UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) of the Securities
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrantþx
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Preliminary Proxy Statement | ||||
¨ | Confidential, for Use of the Commission Only (as permitted byRule 14a-6(e)(2)) | |||
x | Definitive Proxy Statement | |||
¨ | Definitive Additional Materials | |||
¨ | Soliciting Material |
Corrections Corporation of America | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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To our stockholders:
You are invited to attend the 20102012 Annual Meeting of Stockholders of Corrections Corporation of America (the “Company”) to be held at 10:00 a.m., local time, on Thursday, May 13, 2010,10, 2012, at the Company’s corporate headquarters, 10 Burton Hills Boulevard, Nashville, Tennessee. The Notice of Annual Meeting and Proxy Statement, both of which accompany this letter, provide details regarding the business to be conducted at the meeting, as well as other important information about the Company.
Following the formal matters to be addressed at the meeting, stockholders will have the opportunity to ask questions about the Company.
Along with the other members of the Board of Directors and management, we look forward to greeting you at the Annual Meeting if you are able to attend.
Sincerely, | ||||
John D. Ferguson | ||||
Chairman of the Board of Directors |
Damon T. Hininger | ||||
President and Chief Executive Officer | ||||
10 Burton Hills Boulevard
Nashville, Tennessee 37215
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 13, 2010
The Annual Meeting of Stockholders will be held at 10:00 a.m., local time, on Thursday, May 13, 2010,10, 2012, at our corporate headquarters, 10 Burton Hills Boulevard, Nashville, Tennessee. At the Annual Meeting, stockholders will consider and vote on the following proposals:
(1) | The election of | ||
(2) | The ratification of the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm; | ||
(3) | An advisory vote to approve the compensation of our Named Executive Officers; |
(4) | A stockholder proposal, if properly presented at the Annual Meeting; and |
(5) | Any other matters that may properly come before the Annual Meeting or any adjournments or postponements thereof. |
We are pleased to take advantage of Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their stockholders over the internet. We believe these rules allow us to provide our stockholders with the information they need in a timely and convenient manner, while lowering the costs of delivery and reducing the environmental impact of our annual meeting.
Your vote is important. You may vote by toll-free telephone or by the internet. If you elected to receive a copy of the proxy card by mail, you may vote by completing, signing and returning the proxy card in the accompanying postage-paid envelope. Please refer to the proxy card and the accompanying Proxy Statement for additional information regarding your voting options. Even if you plan to attend the Annual Meeting, please take advantage of one of the advance voting options to ensure that your shares are represented at the Annual Meeting. You may revoke your proxy at any time before it is voted by following the procedures described in the accompanying Proxy Statement.
Stockholders of record at the close of business on Wednesday,Tuesday, March 17, 201013, 2012 are entitled to vote at the Annual Meeting and any adjournments or postponements thereof.
By Order of the Board of Directors, | ||||
Steven E. Groom | ||||
Executive Vice President, General Counsel and Secretary | ||||
March 31, 2010
30, 2012
Nashville, Tennessee
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PROPOSAL 3 - ADVISORY VOTE TO APPROVE THE COMPENSATION OF NAMED EXECUTIVE OFFICERS | 24 | ||||||
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Information Concerning Executive Officers Who Are Not Directors |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | |||||||
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PROXY STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 13, 2010
We are providing this Proxy Statement in connection with the solicitation by the Board of Directors, or the Board, of Corrections Corporation of America, a Maryland corporation (the “Company,” “CCA,” “we,” or “us”), of proxies to be voted at our 20102012 Annual Meeting of Stockholders and any adjournment or postponement of the meeting (the “Annual Meeting”).
On or about April 2, 2010,March 30, 2012, a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed to our stockholders as of the record date containing instructions on how to access this Proxy Statement, our 20092011 Letter to Stockholders, the Annual Report on Form 10-K and other proxy materials online, and how to vote. If you prefer to receive the proxy materials in the mail and to vote by mail, the Notice also contains instructions on how to request a printed copy. You will not receive printed copies of the proxy materials in the mail unless you specifically request them.
The Annual Meeting will take place on Thursday, May 13, 2010,10, 2012, at 10:00 a.m., local time, at our corporate headquarters, 10 Burton Hills Boulevard, Nashville, Tennessee. All stockholders who are entitled to vote at the meeting are invited to attend. Seating at the Annual Meeting is limited and will be available on a first come, first served basis. All stockholders of record will need to present a form of personal photo identification and proof of stock ownership in order to be admitted to the Annual Meeting. The Notice provides proof of ownership or, if your shares are held in the name of a bank, broker or other holder of record, you may bring a brokerage statement dated on or after March 17, 201013, 2012 as proof of ownership with you to the Annual Meeting. To obtain directions to attend the Annual Meeting and vote in person, please contact Karin Demler, our Senior Director, Investor Relations, at 10 Burton Hills Boulevard, Nashville, Tennessee 37215, (615) 263-3000.
Stockholders will consider and vote on the following matters at the Annual Meeting:
1. | The election of | ||
2. | The ratification of the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, | ||
3. | A non-binding advisory vote to approve the executive compensation paid to our Named Executive Officers; |
4. | A stockholder proposal, if properly presented at the Annual Meeting; and |
5. | Any other matters that are properly raised at the Annual Meeting. |
As of the date of this Proxy Statement, we are not aware of any other matters that will be presented for action at the Annual Meeting.
Our Board of Directors recommends that you vote:
FOR the election of each of the 14 nominees to serve as directors on the Board of Directors;
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FOR the ratification of the appointment of Ernst & Young LLP;
If you complete and properly sign a proxy card and return it to the Company but do not specify your vote, the proxy will be voted in accordance with the recommendations of the Board of Directors set forth above. Further, if any other matter properly comes before the Annual Meeting or any adjournment or postponement thereof, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion.
Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the internet. Accordingly, we are sending a Notice regarding the internet availability of the proxy materials to most of our stockholders of record and beneficial owners. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or to request to receive a printed set of proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice. In addition, stockholders may request receipt of proxy materials in printed form by mail or electronically by e-mail on an ongoing basis by following instructions set forth in the Notice.
Stockholders of record of our common stock at the close of business on the “record date” are entitled to receive notice of and to vote at the Annual Meeting. The Board of Directors has fixed the close of business on Wednesday,Tuesday, March 17, 201013, 2012 as the record date.
As of the record date, there were 116,050,91799,634,505 shares of common stock outstanding and entitled to vote. Holders of common stock are entitled to one vote for each share of common stock held as of the record date on each matter to be voted on at the Annual Meeting.
You can vote either in person by attending the 20102012 Annual Meeting or by proxy without attending the 20102012 Annual Meeting. To vote by proxy, you must either:
vote by telephone (instructions are on the proxy card); or
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vote by internet (instructions are in the Notice you received in the mail or are on the proxy card); or
if you requested and received printed copies of this Proxy Statement, our 2011 Letter to Stockholders, Annual Report on Form 10-K and other proxy materials, fill out the proxy card enclosed with the materials, date and sign it, and return it in the accompanying postage-paid envelope.
Your vote is important. Whether or not you plan to attend the meeting in person, we urge you to submit your voting instructions to the proxy holders as soon as possible. You may change your vote at any time before it is cast by filing with the Secretary of the Company either a notice of revocation or a duly executed proxy bearing a later date. If you submit voting instructions by telephone or by the internet,
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Quorum Requirement. The presence, in person or by proxy, of the Company’s stockholders entitled to cast a majority of the votes entitled to be cast at the Annual Meeting is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and “broker non-votes” will be treated as shares present and entitled to vote for purposes of determining the presence of a quorum. Failure of a quorum to be represented at the Annual Meeting will necessitate an adjournment or postponement and will subject the Company to additional expense.
Election of Directors. Under the Company’s Fourth Amended and Restated Bylaws (the “Bylaws”) and Maryland law, a plurality of all of the votes cast at the Annual Meeting is sufficient for the election of directors. A properly executed proxy marked “WITHHOLD AUTHORITY” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for the purposes of determining whether there is a quorum.
Ratification of Ernst & Young LLP and Other Items. ForThe affirmative vote of a majority of votes cast is required to approve (i) the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2010,2012, and (ii) any other matter that properly comes before the Annual Meeting, the affirmative vote of a majority of the votes cast is required for approval.Meeting. An “ABSTAIN” election will not be counted as a vote “for” or “against” any such matter. As noted above, if any other matter properly comes before the Annual Meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion.
Advisory Vote on Executive Compensation. The affirmative vote of a majority of votes cast is required to approve to approve the non-binding advisory vote of compensation paid to our Named Executive Officers. Because your vote is advisory, it will not be binding on the Board of Directors or the Company. However, the Board of Directors will review the voting results and take them into consideration when making future decisions regarding executive compensation paid by the Company to its Named Executive Officers.
Stockholder Proposal. If properly presented at the Annual Meeting, the affirmative vote of a majority of the votes cast is required to approve the stockholder proposal. An “ABSTAIN” election will not be counted as a vote “for” or “against” any such matter.
If you hold your shares in “street name” through a broker or other nominee, your broker or nominee may not be permitted to exercise voting discretion with respect to some of the matters to be acted upon. Thus, if you do not give your broker or nominee specific instructions, your shares may not be voted on those matters and will not be counted in determining the number of shares necessary for approval. However, shares represented by such “broker non-votes” will be counted in determining whether there is a quorum.
We will announce the voting results at the Annual Meeting. We also will report the voting results on a Form 8-K, which we expect to file with the SEC within four business days after the Annual Meeting has been held.
Our annual meeting of stockholders generally is held in May of each year. Consistent with applicable SEC rules, we will consider for inclusion in our proxy materials for next year’s annual meeting stockholder proposals that are received at our executive offices no later than December 1, 2010November 25, 2012 and that comply with other SEC rules regarding form and content. Proposals must be sent to the following address: Corrections Corporation of America,CCA, Attention: Secretary, 10 Burton Hills Boulevard, Nashville, Tennessee 37215.
Other stockholder proposals may be raised at next year’s meeting (but not considered for inclusion in our proxy materials) if timely received and otherwise in compliance with the advance notice
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Yes. Stockholders, employees and other parties interested in communicating directly with members of the Company’s Board of Directors (including specific members of the Board or non-management directors as a group) may do so by writing to Corrections Corporation of America,CCA, Attention: Secretary, 10 Burton Hills Boulevard, Nashville, Tennessee 37215. The Secretary of the Company compiles all substantive communications and periodically submits them to the Board, the group of directors or the individual directors to whom they are addressed. Concerns relating to accounting, internal controls or auditing matters are handled in accordance with procedures established by the Audit Committee.
Any stockholder who desires a copy of our Annual Report on Form 10-K for the year ended December 31, 2009,2011, as filed with the SEC, may obtain a copy without charge by visiting our website,www.correctionscorp.comwww.cca.com.
The Notice mailed to you in accordance with the SEC’s new rules contains instructions on how to access our proxy materials and vote over the internet. This Proxy Statement, our 20092011 Letter to Stockholders, Annual Report on Form 10-K and other proxy materials are also available on our internet website atwww.correctionscorp.comwww.cca.com (accessible through the “Investors” link). If you are a stockholder of record and would like to view future proxy statements, annual reports and other proxy materials over the internet instead of receiving paper copies in the mail, follow the instructions provided when you vote over the internet. If you hold your shares through a broker, check the information provided by that entity for instructions on how to elect to view future proxy statements, annual reports and other proxy materials and to vote your shares over the internet. Opting to receive your proxy materials online saves us the cost of producing and mailing the proxy materials to your home or office and gives you an automatic link to the proxy voting site.
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Choosing to receive your future proxy materials by e-mail will allow us to provide our stockholders with the information you need in a timelier manner, will save us the cost of printing and mailing documents to you and will conserve natural resources. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.
The Company pays the cost of soliciting proxies. We have retained MacKenzie Partners to assist with the solicitation of proxies on our behalf. MacKenzie Partners will receive a fee of $7,500,$10,000, plus reasonable expenses, for these and other services in connection with the Annual Meeting. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through brokers, custodians and other like parties to the beneficial owners of shares of our common stock, in which case we will reimburse these parties for their reasonable out-of-pocket expenses. Proxies may also be solicited personally or by telephone or fax by directors, officers and employees of the Company. No additional compensation will be paid for these services.
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The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single Notice and, to the extent requested, single set of proxy materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household proxy materials unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If at any time you no longer wish to participate in householding and would prefer to receive a separate Notice or, to the extent requested, set of proxy materials, or if you are receiving multiple copies of proxy materials and wish to receive only one, please notify your broker if your shares are held in a brokerage account or our transfer agent, identified below, if you hold registered shares. You can also notify us by sending a written request to Corrections Corporation of America,CCA, Attention: Karin Demler, 10 Burton Hills Boulevard, Nashville, Tennessee 37215, or by calling Karin Demler at (615) 263-3000.
If you have any questions about the Annual Meeting or these proxy materials, please contact Karin Demler, our Senior Director, Investor Relations, at 10 Burton Hills Boulevard, Nashville, Tennessee 37215, (615) 263-3000. If you are a registered stockholder and have any questions about your ownership of our common stock, please contact our transfer agent, the American Stock Transfer and Trust Company, at 59 Maiden Lane, New York, New York 10038, (800) 937-5449, or Karin Demler at the address and phone number above. If your shares are held in a brokerage account, please contact your broker.
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You can access our corporate charter, Bylaws, Corporate Governance Guidelines, current Board committee charters, Code of Ethics and Business Conduct and other corporate governance-related information on our website,www.correctionscorp.comwww.cca.com (under the “Corporate Governance” section of the Investors page).
During the first quarter of 2010,2011, the Corporate Governance Guidelines were amended to include an age limit for members of the Board of Directors amended the Audit Committee charter to clarify the SEC rules pursuant to which the Audit Committee prepares the Audit Committee report included in this Proxy Statement.
We believe that effective corporate governance is important to our long-term health and our ability to create value for our stockholders. With leadership from our Nominating and Governance Committee, our Board of Directors regularly evaluates regulatory developments and trends in corporate governance to determine whether our policies and practices in this area should be enhanced. The Nominating and Governance Committee also administers an annual self-evaluation process for the Board of Directors and its standing committees. In addition, our directors are encouraged to attend director education programs, which are reimbursed by the Company.
We do not have a formal policy regarding the separation of our Chairman and Chief Executive Officer (“CEO”) positions. In general, the Board of Directors believes that the determination depends on the circumstances, including the Board’sBoard of Directors’ evaluation of the person or persons available to serve in those positions and the needs of the companyCompany at a particular time.
Pursuant to our Bylaws, the Chairman presides over meetings of the Board of Directors and of the stockholders at which he is present and has general oversight responsibility for our business and affairs. The CEO has responsibility for implementation of the policies of the Company, as determined by the Board of Directors, and for the administration of our business affairs. The CEO also has responsibility for presiding over any meeting of the Board of Directors or of the stockholders at which the Chairman is not present.
The role of Chairman and that of CEO currently are held separately. John D. Ferguson serves as Chairman of the Board of Directors and is an employee of the Company. Damon T. Hininger serves as President and CEO. Prior to Mr. Hininger’s being named President and CEO in October 2009 and beginning in July 2008, Mr. Ferguson served as both Chairman and CEO. Prior to July 2008 and beginning in August 2000, Mr. Ferguson served as Vice-Chairman of the Board of Directors, President and Chief Executive Officer while William F. Andrews, a current Director, served as Chairman.
The Board of Directors believes that the Company’s current leadership structure is appropriate and represents the effective execution of the succession strategy put in place while Mr. Ferguson was serving as President and CEO. Promotingappropriate. Having Mr. Hininger toserve as President and CEO, while retaining Mr. Ferguson as Chairman, achievedhelps us achieve important objectives for us.objectives. Mr. Hininger is positioned to fully focus his energies on implementing our business strategy and administering our day-to-day affairs. Mr. Ferguson is positioned to draw on his relationships with existing Board members and his experience as President and CEO to effectively discharge the duties of Chairman, while also serving as a resource to Mr. Hininger.
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Our Board of Directors is responsible for establishing the Company’s broad corporate policies and strategic objectives, reviewing our overall performance and overseeing management’s performance. Among other things, the Board of Directors selects and evaluates our executive officers;officers, establishes, reviews and approves our corporate objectives and strategies;strategies, and evaluates and approves major capital commitments.
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The Board of Directors currently consists of 1314 members, all of whom are standing for re-election and are identified, along with their biographical information, under “Proposal I —- Election of Directors.”
The Board of Directors met four (4) times in 2009. As a group,2011. Each director attended at least 75% of the total number of meetings of the Board members attended 94% of their BoardDirectors and committee meetings. All directors attended all of their Board meetings, except for one director who missed one meeting, and all directors attended all of their committee meetings, except for one director who missed three meetings and three directors who missed one meeting each. All but one of the directors attended last year’s annual meetingmeetings held by all board committees on which such director served. The Board of stockholders. The BoardDirectors has adopted as its policy that directors are strongly encouraged to attend each annual meeting of stockholders.
Our Board of Directors has four regularly standing committees: the Audit, Compensation, Nominating and Governance and Executive Committees. Each committee has a written charter that has been approved by the committee and the Board of Directors and that is reviewed at least annually. The table on the following page shows the current composition of each of our Board committees, together with a summary of each committee’s responsibilities and the number of meetings each committee held in 2009.
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Committee | Members | Summary of Responsibilities | Meetings | |||||
Audit | ||||||||
C. Michael Jacobi (Chair) Donna M. Alvarado Charles L. Overby Henri L. Wedell | See “Audit Committee Report” below. | |||||||
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Compensation | Joseph V. Russell (Chair) John D. Correnti John R. Horne John R. Prann, Jr. | Responsible for setting CEO and director compensation, periodically reviewing and approving the Company’s compensation philosophy regarding executive compensation, reviewing the Compensation Discussion and Analysis section of this Proxy Statement and issuing the Compensation Committee Report included in this Proxy Statement. Other responsibilities include: • Administration of equity-based compensation plans; • Evaluation of the performance of the CEO and executive officers; and • Assistance to the Nominating and Governance Committee with executive succession planning efforts. | ||||||
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Nominating and Governance | Charles L. Overby (Chair) Dennis W. DeConcini Thurgood Marshall, Jr. Joseph V. Russell | Responsible for identifying and recommending director nominees to the full Board and taking a leadership role in shaping and evaluating the Board’s corporate governance initiatives. Other responsibilities include: • Review of the Company’s ethics and compliance program; • Oversight of Board’s self-evaluation process; and • Leading the Board’s executive succession planning efforts. See “Director Candidates” below. | ||||||
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Executive | William F. Andrews (Chair) John D. Ferguson Damon T. Hininger Joseph V. Russell | When necessary, and subject to authority limitations with respect to significant corporate actions, responsible for acting on behalf of the full Board during intervals between Board meetings. | 0 |
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Executive sessions, or meetings of our non-management directors without management present, are held regularly in order to provide an opportunity for the outside directors to discuss openly any and all matters. During 2009,2011, the outside directors met in Executive session threetwo (2) times. Our Corporate Governance Guidelines provide that Executive sessions are called and chaired by an independent director appointed from time to time by the Nominating and Governance Committee. Charles L. Overby currently serves as the Executive session chair.
Mr. Ferguson, Mr. Hininger and Mr. Andrews are the only members of the Board of Directors who currently are employed by the Company. The Board has determined that all of our other directors are independent. Accordingly, 1011 of our 1314 director nominees are independent and our Audit, Compensation and Nominating and Governance Committees are composed entirely of independent directors. In making its independence determinations, the Board used the standards for director independence set forth in the New York Stock Exchange (“NYSE”) corporate governance listing standards (Section 303A) and, with respect to Audit Committee members, Section 10A(m)(3) of the Securities Exchange Act of 1934.
The Board has determined that each member of the Audit Committee is independent as defined by the standards of the NYSE and Rule 10A-3 under the Securities Exchange Act of 1934. The Board also has determined that each member is “financially literate” as defined by the rules of the NYSE and that Mr. Jacobi qualifies as an “audit committee financial expert” as defined in Item 407(d) of Regulation S-K under the Securities Exchange Act of 1934.
The Board of Directors has determined that each member of the Compensation Committee is independent as defined by the standards of the NYSE and Rule 10A-3 under the Securities Exchange Act of 1934.
The Nominating and Governance Committee considers candidates for Board membership suggested by its members and other Board members, as well as management and stockholders. A stockholder who wishes to recommend a prospective nominee for the Board should notify our Secretary in writing, along with any supporting material the stockholder considers appropriate, in accordance with the stockholder proposal provisions of our Bylaws. General information concerning the submission of stockholder proposals is provided above under the caption “How and when may I submit a stockholder proposal for the Company’s 20112013 Annual Meeting?” Pursuant to Board policy, there are to be no differences in the manner in which the Committee evaluates candidates based on the source of the recommendation.
The Nominating and Governance Committee is authorized by the Board to identify director candidates, evaluate and consider candidates proposed by any director, member of management or stockholder, develop and implement screening processes it deems necessary and appropriate and recommend for selection by the Board director nominees for each annual meeting of stockholders and, when necessary, vacancies on the Board. The Committee is authorized by the Board to exercise sole authority in retaining any third-party search firm the Committee deems appropriate to identify and assist with the evaluation of director candidates and has utilized that authority in past director searches.
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The Nominating and Governance Committee evaluates prospective nominees against the criteria in our Corporate Governance Guidelines, which include professional integrity and sound judgment, sufficient time available to devote to Board activities, a general understanding of marketing, finance and other elements relevant to the
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The Nominating and Governance Committee may also consider other factors it deems relevant, including the current composition of the Board, whether there is a need to fill vacancies or expand or contract the size of the Board, the balance of management and independent directors, the need for expertise on our standing committees and the qualifications of other prospective nominees. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law.
With respect to determining whether current directors should stand for re-election, the Nominating and Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board and the Company. With respect to new candidates for Board service, a full evaluation may also include detailed background checks and in-person and telephonic interviews with the Nominating and Governance Committee and other Board members. The Committee evaluation process culminates with a decision as to whether or not to recommend the prospective nominee to the full Board for appointment and/or nomination.
The Audit Committee charter provides that a member of the Audit Committee may not serve on the audit committee of more than two other public companies without Board approval. Otherwise, we do not believe that our directors should be categorically prohibited from serving on boards and/or board committees of other organizations. However, our Corporate Governance Guidelines instruct the Nominating and Governance Committee and the full Board to take into account the nature of and time involved with respect to a director’s service on other boards as well as other job responsibilities in evaluating the suitability of individual directors and in making its recommendations to our stockholders. Service on boards and/or committees of other organizations must also be consistent with our conflicts of interest policy, as set forth in our Code of Ethics and Business Conduct, which, among other things, requires a director to provide notice to the Board of his or her acceptance of a nomination to serve on the board of another public company.
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Stockholders, employees and other interested parties may communicate with members of our Board of Directors (including specific members of the Board or non-management directors as a group) by writing to Corrections Corporation of America,CCA, Attention: Secretary, 10 Burton Hills Boulevard, Nashville, Tennessee 37215. To the extent such communications are received, our Secretary compiles all substantive communications and periodically submits them to the Board, the group of directors or the individual directors to whom they are addressed. Communications that the Secretary would not consider “substantive,” and therefore may exercise discretion in submitting to the addressee, may include junk mail, mass mailings, resumes and job inquiries, surveys, business solicitations, advertisements, frivolous communications and other similarly unsuitable communications.
Communications expressing concerns or complaints relating to accounting, internal controls or auditing matters are handled in accordance with procedures established by the Audit Committee. Under those procedures, concerns that are improperly characterized as having to do with accounting, internal controls or auditing matters or that are frivolous or clearly inconsequential may be addressed by the Secretary without presentation to the Audit Committee. However, in all cases the Secretary maintains a log of correspondence addressed to directors that may be reviewed by any director at his or her request.
Since the beginning of the last fiscal year, we are aware of no related party transactions between us and any of our directors, executive officers, 5% stockholders or their family members which require disclosure under Item 404 of Regulation S-K under the Securities Exchange Act of 1934.
Pursuant to its written charter, the Audit Committee has adopted a Related Party Transaction Policy that, subject to certain exceptions, requires the Audit Committee (or the chair of the Audit Committee in certain instances) to review and either ratify, approve or disapprove all “Interested Transactions,” which are generally defined to include any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which:
the aggregate amount involved exceeded, or will or may be expected to exceed, $120,000 in any calendar year;
the Company was, is or will be a participant; and
any Related Party had, has or will have a direct or indirect interest.
For purposes of the policy, a “Related Party” is any:
person who is or was (since the beginning of the last fiscal year for which the Company has filed a Form 10-K and proxy statement, even if they do not presently serve in that role) an executive officer, director or nominee for election as a director;
greater than 5% beneficial owner of the Company’s common stock; immediate family member of any of the foregoing; or firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner, managing member or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest. |
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In determining whether to approve or ratify an Interested Transaction under the policy, the Audit Committee is to consider all relevant information and facts available to it regarding the Interested Transaction and take into account factors such as the Related Party’s relationship to the Company and interest (direct or indirect) in the transaction, the terms of the transaction and the benefits to the Company of the transaction. No director is to participate in the approval of an Interested Transaction for which he or she is a Related Party or otherwise has a direct or indirect interest.
In addition, the Audit Committee is to review and assess ongoing Interested Transactions, if any, on at least an annual basis to determine whether any such transactions remain appropriate or should be modified or terminated.
During 2009,2011, Mr. Russell, Mr. Correnti, Mr. Horne and Mr. Prann served on our Compensation Committee for the full year, with Mr. Russell serving as the committee’s Chair. None of the current members of the Compensation Committee or any of their family members serve or have served as an officer or employee of the Company. None of our executive officers served during 20092011 as a member of the board of directors or compensation committee (or other committee serving an equivalent function) of any entity that had one or more executive officers serving as a member of the Board or the Compensation Committee.
During the first quarter of 2007, the Board adopted stock ownership guidelines (the “Guidelines”) for the Company’s executive officers and directors, effective as of March 1, 2007 (the “Effective Date”). The Guidelines, which are administered and interpreted by the Compensation Committee, provide that the Company’s executive officers are expected to own a fixed number of shares of common stock of the Company equal to three times such executive officer’s base salary in effect as of the Effective Date divided by the Company’s closing common stock price, as reported by the NYSE, on the Effective Date. For any individual who becomes an executive officer after the Effective Date, base salary and closing common stock price are determined based on such executive officer’s date of hire or promotion, as applicable. SubjectExecutive officers are required to achieve these ownership levels, subject to a limited hardship exemption, executive officers are expected to meet these ownership guidelines by the later of (1) March 1, 2012 or (2) five years following their date of hire or promotion, as applicable.
With respect to the Company’s non-executive directors, such individuals are each expected to own a fixed number of shares of common stock of the Company equal to four times the annual retainer for non-executive directors (excluding any retainer for chairing or serving on a committee) in effect as of the Effective Date divided by the Company’s closing common stock price, as reported by the NYSE, on the Effective Date. For any individual who becomes a non-executive director after the Effective Date, annual retainer and closing common stock price are determined based on the date of such non-executive director’s initial election to the Board. SubjectNon-executive directors are required to achieve these ownership levels, subject to a limited hardship exemption, non-executive directors are expected to meet these ownership guidelines by the later of (1) March 1, 2012 or (2) five years following their initial election to the Board.
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The Guidelines are accessible on our website,www.correctionscorp.comwww.cca.com (under the “Corporate Governance” section of the Investors page).
All of our directors and employees, including our Chief Executive Officer, Chief Financial Officer and principal accounting officer, are subject to our Code of Ethics and Business Conduct. Our Code of Ethics and Business Conduct and related compliance policies are designed to promote an
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Our Board of Directors oversees risk management with a focus on the Company’s primary areas of risk: risk related to our business strategy, financial risk, legal/compliance risk and operational risk. The President and Chief Executive Officer and each of the Company’s Executive Vice Presidents are responsible for managing risk in their respective areas of authority and expertise, identifying key risks to the Board and explaining to the Board how those risks are being addressed.
The Board oversees management’s strategic planning process, which includes an evaluation of opportunities and risks presented by the Company’s current strategies and alternative strategies. The Board also receives regular reports from each of the executives with respect to their areas of managerial responsibility. These reports include information concerning risks and risk mitigation strategies. For example, the Board receives quarterly reports from our Chief Corrections Officer with respect to key areas of operational risk; monitors risks relating to our partnership development efforts through quarterly reports from our Chief Development Officer; and receives regular reports from our General Counsel with respect to legal and compliance risks. In addition, the Board evaluates risk in the context of particular business strategies and transactions. For example, the Board monitors significant capital expenditures through its annual budget review and quarterly capital expenditure reports from management and monitors risk relating to our financing activities through in depth reviews of proposed financing transactions.
The standing committees of the Board also have responsibility for risk oversight. The Audit Committee focuses on financial risk, including fraud risk and risks relating to our internal controls over financial reporting. It receives an annual risk assessment report from the Company’s internal auditors, as well as financial risk assessment information in connection with particular events or transactions. The Nominating and Governance Committee assists the Board of Directors in fulfilling its oversight responsibility with respect to regulatory compliance and receives regular reports from the Company’s General Counsel and its Ethics Officer. As discussed in detail below, the Compensation Committee addresses risks relating to our executive compensation strategies. The full Board receives regular reports from the chairs of these activities and receives reports and other meeting materials provided to each of the committees.
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In order to streamline and enhance risk management on a company-wide basis and assist the Board’s oversight of the Company’s risk management processes, we are implementing an enterprise risk management (“ERM”) program. The ERM program entails the identification, prioritization and assessment of a broad range of risks (e.g., financial, operational, business, reputational, governance and managerial), and the formulation of plans to manage these risks or mitigate their effects in an integrated effort involving the Board, management and other personnel. Our General Counsel is responsible for the development of the ERM program, which is being overseen by the Audit Committee with periodic reports to the full Board.
In setting compensation, our Compensation Committee considers the risks to CCA’s stockholders and to achievement of ourCCA’s goals that may be inherent in the compensation program.program as well as the risks to CCA’s stockholders. Although a significant portion of our executives’ compensation is performance-based and “at-risk,” the Compensation Committee believes our executive compensation plans are appropriately structured and do not pose a material risk to CCA. The Compensation Committee considered the following elements of our executive compensation plans and policies when evaluating whether such plans and policies encourage our executives to take unreasonable risks:
We set performance goals that we believe are reasonable in light of past performance and current market and economic conditions.
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We use a combination of restricted stock units and stock options for equity awards because restricted stock units retain value even in a depressed market (assuming achievement of performance criteria) and stock options provide for potential realization of value over time, based on an increase in share price.
Assuming achievement of at least a minimum level of performance, payouts under our performance-based plans result in some compensation at levels below full target achievement, rather than an “all-or-nothing” approach.
Our executive stock ownership policy requires our executives to hold certain levels of CCA stock, which aligns an appropriate portion of their personal wealth to the long-term performance of CCA.
The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
General Responsibilities
Our Audit Committee is charged with oversight of the integrity of our financial statements; the effectiveness of our internal control over financial reporting; our compliance with legal and regulatory requirements; the qualifications, independence and performance of our independent registered public accounting firm; and the performance of our internal audit function. Among other things, the Committee monitors preparation by our management of quarterly and annual financial reports and interim earnings
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releases; reviews Management’s Discussion and Analysis of Financial Condition and Results of Operations prior to the filing of our periodic reports with the SEC; supervises our relationship with our independent registered public accounting firm, including making decisions with respect to appointment or removal, reviewing the scope of audit services, approving audit and non-audit services and annually evaluating the audit firm’s independence; and oversees management’s implementation and maintenance of effective systems of internal accounting and disclosure controls, including review of our policies relating to legal and regulatory compliance and review of our internal auditing program. The full text of the Audit Committee charter is available on the Company’s website atwww.correctionscorp.comwww.cca.com (under the “Corporate Governance” section of the Investors page).
20092011 Meetings
The Audit Committee met sixfive (5) times in 2009.2011. Within those meetings, the Committee met in executive session with our independent registered public accounting firm two times.
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As part of its oversight of our financial statements, the Committee reviews and discusses with both management and our independent registered public accounting firm all annual and quarterly financial statements prior to their issuance. With respect to the 20092011 fiscal year, management advised the Committee that each set of financial statements reviewed had been prepared in accordance with generally accepted accounting principles and reviewed significant accounting and disclosure issues with the Committee. These reviews included discussion with the independent registered public accounting firm of matters required to be discussed pursuant toStatement on Auditing Standards No. 61 (Communication with Audit Committees), as amended, including the quality of our accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Committee also received the written disclosures and a letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding its communications with the Committee concerning independence, and has discussed with Ernst & Young LLP its independence.
Also with respect to fiscal 2009,2011, the Audit Committee received periodic updates provided by management, the independent registered public accounting firm and the internal auditors at each regularly scheduled Audit Committee meeting and provided oversight during the process. At the conclusion of the process, management provided the Audit Committee with, and the Audit Committee reviewed a report on, the effectiveness of our internal control over financial reporting. The Audit Committee also reviewed Management’s Report on Internal Control over Financial Reporting and Ernst & Young LLP’s Reports of Independent Registered Public Accounting Firm included in our Annual Report on Form 10-K for the year ended December 31, 2009.
Taking all of these reviews and discussions into account, the undersigned Committee members recommended to the Board of Directors that the Board approve the inclusion of our audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009,2011, for filing with the SEC.
Submitted by the Audit Committee of the Board of Directors: |
C. Michael Jacobi, Chair |
Donna M. Alvarado |
Charles L. Overby |
Henri L. Wedell |
The current term of office of each of our directors expires at the Annual Meeting. The Board of Directors proposes that the following nominees, all of whom are currently serving as directors, be re-elected for a new term to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified. We expect each of the nominees to serve if elected. If any of them becomes unavailable to serve as a director, the Board may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board.
A plurality of the votes cast is sufficient to elect each director.
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Information regarding each of the nominees for director, including particular qualifications considered for each nominee, is set forth below. Directors’ ages are given as of the date of this Proxy Statement.
The Board of Directors unanimously recommends a vote FOR each of the 1314 nominees listed below.
JOHN D. FERGUSON | ||
Director since 2000 |
Mr. Ferguson, age 64,66, has served as a director since August 2000 and also serves as Chairman of our Board and member of our Executive Committee. Mr. Ferguson formerly served as our Chief Executive Officer from August 2000 to October 2009 and as our President from August 2000 until July 2008. Mr. Ferguson’s career in business and government includes service as the Commissioner of Finance for the State of Tennessee and as the chairman and chief executive officer of Community Bancshares, Inc., the parent corporation of The Community Bank of Germantown (Tennessee), as well as service on the State of Tennessee Board of Education and the Governor’s Commission on Practical Government for the State of Tennessee. Mr. Ferguson currently serves as a director of the Community Foundation of Middle Tennessee, Performing Arts Center, the Boy Scouts of America —- Middle Tennessee Council, the Nashville Symphony Association and the Nashville Alliance for Public Education.Education Foundation. Mr. Ferguson graduated from Mississippi State University in 1967.
In making the decision to nominate Mr. Ferguson to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, Mr. Ferguson’s knowledge of the Company and its business and management team by virtue of his past service as our President and Chief Executive Officer; his demonstrated business acumen and leadership skills; his understanding of government gained through his experience in state government; and his civic and community involvement.
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DAMON T. HININGER | ||
Director since 2009 |
Damon T. Hininger, age 40,42, has served as a director and our President and Chief Executive Officer since October 2009. From July 2008 until October 2009, Mr. Hininger served as our President and Chief Operating Officer. From 2007 until July 2008, Mr. Hininger served as our Senior Vice President, Federal and Local Customer Relations. Mr. Hininger joined the Company in 1992 and held several positions, including Vice President, Business Analysis and Vice President, Federal Customer Relations before being promoted to Senior Vice President. Mr. Hininger earned a bachelor’s degree from Kansas State University and an M.B.A. from the Jack Massey School of Business at Belmont University.
In making the decision to nominate Mr. Hininger to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his current service as our President
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DONNA M. ALVARADO | ||
Director since 2003 |
Ms. Alvarado, age 61,63, has served as a director and member of our Audit Committee since December 2003. Ms. Alvarado is the founder and current president of Aguila International, an international business-consulting firm that specializes in human resources and leadership development. She also serves as a director and member of the audit and compensation committees of CSX Corporation, a publicly-traded provider of rail and other transportation services, as a director of Park National Bank, the lead affiliate bank of Park National Corporation, a publicly-held bank holding company, and as a member and the immediate past Chairwoman of the Ohio Board of Regents. Ms. Alvarado has held senior management positions in government, including Deputy Assistant Secretary of Defense with the U.SU.S. Department of Defense and Director of ACTION, the federal domestic volunteer agency. Ms. Alvarado earned both a master’s and a bachelor’s degree in Spanish from Ohio State University, completed doctoral coursework in Latin American Literature at the University of Oklahoma and earned a postgraduate certificate in Financial Management from the Wharton School of Business at the University of Pennsylvania.
In making the decision to nominate Ms. Alvarado to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, her understanding of government through her public sector experience; her experience as a public company director and audit committee member; her human resources and leadership development expertise; her civic and community involvement; and her contribution to the Board’s gender and cultural diversity.
WILLIAM F. ANDREWS | ||
Director since 2000 |
Mr. Andrews, age 78,80, has served as a director since August 2000. Mr. Andrews also serves as Chair of our Executive Committee. From August 2000 until July 2008, Mr. Andrews served as Chairman of our Board. Mr. Andrews has been a principal of Kohlberg & Company, a private equity firm specializing in middle market investing, since 1995. He also currently serves as chairman of Katy Industries, Inc., a publicly-traded diversified manufacturing company with consumer and commercial product lines; a director of Black Box Corporation, a publicly-traded provider of information technology infrastructure solutions; a director of Trex Corporation, a publicly-traded producer of decking and railing products; a director of O’Charley’s Inc., a publicly-traded restaurant company; and chairmana director of SVP Holdings, Ltd. and a director of, Central Parking Corporation bothand Thomas Nelson Publishing, all private companies. Mr. Andrews is a graduate of the University of Maryland and received an M.B.AM.B.A. from Seton Hall University.
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In making the decision to nominate Mr. Andrews to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, Mr. Andrews’ past or current experience as a director of several publicly-companies,publicly-traded companies, including his experience as Chairman of our Board; his leadership and oversight experience across a diverse array of industries; and his knowledge and experience with respect to corporate finance and investing.
JOHN D. CORRENTI | ||
Director since 2000 |
Mr. Correnti, age 63,65, has served as a director since December 2000 and is a member of our Compensation Committee. Mr. Correnti is the chairman and executive officer of Steel Development Company, a steel development and operations company. Mr. Correnti served as chief executive officer of SeverCorr, LLC,
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In making the decision to nominate Mr. Correnti to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his executive leadership experience gained through his service as a chief executive of established and start-up companies, both public and private, and his public company director experience.
DENNIS W. DECONCINI | ||
Director since 2008 |
Mr. DeConcini, age 72,74, was appointed as a director and member of our Nominating and Governance Committee in February 2008. Mr. DeConcini served as a member of the United States Senate as a Senator from Arizona for three terms (18 years). During his Senate tenure, he served on the Senate Select Committee on Intelligence (as Chairman from 1993 —– 1994), the Judiciary Committee and the Appropriations Committee, and served as rotating Chairman to the Commission on Security and Cooperation in Europe (the Helsinki Commission). He currently is a partner in the law firm DeConcini McDonald Yetwin & Lacy, P.C. in Tuscon,Tucson, Arizona. He also is a member of the Arizona Board of Regents, the governing body for the Arizona State University system, and the boards of directors of both the National and International Centers for Missing and Exploited Children. He also served as county attorney for Pima County, Arizona from 1973 through 1976. Mr. DeConcini served in the United States Army and Reserve from 1959 to 1967. He received his B.A. from the University of Arizona in 1959 and his L.L.B. from the University of Arizona in 1963.
In making the decision to nominate Mr. DeConcini to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his understanding of government, politics and the public sector through his service as a United States Senator, a member of the Arizona Board of Regents and as a registered lobbyist; his understanding of and experience with the State of Arizona, a state where a significant portion of our operations is located; his understanding of corporate governance, legal and compliance matters through his education and background as a lawyer and former prosecutor; and his civic and community involvement.
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JOHN R. HORNE | ||
Director since 2001 |
Mr. Horne, age 72,74, has served as a director since December 2001 and is a member of our Compensation Committee. Mr. Horne served as chairman of Navistar International Corporation from April 1996 to February 2004 and prior to that as Navistar’s president and chief executive officer. Mr. Horne currently serves on the board of directors of Junior Achievement of Chicago. Mr. Horne received his M.S. degree in mechanical engineering from Bradley University in 1964, a B.S. degree in mechanical engineering from Purdue University in 1960, which also awarded him an Honorary Doctor of Engineering degree in May 1998, and is a graduate of the management program at Harvard Graduate School of Business Administration.
In making the decision to nominate Mr. Horne to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his leadership experience as chairman and as chief executive officer of a large, publicly traded industrial company and his extensive educational and business achievements.
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C. MICHAEL JACOBI | ||
Director since 2000 |
Mr. Jacobi, age 68,70, has served as a director and as Chair of the Audit Committee since December 2000. Mr. Jacobi is the owner and president of Stable House, LLC, a private company engaged in residential real estate development. From June 2001 through May 2005, Mr. Jacobi served as the president and chief executive officer and a director of Katy Industries, Inc., a publicly-traded diversified manufacturing company. He is a director and the chairchairman of the audit committeesboard of Sturm, Ruger and Company, Inc., a publicly-traded maker of firearms, a director of Webster Financial Corporation, a publicly-traded banking and financial services company, and Sturm, Ruger and Company, Inc., a publicly-traded maker of firearms, and a director and member of the audit committee of Kohlberg Capital Corporation, a publicly-traded business development company specializing in term loans, mezzanine investments and selected equity positions in middle market companies. Mr. Jacobi is a certified public accountant and holds a B.S. degree from the University of Connecticut.
In making the decision to nominate Mr. Jacobi to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his leadership experience as chief executive officer and chief financial officer of a public company; his extensive experience as a public company director and audit committee member and chairman; and his financial and accounting experience and expertise.
ANNE L. MARIUCCI | Director since 2011 |
Ms. Mariucci, age 54, has served as a director since December 2011. Ms. Mariucci is affiliated with the private equity firms Hawkeye Partners (Austin, Texas), Inlign Capital Partners (Phoenix, Arizona), and Glencoe Capital (Chicago, Illinois) since 2003. Prior to 2003, Ms. Mariucci was employed by Del Webb Corporation in a variety of senior management capacities involved in the large-scale community development and home building business, including serving as President following its merger with Pulte Homes, Inc. Ms. Mariucci received her undergraduate degree in accounting and finance from the University of Arizona and completed the corporate finance program at the Stanford University Graduate School of Business. She presently serves on the Arizona Board of Regents, and is its immediate past-chairman. She also serves as a director of Southwest Gas Company, Scottsdale Healthcare, the Arizona State University Foundation, and the Fresh Start Women’s Foundation. She is a past director of the Arizona State Retirement System and Action Performance Companies, as well as a past Trustee of the Urban Land Institute.
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In making the decision to nominate Ms. Mariucci to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, her public company executive leadership experience; her understanding of and experience with the State of Arizona, a state where a significant portion of our operations is located; her background in accounting and corporate finance; her experience and knowledge with real estate; her experience as a public company director and member of audit and compensation committees; her civic and community involvement; and her contribution to the Board’s gender diversity.
THURGOOD MARSHALL, JR. | Director since 2002 |
Mr. Marshall, age 53,55, has served as a director and member of the Nominating and Governance Committee since December 2002. Mr. Marshall is a partner in the law firm of Bingham McCutchen LLP in Washington D.C., and a principal in Bingham Consulting Group LLC, a wholly owned subsidiary of Bingham McCutchen LLP that assists business clients with communications, political and legal strategies. Mr. Marshall, the son of the historic Supreme Court Justice Thurgood Marshall, has held appointments in each branch of the federal government, including Cabinet Secretary to President Clinton and Director of Legislative Affairs and Deputy Counsel to Vice President Al Gore. He is a board memberIn November of 2011, Mr. Marshall was appointed as the Chairman of the Board of Governors of the United States Postal Service,Service. In March of 2012, he was appointed to the board of directors of Genesco, a publicly traded specialty retailer. He also serves on the boards of the Ford Foundation and the Supreme Court Historical Society. He serves on the American Bar Association Election Law Committee and the Ethics Oversight Committee of the United States Olympic Committee. Mr. Marshall earned a B.A. in 1978 and a J.D. in 1981 from the University of Virginia, after which he clerked for United States District Judge Barrington D. Parker.
In making the decision to nominate Mr. Marshall to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his understanding of politics and the public sector through his varied government service and consulting work; his understanding of organizational governance and oversight through his service as a director in the public, non-profit and for-profit sectors; his understanding of legal/legal, regulatory and compliance issues through his education and experience as a lawyer; and his contribution to the Board’s cultural diversity.
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CHARLES L. OVERBY | ||
Director since 2001 |
Mr. Overby, age 63,65, has served as a director since December 2001. Mr. Overby has served as a member of the Audit Committee since February 2002 and as the Chair of the Nominating and Governance Committee since the committee was established in December 2002. From 1997 through 2011, Mr. Overby iswas the chairman and chief executive officer of The Freedom Forum, an independent, non-partisan foundation dedicated to the First Amendment and media issues, and The Diversity Institute. He is alsoas well as chief executive officer of its affiliates, The Diversity Institute and the Newseum, a museum in Washington DC about news and history.history in Washington, D.C. Mr. Overby continues to serve on the Board of Trustees of the Freedom Forum. Mr. Overby is a former Pulitzer Prize-winning editor in Jackson, Mississippi. He worked 16 years for Gannett Co., the nation’s largest newspaper company, in various capacities, including as reporter, editor, and corporate executive. He was vice president for news and communications for Gannett and served on the management committees of Gannett and USA TODAY. Mr. Overby currently serves on the boards of the Horatio Alger Association of Distinguished Americans and the University of Mississippi Foundation.
In making the decision to nominate Mr. Overby to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his executive leadership experience and understanding of corporate governance as chief executive of several non-profit organizations; his understanding of media and public relations through his career as a journalist, print media executive and executive with other media related organizations; his political experience; and his civic and community involvement and leadership.
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JOHN R. PRANN, JR. | Director since 2000 |
Mr. Prann, age 59,61, has served as a director and member of the Compensation Committee since December 2000. Mr. Prann’s business experience includes service as the president and chief executive officer of Katy Industries, Inc., as a partner with the accounting firm of Deloitte & Touche and as a director of several private companies. Mr. Prann earned a B.A. in Biology from the University of California, Riverside and an M.B.AM.B.A. from the University of Chicago.
In making the decision to nominate Mr. Prann to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his executive leadership experience as president and chief executive of a public company and his understanding of accounting and finance issues through his education and career.
JOSEPH V. RUSSELL | ||
Director since 1999 |
Mr. Russell, age 69,71, has served as a director since 1999. Mr. Russell is the Chair of the Compensation Committee and a member of the Executive and the Nominating and Governance Committees. Mr. Russell is the co-chairman and co-chief executive officer of Elan-Polo, Inc., a privately-held, world-wide producer and distributor of footwear. Mr. Russell graduated from the University of Tennessee in 1963 with a B.S. in Finance.
In making the decision to nominate Mr. Russell to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his experience as the owner and chief executive officer of a manufacturing company; his familiarity with the Company through his long tenure as a Director; his demonstrated leadership skills as a director and Chair of the Compensation Committee; and his knowledge, experience and judgment with respect to executive compensation issues.
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HENRI L. WEDELL | ||
Director since 2000 |
Mr. Wedell, age 68,70, has served as a director and member of the Audit Committee since December 2000. Mr. Wedell is a private investor in Memphis, Tennessee. Prior to his retirement in 1999, Mr. Wedell was the senior vice president of sales of The Robinson Humphrey Co., an investment banking subsidiary of Smith-Barney, Inc., with which he was employed for over 24 years. Mr. Wedell’s business career also includes service as a member of the board of directors of Community Bancshares, Inc. He currently serves on the boards of the Delta Waterfowl FoundationDixon Gallery and Gardens of Memphis, Tennessee and the Exceptional Foundation of West Tennessee. Mr. Wedell earned an M.B.A. from the Tulane University School of Business.
In making the decision to nominate Mr. Wedell to serve as a director, the Nominating and Governance Committee considered, in addition to the criteria referred to above, his understanding of accounting and corporate finance issues through his career in the securities industry; his perspective as a private investor and significant stockholder of the Company; and his civic and community involvement.
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PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2010.2012. Services provided to the Company and its subsidiaries by Ernst & Young LLP in fiscal 20092011 are described below under “Audit and Non-Audit Fees.”
Representatives of Ernst & Young LLP will be present at the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and we expect that they will be available to respond to questions.
Ratification of the appointment of Ernst & Young LLP requires the affirmative vote of a majority of the votes cast by the holders of the shares of common stock voting in person or by proxy at the Annual Meeting. If the Company’s stockholders do not ratify the appointment of Ernst & Young LLP, the Audit Committee will reconsider the appointment and may affirm the appointment or retain another independent accounting firm. If the appointment is ratified, the Audit Committee may in the future replace Ernst & Young LLP as our independent registered public accounting firm if it is determined that it is in the Company’s best interest to do so.
The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2010.
The following table presents fees for audit, audit-related, tax and other services rendered by the Company’s principal independent registered public accounting firm, Ernst & Young LLP, for the years ended December 31, 20092011 and 2008.
Fees | 2009 | 2008 | ||||||
Audit Fees(1) | $ | 960,940 | $ | 872,347 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees(2) | 229,432 | 243,129 | ||||||
All Other Fees(3) | 1,995 | 1,500 | ||||||
Total | $ | 1,192,367 | $ | 1,116,976 | ||||
Fees | 2011 | 2010 | ||||||
Audit Fees(1) | $ | 880,280 | $ | 849,670 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees(2) | �� | 123,044 | 330,206 | |||||
All Other Fees(3) | 1,995 | 1,995 | ||||||
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Total | $ | 1,005,319 | $ | 1,181,871 | ||||
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(1) | Audit fees for | |
(2) | Tax fees for | |
(3) | All other fees for |
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Consistent with Section 202 of the Sarbanes-Oxley Act of 2002 and SEC rules regarding auditor independence, our Audit Committee pre-approves all audit and non-audit services provided by our independent registered public accounting firm. In 20082010 and 2009,2011, the Audit Committee approved all fees disclosed under “tax,” “audit-related” and “all other” fees by Ernst & Young in accordance with applicable rules.
The Audit Committee’s Auditor Independence Policy prohibits our independent registered public accounting firm from performing certain non-audit services and any services that have not been approved by the Audit Committee in accordance with the policy and the Section 202 rules. The policy establishes procedures to ensure that proposed services are brought before the Audit Committee for consideration and, if determined by the Committee to be consistent with the auditor’s independence, approved prior to initiation, and to ensure that the Audit Committee has adequate information to assess the types of services being performed and fee amounts on an ongoing basis. The Audit Committee has delegated to its Chair, Mr. Jacobi, the authority to pre-approve services between meetings when necessary, provided that the full Committee is apprised of the services approved at its next regularly scheduled meeting.
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PROPOSAL 3 - ADVISORY VOTE TO APPROVE THE COMPENSATION OF NAMED
EXECUTIVE OFFICERS
The Company seeks your non-binding advisory vote and asks that you support the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis section (“CD&A”) and the accompanying tables contained in this Proxy Statement. Because your vote is advisory, it will not be binding on the Board or the Company. However, the Board will review the voting results and take them into consideration when making future decisions regarding executive compensation for our Named Executive Officers. We urge you to read the CD&A, which begins on page 33, and any other sections of this Proxy Statement for additional details on our executive compensation, including our compensation philosophy and objectives and the 2011 compensation of our Named Executive Officers.
As described in detail in the CD&A, our executive compensation programs are designed to ensure that our executive officers are rewarded appropriately for their contributions to the Company and that the overall compensation strategy supports the objectives and values of our organization, as well as stockholder interests. Our programs are designed to attract and maintain executive leadership for the Company that will execute our business strategy, uphold our Company values and deliver results and long-term value to our stockholders. Our goal is to have a substantial portion of executive compensation contingent upon the Company’s performance.
The Compensation Committee continually reviews the compensation programs for our Named Executive Officers to ensure our programs achieve the desired goals of aligning our executive compensation structure with our stockholders’ interests and current market practices. The Compensation Committee also has engaged an independent compensation consultant, PricewaterhouseCoopers LLP, to assist it in reviewing the Company’s compensation strategies and plans.
We believe that our executive compensation programs are structured in the best manner possible to support our company and our business objectives.
Stockholders are being asked to vote on adoption of the following resolution:
RESOLVED: That the stockholders of Corrections Corporation of America approve the compensation of the Company’s Named Executive Officers, as described in the Compensation Discussion and Analysis section and related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2012 Annual Meeting of Stockholders.
The Board of Directors unanimously recommends, on an advisory basis, a vote “FOR” the approval of the Company’s compensation of our Named Executive Officers.
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PROPOSAL 4 - STOCKHOLDER PROPOSAL
REQUESTING BIANNUAL REPORTS TO STOCKHOLDERS DESCRIBING BOARD
OVERSIGHT OF THE COMPANY’S EFFORTS TO REDUCE PRISONER SEXUAL ABUSE
AND INCLUDING STATISTICAL DATA RELATED TO SUCH ALLEGATIONS AT THE
COMPANY’S FACILITIES
The Company has been advised that Alex Friedmann, 5331 Mt. View Road #130, Antioch, Tennessee 37013, a beneficial owner of shares of the Company’s common stock having a market value in excess of $2,000, intends to submit the proposal set forth below at the Annual Meeting:
RESOLVED: That the stockholders of Corrections Corp. of America (“Company”) request that the Board of Directors (“Board”) report to the Company’s stockholders on a bi-annual basis, beginning within ninety days after the 2012 annual meeting of stockholders, excluding proprietary and personal information, on the Board’s oversight of the Company’s efforts to reduce incidents of rape and sexual abuse of prisoners housed in facilities operated by the Company. The reports should describe the Board’s oversight of the Company’s response to incidents of rape and sexual abuse at the Company’s facilities, including statistical data by facility regarding all such incidents during each reporting period.
Supporting Statement:
In 2003, Congress enacted the Prison Rape Elimination Act (PREA) to address the problem of rape and sexual abuse of inmates.
In adopting PREA, Congress found that prison rape is a significant public policy issue, stating, “Prison rape endangers the public safety by making brutalized inmates more likely to commit crimes when they are released… Victims of prison rape suffer severe physical and psychological effects that hinder their ability to integrate into the community… upon their release from prison.”
Although final PREA standards have not been issued by the Department of Justice, the Company has stated its “level of focus on inmate sexual abuse has been voluntary and ongoing” and its “practices, policies and procedures are in compliance and reflect best practices.”1
Nonetheless, incidents of sexual abuse at facilities operated by the Company continue to occur, demonstrating that the important public policy goal of eliminating sexual abuse of prisoners has not been achieved by the Company.
In a 2008 report, the Justice Department found that the Torrance County Detention Facility, operated by the Company, had the highest rate of sexual victimization among those surveyed.2 In October 2011 the ACLU of Texas filed a class-action lawsuit against the Company, alleging that immigrant detainees were sexually assaulted by a CCA employee at the Company’s T. Don. Hutto facility.3
Two states, Kentucky and Hawaii, removed their female prisoners from the Company’s Otter Creek facility following a sex scandal involving Company employees.4 Also, the Company has faced litigation as a result of rape and sexual abuse of prisoners, resulting in legal expenses and negative publicity.5
1 | http://www.insidecca.corn/cca-source/cca-prea-always-aware-staying-vigilant |
2 | http://bjs.ojp.usdoj.gov/index.cfm?ty—pbdetail&iid=1148 |
3 | http://www.aclutx.org/2011/10/19/aclu-of-texas-sues-ice-officials-williamson-county-and-cca-for-sexual-assault-of-immigrant-women |
4 | http://www.nytimes.com/2009/08/26/us/26kentucky.html |
5 | www.lex18.com/news/kentucky-inmate-sues-cca-elaims-sexual-assault |
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In light of the ongoing occurrence of rape and sexual abuse at the Company’s facilities, stockholders have valid concerns that the Board needs to provide greater oversight of the Company’s efforts to reduce rape and sexual abuse of prisoners. A failure by the Company to adequately address this issue, and the negative publicity, loss of business and litigation that results, constitutes a risk to the Company and a threat to shareholder value.
Reports to stockholders on the Board’s oversight of efforts by the Company to eliminate incidents of rape and sexual abuse will provide transparency, reduce risk to the Company and stockholders, increase investor confidence and further the important public policy goal of reducing sexual abuse of prisoners.
Shareholders are urged to vote FOR this resolution.
The Response of the Board of Directors to the Stockholder Proposal
The Board of Directors believes that adoption of the proposal is NOT in the best interests of the Company or our stockholders and recommends a vote AGAINST the proposal.
The Board bases its recommendation on the following key points:
CCA takes a “zero tolerance” approach to prisoner sexual abuse. Since the creation of proposed national standards to eliminate prison sexual assaults, CCA has taken a leadership position on this important public policy issue. Even though the proposed standards have not yet been mandated and remain under consideration by the Department of Justice (“DOJ”), CCA has proactively adopted – and in some cases exceeded — many of the national PREA (Prison Rape Elimination Act) standards and best practices.
23Key features of CCA’s sexual abuse prevention program include:
Regular oversight by our Board of Directors, including quarterly review of key program information;
Management oversight of the program through a PREA committee consisting of high level company officers and health care, legal, and corrections professionals;
Comprehensive sexual assault prevention and incident reporting policies and procedures;
24 hour access by inmates to toll free telephone numbers for reporting allegations of sexual harassment or abuse;
Training for inmates and employees, as well as other awareness efforts that emphasize our zero tolerance approach and encourage employees and inmates to report allegations of sexual assault or harassment, such as posters conspicuously placed throughout our facilities;
Review by the PREA committee of every allegation of sexual abuse at a CCA facility – from receipt of the incident report through investigation and enforcement of applicable policies, as well as referral to law enforcement where appropriate; and
Auditing of compliance with our standards and procedures by CCA’s Quality Assurance team.
The Board believes that efforts directed at eliminating prisoner sexual abuse, including reporting functions, are best served if implemented and/or updated in conjunction and in coordination with industry-wide standards, best practices and
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regulations. Proposed regulations pending promulgation by DOJ, for which CCA has publicly expressed support, would enhance existing reporting requirements and ensure reporting from all industry participants in a coordinated, consistent manner. Adoption of this proposal would be an unwarranted departure by the Company from that responsible approach. |
Meaningful disclosure already is publicly available – both voluntarily by the Company through its website and by the Bureau of Justice Statistics (“BJS”) – for stockholders and others who are interested in the Company’s efforts to eliminate prisoner sexual abuse. BJS makes publicly available statistical data reported on an annual basis by CCA and other public and private industry participants.
CCA is subject to strong oversight in this area from its Board of Directors and government partners. Because of this oversight, together with existing disclosure requirements, pending regulations, and the media scrutiny and litigation that accompany alleged failures to protect prisoners from sexual abuse, the Company has powerful incentives to take all appropriate measures to prevent prisoner sexual abuse. Adoption of the proposal’s reporting requirements will not provide a meaningful addition to those incentives.
CCA Has Taken a Leadership Position on Eliminating Prisoner Sexual Abuse
Prisoner sexual abuse is an important public policy and corrections industry issue that affects public and private operators alike, as well as our employees and the prisoners entrusted to our care. With the appointment of the Company’s then-executive vice president and general counsel to the National Prison Rape Elimination Commission (“NPREC”), CCA has taken a leadership position from the beginning of national efforts to address this issue. The NPREC was established by PREA and developed a set of proposed national standards for the prevention of and response to sexual abuse at corrections facilities. Those standards provided the foundation for the proposed regulations that now await final promulgation by the Attorney General.
CCA has publicly supported adoption of enforceable national standards to prevent prisoner sexual abuse,1 which include standards on reporting prisoner sexual abuse incident and allegation data. CCA also has endeavored to establish a best practice sexual abuse prevention program. CCA’s program includes best practice prisoner reporting methods, prisoner and staff training and awareness initiatives, inmate education, investigation procedures, and audit processes. Interested stockholders can find information about our PREA practices on our website, where we regularly report on PREA initiatives. For example, the article “CCA and PREA: Always Aware, Staying Vigilant” (available athttp://www.insidecca.com/cca-source/cca-prea-always-aware-staying-vigilant) summarizes key features of CCA’s comprehensive approach to raising awareness, enhancing education, and heightening sensitivity about and affirming the Company’s “zero tolerance” approach toward prisoner sexual abuse.
1 | CCA submitted comments to the Department of Justice during the rulemaking comment period in 2011, in support of the rulemaking process and the PREA standards generally: “CCA…wholeheartedly feels that the promulgation of these standards will result in a safer and much more secure environment for both staff and offenders in this country’s correctional facilities,” see March 30, 2011, letter from CEO and President Damon Hininger and Vice President Steve Conry athttp://www.regulations.gov/#!documentDetail;D=DOJ-OAG-2011-0002-1318, last retrieved on February 24, 2012. |
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CCA’s Board Exercises Regular Oversight of the Company’s Efforts to Eliminate Prisoner Sexual Abuse
CCA’s Board of Directors exercises regular oversight with respect to the Company’s efforts to reduce and eliminate prisoner sexual abuse. Since PREA was adopted by Congress in 2003, the Board has monitored CCA’s adoption of policies, procedures, and practices to address the challenges presented by prisoner sexual abuse. The Board of Directors receives a report on a quarterly basis at each regularly scheduled Board meeting regarding PREA matters. Through these reports, the Board continually monitors the effectiveness of the Company’s sexual abuse prevention, detection, and response policies, practices, and training. The Board of Directors also regularly visits correctional facilities operated by CCA where Board members are able to directly observe the Company’s efforts in improving prisoner safety and preventing sexual abuse.
CCA’s Government Partners Exercise Oversight of the Company’s Efforts to Eliminate Prisoner Sexual Abuse
In addition to strong Board and management oversight of our program, our government partners provide an additional layer of oversight and enforcement of related contractual and policy requirements. These enforcement efforts include, among others, regular on-site inspections, agency audits, and joint training initiatives. Further, government and law enforcement officials with oversight and investigatory authority have unfettered access to CCA facilities and the inmates and detainees housed in the Company’s facilities.
Impending DOJ Rulemaking is Expected to Impose Industry-Wide Reporting Requirements on All Corrections and Detention Agencies
Under the Prison Rape Elimination Act of 2003 (“PREA”), the Attorney General is required to promulgate regulations to ensure the prevention, detection, investigation, reporting, and prosecution of prisoner sexual abuse. We believe those regulations, which will eventually govern every state, federal, and local correctional facility, are likely to be issued in the very near future. As noted above, CCA has supported publicly adoption of effective, industry-wide regulations that keep the industry as a whole moving forward on equal footing to eliminate prisoner sexual abuse. CCA is moving swiftly and deliberately to prepare for the implementation of those standards. Those standards will provide the actual framework for PREA compliance, embracing every aspect of prisoner safety from sexual abuse, including comprehensive and standardized reporting.2
As the Department of Justice will soon impose reporting requirements on all corrections and detention agencies through its rulemaking pursuant to PREA, the preemptive adoption of a customized reporting program as the proponent has requested is likely to undermine industry-wide efforts to develop comparable data for use in prevention, detection, investigation, and prosecution of prisoner sexual abuse. The proponent’s request is likely to lead to the adoption of confusing and contradictory reporting practices, inconsistent with those soon to be mandated by the Attorney General.
2 | The proposed PREA regulations require, for example, that “The agency shall make all aggregated sexual abuse data, from facilities under its direct control and private facilities with which it contracts, readily available to the public at least annually through its Web site or, if it does not have one, through other means.” Similarly, agencies are required to report “a comparison of the current year’s data and corrective actions with those from prior years and … an assessment of the agency’s progress in addressing sexual abuse.” See Federal Register Notice Docket No. OAG–131; AG Order No. 3244– 2011. |
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Significant Data on CCA and Other Corrections Agencies Already is Publicly Available through the Bureau of Justice Statistics
CCA currently reports statistical data regarding PREA allegations on an annual basis to the BJS for CCA facilities selected by the BJS. The BJS in turn compiles CCA data with comparable data from other corrections providers and makes publicly available an annual report on prisoner sexual abuse. These reports provide detailed statistical data regarding allegations of prisoner sexual abuse at facilities managed by CCA as well as other private and public operators. We believe these reports also allow stockholders and other interested persons a meaningful opportunity to compare CCA with other operators.
The information requested by the proponent would not add meaningfully to information that is already publicly available because it would not, like the BJS reports, provide comparable data for the same time periods and like facilities from other public and private operators. Further, because other operators would not be required to disclose the same level of information, the data could easily be misconstrued or taken out of context and thus be used to the Company’s detriment.
The Proponent is an Anti-Privatization Activist and His Motives in Seeking Data from CCA are Suspect
The proponent is an anti-privatization activist who was incarcerated at a correctional facility operated by CCA for six of his ten years in prison. He now serves in leadership roles with publications and organizations that operate with the goal of criticizing and eliminating partnership prisons. The proponent is an editor of Prison Legal News, through which he regularly publishes stories, press releases, and op-eds that are consistently critical of CCA and its management team. The proponent also serves as president of the Private Corrections Institute, which states that its mission is to disseminate information regarding the purported “dangers and pitfalls of privatization of correctional institutions and services in order to reverse and stop this social injustice” and which describes itself as holding the position that “for-profit prisons have no place in a free and democratic society.”
The Board believes that the proponent’s motives are evidenced by his conduct in connection with this shareholder proposal. The Company is not averse to transparency in this area and, despite the proponent’s history of anti-privatization activism, initiated dialogue with the proponent on the proposal and offered to produce an annual report on Board oversight of the Company’s sexual abuse prevention program. We believe this proposed compromise was reasonable and would substantially achieve the goals of the proposal; however, for the reasons set out above, the Company did not agree to biannual reporting of incident and allegation data. The proponent declined the Company’s offer and made no counterproposal.
The Company proceeded to seek no-action guidance from the Securities and Exchange Commission (“SEC”). We took this step because we do not believe, for the reasons stated in this opposition statement, that the data reporting requested in the proposal is in the best interests of the Company or its stockholders, and also because we believed our offer to publish an annual report on Board oversight in combination with the sexual abuse data published by BJS would amount to substantial implementation of the proposal. The SEC declined to grant no action guidance. The SEC’s decision in this regard is not a judgment on the merits of the proposal, but rather rests on the SEC’s interpretation of its proxy rules.
Rather than engage in further dialogue with the Company, the proponent published a self-serving press release that we believe mischaracterized the Company’s position on sexual abuse prevention, the Company’s argument for no-action relief, and the SEC’s decision on the Company’s no-action request. The Board believes this press release speaks to the proponent’s motives and strategy in submitting this stockholder proposal.3
3 | As of February 24, 2012, the press release, which was headed “SEC Rejects Corrections Corporation of America’s Objection to Shareholder Effort to Reduce Prisoner Sexual Abuse,” was available on the Prison Legal News website. CCA’s no-action request is available via the investor page of the Company’s website:http://ir.correctionscorp.com. |
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The Board also believes that it is reasonable to expect that the proponent, the organizations he represents, and similar organizations would seek to use any information published by the Company, including but not limited to the sexual assault incident data requested in the proposal, with the intent to harm, not benefit, the Company and its stockholders.
For these reasons, the Board of Directors unanimously recommends a vote AGAINST this proposal.
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Todd J Mullenger, age 51,53, has served as an Executive Vice President and our Chief Financial Officer since March 2007. Mr. Mullenger served as our Vice President, Treasurer from January 2001 to March 2007, as Vice President, Finance from August 2000 to January 2001 and prior to that as Vice President, Finance of our predecessor company. Mr. Mullenger graduated from the University of Iowa in 1981 with a B.B.A. degree and later earned an M.B.A. from Middle Tennessee State University.
Richard P. SeiterHarley G. Lappin, age 61,56, has served as an Executive Vice President and our Chief Corrections Officer since January 2005.June 2011. Prior to joining the Company and since 1999,2003, Mr. SeiterLappin served as an associate professor in the DepartmentDirector of Sociology and Criminal Justice at Saint Louis University, St. Louis, Missouri. Mr. Seiter has served as a Warden with the Federal Bureau of Prisons, (Federalthe nation’s largest correctional system, with oversight and management responsibility for 116 federal prisons, 14 large, private contract facilities and more than 250 contracts for community correctional facilities, in total comprising more than 215,000 inmates managed by 38,000 employees. Previously, Mr. Lappin served in a variety of other roles with the Bureau of Prisons beginning in 1985, including Regional Director, Warden of the United States Penitentiary in Indiana, and Warden of the Federal Correctional Institution Greenville, Illinoisin North Carolina, among other positions. Mr. Lappin has a master’s degree in criminal justice from Kent State University and Federal Prison Camp, Allenwood, Pennsylvania), as chief operating officer of Federal Prison Industries and as directoran undergraduate degree from Indiana University. Mr. Lappin has served in leadership roles for numerous professional organizations. Currently, Mr. Lappin is chair of the Ohio DepartmentStandards Committee of Rehabilitation and Correction. Mr. Seiter has authored two textbooks on corrections, Corrections: An Introduction (2005) andthe American Correctional Administration: Integrating Theory and Practice (2002), both published by Prentice Hall, and has served as editor of Corrections Management Quarterly. Mr. Seiter holds a B.S. in Business Administration and a Ph.D. in Public Administration from Ohio State University.
G. A. Puryear IVSteven E. Groom, age 41, has served as an60, was named Executive Vice President and General Counsel in April 2010. Prior to this appointment, Mr. Groom served as our Vice President & Deputy General Counsel with responsibility for litigation and Secretary since January 2001.risk management. Previously, Mr. Puryear isGroom was a partner in the law firm of Stites & Harbison, PLLC in Nashville and served in managing attorney and general counsel roles for SunTrust Bank, Inc. Mr. Groom earned a bachelor’s degree from Lipscomb University and his law degree from the University of Memphis, where he was a member of the boardsLaw Review. Mr. Groom serves on the Board of directorsVisitors of NBT Holdings, Inc., a bank holding companyLipscomb University’s College of Business and Nashville Bank and Trust, an FDIC member banking institution located in Nashville, Tennessee. His prior experience includes government service, including as legislative director and counselthe Board of Advisors of the University’s Institute for U.S. Senator Bill Frist and counsel to the U.S. Senate Committee on Governmental Affairs, and private law practice in Nashville, Tennessee. Mr. Puryear graduated from Emory University and received his J.D. from the University of North Carolina after which he served as a law clerk for the Honorable Rhesa Hawkins Barksdale, U.S. Circuit Court in Jackson, Mississippi. On March 26, 2010, Mr. Puryear notified the Company that he will be resigning to accept a position with another company after a brief transition period. Mr. Puryear’s resignation will constitute a voluntary resignation under his employment agreement (a description of which is in the “Employment Agreements” section beginning on page 43 of this Proxy Statement) with the Company.
Anthony L. Grande, age 40,42, has served as an Executive Vice President and our Chief Development Officer since July 2008. From September 2007 to July 2008, Mr. Grande served as our Senior Vice President, State Customer Relations. Mr. Grande joined CCA in 2003 to serve as Vice President of State Customer Relations. Prior to joining CCA, Mr. Grande served as the Commissioner of Economic and Community Development for the State of Tennessee. Mr. Grande earned his Masters of Education at Vanderbilt University in Nashville, Tennessee and his Bachelor of Arts from The American University in Washington, D.C.
Brian D. Collins, age 52,54, has served as our Executive Vice President and Chief Human Resources Officer since September 14, 2009. Prior to this appointment and since June 2006, Mr. Collins served as a Vice President, Operations, with responsibility for oversight of all aspects of the operations of one of the Company’s three operational business units. Prior to joining the Company, Mr. Collins served for 25 years in a variety of roles with Wal-Mart Stores, Inc., including personnel training and development, field operations and support management. Mr. Collins holds a Bachelor of Business Administration from the University of Arkansas at Pine Bluff.
24Richard P. Seiter, age 63, previously served as an Executive Vice President and Chief Corrections Officer since January 2005. Prior to joining the Company and since 1999, Mr. Seiter served as an associate professor in the Department of Sociology and Criminal Justice at Saint Louis University, St. Louis, Missouri. Mr. Seiter has also served as a Warden with the Federal Bureau of Prisons
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(Federal Correctional Institution, Greenville, Illinois and Federal Prison Camp, Allenwood, Pennsylvania), as chief operating officer of Federal Prison Industries and as director of the Ohio Department of Rehabilitation and Correction. Mr. Seiter retired from the position of Executive Vice President and Chief Corrections Officer effective June 2011, but continues as an employee of the Company as Special Assistant to the CEO to perform specified duties and assist with the orderly transition of his former duties and responsibilities with the Company through May 31, 2013 pursuant to a Transition Agreement.
Compensation Discussion and Analysis
This section of the Proxy Statement discusses the objectives and elements of our compensation programs and the compensation awarded to our Named Executive Officers, or NEOs, in 2009.2011. This information should be read in conjunction with the Summary Compensation Table and the related tables and narratives that follow in this Proxy Statement. Based on SEC proxy disclosure rules, the following individuals were our Named Executive Officers for the fiscal year ended December 31, 2009:2011:
John D. Ferguson, Chairman of the Board of Directors
Damon T. Hininger, President and Chief Executive Officer
Todd J Mullenger, Executive Vice President and Chief Financial Officer
Richard P. Seiter, Special Assistant to the Chief Executive Officer, effective as of June 1, 2011, and formerly Executive Vice President and Chief Corrections Officer
Anthony L. Grande, Executive Vice President and Chief Development Officer
Brian D. Collins, Executive Vice President and Chief Human Resources Officer
Executive Summary. The fundamental objectives of our compensation policies are to attract and retain executive leadership for the Company that will execute our business strategy, uphold our Company values and deliver results and long-term value to our stockholders. We seek to accomplish these goals in a manner that ties a substantial portion of each executive officer’s compensation to the Company’s performance by rewarding executive officers for significant growth in earnings per share (“EPS”). We use EPS as the measure because we believe there is a strong relationship between EPS growth and growth in stockholder value. Our 2011 EPS targets were established in consultation with our independent compensation consultant, PricewaterhouseCoopers LLP (“PwC”).
PwC also conducts competitive analyses from time to time at the request of our Compensation Committee (the “Committee”) in order to analyze our performance and executive compensation against a peer group of companies. These analyses have assisted the Committee in determining if compensation strategies and plans are advisable based on the Company’s current financial position and strategic goals, as well as developments in corporate governance and compensation design. The primary components of our compensation program are cash compensation, consisting of a mix of base salary and cash incentive plan compensation, and equity incentives, consisting of stock options with time-based vesting and restricted stock with performance-based vesting.
In the most recent competitive analysis conducted in 2011, PwC concluded that the Company’s performance was high relative to peer companies when evaluated over one, three and five year time periods, while our senior management compensation levels were consistent with the competitive 50th percentile. We believe PwC’s competitive analysis supports a conclusion that our executive compensation policies are delivering value to our shareholders while positioning CCA to attract and retain effective executive leadership.
Despite a challenging economic environment, the Company delivered strong financial results for fiscal 2011. We believe certain key compensation decisions with respect to 2011, together with our performance during 2011, support the soundness of our executive compensation policies and our Compensation Committee’s decision-making processes. Key compensation decisions and outcomes for 2011 included the following:
In light of particularly challenging economic and state budget environments, we decided to set EPS targets for the 2011 Cash Incentive Plan based on growth in EPS compared to 2010.
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We believe the Company’s results for 2011 were exceptional given the challenging environment. We achieved an EPS of $1.54 for 2011, which represented a 10.8% growth of EPS during fiscal 2011. The EPS figure used for bonus calculation purposes (the “bonus EPS”) in 2010 was $1.41, which reflected an adjustment to exclude goodwill impairment charges, pursuant to the Company’s 2010 Cash Incentive Plan; therefore, EPS for 2011 represented a 9.2% increase in bonus EPS.
Our balance of long- and short-term incentives is an important component of our compensation structure and philosophy. This balance is reflected in our use of different types of equity compensation awards that provide a balance of incentives, our stock ownership guidelines designed to align the incentives of our executives with our stockholders and discourage excessive risk taking, and other concepts of our compensation programs, including our executive compensation program, which are all designed to motivate our executives, including our NEOs, to substantially contribute individually and collaboratively to the Company’s long-term, sustainable growth.
Overview of Compensation Process.The Compensation Committee of the Company’s Board of Directors (the “Committee”) consists solely of “non-employee directors” as defined by SEC rules, “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, and “independent directors” as defined by NYSE listing standards, in each case as determined by our Board of Directors. In addition to a determination of independence, the Nominating and Governance Committee of our Board recommends Committee membership based on the knowledge, experience and skills that it deems appropriate in order to adequately perform the responsibilities of the Committee. Mr. Prann, Mr. Russell, Mr. Horne and Mr. Correnti are the current members of the Committee, with Mr. Russell serving as the Committee’s Chair.
The Committee is responsible for setting the compensation of the Company’s executive officers, overseeing the Board’s evaluation of the performance of our executive officers and administering the Company’s equity-based incentive plans, among other things. The Committee undertakes these responsibilities pursuant to a written charter adopted by the Committee and the Board, which is reviewed at least annually by the Committee. During the fiscal year ended December 31, 2009,2011, no changes were made to the Committee’s charter. The charter may be viewed in full on the Company’s website,www.correctionscorp.comwww.cca.com (under “Corporate Governance” on the Investors page).
The Committee annually reviews executive compensation and the Company’s compensation policies to ensure that the Chief Executive Officer and the other executive officers are rewarded appropriately for their contributions to the Company and that the overall compensation strategy supports the objectives and values of our organization, as well as stockholder interests. The Committee conducts this review and makes compensation decisions through a comprehensive process involving a series of meetings primarily occurring in the first and second quarters. Committee meetings typically are attended by the Committee members, the Committee’s compensation consultant and legal advisors, the Company’s Chairman and the Company’s Chief Executive Officer. As with all Board committees, other Board members also have a standing invitation to attend the Committee’s meetings. The Committee meets in executive session to the extent the members deem necessary or appropriate to ensure independence. Additional information regarding Committee meetings is included above under “Corporate Governance —– Board of Director Meetings and Committees.”
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• | Performance-based: A significant component of compensation should be determined based on whether or not the Company meets performance criteria that are aligned with growth in stockholder value and do not encourage unreasonable risk-taking. | ||
• | Competitive: Pay for performance scales are established so the competitive positioning of an executive’s total compensation reflects the competitive positioning of the Company’s performance,i.e., high Company performance relative to peers results in high compensation relative to competitive benchmarks, andvice versa. | ||
• | Balanced: Performance-oriented features and retention-oriented features should be balanced so the entire program accomplishes the Company’s pay-for-performance and executive retention objectives, while encouraging prudent risk-taking that is aligned with the Company’s overall strategy. | ||
• | Fair: Compensation levels and plan design should reflect competitive practices, our performance relative to peer companies and the relationship of compensation levels from one executive to another. |
The Committee’s goal is to have a substantial portion of each executive officer’s compensation contingent upon the Company’s performance, as well as upon his or her individual performance. The Committee’s compensation philosophy for an executive officer emphasizes an overall analysis of the executive’s performance for the year, projected role and responsibilities, impact on execution of Company strategy, external pay practices, total cash and total direct compensation positioning relative to other Company executives and other factors the Committee deems appropriate. Our philosophy also considers employee retention, vulnerability to recruitment by other companies and the difficulty and costs associated with replacing executive talent. Based on these objectives, the Committee has determined that our Company should provide its executives with compensation packages comprised of three primary elements: (i) base salary, which takes individual performance into account and is designed to be competitive with median salary levels in an appropriate peer group; (ii) annual variable performance awards, payable in cash and based on the financial performance of the Company, in accordance with the goals established by the Committee; and (iii) long-term stock-based incentive awards which strengthen the commonality of interests between executive officers and our stockholders. (Benefits and perquisites play a negligible role in our executives’ total compensation packages.) The Committee believes that as a result of our Company’s balance of long- and short-term incentives, our use of different types of equity compensation awards that provide a balance of incentives and our stock ownership guidelines, our compensation programs, including our executive compensation program, doesdo not encourage our management to takeunnecessary or unreasonable risks relatingrisk taking with respect to our business.
Compensation Programs for 20092011
Role of Compensation Consultant. Beginning in 2000 and continuing into 2010,2012, the Committee has engaged PricewaterhouseCoopers LLP (“PwC”)PwC to assist it in reviewing the Company’s compensation strategies and plans. At the Committee’s request, PwC has performed several analyses, including peer and market comparisons, internal pay equity, updating of the executive salary structure and modeling of executive compensation levels at different levels of Company performance. TheseWhile not used to benchmark our compensation, these analyses have assisted the Committee in determining if such strategies and plans were advisable based on the
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were that CCA’s performance is generally high relative to peer group companies, and that its senior management compensation levels are on average consistent with the competitive 50th percentile. PwC was selected due to its extensive experience in providing compensation consulting services. Additionally, the Committee is not aware of any potential conflicts of interest affecting its consultation services that PwC may have with either Board members or Company management.
At the request of the Committee, in early 2008January 2010 PwC reexaminedrefreshed the peer group of business services companies that the Company had been using since 20032008 for executive compensation benchmarking purposescomparison purposes. The update relied on the same criteria that had been used in 2008, as follows:
Owners and operators of multi-state facilities delivering services to determine whetherthird parties
Minimum employee base of 10,000
Market capitalization between $2 billion to $5 billion
Annual EBITDA between $200 million to $600 million
Investment in fixed assets of $1 billion to $5 billion
Future growth heavily dependent upon the acquisition or development of additional facilities
As a result of the update, two companies were deleted from the peer group continued to provide appropriate comparisons for such purposes. Based on its analysis, PwC suggested including(Convergys Corporation and Manor Care Inc.), three companies in other industries with strategies that resemble the Company’s strategy of building, owningwere added (Hyatt Hotels Corporation, Penn National Gaming Inc. and managing prison facilities. Accordingly, PwCTenet Healthcare Corporation), and the Committee developed a newone company was acquired (Psychiatric Solutions, Inc.), resulting sixteen-company peer group for purposes of companies that, like the Company, generally met most of the following criteria:
• Boyd Gaming Corporation | • Hyatt Hotels Corporation | |
• Brookdale Senior Living Inc. | • Iron Mountain Incorporated | |
• Cinemark Holdings Inc. | • Lifepoint Hospitals Inc. | |
• Community Health Systems, Inc. | • Penn National Gaming Inc. | |
• Gaylord Entertainment Company | • Quanta Services Inc. | |
• The Geo Group, Inc. | • Tenet Healthcare Corporation | |
• Health Management Associates, Inc. | • Universal Health Services, Inc. | |
• HealthSouth Corporation | • Wyndham Worldwide Corporation |
In 2011, the Committee requested PwC then analyzed andto conduct a competitive analysis of CCA’s performance compared the compensation of the Company’s senior management to the compensation offered by the companies included in this peer group, supplemented by general industry survey data of similarly sized companies. Using the survey data and primarily publicly available proxy statement data for the peer group PwC’s study calculatedcompanies, as well as a competitive analysis of its senior management compensation levels (25th percentile,as compared to compensation levels of senior management at the peer group companies. Based on its research, PwC concluded that CCA’s performance was generally high relative to the peer companies over one-year, three-year and five-year time periods, and that CCA’s senior management compensation levels were on average consistent with the competitive 50th percentile and 75th percentile) for executive base salary, total cash compensation (base salary plus annual cash incentives) and total compensation (total cash compensation plus fair value of equity incentive awards).percentile. The Committee usedbelieves that that the results of this study, along with other factors discussed below,peer group is still relevant for compensation decisions made in 2012 but continues to help determineevaluate the peer group criteria on an appropriate executive compensation structure for 2009. As discussed further below, due to a variety of factors not related to the performance of the Company or our executive officers, the Committee did not make any adjustments to the base salary of the Company’s executive officers in 2009.
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Position | Base Salary Structure(1) | LTIP Fair | Total Comp. | |||||||||||||||||||||||||
Level | Position Titles | Minimum | Midpoint | Maximum | Bonus(2) | Value(3) | Midpoint(4) | |||||||||||||||||||||
A | Chief Executive Officer | $ | 576,000 | $ | 720,000 | $ | 864,000 | 75 | % | $ | 2,000,000 | $ | 3,260,000 | |||||||||||||||
B | Chief Financial Officer and Chief Corrections Officer | $ | 268,000 | $ | 335,000 | $ | 402,000 | 75 | % | $ | 800,000 | $ | 1,386,250 | |||||||||||||||
C | General Counsel, Chief Human Resources Officer, and Chief Development Officer | $ | 224,000 | $ | 280,000 | $ | 336,000 | 75 | % | $ | 415,000 | $ | 905,000 |
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Position Level | Base Salary Structure(1) | LTIP Fair | Total Comp. | |||||||||||||||||||||||
Position Titles | Minimum | Midpoint | Maximum | Bonus (2) | ||||||||||||||||||||||
A | Chief Executive Officer | $ | 640,000 | $ | 800,000 | $ | 960,000 | 75 | % | $ | 2,500,000 | $ | 3,900,000 | |||||||||||||
B | Chief Financial Officer, Chief Corrections Officer and Chief Development Officer | $ | 296,000 | $ | 370,000 | $ | 444,000 | 75 | % | $ | 850,000 | $ | 1,497,500 | |||||||||||||
C | General Counsel and Chief Human Resources Officer | $ | 248,000 | $ | 310,000 | $ | 372,000 | 75 | % | $ | 430,000 | $ | 972,500 |
(1) | The midpoint amounts are aligned with the 50th percentile payouts of executives benchmarked in the PwC market analysis. The minimum amounts represent 80% of the midpoint while the maximum amounts represent 120% of the midpoint. | |
(2) | Bonus targets are percentages of the executive’s base salary. | |
(3) | ||
Equals the sum of base salary midpoint plus target bonus percentage plus LTIP fair value. For Position Levels A and B, Total Compensation Midpoint reflects a 50/50 blend of competitive 50th and 75th percentiles. For Position Level C, Total Compensation Midpoint reflects the competitive 75th percentile. |
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Base Salary. We seek to provide base salaries for our executive officers that provide a secure level of guaranteed cash compensation in accordance with their experience, professional status and job responsibilities. Typically in the second quarter of each year, the Committee reviews and approves a revised annual salary plan for our executive officers, taking into account several factors, including prior year salary, responsibilities, tenure, performance, salaries paid by comparable companies for comparable positions, the Company’s overall pay scale and the Company’s recent and projected financial performance. As part of the PwCPwC’s January 2010 study discussed above, the Committee determined that base salary generally should be set at the 50th percentile of the benchmarks from the PwC market analysis, subject to adjustment to account for the individual factors referenced above. This market positioning was based on the Committee’s objective of providing competitive base salaries for recruiting and retention purposes.
The Committee also solicits the views and recommendations of our Chief Executive Officer, andin consultation with our Chairman, when setting the base salaries of the other executive officers, given their respective insight into internal pay equity and positioning issues, as well as executive performance. At a Committee meeting typically held in the first or second quarter of each year, the Chief Executive Officer and our Chairman summarize theirsummarizes his assessment of the performance during the previous year of each of the other executive officers. The Chief Executive Officer, andin consultation with our Chairman, also provide theirprovides his recommendations on any compensation adjustments. Following the presentation of our Chief Executive Officer and our Chairman and Committee discussion, theThe Committee approves any base salary adjustments for these executives, based on such factors as the competitive compensation analysis, the Chief Executive Officer’s and Chairman’s assessment of individual performance, the Company’s performance and the location in the salary range of the executive’s current salary, general market conditions and internal pay equity considerations.
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The process is similar for determining any base salary adjustments for the Chief Executive Officer, except that the Chief Executive Officer does not provide the Committee with a recommendation. The Chief Executive Officer presents a self-assessment of his performance during the year to the Committee, which then approves any base salary adjustment based on the factors described above with respect to the other executives. To the extent it deems necessary and appropriate, the Committee meets in executive session to discuss adjustments to the base salaries of the Company’s executive officers, including the Chief Executive Officer. Such adjustments typically take effect on or about July 1 of each year. Due to a deterioration in the overall economy and other factors previously described herein, but not related to the performance of the Company or of each of the executive officers, the Committee did not make any adjustments to the base salary of the Company’s executive officers in 2009.
During 2009,2011, the Committee approved or reaffirmed the base salaries for our Named Executive Officers in the following amounts:
Prior Year Base | Percentage | 2009 as % of Salary | ||||||||||||||
Name | 2009 Base Salary(1) | Salary | Increase | Midpoint | ||||||||||||
John D. Ferguson | $ | 749,858 | $ | 749,858 | 0 | % | 104 | % | ||||||||
Damon T. Hininger | $ | 600,000 | $ | 325,000 | 84.6 | % | 83 | % | ||||||||
Todd J Mullenger | $ | 290,000 | $ | 290,000 | 0 | % | 87 | % | ||||||||
Richard P. Seiter | $ | 310,655 | $ | 310,655 | 0 | % | 93 | % |
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Name | Current Base Salary | Prior Year Base Salary | Percentage Increase (Decrease) | 2011 as % of Salary Midpoint | ||||||||||||
John D. Ferguson | $ | 540,000 | $ | 540,000 | 0.0 | % | — | (1) | ||||||||
Damon T. Hininger | $ | 660,000 | $ | 600,000 | 10.0 | % | 82.5 | % | ||||||||
Todd J Mullenger | $ | 320,000 | $ | 290,000 | 10.3 | % | 86.5 | % | ||||||||
Richard P. Seiter(2) | $ | 310,655 | $ | 310,655 | 0.0 | % | — | (2) | ||||||||
Anthony L. Grande | $ | 300,000 | $ | 270,000 | 11.1 | % | 81.1 | % | ||||||||
Brian D. Collins | $ | 270,000 | $ | 248,310 | 8.7 | % | 87.1 | % |
Prior Year Base | Percentage | 2009 as % of Salary | ||||||||||||||
Name | 2009 Base Salary(1) | Salary | Increase | Midpoint | ||||||||||||
Anthony L. Grande | $ | 270,000 | $ | 270,000 | 0 | % | 96 | % | ||||||||
G.A. Puryear IV | $ | 257,094 | $ | 257,094 | 0 | % | 92 | % | ||||||||
William K. Rusak | $ | 267,806 | $ | 267,806 | 0 | % | 96 | % |
(1) | The salary for Mr. Ferguson is representative of arm’s length negotiations which occurred between Mr. Ferguson and the Committee, and reflects the desire of the Board of Directors for Mr. Ferguson to remain actively engaged in the business of the Company and Mr. Ferguson’s willingness to do so. |
(2) | Mr. |
Cash Incentive Plan Compensation. In addition to base salary, cash incentive plan compensation provides our executive officers with the potential for significantly enhanced cash compensation based on the extent to which financial performance targets set in advance by the Committee are met. In December 2007, the Committee established a three-year set of performance targets that would serve as the basis for determining executive officers’ cash incentive plan compensation as well as whether performance-based restricted shares would vest. The Committee established performance objectives that would reward senior management for significant growth in earnings per share (“EPS”).EPS. The Committee chose EPS as the measure because it believes there is a strong relationship between EPS growth and growth in stockholder value. The Company’s 20092011 Cash Incentive Plan was structured to provide incremental increases in bonus (as a percentage of base salary) based on EPS as follows:
EPS(1) | % of Base Salary | |||
$1.12 | 0 | % | ||
$1.21 | 75 | % | ||
$1.31 | 100 | % | ||
$1.49 | 200 | % |
EPS(1) | % of Base Salary | |||
$1.24 | 0.00 | % | ||
$1.40 | 75.00 | % | ||
$1.43 | 101.79 | % | ||
$1.49 | 155.36 | % | ||
$1.54 | 200.00 | % |
(1) | Awards increase incrementally for EPS results between |
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The initial EPS guidance for 2011 as set forth in the Company’s earnings news release dated February 9, 2011, ranged from $1.37 to $1.45. The target for bonuses was setremained at 75% of base salary, which would be met if the Company achieved 12% compounded growthEPS of EPS over a three-year period beginning in 2007.$1.40 for 2011. The maximum bonus was set at 200% of base salary, which would be met if the Company achieved 20%9.2% or more compounded EPS growth over a three-year period beginningthe “bonus EPS” achieved in 2007. The EPS levels were based on research conducted by PwC on multi-year EPS growth rates among the peer companies as well as general industry information. As a result, the target EPS level was consistent with the 75th percentile multi-year EPS growth rate for the peer group, which was, in the Committee’s view, a challenging performance target at the time it was set.2010. At the time the Committee established the Company’s 20092011 Cash Incentive Plan in February 2009,2011, it determined to exclude from the EPS figure used for bonus calculation purposes (“bonus EPS”)EPS the impact of charges incurred for financing transactions approved by the Board of Directors and goodwill and other asset impairment write-offs to the extent eitherthey affected the Company’s 20092011 EPS, to ensure that bonus EPS reflected an accurate comparison with the baseline EPS and that incentive cash bonuses accurately reflected the extent to which the Company achieved the performance objectives set by the Committee. For 2009, the Company’s reported EPS for 2009 was adjusted to exclude charges associated with refinancing activities completed during 2009, and was reduced by the impact of certain income tax benefits that were included in the Company’s reported EPS for 2009, because such benefits were charged to equity upon the adoption of a new accounting pronouncement in 2007. Based on bonus EPS of $1.32$1.54 for 2009,2011, which represented a 10%10.8% growth of EPS during fiscal 2009,2011, the following cash incentive plan compensation was awarded to our Named Executive Officers in February 2010:2012: Damon T. Hininger ($398,895)1,255,386); John D. Ferguson ($1,080,000); Todd J Mullenger ($306,124)607,692); Richard P. Seiter ($327,927)621,310); Anthony L. Grande ($285,013)567,694); and G.A. Puryear IVBrian D. Collins ($271,389)516,642). Such amounts represented approximately 105.56%200% of each Named Executive Officer’s base salary earned during 2009.2011. The Committee understands that in some situations using a single metric (EPS in this case) might have the potential to encourage management to take excessive risks. However, the Committee believes that these potential concerns are mitigated by the
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Long-Term Stock-Based Incentive Compensation. As described above, one of our key compensation philosophies is that long-term stock-based incentive compensation strengthens and aligns the interests of our executive officers with our stockholders. Based on the PwC market analysis discussed above and the Company’s compensation philosophies, the Committee has determined that a compensation strategy utilizing a mix of stock options with time-based vesting and restricted stock and/or restricted stock units with performance-based vesting is in the best interest of stockholders. The Committee believes this strategy allows it to set optimal combinations of time- and performance-based vesting and annual and long-term performance goals. The Committee also believes this approach will reduce the dilutive impact of equity grants to management compared to equity grants consisting solely of stock options.
Equity incentive awards are generally granted to our executive officers on an annual basis. Award levels in 20092011 for the Company’s Named Executive Officers were consistent with the market-based 20092011 compensation structure prepared with the advice of PwC and approved by the Committee. Additionally, for 2009, given the significant disruption in the stock market and the corresponding decline in the Company’s stock price during the period leading up to the Compensation Committee meeting in February 2009, the Committee decided to limit the number of restricted stock units and options to purchase shares of the Company’s common stock awarded to 150% of the number of such awards made during 2008, even though such limitation had the effect of reducing LTIP fair value substantially below the target levels of LTIP fair value. Equity awards to Mr. Hininger reflected his appointment to President and Chief Operating Officer during 2008 while equity awards to Mr. Grande reflected his appointment to Executive Vice President and Chief Development Officer during 2008. Further, Mr. Ferguson asked that he not be considered for equity awards at that time so that the Company would continue to have sufficient share awards under the 2008 Stock Incentive Plan (the “2008 Plan”) for awards to other employees. The Committee believed these awards were consistent with the Company’s retention, pay-for-performance and stockholder alignment objectives, and reflected the trend in the marketplace to place limits on the aggregate number of shares subject to awards given the decline in many companies’ share prices during the period of market turmoil, even though the value of the awards would be reduced below threshold levels established by companies for the positions being compensated.objectives. In making this decision, the Committee also considered existing equity holdings for each executive officer as well as gross proceeds from option exercises over the prior three-year period.
During 2009,2011, non-qualified options for the purchase of the Company’s common stock and restricted shares of the Company’s common stock units were granted to our Named Executive Officers, pursuant to the Company’s Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”), as follows:
Number of | ||||||||||||
Performance- | ||||||||||||
Based Vesting | ||||||||||||
Shares Subject to Time-Based | Restricted | |||||||||||
Name | Vesting Option Grant | Exercise Price | Stock Units | |||||||||
John D. Ferguson(1) | — | — | — | |||||||||
Damon T. Hininger(2) | 67,607 | $ | 10.73 | 19,515 | ||||||||
30,053 | $ | 20.43 | 11,209 | |||||||||
Todd J Mullenger | 67,607 | $ | 10.73 | 19,515 | ||||||||
Richard P. Seiter | 67,607 | $ | 10.73 | 19,515 | ||||||||
Anthony L. Grande | 67,607 | $ | 10.73 | 19,515 | ||||||||
G.A. Puryear IV | 55,934 | $ | 10.73 | 16,146 | ||||||||
William K. Rusak(3) | 55,934 | $ | 10.73 | 16,146 |
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Name | Shares Subject to Time-Based Vesting Option Grant | Exercise Price(1) | Number of Performance- Based Vesting RSUs | |||||||||
Damon T. Hininger | 91,287 | $ | 24.42 | 36,149 | ||||||||
Todd J Mullenger | 43,950 | $ | 24.42 | 17,404 | ||||||||
Richard P. Seiter | 43,950 | $ | 24.42 | 17,404 | ||||||||
Anthony L. Grande | 43,950 | $ | 24.42 | 17,404 | ||||||||
Brian D. Collins | 36,194 | $ | 24.42 | 14,333 |
(1) | ||
All grants were made on February | ||
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The nonqualified options are subject to the terms of the 2008 Plan and the individual award agreements. The options vest in equal one third increments as of the first, second and third anniversary dates of the grant date, subject to acceleration as contemplated by the 2008 Plan. Each of the options has an exercise price equal to the fair market value of our common stock at the time of the grant, as determined by the closing price of our common stock on the NYSE on the grant date.
The restricted stock awardsunits vest over time and are based upon achieving EPS performance objectives established by the Committee (achievable in increments or in the aggregate over a three-year period), with no vesting to occur below a base EPS performance level and incremental vesting from 50% to 100% of the award (target of 75% of the award) as established EPS targets are achieved. As with the EPS targets generally set for the annual incentive plan, the EPS levels for vesting of restricted stock awardsunits were based on research conducted by PwC on multi-year EPS growth rates among the peer companies as well as general industry information. The Committee will also adjust EPS targets for restricted stock unit vesting purposes in the same manner as it does when calculating bonus EPS (discussed above).
Restricted stock awardsunits vest over a three year period based on the extent to which the Company meets the annual and cumulative performance targets set by the Committee. Vesting may occur on an incremental or a cumulative basis, or a combination thereof. For example, for 2009the 2011 restricted stock awards:
Vesting will occur annually in one-third (1/3) increments if the Company achieves 8% compounded EPS growth for each of fiscal 2011 and 2012 and at least 6% compounded EPS growth over long term EPS growth targets previously established by the Committee for the full fiscal 2011-2013 vesting period.
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If the Company does not achieve 8% compounded EPS growth in fiscal 2011 but does achieve 8% compounded EPS growth for fiscal 2011 and 2012, then two-thirds (2/3) will generally vest on the second anniversary of the grant date.
Compounded | % of Restricted Shares Vested | |||||||
Three-Year Cumulative EPS(1) (2) | Growth | After 3 Years | ||||||
Less than $3.03 | < 4 | % | 0 | %(3) | ||||
$3.03 | 4 | % | 50 | %(3) | ||||
$3.26 | 6 | % | 75 | % | ||||
Greater than or equal to $3.51 | 8 | % | 100 | % |
Three-Year Cumulative EPS(1) (2) | Compounded Growth | % of Restricted Shares Vested After 3 Years | ||||||
Less than $3.21 | < 2 | % | 0 | %(3) | ||||
$3.21 | 2 | % | 50 | %(3) | ||||
$3.69 | 4 | % | 75 | % | ||||
Greater than or equal to $4.18 | 6 | % | 100 | % |
(1) | If EPS for fiscal | |
(2) | If cumulative EPS for fiscal | |
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(3) | Unless either or both of the targets for years one and two were met, in which case one-third (1/3) or two-thirds (2/3), as applicable, of the shares would already have vested as of the end of the vesting period. |
Notwithstanding the foregoing, the shares of restricted stock units will become fully vested upon the occurrence of death, Disability, or a Change in Control of the Company (each such condition as defined in the 2008 Plan). The restricted stock awardsunits are further subject to the terms of the 2008 Plan and the individual award agreements.
The dollar values of the 20092011 grants of restricted stock units, based on the fair market value of the Company’s common stock on the date of the grant, are as follows: John D. Ferguson ($0); Damon T. Hininger ($438,396)882,759); Todd J Mullenger ($209,396)425,006); Richard P. Seiter ($209,396)425,006); Anthony L. Grande ($209,396); G.A. Puryear IV ($173,247)425,006); and William K. RusakBrian D. Collins ($173,247)350,012). Based on bonus EPS of $1.32$1.54 for 2009,2011, representing EPS growth of 10%10.8%, the first one-third of the restricted sharesstock units awarded to Messrs. Hininger, Mullenger, Seiter, Grande Puryear, and RusakCollins in 20092011 vested during the first quarter of 2010.
Retirement Plans. The Company matches a percentage of eligible employee contributions to our qualified 401(k) Plan. TheEmployer matching contributions are made in cash andcash. Discretionary matching contributions vest 20% after two years of service, 40% after three years of service, 80% after four years of service and 100% after five years of service. Effective January 1, 2012, the 401(k) Plan adopted a safe harbor match provision which provides that safe harbor matching contributions are 100% vested immediately. Of the Named Executive Officers, only Messrs. Seiter, Mullenger and MullengerGrande participated in the 401(k) Plan during 2009,2011, with respect to whom the Company matched contributions in the amount of $11,600$12,250 for Mr. Seiter, $9,115 for Mr. Mullenger and $12,250 for Mr. Seiter.Grande. Although neither Mr. Ferguson did not participatenor Mr. Hininger participated in the 401(k) Plan during 2009, he2011, each retains a balance in the plan based on contributions made in prior years.
The Company also has a nonqualified deferred compensation plan covering our executive officers and key employees. Under the terms of the deferred compensation plan, participants are allowed to defer up to 50% of their annual base salary and 100% of their incentive cash bonus each plan year. The Company, in its discretion, may make matching contributions to the plan. Currently, the Company makes matching contributions equal to 100% of amounts deferred up to 5% of total cash compensation. The matching contribution is credited on a monthly basis, but is reduced at the end of the plan year for any matching amounts contributed to the participant’s 401(k) account. Any compensation deferred and matching contributions, if any, earn a return determined based on the return received by the Company on certain investments designated as a funding mechanism for meeting its obligations under the plan. Participants are 100% vested in amounts deferred under the plan and earnings on those amounts, while the matching contributions vest in the same manner as discretionary matching contributions under the 401(k) Plan. Participants generally may make an up frontup-front election to receive benefits accrued under the plan at any time after the end of the fifth year following the deferral or upon termination of employment, subject to certain
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Severance and Change in Control Benefits. We.We believe that reasonable severance and change in control benefits are necessary in order to recruit and retain effective senior managers. These severance benefits reflect the fact that it may be difficult for such executives to find comparable employment within a short period of time and are a product of a generally competitive recruiting environment within our industry. We also believe that a change in control arrangement will provide an executive security that will likely reduce the reluctance of an executive to pursue a change in control transaction that could be in
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the best interests of our stockholders. In addition, we have sought to maintain a high level of consistency in the contractual terms applicable to all members of the executive team, including those who were initially retained during the period around the year 2000 when the Company was experiencing substantial financial upheaval and uncertainty regarding the viability of its capital structure and to whom the Committee thus believed it appropriate to provide certain assurances, including protections in the event of a change in control of the Company.team. The executive employment agreements and the potential costs in the event of a change in control are reviewed periodically by the Compensation Committee and the Committee stays abreast of developments and suggested best practices in compensation structure and design. Moreover,In 2011, the Company plans to undertakeundertook a comprehensive review of the provisions of the executive employment agreements (including protections provided in the event of a change in control) uponand has entered into new or revised employment agreements with each of its executives. Based on the expirationcompetitive analysis conducted by PwC in 2011 and described above, the Committee determined that the Company’s severance and change in control benefits were at, if not below, the competitive norms of each agreement.our peer group. For a detailed discussion of potential severance and change in control benefits, see “Potential Payments Upon Termination or Change in Control,” beginning on page 4854 of this Proxy Statement.
Perquisites and Other Benefits. The Company has previously paid relocation expenses, either in the form of reimbursement or a lump sum payment, to the Named Executive Officers who have relocated to Nashville, Tennessee in order to assume their positions with the Company, and has made tax gross up payments to such officers to cover income tax associated with the taxable portions (if any) of such payments. No such relocation and tax gross up payments were made to the Named Executive Officers during 2009.2011. The Named Executive Officers are also eligible for benefits generally available to and on the same terms as the Company’s employees who are exempt for purposes of the Fair Labor Standards Act, including health insurance, disability insurance, dental insurance and life insurance. Pursuant to their employment agreements and in order to encourage community involvement, the Named Executive Officers are also eligible for reimbursement for certain civic and professional memberships that are approved in advance by the Company. The Company also pays for physicals for executive officers up to $2,000 per individual on an annual basis.
Stock Ownership Guidelines and Equity Grant Timing
Stock Ownership Guidelines. DuringThe Company’s original stock ownership guidelines were adopted by the Board of Directors during the first quarter of 2007 the Board of Directors adopted stock ownership guidelines for the Company’s executive officers and directors and became effective on March 1, 2007 (the “Effective Date”). 2007. The stock ownership guidelines were amended by the Board of Directors during the first quarter of 2012 to include for the purpose of calculating stock ownership under the Guidelines the beneficial ownership of securities held by executive officers and directors, directly or indirectly, through legal entities established for estate planning purposes (subject to approval by the Compensation Committee) and to confirm inclusion of shares of restricted stock or restricted stock units where the restrictions have lapsed, but for which an election to defer receipt of the shares has been made. These amendments became effective on February 23, 2012. Other than these amendments, the guidelines remain unchanged as originally adopted. The stock ownership guidelines are designed to align the economic interests of executive officers and directors with those of shareholders, and to discourage excessive risk-taking by management and directors.
The guidelines provide that the Company’s executive officers are expected to own a fixed number of shares of common stock of the Company equal to three times such executive officer’s base salary in effect as of the Effective Date divided by the Company’s closing common stock price, as reported on the NYSE, on the Effective Date. For any individual who became an executive officer after the Effective Date, base salary and closing common stock price are determined based on such executive officer’s date of hire or promotion, as applicable. SubjectExecutive officers are required to achieve these ownership levels, subject to a limited hardship exemption, executive officers are expected to meet these ownership guidelines by the later of (1) March 1, 2012 or (2) five
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The guidelines also provide that the Company’s non-executive directors are expected to own a fixed number of shares of common stock of the Company equal to four times such director’s annual retainer (excluding any retainer for chairing or serving as a member of a committee) in effect as of the Effective Date divided by the Company’s closing common stock price, as reported on the NYSE, on the Effective Date. For any individual who became a non-executive director after the Effective Date, annual retainer and closing common stock price are determined based on the date of such director’s initial election to the Board. Non-executive directors are required to achieve these ownership levels, subject to a limited hardship exemption, five years following their initial election to the Board, or (in the case of directors serving on the Board at the time the guidelines were adopted) by March 1, 2012.
The following may be used in determining share ownership:
shares of common stock owned outright by the executive officer or non-executive director and his or her immediate family members who share the same household, whether held individually or jointly;
shares of restricted stock or restricted stock units where the restrictions have lapsed, even though such shares may be subject to an election made by the executive to defer receipt of the shares;
shares acquired upon stock option exercise;
shares purchased in the open market; and
shares held in trusts or other legal entities established for estate planning purposes with respect to which the executive officer or non-executive director retains beneficial ownership (due to complexities of these arrangements, requests to include shares held in such arrangements must be reviewed and approved by the Committee).
The guidelines were based, in part, on information provided by PwC that summarized the frequency of such programs at Fortune 500 companies and reported on the most common types of such programs. Based on such research, the Board of Directors determined that 3X was athree times and four times were fair, yet challenging, base salary multiplemultiples for share ownership and that five years was a reasonable time period during which executives and directors would be able to comply. The Committee believes that these ownership guidelines encourage executive officers and directors of the Company to act in the long-term interests of our shareholders, while discouraging excessive risk-taking.
Our guidelines and the compliance status of the Company’s Named Executive Officers as of March 17, 2010 (excluding Mr. Rusak, to whom the guidelines no longer apply)1, 2012 are shown in the table below.
Shares Needed to | Current Number of | |||||||||
Name | Comply with Guidelines | Shares Held(1) | Compliance Date | |||||||
Damon T. Hininger | 74,135 | 22,269 | October 15, 2014 | |||||||
Todd J Mullenger | 32,271 | 25,351 | March 16, 2012 | |||||||
Richard P. Seiter | 33,695 | 49,513 | March 1, 2012 | |||||||
Anthony L. Grande | 30,348 | 21,620 | August 21, 2013 | |||||||
G. A. Puryear IV | 27,885 | 44,898 | March 1, 2012 | |||||||
John D. Ferguson | 81,332 | 748,985 | (2) | March 1, 2012 |
Name | Shares Needed to Comply with Guidelines | Current Number of Shares Held | Compliance Date | |||||||
Damon T. Hininger | 74,135 | 62,746 | October 15, 2014 | |||||||
Todd J Mullenger | 32,271 | 61,752 | March 16, 2012 | |||||||
Anthony L. Grande | 30,348 | 47,180 | August 21, 2013 | |||||||
John D. Ferguson | 81,332 | 330,118 | (1) | March 1, 2012 | ||||||
Brian D. Collins | 33,035 | 15,166 | September 4, 2014 |
(1) | ||
Includes shares held in |
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Grant Timing Policy. To ensure that our equity compensation awards are granted appropriately, we have the following practices regarding the timing of equity compensation grants and for stock option exercise price determinations:
Grants of stock options and restricted stock for executive officers are typically made on the date of the Company’s February Compensation Committee meeting, after the Committee has had the opportunity to review full year results for the prior year and consider the Company’s anticipated results for the current year.
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Each stock option that was granted in fiscal 2011 had an exercise price equal to the fair market value of the Company’s common stock at the time of grant, as determined by the closing market price on the grant date.
Compensation Decisions for 20102012
Grant of Restricted Stock Units. Although the Company has historically made annual grants of performance-based restricted stock to its executive officers, beginning in February 2009 the Committee decided to make grants of restricted stock units (“RSUs”) to its executive officers in lieu of restricted stock pursuant to the terms of the 2008 Plan. The primary reason for granting RSUs was to provide recipients with the option to elect to defer the receipt of shares upon vesting in accordance with the applicable award agreement and deferral election form, thus enabling the deferral of applicable tax consequences to the recipient beyond the applicable vesting dates. As discussed below, the RSUs granted to executive officers vest in generally the same manner that the Company’s restricted stock (including restricted stock units issued in 2009), has traditionally vested.
EPS | % of Base Salary(1) | |||
$1.15 | 0.00 | % | ||
$1.30 | 78.95 | % | ||
$1.34 | 100.00 | % | ||
$1.40 | 150.00 | % | ||
$1.45 | 200.00 | % |
EPS | % of Base Salary (1) | |||
$1.54 | 0.00 | % | ||
$1.70 | 75.00 | % | ||
$1.74 | 100.00 | % | ||
$1.79 | 150.00 | % | ||
$1.85 | 200.00 | % |
(1) | Awards increase incrementally for EPS results between |
The target for bonuses remainedwas set at 75% of base salary, which will be met if the Company achieves 1.6%10.0% EPS growth over 2009.the EPS achieved for 2011. The maximum bonus was set at 200% of base salary, which will be met if the Company achieves 13.3%20.0% or more EPS growth over 2009.
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Additionally, the Committee determined that the vesting of 20102012 restricted stock unit awards for executive officers will be based on annual compounded EPS growth and three-year cumulative EPS
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Compounded | % of Restricted Share Units | |||||||
Three-Year Cumulative EPS(1) (2) | Growth | Vested After 3 Years | ||||||
Less than $3.09 | < 2 | % | 0 | %(3) | ||||
$3.09 | 2 | % | 50 | %(3) | ||||
$3.40 | 4 | % | 75 | % | ||||
Greater than or equal to $3.72 | 6 | % | 100 | % |
Three-Year Cumulative EPS(1) (2) | Compounded Growth | % of Restricted Share Units Vested After 3 Years | ||||||
Less than $3.21 | < 2 | % | 0 | %(3) | ||||
$3.21 | 2 | % | 50 | %(3) | ||||
$3.69 | 4 | % | 75 | % | ||||
Greater than or equal to $4.18 | 6 | % | 100 | % |
(1) | If EPS for fiscal | |
(2) | If cumulative EPS for fiscal | |
(3) | Unless either or both of the targets for years one and two were met, in which case one-third (1/3) or two-thirds (2/3), as applicable, of the |
As part of its establishment of EPS targets, the Committee also determined that it will adjust EPS for bonus and restricted stock unit vesting purposes to exclude certain limited non-operating events outside the ordinary course, such as goodwill and other impairment charges, and refinancing charges incurred by the Company and future financing or other transactions.
20102012 Equity Grants. During February 2010,March 2012, the Committee made awards of stock options and performance-based restricted stock units to certain of its executive officers. The table below summarizes the 20102012 equity incentive grants to certain of the Company’s executive officers, including the Named Executive Officers (except for Mr. Ferguson and Mr. Rusak)Seiter), which reflects the Committee’s determination that LTIP values for these individuals should generally be aligned with a 50/50 blend of competitive 50th and 75th percentiles for position levels within the benchmarks from the PwC market analysis (except for the General Counsel and Chief Human Resources Officer, to whom the Committee has aligned LTIP values with the 75th percentile).
Time-Based Vesting | Exercise | Performance-Based | ||||||||||
Name | Option Grant | Price(1) | Vesting RSUs(2) | |||||||||
Damon T. Hininger | 107,984 | $ | 20.65 | 39,952 | ||||||||
Todd J Mullenger | 51,989 | $ | 20.65 | 19,235 | ||||||||
Richard P. Seiter | 51,989 | $ | 20.65 | 19,235 | ||||||||
Anthony L. Grande | 51,989 | $ | 20.65 | 19,235 | ||||||||
G.A. Puryear IV | 42,985 | $ | 20.65 | 15,904 |
Name | Shares Subject to Time-Based Vesting Option Grant | Exercise Price(1) | Number of Performance-Based Vesting RSUs(2) | |||||||||
Damon T. Hininger | 118,490 | $ | 26.26 | 33,616 | ||||||||
Todd J Mullenger | 57,047 | $ | 26.26 | 16,184 | ||||||||
Anthony L. Grande | 57,047 | $ | 26.26 | 16,184 | ||||||||
Brian D. Collins | 46,980 | $ | 26.26 | 13,328 |
(1) | The exercise price per share is equal to the fair market value of the common stock on the date of the grant. | |
(2) | The restricted stock units are subject to vesting over a three-year period upon satisfaction of certain performance criteria for the fiscal years ending December 31, |
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Deductibility of Executive Compensation. Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility on the Company’s tax return of compensation over $1.0 million to the Chief Executive Officer or any of the other four most highly compensated executive officers serving at the end of the fiscal year unless, in general, the compensation is paid pursuant to a plan which is performance-related, non-discretionary, and has been approved by our stockholders. The Compensation Committee’s actions with respect to Section 162(m) in 20092011 were to make reasonable efforts to ensure that compensation was deductible to the extent permitted while simultaneously providing appropriate rewards for performance. The Committee intends to structure performance based compensation awarded in the future to executive officers who may be subject to Section 162(m) in a manner that satisfies the relevant requirements. The Committee, however, reserves the authority to award non-deductible compensation as deemed appropriate. Further, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and related regulations, no assurance can be given that compensation intended to satisfy the requirements for deductibility under Section 162(m) will in fact do so.
The following Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with our management. Taking this review and discussion into account, the undersigned Committee members recommended to the Board of Directors that the Board approve the inclusion of the Compensation Discussion and Analysis in our Proxy Statement on Schedule 14A for filing with the SEC.
Submitted by the Compensation Committee of the Board of Directors: |
Joseph V. Russell, Chair
John D. Correnti John R. Horne John R. Prann, Jr. |
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The following table summarizes the compensation paidawarded to our named executive officers with respect to the fiscal year ended December 31, 2009 to (i) John D. Ferguson, our former principal executive officer, (ii) Damon T. Hininger, our current principal executive officer, (iii) Todd J Mullenger, our principal financial officer, (iv) our other three most highly compensated executive officers who were serving in such capacities as of December 31, 2009, and (v) William K. Rusak, our former Executive Vice President and Chief Human Resources Officer2011 (collectively, the “Named Executive Officers”). Effective October 15, 2009, John D. Ferguson retired as Chief Executive Officer but remains Chairman of the Board of Directors. Also effective October 15, 2009, Damon T. Hininger was appointed to serve as Chief Executive Officer of the Company.
Change in | ||||||||||||||||||||||||||||||||||||
Restricted | Non-Equity | Nonqualified | ||||||||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | Deferred | |||||||||||||||||||||||||||||||||
Awards | Awards | Compensation | Compensation | All Other | ||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus | ($)(1) | ($)(2) | ($)(3) | Earnings ($)(4) | Comp.($)(5) | Total ($) | |||||||||||||||||||||||||||
John D. Ferguson(6) | 2009 | $ | 749,858 | — | $ | 0 | $ | 0 | $ | 791,551 | $ | 19,866 | $ | 88,362 | $ | 1,649,637 | ||||||||||||||||||||
Chairman of the | 2008 | $ | 737,179 | — | $ | 694,994 | $ | 695,003 | $ | 958,333 | $ | 24,925 | $ | 93,242 | $ | 3,203,676 | ||||||||||||||||||||
Board and Former Chief Executive Officer | 2007 | $ | 712,249 | — | $ | 695,139 | $ | 641,784 | $ | 1,068,374 | $ | 16,435 | $ | 90,893 | $ | 3,224,874 | ||||||||||||||||||||
Damon T. Hininger(7) | 2009 | $ | 377,885 | — | $ | 438,396 | $ | 477,798 | $ | 398,895 | $ | 2,483 | $ | 38,090 | $ | 1,733,547 | ||||||||||||||||||||
President and Chief | 2008 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Executive Officer | 2007 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Todd J Mullenger | 2009 | $ | 290,000 | — | $ | 209,396 | $ | 248,794 | $ | 306,124 | $ | 8,380 | $ | 33,841 | $ | 1,096,535 | ||||||||||||||||||||
Executive Vice President | 2008 | $ | 280,000 | — | $ | 347,497 | $ | 347,497 | $ | 364,000 | $ | 4,858 | $ | 32,773 | $ | 1,376,625 | ||||||||||||||||||||
and Chief Financial Officer | 2007 | $ | 253,527 | — | $ | 335,442 | $ | 305,086 | $ | 352,568 | $ | 455 | $ | 21,340 | $ | 1,268,418 | ||||||||||||||||||||
Richard P. Seiter | 2009 | $ | 310,655 | — | $ | 209,396 | $ | 248,794 | $ | 327,927 | $ | 5,170 | $ | 36,608 | $ | 1,138,550 | ||||||||||||||||||||
Executive Vice President | 2008 | $ | 305,402 | — | $ | 347,497 | $ | 347,497 | $ | 397,023 | $ | 5,307 | $ | 38,651 | $ | 1,441,377 | ||||||||||||||||||||
and Chief Corrections | 2007 | $ | 295,075 | — | $ | 347,649 | $ | 320,892 | $ | 442,613 | $ | 2,745 | $ | 37,393 | $ | 1,446,367 | ||||||||||||||||||||
Officer | ||||||||||||||||||||||||||||||||||||
Anthony L. Grande(8) | 2009 | $ | 270,000 | — | $ | 209,396 | $ | 248,794 | $ | 285,013 | $ | 2,783 | $ | 30,669 | $ | 1,046,655 | ||||||||||||||||||||
Executive Vice | 2008 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
President and Chief | 2007 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Development Officer | ||||||||||||||||||||||||||||||||||||
G. A. Puryear IV | 2009 | $ | 257,094 | — | $ | 173,247 | $ | 205,837 | $ | 271,389 | — | $ | 1,014 | $ | 908,581 | |||||||||||||||||||||
Executive Vice | 2008 | $ | 252,747 | — | $ | 287,516 | $ | 287,502 | $ | 328,571 | — | $ | 1,035 | $ | 1,157,371 | |||||||||||||||||||||
President, General | 2007 | $ | 244,200 | — | $ | 287,638 | $ | 265,506 | $ | 366,300 | — | $ | 1,070 | $ | 1,164,714 | |||||||||||||||||||||
Counsel, and Secretary | ||||||||||||||||||||||||||||||||||||
William K. Rusak(9) | 2009 | $ | 267,806 | — | $ | 173,247 | $ | 205,837 | $ | 282,696 | $ | 2,965 | $ | 31,558 | $ | 964,109 | ||||||||||||||||||||
Former Executive | 2008 | $ | 263,278 | — | $ | 287,506 | $ | 287,498 | $ | 342,262 | $ | 2,805 | $ | 33,320 | $ | 1,216,669 | ||||||||||||||||||||
Vice President and Chief Human Resources Officer | 2007 | $ | 254,375 | — | $ | 287,638 | $ | 265,506 | $ | 381,562 | $ | 936 | $ | 23,209 | $ | 1,213,226 |
Year | Salary ($) | Bonus | Restricted Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Nonqualified Deferred Compensation Earnings ($)(4) | All Other Comp.($)(5) | Total ($) | ||||||||||||||||||||||||||||
John D. Ferguson(6) | 2011 2010 2009 | $ $ $ | 540,000 543,228 749,858 | — — — | $ $ $ | 0 0 0 | $ $ $ | 0 0 0 | $ $ $ | 1,080,000 869,165 791,551 | $ $ $ | 42,210 23,297 19,866 | $ $ $ | 72,583 68,864 88,362 | $ $ $ | 1,734,793 1,504,554 1,649,637 | ||||||||||||||||||||
Damon T. Hininger(7) | 2011 2010 2009 | $ $ $ | 627,693 600,000 377,885 | — — — | $ $ $ | 882,759 825,009 438,396 | $ $ $ | 882,745 824,998 477,798 | $ $ $ | 1,255,386 960,000 398,895 | $ $ $ | 8,093 4,074 2,483 | $ $ $ | 40,122 52,306 38,090 | $ $ $ | 3,696,798 3,266,387 1,733,547 | ||||||||||||||||||||
Todd J Mullenger | 2011 2010 2009 | $ $ $ | 303,846 290,000 290,000 | — — — | $ $ $ | 425,006 397,203 209,396 | $ $ $ | 424,997 397,196 248,794 | $ $ $ | 607,692 464,000 306,124 | $ $ $ | 33,924 14,101 8,380 | $ $ $ | 39,583 30,948 33,841 | $ $ $ | 1,835,048 1,593,448 1,096,535 | ||||||||||||||||||||
Richard P. Seiter(8) | 2011 2010 2009 | $ $ $ | 310,655 310,655 310,655 | — — — | $ $ $ | 425,006 397,203 209,396 | $ $ $ | 424,997 397,196 248,794 | $ $ $ | 621,310 497,048 327,927 | $ $ $ | 21,989 8,978 5,170 | $ $ $ | 41,609 33,153 36,608 | $ $ $ | 1,845,566 1,644,233 1,138,550 | ||||||||||||||||||||
Anthony L. Grande | 2011 2010 2009 | $ $ $ | 283,847 270,000 270,000 | — — — | $ $ $ | 425,006 397,203 209,396 | $ $ $ | 424,997 397,196 248,794 | $ $ $ | 567,694 432,000 285,013 | $ $ $ | 5,941 3,409 2,783 | $ $ $ | 27,554 27,563 30,669 | $ $ $ | 1,735,039 1,527,371 1,046,655 | ||||||||||||||||||||
Brian D. Collins | 2011 2010 | $ $ | 258,321 248,310 | — — | $ $ | 350,012 328,418 | $ $ | 349,996 328,405 | $ $ | 516,642 397,296 | $ $ | 3,328 1,519 | $ $ | 26,847 21,889 | $ $ | 1,505,146 1,325,837 |
(1) | The amounts shown in this column represent the aggregate grant-date fair value of restricted stock/unit awards for the given year. Restricted stock and unit awards during each year vest over time and are based upon achieving EPS performance objectives that were established by the Compensation Committee each year. The values presented reflect the probability that the performance criteria for all restricted stock awards will be met resulting in 100% vesting of each award. All grants of restricted stock were made |
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under the Company’s 2008 |
(2) | The amounts shown in this column represent the aggregate grant date fair value of option awards for the given year, calculated in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. Assumptions used in the calculation of these amounts are described in Note 14 to the Company’s audited financial statements for the fiscal year ended December 31, 2011, included in the Company’s Annual Report on Form 10-K that was filed with the SEC on February 27, 2012. All grants of options to purchase the Company’s common stock were made under the Company’s 2008 Plan and are subject to individual award agreements, the forms of which were previously filed with the SEC. During 2009, 2010 and 2011, there were no forfeitures of option awards related to service-based vesting conditions for the Named |
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Executive Officers. However, in order to make additional shares available under the Company’s Amended and Restated 2000 Stock Incentive Plan and its 2008 Plan for future equity grants to company employees, on August 12, 2010, CCA entered into a Stock Option Cancellation Agreement with Mr. Ferguson pursuant to which Mr. Ferguson surrendered and cancelled his 2008 option award. Further, Mr. Ferguson asked that he not be considered for equity awards in 2009 so that the Company would continue to have sufficient share awards under the 2008 Plan for awards to other employees. | ||
(3) | The amounts shown in this column reflect cash incentive plan compensation earned pursuant to the Company’s | |
(4) | The amounts shown in this column represent above-market earnings on amounts that the Named Executive Officers chose to defer pursuant to the Company’s Executive Deferred Compensation Plan, which is more fully described under the heading “Nonqualified Deferred Compensation.” | |
(5) | The amounts shown in this column for |