UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Boston Private Financial Holdings, Inc.
(Name of Registrant as Specified In Its Charter)
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BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
Ten Post Office Square
Boston, Massachusetts 02109
Dear Fellow Shareholders:
On behalf of the Board of Directors and the management of Boston Private Financial Holdings, Inc. (the “Company”), you are invited to attend the Company’s 20172019 Annual Meeting of Shareholders.Shareholders (the “Meeting”). The meetingMeeting will be held on Thursday, April 27, 201718, 2019 at 10:00 a.m., Eastern time,Time, at Ten Post Office Square, 2nd Floor, Boston, Massachusetts 02109.
The attached Notice of the 20172019 Annual Meeting of Shareholders and Proxy Statement describe the formal business to be conducted at the meeting.Meeting. Please refer to the Proxy Statement for detailed information on each of the proposals. Only shareholders of record at the close of business on March 9, 20171, 2019 may vote at the meetingMeeting or any postponements or adjournments of the meeting.Meeting.
On behalf of the Board of Directors and all employees of Boston Private Financial Holdings, Inc., I thank you for your continued support of our Company.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the 20172019 Annual Meeting of Shareholders, please vote in order to ensure the presence of a quorum.
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| Sincerely, |
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/s/ CLAYTON G. DEUTSCH
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Clayton G. DeutschAnthony DeChellis |
| Chief Executive Officer and President |
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| Boston, Massachusetts |
Dated: March 21, 201714, 2019 |
BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
Ten Post Office Square
Boston, Massachusetts 02109
NOTICE OF 20172019 ANNUAL MEETING OF SHAREHOLDERS
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| TIME AND DATE | | 10:00 a.m., Eastern Time, Thursday, April 27, 201718, 2019 |
| PLACE | | Ten Post Office Square, 2nd Floor Boston, Massachusetts 02109 |
| ITEMS OF BUSINESS | (1) | To elect the elevennine director nominees named in the Proxy Statement to serve until the 20182020 annual meeting and until their successors are duly elected and qualified. |
| | (2) | To approve an advisory, non-binding resolution on the compensation of the named executive officers as disclosed in the Proxy Statement. |
| | (3) | To select the frequency of future shareholder advisory votes to approve the compensation of the Company’s named executive officers. |
| (4) | To ratify the selection of KPMG LLP as the Company’s independent registered public accounting firm for fiscal year 2017.2019. |
| | (5)(4) | To transact any other business that may properly come before the meeting.Meeting. |
| RECORD DATE | | Only shareholders of record at the close of business on March 9, 20171, 2019 may vote at the meeting or any postponements or adjournments of the meeting.Meeting. |
| PROXY VOTING | | Your vote is very important. Please complete, date, sign and return the accompanying proxy card or vote electronically via the Internetinternet or by telephone. The enclosed return envelope requires no additional postage if mailed in the United States. For specific instructions on how to vote your shares, please refer to the section in the Proxy Statement entitled “Voting Options.” |
We look forward to your attendance in person or by proxy.
By Order of the Board of Directors,
MARGARET W. CHAMBERS
CHRISTOPHER A. COOPER
Corporate Secretary
Boston, Massachusetts
Dated: March 21, 201714, 2019
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on April 18, 2019. The Proxy Statement and our 2018 Annual Report are available at: http://www.viewproxy.com/bostonprivate/2019
TABLE OF CONTENTS
PROXY STATEMENT
for the
20172019 ANNUAL MEETING OF SHAREHOLDERS
The Company’s Board of Directors (the “Board”) is making this Proxy Statement available to you in connection with the solicitation of proxies by our Board for the 20172019 Annual Meeting of Shareholders (the “Meeting”). The Meeting will be held on Thursday, April 27, 201718, 2019 at 10:00 a.m., Eastern time,Time, at Ten Post Office Square, 2nd Floor, Boston, Massachusetts 02109.
VOTING INFORMATION
Record Date. The record date for the Meeting is March 9, 20171, 2019 (the “Record Date”). At the close of business on the Record Date, there were 84,134,00583,767,232 shares of the Company’s common stock entitled to be voted at the Meeting, and there were 1,003878
shareholders of record. There are no other outstanding shares that are eligible to vote.
Voting Your Proxy. Only shareholders of record at the close of business on the Record Date are entitled to vote at the Meeting. Each outstanding share of common stock is entitled to one vote on each matter before the Meeting.
Vote Required. A quorum of the common stock must be present at the Meeting for any business to be conducted. The presence, in person or by proxy, of the holders of at least a majority of the votes entitled to be cast on a matter for each voting group constitutes a quorum. Abstentions and broker non-votes will be counted for purposes of determining whether a quorum is present. If a quorum is not present, the Meeting will be adjourned until a quorum is obtained.
Because the number of director nominees is not greater than the number of directors that shareholders will be asked to elect, each director nominee must receive the affirmative vote of a majority of the votes cast as to such nominee by shareholders in order to be elected. Abstentions and broker non-votes will have no effect on the outcome of the election of the nominees.
The approval of the advisory, non-binding resolution on executive compensation requires the affirmative vote of a majority of the votes cast at the Meeting. Abstentions and broker non-votes will have no effect on the outcome of the vote for this proposal.
The non-binding resolution to select the frequency of future shareholder advisory votes to approve the compensation of the Company’s named executive officers will involve your consideration of three choices: every year, every two years, or every three years. You also have the choice to abstain from voting on this item. The choice that receives the highest number of votes, even if it receives less than a majority of the votes cast, will be deemed the choice of the shareholders. Abstentions and broker non-votes will have no effect on the vote for this proposal.
The ratification of the selection of the Company’s independent registered public accounting firm requires the affirmative vote of a majority of the votes cast at the Meeting. Abstentions and broker non-votes will have no effect on the outcome of the vote for this proposal.
We are first sending this Proxy Statement and the accompanying materials to shareholders on or about March 21, 2017.14, 2019.
VOTING OPTIONS
Your vote is very important. Even if you plan to attend the Meeting in person, please cast your vote as soon as possible by:
Mail. The accompanying proxy card, if properly completed, signed, dated and returned in the enclosed envelope, will be voted in accordance with your instructions. The enclosed envelope requires no additional postage if mailed in the United States.
Telephone or Internet. If you hold your shares of common stock directly and not in street name, you may vote by telephone or Internetinternet by following the instructions included on your proxy card. If you vote by telephone or Internet,internet, you do not have to mail in your proxy card. Telephone and Internetinternet voting are available 24 hours a day. For participants in the Company’s 401K and ESPP Plans, Internettelephone and telephoneinternet voting are available through April 24, 201715, 2019 at 11:59 p.m., Eastern time.Time. For all other holders, Internettelephone and telephoneinternet voting are available through April 26, 201717, 2019 at 11:59 p.m., Eastern time.Time.
Voting in Person at the Meeting. If you are a registered shareholder as of the Record Date and attend the Meeting, you may deliver your completed proxy card in person. Additionally, we will have ballots available for those registered shareholders as of the Record Date who wish to vote in person at the Meeting.
A shareholder of record may revoke a proxy any time before the polls close by submitting a later dated vote by telephone, Internet,internet, or mail, by delivering instruments to the Corporate Secretary before the Meeting or by appearing in person at the Meeting and specifically withdrawing any previously voted proxy.
VOTING MATTERS AND VOTING RECOMMENDATIONS
By submitting your proxy by one of the methods listed above, you authorize Margaret W. Chambers, ExecutiveChristopher A. Cooper, Senior Vice President, Acting General Counsel and Corporate Secretary, and David J. Kaye,Steven M. Gaven, Executive Vice President and Chief Financial and Administrative Officer (collectively, the “Proxy Holders”), to represent you and vote your shares at the Meeting in accordance with your instructions. If a properly executed proxy is submitted and no instructions are given, the proxy will be voted in accordance with the Board’s recommendations as follows:
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| Proposal | | | Board Recommendation | | Page Reference (for more detail) |
| Item 1 | Elect the elevennine director nominees named in this Proxy Statement to serve until the 20182020 annual meeting of shareholders and until their successors are duly elected and qualified. | | FOR each Director Nominee | | |
| Item 2 | Approve an advisory, non-binding resolution on the compensation of the Company’s named executive officers. | | FOR | | |
| Item 3 | To select the frequency of future shareholder advisory votes to approve the compensation of the Company’s named executive officers. | | ONE YEAR | | |
Item 4 | Ratify the selection of KPMG LLP as the Company’s independent registered public accounting firm for fiscal year 2017.2019. | | FOR | | |
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors is not aware of any other matters to be considered at the Meeting. If any other matters properly come before the Meeting, the proxies will be voted at the discretion of the Proxy Holders.
ANNUAL REPORT
All shareholders of record are being sent a copy of the Company’s 20162018 Annual Report to Shareholders and the Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which2018 (which contains audited financial statements of the Company for the fiscal years ended December 31, 2016, 20152018, 2017 and 2014,2016), as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2017.27, 2019. These reports, however, are not part of the proxy soliciting material.
A copy of the Company’s Annual Report on Form 10-K filed with the SEC (our “Annual Report”), including all exhibits, may be obtained free of charge by writing to Boston Private Financial Holdings, Inc., Ten Post Office Square, Boston, Massachusetts 02109, Attention: Corporate Secretary,Investor Relations, or by accessing the Company’s website at www.bostonprivate.com, selecting the “Investor Relations” link at the bottom of the page, and then selecting “SEC filings”“Annual Reports” under “Documents.“Financial Information.” [
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of elevennine members. On September 28, 2016,November 5, 2018, the Company announced the resignation of Clayton G. Deutsch as Chief Executive Officer and President of the Company and as a member of the Board of Directors, elected Mark F. Furlongeffective as of November 26, 2018, and Joseph C. Guyaux tothe appointment of Anthony DeChellis as Mr. Deutsch's successor. On February 14, 2019, Daniel P. Nolan resigned from the Board of Directors of the Company. His decision to resign was not the result of any disagreement with management or the Board of Directors.
At this year’s annual meeting,the Meeting, shareholders will be asked to elect elevennine directors, each of whom is currently serving as a director of the Company. Each of the elevennine director nominees has consented to serve as a director if elected at this year’s annual meeting.the Meeting. Each nominee elected as a director will serve until the next annual meeting and until his or her successor has been duly elected and qualified. If any nominee is unable to serve as a director at the annual meeting,Meeting, the Board may reduce the number of directors to be elected at the annual meeting.Meeting.
On January 18, 2017,At the Board of Directors of the Company adopted Amended and Restated By-Laws of the Company to provide for majority voting in uncontested director elections. Article 1, Section 8 of the Amended and Restated Bylaws provides that in order to be elected in an uncontested election, a nominee must receive a majority of the votes cast as to such nominee by the shares entitled to vote in the election at a meeting at which a quorum is present. An incumbent director nominee who fails to receive at least a majority of the votes cast at such a meeting will be required to offer to resign from the Board. The Board will then consider such director’s offer to resign, taking into consideration any factors that it deems relevant in deciding whether to accept such director’s resignation. The Amended and Restated By-Laws retain the plurality voting standard in contested elections where the number of nominees exceeds the number of directors to be elected. At this year’s annual meeting,Meeting, because the number of director nominees is not greater than the number of directors that shareholders will be asked to elect, director nominees must receive a majority of the votes cast as to such nominee by shareholders in order to be elected.
The biographical description below for each nominee includes the specific experience, qualifications, attributes and skills that led to the conclusion by the Board of Directors that such person shouldwould be a good candidate to serve as a director of the Company. In addition to the information presented below regarding each director’s specific experience, qualifications, attributes and skills, the Board also believes that all of the directors have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment ofto service to the Company.
The Board has determined that each nominee, except Mr. Deutsch,DeChellis, qualifies as an independent director under the NASDAQ listing standards.
If any of the nominees shall become unavailable for any reason, all proxies will be voted FOR the election of such other person as the Board of Directors may nominate and recommend.
The Board of Directors unanimously recommends a vote FOR each of its elevennine director nominees.
INFORMATION REGARDING DIRECTOR NOMINEESInformation Regarding Director Nominees
The following table sets forth certain information regarding the nominees for election at the Meeting, based on information furnished by them to the Company:
| | | | Age | | Director Since | | Independent | Age | | Director Since | | Independent |
| Board Nominees | | | | | | | | | | |
| Clayton G. Deutsch | 61 | | 2010 | | NO | |
| Anthony DeChellis | | 56 | | 2018 | | NO |
| Mark F. Furlong | 59 | | 2016 | | YES | 61 | | 2016 | | YES |
| Joseph C. Guyaux | 66 | | 2016 | | YES | 68 | | 2016 | | YES |
| Deborah F. Kuenstner | 58 | | 2007 | | YES | 60 | | 2007 | | YES |
| Gloria C. Larson | 66 | | 2015 | | YES | 68 | | 2015 | | YES |
| John Morton III | 73 | | 2008 | | YES | |
| Daniel P. Nolan | 64 | | 2014 | | YES | |
| Kimberly S. Stevenson | 54 | | 2015 | | YES | 56 | | 2015 | | YES |
| Stephen M. Waters, Chairman of the Board | 70 | | 2004 | | YES | |
| Donna C. Wells | 55 | | 2014 | | YES | |
| Luis Antonio Ubiñas | | 56 | | 2017 | | YES |
| Stephen M. Waters, Chair of the Board | | 72 | | 2004 | | YES |
| Lizabeth H. Zlatkus | 58 | | 2015 | | YES | 60 | | 2015 | | YES |
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Director Nominee Qualifications
This section provides information as of the date of this Proxy Statement about each nominee standing for re-election at the Meeting. It is expected that each nominee, if elected, will also be appointed to the board of directors of Boston Private Bank & Trust Company (the “Bank”), a wholly-owned subsidiary of the Company. Each nominee is currently a member of the board of directors of the Bank. For more information see “Corporate Governance.”
Clayton G. DeutschAnthony DeChellis
Mr. DeutschDeChellis is the Chief Executive Officer and President of the Company which he joined in August 2010, and is also the Chief Executive Officer of the Bank. He joined the Company and was elected to the Board in November 2018. Mr. Deutsch is a member of the Company’s Leadership Team andDeChellis has over 30 years of experience in the financial services industry. He began his career in banking in the 1970s at Society Corporation, the predecessor to Key Corp. Prior to joining the Company, he was the President of OurCrowd Venture Capital from 2014 to 2016, where he developed the firm’s business strategy for an equity capital crowdfunding platform, established a director at McKinseydeal flow process to review hundreds of company investment opportunities each year and initiated the development of a new website to engage and manage client relationships. From 2006 to 2013, Mr. DeChellis was the CEO of Credit Suisse Private Banking - Americas. In this role, he provided executive leadership for Credit Suisse’s Private Banking & Company, which he joinedWealth Management businesses in 1980,North and South America and served as Global Leader of that firm’s Merger Management Practice. During his time at McKinsey, he developed deep experience working with many leading financial institutions, with a particular focus in the private banking, wealth advisory, and wealth management sectors, as he helped establish and build McKinsey’s Financial Services practice globally. As a senior leader at McKinsey, Mr. Deutsch managed the Midwest complex of McKinsey offices including Chicago, Pittsburgh, Minneapolis, Cleveland and Detroit, and founded and led the Great Lakes Financial Services practice. Throughout his career with McKinsey, he consulted with financial services providers and other businesses on global strategy development, performance improvement, mergers and acquisitions strategy and corporate governance, among other areas. Mr. Deutsch also served as Chairman of McKinsey’s Principal Review Committee, a member of the Director ReviewCS Global Private Banking Management Committee, the Board of Directors for Credit Suisse Securities USA, LLC, the firm's Private Banking Global Risk Management Committee, the firm’s Global Diversity Committee and the CS Global Investment Banking Management Committee. From 2003 to 2006, Mr. DeChellis was the Head of UBS Private Wealth Management. During his tenure at UBS, Mr. DeChellis launched the Private Wealth Management business for UBS in the United States and oversaw the expansion of services catering to ultra-high net worth clients. He was a long-time member of the ShareholdersUBS Americas Management Council (McKinsey’s boardand the UBS Global Private Banking Leadership Group. Prior to joining UBS, from 1987 to 2003, Mr. DeChellis held various positions at Merrill Lynch, including Head of directors) and ChairInternational Private Banking for Merrill Lynch Europe. Mr. DeChellis is a member of the Professional Standards Committee. Mr. DeutschBoard of Trustees of The Berkshire School, the Board of Directors of The Open Door Homeless Shelter and the President’s Leadership Council of Rollins College. He serves as a member of the board of directors of each of the Company’sCompany's operating subsidiaries. In addition to Mr. Deutsch’sDeChellis’ management expertise, he brings to our Board extensive knowledge of financial services strategies. His skills at directing corporate strategy provide our Board with a valuable resourceprivate banking and wealth management strategies as the Company expands its strategic direction. Mr. Deutsch’s extensive experience in the financial services industry and deep strategic expertise makedirection, making him an excellent nominee for the Board.
Mark F. Furlong
Mr. Furlong was elected to the Board in September 2016. Mr. Furlong retired as President and Chief Executive Officer of BMO Harris Bank, N.A. in 2015, a role he assumed upon the close of the acquisition of Marshall & Ilsley Corporation by BMO Financial Group in 2011. He joined Marshall & Ilsley Corporation in 2001 as Chief Financial Officer, was elected President in 2004, Chief Executive Officer in 2007, and ChairmanChair in 2010. Prior to joining Marshall & Ilsley, he was Chief Financial Officer of Old Kent Financial Corp.; First Vice President, Corporate Development, for H. F. Ahmanson & Company; a partner for Deloitte; and a manager for KPMG LLP. Mr. Furlong also is a member of the boards of directors of Kforce Inc., Antares Capital and Antares
Capital.Heska Corporation. Mr. Furlong is the immediate past-Chair of Chicago United, the largest Chicago-based organization focused solely on businesses, addressing diversity in boards of directors, management, and supplier relationships. He is a board member of One Hope United,Common Ground Foundation, a social services organization focused on families;group that works with high school students
from under-served communities to become future leaders; Chicago Board of Education; Chicago Teachers’ Pension Fund; Northwestern Memorial Hospital Finance Committee; and the Northwestern Memorial Foundation; and World Business Chicago.Foundation. He is the founding and immediate past-Chair of LEAP Innovations. During his tenure in Milwaukee, heMr. Furlong was involved in numerous civic activities, including the roles of Chair of both Junior Achievement of Wisconsin and Schools That Can Milwaukee, and a member of the boards of directors of United Way of Greater Milwaukee, Wisconsin Manufacturers and Commerce, Froedtert Health, and the United Performing Arts Fund. Due to his considerable expertise, including his experience as President and Chief Executive Officer of BMO Harris Bank, N.A., the Company believes Mr. Furlong brings unique insight to the Board concerning capital allocation strategies and banking issues, in addition to his overall management, auditing and financial expertise. With his significant experience in the banking industry, as well as his background as a chief executive officer, the Company believes Mr. Furlong is a highly qualified candidate for the Board.
Joseph C. Guyaux
Mr. Guyaux was elected to the Board in September 2016. He retired in 2016 from PNC Financial Services Group, Inc., where he worked for 44 years and served as President from 2002 to 2012. In this role, Mr. Guyaux was head of Retail Banking, responsible for leading all of PNC Bank’s (a subsidiary of PNC Financial Services Group) consumer businesses, including consumer and business banking, wealth management and brokerage. Mr. Guyaux held several other senior leadership positions at PNC Financial Services Group, including Chief Risk Officer from 2012 to 2015. Most recently, Mr. Guyaux served as President and CEO of PNC Mortgage, a division of PNC Bank, from 2015 to 2016. Mr. Guyaux is ChairmanChair of the Boardsboards of directors of DQE Holdings, LLC, Duquesne Light Company and Highmark Health, Inc. He is also isLead Director of Highmark, Inc. and a lead director of AHN Health Network and Visionworks, Inc., each a subsidiary of Highmark Health, Inc. He serves as a Life Trustee for Carnegie Museums of Pittsburgh and as an Emeritusa director emeritus for the Civic Light Opera and Duquesne University. The Company believes that Mr. Guyaux’s extensive experience in the financial services industry makesand his risk management expertise make him an excellent nominee for the Board of Directors.Board.
Deborah F. Kuenstner
Ms. Kuenstner is the Chief Investment Officer of Wellesley College. Before joining Wellesley College in February of 2009, Ms. Kuenstner was Chief Investment Officer and Vice President of Investment Management at Brandeis University from 2007 to January 2009. Prior to working at Brandeis, Ms. Kuenstner was Managing Director of Research for Fidelity Management & Research Company, the investment management organization of Fidelity Investments.Investments, from 2005 to 2006. Ms. Kuenstner was the Chief Investment Officer, Global Value, at Putnam Investments from 2000 to 2004. Her other roles at Putnam included Chief Investment Officer, International Value, and Senior Portfolio Manager, International Equities. Prior to that, she worked at DuPont Pension Fund Investment in Wilmington, Delaware as a Senior Portfolio Manager, International Equities. Ms. Kuenstner has also been a Vice President, International Investment Strategist, at Merrill Lynch, in addition to an Economist at the Federal Reserve Bank of New York. Ms. Kuenstner was actively involved in the Board of Pensions of the Presbyterian Church USA from 1996-2004 as Investment Committee Chair and a director, and most recently,until becoming a co-opted director. Ms. Kuenstner brings to the Board valuable experience and knowledge about the financial services industry generally and, in particular, the investment management arena. Along with this experience, herMs. Kuenstner's economic and risk management expertise make her an excellent nominee for the Board.
Gloria C. Larson
Ms. Larson hascurrently serves as President in Residence of the Harvard Graduate School of Education. Until her retirement in 2018, Ms. Larson served as the President of Bentley University since July 2007 and iswas the first woman to hold this position. Ms. Larson formerly served as the Co-Chair of the Government Strategies Group at the law firm of Foley Hoag LLP and from 1996 until 2007 and managed a practice that covered a broad array of federal, state and local regulatory and business development issues. Widely influential in economic policy, Ms. Larson was Secretary of Economic Affairs for The Commonwealth of Massachusetts from 1993 to 1996 and was responsible for developing and promoting economic growth policies and fostering employment opportunities. She served as The Commonwealth of Massachusetts Secretary of Consumer Affairs and Business Regulation from 1991 to 1993, where she was responsible for regulatory oversight of banking, insurance and energy, as well as consumer protection. Prior to her state service, she oversaw business and regulatory issues at the federal level as a senior official with the Federal Trade Commission (FTC), where she served as Deputy Director of Consumer Protection from 1990 to 1991 and as Attorney Advisor to Commissioner Patricia P. Bailey from 1981 to 1988. Ms. Larson has been honored and recognized by many groups for her contributions to state economic development policy and her commitment to civic engagement. Ms. Larson previously served as a member of the Council of Economic Advisors, as well as the Massachusetts Clean Energy Center and the Commonwealth’s Successful Women, Successful Families Task Force. Ms. Larson has served as a member of the Liberal Education and America’s Promise (LEAP) Presidents’ Trust and is a former member of the Executive Committee of the American College and University Presidents Climate Commitment. She served for more than a decade as ChairmanChair of the Massachusetts Convention Center Authority (MCCA), and was the first woman to serve as ChairmanChair of the Greater Boston Chamber of Commerce, where she continues to serve on the Chamber’s Executive Committee. Ms. Larson presently holds the post of President of the Massachusetts Conference for Women. In addition, she is a board or advisory council member of several prominent professional, charitable and civic organizations. Ms. Larson currently serves as a directoron the board of Unum
Group, chairing Unum’s Regulatory ComplianceGovernance Committee. She was recently elected to the McLean Hospital Board of Trustees. Ms. Larson previously served as a director on the boards of
KeySpan Energy and RSA Security, as well as a member of the board of Blue Cross Blue Shield of MA.Massachusetts. Ms. Larson’s deep ties in the Massachusetts community, as well as her expertise in public company matters, and in the regulatory oversight of banking and the financial services industry bring great value to the Board of Director’sBoard’s oversight and guidance of the Company as it continues to focus on its strategic goal of becoming a premier private banking, and wealth management company.
John Morton III
Mr. Morton is a seasoned bank executive with over 35 years of banking and financial services experience. He has extensive experience leading organizational turnarounds, acquisition integrations, business growth and corporate governance activities. Mr. Morton was a director of Fortress International Group, Inc. from January 2007, and served as Chairman from December 2008 to January 2012, when he resigned from the board. Mr. Morton served as an advisor to Fortress International Group, Inc.’s board through the first quarter of 2012. He has been a director of Barry-Wehmiller Companies, Inc. since July 2007, and Dynamac International Inc., from the late 1980s until it was sold in early 2010. Mr. Morton served as a director of Broadwing Corporation from April 2006 to January 2007. He served as President of Premier Banking for Bank of America Corp. from August 2004 to September 2005. From 1997 to 2001, Mr. Morton served as President of the Mid-Atlantic Region, Bank of America. He was President of the Private Client Group of NationsBank from 1996 to 1997. From 1994 to 1996, he served as Chairman, Chief Executive Officer and President of The Boatmen’s National Bank of St. Louis, and as Chief Executive Officer of Farm and Home Financial Corporation from 1992 to 1993. In 1990 and 1991, Mr. Morton served as Perpetual Financial Corporation’s Chairman, Chief Executive Officer and President. He served in the U.S. Navy as a lieutenant aboard the nuclear submarine U.S.S. George Washington Carver. He serves as Commissioner of the Maryland State Lottery and Gaming Control Commission, Director, U.S. Naval Institute, and director of the U.S. Naval Academy Foundation Athletic and Scholarship Programs. We believe Mr. Morton is a valuable nominee for the Board in light of his experience as the chairman, chief executive officer and president of several banking institutions, coupled with his service on a number of public company boards. He brings to the Board operational expertise, a deep background in the financial services industry, and a comprehensive understanding of the Company’s business, all of which make him particularly qualified and an excellent nominee to serve on the Board.
Daniel P. Nolan
Mr. Nolan has served as President and CEO of Hugh Johnson Advisors, LLC, a registered investment advisor located in Albany, New York, since October 2008. Mr. Nolan is also a principal in NPV Capital LLC, a private equity and real estate investment firm that he formed in July 2007. Prior to holding these positions, he was a partner in Ayco Company, L.P., a wholly-owned subsidiary of Goldman Sachs. During his 28-year career at Ayco, from August 1978 through April 2007, Mr. Nolan provided tax, investment and financial planning advice to Ayco’s highest net worth clients. He served as a Regional Vice President of two of Ayco’s regional offices and held a variety of management positions, serving on both the Senior Management Committee and the Strategic Planning Committee. Mr. Nolan founded and led the firm’s Special Investment Group, creating venture capital, private equity and hedge fund opportunities for the firm’s clients. In July 2003, Ayco was sold to The Goldman Sachs Group and Mr. Nolan led the effort to integrate Ayco into Goldman’s Private Wealth Management practice. He previously served on the board of Capital Bank & Trust, a community bank headquartered in Albany, New York. Mr. Nolan has been a trustee of Albany Law School since May 2011 and a trustee of The College of St. Rose since May 1989. Mr. Nolan has been a member of the board of directors of Combate Americas, LLC since January 2017, a member of the board of directors of NSC de Puerto Rico, Inc. since June 1998, a member of the Center for Disability Services Endowment since May 2013, and a member of the College Affairs Committee of the Albany Medical Center board of directors since August 2012. Mr. Nolan’s proven business acumen, as demonstrated by his success in founding and leading several companies, is a valuable resource as the Company continues to build on its current strategy. He has significant leadership, operational and investment management and financial expertise. Further, Mr. Nolan offers the Board a unique and valuable perspective into a number of important areas, including strategic planning and wealth management.trust company.
Kimberly S. Stevenson
Ms. Stevenson is an independent directora venture partner at RIDGE-LANE Limited Partners, a strategic advisory and joinedventure development firm. She serves as a fiduciary advisor to companies looking to accelerate growth through the Company’s Boarduse of Directors in 2015.technology. Formerly, Ms. Stevenson was a Senior Vice President at Lenovo where, during 2018, she led the $5 billion data center group business. She was responsible for the profit and loss statement of all data center products, platforms and software solutions. From September 2009 to February 2017, Ms. Stevenson was an executive officer and corporate vice president of Intel Corporation. Her most recent position at Intel was chief operating officerChief Operating Officer (COO) for Intel’s Client and Internet of Things Businesses and Systems Architecture (CISA) Group. The CISA organization is responsible for aligning technology, engineering, product design and business direction to extend Intel’s strategy and speed execution across the client device and IoT segments - all core to growth in the smart and connected computing era. In this role, Ms. Stevenson was responsible for CISA’s operational excellence, strategic planning process and related cross-company coordination. She also served on Intel’s management committee. Prior to the COO role, Ms. Stevenson served as Intel’s chief information officerChief Information Officer (CIO) from 2012 until August 2016. Previously, Ms. Stevenson held the position of vice presidentVice President and general managerGeneral Manager of Intel’s Global IT Operations and Services. Prior to joining Intel, Ms. Stevenson spent seven years at the former EDS,HP Enterprise Services, now HP enterprise services,DXC Technology, holding a variety of positions including vice presidentVice President of its Worldwide Communications, Media and Entertainment (CM&E) Industry Practice, as well as the vice presidentVice President of Enterprise Service Management, where she oversaw the global development and delivery of enterprise services. Before
joining EDS, Ms. Stevenson spent 18 years at IBM,HP Enterprise Services, from February 1983 to September 2002, inMs. Stevenson held several executive positions at IBM, including vice presidentVice President of Marketing and Operations of the eServer iSeries division. She previously servedserves on the board of directors of Skyworks Solutions, Inc. and previously served on the boards of directors of Cloudera and Riverbed Technology until 2017 and served as a director on the board of Riverbed Technology until 2015.2015, respectively. With the financial services industry increasingly reliant on technology, Ms. Stevenson’s deep operational and technology experience serve to enhance the Board’s overall makeup.makeup and make her an excellent candidate for the Board of Directors.
Luis Antonio Ubiñas
Mr. Ubiñas is currently President of the Board of Trustees of the Pan American Development Foundation, which invests nearly $100 million annually in development projects in Central and South America and the Caribbean. He also serves on several multilateral, governmental and nonprofit boards and advisory committees, including the Advisory Board of the United Nations Fund for International Partnerships. Mr. Ubiñas is a Trustee and Executive Committee member of the New York Public Library and Vice Chair of the Statue of Liberty-Ellis Island Foundation. In the private sector, Mr. Ubiñas is Lead Director at Electronic Arts, and serves on the boards of directors of GFR Media, the largest media company in Puerto Rico, and Shorelight Education. Mr. Ubiñas previously served as president of the Ford Foundation from 2008 through 2013. The Ford Foundation is the second largest foundation in the United States with an endowment of approximately $12 billion and operates worldwide, with offices in Asia, Africa, and Central and South America. While at the Ford Foundation, he led a broad-based restructuring of the organization, including a strategic resetting of its programs, reinvestment of over 80% of the endowment, and a rebuilding of facilities and systems. Prior to leading the Ford Foundation, Mr. Ubiñas was a Director at McKinsey & Company, leading the firm’s media practice on the West Coast, where he helped technology, telecommunications and media companies develop and implement strategies and improve operations. Much of his work focused on the opportunities and challenges represented by the global growth of broadband and wireless technologies and applications. Mr. Ubiñas is a Fellow of the American Academy of Arts and Sciences and a member of the Council on Foreign Relations. Along with his expertise in governance-related matters, we believe Mr. Ubiñas' deep knowledge in the marketing and media arenas will help the Board guide the Company as it implements a digital transformation and make him an excellent nominee for the Board.
Stephen M. Waters
Mr. Waters is Chairmanthe Chair of the BoardsBoard of the Company and the board of directors of the Bank, and is Managing Partner of Compass Partners Advisors LLPCapital LLC and its advisory and investment subsidiaries. He founded Compass Partners in 1996. Previously, Mr. Waters spent over 20 years advising corporate and financial entities both in the U.S.United States and internationally. Mr. Waters served from 1992 to 1996 as Co-Chief Executive Officer of Morgan Stanley, Europe, and was a member of Morgan Stanley’s worldwide 12-person Operating Committee. Mr. Waters joined Morgan Stanley as a Managing Director in the Mergers and Acquisitions Department in June 1988 and was Co-Director of that department from January 1990 to early 1992. Mr. Waters was Co-Director of the Mergers and Acquisition Department at Shearson Lehman Brothers from 1985 to 1988. He serves on the board of directors of Valero Energy Corporation, where he sits on the audit committee. Mr. Waters brings over 40 years of specific and relevant financial services experience to the Board, along with a deep understanding and practical knowledge of the investment management business. His background as a chief executive officer and director, as well as his extensive experience in investment management, economics, and mergers and acquisitions, make himMr. Waters an excellent nominee for the Board.
Donna C. Wells
Ms. Wells is currently Board Director, President and CEO of Mindflash Technologies, Inc., a private, Palo Alto, California company providing a market-leading cloud-based platform for employee and customer training. Prior to joining Mindflash in 2010, Ms. Wells had a nearly 20-year career in the financial services industry, including experience leading transitions from offline to online business models within Fortune 1000 companies and successfully disrupting established players with small, start-up teams as a serial entrepreneur. Ms. Wells began her career at American Express in 1989 as a member of the Corporate Strategic Planning group and later held positions of increasing responsibility in that company’s Consumer and Corporate Card businesses. From 1997 to 2000, she helped establish a new, strategic product development function for Charles Schwab’s retail business and ultimately held responsibility for product development and marketing to customer segments representing 70% of all Schwab client households. This early experience with the power and scale afforded by online financial service delivery drove Ms. Wells to leadership roles with three of the most innovative companies in this space from 2000 through 2009: MyCFO Wealth Management (sold to Harris Bank), Intuit and Mint.com (sold to Intuit). Ms. Wells’ teams’ work has won multiple Webby’s (the “Oscars of the Internet”) and recognition as a Tech Pioneer by the World Economic Forum in Davos. She has been named a Top 25 Women in Tech to Watch by Accenture and a Marketing Executive of the Year Finalist by the Wall Street Journal. Her company, Mindflash, was named a Top 50 Small Workplace in the US by Fortune magazine in 2016. The Company believes that Ms. Wells’ extensive experience in the financial services industry and her expertise in online marketing and business models delivery qualify her for re-election to the Board of Directors.
Lizabeth H. Zlatkus
Ms. Zlatkus serves as a director on the boards of Computer Sciences Corp. (CSC), which she joined in August 2016, and Indivior PLC, which she joined in September 2016. She has served on the Pennsylvania State University Business School Board since September 2003 and has served on the Connecticut Science Center Trustee Board since December 2010.Until her retirement from The Hartford Financial Services Group, Ms. Zlatkus held many senior leadership positions during her tenure at The Hartford Financial Services Group from 1983 to 2011. These roles included her role asboth Chief Financial Officer and Chief Risk Officer of the company,Company, as well as Co-President of Hartford Life Insurance Companies. She also previously served as Executive Vice President of two of the largest divisions of the firm, the international operations and the group life and disability divisions. Ms. Zlatkus currently serves as a director on the boards of SE2 Holdings, Inc. and Indivior PLC, will become a member of the board of AXIS Capital Holdings Limited, effective March 15, 2019, and previously served as a director of Legal & General Group, Plc, and Computer Sciences Corporation. She sits on the Pennsylvania State University Business School Board, where she served as Chair from 2012 to 2015, and sits on The Connecticut Science Center Trustee Board, serving on the executive committee. Ms. Zlatkus has been recognized by the White House for her professional achievements and contributions to the community. Hillary Clinton recognized herprevious work supporting the disability community, in 1999, and she hasduring that time participated as a member of The President’s Committee on Employment of People with Disabilities. Ms. ZlatkusShe was the cover feature of CFO magazine, was named one of the top 100 women executives by Business Insurance magazine, named toreceived the Women Worth Watching List by the Profiles in Diversity Journal,Pennsylvania State University Alumni Fellow award, and was named as the Community Leader of the Year by the Cystic Fibrosis Foundation’s Connecticut Chapter. Ms. Zlatkus served as Regulatory Chair for the North American Chief Risk Officers Council. She was a member on the Hewlett Packard Financial Services Board of Advisors, the LOMA board of directors, and a Trustee of the Connecticut Women’s Hall of Fame. Ms. Zlatkus was selected as an Alumni Fellow of The Pennsylvania State University in 2003 and served as the commencement speaker for the business school in 2013. Ms. Zlatkus’sZlatkus’ extensive experience in the financial services arena, where she has deep expertise in risk and finance, regulation, governance, and operations,, brings unique insight to makes her an excellent nominee for the Board.
CORPORATE GOVERNANCE
The business of the Company is managed under the direction of the Company’s Board of Directors in accordance with the Massachusetts General Laws, the Company’s Restated Articles of Organization, as amended, and the Company’s Amended and Restated By-Laws.Bylaws (the "Bylaws"). The Board of Directors provides oversight of the Company’s activities for the benefit of its shareholders and other constituencies, which include the Company’s regulators, affiliated companies, employees, customers, suppliers, creditors and the communities in which the Company and its affiliates conduct business. The table below lists many of our governance practices.
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| Board and Other Governance Information |
| Majority Voting for Directors | Yes |
| Annual Election of All Directors | Yes |
| Diverse Board (as to Gender, Composition, Skills, Experience, etc.)* | Yes |
| Annual Board and Committee Self-Evaluation | Yes |
Separate ChairmanChair of the Board and CEO | Yes |
Independent Directors Meet Without Management at Each Regularly Scheduled Board MeetingMeetings | Yes |
| Annual Independent Director Evaluation of CEO | Yes |
| Code of Business Conduct and Ethics for Directors | Yes |
| Board Level Risk Management Committee | Yes |
| Size of Board* | 119 |
| Number of Independent Directors* | 108 |
| Average Director Age* | 62 |
| Average Director Tenure (in Years)* | 3.95.3 |
| Annual Equity Grant to Directors | Yes |
| Disclosure Committee for Financial Reporting | Yes |
| Director Stock Ownership Policy | Yes |
| Term and Age Limit Guidance for Directors | Yes |
*Based on nominated Boardthe nine director nominees named in this Proxy Statement. | |
Corporate Governance Guidelines
The Board of Directors has a particular focus on corporate governance, developing the strategic direction of the Company, and seeking to ensure the success of the Company’s business through the appointment and retention of qualified executive management. The Board has documented its commitment to serve the best interests of the Company and its shareholders in its Corporate Governance Guidelines which, among other things, describe our most important corporate governance practices and address issues such as director qualification standards, director responsibilities, board composition and structure, performance evaluation and succession planning. Under the Company’s Corporate Governance Guidelines, a director who reaches the age of 74 or a term of 20 years while serving as director is required to offer his or her resignation from the Board of Directors as of the next annual meeting of shareholders.
Board Leadership Structure
In accordance with the Company’s by-laws,Bylaws, the Board of Directors elects the ChairmanChair of the Board and appoints the President, who also serves as Chief Executive Officer (“CEO”). The Board of Directors has adopted a policy that provides for the separation of the roles of ChairmanChair of the Board and CEO.
The Compensation, Governance and Executive Committee has established a Statement of Roles and Responsibilities (“Statement”) for the non-executive ChairmanChair of the Board of Directors (“non-executive Chair”). The Statement provides that the position of non-executive ChairmanChair may only be held by a member of the Board of Directors who has been determined to be “independent”independent under the NASDAQ listing standards. The non-executive ChairmanChair is elected by the Company’s Board of Directors annually and may be removed at any time with or without cause. The non-executive ChairmanChair is responsible for the management, development and effective functioning of the Board of Directors and provides leadership in every aspect of the Board’s oversight of the Company. The non-executive ChairmanChair acts in an advisory capacity to the CEO and President of the Company, and to other executive officers in matters
concerning the interests of the organization and the Board, as well as serving as the liaison between management and the Board of Directors. The duties of the ChairmanChair of the Board include the following:
setting agendas for the Board meetings in consultation with the CEO;
chairing Board meetings and ensuring that Board functions are effectively carried out;
chairing executive sessions of independent directors and providing feedback to the CEO and President, as appropriate;
serving as liaison for Chairschairs of affiliated company boards, as needed;
facilitating the Board’s efforts to create and maintain practices that respond to feedback from shareholders and other stakeholders;
representing the Board at meetings with major shareholders and other stakeholder groups on governance-related matters, as may be requested from time to time;
providing advice on behalf of the Board to the CEO and President on major issues;
facilitating effective communication between directors and management, both inside and outside of meetings of the Board;
working with the CEO and President to ensure management strategies, plans and performance are appropriately risk assessed and represented to the Board; and
advising management in the planning of the strategy meeting.
The Compensation, Governance and Executive Committee conducts a periodic review of the role and responsibilities of the non-executive ChairmanChair and this review is then presented to the full Board of Directors.
Board Committee Structure
In January of 2019, the Board of Directors realigned its committee structure to better address the evolving needs of the Company. As a part of this restructuring, the Board of Directors: (1) eliminated the former Growth Initiatives/Trust and Investment Committee (previously known as the Wealth Management/Trust and Investment Committee) and assigned this committee's fiduciary responsibilities relating to the operation of trusts and the administration of fiduciary accounts to the Audit Committee of the Bank; and (2) split the Compensation, Governance and Executive Committee into two separate committees, the Compensation Committee and the Governance and Executive Committee. As a result, the Board of Directors currently has four standing committees: the Audit and Finance Committee; the Compensation Committee; the Governance and Executive Committee; and the Risk Management Committee.
Each committee is comprised solely of members of the Board of Directors who have been determined to meet the definition of independent directors in accordance with NASDAQ listing standards. All committees have adopted charters that provide a statement of the respective committee’s roles and responsibilities. Current charters for the Audit and Finance Committee and the Compensation Committee can be viewed online by accessing the Company’s website at www.bostonprivate.com, selecting the “Investor Relations” link at the bottom of the page, and then selecting “Corporate Governance” under “Governance.”
Risk Oversight
The Board of Directors playsand its committees play an important role in the risk oversight of the Company and is involved in risk oversight throughits management, and exercise direct decision-making authority with respect to significant matters, including the development of limits and specific risk tolerances, and the oversight of management by the Board of Directors and its committees.tolerances. The Board of Directors and its committees also are each directly responsible for considering and overseeing risks and the oversight of risks relating to decisions that each committee is responsible for making.in specified areas. In light of the Company’s overall business and market, the extensive regulatory schemes under which the Company and all of its affiliates operate, and the complexities of the Company’s operations as a whole, the Board has established a Risk Management Committee that is tasked with specific responsibility for direct oversight of all of the risks inherent in the Company’s business, along with management of the enterprise-wide risk management program. The Risk Management Committee consults with each of the other committees of the Board of Directors for an analysis of their areas of risk, as well as with management and outside experts, and provides regular, detailed reporting and recommendations on risk-related actions to the full Board. The Risk Management Committee also monitors the risk management function, and reviews risk assessments and other risk reporting for all of the Company’s subsidiaries, participates directly in the risk management committee meetings of the Bank, which is the Company’s largest subsidiary,business segments and operations, and adopts and directs the implementation of risk management policies that relate to both the Company and its subsidiaries, and analyzes reporting regardingincluding the same.Bank.
In addition to the Risk Management Committee, the Board of Directors administers its risk oversight function through:
the review and discussion of regular, periodic reports to the Board of Directors and its committees on topics relating to the risks that the Company faces, including, among others, credit risk, interest rate risk, operational risks (including cybersecurity and technology-related risks), and compliance and regulatory risk;
monitoring the level and trend of such risks relative to pre-approved appetites and the ability to manage and mitigate such risks;
the required approval by the Board of Directors (or a committee thereof) of significant transactions and other decisions, including among others, final budgets, material uses of capital, strategic direction, and executive management hiring and promotions;
the direct oversight of specific areas of the Company’s business by the Risk Management Committee, the Audit and Finance Committee, the Wealth Management/Trust and InvestmentCompensation Committee and the Compensation, Governance and Executive Committee; and
regular periodic reports from the Company’s internal and external auditors and other third party consultants regarding various areas of potential risk, including, among others, those relating to the Company’s internal controls and financial reporting.
The Board of Directors also relies on management to bring significant matters impacting the Company and its subsidiaries to the Board of Directors’ attention.
Risk Review and Analysis of Incentive Compensation Arrangements
The Company’s compensation program is designed to offer competitive pay for performance, aligning with the Company’s short- and long-term business strategies, risk appetite and shareholder interests. The Board oversees the Company’s incentive compensation programs, primarily though the Compensation Committee, with additional input from the Company’s Chief Risk Officer, and Chief Human Resources Officer, monitorGeneral Counsel, Chief Financial Officer and on a biennial basis, or more frequently as material changes occur, discuss, evaluate and review the Company’s compensation programs. A detailed review was performed in 2016 with the majorityManager of plans categorized as low risk.Compensation. The next formal risk review will be conducted in 2018. The findings of these reviews are presented to the Compensation, Governance and Executive Committee for further evaluation and discussion with particular focus on(the predecessor to the following key areas:current Compensation Committee which was established in January 2019) conducted a detailed review of the Company’s incentive compensation arrangements. This review focused on: (1) the compensation plans of the persons identified as named executive officers (“NEOs”) in this Proxy Statement to ensure that such plans do not encourage the NEOs to take unnecessary or excessive risks that threaten the value of the Company; (2) employee compensation plans in light of the risks posed to the Company by such plans and how to limit these risks; and (3) employee compensation plans to ensure these plans do not encourage the manipulation of reported earnings to enhance compensation. In 2018, the majority of incentive compensation plans reviewed were categorized as low risk. NEO compensation plans are described in detail in “Compensation Discussion and Analysis.” The Compensation Committee has determined to conduct future incentive compensation reviews for the non-Bank segments on a biennial basis, with interim reviews if material changes occur.
The Compensation Governance and Executive Committee’s review focuses on incentive compensation plans as opposed to base salary plans or standard benefit arrangements, as the CompanyCommittee believes that incentive compensation arrangements have the greatest potential to encourage inappropriate risk-taking, and/or encourage the manipulation of earnings to enhance compensation. The Company also believes that its base salary and benefit arrangements are generally reasonable and appropriate, considering the Company’s compensation philosophy and industry and regional differences.
The Compensation, Governance and Executive Committee evaluates each plan using the following risk categories: acceptable-to-low risk, moderate level of risk, and significant risk/potential for material adverse impact. The majority of the Company’s incentive compensation plans have been rated in the “acceptable-to-low risk category.” The Company believes appropriate controls are in place to minimize the risk for permittingof unnecessary and inappropriate risk-taking or encouragingas a result of the incentive plans and to discourage the manipulation of earnings to enhance compensation. Such controls include the addition of mechanisms to clawbackclaw back compensation in certain circumstances, enhanced governance processes for compensation reviews and the on-going monitoring of employee compensation that may trigger additional individual or plan reviews.
The Compensation Governance and Executive Committee believes that the balance of base compensation, variable annual incentive bonuses determined based on Company and individual performance, and long-term equity incentive compensation is weighted such thatto discourage excessive or unnecessary risk taking will not be encouraged by the variable elements of compensation.risk-taking. Further, the Compensation Governance and Executive Committee believes that the long-term equity components of compensation encourage the Company’s executives to focus on elements of the Company’s performance to influence long-term value creation and share price appreciation.
Committees of the Board and Related Matters
The Board of Directors currently has four standing Committees: the Audit and Finance Committee; Compensation, Governance and Executive Committee; Risk Management Committee; and Wealth Management/Trust and Investment Committee. Each committee was comprised solely of members of the Board of Directors who have been determined to meet the definition of “independent” in accordance with the NASDAQ listing standards. All of the committees have adopted charters that provide a statement of the respective committee’s roles and responsibilities. Current charters for the Audit and Finance Committee and the Compensation, Governance and Executive Committee can be viewed online by accessing the Company’s website at www.bostonprivate.com, selecting the “Investor Relations” link at the bottom of the page, and then selecting “Corporate Governance” under “Corporate Information.”
The following table sets forth membership on the committees that were in place during 2018 and the number of meetings held during 2016.2018.
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| Name | | Audit and Finance | | Compensation, Governance and Executive | | Risk Management | | Wealth Management/Trust and Investment Committee |
| Mark F. Furlong (1), (2), (3) | | Ÿ | | | | | | Ÿ |
| Joseph C. Guyaux (1), (4) | | | | Ÿ | | Ÿ | | |
| Deborah F. Kuenstner (1), (2), (5) | | Ÿ | | Chair (8) | | | | Ÿ |
| Gloria C. Larson (1) | | | | Ÿ | | Ÿ | | |
| John Morton III (1), (2) | | Chair (8) | | | | Ÿ | | |
| Daniel P. Nolan (1), (2), (6) | | Ÿ | | Ÿ | | | | Chair (8) |
| Kimberly S. Stevenson (1) | | | | | | Chair (8) | | Ÿ |
| Stephen M. Waters (1), (2) | | | | Ÿ | | | | Ÿ |
| Donna C. Wells (1) | | | | | | Ÿ | | Ÿ |
| Lizabeth H. Zlatkus (1), (2), (7) | | Ÿ | | Ÿ | | | | Ÿ |
| Number of Committee Meetings Held in 2016 | | 9 | | 9 | | 8 | | 4 |
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| Name | | Audit and Finance | | Compensation, Governance and Executive (1) | | Risk Management | | Growth Initiatives/Trust and Investment Committee (2) |
| Mark F. Furlong (3), (4), (5) | | Ÿ | | | | | | |
| Joseph C. Guyaux (3) | | | | Ÿ | | Ÿ | | |
| Deborah F. Kuenstner (3), (4), (6) | | | | Chair (10) | | | | |
| Gloria C. Larson (3) | | | | Ÿ | | Ÿ | | |
| Daniel P. Nolan (3), (4), (11) | | Ÿ | | | | | | Ÿ |
| Kimberly S. Stevenson (3), (4) | | | | | | Chair (10) | | Ÿ |
| Luis Antonio Ubiñas (3), (4), (7) | | Ÿ | | | | | | Chair (10) |
| Stephen M. Waters (3), (4). (8) | | | | Ÿ | | | | |
| Lizabeth H. Zlatkus (3), (4), (9) | | Chair (10) | | | | | | |
| Number of Committee Meetings Held in 2018 | | 9 | | 8 | | 8 | | 7 |
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| (1) | In January of 2019, the Board of Directors split the Compensation, Governance and Executive Committee into two separate committees, the Compensation Committee and the Governance and Executive Committee. |
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| (2) | In April of 2018, the former Wealth Management/Trust and Investment Committee became the Growth Initiatives/Trust and Investment Committee. In January of 2019, the Board of Directors eliminated the Growth Initiatives/Trust and Investment Committee. |
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| (3) | Our Board of Directors has determined that this member meets the definition of an “independent”independent director under NASDAQ listing standards. |
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(2)(4) | Our Board of Directors has determined that this member meets the definition of an “audit committee financial expert” under SEC regulations. |
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(3)(5) | Mark F. Furlong joinedleft the Board of Directors, the Audit and Finance Committee and the Wealth Management/Growth Initiatives/Trust and Investment Committeeas of September 2016. April 2018. |
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(4)(6) | Joseph C. Guyaux joinedDeborah F. Kuenstner left the BoardAudit and Finance Committee as of Directors,April 2018. |
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| (7) | Luis Antonio Ubiñas left the Compensation, Governance, and Executive Committee and the Risk Management Committee as of September 2016.April 2018 and joined the Audit and Finance Committee and the Growth Initiatives/Trust and Investment Committee as of April 2018. |
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(5)(8) | Deborah F. KuenstnerStephen M. Waters left the Wealth Management/Growth Initiatives/Trust and Investment Committeeas of April 2016.
2018. |
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(6)(9) | Daniel P. NolanLizabeth H. Zlatkus left the Compensation, Governance, and Executive Committee as of April 2016 and joined the Audit and Finance Committee as of April 2016.2018. |
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(7) | Lizabeth H. Zlatkus left the Wealth Management/Trust and Investment Committee as of April 2016 and joined the Compensation, Governance, and Executive Committee as of April 2016. |
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(8)(10) | Indicates Chair as of December 31, 2016.2018. |
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| (11) | On February 14, 2019, Mr. Nolan resigned from the Board of Directors of the Company. |
Attendance at Board and Committee Meetings and the Annual Meeting
The Board of Directors held eight11 meetings of the full Board during 2016. Each incumbent director who was a director in 20162018. In 2018, each of the directors attended at least 75% of the aggregate number of meetings of the full Board of Directors and relevant committees held during the time such person was a director. The Company does not have a policy of requiring directors to attend the annual meeting of shareholders. The Company does, however, typically schedule a meeting of its Board of Directors the day before or close to the annual meeting of shareholders to facilitate each director’s attendance at the annual meeting of shareholders. Eightmeeting. Six of the Company’s non-executive directors attended the 20162018 annual meeting.
Executive Sessions without Management
To promote opencandid discussion among the non-management directors, the Board of Directors schedules regular executive sessions in which the non-management directors meet without management’s participation. Such sessions are scheduled totypically occur at every regularly scheduled Board and committee meeting. The ChairmanChair of the Board or the respective committee chairperson is the presiding director at suchthese executive sessions.
Audit and Finance Committee
The majority ofAll members of the Audit and Finance Committee are “audit committee financial experts” as defined in SEC regulations and all members are “independent”independent as defined under the NASDAQ listing standards. Pursuant to the Audit and Finance Committee’s charter, the Audit and Finance Committee assists the Board in its oversight of (1) the process of reporting the Company’s financial statements; (2) the system of internal controls as it relates to financial reporting;reporting and risk management; (3) the audit process;
(4) the Company’s process for monitoring compliance with laws and regulations and codethe Code of conduct;Business Conduct and Ethics; (5) the review and approval of the Company’s declaration of dividends; and (6) the qualifications, independence and performance of the Company’s independent registered public accounting firm in accordance with SEC regulations. The Audit and Finance Committee is solely responsible for retaining the Company’s independent registered public accounting firm. The Audit and Finance Committee also conducts analysis and makes recommendations to the Board and management regarding the Company’s financial planning, capital structure, capital raising, proposed acquisitions, mergers and divestitures, overall strategic planning, and financial performance, whereas relevant.
Risk Management Committee
The Risk Management Committee’s responsibilities are described above under “Risk Oversight.”
Wealth Management/Trust and Investment Committee
The Wealth Management/Trust and Investment Committee provides strategic direction and oversight on behalf of both the Board of Directors and the board of directors of the Bank regarding the Company’s wealth management businesses, both in the registered investment advisory affiliates and in the Bank’s Trust division. The Committee assists the boards in analyzing the optimal means of enhancing the Company’s performance and expanding its acquisition and retention of private clients through these businesses. The Committee also assists the Bank in fulfilling its fiduciary responsibilities relating to the operation of trusts and the administration of fiduciary accounts. The Committee offers oversight and guidance to management relating to capital allocations and with respect to leveraging synergies within the wealth management business.
Compensation Governance and Executive Committee
The Compensation Governance and Executive Committee makes recommendations to the Board of Directors, where necessary, on certain matters including, but not limited to, changes to compensation plans and the adoption of new plans, and changes to the CEO’s compensation and changes to Board compensation programs of the Company. In addition, the Committee serves as the Executive Committee of the Bank’s board of directors.programs. The Compensation Governance and Executive Committee has been delegated the authority by the Board of Directors to approve compensation matters for all executive officers. Compensation decisions relating to the CEO are also reviewed and approved by the entire Board. For additional information on the Compensation Governance and Executive Committee’s process for the consideration and determination of the executive officer and director compensation, please see “Compensation Discussion and Analysis.”
Governance and Executive Committee
The Compensation, Governance and Executive Committee periodically reviews the arrangements for the overall governance of the Company by the Board of Directors and its committees and, among other things, assists the Board of Directors by evaluating the performance of the Board and its committees, identifies individuals qualified to become members of the Board, recommends the slate of candidates to be nominated for election to the Board of Directors and on the boards atboard of the Company’s subsidiaries where such membership is not otherwise mandated by contract,Bank, recommends the members and the chairs of the committees of the Board, adopts and implements governance practices and policies applicable to both the Company and its subsidiaries, and reviews and assesses the charters of all of the committees of the Board. In addition, the Committee serves as the Executive Committee of the Bank’s board of directors.
Consideration of Director Nominees
The Compensation, Governance and Executive Committee is responsible for identifying, assessing and recommending the slate of candidates to be nominated for election to the Board of Directors. The Compensation, Governance and Executive Committee uses a variety of methods for identifying and evaluating nominees for director, and assesses the mix of skills and the performance of the Board as a whole on an annual basis. In the course of establishing the slate of nominees for director each year, the Compensation, Governance and Executive Committee will consider whether any vacancies on the Board are expected due to retirement or otherwise, the skills represented by retiring and continuing directors, and additional skills highlighted during the annual Board self-assessment process that could improve the overall quality and ability of the Board to carry out its function. In the event thatresponsibilities. When vacancies are anticipated or arise, the Compensation, Governance and Executive Committee considers various potential candidates for director. Candidates may come to the attention of the Compensation, Governance and Executive Committee through the business and other networks of the existing members of the Board or from management. The Compensation, Governance and Executive Committee may also solicit recommendations for director nominees from independent search firms or any other source it deems appropriate, and has most recently sourced non-incumbent candidates through the retention of such independent search firms and through the boards of its affiliates. When an incumbent director is up for re-election, the Compensation,firms. The Governance and Executive Committee reviews the performance, skills and characteristics of suchall incumbent directordirectors before making a determination to recommend that the full Board nominate him or her for re-election.
The Compensation, Governance and Executive Committee requires all nominees and candidates to possess the highest personal and professional ethics, integrity and values; to be committed to representing the long-term interests of our shareholders; to be able to devote theconsistently an appropriate amount of time to be consistently informed about the Company’s business and strategy, withstrategy; a balanced perspective, strong business and financial acumen; and thean ability to approach all decision making with a high level of
confidence and independence. In addition to reviewing a candidate’s background and accomplishments, candidates are reviewed in the context of the current composition of the Board of Directors and the Company’s evolving needs of the Company.
Following the 2016 annual meeting, the Board of Directors sought to recruit additional Board members whose qualifications aligned with the Company’s long-term strategy. The Company engaged a third-party search firm to vet and recommend director candidates in exchange for a fee. After considering a number of candidates submitted by Directors, management and the search firm, the Board elected Messrs. Mark F. Furlong and Joseph C. Guyaux to the Board on September 28, 2016. Both have extensive banking experience and, as a result, bring excellent insights and perspectives to our Board.needs.
Pursuant to guidelinesthe Company's Corporate Governance Guidelines established by the Board, no more than two members of the Board may be executive members, and all others must meet the definition of “independent”an “independent director” under the NASDAQ listing standards. The CEO will always be a member of the Board. The Board of Directors elected Anthony DeChellis to the Board, effective as of November 26, 2018, when he became the Chief Executive Officer and President of the Company. Currently, the CEO is the only member of the Board who is not “independent.”independent. On an annual basis, the Compensation, Governance and Executive Committee reviews the “independent”independence status of each member of the Board to determine whether any relationship is inconsistent with a determination that the director wasis independent. The most recent review was undertaken in January 20172019 and, as a result, the Board, after such review, and recommendation by the Compensation, Governance and Executive Committee, determined that each of the Company’s non-executive directors (Mses. Kuenstner, Larson, Stevenson, Wells and Zlatkus, and Messrs. Furlong, Guyaux, Morton, NolanUbiñas and Waters) meets the qualifications for independence in accordance with the NASDAQ listing standards.
Directors of the Company are nominated in accordance with the Company’s by-laws,Bylaws, which provide that directors may be nominated (1) by a majority of the Board of Directors, or (2) by any holder of record of any shares of the capital stock of the Company entitled to vote at the annual meeting of shareholders. While the Compensation, Governance and Executive Committee does not have a formal policy regarding the consideration of any director candidates recommended by shareholders, such candidates recommended by a shareholder are evaluated on the same basis as candidates recommended from other sources. A shareholder wishing to nominate a director separately from the slate of directors nominated by the Company for the 20182020 annual meeting should follow the procedures described in this Proxy Statement under the heading “Submission of Shareholder Proposals for 20182020 Annual Meeting.” Any shareholder who seeks to make such a nomination for the 20182020 annual meeting must be present in person at such annual meeting.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics which applies to all of the Company’s and its subsidiaries’ employees, officers, and directors. In addition, the Company maintains procedures for the confidential, anonymous submission of any complaints or concerns about the Company, including complaints regarding accounting, internal accounting controls or auditing matters. Shareholders may access the Code of Business Conduct and Ethics by accessing the Company’s website at www.bostonprivate.com, selecting the “Investor Relations” link at the bottom of the page, and then selecting “Corporate Governance” under “Corporate Information.“Governance.”
Shareholders’ Communications with the Board of Directors
Shareholders wishing to communicate with the Company’s Board of Directors should address their communications toemail the Company’s investor relations department by email at investor-relations@bostonprivate.com, by telephone atcall 888-666-1363 or by mail sent to the Company’s main address at Ten Post Office Square, Boston, Massachusetts 02109, Attention: Investor Relations. The mailing envelope should contain a clear notation indicating that the enclosed letter is a “Shareholder-Board Communication” or “Shareholder-Director Communication.” All such letters should clearly state whether the intended recipients are all members of the Board or certain specified individual directors. All communications will be reviewed by the Company’s investor relations department, which will determine whether the communication will be relayed to the Board or the director. Except for resumes, sales and marketing communications or notices regarding seminars or conferences, summaries of all shareholder communications will be provided to the Board.
INFORMATION REGARDING EXECUTIVE OFFICERS
The following table lists the name, age and current position of each executive officer of the Company.
|
| | | | | |
| Name | | Age | | Current Position |
Margaret W. ChambersMaura S. Almy | | 5753 |
| | Executive Vice President General Counsel and Corporate SecretaryChief Operating and Platform Officer of the Company and the Bank |
Clayton G. DeutschAnthony DeChellis | | 6156 |
| | Chief Executive Officer and President of the Company Chief Executive Officer of Boston Privateand the Bank & Trust Company |
Corey A. GriffinSteven M. Gaven | | 55 |
| | Chief Executive Officer, Boston Private Wealth LLC; Executive Vice President of the Bank and the Company; Chief Executive Officer – Wealth Management and Trust Segment |
Martha T. Higgins | | 5339 |
| | Executive Vice President and Chief Human ResourcesFinancial Officer of the Company and the Bank; Chief Financial Officer, Boston Private Wealth LLC |
| Corey A. Griffin | | 57 |
| | Executive Vice President of the Company and the Bank; Chief Executive Officer, Boston Private Wealth LLC; Chief Executive Officer – Private Clients Group of the Bank |
| David J. Kaye | | 5254 |
| | Executive Vice President Chief Financial and Administrative Officer of the Company and the Bank; Chief Executive Officer – Corporate Clients Group of the Bank |
| W. Timothy MacDonald | | 5860 |
| | Executive Vice President and Chief Risk Officer of the Company and the Bank |
George G. SchwartzJoy McCune | | 5851 |
| | Executive Vice President Bank;and Chief ExecutiveHuman Resources Officer – Private Banking Segmentof the Company and the Bank
|
| Jacqueline S. Shoback | | 5052 |
| | Executive Vice President and Chief Client DevelopmentMarketing Officer of the Company and the Bank |
| Paul M. Simons | | 53 |
| | Executive Vice President and Chief of Corporate Strategy and Development of the Company and the Bank |
Pursuant to the by-lawsBylaws of the Company, the President, Treasurer and Secretary of the Company hold office until the first meeting of the directors following the annual meeting of shareholders. Other officers shall hold office for the same term described above, unless a shorter term is specified in the vote electing or appointing them.
Margaret W. Chambers.Maura S. Almy. Ms. Chambers isAlmy joined the Company in February 2019 as Executive Vice President General Counsel and Corporate Secretary forChief Operating and Platform Officer of the Company and also serves in these same positions for Boston Private Bank & Trust Company. Shethe Bank. Ms. Almy has over 2535 years of experience in the legal arena focusing on financial services matters. She is responsible for overseeing the Company’sroles spanning across retail trading, client relationship management, sales, operations from a legal perspective including merger and acquisition activities, divestitures, regulatory examinations, corporate governance, board materials and relations, regulatory filings, real estate, risk management and compliance, employment and insurance matters. She also works as part of the executive management team on strategic planning and related matters.technology. Prior to joining the Company, from January 2014 to July 2018, Ms. Almy was a Senior Vice President and Chief Operating Officer of Santander Securities LLC USA, where she led the operations, information technology, project management, vendor management and business continuity planning functions; managed wealth management for the investments division; built middle office call centers; and conceptualized and implemented Salesforce applications for the various business lines within the organization. She also served on various committees at Santander Securities, including as a voting member of the Executive Committee, the elected chair of the Risk Committee (2014 to 2016) and a voting member of the New Product Committee. From April 2009 to October 2013, Ms. Almy held the positions of Director, and subsequently Managing Director, at Credit Suisse - Private Banking Americas. During her tenure there, she oversaw operations and technology, and led the organization's expansion into Chile, as well as its efforts to build out operations and technology solutions to meet needs of The Americas client marketplace. Prior to Credit Suisse, Ms. Almy served in 2002, Ms. Chambers servednumerous leadership roles at Fidelity Investments, Barber & Bronson, Bear Stearns & Co. Inc., Dean Whitter / Morgan Stanley, among others, managing operations platforms delivered through technology.
Steven M. Gaven. Mr. Gaven joined the Company in November 2011 as Vice President, Corporate Finance and Director of Investor Relations of the Company. In February 2016, he was named Chief Financial Officer of Boston Private Wealth LLC ("BPW"), a wholly-owned subsidiary of the Bank. He became Executive Vice President and General Counsel for Funds Distributor, Inc., a Boston Institutional Group company. Before joining Funds Distributor, she servedChief Financial Officer of the Company and the Bank in January 2018 while also continuing in his role as Vice President and Assistant General Counsel at the investment management firmChief Financial Officer of Loomis, Sayles & Company, L.P.BPW. Prior to her position with Loomis, shejoining the Company, Mr. Gaven was an associate witha member of the law firm of Ropes & Gray LLP focusing on securities regulatory matters, including investment company, investment advisory, broker-dealer, and securities offering matters. She currentlyU.S. Industrials equity research team at Susquehanna International Group after holding several corporate finance roles at Investor Financial Services Corp. Mr. Gaven serves on the Boardboard of Directorsdirectors of the Bank, BPW and KLS Professional Advisors Group, LLC, and is the secretary of Boston Private Wealth LLC, bothall of which are affiliates of the Company.
Corey A. Griffin. Mr. Griffin became a consultant for the Company in September 2013 and joined the Company as an employee in May 2014. He is currently CEO of Boston Private Wealth LLC, a wholly owned subsidiary of Boston Private Bank & Trust Company (the “Bank”); Executive Vice President of the BankCompany and the Company;Bank and Chief Executive Officer – Wealth Management and Trust Segment.Private Clients Group of the Bank, a role he assumed in January 2018. He also serves as the Chief Executive Officer of BPW. Prior to joining the Company, Mr. Griffin served as President of The Davis Companies, an institutional real estate investment manager, from September 2011 to February 2013. From 1994 to 2011 he worked with Bank of New York Mellon where he served as
Chairman and CEOChief Executive Officer of The Boston Company Asset Management from 2002 to 2009. Under Mr. Griffin’s leadership, theThe Boston Company opened offices worldwide while developing a $75 billion global, multi-strategy equity business across the style and capitalization spectrum with clients in North and South America, Europe, Asia and Africa. He also served as a member of the Bank of New York Mellon’s Operating, Ethics, and Product Development Committees and as a board member of Standish Mellon Asset Management.
Martha T. Higgins. Ms. Higgins joined Mr. Griffin serves on the boards of directors of the Bank and BPW, each of which are affiliates of the Company. On March 6, 2019, the Company in 2008 as Executive Vice President and is currentlyannounced the Company’s and the Bank’s Executive Vice President and Chief Human Resources Officer. She is responsible for enterprise-wide human capital initiatives and serves as an advisor to senior management and to the Company’s affiliate partners on human capital strategy, workforce planning and overall organizational effectiveness. In addition, she supports the Company’s Board Compensation, Governance and Executive Committee and serves as Chairdeparture of the Company’s 401(k) Committee. Prior to joining the Company, Ms. Higgins was a Senior Consultant at W.T. Haigh & Company, an executive compensation and human resources consulting
firm in Cambridge, Massachusetts. She has over 25 years of experience working in the financial services industry. Ms. Higgins started her career at The Boston Company and also worked for Fidelity Investments as a Senior Compensation Consultant. She is a member of the Society for Human Resources Management, the New England Human Resources Association and the National Association of Stock Plan Professionals. Ms. Higgins is a Certified Equity Professional (CEP) and is also a certified professional coach.Mr. Griffin, effective May 31, 2019.
David J. Kaye. Mr. Kaye joined the Company in 2007 and is currently Executive Vice President of the Company and the Bank and Chief Executive Officer - Corporate Clients Group of the Bank, a role he assumed in January 2018. Previously, he served as Executive Vice President, Chief Financial and Administrative Officer of the Company and he also serves in these capacities for the Bank. Before joining the Company, Mr. Kaye served as Senior Vice President and Chief Financial Officer for Columbia Management, Bank of America’s asset management organization. Heorganization where he led a team of finance professionals with responsibilityresponsible for all financial reporting for the organization and served as a strategic advisor to the group’s President. Prior to that position, Mr. Kaye was the Chief Financial Officer of Bank of America’s Private Bank. Previously, Mr. Kaye was the Vice President and Controller for Goldman Sachs Asset Management, heading a team that performed all financial reporting functions for the division. Earlier in his career, he held several finance positions at Lehman Brothers, and was a consultant with Coopers & Lybrand Consulting. He is a Certified Management Accountant (CMA). Mr. Kaye serves on the boards of directors of Bingham, Osborn & Scarborough LLC, Anchor Capital Advisors LLC, the Bank and Boston Private Wealth LLC, allBPW, each of which are affiliates of the Company. On March 6, 2019, the Company announced the departure of Mr. Kaye, effective March 22, 2019.
W. Timothy MacDonald. Mr.MacDonaldis Executive Vice President and Chief Risk Officer of the Company and the Bank, responsible for overseeing the company’s governance and strategy for enterprise risk management, including relationships with key regulators. Mr. MacDonald joined the Company in 2009. First serving as Senior Vice President, Deputy Chief Risk Officer, he was named Executive Vice President and Chief Risk Officer of Boston Privatethe Bank & Trust Company in March 2011 and, in January 2013, Mr. MacDonald was elected Executive Vice President and Chief Risk Officer of the Company. As Chief Risk Officer, Mr. MacDonald oversees all aspects of the Enterprise Risk Management program that includes Risk Analytics, Model Risk Management, Operational Risk Management, Financial Intelligence Unit, Information Security,risk analytics, model risk management, operational risk management, financial crimes prevention and Loan Reviewinvestigation, information security, and loan review functions. He is authorizedHis team leads efforts to dischargebuild and sustain a strong culture in which all employees understand the program in a manner consistent with the Company’s currentimportance of managing risk to deliver responsible growth and anticipated risk profileserve our customers, clients and strategic plan.communities. Prior to joining Boston Private, Mr. MacDonald functions as chair of the Risk Management Steering Committee and as a member of the Executive Loan Committee, Asset/Liability Committee, and Operational Risk Management Committee as well as other governing committees of the Company. He previously held key positions at GE Capital from 2006 to 2009, where he was responsible for overseeing various initiatives as Vice President of Risk Monitoring and Controllership. Mr. MacDonald hasHe also worked withat KPMG LLP, the Federal Reserve System and Shawmut Bank. He is a CFA charterholder and an active member of various professional risk management associations.
George G. SchwartzJoy McCune. Mr. SchwartzMs. McCune joined Boston Private Bank & Trustthe Company in 1998 and is currentlyAugust 2018 as Executive Vice President of the Bank and Chief Executive Officer – Private Banking Segment. He oversees the Bank’s Deposit, Mortgage, Commercial Banking and Community Investment groups. As the former Chief OperatingHuman Resources Officer of the Bank, heCompany and the Bank. Previously, Ms. McCune was the Chief Human Resources Officer at Boston Financial Data Services from 2015 to 2017, with responsibility for the Human Resources organization, charitable giving and employee communications. From 1997 to 2015, she served as a senior vice president at State Street Corporation, where she was responsible for providing strategic support to the Bank’s client service model, trust department,State Street Management Committee and the Bank’s marketing, operations,their global lines of business and led efforts in support of succession planning, new business line launches, and human resources matters in mergers and acquisitions. Her early experience also includes various human resources roles at other financial services and technology functions, as well as the expansion of the Bank’s office network. Mr. Schwartz also served as Treasurer of the Bank for 15 years, developing its treasury function and ALCO process. Prior to joining the Company, Mr. Schwartz was a founding officer and Senior Vice President at the de novo Wainright Bank and Trust. Earlier in his professional career, he served in the trust training program and on the international treasury trading desk at the Bank of New England. He has more than 30 years in the banking and financial services industry. Mr. Schwartz serves on the boards of directors of the Bank and Boston Private Wealth, LLC, both of which are affiliates of the Company, as well as Sail Boston. He alsocompanies. Ms. McCune is a member of the WGBH Corporate Executive Council and is the ChairmanBoard of Overseers for Big Brothers Big Sisters of Massachusetts Bay, a former member of the Board of the non-profit A Better City.Directors of New England Human Resources Association, and a former Governing Body Member of Evanta CHRO Leadership.
Jacqueline S. Shoback. Ms. Shoback joined the Company in February 2015 asand is currently Executive Vice President and Chief Marketing Officer of the Company and the Bank, a role she assumed in January 2019. Previously, she served as Chief Executive Officer – Emerging Businesses and Client Experience of the Bank as well as Chief Client Development Officer of the Company and she also serves in these capacities for the Bank. She is an accomplished and seasoned executive with deep financial services and multi-channel retail experience, having run businesses and managed profit and loss statements ranging from $50 million to over $1 billion in revenue. Prior to Boston Private,the Company, Ms. Shoback spent four years as the Senior Vice President, Head of Individual and Retail Marketing, at TIAA-CREF, a wealth management and financial services provider, managing over $600 billion of assets for nearly four million individuals across the US. While withprovider. Before joining TIAA-CREF, Ms. Shoback built its consumer marketing capability, harnessing digital technology, customer data and analytics to drive targeted client acquisition, development and retention with significant, high impact results on the overall business. She came to TIAA-CREF from Fidelity Investments, where she was Senior Vice President, Head of High Net Worth and Mass Affluent Customer Segments for the retail division.division of Fidelity Investments. During her seven years there, she held various senior leadership positions in Distribution, Marketing and Operations, including Head of Distribution National Sales and Service. Prior to that,Previously, Ms. Shoback was withworked at Staples for 10 years where she held a number of strategic executive marketing, operational and general management roles both in the United States and internationally. She was a key senior executive in leading the launch of Staples.com in the United States and growing it to over $250 million in revenue in less than 2 years. She received the Boston Business Journal’s 40 Under 40 Award in 2005, is a member of the Wellesley College Alumnae Business Leadership Council, serves on the Boardboards of Directors ofCUNA Mutual Group and Harvard Student Agencies, (The Harvard Shop), and is on the Boardboard and Investment Committeeinvestment committee for the Brookline Library Foundation. She is also a member of the Massachusetts Women’s Forum and the Women Corporate Directors. Ms. Shoback serves on the board of directors of the Bank, an affiliate of the Company.
Paul M. Simons. Mr. Simons joined the Company in December 2018 as Executive Vice President and Chief of Corporate Strategy and Development of the Company and the Bank. Effective on March 15, 2019, Mr. Simons will become the President of Private Banking, Wealth & Trust of the Bank, while continuing to serve in his role as Executive Vice President of the Company and the Bank. With over 30 years of experience in the financial services sector, he has demonstrated expertise and leadership in virtually every aspect of financial services, including asset management, wealth management, financial technology, private banking, investment banking, family office and client relationship management. From May 2017 to November 2018, Mr. Simons was a Managing Director of Seaport Global Holdings, an institutional securities firm, where he developed and launched Seaport Global Asset Management, a business to diversify the firm’s revenue streams and deliver bespoke managed investment solutions to wealthy families and related entities. Prior to joining Seaport, from December 2014 to October 2016, he served as provisional CEO for a start-up financial information and technology company. In this role, he led the delivery of a launch-ready comprehensive digital investment, capital markets origination, and advanced data and analytics platform for investors, advisors, financial institutions. From 2006 to 2011, Mr. Simons held a range of positions with increasing responsibility at Credit Suisse, beginning with Managing Director, Head of Americas Client Solution Group, before becoming Managing Director, Co-Head of Private Banking USA, and ending with his promotion to Managing Director, Head of Americas Wealth Management Solutions, a position in which he was responsible for the management and development of onshore investment product and service platforms across North and South America. During his tenure at Credit Suisse, Mr. Simons also was an active member of the firm’s Global Executive Committee and Managing Director Evaluation Committee. From 1988 to 2006, Mr. Simons held various positions at Merrill Lynch, including Managing Director, Global Markets and Investment Banking. He serves on the board of Intonation Music Workshop, a non-profit music education initiative directed towards underserved youth in the Chicago area, and as a trustee of Millbrook School, a private coeducational boarding school in Millbrook NY. Mr. Simons serves on the board of directors of Dalton, Greiner, Hartman, Maher & Co., LLC, an affiliate of the Company.
For biographical information regarding Clayton G. DeutschAnthony DeChellis see “Information Regarding Director Nominees.”
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that the Company’s officers and directors and persons who own beneficially more than 10% of the Company’s outstanding shares of common stock file reports of ownership and changes in ownership with the SEC. Based solely upon a review of the reports and amendments thereto filed with the SEC under Section 16(a), copies of which are required to be furnished to the Company under SEC regulations, during and with respect to fiscal year 2016,2018, no officer, director or person who owns beneficially more than 10% of the Company’s outstanding shares of common stock failed to file such reports on a timely basis.basis with the exception of Joseph C. Guyuax who did not file timely two Form 4s with respect to transactions effected by his wife’s trust account.
PRINCIPAL SHAREHOLDERSPrincipal Shareholders
The following table sets forth the beneficial ownership of the Company’s common stock as of January 30, 20172019 with respect to (1) each director and nominee for director; (2) each of the Company’s named executive officers identified in this Proxy Statement; and (3) all directors and executive officers of the Company as a group.
| | | Name* | | Common Stock(2) | | Exercisable Options | | Percentage of Outstanding Stock | | Common Stock (1) | | Exercisable Options | | Percentage of Outstanding Stock (2) |
Current Directors (1) | | | | | | | | | | | | |
| Mark F. Furlong | | 5,363 |
| | — |
| | ** |
| | 20,498 |
| | — |
| | ** |
|
| Joseph C. Guyaux | | 463 |
| | — |
| | ** |
| | 8,487 |
| | — |
| | ** |
|
| Deborah F. Kuenstner | | 112,818 |
| | 10,653 |
| | ** |
| | 130,922 |
| | — |
| | ** |
|
| Gloria C. Larson | | 9,986 |
| | — |
| | ** |
| | 17,921 |
| | — |
| | ** |
|
| John Morton III | | 31,290 |
| | 7,410 |
| | ** |
| |
| Daniel P. Nolan | | 48,511 |
| | — |
| | ** |
| |
| Daniel P. Nolan (3) | | | 65,330 |
| | — |
| | ** |
|
| Kimberly S. Stevenson | | 12,044 |
| | — |
| | ** |
| | 29,302 |
| | — |
| | ** |
|
| Luis Antonio Ubiñas | | | 4,759 |
| | — |
| | ** |
|
| Stephen M. Waters | | 39,138 |
| | 11,704 |
| | ** |
| | 24,255 |
| | — |
| | ** |
|
| Donna C. Wells | | 12,308 |
| | — |
| | ** |
| |
| Lizabeth H. Zlatkus | | 7,111 |
| | — |
| | ** |
| | 18,397 |
| | — |
| | ** |
|
| Named Executive Officers (3) | | | | | | | |
| Margaret W. Chambers | | 129,244 |
| | 19,100 |
| | ** |
| |
| Clayton G. Deutsch*** | | 738,566 |
| | — |
| | ** |
| |
| Named Executive Officers (4) | | | | | | | |
| Anthony DeChellis*** | | | 150,079 |
| | — |
| | **
|
|
| Clayton G. Deutsch | | | 737,204 |
| | — |
| | ** |
|
| Steven M. Gaven | | | 6,531 |
| | 5 |
| | **
|
|
| Corey A. Griffin | | 47,068 |
| | — |
| | ** |
| | 78,773 |
| | — |
| | ** |
|
| David J. Kaye | | 129,985 |
| | 20,240 |
| | ** |
| | 110,333 |
| | — |
| | ** |
|
| George G. Schwartz | | 124,129 |
| | 42,810 |
| | ** |
| |
Jacqueline S. Shoback
| | | 39,451 |
| | — |
| | **
|
|
All Current Directors, Nominees and Executive Officers as a Group (18 Persons) (4)(5) | | 1,594,608 |
| | 141,416 |
| | 2.07 | % | | 1,554,346 |
| | 14,764 |
| | 1.87 | % |
| |
| * | Unless otherwise indicated, the address is c/o Boston Private Financial Holdings, Inc., Ten Post Office Square, Boston, MA 02109. |
| |
| ** | Represents less than 1% |
| |
| *** | Mr. DeutschDeChellis is also a director of the Company. |
| |
| (1) | Percentages held by executive officers and directors individually and as a group are calculated on the basis of 83,829,378 shares of common stock outstanding as of January 30, 2017. |
| |
(2) | Beneficial share ownership is determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended. Accordingly, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares the power to vote such security or the power to dispose of such security. The amounts set forth above as beneficially owned include shares owned, if any, by spouses and relatives living in the same home as to which beneficial ownership may be disclaimed. |
| |
| (2) | Percentages held by executive officers and directors individually and as a group are calculated on the basis of 83,747,159 shares of common stock outstanding as of January 30, 2019. |
| |
| (3) | On February 14, 2019, Mr. Nolan resigned from the Board of Directors of the Company. |
| |
| (4) | Performance shares, restricted stock units and performance stock units that are not eligible to vest within 60 days of January 30, 2019 are not included as executive officers have no beneficial interest in such sharesequity awards until either established performance criteria are met.met or a vesting time period has lapsed. Please see “Compensation Discussion and Analysis.” |
| |
(4)(5) | Includes 146,584112,104 shares of common stock and 29,49914,759 exercisable options held by the Company’s current executive officers not identified on this table. |
The following table lists certain persons known by the Company to own beneficially more than five percent of the Company’s outstanding shares of common stock as of December 31, 2016.2018.
|
| | | | |
| Name and Business Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | Percentage of Outstanding Stock |
| BlackRock, Inc., 55 East 52nd Street, New York, NY 10055 | | 9,685,26712,429,392 (1) | | 11.70%14.70% |
| The Vanguard Group, 100 Vanguard Blvd., Malvern, PA 19355 | | 7,144,6438,921,482 (2) | | 8.59%10.57% |
| FMR LLC, 245 Summer Street, Boston, MA 02210 | | 6,141,0286,609,585 (3) | | 7.387%7.83% |
| Dimensional Fund Advisors LP, Building One, 6300 Bee Cave Road, Austin, Texas, 78746 | | 5,389,7505,594,923 (4) | | 6.48%6.63% |
| |
| (1) | This information is based solely on a Schedule 13G13G/A filed with the SEC on January 12, 201724, 2019 by BlackRock, Inc., in which it reported sole voting power of 9,392,43311,970,819 shares and sole dispositive power of 9,685,267 12,429,392shares. In this same Schedule 13G/A filing, BlackRock identified iShares Core S&P Small-Cap ETF as having the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, more than 5% of our shares. |
| |
| (2) | This information is based solely on a Schedule 13G13G/A filed with the SEC on February 10, 201711, 2019 by The Vanguard Group, in which it reported sole voting power of 98,74679,771 shares, shared voting power of 20,895 shares, sole dispositive power of 7,029,5368,827,521 shares and shared dispositive power of 115,10793,961 shares. |
| |
| (3) | This information is based solely on a Schedule 13G13G/A filed with the SEC on February 14, 201713, 2019 by FMR LLC, in which it reported sole voting power of 3,738,4973,170,527 shares and sole dispositive power of 6,141,0286,609,585 shares. |
| |
| (4) | This information is based solely on a Schedule 13G13G/A filed with the SEC on February 9, 20178, 2019 by Dimensional Fund Advisors LP, in which it reported sole voting power of 5,085,3855,294,600 shares and sole dispositive power of 5,389,7505,594,923 shares. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the securities of the Company that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Company held by the Funds. However, all securities reported in this table are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. |
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
This Compensation Discussion and Analysis (“CD&A”) describes both the Company’s executive compensation program, including 20162018 total compensation for the Company’s named executive officers (“NEOs”), and how the Compensation, Governance and Executive Committee of the Company’s Board of Directors (the predecessor to the current Compensation Committee which was established in January 2019) (the “Committee”) determined 20162018 compensation for the Company’s NEOs listed below.
Named executive officers
NEOs reported in this year’s CD&A (titles as of December 31, 2016)2018):
Clayton G. DeutschAnthony DeChellis - Chief Executive Officer and President of the Company and the Bank
Clayton G. Deutsch - retired Chief Executive Officer and President of the Company and retired Chief Executive Officer of the Bank
Steven M. Gaven - Executive Vice President and Chief Financial Officer of the Company and the Bank; Chief Financial Officer, BPW
David J. Kaye - Executive Vice President of the Company and the Bank; Chief Financial and AdministrativeExecutive Officer – Corporate Clients Group of the Bank
Corey A. Griffin - Chief Executive Officer – Wealth Management and Trust Segment; and Executive Vice President
George G. Schwartz - President, Boston Private Bank & Trust Company; of the Company and the Bank; Chief Executive Officer – Private Banking SegmentClients Group of the Bank; Chief Executive Officer, BPW
Margaret W. ChambersJacqueline S. Shoback - Executive Vice President General Counselof the Company and Corporate Secretarythe Bank; Chief Executive Officer – Emerging Businesses and Client Experience of the Bank
All compensation actions taken in 2016On November 5, 2018, the Company announced the resignation of Clayton G. Deutsch as Chief Executive Officer and recommended for 2017 reflectPresident of the Company’s commitment to shareholder-aligned governanceCompany and compensation arrangements. as a member of the Board of Directors, effective as of November 26, 2018, and the appointment
of Anthony DeChellis as Mr. Deutsch's successor. Mr. Deutsch's formal retirement date was December 31, 2018. As of January 1, 2019, the NEOs with continuing employment relationships with the Company were Ms. Shoback and Messrs. DeChellis, Gaven, Kaye and Griffin. On March 6, 2019, the Company announced the departures of Mr. Kaye, effective March 22, 2019, and Mr. Griffin, effective May 31, 2019.
The Company’s executive compensation program and related actions are intended to reward sustained, long-term performance and returns for shareholders consistent with the Company’s overall risk profile and disciplined growth strategy. All compensation actions taken in 2018 reflect the Committee’s commitment to shareholder-aligned governance and compensation arrangements.
20162018 Operational and Financial Highlights
The Company made great progressCompany's primary strategic objective in 2016 with respect to executing against itsrecent years has been the pursuit of a “One Boston Private” strategy for delivering integrated Wealth, Trustwealth management, trust, and Private Bankingcommercial and private banking solutions to its clientsclients. Management believes that a Company focused on providing holistic financial advice, combined with balance sheet solutions, will deliver higher risk adjusted returns and increasing shareholdercreate long-term value as illustrated below:for its shareholders.
GAAP Earnings Per ShareAs part of this objective, the Company simplified its corporate structure by divesting two affiliates that did not align with our strategy:
On December 20, 2017, the Company announced the divestiture of Anchor Capital Advisors, LLC ("Anchor"). The transaction closed on April 13, 2018.
On October 17, 2018, the Company announced the divestiture of Bingham, Osborn, and Scarborough, LLC ("BOS," and together with Anchor, the "Divested Affiliates"). The transaction closed on December 3, 2018.
The proceeds from these divestitures contributed to higher levels of capital, creating flexibility for future investments and growth in the core wealth management, trust, and commercial and private banking businesses and for capital return to shareholders.
During 2018, the Company's tangible book value per share (non-GAAP measure) increased to $0.81$8.18, a 15% year-over-year increase. Tangible book value per share in 2016 from $0.74 per share in 2015, an increase of 9%.is calculated as tangible common equity (total shareholder equity less goodwill and intangible assets) divided by common shares outstanding.
GAAP Net Income was $71.6 million in 2016 as compared to $64.9 million in 2015, an increase of 10%.
Return on Average Common Equity (“ROACE”) was 9.4% in 2016 compared to 9.0% in 2015.
Total stock price appreciation in 2016 was 45.9%, outperforming the KBW Regional Bank Index (“KRX”) average appreciation of 35.7%.
The Company’s cumulative stock price appreciation from August of 2010 (Mr. Deutsch’s arrival) through December 2016 was 150.4%, outperforming the KRX gain of 129.9% while the S&P 500 gained 103.2% forAt the same time, period.the Company returned $62.4 million, or 72% of operating net income, to shareholders through dividends and share repurchases, including the completion of a $20 million share repurchase program.
_____________
Source: FactSet/IPREOFinancial Highlights:
2018 GAAP diluted earnings per share was $0.92.
2018 operating diluted earnings per share was $0.97, a 10% year-over-year increase compared to $0.88 in 2017. Management believes that operating earnings per share more accurately reflects the core earnings power of the Company's business than GAAP earnings per share. A full reconciliation from GAAP to operating financial metrics, including earnings, can be found in the table on page 21.
2018 GAAP return on average common equity ("ROACE") was 10.7%. 2018 operating ROACE was 11.2%, an increase from 10.1% in 2017.
2018 operating Pre-Tax, Pre-Provision ("PTPP") earnings was $106.9 million, a 2% year-over-year increase from 2017. The increase was driven by 8% growth in the Company's core business, partially offset by lost earnings from the Divested Affiliates.
During the third quarter of 2018, the Company initiated an efficiency program guided by a focus on improving operating efficiency and sustained earnings enhancement. The program included a net reduction in total employees of approximately 7% and resulted in a restructuring expense in 2018 of $7.8 million. The Company expects these actions will result in annual expense reduction in excess of $11.0 million, with the full impact of the savings evident in 2019.
The Company has increased its quarterly dividend six timesin 2018 to $0.12 per share, the eighth such increase in the past five years, from a quarterly dividendseven years. In 2018, the Company paid $0.48 of $0.01dividends per common share and had $0.97 of operating diluted earnings per share, resulting in 2012,a 49% payout ratio on operating earnings.
Asset Quality:
Disciplined balance sheet risk management is a central element of our strategy. The Company targets top quartile credit metrics relative to $0.11 per sharethe KBW Regional Banking Index ("KRX").
Nonperforming assets as a percentage of January 2017, whichtotal assets were 0.17% at December 31, 2018, compared to the KRX median of 0.52%. The Company was paid in February 2017.the 96th percentile relative to the KRX.
Total net loans (charged-off) / recovered as a percentage of average loans for 2018 were 0.04%, compared to the KRX median of (0.15%). The Company was in the 96th percentile relative to the KRX.
Total Shareholder Return (“TSR”("TSR") (stock price appreciation plus dividends), is shown below:
Despite a challenging environment, the Company continued to demonstrate progress in expense and balance sheet management, and continued to maintain strong capital ratios. Additional financial highlights included:
Net Interest Income increased 8% in 2016. This was due to increases in interest income across both loans and investment securities, coupled with lower borrowing costs.
Core Fees and Income decreased by 3% in 2016. This was due to revenue declines in the Wealth Management and Trust and Investment Management segments that were partially offset by an improvement in Banking segment fees.
Non-Performing Assets as a percentage of Total Assets, as of December 31, 2016, decreased to 0.24% from a fourth quarter level of 0.36% in 2015 and 0.66% in 2014.
Tier 1 Common Equity increased to 10% in 2016, from 9.8% in 2015 and 9.2% in 2014.
Assets Under Management/Advisory were flat from 2015, ending 2016 at $27.6 billion.
The Company achieved 6% year-over-year average loan growth and 5% year-over-year average deposit growth.
In addition, the Company made strategic investments in talent, market expansion and branding for its core businesses and continues to make significant progress with respect to strengthening its leadership and talent profile, cost infrastructure, technology and overall market positioning. For example, the Company hired a Chief Technology Officer at the end of 2015, developed a three-year technology strategy and implemented Sales Force, a new client relationship management system, in 2016 to help enhance the overall client experience.
2016 Compensation Program Design Changes:
The Company made targeteddelivered a TSR of (29)% during 2018, under-performing the KRX median of (18)%. The Committee took into consideration this under-performance when determining management compensation program changes in 2016. Those changes were made to enhance2018, as discussed below.
The Company's cumulative stock price appreciation (i.e., stock price growth excluding the performance orientation and alignmentreinvestment of executive compensation programs with shareholders. In particular:
Short-Term Incentive (“STI”) Plan: This Plan was simplified while maintaining a formulaic, scorecard approach with three metrics tied to key financial metrics, continuing to retain an elementdividends) from August of discretion to ensure overall outcomes were aligned with actual performance and maintaining Section 162(m) tax deductibility. Company and business area scorecards were considered for funding the executive STI bonus pool and for the allocation of individual payouts in 2016. In 2017,2010, when Mr. Deutsch joined the Company scorecard will beas CEO, through December 31, 2018, the primary driver for funding all executive bonuses to reinforceend of the Company’s One Boston Private strategy with business areayear in which he retired, was 60%, under-performing the KRX return of 85% and individual performance still consideredthe S&P 500 return of 128% in determining final bonus awards. Target STI goals for full target STI payout continue to align with market 75th percentile relative performance.the same period.
|
| | |
| BPFH Total Shareholder Return | | BPFH vs. Index Relative Performance |
Long-Term Incentive (“LTI”) Plan: The LTI consists of both a performance-based share payout and a time-based payout. A new matrix was developed in 2016 for determining executive performance-share payouts based on relative and absolute ROACE performance in 2016. The Committee is maintaining this matrix structure for 2017. Target ROACE for full target LTI payout continues to align with market 75th percentile relative performance.
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Source: S&P Market Intelligence
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| The table below summarizes adjustments made to the Company's GAAP results: |
| | | | | |
| ($ in millions) | | Full Year 2018 | | Full Year 2017 |
| | | GAAP | | Adj. | | Operating | | GAAP | | Adj. | | Operating |
| Net interest income | | $ | 234.6 |
| | $ | — |
| | $ | 234.6 |
| | $ | 224.7 |
| | $ | — |
| | $ | 224.7 |
|
| Core fees and income | | 131.6 |
| | — |
| | 131.6 |
| | 152.8 |
| | — |
| | 152.8 |
|
| Other income | | 18.4 |
| | (18.1 | ) | | 0.2 |
| | 1.2 |
| | 1.3 |
| | 2.4 |
|
| Total revenue | | 384.6 |
| | (18.1 | ) | | 366.4 |
| | 378.7 |
| | 1.3 |
| | 379.9 |
|
| Total expense | | 267.4 |
| | (7.8 | ) | | 259.5 |
| | 299.9 |
| | (25.3 | ) | | 274.6 |
|
| Pre-tax, pre-provision income | | 117.2 |
| | (10.3 | ) | | 106.9 |
| | 78.7 |
| | 26.6 |
| | 105.3 |
|
| Provision expense / (credit) | | (2.2 | ) | | — |
| | (2.2 | ) | | (7.7 | ) | | — |
| | (7.7 | ) |
| Pre-tax income | | 119.4 |
| | (10.3 | ) | | 109.1 |
| | 86.4 |
| | 26.6 |
| | 113.0 |
|
| Taxes | | 37.5 |
| | (14.6 | ) | | 23.0 |
| | 46.2 |
| | (12.3 | ) | | 33.9 |
|
| Discontinued operations | | 2.0 |
| | — |
| | 2.0 |
| | 4.9 |
| | — |
| | 4.9 |
|
| Noncontrolling interest | | 3.5 |
| | — |
| | 3.5 |
| | 4.5 |
| | — |
| | 4.5 |
|
| Net income | | $ | 80.4 |
| | $ | 4.3 |
| | $ | 84.6 |
| | $ | 40.6 |
| | $ | 38.9 |
| | $ | 79.5 |
|
| | | | | | | | | | | | | |
| Diluted Earnings Per Share | | $ | 0.92 |
| |
|
| | $ | 0.97 |
| | $ | 0.42 |
| | | | $ | 0.88 |
|
| ROACE | | 10.7 | % | | | | 11.2 | % | | 5.0 | % | | | | 10.1 | % |
| ROATCE | | 12.5 | % | | | | 13.1 | % | | 7.0 | % | | | | 13.6 | % |
Full year 2018 operating results have been adjusted to exclude the after-tax impact of:
$18.1 million gain on sale and $3.5 million tax expense related to the divestiture of BOS;
$7.8 million of restructuring charges related to efficiency initiatives; and
$12.7 million tax expense related to the divestiture of Anchor.
Full year 2017 operating results have been adjusted to exclude the after-tax impact of:
$25.3 million of expenses, including impairment of goodwill, related to the divestiture of Anchor; and
$12.9 million of tax expense related to the Tax Cuts and Jobs Act.
Summary of 2018 Compensation Actions
|
| | | | |
Base Salary:
0%
No base salary increases for any NEO since 2016 (other than two increases made in connection with promotions)
| | Short-Term Incentive (% of target):
Initial Funding = 69%
ê
Final Funding = 65%
The Committee exercised negative discretion to reduce funding by four percentage points
| | PSUs (% of target):
110%
3-year average PSU payout: Payouts for the last three PSU cycles have averaged 83.3% of target
|
Despite the operational and financial outcomes described above that better position the Company for future success, 2018 was a challenging year for us and our shareholders, and our compensation outcomes reflect those challenges.
In 2018, the Company underperformed on its core financial performance metrics (ROACE and PTPP Income Growth), which resulted in initial STI funding of 69% of target. The Company’s compensation peer group was updatedCommittee took into consideration additional factors to align better withassess holistic Company performance and progress toward strategic objectives. Among the Company’s size from a revenueadditional factors considered were top quartile performance related to credit quality and market capitalization standpoint. The Company is now positioned intargeted BPW EBITDA margin growth, offset by below plan loan and deposit growth, below plan operating leverage, and TSR below the mid-range50th percentile of the peer group from a relative size standpoint (i.e., assets, market cap and enterprise value). The number of companies in the peer group was expanded to 19.
KRX.
The Company continues
Similar to promote best practice standards with respectlast year, when the Committee exercised its negative discretion to compensation design and governance:reduce STI funding by 18 percentage points, the Committee felt it important to reduce the 2018 funded STI payout, already well below target, by four additional percentage points to acknowledge disappointing shareholder results in 2018.
The use of stretch goals in its programs and a pay mix focused on delivering variable, performance-based pay promotes strong pay
Historical Pay for performance orientation.Performance Alignment
The Company caps the upside leverage (i.e., percentage of target pay opportunity) that can be earned each year by its executives through our incentive programs. This limitation, along with the performance scorecard framework noted above, ensures that executives are rewarded within the Company’s risk/reward profile to take appropriate, but not excessive, risk. The following chart illustrates the actual STI and actual performance share payouts (percent of target awards) relative to the target and maximum payouts that could behave been earned based on limits defined in the executive compensation program.
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| |
| (1) | Although overall STI funding for executives/senior leaders of the Company was 86% of target, the CEO STI funding level was 72% of target to align with the calculated funding based on the Company’s overall financial results. |
| |
| (2) | Although the scorecard calculated STI funding for executives/senior leaders of the Company was 143%, the Committee exercised negative discretion to reduce the funding amount to 125% of target. |
(1)(3) Although overall bonusthe scorecard calculated STI funding for executives/senior leaders of the Companycompany was 86%69%, the CEO bonusCommittee exercised negative discretion to reduce the funding was based on the Company scorecard at 72%.
(2) For the 2014amount to 2016 performance share tranche, the maximum payout is 180%; beginning with the 2016 to 2018 performance share tranche, the maximum payout increased from 180% to 200%.
The Company continues to promote executive stock ownership through ownership guidelines at the lower of (i) a range of three to six times base salary depending on the NEO position, or (ii) a minimum share guideline ranging from 83,000 shares for Ms. Chambers to 350,000 shares for Mr. Deutsch. All NEOs, with the exception of Mr. Griffin, have attained their guidelines. Mr. Griffin has five years from the start of his employment, May 2014, to achieve the ownership guidelines.
In October 2016, the Committee approved a formal severance plan for its executives with an officer designation of Executive Vice President and above that provides for severance benefits in the event that an executive’s position is eliminated, or the executive is terminated “without cause.” The severance plan was put in place to formalize the severance policy that had been in place since 2014 providing for a benefit of one times base salary, a pro-rated bonus, accelerated vesting of all unvested time-based stock awards on a pro-rata basis (pro-ration on accelerated shares is determined using the time period from grant date to the date of separation), pro-rata vesting for performance-based shares upon completion65% of the performance period, and reasonable outplacement costs. Severance benefits are provided in exchange for a general release and non-solicitation of clients and employees.
In addition, the Company continues to maintain the following practices:
Double-trigger change-in-control severance arrangements (for legacy change-in-control agreements). The Company has not offered change-in-control agreements for any NEOs since 2008.
No hedging policy.
Claw-backs for compensation in the event of material financial restatements.
No tax gross-ups on perquisites.
target.
Say on Pay Shareholder Approval Levels for 2015 and 2016
The Company’s shareholders approved the “say on pay” resolution included in the Company’s 2016 Proxy Statement with 92% of the votes cast in favor of the resolution, compared to 98% in 2015. The Company believes these votes strongly affirm shareholder support of its approach to executive compensation.
CEO Pay Versus Performance
History of strong CEO pay and performance alignment
Positive cumulative TSRThe realizable pay of Mr. Deutsch, the Company's retired CEO, for the period from January 1, 2016 to his retirement on December 31, 2018 was below his targeted pay opportunity over the past three-yearsame period, was 44%, with 2016reflecting the TSR of 51%.
2016 performance was slightly below expectations, correlating to a below-target payout on(7%) during the annual cash incentive (72%) and a 71% payout on performance shares covering the 2014 to 2016 period.
Over the three-year period, Mr. Deutsch’s realizable pay was 5.4% abovealso excludes any salary increases as he had no base salary increases during his entire seven-year tenure with the target pay opportunity for the CEO as illustrated below:
_____________
| |
(1) | Represents Mr. Deutsch’s cumulative base salary, target cash bonus, and target long-term incentive as of the end of fiscal 2016. Excludes 2014 retention LTI award granted on December 17, 2014. |
| |
(2) | Represents Mr. Deutsch’s cumulative base salary,Company. In addition, Mr. Deutsch's actual cash bonus paid at 72% of target for FY2016, and actual outstanding, unvested equity grants as of the end of fiscal 2016 with all of the equity being valued as of December 31, 2016; 2014-2016 annual performance shares are valued assuming 71% of target number of shares earned and 2015-2017 and 2016-2018 performance shares valued assuming target number of shares will be earned. Excludes 2014 retention LTI award granted on December 17, 2014. |
While there is a slight increase in realizable value of pay, attributable to the increase in the stock price over the calendar year and over the three-year period, the cash portion of the CEO’s three-year pay is down 11% due to below target annual cash bonus payouts demonstratingin the strongaggregate for the period were 13% below his cash bonus targets for the period. The payout for the 2016-2018 performance shares was 110% for above-target performance over the period. However, the realized value of the award was below the grant date fair value considering the December 31, 2018 stock price of $10.57, demonstrating alignment of pay to performance within the Company’s compensation programs.
Analysis________
(1) Represents Mr. Deutsch’s three-year cumulative base salary, target cash bonus, and grant date fair market value target long-term incentive opportunity as of the end of fiscal year 2018.
(2) Represents Mr. Deutsch’s cumulative base salary, actual cash bonus paid at 72%, 125% and 65% of target for fiscal years 2016, Compensation Actions2017 and 2017 Recommended Actions2018, respectively, and actual outstanding, unvested equity grants as of the end of fiscal year 2018 (assuming Mr. Deutsch were CEO as of the end of fiscal year 2018 in order to compare target pay against realizable pay), with all of the equity being valued as of December 31, 2018 ($10.57); 2016-2018 annual performance shares are valued assuming 110% of target number of shares earned and 2017-2019 and 2018-2020 performance shares and performance restricted stock shares/units, respectively, valued assuming target number of units will be earned.
Base Salary:
As a result of Mr. Schwartz’s expanded role asNew CEO of the Private Banking Segment, his base salary increased to $400,000 in July 2016. There were no salary increases for any other NEOs in 2016 or 2017.
Short Term Incentives:Pay Arrangement
Based on many improvementsOn November 5, 2018, the Company announced the resignation of Mr. Deutsch as CEO, effective as of November 26, 2018, and the appointment of Anthony DeChellis as Mr. Deutsch's successor. As part of his employment agreement, which is described in greater detail below under "Employment Agreements and Executive Severance and Change-in-Control Agreements", Mr. DeChellis received equity-based inducement awards. The inducement awards were offered to recruit Mr. DeChellis to the Company’s 2016 financialCompany and operational performance, executive compensation increasedprovide an opportunity to strengthen alignment with shareholders from the prior year. For example, in 2016beginning of his tenure. Reflecting the CEO’s cash bonus was increased by 29% as comparedCommittee’s commitment to 2015 (i.e., 72%align pay with shareholder outcomes, half of target versus 56%the value of target last year), and hisMr. DeChellis’ inducement awards consists of stock options that will only vest upon the achievement of performance share payout was increased from a 0% payout for the 2013-2015 performance share cyclehurdles directly tied to a 71% payout for the 2014-2016 performance share cycle. The other NEOs incurred similar increases in cash and equity award payouts given the performance improvementsof the Company's stock price. Time-based stock options and restricted stock units made up the remaining portion of the inducement awards, both of which vest in 2016 as compared to 2015.four equal annual installments beginning on November 26, 2019.
2018 Compensation Program Design Changes
The Company made modest compensation program changes in 2018. Changes made were to simplify and enhance the performance orientation and alignment of executive compensation programs with the Company’s business strategy and shareholders. In particular:
Short-Term Incentive Plan ("STI"): In 2018, the Committee metcontinued to use one scorecard as the primary driver for funding all executive bonuses, to simplify and reinforce the Company’s “One Boston Private” strategy, and eliminated revenue growth as a core metric, thereby reducing the number of core metrics in the scorecard from three to two to increase weighting on January 17, 2017ROACE and approved 2016 maximum bonusPTPP Income Growth. The Company made this change because it believes that ROACE and PTPP Income Growth most closely correlate with the Company’s stock price performance and, as a result, are most closely aligned with shareholder interests. In addition, the Company reduced the ROACE payout range around the target in the 2018 scorecard. The 2018 scorecard included examples of discretionary modifiers that could be used by the Committee to modify the calculated scorecard funding for NEOs at 200% of target awards, with actual bonus payments and funding subject to the Committee’s negative discretion. Maximum funding was determinedup or down by 20% based on the Company’s achievement of positive net earnings forcore metrics. (Note: The Committee has full discretion to go beyond the year. After certification of maximum funding available for executive bonuses,20% modifier guideline as it feels appropriate in any given year, based on the facts and circumstances). The discretionary modifiers provide the Committee thenflexibility to set final funding in consideration of the overall performance of the executive team based on a variety of factors. Examples of discretionary modifiers considered for 2018 were relative credit quality, average loan growth, average deposit growth, operating leverage, BPW EBITDA margin and TSR as measured against the KRX. The Company continues to calibrate performance goals with STI payouts to ensure a strong pay for performance correlation in the overall design of the STI.
Long-Term Incentive Plan ("LTI"): No design changes were made to the LTI funding matrix for performance stock units ("PSUs") in 2018, which continues to be based on relative and absolute ROACE performance. Target ROACE for full target LTI payout aligns with above median performance. The Company continues to calibrate performance goals with LTI payouts to ensure a strong pay for performance correlation in the overall design of the long-term incentive plan. PSUs continue to comprise 60% of the annual LTI grant.
The Company continues to promote best practice standards with respect to compensation design and governance, including:
The use of stretch goals in its programs and a pay mix focused on delivering variable, performance-based pay promotes strong pay for performance orientation.
The Company caps the percentage of target pay opportunity that can be earned each year by its executives through our incentive programs. This limitation, along with the performance scorecard frameworks discussed above, ensures that executives are rewarded within the Company’s risk/reward profile to take appropriate, but not excessive, risk.
The Company continues to promote executive stock ownership through a stock ownership policy at a range of three to six times base salary depending on the NEO position as described below under "Executive Officer Stock Ownership Policy."
In addition, the Company continues to maintain the following practices:
| |
| ◦ | Double-trigger change-in-control severance arrangements for a legacy NEO change-in-control agreement and in Mr. DeChellis' employment agreement. |
| |
| ◦ | A no hedging or margin policy. |
| |
| ◦ | Claw-backs for compensation in the event of material financial restatements. |
Say on Pay Shareholder Approval Level for 2018
The Company’s shareholders approved the “say on pay” resolution included in the Company’s 2018 Proxy Statement with 82% of the votes cast in favor of the resolution. Following the 2018 annual meeting of shareholders, the Company engaged Alliance Advisors to reach out to the governance teams of the Company’s top 30 shareholders, representing approximately 79% of the outstanding shares, to ask if those shareholders would participate in meetings or calls with the Company to discuss the voting on the “say on pay” resolution. Three of these shareholders, representing approximately 14% of the Company’s outstanding shares, accepted meetings or calls. Two of these shareholders had voted “for” and one of these shareholders had voted “against” the Company’s “say on pay” resolution included in the Company’s 2018 Proxy Statement. The Chair of the Committee and the following members from the Company's management team participated on these calls during the fourth quarter of 2018: the Chief Financial Officer, the Chief Human Resources Officer, the General Counsel and the Director of Investor Relations.
During the calls, the Company reviewed in greater detail its executive compensation design and philosophy and answered questions from the shareholders. The Company asked the shareholder that previously voted "against" the Company's "say on pay" resolution to identify any specific concerns that led it to vote against the proposal. The shareholder inquired about the appropriateness of the design of the STI in light of the Committee's decision to exercise negative discretion in 2018. Specifically, despite outperformance on the core financial performance metrics of the STI (ROACE, Revenue Growth, and PTPP Income Growth) which resulted in initial scorecard funding of 143% of target, the Committee took into consideration additional factors outside of these core metrics to assess holistic Company performance, such as below median TSR in 2017 relative to the KRX, and reduced the funded STI payout by 18 percentage points.
The Company believes the STI plan strikes an appropriate balance between strong financial results (against the internally developed plan and relative to the prior year) and the returns experienced by our shareholders. The Company further believes the issues that resulted in the Committee exercising negative discretion to reduce by 18 percentage points STI funding for 2017 from a 143% STI scorecard level were isolated. Apart from 2017, the STI scorecard has funded at a 56%, 86% and 69% level for each of 2015, 2016 and 2018, respectively, reflecting the rigor of the goal setting approach and further demonstrating the alignment between pay outcomes and performance over an extended period. As noted above, the Compensation Committee exercised its negative discretion to reduce the overall bonus pool funding2018 STI payout by an additional four percentage points to 86% of targetacknowledge the particularly challenging shareholder experience in 2018. The Compensation Committee will continue to monitor and assess the aggregate for all executives/senior leadersplan design of the Company to align better the funding of incentives with the performance of the Company, considering three performance scorecards covering the financial results for the consolidated Company, the Wealth ManagementSTI and Trust Segment, and the Private Banking Segment. The Committee met again on February 8, 2017 and approved bonus payments for executives again using the combination of three scorecards based on an assessment of the contributions of its executives, many of whom serve across multiple areas of the Company. Although in aggregate the combined metrics for the scorecards produced an 86% funding level across the three scorecards, the funding level for the NEOs as a group was in aggregate 78% of target, to ensure appropriate allocation of bonus pool dollars to the non-executive population.
All NEOs were considered to be strong contributors to the Company’s overall One Boston Private strategy and related deliverables. The CEO’s bonus was approved at 72% of his target award to align his pay directly with the financial results of the Company scorecard. The Committee approved bonuses for all other executives in a tight range from 75% to 86% of target. The variable payout within a tight band reinforced a strong team orientation, yet allowed meaningful differentiation of bonuses awarded given individual performance considerations,executive compensation for specific positions versus industry benchmarks and different financial outcomes for the different businesses. Differences in Mr. Griffin’s and Mr. Schwartz’s bonus awards primarily reflect differences in the financial performance of the Wealth Management and Trust Segment and the Private Banking Segment. The Private Banking Segment continued to demonstrate strong credit quality, expense discipline and financial ratios, but fell short on its deposit and loan growth goals for the year. The Wealth Management and Trust Segment, although demonstrating measurable progress on new client development, gross AUM flows, expense management and the restructuring of its investment platform, was impacted by client attrition rates that were higher than expected in the first half of the year, despite trending improvements in the latter half of the year. Mr. Kaye’s and Ms. Chambers’ respective bonuses reflect their contributions across multiple areas of the Company, including the successful sale of select West Coast offices and contributions to the execution of the Company’s integrated Wealth Management, Trust and Private Banking strategy from a legal, regulatory and governance perspective (Ms. Chambers) and from a financial, capital and balance sheet management perspective (Mr. Kaye), especially considering the challenging regulatory and interest rate environment for banking.plans.
The CEO’s bonus was determined by the Committee in executive session on February 8, 2017 and recommended for approval, and approved, by the full Board on February 9, 2017. The Committee approved bonuses for all other executives on February 8, 2017.
See “Annual Executive Incentive Plan (STI)” for further details.
Long Term Incentives:
The Committee met on April 19, 2016 and approved equity grant recommendations for NEOs at 100% of target award levels. Target award levels vary by position and range from 150% of base salary for the CEO to 75% to 100% for other NEO positions. The CEO’s equity award was approved by the full Board on January 26, 2016. Equity awards were granted 60% in performance shares and must be earned based on future performance (three-year performance period) and 40% in time-based restricted stock with a three-year cliff vesting period. Given the team-performance orientation to managing the Company, and
the strong historical performance of individuals on the team, equity awards were allocated in a consistent manner across the NEO positions. 2017 equity awards will not be granted until May of 2017; however, on February 8, 2017, the Committee approved the equity value for May 15, 2017 awards at 100% of target awards levels. 2017 equity awards granted in May 2017 will be reported in next year’s CD&A.
Compensation Components and Mix of Compensation
The Company’s direct compensation components consist of base salary, performance-based annual cash incentives, performance-based equity incentives and service-based equity incentives. The Company continues to emphasize performance-based, variable pay in its executive compensation programs. For example, annual cash incentives under the STI can range from 0% of target awards to 200% of target awards based on performance that is typically measured over one year. Equity incentives consist of a combination of time-based restricted stock (40%units ("RSUs") at 40% of targeted equity compensation award for 2016)2018 and performance-based restricted stock or “performance shares” (60%PSUs at 60% of targeted equity compensationcompensation award for 2016). Performance shares vest2018. PSUs vest only if and to the extentextent they are earned based on the achievement of three-year, forward-looking metrics. The Company’s overall executive compensation mix is heavily weighted towards variable and performance-based pay, approximately one-third base salary and two-thirds annual and equity incentives.
The following charts illustrate the targeted 2018 mix of fixed (base salary) versus variable (incentives/equity)(bonus and equity incentives) pay and also performance-basedshort-term (annual STI bonus) versus service-based paylong-term (equity) incentives for the Company’s CEOMr. Deutsch and other NEOs:
Peer Group and Total Compensation Market Benchmarking
In July of 2016, the Committee reviewed and approved a new, size appropriatesize-appropriate peer group. Thisgroup which was modified in July of 2017 to remove one bank that had been acquired. In July of 2018, the Committee re-approved this same peer group to be used to make 2019 pay decisions with one additional change: the removal of Banc of California due to its current engagement with activist investors and involvement with various lawsuits over outlier governance and compensation practices.
The peer group listed below, includes nineteen banks/which the Company used to make 2018 pay decisions, included 18 banks and financial services companies which were selected based on similartheir size (approximately 1/3 to 3 times the Company’s primary size indicators, – i.e.,with total assets of $2 billion to $30 billion and market capcapitalizations of $300 million to $3 billion) and fees as a percent of revenue of at least 20% to reflect the Company’s Wealth Management, Trustwealth management, trust and Private Bankingcommercial and private banking business orientation (as opposed to community/retail banking orientation).orientation. Other criteria used for peer company selection included companies headquartered in major metropolitan areas and companies with whomwhich the Company competes for executive talent. The peer group is a market frame of reference for compensation and performance comparisons and will also be used in 2017.
comparisons. The following companies were included in the Company’s 2016 peer group:group used to make 2018 pay decisions:
|
| |
Banc of California,Berkshire Hills Bancorp, Inc. | NBT Bancorp, Inc. |
Berkshire HillsBrookline Bancorp, Inc. | Pinnacle Financial Partners Inc. |
Brookline Bancorp, Inc. | PrivateBancorp, Inc. |
| Bryn Mawr Bank Corp. | Sandy Spring Bancorp Inc. |
| CoBiz Financial Inc. | UMB Financial Corporation |
| Columbia Banking System Inc. | Washington Trust Bancorp, Inc. |
| Community Bank System Inc. | Webster Financial Corporation |
| First Commonwealth Financial Corp. | Wintrust Financial Corporation |
| Independent Bank Corp. (INDB) | WSFS Financial Corporation |
| MB Financial Inc. | |
In addition, the KRX has beenwas added to measure the Company’s ROACE relative performance in the 2016, 2017, 2018 and 20172019 long-term incentive matrices. The Compensation Committee believes the KRX provides a more consistent benchmark for
purposes of measuring performance over a three-year time horizon given the larger number of peer banks in the IndexKRX to normalize any anomalies.
The Company’s independent compensation consultant, Frederic W. Cook & Co. (“FW Cook”), provides other relevant market reference points such as broader financial services and general industry compensation survey data covering companies of similar size to augment this peer group data, when appropriate.
The lastA market compensation review was conducted by FW Cook in October of 20162017 for the Company’s CEO and other select executive positions. Based on the market comparative data used, (reflecting 2015 actions), the Company’s overall target compensation position for executive positions was determined to be competitive with market, (above median) largely attributable to strong variable, performance-based pay opportunities that are aligned with stretch goals that, if attained, produce top quartile performance. Base salaries, in aggregate, were positioned close to median. Actual 20152017 compensation was determined to be, on average, within 10% of median and lower than target pay due to 2015 performance which was below expectations, resulting in below-target bonus payouts.median. Actual compensation versus market and versus target opportunities will vary year-to-year based on overall Company performance, individual contributions and cost considerations.
Base Salary
There were no base salary increases for any NEOs in 2018, other than increases made in connection with the promotion of Mr. Gaven to Executive Vice President and Chief Financial Officer of the Company and the Bank and the promotion of Ms. Shoback to CEO of the Emerging Client Group of the Bank in January 2018.
The Compensation Committee reviews the base salaries of its NEOs each year, with salary increases, if any, typically taking effect on January 1.1st. Salary increases are generally based on an executive’s performance within specific areas of accountability, external market competitiveness and/or internal budget considerations. Mr. Schwartz was the only NEO to receive a base salary increase in 2016 as a result of his expanded role as CEO of the Private Banking Segment.
Annual Executive Incentive Plan (STI)
Following its usual practice, the Committee established ana 2018 annual incentive target for 2016under the STI for each NEOof the NEOs stated as a percentage of base salary. Incentive target levels are based on each executive’s role, organization level, impact on annual performance and competitive considerations. Executives can earn from 0% up to 200% of target based on performance against pre-defined metrics. Targets are reviewed annually by the Compensation Committee and adjusted as appropriate to consider market competitiveness and desired mix of annual and long-term incentives. There were no increases to annual incentive plan targets for any NEO for 2018. In 2016,2018, the Board and Committee established a performance scorecard framework for compensation actions in 20162018 that considered financial goals important to the Company’s profitability and sustainable growth. Details of this performance-based framework, associated financial metrics, the Company’s achievement of these metrics and the Committee’s determination with respect to overall performance for the consolidated Company are described in the scorecard below.
|
| | | | | |
| | 2018 Targeted Performance Levels | | 2018 Actual Performance Levels and Weighted Funding |
| | Target | | Result (1) | | Weighted Funding |
| ROACE | 11.5% | | 11.0% | | 47.5% |
| | | | | | |
| PTPP Income Growth (2) | $113 | | $103 | | 21.6% |
| | | | | | |
| Final funding level | | | | | 69.0% |
(1) Presented on an operating basis.
(2) $ in millions.
Due to the Company's under-performance relative to the scorecard targets for ROACE and PTPP Income Growth, bonuses decreased for the executive team, including the NEOs, from the prior year; additionally, as noted above under “Summary of 2018 Compensation Actions”, the Committee exercised its negative discretion to further reduce the bonus pool from 69% to 65% of target. The decision to reduce the funding was made to align bonus outcomes with the Company’s performance. The 2018 metrics and related performance considered in the discretionary modification included the following:
|
| | | | | |
| | 2016 Targeted Performance Levels | | 2016 Actual Performance Levels and Weighted Funding |
| | Target | | Result | | Weighted Funding |
| ROACE | 10% | | 9.4% | | 28% |
| Total Revenue Growth (year-over-year) | 4.5% | | 2.7% | | 23% |
| Pre-Tax Pre Provision Growth | 15% | | 7.9% | | 21% |
| | | | | | |
| Final Funding Level | | | | | 72% |
|
| |
| Relative credit quality | Top quartile of the KRX |
| Year-over-year average loan growth | Below target |
| Year-over-year average deposit growth | Below target |
| Operating Leverage | Below target |
| BPW EBITDA margin | Met target |
| TSR (versus KRX) | Below 50th percentile |
In addition to consolidated Company results, actual bonus payouts for NEOs also considered the separate performance results of the Wealth Management and Trust Segment, and Private Banking Segment, as well as individual performance.
After considering performance against all three scorecards covering the financial results for the consolidated Company, the Wealth Management and Trust Segment and the Private Banking Segment, the overall bonus pool funding was set at 86% of target in the aggregate for all executives/senior leaders of the Company. The Committee, with the input from the CEO for positions other than himself, then approved, or recommended to the full Board for approval, actual bonus payments for executives using the combination of three scorecards andeach executive based on an assessmentthe scorecard result of 69% of target and the contributionsCommittee’s decision to reduce the bonus pool from 69% of its executives, many of whom serve across multiple areas of the Company. Although in aggregate the combined metrics for the scorecards produced an 86% funding level across the three scorecards, the funding level for the NEOs as a group was in aggregate 78%target to 65% of target. ForThe Committee and CEO considered the CEO,individual performance of each NEO and allocated bonuses in range of 60% to 83%.
The retired CEO’s bonus was determined by the Compensation Committee in executive session on February 13, 2019 and recommended for approval, and approved, by the full Board on February 13, 2019. The Compensation Committee approved a bonus directly aligned withbonuses for executives (other than the results ofCEO) on February 13, 2019. Given his start date, Mr. DeChellis did not participate in the overall Company scorecard.2018 STI.
The following table outlines the annual incentive targets for 20162018 and the actual bonus received by each NEO:NEO.
TARGET AND ACTUAL BONUS DETAILS | | | Executive | | Annual Base Salary | | Target Bonus % of Base Salary | | Target Bonus | | Minimum (0% of Target) | | Maximum (200% of Target) | | Actual Bonus | | Actual as % of Target | | Annual Base Salary | | Target Bonus % of Base Salary | | Target Bonus | | Minimum (0% of Target) | | Maximum (200% of Target) | | Actual Bonus | | Actual as % of Target |
| C. Deutsch | | $ | 675,000 |
| | 125 | % | | $ | 843,750 |
| | $ | — |
| | $ | 1,687,500 |
| | $ | 607,500 |
| | 72 | % | | $ | 675,000 |
| | 125 | % | | $ | 843,750 |
| | $ | — |
| | $ | 1,687,500 |
| | $ | 548,438 |
| | 65 | % |
| D. Kaye | | 425,000 |
| | 100 | % | | 425,000 |
| | — |
| | 850,000 |
| | 365,000 |
| | 86 | % | | 400,000 |
| | 100 | % | | 400,000 |
| | — |
| | 800,000 |
| | 240,000 |
| | 60 | % |
| C. Griffin | | 400,000 |
| | 100 | % | | 400,000 |
| | — |
| | 800,000 |
| | 300,000 |
| | 75 | % | | 400,000 |
| | 100 | % | | 400,000 |
| | — |
| | 800,000 |
| | 240,000 |
| | 60 | % |
| G. Schwartz | | 400,000 |
| | 100 | % | | 400,000 |
| | — |
| | 800,000 |
| | 345,000 |
| | 86 | % | |
| M Chambers | | 360,000 |
| | 100 | % | | 360,000 |
| | — |
| | 720,000 |
| | 288,000 |
| | 80 | % | |
| J. Shoback | | | 400,000 |
| | 100 | % | | 400,000 |
| | — |
| | 800,000 |
| | 240,000 |
| | 60 | % |
| S. Gaven | | | 225,000 |
| | 75 | % | | 225,000 |
| | — |
| | 450,000 |
| | 186,000 |
| | 83 | % |
Equity-Based Long-Term Incentives (LTI)
Overview of Program
The Compensation Committee considers long-term equity-based compensation to be an integral part of the Company’s compensation program and grants equity each year, typically in May. The Company’s primary grant forms for its executives under the LTI are:
1. Performance-based sharesPSUs (60% of an executive’s target award value); and
2. Time-based restricted stockRSUs (40% of an executive’s target award value).
The Compensation Committee reviews thethis mix of grant forms annually. Performance sharesPSUs are earned and vest at the end of the three-year performance period only if and to the extent results are achieved within the acceptable performance range (threshold to significant over-achievement) as determined by the Compensation Committee. Performance sharesPSUs are subject to forfeiture in the event that pre-established performance goals are not achieved. Time-based restricted stock willRSUs vest in full three years from the date of grant, subject to the executive’s continued employment through the vesting date.
Vesting of Performance Share AwardAwards for the 2014-20162016-2018 Performance Period
The Company’s NEOs earned 71%110% of the targeted performance shares based on ROACE performance for the 20142016 to 20162018 performance period. As a result, a portion of thethere will be an incremental increase in shares scheduled tothat vest on May 15, 2017 will be forfeited.2019. The Company’s three-year average ROACE for the 20142016 to 20162018 performance period was 9.7%9.88% versus a target goal of 12%11% and a threshold goal of 8%4.2% for the performance period. This three-year average ROACE was adjusted to neutralize the impact of the Tax Cuts and Jobs Act. The 71%funding reflects the Company’s performance relative to the constituents in the KBW Regional Index. The Company’s three-year average Operating Return on Average Equity ranked in the 63rd percentile of the peer data set. The 110% earn-out is the result of interpolation between a 50%100% payout at the thresholdtarget performance level and a 100%200% payout at the targetmaximum performance level. The following table outlines the awards earned:
| | Executive | | Grant Date | | Target Number of Shares | | Performance Metric Achieved | | Total Shares Vested Based upon Performance | | Grant Date | | Target Number of Shares | | Performance Metric Achieved | | Total Shares Vested Based upon Performance |
C. Deutsch | | 5/15/2014 | | 45,134 |
| | 71% | | 32,045 |
| | 5/15/2016 | | 47,148 |
| | 110% | | 51,863 |
|
| D. Kaye | | 5/15/2014 | | 14,211 |
| | 71% | | 10,090 |
| | 5/15/2016 | | 16,895 |
| | 110% | | 18,585 |
|
| C. Griffin | | 5/15/2014 | | 8,916 |
| | 71% | | 6,330 |
| | 5/15/2016 | | 21,201 |
| | 110% | | 23,321 |
|
| G. Schwartz | | 5/15/2014 | | 10,030 |
| | 71% | | 7,121 |
| |
| M. Chambers | | 5/15/2014 | | 12,036 |
| | 71% | | 8,546 |
| |
| J. Shoback | | | 5/15/2016 | | 11,926 |
| | 110% | | 13,119 |
|
| S. Gaven | | | 5/15/2016 | | 2,028 |
| | 110% | | 2,231 |
|
(1) Mr. Deutsch's May 15, 2016 performance award was pro-rated to his retirement date of December 31, 2018.
2016
2018 Equity Awards
In 2016,2018, the Company granted equity awards to its NEOs, other than Mr. DeChellis. consisting of performance sharesboth PSUs and time-based restricted stockRSUs under the Company’s 2009 Amended and Restated Stock Option and Incentive Plan.Plan (the "2009 Plan"). Each NEO has an established long-term incentive award target as follows (expressed as a percentage of each executive’s base salary): 150% for Mr. Deutsch, 75%Deutsch; 100% each for Mr.Messrs. Kaye and Griffin and Ms. Chambers, 100%Shoback; and 75% for Mr. Griffin and Mr. Schwartz.Gaven.
The total long-term incentive award values set forth below were approved by the Board for the CEO on January 26, 2016 and by the Committee for the other NEOs on April 19, 2016 for a future grant date of May 13, 2016. For 2016,2018, 60% of the grant date fair value of the award was delivered in the form of performance-based sharesPSUs and 40% of the grant date fair value of the award was delivered in the form of time-based restricted stock.RSUs. The approved values converted to a fixed number of time-based restricted sharesRSUs and performance sharesPSUs using the average daily stockadjusted closing price foron the 30 days prior to the conversiongrant date of $11.32$16.60 per share. This methodology is used to provide an equity award that takes into account the share price of the Company over the prior 30-day period, as opposed to a single trading day. Once the number of shares was determined based on the values previously approved by the Committee, shares were granted at the closing price of $11.67 on May 13, 2016, the approved grant date under the Company’s equity grant policy. Awards were determined based on each executive’s performance, criticality of position and relevant employment agreement terms, as applicable.
The 2016 performance-based shares2018 PSUs will be earned or forfeited based on the Company’s performance for the January 1, 20162018 to December 31, 20182020 period, following the conclusion of such performance period, with 0% to 200% of the sharesunits earned tied to the Company’s ROACE performance utilizing a matrix approach, as follows:
| |
| 1. | Absolute Measure: Three-year average ROACE targeted at 10.5%12% over the 2016-20182018-2020 time frame: |
| | | Threshold | Low Target | Target | Outperform | Low Target | Target | Maximum |
| 4.0% | 8.0% | 10.5% | 11.5% | |
| 8.0% | | 11.0% | 12.0% | 13.5% |
| |
| 2. | Relative Measure: Three-year average ROACE relative to the KBW Regional Bank IndexKRX targeted at the 50th percentile: |
|
| | |
| Threshold | Target | Outperform |
| 25th percentile | 50th percentile | 75th percentile |
Actual equity grants awarded in 2018 to the Company’s NEOs, in 2016other than Mr. DeChellis, are set forth in the table below. As described further in the footnotes below, a significant portion of the stock awards (60% of the total) must beare earned based on performance with the potential for an earn-out of 0% to 200% of the target performance sharesrestricted units awarded.
GRANT DATE FAIR VALUE OF AWARDS
| | | | | 2016 Awards | | 2018 Awards |
| | | Time-Based Restricted Stock | | Performance-Based Restricted Stock | | Time-Based Restricted Stock Units (RSUs) | | Performance-Based Restricted Stock Units (PSUs) |
Executive | | Grant Date | | Number of Stock Awards | | Grant Date Fair Value (1) | | Target Number of Shares Granted | | Grant Date Fair Value: Target (1) | | Maximum Number of Shares Potentially Earned (2) | | Grant Date Fair Value: Maximum (1) | | Grant Date | | Number of Stock Awards | | Grant Date Fair Value (1) | | Target Number of Units Granted | | Grant Date Fair Value: Target (1) | | Maximum Number of Units Potentially Earned (2) | | Grant Date Fair Value: Maximum (1) |
| C. Deutsch | | 5/13/2016 | | 35,777 |
| | $ | 417,518 |
| | 53,666 |
| | $ | 626,282 |
| | 107,332 |
| | $ | 1,252,564 |
| | 5/15/2018 | | 21,958 |
| | $ | 364,503 |
| | 32,937 |
| | $ | 546,754 |
| | 65,874 |
| | $ | 1,093,508 |
|
| D. Kaye | | 5/13/2016 | | 11,263 |
| | 131,439 |
| | 16,895 |
| | 197,165 |
| | 33,790 |
| | 394,329 |
| | 5/15/2018 | | 8,675 |
| | 144,005 |
| | 13,012 |
| | 215,999 |
| | 26,024 |
| | 431,998 |
|
| C. Griffin | | 5/13/2016 | | 14,134 |
| | 164,944 |
| | 21,201 |
| | 247,416 |
| | 42,402 |
| | 494,831 |
| | 5/15/2018 | | 8,675 |
| | 144,005 |
| | 13,012 |
| | 215,999 |
| | 26,024 |
| | 431,998 |
|
| G. Schwartz | | 5/13/2016 | | 13,074 |
| | 152,574 |
| | 19,611 |
| | 228,860 |
| | 39,222 |
| | 457,721 |
| |
| M. Chambers | | 5/13/2016 | | 9,541 |
| | 111,343 |
| | 14,311 |
| | 167,009 |
| | 28,622 |
| | 334,019 |
| |
| J. Shoback | | | 5/15/2018 | | 8,675 |
| | 144,005 |
| | 13,012 |
| | 215,999 |
| | 26,024 |
| | 431,998 |
|
| S. Gaven | | | 5/15/2018 | | 4,880 |
| | 81,008 |
| | 7,319 |
| | 121,495 |
| | 14,638 |
| | 242,991 |
|
| |
| (1) | Based upon the closing price on May 13, 201615, 2018 of $11.67.$16.60. |
| |
| (2) | Maximum sharesunits potentially earned are equal to 200% of the target performance sharesPSUs granted. |
In connection with his hire, Mr. DeChellis received equity-based inducement awards in order to recruit him to the Company and strengthen alignment with shareholders from the beginning of his tenure. Reflecting the Committee’s commitment to aligning pay with shareholder outcomes, half of the value of Mr. DeChellis’ inducement awards consists of stock options that will only vest if (1) the closing price of Company's common stock is at or above $18.00 per share for 20 consecutive trading days prior to November 26, 2022, and (2) at the time that the foregoing condition is met, the Company's Tier 1 risk-based capital ratio is at least 6.0%, or such other level as may be required by any governmental agency or other governmental entity. Time-based stock options and restricted stock units made up the remaining portion of the inducement awards, both of which vest in four equal annual installments beginning on November 26, 2019. The inducement equity awards granted to Mr. DeChellis in 2018 are set forth in the table below.
GRANT DATE FAIR VALUE OF AWARDS
|
| | | | | | | | | | | | | | | | |
| | | | | Time-Based Restricted Stock Units (RSUs)
| | Time-Based Stock Options | | Performance-Based Stock Options | |
| Executive | | Grant Date | | Number of Stock Units | Grant Date Fair Value (1) | | Number of Shares Underlying Option Granted | | Grant Date Fair Value Target (1) | | Number of Shares Underlying Option Granted | | Grant Date Fair Value Target (1) | |
| A. DeChellis | | 11/26/2018 | | 59,055 | | $750,000 | | 125,628 | | $500,000 | | 391,850 |
| | $1,250,000 | |
Equity Grant Policy
The Company has adoptedmaintains an Equity Grant Policy most recently approved in July 2014, to ensure that its equity grantinggrant practices are maintainedadministered in strict compliance with the Company’s equity plans, policies and all applicable laws, and specifically to prevent backdating of any equity grant, or changing of the timing of equity grants in relation to public release of material information with the intent of benefiting a grantee under an equity award. The policy became effective for equity grants made after March 31, 2007. The Company’s policy is that equity grants occur on a pre-established day during each calendar quarter after the Company’s financial results for the prior quarter have been publicly disclosed. Accordingly, the grant date for all equity grants is generally the 15th day of the month (or the last business day before the 15th day of the month) following the quarterly Board meeting, unless approved otherwise by the Compensation Committee. The grant date shall not precede the date the grant was authorized by the Compensation Committee, and the grant date for any new hire shall not precede the employee’s date of hire. In addition, the policyPolicy provides that all awards and award terms are approved by the Compensation Committee in advance of the grant date. The Company executives do not have an ability to select a grant date, and the option exercise price is the closing price of the underlying stock on the date of grant.
Executive Officer Stock Ownership Policy
In April 2018, the Committee revised its Board and Executive Officer Stock Ownership and Share Retention Guidelines
The Committee implemented executive stock ownership guidelines in July 2008 and revised these guidelines in July of 2014 to increase the guidelinesPolicy based upon a comprehensive review and recommendation by W.T. Haigh & Company, the Company’s compensation consultant at the time.FW Cook. The requirementsrequired ownership levels in the guidelinespolicy are expressed as the lesser of a multiple of an executive’s base salary or a fixed number of shares.salary. The Company and theCompensation Committee reviewreviews executive officer stock holdings against the ownership guidelinespolicy at least annually. The Company has established ownership guidelinelevel multiples of six times base salary for the Company’s CEO and three times base salary for the other NEOs. NEOs must meet the lesser of the fixed share guideline (350,000 for the Company’s CEO and 83,000Executives are expected to 98,000 for other NEO positions) or the salary multiple guideline. Executives and Board members must attain their respective ownership guidelineslevel within a five-year period. However, consideration will be given if an executive has a significant change in role and/or compensation that impacts their ownership level. In addition, executives must hold all of their shares (excluding shares withheld or sold to cover exercise costs, such as exercise prices and income taxes) following the exercise of options or the vesting of equity awards until the ownership levels are met. The Compensation Committee reviews hardships on an individual basis, if needed.
The following table shows the continuing NEOs’ required stock ownership relative to the guidelineslevels as of December 31, 2016.2018.
|
| | |
| Name | GuidelineLevel (multiple of salary) | Status |
Mr. DeutschDeChellis | 6 x Base Salary ($4,050,000)
|
| Mr. Gaven | Meets Requirement3 x Base Salary
|
| Mr. Kaye | 3 x Base Salary ($1,275,000) | Meets Requirement |
Mr. Griffin (1) | 3 x Base Salary ($1,200,000) | Does Not Meet Requirement |
Mr. SchwartzMs. Shoback | 3 x Base Salary ($1,200,000) | Meets Requirement |
Ms. Chambers | 3 x Base Salary ($1,080,000) | Meets Requirement |
(1) Mr. Griffin joined the Company in May of 2014 and is not required to attain minimum guidelines until May 2019.
Based on the beneficial ownership calculation as reported in this Proxy Statement, as of January 30, 2017, the CEO owned 0.88% and other NEOs as a group owned 0.61% of the Company’s common stock.
Role of Compensation Governance and Executive Committee, Outside Advisers and Management in Compensation Decisions
The Compensation Committee, pursuant to its charter, provides management and the Board with guidance on matters of executive and director compensation and related benefits. The Compensation Committee meets in executive sessions when discussing both CEO and executive officer performance and specific actions related to CEO and executive officer compensation. The Compensation Committee approves all compensation actions with respect to the Company’s CEO, and recommends these actions to the Board of Directors that theDirectors. The Board of Directors also approvethen reviews and approves such compensation actions. The Compensation Committee approves all compensation actions for the Company’s other executive officers after reviewing the recommendations of the CEO. The Compensation Committee relies on management and outside advisers for staff work and technical guidance in conducting its affairs. It retains full authority to engage independent third party advisers, and currently retains FW Cook to conduct independent studies and provide objective advice on executive and director compensation. FW Cook’s primary role with the Company is as adviser to the Compensation Committee on executive compensation matters.matters, although it is possible that FW Cook could provide certain advice to the Company generally. In 2016,2018, FW Cook’s services wholly related to Committee mattersmatters. The Committee assessed the independence of FW Cook consistent with NASDAQ listing standards and no conflicts of interest were noted.
The Company also retains Goodwin Procter LLP for legal services on executive compensation matters, including drafting of legal plan documents. The Company may use other firms from time to time in the normal course of business.
Executive Benefits and Perquisites
NEOs are entitled to a flexible benefit amount to be used for financial products and services including life insurance, financial planning, long-term care insurance and other health and wellness benefits that enable the executives to manage better and balance their personal lives given the amount of time spent at work. The flexible amount is a fixed maximum annual benefit $65,000 for the CEO, and $20,000 for other NEOs with the exception of Mr. Schwartz, who for 2016 was covered by separate, legacy long-term disability and long-term care policies sponsored by Boston Private Bank & Trust Company (the “Bank”). As of December 31, 2016, premiums for Mr. Schwartz’s Bank-sponsored long-term care policies have been fully paid and as a result Mr. Schwartz will transition to the flexible benefit of $20,000 for 2017, which will include the continuation of his legacy long-term disability premiums.$20,000. NEOs are also eligible for an annual physical examination. The full value of all perquisites is reported as income to the individuals and, accordingly, is taxable. The flexible benefit may not be used for any type of personal luxury or entertainment expenditures.
NEOs are also eligible for Company-sponsored benefit programs available broadly to Company employees, including healthcare,health care, dental and vision benefits, short-term and long-term disability, life insurance, a 401(k) profit sharing plan and the Company’s Employee Stock Purchase Plan.
Employment Agreements and Executive Severance and Change-in-Control Agreements
The Company no longer provides executive change-in-control agreements in the event ofhas a change-in-control of the Company. The Company has grandfathered change-in-control agreements with three of the Company’s NEOs: Ms. Chambers, Mr. Kaye and Mr. Schwartz. Mr. Deutsch has an employment agreement with the Company. These grandfatheredMr. Kaye. This change-in-control agreements and the employment agreement, for Mr. Deutsch together with the payments and benefits payable to the NEOsMr. Kaye in connection with a termination of employment or change-in-control, are discussed in greater detail under “Potential Payments Upon Termination or Change-in-Control.” This agreement will terminate upon Mr. Kaye's announced departure, effective on March 22, 2019.
Prior to his retirement on December 31, 2018, Mr. Deutsch had an employment agreement with the Company.
In connection with his employment with the Company, Mr. DeChellis entered into an employment agreement with the Company, dated as of November 5, 2018. Pursuant to the terms of his employment agreement, Mr. DeChellis has an initial base salary of $700,000 per year, which will be re-determined annually by the Board or the Compensation Committee.
Mr. DeChellis also is eligible to receive an annual bonus based on the attainment of Company and/or individual performance metrics established annually by the Compensation Committee. He may elect to receive this annual bonus in the form of Company stock. Mr. DeChellis’ target bonus for 2019 is 100 percent of his base salary. Mr. DeChellis will be eligible to receive annual equity incentive grants under the Company’s stock incentive plans, determined in the discretion of the Board or the Compensation Committee. It is anticipated that Mr. DeChellis will be eligible to receive a long-term equity incentive grant in 2019 with a target aggregate grant date fair value of $1,100,000, although the actual terms and conditions of any long-term equity incentive award will be determined in the discretion of the Board and Compensation Committee. Additionally, the Company will provide Mr. DeChellis with prompt reimbursement of all reasonable expenses incurred while performing the services specified in his employment agreement.
To induce Mr. DeChellis to commence employment with the Company and pursuant to the Company's 2010 Inducement Stock Plan, as amended, on his commencement date, Mr. DeChellis was granted the following equity awards:
a number of shares of Company common stock equal to $1,000 to allow Mr. DeChellis to be in compliance with applicable legal requirements for directors of a Massachusetts bank and trust company;
a number of RSUs with an aggregate grant date fair value of $750,000 that will vest in four equal installments on the first, second, third, and fourth anniversaries of his employment commencement date, respectively, subject to Mr. DeChellis’ continued employment with the Company through each such vesting date;
a number of stock options with an aggregate grant date fair value of $500,000 that will vest ratably on the first, second, third and fourth anniversaries of his employment commencement date, subject to Mr. DeChellis’ continued employment with the Company through each such vesting date; and
a number of performance based stock options with an aggregate grant date fair value of $1,250,000 that will vest if (i) the closing price of Company stock is at or above $18.00 per share for 20 consecutive trading days prior to the four-year anniversary of his employment commencement date, and (ii) at the time that the foregoing condition is met, the Company’s Tier 1 risk-based capital ratio is at least 6.0%, or such other level as may be required by any governmental agency or other governmental entity, subject to Mr. DeChellis’ continued employment with the Company through such vesting date.
Executive Deferred Compensation Plan
The Company offers a deferred compensation plan that enables certain executives, including each of the NEOs, to defer a portion of their income. Amounts deferred are excluded from an executive’s taxable income and are not deductible by the Company until paid. Executives select from a number of mutual funds and the deferred amounts are increased or decreased to correspond to changes in market value of these underlying mutual fund investments. Any increase in value is recognized as compensation expense. The Company maintains a Rabbirabbi trust with respect to these obligations. During 2016,2018, no NEOs participated in the deferred compensation plan, but Mr. Schwartz had an outstanding deferred compensation balance from prior years’ participation as of December 31, 3016.plan.
Tax, Regulatory and Accounting Implications
The Company believes it complies with all tax, regulatory and accounting standards. Furthermore, the Compensation Committee will continue to review each element of compensation and take appropriate steps to ensure tax deductibility to the extent permitted under applicable law and to the extent this can be accomplished without sacrificing flexibility and other important objectives of the overall compensation program for its executives.
Compensation Governance and Executive Committee Report
The Compensation Governance and Executive Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K promulgated under the Securities Act of 1933, as amended (“Regulation S-K”), with management and, based on this review and these discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and AnalysisCD&A be included in the Company’s Proxy Statement.
Submitted by the Compensation Governance and Executive Committee of the Board:
Lizabeth H. Zlatkus, Chair
Deborah F. Kuenstner, Vice Chair
Gloria C. Larson
Joseph C. Guyaux
Lizabeth H. Zlatkus
Stephen M. Waters
EXECUTIVE COMPENSATION TABLES
The following tables and footnote disclosures set forth information concerning the compensation paid to or earned by the NEOs, including the CEO, the retired CEO, the Chief Financial Officer and the next three most highly compensated executive officers of the Company, who served in such capacities during 2016.2018.
SUMMARY COMPENSATION TABLE
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) |
Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards Grant Date Fair Value ($)(3) | | Non-Equity Incentive Plan Compensation ($)(6) | | All Other Compensation ($) | | Total ($) |
| Clayton G. Deutsch | | 2016 | | $ | 675,000 |
| | | $ | — |
| | | $ | 1,043,800 |
| (4) | | $ | 607,500 |
| | | $ | 115,848 |
| (7) | | $ | 2,442,148 |
|
| CEO and President | | 2015 | | 675,000 |
| | | — |
| | | 1,015,681 |
| | | 472,500 |
| | | 135,834 |
| | | 2,299,015 |
|
| | 2014 | | 675,000 |
| | | — |
| | | 2,903,440 |
| (5) | | 928,100 |
| | | 180,392 |
| | | 4,686,932 |
|
| | | | | | | | | | | | | | | | | | | | |
| David J. Kaye | | 2016 | | 425,000 |
| | | — |
| | | 328,604 |
| (4) | | 365,000 |
| | | 38,302 |
| (7) | | 1,156,906 |
|
| Executive Vice President, Chief Financial and Administrative Officer | | 2015 | | 425,000 |
| | | — |
| | | 316,294 |
| | | 238,000 |
| | | 38,738 |
| | | 1,018,032 |
|
| | 2014 | | 425,000 |
| | | — |
| | | 284,457 |
| | | 467,500 |
| | | 40,660 |
| | | 1,217,617 |
|
| | | | | | | | | | | | | | | | | | | | |
| Corey A. Griffin | | 2016 | | 400,000 |
| | | — |
| | | 412,360 |
| (4) | | 300,000 |
| | | 27,950 |
| (7) | | 1,140,310 |
|
| CEO – Wealth Management and Trust Segment; and Executive Vice President | | 2015 | | 400,000 |
| | | — |
| | | 297,388 |
| | | 224,000 |
| | | 27,950 |
| | | 949,338 |
|
| | 2014 | | 263,077 |
| (1) | | — |
| | | 578,528 |
| | | 440,000 |
| | | 266,133 |
| (1) | | 1,547,738 |
|
| | | | | | | | | | | | | | | | | | | | |
| George G. Schwartz | | 2016 | | 383,039 |
| (2) | | — |
| | | 381,434 |
| (4) | | 345,000 |
| | | 42,446 |
| (7) | | 1,151,919 |
|
| President, Boston Private Bank & Trust Company, CEO – Private Banking Segment | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Margaret W. Chambers | | 2016 | | 360,000 |
| | | — |
| | | 278,352 |
| (4) | | 288,000 |
| | | 39,389 |
| (7) | | 965,741 |
|
| Executive Vice President, General Counsel and Corporate Secretary | | 2015 | | 360,000 |
| | | — |
| | | 267,146 |
| | | 201,600 |
| | | 38,330 |
| | | 867,076 |
|
| | 2014 | | 360,000 |
| | | — |
| | | 240,920 |
| | | 396,000 |
| | | 40,169 |
| | | 1,037,089 |
|
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | |
| | | | | | | | |
| (1) | Mr. Griffin’s 2014 salary reflects partial year salary based on his hire date, and all other compensation in 2014 includes compensation earned as a Consultant for the Company prior to his employment. |
| | | | | | | | |
| (2) | Mr. Schwartz’s salary increased from $355,000 to $400,000 during the year. The amount reflected represents actual salary paid to Mr. Schwartz in 2016. |
| | | | | | | | |
| (3) | The amounts in column (e) reflect the grant date fair value of the equity awards in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”) pursuant to the 2009 Amended and Restated Stock Option and Incentive Plan. Information about the assumptions used to value these awards can be found in Part II. Item 8. “Financial Statements and Supplementary Data - Note 18: Employee Benefits” of the Company’s 2016 Annual Report on Form 10-K. |
| | |
| (4) | 2016 Stock Awards Grant Date Fair Value data includes performance shares which could, based on performance, result in the earn-out of additional shares for above target outperformance (and an increase in the grant date fair value, based on the incremental shares earned, using the original $11.67 price): |
| | NEO | | Target performance shares granted | | Maximum shares potentially earned | | Increase in grant date fair value based on incremental shares that may be earned at maximum performance level |
| | Clayton G. Deutsch | | 53,666 |
| | 107,332 |
| | $ | 626,282 |
|
| | David J. Kaye | | 16,895 |
| | 33,790 |
| | 197,165 |
|
| | Corey A. Griffin | | 21,201 |
| | 42,402 |
| | 247,416 |
|
| | George G. Schwartz | | 19,611 |
| | 39,222 |
| | 228,860 |
|
| | Margaret W. Chambers | | 14,311 |
| | 28,622 |
| | 167,009 |
|
| | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | |
| (5) | This amount includes a retention award that was issued to Mr. Deutsch on December 17, 2014. | |
| | | | | | | | | | | | | |
| (6) | The amounts in column (f) reflect the annual incentive awards to the named individuals under the 2014, 2015 and 2016 Annual Executive Incentive Plan. |
| | | | | | | | | | | | | |
| (7) | All Other Compensation is composed of the following amounts: |
| | Compensation item | | Clayton G. Deutsch | | David J. Kaye | | Corey A. Griffin | | George G. Schwartz | | Margaret W. Chambers | |
| | Matching contribution to 401(k) plan | | $ | 7,950 |
| | $ | 7,950 |
| | $ | 7,950 |
| | $ | 7,950 |
| | $ | 7,950 |
| |
| | Dividends paid on unvested stock grants | | 42,898 |
| | 12,601 |
| | — |
| | 9,533 |
| | 11,439 |
| |
| | Executive medical services | | — |
| | — |
| | — |
| | 2,300 |
| | — |
| |
| | Life insurance premiums | | 57,708 |
| | 5,639 |
| | — |
| | — |
| | — |
| |
| | Long-term disability premiums | | 7,292 |
| | — |
| | — |
| | 8,974 |
| | — |
| |
| | Long-term care premiums | | — |
| | 10,412 |
| | — |
| | 13,689 |
| | 20,000 |
| |
| | Tax and financial planning | | — |
| | 1,700 |
| | 20,000 |
| | — |
| | — |
| |
| | | | | | | | | | | | | |
| | Total All Other Compensation | | $ | 115,848 |
| | $ | 38,302 |
| | $ | 27,950 |
| | $ | 42,446 |
| | $ | 39,389 |
| |
| | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($) | | Option Awards ($) | | Non-Equity Incentive Plan Compensation ($)(8) | | All Other Compensation ($) | | Total ($) |
| Anthony DeChellis | | 2018 | | 51,154 |
| (1) | | — |
| | | 750,000 |
| (4) | | 1,750,000 |
| (7 | ) | — |
| | | 25,799 |
| (9) | | 2,576,953 |
|
| CEO and President | | | |
| | | | | | | | | | |
|
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Clayton G. Deutsch | | 2018 | | 675,000 |
| (2) | | — |
| | | 911,257 |
| (5), (6) | | | | 548,438 |
| | | 232,675 |
| (9) | | 2,367,370 |
|
| CEO and President (Retired) | | 2017 | | 675,000 |
| | | — |
| | | 964,876 |
| | | | | 1,054,700 |
| | | 204,535 |
| | | 2,899,111 |
|
| | 2016 | | 675,000 |
| | | — |
| | | 1,043,800 |
| | | | | 607,500 |
| | | 115,848 |
| | | 2,442,148 |
|
| | | | | | | | | | | | | | | | | | | | | | |
| David J. Kaye | | 2018 | | 400,577 |
| | | — |
| | | 360,004 |
| (5),(6) | | | | 240,000 |
| | | 55,489 |
| (9) | | 1,056,070 |
|
Executive Vice President of the Company and the Bank; Chief Executive Officer – Corporate Clients Group of the Bank
| | 2017 | | 425,000 |
| | | — |
| | | 303,763 |
| | | | | 531,250 |
| | | 48,179 |
| | | 1,308,192 |
|
| | 2016 | | 425,000 |
| | | — |
| | | 328,604 |
| | | | | 365,000 |
| | | 38,302 |
| | | 1,156,906 |
|
| | | | | | | | | | | | | | | | | | | | | | |
| Corey A. Griffin | | 2018 | | 400,000 |
| | | — |
| | | 360,004 |
| (5),(6) | | | | 240,000 |
| | | 70,942 |
| (9) | | 1,070,946 |
|
| Executive Vice President of the Company and the Bank; Chief Executive Officer – Private Clients Group of the Bank | | 2017 | | 400,000 |
| | | — |
| | | 381,186 |
| | | | | 500,000 |
| | | 42,092 |
| | | 1,323,278 |
|
| | 2016 | | 400,000 |
| | | — |
| | | 412,360 |
| | | | | 300,000 |
| | | 27,950 |
| | | 1,140,310 |
|
| | | | | | | | | | | | | | | | | | | | | | |
| Jacqueline S. Shoback | | 2018 | | 397,692 |
| | | — |
| | | 360,004 |
| (5),(6) | | | | 240,000 |
| | | 71,434 |
| (9) | | 1,069,130 |
|
| Executive Vice President of the Company and the Bank; Chief Executive Officer – Emerging Businesses and Client Experience of the Bank | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Steven M. Gaven | | 2018 | | 297,346 |
| (3) | | — |
| | | 202,503 |
| (5),(6) | | | | 186,000 |
| | | 12,836 |
| (9) | | 698,685 |
|
| Executive Vice President and Chief Financial Officer of the Company and the Bank; Chief Financial Officer, Boston Private Wealth LLC | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | |
| | | | | | | | |
| (1) | Mr. DeChellis joined the Company on November 26, 2018. The amount reflected represents actual salary paid to Mr. DeChellis in 2018. His annualized base salary for 2018 was $700,000. |
| | | | | | | | |
| (2) | Mr. Deutsch stepped down as CEO on November 26, 2018 and retired from the Company on December 31, 2018. |
| | |
| (3) | Mr. Gaven became Executive Vice President and Chief Financial Officer of the Company on January 1, 2018. The amount reflected represents actual salary paid to Mr. Gaven during 2018. |
| | |
| (4) | This amount reflects the grant date fair value of time-based RSU's calculated in accordance with ASC Topic 718, Compensation-Stock Compensation ("ASC 718") granted under the 2010 Inducement Plan. Information about the assumptions used to value these awards can be found in Part II. Item 8: "Financial Statements and Supplementary Date - Note 18: "Employee Benefits" of the Company's 2018 Annual Report on Form 10-K.
|
| | | | | | | | |
| (5) | Amounts reflect the grant date fair value of the equity awards in accordance with ASC 718 granted pursuant to the 2009 Plan. Information about the assumptions used to value these awards can be found in Part II. Item 8 "Financial Statements and Supplementary Date - Note 18: "Employee Benefits" of the Company's 2018 Annual Report on Form 10-K. |
| (6) | 2018 Stock Awards Grant Date Fair Value data includes PSU's which could, based on performance, result in the earn-out of additional units for above target outperformance (and an increase in the grant date fair value, based on the incremental units earned, using the original $16.60 price): |
| | NEO | | Target performance units granted | | Maximum units potentially earned | | Increase in grant date fair value based on incremental units that may be earned at maximum performance level |
| | Clayton G. Deutsch | | 32,937 |
| | 65,874 |
| | $ | 546,754 |
|
| | David J. Kaye | | 13,012 |
| | 26,024 |
| | 215,999 |
|
| | Corey A. Griffin | | 13,012 |
| | 26,024 |
| | 215,999 |
|
| | Jacqueline S. Shobak | | 13,012 |
| | 26,024 |
| | 215,999 |
|
| | Steven M. Gaven | | 7,319 |
| | 14,638 |
| | 121,495 |
|
| | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (7) | This amount reflects the grant date fair value of stock options calculated in accordance with ASC 718 granted under the 2010 Inducement Plan. Information about the assumptions used to value these awards can be found in Part II. Item 8 "Financial Statements and Supplementary Date - Note 18: "Employee Benefits" of the Company's 2018 Annual Report on Form 10-K.The Grant Date Fair Value data for these awards includes performance-based stock options. The maximum number of shares that could be earned and the maximum value of such shares is the same as the target value of the award as reported in the table above, which is $1,250,000. | |
| (8) | The amounts in this column reflect the annual incentive awards to the named individuals under the 2016, 2017 and 2018 Annual Executive Incentive Plan. |
| | | | | | | | | | | | | | | |
| (9) | All Other Compensation is composed of the following amounts: |
| | Compensation item | | Anthony DeChellis | | Clayton G. Deutsch | | David J. Kaye | | Corey A. Griffin | | Jacqueline S. Shoback | | Steven M. Gaven | |
| | Matching contribution to 401(k) plan | | $ | 1,573 |
| | $ | 8,250 |
| | $ | 8,250 |
| | $ | 8,250 |
| | $ | 8,250 |
| | | |
| | Dividends paid on unvested stock grants | | | | 159,424 |
| | 26,098 |
| | 42,692 |
| | 43,184 |
| | 2,592 |
| |
| | Executive medical services | |
| | | | 2,150 |
| |
| |
| |
| |
| | Life insurance premiums | |
| | 57,709 |
| | 5,638 |
| |
| |
| | 3,015 |
| |
| | Long Term Disability | | | | 7,292 |
| | | | | | | | | |
| | Child care | |
| | | |
| |
| |
| | 4,337 |
| |
| | Long-term care premiums | |
| | | | 11,453 |
| |
| |
| |
| |
| | Tax and financial planning | |
| | | | 1,900 |
| | 20,000 |
| |
| |
| |
| | Charitable Contributions | | | | | | | | | | 20,000 |
| | | |
| | Relocation Expense | | $ | 24,226 |
| | | | | | | | | | | |
| | Total All Other Compensation | | $ | 25,799 |
| | $ | 232,675 |
| | $ | 55,489 |
| | $ | 70,942 |
| | $ | 71,434 |
| | $ | 12,836 |
| |
| | | | | | | | | | | | | | | |
GRANTS OF PLAN-BASED AWARDS
| | | (a) | | (b) | | | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | | (k) | | (l) | |
| | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | All Other Stock Awards: Number of Shares of Stock or Units # | | All Other Option Awards Number of Securities Underlying Options # | | Exercise or Base Price of Option Awards ($/share) | | Grant Date Fair Value of Stock and Option Awards ($)(3) | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | All Other Stock Awards: Number of Shares of Stock or Units # | | All Other Option Awards Number of Securities Underlying Options # | | Exercise or Base Price of Option Awards ($/unit) | | Grant Date Fair Value of Stock and Option Awards ($)(3) |
| Name | | Grant Date | | Grant Approved Date | | Threshold $ | | Target $ | | Maximum $ | | Threshold # | | Target # | | Maximum # | | | Grant Date | | Grant Approved Date | | Target $ | | Maximum $ | | Target # | | Maximum # | |
| Anthony DeChellis | | | 11/26/2018 | | 11/5/2018 | | | | | | 391,850 |
| | | | 59,055 |
| | 125,628 |
| | $ | 12.70 |
| | $ | 2,500,000 |
|
| | | | | | | | | | | | | | | | | | |
| Clayton G. Deutsch | | 5/13/2016 | | 1/26/2016 | | | | | | | | 13,416 |
| | 53,666 |
| | 107,332 |
| | 35,777 |
| | — |
| | $ | — |
| | $ | 1,043,800 |
| | 5/15/2018 | | 5/8/2018 | | | | | | 32,937 |
| | 65,874 |
| | 54,895 |
| | | | | | $ | 911,257 |
|
| | | 2016 | | | | $ | 421,875 |
| | $ | 843,750 |
| | $ | 1,687,500 |
| | |
| | | | |
| | |
| | |
| | |
| | |
| |
| | | | | | | | | | | | | | | | | | | | | | | 2018 | | | | $ | 843,750 |
| | $ | 1,687,500 |
| | | | |
| | |
| | |
| | |
| | |
|
| David J. Kaye | | 5/13/2016 | | 4/19/2016 | | | | | | | | 4,223 |
| | 16,895 |
| | 33,790 |
| | 11,263 |
| | — |
| | — |
| | 328,604 |
| | 5/15/2018 | | 5/8/2018 | | | | | | 13,012 |
| | 26,024 |
| | 8,675 |
| | | | | | 360,004 |
|
| | | 2016 | | | | 212,500 |
| | 425,000 |
| | 850,000 |
| | |
| | | | |
| | |
| | |
| | |
| | |
| | 2018 | | | | 400,000 |
| | 800,000 |
| | | | |
| | |
| | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Corey A. Griffin | | 5/13/2016 | | 4/19/2016 | | | | | | | | 5,300 |
| | 21,201 |
| | 42,402 |
| | 14,134 |
| | — |
| | — |
| �� | 412,360 |
| | 5/15/2018 | | 5/8/2018 | | | | | | 13,012 |
| | 26,024 |
| | 8,675 |
| | | | | | 360,004 |
|
| | | 2016 | | | | 200,000 |
| | 400,000 |
| | 800,000 |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | 2018 | | | | 400,000 |
| | 800,000 |
| | |
| | |
| | |
| | | | | | |
|
| George G. Schwartz | | 5/13/2016 | | 4/19/2016 | | | | | | | | 4,902 |
| | 19,611 |
| | 39,222 |
| | 13,074 |
| | — |
| | — |
| | 381,434 |
| |
| Jacqueline S. Shoback | | | 5/15/2018 | | 5/8/2018 | | | | | | 13,012 |
| | 26,024 |
| | 8,675 |
| | | | | | 360,004 |
|
| | | 2016 | | 200,000 |
| | 400,000 |
| | 800,000 |
| | | | | | | | | | | | | | | | 2018 | | 400,000 |
| | 800,000 |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Margaret W. Chambers | | 5/13/2016 | | 4/19/2016 | | | | | | | | 3,577 |
| | 14,311 |
| | 28,622 |
| | 9,541 |
| | — |
| | — |
| | 278,352 |
| |
| Steven M. Gaven | | | 5/15/2018 | | 5/8/2018 | | | | | | 7,319 |
| | 14,638 |
| | 4,880 |
| | | | | | 202,503 |
|
| | | 2016 | | | | 180,000 |
| | 360,000 |
| | 720,000 |
| | |
| | | | |
| | |
| | |
| | |
| | |
| | 2018 | | | | 225,000 |
| | 450,000 |
| | | | |
| | |
| | |
| | |
| | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| (1) | The amounts shown in column (c) reflect the minimum threshold payment levels, which are 50% of the target amount shown in the Maximum column (d). The amount shown in column (e) is 200% of the target amount shown in the Target column (d), asand is the maximum that may be awarded under the Company’s Annual Executive BonusIncentive Plan. There is no threshold for amounts that may be awarded under the Company's Annual Executive Incentive Plan. |
| |
| (2) | The number of sharesunits shown in column (f) reflect the minimum threshold number of shares, which are 25% of the target amount shown inMaximum column (g); the number of shares shown in column (h) is 200% of the target amount shown in the Target column, (g) aswhich is the maximum number of units that may be awardedearned under the Company’s 2009 Amended and Restated Stock Option and Incentive Plan.awards. For a description of these awards see “Equity-Based Long-Term Incentives.” There is no threshold for amounts that may be awarded under the 2009 Plan. |
| |
| (3) | This column shows the grant date fair value of equity awards in accordance with ASC 718. Information about the assumptions used to value these awards can be found in Part II. Item 8. “Financial Statements and Supplementary Data - Note 18: Employee Benefits” of the Company’s 20162018 Annual Report on Form 10-K. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information with respect to holdings of exercisableunexercisable and unexercisableexercisable stock options, and unvested time-based restricted stock and performance sharerestricted stock unit awards and performance-based restricted stock unit awards held by the NEOs as of December 31, 2016.2018.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | (h) | | (i) | (j) |
| | | Option Awards | | Stock Awards |
| | | Number of Securities Underlying
Unexercised Options (1) | | | | | | Shares or Units of Stock That Have Not Vested | | Equity Incentive Plan Awards: Unearned Shares, Units or Other Rights That Have Not Vested |
| NEO | | (#) Exercisable | | (#) Unexercisable | | (#) Equity Incentive Plan Awards | | Option Exercise Price ($) | | Option Expiration Date | | Number (#) | | Market Value ($) (2) | | Number (#) | | Market or Payout Value ($) (2) |
| Clayton G. Deutsch | | — |
| | — |
| | — |
| | $ | — |
| | | | 35,777 |
| | $ | 592,109 |
| (3) | | 53,666 |
| (8) | | $ | 888,172 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 32,685 |
| | 540,937 |
| (4) | | 49,027 |
| (9) | | 811,397 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 60,883 |
| | 1,007,614 |
| (6) | | 91,324 |
| (6), (10) | | 1,511,412 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 30,090 |
| | 497,990 |
| (5) | | 32,045 |
| (11) | | 530,345 |
|
| | | | | | | | | | | | | | | | | | | | | |
| David J. Kaye | | 20,240 |
| | — |
| | — |
| | 20.37 |
| | 5/15/2018 | | 11,263 |
| | 186,403 |
| (3) | | 16,895 |
| (8) | | 279,612 |
|
| | | — |
| | — |
| | — |
| | — |
| |
| | 10,178 |
| | 168,446 |
| (4) | | 15,268 |
| (9) | | 252,685 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 9,474 |
| | 156,795 |
| (5) | | 10,090 |
| (11) | | 166,990 |
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Corey A. Griffin | | — |
| | — |
| | — |
| | — |
| | | | 14,134 |
| | 233,918 |
| (3) | | 21,201 |
| (8) | | 350,877 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 9,570 |
| | 158,384 |
| (4) | | 14,355 |
| (9) | | 237,575 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 33,200 |
| | 549,460 |
| (7) | | 6,330 |
| (11) | | 104,762 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 5,944 |
| | 98,373 |
| (5) | | — |
| | | — |
|
| | | | | | | | | | | | | | | | | | | | | |
| George G. Schwartz | | 15,935 |
| | — |
| | — |
| | 6.42 |
| | 5/13/2021 | | 13,074 |
| | 216,375 |
| (3) | | 19,611 |
| (8) | | 324,562 |
|
| | | 15,505 |
| | — |
| | — |
| | 7.94 |
| | 5/14/2020 | | 7,624 |
| | 126,177 |
| (4) | | 11,436 |
| (9) | | 189,266 |
|
| | | 3,870 |
| | — |
| | — |
| | 4.92 |
| | 6/15/2019 | | 6,687 |
| | 110,670 |
| (5) | | 7,121 |
| (11) | | 117,853 |
|
| | | 7,500 |
| | — |
| | — |
| | 9.03 |
| | 8/15/2018 | | — |
| | — |
| | | — |
| | | — |
|
| | | | | | | | | | | | | | | | | | | | | |
| Margaret W. Chambers | | 7,500 |
| | — |
| | — |
| | 9.03 |
| | 8/15/2018 | | 9,541 |
| | 157,904 |
| (3) | | 14,311 |
| (8) | | 236,847 |
|
| | | 11,600 |
| | — |
| | — |
| | 20.37 |
| | 5/15/2018 | | 8,597 |
| | 142,280 |
| (4) | | 12,895 |
| (9) | | 213,412 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 8,024 |
| | 132,797 |
| (5) | | 8,546 |
| (11) | | 141,436 |
|
| | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| | NEO | Number of Securities Underlying
Unexercised Options Exercisable (#)(1) | | Number of Securities Underlying
Unexercised Options Unexercisable (#)(2) | | (#) Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock that Have Not Vested (#) | | Number of Shares or Units of Stock that Have Not Vested ($) | | | Equity Incentive Plan Awards: Unearned Shares, Units or Other Rights That Have Not Vested (#) | | | Equity Incentive Plan Awards: Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) |
| |
| | Anthony DeChellis | — |
| | 125,628 |
| | — |
| | $ | 12.70 |
| | 11/26/2028 | | 59,055 |
| | $ | 624,211 |
| (10) | | — |
| | | $ | — |
|
| | | — |
| | | | 391,850 |
| (11 | ) | $ | 12.70 |
| | 11/26/2028 | | | | | | | — |
| | | — |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Clayton G. Deutsch | — |
| | — |
| | — |
| | — |
| | | | — |
| | — |
| | | 6,918 |
| (7) | | 73,123 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | — |
| | — |
| | | 20,165 |
| (8) | | 213,144 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | — |
| | — |
| | | 51,863 |
| (9) | | 548,192 |
|
| | | | | | | | | | | | | | | | | | | | | |
| | David J. Kaye | — |
| | — |
| | — |
| | — |
| | | | 8,675 |
| | 91,695 |
| (3) | | 13,012 |
| (7) | | 137,537 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 7,789 |
| | 82,330 |
| (4) | | 11,683 |
| (8) | | 123,489 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 11,263 |
| | 119,050 |
| (5) | | 18,585 |
| (9) | | 196,443 |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Corey A. Griffin | — |
| | — |
| | — |
| | — |
| | | | 8,675 |
| | 91,695 |
| (3) | | 13,012 |
| (7) | | 137,537 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 9,774 |
| | 103,311 |
| (4) | | 14,661 |
| (8) | | 154,967 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 14,134 |
| | 147,857 |
| (5) | | 23,321 |
| (9) | | 246,503 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 22,131 |
| | 512,940 |
| (6) | | — |
| | | — |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Jacqueline S. Shoback | — |
| | — |
| | — |
| | — |
| | | | 8,675 |
| | 91,695 |
| (3) | | 13,012 |
| (7) | | 137,537 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 5,498 |
| | 58,114 |
| (4) | | 8,247 |
| (8) | | 87,171 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 7,951 |
| | 84,042 |
| (5) | | 13,119 |
| (9) | | 138,668 |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Steven M. Gaven | 5 |
| | — |
| | — |
| | 9.05 |
| | 5/15/2022 | | 4,880 |
| | 51,582 |
| (3) | | 7,319 |
| (7) | | 77,362 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 1,680 |
| | 17,758 |
| (4) | | 1,680 |
| (8) | | 17,758 |
|
| | | — |
| | — |
| | — |
| | — |
| | | | 2,208 |
| | 23,339 |
| (5) | | 2,429 |
| (9) | | 25,675 |
|
|
| |
| | |
| | |
| (1) | All securities issued under the Company’s 2004 Stock Option and Incentive Plan or the Company’s 2009 Amended and Restated Stock Option and IncentivePlan, other than the awards made to Mr. DeChellis in 2018, which were granted under the 2010 Inducement Plan. |
| | |
| (2) | The market value is based on the closing price of the Company’s common stock on December 31, 20162018 of $16.55,$10.57 multiplied by the applicable number of sharesshares/units of restricted stock or performance shares.shares/units. |
| | |
| (3) | This award vests on May 13, 2019.15, 2021. |
| | |
| (4) | This award vests on May 15, 2018.13, 2020. |
| | |
| (5) | This award vests on May 15, 2017.2019. |
| | |
| (6) | This supplemental retention award with both time-based and performance-based awards, the time-based will vest on December 17, 2017 and the performance-based will vest at the end of the performance period. |
| |
(7) | This award is a matching restricted award that will vest over a fivesix year period beginning in year threefour to the extent that Mr. Griffin purchases an equal number of shares of Company stock over the period. The vest date for this award was extended by one year by the Compensation, Governance and Executive Committee due to the Company's trading window being closed and Mr. Griffin’s inability to purchase shares during a closed window. |
| | |
|
| | | | | | | |
| (8) | 2016 Stock Awards include performance shares which could, based on performance for the 2016 - 2018 performance period, result in the earn-out of additional shares for above target outperformance as set forth below. |
| | NEO | | Target performance shares granted | | Maximum shares potentially earned |
| | Clayton G. Deutsch | | 53,666 |
| | 107,332 |
|
| | David J. Kaye | | 16,895 |
| | 33,790 |
|
| | Corey A. Griffin | | 21,201 |
| | 42,402 |
|
| | George G. Schwartz | | 19,611 |
| | 39,222 |
|
| | Margaret W. Chambers | | 14,311 |
| | 28,622 |
|
| | | | | | |
|
| | | | | | | |
| (7) | 2018 Stock Awards include performance-restricted stock units which could, based on performance for the 2018 - 2020 performance period, result in the earn-out of additional units for above target outperformance as set forth below. Shares included below for Mr. Deutsch represent a pro-rata portion of the origianl award based on his retirement of December 31, 2018. |
| | NEO | | Target performance units granted | | Maximum units potentially earned |
| | Clayton G. Deutsch | | 6,918 |
| | 13,836 |
|
| | David J. Kaye | | 13,012 |
| | 26,024 |
|
| | Corey A. Griffin | | 13,012 |
| | 26,024 |
|
| | Jacqueline S. Shoback | | 13,012 |
| | 26,024 |
|
| | Steven M. Gaven | | 7,319 |
| | 14,638 |
|
| | | | | | |
|
| | | | | | | |
| (9) | 2015 Stock Awards include performance shares which could, based on performance for the 2015 - 2017 performance period, result in the earn-out of additional shares for above target outperformance as set forth below. |
| | NEO | | Target performance shares granted | | Maximum shares potentially earned |
| | Clayton G. Deutsch | | 49,027 |
| | 88,248 |
|
| | David J. Kaye | | 15,268 |
| | 27,482 |
|
| | Corey A. Griffin | | 14,355 |
| | 25,839 |
|
| | George G. Schwartz | | 11,436 |
| | 20,584 |
|
| | Margaret W. Chambers | | 12,895 |
| | 23,211 |
|
| | | | | | |
|
| | | | | | | |
| (8) | 2017 Stock Awards include performance shares which could, based on performance for the 2017 - 2019 performance period, result in the earn-out of additional shares for above target outperformance as set forth below. Shares included below for Mr. Deutsch represent a pro-rata portion of the origianl award based on his retirement of December 31, 2018. |
| | NEO | | Target performance shares granted | | Maximum shares potentially earned |
| | Clayton G. Deutsch | | 20,165 |
| | 40,330 |
|
| | David J. Kaye | | 11,683 |
| | 23,366 |
|
| | Corey A. Griffin | | 14,661 |
| | 29,322 |
|
| | Jacqueline S. Shoback | | 8,247 |
| | 16,494 |
|
| | Steven M. Gaven | | 1,680 |
| | 3,360 |
|
| | | | | | |
|
| | | | | | | |
| (10) | 2014 Retention LTI Stock Award includes performance shares which could, based on performance for the 2015 - 2017 performance period, result in the earn-out of additional shares for above target outperformance as set forth below. |
| | NEO | | Target performance shares granted | | Maximum shares potentially earned |
| | Clayton G. Deutsch | | 91,324 |
| | 164,383 |
|
| | | | | | |
|
| | | | | | | |
| (11) | 2014 Stock Awards include performance shares which, based on performance for the 2014 - 2016 performance period, were prorated down to 71% of shares granted. |
| | NEO | | Target performance shares granted | | Actual shares earned |
| | Clayton G. Deutsch | | 45,134 |
| | 32,045 |
|
| | David J. Kaye | | 14,211 |
| | 10,090 |
|
| | Corey A. Griffin | | 8,916 |
| | 6,330 |
|
| | George G. Schwartz | | 10,030 |
| | 7,121 |
|
| | Margaret W. Chambers | | 12,036 |
| | 8,546 |
|
| | | | | | |
|
| | | | | | | |
| (9) | 2016 Stock Awards include performance shares which, based on performance for the 2016 - 2018 performance period, were adjusted up to 110% of shares granted. Shares included below for Mr. Deutsch represent a pro-rata portion of the origianl award based on his retirement of December 31, 2018. |
| | NEO | | Target performance shares granted | | Actual shares earned |
| | Clayton G. Deutsch | | 47,148 |
| | 51,863 |
|
| | David J. Kaye | | 16,895 |
| | 18,585 |
|
| | Corey A. Griffin | | 21,201 |
| | 23,321 |
|
| | Jacqueline S. Shoback | | 11,926 |
| | 13,119 |
|
| | Steven M. Gaven | | 2,028 |
| | 2,231 |
|
| | | | | | |
| (10) | This award vests in four (4) equal annual installments beginning on November 26, 2019. |
| (11) | This award vest if (i) the closing price of Company's common stock is at or above $18.00 per share for 20 consecutive trading days prior to November 26, 2022, and (ii) at the time that the foregoing condition is met, the Company's Tier 1 risk-based capital ratio is at least 6.0%, or such other level as may be required by any governmental agency or other governmental entity.
|
OPTION EXERCISES AND STOCK VESTED
The following table provides information with the respect to stock options exercised and restricted stock awards that vested during 2016.2018.
| | | (a) | | (b) | | (c) | | (d) | | (e) | |
| Name | | Number of Shares Acquired on Exercise # (1) | | Value Realized on Exercise $ | | Number of Shares Acquired on Vesting # (1) (2) | | Value Realized on Vesting $ (2) | | Number of Shares Acquired on Exercise # (1) | | Value Realized on Exercise $ | | Number of Shares Acquired on Vesting # (1) (2) | | Value Realized on Vesting $ (2) |
| Clayton G. Deutsch | | — | | $— | | 42,057 | | $490,805 | | — |
| | $ | — |
| | 82,171 |
| | $ | 1,065,639 |
|
| David J. Kaye | | 7,500 | | 23,555 | | 12,354 | | 144,171 | | — |
| | — |
| | 10,178 |
| | 168,955 |
|
| Corey A. Griffin | | — | | — | | — | | — | | — |
| | — |
| | 20,639 |
| | 311,614 |
|
| George G. Schwartz | | 10,000 | | 80,766 | | 9,346 | | 109,068 | |
| Margaret W. Chambers | | — | | — | | 11,215 | | 130,879 | |
| Jacqueline S. Shoback | | | — |
| | — |
| | 28,775 |
| | 434,086 |
|
| Steven M. Gaven | | | — |
| | — |
| | 1,217 |
| | 20,202 |
|
| | | | | | | | | | |
| | | (1) | All securities issued under the Company’s 2009 Amended and Restated Stock Option and Incentive Plan. | All securities issued under the Company’s 2009 Plan. |
| | | | | | | | | | | |
| (2) | The number and value realized of shares acquired on vesting in 2016 includes the following time-restricted shares with fair value at the vest date, using the closing price on the vest date, as listed below. | The number and value realized of shares acquired on vesting in 2018 includes the following time-restricted shares units with fair value at the vest date, using the closing price on the vest date, as listed below: |
| | NEO | | Total shares granted | | Weighted Average Vest Date Fair Value per Share | | Value realized on vesting, based on total shares granted | | NEO | | Total shares granted | | Weighted Average Vest Date Fair Value per Share | | Value realized on vesting, based on total shares granted | |
| | Clayton G. Deutsch | | 42,057 |
| | $11.67 | | $ | 490,805 |
| | Clayton G. Deutsch (1) | | 82,171 |
| | $12.97 | | $ | 1,065,639 |
| |
| | David J. Kaye | | 12,354 |
| | 11.67 | | 144,171 |
| | David J. Kaye | | 10,178 |
| | 16.60 | | 168,955 |
| |
| | Corey A. Griffin (a) | | — |
| |
| | — |
| | Corey A. Griffin | | 9,570 |
| | 16.60 | | 311,614 |
| |
| | George G. Schwartz | | 9,346 |
| | 11.67 | | 109,068 |
| | Jacqueline S. Shoback | | 5,839 |
| | 16.60 | | 434,086 |
| |
| | Margaret W. Chambers | | 11,215 |
| | 11.67 | | 130,879 |
| | Steven M. Gaven | | 1,217 |
| | 16.60 | | 20,202 |
| |
| | | | | | | | | | | | |
(a)(1) As part of Mr. GriffinDeutsch's retirement his outstanding time-based restricted stock awards were pro-rated and vesting was not employed by the Company in 2013 and therefore did not have a time-based award in 2013.accelerated to his retirement date of December 31, 2018.
NON-QUALIFIED DEFERRED COMPENSATION
|
| | | | | | | | | | | | | | | | | | | | |
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) |
Name | | Executive Contributions in Last FY $ | | Registrant Contributions in Last FY $ | | Aggregate Earnings in Last FY $ | | Aggregate Withdrawals/ Distributions $ | | Aggregate Balance at Last FYE $(1) |
| George G. Schwartz | | $ | — |
| | $ | — |
| | $ | 121,444 |
| | $ | — |
| | $ | 1,262,208 |
|
| | | | | | | | | | | |
|
| |
(1) | Deferred compensation accounts are deemed invested in mutual funds managed by third party administrators. |
Potential Payments Upon Termination or Change-in-Control
Employment Agreement with the Company’s Chief Executive Officer
On June 7, 2010,November 5, 2018, the Company entered into an employment agreement with its CEO, Mr. Deutsch.DeChellis. In addition to the compensation and benefit arrangements described in detail above, under the terms of the employment agreement, Mr. DeutschDeChellis will be eligible to receive certain payments and benefits if his employment is terminated under certain conditions.
If Specifically, if Mr. Deutsch’sDeChellis’ employment is terminated either by the Company without “cause,”“cause” or ifby Mr. Deutsch terminates his employmentDeChellis for “good"good reason,”" each as defined in the applicablehis employment agreement, heMr. DeChellis will be entitled to receive the following payments and benefits:
subject to signinghis execution of a general release of claims in favor of the Company, a severance paymentan amount equal to two times the sum of (1) his then current base salary and (2) his target annual bonus (or, if such target annual bonus has not been established, an amount equal to the target annual bonus for the immediately preceding year), paid out in substantially equal installments in accordance with the Company’s payroll practice over 2418 months;
time-based restricted stock awards granted to Mr. Deutsch are subject to pro-rated vesting based on the portion of the applicable vesting period completed as of the date of termination, pursuant to the terms of the applicable award agreements;
all stock options and other stock-based awards that are subject to performance-based vesting shall vest upon the completion of the performance period to which such award relates. Vesting of these awards shall be pro-rated based on the portion of the applicable performance period completed as of the date of termination; and
subject to thehis co-payment of premium amounts at the active employees’ rate, Mr. Deutsch may continue to participate in the Company’scontinued group health, dental and vision programscoverage under the Company’s benefit plans for a period of up to 24 months.18 months; and
The payments described aboveacceleration of any equity awards that will immediately cease if Mr. Deutsch breaches certain non-competition, non-solicitation, non-disparagement, confidentiality, third-party agreements and/or cooperation provisionsvest in accordance with the terms of the his employment agreement.their respective award agreements.
If Mr. Deutsch’s employment terminates due to death or disability, he would be entitled to receive the following:
a portion of his annual bonus for the year of termination pro-rated for the number of days employed during the year to18 month period following the dateoccurrence of termination;
all stock options and other stock-based awards that are subject to time-based vesting only shall vesta "change in full and become exercisablecontrol" Mr. DeChellis’ employment is terminated by either the Company without “cause” or non-forfeitableby Mr. DeChellis for "good reason," each as of the date of termination; and
all stock options and other stock-based awards that are subject to performance-based vesting will remain eligible to vest based on actual company performance for the applicable performance period. Vesting of such award shall be pro-rated based on the portion of the applicable performance period completed as of the date of termination.
If amounts payable to Mr. Deutsch, whether underdefined in his employment agreement, or otherwise, give rise to the excise tax imposed by Section 4999 of the Code, heMr. DeChellis will receive the greater after-taxfollowing payments and benefits:
subject to his execution of a release of claims in favor of the Company within 60 days of his termination, a lump sum payment equal to two times the sum of his then current base salary (or his base salary in effect immediately prior to the change in control, if higher) plus his then current target annual bonus (or his target annual bonus in effect immediately prior to the change in control, if higher);
acceleration of any equity awards that will vest in accordance with the terms of their respective award agreements; and
a monthly cash payment for 18 months, or his COBRA health continuation period, whichever ends earlier, in an amount equal to the monthly employer contribution that the Company would have made to provide health insurance to Mr. DeChellis if he had remained employed by the Company.
If any of either (1) the full paymentpayments or (2) a reduced payment that does not give risebenefits described in the two preceding paragraphs would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”)., Mr. DeChellis will receive the greater after-tax amount of either: (i) the full payment or (ii) a reduced payment that does not give rise to the excise tax imposed by Section 4999 of the Code. Under the terms of his employment agreement, Mr. DeutschDeChellis will not be entitled to any tax gross-up related to severance payments.
Change-In-Control Agreement with NEOs
The Company previously has previously entered into a change-in-control agreementsagreement with its NEOs (other than Mr. Deutsch and Mr. Griffin) that provideKaye. This agreement provides for certain payments and other benefits in connection with a “terminating event” that occurs within the two-year period following a change-in-control of the Company.
For purposes of these agreements,this agreement, the term “terminating event” includes the following: (1) a material diminution in the executive’s responsibilities, authority or duties; (2) a material diminution in the executive’s base salary or target annual bonus other than across the board salary reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees of the Company; (3) a material change in the geographic location at which the executive provides services to the Company; or (4) thea material breach of the agreement by the Company, as set forth in the agreements.agreement. In connection with any such terminating event"terminating event" within the applicable period following a change-in-control, the NEOsMr. Kaye will be eligible to receive the following payments and benefits:
a lump-sum cash severance payment equal to 2.5 times his annual compensation (sum of base salary and average bonus payments for the three most recent taxable years preceding termination);
a pro-rated bonus for the fiscal year in which the termination occurs; and
accelerated vesting of all outstanding, unvested stock option and stock awards.
Notwithstanding the foregoing, the Company will not be required to make any payment under the agreementsagreement to the extent such payment would constitute a parachute payment for purposes of Section 280G of the Code. Mr. Kaye's change-in-control agreement will terminate upon his announced departure, effective on March 22, 2019.
Equity Award Agreements
Pursuant to the terms of the Company’s current forms of restricted stock award and stock unit agreements granted to the Company’s NEOs, in the event that an executive’s employment is terminated either by the Company without “cause,”“cause” or due to a qualifying retirement (1) a pro-rated number of shares of time-based restricted stockequity awards will vest, and (2) a pro-rated number of performance sharesperformance-based equity awards will remain eligible to vest based on actual Company performance for the applicable performance period. In connection with a termination of employment due to an executive’s disability, all outstanding time-based equity awards of stock options or time-vesting restricted stock will vest and a pro-rated number of performance sharesperformance-based equity awards will remain eligible to vest based on actual Company performance for the applicable performance period. Termination of employment due to an executive’s death will result in full acceleration of all outstanding time-vesting restricted stocktime-based equity awards and pro-rata accelerated vesting of all performanceperformance-based equity awards based shares.on the original target award.
In the event of a change-in-control of the Company in which restricted stockthe equity awards are assumed, continued or substituted for new awards, (1) time-based restricted stockequity awards will vest in the event thatif the executive’s employment is terminated by the Company or its successor without cause within 24 months following such change-in-control, and (2) the parties to such change-in-control may adjust the performance metrics applicable to any performance shareperformance-based equity awards. In the event that restricted stockequity awards are not assumed or continued in a change-in-control or substituted for new awards, then (i) time-based restricted stockequity awards will vest upon and subject to the occurrence of such change-in-control, and (ii) a pro-rated portion of the performance sharesperformance-based equity awards will vest.
Executive Severance Plan
A severance plan was put into place to provide for reasonable executive severance, in the event of "without cause" termination. The severance plan provides for a payment of one times base salary, a pro-rated bonus, accelerated vesting of all unvested time-based equity awards on a pro-rata basis (pro-ration on accelerated shares/units is determined using the time period from grant date to the date of separation), pro-rata vesting for performance-based shares/units upon completion of the performance period, and reasonable outplacement costs. Severance benefits are provided in exchange for a general release and non-solicitation of clients and employees.
Retirement Policy
In October of 2017, the Committee approved a formal retirement program for all regular employees of the Bank and its subsidiaries. To be eligible to receive benefits under this program, employees must meet certain criteria, including attaining the age of 65 or satisfying the "Rule of 70" at the time of their voluntary separation of employment, providing three (3) months advance notice of their expected retirement date and entering into a retirement agreement with the Company that includes a customary release of claims, non-solicitation and non-disclosure covenants in favor of the Company. The "Rule of 70"means an employee’s age plus continuous years of service at their employer equals 70 or more, with a minimum age of 60. The retirement program benefits include: (a) pro-rata vesting for all equity awards; (b) pro-rata vesting for the annual bonus in the year of retirement; and (c) one-on-one retirement coaching with a focus on health care coaching and life after retirement planning. Mr. Deutsch's departure in 2018 was treated as a retirement under the terms of the retirement policy.
The table below sets forth the cash severance, bonus (if any), value of accelerated vesting of equity awards and value of health benefits payable to each NEO in the event of a termination of employment (excluding retirement) without cause, or due to death or disability, a change-in-control of the Company, and a termination of employment following a change-in-control, and assuming, in each case, that the applicable triggering event(s) occurred on December 31, 2016.2018. Estimated equity values in the table below are calculated assuming the closing price of the Company’s stock on December 31, 20162018 of $16.55.$10.57.
| | | Name | | Payment/Benefit | | Termination without Cause/for Good Reason | | Termination due to death or disability (4) | | Change-in-Control (no termination) | | Termination without Cause/for Good Reason in connection with a Change-in-Control (5) | | Payment/Benefit | | Termination without Cause/for Good Reason (1) | | Termination due to death or disability (5) | | Change-in-Control (no termination) | | Termination without Cause/for Good Reason in connection with a Change-in-Control (6) |
| Anthony DeChellis | | | Cash Severance | | $ | 2,800,000 |
| | $ | — |
| | $ | — |
| | $ | 2,800,000 |
|
| | Pro-Rated Bonus | | $ | — |
| | $ | 700,000 |
| | $ | — |
| | $ | — |
|
| | Accelerated Vesting of Equity (2), (4) | | $ | 624,211 |
| | $ | 624,211 |
| | $ | — |
| | $ | 624,211 |
|
| | Benefits (3) | | $ | 21,111 |
| | $ | — |
| | $ | — |
| | $ | 21,111 |
|
| | Fringe Benefits (maximum annual cap) | | $ | 20,000 |
| | $ | — |
| | $ | — |
| | $ | 20,000 |
|
| | Total | | $ | 3,465,322 |
| | $ | 1,324,211 |
| | $ | — |
| | $ | 3,465,322 |
|
| | | | | | | | | | |
| Clayton G. Deutsch | | Cash Severance | | $ | 3,037,500 |
| | $ | — |
| | $ | — |
| | $ | 3,037,500 |
| | Cash Severance | | $ | 3,037,500 |
| | $ | — |
| | $ | — |
| | $ | 3,037,500 |
|
| | Pro-Rated Bonus | | — |
| | 843,750 |
| | — |
| | — |
| | Pro-Rated Bonus | | — |
| | 843,750 |
| | — |
| | — |
|
| | Accelerated Vesting of Equity (1) | | 3,844,581 |
| | 4,945,388 |
| | — |
| | 4,945,388 |
| | Accelerated Vesting of Equity (2) | | 982,404 |
| | 1,333,272 |
| | — |
| | 1,333,272 |
|
| | Benefits (2) | | 42,074 |
| | — |
| | — |
| | 42,074 |
| | Benefits (3) | | 30,763 |
| | — |
| | — |
| | 30,763 |
|
| | Fringe Benefits (maximum annual cap) | | 65,000 |
| | — |
| | — |
| | 65,000 |
| | Fringe Benefits (maximum annual cap) | | 65,000 |
| | — |
| | — |
| | 65,000 |
|
| | Total | | $ | 6,989,155 |
| | $ | 5,789,138 |
| | $ | — |
| | $ | 8,089,962 |
| | Total | | $ | 4,115,667 |
| | $ | 2,177,022 |
| | $ | — |
| | $ | 4,466,535 |
|
| | | | | | | | | | | | | | | | | |
| David J. Kaye | | Cash Severance | | $ | 425,000 |
| | $ | — |
| | $ | — |
| | $ | 1,954,583 |
| | Cash Severance | | $ | 400,000 |
| | $ | — |
| | $ | — |
| | $ | 1,946,875 |
|
| | Pro-Rated Bonus | | 365,000 |
| | — |
| | — |
| | 365,000 |
| | Pro-Rated Bonus | | 240,000 |
| | — |
| | — |
| | 240,000 |
|
| | Accelerated Vesting of Equity (1), (3) | | 668,188 |
| | 912,560 |
| | — |
| | 912,560 |
| | Accelerated Vesting of Equity (2), (4) | | 419,668 |
| | 544,876 |
| | — |
| | 544,879 |
|
| | Benefits (2) | | — |
| | — |
| | — |
| | 59,377 |
| | Benefits (3) | | 22,304 |
| | — |
| | — |
| | 55,760 |
|
| | Fringe Benefits (maximum annual cap) | | 20,000 |
| | — |
| | — |
| | 20,000 |
| | Fringe Benefits (maximum annual cap) | | 20,000 |
| | — |
| | — |
| | 20,000 |
|
| | Total | | $ | 1,478,188 |
| | $ | 912,560 |
| | $ | — |
| | $ | 3,311,520 |
| | Total | | $ | 1,101,972 |
| | $ | 544,876 |
| | $ | — |
| | $ | 2,807,514 |
|
| | | | | | | | | | | | | | | | | |
| George G. Schwartz | | Cash Severance | | $ | 400,000 |
| | $ | — |
| | $ | — |
| | $ | 1,786,500 |
| |
| | Pro-Rated Bonus | | 345,000 |
| | — |
| | — |
| | 345,000 |
| |
| | Accelerated Vesting of Equity (1), (3) | | 525,643 |
| | 768,605 |
| | — |
| | 768,605 |
| |
| | Benefits (2) | | — |
| | — |
| | — |
| | 59,377 |
| |
| | Fringe Benefits (maximum annual cap) | | 20,000 |
| | — |
| | — |
| | 20,000 |
| |
| | Total | | $ | 1,290,643 |
| | $ | 768,605 |
| | $ | — |
| | $ | 2,979,482 |
| |
| Corey A. Griffin | | | Cash Severance | | $ | 400,000 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | Pro-Rated Bonus | | 240,000 |
| | — |
| | — |
| | — |
|
| | Accelerated Vesting of Equity (2), (4) | | 638,407 |
| | 887,004 |
| | — |
| | 887,004 |
|
| | Benefits (3) | | 22,223 |
| | — |
| | — |
| | — |
|
| | Fringe Benefits (maximum annual cap) | | 20,000 |
| | — |
| | — |
| | — |
|
| | Total | | $ | 1,320,630 |
| | $ | 887,004 |
| | $ | — |
| | $ | 887,004 |
|
| | | | | | | | | | | | | | | | | |
| Margaret W. Chambers | | Cash Severance | | $ | 360,000 |
| | $ | — |
| | $ | — |
| | $ | 1,638,000 |
| |
| | Pro-Rated Bonus | | 288,000 |
| | — |
| | — |
| | 288,000 |
| |
| | Accelerated Vesting of Equity (1), (3) | | 565,400 |
| | 772,219 |
| | — |
| | 772,219 |
| |
| | Benefits (2) | | — |
| | — |
| | — |
| | 59,377 |
| |
| | Fringe Benefits (maximum annual cap) | | 20,000 |
| | — |
| | — |
| | 20,000 |
| |
| Jacqueline S. Shoback | | | Cash Severance | | $ | 400,000 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | Pro-Rated Bonus | | 240,000 |
| | — |
| | — |
| | — |
|
| | Accelerated Vesting of Equity (2), (4) | | 310,290 |
| | 420,022 |
| | — |
| | 420,022 |
|
| | Benefits (3) | | 22,304 |
| | — |
| | — |
| | — |
|
| | Fringe Benefits (maximum annual cap) | | 20,000 |
| | — |
| | — |
| | — |
|
| | Total | | $ | 992,594 |
| | $ | 420,022 |
| | $ | — |
| | $ | 420,022 |
|
| | | Total | | $ | 1,233,400 |
| | $ | 772,219 |
| | $ | — |
| | $ | 2,777,596 |
| | | | | | | | |
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | |
| Steven M. Gaven | | Cash Severance | | $ | 300,000 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | Pro-Rated Bonus | | 186,000 |
| | — |
| | — |
| | — |
|
| | Accelerated Vesting of Equity (1), (4) | | 86,943 |
| | 138,835 |
| | — |
| | 138,835 |
|
| | Benefits (3) | | 22,223 |
| | — |
| | — |
| | — |
|
| | Fringe Benefits (maximum annual cap) | | 20,000 |
| | — |
| | — |
| | — |
|
| | | Total | | $ | 615,166 |
| | $ | 138,835 |
| | $ | — |
| | $ | 138,835 |
|
| | | | | | | | | | | |
| |
| (1) | Amounts in this column reflect payments due Mr. Deutsch and Mr. DeChellis per their Employment Agreements, payments due Mr. Kaye per his change-in-control agreement and the Executive Severance Plan and payments due all other NEOs as per the Executive Severance Plan. |
| |
| (2) | In the event of a change-in-control with no termination all outstanding non-vested grants of time-based restricted stock would vest if the acquiring company elected not to assume or replace the outstanding grants, and all performance sharesshares/units would vest pro-rata based on the number of days from the grant date to the date of the change-in-control. |
| |
(2)(3) | Health and dental continuation for two years for Mr. Deutsch and two and a half years for Mr. Kaye, Mr. Schwartz and Ms. Chamberscalculated using premium rates at January 1, 2017.2019. |
| |
(3)(4) | Performance sharesshares/units pro-rated based on grant date for each performance/vesting cycle. Beginning with 2011 grants, time-basedTime-based restricted stock isstock/units are pro-rated (not fully accelerated) upon termination without cause/for good reason and fully accelerated in a change-in-control termination assuming grants not assumed or replaced. |
| |
(4)(5) | In the event of termination due to death, the equity awards for all NEOs except for Mr. DeChellis and Mr. Deutsch will vest on a pro-rata basis for all performance based awards. Mr. DeChellis and Mr. Deutsch’s equity awards will fully vest per histheir employment agreement.agreements. |
| |
(5)(6) | Triggering termination of employment includes a termination in connection with a “terminating event,” as defined in the applicable change-in-control agreement for each of Mr. Kaye, Mr. Schwartz and Ms. Chambers.Kaye. |
CEO Pay Ratio
In accordance with the requirements of Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, the Company is providing the following information about the relationship of the annual total compensation of our "median employee" and the annual total compensation of Mr. Deutsch, our retired CEO who held the position of CEO on the date we used to identify the "median employee" as described below. We decided to identify a new "median employee" for 2018 due to changes in the Company's employee population that occurred in 2018, including as a result of the sale of Anchor.
For 2018, our last completed fiscal year:
the annual total compensation of the "median employee" of our Company (other than Mr. Deutsch) was $95,985; and
the annual total compensation of Mr. Deutsch, as reported in the Summary Compensation Table included elsewhere in this Proxy Statement, was $2,367,370.
Based on this information, for 2018 the ratio of the annual total compensation of Mr. Deutsch to the annual total compensation of our "median employee" was 24.66 to 1.
To identify the "median employee," as well as to determine the annual total compensation of our "median employee" and Mr. Deutsch, we took the following steps:
We determined that, as of October 15, 2018, our employee population, including employees of our consolidated affiliates, consisted of approximately 893 individuals with all of these individuals located in the United States. This population consisted of our full-time, part-time, and temporary employees. We excluded from our employee population any independent contractors or similar workers compensated by an unaffiliated third party who performed services for us during 2018. We also excluded any employee whose employment terminated prior to October 15, 2018.
We selected October 15, 2018 as the date upon which we would identify the "median employee" because this date provided a sufficient amount of data and time to allow us to make such identification in a reasonably efficient manner. This date also is consistent with the October 15, 2017 date we used to identify the "median employee" for our 2017 CEO pay ratio disclosure.
To identify the “median employee” from our employee population, we compared the amount of salary, wages, tips and overtime pay of our employees as reflected in our payroll records maintained for reporting to the Internal Revenue Service on Form W-2 for 2018. For employees whose compensation is listed on Form K-1 rather than on Form W-2, we compared the amount of base and bonus compensation payments as reflected in our payroll records maintained for reporting to the Internal Revenue Service on Form K-1 for 2018. However, for these employees we excluded any reported profits interest distributions since we attributed these distributions to ownership dividends rather than compensation.
In making this determination, we annualized the compensation of approximately 133 full-time employees who were hired in 2018 but did not work for us for the entire fiscal year. We did not annualize the salary for employees on leave during a portion on 2018 because we estimated the difference between actual pay and annualized pay for these employees to be minimal.
We identified our "median employee" using this compensation measure, which was consistently applied to all of our employees included in the calculation. Because all of our employees are located in the United States, as is Mr. Deutsch, we did not make any cost-of-living adjustments in identifying the "median employee."
Once we identified our "median employee," we combined all of the elements of such employee’s compensation for 2018 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $95,985. The difference between such employee’s salary, wages, tips and overtime pay and the employee’s annual total compensation represented the estimated value of the following benefits: company matching contributions to participants in our Section 401(k) employee savings plan, company-provided gift cards, payment for accrued and unused vacation time and wellness benefits.
With respect to the annual total compensation of Mr. Deutsch, we used the amount reported in the "Total" column of our 2018 Summary Compensation Table included in this Proxy Statement.
Compensation Committee Interlocks and Insider Participation in Compensation Decisions
TheDuring the fiscal year ended December 31, 2018, the Compensation, Governance and Executive Committee is comprised entirely ofincluded the following independent directors: Deborah F. Kuenstner, Chair, Gloria C. Larson, Joseph C. Guyaux, Lizabeth H. ZlatkusGloria C. Larson and Stephen M. Waters. NoNone of these members has at any time been one of our officers or employees or had any relationship requiring disclosure herein. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board of Directors or the Compensation Committee.
Retirement Age and Term Limit
As previously described in this Proxy Statement, the Company’s Corporate Governance Guidelines provide for term and Executive Committee is a current, or was a former, officer or employee of the Company or any of its subsidiaries.age limits for directors.
Compensation of Directors
Board Retainer
Directors of the Company who are not full-time employees of the Company or any of its subsidiaries receive compensation under a compensation program effective May 1, 20162018 that includes an annual retainer fee of $120,000, of which 50% ($60,000) is payable in cash as a cash retainer and 50% ($60,000) is payable in Company stock as a stock retainer. The non-executive Chair’s supplemental annual retainer fee is $50,000, of which 50%, or $25,000, ($25,000) is paid in cash, for a total cash retainer of $85,000, and 50%, or $25,000, ($25,000) is paid in stock, for a total stock retainer of $85,000. The total Chair retainer is $170,000. Each director can elect to receive up to 100% of the annual cash retainer fee in stock.
Committee Retainers
The annual retainer for Committee Chairs is $10,000. This increased from $3,000 in 2015 to more appropriately reflect the added work level and responsibilities of the Committee Chairs. It is assumed that each director will serve on two committees with a supplemental retainer of $10,000 for any director serving on three or more committees.
Stock Ownership GuidelinesPolicy
Directors receive their stock retainer, and any portion of their cash retainer that is elected to be paid in stock, in shares of the Company’s common stock. These shares are purchased by the Company at fair market value on each of the Company’s quarterly grant dates and deposited in each director’s brokerage account. The Company believes that director stock ownership is important and has implemented a minimum stock ownership guideline thresholdpolicy for outside directors equal to the lower of (a) five times the annual Board member cash retainer of $60,000, or $300,000 in value or (b) 30,000 shares. The non-executive Chair is requiredvalue. Directors are expected to hold the lower of $425,000 in value based on his $85,000 annual cash retainer (5 x $85,000 = $425,000) or 42,500 shares. Board members must attain this minimum ownership guidelineslevel within a five year periodyears from the date of their initial election. The Compensation Committee reviews hardships on an individual basis, if needed.
DIRECTOR COMPENSATION PAID IN 2018
| | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | |
| Name and Principal Position | | Year | | Fees Earned or Paid in Cash ($) | | Stock Awards ($) | | Option Awards ($) | | Non-Equity Incentive Plan Compensation ($) | | Change in Pension Value and NQ Deferred Compensation Earnings ($) | | All Other Compensation ($) | | Total ($) | | Fees Earned or Paid in Cash ($) | | Stock Awards ($) (8) | | Option Awards ($) | | Non-Equity Incentive Plan Compensation ($) | | Change in Pension Value and NQ Deferred Compensation Earnings ($) | | All Other Compensation ($) | | Total ($) |
| Board of Directors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mark Furlong (1) | | 2016 | | $ | 5,543 |
| | $ | 5,543 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 11,086 |
| |
| Joseph Guyaux (1) | | 2016 | | 5,543 |
| | 5,543 |
| | — |
| | — |
| | — |
| | — |
| | 11,086 |
| |
Mark F. Furlong | | | $ | 60,000 |
| | $ | 60,000 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 120,000 |
|
| Joseph C. Guyaux | | | 60,000 |
| | 60,000 |
| | — |
| | — |
| | — |
| | — |
| | 120,000 |
|
| Deborah F. Kuenstner | | 2016 | | 36,500 |
| | 90,000 |
| | — |
| | — |
| | — |
| | — |
| | 126,500 |
| | 70,000 |
| | 60,000 |
| | — |
| | — |
| | — |
| | — |
| | 130,000 |
|
| Gloria C. Larson | | 2016 | | 60,000 |
| | 60,000 |
| | — |
| | — |
| | — |
| | — |
| | 120,000 |
| | 60,000 |
| | 60,000 |
| | — |
| | — |
| | — |
| | — |
| | 120,000 |
|
| John Morton III | | 2016 | | 57,750 |
| | 68,750 |
| | — |
| | — |
| | — |
| | — |
| | 126,500 |
| |
| Daniel P. Nolan | | 2016 | | — |
| | 126,500 |
| | — |
| | — |
| | — |
| | — |
| | 126,500 |
| |
| Brian G. Shapiro (2) | | 2016 | | 31,500 |
| | 30,000 |
| | — |
| | — |
| | — |
| | — |
| | 61,500 |
| |
| John Morton III (1) | | | 30,000 |
| | 30,000 |
| | — |
| | — |
| | — |
| | — |
| | 60,000 |
|
| Daniel P. Nolan (2) | | | 65,000 |
| (3 | ) | 60,000 |
| | — |
| | — |
| | — |
| | — |
| | 125,000 |
|
| Kimberly S. Stevenson | | 2016 | | — |
| | 125,000 |
| | — |
| | — |
| | — |
| | — |
| | 125,000 |
| | 70,000 |
| (4 | ) | 60,000 |
| | — |
| | — |
| | — |
| | — |
| | 130,000 |
|
| Luis Antonio Ubiñas | | | 65,000 |
| | 60,000 |
| | — |
| | — |
| | — |
| | — |
| | 125,000 |
|
| Donna Wells (5) | | | 17,697 |
| | 17,697 |
| | — |
| | — |
| | — |
| | — |
| | 35,394 |
|
Stephen M. Waters (3)(6) | | 2016 | | 85,000 |
| | 85,000 |
| | — |
| | — |
| | — |
| | — |
| | 170,000 |
| | 85,000 |
| | 85,000 |
| | — |
| | — |
| | — |
| | — |
| | 170,000 |
|
| Donna C. Wells | | 2016 | | 60,000 |
| | 60,000 |
| | — |
| | — |
| | — |
| | — |
| | 120,000 |
| |
| Lizabeth H. Zlatkus | | 2016 | | 55,000 |
| | 65,000 |
| | — |
| | — |
| | — |
| | — |
| | 120,000 |
| | 70,000 |
| (7 | ) | 60,000 |
| | — |
| | — |
| | — |
| | — |
| | 130,000 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| (1) | On April 18, 2018, Mr. Furlong and Mr. Guyaux joinedMorton retired from the Board on September 28, 2016, and their compensation reflects their pro-rated earnings.of Directors of the Company. |
| |
| (2) | On February 14, 2019, Mr. Shapiro’s compensation is pro-rated based on his leavingNolan resigned from the Board on April 20, 2016.of Directors of the Company. |
| |
| (3) | Mr. Nolan has elected to receive the cash portion of his compensation in the form of Company stock. |
| |
| (4) | Ms. Stevenson has elected to receive the cash portion of her compensation in the form of Company stock. |
| |
| (5) | On February 16, 2018, Ms. Wells resigned from the Board of Directors of the Company. |
| |
| (6) | Non-Executive Chair of the Board.Board |
| |
| (7) | Ms. Zlatkus has elected to receive $30,000 of her cash compensation in the form of Company stock. |
| |
| (8) | Represents the aggregate grant date fair value, computed in accordance with ASC 718, of awards that were granted to our directors in 2018. |
REPORT OF THE AUDIT AND FINANCE COMMITTEE
The following is the report of the Audit and Finance Committee with respect to the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2016. The Audit and Finance Committee acts under a written charter which specifies the scope of the Audit and Finance Committee’s responsibilities and how it carries out those responsibilities. Each member of the Audit and Finance Committee is listed below and is independent within the definition of the NASDAQ listing standards.
While the Audit and Finance Committee oversees the Company’s financial reporting process for the Board of Directors consistent with its charter, management has primary responsibility for this process, including the Company’s system of internal controls, and for the preparation of the Company’s consolidated financial statements in accordance with U.S. generally accepted accounting principles. In addition, the Company’s independent registered public accounting firm is responsible for auditing those consolidated financial statements, and not the Audit and Finance Committee.
The Audit and Finance Committee has reviewed and discussed the Company’s December 31, 2016 audited consolidated financial statements with management and with KPMG LLP, the Company’s independent registered public accounting firm (“KPMG”). The Audit and Finance Committee also has discussed with KPMG the matters required to be discussed by Auditing Standard No. 1301, Communication with Audit Committees as adopted by the Public Company Accounting Oversight Board (the “PCAOB”). In addition, the Audit and Finance Committee has also received from KPMG the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit and Finance Committee concerning independence, and has discussed with KPMG its independence from the Company. The Audit and Finance Committee also considered whether KPMG’s provision of non-audit services to the Company is compatible with its independence.
Based on the reviews and discussions referred to above, the Audit and Finance Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2016 for filing with the Securities and Exchange Commission.
Submitted by the Audit and Finance Committee:
John Morton III, Chair
Lizabeth H. Zlatkus
Mark F. Furlong
Deborah F. Kuenstner
Daniel P. Nolan
The foregoing report shall not be deemed to be “soliciting material” or to be “filed” with the SEC and should not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that the Company specifically incorporates this information by reference and shall not otherwise be deemed filed under such acts.
AUDIT FEES
The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial statements for 2016 and 2015, and fees billed for other services rendered by KPMG.
|
| | | | | | | | |
| | | 2016 | | 2015 |
| Audit fees (1) | | $ | 1,103,750 |
| | $ | 915,500 |
|
| All other fees (2) | | — |
| | 1,662 |
|
| Total fees | | $ | 1,103,750 |
| | $ | 917,162 |
|
| |
(1) | Audit fees for 2016 and 2015 include fees billed, or expected to be billed, for the annual audit and quarterly reviews. |
| |
(2) | All other fees for 2015 include fees billed during the year for services related to the IRS exam. |
KPMG audited the Company’s consolidated financial statements for the year ended December 31, 2016. The Company expects representatives of KPMG to be present at the Meeting. These representatives will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
In January 2017, the Audit and Finance Committee completed the process to review the appointment of the Company’s independent registered accounting firm and to review compliance with applicable lead audit partner rotational requirements. In the course of the review, the Committee considered, among other things, (1) historical and recent performance on the Company’s audit; (2) tenure as the Company’s independent auditor and familiarity with our operations; (3) the appropriateness of fees; and (4) the auditor’s independence. As a result of this review and following careful deliberation, the Committee has re-appointed KPMG LLP as the Company’s independent registered public accounting firm and as auditors of the Company’s consolidated financial statements for 2017. KPMG LLP has served as the Company’s independent registered public accounting firm for over ten years.
The Audit and Finance Committee pre-approves all auditing services and the terms thereof (which may include providing comfort letters in connection with securities underwritings) and non-audit services (other than non-audit services prohibited under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the PCAOB) to be provided to the Company by KPMG; however, the pre-approval requirement is waived with respect to the provision of non-audit services for the Company if the “de minimis” provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied. There were no non-audit services provided under the “de minimis” provision in 2016. The authority to pre-approve non-audit services may be delegated to one or more members of the Audit and Finance Committee, who shall present all decisions to pre-approve an activity to the full Committee at its first meeting following such decision.
PROPOSAL 2
ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
As required by Section 14A of the Exchange Act, the Board of Directors is submitting for shareholder approval, on an advisory, non-binding basis, the compensation paid to the Company’s named executive officers as described in this Proxy Statement pursuant to Item 402 of Regulation S-K. As previously disclosed by the Company, the shareholders of the Company previously voted on an advisory, non-binding basis, and the Board of Directors determined, to hold an advisory vote on executive compensation annually.
The resolution that is the subject of this proposal is an advisory, non-binding resolution and will not have any binding legal effect regardless of whether or not it is approved, and may not be construed as overruling a decision by the Company or the Board of Directors or creating or implying any change to the fiduciary duties of the Board. Furthermore, because this advisory, non-binding resolution relates primarily to compensation that has already been paid or contractually committed for the Company’s named executive officers, there is generally no opportunity for the Board to revisit those decisions. However, the Compensation Governance and Executive Committee (the “Committee”) intends to take the results of the vote on this proposal into account in its future decisions regarding the compensation of the Company’s named executive officers.
The Company’s compensation program is designed to attract, motivate and retain the named executive officers who are critical to the Company’s success by offering a combination of base salary and annual and long-term incentives that are closely aligned with the Company’s annual and long-term performance objectives. Please see the section titled “Compensation Discussion and Analysis” for additional information about the Company’s executive compensation programs.
We believe that the effectiveness of our compensation programs is demonstrated by the accomplishments of management over the last fiscal year as detailed in our discussion in the section titled “Compensation Discussion and Analysis.”
For these reasons, the Board of Directors recommends that shareholders vote in favor of the following resolution:
RESOLVED, that the compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including in the Compensation Discussion and Analysis, the compensation tables and narrative discussion, be approved.
The Board of Directors unanimously recommends that shareholders vote FOR approval of the compensation of the Company’s named executive officers.
PROPOSAL 3
ADVISORY (NON-BINDING) VOTE TO SELECT THE FREQUENCY OF FUTURE SHAREHOLDER ADVISORY VOTES ON EXECUTIVE COMPENSATION
As required under the Dodd-Frank Act, the Company’s Board of Directors is also submitting for shareholder consideration a proposal to determine, on an advisory basis, whether future shareholder advisory votes to approve the compensation paid to our named executive officers should be sought annually, every two years or every three years.
The vote on this proposal is advisory. The vote on this proposal may not be construed as having any binding legal effect, or overruling a decision by the Company or the Board of Directors, and will not create or imply any change to the fiduciary duties of the Board. However, the Board intends to take the results of the vote on this proposal into account in its decision regarding the frequency with which the Company submits say-on-pay proposals in the future.
The Board of Directors values the importance of receiving regular input from our shareholders on important matters such as the compensation of the Company’s executive officers. Accordingly, as indicated below, the Board of Directors recommends that you vote for a frequency of every year for future shareholder advisory votes to approve the compensation of the Company’s named executive officers.
The enclosed proxy card gives you four choices on voting on this item. In addition to considering whether future shareholder advisory votes to approve the compensation of the Company’s named executive officers should occur every year, every two years, or every three years, you also have the choice to abstain from voting on this item.
Please note that you are not voting to approve or disapprove the Board’s recommendation on this item.
The Board of Directors unanimously recommends that shareholders vote for a frequency of EVERY YEAR for future shareholder advisory votes to approve the compensation of the Company’s named executive officers.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit and Finance Committee has selected KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm to perform the audit of the Company’s consolidated financial statements for fiscal year 2017.2019.
Although ratification by shareholders is not required by law or by the Company’s bylaws,Bylaws, the Audit and Finance Committee believes that submission of its selection to shareholders is a matter of good corporate governance. If the shareholders fail to ratify the selection, the Audit and Finance Committee will take that fact into consideration, together with such other factors it deems relevant, in determining whether to retain KPMG as ourthe Company’s independent registered public accounting firm in the future. Even if the selection is ratified, the Audit and Finance Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Committee determines that such change would be in the best interests of the Company and its shareholders.
Representatives of KPMG will be present at the Annual Meeting, will be given an opportunity to make a statement at the meetingMeeting if they desire to do so, and will be available to respond to appropriate questions from shareholders.
The Audit and Finance Committee reviews audit and non-audit services performed by KPMG, as well as the fees charged by KPMG for such services. In its review of non-audit service fees, the Audit and Finance Committee considers, among other things, the possible effect of the performance of such services on the auditor’s independence. Additional information concerning the Audit and Finance Committee and its activities with KPMG can be found in the “Corporate Governance - Committees of the Board and Related Matters” and “Report of the Audit and Finance Committee” sections of this Proxy Statement.
Audit Fees
The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial statements for 2018 and 2017, and fees billed for other services rendered by KPMG.
|
| | | | | | | | | |
| | | 2018 | | 2017 |
| Audit fees (1) | | $ | 1,074,355 |
| | $ | 1,134,725 |
|
| Audit-related fees | | 8,750 |
| | — |
|
| Tax fees | | — |
| — |
| — |
|
| All other fees | | — |
| | — |
|
| Total fees | | $ | 1,083,105 |
| | $ | 1,134,725 |
|
| |
| (1) | Audit fees for 2018 and 2017 include fees billed, or expected to be billed, for the annual audit and quarterly reviews. |
KPMG audited the Company’s consolidated financial statements for the year ended December 31, 2018.
In January 2019, the Audit and Finance Committee completed the process to review the appointment of the Company’s independent registered accounting firm and to review compliance with applicable lead audit partner rotational requirements. In the course of the review, the Committee considered, among other things, (1) historical and recent performance on the Company’s audit; (2) tenure as the Company’s independent auditor and familiarity with our operations; (3) the appropriateness of fees; and (4) the auditor’s independence. As a result of this review and following careful deliberation, the Committee has re-appointed KPMG LLP as the Company’s independent registered public accounting firm and as auditors of the Company’s consolidated financial statements for 2019. KPMG LLP has served as the Company’s independent registered public accounting firm since 1987.
Pre-approval Policy and Procedures
Pursuant to the Audit and Finance Committee Charter, all audit and non-audit services provided to the Company by KPMG must be pre-approved by the Audit and Finance Committee, provided,Committee; however, that certain de minimisthis pre-approval requirement is waived with respect to the provision of non-audit services for the Company if the “de minimis” provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied. The authority to pre-approve non-audit services may be provided withoutdelegated to one or more members of the Audit and Finance Committee, who shall present a report on all decisions to pre-approve an activity to the full Committee at its first meeting following such pre-approval.decision. The Company’s Internal Audit Policy provides for (a) general pre-approval of audit-related services which do not exceed certain aggregate dollar thresholds approved by the Audit and Finance Committee, and (b)
specific pre-approval of all other permitted services and any proposed services which exceed these same dollar thresholds. The Audit and Finance Committee is also mindful of the relationship between fees for audit and non-audit services in deciding whether to pre-approve any such services. It may determine, for each fiscal year, the appropriate ratio between the total amount of fees for audit, audit related and tax services and the total amount of fees for certain permissible non-audit services classified as “all other fees.”
The Audit and Finance Committee pre-approved allthe audit andfees of KPMG during fiscal 2018. There were no non-audit fees of KPMG during fiscal 2016.2018.
The Board of Directors unanimously recommends that shareholders vote FOR the ratification of the selection of KPMG as the Company’s independent registered public accounting firm.firm for fiscal year 2019.
OTHER BUSINESSREPORT OF THE AUDIT AND FINANCE COMMITTEE
The following is the report of the Audit and Finance Committee with respect to the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2018. The Audit and Finance Committee acts under a written charter which specifies the scope of the Audit and Finance Committee’s responsibilities and how it carries out those responsibilities. Each member of the Audit and Finance Committee is listed below and is independent within the definition of NASDAQ listing standards.
While the Audit and Finance Committee oversees the Company’s financial reporting process for the Board of Directors is not awareconsistent with its charter, management has primary responsibility for this process, including the Company’s system of any other business that may properly come beforeinternal controls, and for the Meeting. If any other matters properly come before the Meeting, the proxies will be voted at the discretionpreparation of the Proxy Holders.Company’s consolidated financial statements in accordance with U.S. generally accepted accounting principles. In addition, the Company’s independent registered public accounting firm is responsible for auditing those consolidated financial statements, and not the Audit and Finance Committee.
The Audit and Finance Committee has reviewed and discussed the Company’s December 31, 2018 audited consolidated financial statements with management and with KPMG, the Company’s independent registered public accounting firm. The Audit and Finance Committee also has discussed with KPMG the matters required to be discussed by Auditing Standard No. 1301, Communication with Audit Committees as adopted by the Public Company Accounting Oversight Board (the “PCAOB”). In addition, the Audit and Finance Committee has also received from KPMG the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit and Finance Committee concerning independence, and has discussed with KPMG its independence from the Company. The Audit and Finance Committee also considers whether KPMG’s provision of non-audit services to the Company is compatible with its independence, if applicable.
Based on the reviews and discussions referred to above, the Audit and Finance Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for filing with the Securities and Exchange Commission.
Submitted by the Audit and Finance Committee:
Mark F. Furlong, Chair
Lizabeth H. Zlatkus, Vice Chair
Luis Antonio Ubiñas
The foregoing report shall not be deemed to be “soliciting material” or to be “filed” with the SEC and should not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that the Company specifically incorporates this information by reference and shall not otherwise be deemed filed under such acts.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 20162018 regarding shares of common stock that may be issued under the Company’s equity compensation plans including the Company’s 2004 Stock Option and Incentive Plan (“2004(the “2004 Plan”), the Company’s Amended and Restated 2009 Stock Option and Incentive Plan (“2009(the “2009 Plan”), the Company’s 2010 Inducement Stock Plan, as amended (the “Inducement Plan”), and the Company’s 2001 Employee Stock Purchase Plan (as Amended and Restated as of January 1, 2014) (“ESPP”(the “ESPP”).
| | | | | Equity Compensation Plan Information | | Equity Compensation Plan Information |
| Plan category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted Average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plan (excluding securities referenced in column (a)) | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted Average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plan (excluding securities referenced the first column |
| | | (a) | | (b) | | (c) | | | | | | |
| Equity compensation plans approved by security holders (1) | | 1,378,408 |
| (3), (4) | | $ | 6.24 |
| | 2,756,686 |
| (5), (6) | | 761,811 |
| (3), (4) | | $ | 6.98 |
| (5) | 2,132,759 |
| (6), (7) |
| Equity compensation plans not approved by security holders (2) | | — |
| | $ | — |
| | 148,854 |
| | | 517,478 |
| | $ | 12.70 |
| | 165,230 |
| |
| | | | | | | | | | | | | | | |
| Total | | 1,378,408 |
| | $ | 6.24 |
| | 2,905,540 |
| | | 1,279,289 |
| | $ | 5.93 |
| | 2,297,989 |
| |
| |
| (1) | The 2004 Plan, the 2009 Plan, and the ESPP. |
| |
| (2) | The Inducement Plan. The Company’s Board of Directors approved the Inducement Plan, which has not been approved by the Company’s shareholders. The purpose of the Inducement Plan is to grant equity awards (stock options, restricted stock, restricted stock units, stock appreciation rights and other stock awards) to new employees as an inducement to join the Company. In November 2018, the Company's Board of Directors approved and adopted an amendment to the Inducement Plan, increasing the maximum number of shares of common stock reserved and available for issuance under the Inducement Plan from 1,245,000 shares to 1,845,000 shares. |
| |
| (3) | Does not include purchase rights accruing under the ESPP because the purchase price (and therefore the number of shares to be purchased) will not be determined until the end of the purchase period. |
| |
| (4) | Includes 772,008615,834 shares of restricted stock that could be issued if certain performance metrics are met. |
| |
| (5) | The weighted average exercise price does not include outstanding performance awards |
| |
| (6) | Includes 2,700,9682,253,889 shares available for future issuances under the 2004 Plan and the 2009 PlansPlan and 777,726494,704 shares available under the ESPP, less the incremental shares discussed above in note (4) to this table. |
| |
(6)(7) | Includes 72,81188,862 shares issued in January 20172019 under the ESPP for the July 1 through December 31, 20162018 purchase period. |
RELATED PARTY TRANSACTIONS
The Company sends out annual questionnaires to its directors and executive officers and those of its majority or wholly-owned subsidiaries regarding related party transactions. If there are any affirmative responses, the Board, who is responsible for the oversight of such transactions, reviews themany such affirmative responses and theconsiders their terms and conditions of any such transactions.conditions. There was one related party transaction disclosed in 2016.2018. Before Jacqueline S. Shoback, who currently is Executive Vice President and Chief Client DevelopmentMarketing Officer of the Company and the Bank, joined the Company in February 2015, her husband’s company completed several credit facilities with the Bank, totaling approximately $17.6 million in total.million. The credit facilities with Boston Privatethe Bank & Trust Company were originated prior to Ms. Shoback becoming an employee of the Company and no additional credit facilities have been provided to Ms. Shoback's husband's company since then. Allher employment commencement date. The Company has determined that all credit facilities were made in the ordinary course of business under normal credit terms, including interest rates and collateral requirements prevailing at the time of origination for comparable transactions with other persons, and do not represent more than normal credit risk.
OTHER BUSINESS
The Board of Directors is not aware of any other business that may properly come before the Meeting. If any other matters properly come before the Meeting, the proxies will be voted at the discretion of the Proxy Holders.
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the form enclosed herewith will be borne by the Company. In addition to the solicitation of proxies by mail, the Company’s regular employees may also solicit proxies personally or by telephone. Banks, brokerage houses, custodians, nominees and other fiduciaries have been requested to forward proxy materials to the beneficial owners of shares of common stock held of record by them. Such custodians will be reimbursed for their expenses. The Company will pay the expenses of soliciting proxies, including the reasonable charges and expenses of brokerage firms and others for forwarding solicitation material to beneficial owners of stock. The Company’s representatives may solicit proxies by mail, telephone, electronic or facsimile transmission, or personal interview.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 20182020 ANNUAL MEETING
Shareholder proposals intended to be presented at the next annual meeting of shareholders and which are to be considered for inclusion in the Company’s Proxy Statement and form of proxy for that meeting, must be received by the Company on or before November 21, 2017.14, 2019. These proposals must also comply with the rules of the SEC governing the form and content of proposals in order to be included in the Company’s Proxy Statement and form of proxy. Any such proposals should be mailed to: Corporate Secretary, Boston Private Financial Holdings, Inc., Ten Post Office Square, Boston, Massachusetts 02109.
A shareholder of record who wishes to present a proposal at the next annual meeting, other than a proposal to be considered for inclusion in the Company’s Proxy Statement described above, must provide written notice of such proposal and appropriate supporting documentation, as set forth in the Company’s by-laws,Bylaws, to the Company at its principal executive office no earlier than December 28, 2017,19, 2019, nor later than January 27, 2018;18, 2020; provided, however, that in the event the annual meeting is scheduled to be held on a date more than 30 days before the first anniversary of the date of the preceding year’s annual meeting (the “Anniversary Date”) or more than 60 days after the Anniversary Date, timely notice by the shareholder must be delivered not earlier than the close of business on the later of (1) the 90th day prior to the scheduled date of such annual meeting or (2) the 10th day following the first date on which the date of such annual meeting is publicly disclosed. Proxies solicited by the Board of Directors will confer discretionary voting authority with respect to these proposals, subject to SEC rules governing the exercise of this authority. Any such proposal should be mailed to: Corporate Secretary, Boston Private Financial Holdings, Inc., Ten Post Office Square, Boston, Massachusetts 02109.
