design of our compensation program, which includes the following components:

 

Awarding fixed and variable Annual Incentive Compensation in an appropriate mix to align management incentives with shareholder value creation

 

Performing market comparisons to ensure that our compensation is in line with that of our Peer Group

 

Implementing strong compensation governance practices within a robust corporate governance framework

Shareholder and Proxy Advisory Firm Feedback and Surveys

To ensure that our Board of Directors, including the Compensation Committee, is apprised of stockholder and proxy advisory firm views, we regularly meet with and survey these constituents regarding our executive compensation program. As part of this process, we conduct regular outreach initiatives with the corporate governance teams at our largest stockholders, as well as

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representatives from major proxy advisory firms, throughout the year, and we have a demonstrated history of integrating shareholder feedback into our executive compensation program design. In 2021, 83% of stockholders voted in favor of our Say-on-Pay proposal, expressing strong support for our executive compensation program design and its demonstrated linkage of pay-for-performance, as well as the significant integration of shareholder feedback.

As in previous years, shareholder feedback gathered throughout the year was carefully considered, along with input from our new compensation consultant, as well as commentary from proxy advisory firms, as described in the following table:

Recent Changes to Executive Compensation Program

Stockholder Comments

AMG Response

Simplify the compensation determination process

•   Streamlined into a single quantitative assessment scorecard, with scoring applied to pre-set target incentive amounts, and the payout allocated between cash bonus and equity awards using a pre-established tiered formula

Disclose compensation targets, in addition to maximum payout caps

•   New target payout amounts set annually based on peer benchmarking, where available, and reflecting input from our independent compensation consultant; ongoing use of caps on NEO incentive compensation

Performance Assessment should be more formulaic, with an emphasis on objective performance measures

 

Disclose additional objective targets used in the determination of incentive awards

•   Scorecard assessment is now weighted over 90% to pre-determined, objective metrics set in the first half of each year and aligned with AMG management’s ability to create shareholder value across capital allocation decision-making; overall, 13 distinct quantitative targets

•   Cap of 200% achievement set on each individual metric. Metrics have relatively uniform weightings, minimizing distortion in score result

•   Significantly Broadened Array of Financial Performance Targets:

-    Use of pre-set earnings targets has been expanded to include both annual targets as well as a 3-year relative earnings target measured against peers on a percentile-ranked basis, to focus management on generating long-term shareholder value

-    Added new capital deployment targets, measuring average yield and EBITDA acquired from new Affiliate investments, and weighted returns on share repurchases and new Affiliate investments – in each case over a 3-year period

•   New TSR Targets: Added pre-set Total Stockholder Return targets, based on 1- and 3-year returns on both an absolute and a relative basis, to further align the interests of management with those of our stockholders

   New Performance Categories and Targets: Added pre-set targets for operational and organizational performance goals, enhancing the formulaic nature of the assessment and expanding the scope into additional areas, including ESG:

-    AMG Distribution Effectiveness – measuring results relative to gross sales targets relating to our AMG-led distribution business

-    Strategic and Organizational Initiatives – measuring organizational diversity, AMG’s participation in responsible investment, and employee engagement

Factor ESG-related activities into incentive determination in a more granular fashion

•   Introduced a new category of pre-set ESG-related targets that factor directly into the more formulaic and transparent process for compensation determination, measuring organizational diversity, participation in responsible investment, and employee engagement

Revise AMG’s Peer Group to better reflect AMG’s business model and the evolving industry

•   Expanded and evolved Peer Group, to include peers with market capitalizations and business scope (including alternative-focused investment firms) aligned with the ongoing evolution of AMG’s business, and to replace peers impacted by industry consolidation

ROE performance hurdle for performance RSUs is an appropriate metric, but targets should increase as the business grows

•   Overall, stockholders expressed support for our use of Return on Equity, which aligns management incentives with the strategic goals of growing earnings and the effective stewardship of shareholder capital, and incorporates the effect of share repurchases, new investments, cost containment, and reinvestment in the business

•   For the 2021 Long-Term Achievement Awards, the Committee raised the ROE target levels by over 10% compared to the 2020 awards, and widened the achievement level ranges

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The Compensation Committee recognizes that in enhancing the compensation program, stockholder input has been and continues to be critical for ensuring the continued alignment of management and stockholder interests, and the Committee promotes an active process of shareholder engagement throughout the year. Our management team continues to communicate with our largest stockholders and proxy advisory firms, and to follow developments in their methodologies and analyses to ensure that the Company and our Board of Directors remain apprised of current and potential future developments.

Policies to Promote Director and Officer Equity Ownership

We believe that equity ownership by our named executive officers and directors aligns their interests with those of our stockholders, and we have two formal policies designed to promote their long-term accumulation and retention of equity in our Company. The Equity Holding Policy was implemented in 2019 for recipients of the Long-Term Equity Alignment Award, and together with the Equity Ownership Guidelines, represent an industry-leading set of policies to further cultivate an ownership mindset among senior executives, with direct and substantial alignment with stockholders through ownership of vested, unrestricted shares of AMG stock.

In addition to these formal policies, our directors and executives have demonstrated their commitment to the long-term accumulation and retention of equity through open market purchases of shares of our common stock on multiple occasions. Our executives collectively purchased over 59,000 shares in the open market since 2019, totaling more than $5.3 million in notional value at time of purchase, including our President and Chief Executive Officer who has purchased 52,000 shares in the open market, across seven distinct purchases, with an aggregate notional value of approximately $4.2 million at the time of purchase, since his May 2019 appointment, reflecting an increase of over +240% relative to the unrestricted shares held at the time of his appointment. Over the past two years, other named executive officers have purchased over 7,000 shares, with an aggregate notional value of more than $1 million at the time of purchase. A majority of our current independent directors, including our Board Chair, have also purchased shares in the open market; independent directors have collectively purchased over 50,000 shares, with an aggregate notional value of over $5.0 million at the time of purchase, since 2019.

Equity Ownership Guidelines

      Implemented in 2011, our Equity Ownership Guidelines provide that an executive officer or director should own equity in the amount of:

-    10x annual base salary in the case of our President and Chief Executive Officer

-    7x times annual base salary in the case of the other named executive officers

-    5x times base annual fees for service in the case of our independent directors

      Shares underlying outstanding stock options and unearned performance awards are not counted for purposes of meeting these guidelines

      Executives and directors are strongly encouraged to meet these ownership guidelines within five years of becoming an executive officer, or three years of becoming a director

      Revised in 2020 to add a new restriction on selling shares of AMG stock while the equity ownership of the director or executive does not exceed the required level through the accumulation period

      All named executive officers and directors currently satisfy these Equity Ownership Guidelines

Equity Holding Policy

      New Equity Holding Policy implemented in 2019 and applicable to all recipients of the Long-Term Equity Alignment Award

      Imposes additional restrictions on sales of AMG stock, for the duration of their AMG service

-     No sales permitted by CEO unless vested, unrestricted shares held exceeds 2x Total Annual Compensation

-     No sales permitted by non-CEO NEOs unless vested, unrestricted shares held exceeds 1x Total Annual Compensation

-     Alignment RSUs must be held for at least 6 years after grant (through 2025), and Alignment Option Shares must be held for 7 years after grant (through 2026)

      Total Annual Compensation comprises the total amount of the executive officer’s cash compensation (including cash bonus) and equity compensation (based on the grant date fair value) received for performance in the year prior to measurement

      Equity eligible for determining compliance includes unrestricted shares of AMG stock, whether acquired through award vesting, option exercises, open market purchases, or otherwise, and excludes unvested awards, undelivered performance awards, and unexercised options

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Named Executive Officer Annual Compensation Determination Process and Results

The Compensation Committee’s annual compensation determination process begins during Committee meetings early in the performance year and continues throughout the year, with periodic reviews of the Company’s financial performance on both a relative and absolute basis and progress on various strategic objectives, as well as discussions regarding the principles and continuing effectiveness of the compensation program. The Committee, including, in particular, the Committee Chair, meets with its independent outside executive compensation consulting firm, Semler Brossy Consulting Group, to consider the executive and director compensation of the peer companies set forth in the “Market and Industry Comparison” section of this Proxy Statement (our “Peer Group”) and potential structures for incentive awards. The Committee considers the components of the compensation program (including the mix of compensation elements, market‑level compensation, and our compensation governance practices) in analyzing the extent to which the program furthers the Committee’s objectives of aligning compensation with shareholder value creation while retaining and motivating our executives. As discussed above, the Committee also seeks feedback from stockholders and proxy advisory firms in an ongoing engagement cycle, and takes that feedback into account in both enhancing the compensation program design, as well as in the Committee’s final compensation determinations for the year.

Following year‑end, the Compensation Committee conducts a comprehensive Performance Assessment of the Company’s accomplishments during the year and over the long term, on both an absolute basis and relative to our Peer Group, and considers the individual roles of our executive officers, to establish the amount of annual performance‑based incentive awards (“Annual Incentive Compensation”) for each executive. The following provides an overview of the outcome of the revised incentive compensation determination process implemented in 2021 for our President and Chief Executive Officer; it also provided the basis for determining Annual Incentive Compensation of our other named executive officers. This structure reflects the Committee’s executive compensation program philosophy of closely aligning management incentives with long‑term stockholder interests, with the substantial majority of Annual Incentive Compensation in the form of variable performance‑based incentive awards, the significant majority of which are in the form of equity incentive awards (with delivery of 60% of the grant value of these equity incentive awards tied to the achievement of rigorous pre‑established performance targets).

 

2021 Incentive Compensation Determination Process: CEO Outcome

 

Dollars in millions.

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The Compensation Committee regularly reviews our Peer Group in order to ensure its ongoing relevance. In determining the Company’s Peer Group on an annual basis, the Compensation Committee considers both industry and company specific dynamics to identify the peers with which we compete for client assets, stockholders, and talent. The Committee evaluates the Peer Group to ensure that it reflects the Company’s growth, overall changes in the asset management industry, and the business models, size, and scope of our competitors.  

 

Our Peer Group was revised in 2021 to:

–    Increase the size of the Peer Group, to replace peers impacted by industry consolidation and maintain a peer group with a larger data set for comparability

 

–    Add peers with business scope in line with AMG’s, including alternative-focused asset management business, given the ongoing evolution of our business

 

–    Evolve the Peer Group, reducing the median market capitalization across the Peer Group by approximately 40%

 

–    CEO Target Payout was set at the median of the revised Peer Group, of $9.6 million

 

For 2021, the Target Payout for our President and Chief Executive Officer was set at the median of CEO compensation for our Peer Group, resulting in a Target Payout of $9.6 million, and CEO Annual Incentive Compensation was capped at $17.5 million.

The following table displays the 2021 targets and 2021 actual results for each individual metric considered in the Compensation Committee’s scorecard assessment, in which objective metrics accounted for more than 90% of the overall score. The Committee implemented a cap of 200% on the achievement level of each individual metric. The final score of 147% incorporated the individual metric caps, and reflected strong financial and operating performance for performance year 2021 measured against objective pre-determined targets in areas where management drives shareholder value:

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Performance targets used in the Performance Assessment are designed to align management incentives with shareholder value creation, and take into account factors known at the time. Actual results may be impacted by a number of external factors, including macroeconomic factors, market changes, and regulatory or political changes, as well as other factors such as share repurchases and new investments in Affiliates, which may not be anticipated and could significantly impact AMG’s business. Financial targets are not intended to be a form of guidance or a prediction of AMG’s performance during the performance year or in any future period. See the “Forward-Looking Statements” section of our Annual Report on Form 10-K. EEPS / GAAP EPS Growth Percentile Rank relative to peers is determined using reported peer data or sell-side estimates dependent on availability at the time of the January meeting of the Compensation Committee for the performance year determination. ESG-Dedicated AUM is based on information sourced from Affiliates. Other Strategic and Organizational Initiatives data related to employees pertain to AMG’s employees (excluding our U.S. wealth subsidiary), and not those of our Affiliates. Through our innovative partnership approach, each Affiliate’s management team retains operational autonomy in day-to-day business management and decisions, including with respect to their human capital. Additional information regarding the calculations of these measures is included below under “Summary of Performance Assessment Target Descriptions and Rationale and 2021 Target Setting Process.” Amounts marked “not disclosed” reflect target and actual results for a performance metric that has not been publicly disclosed due to the commercially sensitive nature of the competitive information.

(1) 2020 actual Annual Management Fee EBITDA was $713 million and 2020 actual Annual EEPS was $13.36 per share. Additional information regarding non-GAAP financial performance measures, including reconciliations to the most directly comparable GAAP measure, can be found in AMG’s Annual Report on Form 10-K under “Supplemental Financial Performance Measures.”

The weighted Performance Assessment score of 147% for our President and Chief Executive Officer was applied to the Target Payout of $9.6 million, to produce Total Formulaic Incentive Compensation of $13.4 million. As previously described, the Compensation Committee granted a one-time Long-Term Equity Alignment Award to members of our Executive Committee in 2019, to align the group of next-generation management with stockholders over at least a seven-year period, with the expectation that this award would replace a portion of annual incentive awards over a three-year period; as a result, in keeping with performance years 2019 and 2020, the Compensation Committee reduced the Total Formulaic Incentive Compensation derived from the annual Performance Assessment in 2021. In the third and final year of impact related to the special 2019 Long-Term Equity Alignment Award, Total Formulaic Incentive Compensation was reduced by $1.7 million to $11.7 million for our President and Chief Executive Officer, reflecting the Committee’s commitment made to stockholders in connection with that one-time award. Over the three-year period, the formulaic compensation for the President and Chief Executive Officer was reduced by approximately $7.8 million in aggregate, specifically related to the one-time award.

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The final amount of Annual Incentive Compensation for our President and Chief Executive Officer was then allocated between cash bonus and long-term equity awards using a pre-established tiered formula which caps ultimate cash awards at 45% of Annual Incentive Compensation, resulting in a formulaic cash bonus of $4.8 million (41%) and a formulaic equity incentive award amount of $6.9 million (59%) for our President and Chief Executive Officer. This formulaic equity incentive award amount was granted 40% in the form of Long-Term Deferred Equity Awards and 60% in the form of Long-Term Performance Achievement Awards, consistent with the Committee’s targeted allocations. Consistent with prior years, a majority of equity compensation was awarded in the form of awards subject to three-year cliff vesting, with delivery tied to rigorous Average Return on Equity (ROE) targets. In 2021, the ROE targets governing delivery of the awards were raised for the 2021 Long-Term Equity Achievement Awards. This process is displayed in the following schematic:

 

(1)

Cash determined via a tiered formula: First $5 million in incentive compensation is split 45% cash and 55% equity; next $5 million is split 40% cash and 60% equity; any incentive compensation thereafter is split 30% cash and 70% equity.

Other Named Executive Officers

Annual Incentive Compensation for our other named executive officers was also based on the Performance Assessment, with scorecard weightings, targets, and payouts customized for each executive officer. The targets were established for each executive officer based on the roles and responsibilities of the given position, tenure, and contributions for the performance year, as well as benchmarking data (where available) for their role. Performance Assessment scores for these executive officers ranged from 130% to 154%, as compared to 147% for our President and Chief Executive Officer, and prior to any reductions for the one-time 2019 Long-Term Equity Alignment Award. In the case of Mr. Jamal, Head of Affiliate Investments, the result reflected leadership in growth investments, across both new and existing Affiliates, against the backdrop of an exceptional year with respect to investment activity and execution. For Mr. Wojcik, our Chief Financial Officer, the result reflected leadership in capital management and shareholder engagement, as well as strategic execution. For Mr. Erickson, Head of Affiliate Engagement, the result reflected leadership in Affiliate relationship management and strategic engagement. For Mr. Billings, General Counsel, the result reflected leadership in corporate affairs and governance. Further, consistent with prior years, the Compensation Committee applied a cap on

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Annual Incentive Compensation for each of our Head of Affiliate Investments, Chief Financial Officer, and Head of Affiliate Engagement of $10.0 million, and applied a cap on Annual Incentive Compensation for our General Counsel of $5.0 million.

The following table summarizes incentive compensation awarded in respect of performance year 2021 to our named executive officers:

 

 

 

 

 

Total

 

 

 

Final

 

Formulaic Incentive Awards

 

 

 

 

Formulaic

 

Impact Due to

 

Incentive

 

 

 

 

 

Equity Awards

 

 

 

 

Incentive

 

2019 Alignment

 

Compensation

 

 

 

 

 

Perf-based

 

Time-Based

 

 

 

 

Compensation

 

Award

 

Payout

 

Cash

 

(LTPAA)

 

(LTDEA)

Jay C. Horgen

 

President and Chief Executive Officer

 

 

$13.4

 

 

 

($1.7)

 

 

 

$11.7

 

 

 

$4.8

 

 

 

$4.2

 

 

 

$2.8

 

Rizwan M. Jamal

 

Head of Affiliate Investments

 

 

$7.0

 

 

 

($0.7)

 

 

 

$6.4

 

 

 

$2.1

 

 

 

$2.6

 

 

 

$1.7

 

Thomas M. Wojcik

 

Chief Financial Officer

 

 

$5.9

 

 

 

($0.5)

 

 

 

$5.4

 

 

 

$2.4

 

 

 

$1.8

 

 

 

$1.2

 

John R. Erickson

 

Head of Affiliate Engagement

 

 

$4.2

 

 

 

($0.7)

 

 

 

$3.5

 

 

 

$1.3

 

 

 

$1.4

 

 

 

$0.9

 

David M. Billings

 

General Counsel and Secretary

 

 

$2.5

 

 

 

NA

 

 

 

$2.5

 

 

 

$1.1

 

 

 

$0.8

 

 

 

$0.6

 

 

The above table includes equity awards granted to the Company’s named executive officers in March 2022 in recognition of 2021 performance (and excludes equity awards granted in March 2021 in recognition of 2020 performance), to better demonstrate how the Company evaluates and compensates its named executive officers on an annual basis. These amounts differ from the compensation reported in the Summary Compensation Table in the “Executive Compensation Tables” section of this Proxy Statement because SEC rules require equity awards to be reported in the fiscal year of grant, even where the awards are intended to compensate executives for performance in a prior year. Cash incentive awards for Mr. Jamal and Mr. Erickson varied from the value implied by the tiered formula due to the resolution of a long-term incentive award last granted in 2018. Total amounts in the table may not add due to rounding.

The Long-Term Deferred Equity Awards (LTDEA) vest in four equal installments on March 5, 2023, 2024, 2025, and 2026, subject to continued employment through each vesting date (and with certain limited exceptions in the case of death, disability, Retirement, or certain terminations of employment in connection with a change in control). The Long-Term Performance Achievement Awards (LTPAA) vest on March 5, 2025, subject to continued employment through such date (and with certain limited exceptions in the case of death, disability, Retirement, certain terminations of employment in connection with a change in control, or terminations of employment other than for cause or by the employee for good reason). The portions of the Long-Term Performance Achievement Awards that will be eligible to vest will be determined based on the Company’s level of achievement measured against pre-established performance targets measuring the Company’s Average Return on Equity, defined as the annual average of the Company’s Economic net income (calculated on a pre-compensation basis) over a three-year measurement period ending on December 31, 2024, divided by the quarterly average of the Company’s stockholder’s equity, controlling interest over such period (excluding accumulated other comprehensive income, impairments recorded subsequent to the grant date, and other transactions and investments included in GAAP Net income but that do not impact Economic net income), reflected as a percentage. If Average Return on Equity is below 10% for the measurement period, no shares underlying the initial award will be issued and distributed. If Average Return on Equity is between 10% and 25% for the measurement period, a ratable portion between 20% and up to a maximum of 150% of the shares underlying the award will be issued and distributed, with 100% of the shares underlying the initial award issued and distributed if an Average Return on Equity of between 18% and 20% is achieved. The reported grant date fair value assumes that the midpoint level of Average Return on Equity will be achieved.

 

 

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Summary of Performance Assessment Target Descriptions and Rationale, and 2021 Target Setting Process

The following is a summary of the metrics utilized in the new Performance Assessment scorecard, including the rationale for including each metric and the methodology used in setting the individual metric targets. In setting the targets for the revised quantitative scorecard, the Compensation Committee employed a disciplined methodology, relying on informed views of performance expectations applied to a framework in order to pre-set targets during the first half of the year, to appropriately incentivize executives.

 

Incentive Compensation Performance Assessment: Metric Descriptions / Rationale and Target-Setting Methodology

 

Metric

Description / Rationale                                              

Target-Setting Methodology

Financial Metrics                       

Annual Management Fee EBITDA

-   Key top-line growth metric at AMG tied to the long-term value creation of the business, measuring AMG profit net of performance fees, interest expense, taxes, and non-cash depreciation amortization – indicates the condition of AMG’s Affiliate base on an ownership-weighted basis, the efficacy of capital reinvested for growth, and management of corporate expenses

-   Performance fee earnings removed, to dampen volatility year-over-year

-   Annual growth in Management Fee EBITDA is influenced by the following primary factors:

1.   Change in market asset levels for the year (time weighted), estimated based on publicly available market composite data (“Beta”);

2.   Relative investment performance by AMG’s Affiliates;

3.   Asset-based fee rates;

4.   Annual expenses incurred by AMG and certain of our Affiliates;

5.   AMG’s ownership levels across our Affiliate group; and

6.   Management Fee EBITDA contributed by new Affiliate investments

-   Neither AMG’s management team nor our Affiliates can control market beta; therefore, for the purpose of setting the annual target for Management Fee EBITDA, we apply a framework that establishes an annual growth target based on a sliding scale of Beta (calculated by AMG as a market composite blend based on composites and weightings published by the Company quarterly, as a convention to approximate the impact of market changes on AMG’s assets under management) throughout the year

-   Framework for Setting Management Fee EBITDA Target:

o    If Beta has declined by more than (5)%, then the target Management Fee EBITDA will be 100% of prior-year Management Fee EBITDA

o    If Beta has increased by more than 5%, then the target Management Fee EBITDA will be 110% of prior-year Management Fee EBITDA

o    If Beta is between (5)% and 5%, the target Management Fee EBITDA will be calculated linearly between 100% and 110%

-       We believe that the resulting target is a rigorous metric given that the year-over-year change in Management Fee EBITDA is reflective of management’s execution against its strategy (described above) and beyond the impact of Beta on AMG’s business across a range of reasonable market outcome scenarios

Annual Economic Earnings Per Share

-   Most comprehensive measure of overall earnings contribution on a per-unit basis; please refer to AMG’s most recent Form 10-K for a full definition

-   Incorporates aggregate condition of Affiliates, corporate expenses, capital structure, tax exposure, and the full weight of capital allocation decisions (deployment of capital into new Affiliate investments and share repurchases)

-   Economic Earnings Per Share (EEPS) is a key non-GAAP performance metric

-   Annual growth in EEPS is influenced by similar principal factors that affect Management Fee EBITDA (1-6 above) and also includes the impact of performance fees and share repurchases

-   As discussed, neither AMG’s management team nor our Affiliates can control market beta; therefore, for the purpose of setting the annual target for EEPS, we apply a framework that establishes an annual growth target based on a sliding scale of Beta throughout the year. The framework for setting the EEPS target is aligned with that described for Management Fee EBITDA above

-   We believe that the resulting EEPS target is a rigorous metric given that the year-over-year change in EEPS is reflective of management’s execution against its strategy above and beyond the impact of Beta on AMG’s business across a range of reasonable market outcome scenarios


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Metric

-   Description and Rationale                                              

Target-Setting Methodology

Relative Earnings Growth -
Percentile Rank

-   Relative growth ranking vs. Peer Group across GAAP Earnings Per Share and Economic Earnings Per Share (equally-weighted); relative metric reduces impact of macro factors

-   EEPS is one of AMG’s key performance metrics, but must be calculated for certain peers that do not disclose a comparable metric. Given that all public companies must report under GAAP, diluted GAAP EPS is included in the composite metric, enhancing conformity across the Peer Group. Idiosyncratic issues across each metric are offset by equally weighting EEPS vs. GAAP EPS; short-term anomalies are offset by comparing across a 3-year period

-   Target for AMG’s relative growth ranking vs. Peer Group across GAAP Earnings Per Share and Economic Earnings Per Share (equally-weighted) is the peer median (50th percentile)

Shareholder Value Creation Metrics: Total Stockholder Return, Annualized (1- and 3-Year Composites)

Absolute TSR

-   TSR metrics directly link Performance Assessment with shareholder investment experience

-   Absolute metric accounts for AMG’s unique exposures that are not captured in the Peer Group

-   1- / 3-year composites recognize annual performance and align performance with longer-term stockholder return

-   Target for the Absolute TSR, Annualized, metric (1- and 3-Year Composite) was set at 10%, given cost of capital estimated utilizing the Capital Asset Pricing Model (CAPM), including assumptions for the risk-free rate, equity risk premium, and long-term beta

Relative TSR

-   TSR metrics directly link Performance Assessment with shareholder investment experience

-   Relative metric provides comparability with Peer Group and mitigates macro impact(s) on individual stocks’ return

-   1- / 3-year composites recognize annual performance and align performance with longer-term stockholder return

-   Target for the Relative TSR, Annualized, metric (1- and 3-Year Composite) was set at the peer median (50th percentile)

AMG Distribution Business Metric

Total AMG-Related Gross Sales: 3-Year

-   Measures success of AMG’s efforts to support Affiliate growth (AMG distribution personnel marketing to institutional and wealth clients on behalf of Affiliates), on a 3-year basis; metric is Annual Gross Sales generated by AMG distribution efforts, in aggregate, over the 3-year period

-   Target is based on 3-year gross sales generated by AMG distribution personnel on behalf of Affiliates, which represented approximately 10% of AMG’s annual total gross sales

Capital Deployment and Return on Capital Metrics                       

EBITDA from New Investments: 3-Year

-   Measures Total Adjusted EBITDA recognized through execution of new Affiliate investment strategy, on a 3-year basis to offset short-term anomalies, indicating productivity of the new investment effort over such 3-year period

-   Incents ongoing investment in growth and diversification and evolution of AMG’s product offering and asset exposure over time

-   Target is based on the 10-year historical average of total EBITDA acquired through execution of new investments strategy over rolling 3-year periods

Average Annualized New Investments Yield: 3-Year

-   Measures average pre-tax cash returns on new investments on a 3-year basis, therefore indicating efficacy of new investment effort over the period; 3-year period offsets short-term anomalies

-   Incents a focus on pricing, structure, and long-term growth potential

-   Target pre-tax cost of equity of 12% is estimated utilizing the Capital Asset Pricing Model (CAPM), including assumptions for the risk-free rate, equity risk premium, and long-term beta

Average Annualized Adjusted Return on Capital: 3-Year

-   Average annual after-tax return on investment from capital deployed over 3-year period across the combination of new investments and share repurchases (together accounting for the significant majority of AMG’s discretionary capital decisions)

-   Incents a disciplined approach to capital allocation across growth investments and share repurchases as management creates shareholder value over time; 3-year period offsets short-term anomalies

-   Target after-tax cost of capital of 10% is estimated utilizing the Capital Asset Pricing Model (CAPM), including assumptions for the risk-free rate, equity risk premium, and long-term beta

Strategic and Organizational Initiatives

ESG-Dedicated AUM

-   Measures the notional level of ESG-dedicated AUM as AMG increasingly participates in this secular growth area via investments in new Affiliates or collaborating with existing Affiliates in product development or enhancing capabilities; targets are reconsidered annually to ensure appropriate progress is incented over time

-   Target set relative to the prior-year level of AMG notional AUM in these strategies

Organizational Diversity and Leadership

-   Percentage of women at AMG in management positions (excluding our U.S. wealth subsidiary), reflecting importance of diverse management and leadership perspectives; targets are re-considered annually to ensure appropriate progress is incented over time

-   Target set relative to the prior-year AMG level, and over time may include goals and objectives and incorporate other forms of diversity

Employee Engagement Survey Score

-   Percentage of AMG employees indicating overall job satisfaction in formal annual employee engagement survey, relative to industry benchmark satisfaction rate

-   Target set relative to an industry benchmark satisfaction rate

Other Strategic Initiatives

-   Board of Directors’ assessment of management performance in strategic execution not directly captured in other metrics

-   Target set at 4 on a scale of 1 to 5 as the Board intends for the management team to execute across all strategic initiatives, including those not captured by other metrics in the Performance Assessment, in excellent fashion

-

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Summary of Enhancements to Performance Assessment

The following is a summary of the key features of the Compensation Committee’s annual incentive compensation determination process, including the enhancements made in 2021, in response to shareholder and proxy advisory firm feedback and to further support our compensation program philosophy of aligning pay with performance:

 

Caps on total Annual Incentive Compensation: The Compensation Committee applied a cap on Annual Incentive Compensation for our President and Chief Executive Officer (“CEO Annual Incentive Compensation”) of $17.5 million, which has been consistent since 2017. The Committee also applied annual caps on the Annual Incentive Compensation for each of our Head of Affiliate Investments, our Chief Financial Officer, and our Head of Affiliate Engagement of $10.0 million, and applied a cap on the Annual Incentive Compensation for our General Counsel of $5.0 million.

 

Use of a Target Payout as the basis for determining variable Annual Incentive Compensation award amounts: The Compensation Committee set a target payout level (the “Target Payout”) for the performance year, based on peer benchmarking and reflecting input from our independent Compensation Consultant. The Committee uses the Target Payout as the basis for determining Annual Incentive Compensation, including cash bonuses and all equity awards. For 2021, the Target Payout of $9.6 million for our President and Chief Executive Officer was based on the median of Peer Group compensation.

 

Determine Annual Incentive Compensation using a single Performance Assessment: The Compensation Committee determined all incentive compensation, including cash bonus and equity incentive awards, using a single process. The separate Short-Term and Long-Term Scorecards used in prior years have now been streamlined into a single quantitatively-based Performance Assessment scorecard to simplify the compensation determination process and enhance its formulaic nature, in alignment with shareholder feedback. Pre-determined, objective metrics now account for more than 90% of the score weighting, and a number of new metric targets have been disclosed:

 

Significantly Broadened Array of Financial Performance Targets

 

o

Use of pre-set earnings targets has been expanded to include both annual targets as well as a 3-year relative earnings target measured against peers on a percentile-ranked basis, to focus management on generating long-term shareholder value

 

o

Added new capital deployment targets, measuring average yield and EBITDA acquired from new Affiliate investments, and weighted returns on share repurchases and new Affiliate investments – in each case over a 3-year period

 

New TSR Targets

 

o

Added pre-set Total Stockholder Return targets, based on 1- and 3-year returns on both an absolute and a relative basis, to further align the interests of management with those of our stockholders

 

New Performance Categories and Targets

 

o

Added pre-set targets for operational and organizational performance goals, enhancing the formulaic nature of the assessment and expand the scope into additional areas, including ESG:

 

AMG Distribution Effectiveness – measuring results relative to gross sales targets relating to our AMG-led distribution business

 

Strategic and Organizational Initiatives – measuring organizational diversity, AMG’s participation in responsible investment, and employee engagement

 

Total Formulaic Incentive Compensation calculated by applying Performance Assessment score to Target Payout: The weighted score of the Committee’s Performance Assessment of 147%, determined based on the quantitative scorecard assessment, was applied to the Target Payout amount of $9.6 million, to produce a Total Formulaic Incentive Compensation amount of $13.4 million for our President and Chief Executive Officer.

 

Application of a reduction of formulaic incentive amounts, consistent with 2019 commitment to stockholders: In the third and final year of impact related to the one-time, long-duration, 100% performance-based 2019 Long-Term Equity Alignment Award granted to our President and Chief Executive Officer and other executive officers, Total Formulaic Incentive Compensation was reduced by $1.7 million to $11.7 million for our President and Chief Executive Officer, reflecting the Committee’s commitment made to stockholders in connection with that one-time award. Over the three-year period, the formulaic compensation for the President and Chief Executive Officer was reduced by approximately

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$7.8 million in aggregate, specifically related to the one-time award. The Committee also reduced incentive compensation awarded to other recipients of the one-time 2019 award, over the three-year period, including in 2021.

 

The Long-Term Equity Alignment Award was granted in 2019 to accomplish specific alignment goals during a period of unique transition from the founding generation to the next generation of management. The award was designed to further align our Chief Executive Officer and the new leadership team with stockholders over the long term, galvanize the team around the goal of long-term shareholder value creation, retain the team through the management transition, and lengthen the duration of their equity incentives. In keeping with AMG’s pay-for-performance philosophy, the award will expire with little or no value if the management team does not achieve results in the form of both a higher stock price and strong Average Return on Equity results

 

Allocations of Annual Incentive Compensation reflect a significant proportion of performance‑based equity awards: The final Annual Incentive Compensation is allocated between cash bonus and long-term equity awards using a pre-established tiered formula, which caps cash awards at 45% of Annual Incentive Compensation, wherein the first $5 million in incentive compensation is split as 45% cash and 55% equity, the next $5 million in incentive compensation is split as 40% cash and 60% equity, and any incentive compensation thereafter is split as 30% cash and 70% equity, resulting in a formulaic cash bonus of $4.8 million and a formulaic equity incentive award amount of $6.9 million for our President and Chief Executive Officer:

 

A majority of Annual Incentive Compensation is in the form of equity incentive awards: The majority of CEO Annual Incentive Compensation was in the form of equity incentive awards – in 2021, approximately 60%

 

A substantial majority of the equity incentive awards have rigorous, transparent, pre-established performance hurdles governing delivery of the award: Of the equity incentive awards, 60% were targeted to be performance awards, granted in the form of Long‑Term Performance Achievement Awards, with three‑year cliff vesting and delivery further subject to rigorous and transparent pre-established performance targets

 

Long‑Term Performance Achievement Awards use an Average Return on Equity target, measured over a single three‑year performance period; target achievement levels were raised by over 10% in 2021:

 

Long‑Term Performance Achievement Awards are only deliverable if we meet minimum Return on Equity levels:

 

o

Return on Equity targets align management incentives with the strategic goals of not only growing earnings, but also effective stewardship of shareholder capital; the three‑year measurement period takes into account retained earnings from previous years and indicates the effectiveness of stockholder capital reinvestment

 

o

Return on Equity target range for the 2021 Long Term Performance Achievement Awards (achievement levels at which 100% of the shares would be delivered) was raised to 18 - 20% (from 16 - 18% for the 2020 performance year awards)

 

o

Return on Equity incorporates the effect of dividends, share repurchases, new investments, cost containment, and reinvestment in the business

 

Use of a single forward‑looking performance period:

 

o

Use of a single forward three‑year measurement period, with cliff vesting three years from issuance; any portion of the award that will not be delivered following the performance period will be forfeited


40


 

 

Market and Industry Comparison

The Compensation Committee believes that in order to retain and motivate key management team members, which is an important part of our compensation program philosophy, total compensation must be competitive relative to the market for the services of our named executive officers. The Compensation Committee used data derived from our Peer Group as one of a number of analytical tools and reference points to inform its decisions about overall compensation, compensation elements, optimum pay mix, and the relative competitive landscape.

The Compensation Committee regularly reviews our Peer Group in order to ensure its ongoing relevance. In determining the Company’s Peer Group on an annual basis, the Compensation Committee considers both industry and company‑specific dynamics to identify the peers with which we compete for client assets, stockholders, and talent. As a result, the Committee focuses on peers within the asset management industry, as well as financial services companies with significant asset management components to their businesses and does not, for example, include retail or investment banks, brokerage or custodian firms, or insurance companies. The Committee also evaluates the Peer Group to ensure that it reflects the Company’s growth, overall changes in the asset management industry, and the business models, size, and scope of our competitors.

As part of its annual process, the Compensation Committee reviewed our Peer Group for 2021 compensation comparisons, applying the following principles as a guide.

AMG Guiding Principles for Peer Selection 

 

Consider Industry

 

Identify companies with a similar business model/philosophy

    Begin with direct ‘pure-play’ peers within the mono-line asset management industry; once mono-line asset manager peers are identified, select those that are most comparable

 

    Extend search beyond mono-line asset managers to identify peers with operationally similar business models (i.e., financial services companies with a significant asset management component to their business)

    Identify peers within the asset management industry managing assets in similar strategies and for similar client types

 

 

Consider Size and Scope

 

Select companies similar in strategic complexity, geographic focus, and financial scale

 

    Evaluate peers for comparability, primarily considering assets under management and fee revenue as the most relevant metrics

 

    Select asset managers with global scale and international operations 

These guiding principles reflect the Compensation Committee’s focus on maintaining a Peer Group that remains relevant throughout the various stages of our growth and expansion, and that reflects current developments in the businesses of our peers. The Committee believes that success in the asset management industry, in particular, relies heavily on human talent, given the service‑oriented and fee‑based business model, as well as the modest capital requirements of asset management companies. This is in contrast to other financial services companies, such as banks, insurance, specialty finance, brokerage and custodian firms, and financial information technology companies, which also rely on balance sheet capital, scale of operations, and physical infrastructure to drive revenue and profitability. Thus, the size of the businesses competing with us for human talent, as measured by assets or revenues, does not always correspond to their profitability. Further, the Committee recognizes that certain firms within the industries that we compete with for executive talent, such as private equity firms and certain asset managers, use compensation models that are distinct from other businesses when comparing pay as a factor of assets or financial results.

In addition, the Compensation Committee recognizes that the companies within our Peer Group vary by business strategy (including those with substantial passive investment businesses versus actively managed investment strategies), product concentration (money market products versus return‑oriented equity and/or alternative products), overall profitability, and stockholder returns. The nature of the roles of executives also varies by firm. For example, our senior management team has developed a differentiated skill set and reputation to match our unique business model of pursuing long‑term partnerships with outstanding independent, partner-owned investment management firms. The Committee takes Peer Group comparisons into account and also forms its own perspective on appropriate compensation levels, considering additional factors with respect to unique elements of AMG officer roles and responsibilities.

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The following table lists the companies in our Peer Group, which the Compensation Committee reviewed in determining 2021 compensation for our named executive officers. We believe this Peer Group is consistent with our guiding principles, and includes companies that we compete with for client assets, executive talent, and capital providers, including stockholders. Our Peer Group was revised in 2021 to include peers with market capitalizations and business scope (including alternative-focused asset management businesses) aligned with the ongoing evolution of our business, and to replace peers impacted by industry consolidation. See “Named Executive Officer Annual Compensation Determination Process and Results on page 32.

Peer Group: 12 Peers

AllianceBernstein

Franklin Resources

Ameriprise Financial

Invesco

Ares Management

Janus Henderson Group

Artisan Partners

Lazard

Carlyle Group

Victory Capital Management

Federated Hermes

Virtus Investment Partners

 

 

 

 

Compensation Governance Practices

Our Board of Directors is committed to maintaining responsible compensation practices, and believes that rewards for our senior leaders should be commensurate with the results they achieve for our stockholders. Our strong governance procedures and practices with respect to employment and compensation include the following:

What we do

 

What we don’t do

 

 

 

      Annual Say-on-Pay Vote

      Caps on Annual Incentive Compensation for each NEO, including the CEO

      Annual cap on independent director equity awards

      Equity ownership guidelines for NEOs and directors, as well as an equity holding policy for NEOs

      One-year minimum vesting on equity awards

      Double-trigger vesting upon change in control

      Clawback policy

      Mitigation of dilutive impact of equity awards through share repurchases

      Formulaic performance assessment scorecard; pre-set objective quantitative metrics drive over 90% of the assessment score, with achievement caps on each individual metric

      Significant portion of variable compensation is performance-based equity awards tied to key business metrics

      Majority of equity awards are performance-based, with delivery tied to the achievement of pre-established performance targets

      A thorough risk assessment process, as described under “Risk Considerations in our Compensation Program” below

 

      No employment agreements with any NEOs, including the CEO

      No golden parachute change in control agreements with executives

      No tax reimbursements or gross-ups for perquisites

      No hedging or pledging of AMG securities by directors or officers

      No option re-pricing or buy-outs of underwater stock options

      No option grants with exercise price below grant date stock price

      No payment of dividends on equity awards prior to vesting

      No liberal share counting or recycling of shares tendered or surrendered to pay the exercise cost or tax obligation of grants

      No “evergreen” equity plan feature

      No excessive perquisites

42


 

 

Our Compensation Committee

The Compensation Committee oversees our general compensation policies, establishes and reviews the compensation plans and benefit programs applicable to our named executive officers, and administers our incentive plans.

The Compensation Committee was entirely reconstituted in 2020 and currently consists of Mr. Churchill, Mr. Jeffery, and Ms. Palandjian, with Mr. Jeffery serving as the Chair. The members of the Committee have significant experience in compensation matters from their service as directors, executive officers, and/or advisors to various public and private companies, and the Committee members collectively have extensive experience with the Company and its compensation matters. The Committee’s agenda and meeting calendar are determined by the Committee, with input as appropriate from our President and Chief Executive Officer, Mr. Horgen, who attends meetings at the request of the Committee to participate in discussions concerning the compensation of other members of executive management and the design of our incentive plans, but does not participate in discussions regarding his own compensation, which occur in executive sessions of the Committee. The Committee also invites other members of the executive team to attend certain meetings to discuss the design, implementation, and administration of our incentive plans. The Committee has the sole authority to approve the compensation of our named executive officers and the performance goals related to such plans and programs.

The Compensation Committee regularly meets without management team members present, and the Chair regularly provides reports to the Board of Directors on compensation considerations. Our Compensation Consultant provides input and advice to the Compensation Committee, and to the Chair of the Committee in particular, at key points throughout the year.

Compensation Consultant

As part of our continual review and evolution of our compensation program, in early 2020, we initiated a formal process to identify a new independent compensation consultant. In mid-2020, the Compensation Committee selected Semler Brossy Consulting Group, a national compensation consulting firm providing executive compensation advisory services. The Compensation Consultant assists the Committee with compensation matters, including reviewing Peer Group benchmarking information, and providing an independent analysis of how our executive and director compensation policies and practices compared to the companies in our Peer Group. Our Compensation Consultant, which provides no other services to us, reported its findings directly to the Compensation Committee. The independence of our Compensation Consultant has been evaluated in accordance with SEC rules, and the Committee has determined that the Compensation Consultant’s work does not raise any conflicts of interest.

Risk Considerations in our Compensation Program

The Compensation Committee has discussed the concept of risk as it relates to our compensation program with our management team and with our Compensation Consultant. The Compensation Committee does not believe the goals or the underlying philosophy of our compensation program encourage excessive or inappropriate risk-taking, or create risks that are reasonably likely to have a material adverse effect on the Company.

Throughout our compensation program, compensation is aligned with increases in shareholder value and long-term stockholder interests and, therefore, we believe our compensation arrangements do not encourage inappropriate risk-taking. The named executive officers’ salaries are fixed in amount and typically account for approximately 10% of their Annual Total Direct Compensation. For 2021, all other Annual Total Direct Compensation (other than base salaries and perquisites) for named executive officers was determined using the Performance Assessment, which links incentive award payouts to pre-established performance targets (with caps on the scoring of individual metrics) and to a peer benchmarked pay target, and the total Annual Incentive Compensation of each named executive officer was subject to a maximum payout. Total Formulaic Incentive Compensation is then allocated between cash bonus and long-term equity awards using the pre-established tiered formula, resulting in formulaic cash bonus and equity incentive award amounts. Additionally, a substantial portion of executive compensation is in the form of equity incentive awards, a majority of which are subject to specific pre-established performance targets, which further aligns executives’ interests with those of our stockholders. We believe that these awards do not encourage excessive or inappropriate risk-taking given that the value of the awards is tied to our performance, and the awards are subject to long term vesting schedules to help ensure that executives have significant value tied to long-term performance. In addition, to further ensure the alignment of compensation with long-term performance, we have a clawback policy that allows for the recoupment of performance-based compensation from executive officers in the event of a material restatement of our financial results due to a material error within three years of the original reporting. In the event of such occurrence, the Board of Directors will review the facts and circumstances that led to the restatement and will take such actions as it deems necessary and appropriate (such as the possible recoupment of incentive compensation of one or more executive officers).

43


 

In connection with the Long-Term Equity Alignment Award granted in August of 2019, the Compensation Committee applied its risk assessment process and included specific design features to the award to avoid creating incentives that might encourage inappropriate risk-taking. These features include extended vesting periods, with no awards vesting in the first two years from grant, and a significant portion of the award is subject to five-year cliff vesting, to avoid incentives that might encourage inappropriate risk-taking focused on short-term results. Further, both the Alignment RSUs and the Alignment Options are subject to performance conditions based on average Return on Equity, with extended measurement periods ranging from two to five years, to focus management on producing long-term shareholder value over an extended period. Recipients of the Long-Term Equity Alignment Award are subject to an Equity Holding Policy adopted in 2019 that adds additional restrictions on sales of AMG shares for the remainder of the recipient’s time at the Company, and includes specific holding periods on the Alignment RSUs of six years after grant (through 2025) and on the Alignment Option shares for seven years after grant (through 2026). The awards are also subject to the Company’s clawback policy that allows, under certain circumstances, for the recoupment of the awards. These features of the awards were designed to discourage risk taking and ensure that executives have significant value tied to long-term performance of the Company.

Pay Ratio

The total annual compensation of our President and Chief Executive Officer for 2021, as reported in the “Total” column of the Summary Compensation Table, was $9,063,156. The total annual compensation of our median employee for 2021, calculated on the same basis as the Summary Compensation Table, was $183,137. The ratio of our Chief Executive Officer’s total annual compensation for 2021 to our median employee’s total annual compensation for 2021 was 49 to 1.

We selected our median employee by analyzing the compensation of each of our employees who were employed by the Company as of December 31, 2021, excluding our President and Chief Executive Officer, with each employee’s compensation calculated by reference to their fixed cash compensation for the year ended December 31, 2021, derived from payroll and other company records. We established a new median employee for 2021, following the previous median employee’s departure form the Company. We did not make any cost‑of‑living or other adjustments to these amounts, and did not exclude non‑U.S. employees. We annualized total compensation for full‑time employees that joined the Company during 2021 or had an unpaid leave‑of‑absence during the year. For purposes of this analysis, we included all full‑ and part‑time employees at the Company and at our subsidiaries where we control the compensation determinations for the subsidiary’s employees.

We believe executive pay must be internally consistent and equitable to motivate our employees to create shareholder value. We are committed to internal pay equity, and the Compensation Committee monitors the relationship between the pay our executive officers receive and the pay our other employees receive.

Equity Grant Policy

We grant all equity awards, including stock options, under the terms of an equity grant policy. Pursuant to the policy, we generally grant equity awards to our named executive officers at regularly scheduled meetings of the Compensation Committee in the first quarter, and to directors at regularly scheduled meetings of the Compensation Committee in the first quarter and in the third quarter, although the Committee retains discretion to grant awards at other times during the year. If the date of a Committee approval of an equity grant falls within a regularly scheduled quarterly blackout period under our insider trading policy, the awards will not become effective and are not priced until the closing of the last day of the blackout period following the public release of our earnings results for the prior quarter and/or year, as applicable. In all other cases, the effective grant date of any equity awards will be the date of the relevant Committee meeting or written consent.

We do not have any program, plan, or practice to time equity awards to employees or directors in coordination with the release of material non‑public information. If the Compensation Committee is in possession of material non‑public information, either favorable or unfavorable, when equity awards are made, the Compensation Committee will not take this information into consideration when determining award amounts.

Tax Deductibility of Compensation

The availability of tax deductions for cash and equity compensation is one of many factors that the Compensation Committee considers in designing a compensation program that is intended to attract and retain executive talent and to reward our named executive officers for their contributions to the success of the Company.

44


 

The Internal Revenue Code of 1986, as amended from time to time, under Section 162(m), generally disallows a tax deduction for compensation in excess of $1 million paid to any “covered employee” of a publicly held corporation (generally the corporation’s chief executive officer, chief financial officer, and its next three most highly compensated executive officers, in the year that the compensation is paid). The Compensation Committee is committed to maintaining a compensation program and establishing compensation levels that take tax consequences into account, and will continue to consider these issues, while prioritizing a focus on attracting and retaining executive talent and aligning management incentives with long‑term stockholder interests.

Compensation Committee Report

The Compensation Committee has reviewed and discussed this Compensation Discussion and Analysis with our management team. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that this Compensation Discussion and Analysis be included in this Proxy Statement.

Reuben Jeffery III, Chair

Dwight D. Churchill

Tracy P. Palandjian

 

45


 

 

EXECUTIVE COMPENSATION TABLES

The following tables provide information regarding the compensation arrangements for the years indicated with respect to the Company’s Chief Executive Officer and Chief Financial Officer, and three other most highly compensated executive officers, during the fiscal year ended December 31, 2021 (collectively, the “named executive officers”).

Equity awards granted in March 2022 in recognition of performance during fiscal year 2021 do not appear in the following Summary Compensation Table or the Grants of Plan-Based Awards table because SEC rules require equity awards to be reported in these tables in the fiscal year of grant, even where the awards are intended to compensate executives for performance in a prior year. For information on the equity awards granted in March 2022 in recognition of 2021 performance, please refer to the discussion in the Compensation Discussion and Analysis section of this Proxy Statement.

Summary Compensation Table

 

Name and Principal Position

 

Year

 

Salary

($)

 

 

Non-Equity

Incentive Plan

Compensation

($)(1)

 

Stock

Awards

($)

 

 

Stock

Option

Awards($)

 

 

All Other

Compensation

($)(2)

 

Total

($)

Jay C. Horgen

 

2021

 

750,000

 

 

4,755,000

 

3,500,000

(3)

 

 

 

58,156

 

9,063,156

President and Chief Executive Officer

 

2020

 

750,000

 

 

2,550,000

 

4,275,000

(4)

 

 

 

57,026

 

7,632,026

 

 

2019

 

648,718

(5)

 

2,000,000

 

14,224,000

(6)

 

7,276,000

(7)

 

48,910

 

24,197,628

Thomas M. Wojcik(8)

 

2021

 

500,000

 

 

2,400,000

 

2,075,000

(3)

 

 

 

21,240

 

4,996,240

Chief Financial Officer

 

2020

 

500,000

 

 

1,175,000

 

1,950,000

(4)

 

 

 

20,940

 

3,645,940

 

 

2019

 

346,795

 

 

800,000

 

4,470,680

(6)

 

4,525,000

(7)

 

24,404

 

10,166,879

Rizwan M. Jamal(9)

 

2021

 

500,000

 

 

2,100,000

 

2,050,000

(3)

 

 

 

27,270

 

4,677,270

Head of Affiliate Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John R. Erickson(9)

 

2021

 

500,000

 

 

1,250,000

 

1,350,000

(3)

 

 

 

21,894

 

3,121,894

Head of Affiliate Engagement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David M. Billings

 

2021

 

500,000

 

 

1,125,000

 

1,400,000

(3)

 

 

 

23,454

 

3,048,454

General Counsel and Secretary

 

2020

 

400,000

 

 

1,100,000

 

450,000

(4)

 

 

 

23,154

 

1,973,154

 

 

2019

 

400,000

 

 

1,100,000

 

600,000

(6)

 

 

 

28,454

 

2,128,454

 

(1)

For 2021, amounts represent performance-based cash bonuses awarded in recognition of performance in 2021, determined using the Performance Assessment scorecard and framework, applying a formulaic score to target payout levels set based on peer benchmarking, and allocating between cash bonus and long-term equity awards using a pre-established tiered formula, as more fully described in the Compensation Discussion and Analysis section of this Proxy Statement.

(2)

For 2021, all other compensation consisted of (i) contributions to a 401(k) profit-sharing or similar pension plan in the amount of $17,400 on behalf of each named executive officer, (ii) medical benefits and life and long-term disability insurance premiums with respect to each named executive officer, and (iii) tax preparation services with respect to Mr. Horgen. The Company does not provide tax reimbursements for any perquisite.

(3)

Represents the aggregate grant date fair value (computed in accordance with FASB ASC Topic 718) of the following equity incentive awards consisting of restricted stock units granted under the 2020 Equity Incentive Plan (the “2020 Stock Plan”) in March 2021 in recognition of performance in 2020: (i) 2020 Long-Term Deferred Equity Awards granted to Mr. Horgen, Mr. Wojcik, Mr. Jamal, Mr. Erickson, and Mr. Billings with grant date values of $1,400,000, $830,000, $820,000, $540,000, and $560,000, respectively, and (ii) 2020 Long-Term Performance Achievement Awards granted to Mr. Horgen, Mr. Wojcik, Mr. Jamal, Mr. Erickson, and Mr. Billings with grant date values of $2,100,000, $1,245,000, $1,230,000, $810,000, and $840,000, respectively. The portions of the 2020 Long-Term Performance Achievement Awards that will be eligible to vest will be determined based on the Company’s level of achievement measured against pre-established performance targets measuring the Company’s Average Return on Equity, defined as the annual average of the Company’s Economic net income (calculated on a pre-compensation basis) over a three-year measurement period ending on December 31, 2023, divided by the quarterly average of the Company’s stockholder’s equity, controlling interest over such period (excluding accumulated other comprehensive income, impairments recorded subsequent to the grant date, and other transactions and investments

46


 

included in GAAP Net income but that do not impact Economic net income), reflected as a percentage. If Average Return on Equity is below 10% for the measurement period, no shares underlying the initial award will be issued and distributed. If Average Return on Equity is between 10% and 23% for the measurement period, a ratable portion between 50% and up to a maximum of 150% of the shares underlying the award will be issued and distributed, with 100% of the shares underlying the initial award issued and distributed if an Average Return on Equity of between 16% and 18% is achieved. The grant date fair value of the 2020 Long-Term Performance Achievement Awards assumes that the midpoint level of Average Return on Equity will be achieved. For details on the assumptions made in the valuation of these and the other awards described herein, see the Company’s 2021 Annual Report on Form 10-K, under “Critical Accounting Estimates and Judgments—Share-Based Compensation and Affiliate Equity” and the “Share-Based Compensation” note to the Consolidated Financial Statements included therein.

(4)

Represents the aggregate grant date fair value (computed in accordance with FASB ASC Topic 718) of the following equity incentive awards consisting of restricted stock units granted under the 2013 Stock Incentive Award Plan (as amended, the “2013 Stock Plan”) in March 2020 in recognition of performance in 2019: (i) 2019 Long-Term Deferred Equity Awards granted to Mr. Horgen, Mr. Wojcik, and Mr. Billings with grant date fair values of $1,710,000, $780,000, and $180,000, respectively, and (ii) 2019 Long-Term Performance Achievement Awards granted to Mr. Horgen, Mr. Wojcik, and Mr. Billings with grant date fair values of $2,565,000, $1,170,000, and $270,000, respectively. The portions of the 2019 Long-Term Performance Achievement Awards that will be eligible to vest will be determined based on the Company’s level of achievement measured against pre-established performance targets measuring the Company’s Average Return on Equity, defined as the annual average of the Company’s Economic net income (calculated on a pre-compensation basis) over a three-year measurement period ending on December 31, 2022, divided by the quarterly average of the Company’s Total stockholder’s equity, controlling interest (excluding accumulated other comprehensive income and impairments recorded subsequent to the grant date) over such period, reflected as a percentage. If Average Return on Equity is below 12% for the measurement period, no shares underlying the award will be issued and distributed. If Average Return on Equity is between 12% and 22% for the measurement period, a ratable portion between 50% and up to a maximum of 175% of the shares underlying the award issued will be issued and distributed, with 100% of the shares underlying the award issued and distributed if a midpoint of 16% Average Return on Equity is achieved. The grant date fair value of the 2019 Long-Term Performance Achievement Awards assumes that the midpoint level of Average Return on Equity will be achieved.

(5)

Mr. Horgen became the Chief Executive Officer of the Company in May 2019, and his salary was increased to $750,000. Mr. Horgen previously served as the Company’s President and Chief Financial Officer.

(6)

Represents the aggregate grant date fair value (computed in accordance with FASB ASC Topic 718) of the following equity incentive awards consisting of restricted stock units granted under the 2013 Stock Plan: (i) 2018 Long-Term Deferred Equity Awards granted in February 2019 in recognition of performance in 2018 to Mr. Horgen and Mr. Billings with grant date fair values of $1,400,000 and $240,000, respectively, (ii) 2018 Long-Term Performance Achievement Awards granted in February 2019 in recognition of performance in 2018 to Mr. Horgen and Mr. Billings with grant date fair values of $2,100,000 and $360,000, respectively, (iii) Alignment RSUs granted in August 2019 to Mr. Horgen and Mr. Wojcik with grant date fair values of $10,724,000 and $1,100,000, respectively, and (iv) for Mr. Wojcik, a one-time make-whole award of restricted stock units granted in May 2019 in connection with the commencement of his employment, with a grant date fair value of $3,370,680. The portions of the 2018 Long-Term Performance Achievement Awards that will be eligible to vest will be determined based on the Company’s level of achievement measured against pre-established performance targets measuring the Company’s Average Return on Equity, defined as the annual average of the Company’s Economic net income (calculated on a pre-compensation basis) over a three-year measurement period ending on December 31, 2021, divided by the quarterly average of the Company’s Total stockholder’s equity, controlling interest (excluding accumulated other comprehensive income) over such period, reflected as a percentage. If Average Return on Equity is below 12% for the measurement period, no shares underlying the award will be issued and distributed. If Average Return on Equity is between 12% and 22% for the measurement period, a ratable portion between 25% and up to a maximum of 175% of the shares underlying the award issued will be issued and distributed, with 100% of the shares underlying the award issued and distributed if a midpoint of 17% Average Return on Equity is achieved. The Alignment RSUs are divided into three equal tranches, and the number of shares of common stock of the Company underlying each tranche that may be issued and distributed for each restricted stock unit will be determined based on the Company’s level of achievement measured against pre-established performance targets measuring Average Return on Equity, defined as the annual average of the Company’s Economic net income (calculated on a pre-compensation basis) over the applicable three-, four- or five-year measurement period ending on December 31, 2020, 2021, or 2022, respectively, divided by the quarterly average of the Company’s Total stockholder’s equity, controlling interest (excluding accumulated other comprehensive income and impairments recorded subsequent to the grant date) over the applicable measurement period, reflected as a percentage. For each tranche, if Average Return on Equity is below 12% for the applicable measurement period, no shares underlying such tranche will be issued and distributed, and if Average Return on Equity is 12% or above for the applicable measurement period, 100% of the shares underlying the tranche will be issued

47


 

and distributed. The grant date fair value of the Alignment RSUs assumes that the target-level Average Return on Equity, the midpoint of 17%, will be achieved.

(7)

Represents the aggregate grant date fair value (computed in accordance with FASB ASC Topic 718 and assuming the midpoint level of performance will be achieved) of the Alignment Options (together with the Alignment RSUs, the “Alignment Awards”) consisting of stock options granted under the 2011 Stock Option and Incentive Plan (as amended, the “2011 Option Plan”) in August 2019. The number of shares of common stock of the Company underlying each stock option award that may become exercisable following vesting will be determined based on the Company’s level of achievement measured against pre-established performance targets measuring Average Return on Equity (calculated on the same basis as the Alignment RSUs) over a five-year performance period ending on December 31, 2023. If Average Return on Equity is between 12% and 20% or above for the measurement period, a ratable portion between 50% and up to a maximum of 150% of the shares underlying the award will be eligible for exercise, with 100% of the shares underlying the award becoming eligible for exercise if a midpoint of 16% Average Return on Equity is achieved for the measurement period. If Average Return on Equity is equal to or less than 12% for the measurement period, 50% of the shares underlying the award will be eligible for exercise. Any portion of the award that will not be delivered following the five-year performance period will be forfeited. The grant date fair value of the Alignment Options was determined using the Black-Scholes option pricing model, and assumes that the midpoint level of Average Return on Equity will be achieved.

(8)

Mr. Wojcik joined the company in April 2019 and, therefore, amounts in the table for 2019 represent Mr. Wojcik’s compensation for the period since he joined the Company.

(9)

Each of Mr. Jamal and Mr. Erickson were first determined to be named executive officers for fiscal year 2021 and, therefore, in accordance with SEC rules, their compensation is not included in the table for years prior to 2021.

48


 

Grants of Plan-Based Awards in Fiscal Year 2021

 

 

 

 

 

 

Estimated Future

Payouts

Under Non-Equity

Incentive Plan

Awards(1)

 

 

 

Estimated Future Payouts

Under Equity

Incentive Plan Awards

 

Grant

Date

Fair Value

Name

 

Grant

Date

 

Threshold

($)

 

Target

($)

 

Maximum

($)

 

Threshold

(#)

 

Target

(#)

 

Maximum

(#)

 

of Stock

Awards ($)

Jay C. Horgen

 

1/27/2022

 

 

 

4,755,000

 

 

 

 

 

 

 

3/5/2021

(2)

 

 

 

 

 

10,050

 

 

1,400,000

 

 

3/5/2021

(3)

 

 

 

 

 

15,074

 

22,611

 

2,100,000

Thomas M. Wojcik

 

1/27/2022

 

 

 

2,400,000

 

 

 

 

 

 

 

3/5/2021

(2)

 

 

 

 

 

5,958

 

 

830,000

 

 

3/5/2021

(3)

 

 

 

 

 

8,937

 

13,406

 

1,245,000

Rizwan M. Jamal

 

1/27/2022

 

 

 

2,100,000

 

 

 

 

 

 

 

3/5/2021

(2)

 

 

 

 

 

5,886

 

 

820,000

 

 

3/5/2021

(3)

 

 

 

 

 

8,829

 

13,244

 

1,230,000

John R. Erickson

 

1/27/2022

 

 

 

1,250,000

 

 

 

 

 

 

 

3/5/2021

(2)

 

 

 

 

 

3,876

 

 

540,000

 

 

3/5/2021

(3)

 

 

 

 

 

5,814

 

8,721

 

810,000

David M. Billings

 

1/27/2022

 

 

 

1,125,000

 

 

 

 

 

 

 

3/5/2021

(2)

 

 

 

 

 

4,020

 

 

560,000

 

 

3/5/2021

(3)

 

 

 

 

 

6,030

 

9,045

 

840,000

 

(1)

Represents performance-based cash bonuses awarded in recognition of performance in 2021, determined using the Performance Assessment scorecard and framework, applying a formulaic score to target payout levels set based on peer benchmarking, and allocating between cash bonus and long-term equity awards using a pre-established tiered formula, as more fully described in the Compensation Discussion and Analysis section of this Proxy Statement.

(2)

Represents 2020 Long-Term Deferred Equity Awards granted in March 2021 under the 2020 Stock Plan in recognition of performance in 2020, vesting in four equal installments on March 5, 2022, 2023, 2024, and 2025, subject to continued employment through each vesting date (with certain limited exceptions in the case of death, disability, Retirement, or certain terminations of employment in connection with a change in control. To be eligible for Retirement, the named executive officer must (a) have completed at least 120 months (10 years) of service and (b) have a number of completed months of service plus age in months that, when summed, equals at least 780 months (65 years). Upon Retirement, qualifying awards continue to vest post-termination in accordance with the original schedule, subject to any applicable performance conditions). The grant date fair value has been computed in accordance with FASB ASC Topic 718.

(3)

Represents 2020 Long-Term Performance Achievement Awards granted in March 2021 under the 2020 Stock Plan in recognition of performance in 2020, vesting in full on March 5, 2024, subject to continued employment through the vesting date (with certain limited exceptions in the case of death, disability, Retirement, certain terminations of employment in connection with a change in control, or terminations of employment other than for cause or by the employee for good reason). The number of shares of common stock of the Company underlying each award that may be issued and distributed for each restricted stock unit is based on the Company’s level of achievement measured against pre-established performance targets measuring the Company’s Average Return on Equity over a three-year measurement period ending on December 31, 2023. The grant date fair value has been computed in accordance with FASB ASC Topic 718, and assumes that the midpoint level of Average Return on Equity will be achieved.

49


 

Outstanding Equity Awards at 2021 Fiscal Year-End

 

 

 

Option Awards

 

Stock Awards

Name

 

Number of

Securities

Underlying

Unexercised

Options

Exercisable

(#)(1)

 

 

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)(2)

 

 

Option

Exercise

Price ($)

 

 

Option

Expiration

Date

 

Number of

Shares of

Stock That

Have Not

Vested

(#)(3)

 

 

Market or

Payout

Value of

Shares of

Stock That

Have Not

Vested ($)

 

 

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares of

Stock That

Have Not

Vested

(#)(4)

 

 

Equity

Incentive

Plan Awards:

Market

Value of

Unearned

Shares

of Stock That

Have Not

Vested ($)

Jay C. Horgen

 

 

 

 

400,000

 

 

 

74.49

 

 

8/15/2026

 

 

35,573

 

 

 

5,852,114

 

 

 

164,890

 

 

27,126,054

Thomas M. Wojcik

 

 

 

 

248,763

 

 

 

74.49

 

 

8/15/2026

 

 

24,999

 

 

 

4,112,585

 

 

 

34,634

 

 

5,697,639

Rizwan M. Jamal

 

 

 

 

 

285,871

 

 

 

74.49

 

 

8/15/2026

 

 

18,174

 

 

 

2,989,805

 

 

 

53,867

 

 

8,861,660

John R. Erickson

 

 

 

 

250,137

 

 

 

74.49

 

 

8/15/2026

 

 

14,149

 

 

 

2,327,652

 

 

 

44,711

 

 

7,355,407

David M. Billings

 

 

8,098