Waste
Management, Inc. is a holding company, and all operations are conducted by its subsidiaries. Our subsidiaries are operated and managed locally and focus on providing services in distinct
geographic areas. Through our subsidiaries, we are North America's leading provider of comprehensive waste management environmental services, and we are also a leading developer, operator and owner of
landfill gas-to-energy facilities in the United States.
Our
Board of Directors is soliciting your proxy for the 2020 Annual Meeting of Stockholders and at any postponement or adjournment of the meeting. We are furnishing proxy materials to our stockholders
primarily via the Internet. On March 27, 2020, we sent an electronic notice of how to access our proxy materials and our Annual Report to stockholders that have previously signed up to receive
their proxy materials via the Internet. On March 27, 2020, we began mailing a Notice of Internet Availability of Proxy Materials to those stockholders that previously have not signed up for
electronic delivery. The Notice contains instructions on how stockholders can access our proxy materials on the website referred to in the Notice or request that a printed set of the proxy materials
be sent to them. Internet distribution of our proxy materials is designed to expedite receipt by stockholders, lower the costs of the annual meeting, and conserve natural resources.
Record Date March 16, 2020.
Quorum The holders of a majority of the shares of Common Stock outstanding on the record date must be present in person or by
proxy.
Shares Outstanding There were 423,627,187 shares of our Common Stock outstanding and entitled to vote as of
March 16, 2020.
Voting by Proxy Internet, phone, or mail.
Voting at the Meeting Stockholders can vote in person during the meeting.
Stockholders of record will be on a list held by the inspector of elections. Beneficial holders must obtain a proxy from their brokerage firm, bank, or other stockholder of record and present it to
the inspector of elections with their ballot. Voting in person by a stockholder will revoke any previously submitted proxy.
Changing Your Vote Stockholders of record may revoke their proxy at any time before we vote it at the meeting by submitting a
later-dated proxy via the Internet, by telephone, by mail, by delivering instructions to our Corporate Secretary before the annual meeting revoking the proxy or by voting in person at the annual
meeting. If you hold shares through a bank or brokerage firm, you may revoke any prior voting instructions by contacting that firm.
Votes Required to Adopt Proposals Each share of our Common Stock outstanding on the record date is entitled to one vote on each
of the eight director nominees and one vote on
each
other matter. To be elected, a director must receive a majority of the votes cast with respect to that director's election at the meeting. This means that the number of shares voted "for" a
director must exceed 50% of the votes cast with respect to that director. Each of the other proposals requires the favorable vote of the holders of a majority of the outstanding shares of Common Stock
present, either by proxy or in person, and entitled to vote on the matter.
Effect of Abstentions and Broker Non-Votes Abstentions will have no effect on the election of directors. For each of the other
proposals, abstentions will have the same effect as a vote against these matters because they are considered present and entitled to vote on the matters.
If
your shares are held by a broker, the broker will ask you how you want your shares to be voted. If you give the broker instructions, your shares must be voted as you direct. If you do not give
instructions, one of two things can happen depending on the type of proposal. For the proposal to ratify selection of the Company's independent registered public accounting firm, the broker may vote
your shares at its discretion. But for all other proposals in this Proxy Statement, including the election of directors, the advisory vote on executive compensation and the amendment and restatement
of our ESPP, the broker cannot vote your shares at all. When that happens, it is called a "broker non-vote." Broker non-votes are counted in determining the presence of a quorum at the meeting, but
they are not counted for purposes of calculating the shares present and entitled to vote on particular proposals at the meeting.
Voting Instructions You may receive more than one proxy card depending on how you hold your shares. If you hold shares through a
broker, your ability to vote by phone or over the Internet depends on your broker's voting process. You should complete and return each proxy or other voting instruction request provided to you. If
you complete and submit your proxy voting instructions, the persons named as proxies will follow your instructions. If you submit your proxy but do not give voting
2020 Proxy Statement | 1
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instructions,
we will vote your shares as set forth below. If you give us your proxy, any other matters that may properly come before the meeting will be voted at the discretion of the proxy holders.
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Item
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Matter
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Board Vote
Recommendation
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1
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Election of Directors Nominees
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FOR each director nominee
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2
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Ratification of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for fiscal year 2020
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FOR
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3
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Approve the Company's Executive Compensation
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FOR
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4
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Proposal to amend and restate our ESPP
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FOR
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Committee
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Name
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Age
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Tenure
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Independent
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Audit
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Management
Development
and
Compensation
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Nominating
and
Governance
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Frank M. Clark, Jr.
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74
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2002 - Present
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James C. Fish, Jr.
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57
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2016 - Present
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Andrés R. Gluski
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62
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2015 - Present
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Victoria M. Holt
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62
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2013 - Present
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Kathleen M. Mazzarella
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60
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2015 - Present
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William B. Plummer
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61
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2019 - Present
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John C. Pope
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70
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1997 - Present
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Thomas H. Weidemeyer
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72
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2005 - Present
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Chair,
as of 2020 Annual Meeting
Member
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2020 Proxy Statement
Table of Contents
Attending the Meeting Only stockholders, their proxy holders and our invited guests may attend the meeting. If you plan to
attend, please bring identification and, if you hold shares in street name, bring your bank or broker statement showing your beneficial ownership of Waste Management, Inc. stock as of the
record date in order to be admitted to the meeting. If you are planning to attend our annual meeting and require directions to the meeting, please contact our Corporate Secretary at 713-512-6200. The
only items on the agenda for this year's annual meeting are the items set out in the Notice. There will be no presentations.
Potential Alternative Meeting Arrangements We intend to hold our annual meeting in person. However, we are actively monitoring
the public health and travel concerns relating to COVID-19 (coronavirus). In the event it is not possible or advisable to hold the annual meeting as planned, we will announce alternative arrangements
for the meeting, which may include holding the meeting solely by means of remote communication. Any alternative arrangements for the meeting will be publicly announced in a press release available on
the Company's "Investors" webpage at www.wm.com and filed with the SEC. As always, we encourage you to vote your shares prior to the annual meeting.
Stockholder Proposals and Nominees for the 2021 Annual Meeting Stockholder
Proposals: Eligible stockholders who wish to submit a proposal for inclusion in the proxy statement for our 2021 Annual Meeting must submit their proposal to our Corporate
Secretary at Waste Management, Inc., 1001 Fannin Street, Houston, Texas 77002. The written proposal must be received at our offices on or before November 27, 2020, and the
stockholder must have been the registered or beneficial owner of (a) at least 1% of our outstanding Common Stock or (b) shares of our Common Stock with a market value of $2,000 for at
least one year before submitting the proposal. The proposal must comply with the requirements set forth in the federal securities laws, including Rule 14a-8 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in order to be included in the Company's proxy statement and proxy card for the 2021 Annual Meeting.
Advance Notice Proposals and Nominations: In addition, the Company's By-laws establish advance notice procedures that must be complied with for
stockholders to bring proposals that are not included in the Company's proxy materials and nominations of persons for election as directors (other than pursuant to our proxy access By-law discussed
below) before an annual meeting of stockholders. In accordance with our By-laws, for a proposal or nominee not included in our proxy materials to be properly brought before the 2021 Annual Meeting, a
stockholder's notice must be delivered to or mailed and received by the Company not less than 120 days nor more
than
150 days in advance of the first anniversary of the previous year's annual meeting of stockholders. As a result, any such stockholder's notice for the 2021 Annual Meeting must be received
no earlier than December 13, 2020 and no later than January 12, 2021 and must contain the information specified in the Company's By-laws. The stockholder's notice must be delivered to
our Corporate Secretary at Waste Management, Inc., 1001 Fannin Street, Houston, Texas 77002.
Proxy Access Nominations: In November 2019, the Company amended and restated its By-laws to provide for "proxy access." This provision permits a
stockholder or group of up to 20 stockholders owning 3% or more of the Company's outstanding Common Stock continuously for at least three years to nominate and include in the Company's proxy materials
director nominees constituting up to the greater of 20% of the Board of Directors or two individuals, provided the stockholder(s) and the nominee(s) satisfy the requirements specified in the By-laws.
In order for such nominees to be included in our proxy statement and form of proxy, stockholders and nominees must submit a notice of proxy access nomination together with other related information
required by our By-laws. The information necessary to nominate a director candidate using our proxy access By-law must be delivered to or mailed and received by the Company not less than
120 days nor more than 150 days before the anniversary of the date that the Company commenced mailing of its proxy statement for the previous year's annual meeting of stockholders. As a
result, any such nomination for the 2021 Annual Meeting must be received no earlier than October 28, 2020 and no later than November 27, 2020 and must contain the information specified
in the Company's By-laws. Such information must be delivered to our Corporate Secretary at Waste Management, Inc., 1001 Fannin Street, Houston, Texas 77002.
A
copy of our By-laws may be obtained free of charge by writing to our Corporate Secretary and is available in the "ESG Corporate Governance" section of the
"Investors" page on our website at www.wm.com. The Company will not consider any proposal or nomination that is not timely or otherwise does not meet the By-law and SEC requirements for submitting a
proposal or nomination.
Due
to an anticipated address change for our principal executive officers during the fourth quarter of 2020, we also ask that you email a courtesy copy of any notice to GCLegal@wm.com.
Expenses of Solicitation We pay the cost of preparing, assembling and mailing this proxy-soliciting material. In addition to the
use of the mail, proxies may be solicited personally, by Internet or telephone, or by Waste Management officers and
2020 Proxy Statement | 3
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employees
of the Company's subsidiaries without additional compensation. We pay all costs of solicitation, including certain expenses of brokers and nominees who mail proxy materials to their
customers or principals. Also, Innisfree M&A Incorporated has been hired to help in the solicitation of proxies for the 2020 Annual Meeting for a fee of $15,000 plus associated costs and expenses.
Annual Report A copy of our Annual Report on Form 10-K for the year ended December 31, 2019, which includes our
financial statements for fiscal year 2019, is included with this Proxy Statement. The Annual Report on Form 10-K is not incorporated by reference into this Proxy Statement or deemed to be a
part of the materials for the solicitation of proxies.
Householding Information We have adopted a procedure approved by the SEC called "householding." Under this procedure,
stockholders of record who have the same address and last name and do not participate in electronic delivery of
proxy materials will receive only one copy of the Proxy Statement and Annual Report unless we are notified that one or more of these individuals wishes to
receive separate copies. This procedure helps reduce our printing costs and postage fees.
If
you wish to receive a separate copy of this Proxy Statement and the Annual Report, please contact: Waste Management, Inc., Corporate Secretary, 1001 Fannin Street, Houston,
Texas 77002, telephone 713-512-6200.
If
you do not wish to participate in householding in the future and prefer to receive separate copies of the proxy materials, please contact: Broadridge Financial Solutions, Attention Householding
Department, 51 Mercedes Way, Edgewood, NY 11717, telephone 1-866-540-7095. If you are currently receiving multiple copies of proxy materials and wish to receive only one copy for your
household, please contact Broadridge.
4 |
2020 Proxy Statement
Table of Contents
Our
Board of Directors currently has nine members. Each member of our Board is elected annually. Mr. Patrick W. Gross has reached the retirement age set forth in the Company's Corporate
Governance Guidelines; therefore, he is not standing for re-election and his term as a Director of the Company will expire at the 2020 Annual Meeting. The Board of Directors intends to reduce the size
of the Board to eight members effective as of the expiration of Mr. Gross's term at the 2020 Annual Meeting.
Mr. Thomas
H. Weidemeyer is the Non-Executive Chairman of the Board and presides over all meetings of the Board, including executive sessions that only non-employee directors attend.
Stockholders and interested parties wishing to communicate with the Board or the non-employee directors should address their communications to Mr. Thomas H. Weidemeyer, Non-Executive Chairman
of the Board, c/o Waste Management, Inc., P.O. Box 53569, Houston, Texas 77052-3569.
Leadership Structure
We separated the roles of Chairman of the Board and Chief Executive Officer at our Company in 2004. We believe that having a Non-Executive
Chairman of the Board is in the best interests of the Company and stockholders, due in part to the ever-increasing demands made on boards of directors under federal securities laws, national stock
exchange rules and other federal and state regulations. The Non-Executive Chairman's responsibilities include leading full Board meetings and executive sessions and managing the Board function.
Effective May 17, 2018, the Board elected Mr. Thomas H. Weidemeyer to serve as Chairman of the Board due to his many years as a valuable member of our Board, his experience serving on
boards of other large public companies, and his extensive operational and leadership experience. Mr. Weidemeyer also serves on all three Board committees.
The
separation of the positions allows our Chairman of the Board to focus on management of Board matters and allows our Chief Executive Officer to focus his attention on managing our business.
Additionally, we believe the separation of those roles contributes to the independence of the Board in its oversight role and in assessing the Chief Executive Officer and management generally.
Role in Risk Oversight
Our executive officers have primary responsibility for risk management within our Company. Our Board of Directors oversees risk management to
ensure that the processes designed, implemented and maintained by our executives are functioning as intended and adapted when necessary to
respond
to changes in our Company's strategy as well as emerging risks. The primary means by which our Board oversees our risk management processes is through its regular communications with
management and by regularly reviewing our enterprise risk management, or ERM, framework. We believe that our leadership team's engagement and communication methods are supportive of comprehensive risk
management practices and that our Board's involvement is appropriate to ensure effective oversight.
Our
ERM process is supported by regular inquiries of our Company's Senior Leadership Team, and additional members of management and operations leadership across the enterprise, as to the risks,
including emerging risks, that may affect the execution of our strategic priorities or achievement of our long-term outlook. For the most significant risks, the ERM process is designed to generate
actionable insights that are actively discussed and reviewed with the Senior Leadership Team and our Board of Directors.
Risks
and opportunities are assessed and then prioritized using internal evaluations of financial impact, likelihood of occurrence, outlook for changes in the nature or extent of risk exposure and a
self-assessment of the Company's confidence in existing risk mitigation efforts. The Senior Leadership Team reviews the outcomes of the risk assessments, focusing largely on the estimated scope of
impacts, as well as the adequacy of current support by internal staff, the sufficiency of financial support for mitigation measures needed to manage and reduce risk, and the sufficiency of any
third-party expertise that may be necessary to supplement internal resources. All significant risks have a standardized scorecard that includes forward-looking action plans with measurable indicators
and progress updates on action plans from previous assessments.
Our
Board of Directors generally has seven regular meetings per year, five of which are in person, including one meeting that is dedicated specifically to strategic planning, and regular updates are
given to our Board of Directors on Company risks. At each of these meetings, our President and Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Chief Legal Officer report
to our Board and, when appropriate, specific committees. Additionally, other members of management and employees attend meetings periodically and present information, including those responsible for
our Internal Audit, Environmental Audit, Business Ethics and Compliance, Human Resources, Government Affairs, Digital,
Insurance, Safety, Finance and Accounting functions. These presentations allow our Board to have direct communication with members of management and assess management's evaluation and administration
of the Company's risk profile through our ERM process. For example, our Digital organization briefs our Board or Audit Committee on
2020 Proxy Statement | 5
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cybersecurity
risk and potentially disruptive technologies at least twice a year, and environmental impacts, risks and opportunities are discussed with our Board or Audit Committee at least annually.
Other key areas of assessment addressed by our ERM process and overseen by our Board include the following: industry disruption; commodity markets; revenue management; legal and regulatory; capital
allocation; supply chain management; service to customers; cost discipline; process improvement; physical infrastructure; brand management; health & safety; human capital; information
technology and currency & cash management. Consistent with our Company's long-standing commitment to corporate sustainability and environmental stewardship, we have published our 2019
Sustainability Report, an update to our full length 2018 Sustainability Report, "Driving Change," which provides additional information about our management of these risks. The information in this
report can be found on our Company website but does not constitute a part of our Proxy Statement or Annual Report.
Management
is also encouraged to communicate with our Board of Directors with respect to extraordinary risk issues or developments that may require more immediate attention between regularly scheduled
Board meetings. Our Non-Executive Chairman of the Board facilitates communications with our Board of Directors as a whole and is integral in initiating the discussions among the independent Board
members necessary to ensure management is adequately evaluating and overseeing our Company's risk management. Additionally, in accordance with New York Stock Exchange requirements, the Audit Committee
of our Board is responsible for discussing our major financial risk exposures, steps management has taken to monitor and control such exposures and the Company's process for risk assessment and
management, and quarterly reports are made to the Audit Committee on financial and compliance risks.
Independence of Board Members
The Board of Directors has determined that each of the following seven non-employee director nominees are independent in accordance with the
New York Stock Exchange listing standards:
Frank
M. Clark, Jr.
Andrés R. Gluski
Victoria M. Holt
Kathleen M. Mazzarella
William B. Plummer
John C. Pope
Thomas H. Weidemeyer
Mr. James
C. Fish, Jr., our President and Chief Executive Officer, is also a director of the Company. As an employee of the Company, Mr. Fish is not an "independent" director.
To
assist the Board in determining independence, the Board of Directors adopted categorical standards of director
independence,
which meet or exceed the requirements of the New York Stock Exchange. These standards specify certain relationships that are prohibited in order for the non-employee director to be
deemed independent. The categorical standards our Board uses in determining independence are included in our Corporate Governance Guidelines, which can be found on our website. In addition to these
categorical standards, our Board makes a subjective determination of independence considering relevant facts and circumstances.
The
Board reviewed all commercial and non-profit affiliations of each non-employee director and the dollar amount of all transactions between the Company and each entity with which a non-employee
director is affiliated to determine independence. These transactions consisted of the Company, through its subsidiaries, providing waste management services in the ordinary course of business and the
Company's subsidiaries purchasing goods and services in the ordinary course of business and included commercial dealings with Graybar Electric Company, Inc. and The AES Corporation.
Ms. Mazzarella and Mr. Gluski, respectively, are the chief executive officer of these entities. The Board concluded there are no transactions between the Company and any entity with
which a non-employee director is affiliated that (a) are prohibited by our categorical standards of independence, (b) are material individually or in the aggregate or (c) give
rise to a material direct or indirect interest for that non-employee director. Accordingly, the Board has determined that each non-employee director candidate meets the categorical standards of
independence and that there are no relationships that would affect independence.
Meetings and Board Committees
Last year the Board held seven regular meetings and two special meetings, and each committee of the Board met independently as set forth below.
Each director attended at least 75% of the meetings of the Board and the committees on which he or she served. In addition, all directors attended the 2019 Annual Meeting of Stockholders. Although we
do not have a formal policy regarding director attendance at annual meetings, it has been longstanding practice that all directors attend unless there are unavoidable schedule conflicts or unforeseen
circumstances.
The
Board appoints committees to help carry out its duties. Committee members take on greater responsibility for key issues, although all members of the Board are invited to attend all committee
meetings and the committee reviews the results of its meetings with the full Board. The Board has three separate standing committees: the Audit Committee; the Management Development and Compensation
Committee (the "MD&C Committee"); and the Nominating and Governance Committee. Additionally, the Board has the power to appoint additional committees, as it deems necessary.
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2020 Proxy Statement
Table of Contents
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THE AUDIT COMMITTEE
Members
Patrick W. Gross, Chairman
Frank M. Clark, Jr.
Andrés R. Gluski
Victoria M. Holt
William B. Plummer
Thomas H. Weidemeyer
Number of Meetings Held in 2019
9
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Mr. Gross has been the Chairman of our Audit Committee since May 2010. The other members of our Audit Committee are Messrs. Clark, Gluski, Plummer and Weidemeyer and Ms. Holt. Chairman Gross has reached the
retirement age set forth in the Company's Corporate Governance Guidelines and is not standing for re-election. In February 2020, the Nominating and Governance Committee recommended, and the Board approved, appointment of Mr. Plummer to become
Chairman of our Audit Committee, effective upon the expiration of Chairman Gross' term as a Director of the Company at the 2020 Annual Meeting. Each member of our Audit Committee satisfies the additional New York Stock Exchange independence standards
for audit committees set forth in Section 10A of the Exchange Act.
Our Board of Directors has determined that Audit Committee Chairman Mr. Gross,
Mr. Clark, Mr. Gluski, Mr. Plummer and Ms. Holt are audit committee financial experts as defined by the SEC based on a thorough review of their education and financial and public company experience.
Mr. Gross was a founder of American Management Systems Inc. where he was principal executive officer for over 30 years. Since 2001, he has served as Chairman of The Lovell Group,
a private investment and advisory firm. Mr. Gross holds an MBA from Stanford University's Graduate School of Business, a master's degree in engineering science from the University of Michigan and a bachelor's degree in engineering science from
Rensselaer Polytechnic Institute.
Mr. Clark served as Chairman and Chief Executive Officer of ComEd from 2005 to 2012 and President of ComEd from 2001 to 2005.
Mr. Clark holds a LLB from DePaul University College of Law and a BBA from DePaul University.
Mr. Gluski has served as President, Chief Executive Officer and
Director of The AES Corporation since 2011 and was Executive Vice President and Chief Operating Officer of The AES Corporation from 2007 to 2011. Mr. Gluski is a graduate of Wake Forest University and holds a PhD and MA in Economics from the
University of Virginia.
Mr. Plummer served as Executive Vice President and Chief Financial Officer of United Rentals, Inc. from 2008 to 2018. Mr. Plummer
holds degrees in aeronautics and astronautics from the Massachusetts Institute of Technology and an MBA from Stanford University's Graduate School of Business.
Ms. Holt has served as President, Chief Executive Officer and Director of Proto Labs, Inc. since 2014 and was President and Chief Executive Officer of Spartech Corporation from 2010 to 2013. Prior to joining Spartech, she served as Senior
Vice President of PPG Industries, Inc. for over five years. Ms. Holt holds an MBA from Pace University and a bachelor's degree in chemistry from Duke University.
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2020 Proxy Statement | 7
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Key Functions
The Audit Committee's duties are set forth in a written charter that was approved by the Board of
Directors. A copy of the charter can be found on our website. The Audit Committee generally is responsible for overseeing all matters relating to our financial statements and reporting, independent auditors and internal audit function. As part of its
function, the Audit Committee reports the results of all of its reviews to the full Board. In fulfilling its duties, the Audit Committee, has the following responsibilities:
Administrative Responsibilities
Report to the Board, at least annually, all public company audit committee memberships by members of the Audit Committee;
Perform an annual
review of its performance relative to its charter and report the results of its evaluation to the full Board; and
Adopt an orientation program for new Audit Committee members.
Financial Statements
Review financial statements and Forms 10-K and 10-Q with management and the independent auditor;
Review all earnings
press releases and discuss with management the type of earnings guidance that we provide to analysts and rating agencies;
Discuss with the independent auditor any material changes to our accounting principles and matters
required to be communicated by Public Company Accounting Oversight Board (United States) Auditing Standard No. 1301 Communications with Audit Committees;
Review our financial reporting,
accounting and auditing practices with management, the independent auditor and our internal auditors;
Review management's and the independent auditor's assessment of the adequacy and effectiveness of internal controls over financial
reporting; and
Review executive officer certifications related to our reports and filings.
Independent Auditor
Engage an
independent auditor, determine the auditor's compensation and replace the auditor if necessary;
Review the independence of the independent auditor and establish our policies for hiring current or former employees of the independent
auditor;
Evaluate the lead partner of our independent audit team and review a report, at least annually, describing the independent auditor's internal control procedures; and
Pre-approve all services,
including non-audit engagements, provided by the independent auditor.
Internal Audit
Review the plans, staffing,
reports and activities of the internal auditors; and
Review and establish procedures for receiving, retaining and handling complaints, including anonymous complaints by our employees, regarding accounting, internal controls and
auditing matters.
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2020 Proxy Statement
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AUDIT COMMITTEE REPORT
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The role of the Audit Committee is, among other things, to oversee the Company's financial reporting process on behalf of the Board of Directors, to recommend to the Board whether the Company's financial statements should be
included in the Company's Annual Report on Form 10-K and to select the independent auditor for ratification by stockholders. Company management is responsible for the Company's financial statements as well as for its financial reporting process,
accounting principles and internal controls. The Company's independent auditors are responsible for performing an audit of the Company's financial statements and expressing an opinion as to the conformity of such financial statements with accounting
principles generally accepted in the United States.
The Audit Committee has reviewed and discussed the Company's audited financial statements as of and for the year
ended December 31, 2019 with management and the independent registered public accounting firm, and has taken the following steps in making its recommendation that the Company's financial statements be included in its annual report:
First, the Audit Committee discussed with Ernst & Young, the Company's independent registered public accounting firm for fiscal year 2019, those matters required to be discussed by the applicable requirements of the Public Company
Accounting Oversight Board (United States) and the SEC, including information regarding the scope and results of the audit. These communications and discussions are intended to assist the Audit Committee in overseeing the financial reporting and
disclosure process.
Second, the Audit Committee discussed with Ernst & Young its independence and received from Ernst & Young a letter concerning independence as required under
applicable independence standards for auditors of public companies. This discussion and disclosure helped the Audit Committee in evaluating such independence. The Audit Committee also considered whether the provision of other non-audit services to
the Company is compatible with the auditor's independence.
Third, the Audit Committee met periodically with members of management, the internal auditors and Ernst & Young to review and discuss internal controls over financial
reporting. Further, the Audit Committee reviewed and discussed management's report on internal control over financial reporting as of December 31, 2019, as well as Ernst & Young's report regarding the effectiveness of internal control
over financial reporting.
Finally, the Audit Committee reviewed and discussed, with the Company's management and Ernst & Young, the Company's audited consolidated balance sheet as of
December 31, 2019, and consolidated statements of operations, comprehensive income, cash flows and changes in equity for the fiscal year ended December 31, 2019, including the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the clarity of the disclosure.
The Committee has also discussed with the Company's internal auditors and
independent registered public accounting firm the overall scope and plans of their respective audits. The Committee meets periodically with both the internal auditors and independent registered public accounting firm, with and without management
present, to discuss the results of their examinations and their evaluations of the Company's internal controls over financial reporting.
The members of the Audit
Committee are not engaged in the accounting or auditing profession and, consequently, are not experts in matters involving auditing or accounting. In the performance of their oversight function, the members of the Audit Committee necessarily relied
upon the information, opinions, reports and statements presented to them by Company management and by the independent registered public accounting firm.
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Based on the reviews and discussions explained above (and without other independent verification), the Audit Committee recommended to the Board (and the Board approved) that the Company's financial statements be included in its annual report for its
fiscal year ended December 31, 2019. The Committee has also approved the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year 2020.
The Audit Committee of the Board of Directors
Patrick W. Gross, Chairman
Frank M. Clark, Jr.
Andrés R. Gluski
Victoria M. Holt
William B. Plummer
Thomas H. Weidemeyer
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THE MANAGEMENT
DEVELOPMENT AND
COMPENSATION
COMMITTEE
Members
Frank M. Clark, Jr., Chairman
Andrés R. Gluski
Victoria M. Holt
Kathleen M. Mazzarella
William B. Plummer
John C. Pope
Thomas H. Weidemeyer
Number of Meetings Held in 2019
5
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Mr. Clark has served as the Chairman of our MD&C Committee since May 2011. The other members of the Committee are Mr. Gluski, Ms. Holt, Ms. Mazzarella, Mr. Plummer, Mr. Pope and Mr. Weidemeyer. Each member of
our MD&C Committee is independent in accordance with the rules and regulations of the New York Stock Exchange.
Key
Functions
Our MD&C Committee is responsible for overseeing our executive officer compensation, as well as developing the Company's
compensation philosophy generally. The MD&C Committee's written charter, which was approved by the Board of Directors, can be found on our website. In fulfilling its duties, the MD&C Committee has the following responsibilities:
Review and establish policies governing the compensation and benefits of our executive officers;
Approve the compensation of our executive officers and set the bonus plan goals for those individuals;
Conduct an annual
evaluation of our Chief Executive Officer by all independent directors and set his compensation;
Oversee the administration of our equity-based incentive plans;
Review the results of the
stockholder advisory vote on executive compensation and consider any implications of such voting results on the Company's compensation programs;
Recommend to the full Board new
Company compensation and benefit plans or changes to our existing plans;
Evaluate and recommend to the Board the compensation paid to our non-employee directors;
Review the independence of the
MD&C Committee's compensation consultant annually; and
Perform an annual review of its performance relative to its charter and report the results of its evaluation to the full Board.
In overseeing compensation matters, the MD&C Committee may delegate authority for day-to-day administration and interpretation of the Company's plans, including selection of participants,
determination of award levels within plan parameters, and approval of award documents, to Company employees. However, the MD&C Committee may not delegate any authority to Company employees under those plans for matters affecting the compensation
and benefits of the executive officers. For additional information on the MD&C Committee, see the Compensation Discussion and Analysis beginning on page 26.
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COMPENSATION COMMITTEE REPORT
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The MD&C Committee has reviewed and discussed the Compensation Discussion and Analysis, beginning on page 26, with management. Based on their review and discussions, the MD&C Committee
recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's Proxy Statement.
The Management Development and Compensation
Committee of the Board of Directors
Frank M. Clark, Jr., Chairman
Andrés R. Gluski
Victoria M. Holt
Kathleen M. Mazzarella
William B. Plummer
John C. Pope
Thomas H. Weidemeyer
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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During 2019, Ms. Holt, Ms. Mazzarella and Messrs. Clark, Gluski, Plummer, Pope and Weidemeyer served on the MD&C Committee. No member of the MD&C Committee was an officer or employee of the Company during 2019; no member of
the MD&C Committee is a former officer of the Company; and during 2019, none of our executive officers served as a member of a board of directors or compensation committee of any entity that has one or more executive officers who serve on our
Board of Directors or MD&C Committee.
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THE NOMINATING
AND GOVERNANCE
COMMITTEE
Members
Kathleen M. Mazzarella, Chairman
Patrick W. Gross
John C. Pope
Thomas H. Weidemeyer
Number of Meetings Held in 2019
5
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Ms. Mazzarella was named Chairman of our Nominating and Governance Committee in May 2018. The other members of the Committee include Messrs. Gross, Pope and Weidemeyer. Each member of our Nominating and Governance Committee is independent
in accordance with the rules and regulations of the New York Stock Exchange.
Key Functions
The Nominating and Governance Committee has a written charter that has been approved by the Board of Directors and can be found on our website. It is the duty of the Nominating and
Governance Committee to oversee matters regarding corporate governance. In fulfilling its duties, the Nominating and Governance Committee has the following responsibilities:
Review and recommend the
composition of our Board, including the nature and duties of each of our committees, in accordance with our Corporate Governance Guidelines;
Evaluate the charters of each of the committees and recommend directors to serve as committee
chairs;
Review individual director's performance in consultation with the Chairman of the Board and review the overall effectiveness of the Board;
Recommend retirement policies
for the Board, the terms for directors and the proper ratio of employee directors to outside directors;
Perform an annual review of its performance relative to its charter and report the results of its evaluation to the full Board;
Review stockholder proposals received for inclusion in the Company's proxy statement and recommend action to be taken with regard to the proposals to the Board; and
Identify and recommend to the
Board candidates to fill director vacancies.
Potential new director candidates are identified through various methods; the Nominating and Governance Committee welcomes
suggestions from directors, members of management, and stockholders. From time to time, the Nominating and Governance Committee uses outside consultants to assist with identifying potential director candidates. In 2018, the Nominating and Governance
Committee retained an outside consultant who later identified Mr. William B. Plummer as a potential director candidate. Our Board of Directors elected Mr. Plummer as a member of the Board effective August 19, 2019, and he was appointed
to the Audit Committee and MD&C Committee. He is a nominee for re-election at the annual meeting.
For all potential candidates, the Nominating and Governance
Committee considers all factors it deems relevant, such as a candidate's personal and professional integrity and sound judgment, business and professional skills and experience, independence, possible conflicts of interest, diversity, and the
potential for effectiveness, in conjunction with the other directors, to serve the long-term interests of the stockholders. While there is no formal policy with regard to consideration of diversity in identifying director nominees, the Committee
considers diversity in business experience, professional expertise, gender and ethnic background, along with various other factors when evaluating director nominees. The Nominating and Governance Committee has considered the gender and racial /
ethnic composition of our Board, including the presence of two women, Mr. Clark's and Mr. Plummer's self-identification as African American / Black and Mr. Gluski's self-identification as Hispanic, and believes these factors,
among numerous others, contribute to a valuable diversity of background, thoughts and opinions on our Board. The Committee uses a matrix of experience, skills and expertise to develop criteria to select candidates. Before being nominated by the
Nominating and Governance Committee, director candidates are interviewed by the Chief Executive Officer and a minimum of two members of the Nominating and Governance Committee, including the Non-Executive Chairman of the Board. Additional interviews
typically include other members of the Board, representatives from senior levels of management and an outside consultant.
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The Nominating and Governance Committee will consider all potential nominees on their merits without regard to the source of recommendation. The Nominating and Governance Committee believes that the nominating process will and should continue to
involve significant subjective judgments. To suggest a nominee for consideration by the Nominating and Governance Committee, you should submit your candidate's name, together with biographical information and his or her written consent to nomination
to the Chairman of the Nominating and Governance Committee, Waste Management, Inc., 1001 Fannin Street, Houston, Texas 77002, between October 27, 2020 and November 26, 2020.
In addition to the Nominating and Governance Committee's consideration of any potential nominees submitted, in November 2019, the Company amended and restated its By-laws to provide for "proxy
access." This provision permits a stockholder or group of up to 20 stockholders owning 3% or more of the Company's outstanding Common Stock continuously for at least three years to nominate and include in the Company's proxy materials director
nominees constituting up to the greater of 20% of the Board of Directors or two individuals, provided the stockholder(s) and the nominee(s) satisfy the requirements specified in the By-laws. In order for such nominees to be included in our proxy
statement and form of proxy, stockholders and nominees must submit a notice of proxy access nomination together with other related information required by our By-laws. Please see "Stockholder Proposals and Nominees for the 2021 Annual
Meeting Proxy Access Nominations" on page 3 for additional information about timing, notification and informational requirements.
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Related Party Transactions
The Board of Directors has adopted a written Related Party Transactions Policy for the review and approval or ratification of related party
transactions. Our policy generally defines related party transactions as current or proposed transactions in excess of $120,000 in which (i) the Company is a participant and (ii) any
director, executive officer or immediate family member of any director or executive officer has a direct or indirect material interest. In addition, the policy sets forth certain transactions that
will not be considered related party transactions, including (i) executive officer
compensation and benefit arrangements; (ii) director compensation arrangements; (iii) business travel and expenses, advances and reimbursements in the ordinary course of business;
(iv) indemnification payments and advancement of expenses, and payments under directors' and officers' indemnification insurance policies; (v) any transaction between the Company and any
entity in which a related party has a relationship solely as a director, a less than 5% equity holder, or an employee (other than an executive officer); and (vi) purchases of Company debt
securities, provided that the related party has a passive ownership of no more than 2% of the principal amount of any outstanding series. The Nominating and Governance Committee is responsible for
overseeing the policy.
All
executive officers and directors are required to notify the Chief Legal Officer or the Corporate Secretary as soon as practicable of any proposed transaction that they or their family members are
considering entering into that involves the Company. The Chief Legal Officer will determine whether potential transactions or relationships constitute related party transactions that must be referred
to the Nominating and Governance Committee.
The
Nominating and Governance Committee will review a detailed description of the transaction, including:
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the terms of the transaction;
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the business purpose of the transaction;
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the benefits to the Company and to the relevant related party; and
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whether the transaction would require a waiver of the Company's Code of Conduct.
In
determining whether to approve a related party transaction, the Nominating and Governance Committee will consider, among other things, whether:
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the terms of the related party transaction are fair to the Company and such terms would be reasonable in an arms-length transaction;
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there are business reasons for the Company to enter into the related party transaction;
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the related party transaction would impair the independence of any non-employee director;
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the related party transaction would present an improper conflict of interest for any director or executive officer of the Company; and
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the related party transaction is material to the Company or the individual.
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Any
member of the Nominating and Governance Committee who has an interest in a transaction presented for consideration will abstain from voting on the related party transaction.
The
Nominating and Governance Committee's consideration of related party transactions and its determination of whether to approve such a transaction are reflected in the minutes of the Nominating and
Governance Committee's meetings. As discussed above under "Independence of Board Members," the Company reviewed all transactions between the Company and each entity with which a non-employee director
is affiliated, as well as all transactions between the Company and each entity with which an executive officer is affiliated, and the Company is not aware of any transactions in 2019 that are required
to be disclosed.
Board of Directors Governing Documents
Stockholders may obtain copies of our Corporate Governance Guidelines, the charters of the Audit Committee, the MD&C Committee, and the
Nominating and Governance Committee, and our Code of Conduct free of charge by contacting the Corporate Secretary, c/o Waste Management, Inc., 1001 Fannin Street, Houston, Texas 77002 or
by accessing the "ESG Corporate Governance" section of the "Investors" page on our website at www.wm.com.
COMPENSATION DISCUSSION AND ANALYSIS
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Introduction
The
Company's Compensation Discussion and Analysis provides information about the Company's executive compensation philosophy and the components of its compensation programs. This includes information
about how compensation of the
Company's named executive officers for the fiscal year ended December 31, 2019 aligned with the Company's 2019 financial goals and performance. The Compensation Discussion and Analysis helps
readers better understand the information found in the Summary Compensation Table and other accompanying tables included in this Proxy Statement.
This
Compensation Discussion and Analysis focuses on our executive pay program as it relates to the following executive officers during 2019, whom we refer to as the "named executive officers" or
"named executives":
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Mr. James C. Fish, Jr. President and Chief Executive Officer since November 2016.
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Ms. Devina A. Rankin Senior Vice President and Chief Financial Officer since February 2017.
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Mr. John J. Morris, Jr. Executive Vice President and Chief Operating Officer since January 2019; Senior Vice
President, Operations from July 2012 to December 2018.
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Ms. Tara J. Hemmer Senior Vice President, Operations since January 2019.
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Mr. Steven R. Batchelor Senior Vice President, Operations since January 2019.
For
additional information about the named executives' background and prior experience with the Company and Ms. Rankin's promotion in February 2020, please see "Executive Officers" on
pg 25 of this Proxy Statement.
Executive Summary
The objective of our executive compensation program is to attract, retain, reward and incentivize talented employees who will lead the Company
in the successful execution of our strategy. The Company seeks to accomplish this goal by designing a compensation program that is supportive of and aligns with the strategy of the Company and the
creation of stockholder value, while discouraging excessive risk-taking. The following key structural elements and policies further the objective of our executive compensation program:
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a substantial portion of executive compensation is linked to Company performance, through annual cash incentive performance criteria and
long-term equity-based incentive awards. As a result, our executive compensation program provides for notably higher total compensation in periods of above-target Company performance, as we saw with
respect to some compensation elements in 2019. Performance-based annual cash incentive and long-term equity-based incentive awards comprised approximately 88% of total 2019 target compensation for our
President and Chief Executive Officer, while approximately 80% of the 2019 target compensation opportunities for our other named executives was performance-based;
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at target, 70% of total compensation of our President and Chief Executive Officer was tied to long-term equity awards, and approximately 62% of
total compensation of our other named executives was tied to long-term equity awards, which aligns executives' interests with those of stockholders;
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our total direct compensation opportunities for named executive officers are targeted to fall in a range around the competitive median;
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performance-based awards include threshold, target and maximum payouts correlating to a range of performance outcomes and are based on a variety
of indicators of performance, which limits risk-taking behavior;
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performance stock units with a three-year performance period, as well as stock options that vest over a three-year period, link executives'
interests with long-term performance and reduce incentives to maximize performance in any one year;
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all of our executive officers are subject to stock ownership guidelines, which we believe
demonstrates a commitment to, and confidence in, the Company's long-term prospects;
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the Company has clawback provisions in its equity award agreements and executive officer employment agreements, and has adopted a clawback
policy applicable to annual incentive compensation, designed to recoup compensation when cause and/or misconduct are found;
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our executive officer severance policy implemented a limitation on the amount of benefits the Company may provide to its executive officers
under severance agreements entered into after the date of such policy (the "Severance Limitation Policy"); and
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the Company has adopted a policy that prohibits it from entering into new agreements with executive officers that provide for certain death
benefits or tax gross-up payments.
2019 Pay-for-Performance
During 2019, we continued our focus on optimizing our solid waste business, developing our people and investing in technology to better serve our customers. We
produced strong operating results from our collection and disposal business, and these results demonstrate that that we are investing in the right areas and driving the right behaviors. This positive
2019 performance continues to position management to execute on the strategic long-term growth goals of the Company through investments in our employees, technology, and asset network. Following is a
summary of the 2019 compensation program results:
Total Shareholder Return
With
respect to the half of the performance share units ("PSUs") granted in 2017 with a three-year performance period ended December 31, 2019 that was subject to total shareholder return
relative to the S&P 500, the performance of the Company's Common Stock on this measure translated into a percentile rank relative to the S&P 500 of 73.66%, resulting in a 194.7% payout
on these PSUs in shares of Common Stock. This performance directly benefited our stockholders, delivering total shareholder return of 69.83% over the three-year performance period.
Cash Flow Generation
The
Company generated net cash flow from operating activities, less capital expenditures, for purposes of the performance goal associated with the other half of our PSUs granted in 2017, of
$5.959 billion, exceeding the maximum performance level of $5.336 billion for the three-year performance period ended December 31, 2019. This performance resulted in a maximum
200% payout on these PSUs in shares of Common Stock.
Annual Incentive Performance Measures
Company
performance on annual cash incentive performance measures for named executive officers is set forth below. Due to these results, each of the named executives received an annual cash incentive
payment for fiscal year 2019 equal to 99.47% of target.
Income from Operations, excluding Depreciation and
Amortization $4.360 billion, exceeding threshold of $4.216 billion but below target of
$4.454 billion, yielding a payout of 84.33%
Income from Operations Margin 18.03%, exceeding threshold of 18.0%, but below target
of 18.3%, yielding a payout of 64.22%
Internal Revenue Growth defined as internal revenue growth from yield, plus internal
revenue growth from volume, at the consolidated level for the traditional solid waste business 5.4%, exceeding maximum of 5.3%. This performance would have
yielded a payout of 200% for that metric, but management proposed, and the MD&C Committee approved, a reduced payout of 165% on this metric to more fairly reward actual achievement.
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On
the whole, the 2019 compensation program continued to demonstrate alignment between executive pay and Company performance. The payouts on the PSUs granted in 2017 correlate with outstanding cash
flow generation and total shareholder return over the three-year performance period. The blended results of the annual incentive performance measures, after a voluntary reduction in the payout under
the internal revenue growth measure to better calibrate this new performance measure, were almost exactly at target. Overall, these results reflect strong pay-for-performance, with both shareholders
and executives being rewarded.
When establishing 2019 compensation for the named executives, the MD&C Committee noted the results of the advisory stockholder votes on executive compensation,
with at least 96% of shares present and entitled to vote at the annual meeting voting in favor of the Company's executive compensation every year since the advisory vote on compensation was
implemented. Accordingly, the results of the stockholder advisory vote have not caused the MD&C Committee to recommend any changes to our compensation practices.
The MD&C Committee continually reviews our compensation program to ensure it is clearly aligned with the business strategy and best supports the accomplishment
of our goals, and its choice of long-term performance measures and respective weighting has been consistent since 2016. The MD&C Committee is pleased with the results that have been delivered,
including outstanding financial results while maintaining our focus on pricing, capital allocation and cost control. Accordingly, the Committee has approved keeping the 2020 long-term incentive
program design consistent with the 2019 design. The MD&C Committee has also approved retaining the annual incentive program design consistent with the prior year, which included the introduction of
the new internal revenue growth measure. This consistency reinforces the MD&C Committee's efforts to maintain a compensation program that is straightforward, easy to communicate and readily translates
into actionable goals.
Our Compensation Philosophy for Named Executive Officers
The Company's compensation philosophy is designed to:
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Attract and retain exceptional employees through competitive compensation opportunities;
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Encourage and reward performance through substantial at-risk performance-based compensation, while discouraging excessive risk-taking behavior;
and
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Align our decision makers' long-term interests with those of our stockholders through emphasis on equity ownership.
Additionally,
our compensation philosophy is intended to encourage executives to embrace the Company's strategy and to lead the Company in setting aspirations that will continue to drive exemplary
performance.
With
respect to our named executive officers, the MD&C Committee believes that total direct compensation at target should be in a range around the competitive median according to the
following:
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Base salaries should be paid within a range of plus or minus 10% around the competitive median, with attention given to individual
circumstances, including strategic importance of the named executive's role, the executive's experience and individual performance;
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Target short-term and long-term incentive opportunities should generally be set at the competitive median; and
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Total direct compensation opportunities should generally be within a range of plus or minus 20% around the competitive median.
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Overview of Elements of Our 2019 Executive Compensation Program
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Timing
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Component
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Purpose
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Key Features
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Current
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Base Salary
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To attract and retain executives with a competitive level of regular income
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Adjustments to base salary primarily consider competitive market data and the executive's individual performance and responsibilities.
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Short-Term
Performance
Incentive
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Annual Cash Incentive
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To encourage and reward contributions to our annual financial objectives through performance-based compensation subject to challenging, yet attainable, objective and transparent metrics
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Cash incentives are targeted at a percentage of base salary and range from zero to 200% of target based on the following performance measures:
Income from Operations, excluding
Depreciation and Amortizationdesigned to encourage balanced growth and profitability (weighted 50%);
Income from Operations Margin defined as Income from Operations as a percentage of
Revenue motivates executives to control costs and operate efficiently while focusing on yield (weighted 25%); and
Internal Revenue Growth defined as internal revenue growth from yield, plus internal revenue
growth from volume, at the consolidated level for the traditional solid waste business designed to support strategic growth goals (weighted 25%).
The
MD&C Committee has discretion to increase or decrease an individual's payment by up to 25% based on individual performance, but such modifier has never been used to increase a payment to a named executive.
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Long-Term
Performance
Incentives
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Performance Share Units
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To encourage and reward building long-term stockholder value through successful strategy execution;
To retain executives; and
To increase stockholder alignment through executives' stock ownership
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Number of shares delivered range from zero to 200% of the initial target grant based on performance over a three-year performance period.
Payout on half of each
executive's PSUs granted in 2019 is dependent on cash flow generation, defined as net cash flow provided by operating activities, less capital expenditures, with certain exclusions, which continues our focus on capital discipline, while also aligning
the Company with stockholders' free cash flow expectations.
Payout on the remaining half of the PSUs granted in 2019 is dependent on total shareholder return relative to
other companies in the S&P 500 over the three-year performance period.
PSUs earn dividend equivalents that are paid at the end of the performance period based on
the number of shares earned. Recipients can defer the receipt of shares, in which case such shares of Common Stock will be paid out, without interest, at the end of the deferral period.
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Stock Options
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To support the growth element of the Company's strategy and encourage and reward stock price appreciation over the long-term;
To retain executives; and
To increase stockholder alignment through executives' stock ownership
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Stock options vest in 25% increments on the first two anniversaries of the date of grant and the remaining 50% vest on the third anniversary.
Exercise price is the average
of the high and low market price of our Common Stock on the date of grant.
Stock options have a term of ten years.
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Restricted Stock Units
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Used on a limited basis (e.g. promotion and new hire) to make awards that encourage and reward long-term performance and increase alignment with stockholders
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No restricted stock units ("RSUs") were granted to named executives in 2019.
RSUs typically vest in full three years after the date of grant. Time-based vesting aids
retention. Dividend equivalents on RSUs accrue and are paid in cash upon vesting.
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Deferral Plan. Each of our named executive officers is eligible to participate in our 409A Deferral Plan and may elect to defer receipt
of portions of their base salary and cash incentives in excess of the annual compensation threshold established under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the
"IRC"). We believe that providing a program that allows and encourages planning for retirement is a key factor in our ability to attract and retain talent. Additional details on the 409A Deferral Plan
can be found in the Nonqualified Deferred Compensation in 2019 table and accompanying disclosure on page 46.
Perquisites. The Company provides very limited perquisites or personal benefits to executive officers, consisting of reimbursement of
the cost of physical exams, cost to the Company for spousal or guest participation in corporate events, and use of Company aircraft for personal travel. The MD&C Committee permits our President and
Chief Executive Officer to use the Company's aircraft for business and personal travel; provided, however, that personal use of the Company aircraft attributed to him that results in incremental cost
to the Company shall not exceed 90 hours during any calendar year without approval from the Chairman of the MD&C Committee. In 2019, our President and Chief Executive Officer had less than one
hour of personal use of Company aircraft under this standard resulting from a brief route deviation during a business trip. Personal use of the Company's aircraft by other employees resulting in
incremental cost to the Company is permitted with Chief Executive Officer approval, but this occurs infrequently. The value of our named executives' personal use of the Company's aircraft is treated
as taxable income to the respective executive in accordance with IRS regulations using the Standard Industry Fare Level formula. This is a different amount than we calculate pursuant to the SEC
requirement to report the incremental cost to us of their use. See note (5) to the Summary Compensation Table below for additional information about this calculation.
Post-Employment and Change in Control Compensation. The Company provides severance protections that aid in retention of senior
leadership by providing the individual with comfort that he or she will be treated fairly in the event of an involuntary termination not for cause. The change in control provisions included in our
Executive Severance Protection Plan, our stock option award documentation and, if applicable, employment agreements require a double trigger in order to receive any payment in the event of a change in
control situation. Additional details can be found under "Post Employment and Change in Control Compensation; Clawback Policies" and "Potential Payments Upon Termination or Change in
Control."
How Named Executive Officer Compensation Decisions are Made
The MD&C Committee meets several times each year to perform its responsibilities as delegated by the Board of Directors and as set forth in the
MD&C Committee's charter. These responsibilities include evaluating and approving the Company's compensation philosophy, policies, plans and programs for our named executive officers.
In
the performance of its duties, the MD&C Committee regularly reviews the total compensation, including the base salary, target annual cash incentive award opportunities, long-term incentive award
opportunities and other benefits, including potential severance payments for each of our named executive officers. At a regularly scheduled meeting each year, the MD&C Committee reviews our named
executives' total compensation and compares that compensation to the competitive market, as discussed below. In the first quarter of each year, the MD&C Committee meets to determine salary increases,
if any, for the named executive officers; verifies the results of the Company's performance for annual cash incentive and performance share unit calculations; reviews the individual annual cash
incentive targets for the current year as a percent of base salary for each of the named executive officers; and makes decisions on granting long-term equity awards.
Compensation Consultant. The MD&C Committee uses several resources in its analysis of the appropriate compensation for the named
executive officers. The MD&C Committee selects and employs an independent consultant to provide advice relating to market and general compensation trends. The MD&C Committee also uses the services of
its independent consultant for data gathering and analyses. The MD&C Committee has retained Frederic W. Cook & Co., Inc. ("FW Cook") as its independent consultant since
2002. The Company makes regular payments to FW Cook for its services around executive compensation, including meeting preparation and attendance, advice, and best practice information, as well
as competitive data. Information about such payments is submitted to the chair of the MD&C Committee.
In
addition to services related to executive compensation, FW Cook also provides the MD&C Committee information and advice with respect to compensation of the independent directors. FW Cook has no
other business relationships with the Company and receives no other payments from the Company. The MD&C Committee adopted a charter provision requiring that it consider the independence of any
compensation consultants it uses for executive compensation
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matters.
The MD&C Committee has considered the independence of FW Cook in light of SEC rules and New York Stock Exchange listing standards. In connection with this process, the MD&C Committee has
reviewed, among other items, a letter from FW Cook addressing the independence of FW Cook and the members of the consulting team serving the MD&C Committee, including the following factors:
(i) other services provided to us by FW Cook; (ii) fees paid by us as a percentage of FW Cook's total revenue; (iii) policies or procedures of FW Cook that are
designed to prevent conflicts of interest; (iv) any business or personal relationships between the senior advisor of the consulting team with a member of the MD&C Committee; (v) any
Company stock owned by the senior advisor or any member of his immediate family and (vi) any business or personal relationships between our executive officers and the senior advisor. The MD&C
Committee reviewed these considerations and concluded that the work performed by FW Cook and its senior advisor involved in the engagement did not raise any conflict of interest.
Role of CEO and Human Resources. Our President and Chief Executive Officer contributes to compensation determinations by assessing the
performance of the other named executive officers and providing these assessments with recommendations to the MD&C Committee. Personnel within the Company's Human Resources Department assist the MD&C
Committee by working with the independent consultant to provide information requested by the MD&C Committee and assisting it in designing and administering the Company's compensation programs.
Peer Company Comparisons. The MD&C Committee uses compensation information of comparison groups of companies to gauge the competitive
market, which is relevant for attracting and retaining key talent and for ensuring that the Company's compensation practices are aligned with prevalent practices. For purposes of establishing the 2019
executive compensation program, the MD&C Committee considered a competitive analysis of total direct compensation levels and compensation mix for our executive officers during the second half of 2018,
using information from:
-
-
Size-adjusted median compensation data from two general industry surveys in which management annually participates; the Aon Hewitt 2018 Total
Compensation Measurement ("TCM") survey and the Willis Towers Watson 2018 Executive Compensation Data base ("CDB") survey. The Aon Hewitt TCM and Willis Towers Watson CDB surveys include over 500
companies ranging in size from approximately $5 million to $500 billion in annual revenue. Data selected from these surveys is scoped based on Company revenue; and
-
-
Median compensation data from a comparison group of 18 publicly traded U.S. companies, described below.
The
comparison group of companies is initially recommended by the independent consultant prior to the data gathering process, with input from management and the MD&C Committee. The composition of the
group is evaluated, and a final comparison group of companies is approved by the MD&C Committee each year. The selection process for the comparison group begins with all companies in the
Standard & Poor's North American database that are publicly traded U.S. companies in 15 different Global Industry Classifications. These industry classifications are meant to provide a
collection of companies in industries that share similar characteristics with us. The companies are then limited to those with at least $5 billion in annual revenue to ensure appropriate
comparisons, and further narrowed by choosing those with asset intensive domestic operations, as well as those focusing on transportation and logistics. Companies with these characteristics are chosen
because the MD&C Committee believes that it is appropriate to compare our executives' compensation with executives that have similar responsibilities and challenges at other companies. Compared to the
2017 comparison group used to inform 2018 compensation decisions, Baker Hughes was removed from the comparison group and no companies were added.
The
following chart sets forth various size comparisons to companies in the comparison group; this table is provided to evidence that the Company was appropriately positioned within its peer group for
purposes of establishing 2019 compensation during 2018. All financial and market data are taken from Standard & Poor's Capital IQ, with financial data as of each company's 2017 fiscal year end
and market capitalization as of December 31, 2017.
2020 Proxy Statement | 31
Table of Contents
For
purposes of each of the named executives, the general industry data and the comparison group data are blended when composing the competitive analysis, when possible, such that the combined general
industry data and the comparison group are each weighted 50%. For competitive comparisons, the MD&C Committee has determined that total direct compensation packages for our named executive officers
within a range of plus or minus 20% of the median total compensation of the competitive analysis is appropriate. In making these determinations, total direct compensation consists of base salary,
target annual cash incentive, and the annualized grant date fair value of long-term equity incentive awards.
Allocation of Compensation Elements and Tally Sheets. The MD&C Committee considers the forms in which total compensation will be paid
to executive officers and seeks to achieve an appropriate balance between base salary, annual cash incentive compensation and long-term incentive compensation. The MD&C Committee determines the size
of each element based primarily on comparison group data and individual and Company performance. The percentage of compensation that is contingent on achievement of performance criteria typically
increases in correlation to an executive officer's responsibilities within the Company, with performance-based incentive compensation making up a greater percentage of total compensation for our most
senior executive officers. Additionally, as an executive becomes more senior, a greater percentage of the executive's compensation shifts away from short-term to long-term incentive awards.
The
MD&C Committee uses tally sheets to review the compensation of our named executive officers, which show the cumulative impact of all elements of compensation. These tally sheets include detailed
information and dollar amounts for each component of compensation, the value of all equity held by each named executive, and the value of welfare and retirement benefits and severance payments. Tally
sheets provide the MD&C Committee with the relevant information necessary to determine whether the balance between short-term and long-term compensation, as well as fixed and variable compensation, is
consistent with the overall compensation philosophy of the Company. This information is also useful in the MD&C Committee's analysis of whether total direct compensation provides a compensation
package that is appropriate and competitive. Tally sheets are provided annually to the full Board of Directors.
The
following charts display the allocation of total 2019 target compensation among base salary, annual cash incentive and long-term incentives for (a) our President and Chief Executive Officer
and (b) our other named executives, on average. These charts reflect the MD&C Committee's 2019 desired total mix of target compensation for named executives, which includes approximately 62% of
total compensation derived from long-term equity awards, while long-term equity awards comprised 70% of our President and Chief Executive Officer's total target compensation. These charts also reflect
that approximately 88% of our President and Chief Executive Officer's total target compensation opportunities awarded in 2019 were performance-based, while approximately 80% of the total target
compensation established in February 2019 for the other named executives was performance-based. We consider stock options granted under our long-term incentive plan to be performance-based because
their value will increase as the market value of our Common Stock increases.
32 |
2020 Proxy Statement
Table of Contents
Internal Pay Equity. The MD&C Committee considers the differentials between compensation of the named executive officers. The MD&C
Committee also reviews compensation comparisons between the President and Chief Executive Officer and the other executive officers, while recognizing the additional responsibilities of the President
and Chief Executive Officer and that such differentials will increase in periods of above-target performance and decrease in times of below-target performance. Based on these considerations, the MD&C
Committee concluded that the compensation paid to the President and Chief Executive Officer is reasonable compared to that of the other executive officers.
Policy on Calculation Adjustments. In 2014, the MD&C Committee adopted a policy on calculation adjustments that affect payouts under
annual and long-term incentive awards in order to address the potentially distorting effect of certain items. Such adjustments are intended to align award payments with the underlying performance of
the business; avoid volatile, artificial inflation or deflation of awards due to unusual items in either the award year or the previous comparator year; and eliminate counterproductive incentives to
pursue short-term gains and protect current incentive opportunities. To ensure the integrity of the adjustments, the policy provides that the MD&C Committee's approach to adjustments shall generally
be consistent with the Company's approach to reporting adjusted non-GAAP earnings to the investment community, except that the MD&C Committee has determined that potential adjustments arising from a
single transaction or event generally should be disregarded unless, taken together, they change the calculated award payout by at least five percent. For this reason, actual results reported in this
proxy statement on financial performance metrics may differ from earnings results reported to the investment community. The MD&C Committee retains discretion to evaluate all adjustments, both income
and expense, as circumstances warrant; however, beginning with long-term equity incentive awards granted in 2017, the MD&C Committee agreed that it shall not have the ability to use negative
discretion with respect to the calculation of cash flow for purposes of the PSUs
subject
to that performance measure, in order to avoid variable accounting treatment for those awards.
Tax and Accounting Matters. Our compensation programs were designed to permit the Company to deduct compensation expense under
Section 162(m) of the IRC, which historically limited the tax deductibility of annual compensation paid to certain named executives to $1 million, unless the compensation qualified as
performance-based. The Company also reserved the right to pay compensation that did not qualify as performance-based. Other than some limited exceptions relating to certain previously-granted awards,
the ability to rely on this performance-based exception was eliminated in 2017, and the limitation on deductibility of compensation was expanded to include all named executive officers. As a result,
the Company generally may no longer take a deduction for any compensation paid to any of its named executive officers in excess of $1 million.
Section 409A
of the IRC ("Code Section 409A") generally provides that any deferred compensation arrangement which does not meet specific requirements will result in immediate taxation of
any amounts deferred to the extent not subject to a substantial risk of forfeiture. In general, to avoid a Code Section 409A violation, amounts deferred may only be paid out on separation from
service, disability, death, a specified time or fixed schedule, a change in control or an unforeseen emergency. Furthermore, the election to defer generally must be made in the calendar year prior to
performance of services. We intend to structure all of our compensation arrangements, including our 409A Deferral Plan, in a manner that complies with or is exempt from Code Section 409A.
We
account for equity-based payments, including stock options, PSUs and RSUs, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation
("ASC Topic 718"). The MD&C Committee takes into consideration the accounting treatment under ASC Topic 718 when determining the form and amount of annual long-term equity incentive awards.
2020 Proxy Statement | 33
Table of Contents
However,
because our long-term equity incentive awards are based on a target dollar value established prior to grant (described in further detail under "Named Executives' 2019 Compensation Program and
ResultsLong-Term Equity Incentives"), this "value" will differ from the grant date fair value of awards calculated pursuant to ASC Topic 718.
Risk Assessment. The MD&C Committee uses the structural elements set forth in the Executive Summary earlier to establish compensation
that will provide sufficient incentives for named executive officers to drive results while avoiding unnecessary or excessive risk taking that could harm the long-term value of the Company. During
2019, the MD&C Committee reviewed the Company's compensation policies and practices and the assessment and analysis of related risk conducted by the independent compensation consultant. Based on this
review and analysis, the MD&C Committee and the independent compensation consultant concluded that our compensation policies and practices do not create risks that are reasonably likely to have a
material adverse effect on the Company.
Consideration of Stockholder Advisory Vote on Executive Compensation. The MD&C Committee reviews the results of the stockholder
advisory vote on executive compensation
and
considers any implications of such voting results on the Company's compensation programs. In light of the fact that at least 96% of shares present and entitled to vote at the annual meeting have
voted in favor of the Company's executive compensation every year since the advisory vote on compensation was implemented, the results of the stockholder advisory votes have not caused the MD&C
Committee to recommend any changes to our compensation practices.
Named Executives' 2019 Compensation Program and Results
The MD&C Committee approved increases to the 2019 base salaries of named executive officers, consistent with our compensation philosophy and driven by
competitive market data, internal pay equity considerations and individual performance relative to the executive's responsibilities and contributions. The Committee also considered the promotions
effective January 1, 2019 for each of Mr. Morris, Ms. Hemmer and Mr. Batchelor. The table below shows the 2019 annual base salary established by the MD&C Committee for each
of our named executive officers.
|
|
|
|
|
Named Executive Officer
|
|
2019
Base Salary
|
|
|
|
|
|
|
Mr. Fish
|
|
$
|
1,250,000
|
|
|
|
|
|
|
Ms. Rankin
|
|
$
|
638,100
|
|
|
|
|
|
|
Mr. Morris
|
|
$
|
700,000
|
|
|
|
|
|
|
Ms. Hemmer
|
|
$
|
537,600
|
|
|
|
|
|
|
Mr. Batchelor
|
|
$
|
537,600
|
|
|
|
|
|
|
Annual Cash Incentive
-
-
Annual cash incentives were dependent on the following performance measures: Income from Operations, excluding
Depreciation and Amortization; Income from Operations Margin and Internal Revenue Growth.
-
-
Company performance on each of the performance measures set forth below resulted in each of the named executives
receiving an annual cash incentive payment in March 2020 for fiscal year 2019 equal to 99.47% of target.
The
MD&C Committee develops financial performance measures for annual cash incentive awards to drive improvements in business operations, as well as support and fund the long-term strategy of the
Company. The MD&C Committee has found that the Income from Operations, excluding Depreciation and Amortization, performance
measure
encourages balanced focus on growth and profitability, while the Income from Operations Margin performance measure continues to keep the Company focused on cost control, operational
improvements and yield. In 2019, the Company replaced a prior cost control performance measure with the new Internal Revenue Growth measure. The MD&C Committee believes that this measure better
supports the Company's strategic growth and creation of shareholder value, and the MD&C Committee believes these financial performance measures, collectively, support and align with the strategy of
the Company and are appropriate indicators of our progress toward the Company's goals.
When
setting threshold, target and maximum performance measure levels each year, the MD&C Committee looks to the Company's historical results of operations and analyses and forecasts for the coming
year. Specifically, the MD&C Committee considers expected revenue based on analyses of pricing and volume trends, as affected by operational and general economic factors and expected costs.
34 |
2020 Proxy Statement
Table of Contents
The
table below details the performance measures set by the MD&C Committee for purposes of the named executive officers' annual cash incentive for 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold
Performance
(60% Payment)
|
|
Target
Performance
(100% Payment)
|
|
Maximum
Performance
(200% Payment)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Operations, excluding Depreciation and Amortization
|
|
$
|
4.216 billion
|
|
$
|
4.454 billion
|
|
$
|
4.610 billion
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Operations Margin
|
|
|
18.0
|
%
|
|
18.3
|
%
|
|
18.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Internal Revenue Growth
|
|
|
2.5
|
%
|
|
3.9
|
%
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
The
following table sets forth the Company's performance achieved on each of the annual cash incentive performance measures and the payout earned on account of such performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
Operations
Margin
(weighted
25%)
|
|
|
|
|
|
|
|
Income from Operations,
excluding Depreciation
and Amortization
(weighted 50%)
|
|
|
|
|
|
|
|
|
Internal Revenue
Growth
(weighted 25%)
|
|
|
|
|
Total
Payout Earned
(as a percentage
of Target)
|
|
Actual
|
|
Payout
Earned
|
|
Actual
|
|
Payout
Earned
|
|
Actual
|
|
Payout
Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$4.360 billion
|
|
|
84.33
|
%
|
|
18.03
|
%
|
|
64.22
|
%
|
|
5.4
|
%
|
|
165
|
%
|
|
99.47
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
discussed above, the MD&C Committee has discretion to adjust the performance calculations for unusual or otherwise non-operational matters in line with its policy on calculation adjustments. The
calculation of 2019 annual cash incentive performance measures was generally made on a basis consistent with the Company's reporting of its 2019 financial results, including exclusion of
$33 million in costs related to the planned acquisition of Advanced Disposal Services, Inc. Additionally, actual performance on the internal revenue growth measure would have yielded a
payout of 200% for that
metric,
but management proposed, and the MD&C Committee approved, a reduced payout of 165% on this metric to more fairly reward actual achievement and to better calibrate this new performance measure.
Target
annual cash incentives are a specified percentage of the executives' base salary. The following table shows each named executive's target percentage of base salary for 2019 and annual cash
incentive for 2019 paid in March 2020.
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Target Percentage
of Base Salary
|
|
Annual Cash Incentive
For 2019(1)
|
|
|
|
|
|
|
|
|
|
Mr. Fish
|
|
|
140
|
|
$
|
1,704,132
|
|
|
|
|
|
|
|
|
|
Ms. Rankin
|
|
|
95
|
|
$
|
578,516
|
|
|
|
|
|
|
|
|
|
Mr. Morris
|
|
|
95
|
|
$
|
661,476
|
|
|
|
|
|
|
|
|
|
Ms. Hemmer
|
|
|
90
|
|
$
|
479,828
|
|
|
|
|
|
|
|
|
|
Mr. Batchelor
|
|
|
90
|
|
$
|
479,828
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Calculations
of annual cash incentive payouts, as a percentage of base salary, were made using the named executive's actual base salary received in 2019. Such
amounts are lower than if calculated using the 2019 base salaries in the table above due to the timing of when base salary increases take effect.
Our equity awards are designed to hold individuals accountable for long-term decisions by rewarding the success of those decisions. The MD&C Committee
continuously evaluates the components of its programs. In determining which forms of equity compensation are appropriate, the MD&C Committee considers whether the awards granted are achieving their
purpose; the competitive market; and accounting, tax or other regulatory issues, among others. In determining the appropriate awards for the named executives' 2019 annual long-term incentive award,
the MD&C Committee decided to grant both PSUs comprising 80% of each named executive's award and stock options comprising 20% of each named
executive's
award, consistent with prior years. Payout on half of each named executives' PSUs granted in 2019 is dependent on cash flow generation. Payout on the remaining half of PSUs granted in 2019
is dependent on total shareholder return relative to the S&P 500. Meanwhile, stock options encourage focus on increasing the market value of our stock. Before determining the actual number of
PSUs and stock options that were granted to each of the named executives in 2019, the MD&C Committee established a target dollar amount for each named executive's annual total long-term equity
incentive award. The values chosen were based primarily on the comparison information for the competitive market and
2020 Proxy Statement | 35
Table of Contents
consideration
of the named executives' responsibility for meeting the Company's strategic objectives. Target dollar
amounts
for equity incentive awards will vary from grant date fair values calculated for accounting purposes.
|
|
|
|
|
Named Executive Officer
|
|
Dollar Values of 2019
Long-Term Equity Incentives
Set by the Committee
(at Target)
|
|
|
|
|
|
|
Mr. Fish
|
|
$
|
7,000,000
|
|
|
|
|
|
|
Ms. Rankin
|
|
$
|
2,000,000
|
|
|
|
|
|
|
Mr. Morris
|
|
$
|
2,200,000
|
|
|
|
|
|
|
Ms. Hemmer
|
|
$
|
1,650,000
|
|
|
|
|
|
|
Mr. Batchelor
|
|
$
|
1,650,000
|
|
|
|
|
|
|
Overview of Performance Share Units.
-
-
Named executives were granted new PSUs with a three-year performance period ending December 31, 2021. Payout on
half of each named executive's PSUs granted in 2019 is dependent on cash flow generation, and payout on the remaining half of PSUs granted in 2019 is dependent on total shareholder return relative to
the S&P 500.
-
-
Named executives received a payout of 197.4% of the PSUs granted in 2017 with a three-year performance period ended
December 31, 2019. The Company exceeded the maximum level of performance for the cash flow generation performance measure and exceeded the target level of performance for the relative total
shareholder return performance measure.
PSUs Granted in 2019. Performance share units are granted to our named executive officers annually to align compensation with the
achievement of our long-term financial goals and to increase stockholder alignment through stock ownership. PSUs provide an immediate retention benefit to the Company
because
there is unvested potential value at the date of grant. The number of PSUs granted to our named executive officers corresponds to an equal number of shares of Common Stock. At the end of the
three-year performance period for each grant, the Company will deliver a number of shares ranging from 0% to 200% of the initial number of PSUs granted, depending on the Company's three-year
performance against pre-established targets.
The
MD&C Committee determined the number of PSUs that were granted to each of the named executives in 2019 by taking the targeted dollar amounts established for total long-term equity incentives (set
forth in the table above) and multiplying by 80%. Those values were then divided by the average of the high and low market price of our Common Stock over the 30 trading days preceding the date of the
MD&C Committee meeting at which the grants were approved to determine the number of PSUs granted. The number of PSUs granted in 2019 are shown in the table below.
|
|
|
|
|
Named Executive Officer
|
|
Number
of PSUs
|
|
|
|
|
|
|
Mr. Fish
|
|
|
58,948
|
|
|
|
|
|
|
Ms. Rankin
|
|
|
16,842
|
|
|
|
|
|
|
Mr. Morris
|
|
|
18,526
|
|
|
|
|
|
|
Ms. Hemmer
|
|
|
13,894
|
|
|
|
|
|
|
Mr. Batchelor
|
|
|
13,894
|
|
|
|
|
|
|
Half
of each named executive's PSUs included in the table above are subject to a cash flow generation performance measure; the cash flow generation performance measure requires focus on capital
discipline and strengthens alignment with stockholders' free cash flow expectations. For purposes of these PSUs, we define cash flow as net cash provided by operating activities, less capital
expenditures, with the following adjustments: (a) costs associated with labor disruptions and multiemployer plan withdrawal liabilities are excluded due to being required as a result of past
labor commitments combined with changing economic conditions and business climate; (b) strategic acquisition, restructuring, and transformation and reorganization costs are excluded; and
(c) cash proceeds from the divestiture of businesses and other assets are included. The table below shows the
36 |
2020 Proxy Statement
Table of Contents
required
achievement of the cash flow generation performance measure and the corresponding potential payouts under our PSUs granted in 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
|
|
Performance
|
|
Payout
|
|
Performance
|
|
Payout
|
|
Performance
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow
|
|
$
|
5.875 billion
|
|
|
50
|
%
|
$
|
6.375 billion
|
|
|
100
|
%
|
$
|
6.875 billion
|
|
|
200
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
remaining half of each named executive's PSUs are subject to total shareholder return relative to the S&P 500. This measure directly correlates executive compensation with creation of
stockholder value. Total shareholder return is calculated as follows: (Common Stock price at end of performance periodCommon Stock price at beginning of performance
period + dividends during performance period) / Common Stock price at beginning of performance period. The table below shows the required achievement of the total shareholder return
performance measure and the corresponding potential payouts under our PSUs granted in 2019.
|
|
|
|
|
Total Shareholder Return Relative to the S&P 500
|
|
Performance
|
|
Payout
|
|
|
|
|
|
|
75th percentile (Maximum)
|
|
|
200
|
%
|
|
|
|
|
|
50th percentile (Target)
|
|
|
100
|
%
|
|
|
|
|
|
25th percentile (Threshold)
|
|
|
50
|
%
|
|
|
|
|
|
If
actual performance falls between performance levels for either of the PSU performance measures, then the number of PSUs earned will be interpolated between the two performance levels, rounded to
the nearest 0.1%.
The
different performance measure levels are determined based on an analysis of historical performance and current projections and trends. The MD&C Committee uses this analysis and modeling of
different scenarios related to items that affect the Company's performance such as yield, volumes and capital to set the performance measures. As with the consideration of targets for the annual cash
incentives, when the MD&C Committee established the cash flow targets, the MD&C Committee carefully considered several material factors affecting the Company for 2019 and beyond, including general
economic and market conditions and economic indicators for future periods, to ensure that the cash flow targets align with the Company's long-range strategic plan.
Payout on PSUs for the Performance Period Ended December 31, 2019. Half of the PSUs granted in 2017 with the performance period
ended December 31, 2019 were subject to the cash flow generation performance measure, and the remaining half of the PSUs granted in 2017 were subject to total shareholder return relative to the
S&P 500. For the three-year performance period ended December 31, 2019, the Company generated net cash flow from operating activities, less capital expenditures, of
$5.959 billion, exceeding the maximum
of
$5.336 billion; this performance level yielded a 200% payout in shares of Common Stock that were issued in February 2020. With respect to the PSUs with a three-year performance period ended
December 31, 2019 that were subject to total shareholder return relative to the S&P 500, the performance of the Company's Common Stock on this measure translated into a percentile rank
relative to the S&P 500 of 73.66%, resulting in a 194.7% payout in shares of Common Stock that were issued in February 2020. In line with the MD&C Committee's policy on calculation adjustments
discussed above, no adjustments were made to the performance calculations for these PSUs.
Stock Options. The MD&C Committee believes use of stock options is appropriate to support the growth element of the Company's strategy.
The grant of options made to the named executive officers in the first quarter of 2019 in connection with the annual grant of long-term equity awards was based on the targeted dollar amounts
established for total long-term equity incentives (set forth in the table above) and multiplied by 20%. The actual number of stock options granted was determined by assigning a value to the options
using an option pricing model and dividing the dollar value of target compensation by the value of an option. The resulting number of stock options are shown in the table below.
|
|
|
|
|
Named Executive Officer
|
|
Number
of Options
|
|
|
|
|
|
|
Mr. Fish
|
|
|
114,566
|
|
|
|
|
|
|
Ms. Rankin
|
|
|
32,733
|
|
|
|
|
|
|
Mr. Morris
|
|
|
36,007
|
|
|
|
|
|
|
Ms. Hemmer
|
|
|
27,005
|
|
|
|
|
|
|
Mr. Batchelor
|
|
|
27,005
|
|
|
|
|
|
|
2020 Proxy Statement | 37
Table of Contents
The
stock options will vest in 25% increments on the first two anniversaries of the date of grant and the remaining 50% will vest on the third anniversary. The exercise price of the options granted in
2019 is $98.898, which is the average of the high and low market price of our Common Stock on the date of grant, and the options have a term of ten years. We account for our employee stock options
under the fair value method of accounting using a Black-Scholes methodology to measure stock option expense at the date of grant. The fair value of the stock options at the date of grant is amortized
to expense over the vesting period less expected forfeitures, except for stock options granted to retirement-eligible employees, for which expense is fully recognized at the time of grant.
Restricted Stock Units. The MD&C Committee anticipates that grants of RSUs to named executives will continue to be made on a limited
basis in cases such as a significant promotion and increased responsibilities and to attract new hires, and that RSUs will not be a routine component of named executive compensation. No RSUs were
granted to named executives in 2019.
The
MD&C Committee approved an award of 15,625 RSUs to Mr. Fish upon his promotion to President and Chief Executive Officer in November 2016 that vested ratably over three years. The final
one-third of this promotional grant of RSUs vested in November 2019. Additionally, Ms. Rankin, Ms. Hemmer and Mr. Batchelor previously received RSUs as part of their equity
incentive compensation granted prior to being promoted to the senior leadership team, and such RSUs vest in full on the third anniversary of the date of grant. Ms. Rankin's last remaining grant
of RSUs vested in February 2019. As of December 31, 2019, Ms. Hemmer and Mr. Batchelor had 1,331 and 1,107 unvested RSUs, respectively. Dividend equivalents on RSUs accrue and are
paid in cash upon vesting. RSUs may not be voted or transferred until vested.
Post-Employment and Change in Control Compensation; Clawback Policies
Severance Protection Plan. In December 2017, we adopted an Executive Severance Protection Plan (the "Severance Protection Plan") and
each of Messrs. Fish and Morris and Ms. Rankin entered into new or amended and restated employment agreements (the "2017 Employment Agreements"). The Severance Protection Plan covers
each of our executive officers. The 2017 Employment Agreements do not contain separate severance entitlements, but instead provide for additional terms and protections relating to the respective
executive's participation in the Severance Protection Plan. The 2017 Employment Agreements are intended to transition the Company's severance protections away from contract-based protections and onto
a standardized and flexible plan-based approach. Going forward, the Company does not anticipate entering into new employment agreements with our executive officers, and neither Ms. Hemmer
nor
Mr. Batchelor are party to an employment agreement with the Company.
Post-Employment Covenants and Clawback Policies. The 2017 Employment Agreements contain noncompetition and nonsolicitation restrictions
that apply during employment and for a two-year period following termination. Additionally, the Severance Protection Plan contains (a) a requirement that the individual execute a general
release prior to receiving post-termination benefits and (b) a clawback feature that allows for the suspension and refund of termination benefits for subsequently discovered cause. The clawback
feature generally allows the Company to cancel any remaining payments due and obligates the named executive to refund to the Company severance payments already made if, within one year of termination
of employment of the named executive by the Company for any reason other than for cause, the Company determines that the named executive could have been terminated for cause.
Our
current equity award agreements also include a requirement that, in order to be eligible to vest in any portion of the award, the employee must enter into an agreement containing restrictive
covenants applicable to the employee's behavior following termination. Additionally, our equity award agreements include compensation clawback provisions that provide, if the MD&C Committee determines
that an employee either engaged in or benefited from misconduct, then the employee will refund any amounts received under the equity award agreements. Misconduct generally includes any act or failure
to act that caused or was intended to cause a violation of the Company's policies, generally accepted accounting principles or applicable laws and that materially increased the value of the equity
award. Further, our MD&C Committee has adopted a clawback policy applicable to our annual cash incentive awards that is designed to recoup annual cash incentive payments when the recipient's personal
misconduct affects the payout calculations for the awards. Clawback terms applicable to our incentive awards allow recovery within the earlier to occur of one year after discovery of misconduct and
the second anniversary of the employee's termination of employment.
Other Compensation Policies and Practices
Compensation Limitation Policies. The Company has adopted a Severance Limitation Policy that generally provides that the
Company may not enter into new severance arrangements with its executive officers, as defined in the federal securities laws, that provide for benefits, less the value of vested equity awards and
benefits provided to employees generally, in an amount that exceeds 2.99 times the executive officer's then current base salary and target annual cash incentive, unless such future severance
arrangement receives stockholder approval. The Company has also adopted its Policy Limiting Certain Compensation Practices, which generally provides that the Company will not enter into new
compensation
38 |
2020 Proxy Statement
Table of Contents
arrangements
that would obligate the Company to pay a death benefit or gross-up payment to an executive officer unless such arrangement receives stockholder approval. Both of these compensation
limitation policies are subject to certain exceptions, including benefits generally available to management-level employees and any payment in reasonable settlement of a legal claim. Additionally,
"Death Benefits" under the policy does not include deferred compensation, retirement benefits or accelerated vesting or continuation of equity-based awards pursuant to generally-applicable equity
award plan provisions. None of our executive officers are party to any employment agreement or arrangement with the Company that provides for severance, gross-up or death benefits that exceed amounts
permitted by these compensation limitation policies.
Stock Ownership Guidelines and Holding Requirements. All of our named executive officers are subject to stock ownership guidelines. We
instituted stock ownership guidelines because we believe that ownership of Company stock demonstrates a commitment to, and confidence in, the Company's long-term prospects and further aligns
employees' interests with those of our stockholders. We believe that the requirement that these individuals maintain a portion of their individual wealth in the form of Company stock deters actions
that would not benefit stockholders generally. Although there is no deadline set for executives to reach their ownership guidelines, the MD&C Committee monitors ownership levels to confirm that
executives are making sustained progress toward achievement of their ownership guidelines.
Additionally,
our stock ownership guidelines contain holding requirements. Executives with a title of Senior Vice President or higher, which includes all of our named executives,
must
hold 100% of all net shares acquired through the Company's long-term incentive plans for at least one year, and those individuals must continue to hold 100% of all such net shares until the
individual's ownership guideline is achieved. Once achieved, the requisite stock ownership level must continue to be retained throughout the executive's employment with the Company. Our MD&C Committee
believes these holding periods discourage executives from taking actions in an effort to gain from short-term increases in the market value of our stock.
The
MD&C Committee regularly reviews the ownership guidelines to ensure that the appropriate share ownership levels are in place. Guidelines are expressed as a fixed number of shares and were revised
in November 2018 to account for the Company's more recent sustained Common Stock market value. The ownership requirement of Mr. Fish, our President and Chief Executive Officer, was over six
times base salary, using his base salary as of December 31, 2019 and an assumed $80 per share stock price. Using the closing price of our Common Stock on March 16, 2020, the ownership
requirement of our President and Chief Executive Officer is approximately 7.6 times his base salary as of December 31, 2019. Shares owned outright, vested RSUs and PSUs that have been deferred,
stock equivalents based on holdings in the Company's 401(k) Retirement Savings Plan and phantom stock held in the Company's 409A Deferral Plan count toward meeting the ownership guidelines. Stock
options, PSUs, RSUs and restricted stock, if any, do not count toward meeting the ownership guidelines until they are vested or earned. The following table outlines the stock ownership guidelines and
attainment for our named executive officers.
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Ownership
Guideline (number
of shares)
|
|
Attainment as of
March 16, 2020
|
|
|
|
|
|
|
|
|
|
Mr. Fish
|
|
|
95,000
|
|
|
278
|
%
|
|
|
|
|
|
|
|
|
Ms. Rankin
|
|
|
25,000
|
|
|
102
|
%
|
|
|
|
|
|
|
|
|
Mr. Morris
|
|
|
27,500
|
|
|
325
|
%
|
|
|
|
|
|
|
|
|
Ms. Hemmer
|
|
|
14,000
|
|
|
153
|
%
|
|
|
|
|
|
|
|
|
Mr. Batchelor
|
|
|
14,000
|
|
|
187
|
%
|
|
|
|
|
|
|
|
|
As
discussed under "Director and Officer Stock Ownership," the MD&C Committee also establishes ownership guidelines for the independent directors and performs regular reviews to ensure all independent
directors are in compliance or are showing sustained progress toward achievement of their ownership guideline.
Insider Trading; Prohibition of Hedging and Pledging Company Securities. The Company's Insider Trading Policy prohibits directors,
executive officers and other "designated insiders" from engaging in most transactions involving the Company's Common Stock during periods, determined by the Company, that those individuals are most
likely to be aware of material, non-public information. Directors, executive officers and other designated insiders subject to stock ownership guidelines must clear all their transactions in our
Common Stock with the Company's office of
the
Chief Legal Officer in advance. Additionally, it is our policy that directors, executive officers and designated insiders are not permitted to hedge their ownership of Company securities,
including (a) trading in options, warrants, puts and calls or similar derivative instruments on any security of the Company, (b) selling any security of the Company "short" and
(c) purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) or otherwise engaging in transactions that are designed to or
have the effect of offsetting any decrease in the market value of any security of the Company granted as compensation or held, directly or indirectly, by the director, executive officer or designated
insider. The Company's Insider Trading Policy also provides that directors and executive officers may not pledge Company securities or hold Company securities in a margin account.
2020 Proxy Statement | 39
Table of Contents
Executive Compensation Tables
|
We
are required to present compensation information in the tabular format prescribed by the SEC. This format, including the tables' column headings, may be different from the way we describe or
consider elements and components of compensation internally. The Compensation Discussion and Analysis contains a discussion that should be read in
conjunction with these tables to gain a complete understanding of our executive compensation philosophy, programs and decisions.
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)(1)
|
|
Stock
Awards
($)(2)
|
|
Option
Awards
($)(3)
|
|
Non-Equity
Incentive Plan
Compensation
($)(4)
|
|
All Other
Compensation
($)(5)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James C. Fish, Jr.
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
1,232,788
|
(7)
|
|
|
|
|
6,853,530
|
|
|
1,399,997
|
|
|
1,704,132
|
|
|
107,654
|
|
|
11,298,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
1,157,692
|
(7)
|
|
|
|
|
5,431,408
|
|
|
1,199,997
|
|
|
1,169,293
|
|
|
166,891
|
|
|
9,125,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
1,076,923
|
|
|
|
|
|
4,762,674
|
|
|
1,000,002
|
|
|
2,062,111
|
|
|
92,395
|
|
|
8,994,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Devina A. Rankin
Senior Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
618,208
|
|
|
|
|
|
1,958,118
|
|
|
399,997
|
|
|
578,516
|
|
|
68,575
|
|
|
3,623,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
539,923
|
|
|
|
|
|
1,538,892
|
|
|
340,006
|
|
|
379,541
|
|
|
53,956
|
|
|
2,852,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
470,077
|
|
|
50,000
|
|
|
952,569
|
|
|
200,002
|
|
|
572,398
|
|
|
34,062
|
|
|
2,279,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Morris, Jr.
Executive Vice President and Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
699,807
|
|
|
|
|
|
2,153,907
|
|
|
440,006
|
|
|
661,476
|
|
|
86,046
|
|
|
4,041,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
646,192
|
|
|
|
|
|
1,629,462
|
|
|
359,997
|
|
|
435,053
|
|
|
116,032
|
|
|
3,186,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
625,577
|
|
|
|
|
|
1,428,853
|
|
|
299,999
|
|
|
798,560
|
|
|
65,941
|
|
|
3,218,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tara J. Hemmer(6)
Senior Vice President Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
535,670
|
|
|
|
|
|
1,615,372
|
|
|
330,001
|
|
|
479,828
|
|
|
38,502
|
|
|
2,999,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven R. Batchelor(6)
Senior Vice President Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
535,397
|
|
|
|
|
|
1,615,372
|
|
|
330,001
|
|
|
479,828
|
|
|
29,157
|
|
|
2,989,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Ms. Rankin
received a $50,000 cash bonus in January 2017 in recognition of her additional responsibilities while serving as Acting Chief Financial Officer.
Ms. Rankin's promotion was made permanent in February 2017.
-
(2)
-
Amounts
in this column represent the grant date fair value of PSUs granted to all named executives annually. The grant date fair values were calculated in accordance
with ASC Topic 718, as further described in Note 15 in the Notes to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K. The grant date fair value of a PSU
granted in 2019 subject to total shareholder return relative to the S&P 500, based on a Monte Carlo valuation, is $133.63, and because total shareholder return is a market condition, projected
achievement is embedded in the grant date fair value. The grant date fair value of a PSU granted in 2019 subject to the cash flow generation performance measure is $98.898, which is the average of the
high and low market price of our Common Stock on the date of the grant, in accordance with our 2014 Stock Incentive Plan. The table below shows (a) the aggregate grant date fair value of PSUs
subject to the cash flow generation performance measure assuming target level of performance is achieved (this is the amount included in the Stock Awards
40 |
2020 Proxy Statement
Table of Contents
column
in the Summary Compensation Table) and (b) the aggregate grant date fair value of the same PSUs assuming the Company will reach the highest level of achievement for this performance
measure and maximum payouts will be earned.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Aggregate Grant Date
Fair Value of Cash
Flow Generation PSUs
Assuming Target
Level of Performance
Achieved ($)
|
|
Aggregate Grant Date
Fair Value of Cash
Flow Generation PSUs
Assuming Highest
Level of Performance
Achieved ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Fish
|
|
|
2019
|
|
|
2,914,920
|
|
|
5,829,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2,354,189
|
|
|
4,708,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2,065,774
|
|
|
4,131,548
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Rankin
|
|
|
2019
|
|
|
832,820
|
|
|
1,665,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
667,017
|
|
|
1,334,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
413,169
|
|
|
826,338
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Morris
|
|
|
2019
|
|
|
916,092
|
|
|
1,832,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
706,274
|
|
|
1,412,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
619,754
|
|
|
1,239,508
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Hemmer
|
|
|
2019
|
|
|
687,044
|
|
|
1,374,088
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Batchelor
|
|
|
2019
|
|
|
687,044
|
|
|
1,374,088
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(3)
-
Amounts
in this column represent the grant date fair value of stock options granted annually, in accordance with ASC Topic 718. The grant date fair value of
the options granted in 2019, estimated using the Black-Scholes option pricing model, is $12.22 per option. The assumptions made in determining the grant date fair values of options are disclosed in
Note 15 in the Notes to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K.
-
(4)
-
Amounts
in this column represent cash incentive awards earned and paid based on the achievement of performance criteria. Please see "Compensation Discussion and
Analysis Named Executive's 2019 Compensation Program and Results Annual Cash Incentive" for additional information.
-
(5)
-
The
amounts included in "All Other Compensation" for 2019 are shown below (in dollars):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k)
Plan Matching
Contributions
|
|
409A
Deferral
Plan
Matching
Contributions
|
|
Life Insurance
Premiums
|
|
Perquisites
and Other
Personal
Benefits(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Fish
|
|
|
12,600
|
|
|
92,945
|
|
|
2,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Rankin
|
|
|
12,600
|
|
|
32,867
|
|
|
1,027
|
|
|
22,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Morris
|
|
|
12,600
|
|
|
38,546
|
|
|
1,225
|
|
|
33,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Hemmer
|
|
|
12,600
|
|
|
25,028
|
|
|
874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Batchelor
|
|
|
12,600
|
|
|
15,816
|
|
|
741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
perquisites and personal benefits received by a named executive officer in 2019, to the extent that the total value of such perquisites and personal
benefits was at least $10,000. This column includes (i) incremental cost to us for personal use of Company aircraft in the following amounts:
Ms. Rankin $15,781 and Mr. Morris $30,525 and (ii) income that is imputed to each of our named
executive officers reflecting the cost to the Company of the executive's guest's participation in corporate events in the following amounts:
Ms. Rankin $6,300; and Mr. Morris $3,150. Annually, we calculate an hourly direct operating cost for
Company aircraft using industry standard measurements of costs for fuel, catering, telecommunications, maintenance, landing and hangar fees, flight plans and permits, and crew. We then allocate
incremental cost to the named executive based on the amount of aircraft time required for the personal use, multiplied by the direct operating cost. For example, the majority of Mr. Morris'
personal aircraft use reported above resulted from deviations from business travel flight plans to pick up or drop off the executive in another location for personal reasons; in such case, we
calculate the time difference resulting from the flight plan deviation and multiply it by the direct operating cost. We also allocate incremental cost to the named executive for any deadhead flights
required to position the aircraft to serve personal needs. We own
2020 Proxy Statement | 41
Table of Contents
and
operate our aircraft primarily for business use; therefore, we do not include purchase costs or other fixed costs associated with the ownership or operation of our aircraft in the direct operating
cost.
-
(6)
-
Each
of Ms. Hemmer and Mr. Batchelor were promoted to their current positions on January 1, 2019.
-
(7)
-
Includes
$75,000 of base salary in 2019 and $50,000 of base salary in 2018 to which Mr. Fish was entitled but voluntarily relinquished to fund a scholarship
program for children of Company employees.
GRANT OF PLAN-BASED AWARDS IN 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other
Option
Awards:
Number of
Securities
Underlying
Options(#)(3)
|
|
|
|
|
|
Grant
Date Fair
Value of
Stock and
Option
Awards
($)(5)
|
|
|
|
Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)
|
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
|
|
Exercise
or Base
Price of
Option
Awards
($/sh)(4)
|
|
Closing
Market
Price on
Date of
Grant
($/sh)
|
|
Grant Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James C. Fish, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive
|
|
|
1,027,535
|
|
|
1,712,559
|
|
|
3,425,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/19
|
|
|
|
|
|
|
|
|
|
|
|
29,474
|
|
|
58,948
|
|
|
117,896
|
|
|
|
|
|
|
|
|
|
|
|
6,853,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,566
|
|
|
98.898
|
|
|
99.08
|
|
|
1,399,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Devina A. Rankin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive
|
|
|
348,509
|
|
|
580,848
|
|
|
1,161,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/19
|
|
|
|
|
|
|
|
|
|
|
|
8,421
|
|
|
16,842
|
|
|
33,684
|
|
|
|
|
|
|
|
|
|
|
|
1,958,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,733
|
|
|
98.898
|
|
|
99.08
|
|
|
399,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Morris, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive
|
|
|
399,000
|
|
|
665,000
|
|
|
1,330,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/19
|
|
|
|
|
|
|
|
|
|
|
|
9,263
|
|
|
18,526
|
|
|
37,052
|
|
|
|
|
|
|
|
|
|
|
|
2,153,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,007
|
|
|
98.898
|
|
|
99.08
|
|
|
440,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tara J. Hemmer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive
|
|
|
289,430
|
|
|
482,384
|
|
|
964,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/19
|
|
|
|
|
|
|
|
|
|
|
|
6,947
|
|
|
13,894
|
|
|
27,788
|
|
|
|
|
|
|
|
|
|
|
|
1,615,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,005
|
|
|
98.898
|
|
|
99.08
|
|
|
330,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven R. Batchelor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive
|
|
|
289,430
|
|
|
482,384
|
|
|
964,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/19
|
|
|
|
|
|
|
|
|
|
|
|
6,947
|
|
|
13,894
|
|
|
27,788
|
|
|
|
|
|
|
|
|
|
|
|
1,615,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,005
|
|
|
98.898
|
|
|
99.08
|
|
|
330,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Actual
payouts of cash incentive awards for 2019 performance are shown in the Summary Compensation Table under "Non-Equity Incentive Plan Compensation." The named
executives' possible annual cash incentive payouts are calculated using a percentage of base salary approved by the MD&C Committee. The threshold levels represent the amounts that would have been
payable if the minimum performance requirements were met for each performance measure. Please see "Compensation Discussion and Analysis Named Executive's 2019 Compensation Program
and Results Annual Cash Incentive" for additional information about these awards, including performance criteria.
-
(2)
-
Represents
the number of shares of Common Stock potentially issuable based on the achievement of performance criteria under PSU awards granted under our 2014 Stock
Incentive Plan. Please see "Compensation Discussion and Analysis Named Executive's 2019 Compensation Program and
Results Long-Term Equity Incentives Performance Share Units" for additional information about these awards, including
performance criteria. The performance period for these awards
42 |
2020 Proxy Statement
Table of Contents
ends
December 31, 2021. PSUs earn dividend equivalents, which are paid out based on the number of shares earned at the end of the performance period.
-
(3)
-
Represents
the number of shares of Common Stock potentially issuable upon the exercise of options granted under our 2014 Stock Incentive Plan. Please see
"Compensation Discussion and Analysis Named Executive's 2019 Compensation Program and Results Long-Term Equity
Incentives Stock Options" for additional information about these awards. The stock options will vest in 25% increments on the first two anniversaries of the
date of grant and the remaining 50% will vest on the third anniversary. Although we consider all of our equity awards to be a form of incentive compensation because their value will increase as the
market value of our Common Stock increases, only awards with performance criteria are considered "equity incentive plan awards" for SEC disclosure purposes. As a result, stock option awards are not
included as "Equity Incentive Plan Awards" in either the table above or the Outstanding Equity Awards as of December 31, 2019 table.
-
(4)
-
The
exercise price represents the average of the high and low market price of our Common Stock on the date of the grant, in accordance with our 2014 Stock Incentive
Plan.
-
(5)
-
These
amounts are grant date fair values of the awards as calculated under ASC Topic 718 and as further described in Note 15 in the Notes to the Consolidated
Financial Statements in our 2019 Annual Report on Form 10-K and notes (2) and (3) to the Summary Compensation Table.
2020 Proxy Statement | 43
Table of Contents
OUTSTANDING EQUITY AWARDS AS OF DECEMBER 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards(1)
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(2)
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock
That Have
Not Vested
(#)(6)
|
|
Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)(6)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#)(7)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
($)(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James C. Fish, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,566
|
(3)
|
|
98.898
|
|
|
2/19/2029
|
|
|
|
|
|
|
|
|
114,120
|
|
|
26,010,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,013
|
(4)
|
|
85.34
|
|
|
2/20/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,767
|
(5)
|
|
73.335
|
|
|
2/28/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Devina A. Rankin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,733
|
(3)
|
|
98.898
|
|
|
2/19/2029
|
|
|
|
|
|
|
|
|
32,474
|
|
|
7,401,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,990
|
|
|
20,971
|
(4)
|
|
85.34
|
|
|
2/20/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,953
|
|
|
12,954
|
(5)
|
|
73.335
|
|
|
2/28/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,386
|
|
|
|
|
|
56.235
|
|
|
2/26/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Morris, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,007
|
(3)
|
|
98.898
|
|
|
2/19/2029
|
|
|
|
|
|
|
|
|
35,078
|
|
|
7,994,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,401
|
|
|
22,204
|
(4)
|
|
85.34
|
|
|
2/20/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,430
|
(5)
|
|
73.335
|
|
|
2/28/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tara J. Hemmer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,005
|
(3)
|
|
98.898
|
|
|
2/19/2029
|
|
|
1,331
|
|
|
151,681
|
|
|
23,090
|
|
|
5,262,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,111
|
|
|
12,336
|
(4)
|
|
85.34
|
|
|
2/20/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,969
|
|
|
2,969
|
(5)
|
|
73.335
|
|
|
2/28/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,530
|
|
|
|
|
|
56.235
|
|
|
2/26/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven R. Batchelor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,005
|
(3)
|
|
98.898
|
|
|
2/19/2029
|
|
|
1,107
|
|
|
126,154
|
|
|
15,438
|
|
|
3,518,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
921
|
|
|
2,763
|
(4)
|
|
85.34
|
|
|
2/20/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,721
|
|
|
2,722
|
(5)
|
|
73.335
|
|
|
2/28/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,530
|
|
|
|
|
|
56.235
|
|
|
2/26/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,342
|
|
|
|
|
|
54.635
|
|
|
2/25/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,146
|
|
|
|
|
|
41.37
|
|
|
3/7/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,442
|
|
|
|
|
|
36.885
|
|
|
3/8/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,003
|
|
|
|
|
|
34.935
|
|
|
3/9/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Values
are based on the closing price of our Common Stock on December 31, 2019 of $113.96.
-
(2)
-
Includes
vested stock options granted on March 9, 2012, March 8, 2013 and March 7, 2014 pursuant to our 2009 Stock Incentive Plan and vested
stock options granted on February 25, 2015, February 26, 2016, February 28, 2017 and February 20, 2018 pursuant to our 2014 Stock Incentive Plan.
44 |
2020 Proxy Statement
Table of Contents
-
(3)
-
Includes
stock options granted on February 19, 2019 that vest 25% on the first and second anniversary of the date of grant and 50% on the third anniversary of
the date of grant.
-
(4)
-
Includes
stock options granted on February 20, 2018 that vested 25% on the first anniversary of the date of grant. An additional 25% will vest on the second
anniversary of the date of grant and 50% will vest on the third anniversary of the date of grant.
-
(5)
-
Includes
stock options granted on February 28, 2017 that vested 25% on the first and second anniversary of the date of grant. The remaining 50% will vest on
the third anniversary of the date of grant.
-
(6)
-
Includes
the following number of RSUs granted under our 2014 Stock Incentive Plan to Ms. Hemmer and Mr. Batchelor as incentive compensation prior to
their promotion to the senior leadership team: Ms. Hemmer 646 granted on February 28, 2017 and 685 granted on May 2, 2017;
Mr. Batchelor 592 granted on February 28, 2017 and 515 granted on February 20, 2018. All RSUs vest on the third anniversary of the date of
grant.
-
(7)
-
Includes
PSUs with three-year performance periods ending December 31, 2020 and December 31, 2021. Payouts on PSUs are made after the Company's
financial results for the performance period are reported and the MD&C Committee determines achievement of performance results and corresponding vesting, typically in mid to late February of the
succeeding year. The PSUs for the performance period ended December 31, 2019 are not included in the table as they are considered earned as of December 31, 2019 for proxy statement
disclosure purposes; instead, such PSUs are included in the Option Exercises and Stock Vested table below. Pursuant to SEC disclosure instructions, because the Company's performance on the metrics
governing our PSUs with the performance period ended December 31, 2019 exceeded target, the payout value of unearned awards is calculated assuming maximum performance criteria is achieved. The
following number of PSUs have a performance period ending December 31, 2020: Mr. Fish 55,172;
Ms. Rankin 15,632; Mr. Morris 16,552; Ms. Hemmer 9,196; and
Mr. Batchelor 1,544. The following number of PSUs have a performance period ending December 31, 2021:
Mr. Fish 58,948; Ms. Rankin 16,842; Mr. Morris 18,526;
Ms. Hemmer 13,894; and Mr. Batchelor 13,894.
OPTION EXERCISES AND STOCK VESTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of Shares
Acquired on Exercise (#)
|
|
Value Realized on
Exercise ($)
|
|
Number of Shares
Acquired on Vesting (#)(1)
|
|
Value Realized on
Vesting ($)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James C. Fish, Jr.
|
|
|
84,314
|
(2)
|
|
3,810,206
|
|
|
116,391
|
|
|
14,369,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Devina A. Rankin
|
|
|
|
|
|
|
|
|
22,996
|
|
|
2,834,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Morris, Jr.
|
|
|
42,795
|
(3)
|
|
1,813,700
|
|
|
33,356
|
|
|
4,138,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tara J. Hemmer
|
|
|
14,539
|
(4)
|
|
974,903
|
|
|
4,597
|
|
|
551,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven R. Batchelor
|
|
|
|
|
|
|
|
|
4,281
|
|
|
512,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Includes
shares of the Company's Common Stock issued on account of PSUs granted in 2017 with a performance period ended December 31, 2019. The determination
of achievement of performance results and corresponding vesting of such PSUs was performed by the MD&C Committee in February 2020. Following such determination, shares of the Company's Common Stock
earned under this award were issued on February 13, 2020, based on the average of the high and low market price of our Common Stock on that date. Also includes the following number of RSUs that
vested in 2019: Mr. Fish 5,208; Ms. Rankin 759;
Ms. Hemmer 776; and Mr. Batchelor 776. The value of RSUs realized on vesting was calculated using the
average of the high and low market price of our Common Stock on the date of vesting.
-
(2)
-
Mr. Fish
received 19,834 net shares after withholdings and the sale of shares to cover option costs and taxes.
-
(3)
-
Mr. Morris
received 10,340 net shares after withholdings and the sale of shares to cover option costs and taxes.
-
(4)
-
Ms. Hemmer
received 5,161 net shares after withholdings and the sale of shares to cover option costs and taxes.
2020 Proxy Statement | 45
Table of Contents
Nonqualified Deferred Compensation in 2019
Each of our named executive officers is eligible to participate in our 409A Deferral Plan and may elect to defer receipt of portions of their base salary and
cash incentives in excess of the annual compensation threshold established under Section 401(a)(17) of the IRC, referred to as the "Threshold." As of 2019, the Threshold was $280,000. The plan
provides that eligible employees may defer for payment at a future date (i) up to 25% of base salary and up to 100% of annual cash incentives payable after the aggregate of such compensation
components reaches the Threshold; (ii) receipt of any RSUs and (iii) receipt of any PSUs. The Company match provided under the 409A Deferral Plan is dollar for dollar on the employee's
deferrals, up to 3% of the employee's aggregate base salary and cash incentives in excess of the Threshold, and fifty cents on the dollar on the employee's deferrals, in excess of 3% and up to 6% of
the employee's aggregate base salary and cash incentives in excess of the Threshold. Additional deferral contributions will not be matched but will be tax-deferred. Amounts deferred under this plan
are allocated into accounts that mirror selected investment funds in our 401(k) Retirement
Savings
Plan, including a Company stock fund, although the amounts deferred are not actually invested in stock or funds. There is no Company match on deferred RSUs or PSUs, but the Company makes a
cash payment of dividend equivalents on the shares deferred at the same time and at the same rate as dividends on the Company's Common Stock.
Participating
employees generally can elect to receive distributions commencing six months after the employee leaves the Company in the form of annual installments or a lump sum payment. Special
circumstances may allow for a modified or accelerated distribution, such as the employee's death, an unforeseen emergency, or upon termination of the plan. In the event of death, distribution will be
made to the designated beneficiary in a single lump sum in the following calendar year. In the event of an unforeseen emergency, the plan administrator may allow an early payment in the amount
necessary to satisfy the emergency. All participants are immediately 100% vested in all of their contributions, Company matching contributions, and gains and/or losses related to their investment
choices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions
in Last
Fiscal
Year ($)(1)
|
|
Registrant
Contributions
in Last
Fiscal
Year ($)(2)
|
|
Aggregate
Earnings
in Last
Fiscal
Year ($)(3)
|
|
Aggregate
Withdrawals/
Distributions ($)(4)
|
|
Aggregate Balance
at Last Fiscal
Year End ($)(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James C. Fish, Jr.
|
|
|
4,784,171
|
|
|
92,945
|
|
|
2,751,463
|
|
|
194,430
|
|
|
12,478,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Devina A. Rankin
|
|
|
39,921
|
|
|
32,867
|
|
|
19,319
|
|
|
|
|
|
299,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Morris, Jr.
|
|
|
47,945
|
|
|
38,546
|
|
|
348,607
|
|
|
|
|
|
1,722,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tara J. Hemmer
|
|
|
46,457
|
|
|
25,028
|
|
|
39,447
|
|
|
|
|
|
264,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven R. Batchelor
|
|
|
50,860
|
|
|
15,816
|
|
|
351,166
|
|
|
168,626
|
|
|
1,890,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Contributions
are made pursuant to the Company's 409A Deferral Plan. Executive contributions of base salary and annual cash incentive compensation is included in the
Salary column and the Non-Equity Incentive Plan Compensation column, respectively, of the Summary Compensation Table. Additionally, Mr. Fish deferred receipt of 51,852 shares of Common Stock in
2019 that were earned on account of PSUs with the performance period ended December 31, 2018. The grant date fair value of such PSUs was included in the Stock Awards column of the Summary
Compensation Table when granted in 2016.
-
(2)
-
Company
contributions to the executives' 409A Deferral Plan accounts are included in the All Other Compensation column in the Summary Compensation Table.
-
(3)
-
Earnings
on these accounts are not included in any other amounts in the tables included in this Proxy Statement, as the amounts of the named executives' earnings on
deferred cash compensation represent the general market gains (or losses) on investments, rather than amounts or rates set by the Company for the benefit of the named executives. In case of
Mr. Fish, who has deferred receipt of 94,844 shares of Common Stock, earnings also include the change in the closing price per share of the Company's Common Stock from December 31, 2018
to December 31, 2019, plus $2.05 of dividends paid per share of Common Stock in 2019, multiplied by the number of shares deferred. The value of such deferred shares was included in the Option
Exercises and Stock Vested table for the year of vesting.
-
(4)
-
The
amount shown in this column for Mr. Fish consists of dividend equivalents paid on deferred shares. The amount shown in this column for
Mr. Batchelor reflects a distribution that was automatically made pursuant to his prior election for a date-specific withdrawal to occur on May 1, 2019.
-
(5)
-
Amounts
shown in this column include the following amounts that were reported as compensation to the named executive in the Summary Compensation Table for 2017-2019:
Mr. Fish $848,765; Ms. Rankin $211,989;
Mr. Morris $330,978; Ms. Hemmer $71,485 and
Mr. Batchelor $66,676. Because Ms. Hemmer and Mr. Batchelor became named executives in 2019, such amounts only include 2019 compensation
for those individuals.
46 |
2020 Proxy Statement
Table of Contents
Potential Payments Upon Termination or Change in Control
Change in Control. The post-employment compensation our named executives receive is based on provisions included in retirement and severance plan documents,
employment agreements and equity incentive award documentation. Severance protections aid in retention of senior leadership by providing the individual with comfort that he or she will be treated
fairly in the event of an involuntary termination not for cause. The change in control provisions included in the Severance Protection Plan, our stock option award agreements and, if applicable,
employment agreements require a double trigger in order to receive any payment in the event of a change in control situation. First, a change in control must occur, and second, the individual must
terminate employment for good reason or the Company must terminate employment without cause within six months prior to or two years following the change in control event. PSUs are paid out in cash on
a prorated basis based on actual results achieved through the end of the fiscal quarter prior to a change in control. Thereafter, the executive would typically receive a replacement award from the
successor entity, provided that the successor entity is publicly traded. If the successor is not publicly traded, the executive will be entitled to a replacement award of cash. RSUs, which are not
routinely a component of our named executive officer compensation, vest upon a
change in control, unless the successor entity converts the awards to equivalent grants in the successor. In the case of both converted RSU and PSU awards, they will vest in full if the executive is
terminated without cause following the change in control. We believe providing change in control protection encourages our named executives to pursue and facilitate transactions that are in the best
interests of stockholders while not granting executives an undeserved windfall.
Involuntary Termination or Resignation for Good Reason. Under the Severance Protection Plan, in the event a participant is terminated without cause or resigns for
good reason, subject to execution of a release of claims and continued compliance with all restrictive covenants, he or she will be entitled to receive: (a) cash severance in an aggregate
amount equal to two times the sum of the participant's base salary and target annual bonus (with one half payable in a lump sum at termination, and the remaining half payable in installments over a
two-year period); (b) continuation of group health benefits over a two-year period following termination and (c) a pro rata annual cash
incentive payment for the year of termination. In the event a named executive is terminated for cause, he or she is entitled to any accrued but unpaid salary only, and all unvested awards and
outstanding stock options, whether exercisable or not, are forfeited.
The
terms "cause," "good reason," and "change in control" are defined in the executives' employment agreements, the Severance Protection Plan and equity award plans and agreements, as applicable, but
such terms have the
meanings
generally described below. You should refer to the applicable documentation, accessible through the Company's Form 10-K Exhibit List, for the actual definitions.
"Cause"
generally means the named executive has: deliberately refused to perform his or her duties; breached his or her duty of loyalty to the Company; been convicted of a felony; intentionally and
materially harmed the Company; materially violated the Company's policies and procedures or breached the covenants contained in his or her agreement.
"Good
Reason" generally means that, without the named executive's consent: his or her duties or responsibilities have been substantially changed; he or she has been removed from his or her position;
the Company has breached his or her employment agreement; any successor to the Company has not assumed the obligations under his or her employment agreement; or he or she has been reassigned to a
location more than 50 miles away.
"Change
in Control" generally means that: at least 25% of the Company's Common Stock has been acquired by one person or persons acting as a group; certain significant turnover in our Board of
Directors has occurred; there has been a merger of the Company in which at least 50% of the combined post-merger voting power of the surviving entity does not consist of the Company's pre-merger
voting power, or a merger to effect a recapitalization that resulted in a person or persons acting as a group acquired 25% or more of the Company's voting securities; or the Company is liquidating or
selling all or substantially all of its assets.
Benefits
to a participant under the Severance Protection Plan are subject to reduction to the extent required by the Company's Severance Limitation Policy or if the excise tax described in
Sections 280G or 4999 of the IRC is applicable and such reduction would place the participant in a better net after tax position.
Voluntary Termination; Retirement. Our equity award agreements generally provide that an executive forfeits unvested awards if he or she voluntarily terminates
employment. RSUs and PSUs generally vest on a pro rata basis upon involuntary termination other than for cause. RSUs generally vest on a pro rata basis
upon an employee's qualifying retirement; however, PSUs and stock options generally continue to vest following a qualifying retirement as
if the employee had remained employed until the end of the performance period. If the recipient is terminated by the Company without cause or voluntarily resigns, the recipient is entitled to exercise
all stock options outstanding and exercisable within a specified time frame after such termination.
Explanation of Tabular Disclosure. The following table presents potential payouts to our named executives at
2020 Proxy Statement | 47
Table of Contents
year-end upon termination of employment in the circumstances indicated pursuant to the terms of applicable plans and agreements. The payouts set forth below
assume the triggering event indicated occurred on December 31, 2019, when the closing price of our Common Stock was $113.96 per share. These payouts are calculated for SEC disclosure purposes
and are not necessarily indicative of the actual amounts the named executive would receive. Please note the following when reviewing the payouts set forth
below:
-
-
The compensation component set forth below for accelerated vesting of stock options is comprised of the unvested stock options granted in 2017,
2018 and 2019, which vest 25% on the first and second anniversary of the date of grant and 50% on the third anniversary of the date of grant.
-
-
For purposes of calculating the payout of performance share unit awards outstanding as of December 31, 2019, we have assumed that target
performance was achieved; any actual performance share unit payouts will be based on actual performance of the Company during the performance period.
-
-
For purposes of calculating the payout upon the "double trigger" of change in control and subsequent involuntary termination not for cause, the
value of the performance share unit replacement award is equal to the number of PSUs that would be forfeited based on the prorated acceleration of the PSUs, multiplied by the closing price of our
Common Stock on December 31, 2019.
-
-
The payout for continuation of benefits is an estimate of the cost the Company would incur to continue those benefits.
-
-
The Company's practice is to provide all benefits eligible employees with life insurance that pays one times annual base salary upon death. The
insurance benefit is a payment by an insurance company, not the Company, and is payable under the terms of the insurance policy.
-
-
Refer to the Nonqualified Deferred Compensation in 2019 table above for aggregate balances payable to the named executives under our 409A
Deferral Plan pursuant to the named executive's distribution elections.
48 |
2020 Proxy Statement
Table of Contents
Potential Consideration Upon Termination of Employment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Fish
|
|
Ms. Rankin
|
|
Mr. Morris
|
|
Ms. Hemmer
|
|
Mr. Batchelor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payout or Value of Compensation Components, in dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Event of Death or Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated vesting of stock options
|
|
|
6,475,004
|
|
|
1,619,470
|
|
|
1,967,159
|
|
|
880,421
|
|
|
596,407
|
|
Payment of PSUs (contingent on actual performance at end of performance period)
|
|
|
13,005,115
|
|
|
3,700,737
|
|
|
3,997,489
|
|
|
2,631,336
|
|
|
1,759,314
|
|
Accelerated vesting of restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
151,681
|
|
|
126,154
|
|
Life insurance benefit paid by insurance company (in the case of death)
|
|
|
1,125,000
|
|
|
552,000
|
|
|
650,000
|
|
|
461,000
|
|
|
390,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
20,605,119
|
|
|
5,872,207
|
|
|
6,614,648
|
|
|
4,124,438
|
|
|
2,871,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Event of Termination Without Cause by the Company or For Good Reason by the Employee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Two times base salary plus target annual cash bonus (one-half payable in lump sum; one-half payable in bi-weekly installments over a two-year period)
|
|
|
6,000,000
|
|
|
2,488,590
|
|
|
2,730,000
|
|
|
2,042,880
|
|
|
2,042,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continued coverage under health and welfare benefit plans for two years
|
|
|
25,752
|
|
|
25,752
|
|
|
25,752
|
|
|
25,752
|
|
|
25,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated payment of PSUs (contingent on actual performance at end of performance period)
|
|
|
6,430,839
|
|
|
1,827,387
|
|
|
1,961,252
|
|
|
1,226,437
|
|
|
645,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated vesting of restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
139,413
|
|
|
100,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12,456,591
|
|
|
4,341,729
|
|
|
4,717,004
|
|
|
3,434,482
|
|
|
2,814,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Event of Termination Without Cause by the Company or For Good Reasons by the Employee Six Months Following a Change in Control (Double Trigger)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Two times base salary plus target annual cash bonus (one-half payable in lump sum; one-half payable in bi-weekly installments over a two-year period)
|
|
|
6,000,000
|
|
|
2,488,590
|
|
|
2,730,000
|
|
|
2,042,880
|
|
|
2,042,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continued coverage under health and welfare benefit plans for two years
|
|
|
25,752
|
|
|
25,752
|
|
|
25,752
|
|
|
25,752
|
|
|
25,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated vesting of stock options
|
|
|
6,475,004
|
|
|
1,619,470
|
|
|
1,967,159
|
|
|
880,421
|
|
|
596,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated accelerated payment of PSUs
|
|
|
6,430,839
|
|
|
1,827,387
|
|
|
1,961,252
|
|
|
1,226,437
|
|
|
645,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated payment of PSUs replacement grant
|
|
|
6,574,276
|
|
|
1,873,350
|
|
|
2,036,237
|
|
|
1,404,899
|
|
|
1,114,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated vesting of restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
151,681
|
|
|
126,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated annual cash bonus(1)
|
|
|
3,500,000
|
|
|
1,212,390
|
|
|
1,330,000
|
|
|
483,840
|
|
|
483,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
29,005,871
|
|
|
9,046,939
|
|
|
10,050,400
|
|
|
6,215,910
|
|
|
5,034,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Pursuant
to the Severance Protection Plan, Ms. Hemmer and Mr. Batchelor receive a prorated target annual cash bonus under this scenario.
Mr. Fish, Ms. Rankin and Mr. Morris receive a prorated maximum annual cash bonus under this scenario pursuant to their 2017 Employment Agreements. The 2017 Employment Agreements
provided for this enhanced treatment partially on account of similar terms in pre-existing employment agreements that executives were agreeing to terminate in order to support the Company's transition
toward a more standardized and flexible approach to severance protections.
2020 Proxy Statement | 49
Table of Contents
Chief Executive Officer Pay Ratio
In 2018, we identified the Company's median employee, based on total annual compensation for all employees other than our Chief Executive Officer, in accordance
with SEC Regulation S-K, Item 402(u) (the "Median Employee") for purposes of the proxy statement filed in March 2018. During 2019, a change in such employee's circumstances make it no
longer appropriate to use that individual as the Median Employee. A new Median Employee was selected, whose compensation is substantially similar to the original median employee based on the
compensation measure used to select the original median employee. The Median Employee, a Driver in the United States, was identified from a list of Company employees as of December 31, 2017.
Out of a total worldwide employee population of 42,075 on that date, the list included 41,585 employees and excluded the Chief Executive Officer and our 489 employees based in India. Approximately 90%
of these total employees work in the United States and approximately 10% work in Canada. Over 99% of these individuals are full-time employees. Any temporary or seasonal employees are included; any
subcontracted workers are not employees and are excluded.
To
select the Median Employee, we determined the actual taxable compensation paid to each listed employee in 2017, converted to U.S. dollars at appropriate exchange rates for non-U.S. employees and
annualized for salaried employees hired during the year. We did not apply any cost-of-living adjustments nor did we use any form of statistical sampling.
Since
December 31, 2017, there have been no changes to the Company's employee population, compensation arrangements, or the circumstances of the Median Employee (except as noted above) that the
Company believes would significantly impact this pay ratio disclosure. Accordingly, as permitted by SEC Regulation S-K, Item 402(u), the Company is providing the following information
based on the Median Employee as identified.
For
2019, total annual compensation for the Median Employee was $76,048. The annual compensation of our Chief Executive Officer was $11,298,101, for a ratio of 1:149. These compensation values were
calculated in accordance with SEC Regulation S-K, Item 402(c)(2)(x) requirements for reporting total compensation in the Summary Compensation Table.
Equity Compensation Plan Table
The following table provides information as of December 31, 2019 about the number of shares to be issued upon vesting or exercise of
equity awards and the number of shares remaining available for issuance under our equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of
Securities to be
Issued Upon
Exercise
of Outstanding
Options and Rights
|
|
Weighted-Average
Exercise Price of
Outstanding
Options and Rights
|
|
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders(1)
|
|
|
5,588,356
|
(2)
|
$
|
69.66
|
(3)
|
|
20,762,702
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Includes
our 2009 Stock Incentive Plan, 2014 Stock Incentive Plan and Employee Stock Purchase Plan ("ESPP"). No additional awards may be granted under our 2009 Stock
Incentive Plan.
-
(2)
-
Includes:
options outstanding for 3,938,478 shares of Common Stock; 224,997 shares of Common Stock to be issued in connection with deferred compensation obligations;
347,997 shares underlying unvested restricted stock units and 1,076,884 shares of Common Stock that would be issued on account of outstanding PSUs if the target performance level is achieved.
Assuming, instead, that the maximum performance level was achieved on such PSUs, the number of shares of Common Stock that would be issued on account of outstanding awards would increase by 1,076,884
shares.
-
-
The
total number of shares subject to outstanding awards in the table above includes 361,856 shares on account of PSUs, at target, with the performance
period ended December 31, 2019. The determination of achievement of performance results on such PSUs was performed by the MD&C Committee in February 2020, and the Company achieved
(a) maximum performance criteria on the half of the PSUs that are subject to the cash flow generation performance measure, yielding a 200% payout and (b) near-maximum performance
criteria on the half of the PSUs that are subject to the total shareholder return performance measure, yielding a 194.7% payout. A total of 475,627 shares of Common Stock were issued on account of
such PSUs in February 2020, net of units deferred, of which 241,022 shares of Common Stock were included in the first column of the table above.
-
-
Excludes
purchase rights that accrue under the ESPP. Purchase rights under the ESPP are considered equity compensation for accounting purposes; however,
the number of shares to be purchased is indeterminable until the time shares are actually issued, as automatic employee contributions may be terminated before the end of an offering period and, due to
the look-back pricing feature, the purchase price and corresponding number of shares to be purchased is unknown.
-
(3)
-
Excludes
PSUs and restricted stock units because those awards do not have exercise prices associated with them. Also excludes purchase rights under the ESPP for the
reasons described in (2) above.
-
(4)
-
The
shares remaining available include 807,579 shares under our ESPP and 19,955,123 shares under our 2014 Stock Incentive Plan, assuming payout of PSUs at maximum.
Assuming payout of PSUs at target, the number of shares remaining available for issuance under our 2014 Stock Incentive Plan would be 21,032,007.
50 |
2020 Proxy Statement
Table of Contents
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
(Item 2 on The Proxy Card)
|
Our
Board of Directors, upon the recommendation of the Audit Committee, has ratified the selection of Ernst & Young LLP to serve as our independent registered public accounting firm for
fiscal year 2020, subject to ratification by our stockholders.
Representatives
of Ernst & Young LLP will be at the annual meeting. They will be able to make a statement if they want, and will be available to answer any appropriate questions
stockholders may have.
Although
ratification of the selection of Ernst & Young is not required by our By-laws or otherwise, we are submitting the selection to stockholders for ratification because we value our
stockholders' views on our independent registered public accounting firm and as a matter of good governance. If our stockholders do not ratify our selection, it will be considered a direction to our
Board and Audit Committee to consider selecting another firm. Even if the selection is ratified, the Audit Committee may, in its discretion, select a different independent registered public accounting
firm, subject to ratification by the Board, at any time during the year if it determines that such a change is in the best interests of the Company and our stockholders.
Independent Registered Public Accounting Firm Fee Information
Fees for professional services provided by our independent registered public accounting firm in each of the last two fiscal years, in each of
the following categories, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Audit Fees
|
|
|
$
|
4.5
|
|
|
|
$
|
4.6
|
|
|
|
|
|
|
|
|
Audit-Related Fees
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
4.6
|
|
|
|
$
|
4.7
|
|
|
|
|
|
|
|
|
Audit
fees includes fees for the annual audit, reviews of the Company's Quarterly Reports on Form 10-Q, work performed to support the Company's debt issuances, accounting consultations, and
separate subsidiary audits required by statute or regulation. Audit-related fees principally include financial due diligence services relating to certain potential acquisitions.
The
Audit Committee has adopted procedures for the approval of Ernst & Young's services and related fees. At the beginning of each year, all audit and audit-related services, tax fees and other
fees for the upcoming audit are provided to the Audit Committee for approval. The services are grouped into significant categories and provided to the Audit Committee
in the format shown above. All projects that have the potential to exceed $100,000 are separately identified and reported to the Committee for approval. The Audit Committee Chairman has the authority
to approve additional services, not previously approved, between Committee meetings. Any additional services approved by the Audit Committee Chairman between Committee meetings are reported to the
full Audit Committee at the next regularly scheduled meeting. The Audit Committee is updated on the status of all services and related fees at every regular meeting. In 2019 and 2018, the Audit
Committee or Audit Committee Chairman pre-approved all audit and audit-related services performed by Ernst & Young. As set forth in the Audit Committee Report on page 9, the Audit Committee has
considered whether the provision of these audit-related services is compatible with maintaining auditor independence and has determined that it is.
Vote Required for Approval
Approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock present at the meeting, in
person or represented by proxy, and entitled to vote.
2020 Proxy Statement | 51
Table of Contents
ADVISORY VOTE ON EXECUTIVE COMPENSATION
|
(Item 3 on the Proxy Card)
|
Pursuant
to Section 14A of the Exchange Act, stockholders are entitled to an advisory (non-binding) vote on compensation programs for our named executive officers (sometimes referred to as "say
on pay"). The Board of Directors has determined that it will include this "say on pay" vote in the Company's proxy materials annually, pending consideration of future advisory stockholder votes on the
frequency of this advisory vote on executive compensation.
We
encourage stockholders to review the Compensation Discussion and Analysis and the Executive Compensation
Tables on pages 26 to 50 of this Proxy Statement. The Company has designed its executive compensation program to be supportive of, and align with, the strategy of the
Company and the creation of stockholder value, while discouraging excessive risk-taking. The following key structural elements and policies, discussed in more detail in the Compensation Discussion and Analysis, further the objective of our executive compensation program and evidence our dedication to competitive and
reasonable compensation practices that are in the best interests of stockholders:
-
-
over 80% of our named executive's target compensation, on average, is linked to Company performance, through annual cash incentive performance
criteria and long-term equity-based incentive awards, and over 60% of our named executive's target compensation is tied to long-term equity awards, which aligns executives' interests with those of
stockholders;
-
-
our total direct compensation opportunities for named executive officers are targeted to fall in a range around the competitive median;
-
-
performance-based awards include threshold, target and maximum payouts correlating to a range of performance outcomes and are based on a variety
of indicators of performance, which limits risk-taking behavior;
-
-
performance stock units with a three-year performance period, as well as stock options that vest over a three-year period, link executives'
interests with long-term performance and reduce incentives to maximize performance in any one year;
-
-
all of our executive officers are subject to stock ownership guidelines, which we believe demonstrates a commitment to, and confidence in, the
Company's long-term prospects;
-
-
the Company has clawback provisions in its equity award agreements and executive officer employment agreements, and has adopted a clawback
policy applicable to annual incentive compensation, designed to recoup compensation when cause and/or misconduct are found;
-
-
our Severance Limitation Policy limits the amount of benefits the Company may provide to its executive officers under severance agreements
entered into after the date of such policy; and
-
-
the Company has adopted a policy that prohibits it from entering into new agreements with executive officers that provide for certain death
benefits or tax gross-up payments.
The
Board strongly endorses the Company's executive compensation program and recommends that the stockholders vote in favor of the following resolution:
RESOLVED,
that the compensation of the Company's named executive officers as described in this Proxy Statement under "Executive Compensation," including the Compensation
Discussion and Analysis and the tabular and narrative disclosure contained in this Proxy Statement, is hereby APPROVED.
52 |
2020 Proxy Statement
Table of Contents
ADVISORY VOTE ON EXECUTIVE COMPENSATION
|
Vote Required for Approval
Approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock present at the meeting, in
person or represented by proxy, and entitled to vote. Because the vote is advisory, it will not be binding, and neither the Board nor the MD&C Committee will be required to take any action as a result
of the outcome of the vote on this proposal. The MD&C Committee will carefully consider the outcome of the vote in connection with future executive compensation arrangements.
2020 Proxy Statement | 53
Table of Contents
PROPOSAL TO AMEND AND RESTATE THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
|
(Item 4 on the Proxy Card)
|
Description of the Proposed Amendment and Restatement
Our ESPP was approved by stockholders at our 1997 Annual Meeting. An aggregate of one million shares of Common Stock was originally authorized
for issuance under the ESPP and stockholders have approved an additional 14.75 million shares for issuance since then. As of January 1, 2020, approximately 40,175 employees were eligible
to participate in the ESPP and approximately 807,579 shares remained available for issuance. The total number of shares issued under the ESPP in each of 2019, 2018 and 2017 was approximately 537,000,
582,000 and 594,000, respectively. The Board of Directors has concluded it is in the best interest to amend and restate the ESPP to authorize an additional three million shares of Common Stock for
issuance under the plan, subject to stockholder approval. If stockholder approval is not obtained, the amendment and restatement will be of no force or effect.
Key
considerations applicable to the ESPP and the proposed amendment and restatement include the following. Please read "Operation of the ESPP" below for further detail.
-
-
The price of shares of Common Stock purchased under the ESPP is 85% of the lower of the fair market value on the first day and the last day of
the offering period.
-
-
Each offering period is six months.
-
-
The additional three million shares proposed to be authorized for issuance pursuant to the amendment and restatement comprise less than 1% of
the Company's outstanding shares of Common Stock.
Description of the ESPP
The following description of the ESPP is qualified in its entirety by, and should be read in conjunction with, the text of the plan, a copy of
which, as proposed to be amended and restated, is attached hereto as Appendix A and incorporated herein by reference.
The purpose of the ESPP is to provide an incentive for present and future employees of the Company's participating subsidiaries to acquire or increase their
proprietary interest in the Company through the purchase of shares of Common Stock at a discount.
The closing price of the Company's Common Stock as of March 16, 2020 was $99.89 per share.
The ESPP is administered by the Administrative Committee of the Waste Management Employee Benefit Plans, a committee appointed by the Board of Directors. The
Administrative Committee has the authority to interpret all provisions of the ESPP.
Any employee who customarily works for one of the Company's participating subsidiaries at least 20 hours per week and more than five months in a
calendar year is eligible to participate in the ESPP after having been employed for at least 30 days prior to an enrollment date.
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2020 Proxy Statement
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PROPOSAL TO AMEND AND RESTATE THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
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On the last day of each six-month period between January 1 and June 30 and July 1 and December 31 (each, an "Offering Period"),
each employee who is enrolled in the ESPP will automatically purchase a number of shares of Common Stock determined by dividing such employee's payroll deductions accumulated in the ESPP during such
Offering Period by the Offering Price. The Offering Price of each of the shares purchased in a given Offering Period shall be the lower of (a) 85% of the fair market value of a share of Common
Stock on the first day of the Offering Period and (b) 85% of the fair market value of a share of Common Stock on the last day of the Offering Period. If an employee withdraws from participation
during an Offering Period, the monies contributed to the Plan are refunded without interest.
Eligible
employees may elect to participate in the ESPP by taking such enrollment steps as are determined by the Administrative Committee to authorize payroll deductions from the employee's pay in an
amount from 1% to 10% (in whole percentages) of the employee's gross base pay. No employee may (a) make payroll deductions during any calendar year in excess of $21,250 (or such other amount
determined by the Administrative Committee); (b) purchase shares under the ESPP if such purchase would result in the employee owning five percent or more of the total combined voting power or
value of the Company's outstanding capital stock; or (c) purchase shares under the ESPP with a fair market value in excess of $25,000 per calendar year.
All
payroll deductions for the ESPP are placed in our general corporate account. No interest accrues on the payroll deductions. Employees may purchase Common Stock under the ESPP only through payroll
deductions, and an employee participating in the ESPP may not make any additional payments into the account.
If an employee withdraws from participation in the ESPP or terminates employment for any reason, including retirement or death, during an Offering Period, the
payroll deductions credited to the employee's account will be refunded promptly without interest.
The Board of Directors may amend the ESPP at any time; provided, however, the ESPP may not be amended in any way (a) that will cause rights issued
thereunder to fail to meet the requirements for employee stock purchase plans as defined in Section 423 of the Internal Revenue Code of 1986, as amended (the "Code") or (b) that requires
stockholder approval, unless such stockholder approval is obtained. In addition, other amendments not requiring stockholder approval pursuant to Section 423 of the Code may also be made by the
Plan Sponsor Committee of Waste Management Employee Benefit Plans, a committee appointed by the Board of Directors.
The
ESPP will terminate on the earlier of (a) the date that participating employees become entitled to purchase an aggregate number of shares greater than the number of shares remaining
available for purchase under the ESPP and (b) the date on which the ESPP is terminated by the Board of Directors.
Federal Income Tax Consequences
The following discussion is intended to be a general summary only of the federal income tax aspects of purchase rights granted under the ESPP
and not of state or local taxes that may be applicable. Tax consequences may vary depending on the particular circumstances, and administrative and judicial interpretations of the application of the
federal income tax laws are subject to change. Participants in the ESPP who are residents of or are employed in a country other than the United States may be subject to taxation in accordance with the
tax laws of that particular country in addition to or in lieu of U.S. federal income taxes.
The
ESPP is intended to be an "employee stock purchase plan" as defined in Section 423 of the Code. A participant recognizes no taxable income either as a result of commencing participation in
the ESPP or purchasing Common Stock under the terms of the ESPP. If a participant disposes of shares purchased under the ESPP within either two years from the first day of the applicable Offering
Period or within one year from the purchase date, known as disqualifying dispositions, the participant will realize ordinary income in the year of such disposition equal to the amount by which the
fair market value of the shares on the purchase date exceeds the purchase price. The amount of the ordinary income will be added to the participant's basis in the shares, and any additional gain or
resulting loss recognized on the disposition of the shares will be a capital gain or loss, which will be long-term if the participant's holding period is more than 12 months. If the participant
disposes of shares purchased under the ESPP at least two years after the first day of the applicable Offering Period and at least one year after the purchase date, the participant will realize
ordinary income in the year of disposition equal to the lesser of (a) the excess of the fair market value of the shares on the date of disposition over the purchase price or (b) 15% of
the fair market value of the shares on the first day of the applicable Offering Period. The amount of any ordinary income will be added to the participant's basis in the shares, and any additional
gain recognized upon the disposition after such basis adjustment will be a long-term capital gain. If the fair market value of the shares on the date of disposition is less than the purchase price,
there will be no ordinary income and any loss recognized will be a
2020 Proxy Statement | 55
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PROPOSAL TO AMEND AND RESTATE THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
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long-term
capital loss. Any ordinary income recognized by a participant upon the disqualifying disposition of the shares generally should be deductible by the Company for federal income tax purposes,
except to the extent such deduction is limited by applicable provisions of the Code or the regulations thereunder.
New Plan Benefits
The value of the Common Stock purchased through the ESPP will vary based on the fair market value of our Common Stock on the first and last
days of the Offering Period. Accordingly, the number of shares that may be purchased by the named executive officers, the executive officers as a group and all employees, including all current
officers who are not executive officers, as a group in the future is not currently determinable. However, the table below shows, as to each of the indicated individuals and groups, the number of
shares of Common Stock purchased by such individuals during the 2019 Offering Periods under the ESPP. The weighted average purchase price per share of Common Stock purchased during the 2019 Offering
Periods under the ESPP was $85.09. Non-employee directors of the Company are not eligible to participate in the ESPP.
|
|
|
|
|
Name/Group
|
|
Number of Shares
|
|
|
|
|
|
|
James C. Fish, Jr.
|
|
|
|
|
|
|
|
|
|
Devina A. Rankin
|
|
|
|
|
|
|
|
|
|
John J. Morris, Jr.
|
|
|
|
|
|
|
|
|
|
Steven R. Batchelor
|
|
|
281
|
|
|
|
|
|
|
Charles C. Boettcher
|
|
|
261
|
|
|
|
|
|
|
Tara J. Hemmer
|
|
|
281
|
|
|
|
|
|
|
Leslie K. Nagy
|
|
|
70
|
|
|
|
|
|
|
Tamla Oates-Forney
|
|
|
|
|
|
|
|
|
|
Nikolaj H. Sjoqvist
|
|
|
281
|
|
|
|
|
|
|
Michael J. Watson
|
|
|
265
|
|
|
|
|
|
|
All executive officers, as a group
|
|
|
1,439
|
|
|
|
|
|
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All employees, including all current officers who are not executive officers, as a group
|
|
|
535,484
|
|
|
|
|
|
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Vote Required for Approval
Approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock present at the meeting, in
person or represented by proxy, and entitled to vote.
The
Company does not intend to bring any other matters before the annual meeting, nor does the Company have any present knowledge that any other matters will be presented by others for action at the
meeting. If any other matters are properly presented, your proxy card authorizes the people named as proxy holders to vote using their judgment.
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WASTE MANAGEMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated Effective May 12, 2020)
The Waste Management, Inc. Employee Stock Purchase Plan (the "Plan") has been established for the benefit of its eligible employees, and is hereby
amended and restated, effective as of the date upon which shareholder approval is obtained pursuant to Section 17. The terms of the amended and restated Plan are set forth below.
1. Definitions.
As
used in the Plan the following terms shall have the meanings set forth below:
(a) "Board"
means the Board of Directors of the Company.
(b) "Code"
means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.
(c) "Committee"
means the Administrative Committee of the Waste Management Employee Benefit Plans appointed by the Board to administer the Plan as described in
Section 4 below, or such other committee appointed by the Board.
(d) "Common
Stock" means the common stock, $0.01 par value, of the Company.
(e) "Company"
means Waste Management, Inc., a Delaware corporation, or any successor corporation by merger, reorganization, consolidation or otherwise.
(f) "Continuous
Employment" means the absence of any interruption or termination of service as an Eligible Employee with the Company and/or its Participating Subsidiaries.
For purposes of the preceding sentence, an authorized leave of absence shall not be considered an interruption or termination of service, provided that such leave is for a period of not more than
90 days or reemployment upon the expiration of such leave is guaranteed by contract or statute.
(g) "Eligible
Compensation" means, with respect to each Participant for each pay period, the regular base earnings, commissions, overtime and, for employees on an
Involuntary Military Leave of Absence, pay differential, paid to the Participant by the Company and/or one or more Participating Subsidiaries during the Offering Period before reductions are made to
Code Section 125 and Section 401(k) plans maintained by the Company and/or its Participating Subsidiaries. However, any incentive compensation or other bonus amounts shall be excluded
for purposes of determining Eligible Compensation.
(h) "Eligible
Employee" means an employee of the Company or one of its Participating Subsidiaries who is customarily employed for at least 20 hours per week and more
than five months in a calendar year, or are absent from active employment while on an Involuntary Military Leave of Absence. For purposes of the preceding sentence, employees who are members of a
collective bargaining unit shall be excluded as eligible employees under the Plan, unless their applicable collective bargaining agreement provides for participation in the Plan.
(i) "Enrollment
Date" means the first business day of each Offering Period.
(j) "Exercise
Date" means the last business day of each Offering Period.
(k) "Exercise
Price" means the price per share of Common Stock offered in a given Offering Period, which shall be the lower of: (i) 85% of the Fair Market Value of a
share of the Common Stock on the Enrollment Date of such Offering Period, or (ii) 85% of the Fair Market Value of a share of the Common Stock on the Exercise Date of such Offering Period.
(l) "Fair
Market Value" means, with respect to a share of Common Stock as of any Enrollment Date or Exercise Date, the closing price of such Common Stock on the New York
Stock Exchange on such date, as reported in The Wall Street Journal. In the event that such a closing price is not available for an Enrollment Date or an
Exercise Date, the Fair Market Value of a share of Common Stock on such date shall be the closing price of a share of the Common Stock on the New York Stock Exchange on the last business day prior to
such date or such other amount as may be determined by the Committee by any fair and reasonable means.
2020 Proxy Statement | A-1
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(m) "Involuntary
Military Leave of Absence" means an employee's leave from employment pursuant to the Company's Paid Leave of Absence Policy to perform military service
obligations in the United States Air Force, Army, Navy, Marines, Coast Guard, Public Health Service Corps or National Guard, and the employee is either drafted or a member of the Reserves called to
active duty.
(n) "Offering
Period" means each six-month period that begins and ends on the business days that coincide with January 1 through June 30, or July 1
through December 31, or such other period or periods as the Committee may establish. However, if the first and/or last day of an Offering Period begins or ends (as applicable) on a Saturday,
Sunday or holiday, then (i) the first day of the Offering Period will begin on the immediately following business day, and/or (ii) the last day of an Offering Period will end on the
immediately preceding business day.
(o) "Participant"
means an Eligible Employee who has elected to participate in the Plan by filing an enrollment agreement with the Company as provided below in
Section 6.
(p) "Participating
Subsidiary" means any Subsidiary not excluded from participation in the Plan by the Committee, in its sole discretion.
(q) "Subsidiary"
means any domestic or foreign corporation of which the Company owns, directly or indirectly, 50% or more of the total combined voting power of all classes
of stock or other equity interests and that otherwise qualifies as a "subsidiary corporation" within the meaning of Section 424(f) of the Code or any successor thereto.
2. Purpose of the Plan.
The
purpose of the Plan is to provide an incentive for present and future employees of the Company and its Participating Subsidiaries to acquire a proprietary interest (or increase an
existing proprietary interest) in the Company through the purchase of Common Stock. The Company intends that the Plan qualify as an "employee stock purchase plan" under Section 423 of the Code,
and that the Plan shall be administered, interpreted and construed in a manner consistent with the requirements of Section 423 of the Code.
3. Shares Reserved for the Plan.
As
of the effective date of this restatement, the Company shall reserve for issuance and purchase by Participants under the Plan an aggregate of three million shares of Common Stock in
addition to shares previously reserved under the Plan, subject to adjustment as provided below in Section 13. Shares of Common Stock subject to the Plan may be newly issued shares or treasury
shares. If and to the extent that any option to purchase shares of Common Stock shall not be exercised for any reason, or if such right to purchase shares shall terminate as provided herein, the
shares that have not been so purchased hereunder shall again become available for the purposes of the Plan, unless the Plan shall have been terminated.
4. Administration of the Plan.
(a) The
Committee has been appointed by the Board to administer the Plan. The Committee shall have the authority to interpret the Plan, to prescribe, amend and rescind rules
and regulations relating to the Plan, to correct any defect or rectify any omission in the Plan, or to reconcile any inconsistency in this Plan and any option to purchase shares granted hereunder, and
to make all other determinations necessary or advisable for the administration of the Plan. The Committee's actions and determinations with respect to the foregoing shall be final, conclusive and
binding on all persons. The act or determination of a majority of the members of the Committee shall be deemed to be the act or determination of the entire Committee.
(b) The
Committee may, in its discretion, request advice or assistance, or employ such other persons as it deems necessary or appropriate for the proper administration of
the Plan, including, but not limited to employing a brokerage firm, bank or other financial institution to assist in the purchase of shares, delivery of reports or other administrative aspects of the
Plan.
5. Eligibility to Participate in the Plan.
Subject
to limitations imposed by Section 423(b) of the Code, each Eligible Employee who is employed by the Company or a Participating Subsidiary for 30 days prior to an
Enrollment Date shall be eligible to participate in the Plan for the Offering Period beginning on that Enrollment Date.
6. Election to Participate in the Plan.
(a) Each
Eligible Employee may elect to participate in the Plan by completing an enrollment agreement in the form provided by the Company and filing such enrollment
agreement with the Company prior to the applicable Enrollment Date, unless the Committee establishes another deadline for filing the enrollment agreement with respect to a given Offering Period.
(b) Unless
a Participant withdraws from participation in the Plan as provided in Section 10 or authorizes a different payroll deduction by filing a new enrollment
agreement prior to the Enrollment Date of a succeeding Offering Period, a Participant who is
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participating
in an Offering Period as of the Exercise Date of such Offering Period shall be deemed to have (i) elected to participate in the immediately succeeding Offering Period and
(ii) authorized the same payroll deduction percentage for such immediately succeeding Offering Period as was in effect for such Participant immediately prior to such succeeding Offering Period.
7. Payroll Deductions.
(a) All
Participant contributions to the Plan shall be made only by payroll deductions. Each time a Participant files the enrollment agreement with respect to an Offering
Period, the Participant shall authorize payroll deductions to be made during the Offering Period in an amount from 1% to 10% (in whole percentages) of the Eligible Compensation that the Participant
receives on each payroll date during such Offering Period. Payroll deductions for a Participant shall commence on the first payroll date following the Enrollment Date and shall end on the last payroll
date in the Offering Period to which such authorization is applicable, unless sooner terminated by the Participant as provided below in Section 10.
(b) All
payroll deductions made for a Participant shall be deposited in the Company's general corporate account and shall be credited to the Participant's account under the
Plan. No interest shall accrue on or be credited with respect to the payroll deductions of a Participant under the Plan. A Participant may not make any additional contributions into such account. All
payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.
(c) Except
as provided in Section 10, a Participant may not change his contribution election during an Offering Period.
(d) Notwithstanding
the foregoing provisions of this Section 7, no Participant may make payroll deductions during any calendar year in excess of $21,250, or such
other limit as may be established by the Committee, in its discretion.
8. Grant of Options.
(a) On
the Enrollment Date of each Offering Period, subject to the limitations set forth in Sections 3 and 8(b) hereof, each Eligible Employee shall be granted an
option to purchase on the Exercise Date for such Offering Period a number of whole and, to the extent permitted by the Committee, fractional shares of the Company's Common Stock determined by dividing
such Eligible Employee's payroll deductions accumulated during the Offering Period by the Exercise Price established for such Offering Period.
(b) Notwithstanding
any provision of the Plan to the contrary, no Eligible Employee shall be granted an option under the Plan (i) if, immediately after the grant,
such Eligible Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase
stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary of the Company, or (ii) which permits such Eligible
Employee's rights to purchase stock under all employee stock purchase plans of the Company and its Subsidiaries to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined
at the time such option is granted) for each calendar year in which such option is outstanding at any time.
9. Automatic Purchase.
Unless
a Participant withdraws from the Plan as provided below in Section 10, the Participant's option for the purchase of shares will be exercised automatically on each Exercise
Date for which an enrollment agreement has been filed, and the maximum number of whole and, to the extent permitted by the Committee, fractional shares subject to the option will be purchased for the
Participant at the Exercise Price established for that Offering Period, as provided above in Section 8. Any
accumulated payroll deductions in excess of the amount applied to purchase shares on the Exercise Date shall be refunded to the Participant as soon as administratively feasible after the Exercise
Date, unless the Committee establishes otherwise.
10. Withdrawal; Termination of Employment.
(a) A
Participant may withdraw all of the payroll deductions credited to the Participant's account for a given Offering Period by providing written notice to the Company no
later than 45 days prior to the last day of such Offering Period. A Participant shall not be permitted to make a partial withdrawal of the payroll deductions credited to his account. All of the
Participant's payroll deductions credited to the Participant's account will be paid to him promptly after receipt of the Participant's notice of withdrawal, the Participant's participation in the Plan
will be automatically terminated, and no further payroll deductions for the purchase of shares hereunder will be made. Payroll deductions will not resume on behalf of a Participant who has withdrawn
from the Plan, unless written notice is delivered to the Company within the enrollment period preceding the commencement of a new Offering Period directing the Company to resume payroll deductions.
(b) Upon
termination of the Participant's Continuous Employment prior to the Exercise Date of the Offering Period for any reason, including retirement or death, the payroll
deductions credited to the Participant's account will be returned to the Participant or, in the case of death, to the Participant's estate, and the Participant's options to purchase shares under the
Plan will be automatically terminated.
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(c) In
the event a Participant ceases to be an Eligible Employee during an Offering Period, the Participant will be deemed to have elected to withdraw all payroll deductions
credited to his account from the Plan. In such circumstance, the payroll deductions credited to the Participant's account will be returned to the Participant, and the Participant's options to purchase
shares under the Plan will be terminated.
11. Transferability.
Options
to purchase Common Stock granted under the Plan are not transferable, in any manner, by a Participant and are exercisable only by the Participant.
12. Reports.
Individual
notional accounts will be maintained for each Participant in the Plan. Following each Exercise Date, Participants who have purchased shares under Section 9 may access a
summary of their purchases in the manner determined by the Committee.
13. Adjustments Upon Changes in Capitalization.
(a) If
the outstanding shares of Common Stock are increased or decreased, or are changed into or are exchanged for a different number or kind of shares, as a result of one
or more reorganizations, restructurings, recapitalizations, reclassifications, stock splits, reverse stock splits, stock dividends or the like, upon authorization of the Committee, appropriate
adjustments shall be made in the number and/or kind of shares, and the per share purchase price thereof, which may be issued in the aggregate and to any Participant upon exercise of options granted
under the Plan.
(b) In
the event of the proposed dissolution or liquidation of the Company, each Offering Period will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Committee. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another
corporation, each option under the Plan shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the
Committee determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, that the Participant shall have the right to exercise the option as to all of the optioned
stock, including shares as to which the option would not otherwise be exercisable. If the Committee makes an option fully exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Committee shall notify the Participant that the option shall be fully exercisable for a stated period, which shall not be less than 10 days from the date of such notice, and
the option will terminate upon the expiration of such period.
(c) In
all cases, the Committee shall have full discretion to exercise any of the powers and authority provided under this Section 13, and the Committee's actions
hereunder shall be final and binding on all Participants. No fractional shares of stock shall be issued under the Plan pursuant to any adjustment authorized under the provisions of this
Section 13.
14. Amendment of the Plan.
The
Company may at any time, or from time to time, amend the Plan in any respect through action of the Board or, for any amendment that does not require shareholder approval, through
action of the Plan Sponsor Committee of the Waste Management Employee Benefit Plans; provided, however, that the Plan may not be amended in any way that will cause rights issued under the Plan to fail
to meet the requirements for employee stock purchase plans as defined in Section 423 of the Code or any successor thereto, including, without limitation, shareholder approval, if required.
15. Termination of the Plan.
The
Plan and all rights of Eligible Employees hereunder shall terminate:
(a) on
the Exercise Date that Participants become entitled to purchase a number of shares greater than the number of reserved shares remaining available for purchase under
the Plan; or
(b) at
any time, at the discretion of the Board.
In
the event that the Plan terminates under circumstances described in Section 15(a) above, reserved shares remaining as of the termination date shall be sold to Participants on a
pro rata basis.
16. Notices.
All
notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by
the Company at the location, or by the person, designated by the Company for the receipt thereof.
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17. Shareholder Approval.
This
amended and restated Plan shall be subject to approval by the shareholders of the Company within twelve months after the date the amended and restated Plan is adopted by the Board
of Directors.
18. Conditions Upon Issuance of Shares.
(a) The
Plan, the grant and exercise of options to purchase shares of Common Stock under the Plan, and the Company's obligation to sell and deliver shares upon the exercise
of options to purchase shares shall be subject to all applicable federal, state and foreign laws, rules and regulations, and to such approvals by any regulatory or governmental agency as may, in the
opinion of counsel for the Company, be required. Notwithstanding anything in the Plan to the contrary, share certificates shall not be delivered to Participants until the later of (i) the date
on which the applicable holding period to avoid a disqualifying disposition (within the meaning of Code Section 421) expires, or (ii) the date that a Participant specifically requests a
certificate for shares purchased pursuant to the Plan.
(b) The
Company may make such provisions, as it deems appropriate, for withholding by the Company pursuant to all applicable tax laws of such amounts as the Company
determines it is required to withhold in connection with the purchase or sale by a Participant of any Common Stock acquired pursuant to the Plan. The Company may require a Participant to satisfy any
relevant tax requirements before authorizing any issuance of Common Stock to such Participant.
19. General Provisions.
(a) Notwithstanding
any provision of the Plan to the contrary and in accordance with Section 423 of the Code, all Eligible Employees who are granted options under the
Plan shall have the same rights and privileges.
(b) Neither
the Plan nor any compensation paid hereunder will confer on any Participant the right to continue as an employee or in any other capacity.
(c) A
Participant will become a stockholder with respect to the shares of Common Stock that are purchased pursuant to options granted under the Plan only when the shares are
issued to the Participant in accordance with the terms of the Plan. A Participant will have no rights as a stockholder with respect to shares of Common Stock for which an election to participate in an
Offering Period has been made until such Participant becomes a stockholder as provided above.
(d) The
Plan shall be binding on the Company and its successors and assigns.
(e) This
Plan constitutes the entire plan with respect to the subject matter hereof and supersedes all prior plans with respect to the subject matter hereof.
(f) The
Plan and all rights hereunder shall be subject to and interpreted in accordance with the laws of the State of Texas, without reference to the principles of conflicts
of laws, and to applicable Federal or other securities laws.
2020 Proxy Statement | A-5
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 11, 2020. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. WASTE MANAGEMENT, INC. 1001 FANNIN STREET HOUSTON, TX 77002 ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by Waste Management, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 11, 2020. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Waste Management, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E96979-P31917 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. WASTE MANAGEMENT, INC. The Board of Directors recommends you vote FOR each of the nominees in item 1 and FOR proposals 2, 3 and 4: 1. Election of Directors Nominees: For Against Abstain ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1a. Frank M. Clark, Jr. 1b. James C. Fish, Jr. For Against Abstain ! ! ! ! ! ! ! ! ! 1c. Andrés R. Gluski 2. Ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for 2020. Non-binding, advisory proposal to approve our executive compensation. Proposal to amend and restate our Employee Stock Purchase Plan to increase the number of shares authorized for issuance. 1d. Victoria M. Holt 3. 4. 1e. Kathleen M. Mazzarella 1f. William B. Plummer NOTE: In their discretion, upon such other matters that may properly come before the meeting or any adjournment or adjournments thereof. 1g. John C. Pope 1h. Thomas H. Weidemeyer ! For address changes and/or comments, please check this box and write them on the back where indicated. ! Yes ! No Please indicate if you plan to attend this meeting. The shares represented by this proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder(s). If no direction is made, this proxy will be voted FOR each of the nominees in item 1 and FOR proposals 2, 3 and 4. If any other matters properly come before the meeting, the persons named in this proxy will vote in their discretion. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Combined Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2019 are available at www.wm.com. E96980-P31917 WASTE MANAGEMENT, INC. Annual Meeting of Stockholders - THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS The undersigned stockholder(s) of Waste Management, Inc., a Delaware corporation, hereby acknowledge(s) receipt of the Proxy Statement dated March 27, 2020, and hereby appoint(s) James C. Fish, Jr. and Charles C. Boettcher, Sr., and each of them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the Annual Meeting of Stockholders of Waste Management, Inc., to be held May 12, 2020, at 11:00 A.M., Central Time, and at any adjournment(s) thereof, and to vote all shares of Common Stock which the undersigned would be entitled to vote if then and there personally present, on all matters set forth on the reverse side. Attention participants in 401(k) plans: If you have an interest in the Common Stock of Waste Management, Inc. through participation in the Waste Management Retirement Savings Plan, you may confidentially instruct the Trustee(s) of the plan on how to vote the shares representing your proportionate interest in such plan's assets. The Trustee(s) shall vote shares in accordance with any instructions received. Any shares for which the Trustee(s) has/have not received timely voting instructions shall be voted by the Trustee(s), pursuant to the direction of the State Street Bank and Trust Company, as Investment Manager for the Common Stock held through the plan. The voting deadline for 401(k) plan participants is 11:59 P.M. Eastern Time on May 10, 2020. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Address Changes/Comments: