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XPO LOGISTICS, INC. |
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Table of Contents
XPO, LOGISTICS, INC.
Five American Lane
Greenwich, Connecticut 06831
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERSTo Be Held on May 11, 202117, 2023
To the Stockholders of XPO, Logistics, Inc.: Notice is hereby given that the 20212023 Annual Meeting of Stockholders (the "Annual Meeting"“Annual Meeting”) of XPO, Logistics, Inc. ("XPO"(“XPO” or the "company"“company”) will be held on Tuesday,Wednesday, May 11, 202117, 2023 at 10:00 a.m. Eastern Time. The meeting will be conducted exclusively as a webcast due to the public health concerns related to COVID-19.live webcast. You can access the meeting at www.meetingcenter.io/260352583meetnow.global/MU5KPDC with password XPO2021 and a control number that will be issued to you upon request. Please follow the instructions on page 8 of the Proxy Statement to request your control number. The Annual Meeting shall be held for the following purposes summarized below, and more fully described in the Proxy Statement accompanying this notice:
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To elect eight (8)nine (9) members of our Board of Directors for a term to expire at the 20222024 Annual Meeting of Stockholders or until their successors are duly elected and qualified;
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To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2021;
2023;
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To conduct an advisory vote to approve the executive compensation of our named executive officers ("NEOs"(“NEOs”), as disclosed in the Proxy Statement;
and
■To consider and act upon a stockholder proposal regarding additional disclosure of the company's political activities, if properly presented at the Annual Meeting;
■To consider and act upon a stockholder proposal regarding the requirement that the chairman of the board be an independent director, if properly presented at the Annual Meeting;
■To consider and act upon a stockholder proposal regarding the acceleration of executive equity awards in the case of a change in control of the company, if properly presented at the Annual Meeting; and
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To consider and transact other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
Only stockholders of record of our common stock, par value $0.001 per share, and our Series A Convertible Perpetual Preferred Stock, par value $0.001 per share, as of the close of business on April 8, 2021March 31, 2023 are entitled to receive notice of, and to vote at, the Annual Meeting or any adjournment or postponement of the Annual Meeting. A complete list of registered stockholders will be available under the “Documents” tab on the top right corner of your screen during the meeting after entering the control number included on the Notice of Internet Availability of Proxy Materials or any proxy card that you received, or on the materials provided by your bank or broker.
Your vote is important. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented. We ask that you vote your shares as soon as possible.
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By Order of the Board of Directors, | | |
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Brad Jacobs
Chairman and Chief Executive Officer |
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Greenwich, Connecticut
April 13, 2021 |
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By order of the Board of Directors,Brad Jacobs
Executive Chairman
Greenwich, Connecticut
April 20, 2023
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to Be Held on May 11, 2021:17, 2023:
The Proxy Statement and our Annual Report on Form 10-K for the Year Ended December 31, 20202022 are available at www.edocumentview.com/XPO
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PROXY STATEMENT SUMMARY
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QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | | | | |
| | An Overview of Our Mission and How Our Board Composition is Aligned with Our Strategy | | | | |
Directors
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Summary of Qualifications and Experience of Director Nominees
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Role of the Board and | | | | |
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| | Compensation Committee Interlocks and Insider Participation | | | | |
| | Corporate Governance Guidelines and Code of Business Ethics | | | | |
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| | Director Selection Process | | | | |
| | Board Oversight of Human Resource Management | | | | |
| | Board Oversight of Sustainability Matters | | | | |
| | Board Oversight of Information Technology and Cybersecurity Risk Management | | | | |
| | Stockholder Communication with the Board | | | | |
| | Stockholder Proposals for Next Year'sYear’s Annual Meeting | | | | |
| | CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | | | | |
| | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | | | | |
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| | Compensation Discussion and Analysis | | | | |
| | Compensation Committee Report | | | | |
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| | Employment Agreements with NEOs | | | | |
| | Equity Compensation Plan Information | | | | |
AUDIT-RELATED MATTERS
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| | Policy Regarding Pre-Approval of Services Provided by the Outside Auditors | | | | |
| | Services Provided by the Outside Auditors | | | | |
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| | Proposal 1: Election of Directors | | | | |
| | Proposal 2: Ratification of the Appointment of KPMG LLP as ourOur Independent Registered Public Accounting Firm for Fiscal Year 2021 2023 | | | | |
| | Proposal 3: Advisory Vote to Approve Executive Compensation | | | | |
Proposal 4: Stockholder Proposal Regarding Additional Disclosure of the Company's Political Activities
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Proposal 5: Stockholder Proposal Regarding the Requirement that the Chairman of the Board be an Independent Director
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Proposal 6: Stockholder Proposal Regarding Acceleration of Executive Equity Awards in the Case of a Change in Control
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Other Matters
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ADDITIONAL INFORMATION
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ANNEX A—A — RECONCILIATION OF NON-GAAP MEASURES | |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on May 11, 2021:
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This Proxy Statement and our Annual Report on Form 10-K for the Year Ended December 31, 2020 are available at www.edocumentview.com/XPO.
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Table of Contents
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PROXY STATEMENT SUMMARY | | |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on May 17, 2023:
This Proxy Statement and our Annual Report on Form 10-K for the Year Ended December 31, 2022 are available at www.edocumentview.com/XPO.
This Proxy Statement sets forth information relating to the solicitation of proxies by the Board of Directors (the
"Board“Board of
Directors"Directors” or
"Board"“Board”) of XPO,
Logistics, Inc.
(“XPO” or the “company”) in connection with our
20212023 Annual Meeting of
Stockholders.Stockholders (the “Annual Meeting”). This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.
2021 ANNUAL MEETING OF STOCKHOLDERS
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2023 ANNUAL MEETING OF STOCKHOLDERSThis Proxy Statement and form of proxy are first being mailed on or about April 13, 2021,20, 2023 to our stockholders of record as of the close of business on April 8, 2021March 31, 2023 (the "Record Date"“Record Date”).
Admission: You will not be able to attend the The Annual Meeting in person this year.will be conducted exclusively as a live webcast. You can access the Annual Meeting at www.meetingcenter.io/260352583 with password XPO2021.meetnow.global/MU5KPDC. You will need to provide the control number on your proxy card in order to access the Annual Meeting. If the shares of common stock you hold are in an account at a broker, dealer, commercial bank, trust company or other nominee (i.e., in "street name"“street name”), you must register in advance to participate in the Annual Meeting, vote electronically and submit questions during the live webcast of the meeting. To register in advance, you must obtain a legal proxy from the bank, broker or other nominee that holds your shares, giving you the right to vote the shares. Requests for registration should be directed to our transfer agent, Computershare Trust Company, N.A. ("Computershare"(“Computershare”), by email at legalproxy@computershare.com no later than 5:00 p.m. Eastern Time, on Thursday, May 6, 2021.11, 2023. You will receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to www.meetingcenter.io/260352583meetnow.global/MU5KPDC and enter your control number and the meeting password, XPO2021.
VOTING MATTERS AND BOARD RECOMMENDATIONS
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VOTING MATTERS AND BOARD RECOMMENDATIONSThe Board is not aware of any matter that will be presented for a vote at the 2021 Annual Meeting of Stockholders other than those shown below.
ABOUT XPO
XPO is one of the largest providers of asset-based less-than-truckload (LTL) transportation in North America, with proprietary technology that moves goods efficiently through its network. We help companies to de-risk their supply chains by moving their goods using cutting-edge technology. Together with our business in Europe, XPO serves approximately 48,000 customers with 554 locations and 38,000 employees.
In our LTL business, shippers value our national network of professional drivers and owned trucks and terminals. Our LTL coverage in North America extends to every US state, including Alaska and Hawaii, and 99% of all postal codes. The proprietary technology backbone we developed for LTL helps us deliver freight on time and damage-free, while continuously improving network efficiency and generating real-time business intelligence for our customers.
Over the last two years, in order to continue unlocking stockholder value, XPO spun out its contract logistics and truck-brokerage businesses into two new publicly-traded companies, GXO Logistics (“GXO”) and RXO. This transformation positioned XPO on a decisive path to deliver world-class results as the industry’s leading innovator of LTL operations.
Today, XPO is on the radar of every industry that requires freight transportation. We’re proud that we prioritized technology from our first days in business a decade ago, because our innovations are creating better ways to move goods into the hands of the people who need them.
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LEADERSHIP TEAM UPDATE
In August 2022, we announced that Mario Harik will succeed Brad Jacobs as chief executive officer (“CEO”) of XPO and join the Board following the spin-off of RXO. On November 1, 2022, in conjunction with the completion of the spin-off, Mr. Harik became CEO. Mr. Harik has been instrumental in establishing XPO as a transportation leader during his tenures as chief information officer since 2011, chief customer officer since February 2021, and president of the company’s North American Less-Than-Truckload business since October 2021. As a senior leader of the business, Mr. Harik oversaw the development of proprietary technology that is transforming the company’s network operations, pricing management and customer service. Mr. Harik’s experience as president of the LTL business ideally positions him to succeed Brad Jacobs given XPO’s go-forward strategy to become pure-play LTL transportation provider in North America.
In conjunction with the naming of Mr. Harik as CEO, Mr. Jacobs transitioned to the role of executive chairman in order to help facilitate a smooth leadership transition, as well as provide ongoing expertise related to corporate strategy, strategic relationships, corporate development, human capital management and business investment.
In connection with his transition into the CEO role, Mario Harik embarked on a coordinated process to identify new members for our executive team. The Board and management interviewed internal and external candidates and weighed many factors, including individual expertise, experience and demonstrated leadership. At the culmination of the search, the company was pleased to hire the following individuals:
| | Carl Anderson
Chief Financial Officer
(November 2022) | | | Carolyn Roach
Chief Human Resources Officer
(January 2023) | | | Ali Faghri
Chief Strategy Officer
(January 2023) | | | Michael Abrahams
Chief Communications Officer
(January 2023) | | | Wendy Cassity
Chief Legal Officer
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PROPOSAL 4: Stockholder Proposal Regarding Additional Disclosure of the Company's Political Activities
To adopt a requirement that the company provide an annual disclosure of its political activities and related expenditures. |
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RECENT EVENTS — XPO’S TRANFORMATION
XPO’s business has evolved meaningfully in conjunction with the spin-offs of GXO in 2021 and RXO in 2022. As a result of each spin-off, XPO made meaningful changes to its Board composition and executive compensation program to align with the business and retain key talent. Throughout these changes, XPO conducted robust stockholder engagement in order to understand stockholders’ perspectives which informed decisions related to the changes made.
The below graphic provides a timeline of key events in conjunction with our business transformation.
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| | | | | August 2021: ✓
XPO spun off its contract logistics business into a new publicly-traded company, GXO, positioning XPO as a more-focused transportation leader ✓
As a part of the GXO spin-off, four directors departed, and four directors were added to align our Board’s composition with XPO’s post-spin-off strategy ■
New directors included Jason Aiken, Mary Kissel, Allison Landry and Johnny C. Taylor Jr. ✓
Board committees were reconstituted upon the completion of the spin-off and as part of the Board’s annual review of Committee assignments, which included naming an entirely new Compensation Committee consisting of all newly elected directors ■
Johnny C. Taylor Jr. named new Compensation Committee chair | |
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XPO divested its intermodal operation May 2022: ✓
Conducted extensive stockholder engagement with select participation from Compensation Committee members — AnnaMaria DeSalva, Allison Landry and Johnny C. Taylor Jr. — engaging with stockholders representing 55% of shares outstanding ■
Engagements focused on discussing compensation changes the Board approved and understanding stockholder feedback on the program. Engagements also included a discussion on stockholder proposals and other environmental, social and corporate governance (“ESG”) matters ✓
Held 2022 Annual Meeting | |
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PROPOSAL 5: Stockholder Proposal Regarding the Requirement that the Chairman of the Board be an Independent Director
To adopt a requirement that the chairman of the Board be an independent director. |
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PROPOSAL 6: Stockholder Proposal Regarding Acceleration of Executive Equity Awards in the Case of a Change in Control
To adopt a policy that, in the event of a change in control of the company, there shall be no acceleration of vesting of any equity award granted to any senior executive officer. |
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Announced Mario Harik as CEO to succeed Brad Jacobs once the spin-off of RXO was completed ✓
Appointed Brad Jacobs to serve as executive chairman October 2022: ✓
As a part of the planned RXO spin-off, announced three directors would depart and three directors would be added to the Board effective upon completion of the spin-off, in order to continue to align our Board’s composition with XPO’s post-spin-off strategy ■
New directors included Bella Allaire, Mario Harik and Irene Moshouris ✓
Announced strategic LTL growth plan at XPO’s Investor Day, including plan to achieve 11-13% adjusted EBITDA CAGR for six-year period 2021-2027 ✓
Initiated multi-month stockholder engagement with select participation from Compensation Committee members — Allison Landry and Johnny C. Taylor Jr. — culminating in engagement with stockholders representing 44% of shares outstanding ■
Engagements focused on understanding stockholder concerns that drove the say-on-pay vote, as well as seeking feedback related to anticipated compensation adjustments as a result of the RXO spin-off ✓
Named Carl Anderson as Chief Financial Officer (“CFO”), effective November 2022 November 2022: ✓
Completed the spin-off of RXO, our tech-enabled brokered transportation services business unit, positioning XPO as the leading pure-play LTL transportation provider in North America ✓
Refreshed Board leadership ■
Appointed Johnny C. Taylor, Jr. to serve as lead independent director ■
Appointed Allison Landry to serve as Vice Chair and Chair of the Nominating, Governance and Sustainability Committee ✓
Added Irene Moshouris to the Compensation Committee, Nominating, Corporate Governance and Sustainability Committee, and Audit Committee ✓
Added Bella Allaire to the Nominating, Corporate Governance and Sustainability Committee | |
| | | | | January 2023: ✓
Named Carolyn Roach as Chief Human Resources Officer, Ali Faghri as Chief Strategy Officer and Michael Abrahams as Chief Communications Officer ✓
Initiated sustainability roadmap efforts to assess and align on ESG priorities for stand-alone XPO, alongside independent ESG consultant March 2023: ✓
Named Wendy Cassity as Chief Legal Officer ✓
Appointed Wes Frye to XPO’s Board, adding direct LTL operational experience to the Board April 2023: ✓
Created new Operational Excellence Committee of the Board, focused on overseeing the company’s operational strategy and progress ■
Appointed CEO Mario Harik as Chair and Wes Frye and Allison Landry as members | |
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2023 BOARD OF DIRECTORS NOMINEES
Our Board aims to create a diverse and highly skilled team of directors who provide our company with thoughtful board oversight. When selecting new directors, our Board considers, among other things, the nominee’s breadth of experience, financial expertise, integrity, ability to make independent analytical inquiries, understanding of our business environment, skills in areas relevant to our growth drivers and willingness to devote adequate time to Board duties — all in the context of the needs of the Board at that point in time, and with the objective of ensuring a diversity of backgrounds, expertise and viewpoints. Our Board also endeavors to include highly qualified women and individuals from historically underrepresented groups in the candidate pool, and has engaged in a purposeful process of regular refreshment. The composition of our Board as of the Record Date was:
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The following table provides summary information about each director nominee and committee memberships as of the date of this Proxy Statement. Each director is elected annually by a majority of the votes cast.
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Memberships | |
| | Name | | | Director
Since | | | Age | | | Occupation | | | Independent | | | AC | | | CC | | | NCGSC | | | OE | |
| | Brad Jacobs | | | 2011 | | | 66 | | | Executive Chairman of the Board, XPO | | | | | | | | | | | | | | | | |
| | Jason Aiken* | | | 2021 | | | 50 | | | Executive Vice President, Technologies and Chief Financial Officer, General Dynamics Corporation | | | Y | | | C | | | | | | | | | | |
| | Bella Allaire | | | 2022 | | | 69 | | | Executive Vice President of Technology and Operations, Raymond James Financial, Inc. | | | Y | | | | | | | | | ✓ | | | | |
| | Wes Frye | | | 2023 | | | 75 | | | Former Senior Vice President and Chief Financial Officer, Old Dominion Freight Line, Inc. | | | Y | | | | | | | | | | | | ✓ | |
| | Mario Harik | | | 2022 | | | 42 | | | Chief Executive Officer, XPO | | | | | | | | | | | | | | | C | |
| | Michael Jesselson | | | 2011 | | | 71 | | | President and Chief Executive Officer, Jesselson Capital Corporation | | | Y | | | ✓ | | | | | | | | | | |
| | Allison Landry | | | 2021 | | | 44 | | | Former Senior Transportation Research Analyst, Credit Suisse | | | Y | | | | | | ✓ | | | C | | | ✓ | |
| | Irene Moshouris | | | 2022 | | | 62 | | | Senior Vice President-Treasurer, United Rentals, Inc. | | | Y | | | ✓ | | | ✓ | | | ✓ | | | | |
| | Johnny C. Taylor, Jr. | | | 2021 | | | 54 | | | President and Chief Executive Officer, Society of Human Resources Management | | | Y | | | | | | C | | | | | | | |
| | AC = Audit Committee CC = Compensation Committee | | | NCGSC = Nominating, Corporate Governance and Sustainability Committee OE = Operational Excellence Committee | | | C = Committee Chair ✓ = Committee Member * = Audit Committee Financial Expert | |
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SUMMARY OF QUALIFICATIONS AND EXPERIENCE OF DIRECTOR NOMINEES
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Jacobs | | | | Jason
Aiken | | | | Bella
Allaire | | | | Wes
Frye | | | | Mario
Harik | | | | Michael
Jesselson | | | | Allison
Landry | | | | Irene
Moshouris | | | | Johnny C.
Taylor, Jr. | |
| | Core Competencies that Contribute to Service on XPO’s Board | |
| | BUSINESS OPERATIONS experience provides a practical understanding of developing, implementing and assessing our operating plan and business strategy. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | CORPORATE GOVERNANCE experience bolsters Board and management accountability, transparency and a focus on stockholder interests. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | ENVIRONMENTAL SUSTAINABILITY AND CORPORATE RESPONSIBILITY experience allows our Board’s oversight to guide our long-term value creation for stockholders in a way that is sustainable. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | EFFECTIVE CAPITAL ALLOCATION experience is crucial to our Board’s evaluation of our financial statements and capital structure. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | CRITICAL ANALYSIS OF CORPORATE FINANCIAL STATEMENTS AND CAPITAL STRUCTURES experience assists our directors in overseeing our financial reporting and internal controls. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | HUMAN RESOURCES MANAGEMENT experience allows our Board to further our goals of making XPO an inclusive workplace and aligning human resources objectives with our strategic and operational priorities. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | MULTINATIONAL CORPORATE MANAGEMENT experience informs the Board’s strategic thinking, given the global nature of our business. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | RISK MANAGEMENT experience is critical to our Board’s role in overseeing the risks facing our company, including mitigation measures. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | TALENT MANAGEMENT AND ENGAGEMENT experience helps our company attract, motivate and retain top candidates for leadership roles and innovation teams. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Skills Central to XPO’s Strategy | |
| | CUSTOMER SERVICE experience brings an important perspective to our Board, given the importance of customer retention to our business model. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | SALES AND MARKETING experience helps our Board assist with our business strategy and with developing new services and operations. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | MERGERS AND ACQUISITIONS, INTEGRATION AND OPTIMIZATION experience helps our company identify the optimal strategic opportunities for profitable growth and realize synergies. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | TRANSPORTATION AND LOGISTICS INDUSTRY experience is important in understanding our competitive environment and market positioning. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | TECHNOLOGY AND INFORMATION SYSTEMS experience provides valuable insights as we continually seek to enhance customer outcomes and internal operations. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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SUSTAINABILITY CULTURE
Over the past several years, we have embarked on several important environmental initiatives, including piloting electric vehicles, investing in fleet technology, using alternative fuels in certain transport operations and retrofitting service centers with energy efficient features. Now that XPO has focused its business in North America on being an LTL carrier with a business model based entirely on transporting LTL freight safely and responsibly, we are taking a renewed look at our approach to sustainability and are focused on setting short-, medium- and long-term targets that match the expectations of stakeholders and that are aligned with our new operations. This will be the most effective way for XPO to achieve its commitment of net zero emissions by 2050.
Our efforts at reducing our carbon footprint in the short-, medium- and long-term incorporate industry-specific measurement standards as well as the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) standards. In 2022, we have also taken steps to begin to align our climate-related disclosure to the Task Force on Climate-Related Financial Disclosures (TCFD), building on our ongoing SASB and GRI reporting.
Guiding our work is XPO’s materiality matrix, which was developed in 2022 in partnership with an independent firm, FrameworkESG, and describes the ESG and economic issues deemed high priority by our company and our stakeholders. The five highest-rated material issues include: health and safety, employee engagement, climate and greenhouse gas (GHG) emissions, talent management and data security and privacy. A second band of five issues that are important to our company and our stakeholders include: fleet management and innovation, diversity, equity and inclusion, network optimization, corporate governance and ethical conduct.
As we refine our sustainability strategy and pursue ESG-related goals and targets, aligned with our new business, we will be guided by this materiality analysis and mindful of the need to deliver value to our stakeholders. For employees, this means maintaining our established workplace culture that is rooted in physical and mental safety, where employees know they belong and where behavioral expectations are clearly defined in robust ethical guidelines. We reinforce diversity and inclusion through open-door management, a robust training curriculum, our virtual community on Workplace, and equal opportunity hiring and promotion policies. We monitor our progress with an ESG scorecard that measures our performance in six categories, including workforce and talent, employee and community safety, and diversity, equity and inclusion. Information about our workplace initiatives and our latest EEO-1 data is available at xpo.com/about-us/sustainability/.
We are also focused on enhancing environmental sustainability through actions such as investing in a modern fleet, optimizing delivery routes, training drivers in eco-friendly techniques, and purchasing electric trucks to deploy in strategic markets. We are proud to have been named one of America’s Most Responsible Companies by Newsweek, and we are committed to continuing to be a sustainable company by performing to the highest standards of business conduct.
The Nominating, Corporate Governance and Sustainability Committee of the Board continues to oversee, and engage with, management regarding the company’s sustainability strategies, performance and disclosures.
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GOVERNANCE HIGHLIGHTS
| | Board and Committee
Independence | | | Seven of our eight currentnine directors are independent. The Audit Committee, the Compensation Committee and the Nominating, Corporate Governance and Sustainability Committee each consist entirely of independent directors. | |
| | Separation of Chairman and CEO Roles | | | Effective November 1, 2022, upon the completion of the RXO spin-off, Mr. Jacobs, our founder who had been our chairman and CEO since 2011, became our executive chairman, and Mr. Harik became our CEO. Our Board determined that splitting the chairman and CEO roles would be in the best interests of the company and our stockholders in order to facilitate a smooth CEO transition. | |
| | Independent Board Oversight and Leadership Roles | | In 2016, | We are committed to independent Board oversight. Alongside our executive chairman, our Board added a robust lead independent director position to its leadership structure to complement the roles of our independent committees and independent committee chairmen in providing effective Board oversight. In 2019, our Board added the position of an independent vice chairman to its leadership structure to provide support on key governance matters and shareholder engagement to our chairman,includes a lead independent director and the Board. Thesean independent structures work in conjunctionvice chair. Our lead independent director is responsible for, among other duties, coordinating with the dual roles served by our chairman with respect to meeting agendas, and chief executive officer.calling and chairing sessions of the independent directors. Our vice chair is responsible for assisting the lead independent director in carrying out his duties and acting on his behalf when he is not present. The Board believes its leadership structure, as well as the leadership structure of the company, function cohesively and serve the best interests of our stockholders based on the company's strategy and ownership structure. |
| stockholders. | | |
| | Board Refreshment | | |
Board Refreshment | | Our Board is committed to ensuring that its composition includes a range of expertise aligned with the company'scompany’s business, as well as fresh perspectives on strategy. One of the ways the Board acts on this commitment is through the thoughtful refreshment of directors when appropriate. In 2015,Upon the RXO spin-off, the composition of the Board initiated a processchanged to seek out highly qualified director candidates who would bring relevant experiencealign more closely to the company’s business and strategy. Three directors stepped down from the Board, in light of our company's growing scalefive directors including Mr. Jacobs remained on the board, and diversity. This resulted in the addition of three new directors—one in 2016, one in 2017directors including Mr. Harik, our CEO, joined the Board. In March 2023, the Board appointed an additional new director. Each new director brings valuable experience and one in 2019. All three of these directors are female, adding diversityperspectives to ourthe Board. | |
| | Committee Rotations | | |
Committee Rotations | | As part of its annual review of committee assignments, the Board reconstitutedreconstitutes its committees and their chairmenchairs as needed to support the evolving needs of the company. Most recently, the company’s committees were reconstituted in May 2018, March 2019 and April 2020 to ensure effective functioning and new perspectives. |
| November 2022 upon the completion of the RXO spin-off. | | |
| | Director Elections | | |
Director Elections | | All directors are elected annually for one-year terms or until their successors are elected and qualified. | |
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| Majority Voting for Director Elections | | | Our bylaws provide for a majority voting standard in uncontested elections, and further require that a director who fails to receive a majority vote must tender his or her resignation to the Board. |
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| | Board Evaluations | | |
Board Evaluations | | Our Board reviews committee and director performance through an annual process of self-evaluation. | |
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| Risk Oversight and Financial Reporting | | | Our Board seeks to provide robust oversight of current and potential risks facing our company by engaging in regular deliberations and participating in management meetings. Our Audit Committee contributes to strong financial reporting oversight through regular meetings with management and dialogue with our auditors. |
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| | Active Board Participation | | |
Active Participation | | Our Board held 20ten meetings during 2020.2022. Each person currently serving as a director, except Mr. Wes Frye who was elected a director on March 8, 2023, attended at least 93%90% of the meetings of the Board meetings, as well as the meetings ofand any committee(s) on which he or she served.served during the time he or she served on the Board or committee(s). | |
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ClearDirect Oversight of Sustainability | | In December 2020, the Board approved amendments to the charter of the | The Nominating, Corporate Governance and Sustainability Committee to supportis tasked in its charter with supporting the Board in its oversight of the company'scompany’s purpose-driven sustainability strategies and external disclosures; this includes engaging with management on material environmental, social and corporate governance ("ESG")ESG matters and stakeholder perspectives. | |
| | Political Activity Disclosure and Oversight | | |
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In December 2022, the company adopted a Political Activity Policy that gives the Nominating, Corporate Governance and Sustainability Committee final approval over all political contributions by the company. The Policy also includes a commitment to publicly disclosing any political contributions by the company via a dedicated webpage that is easily accessible on the company’s website. |
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Established Operational Excellence Committee | |
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In April 2023, the company established the Operational Excellence Committee to review the company’s strategies and objectives with respect to operational excellence, including continuous improvement of quality and service, operational efficiency, cost control, occupational safety, environmental compliance, and technological innovation. The Committee also will review, with management, reports and key performance indicators relating to progress and trends in company operational excellence and achievement against the company’s strategies and objectives. |
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2021 BOARD OF DIRECTORS NOMINEES
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Our Board aims to create a diverse and highly skilled team of directors who provide our global company with thoughtful board oversight. When selecting new directors, our Board considers, among other things, the nominee's breadth of experience, financial expertise, integrity, ability to make independent analytical inquiries, understanding of our business environment, skills in areas relevant to our growth drivers and willingness to devote adequate time to Board duties—all in the context of the needs of the Board at that point in time, and with the objective of ensuring a diversity of backgrounds, expertise and viewpoints. Our Board also endeavors to include highly qualified women and individuals from underrepresented minority groups in the candidate pool, and has engaged in a purposeful process of regular refreshment. This has resulted in the addition of three new directors to the Board, one in 2016, one in 2017 and one in 2019. All three of these directors are female, adding diversity to our Board. The composition of our Board at year-end 2020 was:
The following table provides summary information about each director nominee. Each director is elected annually by a majority of the votes cast.
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Memberships
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| Name | | Director
Since | | Age | | Occupation | | Independent | | AC | | CC | | NCGSC | | AcqC |
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Brad Jacobs | | 2011 | | 64 | | Chairman and Chief Executive Officer, XPO Logistics, Inc. | | | | | | | | | | |
Gena Ashe | | 2016 | | 59 | | General Counsel and Corporate Secretary, Anterix Inc. | | Y | | ✓ | | | | | | ✓ |
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Marlene Colucci | | 2019 | | 58 | | Executive Director of The Business Council | | Y | | | | ✓ | | | | ✓ |
AnnaMaria DeSalva | | 2017 | | 52 | | Vice Chairman, XPO Logistics, Inc.;
Global Chairman and Chief Executive Officer, Hill+Knowlton Strategies | | Y | | | | | | C | | |
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Michael Jesselson | | 2011 | | 69 | | Lead Independent Director, XPO Logistics, Inc.;
President and Chief Executive Officer, Jesselson Capital Corporation |
| Y | | ✓ | | ✓ | | ✓ | | |
Adrian Kingshott | | 2011 | | 61 | | Chief Executive Officer, AdSon, LLC;
Managing Director, Spotlight Advisors, LLC | | Y | | | | | | | | C |
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Jason Papastavrou* | | 2011 | | 58 | | Founder and Chief Investment Officer, ARIS Capital Management, LLC | | Y | | ✓ | | C | | ✓ | | |
Oren Shaffer* | | 2011 | | 78 | | Former Vice Chairman and Chief Financial Officer, Qwest Communications International, Inc. | | Y | | C | | | | | | |
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AC = Audit Committee
CC = Compensation Committee |
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NCGSC = Nominating, Corporate Governance
and Sustainability Committee
AcqC = Acquisition Committee |
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C = Committee Chairman
✓= Committee Member
* = Audit Committee Financial Expert |
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The following table provides a summary of the qualifications and experience of our director nominees.
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2020 PERFORMANCE HIGHLIGHTS
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XPO generated positive financial achievements in 2020, arising from a financial rebound and upward momentum in the second half of the year. Under the skilled leadership of our NEOs, in 2020 we reported:
* See Annex A for reconciliations of non-GAAP measures
Throughout the COVID-19 pandemic, we have prioritized the health, safety and well-being of our employees and the communities in which we operate, taking these and other measures in 2020:
■Created a cross-disciplinary crisis management team, inclusive of all of our executive officers, to oversee all aspects of our response to COVID-19, including health and safety, operating plan and financial strategy. The Board received frequent updates from this team at formal meetings and through informal participation with this group.
■Implemented Paid Pandemic Sick Leave, which allowed full-time and part-time employees to receive up to 80 and 48 hours of additional paid sick leave, respectively.
■Paid out $57 million in COVID-related costs in the second and third quarters, including Frontline Appreciation Pay, which resulted in warehouse workers earning an additional $2 per hour and salaried employees earning additional weekly sums of $100 to $250.
■Fully covered the cost of COVID-19 testing and made additional resources available to employees and families, including mental health counseling.
■Donated and distributed PPE and other essential supplies in the communities where we operate.
The COVID-19 pandemic also highlighted the benefits of our long-standing investment in technology, which positioned XPO to participate in Operation Warp Speed, the U.S. public-private partnership to distribute vaccine supplies. We leveraged our cold-chain logistics expertise and expedited transportation fleet to help combat the pandemic.
Additional details about XPO's commitment to safety and our strategy for COVID-related risk management can be found on our website at xpo.com/covid19.
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We are pleased to have published our 2020 Sustainability Report highlighting our initiatives in the following areas:
2020 STOCKHOLDER ENGAGEMENT AND RESPONSIVENESS
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XPO's Board and management team are committed to engaging with stockholders to ensure our practices continue to align with the long-term interests of our stockholders. The feedback received during these conversations helped inform the company's compensation, sustainability and human capital management.
In 2020, XPO engaged with stockholders to discuss our governance, compensation, sustainability and business practices in two separate periods—in the weeks leading up to our 2020 Annual Meeting as well as in the latter months of the year, continuing through early 2021.
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Further details about Compensation Committee decisions resulting from stockholder engagement are described in the "Stockholder Outreach and Engagement" section of the Compensation Discussion and Analysis.
2020 COMPENSATION HIGHLIGHTS
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The Compensation Committee's pay-for-performance philosophy is focused on rewarding our executives for performance that creates substantial, long-term value for our stockholders. As a result, long-term incentive compensation is tied to ambitious goals for key operational indicators which incentivize our executives to drive long-term stockholder value creation. Over time, our financial and operational results have demonstrated the merits of this philosophy for our stockholders and our granting practices have proven successful in aligning pay outcomes with performance.
During 2020, NEOs acted decisively to navigate through the pandemic by prioritizing the safety of our employees, while ensuring continuity of service for our customers. The leadership of our NEOs and the resilience of our business model preserved value for our stockholders and positioned the company for a dramatic rebound in the second half of the year. As the economy continues to recover, our strengths are aligned with major industry tailwinds that emerged in 2020: logistics automation, the ongoing growth in e-commerce and supply chain outsourcing. Due in large part to the exemplary leadership of our NEOs in 2020, XPO is well-positioned to capitalize on these strategic opportunities. Accordingly, the Compensation Committee took into account the company's strong financial positioning and recovery at 2020 year-end when determining annual short-term incentive compensation.
In connection with the execution of new, four-year employment agreements, in July 2020, long-term incentive awards were granted to Mr. Jacobs, Mr. Cooper and Mr. Harik. The structure of the award incorporates stockholder feedback received prior to our 2020 Annual Meeting. The awards are fully performance-based and include four tranches vesting through January 2026. Each tranche may be earned at a level ranging from zero to 200% of target value, depending on the degree of achievement of goals tied to both absolute and relative adjusted cash flow per share and ESG performance. If a goal for a given tranche is not achieved, the portion of the award associated with that goal will be forfeited. Awards are based on rigorous performance targets, with no payouts for below-target performance.
Further details about executive compensation decisions are described in the "Executive Compensation Elements and Outcomes for 2020" section of the Compensation Discussion and Analysis.
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QUESTIONS AND ANSWERS
ABOUT OUR ANNUAL MEETING | | |
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This Proxy Statement sets forth information relating to the solicitation of proxies by the Board of Directors (our "Board of Directors" or our "Board") of XPO Logistics, Inc. ("XPO" or our "company") in connection with our 2021 Annual Meeting of Stockholders (the "Annual Meeting") or any adjournment or postponement thereof. This Proxy Statement is being furnished
STOCKHOLDER OUTREACH AND ENGAGEMENT
Through collaboration by our Board for use at the Annual Meeting to be held on May 11, 2021 at 10:00 a.m. Eastern Time as a webcast due to the public health concerns related to COVID-19. You can access the meeting at www.meetingcenter.io/260352583 with password XPO2021. You will also be required to have a control number to access the Annual Meeting. Please follow the instructions below to receive your control number.This Proxy Statementinvestor relations team, management team and form of proxy are first being mailed on or about April 13, 2021, to our stockholders of record as of the close of business on April 8, 2021 (the "Record Date").
The following answers address some questions you may have regarding our Annual Meeting. These questions and answers may not include all of the information that may be important to you as a stockholder of our company. Please refer to the more detailed information contained elsewhere in this Proxy Statement.
What items of business will be voted on at the Annual Meeting?
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We expect that the business put forth for a vote at the Annual Meeting will be as follows:
■To elect eight (8) members of our Board, XPO has a robust year-round governance-focused stockholder engagement program. This program involves discussions about various matters of Directors forinterest, such as our business and strategic priorities, financial and operating performance, corporate governance initiatives, executive compensation, ESG-related disclosures and practices, diversity and inclusion culture, human capital management and risk management. Feedback gathered from our stockholders throughout the year is regularly considered by the Board and management team, as the Board greatly values stockholder insights that help inform the decision-making processes and enhancements to XPO’s policies and disclosures.
The Compensation Committee considers dialogue with existing stockholders to be especially critical in formulating our executive compensation philosophy and program. To that end, as a term to expire atpart of a holistic compensation review, following the 2022 Annual Meeting of Stockholders, or until their successors are duly electedXPO conducted a robust outreach and qualified (Proposal 1);
■To ratifyengagement program which members of the appointmentCompensation Committee participated in. Compensation Committee members participated in meetings with stockholders holding 31% of KPMG LLP ("KPMG") as our independent registered public accounting firmcommon stock. A priority of the engagement initiative was to further understand the stockholder concerns that drove the 2022 say-on-pay vote in order to inform the design of Mr. Harik and new management team’s compensation program. Additionally, in preparation for fiscal year 2021 (Proposal 2);
■To conduct an advisory votethe closing of the RXO spin-off, another priority was to approveseek stockholder feedback on how to address the outstanding, in-flight awards.
Our robust engagement program included outreach to a broad range of our stockholders, with engagement statistics outlined below:
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RESPONSIVENESS TO 2022 SAY-ON-PAY VOTE
The following chart summarizes: (i) the executive compensation offeedback provided by our named executive officers ("NEOs") as disclosedstockholders through our focused engagement, and (ii) the ways in this Proxy Statement (Proposal 3);
■To consider and act upon a stockholder proposal regarding additional disclosure of the company's political activities, if properly presented at the Annual Meeting (Proposal 4);
■To consider and act upon a stockholder proposal regarding the appointment of an independent chairman of the board, if properly presented at the Annual Meeting (Proposal 5);
■To consider and act upon a stockholder proposal regarding the acceleration of executive equity awards in the case of a change in control of the company, if properly presented at the Annual Meeting (Proposal 6); and
■To consider and transact other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.Senior management of XPO and representatives of our outside auditor, KPMG, will be available to respond to appropriate questions.
Who can attend and vote at the Annual Meeting?
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You are entitled to receive notice of, attend and vote at the Annual Meeting, or any adjournment or postponement thereof, if, as of the close of business on April 8, 2021, the Record Date, you were a holder of record of our common stock or Series A Convertible Perpetual Preferred Stock (the "Series A Preferred Stock").
You will not be able to attend the Annual Meeting in person this year due to COVID-19 safety precautions. You can access the Annual Meeting at www.meetingcenter.io/260352583 with password XPO2021. You will be required to provide the control number on your proxy card to access the Annual Meeting. If the shares of common stock you hold are in an account at a broker, dealer, commercial bank, trust company or other nominee (i.e., in "street name"), you must register in advance to participate in the Annual Meeting, vote electronically and submit questions during the live webcast of the meeting. To register, you must obtain a legal proxy from the bank, broker or other nominee that holds your shares giving you the right to vote the shares. Requests for registration should be directed to Computershare by email at legalproxy@computershare.com no later than 5:00 p.m. Eastern Time, on Thursday, May 6, 2021. You will receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to www.meetingcenter.io/260352583 and enter your control number and the meeting password, XPO2021.
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Can I ask questions during the Annual Meeting?
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Stockholders (or their proxy holders) may submit questions for the Annual Meeting's question and answer session in advance by logging on to the meeting site at www.meetingcenter.io/260352583 with password XPO2021. You will need the control number on your proxy card or confirmation email from Computershare in order to submit a question. Click on the "message" icon at the top of the screen and submit your question. Please provide your name, address (city and state) and organization, and, if applicable, the specific proposal to which your question relates. Questions can be submitted in advance of the Annual Meeting beginning at 9:00 a.m., Eastern Time, on May 10, 2021. Questions may also be submitted during the Annual Meeting through the meeting website. We will answer as many questions during the meeting as time will allow and will group questions together where appropriate.
How many shares of XPO common stock or Series A Preferred Stock must be present to conduct business at the Annual Meeting?
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As of the Record Date, there were 111,676,088 shares of common stock issued and outstanding, with each share entitled to one vote on each matter to come before the Annual Meeting. In addition, each share of Series A Preferred Stock is entitled to vote on each matter to come before the Annual Meeting as if the shares of Series A Preferred Stock were converted into shares of common stock as of the Record Date, meaning that each share of Series A Preferred Stock is entitled to approximately 143 votes on each matter to come before the Annual Meeting. As of the Record Date, there were 40 shares of Series A Preferred Stock issued and outstanding, representing 5,714 votes. In total, 111,681,802 votes are eligible to be cast at the Annual Meeting based on the number of outstanding shares of our common stock and Series A Preferred Stock, voting together as a single class.
A quorum is necessary to hold a valid meeting of stockholders. Pursuant to the company's bylaws, the presence, in person or by proxy, of the holders of a majority of the shares issued and outstanding is necessary for each of the proposals to be presented at the Annual Meeting. Accordingly, holders of shares of our common stock or Series A Preferred Stock outstanding on the Record Date representing 55,840,902 votes must be present at the Annual Meeting. If you vote by internet, telephone or proxy card, the shares you vote will be counted toward the quorum for the Annual Meeting. Abstentions and broker non-votes are counted as present for the purpose of determining a quorum.
What are my voting choices?
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With respect to the election of directors, you may vote "FOR" or "AGAINST" each of the director nominees, or you may "ABSTAIN" from voting for one or more of such nominees. With respect to the other proposals to be considered at the Annual Meeting, you may vote "FOR" or "AGAINST" or you may "ABSTAIN" from voting on any proposal. If you sign your proxy without giving specific instructions, your shares will be voted in accordance with the recommendations of our Board of Directors with respect to the specific proposals described in this Proxy Statement and at the discretion of the proxy holders on any other matters that properly come before the Annual Meeting.
What vote is required to approve the proposals being considered at the Annual Meeting?
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■Proposal 1: Election of eight (8) directors. The election of each of the eight (8) director nominees named in this Proxy Statement requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" a nominee must exceed the number of shares voted "against" such nominee) by holders of shares of our common stock (including those shares that would be issued if all of our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present. If any incumbent director standing for re-election receives a greater number of votes "against" his or her election than votes "for" such election, our bylaws require that such person must promptly tender his or her resignation to our Board of Directors. You may not accumulate your votes for the election of directors.
Brokers may not use discretionary authority to vote shares of our common stock on the election of directors if they have not received specific instructions from their clients. If you are a beneficial owner of shares of our common stock, in order for your vote to be counted in the election of directors, you will need to communicate your voting decisions to your bank, broker or other nominee before the date of the Annual Meeting in accordance with their specific instructions. Abstentions and broker non-votes are not considered votes cast for purposes of tabulation and will have no effect on the election of director nominees.
■Proposal 2: Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2021. Ratification of the appointment of KPMG as our independent registered public accounting firm for the year ending December 31, 2021 requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those shares that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present. Abstentions are not considered votes cast for purposes of tabulation and will have no effect on the proposed ratification of KPMG. We do not expect any broker non-votes, as brokers have discretionary authority to vote on this proposal.
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■Proposal 3: Advisory vote to approve executive compensation. Advisory approval of the resolution on executive compensation of our NEOs as disclosed in this Proxy Statement requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those shares that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present. This resolution, commonly referred to as a "say-on-pay" resolution, is not binding on our Board of Directors. Although non-binding, our Board and the Compensation Committee will consider the voting results when making futuresought to address this feedback in its decisions regarding ouron prospective executive compensation program.
Brokers may not use discretionary authority to vote shares of our common stock on the advisory vote to approve executive compensation if they have not received specific instructions from their clients. If you are a beneficial owner of shares of our common stock, in order for your vote to be counted in the advisory vote to approve executive compensation, you will need to communicate your voting decisions to your bank, broker or other nominee before the date of the Annual Meeting in accordance with their specific instructions. Abstentionspay design and broker non-votes are not considered votes cast for purposes of tabulation and will have no effect on the advisory vote to approve executive compensation.
■Proposal 4: Stockholder proposal regarding additional disclosure of the company's political activities. Approval of a requirement that the company issue an annual report disclosing the company's political activities and related expenditures requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those shares that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
Brokers may not use discretionary authority to vote shares of our common stock on this stockholder proposal if they have not received specific instructions from their clients. If you are a beneficial owner of shares of our common stock, for your vote to be counted for or against the stockholder proposal, you will need to communicate your voting decision to your bank, broker or other nominee before the date of the Annual Meeting in accordance with their specific instructions. Abstentions and broker non-votes are not considered votes cast for purposes of tabulation and will have no effect on the vote on this stockholder proposal.
■Proposal 5: Stockholder proposal regarding the requirement that the chairman of the board be an independent director. Approval of a policy requiring that the chairman of the board of directors be appointed from among independent directors requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those shares that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
Brokers may not use discretionary authority to vote shares of our common stock on this stockholder proposal if they have not received specific instructions from their clients. If you are a beneficial owner of shares of our common stock, for your vote to be counted for or against the stockholder proposal, you will need to communicate your voting decision to your bank, broker or other nominee before the date of the Annual Meeting in accordance with their specific instructions. Abstentions and broker non-votes are not considered votes cast for purposes of tabulation and will have no effect on the vote on this stockholder proposal.
■Proposal 6: Stockholder proposal regarding acceleration of executive equity awards in the case of a change in control. Approval of a policy requiring that there shall be no acceleration of vesting of senior executive officers' equity awards in the event of a change in control of the company requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those shares that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
Brokers may not use discretionary authority to vote shares of our common stock on this stockholder proposal if they have not received specific instructions from their clients. If you are a beneficial owner of shares of our common stock, for your vote to be counted for or against the stockholder proposal, you will need to communicate your voting decision to your bank, broker or other nominee before the date of the Annual Meeting in accordance with their specific instructions. Abstentions and broker non-votes are not considered votes cast for purposes of tabulation and will have no effect on the vote on this stockholder proposal.
In general, other business properly brought before the Annual Meeting at which a quorum is present requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those shares that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date).
disclosures.
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How does the Board of Directors recommend that I vote?
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Our Board of Directors, after careful consideration, recommends that our stockholders vote "FOR" the election of each director nominee named in this Proxy Statement, "FOR" ratification of KPMG as our independent registered public accounting firm for fiscal year 2021, "FOR" the advisory approval of the resolution to approve executive compensation, "AGAINST" the approval of the stockholder proposal regarding additional disclosure of the company's political activities, if such proposal is properly presented at the meeting; "AGAINST" the approval of the stockholder proposal regarding the requirement that the chairman of the board be an independent director, if such proposal is properly presented at the meeting; and "AGAINST" the approval of the stockholder proposal regarding acceleration of executive equity awards in the case of a change in control, if such proposal is properly presented at the meeting.
What do I need to do now?
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We urge you to read this Proxy Statement carefully, then vote via internet or by telephone by following the instructions on the proxy card, or mail your completed, dated and signed proxy card in the enclosed return envelope as soon as possible, so that your shares of our common stock can be voted at the Annual Meeting.
Registered Stockholders. If you are a registered stockholder (i.e., you hold your shares in your own name through our transfer agent, Computershare Trust Company, N.A., and not through a broker, bank or other nominee that holds shares for your account in "street name"), you may vote by proxy via internet or by telephone by following the instructions provided on the proxy card, or mail your completed, dated and signed proxy card in the enclosed return envelope. Proxies submitted via internet or by telephone must be received by 1:00 a.m. Eastern Time on May 11, 2021. Please see the proxy card provided to you for instructions on how to submit your proxy via internet or by telephone. Stockholders of record who attend the Annual Meeting may vote directly at the Annual Meeting by following the instructions provided during the Annual Meeting.
Beneficial Owners. If you are a beneficial owner of shares (i.e., your shares are held in the name of a brokerage firm, bank or a trustee), you may vote by proxy by following the instructions provided in the voting instruction form or other materials provided to you by the brokerage firm, bank or other nominee that holds your shares. To vote directly at the Annual Meeting, you must obtain a legal proxy from the brokerage firm, bank or other nominee that holds your shares. Follow the instructions provided above to obtain a control number and the voting instructions provided during the Annual Meeting.
What is the deadline to vote?
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If you hold shares as the stockholder of record, your vote by proxy must be received before the polls close at the Annual Meeting. As indicated on the proxy card provided to you, proxies submitted via internet or by telephone must be received by 1:00 a.m. Eastern Time on May 11, 2021.
If you are the beneficial owner of shares of our common stock, please follow the voting instructions provided by your broker, trustee or other nominee.
What happens if I do not respond, or if I respond and fail to indicate my voting preference, or if I abstain from voting?
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If you fail to vote via internet or by telephone as indicated on your proxy card, or fail to properly sign, date and return your proxy card, your shares will not be counted towards establishing a quorum for the Annual Meeting, which requires holders representing a majority of the outstanding shares of our common stock (including those that would be issued if all of our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) to be present in person or by proxy.
Failure to vote, assuming the presence of a quorum, will have no effect on the tabulation of the votes on the proposals. If you are a stockholder of record and you properly sign, date and return your proxy card, but do not indicate your voting preference, we will count your proxy as a vote "FOR" the election of the eight nominees for director named in "Proposal 1—Election of Directors," "FOR" ratification of KPMG as our independent registered public accounting firm for fiscal year 2021, "FOR" advisory approval of the resolution to approve executive compensation, "AGAINST" the approval of the stockholder proposal regarding additional disclosure of the company's political activities, if such proposal is properly presented at the meeting; "AGAINST" the approval of the stockholder proposal regarding the requirement that the chairman of the board be an independent director, if such proposal is properly presented at the meeting; and "AGAINST" the approval of the stockholder proposal regarding acceleration of executive equity awards in the case of a change in control, if such proposal is properly presented at the meeting.
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If my shares are held in "street name" by my broker, dealer, commercial bank, trust company or other nominee, will my broker or other nominee vote my shares for me?
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You should instruct your broker or other nominee on how to vote your shares of our common stock using the instructions they provide to you. Brokers or other nominees who hold shares of our common stock in "street name" for customers are prevented by the rules set forth in the Listed Company Manual (the "NYSE Rules") of the New York Stock Exchange (the "NYSE") from exercising voting discretion with respect to non-routine or contested matters (i.e., they must receive specific voting instructions from a stockholder in order to vote that stockholder's shares on non-routine or contested matters). Shares not voted by a broker or other nominee, because they did not receive specific voting instructions from the stockholder on one or more proposals, are referred to as "broker non-votes."
We expect that when the NYSE determines whether each of the six proposals to be voted on at our Annual Meeting is a routine or non-routine matter, only "Proposal 2—Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for Fiscal Year 2021" will be determined to be routine. It is important that you instruct your broker or other nominee on how to vote your shares of our common stock held in "street name" by following the instructions provided to you by your broker or other nominee.
What if I want to change my vote?
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Whether you attend the Annual Meeting or not, you may revoke a proxy at any time before your proxy is voted at the Annual Meeting. You may do so by properly delivering a later-dated proxy either via internet, by telephone, by mail, or by attending the Annual Meeting virtually and voting. Please note, however, that your attendance at the Annual Meeting will not automatically revoke any prior proxy, unless you vote again at the Annual Meeting or specifically request in writing that your prior proxy be revoked. You also may revoke your proxy by delivering a notice of revocation to our company (Attention: Secretary, XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831) prior to the vote at the Annual Meeting. If you hold your shares through a broker, dealer, commercial bank, trust company or other nominee, you should follow the instructions of your broker or other nominee regarding revocation of proxies.
How will the persons named as proxies vote?
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If you are a registered stockholder (i.e., you hold your shares of our common stock in your own name through our transfer agent, Computershare Trust Company, N.A., and not through a broker, bank or other nominee that holds shares for your account in "street name") and you complete and submit a proxy, the persons named as proxies will follow your instructions. If you submit a proxy but do not provide voting instructions, or if your instructions are unclear, the persons named as proxies will vote as recommended by our Board of Directors or, if no recommendation is given, by using their own discretion.
Where can I find the results of the voting?
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We intend to announce preliminary voting results at the Annual Meeting and will publish final results on a Current Report on Form 8-K to be filed with the U.S. Securities and Exchange Commission (the "SEC") within four (4) business days after the Annual Meeting. The Current Report on Form 8-K will also be available on the internet at our website, www.xpo.com.
Who will pay for the cost of soliciting proxies?
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The company will pay for the cost of soliciting proxies. We have engaged Innisfree M&A Incorporated to assist us in soliciting proxies in connection with the Annual Meeting and have agreed to pay them approximately $15,000 plus their expenses for providing such services. Our directors, officers and other employees, without additional compensation, may solicit proxies personally, in writing, by telephone, by e-mail or otherwise. As is customary, we will reimburse brokerage firms, fiduciaries, voting trustees and other nominees for forwarding our proxy materials to each beneficial owner of shares of our common stock or Series A Preferred Stock held of the Record Date through them.
What is "householding" and how does it affect me?
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In cases where multiple company stockholders share the same address, and the shares are held through a bank, broker or other holder of record ("street-name stockholders"), only one copy of our proxy materials will be delivered to that address unless a stockholder at that address requests otherwise. This practice, known as "householding," is intended to reduce our printing and postage costs. However, any such street-name stockholders residing at the same address who wish to receive a separate copy of our proxy materials may request a copy by contacting their bank, broker or other holder of record, or by sending a written request to: Investor Relations, XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831, or by contacting Investor Relations by telephone at 1-855-976-6951. The voting instruction form sent to a street-name stockholder should provide information on how to request a separate copy of future materials for each company stockholder at that address, if that is your preference.
Can I obtain an electronic copy of the company's proxy materials?
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Yes, this Proxy Statement and our 2020 Annual Report are available on the internet at www.edocumentview.com/XPO.
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CORPORATE GOVERNANCE | | |
| | | Modifications to Outstanding Awards | | |
| | | Equity Mix | | | | | | |
| | | ■
Stockholders generally expressed a preference for the outstanding 2020 Cash Long-Term Incentive (“LTI”) performance-based awards to incorporate an equity component, as opposed to being entirely cash-based. | | | | ■
Converted 100% of the target value of Mr. Jacobs and Mr. Harik’s final 2023 tranche of the 2020 Cash LTI performance-based awards into performance-based equity. | | |
| | | Metrics | | | | | | |
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Some stockholders expressed a preference to remove the adjusted cash flow per share metric in the 2020 Cash LTI performance-based awards and, in choosing new operational or financial metrics for go-forward performance-based stock unit (“PSU”) awards, to exclude gains from sales of real estate in calculating the selected measures. ■
Most stockholders continued to support the inclusion of relative metrics, such as relative total shareholder return (“TSR”), in LTI award structures. | | | | ■
Eliminated the adjusted cash flow per share metric from the final 2023 tranche of the 2020 Cash LTI performance-based awards and replaced it with a relative TSR metric to further align executive compensation with stockholder interests. ■
Operational and financial metrics used in our PSU award constructs exclude the impact of gains from real estate sales. | | |
| | | Change-in-Control Provision | | | | | | |
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Stockholders inquired about the Compensation Committee’s stance on moving away from a single-trigger change-in-control provision in the previously granted awards, and indicated a preference for double-trigger provisions. | | | | ■
Eliminated single-trigger change-in-control provisions from outstanding performance-based awards held by NEOs, including those converted following the RXO spin-off; double-trigger provisions have now been applied to all outstanding awards. | | |
| | | Go-Forward Compensation Program Structure | | |
| | | Formulaic Structure | | | | | | |
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Stockholders expressed a preference for short-term incentive (“STI”) and LTI program structures to be less discretionary, more predictable and more formulaic. | | | | ■
Committed to a STI award that is purely formulaic •
2023 Annual Incentive for executive chairman, CEO and CFO based on adjusted EBITDA, with the application of a linear bonus payout curve from 50% threshold for performance at 90% of target to 200% at maximum for 120% of target ■
Adopted a formulaic LTI program with multiyear vesting periods, to be granted annually; this further reinforces a reliable, predictable incentive structure and aligns pay with performance •
For executive chairman and CEO 80% of the award opportunity in the form of performance-based RSUs and 20% as time-based RSUs •
For CFO 65% of the award opportunity in the form of performance-based RSUs and 35% as time-based RSUs | | |
| | | CEO Promotion | | | | | | |
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Stockholders overall asked for XPO to continue its robust disclosure of the CEO compensation package and sought to understand the structure of the Promotion PSU award granted to Mr. Harik in connection with his transition to the CEO position after the RXO spin-off. | | | | ■
As described further in this CD&A, Mr. Harik received a promotion award at his assumption to the CEO role to recognize his contributions to date and provide a competitive compensation package commensurate with the role. The Promotion PSU award is based entirely on achieving challenging relative TSR goals over a four-year cliff period, with target paying out if XPO’s performance is at the 67th percentile relative to the S&P Midcap 400, and payout of 150% of target if performance is at the 83rd percentile ranking, with a chance to qualify for a modifier (up to a cap of 200% total payout) if XPO’s TSR further outperforms select transportation peers. | | |
| | | CD&A Disclosure | | | | | | |
| | | ■
Stockholders requested more clear disclosure of the Compensation Committee’s considerations with respect to how it structured LTIs awarded to top executives, the reasoning behind the metrics chosen, and the level of pay granted. | | | | ■
The CD&A discloses the Compensation Committee’s considerations around changes made to executive awards, which included reevaluating the pay program’s structure in the context of stockholder feedback, and its relevance for the current company after two successive spin-offs. | | |
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AN OVERVIEW OF OUR MISSION AND HOW OUR BOARD COMPOSITION IS ALIGNED WITH OUR STRATEGY
| | WHAT WE HEARD FROM STOCKHOLDERS | | | | RESPONSIVE ACTIONS | | |
| | | ■
Stockholders requested more clarity around the Compensation Committee’s use of a 25% modifier in the STI formula and the use of an ESG Scorecard. | | | | ■
The CD&A includes a thorough description of the Compensation Committee’s go-forward approach to executive compensation, including the removal of discretionary components of the STI program and a new construct for the annual LTI awards. ■
The Compensation Committee expanded its disclosure of the initiatives embedded in the ESG scorecard by providing a view of all 43 deliverables relevant to the determination of 2022 performance achievement within the 2020 Cash LTI program, as well as the adjustments to the scorecard deemed necessary by the Compensation Committee in connection with the RXO spin-off for the final 2023 tranche of the award (now a part of a replacement PSU structure, remaining at a weighting of 25%). See Annex B entitled “ESG Scorecard — 2022 Deliverables and Achievements”. | | |
COMPENSATION GOVERNANCE HIGHLIGHTS
The company has adopted a compensation governance framework that includes the components described below, each of which the Committee believes reinforces the company’s executive compensation philosophy.
| WHAT WE DO | | | WHAT WE DON’T DO | |
![[MISSING IMAGE: ic_tickmarkgray-bw.jpg]](/files/DEF 14A/0001104659-23-047333/ic_tickmarkgray-bw.jpg) Significant emphasis on variable compensation. Our compensation program is heavily weighted toward variable compensation, including LTIs that are majority performance-based, and annual short-term cash incentives that are formulaically determined based on adjusted EBITDA. This allows the Committee to closely align total compensation values with company performance on an annual and long-term basis. | | | ![[MISSING IMAGE: ic_wedont-bw.jpg]](/files/DEF 14A/0001104659-23-047333/ic_wedont-bw.jpg) No exceptional perquisites. Our NEOs have no relocation benefits or supplemental pension or retirement savings beyond what is provided broadly to all XPO employees. In addition, our NEOs have no personal use of executive health services, club memberships, stipends or financial planning services. | |
Substantial portion of compensation linked to creation of stockholder value. Performance-based awards are, and have been, subject to meaningful stock price and/or earnings-related performance goals measured over service-based vesting periods. While performance-based awards have an important role in sustaining the NEOs’ focus on the company’s strategic objectives, the Committee also regularly reviews the full portfolio of XPO stockholdings for each NEO to ensure there is a sufficient amount of compensation at risk if the objectives are not met, further aligning compensation with stockholder returns and value creation, while sustaining the NEOs’ focus on the company’s strategic objectives. | | | No pledging or hedging of company stock. Under our insider trading policy, our company’s directors and executive officers, including the NEOs, are prohibited from pledging or holding company securities in a margin account. In addition, they are prohibited from engaging in hedging transactions, such as prepaid variable forwards, equity swaps, collars and exchange funds or any other transactions that are designed to or have the effect of hedging or offsetting any decrease in the market value of company equity securities. | |
Stock ownership policies. The Board has established stock ownership guidelines and stock retention requirements that encourage a strong ownership mindset among our NEOs. Our ownership guidelines reflect 6x annual base salary for our CEO and 3x annual base salary for our other NEOs. In addition, certain awards of our executive chairman and CEO were amended during 2022 to include one-year holding periods after vesting, as described above. | | | No guaranteed annual salary increases. Salary increases are not guaranteed annually and are benchmarked against market values. | |
Clawback policy. Our NEOs are subject to clawback restrictions with respect to incentive compensation. | | | No stock option repricing or discounted exercise price. Our company’s equity incentive plan does not permit either stock option repricing without stockholder approval or stock option awards with an exercise price below fair market value. | |
Restrictive covenants. Our NEOs are subject to comprehensive non-competition and other restrictive covenants. | | | No golden parachute excise tax gross-ups. XPO does not provide golden parachute excise tax gross-ups. | |
Engage with stockholders. Our Board values stockholder feedback and carefully considers investor perspectives for incorporation into its decision-making processes for governance, compensation and sustainability practices. | | | No consultant conflicts. The Committee retains an independent compensation consultant who performs services only for the Committee, as described in more detail below under the heading Role of the Committee’s Independent Compensation Consultant. | |
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BOARD OF DIRECTORS AND
AN OVERVIEW OF OUR MISSION AND HOW OUR BOARD COMPOSITION IS ALIGNED WITH OUR STRATEGY
Our company’s mission is to be the leading provider of cutting-edge supply chain solutions to the most successful companies in the worldfreight transportation services and help our customers manage theirmove goods most efficiently throughoutthrough their supply chains. We run our business on a global basis, with more than 50,000 customers served by over 100,000 employees and 1,629 locations in 30 countries, primarilychains in North America and Europe.Our business has two segments, transportationEurope using our proprietary technology. We serve 48,000 customers with 554 locations and logistics—each has robust service offerings, leadership positions and growth prospects. Our transportation segment primarily provides less-than-truckload (LTL) and truck brokerage services in North America and Europe. We are a top three provider of LTL services in North America, and we have one of the largest LTL networks in Western Europe. In addition, we are the second largest truck brokerage provider globally. Our logistics segment provides order fulfillment and other distribution services differentiated by our ability to deliver technology-enabled, customized solutions. We are the second largest logistics company in the world, with one of the largest outsourced e-commerce fulfilment platforms. Our logistics customers include many preeminent companies that benefit from our scale, automation and range of vertical expertise. Our blueprint for transforming supply chain management is rooted in innovation and revolves around our people.38,000 employees. We care deeply about keeping our employees and customers happy, and we view safety, sustainability, strong governance and a purpose-driven culture as essential components of value creation. In addition,
Our company has two reportable segments: North American Less-Than-Truckload (“North American LTL”), the largest component of our companybusiness, and European Transportation. LTL in North America is a leading proponentbedrock industry providing a critical service to the economy, with favorable pricing dynamics and a stable competitive landscape. We have one of supply chain technology,the industry’s largest asset-based, national networks of tractors, trailers, terminals and drivers in North America, serving approximately 27,000 customers. We provide shippers with a global teamcritical geographic density and day-definite domestic and cross-border services to approximately 99% of technologistsU.S. zip codes, as well as Mexico, Canada and data scientists who concentrate their efforts in four areasthe Caribbean. Together, our capacity and reach give us the ability to manage large freight volumes efficiently and balance our network to leverage fixed costs. For the year ended December 31, 2022, we delivered approximately 18 billion pounds of innovation: automation and intelligent machines; visibility and customer service; our proprietary digital transportation platform; and dynamic data science.freight.
Our Board of Directors consists of a highly skilled group of leaders who share our values and reflect our culture. Many of our directors have served as executive officers or board members of major companies and have an extensive understanding of the principles of corporate governance. In addition, our directors have a strong owner orientation—as of the Record Date, approximately 17.5% of the voting power of our capital stock is held by our directors or by entities or persons related to our directors. As described on page 19,6, our Board as a whole has extensive expertise in the followingand skill sets, all of which are relevant to our company, business, industry and strategy:■Business operations;
■Corporate governance;
■Customer service;
■Environmental sustainability and corporate responsibility;
■Effective capital allocation;
■Critical analysis of corporate financial statements and capital structures;
■Human resource management;
■Multinational corporate management;
■Sales and marketing;
■Mergers and acquisitions, integration and optimization;
■The transportation and logistics industry;
■Risk management;
■Talent management and engagement; and
■Technology and information systems.
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Our Board of Directors currently consists of eight (8) members as set forth in the table below.nine (9) members. The current term of each of our directors will expire at the 2021 Annual Meeting. Our Board has nominated all of the current directors to stand for election at the Annual Meeting, as set forth in Proposal 1 on page 6678 of this Proxy Statement.
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Brad Jacobs | | Chairman and Chief Executive Officer, XPO Logistics, Inc. |
Gena Ashe | | General Counsel and Corporate Secretary, Anterix Inc. |
Marlene Colucci | | Executive Director, The Business Council |
AnnaMaria DeSalva | | Vice Chairman, XPO Logistics, Inc.; Global Chairman and Chief Executive Officer, Hill+Knowlton Strategies |
Michael Jesselson | | Lead Independent Director, XPO Logistics, Inc.; President and Chief Executive Officer, Jesselson Capital Corporation |
Adrian Kingshott | | Chief Executive Officer, AdSon, LLC; Managing Director, Spotlight Advisors, LLC |
Jason Papastavrou | | Founder and Chief Investment Officer, ARIS Capital Management, LLC |
Oren Shaffer | | Former Vice Chairman and Chief Financial Officer, Qwest Communications International, Inc. |
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Under the terms of an Investment Agreement, dated June 13, 2011 (the "Investment Agreement"), by and among Jacobs Private Equity, LLC ("JPE"), the other investors party thereto (collectively with JPE, the "Investors"), and our company, JPE has the right to designate certain percentages of the nominees for our Board of Directors so long as JPE owns securities representing specified percentages of the total voting power of our capital stock on a fully-diluted basis. JPE does not currently own securities representing the required voting power to qualify for the right to designate nominees for our Board of Directors. The foregoing rights of JPE under the Investment Agreement are in addition to, and not in limitation of, JPE's voting rights as a holder of capital stock of our company. JPE is controlled by Brad Jacobs, our chairman and chief executive officer. The Investment Agreement and the terms contemplated therein were approved by our stockholders at a special meeting on September 1, 2011.
None of the foregoing will prevent our Board of Directors from acting in accordance with its fiduciary duties or applicable law or stock exchange requirements or from acting in good faith in accordance with our governing documents, while giving due consideration to the intent of the Investment Agreement.
Set forth below is information regarding each of our director nominees, including the experience, qualifications, attributes or skills that led our Board to conclude that each such nominee should serve as a director.
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Brad Jacobs Age: 66 | | Chairman and | Director since 2011
Executive Chairman since 2022 | |
Age: 64 |
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Mr. Jacobs has served as our chief executive officer and chairman of our Board of Directors since November 1, 2022 and previously held the titles of chairman and chief executive officer from September 2, 2011.2011 to October 31, 2022. Mr. Jacobs has served as non-executive chairman of the board of directors of GXO Logistics, Inc. (NYSE: GXO) since August 2, 2021 and RXO, Inc. (NYSE: RXO) since November 1, 2022. Additionally, he is also the managing member of JPE, which is our largest stockholder.Jacobs Private Equity, LLC. Prior to XPO, Mr. Jacobs led two public companies: United Rentals, Inc. (NYSE: URI), which he founded in 1997, and United Waste Systems, Inc., which he founded in 1989. Mr. Jacobs served as chairman and chief executive officer of United Rentals for that company'scompany’s first six years, and as its executive chairman for an additional four years. He served eight years as chairman and chief executive officer of United Waste Systems. | |
| Board Committees:None | |
| | Other Public Company Boards:None GXO Logistics, Inc. (NYSE: GXO); RXO, Inc. (NYSE: RXO) | |
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Mr. Jacobs brings to the Board:■
Jacobs’s Skills and Experience Aligned with XPO’s Strategy: ▪
In-depth knowledge of the company'scompany’s business resulting from his years of service with the company as its chief executive officer; ■
officer provides the Board with invaluable insight and critical perspective in overseeing XPO’s long-term strategic priorities; ▪
Leadership experience as the company'scompany’s chairman and chief executive officer of several public companies lends Mr. Jacobs the ability to facilitate productive decision-making and a successful track record of leading companies that execute strategies similar to ours;advice during the company’s transformation in his role as executive chairman; and ■
▪
Extensive past and current experience as the chairman of the boardboards of directors of several public companies.companies gives Mr. Jacobs experience in providing valuable operational insights and strategic and long-term planning capabilities. | |
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Gena AsheJason Aiken Age: 50 | | | Independent Director since 20162021 | | |
Age: 59 |
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Mr. Aiken has served as a director of the company since August 2, 2021. He has served as executive vice president, technologies and chief financial officer of General Dynamics Corporation since January 2023 and previously held the title of senior vice president and chief financial officer from January 2014 to January 2023. Prior to that, Mr. Aiken was the senior vice president and chief financial officer of General Dynamics subsidiary Gulfstream Aerospace Corporation, and held earlier positions with General Dynamics, including controller, vice president of accounting and director of consolidation accounting. Prior to joining General Dynamics, Mr. Aiken was an audit manager with Arthur Andersen LLP in Washington, D.C., where he provided audit and consulting services for defense contractors. He holds a masters in business administration degree from the Kellogg School of Management at Northwestern University, and a bachelor’s degree in business administration and accounting from Washington and Lee University. | | |
| | Board Committees: ▪
Chair of the Audit Committee | | |
| | | Other Public Company Boards: None | | |
| | | Mr. Aiken’s Skills and Experience Aligned with XPO’s Strategy: ▪
Significant financial and accounting expertise through his service as chief financial officer and other senior finance positions with a Fortune 100 company gives Mr. Aiken deep knowledge of financial strategy and risk management needed to serve on XPO’s Board and lead the Audit Committee as committee chair; and ▪
Senior operational, transactional and strategic experience that has been and continues to be essential for XPO in its strategic spin-offs and continued efforts to drive stockholder value creation. | | |
| | Bella Allaire Age: 69 | | | Independent Director since 2022 | |
| | Ms. AsheAllaire has served as a director of the company since November 1, 2022. She has served as executive vice president of technology and operations of Raymond James Financial, Inc. since June 2011. Previously she was managing director and chief information officer of UBS Wealth Management, Americas, and held a variety of technology roles at Prudential Securities, including executive vice president and chief information officer. Ms. Allaire holds a bachelor’s degree from Lviv University in Ukraine. | |
| | Board Committees: ▪
Member of the Nominating, Corporate Governance and Sustainability Committee | |
| | Other Public Company Boards: None | |
| | Ms. Allaire’s Skills and Experience Aligned with XPO’s Strategy: ▪
Deep technical knowledge through her executive roles overseeing technological transformation and operations provide the company with important expertise in operational excellence and technological innovation; and ▪
Significant experience in cybersecurity and enterprise risk management, and talent management. | |
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| | | Wes Frye Age: 75 | | | Independent Director since 2023 | | |
| | | Mr. Frye has served as a director of the company since March 21, 2016. She has8, 2023. He served as the general counsel and corporate secretary of Anterix Inc. since July 2019, and as thesenior vice president and chief executivefinancial officer for the last 18 years of GLA Legal Advisory Group, LLC since February 2018. She was senior vice president, chief legal officer and corporate secretary of Adtalem Global Educationhis 30-year tenure at Old Dominion Freight Line, Inc. (NYSE: ATGE)ODFL) from May 2017 to February 2018,1985 until his retirement in 2015. Mr. Frye holds an MBA degree in finance from the University of North Carolina at Charlotte, and executive vice president, chief legal officer, and corporate secretary of BrightView Landscapes, LLC (formerly The Brickman Group, Ltd. LLC)a bachelor’s degree in business administration from December 2012 to June 2016. Ms. Ashe has served as vice-chairmanAppalachian State University. | | |
| | | Board Committees: ▪
Member of the SupervisoryOperational Excellence Committee | | |
| | | Other Public Company Boards: None | | |
| | | Mr. Frye’s Skills and Experience Aligned with XPO’s Strategy: ▪
Mr. Frye’s direct LTL operational experience through 30-year tenure at Old Dominion Freight Line adds important industry expertise to the Board as the company continues in its next chapter as a pure-play LTL business; and ▪
Extensive finance and accounting knowledge gained through role as an operationally oriented chief financial officer at Old Dominion Freight Line gives Mr. Frye an understanding of XPO Logistics Europe S.A., our majority-owned subsidiary,financial undertakings and risks associated with XPO’s business and the industry. | | |
| | Mario Harik Age: 42 | | | Director since February 2017. In addition, she2022 | |
| | ![[MISSING IMAGE: ph_marioharik-4c.jpg]](/files/DEF 14A/0001104659-23-047333/ph_marioharik-4c.jpg) Mr. Harik has served as a director and as chief executive officer of the Executive Leadership Councilcompany since November 1, 2022. Previously, Mr. Harik served as president of the company’s North America Less-Than-Truckload business unit from October 2021 to October 2022. He was also XPO’s chief information officer from November 2011 to October 2022 and chief customer officer from February 20202021 to October 2022. Prior to XPO, Mr. Harik held positions as chief information officer and American Landscape Partners, LLC since January 2021. Ms. Ashesenior vice president of research and development with Oakleaf Waste Management, chief technology officer with Tallan, Inc., and co-founder and chief architect of web and voice applications with G3 Analyst. He holds a juris doctorate degree from Georgetown University Law Center, where she serves on the Georgetown Law Advisory Board, a master'smaster’s degree in electrical engineering, information technology from GeorgiaMassachusetts Institute of Technology, and a bachelor's degree in mathematicsengineering, computer and communications from Spelman College, where she sits on the American University of Beirut in Lebanon. | |
| | Board of Trustees. She has completed the executive development program at the Wharton SchoolCommittees: ▪
Chair of the University of Pennsylvania and holds a certificate in international management from Oxford University in England.Operational Excellence Committee | |
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Member of Audit Committee
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Member of Acquisition Committee
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Ms. Ashe brings to the Board:■
More than two decades of valuable legalMr. Harik’s Skills and Experience Aligned with XPO’s Strategy: ▪
Extensive leadership and company-specific experience with publicas chief information officer, chief customer officer and private companies, enabling her to provide guidance to the Board and management on legal matters, compliance and risk assessment and corporate governance best practices; and ■
An in-depthpresident, North American LTL at XPO lends him a deep understanding of the dynamicsbusiness and the industry-best technology platform. Mr. Harik has helped build a platform to connect shippers and carriers more efficiently and build XPO into one of threethe largest North American trucking and logistics companies; and
▪
Mr. Harik’s experience leading XPO’s global technology strategy, organization and proprietary technology development demonstrates the value of our most important customer verticals: e-commerce, technology and food and beverage.his technical knowledge for XPO’s Board.
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Marlene Colucci | | Independent Director since 2019 |
Age: 58 |
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Ms. Colucci has served as a director of the company since February 7, 2019. She has served as the executive director of The Business Council in Washington, D.C. since July 2013. Previously, from September 2005 to June 2013, she was executive vice president of public policy for the American Hotel & Lodging Association. From September 2003 to June 2005, she served in the White House as special assistant to President George W. Bush in the Office of Domestic Policy. In this role, she developed labor, transportation and postal reform policies and advised the president and his staff on related matters. Earlier, Ms. Colucci served as deputy assistant secretary with the U.S. Department of Labor's Office of Congressional and Intergovernmental Affairs. Her law career includes more than 12 years with the firm of Akin Gump Strauss Hauer & Feld LLP, where she served as senior counsel. She holds a juris doctorate degree from the Georgetown University Law Center. |
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Member of Compensation Committee
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Member of Acquisition Committee
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Ms. Colucci brings to the Board:■
Significant experience with public policy development, including labor and transportation policy, from over two decades of relevant government and private sector experience; and
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Meaningful perspectives on matters of corporate governance and business operations from her tenure leading the premier association of chief executive officers of the world's most important business enterprises.
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AnnaMaria DeSalva | | Independent Director since 2017 |
Age: 52 |
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Vice Chairman since 2019 |
Ms. DeSalva has served as a director of the company since September 19, 2017 and vice chairman of the Board since February 7, 2019. She has served as global chairman and chief executive officer of Hill+Knowlton Strategies since June 2019. Prior to that, Ms. DeSalva served as chief communications officer of E.I. du Pont de Nemours & Co. (DuPont) from March 2014 to January 2018, then as senior advisor to the CEO of DowDuPont until February 2019. Previously, she served as vice president of corporate affairs for biopharmaceutical innovation at Pfizer; was an advisor to the U.S. Food and Drug Administration; and led the global healthcare practice of Hill & Knowlton. For Bristol-Myers Squibb, she led global public affairs for the oncology business and served as the director of the Bristol-Myers Squibb Foundation. Ms. DeSalva serves on the board of governors of Argonne National Laboratory of the U.S. Department of Energy and is a member of its compensation and nominating committees. She is a member of The Economic Club of New York, The Partnership for New York City, and the Paley International Council, and a Trustee of the Committee for Economic Development of The Conference Board. Ms. DeSalva also serves on the boards of directors of the non-profit Project Sunshine and the William & Mary Alumni Association. She is a graduate of The College of William & Mary in Williamsburg, Virginia, where she serves as executive in residence at the Raymond A. Mason School of Business. Ms. DeSalva has completed the Harvard School of Public Health's executive education program in risk communication, and the Advanced Health Leadership Program jointly offered by the University of California at Berkeley and Pompeu University in Barcelona, Spain. |
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Board Committees:■
Chairman of Nominating, Corporate Governance and Sustainability Committee
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Other Public Company Boards: None |
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Ms. DeSalva brings to the Board:■
Global perspective as the chief executive officer of a multinational organization serving clients across almost every sector of the world economy; and
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Significant experience in corporate affairs, regulatory affairs and corporate social responsibility, having previously served in senior leadership roles at several public companies.
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Michael Jesselson Age: 71 | | | Independent Director since 2011 |
Age: 69 |
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Lead Independent Director since 2016 |
| | Mr. Jesselson has served as a director of the company since September 2, 2011 and served as lead independent director sincefrom March 20, 2016.2016 to October 31, 2022. He has been president and chief executive officer of Jesselson Capital Corporation since 1994, and became1994. Mr. Jesselson served as a director of Ascendant Digital Acquisition Corp. (NYSE: ACND) inIII from November 2021 to February 2023 and as a director of Ascendant Digital Acquisition Corp. I from July 2020. Mr. Jesselson served as2020 to July 2021. He was a director of American Eagle Outfitters, Inc. (NYSE: AEO) from November 1997 to May 2017, most recently as its lead independent director. Earlier, he worked at Philipp Brothers, a division of Engelhard Industries from 1972 to 1981, then at Salomon Brothers Inc., in the financial trading sector. He is a director of C-III Capital Partners LLC, Clarity Capital and other private companies, as well as numerous philanthropic organizations. Mr. Jesselson also serves as the chairman of Bar Ilan University in Israel. He attended New York University School of Engineering. | | |
| | | Board Committees: ▪
Member of the Audit Committee | | |
Board Committees:■
Member of Audit Committee
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Member of Compensation Committee
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Member of Nominating, Corporate Governance and Sustainability Committee
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| Other Public Company Boards:Ascendant Digital Acquisition Corp. (NYSE: ACND) None. | | |
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Mr. Jesselson brings to the Board:■
Jesselson’s Skills and Experience Aligned with XPO’s Strategy: ▪
Significant experience with public company governance through prior service on the board of directors of American Eagle Outfitters, including as its lead independent director;director, contributes to the effective, independent oversight of XPO’s Board and ■
Extensivethoughtful approach to governance practices; and
▪
Mr. Jesselson’s extensive investment expertise. |
expertise is important to XPO’s business model as the company continues to invest in growth and provide value for its stockholders.
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| | Allison Landry Age: 44 | |
Adrian Kingshott | | Independent Director since 20112021
Vice Chair since 2022 | |
Age: 61 |
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Mr. Kingshott![[MISSING IMAGE: ph_allisonlandry-4c.jpg]](/files/DEF 14A/0001104659-23-047333/ph_allisonlandry-4c.jpg) Allison Landry has served as a director of the company since August 2, 2021 and as vice chair since November 1, 2022. From September 2, 2011. He has served as the chief executive officer of AdSon, LLC since October 2005 managing director of Spotlight Advisors, LLC since September 2015 and a member of the board of directors of Centre Lane Investment Corp. since May 2011. Mr. Kingshottto July 2021, she was a senior advisor to Headwaters Merchant Bank from 2013 until June 2018.transportation research analyst with Credit Suisse, covering the trucking, railroad, airfreight and logistics industries. Previously, Ms. Landry served as a financial analyst and senior accountant with Goldman Sachs, he was co-head of the firm's Global Leveraged Finance business and held other positions over a 17-year tenure. More recently, Mr. Kingshott was a managing director and portfolio manager at Amaranth Advisors, LLC. He is an adjunct professor of Global Capital Markets and Investments at Fordham University's Gabelli School of Business. HeOneBeacon Insurance Company (now Intact Insurance Specialty Solutions). She holds a master'smaster’s degree in business administration from HarvardBoston University’s Questrom School of Business, School and a masterbachelor’s degree in psychology from College of jurisprudence degree from Oxford University.the Holy Cross. | |
| | Board Committees: ▪
Chair of the Nominating, Corporate Governance and Sustainability Committee ▪
Member of the Compensation Committee ▪
Member of the Operational Excellence Committee | |
Board Committees:■
Chairman of Acquisition Committee
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Mr. Kingshott brings to the Board:■
Ms. Landry’s Skills and Experience Aligned with XPO’s Strategy: ▪
More than 2515 years of experience in the investment bankingtransportation sector, equity markets, research and investment management industries;analysis gives Ms. Landry invaluable investor perspective and ■
Expertise with respectunderstanding of stockholder value creation for XPO as the Chair of the Nominating, Corporate Governance and Sustainability Committee; and
▪
Significant experience in investments, financial analysis and valuation allows Ms. Landry to corporate governance, acquisition transactions, debthelp XPO in continuously identifying and equity financing and corporate financial management issues.evaluating best strategic opportunities for profitable growth.
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Jason Papastavrou, Ph.D.Irene Moshouris Age: 62 | | | Independent Director since 20112022 | | |
Age: 58 |
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Dr. Papastavrou![[MISSING IMAGE: ph_irenemoshouris-4c.jpg]](/files/DEF 14A/0001104659-23-047333/ph_irenemoshouris-4c.jpg) Ms. Moshouris has served as a director of the company since September 2, 2011. He founded ARIS Capital Management, LLC in 2004 and servesNovember 1, 2022. She has served as its chief investment officer. Previously, Dr. Papastavrou was the founder and managing director of the Fund of Hedge Funds Strategies Group of Banc of America Capital Management (BACAP), president of BACAP Alternative Advisors, and a senior portfolio manager with Deutsche Asset Management. He was a tenured professor at Purdue University School of Industrial Engineering and holds a doctorate in electrical engineering and computer science from the Massachusetts Institute of Technology. Dr. Papastavrou served on the board of directorsvice president-treasurer of United Rentals, Inc. (NYSE: URI) since April 2011 and previously held the position of vice president-treasurer from August 2006 to April 20052011. Prior to May 2020.that, Ms. Moshouris was vice president and deputy treasurer with Avon Products, Inc., corporate tax manager with GTE Corporation, tax director-pharmaceutical group with Sterling Winthrop Inc. and tax manager with Arthur Andersen & Co. She holds a master of laws in taxation from New York University School of Law, juris doctorate from Brooklyn Law School and bachelor’s degree from Queens College. | | |
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Board Committees: ■
Chairman
▪
Member of the Audit Committee, the Compensation Committee ■
Member of Audit Committee
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Member ofand the Nominating, Corporate Governance and Sustainability Committee
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| | Other Public Company Boards:None |
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Dr. Papastavrou brings to the Board:■
Financial expertise related to his qualifications as an "audit committee financial expert" under SEC regulations; and
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Extensive experience with finance and risk-related matters, from holding senior positions at investment management firms.
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| Ms. Moshouris’ Skills and Experience Aligned with XPO’s Strategy: ▪
Financial leadership experience gained through her role as senior vice president and treasurer of United Rentals, as well as numerous treasury and tax management positions with global corporations, provides Ms. Moshouris with strong oversight skills necessary for a member of the audit committee; and ▪
International business experience, including international treasury role and director of global finance for Avon in Europe and Latin America, contributes to Board’s oversight of strategy given the global nature of XPO’s business. | |
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Table of Contents
| | Johnny C. Taylor, Jr. Age: 54 | |
Oren Shaffer | | Independent Director since 20112021
Lead Independent Director since 2022 | |
Age: 78 |
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![[MISSING IMAGE: ph_johnnyctaylorjr-4c.jpg]](/files/DEF 14A/0001104659-23-047333/ph_johnnyctaylorjr-4c.jpg) Mr. ShafferTaylor has served as a director of the company since SeptemberAugust 2, 2011. From 2002 to 2007, Mr. Shaffer was vice chairman2021 and chief financial officer of Qwest Communications International, Inc. (now CenturyLink, Inc.). Previously, Mr. Shaffer waslead independent director from November 1, 2022. He has served as president and chief operatingexecutive officer of Sorrento Networks, Inc., executive vicethe Society of Human Resources Management (SHRM) since December 2017. Previously, Mr. Taylor served as president and chief financialexecutive officer of Ameritech Corporation, and held senior executive positions with The Goodyear Tire & Rubber Company, where he alsothe Thurgood Marshall College Fund from May 2010 to December 2017. He has served onas a member of the board of directors. Additionally, Mr. Shafferdirectors of Guild Education since February 2021 and of iCIMS, Inc. since March 2021. He has served as a directortrustee of the University of Miami since June 2017, as a corporate member of Jobs for America’s Graduates since January 2018, and as a member of the National Board of Governors of the American Red Cross since June 2018. He’s served as chairman of the President’s Advisory Board on Historically Black Colleges and Universities and on the board of Terex Corporation from 2007 until May 2019. HeWhite House American Workforce Policy Advisory Board since February 2018. Mr. Taylor holds a master'sjuris doctorate degree in management from the Sloan School of Management, Massachusetts Institute of Technology, and a master’s degree in financefrom Drake University, and business administrationa bachelor’s degree from the University of California, Berkeley.Miami. | |
| | Board Committees: ▪
Chair of the Compensation Committee | |
Board Committees:■
Chairman of Audit Committee
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Other Public Company Boards:None | |
| | Mr. Taylor’s Skills and Experience Aligned with XPO’s Strategy: ▪
Mr. Taylor’s more than 25 years experience in senior human resources, legal, and business roles across a variety of industries and organizations lends to the Board’s oversight of business operations while incorporating crucial legal and human capital considerations; and ▪
His expertise in human capital strategy and management, diversity and inclusion, workplace culture, and leadership training provides a critical skill set for XPO’s Board given the company’s continued focus on human capital oversight and DE&I efforts. | |
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Mr. Shaffer brings to the Board:■
Senior financial, operational and strategic experience with various large companies;
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Corporate governance expertise from serving as director of various public companies; and
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Financial expertise related to his qualifications as an "audit committee financial expert" under SEC regulations.
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SUMMARY OF QUALIFICATIONS AND EXPERIENCE OF DIRECTOR NOMINEES
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ROLE OF THE BOARD AND BOARD LEADERSHIP STRUCTURE
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ROLE OF THE BOARD
Our business and affairs are managed under the direction of our Board of Directors, which is our company'scompany’s ultimate decision-making body, except with respect to those matters reserved to our stockholders. Our Board's primary responsibilityBoard’s mission is to seek to maximize long-term stockholder value. Our Board establishes our overall corporate policies, selects and evaluates our senior management team, which is charged with the conduct of our business, monitors the performance of our company and management, and provides advice and counsel to management. In fulfilling the Board'sBoard’s responsibilities, our directors have full access to our management, internal and external auditors and outside advisors.Furthermore,
BOARD LEADERSHIP STRUCTURE AND SUCCESSION
Effective November 1, 2022, upon the completion of the RXO spin-off, Mr. Jacobs, our founder who had been our chairman and CEO since 2011, became our executive chairman, and Mr. Harik became our CEO. Our Board of Directors determined that splitting the chairman and CEO roles would be in the best interests of the company and our stockholders in order to position the company for success as a pure-play transportation company in North America and facilitate a smooth CEO transition. The Board believes that the executive chairman Board leadership structure ensures stability for the company after years of transformation and provides strong strategic leadership and key support for management, particularly in the initial years of Mr. Harik’s tenure as CEO. As executive chairman, Mr. Jacobs leads our Board and oversees our overall corporate strategy, strategic customer and other key stakeholder relationships, and corporate development. Mr. Jacobs consults regularly with Mr. Harik and other members of management on growth strategies, critical human capital strategies, key stakeholder engagements and other strategic matters, and joins business operating review meetings to provide direction to leaders across the business. Under Mr. Jacobs’ leadership as XPO’s founder, chairman and CEO, Mr. Harik served as chief information officer since 2011 and chief customer officer since February 2021 and became president of the North American LTL business in October 2021. Thus, when Mr. Harik became CEO in November 2022, he had deep knowledge about our business. As CEO, Mr. Harik collaborates closely with Mr. Jacobs, executes on our strategy, and leads our day-to-day operations and culture. Together, Mr. Jacobs and Mr. Harik chart the mid- to long-term roadmap for our business and our value creation strategy.
Our Board is committed to providing effective independent Board oversight. Our current Board leadership structure includes an executive chairman as well as a lead independent director and an independent vice chairman. The positions of chairman of the Board and chief executive officer are both currently held by Mr. Jacobs. Our Board believes that this combination of roles is appropriate because the structure enables decisive leadership and ensures clear accountability in the context of strong Board practices and a Board culture that facilitates independent oversight. On December 2, 2020, Mr. Jacobs underscored his commitment to maximizing shareholder value when XPO announced that the Board had authorized company management to pursue a plan to spin off XPO's logistics business into an independent, publicly-traded company. The planned spinoff demonstrates Mr. Jacobs' ability to focus on creating value for stockholders and also remain intensely committed to the satisfactionoversight of our customers and employees. Our Board believes the dual roles function well for our company based on our current strategy, governance and ownership structure.business. To further strengthen its independent decision-making, our Board has approved a set of Corporate Governance Guidelines (the "Guidelines"“Guidelines”), which provide that the independent directors may appoint a lead independent director who presides over executive sessions of the independent directors, and who shall serve a term of at least one year.directors. The position of lead independent director has been structured to serve as an effective balance to the dual roles served by Mr. Jacobs, and to include,includes, among other duties: (i) presiding at all meetings of the Board of Directors at which the executive chairman is not present; (ii) presiding at all executive sessions of the independent directors, which must take place at least once a year without members of management present;directors; and (iii) calling additional meetings of the independent directors as necessary. In practice, in 2020, our independent directors met in executive sessions much more frequently. The lead independent director also serves as a liaison between the executive chairman and the independent directors. Together with the executive chairman, the lead independent director reviews and approves Board meeting agendas meeting schedules and meeting materials to be distributed to our Board of Directors in order to ensure focus on critical matters and sufficient time for informed discussion of issues. The lead independent director is also available to meet with significant stockholders as required. On March 20, 2016,November 1, 2022, the independent directors appointed Mr. JesselsonTaylor to serve as lead independent director.
director, taking over the role from Mr. Jesselson, who prior thereto had served as the company’s lead independent director since March 2016.
In addition, on February 7, 2019, the Board establishedGuidelines establish an independent vice chairmanchair position as part of its ongoing commitment to strong corporate governance. The position of vice chairmanchair is defined as an independent director with authorities and duties that include, among others: (i) presiding at meetings of the Board where the executive chairman and lead independent director are not present; (ii) assisting the executive chairman, when appropriate, in carrying out his or her duties; (iii) assisting the lead independent director, when appropriate, in carrying out his or her duties; and (iv) such other duties, responsibilities and assistance as the Board or the executive chairman may determine.determine, including stockholder engagement. Ms. AnnaMaria DeSalva wasserved as vice chair from February 2019 until October 31, 2022 when she resigned from the XPO Board to join the RXO board, and on November 1, 2022 the independent directors appointed Ms. Landry to serve as vice chairman on February 7, 2019, to provide support on key governance matters and stockholder engagement to the chairman, lead independent director and the Board.chair.
Further information regarding the positions of lead independent director and vice chairmanchair is set forth in the Guidelines. The Guidelines are available on the company's corporatecompany’s website at www.xpo.com under the Investors tab.Our Board of Directors held 20 meetings during 2020. Each person currently serving as a director attended at least 93% of the Board meetings, as well as the meetings of any committee(s) on which he or she served. In addition, during 2020, our Board of Directors acted twice via unanimous written consent.
Our directors are expected to attend our annual meetings. Any director who is unable to attend is expected to notify the chairman of the Board in advance of the meeting date. All of our directors serving and standing for re-election attended the 2020 Annual Meeting of Stockholders.
Our Board of Directors provides overall risk oversight, with a focus on the most significant risks facing our company. In addition, the Board is responsible for ensuring that appropriate crisis management and business continuity plans are in place. The management of risks to our business, and the execution of contingency plans, are primarily the responsibility of our senior management team.
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Our Board and senior management team regularly discuss the company'scompany’s business strategy, operations, policies, controls, prospects, and current and potential risks. These discussions include approaches for assessing, monitoring, mitigating and controlling risk exposure. The full Board oversees the company’s cybersecurity risk management program. The Board has delegated responsibility for the oversight of other specific risks to special committees as follows:■Audit Committee. The Audit Committee oversees the policies that govern the process by which our exposure to risk is assessed and managed by management. In that role, the Audit Committee discusses major financial risk exposures with our management and discusses the steps that management has taken to monitor and control these exposures. Additionally, the Audit Committee is responsible
| | | AUDIT
COMMITTEE | | | | COMPENSATION
COMMITTEE | | | | NOMINATING, CORPORATE
GOVERNANCE AND
SUSTAINABILITY COMMITTEE | | |
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Oversees the policies that govern the process by which our exposure to risk is assessed and managed by management. In that role, the Audit Committee discusses major financial risk exposures with our management and discusses the steps that management has taken to monitor and control these exposures. ■
Responsible for reviewing risks arising from related party transactions involving our company, and for overseeing our companywide Code of Business Ethics and overall compliance with legal and regulatory requirements. | | | | ■
Monitors the risks associated with our compensation philosophy and programs. ■
Ensures that the company’s compensation structure strikes an appropriate balance in motivating our senior executives to deliver long-term results for the company’s stockholders, while simultaneously holding our senior leadership team accountable. | | | | ■
Oversees risks related to our governance structure and processes, as well as risks associated with the company’s corporate sustainability practices and reporting. ■
Oversees the company’s political activity and, pursuant to our Political Activity Policy, has final approval over all political contributions of the company. | | |
DIRECTOR ORIENTATION AND CONTINUING EDUCATION
Pursuant to our Guidelines, the company provides new directors with a director orientation program to familiarize such director with, among other things, the company’s business, strategic plans, significant financial, accounting and risk management issue, compliance programs, conflicts policies, our Code of Business Ethics, the Guidelines, principal officers, and overall compliance with legalinternal and regulatory requirements.
■Compensation Committee. external auditors.
Each director is expected to participate in continuing education programs in order to maintain the necessary level of expertise to perform her or her responsibilities as a director. The Compensation Committee monitors the risks associated with our compensation philosophy and programs. The Committee ensures that the company's compensation structure strikes an appropriate balance in motivating our senior executives to deliver long-term resultscompany reimburses directors for the company's stockholders, while simultaneously holding our senior leadership team accountable.
■Nominating, Corporate Governance and Sustainability Committee. The Nominating, Corporate Governance and Sustainability Committee oversees risks related to our governance structure and processes, as well as risks associated with the company's corporate sustainability practices and reporting.
■Acquisition Committee. The Acquisition Committee oversees risks related to the executionreasonable costs of our acquisition strategy.To navigate the evolving COVID-19 pandemic, we assembled a cross-disciplinary crisis management team that includes allattending such programs.
COMMITTEES OF THE BOARD AND COMMITTEE MEMBERSHIP
Each of our executive officers. This team oversees the management of COVID-19 risks to employee health and safety, which is paramount, and to our business operations and financial condition. Board members receive frequent updates from the crisis management team at formal Board meetings and through informal direct participation in crisis management team meetings. Among other topics, these updates cover the measures we are taking to address the risk of transmission of COVID-19 among our employees and the wider communities in which we operate, as well as our COVID-related communications with employees, customers and other company stakeholders.In addition, the Board periodically holds special sessions to evaluate topical trends identified as significant risks or items of strategic interest, such as human resources management, information technology and cyber security. The Board is committed to ensuring that our company has the resources and infrastructure necessary to appropriately address all significant risks.
COMMITTEES OF THE BOARD AND COMMITTEE MEMBERSHIP
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Our Board of Directors has established four separately designated, standing committees to assist the Board in discharging its responsibilities: the Audit Committee, the Compensation Committee and the Nominating, Corporate Governance and Sustainability Committee and the Acquisition Committee. Each of these committees has a written charter that complies with applicable SEC rules and with the NYSE Listed Company Manual.Rules. The Operational Excellence Committee has a charter approved by the Board. These charters are available at
www.xpo.com. You may obtain a printed copy of any of these charters, without charge, by sending a request to:to Corporate Secretary, XPO, Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831. The Audit,
Committee, the Compensation
Committee and
the Nominating, Corporate Governance and Sustainability
CommitteeCommittees are each
composedcomprised entirely of independent directors within all applicable standards, as discussed below. Our
Board'sBoard’s general policy is to review and approve committee assignments annually. After consulting with our
executive chairman of the Board
chairman and considering member qualifications, the Nominating, Corporate Governance and Sustainability Committee is responsible for recommending to our Board all committee assignments, including the roles of committee
chairmen.chairs. Each committee is authorized to retain, in its sole authority, its own outside counsel and other advisors at the
company'scompany’s expense as it desires. Also, each committee may form and delegate authority to subcommittees when appropriate. Our Board may eliminate or create additional committees as it deems appropriate.
As such, in April 2023 the Board established the Operational Excellence Committee, focused on overseeing the company’s operation strategy and progress.
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The following table sets forth the membership of each of our Board committees as of the Record Date.date of this Proxy Statement. Mr. Jacobs does not serve on any Board committees.
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Name
| | Audit Committee | | Compensation Committee | | Nominating, Corporate
Governance and
Sustainability Committee | | Acquisition
Committee
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Name | | | | Audit Committee | | | Compensation Committee | | |
Gena Ashe
Nominating, Corporate
Governance and
Sustainability Committee | | ✓ | Operational Excellence
Committee | |
| | Jason Aiken* | | | C | | | | | | ✓ |
Marlene Colucci
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| | Bella Allaire | | | | | | | | | ✓ | | | | |
| | Wes Frye | | | | | | | | | | | | ✓ | |
AnnaMaria DeSalva
| Mario Harik | | | | | | | | | | | | C | |
| | Michael Jesselson | | | ✓ | | | | | | | | | | |
| | Allison Landry | | | | | | ✓ | | | C | | | ✓ | |
| | Irene Moshouris | | | ✓ | | | ✓ | | | ✓ | | | | |
| | Johnny C. Taylor, Jr. | | | | | | C | | |
Michael Jesselson
| | ✓ | | ✓ | | ✓ | | |
Adrian Kingshott
| | | | | | | | C |
Jason Papastavrou*
| | ✓ | | C | | ✓ | | |
Oren Shaffer*
| | C | | | | | | |
| | C = Committee chair | | | | ✓ = Committee member | | |
C* = Committee chairman
| | ✓
= Committee member
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A brief summary of the committees'committees’ responsibilities is as follows:
Audit Committee.Our Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), to assist our Board of Directors in fulfilling its responsibilities in a number of areas, including, without limitation, oversight of: (i) our accounting and financial reporting processes, including our systems of internal controls and disclosure controls, (ii) the integrity of our financial statements, (iii) our compliance with legal and regulatory requirements, (iv) the qualifications and independence of our independent registered public accounting firm, (v) the performance of our independent registered public accounting firm and internal audit function and (vi) related party transactions. Each member of the Audit Committee satisfies all applicable independence standards, has not participated in the preparation of our financial statements at any time during the past three years, and is able to read and understand fundamental financial statements. During 2020,From January 1, 2022 to October 31, 2022, the Audit Committee was comprised of the following four directors: Mr. Shaffer (chairman)Aiken (chair), Ms. Ashe,AnnaMaria DeSalva, Mr. Jesselson and Dr. Papastavrou. During 2020,Ms. Landry. Ms. DeSalva resigned from the company’s Board on October 31, 2022 to join the RXO board. From November 1, 2022 to the date of this Proxy Statement the Audit Committee met seven timeshas been comprised of the following three directors: Mr. Aiken (chair), Mr. Jesselson and acted three times via unanimous written consent.Ms. Moshouris. Our Board has determined that Mr. Shaffer and Dr. Papastavrou each qualifyAiken qualifies as an "audit“audit committee financial expert"expert” as defined under Item 407(d)(5) of Regulation S-K under the Exchange Act. During 2022, the Audit Committee met five times and acted three times via unanimous written consent.
Compensation Committee.The primary responsibilities of the Compensation Committee are, among other things: (i) to oversee the administration of our compensation programs, (ii) to review and approve the compensation of our executive management, (iii) to review company contributions to qualified and non-qualified plans, (iv) to prepare any report on executive compensation required by SEC rules and regulations, and (v) to retain independent compensation consultants and oversee the work of such consultants. During 2020,2022, the Compensation Committee met 1115 times and, in addition, acted four timestwice via unanimous written consent to deliberate on a range of matters relating to compensation, including:
■
Certification of goal attainment for performance-based stock unit awards ("PSUs")
PSU awards;
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Director and executive compensation benchmarking, compared to market levels of pay
pay;
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Trends in executive pay practices and relevant developments within the regulatory landscape
landscape;
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Executive compensation decision frameworks and strategies for cash and long-term incentive compensation
LTI compensation;
■
Thresholds, targets and/or maximum values related to cash compensation
compensation;
■
Risk assessment of incentive compensation plans
plans;
■
NEO performance evaluations with respect to financial and non-financial goals and expectations
expectations;
■
Approval of compensation decisions for directors and executive officers
officers;
■
Evaluation of share utilization (i.e., burn rate and dilution) in our employee equity plan
plan;
■
Compliance with executive stock ownership guidelines
guidelines;
■
Material changes in benefit plans across the company
company;
■
Cash bonus accruals for employees in our company'scompany’s annual incentive plan, based on financial performance of each business
business;
■Participation in XPO's employee stock purchase program
■
Review and certification of compensation advisor independence
independence; and
■
Inclusion of the compensation, discussion and analysis disclosure in the company'scompany’s annual proxy statement and its incorporation by reference into the company’s annual report on Form 10-K.
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From January 1, 20202022 to April 17, 2020,October 31, 2022, the Compensation Committee was comprised of the following fourthree directors: Mr. Kingshott (chairman)Taylor (chair), Ms. Colucci, Mr. JesselsonKissel and Dr. Papastavrou.Ms. Landry. On April 17, 2020, Mr. Kingshott stepped downOctober 31, 2022, Ms. Kissel resigned from the company’s Board to join the RXO board. From November 1, 2022 to the date of this Proxy Statement the Compensation Committee and Dr. Papastavrou was appointed chairmanhas been comprised of the committee.following directors: Mr. Taylor (chair), Ms. Landry and Ms. Moshouris.
Nominating, Corporate Governance and Sustainability Committee.The primary responsibilities of the Nominating, Corporate Governance and Sustainability Committee are, among other things: (i) to identify individuals qualified to become Board members and recommend that our Board select such individuals to be presented for stockholder consideration at the annual meeting or to be appointed by the Board to fill a vacancy, (ii) to make recommendations to the Board concerning committee appointments, (iii) to develop, recommend to the Board and annually review the Guidelines and oversee corporate governance matters, (iv) to support the Board in its oversight of our company'scompany’s purpose-driven sustainability strategies, performance and external disclosures, including ESG matters and related stakeholder engagement, and (v) to oversee an annual evaluation of our Board and its committees. During 2020,From January 1, 2022 to October 31, 2022, the Nominating, Corporate Governance and Sustainability Committee was comprised of the following three directors: Ms. AnnaMaria DeSalva (chairman)(chair), Mr. Jesselson and Dr. Papastavrou.Mr. Adrian Kingshott. Ms. DeSalva and Mr. Kingshott resigned from the company’s Board on October 31, 2022 to join the RXO board. From November 1, 2022 to the date of this Proxy Statement the Nominating, Corporate Governance and Sustainability Committee has been comprised of the following three directors: Ms. Landry (chair), Ms. Allaire and Ms. Moshouris. The Nominating, Corporate Governance and Sustainability Committee met threeonce during 2022 and acted four times during 2020. In December 2020,via unanimous written consent.
Operational Excellence Committee. Our Operational Excellence Committee is a standing committee of the Board approved amendments to the charterformed on April 12, 2023. The primary responsibilities of the Nominating, Corporate GovernanceCommittee are to review the company’s strategies and Sustainabilityobjectives with respect to operational excellence, including financial and operational performance, continuous improvement of quality and service, operational efficiency, cost control, safety and technological innovation. The Committee will also review, with management, reports and key performance indicators relating to supportprogress and trends in company operational excellence and achievement against the company’s strategies and objectives. The Committee is comprised of Mr. Harik (chair), Mr. Frye and Ms. Landry.
Our Board of Directors held ten meetings during 2022. Each person currently serving as a director, except Mr. Frye who was elected a director on March 8, 2023, attended at least 90% of the meetings of the Board in its oversight of our company's purpose-driven sustainability strategies, performance and external disclosures, including material ESG matters and related stakeholder engagement.Acquisition Committee. The Acquisition Committee is responsible for approving acquisition, divestiture and related transactions proposed by our management inany committee(s) on which he or she served during the total consideration to be paidtime he or received by us, for any particular transaction, does not exceedshe served on the limits that may be established byBoard or committee(s). In addition, during 2022, our Board of Directors from timeacted five times via unanimous written consent.
Our directors are expected to time. From January 1, 2020attend our annual meetings. Any director who is unable to April 17, 2020,attend is expected to notify the Acquisition Committee was comprised of the following four directors: Dr. Papastavrou (chairman), Ms. Ashe, Ms. Colucci and Mr. Kingshott. On April 17, 2020, Dr. Papastavrou stepped down from the Acquisition Committee and Mr. Kingshott was appointed as chairman of the committee. The Acquisition Committee did not meet during 2020.
Board in advance of the meeting date. All of our directors then serving and standing for re-election attended the 2022 Annual Meeting of Stockholders. The following table sets forth information concerning the compensation of each person who served as a non-employee director of our company during 2020.2020 Director Compensation Table(1)
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2022 Director Compensation Table(1)| | Name | | | Fees Earned
in Cash(2) | | | Stock Awards(3) | | | Total | |
| | Jason Aiken(4) | | | | $ | 105,000 | | | | | $ | 190,000 | | | | | $ | 295,000 | | |
| | Bella Allaire(5) | | | | | 13,261 | | | | | | 31,753 | | | | | | 45,014 | | |
| | AnnaMaria DeSalva(6) | | | | | 104,280 | | | | | | 158,247 | | | | | | 262,527 | | |
| | Michael Jesselson(7) | | | | | 100,856 | | | | | | 190,000 | | | | | | 290,856 | | |
| | Adrian Kingshott(8) | | | | | 66,739 | | | | | | 158,247 | | | | | | 224,986 | | |
| | Mary Kissel(9) | | | | | 66,739 | | | | | | 158,247 | | | | | | 224,986 | | |
| | Allison Landry(10) | | | | | 87,459 | | | | | | 190,000 | | | | | | 277,459 | | |
| | Irene Moshouris(11) | | | | | 13,261 | | | | | | 31,753 | | | | | | 45,014 | | |
| | Johnny C. Taylor, Jr.(12) | | | | | 104,144 | | | | | | 190,000 | | | | | | 294,144 | | |
(1)
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Name
| | Fees Earned
in Cash(2)
| | Stock Awards(3)
| | Total
| |
|---|
| | | | | | | | |
Gena Ashe(4) | | | $ | 80,000 | | | | $ | 190,000 | | | $ | 270,000 | |
Marlene Colucci(5) | | | $ | 80,000 | | | | $ | 190,000 | | | $ | 270,000 | |
AnnaMaria DeSalva(6) | | | $ | 125,000 | | | | $ | 190,000 | | | $ | 315,000 | |
Michael Jesselson(7) | | | $ | 105,000 | | | | $ | 190,000 | | | $ | 295,000 | |
Aris Kekedjian(8) | | | $ | 29,451 | | | | $ | 190,000 | | | $ | 29,451 | |
Adrian Kingshott(9) | | | $ | 96,470 | | | | $ | 190,000 | | | $ | 286,470 | |
Jason Papastavrou(10) | | | $ | 98,530 | | | | $ | 190,000 | | | $ | 288,530 | |
Oren Shaffer(11) | | | $ | 105,000 | | | | $ | 190,000 | | | $ | 295,000 | |
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(1)- Compensation information for Brad Jacobs and Mario Harik, who
is a NEOare NEOs of our company, is disclosed in this Proxy Statement under the heading "Executive Compensation—Executive Compensation Tables."— Compensation Tables. Mr. Jacobs and Mr. Harik did not receive additional compensation for histheir service as a director.
(2)
The amounts reflected in this column represent the fees earned by the directors for their service during 2020.2022. Because the fees are paid in arrears and fourth quarter payments are received during the following calendar year, fees earned more accurately represent the compensation received by our directors.
(3)
The amounts reflected in this column represent thea full or prorated grant date fair value of the awards made in 2020,2022, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification 718 "Compensation—“Compensation — Stock Compensation" ("Compensation” (“ASC 718"718”). For further discussion of the assumptions used in the calculation of the grant date fair value, please see "Notes“Notes to Consolidated Financial Statements—Statements — Note 15. Stock-Based Compensation"Compensation” of our company'scompany’s Annual Report on Form 10-K for the year ended December 31, 2020. The values reported in this column represent 2,3922022 (the “2022 Form 10-K”). Each director serving on January 3, 2022 was granted an award of 2,538 restricted stock units ("RSUs"(“RSUs”) granted, corresponding to eachthe value of $190,000, the amount of annual equity compensation paid to our directors. The number of RSUs was adjusted as of the RXO spin-off date to maintain the pre-spin-off economic value of the shares of common stock underlying the RSUs. Mr. Aiken, Mr. Jesselson, Ms. Landry and Mr. Taylor served as directors servingthe entire
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calendar year of 2022 and their full grant vested on January 2, 2020.3, 2023. As a result of the RXO spin-off, Ms. DeSalva, Mr. Kingshott and Ms. Kissel resigned from the company’s board on October 31, 2022 to join the RXO board. Their amounts represent a prorated value of the RSUs from January 1, 2022 to October 31, 2022 and their grants were transferred to RXO as per the terms of the spin-off transaction. Ms. Allaire and Ms. Moshouris joined the company’s board on November 1, 2022 and received a prorated award of 902 RSUs worth $31,753. These awards vested on January 4, 2021. Mr. Kekedjian ceased to be a director on May 14, 2020 and the RSU award granted to him forfeited as a result. Each director serving on January 4, 2021 received an award of 1,604 RSUs on such date for service as a director in 2021; these awards will vest on January 3, 2022 and are not reflected in the table above.
2023.(4)
As of December 31, 2020, Ms. Ashe2022, Mr. Aiken held 14,3984,040 RSUs. The above table does not include €39,000 of fees paid to Ms. Ashe for her service as vice-chairmanAs of the Supervisory BoardRecord Date, Mr. Aiken directly owns 920 shares of XPO Logistics Europe S.A., our majority-owned subsidiary.
common stock and 4,040 RSUs that are or will become vested within 60 days of the Record Date, as disclosed in this Proxy Statement under the heading Security Ownership of Certain Beneficial Owners and Management.”
(5)
As of December 31, 2020,2022, Ms. ColucciAllaire held 2,392902 RSUs. As of the Record Date, Ms. Colucci beneficiallyAllaire directly owns a total of 2,637902 shares of our common stock as disclosed in this Proxy Statement under the heading "SecuritySecurity Ownership of Certain Beneficial Owners and Management."
Management.
(6)
As of October 31, 2022, Ms. DeSalva held 14,508 RSUs. Ms. DeSalva resigned from the company’s board on October 31, 2022 to join the RXO board and her RSUs were transferred to RXO as per the terms of the spin-off transaction.
(7)
As of December 31, 2020,2022, Mr. Jesselson held 19,928 RSUs. As of the Record Date, Mr. Jesselson directly and indirectly owns a total of 290,029 shares of our common stock and 15,888 RSUs that are or will become vested within 60 days of the Record Date, as disclosed in this Proxy Statement under the heading Security Ownership of Certain Beneficial Owners and Management.
(8)
As of October 31, 2022, Mr. Kingshott held 42,261 RSUs. Mr. Kingshott resigned from the company’s board on October 31, 2022 to join the RXO board and his RSUs were transferred to RXO as per the terms of the spin-off transaction.
(9)
As of October 31, 2022, Ms. DeSalvaKissel held 5,6412,538 RSUs. Ms. Kissel resigned from the company’s board on October 31, 2022 to join the RXO board and her RSUs were transferred to RXO as per the terms of the spin-off transaction.
(10)
As of December 31, 2022, Ms. Landry held 4,040 RSUs. As of the Record Date, Ms. DeSalva beneficiallyLandry directly owns a total of 2,8814,960 shares of our common stock as disclosed in this Proxy Statement under the heading "SecuritySecurity Ownership of Certain Beneficial Owners and Management."
(11)
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(7)- As of December 31,
2020, Mr. Jesselson2022, Ms. Moshouris held 8,433902 RSUs. As of the Record Date, Mr. Jesselson beneficiallyMs. Moshouris directly owns a total of 289,380902 shares of our common stock as disclosed in this Proxy Statement under the heading "SecuritySecurity Ownership of Certain Beneficial Owners and Management."
(8)Mr. Kekedjian ceased to be a director on May 14, 2020 and received a prorated cash payment of $9,451 for his service during the second quarter of 2020.
(9)
(12)
As of December 31, 2020,2022, Mr. KingshottTaylor held 22,4404,040 RSUs. As of the Record Date, Mr. Kingshott beneficiallyTaylor directly owns a total of 73,742920 shares of our common stock and 4,040 RSUs that are or will become vested within 60 days of the Record Date, as disclosed in this Proxy Statement under the heading "SecuritySecurity Ownership of Certain Beneficial Owners and Management."
(10)As of December 31, 2020, Dr. Papastavrou held 21,691 RSUs. As of the Record Date, Dr. Papastavrou beneficially owns a total of 180,208 shares of our common stock as disclosed in this Proxy Statement under the heading "Security Ownership of Certain Beneficial Owners and Management."
(12)As of December 31, 2020, Mr. Shaffer held 27,440 RSUs. As of the Record Date, Mr. Shaffer beneficially owns a total of 31,136 shares of our common stock as disclosed in this Proxy Statement under the heading "Security Ownership of Certain Beneficial Owners and Management."
The compensation of our directors is subject to approval ofby our Board, which is based, in part, on the recommendation of the Compensation Committee. Directors who are employees of our company do not receive additional compensation for service as members of either our Board of Directors or its committees. For service during calendar year 2020,2022, our non-employee directors received an annual cash retainer of $80,000, payable quarterly in arrears, and time-based RSUs ("(“Time-Based RSUs"RSUs”) worth $190,000. The annual grant of such Time-Based RSUs was made on the first business day of 20202022 (the "RSU“RSU Grant Date"Date”) and the number of units was determined by dividing $190,000 by the average of the closing prices of the company'scompany’s common stock on the ten trading days immediately preceding the RSU Grant Date. The grant vested on the first business day of 2021.2023. The vice chairmanchair of the Board received an additional $25,000 annual cash retainer, payable quarterly in arrears. The lead independent director also received an additional $25,000 annual cash retainer, payable quarterly in arrears. The chairmen of our Audit Committee, our Compensation Committee, and our Nominating, Corporate Governance and Sustainability Committee and our Acquisition Committee each received an additional cash retainer of $25,000, $20,000 $20,000 and $15,000,$20,000, respectively, payable quarterly in arrears. No other fees are paid to our directors for their attendance at or participation in meetings of our Board or its committees. We reimburse our directors for expenses incurred in the performance of their duties, including reimbursement for air travel and hotel expenses. In 2016, our Board adopted a stock ownership policy establishing guidelines and stock retention requirements that apply to our non-employee directors and executive officers. Non-employee directors are subject to a stock ownership guideline of six (6) times the annual cash retainer. To determine compliance with these guidelines, generally, common shares held directly or indirectly, vested restricted stock units subject to deferred delivery of stock, and unvested restricted stock units subject solely to time-based vesting, count towards meeting the stock ownership guidelines. Stock options whether vested or unvested, and equity-based awards subject to performance-based vesting conditions are not counted toward meeting stock ownership guidelines until they have settledbeen exercised or been exercised,the performance conditions are met, as applicable. Until the guidelines are met, 70% of shares received upon settlement of equity-based awards are required to be retained by the director. Under the policy, a newly-appointed director is required to reach the required ownership level no later than three years from the date of his or her appointment. As of the Record Date, all of our non-employee directors wereMr. Jesselson was in compliance with our stock ownershipthe policy.
Mr. Aiken, Ms. Landry and Mr. Taylor need to acquire the necessary amount of equity by August 2, 2024. Ms. Allaire and Ms. Moshouris need to acquire the necessary amount of equity by November 1, 2025 and Mr. Frye needs to acquire the necessary amount of equity by March 8, 2026. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONFrom January 1, 2020 to April 17, 2020, the Compensation Committee was comprised of the following four directors: Mr. Kingshott (chairman), Ms. Colucci, Mr. Jesselson and Dr. Papastavrou. On April 17, 2020, Mr. Kingshott stepped down and Dr. Papastavrou replaced him as chairman of the Compensation Committee.
None of the members of our Compensation Committee have been an officer or employee of our company. During 2020,2022, there were no material reportable transactions between the company and the members of the Compensation Committee other than described in the "Certain Relationships and Related Party Transactions" section on page 28, and none of our executive officers served on any compensation committee or board of directors of any entity that has one or more executive officers serving on our Compensation Committee or on our Board of Directors.
CORPORATE GOVERNANCE GUIDELINES AND CODE OF BUSINESS ETHICS
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CORPORATE GOVERNANCE GUIDELINES AND CODE OF BUSINESS ETHICSOur Board of Directors is committed to sound corporate governance principles and practices. Our Board adopted Corporate Governance Guidelines on January 16, 2012, and most recently adopted amendments to the Guidelines on February 7, 2019 to establish the
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position of vice chairmanchair of the Board. The vice chairmanchair provides support on key governance matters and stockholder engagement to the chairman, lead independent director and the Board.Board on key governance matters and stockholder engagement.
The Guidelines serve as a framework within which our Board conducts its operations. Among other things, the Guidelines include criteria for determining the qualifications and independence of the members of our Board, requirements for the standing committees of our Board and responsibilities for members of our Board, including meeting attendance, and conductsresponsibility for conducting an annual evaluation of the effectiveness of our Board and its committees. The Nominating, Corporate Governance and Sustainability Committee is responsible for reviewing the Guidelines annually, or more frequently as appropriate, and recommending appropriate changes to our Board in light of applicable laws and regulations, the governance standards identified by leading governance authorities, and our company'scompany’s evolving needs.
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We have a Code of Business Ethics (the "Code"“Code”) that applies to our directors and executive officers. This Code is designed to deter wrongdoing, promote the honest and ethical conduct of all employees and promote compliance with applicable governmental laws, rules and regulations, as well as provide clear channels for reporting concerns. The Code constitutes a "code“code of ethics"ethics” as defined in Item 406(b) of Regulation S-K. We intend to satisfy the disclosure requirements under applicable SEC rules relating to amendments to the Code or waivers of any provision of the Code as applicable to our principal executive officer, our principal financial officer and our principal accounting officer, by posting such disclosures on our website pursuant to SEC rules.
The Guidelines and our Code of Business Ethics are available on our website at
www.xpo.com. In addition, you may obtain a printed copy of these documents, without charge, by sending a request to:to Corporate Secretary, XPO, Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.
Under the Guidelines, our Board of Directors is responsible for making independence determinations annually with the assistance of the Nominating, Corporate Governance and Sustainability Governance Committee. Such independence determinations are made by reference to the independence standard under the Guidelines and the definition of "independent director"“independent director” under Section 303A.02 of the NYSE Listed Company Manual.Rules. Our Board has affirmatively determined that each person who served as a director during any part of 2020,2022, except for Mr. Jacobs, ourthe executive chairman of the Board, and chief executive officer,Mr. Harik, our CEO, satisfies the independence standards under the Guidelines and the NYSE Listed Company Manual.Rules.
In addition to the independence standards provided in the Guidelines, our Board has determined that each director who serves on our Audit Committee satisfies standards for independence of Audit Committee members established by the SEC,SEC; that is, the director may not: (i) accept directly or indirectly any consulting, advisory or other compensatory fee from our company other than their director compensation, or (ii) be an affiliated person of our company or any of its subsidiaries. Our Board has also determined that each member of the Compensation Committee satisfies the NYSE standards for independence of Compensation Committee members, which became effective on July 1, 2013.members. Additionally, our Board has determined that each member of the Nominating, Corporate Governance and Sustainability Committee satisfies the NYSE standards for independence. In making the independence determinations for each director, our Board and the Nominating, Corporate Governance and Sustainability Committee analyzed certain relationships of the directors including both those that were not required to be disclosed pursuant to Item 404(a) of Regulation S-K.S-K and those required to be disclosed pursuant to Item 404(a) of Regulation S-K as set forth below in the section titled Certain Relationships and Related Party Transactions. For Mr. Aiken, Ms. Colucci, thoseMoshouris and Mr. Taylor, the relationships includednot required to be disclosed below include ordinary course commercial transactions between our company and the entity for which Ms. Colucci serves as an executive. For Mr. Jesselson, those relationships included ordinary course commercial transactions between our company and the entity forcompanies at which Mr. Jesselson serves as an executive. For Dr. Papastavrou, those relationships included ordinary course commercial transactions between our companyAiken, Ms. Moshouris and an entity for which Dr. Papastavrou served asMr. Taylor serve in a director until May 2020.
DIRECTOR SELECTION PROCESS
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DIRECTOR SELECTION PROCESSThe Nominating, Corporate Governance and Sustainability Committee is responsible for recommending to our Board of Directors all nominees for election to the Board, including nominees for re-election to the Board, in each case, after consultation with the chairman of the Board and in accordance with our company'scompany’s contractual obligations. Pursuant
Under the terms of an Investment Agreement, dated June 13, 2011 (the “Investment Agreement”), by and among Jacobs Private Equity, LLC (“JPE”), the other investors party thereto (collectively with JPE, the “Investors”), and our company, JPE has the right to designate certain percentages of the nominees for our Board of Directors so long as JPE owns securities representing specified percentages of the total voting power of our capital stock on a fully-diluted basis. JPE does not currently own securities representing the required voting power to qualify for the right to designate nominees for our Board of Directors. The foregoing rights of JPE under the Investment Agreement are in addition to, and not in limitation of, JPE’s voting rights as a holder of capital stock of our company. The Investment Agreement does not grant special voting rights to JPE has hador the other Investors; each share of company’s stock votes equally for each director. JPE is controlled by Brad Jacobs, our executive chairman. The Investment Agreement and may in the future have the contractual right, based on its securities ownership as described above under "Directors," to designate for nominationterms contemplated therein were approved by our Boardstockholders at a certain percentagespecial meeting on September 1, 2011. None of the membersforegoing will prevent our Board of Directors from acting in accordance with its fiduciary duties or applicable law or stock exchange requirements or from acting in good faith in accordance with our Board. Subjectgoverning documents, while giving due consideration to the foregoing, inintent of the Investment Agreement.
In considering new nominees for election to our Board (subject to the contractual rights granted to JPE pursuant to the Investment Agreement), the Nominating, Corporate Governance and Sustainability Committee considers, among other things, breadth of experience, financial expertise, wisdom, integrity, an ability to make independent analytical inquiries, an understanding of our company's
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company’s business environment, knowledge and experience in areas such as technology and marketing, and other disciplines relevant to our company'scompany’s businesses, the nominee'snominee’s ownership interest in our company, and a willingness and ability to devote adequate time to Board duties, all in the context of the needs of the Board at that point in time and with the objective of ensuring diversity in the background, experience and viewpoints of Board members. When searching for new directors, our Board endeavors to actively seek out highly qualified women and individuals from historically underrepresented minoritiesgroups to include in the candidate pool. Our Board aims to create a team of diverse and highly skilled directors who provide our global company with thoughtful board oversight. The Nominating, Corporate Governance and Sustainability Committee assesses the effectiveness of its diversity efforts through periodic evaluations of the Board'sBoard’s composition. Subject to the contractual rights granted to JPE pursuant to the Investment Agreement, the Nominating, Corporate Governance and Sustainability Committee may identify potential nominees for election to our Board from a variety of sources, including recommendations from current directors or management, recommendations from our stockholders or any other source the committee deems appropriate, including engaging a third-party consulting firm to assist in identifying independent director candidates. Our Board will consider nominees submitted by our stockholders, subject to the same factors that are brought to bear when it considers nominees referred by other sources. Our stockholders can nominate candidates for election as directors by following the procedures set forth in our bylaws, which are summarized below. We did not receive any director nominees from our stockholders for the 2021 Annual Meeting.
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Our bylaws require that a stockholder who wishes to nominate an individual for election as a director at our annual meeting must give us advance written notice. The notice must be delivered to or mailed and received by the secretary of our company not less than 90 days, and not more than 180 days, prior to the earlier of the date of the annual meeting and the first anniversary of the preceding year'syear’s annual meeting. As more specifically provided in our bylaws, any nomination must include: (i) the nominator'snominator’s name and address and the number of shares of each class of our capital stock that the nominator owns, (ii) the name and address of any person with whom the nominator is acting in concert and the number of shares of each class of our capital stock that any such person owns, (iii) the information with respect to each such proposed director nominee that would be required to be provided in a proxy statement prepared in accordance with applicable SEC rules, and (iv) the consent of the proposed candidate to serve as a member of our Board.
Any stockholder who wishes to nominate a potential director candidate must follow the specific requirements set forth in our bylaws, a copy of which may be obtained by sending a request to:to Corporate Secretary, XPO, Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.
BOARD OVERSIGHT OF HUMAN RESOURCE MANAGEMENT
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BOARD OVERSIGHT OF HUMAN RESOURCES MANAGEMENTOur culture at XPO is about being safe, respectful, entrepreneurial, innovativemanagement team and inclusive.XPO management and our Board of Directors are committed to maintaining XPO's rewarding work environment.creating an engaging workplace for our employees and attracting a high caliber of talent to our organization. Our success relies in large part on our strongrobust governance structure and Code of Business Ethics, our good corporate citizenship and, importantly, engaged employees who embrace our values. Our management team and Board work together in a transparent manner, allowing for open communication, including with respect to human resources-related matters. Our directors have access to information about our human resources operations and plans, and our chief human resources officer is invited to attendattends and speak regularly presents at meetings of our Board. At the onsetAdditionally, all members of the COVID-19 pandemic, the full Board was directly involved in our pandemic response through frequentare invited to attend internal monthly operating review meetings access towith business unit leaders. These meetings include discussions about human capital management callstopics such as employee health and access to our crisis management team. The Board met nine times between Marchsafety, ESG initiatives and May to discuss, in depth, the impact of COVID-19 and the company's response.employee engagement. The Compensation Committee met 11a combined 15 times during 2020 to discuss2022 and acted an additional two times via unanimous written consent. The Committee discussions focused on executive compensation, ESG initiatives and other items related to human resources management. Our directors also have opportunities
Given macro-economic pressures, we continue to attend and participate in quarterly operating review meetings with business unit management.As a customer-centric company with a strong service culture, we constantly work to maintainfocus on maintaining our position as an employer of choice. This requires an unwavering commitment to workplace inclusion and safety, as well as a competitive total compensation that meets the needs of our employees and their families. Throughout 2020,2022, we madecontinued to make ongoing significant investments in direct employee communications, conducting both quarterly and annual engagement surveys, holding almost 3,000 roundtable discussions and safety and engagement committee meetings across our North American LTL network, and introducing an employee app, XPO Go, to give round-the-clock access to company information to all employees. We continue to be responsive to employee feedback in developing new, and enhancing existing, programs and experiences that support the safety, well-being and satisfaction of our employees in the following areas, among others:
■
Diversity, Equity and Inclusion (DE&I): As part We take pride in having an inclusive workplace that encourages a diversity of skills and perspectives. We welcome employees of every gender identity, sexual orientation, race, ethnicity, national origin, religion, life experience and disability. Our employees take inclusivity training through our XPO University e-learning portal, and we engage in academic partnerships that advance diversity in higher education; these partnerships include our collaborations with Historically Black Colleges and Universities and the Hispanic Association of Colleges and Universities. We celebrate Black history, women’s history, LGBTQ+ pride, Hispanic heritage, Native American heritage, Asian American heritage and military veterans, and we sponsor multicultural employee resource groups.
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Health and Safety: The physical and emotional safety of our ongoing commitment to improveemployees is our Environmental, Social and Governance footprint, we promoted an internal candidate to the newly-created position of chief diversity officer,top priority, and we linked ESG performance targets, including DE&I initiatives,have numerous protocols in place to 25% ofensure a safe work environment. We work to decrease occupational injuries and illnesses is through our top executives' long-term incentive compensation, to further strengthen this aspect of our culture.
■Health and Safety: Amid the onset of COVID-19, we employed a combination of measures to protect our employees, including 100% paid pandemic sick leave for eligible employees, frontline employee appreciation pay for approximately 40,000 workers in the U.S. and Canada, personal protective equipment for employees in all workplaces, a contactless delivery policy, and expanded access to mental health counseling services. Our response to COVID-19 reflected our long-standing commitment to a culture of safety built on shared responsibility and continuous improvement. A major pillar of our safety performance is ourglobal Road to Zero program, which aimsinstills safety and compliance awareness through education, mentoring, communication and on-the-job
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training. As part of this safety program, we track accident-free miles and recognize XPO drivers who have achieved a million-mile safety milestone. As of December 31, 2022, over 2,400 of our drivers have achieved the million-mile accident-free safety designation at XPO, with 252 drivers hitting this threshold in 2022, including XPO’s first driver to achieve zero occupational injuriesreach four million accident-free miles. Further to our record on driver safety, our LTL driver training schools are led by veteran XPO drivers and illnesses, while also supporting the emotional securityreinforce our culture of all XPO colleagues in our workplaces. In 2020, our logistics operations in the U.S. maintained an Occupational Safetysafety.
■
Employee Engagement and Health Administration ("OSHA") total recordable incident rate ("TRIR") that was less than half the published rate for the Warehousing and Storage sector, based on the "Industry Injury and Illness Data" of the U.S. Bureau of Labor Statistics.
■Talent Development and Engagement: We ask our employees for feedback through engagement surveys, virtual roundtables and town halls.halls, as well as quarterly satisfaction surveys among our “wired” employees and an annual satisfaction survey among our “non-wired” U.S. employee audience. We use these periodic engagements to gauge our progress, ask for constructive suggestions and createdevelop action plans at the business unit and facility levels to executeimplement targeted improvements. Our annual engagement survey of the North American LTL business and our quarterly engagement survey both yielded approximately 80% participation rates in 2022, and employee satisfaction scores rose to their highest historical levels. We emphasize professional development and the identification of top industry talent in all aspects of our talent development process. Our professional development initiatives include Grow at XPO, RISE, XPO Accelerate and an XPO Graduate program.
Freight Management Training (“FMT”) Program.
■
Expansive Total Rewards: We offer a Our total compensation package that is both competitiveinstrumental to our rewarding workplace culture and progressiveconveys our appreciation to help attract and retain outstanding talent.employees for choosing XPO. In 2020,2022, we provided additional wage increases to approximately 5,000 eligible employees in over 80 locations, apart from our annual merit and hourly pay increases to hourlyacross the broader population. In total across our North American LTL and European Transportation segments, we expanded our permanent employee population by 4% year-over-year with a net 1,384 new employees, maintainingas part of our strong market competitiveness.ongoing investments in growth. We also offered comprehensive health plan options, a comprehensive pregnancy care policy, family bonding policy, tuition reimbursement, company contributions to 401(k) retirement accounts and additional benefits, such as virtual preventive health care, virtual physical therapy and diabetes management services at no cost to employees, as well as supplemental insurance, short-term loans and short-term loans.Our 2020 Sustainability Report and 2020 Form 10-K disclosures providea personalized Total Rewards Statement.
For additional details of our global progress in these key areas.areas, see Human Capital Management included in Part I, Item 1 of our 2022 Form 10-K.
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BOARD OVERSIGHT OF SUSTAINABILITY MATTERS BOARD OVERSIGHT OF SUSTAINABILITY MATTERS
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Our approachcommitment to advancing sustainability is onereflected in our efforts to continually improve our performance on matters that serve the interests of purpose-driven progress rootedour stakeholders — our stockholders, customers, employees and the communities in innovation. Wewhich we work to promote environmental, social and organizational sustainability through the decisions we make and our interactions with colleagues, customers, suppliers and other stakeholders. Sustainability features prominently in deliberations among our directors and informs their overall approach to risk oversight. In December 2020, thelive. The XPO Board approved amendments to the charter of the Nominating, Corporate Governance and Sustainability Committee to support the Board in itsDirectors supports these efforts by providing oversight of, and engagement with management regarding, various sustainability initiatives. Since 2020, the company's purpose-drivenBoard’s Nominating, Corporate Governance and Sustainability Committee has operated under a charter that describes the Committee’s purpose as, in part, overseeing the work of management regarding the development of sustainability strategies and its associated performance and external disclosures,disclosures. For example, members of the Committee engage with shareholders to discuss XPO’s ESG priorities and seek feedback on the company’s performance. Likewise, the chair and members of the Committee periodically, and at least once every year, meet with management to discuss the development of and progress on sustainability matters, including material ESG matters,the preparation and related stakeholder engagement.
publication of XPO’s sustainability update.
We believeknow that efforts to advance sustainability isare essential to our company'sXPO’s long-term viability. It fosters anviability and that ESG-related initiatives foster equitable workplace for our employees, both nowworkplaces and in the future. In addition, ESG matters are important to many of ourattract stakeholders whothat want to do business with partnersa partner that shareshares their goals; for example, the transitiongoals. The Board is committed to a low-carbon economy.We are pleasedensuring that sustainability features prominently in its deliberations and informs its overall approach to have published our 2020 Sustainability Report detailing our progress in the areas of environmentalrisk oversight. Our most recent sustainability social initiatives and governance performance. Our 2020 Sustainability Reportreport is available at
sustainability.xpo.com. Members of our Board reviewed the contents of the report and provided feedback to the company.
BOARD OVERSIGHT OF INFORMATION TECHNOLOGY AND CYBERSECURITY RISK MANAGEMENT
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BOARD OVERSIGHT OF INFORMATION TECHNOLOGY AND CYBERSECURITY RISK MANAGEMENTOur Board maintains direct oversight over information technology and cybersecurity risk. The Boarddirectors both receivesreceive and providesprovide feedback on regular updates from management regarding information technology and cybersecurity governance processes, the status of projects to strengthen internal cybersecurity, and the results of security breach simulations. The Board also discusses relevant incidents in the industry and the emergingevolving threat landscape.We have
Our company has a robust IT securitycybersecurity team managed by our chief information security officer; thisofficer. This team continuously reviews relevant legislative, regulatory and technical developments and enhances our information security capabilities in order to protect against potential threats.
We are committed to continually improving our detection and recovery processes and have rolled out an IT security training program that all employees are required to complete at regular intervals. We also have obtained an information security risk insurance policy.
STOCKHOLDER COMMUNICATION WITH THE BOARD
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STOCKHOLDER COMMUNICATION WITH THE BOARDStockholders and other parties interested in communicating with our Board of Directors, any Board committee, any individual director, including our lead independent director, or any group of directors (such as our independent directors) should send written correspondence to:to Board of Directors c/o Corporate Secretary, XPO, Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831. Please note that we will not forward communications to the Board that qualify as spam, junk mail, mass mailings, resumes or other forms of job inquiries, surveys, business solicitations or advertisements.
STOCKHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
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STOCKHOLDER PROPOSALS FOR NEXT YEAR’S ANNUAL MEETING
Stockholder proposals intended to be presented at our 20222024 Annual Meeting of Stockholders must be received by our Corporate Secretary no later than December 14, 2021,22, 2023, in order to be considered for inclusion in our proxy materials, pursuant to Rule 14a-8 under the Exchange Act. As more specifically provided for in our bylaws, no business may be brought before an annual meeting of our stockholders unless it is specified in the notice of the annual meeting or is otherwise brought before the annual meeting by or at the direction of our Board of Directors or by a stockholder entitled to vote and who has delivered proper notice to us not less than 90 days, and not more than 180 days, prior to the earlier of the date of the annual meeting and the first anniversary of the preceding year'syear’s annual meeting. For example, assuming that our 20222024 Annual Meeting of Stockholders is held on or after May 11, 2022,17, 2024, any stockholder proposal to be considered at the 20222024 Annual Meeting of Stockholders, including nominations of persons for election to our Board, must be properly submitted to us notno earlier than November 12, 2021, nor19, 2023 and no later than February 10, 2022.17, 2024.
Additionally, to comply with the SEC’s universal proxy rules (once effective), stockholders who intend to solicit proxies in support of director nominees other than the company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 18, 2024.
Detailed information for submitting stockholder proposals or nominations of director candidates will be provided upon written request sent
to:to Corporate Secretary, XPO,
Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.
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| | |
CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS | | |
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CERTAIN RELATIONSHIPS AND
| RELATED PARTY TRANSACTIONS | |
Under its written charter, the Audit Committee of our Board of Directors is responsible for reviewing and approving or ratifying any transaction between our company and a related person (as defined in Item 404 of Regulation S-K) that is required to be disclosed under the rules and regulations of the SEC. Our management is responsible for bringing any such transaction to the attention of the Audit Committee. In approving or rejecting any such transaction, the Audit Committee considers the relevant facts and circumstances, including the material terms of the transaction, risks, benefits, costs, availability of other comparable services or products and, if applicable, the impact on a director'sdirector’s independence.Following approvals by an independent disinterested special committee
Since January 1, 2022, we have not been a participant in any transaction or series of similar transactions in which the amount exceeded or will exceed $120,000 and in which any current director, executive officer, holder of more than 5% of our
Board and the Audit Committee to the extent required by our policy on related party transactions, in December 2020 and January 2021, the company entered into separate exchange agreements with certain holders of our preferredcapital stock,
and warrants, including the following of our directors and officers: Jacobs Private Equity, LLC, of which Mr. Brad Jacobs is the Managing Member; three trusts of which Mr. Michael Jesselson is a trustee; Springer Wealth Management, LLC, of which Dr. Jason Papastavrou is the Managing Member; Mr. Adrian Kingshott; Mr. Oren Shaffer; and Mr. Troy Cooper (the "Exchanging Directors and Officers"). Pursuant to the exchange agreements, the Exchanging Directors and Officers (i) exchanged their preferred stock for a combination of (x) our common stock, based on the number of shares of common stock into which our preferred stock was then convertible; and (y) a lump-sum cash payment that represented an approximationor any member of the
net present valueimmediate family of the
future dividends required by the terms of our preferred stock to be paid by us; and/foregoing, had or
(ii) exchanged their warrantswill have a material interest, except for the
number of shares of our common stock that was equal to the number of shares of common stock that such holder would be entitled to receive upon an exercise of the warrants less the number of shares of our common stock that had an approximate value equal to the exercise price of the warrants, based on the formula set forthtransactions previously disclosed in
the exchange agreements. All of the holders of our preferred stock and warrants have signed an exchange agreement, and we expect all holders of preferred stock and warrants to exchange their securities for shares of our common stock pursuant to the terms of the exchange agreement. All of the exchange transactions, whether with our directors and officers or with the other holders of our preferred stock and warrants, occurred on substantially the same terms.We issued an aggregate of 9,882,141 unregistered shares of our common stock to the Exchanging Directors and Officers in connection with the preferred stock exchanges; and an aggregate of 9,333,733 unregistered shares of our common stock to the Exchanging Directors and Officers in connection with the warrant exchanges. We paid an aggregate of approximately $22.4 million to the Exchanging Directors and Officers as part of the lump-sum cash payments in connection with the preferred stock exchanges.
The exchange transactions were made to simplify our equity capital structure, including in contemplation of our previously announced plan to pursue a spin-off of our logistics business.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial ownership of our voting securities as of the Record Date by: (i) each person who is known by us, based solely on a review of public filings, to be the beneficial owner of more than 5% of any class of our outstanding voting securities, (ii) each director, (iii) each NEO, and (iv) all executive officers and directors as a group. None of the foregoing persons beneficially owned any shares of equity securities of our subsidiaries as of the Record Date. Under applicable SEC rules, a person is deemed to be the "beneficial owner"“beneficial owner” of a voting security if such person has (or shares) either investment power or voting power over such security or has (or shares) the right to acquire such security within 60 days by any of a number of means, including upon the exercise of options or warrants or the conversion of convertible securities. A beneficial owner'sowner’s percentage ownership is determined by assuming that options, warrants and convertible securities that are held solely by the beneficial owner, and which are exercisable or convertible within 60 days, have been exercised or converted. Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all voting securities shown as being owned by them. Unless otherwise indicated, the address of each beneficial owner in the table below is care of XPO, Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.
| | Name of Beneficial Owner | | | Shares of
Common Stock
Beneficially Owned | | | Percentage of
Common Stock
Outstanding(1) | |
| | Beneficial Ownership of 5% or more: | | | | | | | | | | | | | |
| | MFN Partners, LP(2) | | | | | 12,675,369 | | | | | | 11.0% | | |
| | BlackRock, Inc.(3) | | | | | 11,244,910 | | | | | | 9.7% | | |
| | The Vanguard Group(4) | | | | | 10,751,543 | | | | | | 9.3% | | |
| | Orbis Investment Management Limited(5) | | | | | 9,992,273 | | | | | | 8.6% | | |
| | Directors: | | | | | | | | | | | | | |
| | Jason Aiken | | | | | 4,960(6) | | | | | | * | | |
| | Bella Allaire | | | | | 902 | | | | | | * | | |
| | Wes Frye | | | | | 1,500 | | | | | | * | | |
| | Michael Jesselson | | | | | 305,917(7) | | | | | | * | | |
| | Allison Landry | | | | | 4,960 | | | | | | * | | |
| | Irene Moshouris | | | | | 902 | | | | | | * | | |
| | Johnny C. Taylor, Jr. | | | | | 4,960(8) | | | | | | * | | |
| | NEOs: | | | | | | | | | | | | | |
| | Brad Jacobs+ | | | | | 1,688,117(9) | | | | | | 1.5% | | |
| | Mario Harik+ | | | | | 123,548 | | | | | | * | | |
| | Carl D. Anderson II(10) | | | | | — | | | | | | — | | |
| | Ravi Tulsyan(11) | | | | | 20,025 | | | | | | * | | |
| | Current Directors and Executive Officers as a Group: (10 People) | | | | | 2,135,766(12) | | | | | | 1.8% | | |
| | | | |
| | Beneficially Owned
| | Outstanding(1)
|
|---|
Name of Beneficial Owner
| | Shares of
Common Stock
| | Percentage of
Common Stock
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| Beneficial Ownership of 5% or more: | | | | |
| Jacobs Private Equity, LLC | | 18,518,926 (2) | | 16.6 % |
Orbis Investment Management Limited(3)
Orbis House, 25 Front Street
Hamilton Bermuda HM11 |
| 13,980,053 | | 12.5 % |
BlackRock, Inc.(4)
55 East 52nd street
New York, NY 10055 | | 8,327,934 | | 7.5 % |
The Vanguard Group(5)
100 Vanguard Blvd.,
Malvern, PA 19355 |
| 8,095,381 | | 7.2 % |
| Directors: | | | | |
| Gena Ashe | | 14,398 (6) | | * |
| Marlene Colucci | | 5,029 (7) | | * |
| AnnaMaria DeSalva | | 8,522 (8) | | * |
| Michael Jesselson | | 289,380 (9) | | * |
| Adrian Kingshott | | 96,182 (10) | | * |
| Jason Papastavrou | | 201,899 (11) | | * |
| Oren Shaffer | | 58,576 (12) | | * |
| NEOs: | | | | |
| Brad Jacobs+ | | 18,906,342 (13) | | 16.9 % |
| Troy Cooper | | 139,315 | | * |
| Mario Harik | | 123,548 | | * |
| David Wyshner | | 6,193 (14) | | * |
| Sarah Glickman | | 3,602 (15) | | * |
| Kurt Rogers | | 3,853 (16) | | * |
| Current Directors and Executive Officers as a Group: (11 People) | | 19,849,384 (17) | | 17.8 % |
| | | | | |
+
Director and Executive Officer
(1)
For purposes of this column, the number of shares of the class outstanding for each person reflects the sum of: (i) 111,676,088115,750,166 shares of our common stock that were outstanding as of the Record Date, and (ii) the number of RSUs held, if any, that are or will become vested within 60 days of the Record Date.
(2)Mr. Jacobs has indirect beneficial ownership
Based on Amendment No. 1 to the Schedule 13G filed on August 12, 2022 by (i) MFN Partners, LP (the “Partnership”); (ii) MFN Partners GP, LLC (“MFN GP”), as the general partner of the Partnership; (iii) MFN Partners Management, LP (“MFN Management”), as the investment adviser to the Partnership; (iv) MFN Partners Management, LLC (“MFN LLC”), as the general partner of MFN Management; (v) Michael F. DeMichele, as a managing member of MFN GP and of MFN LLC; and (vi) Farhad Nanji, as a managing member of MFN GP and of MFN LLC (each, a “Reporting Person” and collectively, the “Reporting Persons”), which reported that, as of August 11, 2022, the Reporting Persons collectively owned 12,675,369 shares of our common stock with shared voting power and shared dispositive power. The address of the principal business office of each of the Partnership, MFN GP, MFN Management, MFN LLC and Messrs. DeMichele and Nanji is c/o MFN Partners Management, LP, 222 Berkeley Street, 13th Floor, Boston, MA 02116.
(3)
Based on Amendment No. 4 to the Schedule 13G filed on January 30, 2023 by BlackRock, Inc., which reported that, as of December 31, 2022, BlackRock, Inc. beneficially owned by JPE as a result of being its managing member. In addition, Mr. Jacobs directly owns 387,41611,244,910 shares of our common stock, followingwith sole voting power over 11,062,967 shares of our common stock and sole dispositive power over 11,244,910 shares of our common stock. The address of the vestingprincipal business office of equity incentive awards and exercise of stock options. See footnote(13) below.
BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
(4)
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(3)- Based on Amendment No. 8 to the Schedule 13G filed on
January 11, 2021February 9, 2023 by The Vanguard Group, which reported that, as of December 30, 2022, The Vanguard Group beneficially owned 10,751,543 shares of our common stock with shared voting power over 67,174 shares of our common stock, sole dispositive power over 10,512,719
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shares of our common stock and shared dispositive power over 238,824 shares of our common stock. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
(5)
Based on Amendment No. 10 to the Schedule 13G filed on February 14, 2023 by Orbis Investment Management Limited ("OIML"(“OIML”), and Orbis Investment Management (U.S.), L.P. ("OIMUS") and Allan Gray Australia Pty Ltd ("AGAPL"(“OIMUS”), which reported that, as of December 31, 2020,2022, OIML beneficially owned 13,853,375 shares of our common stock, OIMUS beneficially owned 119,1139,851,344 shares of our common stock, and AGAPLOIMUS beneficially owned 7,565140,929 shares of our common stock. The group hasThese entities have sole voting and sole dispositive power over such shares of our common stock.
(4)Based on Amendment No. 2 to The address of the Schedule 13G filed on February 1, 2021 by BlackRock, Inc., which reported that, asprincipal business office of December 31, 2020, BlackRock, Inc. beneficially owned 8,327,934 sharesOIML is Orbis House, 25 Front Street, Hamilton, Bermuda HM11. The address of our common stock, with sole voting power over 7,764,109the principal business office of OIMUS is 600 Montgomery Street, Suite 3800, San Francisco, CA 94111, USA.
(6)
Consists of 920 directly held shares of our common stock and sole dispositive power over 8,327,934 shares of our common stock.
(5)Based on Amendment No. 6 to the Schedule 13G filed on February 10, 2021 by The Vanguard Group, which reported that, as of December 31, 2020, The Vanguard Group beneficially owned 8,095,381 shares of our common stock with shared voting power over 83,351 shares of our common stock, sole dispositive power over 7,889,423 shares of our common stock and shared dispositive power over 205,958 shares of our common stock.
(6)Consists of 14,3984,040 RSUs that are or will become vested within 60 days of the Record Date.
(7)Includes 2,392 RSUs that are or will become vested within 60 days
Consists of the Record Date.
(8)Includes 5,641 RSUs that are or will become vested within 60 days(i) 32,971 directly held shares of the Record Date.
(9)Includes: (i)our common stock, (ii) 5,000 shares of our common stock held in an individual retirement account of Mr. Jesselson, (ii)(iii) 6,000 shares of our common stock owned by Mr. Jesselson'sJesselson’s spouse, (iii)(iv) 201,001 shares of our common stock beneficially owned by the Michael G. Jesselson 12/18/804/8/71 Trust and the Michael G. Jesselson 4/8/7112/18/80 Trust, of which trusts Mr. Jesselson is the beneficiary, (iv)(v) 8,000 shares of our common stock beneficially owned by the JJJ Irrevocable Trust, of which Mr. Jesselson is a trustee, (v)(vi) 8,000 shares of our common stock beneficially owned by the RAJ Irrevocable Trust, of which Mr. Jesselson is a trustee, (vi)(vii) 8,000 shares of our common stock beneficially owned by the SJJ Irrevocable Trust, of which Mr. Jesselson is a trustee, (vii)(viii) 21,057 shares of our common stock beneficially owned by Michael G. Jesselson and Linda Jesselson, Trustees UID 6/30/93 FBO Maya Ariel Ruth Jesselson, and (viii) 6,041(ix) 15,888 RSUs that are or will become vested within 60 days of the Record Date.
(10)Includes 22,440
(8)
Consists of 920 directly held shares of our common stock and 4,040 RSUs that are or will become vested within 60 days of the Record Date.
(11)
(9)
Consists of (i) 180,208387,416 directly held shares of our common stock beneficiallyand 1,300,701 shares of our common stock owned by Springer Wealth Management LLC, of which Dr. Papastavrou is the owner of 100%JPE. Mr. Jacobs has indirect beneficial ownership of the equity securities,shares of our common stock owned by JPE as a result of being its managing member.
(10)
Mr. Anderson became CFO of the company on November 8, 2022.
(11)
Mr. Tulsyan stepped down from his position as CFO of the company on November 7, 2022. His beneficial ownership information is based on the company’s records as of the Record Date. Mr. Tulsyan is not included in the group of current directors and (ii) 21,691executive officers.
(12)
Includes 23,968 RSUs that are or will become vested within 60 days of the Record Date.
(12)Includes 27,440 RSUs that are or will become vested within 60 days of the Record Date.
(13) Excludes Mr. Jacobs has indirect beneficial ownership of the shares of our common stock beneficially owned by JPE as a result of being its managing member. See footnote(2). Also includes 387,416 shares of our common stock held directly by Mr. Jacobs following the vesting of equity incentive awards and exercise of stock options.
(14)Mr. Wyshner became chief financial officer of the company on March 2, 2020.
(15)Ms. Glickman stepped down from her position as acting chief financial officer of the company on March 2, 2020 and left the company on April 13, 2020. Her beneficial ownership information is based on the company's records as of the Record Date.
(16)Mr. Rogers became chief legal officer of the company on February 3, 2020 and stepped down on March 11, 2020. His beneficial ownership information is based on the company's records as of the Record Date.
(17)Includes 100,043 RSUs that are or will become vested within 60 days of the Record Date.Tulsyan’s holdings.
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EXECUTIVE COMPENSATION | | |
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LETTER FROM THEEXECUTIVE COMPENSATION COMMITTEE
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LETTER FROM THE COMPENSATION COMMITTEE
Dear Fellow Stockholder,Throughout this past year, our entireStockholders,
Thank you for your continued investment in XPO. The company fromhas undergone an incredible transformation through two spin-off transactions over the Board of Directorslast few years, and senior managementas we stand today, we are confident in how XPO is positioned as a world-class less-than-truckload (LTL) business and that the company is focused on executing on its growth strategy and delivering value to our frontline employees, worked togetherstockholders.
Compensation Committee Refreshment
In conjunction with the GXO and RXO spin-offs in 2021 and 2022, respectively, the Compensation Committee (the “Committee”) was completely refreshed to provide a new perspective and drive alignment of the compensation program with XPO’s evolving business. Our Committee chair, Johnny C. Taylor Jr., and Allison Landry joined the Committee in August 2021, with Irene Moshouris joining in November 2022. As an entirely reconstituted Committee, we conducted a holistic review of XPO’s executive compensation program to ensure that critical supplies of food, consumables, medical gear and other goods reached the people who needed them. Our management team not only led XPO through the pandemic; they kept our organization focused on implementing technology and other profit improvement initiatives that have the abilityit:
■
Is heavily performance-based to drive sustainable share gains.While 2020 brought a novel set of challenges, as a Compensation Committee, we remained committed to our strategic philosophy of setting ambitious targets for executives, incentivizing them to driveensure alignment with long-term stockholder value creation and aligning these awards with long-term performance.
the company’s evolving business;
■
Continues to attract, motivate and retain top executive talent critical to lead XPO; and
■
Incorporates stockholder feedback regarding both the structure of the program and related disclosures.
Robust Stockholder Engagement
on 2020 Compensation and
Say-on-Pay VoteEach spring, members of our Board and management team engage with many of our top stockholdersCommitment to discuss matters that will be voted on at our annual meeting. These conversations have been instructive in helping the Compensation Committee make informed decisions regarding aspects of our executive compensation program. While our say-on-pay vote received majority support in 2020, we continually strive for improvement, and we value the opportunity to hold ongoing discussions with stockholders throughout the year.
This past winter, AnnaMaria DeSalva, vice chairman, Dr. Jason Papastavrou, chairmanResponsiveness
As a part of the Compensation Committee, and members of senior management conducted an additional round of outreach to stockholders to discuss our 2020 say-on-pay vote andholistic compensation changes that had been madereview, following the 20202022 Annual Meeting. By soliciting feedback on these changes, we also gained insights into how the program can be more responsive to concerns moving forward.For each of spring and winter engagement, weMeeting, XPO reached out to stockholders representing greater than 60%66% of outstanding shares. We ultimately metour common stock and engaged with stockholders representing 45% (spring)holding 44% of our common stock. As Committee members, we participated in meetings with stockholders holding 31% of our common stock. The Committee takes the result of our say-on-pay vote seriously, and 50% (winter)we were disappointed that at the last Annual Meeting, the proposal received 69% support. As such, as a part of outstanding shares, with XPO directors leading over halfour engagement initiative, we wanted to further understand the stockholder concerns that drove the say-on-pay vote in order to inform this year’s proxy disclosures as well as the design of our executive chairman’s, incoming CEO’s and incoming CFO’s compensation programs. Additionally, in preparation for the closing of the meetings (winter).RXO spin-off, we wanted to seek stockholder feedback on how to address the outstanding, in-flight awards.
Investors expressed an interest in an annual incentive that is purely based on operational metrics, as well as for the Committee to transition to an annual schedule of granting long-term incentives that have multi-year performance and vesting periods. The conversations covered2023 compensation program for our compensation practices, pay-for-performance alignment, disclosure enhancements, plan designexecutive chairman, CEO and incorporation of environmental, social and corporate governance ("ESG") factors into company compensation strategy and feedback was sharedCFO, which is explained in detail in the CD&A, is fully responsive to this feedback.
Additionally, during engagement, stockholders acknowledged the need to address the outstanding awards in conjunction with the Compensation Committee.Enhancements MadeGXO and RXO spin-offs. They expressed a preference for the converted awards to be equity-based awards, incorporate extended vesting periods, and contain double-trigger change-in-control provisions. The Committee understood the rationale for this guidance and followed it in Responseconverting the outstanding awards as a result of the completed spin-offs.
We Ask For Your Support
The feedback stockholders shared was critical to Stockholder FeedbackThe company made a number of responsive changes to the executive compensation program over the past year. This Proxy Statement describes the Compensation Committee's decision-making process in greater detail and provides enhanced disclosure about those changes, including information on the impact of COVID-19 and the evolution of the executive compensation program.
Stockholder feedback gained during the past year helped to inform the design of a new long-term cash incentive award (the "2020 LTI"), which was granted in July 2020 in connection with new employment agreements entered into with Mr. Jacobs, Mr. Cooper and Mr. Harik.
Notably, we believe the 2020 LTI takes into account four key elements of stockholder feedback:
■Stockholders asked for more insight into our award timing, given that XPO does not employ an annual grant cycle for the long-term incentive program. In response, the Compensation Committee has committed to not grant additional awards to Mr. Jacobs, Mr. Cooper or Mr. Harik while the 2020 LTI remains outstanding, barring unforeseen circumstances, and excluding any potential modifications to existing awards in connection with the company's plan to spin off our global logistics business.
■Stockholders have expressed concern that awards based on all-or-nothing goals have the potential to incentivize risk-taking. In response, the 2020 LTI has a sliding scale payout, as well as three separately weighted metrics.
■Several stockholders expressed a preference for inclusion of metrics relative to peers. In response, 25% of the 2020 LTI is based on growth in adjusted cash flow per share relative to peers.
■Many stockholders highlighted the importance of integrating ESG into company strategy and incorporating ESG metrics into our executive compensation program. In response to this feedback, which aligns with our long-term strategy, an ESG scorecard has been introduced, worth 25% of the 2020 LTI. The scorecard encompasses goals tied to performance on employee safety, sustainability, information security, diversity and human capital management, among other areas of ESG.
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XPO's Continued Evolution
In 2021, the Board and senior management remain focused on ensuring a safe and satisfying employment experience for our people, helping our customers operate greener supply chains, operating as a good corporate citizen and creating long-term value for our stockholders. We believe that the spin-off planned for later this year has the potential to advance all of these objectives.
The planning for the spin-off requires an evaluation of all company practices, including compensation plan design. We can commit to stockholders that we will remain faithful to our philosophy of aligning executives' interests with the interests of stockholders and maintaining a pay-for-performance culture based on achieving ambitious goals. Our Board looks forward to continuing to engage with stockholders in 2021 to discuss the current executive compensation program, and we thank you. As we continue working to advance XPO’s strategy on its next chapter, we remain committed to ongoing stockholder engagement to ensure our practices continue to reflect stockholder input.
Your vote is very important to us. We strongly encourage you to read our Proxy Statement in its entirety and ask that you vote with our recommendations. On behalf of the
plansentire Board of Directors, thank you for
our future.your investment, support, and continued feedback.
Sincerely,Jason Papastavrou Ph.D. (Committee Chairman)
Marlene Colucci
Michael Jesselson
Johnny C. Taylor, Jr., chair
Allison Landry, member
Irene Moshouris, member
COMPENSATION DISCUSSION AND ANALYSIS
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COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)
This Compensation Discussion and AnalysisCD&A describes XPO'sXPO’s executive compensation programprograms and performance outcomes for 2020. The Compensation2022, as determined by the Committee of our Board of Directors (the "Committee") oversees our executive compensation program and practices. In this section, we explain the Committee's 2020 compensation decisions for the following named executive officers ("NEOs"(“NEOs”).:
| | NEO | | | 2022 ROLES | |
NEO |
| 2020 ROLE |
| Brad Jacobs | | Chairman and | Chief Executive Officer from January 1, 2022 through October 31, 2022;
Executive Chairman commencing November 1, 2022 | |
Troy Cooper | | President |
| Mario Harik | | | Chief Information Officer, Chief Customer Officer, and President, North American LTL through October 31, 2022;
Chief Executive Officer commencing November 1, 2022 | |
David Wyshner | Carl Anderson | Chief Financial Officer |
Sarah Glickman | | Acting Chief Financial Officer
(served as Acting Chief Financial Officer until March 2, 2020)commencing November 8, 2022 | |
Kurt Rogers | Ravi Tulsyan | | | Chief LegalFinancial Officer
(served as Chief Legal Officer until March 11, 2020) from January 1, 2022 through November 7, 2022 | |
2020 COMPANY PERFORMANCE HIGHLIGHTS
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2022 COMPANY PERFORMANCE HIGHLIGHTS In 2020,2022, our NEOs navigated ourled the company through several transformative initiatives outlined in the pandemicMarch 2022 strategic plan authorized by prioritizing the safetyBoard. The company expects the execution of the plan to generate strong and sustainable long-term stockholder value creation, while continuing to generate notable in-year business achievements and maintaining a focus on disciplined deleveraging over time. Key 2022 accomplishments include:
1.
Completion of the sale of XPO’s North American intermodal operation in March 2022. The proceeds from the divestiture were used to redeem a portion of our employees while ensuring continuitysenior notes due in 2025, bringing our net debt leverage ratio* down to 2.0x in the first quarter of service for our customers. The leadership2022, from 2.7x in the fourth quarter of our NEOs2021 on a previously reported basis, prior to the RXO spin-off.
2.
Completion of the RXO spin-off on November 1, 2022, enabling XPO to focus its North America business exclusively on LTL — a goal that top XPO stockholders discussed extensively with management in recent years.
3.
Achievement of strong full-year 2022 financial results:
i.
Company revenue of $7.7 billion, up 7% year-over-year.
ii.
Adjusted diluted earnings per share* of $3.53, up 82% year-over-year.
iii.
Free cash flow* of $391 million, up 11% year-over-year.
4.
In North American LTL, substantial financial and the resilienceoperational gains, and steady execution of our business model preserved value for our stockholders—the company generated positive earningsgrowth initiatives:
i.
LTL adjusted EBITDA of $1 billion, exceeding target.
ii.
Yield improvement of 7% year-over-year, excluding fuel surcharges.
iii.
Adjusted operating ratio improvement*, excluding gains on sales of real estate, of 40 basis points to 83.9% for the full year,year.
iv.
Damage frequency improvement of 66% in the fourth quarter, compared to the same period the prior year.
v.
Manufactured more than 4,700 linehaul trailers in-house, expanding our production capacity and nearly doubling the 2021 output.
vi.
Significant investments made in network expansion, opening new terminals in California, Georgia, Arkansas, Wisconsin and New Jersey, as well as significant revenue, adjusted EBITDAnew fleet maintenance shops in Florida, Ohio, Nevada and free cash flow. InNew York. Since announcing the fourth quarter, we reported record resultsnetwork expansion plan in several key financial metrics,Q4 2021, added 369 net new doors throughout the network.
vii.
Further enhanced our proprietary pricing platform, which is driven by advanced analytics of customer shipment data and automated data management, deepening the analysis at the customer level to optimize rates.
5.
The achievement of all-time-high employee engagement, as described below.Highlightsreflected in our annual employee survey in North American LTL:
i.
The 2022 engagement survey drew a response rate of
our full-year 2020 performance include:■$16.25 billionalmost 80%, with close to 16,000 employees across both the wired and non-wired population providing feedback on 48 questions that asked for insights spanning a wide range of revenue;
■$79 million of net income attributable to common shareholders;
■$0.78 of diluted EPS, and $2.01 of adjusted diluted EPS*;
■$1.39 billion of adjusted EBITDA*;
■$885 million of cash flow from operations;
■$554 million of free cash flow*;
■$2.1 billion of cash and cash equivalents, and $1.0 billion of available borrowing capacity, as of December 31, 2020;
■For the fourth quarter: the highest adjusted EBITDA of any fourth quarter in the company's history, and the highest revenue of any quarter; and
■An absolute one-year total stockholder return ("TSR") of 50% as of December 31, 2020—more than triple the average of the corresponding TSRs for the S&P 400 MidCap (14%) and Dow Jones Transportation Average (17%)—extending the company's track record of TSR outperformance.
employee experiences.
*
See Annex A for reconciliations of non-GAAP
measuresmeasures.
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In addition to these results, three highlights of our 2020 performance demonstrate our NEOs' outstanding ability to balance risks and opportunities:
First, our NEOs acted decisively to protect our employees from COVID-19, with rigorous safety protocols and personal protective equipment. Supply chain operations are critically important to the economy and to quality of life, particularly when consumer access to goods is disrupted. In 2020, our frontline workers had the strong support of management in providing essential services throughout the pandemic, including the delivery of healthcare supplies. Our company invested over $70 million in the safety of workers, including the purchase of 8.75 million facemasks, 5.5 million pairs of gloves and 105,000 gallons of hand sanitizer.
Second, by ensuring that the business operated safely, our NEOs helped the company strengthen ties with key customers and expand those relationships. This was true across a range of verticals in 2020—not only with e-commerce and omnichannel, where customers sought our help to manage growth, but also with supply chains challenged by disruptions in demand. We enhanced our position as a strategic partner by providing these customers with viable solutions that showcase our strengths.
And third, the complementary strengths of our NEOs led to the most compelling aspect of our performance in 2020—our company's dramatic rebound in the second half of the year. By mid-year, we had begun to nimbly recover from the April trough of the COVID-19 impact. By the third quarter, one of our key businesses, truck brokerage, was on a strong upward trajectory and two others, less-than-truckload and logistics, had started to follow suit. By the fourth quarter, we saw robust momentum in all three areas of the business, buoyed by consumer demand and signs of an industrial recovery.
Strong Focus on Stability and Liquidity
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As operating conditions deteriorated
ii.
Results showed a 10-point increase in job satisfaction year-over-year, yielding the highest score in the early part of 2020, our NEOs demonstrated prudent capital management by reducing capital expenditures, while continuingcompany’s recorded history for LTL.
iii.
Average engagement on XPO’s Workplace internal social platform increased 323% compared to invest2021, and 687% since Mr. Harik began leading LTL in key growth initiatives. This balanced approach led to $3.1 billion of total liquidity at year-end, including a $554 million contribution to liquidity from free cash flow*. Importantly, we maintained our near-term service capacity and long-term competitive positioning for profitable growth.As the economy continues to recover, our strengths are aligned with major industry tailwinds that emerged in 2020: logistics automation, the ongoing growth in e-commerce and supply chain outsourcing. Increasingly, customers want the efficiencies of automation and data-driven visibility to reduce risk. In the consumer sectors, customers need partners with the technological capability to manage high-volumes of e-commerce orders and consumer packaged goods. Due in large partOctober 2021, compared to the exemplary leadershipprior 12 months.
6.
Continued external recognition in 2022 as a purpose-driven leader in both transportation and technology:
i.
Newsweek named XPO one of our NEOs“America’s Most Responsible Companies” for a second year.
ii.
Forbes magazine named XPO one of “America’s Best Large Employers”.
Overall, XPO ended the year in 2020, XPO is well-positioneda strong position to capitalize on all these opportunities forits positioning as one of the benefitlargest LTL providers in North America, with approximately 8% share of the $59 billion LTL industry in the U.S. (as measured at the end of 2022); 27,000 customers as of December 2022; low (2%) concentration risk from our largest customer; network coverage of 99% of US zip codes; in-house trailer production and driver training capabilities; and data-driven levers of profit growth embedded in our proprietary technology. We intend to continue making disciplined investments in our people and in high-ROIC components of our network, giving us a solid foundation to deliver on our long-term targets and create outsized value for our stockholders.Our full year 2020 performance was impacted by macroeconomic volatility, resulting
COMPENSATION DISCUSSION AND ANALYSIS ROADMAP
As a result of the transformation of XPO’s business profile and accompanying leadership changes in 2022, the Committee made several changes to XPO’s compensation program and outstanding executive awards considering stockholder feedback and relevance for XPO as a year-over-year declinestand-alone, pure-play LTL business in adjusted EBITDA. Notably, the skilled leadershipNorth America. The below table provides an overview of our NEOs led to a financial rebound for the companyeach element of executive compensation discussed in the second half of the year and created momentum leading into 2021.CD&A along with a summary that includes relevant references to respective CD&A sections which provide more detailed disclosure.
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COMPENSATION
PROGRAM
(discussed on page 36) | | | | ■
Following the completion of the GXO and RXO spin-offs over the course of two years and with the announcement of Mr. Harik as XPO’s new CEO as well as other management hires, the newly reconstituted Committee redesigned the compensation program for 2023 in order to be responsive to stockholder feedback and align with the new business priorities. ■
For 2023, and with the intention to maintain this structure going forward, contingent upon stockholder feedback, the Committee: •
Established a formulaic STI award for executives ▪
2023 Annual Incentive for executive chairman, CEO and CFO based on adjusted EBITDA •
Communicated intention to grant long-term incentive awards on an annual basis ▪
For executive chairman and CEO structured LTI to consist of 80% performance-based RSUs and 20% as time-based RSUs ▪
For CFO structured LTI to consist of 65% performance-based RSUs and 35% as time-based RSUs
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COMPENSATION
PROGRAM
(discussed on page 42) | | | | ■
The Committee made a number of changes to compensation awards in 2022, reflecting modifications of prior awards from cash to equity and granting of awards in connection with the promotion of Mr. Harik to CEO. These include but not are not limited to: •
Replacement LTL PSUs in place of the 2022 cash tranche of the 2020 LTI award equity for 50% of Mr. Jacobs’ award and 100% of Mr. Harik’s which required completion of the RXO spin-off no later than December 31, 2022 and achievement of targets across two metrics. •
Regular LTL PSUs with a three-year vesting period and metrics aligned with path to LTL long-term targets. •
A relative TSR PSU granted to Mr. Harik and Mr. Anderson in connection with their appointments as CEO and CFO and based on rigorous relative TSR target to incentivize a strong focus on XPO’s growth in market position versus core competitors. •
A new hire RSU award for Mr. Harik in connection with his appointment as CEO.
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(1)
| | Free cash flow performance improved year-over-year in the first half of 2020, as a result of disciplined working capital management and the conservation of capital expenditures during the peak of the COVID-19 pandemic. |
(2)
| | Free cash flow performance declined year-over-year in the second half of 2020, as the company used cash for working capital when revenue rebounded and capital expenditures increased. |
* See Annex A for reconciliations of non-GAAP measures
Delivering Significant Total Stockholder Return
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The primary focus of our company's leadership team is to deliver meaningful value to our stockholders and other stakeholders through the execution of our strategy. Our steadfast commitment to long-term value creation, operational excellence and disciplined capital allocation has resulted in the continued outperformance of our total stockholder return (TSR) relative to comparative indices, as illustrated below. In 2020, despite the macroeconomic impacts of COVID-19, our one-year TSR of 50% and three-year TSR of 30% both exceeded the returns generated by relevant indices. In addition to the comparative indices
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OUTSTANDING
2020 LTI AWARDS
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In February 2023, the Committee re-evaluated the structure of the remaining 2023 tranche of the 2020 LTI awards for both Mr. Jacobs and Mr. Harik. Based on stockholder feedback and the impact of the RXO spin-off on the company’s profile, the Committee decided to effectively cancel the original version of the award, denominated in cash, and replace it with new performance-based shares, with metrics that were realigned with post-spin-off strategic priorities. |
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below, we outperformed our core peer group median for one-year TSR, three-year TSR and five-year TSR of 23%, 22% and 95%, respectively.
Notes:
Our core peer group is described in more detail under the heading "Key Factors Considered in Determining Executive Compensation."
TSR calculations reflect the trading price of XPO common stock and that of the relevant indices/companies as of the last trading day of calendar years 2020, 2019, 2018, 2017, 2016 and 2015, as supplied by Research Data Group. The graph above is not the annual performance graph required by Item 201(e) of Regulation S-K; the required graph can be found in Part II, Item 5 of our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 12, 2021.
OUR COMPENSATION PHILOSOPHY AND EXECUTIVE COMPENSATION PROGRAM OBJECTIVES
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XPO's executive compensation philosophy is founded on the following core objectives:
■Attract high-impact, results-oriented executives in a competitive job market who will contribute to XPO's goal of maximizing stockholder value.
■Ensure that each executive receives total compensation that encourages his or her long-term retention through business and individual performance assessments, coupled with market benchmarking.
■Maintain executive focus on the company's top priorities of profitable growth, innovation, operational excellence and customer satisfaction, as well as increased focus on ESG matters including employee safety and engagement.
■Set ambitious targets that incentivize our executives to drive long-term stockholder value creation without unnecessary risk.
■Align the interests of our executives with those of our stockholders by emphasizing high growth and high returns in our long-term, performance-based incentives.
■Incorporate stockholder feedback into the Committee's decision-making process.
Our CommitmentThe target amounts and combined vesting/sales restriction schedules were preserved in the issuance of the replacement awards, however, the weighting of the two metrics were changed so that relative TSR of XPO vs. the S&P Transportation Select Index represents 75% of the award and the ESG scorecard represents 25%. The ESG scorecard was recalibrated to Stockholder Value Creationbetter align with our current business. The new performance measurement period begins on November 1, 2022 and Alignment with Pay-for-Performance
|
The Committee regularly analyzes pay-for-performance alignment to ensure that our compensation plan is achieving its intended outcomes.
In 2020, the Committee reviewed the pay-for-performance alignment of our compensation program on a realizable basis, using a four-year period to correspond with XPO's performance periods for prior awards. A realizable pay analysis allows the Committee to assess whether the value of the compensation received by our CEO and other executive officers is rightsized relative to stockholder return on investment in the company over time.
As shown below, the Committee's most recent analysis demonstrated that CEO pay has been strongly aligned with performance over the past four years. From 2016 to 2019, XPO's realizable pay was at the 82nd percentile versus core peers, while TSR performance was at the 91st percentile. By taking a strategic approach to the timing of grants, which are not made on a typical annual cycle but are heavily performance-based, the Committee has been able to tie awards closely to the company's progress on long-term results. Our method of award design also allows for continuous incorporation of stockholder feedback into the design of subsequent awards. This approach to granting awards has successfully aligned pay outcomes with performance and sustainable value creation.
ends on December 31, 2024.
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OUTSTANDING
2018 & 2019
LTI AWARDS
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Prior to the RXO spin-off, Mr. Jacobs and Mr. Harik held two unvested performance-based stock awards. These PSUs included two separate performance hurdles within each award structure to achieve target payout, with a ‘hit-or-miss’ payout structure. The Committee evaluated market practice for how to properly handle the modification requirements for these awards and found that 72% of companies converted some or all of their outstanding executive PSUs into time-based RSUs vesting on their original schedules in conjunction with a spin-off. ■
Taking into account the extraordinary value creation created by Mr. Jacobs and Mr. Harik over the length of the PSU award, the difficulty in making a fair adjustment methodology following two successive spin-offs and the prevailing market practice, the Committee decided to convert the combined target shares in these two outstanding awards to a single time-based RSU award for each of Mr. Jacobs and Mr. Harik, effective as of the RXO spin-off date. Taking into account stockholder feedback on how to address outstanding awards, the Committee extended the vesting schedule of the 2018 award by two years to December 31, 2024, aligning with the original vesting schedule of the 2019 award and also applied a post-vesting sales restriction on the entire pool of shares across both awards, which expires on December 31, 2025.
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Note:
Realizable pay reflects the impact of performance on target pay and is calculated as the sum of (i) salary paid; (ii) bonus paid; (iii) the value of equity compensation that vested, calculated using the closing stock price on 12/31/2019; (iv) the value of cash-settled performance awards at the settlement value; and (v) the annualized realizable target value of outstanding equity awards using the closing stock price on 12/31/2019.
STOCKHOLDER OUTREACH AND ENGAGEMENT STOCKHOLDER OUTREACH AND ENGAGEMENT
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We believe that regular stockholder engagement is key to strong corporate governance, and we recognize the value of engaging in constructive dialogue with stockholders on numerous topics, including business strategy, governance, executive compensation, corporate sustainability reporting and other important matters. We strive to continually improve in these areas, and we value the opportunity to hold ongoing engagement discussions with stockholders throughout the year. We have traditionally met with stockholders in the spring prior to our annual meeting to discuss proxy proposals, as well as ESG topics. In addition, throughout the year,Through collaboration by our investor relations team, management team and chief strategy officer engage extensively withmembers of our Board, XPO has a robust year-round governance-focused stockholder engagement program. This program involves discussions about various matters of interest, such as our business and strategic priorities, financial and operating performance, corporate governance initiatives, executive compensation, ESG-related disclosures and practices, diversity and inclusion culture, human capital management and risk management. Feedback gathered from our stockholders often togetherthroughout the year is regularly considered by the Board and management team, as the Board greatly values stockholder insights that help inform the decision-making processes and enhancements to XPO’s policies and disclosures.
The Compensation Committee considers dialogue with
our CEO. This engagement includes dialogue immediately following our quarterly earnings calls, participation at investor conferences and other channels of communication.In 2020, XPO engaged withexisting stockholders to discuss these mattersbe especially critical in two separate periods—informulating our executive compensation philosophy and program. To that end, as a part of a holistic compensation review, following the weeks leading up to our 20202022 Annual Meeting, and in the latter months of the year, continuing into early 2021. While the meetings during spring 2020 were primarily focused on items on the ballot at the annual meeting, the discussions provided significant insights onXPO conducted a range of topics and on executive compensation in particular. Collectively, ourrobust outreach and engagement activities allow usprogram which members of the Compensation Committee participated in. Compensation Committee members participated in meetings with stockholders holding 31% of our common stock. A priority of the engagement initiative was to betterfurther understand the viewsstockholder concerns that drove the 2022 say-on-pay vote in order to inform the design of Mr. Jacobs’, Mr. Harik’s and Mr. Anderson’s compensation program.
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Our robust engagement program included outreach to a broad range of our stockholders, by soliciting their feedback and sharing our perspectives through dialogue.with engagement statistics outlined below:
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RESPONSIVENESS TO 2022 SAY-ON-PAY VOTE
Table of Contents
Following the 2020 Annual Meeting, at which 67% of stockholders voted for the Say-On-Pay proposal, stockholder feedback was shared with the Committee. The Committee met again in late spring 2020 to discuss the feedback and the potential design of long-term awards in connection with new employment agreements for Mr. Jacobs, Mr. Cooper and Mr. Harik. These awards were granted in July, consistent with our typical cadence for years in which long-term awards are granted.
The following chart demonstratessummarizes: (i) the executive compensation feedback provided by our stockholders through our focused engagement, and (ii) the ways in which the Committee sought to address stockholderthis feedback through thein its decisions on prospective executive pay design metrics and cadence of these awards.disclosures.
| | | WHAT WE HEARD FROM STOCKHOLDERS | | | | RESPONSIVE ACTIONS | | | | | | |
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| | | Modifications to Outstanding Awards | | |
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| | Topic |
| | | Stockholder Feedback |
| | | Our Response |
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Equity Mix | | | | | | | | | | | | |
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Goal Achievement
and Metrics |
| | | Stockholders raised retention questions around the "hit or miss" construct of prior long-term awards, particularly when used with high-growth, long-term goals that are challenging to realize ■
Stockholdersgenerally expressed a preference for a sliding scalethe outstanding 2020 Cash LTI performance-based awards to incorporate an equity component, as a retentive and risk-reducing measure
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Stockholders expressed a preference for inclusion of a metric relativeopposed to peers in the long-term plan
being entirely cash-based.
| | | | ■The Committee introduced a graduated sliding scale, providing opportunity for executives to earn a payout only if performance is at or above target; no award amounts will be earned for below-target performance
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Maximum goals were set to reflect stretch goals while
Converted 100% of the target goals were set to represent ambitious but reasonably attainable growth ■
The award is balanced among three weighted performance conditions, providing more stability invalue of Mr. Jacobs and Mr. Harik’s final 2023 tranche of the award structure, versus being "hit or miss" on attainment of all goals
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The Committee added a relative adjusted cash flow growth metric to ensure balance between absolute and relative performance
2020 Cash LTI performance-based awards into performance-based equity.
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| | | Metrics | | | | | | |
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Some stockholders expressed a preference to remove the adjusted cash flow per share metric in the 2020 Cash LTI performance-based awards and, in choosing new operational or financial metrics for go-forward PSU awards, to exclude gains from sales of real estate in calculating the selected measures. ■
Most stockholders continued to support the inclusion of relative metrics, such as relative TSR, in LTI award structures. | | | | ■
Eliminated the adjusted cash flow per share metric from the final 2023 tranche of the 2020 Cash LTI performance-based awards and replaced it with a relative TSR metric to further align executive compensation with stockholder interests. ■
Operational and financial metrics used in our PSU award constructs exclude the impact of gains from real estate sales. | | |
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| | Topic |
| | | Stockholder Feedback |
| | | Our Response |
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| | | WHAT WE HEARD FROM STOCKHOLDERS | | | | RESPONSIVE ACTIONS | | |
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Change-in-Control Provision | | | | | | |
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Stockholders inquired about the Committee’s stance on moving away from a single-trigger change-in-control provision in the previously granted awards, and indicated a preference for double-trigger provisions. | | | | ■
Eliminated single-trigger change-in-control provisions from outstanding performance-based awards held by NEOs, including those converted following the RXO spin-off; double-trigger provisions have now been applied to all outstanding awards. | | |
| | | Go-Forward Compensation Program Structure
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| | | Formulaic Structure | | | | | | |
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Stockholders expressed a preference for STI and LTI program structures to be less discretionary, more predictable and more formulaic. | | | | ■
Committed to a STI award that is purely formulaic •
2023 Annual Incentive for executive chairman, CEO and CFO based on adjusted EBITDA, with the application of a linear bonus payout curve from 50% threshold for performance at 90% of target to 200% at maximum for 120% of target ■
Adopted a formulaic LTI program with multiyear vesting periods, to be granted annually; this further reinforces a reliable, predictable incentive structure and aligns pay with performance •
For executive chairman and CEO 80% of the award opportunity in the form of performance-based RSUs and 20% as time-based RSUs •
For CFO 65% of the award opportunity in the form of performance-based RSUs and 35% as time-based RSUs | | |
| | | CEO Promotion | | | | | | |
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Stockholders overall asked for XPO to continue its robust disclosure of the CEO compensation package and sought to understand the structure of the Promotion PSU award granted to Mr. Harik in connection with his transition to the CEO position after the RXO spin-off. | | | | ■
As described further in this CD&A, Mr. Harik received a promotion award at his assumption to the CEO role to recognize his contributions to date and provide a competitive compensation package commensurate with the role. The Promotion PSU award is based entirely on achieving challenging relative TSR goals over a four-year cliff period, with target paying out if XPO’s performance is at the 67th percentile relative to the S&P Midcap 400, and payout of 150% of target if performance is at the 83rd percentile ranking, with a chance to qualify for a modifier (up to a cap of 200% total payout) if XPO’s TSR further outperforms select transportation peers. | | |
| | | CD&A Disclosure | | | | | | |
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Stockholders requested more clear disclosure of the Committee’s considerations with respect to how it structured LTIs awarded to top executives, the reasoning behind the metrics chosen, and the level of pay granted. ■
Stockholders requested more clarity around the Committee’s use of a 25% modifier in the STI formula and the use of an ESG Alignment
Scorecard. | | | | ■
This CD&A discloses the Committee’s considerations around changes made to executive awards, which included reevaluating the pay program’s structure in the context of stockholder feedback, and Metricsits relevance for the current company after two successive spin-offs. ■
This CD&A includes a thorough description of the Committee’s go-forward approach to executive compensation, including the removal of discretionary components of the STI program, and a new construct for the annual LTI awards. ■
The Committee expanded its disclosure of the initiatives embedded in the ESG scorecard by providing a view of all 43 deliverables relevant to the determination of 2022 performance achievement |
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Stockholders discussed the company's potential incorporation of ESG metrics in its executive compensation plan to better align corporate goals with long-term strategy for corporate sustainability and societal impact
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The Committee added an ESG scorecard to the long-term incentive awards, weighted at 25%, with measurable targets set for workforce safety, environmental sustainability, information security, diversity and human capital management, among other categories
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Approximately 80% of the ESG initiatives in the scorecard are quantitative; non-quantitative measures require achievement of pre-determined hurdles or binary milestones in order to be certified
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Pay-for-Performance
Alignment |
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Stockholders inquired about XPO's benchmarking review process, including the pay positioning the company seeks to achieve against peer performance
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The Committee commissioned studies by both its independent advisor and a management consultant to evaluate realizable pay and performance on total stockholder return; both studies found top pay-for-performance alignment
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The Committee's view is that sustained performance on stockholder returns at the top quartile warrants pay at the top quartile
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WHAT WE HEARD FROM STOCKHOLDERS | | | | RESPONSIVE ACTIONS | | | | | | | | |
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Outstanding Awards
and Cadence |
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Stockholders requested clarity around the timing and frequency of executive grants and stated a preference for regularity and predictability in award-granting practices
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Stockholders inquired why the August 2018 award had not been cancelled when granting the new June 2019 award and how the awards interact with each other
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The Committee has committed to not grant additional long-term awards to Mr. Jacobs, Mr. Cooper or Mr. Harik while the 2020 LTI remains outstanding, barring unforeseen circumstances, and excluding any potential modifications to existing awards in connection with the company's plan to spin off our global logistics business
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The Committee determined to leave the previously granted PSU awards in place given that, if achieved and earned, the target metric values would generate extraordinary stockholder value creation
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This winter, we undertook a comprehensive effort to engage with stockholders to: (i) better understand the sources of concern regarding our executive compensation program; (ii) address areas of stockholder interest; (iii) update stockholders on our current business strategy, including our plan to spin off our global logistics business, and (iv) discuss the 2020 LTI structure. These discussions included independent directors of our Board, including our Compensation Committee Chair, Dr. Jason Papastavrou, and Board Vice Chairman, AnnaMaria DeSalva, as well as senior members of our management team. We sought feedback from stockholders who voted in favor of our executive compensation program, as well as from those who opposed it.
In these meetings, we also discussed XPO's ongoing areas of focus as we seek to operate as a safe, innovative and inclusive company. Key topics included:
■Our business strategy, performance and profit goals, including our plan to spin off our global logistics business, anticipated to occur later this year
■The impact of COVID-19 across the business and our strong commitment to employee health, safety and well-being
■Our 2020 say-on-pay vote; our 2020 LTI award structure; our overall executive compensation program, including our approach of incentivizing outperformance against financial and strategic goals; and our historical alignment of pay-for-performance and plan design, as linked to strategy
■Our emphasis on maintaining a diverse workforce, with proactive human capital management initiatives to advance diversity, equity and inclusion
■Our leveraging of technology to drive better outcomes for our customers, employees, operations, stockholders and the planet, as documented through corporate sustainability reporting
■Our thoughtful approach to Board composition, including our commitment to enhancing Board diversity, refreshment and risk oversight, such as the formal addition of ESG oversight by the Nominating, Corporate Governance and Sustainability Committee
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Table of Contents
In these conversations, we discussed several compensation-specific topics, including the structure of the 2020 LTI, our historical granting practices, disclosure enhancements and overall compensation plan design.
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| | | | | | | within the 2020 Cash LTI program, as well as the adjustments to the scorecard deemed necessary by the Committee in connection with the RXO spin-off for the final 2023 tranche of the award (now a part of a replacement PSU structure, remaining at a weighting of 25%). See Annex B entitled “ESG Scorecard — 2022 Deliverables and Achievements”. | | | | |
| | | Topic |
| | | Summary of Discussion |
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2023 GO-FORWARD APPROACH TO EXECUTIVE COMPENSATION
In response to stockholder feedback, the Committee developed a new structure of compensation for our NEOs that includes an annual LTI grant, with the majority comprised of performance-based RSUs, and a purely formulaic STI.
In establishing the new structure, the Committee sought to maintain its longstanding goals of: (i) ensuring that executive compensationis overwhelmingly tied to performance, (ii) creating incentives that have more rigorous achievement standards than the market norm for the industry, (iii) ensuring strong alignment to stockholder value creation and (iv) being responsive to stockholder feedback. We believe the features described below appropriately reflect these objectives.
Elements of Executive Compensation
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| | | 2020 LTI Award | | | | ■
Directors and management discussed the 2020 LTI at length. As previously disclosed, the awards are denominated in cash, which was chosen in part because of the significant equity holdings of our executives as well as the macroeconomic uncertainty and stock volatility at the time of the grant.
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Discussions focused on the form of the award, the structure of the performance periods, vesting terms, ESG metrics and potential disclosure of ESG targets.
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| Component | | | | | | Key Characteristics | | |
| | | | Historical Granting
Practices | | | | ■
Stockholders expressed that while they understood the Committee's rationale for prior long-term awards and appreciated the strong link between pay and performance, they had concerns regarding the predictability and unique structure of these grants.
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Based on these and prior discussions, the Committee has committed to not grant additional long-term awards to Mr. Jacobs, Mr. Cooper or Mr. Harik while the 2020 LTI remains outstanding, barring unforeseen circumstances and excluding any potential modifications to existing awards in connection with the company's plan to spin off our global logistics business.
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| | | Disclosure Enhancements and Overall Plan Design | | | | ■
Stockholders indicated that, given the non-standard form of the company's executive compensation program, additional disclosure would be useful in providing insight into how each element of compensation aligns pay and performance and ties to company strategy.
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Based on these and prior discussions, the Committee has taken steps to provide greater disclosure throughout this 2021 Proxy Statement, including more detail on the Committee's process and rationale for compensation decisions, enhanced disclosure of our stockholder engagement efforts and the role of stockholder input into plan design.
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The Committee has reaffirmed its commitment to conducting rigorous analysis of the link between pay and performance across the compensation program, and to continue to be flexible in plan design, so that the program continues to reflect ambitious long-range goals and evolve to address the needs of all stakeholders, including executives, employees and stockholders.
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| Base Salary | | | | | | | | |
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COMPENSATION GOVERNANCE HIGHLIGHTS
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The company has adopted a compensation governance framework that includes the components described below, each of which the Committee believes reinforces the company's executive compensation philosophy.
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WHAT WE DO
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 Significant emphasis on variable compensation. Our executive compensation program is heavily weighted toward variable compensation, including long-term incentives that are primarily performance-based, and annual short-term cash incentives. This allows the Committee to closely align total compensation values with both company and individual performance on an annual and long-term basis. | |  No exceptional perquisites. Our NEOs have no guaranteed bonuses, relocation benefits or supplemental pension or retirement savings beyond what is provided broadly to all XPO employees. In addition, our NEOs have no perquisites such as personal use of company aircraft, executive health services, club memberships, stipends or financial planning services. |
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WHAT WE DO
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Substantial portion of compensation subject to creation of stockholder value. Performance-based awards are, and have been, subject to meaningful stock price and/or earnings-related performance goals measured over service-based vesting periods. The Committee also continually reviews the full portfolio of XPO stockholdings for each NEO to ensure there is a sufficient amount of compensation at risk and aligned with stockholder returns and value creation, while sustaining the NEO's focus on the company's strategic objectives. | | No pledging or hedging of company stock, without preclearance. Under our insider trading policy, our company's directors and executive officers, including the NEOs, are prohibited from pledging or holding company securities in a margin account without preclearance. In addition, they are prohibited from engaging in hedging transactions without preclearance, such as prepaid variable forwards, equity swaps, collars and exchange funds or any other transactions that are designed to or have the effect of hedging or offsetting any decrease in the market value of company equity securities. |
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Stock ownership policies. The Board has established stock ownership guidelines and stock retention requirements that encourage the strong ownership mindset that exists among our executives. | | No guaranteed annual salary increases or bonuses. Salary increases are not guaranteed annually and are benchmarked against market data. We do not guarantee bonus payouts. |
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Clawback policy. Our NEOs are subject to clawback restrictions with respect to long-term and annual short-term incentive compensation. | | No stock option repricing or discounted exercise price. Our company's equity incentive plan does not permit either stock option repricing without stockholder approval or stock option awards with an exercise price below fair market value. |
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Restrictive covenants. Our NEOs are subject to comprehensive non-competition and other restrictive covenants. | | No golden parachute excise tax gross-ups. XPO does not provide golden parachute excise tax gross-ups. |
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Engage with stockholders. Our Board values stockholder feedback and carefully considers investor perspectives for incorporation into its decision-making process around governance, compensation and sustainability practices. | | No consultant conflicts. The Committee retains an independent compensation consultant who performs services only for the Committee, as described in more detail below under the heading "Role of the Committee's Independent Compensation Consultant." |
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THE COMMITTEE'S COMPENSATION DECISION-MAKING PROCESS
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The Committee met 11 times during 2020 to discuss executive compensation and other items pursuant to its charter. In addition to the regular responsibilities of the Committee, all members of the Board were invited to attend internal quarterly operating review meetings with business unit management; these meetings included in-depth reviews of the company's financial results, as well as discussions about COVID-19, operational execution, sales, customer service, technology initiatives, process innovation, human capital management, safety, the market landscape and business growth trajectories. The meetings also included a review of key performance indicators that track the company's achievement of financial and non-financial objectives for each business line. Multiple Committee members attended these three-day sessions throughout the year in order to remain well-informed of the company's financial and operational performance. In addition, the Board met nine times between March and May to discuss the impact of COVID-19 and the company's response in depth.
The Committee believes that its holistic approach to evaluating individual and company performance results in greater alignment with stockholder interests than do overly formulaic programs, which may skew incentives. The decision-making process incorporates an element of discretion, allowing the Committee to utilize a balanced, multi-dimensional approach to NEO compensation that includes a review of performance against goals set at the beginning of the year, as described below.
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NEO Compensation-Setting Process
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The Committee resets the stage for executive compensation determinations at the start of each year, using a decision-making framework that includes the five key factors described below.
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Our executive compensation program consists of three primary elements: base salary, annual short-term incentive awards and long-term incentive awards. These elements are described in more detail below.
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| | ELEMENT |
| | | PURPOSE |
| | | PAY-FOR-PERFORMANCE DESIGN |
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BASE SALARY |
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To attract and retain high-performing executives
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Fixed cash compensation corresponds to experience and job scope, and is aligned with market levels ■
No guaranteed annual increases; the Committee determines eligibility for an increase based on annual market assessment | | |
| | | | | 2 | | | | Short-Term Incentives (STI) for our Executive Chairman, CEO and CFO | | | | ■
Formulaically tied to performance against the company’s annual adjusted EBITDA target; paid out annually in the first quarter ■
Removed the modifier that permitted adjustments to the formulaic bonus outcome by up to +25%, based on the Committee’s review of ancillary financial and strategic factors ■
Payouts are determined based on a linear bonus payout curve with a 50% payout at 90% of target and a maximum 200% payout at 120% of target ■
The cut-in at 90% of target is more rigorous than standard market practice of 75% to 80% in the industry peer group | | |
| | | 3 | | | | Long-Term Incentives (LTI)
for our Executive Chairman, CEO and CFO | | | | ■
Annual award opportunity for the CEO and executive chairman is 80% allocated to PSUs and 20% allocated to time-based RSUs ■
Annual award opportunity for the CFO is 65% allocated to PSUs and 35% to allocated RSUs ■
XPO’s LTI allocation of PSU mix is higher than industry peers (e.g., peer group CEO median is 61% based on 2021 compensation structures) ■
LTI target levels will be assessed annually by the Committee using market benchmarking analysis ■
PSUs emphasize high growth and high returns, with rigorous standards for threshold, target, and maximum payouts: •
Financial performance goals in the PSU framework are tied to the company’s multi-year outlook for the LTL business, as communicated to the investor community at the time of the RXO spin-off •
A relative TSR metric in the PSU framework ensures alignment with stockholder interests over the long term •
Awards are capped at 200% | | |
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SHORT-TERM INCENTIVE |
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To reward annual performance and individual contributions that support strategy and results
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Executives become eligible for a bonus if adjusted EBITDA is at least 90% of the full-year forecast level
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Payouts are determined based on an evaluation of performance across key financial metrics, including adjusted EBITDA, free cash flow, TSR and individual performance, with awards ranging from zero to a cap of 200% of target
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LONG-TERM INCENTIVES |
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To focus executives on the execution of our strategy and long-term value creation, and to align their compensation with outcomes for our stockholders
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At-Risk Compensation
The Committee believes that most of the compensation for the executive chairman, CEO and CFO should be at risk and tied to a combination of long-term and short-term company performance, with a greater weighting on long-term performance.
The following charts show the percentage of the 2023 target total annual compensation that is variable or at risk, versus fixed, with respect to the 2023 compensation structure developed for our NEOs included in this Proxy Statement — first for Mr. Harik as our go-forward CEO (effective November 1, 2022); and second, Mr. Jacobs in his role as executive chairman (effective November 1, 2022) together with Mr. Anderson as our newly appointed CFO (effective November 8, 2022, replacing Mr. Tulsyan, who became a senior advisor, finance on November 8, 2022 and exited the company on January 6, 2023).
At-risk compensation includes both the target performance-based cash bonus and performance-based equity award. By contrast, the fixed component of pay is comprised of a combination of base salary and RSUs. LTI compensation excludes base salary and STIs, and includes RSUs plus at-risk compensation.
The Committee may utilize a different mix of at-risk compensation for other executive officers depending on the unique circumstances of their roles and their hire or promotion, taking into account the Committee’s commitment to aligning executive pay with performance.
2023 Target Pay Levels for Current NEOs
Mr. Jacobs and Mr. Harik each entered into employment agreements in connection with their transition to their new roles in August and September 2022, respectively; these agreements became effective upon the RXO spin-off on November 1, 2022. Mr. Anderson entered into an offer letter agreement (the “CFO Offer Letter”), a Confidential Information Protection Agreement (the “CIPA”), and a Change in Control and Severance Agreement (the “CFO Severance Agreement”) in connection with his hiring as CFO, effective November 8, 2022. These agreements (collectively, the “NEO Agreements”) outline the terms and conditions of employment with XPO, including all restrictive covenants that benefit the company, with provisions such as non-competition and non-solicitation of customers and employees, as well as the target compensation opportunity designated by the Committee for base salary, annual STIs, annual LTIs, and other separation benefits that the executives would qualify for under specified circumstances. The material terms of these agreements are described later in the section, Employment Agreements with NEOs. There are no multi-year guarantees established in the NEO Agreements. The Committee may adjust compensation levels from year to year based on its annual assessments of performance and market benchmarks. For 2023, the Committee determined that no changes to base salary or target variable compensation levels were warranted, given the recent assessments of competitive pay levels conducted in late 2022, as well as updated assessments conducted again in early 2023.
In setting target pay opportunities for our executive chairman, CEO and CFO, the Committee takes into account stockholder feedback from our extensive engagement sessions and reviews annual market benchmarking analyses for both the established peer group (the “CD&A Peer Group”) as well as a broader multi-industry group of public companies in the revenue range of $5 billion
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Since 2014, awards for our chief executive officer, president, and chief information officer, have been 100% performance-based and subject to the achievement of ambitious goals
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The Committee designs long-term incentive awards to motivate executives to achieve goals over an extended period of time; the Committee takes a strategic approach to the timing of grants in order to align awards with the company's strategy and stockholder returns
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to $10 billion (XPO reported revenues for 2022 were $7.7 billion). These groups are described below under the heading Benchmarking Executive Compensation Levels. As discussed with our stockholders, the Committee’s practice is to position pay for certain executives, particularly for our CEO, within close range of the multi-industry market median (e.g., within 15% above median) and at the top quartile of the CD&A Peer Group, as long as the following conditions are met:
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The “overage” of target pay relative to the CD&A Peer Group median is comprised entirely of performance-based pay; and
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The hurdles to achieve the performance-based pay components are more rigorous than market standards.
In alignment with its pay-for-performance philosophy, the Committee would consider adjustments to target pay levels (particularly for LTI compensation) or design constructs (e.g., raising performance targets in PSUs and STI) if the company demonstrates sustained or persistent underperformance on multiple critical financial or operational KPIs relative to internal targets or industry performance benchmarks. The Committee may also utilize a different approach to target pay for executive officers other than our executive chairman, CEO and CFO depending on the unique circumstances of their roles and their hire or promotion, taking into account the Committee’s commitment to aligning executive pay with performance.
In the Committee’s review of 2023 go-forward compensation, Mr. Harik’s annual total target direct compensation was positioned at the 84th percentile of the CD&A Peer Group median and 12% above the multi-industry market median (with a sample size of 114 CEOs), based on disclosed 2021 compensation levels. Importantly, the entire overage against market median in Mr. Harik’s compensation is performance-based pay, tied to ambitious goals underlying the company’s publicly disclosed five-year business plan. That is, when reviewing “basic pay” elements (base salary, target bonus and time-based RSUs combined), Mr. Harik’s target compensation level is at the 51st percentile of the CD&A peer group CEOs. In order to achieve notable above-median pay, all of the performance goals included in the PSU program must be attained at the high growth levels established by the Committee in the design framework.
As shown in the chart below, the percentage of at-risk compensation levels of our NEOs included in this Proxy Statement is notably higher relative to the 2023 peer group.
Additional information regarding the benchmarking process is provided in the Benchmarking Executive Compensation Levels section below, including determination of executive chairman pay.
The following table provides a synopsis of the 2023 annual target compensation components for our NEOs included in this Proxy Statement:
| | | | | | | | | ANNUAL CASH COMPENSATION | | | | ANNUAL LTI COMPENSATION | | | |
| NEO | | | | Base
Salary | | | | Target Bonus
(% of Base
Salary) | | | | Target Bonus
($ Value) | | | | Total Target
Annual Cash
Compensation | | | | Target
PSUs | | | | Target
RSUs | | | | Total Target
Annual Direct
Compensation | |
| Brad Jacobs | | | | $600,000 | | | | 150% | | | | $900,000 | | | | $1,500,000 | | | | $4,000,000 | | | | $1,000,000 | | | | $6,500,000 | |
| Executive Chairman | | | | | | | | | | | | | | | | | | | | (80% of LTI) | | | | (20% of LTI) | | | | | |
| Mario Harik | | | | $850,000 | | | | 200% | | | | $1,700,000 | | | | $2,550,000 | | | | $6,000,000 | | | | $1,500,000 | | | | $10,050,000 | |
| Chief Executive Officer | | | | | | | | | | | | | | | | | | | | (80% of LTI) | | | | (20% of LTI) | | | | | |
| Carl Anderson | | | | $625,000 | | | | 100% | | | | $625,000 | | | | $1,250,000 | | | | $1,137,500 | | | | $612,500 | | | | $3,000,000 | |
| Chief Financial Officer | | | | | | | | | | | | | | | | | | | | (65% of LTI) | | | | (35% of LTI) | | | | | |
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2023 Formulaic Short-Term Incentive Program
STIs, or annual cash bonuses, for our NEOs included in this Proxy Statement are paid from the same incentive plan as all other bonuses for eligible XPO corporate employees; however, payouts for such executive officers are evaluated based on a more rigorous payout curve, with a cut-in (or threshold performance) starting at 90% of the full-year adjusted EBITDA, versus 80% threshold performance for all other participants.
In response to stockholder feedback to modify the STI program to be entirely formulaic, starting with the 2023 performance year, the Committee is eliminating the modifier that previously allowed for adjustment to formulaic bonuses by up to +25%, based on considerations of supplemental financial and operational measures and the NEO’s performance on strategic objectives.
To determine whether any additional changes to the STI framework were necessary as a result of XPO’s transformation into a pure-play LTL business in North America following the RXO spin-off, beyond those suggested by our stockholders, in 2022, the Committee also commissioned its independent compensation consultant to conduct a comprehensive study of bonus incentive designs across the CD&A Peer Group and concluded that there were no additional call-outs that would trigger further changes.
The year-over-year STI program changes and considerations are summarized below:
| | | Key Terms | | | | 2022 Incentive Plan | | | | 2023 Go-Forward Incentive Plan | | |
| | | Performance Metric | | | | ■
100% based on absolute adjusted EBITDA (inclusive of all company businesses) | | | | Maintain ■
XPO has typically viewed adjusted EBITDA as a mainstay goal for financial performance measurement in each of its reportable segments ■
All CD&A Peer Group companies use a profitability metric in their STI plans (with a median weighting of 50%) | | |
| | | Cut-in for Threshold Payout | | | | ■
90% cut-in to be eligible for bonus (with payout at 50% of target) | | | | Maintain ■
More rigorous than companies in the CD&A Peer Group, in which the median cut-in is 80% for profitability metrics, with 50% of target payout | | |
| | | Linear Payout Curve | | | | ■
Final bonus payout for the NEOs aligns to the calculated corporate pool, once the 90% cut-in is met ■
Linear interpolation between attainment points, based on the curve shown below ■
Maximum payout of 200% at 120% of target | | | | Maintain ■
The median performance range associated with a profitability metric is 80% of target at threshold and 120% of target at maximum ■
Most companies in the CD&A Peer Group cap payout at 200% of target | | |
| | | Supplemental Performance Indicators | | | | Modifier (up to +25% of accrued bonus) ■
Considers supplemental KPIs (e.g., revenue, free cash flow and annual TSR), as well as strategic initiatives and individual performance | | | | Eliminate ■
Stockholders prefer an entirely formulaic structure, with no adjustments considered without precise measurements for each individual modification proposed | | |
| | | STI Payout Curve for NEOs | | |
![[MISSING IMAGE: tb_payoutcurve-pn.jpg]](/files/DEF 14A/0001104659-23-047333/tb_payoutcurve-pn.jpg)
The Committee may utilize a different approach to STIs for executive officers other than our executive chairman, CEO and CFO depending on the unique circumstances of their roles and their hire or promotion, taking into account the Committee’s commitment to aligning executive pay with performance.
2023 Annual Long-Term Incentive Design
In developing the go-forward annual LTI construct for our NEOs, the Committee relied primarily on the following five factors, with the overall goal of motivating our executives to perform at the highest standards of excellence and deliver strong results for our stockholders:
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| | | 1 | | | | Previous stockholder feedback centered on LTI structural design | | |
| | | 2 | | | | Evaluation of peer group incentive pay designs and practices, provided by the Committee’s independent advisor | | |
| | | 3 | | | | The Committee’s longstanding tradition of maintaining ambitious targets for relevant company metrics and a higher proportion of LTI allocated to PSUs | | |
| | | 4 | | | | XPO’s strategic priorities post-spin-off, with specific focus on aligning to the company’s five-year outlook for the LTL business, as conveyed to investors in October 2022 | | |
| | | 5 | | | | Alignment with stockholders’ interests | | |
Stockholder Feedback
Our stockholders provided insights about their general preferences for LTI and PSU designs during our productive engagement sessions over the last several years. These insights aligned largely with the factors noted above, including that LTI (and/or any portion of LTI awarded in the PSUs), should:
i.
Be awarded in a more predictable cadence (e.g., annually), rather than periodically as “one-off” grants;
ii.
Have a tiered pay-for-performance scale versus a binary “hit or miss” goal structure;
iii.
Include a relative performance or market-based metric;
iv.
Be settled primarily in stock rather than in cash;
v.
Have a double-trigger change-in-control provision, rather than a single-trigger provision;
vi.
Remove absolute adjusted cash flow per share as a core award metric;
vii.
Exclude gains from real estate sales in all operational metrics that may be considered in future award designs; and
viii.
Align tightly with the five-year targets for the North American LTL business but use shorter performance measurement intervals.
The Committee thoroughly incorporated their feedback. The new annual structure for performance-based awards, as illustrated in the table at the end of this section, features the core elements of the award framework. Key responsive actions taken by the Committee include:
i.
Annual LTI award targets, including the significant proportion dedicated to performance-based, at-risk stock compensation versus time-based RSUs, have been established for each of our ongoing NEOs, and both the 2023 RSUs and 2023 PSUs have three-year vesting schedules (ratable for RSUs and cliff for PSUs).
ii.
The new PSU construct now incorporates a scaled payout structure.
iii.
The Committee maintained a relative TSR metric in the award design (as introduced in past PSU award grants) with a 40% weighting to underscore the Board’s and our NEOs’ commitment to deliver meaningful upside to XPO’s stock price over the long-term.
iv.
LTI will be issued entirely in stock-based compensation and the last remaining tranche of the 2020 Cash LTI grant has now been fully converted to stock-based compensation, as of February 2023.
v.
All outstanding equity awards held by NEOs have now been modified to include a double-trigger change-in-control provision, either through modifications made to outstanding PSU awards at the time of the RXO spin-off, or through the process of converting the final outstanding 2020 Cash LTI award to performance-based equity in February 2023 for our active NEOs.
vi.
The new PSU award construct does not include an absolute adjusted cash flow per share target, which was commonly used in past awards. Moreover, in the process of converting the final outstanding 2020 Cash LTI tranche, the Committee eliminated entirely both the absolute and relative goals related to adjusted cash flow per share.
vii.
The Committee, with input from the management team, selected core three-year financial and operational metrics for inclusion in the annual award structure that align to the company’s five-year financial and operational KPI outlook for the North American LTL business, as disclosed to investors in conjunction with the RXO spin-off.
viii.
The calculations of the three-year performance targets are predicated on the financial models and operating assumptions used to formulate the five-year LTL plan. In addition to the relative TSR metric with a 40% weighting, as noted in point (iii) above, the two complementary financial and operational metrics in the award program are:
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LTL adjusted EBITDA compound annual growth rate (CAGR) (40% weighting): A target of 8% adjusted EBITDA CAGR for the three-year cliff performance period, starting with full-year 2022 and ending with full-year 2025. The LTL long-term target specifies 11% to 13% adjusted EBITDA CAGR by December 31, 2027 (from a 2021 baseline). With the 2023 performance year facing a challenging macroeconomic environment, 8% CAGR by the end of year three will require significantly stronger performance in 2024 and 2025 to be attained.
■
LTL adjusted operating ratio improvement (20% Weighting): A target of 300 basis points of improvement over the three-year cliff performance period, starting with full-year 2022 and ending with full-year 2025. The LTL long-term target specifies an improvement of 600 basis points by December 31, 2027 (from a 2021 baseline). The 2025 target considers the current challenging economic environment and (similar to the adjusted EBITDA metric), the possibility of a muted 2023 performance.
In summary, the new PSU framework, which represents the majority of the LTI to be issued annually to our NEOs included in this Proxy Statement, includes:
| | | Weighting | | | | Performance Metrics | | | | Performance Target and
Measurement Period | | | | Payout Scale
(Straight-line interpolation between
values) | | |
| | | 40% | | | | LTL Adjusted EBITDA Growth | | | | CAGR of 8% (FY 2023 — FY 2025) | | | | % of Target | | | | % PSU
Earned | | |
| | 90% | | | | 50% | | |
| | 100% | | | | 100% | | |
| | 120% | | | | 200% | | |
| | | 20% | | | | LTL Adjusted Operating Ratio
Improvement | | | | 300 bps (FY 2023 — FY 2025) | | | | Achievement Level | | | | % PSU
Earned | | |
| | 200 bps | | | | 50% | | |
| | 300 bps | | | | 100% | | |
| | 400 bps | | | | 200% | | |
| | | 40% | | | | Relative TSR: XPO vs.
S&P Transportation Select Index | | | | Three-year XPO TSR
relative to
three-year TSR
of companies
in the index (3/6/2023 -3/6/2026) | | | | Percentile vs. Index | | | | % PSU
Earned | | |
| | < 40th | | | | 0% | | |
| | 40th | | | | 25% | | |
| | 50th | | | | 65% | | |
| | 60th | | | | 100% | | |
| | 75th | | | | 200% | | |
| | | Additional Key Features | | |
| | | ■
Vesting schedule: Cliff vesting date of March 6, 2026, contingent upon achievement of the performance hurdles and continued XPO employment through the vesting date. | | |
| | | ■
Post-vesting sales restriction: A one-year lock-up on the sale or transfer of shares post-vesting will apply to ensure continued long-term alignment with stockholder interests. | | |
Annual Time-Based RSUs
In order to support the continued retention of our exceptional executive team, time-based restricted stock units also are granted annually to our NEOs, based on an allocation of 20% of total LTI for Mr. Jacobs and Mr. Harik and 35% of total LTI for Mr. Anderson. For the 2023 grant, vesting will occur in three equal installments on March 15 of 2024, 2025 and 2026. As with all other awards, a double-trigger change-in-control provision has been applied in response to stockholder preference to move away from the single-trigger provision that had been applied historically to LTI grants.
BENCHMARKING EXECUTIVE COMPENSATION LEVELS
In order to attract and retain high-performing talent, the Committee references prevailing pay rates when establishing target compensation opportunities as discussed above. To do this, the Committee uses a variety of sources that represent views of executive pay levels across both the broader market as well as the defined CD&A Peer Group. The Committee prefers to evaluate a range of information regarding market pay practices, as: (i) XPO has a longstanding history of sourcing executives from a diversity of industries outside of transportation and logistics industry segments, and (ii) the gamut of pure-play public transportation carriers of a size similar to XPO is extremely limited; the ultimate peer group is a mix of companies that extend beyond the actual business profile of XPO to adjacent industries, and may not be the most appropriate comparison in all cases.
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At the beginning of 2022, following the spin-off of GXO, and prior to the spin-off of RXO, the Committee conducted a detailed review of the peer group to determine if any changes were needed. The detailed review included an assessment of revenues, market capitalization, industry representation, Transportation Index companies, and relevant high-performing organizations. As a result of the review, the Committee concluded that no changes to the peer group from last year was needed given:
■
Comparability of the peer group to XPO in terms of operating characteristics, revenues, and market capitalization. XPO’s revenues at the start of 2022 ranked at the 61st percentile relative to the peer group.
■
Limited compensation variability in the potential peer group versus the current peer group at the median.
These companies were used to review and establish target compensation for our NEOs for 2022, including Mr. Harik’s compensation upon his promotion to CEO. To establish the pay of our executive chairman, a more extensive comparative analysis was conducted, given the limited information available for executive chairman positions among the peer group. This is described further below, under the heading Executive Chairman Pay Approach.
Beyond setting compensation levels, the peer group also serves as the foundation for relative business performance assessments, incentive plan design, equity utilization, and determination of policies and practices (e.g., perquisites, stock ownership guidelines, etc.).
Peer Group for Non-Chairman Executive Pay prior to RXO spin-off:
| | | PEERS | | |
| | | C.H. Robinson Worldwide, Inc. | | |
| | | CSX Corporation | | |
| | | Expeditors International of Washington, Inc. | | |
| | | FedEx Corporation | | |
| | | J.B. Hunt Transport Services, Inc. | | |
| | | Knight-Swift Transportation | | |
| | | Norfolk Southern Corporation | | |
| | | Ryder System, Inc. | | |
| | | Union Pacific Corporation | | |
| | | United Parcel Service, Inc. | | |
| | | Yellow Corporation(1) | | |
(1)
Yellow Corp. (YELL) was formerly YRC Worldwide (YRCW)
At the start of 2023, following the RXO spin-off, another detailed review of the peer group was conducted to reflect XPO’s go-forward projected revenues. Based on this evaluation, the Committee established a new Peer Group consisting of 19 companies, with XPO’s 2022 revenue of $7.7 billion ranking at the 44th percentile. The change resulted in the removal of two peers — United Parcel Service, Inc. and FedEx Corporation — from the prior year’s peer group, due to their size of revenues relative to XPO, and the addition of ten new peers, including:
| | | ADDITIONAL PEERS | | |
| | | ArcBest Corporation | | |
| | | Avis Budget Group, Inc. | | |
| | | Hertz Global Holdings, Inc. | | |
| | | Hub Group, Inc. | | |
| | | Landstar System, Inc. | | |
| | | Matson, Inc. | | |
| | | Old Dominion Freight Line, Inc. | | |
| | | Schneider National, Inc. | | |
| | | TFI International Inc. | | |
| | | Werner Enterprises, Inc. | | |
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Executive Chairman Pay Approach
In order to provide a more comprehensive understanding of executive chairman pay levels for which data is limited, the Committee’s independent compensation consultant analyzed 43 companies in the S&P 500 for which an executive chairman was in role for one full year or more, as of the end of 2021. Using this analysis, the Committee took a five-pronged approach in framing its considerations and making its final determinations on Mr. Jacobs’ ultimate pay level at target.
EXECUTIVE COMPENSATION ELEMENTS AND OUTCOMES FOR 2020
| | # | | | | CONSIDERATION | | | | MARKET ANALYSIS | | | | COMMITTEE’S OUTCOME | | |
| | | 1 | | | | The ratio of executive chairman (EC) annual total compensation to previous pay in the CEO position | | | | This ratio was 50% at the median of the data set | | | | At target as CEO, Mr. Jacobs’ annual total compensation was $13 million*. This was reduced to $6.5 million, yielding the same 50% CEO-to-EC ratio as market median | | |
| | | 2 | | | | The ratio of EC total compensation to the new CEO’s total compensation | | | | This yielded a range of 50% to 70% across the full data set, and 70% to 90% in cases where the EC had a longer, multi-year tenure | | | | Mr. Jacobs’ $6.5 million target compensation is 65% of Mr. Harik’s $10.05 million target compensation — below the typical range of a longer-serving EC, and in the middle of the range across the full data set | | |
| | | 3 | | | | The absolute total direct compensation of all ECs in the 43-company data set | | | | $7 million at the group median | | | | $6.5 million annual target compensation for Mr. Jacobs | | |
| | | 4 | | | | The absolute total compensation of Mr. Jacobs and Mr. Harik combined, at target value, relative to the full data set | | | | The data set yielded a total in the market of $15.5 million to $17.8 million for combined EC/CEO pay, when reviewing the 50th to 75th percentile range | | | | Mr. Jacobs’ and Mr. Harik’s combined total compensation is $16.55 million, falling within the market range (within 7% of the median) | | |
| | | 5 | | | | Pay mix of LTI and at-risk compensation relative to the full data set | | | | 57% of the EC’s total compensation at the median is issued in the form of LTI compensation and, in many cases, this is not performance-based | | | | Of the $6.5 million in total direct compensation for Mr. Jacobs, $5 million, or 77%, is in the form of LTI, with 80% of that being performance-based stock units. In addition, another $900,000 is provided in the STI tied to a formulaic performance program | | |
LTI portion consists of the 2022 tranche of the Cash LTI award granted in 2020
EXECUTIVE COMPENSATION OUTCOMES FOR 2022
Annual Cash Compensation
Annual base salary provides a fixed incentiveform of pay that is an important component of offering competitive pay to top-tier executives, and corresponds to an executive'sexecutive’s experience and job scope. Thescope, and is balanced against variable performance-based STIs. Each year, the Committee reviews base salaries each year. and annual STI targets, typically expressed as a percentage of base salary, and may make periodic adjustments in response to changes in job scope, prevailing market levels (as evaluated in our extensive benchmarking analyses), or other factors.
In order2022, the Committee approved changes to bringthe base salaries in line with current market levels, the last increase was in 2019, after remaining unchanged since 2016and STI targets for each of Mr. Jacobs Mr. Cooper and Mr. Harik.Harik in connection with their respective role changes and in accordance with the terms of their employment agreements, as shown in the table below. Mr. Tulsyan’s salary and bonus target remained the same and Mr. Anderson’s compensation as a newly hired CFO was determined in alignment with market benchmarks, as described in the Benchmarking Executive Compensation Levels section above. In effect, Mr. Harik received a total cash compensation increase of 127% for the final two months of 2022 and going forward for 2023, as he was promoted to CEO, yielding a blended total cash compensation for the year as shown in the NEO STI Payouts for 2022 section below. Mr. Jacobs’ compensation was decreased by 50%, as he transitioned to executive chairman effective November 1, 2022.
Annual Short-term Incentive
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Summary of Changes to Annual Cash Compensation in 2022
| | | | | | | | | | | | |
| | | | | | January 1 – October 31 | | | | November 1 – December 31 | | |
| | Name | | | | | | | | | | STI Target | | | | | | | | | | | | | | | | STI Target | | | | | | | | |
| | Salary | | | % of
Salary | | | $ Amount | | | Target Cash
Compensation | | | | Salary | | | % of
Salary | | | $ Amount | | | Target Cash
Compensation | | |
| | Brad Jacobs* | | | | | $ | 1,000,000 | | | | | | 200% | | | | | $ | 2,000,000 | | | | | $ | 3,000,000 | | | | | | $ | 600,000 | | | | | | 200% | | | | | $ | 1,200,000 | | | | | $ | 1,800,000 | | | |
| | Mario Harik | | | | | $ | 500,000 | | | | | | 125% | | | | | $ | 625,000 | | | | | $ | 1,125,000 | | | | | | $ | 850,000 | | | | | | 200% | | | | | $ | 1,700,000 | | | | | $ | 2,550,000 | | | |
| | Ravi Tulsyan | | | | | $ | 500,000 | | | | | | 100% | | | | | $ | 500,000 | | | | | $ | 1,000,000 | | | | | | $ | 500,000 | | | | | | 100% | | | | | $ | 500,000 | | | | | $ | 1,000,000 | | | |
| | Carl Anderson | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | $ | 625,000 | | | | | | 100% | | | | | $ | 625,000 | | | | | $ | 1,250,000 | | | |
*
For 2023, Mr. Jacobs’ bonus target is 150%. For the final two months of 2022, the STI percentage applied to Mr.Jacobs remained at 200%, in accordance with the terms of his employment agreement
NEO STI Payouts for 2022
The annual corporate incentive plan applicable to our NEOs and all other bonus-eligible corporate employees is weighted 100% on achieving the company’s adjusted EBITDA target for the year — a central KPI within the industry and a strong focal point with our investors. Adjusted EBITDA for 2022 was measured inclusive of the RXO businesses through the third quarter of 2022. Each NEO is eligible for a target short-term incentive ("STI") amount. Targetan STI amounts were not increased in 2020, consistent with the decision to not increase NEO base salaries. The table below reflects the 2020payout if annual target STI opportunities.
Note:
Ms. Glickman and Mr. Rogers were not eligible for a STI payment for 2020, given that they were not employed for the full year.
Gating Threshold to Establish Eligibility for Short-Term Incentive Payout
|
For the 2020 performance year, the Committee determined that the company's adjusted EBITDA must equal or exceed 90% of the 2020 full-year revised guidance in order for each NEO to become eligible for a short-term incentive award, assuming they remained employed on the payment date. This is the same gating threshold used for 2019.
The evaluation of short-term incentive payouts is based on a review of key performance measures that are of preeminent importance to the company and our stockholders, as well as on the respective contributions of each NEO. Based on the Committee's 2020 decision-making framework, cash bonuses are subject to a payout range of 0% to a cap of 200% of target.
Financial Results Relative to Publicly Disclosed Targets for 2020
|
As part of the company's forecasting process for 2020, senior executives established goals for two key performance indicators, which were reviewed with the Board: adjusted EBITDA and free cash flow, shown below. Performance against these financial measures, together with annual TSR, was considered by the Committee when determining the 2020 annual incentive amounts for our NEOs.
| | |
(1)
| | Pre-pandemic guidance for 2020 adjusted EBITDA of $1.785 billion to $1.835 billion and free cash flow of $600 million to $700 million was provided on February 10, 2020, suspended in April due to the pandemic and reissued with new targets in the third quarter; 2020 targets above reflect the updated guidance provided in the third quarter. |
*
| | See Annex A for reconciliations of non-GAAP measures
|
Our full year 2020 performance was impacted by macroeconomic volatility, resulting in a year-over-year decline in adjusted EBITDA. Despite this macroeconomic disruption, our performance surpassed that of many of our core industry competitors based on multiple operational and financial measures, and we exceeded our ultimate adjusted EBITDA target for 2020. Notably, the skilled leadership of our NEOs led to a financial rebound for the company in the second half of the year and created momentum leading into 2021.
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Assessment of Performance and Contributions In 2020
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In considering the NEOs' annual short-term incentive awards for 2020, the Committee also evaluated the company's performance against its strategic objectives, the importance of each NEO's role in relation to the holistic operation of the company, and the CEO's assessment of each NEO's performance and contributions to the company. The chart below summarizes key 2020 achievements of each of our continuing NEOs. Ms. Glickman and Mr. Rogers are excluded, due to their departures from the company during 2020.
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2020 Short-Term Incentive (STI) Payout
Our short-term incentives are designed to reward annual performance and individual contributions that support strategy and results. Each NEO is eligible for a bonus if adjusted EBITDA is at least 90% of the full-year forecast.target. The maximum annual short-term incentiveSTI payout opportunity is capped at 200% of target. In making annual short-term incentive decisions,target, in accordance with the linear payout curve delineated below.
For the 2022 plan year, the Committee considers keyhad the flexibility to adjust individual NEO payouts upward (up to +25%) or downward (to zero) relative to the formulaic outcome on adjusted EBITDA performance, using a plan modifier. The modifier would be applied based on the Committee’s qualitative assessment of ancillary financial measuresor strategic factors (e.g., absolute and relative performance on revenue, free cash flow, corporate or business unit KPIs, TSR metrics, operational improvement initiatives, etc.). However, despite strong performance on other financial metrics and strategic factors reviewed, the Committee elected not to adjust the formulaic outcome based on EBITDA performance.
As noted under the heading 2023 Formulaic Short-Term Incentive Program, the Committee has eliminated the modifier from the STI program going forward and, for 2022, approved formulaic funding based on actual adjusted EBITDA performance. The Committee further determined that areconsideration of other factors was not warranted, given that the LTIs already captured performance on other measures important to the company and our stockholders, as well as individualparticularly LTL operating ratio improvement, total stockholder return and successful completion of the RXO spin-off.
In terms of actual performance, and the overall funding for the corporate bonus pool. Award amounts are not based on a formulaic approach, as the Committee believes it is important to maintain flexibility, including the ability to adjust downward, in determining short-term incentive payouts.In making annual short-term incentive decisions for NEOs, the Committee first established that the company'scompany’s adjusted EBITDA exceeded target for 2022 by approximately 8% — representing $1.340 billion versus the 90% threshold required for a STI payout. Fortarget of $1.243 billion — as calculated including the 2020 performance year, the company's adjusted EBITDA* was $1.39 billion, reflecting the strong performance of the company in a challenging year and exceeding the external guidance for $1.35 billion of adjusted EBITDA, provided during the second half of 2020. The company had temporarily suspended guidance in April and issued new guidance inoperations that would become RXO through the third quarter, reflectingquarter. Based on the expected impactlinear payout curve within the incentive plan, this yielded a payout of COVID-19 on 2020 financial results.
140%.
The Committee believes thattable below shows the 2022 STI decisions for NEOs should be aligned with the payout for bonus-eligible employees, which wasoutcomes based on the achievementincentive plan formula and the Committee’s determinations. The payouts reflect blended rates of adjusted EBITDA targetspay for Mr. Jacobs and Mr. Harik, as their roles transitioned with the RXO spin-off on November 1, 2022, and the new hire status of Mr. Anderson, who joined the company effective November 8, 2022 and received a proration of approximately 15% of the annual incentive amount. On January 23, 2023, the company entered into a separation agreement and general release with Mr. Tulsyan in 2020. Quarterly adjusted EBITDA performance resultedconnection with his termination as senior advisor, finance effective January 6, 2023. See the “Potential Payments Upon Termination or Change in an aggregate bonus fundingControl” table for further details of 165% of target for corporate bonus-eligible employees,the separation payments made to Mr. Tulsyan in connection with his termination, which includes a payment reflecting significantly higher achievement against goals throughout 2020, including outperformance inhis 2022 bonus.
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| | | | | | | | | | Target | | | | Formulaic Bonus Payout | | | | Committee Assessment | | | | | |
| | Name | | | | Salary | | | | STI Target % | | | | Payout
Curve
Achievement | | | | STI Based on
EBITDA
Achievement | | | | % Modifier
Applied to
EBITDA
Funded Bonus | | | | Bonus Adjusted
following
Committee
Assessment | | | | 2022 Salary +
Final Bonus
Payout | | |
| | Brad Jacobs* | | | | | $ | 929,561 | | | | | | | 200% | | | | | | $ | 1,859,121 | | | | | | | 140% | | | | | | $ | 2,602,769 | | | | | Committee did not exercise the plan modifier
available in 2022, yielding a purely formulaic
outcome; plan modifier removed for 2023 | | | | | $ | 3,532,329 | | | |
| | Mario Harik | | | | | $ | 557,857 | | | | | | | 138% | | | | | | $ | 768,096 | | | | | | | 140% | | | | | | $ | 1,075,334 | | | | | | $ | 1,633,192 | | | |
| | Carl Anderson | | | | | $ | 93,750 | | | | | | | 100% | | | | | | $ | 93,750 | | | | | | | 140% | | | | | | $ | 131,250 | | | | | | $ | 225,000 | | | |
*
The STI percentage applied to Mr. Jacobs remained at 200% during the second halffinal two months of the year, despite continued macroeconomic pressures.* See Annex A for reconciliations of non-GAAP measures
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In consideration of the above factors, Mr. Jacobs, Mr. Cooper and Mr. Harik each received a short-term incentive payout of 165% of target, in lineaccordance with the average payout for bonus eligible employees in the corporate function. Mr. Wyshner who beganterms of his service in March 2020, received a payout of 129% of target. The short-term incentive awards for our NEOs reflect their exemplary work in effectively leading XPO through the pandemic to a dramatic recovery, with the best fourth quarter performance in our history and a strong trajectory into 2021.
Below is a summary of our NEOs' total annual STI compensation at target, and with respect to 2020 final outcomes.
employment agreement LONG-TERM INCENTIVES
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XPO's
Long-Term Incentives
XPO’s incentive compensation is weighted heavily toward long-term incentivesLTIs that are tied to ambitious goals for key operational and financial indicators. The Committee'sCommittee’s pay-for-performance philosophy is also focused on rewarding our NEOs for performance that creates substantial, long-term value for our stockholders; long-term incentive awards for our chief executive officer, president and chief information officer have been fully performance-based since 2014. Additionally, the Committee has taken a strategic approachstockholders. Awards are designed to the timing of grants, which are not made on a typical annual cycle but are tiedtie closely to the company'scompany’s strategic operating plans, as communicated broadly to our investor community, to ensure alignment with expectations set publicly. The Committee’s goal is to ensure our executives remain laser focused on executing to exceptional operational standards, are incentivized to win against industry competition and drive long-term resultsstockholder value creation.
In light of the transformational changes that were executed by the leadership team throughout 2022, we granted targeted awards to our NEOs as described in the table below entitled “NEO Stock Awards Granted in 2022”.
Mr. Jacobs received no incremental new awards for 2022. In response to feedback from our stockholders indicating a preference for performance-based awards in the form of stock, the Committee converted 50% of Mr. Jacobs’ 2022 tranche of the 2020 Cash LTI award, valued at $5 million, to Replacement LTL PSUs, consistent in format to those awarded to Mr. Harik (replacing 100% of Mr. Harik’s 2022 Cash LTI tranche).
As our newly appointed CFO, Mr. Anderson received new hire sign-on awards in 2022 totaling a grant value of $1 million, with 50% awarded in performance-based stock dependent upon significant XPO TSR outperformance against both a broader market index and awarded on a strategic cadence. Outstanding long-term incentive awards do not have overlapping payouts.Recently Completedselect transportation peers, and Currently Outstanding Long-Term Awards
XPO's fully-performance-based long-term incentive program50% in time-based RSUs that cliff-vest in November 2024. Mr. Anderson’s TSR performance-based stock is designedconsistent in format to align NEO performanceMr. Harik’s Promotion PSUs (the “Relative TSR PSUs”, as shown below).
In connection with the interestsRXO spin-off, the Committee also approved modifications to outstanding performance-based awards for Mr. Jacobs and Mr. Harik, as described comprehensively in the section entitled Modifications to Pre-Spin Outstanding Performance-Based Awards in connection with RXO spin-off.
In all cases — both in the granting of new awards and the modification of outstanding unvested awards — the Committee approved double-trigger change-in-control provisions from the single-trigger provisions utilized in past awards, in response to a preference indicated by some of our stockholdersstockholders.
The tables below provide: (i) descriptions of awards granted to our NEOs as LTIs in 2022; and incentivize outperformance through achievement(ii) for awards with certified goal achievements in 2022, the amounts granted along with their values as of long-term goals. The Committee takesDecember 31, 2022, and the view that long-term awards should incorporate ambitious strategic goals, with payouts tied to meeting rigorous measures that are tailoredfinal attainments, where relevant.
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NEO Stock Awards Granted in 2022
| | | AWARD
GRANTED | | | | DESCRIPTION | | | | THE COMMITTEE’S RATIONALE | | |
| | | REPLACEMENT LTL PSUs Recipients: Mr. Jacobs Mr. Harik | | | | ■
Grant Date: March 7, 2022 ■
Vesting Schedule: Cliff vest on December 31, 2023 (aligned with the performance period of the 2022 Cash LTI tranche it replaced) ■
Performance Metrics: ■
Gating Factor: Completion of the RXO spin-off no later than December 31, 2022 ■
50% weighted on 2022 LTL adjusted EBITDA ■
50% weighted on 2022 LTL adjusted operating ratio improvement versus prior year ■
Details provided in the “LTL Performance-Based Stock Units (LTL PSUs)”table below ■
Performance Certified? Yes ■
52% Earned Payout(subject to continued time vesting through vest date) | | | | ■
Replaced 2022 cash tranche included in the 2020 Cash LTI award, in response to stockholder feedback in 2021 indicating a preference for stock-based compensation ■
Aligned metrics with path to LTL long-term targets conveyed to investors in 2022 ■
The binary nature of the gating factor ensures a focus on successfully completing the spin-off transaction to position XPO for significant stockholder value creation through expected higher trading multiples over time | | |
| | | REGULAR
LTL PSUs Recipients: Mr. Harik Mr. Tulsyan | | | | ■
Grant Date: March 7, 2022 ■
Vest Schedule: Cliff vest on March 7, 2025 ■
Performance Metrics: ■
Gating Factor: Completion of the RXO spin-off no later than December 31, 2022 ■
50% weighted on 2022 LTL adjusted EBITDA ■
50% weighted on 2022 LTL adjusted operating ratio improvement versus prior year ■
Details provided in the “LTL Performance-Based Stock Units (LTL PSUs)” table below ■
Performance Certified? Yes ■
52% Earned Payout(subject to continued time vesting through vest date) ■
Details of the pro-rata vesting of equity awards held by Mr. Tulsyan in connection with his termination are included in the “Potential Payments Upon Termination or Change of Control” table below. | | | | ■
Aligned metrics with path to LTL long-term targets conveyed to investors in 2022. ■
The binary nature of the gating factor ensures a focus on successfully completing the spin-off transaction to position XPO for significant stockholder value creation through expected higher trading multiples over time Applicable only to Mr. Harik: ■
Granted to Mr. Harik in recognition of his promotion to LTL acting president (appointed in October 2021) Applicable only to Mr. Tulsyan: ■
Granted to Mr. Tulsyan as part of his annual CFO total compensation structure, bringing total direct compensation to $4 million ■
100% of LTI for Mr. Tulsyan was granted in PSUs, compared to an average 50% for at-risk, performance-based LTIs for CFOs in the CD&A Peer Group | | |
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| | | AWARD
GRANTED | | | | DESCRIPTION | | | | THE COMMITTEE’S RATIONALE | | |
| | | RELATIVE TSR PSUs Recipients: Mr. Harik Mr. Anderson | | | | ■
Grant Date: ■
Mr. Harik — August 5, 2022 ■
Mr. Anderson — November 8, 2022 ■
Vest Schedule: Cliff vest on fourth anniversary of grant date ■
Performance Metrics: ■
100% relative TSR with two-step calculation process: (i) a baseline measuring XPO’s four-year TSR performance against that of companies within the S&P Midcap 400 Index, and (ii) a multiplier based on XPO’s TSR performance against that of select weighted transportation peers ■
Details provided in the “Relative TSR Performance-Based Stock Units” table below Applicable only to Mr. Harik: ■
Gating Factor: Completion of the RXO spin-off no later than March 31, 2023 ■
Post-Vest Sales Restriction: Lock-up on the sale or transfer of shares for one year after settlement of shares, except in the event of a change in control or death ■
Performance Certified? No (performance is still outstanding) | | | | ■
Aligned with stockholder interest for high growth of XPO’s stock price over the long-term; no payout below a 67th percentile ranking against the broader market index, and maximum 200% payout requires a percentile ranking of 83 against the broader index, as well as meaningful outperformance of select transportation peers Applicable only to Mr. Harik: ■
Granted in connection with Mr. Harik’s promotion to CEO ■
The Committee felt it was appropriate to recognize this milestone career accomplishment of Mr. Harik while applying rigor to the award design to incentivize a strong focus on XPO’s growth in market position versus core competitors ■
The binary nature of the gating factor ensures a focus on successfully completing the spin-off transaction to position XPO for significant stockholder value creation through expected higher trading multiples over time Applicable only to Mr. Anderson: ■
Provided as part of new hire sign-on award in the CFO offer package (50% of total sign-on award), in line with standard market practice for C-suite level roles | | |
| | | NEW HIRE SIGN-ON RSU Recipient: Mr. Anderson | | | | ■
Grant Date: November 8, 2022 ■
Vest Schedule: Cliff vest on November 8, 2024 ■
Performance Certified? No (time-based only) | | | | ■
Provided as part of new hire sign-on award in the CFO offer package (50% of total sign-on award), in line with standard market practice for C-suite level roles | | |
| | | RXO SPIN-OFF INCENTIVE Recipient: Mr. Tulsyan | | | | ■
Grant Date: March 7, 2022 ■
Vest Schedule: Cliff vest on March 7, 2025 ■
Gating Factor: Completion of the RXO spin-off no later than December 31, 2022 ■
Time-based vesting after gating factor is achieved ■
Performance Certified? Yes ■
100% Earned Payout ■
Details of the pro-rata vesting of equity awards held by Mr. Tulsyan in connection with his termination are included in the “Potential Payments Upon Termination or Change of Control” table below.” | | | | ■
Granted to incentivize successful execution of the RXO spin-off, recognizing Mr. Tulsyan’s critical role in leading the complex strategic process over the course of eight months and delivering on stockholder requests to simplify the company’s business portfolio | | |
*
Settled in the full earned amount after termination date of January 6, 2023, pursuant to the
driversterms of
future outperformance. The Committee's long-termthe applicable award
structure incentivizes our NEOs to achieve sustainable value creation.
Note:
Outstanding awards do not have overlapping settlements; the settlements for the August 2018 and June 2019 PSU awards, if earned, would occur within the first quarter in the years 2023 and 2025, respectively, with no settlements scheduled in these years for the 2020 LTI grant. Also, all references to adjusted EPS refer to adjusted diluted EPS, unless otherwise noted.
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July 2020 Long-Term Incentive Cash Compensation
LTL Performance-Based Stock Units (LTL PSUs)
The 2020 LTI wasconstruct below applies to the replacement awards granted to each of Mr. Jacobs and Mr. Cooper andHarik, the additional award issued to Mr. Harik in connection with his promotion to acting president of LTL and the executionLTI compensation provided to Mr. Tulsyan as part of new, four-year employment agreements,his total annual direct compensation, as their previous employment agreements expirednoted above in February 2020.the “NEO Stock Awards Granted in 2022” tables.
| | | Weighting | | | | Performance
Metrics | | | | 2022 Target | | | | Payout Scale
(Straight-line interpolation between values) | | |
| | | Gating Factor to Qualify:
Completion of the RXO Spin-Off no later than December 31, 2022 | | |
| | | 50% | | | | LTL Adjusted
EBITDA | | | | $1 billion | | | | LTL Adjusted EBITDA | | | | % PSU Earned | | |
| | < $1 billion | | | | 0% | | |
| | $1 billion | | | | 100% | | |
| | $966 million | | | | 200% | | |
| | | 50% | | | | LTL Adjusted
Operating Ratio
Improvement | | | | 100 bps improvement vs.
2021
(as measured on December 31,
2022) | | | | Basis Point
Improvement | | | | % PSU Earned | | |
| | < 100 bps | | | | 0% | | |
| | 100 bps | | | | 100% | | |
| | 200 bps | | | | 200% | | |
Relative TSR Performance-Based Stock Units
The below framework pertains to the Relative TSR PSUs granted to Mr. Wyshner was granted performance-based restricted stock unitsHarik (Promotion PSU) and time-based restricted stock units upon his hire on March 2, 2020, and did not receiveto Mr. Anderson (New Hire Sign-On PSU), as noted above in the 2020 LTI. The performance-based restricted stock unit“NEO Stock Awards Granted in 2022” tables.
| | | Relative TSR Performance Measures | | | | Payout Scale
(Straight-line interpolation between values) | | |
| | | STEP 1: Baseline | | | | XPO TSR performance vs. TSR
of all companies within the S&P
Midcap 400 Index | | | | Percentile Position vs.
Index Companies | | | | % PSU Earned | | |
| | < 67th | | | | 0% | | |
| | 67th | | | | 100% | | |
| | 83rd | | | | 200% | | |
| | | STEP 2: Multiplier | | | | XPO TSR performance vs.
combined ODFL TSR (weighted
66.7)% and SAIA TSR (weighted
33.3)% | | | | Annualized Basis Points
Outperformance vs. Peers | | | | % of Baseline Achieved | | |
| | ≤ 200 bps | | | | 100% | | |
| | ≥ 500 bps | | | | 133% | | |
2022 Performance-Based LTI Outcomes — LTL Performance Stock Units
As described in the Long-Term Incentives section, the LTL PSUs included two performance goals related to the LTL business (each weighted 50%) which were provided as guidance to investors at the beginning of 2022, as well as a gating factor to quality for the award for Mr. Wyshner has a six-year performance period ending on— the completion of the RXO spin-off no later than December 31, 2024 and is earned if both2022. The table below illustrates these goals, are met: (i) exceedwhich were specific to performance year 2022, with a tail of time-based vesting required, beyond these performance achievements, to fully vest in the S&P Transportation Select Industry Index TSR byrespective award. The Committee was, therefore, able to certify achievement of the performance goals underlying this award at least 34% and (ii) adjusted EPSthe beginning of $9.08.2023, while the time-based vesting element remains outstanding, contingent on continued employment.
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The structuretable below shows the outcomes the Committee certified for the LTL PSUs with respect of performance year 2022:
| | | Weighting | | | | Performance
Metrics | | | | 2022 Target | | | | 2022
Actual(1) | | | | Payout % | | | | Payout Scale
(Straight-line interpolation
between values) | | |
| | | Gating Factor to Qualify – Achieved:
Completion of the RXO Spin-Off no later than December 31, 2022 | | |
| | | 50% | | | | LTL Adjusted
EBITDA(1) | | | | $1 billion | | | | $1.002
billion | | | | 104% | | | | Adjusted EBITDA | | | | % PSU Earned | | |
| | < $1 billion | | | | 0% | | |
| | $1 billion | | | | 100% | | |
| | $966 million | | | | 200% | | |
| | | 50% | | | | LTL Adjusted
Operating Ratio
Improvement(2) | | | | 100 basis-
point
improvement vs. 2021 | | | | 38 bps | | | | 0% | | | | Basis Point Improvement | | | | % PSU Earned | | |
| | < 100 bps | | | | 0% | | |
| | 100 bps | | | | 100% | | |
| | 200 bps | | | | 200% | | |
| | | Blended Payout %: 52% | | |
| | | (1)
Performance metrics have been calculated in accordance with applicable award agreements | | |
| | | Payout values (using XPO’s stock price as of December 31, 2022) for Mr. Jacobs, Mr. Harik and Mr. Tulsyan are detailed in
the Long-Term Incentives section above, and are subject to continued time-based vesting | | |
2022 Performance-Based LTI Outcomes — 2020 Cash LTI
In the course of responding to our stockholders’ preference to issue share-based performance awards instead of cash awards, the Committee converted 50% of Mr. Jacobs’ 2022 tranche of the 2020 Cash LTI incorporates stockholder feedback received prior($5 million) to ourLTL PSUs in March 2022 (as then-CEO), while converting 100% of Mr. Harik’s 2022 tranche ($2.25 million) to the same PSUs; Mr. Tulsyan was not a recipient of the 2020 Annual Meeting. The target valueCash LTI grant. As a result, for each tranche is $10 million, $3.35 million and $2.25 millionthe 2022 performance period, the Committee’s certification of performance outcomes on the cash-based award was relevant only for Mr. Jacobs Mr. Cooper and Mr. Harik, respectively. (for the 50% of his 2022 tranche that remained cash-settled).
The Committee decided to denominatecomponents of the 2020 Cash LTI in cash, in part because of the significant equity holdings of our executives as well as the macroeconomic uncertainty and stock volatility at the time of the grant.These awards are fully performance-based and include four tranches vesting through January 2026. To earn the award, the executives must attain and maintain performanceprogram, along with ultimate 2022 achievement levels that have already been set for the end of 2020, 2021, 2022 and 2023, with additional vesting periods (if the award is earned) of up to two years following the end of each performance period. Each tranche may be earned at a level ranging from zero to 200% of target value, depending on the degree of achievement of goals tied to both absolute and relative adjusted cash flow per share and ESG performance. If a goal for a given tranche is not achieved, the portion of the award associated with that goal will be forfeited (that is, the forfeited portion cannot be carried forward and earned in a future year). Awards are based on rigorous performance targets, with no payouts for below-target performance.
The award structure contains three multi-year performance metrics: absolute adjusted cash flow per share, relative growth in adjusted cash flow per share (as compared to a defined peer group in the transportation industry), and ESG scorecard deliverables.
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2020 LTI Structure
Below are details of the three performance metrics underlyingincorporated in the 2020 LTI, chosen by the Committeeplan, are provided below. Each goal exceeded target, yielding a blended payout value for their alignmentMr. Jacobs of $8.83 million, or approximately 177% of total target value (subject to continued time-based vesting conditions through early 2024).
| | | Weighting | | | | Performance
Metrics | | | | 2022
Target | | | | 2022
Actual(1) | | | | Payout % | | | | Payout Scale (2022 Tranche) | | |
| | | 50% | | | | XPO Absolute
Adjusted Cash Flow
Per Share | | | | $5.35 | | | | $6.19 | | | | 178% | | | | Achievement
Level | | | | % Earned | | |
| | < $5.35 | | | | 0% | | |
| | $5.35 | | | | 100% | | |
| | $5.89 | | | | 150% | | |
| | ≥ $6.42 | | | | 200% | | |
| | | 25% | | | | Relative Cumulative
Growth in Adjusted
Cash Flow Per Share
vs. 2020 (Compared to 15-
Peer Comparator
Group) | | | | 55th
Percentile
Rank | | | | Ranked
3rd out of
16 (~85th
percentile) | | | | 200% | | | | XPO Percentile
Rank | | | | % Earned | | |
| | < 55th | | | | 0% | | |
| | 55th | | | | 100% | | |
| | 65th | | | | 150% | | |
| | ≥ 75th | | | | 200% | | |
| | | 25% | | | | ESG Scorecard (43 initiatives for
2022, each equally
weighted at 2.3
points) | | | | 80 – 85
points
out of 100 | | | | Final
Score of
86.2 (Details
provided in
Annex B) | | | | 150% | | | | Scorecard Grade
(Scale of 1-100) | | | | % Earned | | |
| | < 80 points | | | | 0% | | |
| | ≥ 80 points and < 85 points | | | | 100% | | |
| | ≥ 85 points and < 90 points | | | | 150% | | |
| | ≥ 90 points | | | | 200% | | |
| | | Blended Payout %: Approximately 177% | | |
(1)
Performance metrics have been calculated in accordance with
value creation over time.
applicable award agreements
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2022 Performance-Based LTI Outcomes — ESG Scorecard Highlights
Our ESG scorecard is designed to provide a progressive means of evaluating the management of ESG initiatives and incentivizing long-term, successive ESG achievements. The ESG scorecard metrics are a combination of annual and multi-year goals that span the total performance cycle of the award (performance years 2020, 2021, 2022 and 2023), with many metrics building to full achievement at the end of the four-year period. The Committee uses the scorecard to objectively assess performance, and the company uses it to monitor ESG progress.
Development of the ESG Scorecard
In 2020, the company commissioned a management consultant to conduct a gap analysis relative to our core peer group, so that we could better understand the optimal ESG tracking methods and disclosures. disclosures of related KPIs and align more closely to market trends. In addition, we cross-referenced the gap analysis against the material issues designated at the corporate and business unit levels in our Sustainability Report materiality matrix, to narrow our focus to critical and highly relevant KPIs.
Using these insights, management identifiedmaterial matters as a guide, our operational and functional leaders formed focus groups to identify the most relevant business initiatives as theand existing measurements that could form a basis for measurable ESG improvements over four years, taking into account lead time requirements, category weighting and target variances.years. The Committee agreed with the inputs from management and incorporated these recommendations into the scorecard.The resulting scorecard initiatives encompass a range of material issues at the corporate and business unit levels All targets were determined in our Sustainability Report materiality matrix. July 2020, projecting forward for all four annual periods.
Spin-off Related Goal Recalibrations
The ESG scorecard was recalibrated to appropriately tailor the metrics are a combination of annual and multi-year goals that spanobjectives to operational changes associated with the total performance cycleGXO spin-off in August 2021 and required further modification due to the RXO spin-off in 2022, as described below, under the heading Modification of the award,ESG Component in the Replacement PSU Award. The selected initiatives are more than 85% quantitative, with many buildingthe remainder subject to full achievement at the end of the four-year period. The Committee uses the scorecard to objectively assess performance, and the company uses it to monitor ESG progress.predetermined hurdles or binary milestones.
Our ESG scorecard is organized into six categories, with an average of approximately 4041 initiatives per year and with eachover the total span of the award. There were 43 initiatives in 2022, as described comprehensively in Annex B. Each initiative is weighted equally within the year.
(1) May reflect rounded values
year, adding up to a total of 100 maximum points (2.3 points for each initiative with respect to 2022). For the goals that pertained to the operations that were spun off as RXO in 2022, the Committee captured the year-to-date (Quarter 1 through Quarter 3) performance measurements for the purpose of certifying the attainment of those respective goals.
Summary of ESG Scorecard StructureDeliverables and Content SummaryThe following tables use examples to provide a summaryResults for 2022
To address stockholders’ requests for greater disclosure of
our ESGthe scorecard
methodology. The targets
do not reflectand achievements, the
full setchart in Annex B entitled “ESG Scorecard — 2022 Deliverables and Achievements” provides details of
goals for eachevery deliverable included in the 2022 performance
period.
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Performance and Vesting Schedule
The graphic below depicts the performance and vesting schedulesyear tranche of the 2020 Cash LTI demonstrating that multi-year performance goals reward cumulative growth in steps over the defined time period, with the full vestingaward. The ESG scorecard comprised 25% of the total compensation opportunity related to the 2020 Cash LTI award and, for 2022, was only applicable to Mr. Jacobs’ $5 million cash target related to the 2022 award tranche.
2022 ESG Score of 86.2%
Of the 43 initiatives for the 2022 performance year, 37 were achieved. Six were not completed until January 2026.
(1) The award is earnedachieved, resulting in four installments and vestsa deduction of 13.8 points overall from a maximum score of 100, yielding a final score of 86.2. Based on the first anniversaryassociated payout table shown below, this results in a 150% payout against the 25% portion of grant (July 31, 2021)the 2020 Cash LTI award allocated to the ESG scorecard.
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MODIFICATIONS TO OUTSTANDING PERFORMANCE-BASED AWARDS IN CONNECTION WITH RXO SPIN-OFF
In November 2022, the Committee modified outstanding PSU awards from 2018 and each2019. Additionally, in February 2023, the Committee approved modifications to the remaining tranche of January 15, 2022, 2024the 2020 Cash LTI award, taking into account both stockholder feedback and 2026.Sliding Scale Payout
Thethe need to modify the ESG scorecard goals (which constituted 25% of the outstanding award) by removing goals related to business operations that spun off as RXO. These modifications impacted Mr. Jacobs and Mr. Harik only, as other NEOs do not hold the 2020 Cash LTI features aaward.
Modification of the Outstanding 2018 and 2019 PSUs
Prior to the RXO spin-off, Mr. Jacobs and Mr. Harik held the following unvested PSUs. These PSUs had no sliding scale payout and were binary “hit or miss” awards, with a requirement to meet two separate performance hurdles within each award structure in placeorder to achieve target payout; there was no payout potential above 100%, and no threshold level of pay for below-target achievement:
| | | | | | | PSU
GRANT | | | | GRANT
DATE | | | | ORIGINAL
CLIFF VEST
DATE | | | | # UNITS OUTSTANDING | | | | PERFORMANCE METRICS | | |
| | | 1 | | | | 2018 PSU | | | | August 16,
2018 | | | | December 31,
2022 | | | | ■
Mr. Jacobs: 393,346 ■
Mr. Harik: 38,124 | | | | ■
Achievement of both $9.25 adjusted cash flow
per share and $114.08 stock price by
December 31, 2022 | | |
| | | 2 | | | | 2019 PSU | | | | June 5,
2019 | | | | December 31,
2024 | | | | ■
Mr. Jacobs: 781,149 ■
Mr. Harik: 183,799 | | | | ■
Achievement of both compounded annual
growth of at least 19% in adjusted EPS and
relative TSR outperformance of at least 310
percentage points against the S&P
Transportation Select Industry by December 31,
2022 | | |
In their deliberations on how to properly address the modification requirements for these awards, the Committee evaluated market practice in recent spin-off transactions, while also considering whether a fair adjustment methodology could be applied after two successive spin-offs (GXO in August 2021 and RXO in November 2022). The XPO profile was altered significantly by these transactions, from a company with $16 billion of revenue, $1.4 billion of adjusted EBITDA and over 100,000 employees in 2020, to one with $7.7 billion of revenue, approximately $1 billion of adjusted EBITDA and approximately 38,000 employees as of December 31, 2022.
The Committee reviewed market analysis of approximately 30 spin-off transactions occurring since January 1, 2015, with sufficient spin-off equity treatment disclosure, meeting the following criteria: (i) SpinCo revenue of at least $1 billion; and (ii) a SpinCo to RemainCo revenue ratio greater than or equal to 20%. The findings of this review indicated that approximately 72% of companies (including both SpinCo and RemainCo entities) converted some or all of their outstanding executive PSUs into time-based RSUs vesting on their original schedule. Companies that opted for continued performance treatment typically had performance goals that were either: (i) entirely based on relative TSR and thus required no new or modified goals; or (ii) performance based on a multi-year average of individual one-year periods, which are more easily adapted than an interrupted multi-year cliff performance period.
For XPO, the 2018 and 2019 awards each had both financial and stock-price/TSR-related goals that must be achieved in tandem, and were structured as cliff vesting periods, based on measurement at one end point versus one beginning point in the cumulative period. Recasting the performance goals to reflect the same rigor as the original construct used for the XPO conglomerate could result in failing to credit partial performance gains already attained at that point in the vesting period of each award. Additionally, with the significant changes to XPO’s profile as a result of the "hit or miss" construct usedRXO spin-off and the uncertainty surrounding the impact of other potential strategic alternatives, the Committee could not reliably project company performance goals out to 2024.
In light of these considerations, and taking into account stockholder perspectives on how to address outstanding awards, the Committee decided to convert the combined target shares in prior long-term awards. This change was made in responsethese two outstanding awards to stockholder feedback that overly rigorous goals may pose a retention risk or encourage excessive risk-taking. The payout scales are formulatedtime-based RSU awards for each of Mr. Jacobs and Mr. Harik, effective as shown below.
2020 LTI Outcomes—First Performance Period
The first performance period of the 2020 LTI was completedRXO spin-off date. However, in exchange for removing the associated performance hurdles, the Committee enacted the following changes:
i.
Extended the vesting schedule of the 2018 award by two years, to December 31, 2024, aligning with the original vesting schedule of the 2019 award;
ii.
Applied a post-vesting sales restriction on the entire pool of shares across both awards, which expires on December 31, 2025; and
iii.
Modified the change in control provisions applicable to the awards from single-trigger to double-trigger, responding to stockholder requests to eliminate single-trigger vesting provisions from LTIs.
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From a reporting perspective, these modifications impact the Summary Compensation Table by showing the modified values of these older, previously-reported awards as though they are new, incremental grants with respect to the 2022 performance year. To clarify the Committee’s actual decisions for 2022, we have provided our stockholders with an alternate view of the Summary Compensation Table to consider, entitled Supplemental Summary Compensation Table, located under the required Summary Compensation Table. It is critically important to view these adjustments as tailored changes that maintain the intended operation and values of these awards, as opposed to new grants that represent supplemental value.
Modification of the Outstanding 2020 Performance-Based Cash LTI Grant
In February 2023, the Committee certified performance achievements in connection with the 2022 tranche of Mr. Jacobs’ 2020 Cash LTI award. The Committee also re-evaluated the structure of the remaining 2023 tranche of the awards for both Mr. Jacobs and resultedMr. Harik, who had $10 million and $2.25 million, respectively, of target award values outstanding in a blended outcomethe tranche.
Based on: (i) stockholder feedback to denominate performance awards in equity rather than cash; and (ii) the impact of 175% payout earned for the 2020 performance period. The 2020 consolidated outcome fromRXO spin-off on the three weighted performance goals was as follows:company’s profile, which directly affected the construction of the absolute adjusted cash flow per share (200% earned at 50% weighting); relative growthperformance metric in the award structure, the Committee decided to make meaningful revisions, effectively canceling the original version of the award and replacing it with new performance-based shares, with metrics that were realigned with post-spin-off strategic priorities. The target amounts and combined vesting/sales restriction schedules were preserved in the issuance of the replacement awards.
Unlike the 2018 and 2019 PSUs, the 2020 Cash LTI award contained distinct annual performance goals and measurements (for each of the years from 2020 through 2023), allowing the Committee to consider recalibrations of the associated metrics more readily, without disrupting previous gains which were already certified and, for the first two tranches, settled and paid. In this case, rather than keeping the same goals as the existing structure, and responsive to stockholder input, the Committee removed the two metrics related to adjusted cash flow per share, (100% earned at 25% weighting); andreplacing them with the ESG scorecard (200% earned at 25% weighting). The Committee certified performance achievementmetric of relative TSR versus the S&P Transportation Select Industry Index. This was done in March 2021 with an expected vest dateresponse to stockholder insights from off-season engagement sessions that were completed in July 2021.The following tables detail the first quarter of 2023. The new performance measurement period achievementbegins on November 1, 2022 and ends on December 31, 2024 (the annual PSU for our NEOs, each2023 would cover the period between March 6, 2023 and March 6, 2026).
Core Elements of the performance metrics and the associated payout scales.
2020 LTI Replacement Award Issued in 2023
| | Weighting | | | | Performance
Metrics | | | | Performance Measurement Period | | | | Payout Scale
(straight-line interpolation between
values for relative TSR) |
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2020 LTI Outcome by Metric—First Performance Period
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Absolute Adjusted Cash Flow Per Share50% weighting
Linear interpolation
Second half of 2020 measurement period
75% | | ■
Calculated as adjusted EBITDA (determined in accordance with
| | Relative TSR:
XPO vs.
S&P Transportation
Select Index | | | | November 1, 2022
(RXO spin-off date) through December 31,
2024 (start of 30-day trading average
represents the company's monthly operating reports and for external reporting purposes, and adjusted for the impact of stock and long-term cash-based compensation) less gross capital expenditures and net interest; divided by diluted shares outstanding, provided that the Committee may, in its discretion, adjust the number of diluted shares outstanding to neutralize the impact of changes in capital structure (including stock splits, reverse stock splits or stock dividends) ■
Actual achievement in adjusted cash flow per share for the second half of 2020 was significantly above the target of $3.04, resulting in earned payout at 200%
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period from November 1,
2022 – December 13, 2022) |
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| | Percentile vs. Index | | | | % PSU
Earned | | |
Relative Growth in Adjusted Cash Flow Per Share25% weighting
Linear interpolation
Second half of 2020 measurement period
| < 40th | | ■
Calculated as the percentile rank of the company's growth in adjusted cash flow per share relative to the growth in adjusted cash flow per share of the companies in the peer group for the first performance period
■
Growth, with respect to the 2020 performance period, refers to the percent change between the adjusted cash flow per share for the second half of 2020 and the second half of 2019 for XPO, and for each company in the peer group
■
Actual achievement relative to the peer group was at the 55th percentile rank for the second half of 2020, resulting in earned payout at 100%
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0% | | |
ESG Scorecard25% weighting
Full year 2020 measurement period
| 40th | | ■
Calculated as
| | 25% | | |
| | 50th | | | | 65% | | |
| | 60th | | | | 100% | | |
| | 75th | | | | 200% | | |
| | | 25% | | | | ESG Scorecard | | | | 2023 deliverables stated in the aggregate outcomeESG
scorecard, modified to reflect remaining
XPO business operations post-RXO
spin-off | | | | Scorecard Grade
(Scale of 43 equally-weighted initiatives for 2020, with each initiative worth a rounded value of 2.31-100) | | | | % PSU
Earned | | |
| | < 80 points (initiatives add up to 100 points) | | | | 0% | | |
| | ≥ 80 points and
< 85 points | | | | 100% | | |
| | ≥ 85 points and
< 90 points | | | | 150% | | |
| | ≥ 90 points | | | | 200% | | |
| | | Additional Key Features | | |
| | | Vesting schedule: Cliff vest on February 9, 2025, contingent upon achievement of 90.7 outthe above performance hurdles and continued employment through the vesting date. ■
Post-vest sales restriction: Lock-up on the sale or transfer of 100 points resulted in earned payout at 200% |
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TableOriginal Structure of Contentsthe 2020 Cash LTI Replaced in 2023 | | | Weighting | | | | Performance Metrics | | | | Payout Scale (2023 Tranche) | | |
| | | 50% | | | | XPO Absolute Adjusted Cash Flow Per
Share | | | | Achievement Level | | | | % Earned
(straight-line interpolation between
values) | | |
| | < $5.95 | | | | 0% | | |
| | $5.95 | | | | 100% | | |
| | $6.55 | | | | 150% | | |
| | ≥ $7.14 | | | | 200% | | |
| | | 25% | | | | Relative Cumulative Growth in Adjusted
Cash Flow Per Share vs. 2020
(compared to Peer Group) | | | | XPO Percentile Rank | | | | % Earned
(straight-line interpolation between
values) | | |
| | < 55th | | | | 0% | | |
| | 55th | | | | 100% | | |
| | 65th | | | | 150% | | |
| | ≥ 75th | | | | 200% | | |
| | | 25% | | | | ESG Scorecard
(39 initiatives for 2023, each equally
weighted at 2.6 points) | | | | Scorecard Grade
(Scale of 1-100) | | | | % Earned | | |
| | < 80 points | | | | 0% | | |
| | ≥ 80 points and < 85 points | | | | 100% | | |
| | ≥ 85 points and < 90 points | | | | 150% | | |
| | ≥ 90 points | | | | 200% | | |
Note: Mr. Tulsyan was granted an equity-based award utilizing the same metrics and structure as the 2020 Cash LTI upon his appointment as CFO in September 2021. Due to his separation from the company on January 6, 2023, pursuant to the terms of his award agreement and upon the certification of achievement of the goals in the 2023 tranche of his equity award, he is entitled to a target of 86 shares from this tranche and 2,496 additional shares pursuant to the terms of his separation agreement (the remaining 2,625 shares have been forfeited). The Committee may elect to modify the award for these combined 2,582 target shares at a future date.
Modification of the ESG Component in the Replacement PSU Award
As part of the modification efforts to develop the 2020 LTI Replacement Award, the Committee reviewed the relevance of the 2023 goals embedded in the ESG scorecard and made the following adjustments, with the majority related to removing goals associated with the operations that were spun off as RXO. With these amendments, the ESG scorecard will continue to have deliverables across the topics of Workforce/Talent, Diversity, Equity and Inclusion, Employee and Community Safety, Environment and Sustainability, Information Security and Governance, with 39 initiatives for 2023.
Impact of the Announced Plan to Spin Off Our Global Logistics Business
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In light of the announced plan to spin off our global logistics business, the Committee will review the 2020 LTI structure to recalibrate the targets so that they reflect the remaining company's strategy and financial metrics on a post-separation basis, including the initiatives that underlie the ESG scorecard goals. Similarly, the Committee will consider treatment of the remaining outstanding long-term incentive awards in the context of: (i) the value created for stockholders through the spin-off transaction; (ii) the appropriate incentive structure to encourage retention of the remaining executives; (iii) stockholder feedback from engagement sessions; and (iv) the ability to recreate similarly situated, high-growth goals that are aligned with the Committee's original intentions.
OUR EXECUTIVE COMPENSATION GOVERNANCE FRAMEWORK
| | | | | | 2023 ESG INITIATIVES | | | | TARGET | | | | CHANGE / RATIONALE | | |
| | | 1 | | | | US DOT-Recordable Preventable Accident Frequency Rate
(when holding number of miles driven constant with full-year 2020) | | | | Prior year actual
+ 3%
improvement | | | | Removed RXO-related impact | | |
| | | 2 | | | | Lost Workday Rate | | | | <59 | | | | Removed RXO-related impact | | |
| | | 3 | | | | Total Recordable Incident Rate (TRIR) | | | | <0.95 | | | | Removed RXO-related impact | | |
| | | 4 | | | | Fuel Efficiency Improvement | | | | Maintain
7.1 mpg or higher
by year end | | | | Removed RXO-related impact | | |
| | | 5 | | | | Registration as a Smartway Approved Carrier Partner | | | | Maintain
Partnership | | | | Removed RXO-related impact | | |
| | | 6 | | | | Average Age of Tractors | | | | 2.5 years | | | | Removed RXO-related impact | | |
| | | 7 | | | | CO2 Emissions Control in Europe:
Includes machinery equipment, installations, and road truck emissions | | | | Minimum 5%
improvement
from prior year | | | | Replaced entirely due to unavailability of
EcoTransit tool that was intended to
provide the basis for this measurement;
see point 8 below | | |
| | | 8 | | | | CO2 Emissions Reduction in Europe:
Achieved with electric vehicles, biofuels, reduction of empty miles and renewable energies usage | | | | Minimum
10 million Kg of
CO2 reduced
in 2023 | | | | New goal replaces CO2 Emissions
Control in Europe:
Achieves a similar environmental benefit
as the original goal and alleviates the
measurement difficulties caused by a
delay in the implementation of the
EcoTransit tool | | |
Equitable Adjustments of Equity-Based Awards in the RXO Spin-Off Regarding the impact of the RXO spin-off on equity-based awards, our NEOs were treated the same as our other similarly-situated executives and corporate employees. For all then-active NEOs and corporate employees, each outstanding XPO equity award was treated in a manner similar to that experienced by XPO stockholders with respect to their XPO common stock. More specifically, each of these awards was deemed bifurcated into two separate awards: (i) an adjusted award covering XPO common stock; and (ii) a new award of the same type covering RXO common stock. Each of these two awards remain subject to the same terms and conditions (including with respect to vesting) immediately following the spin-off date as applicable to the corresponding award immediately prior to the spin-off date, except for the modifications and replacement awards relevant to our impacted NEOs, as described herein. OUR EXECUTIVE COMPENSATION GOVERNANCE FRAMEWORK
Stock Ownership Policies
We believe that executive equity ownership in the company mitigates a number of risks, including risks related to executive attrition and undue risk-taking. Stock ownership guidelines are expressed as a multiple of each NEO'sNEO’s annual base salary:
■
CEO: 6x annual base salary
■
Other NEOs: 3x annual base salary
Compliance with our stock ownership guidelines is generally determined using the aggregate count of shares of common stock held directly or indirectly by the NEO, plus unvested restricted stock units ("RSUs") subject solely to time-based vesting. Stock options, whether vested or unvested, and equity-based awards subject to performance-based vesting conditions, are not counted toward meeting stock ownership guidelines until they have settled or been exercised, as applicable. | | | | | 53 | | | | | | © 2023 XPO, Inc. | |
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Until the stock ownership guidelines are met, an executive is required to retain 70% of the net shares (after tax withholding) received upon settlement of equity-based awards. A newly appointed executive is required to reach his or her stock ownership guideline no later than three years from the date of appointment. As of the most recent record date of April 8, 2021, Mr. Jacobs, Mr. Cooper and Mr. HarikRecord Date, all NEOs were in compliance with our stock ownership guidelines.
In addition to our stock ownership guidelines, certain awards of our executive chairman and CEO were amended during 2022 to include one-year holding periods after vesting, as described above.
Clawback Policy
As described above under the heading Employment Agreements with NEOs — Clawbacks, Mr. Jacobs exceeded the guidelines by a significant degree: his ownership as a multiple of salary was equal to 2,303. Ownership as a multiple of salary for Mr. Cooper and Mr. Harik as of the same date was 26 and 30, respectively. Mr. Wyshner is requiredare party to meet his stock ownership guidelines no later than March 2023, three years from his appointment as chief financial officer.Our NEOs are subject toagreements in connection with their employment, which include clawback restrictions with respect to long-termLTI and annual short-term incentiveSTI compensation. Mr. Anderson is subject to agreements in connection with his LTI compensation which include clawback restrictions. The Committee is focused on mitigating the company’s risk associated with the company'sits compensation program for NEOs and believes that clawback provisions are an important tool to achieve this.
Long-term incentive compensation
Annual STI Compensation
The NEO employment agreements include a clawback provision under whichfor Mr. Jacobs and Mr. Harik provide that if the NEO may be required, upon certain triggering events, to repay all or a portion of long-term incentive compensation that was previously paid (including proceeds from previously-exercised and vested equity-based awards) and to forfeit unvested equity-based awards during the term of the employment agreements. These clawback provisions are generally triggered if any of the following conditions apply—the NEO:■Has engaged in fraud or other willful misconduct that contributes materially to any significant financial restatement or material loss to our company or any of our affiliates;
■Is terminated for cause, as defined in the employment agreement; or
■Breaches the restrictive covenants that are applicable under the employment agreement.
Annual short-term incentive compensation
In addition, if a NEO has engaged in fraud or other willful misconduct that contributes materially to any financial restatement or material loss to the company or any of its affiliates, the company may: (i) require repayment by the NEO of any cash bonusSTI or annual bonusSTI previously paid, net of any taxes paid by the NEO on such bonus;STI; (ii) cancel any earned but unpaid cash bonusSTI or annual bonus;STI; and/or (iii) adjust the NEO'sNEO’s future compensation in order to recover an appropriate amount with respect to the restated financial results or the material loss.
Long-Term Incentive Compensation
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TableThe employment agreements for Mr. Jacobs and Mr. Harik include a clawback provision under which the NEO may be required, upon certain triggering events, to repay all or a portion of Contents
LTI compensation that was previously paid (including proceeds from previously-exercised and vested equity-based awards) and to forfeit unvested equity-based awards during the term of the employment agreements. In cases where a cure is possible, the NEO will first be provided with a specified cure period. These clawback provisions are generally triggered if any of the following conditions apply; the NEO:
■
Is terminated for cause, as defined in the employment agreement;
■
Has engaged in fraud or other willful misconduct that contributes materially to any significant financial restatement or material loss to our company or any of our affiliates; or
■
Breaches the restrictive covenants that are applicable under the employment agreement.
The time period for the company to take action under this clawback provision is up to six months from the date of termination for cause and, for all other specified conditions, at any time up to six months after learning of the conduct but in no event more than two years after the NEO engages in such conduct.
Mr. Anderson’s LTI agreements provide that if he breaches any restrictive covenant contained in any arrangements with the company or engages in fraud or willful misconduct that contributes materially to any financial restatement or material loss to the company or any of its subsidiaries, the company may require him to repay any long-term incentive compensation that was previously paid (including proceeds from vested equity-based awards) and to forfeit unvested equity-based awards. In cases where a cure is possible, he will first be provided with a specified cure period.
Additional provisionProvision
To the extent that the rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act are broader than the clawback provisions contained in our NEO employment agreements for Mr. Jacobs and Mr. Harik, and to the extent the company is required to implement a clawback policy pursuant to applicable law, thesuch NEOs each will each be subject to additional clawback provisions pursuant to such rules as described underrules.
Mr. Anderson’s Severance Agreement provides that he will be subject to any legally mandated policy relating to the
heading "Employment Agreements with NEOs—Clawbacks."recovery of compensation, to the extent that the Company is required to implement such policy pursuant to applicable law. The Committee is responsible for approving our compensation practices and overseeing our executive compensation program in a manner consistent with XPO'sXPO’s compensation philosophy. The Committee is tasked with: (i) reviewing the annual and long-term performance goals for our NEOs; (ii) approving awards under incentive compensation and equity-based plans; and (iii) approving all other compensation and benefits for our NEOs. The Committee acts independently but works closely with the full Board and executive management in making many of its decisions. To assist it in discharging its responsibilities, the Committee has retained the services of an independent compensation consultant, as discussed further below.Role of Management
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Role of Management
Executive management provides input to the Committee, including with respect to the Committee'sCommittee’s evaluation of executive compensation practices. In particular, our chief executive officer,CEO, Mr. Jacobs,Harik, provides recommendations for proposed compensation actions with respect to our executive team, but not with respect to his own or Mr. Jacobs’ compensation. The Committee carefully and independently reviews the recommendations of management without members of management present and consults its independent advisorcompensation consultant before making final determinations. We believe this process ensures that our executive compensation program effectively aligns with XPO'sXPO’s compensation philosophy and stockholder interests.Role of the Committee's Independent Compensation Consultant
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Role of the Committee’s Independent Compensation ConsultantThe Committee directly retained Semler BrossyExequity as its independent advisor until September 2020, at which time the Committee decided to retain Exequity.throughout 2022. Among other things, the Committee'sCommittee’s independent advisor consults on compensation and governance matters, monitors trends and evolving market practices in executive compensation and provides general advice and support to the Committee and Committee'sthe Committee’s chairman. Specifically,Exequity’s support for 2020, Semler Brossy supported the Committee byin 2022 included reviewing long-term incentive awardsLTI award grant proposals and LTI modifications for NEOs, and Exequity supported the Committee by providing guidance regardingon various approaches and actions related to the RXO spin-off, assisting in guiding the design of the annual STI awardsprogram and by reviewing the content of this Compensation Discussion and Analysis. Neither Semler Brossy norCD&A. Exequity did not provide any other services to the company. The Committee considered the independence of both Semler Brossy and Exequity in light of applicable SEC rules and NYSE listing standards. After taking into account the absence of any relationships with management and members of the Committee, as well as Semler Brossy and Exequity'sExequity’s internal policies and other information provided to the Committee, the Committee determined that no conflicts of interest existed that would prevent either firmExequity from serving as an independent compensation consultant to the Committee.
OTHER COMPENSATION-RELATED ITEMS
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OTHER COMPENSATION-RELATED ITEMS All equity awards to NEOs are approved by the Committee with a grant date determined at the time of approval. The Committee does not target a specific time during the year to make equity grants, but grant dates are always on
or after the date of Committee approval.
Our NEOs are provided with the same benefits as are generally offered to other eligible employees, including participation in the XPO, Logistics, Inc. 401(k) Plan and insurance benefit programs. Our NEOs receive minimal perquisites, as shown in the "All“All Other Compensation"Compensation” table following this Compensation Discussion and Analysis.We believe that it is in the best interests of our company to enterhave entered into multi-year employment agreements with certain of our NEOs as the agreementsto promote long-term retention, while allowing the Committee to exercise discretion in designing incentive compensation programs. The material compensation-related terms of these agreements are described under the heading "EmploymentEmployment Agreements with NEOs"NEOs and the tables that follow this Compensation Discussion and Analysis.Severance Arrangements with Mr. Rogers and Ms. Glickman
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Following the terminationSeparation from Employment of Mr. RogersTulsyan
Following Mr. Tulsyan’s separation from the company on March 11, 2020,January 6, 2023, and as a result of his termination without cause, Mr. Rogers received a cash severance payment of $164,038. As a result of Mr. Rogers' subsequent re-employment at
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Stericycle Inc. in April 2020, in accordance withpursuant to the terms of his employmentseparation agreement, he did not receive continued medicalseverance agreement, and dental coverage.
Following Ms. Glickman's terminationtransition agreement, Mr. Tulsyan received the following payments and benefits from the company on April 13, 2020,in exchange for agreeing to a general release of claims in favor of the company and as a result of her termination without cause, Ms. Glickman received:other promises by Mr. Tulsyan in the separation agreement, including: (i) a cash severance payments equal to twelve months of Mr. Tulsyan’s base salary as in effect on the Separation Date, totaling a gross amount of $500,000; (ii) an additional payment of $300,769$8,200, equal to the estimated prorated target bonus for the 2023 performance year (January 1 through January 6); (iii) a lump sum equivalent to any unused carryover paid time off for 2022; (iv) a payment equivalent to what Mr. Tulsyan would have received as the funded bonus amount for the company’s 2022 annual incentive plan year if Mr. Tulsyan had remained employed through the payout date; (v) nine (9) months of outplacement services, and (ii)(vi) payment of Mr. Tulsyan’s COBRA premiums for medical and dental coverage for up to six months.
(6) months from the Separation Date. Pursuant to the transition agreement, Mr. Tulsyan will receive a lump sum transition payment of $480,000, less applicable taxes and withholdings, to be paid on July 7, 2023. Mr. Tulsyan’s severance benefits are detailed in the “Potential Payments Upon Termination or Change of Control” table following this CD&A. Section 162(m) of the Internal Revenue Code of 1986 as amended (the "Code"“Code”) disallows a federal income tax deduction to public companies for compensation greater than $1 million paid in any tax year to covered executive officers. Under prior law, there was an exception to the $1 million deduction limitation for compensation that met the requirements of "qualified performance-based compensation." However, for tax years after 2017, this exception has been eliminated, subject to limited transition relief for certain grandfathered arrangements. As a general matter, while tax deductibility is one of several relevant factors considered by the Committee in determining compensation, we believe that the tax deduction limitation imposed by Section 162(m) should not compromise the company'scompany’s access to compensation arrangements that will attract and retain a high level of executive talent. Accordingly, the Committee and
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our Board will take into consideration a multitude of factors in making executive compensation decisions and may approve executive compensation that is not tax deductible.Risk Assessment of Incentive Compensation Programs
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Risk Assessment of Incentive Compensation ProgramsThe Committee has concluded that the company's compensation plans and programs are not reasonably likely to have a material adverse effect on the company.For the 2019 plan year,company, in partnership with a third-party compensation advisory group, the companylast performed an assessment for the Committee in 2022, in order to determine whether there were material risks that could arise from our compensation plans and programs. This assessment included a review of material elements of non-executive and executive compensation plans.
Forplans that were in place as of March 2022. Any material changes enacted in the 2020course of the RXO spin-off in 2022 and the first quarter of 2023 will be reviewed in this 2023 plan year. The Committee has concluded that for the 2022 plan year, non-executivethe company’s compensation plans and programs didare not materially deviate from those in place during 2019. For executive compensation plans and programs,reasonably likely to have a material adverse effect on the Committee considered the fact that executive officer long-term incentives, which were reviewed by the Committee's independent advisor, as well as a third-party compensation advisory group, continued to use metrics that undergo a rigorous goal-setting process, were linked to strategic goals and have longer-term performance periods.
COMPENSATION COMMITTEE REPORT
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COMPENSATION COMMITTEE REPORTThe following statement made by the Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any filing under the Securities Act of 1933, as amended
(the “Securities Act”) or the Exchange Act, except to the extent that we specifically incorporate such statement by reference.
The Committee reviewed the Compensation Discussion and Analysis with management as required by Item 402(b) of Regulation S-K, as set forth above. Based on this review and the resulting discussions with management, the Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the company's Annual Reportcompany’s 2022 on Form 10-K for the fiscal year ended December 31, 2020.
10-K. COMPENSATION COMMITTEE:
Johnny C. Taylor, Jr., chair
Allison Landry, member
Irene Moshouris, member (since November 1, 2022)
COMPENSATION COMMITTEE:
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Jason D. Papastavrou, chairman (since April 17, 2020)
Marlene M. Colucci, member
Michael G. Jesselson, member
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Table of Contents
Summary Compensation Table
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Summary Compensation TableThe following table below sets forth information concerning the total compensation awarded to, earned by, or paid to our NEOs for the year ended December 31, 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | | | | Year | | | | | Salary ($) | | | | | Bonus(1) ($) | | | | | Stock
Awards(2) ($) | | | | | Non-Equity
Incentive Plan
Compensation(3) ($) | | | | | All Other
Compensation(4) ($) | | | | | Total ($)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Brad Jacobs(5) | | | | | 2020 | | | | | $1,000,000 | | | | | $3,300,000 | | | | | — | | | | | $17,500,000 | | | | | $12,660 | | | | | $21,812,660 | | Chairman and Chief | | | | | 2019 | | | | | $838,462 | | | | | — | | | | | $7,007,415(6) | | | | | — | | | | | $12,460 | | | | | $7,858,337 | | Executive Officer | | | | | 2018 | | | | | $625,000 | | | | | — | | | | | $12,690,463(7) | | | | | — | | | | | $12,008 | | | | | $13,327,471 | | Troy Cooper | | | | | 2020 | | | | | $650,000 | | | | | $2,145,000 | | | | | — | | | | | $5,862,500 | | | | | $12,660 | | | | | $8,670,160 | | President | | | | | 2019 | | | | | $601,539 | | | | | — | | | | | $3,751,031(6) | | | | | — | | | | | $12,460 | | | | | $4,365,030 | | | | | | | 2018 | | | | | $537,500 | | | | | — | | | | | $2,460,008(7) | | | | | — | | | | | $12,008 | | | | | $3,009,516 | | Mario Harik | | | | | 2020 | | | | | $500,000 | | | | | $1,031,250 | | | | | — | | | | | $3,937,500 | | | | | $12,660 | | | | | $5,481,410 | | Chief Information Officer | | | | | 2019 | | | | | $467,692 | | | | | — | | | | | $1,648,799(6) | | | | | — | | | | | $12,271 | | | | | $2,128,762 | | | | | | | 2018 | | | | | $425,000 | | | | | $276,300 | | | | | $1,230,004(7) | | | | | — | | | | | $11,857 | | | | | $1,943,161 | | David Wyshner | | | | | 2020 | | | | | $525,096 | | | | | $1,225,000 | | | | | $3,032,212(8) | | | | | — | | | | | $1,050 | | | | | $4,783,358 | | Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sarah Glickman(9) | | | | | 2020 | | | | | $124,231 | | | | | — | | | | | $3,389 | | | | | — | | | | | $324,568 | | | | | $452,188 | | Former Acting Chief | | | | | 2019 | | | | | $425,000 | | | | | — | | | | | $537,660(6) | | | | | — | | | | | $17,274 | | | | | $979,934 | | Financial Officer | | | | | 2018 | | | | | $246,827 | | | | | $207,200 | | | | | $3,528,923 | | | | | — | | | | | $79,369 | | | | | $4,062,319 | | Kurt Rogers(10) | | | | | 2020 | | | | | $59,231 | | | | | — | | | | | $3,549,732(8) | | | | | — | | | | | $195,358 | | | | | $3,804,321 | | Former Chief Legal Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)- 2022. We compensate our NEOs pursuant to the terms of their respective employment agreements. The
amounts reflectedinformation reported in the table below reflects the terms of such agreements. For more information about our NEOs’ employment agreements, see the discussion in this Proxy Statement under the heading Employment Agreements with NEOs.
Note: The Stock Awards column in the table below includes the impact of modifications to previously-granted outstanding stock awards in connection with the RXO spin-off. As a result, it does not clearly represent the compensation paid to our NEOs for fiscal year 2022. For a clearer representation of the compensation paid to our NEOs for fiscal year 2022, see the table titled “Supplemental Summary Compensation Table” below. | | Name and Principal Position | | | | Year | | | | Salary ($) | | | | Bonus(1) ($) | | | | Stock
Awards(2)(3) ($) | | | | Non-Equity
Incentive Plan
Compensation(4) ($) | | | | All Other
Compensation(5) ($) | | | | Total ($) | | | | Brad Jacobs(6)
Executive Chairman | | | | | | 2022 | | | | | | $ | 929,561 | | | | | | | — | | | | | | $ | 34,600,992(7) | | | | | | $ | 11,446,524 | | | | | | $ | 13,880 | | | | | | $ | 46,990,957 | | | | | | | 2021 | | | | | | $ | 1,000,000 | | | | | | | — | | | | | | | — | | | | | | $ | 20,625,000 | | | | | | $ | 418,280 | | | | | | $ | 22,043,280 | | | | | | | 2020 | | | | | | $ | 1,000,000 | | | | | | $ | 3,300,000 | | | | | | | — | | | | | | $ | 17,500,000 | | | | | | $ | 12,660 | | | | | | $ | 21,812,660 | | | | | Mario Harik(8)
Chief Executive Officer | | | | | | 2022 | | | | | | $ | 557,857 | | | | | | | — | | | | | | $ | 7,381,069(7) | | | | | | $ | 1,075,334 | | | | | | $ | 13,463 | | | | | | $ | 9,027,723 | | | | | | | 2021 | | | | | | $ | 500,000 | | | | | | $ | 100,000 | | | | | | | — | | | | | | $ | 4,914,063 | | | | | | $ | 12,863 | | | | | | $ | 5,526,925 | | | | | | | 2020 | | | | | | $ | 500,000 | | | | | | $ | 1,031,250 | | | | | | | — | | | | | | $ | 3,937,500 | | | | | | $ | 12,660 | | | | | | $ | 5,481,410 | | | | | Carl Anderson(9)
Chief Financial Officer | | | | | | 2022 | | | | | | $ | 93,750 | | | | | | | — | | | | | | $ | 1,091,845(10) | | | | | | $ | 129,452 | | | | | | $ | 263 | | | | | | $ | 1,315,310 | | | | | Ravi Tulsyan(11)
Former Chief Financial
Officer | | | | | | 2022 | | | | | | $ | 498,626 | | | | | | | — | | | | | | | — | | | | | | $ | 93,550 | | | | | | $ | 13,463 | | | | | | $ | 605,639 | | | | | | | 2021 | | | | | | $ | 431,539 | | | | | | $ | 100,000 | | | | | | $ | 2,084,951 | | | | | | $ | 874,800 | | | | | | $ | 12,545 | | | | | | $ | 3,503,834 | | |
Supplemental Summary Compensation Table The following table provides a clearer representation of the compensation paid to our NEOs for fiscal year 2022. It excludes the modifications of previously-granted stock awards in connection with the RXO spin-off, as described in footnote 7 below. This Supplemental Summary Compensation Table view is for informational purposes only and is not presented in accordance with SEC requirements. | | Name and Principal Position | | | | Year | | | | Salary ($) | | | | Bonus(1) ($) | | | | Stock
Awards(2)(3) ($) | | | | Non-Equity
Incentive Plan
Compensation(4) ($) | | | | All Other
Compensation(5) ($) | | | | Total ($) | | | | Brad Jacobs(6)
Executive Chairman | | | | | | 2022 | | | | | | $ | 929,561 | | | | | | | — | | | | | | | —(7) | | | | | | $ | 11,446,524 | | | | | | $ | 13,880 | | | | | | $ | 12,389,965 | | | | | | | 2021 | | | | | | $ | 1,000,000 | | | | | | | — | | | | | | | — | | | | | | $ | 20,625,000 | | | | | | $ | 418,280 | | | | | | $ | 22,043,280 | | | | | | | 2020 | | | | | | $ | 1,000,000 | | | | | | $ | 3,300,000 | | | | | | | — | | | | | | $ | 17,500,000 | | | | | | $ | 12,660 | | | | | | $ | 21,812,660 | | | | | Mario Harik(8)
Chief Executive Officer | | | | | | 2022 | | | | | | $ | 557,857 | | | | | | | — | | | | | | | —(7) | | | | | | $ | 1,075,334 | | | | | | $ | 13,463 | | | | | | $ | 1,646,654 | | | | | | | 2021 | | | | | | $ | 500,000 | | | | | | $ | 100,000 | | | | | | | — | | | | | | $ | 4,914,063 | | | | | | $ | 12,863 | | | | | | $ | 5,526,925 | | | | | | | 2020 | | | | | | $ | 500,000 | | | | | | $ | 1,031,250 | | | | | | | — | | | | | | $ | 3,937,500 | | | | | | $ | 12,660 | | | | | | $ | 5,481,410 | | | | | Carl Anderson(9)
Chief Financial Officer | | | | | | 2022 | | | | | | $ | 93,750 | | | | | | | — | | | | | | $ | 1,091,845(10) | | | | | | $ | 129,452 | | | | | | $ | 263 | | | | | | $ | 1,315,310 | | | | | Ravi Tulsyan(11)
Former Chief Financia Officer | | | | | | 2022 | | | | | | $ | 498,626 | | | | | | | — | | | | | | | — | | | | | | $ | 93,550 | | | | | | $ | 13,463 | | | | | | $ | 605,639 | | | | | | | 2021 | | | | | | $ | 431,539 | | | | | | $ | 100,000 | | | | | | $ | 2,084,951 | | | | | | $ | 874,800 | | | | | | $ | 12,545 | | | | | | $ | 3,503,834 | | |
(1)
Annual cash bonus awards for 2022 are included in the column “Non-Equity Incentive Plan Compensation” and reflect formulaic annual cash bonus awards earned in respect of 2022 for Mr. Jacobs, Mr. Harik and Mr. Anderson. Mr. Harik and Mr. Tulsyan received an additional $100,000 cash bonus in 2021 in consideration of their work related to the GXO spin-off. Annual cash bonus awards for 2020 representreflect discretionary annual cash bonus awards earned in respect of 2020 for Mr. Jacobs Mr. Cooper, Mr. Harik and Mr. Wyshner. No cash bonusHarik. (2)
In order to preserve the value of the awards held by employees continuing with XPO following each of the GXO and RXO spin-offs, as applicable, including our NEOs, the number of outstanding shares underlying outstanding awards were earnedadjusted using the ratios and methodologies outlined in respecteach Employee Matters Agreement, as applicable. The GXO ratio was based on the closing price per share of 2019.XPO common stock on July 30, 2021 compared to the closing price per share of XPO common stock on August 2, 2021. The amounts reflectedRXO ratio was based on either (i) the closing price per share of XPO common stock on October 31, 2022 compared to the closing price per share of XPO common stock on November 1, 2022 or (ii) a distribution ratio of one share of RXO common stock for every share of XPO common stock. The modification of these awards in this column for 2018 represent an annual cash bonus award earnedconnection with either spin-off did not result in respect of 2018 for Mr. Harik and Ms. Glickman.
(2)incremental compensation cost. (3)
The amounts reflected in this column represent the aggregate grant date fair value of the awards made during each respective year, as computed in accordance with FASB ASC Topic 718, and for Ms. Glickman, the 2020 amount includes incremental compensation earned in respect of RSUs that were accelerated in connection with her termination of employment with the company. For information related to Ms. Glickman's incremental compensation see footnote 9 of this table.718. For additional information related to the measurement of stock-based compensation awards, see Note 15 to the financial statements included in our Annual Report on2022 Form 10-K10-K. | | | | | 57 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
(4)
The amounts reflected in this column for the year ended December 31, 2020.
(3)2022 include formulaic annual cash bonus awards earned in respect of 2022 of $2,612,822, $1,075,334 and $129,452 for Mr. Jacobs, Mr. Harik and Mr. Anderson, respectively. The amounts reflected in this column for 2022, 2021 and 2020 also include a cash LTI award granted in 2020 and earned in respect of 2022 for Mr. Jacobs, and both 2021 and 2020 for Mr. Jacobs and Mr. Harik. On July 31, 2020, the Committee awarded Mr. Jacobs Mr. Cooper and Mr. Harik 2020 six-year cash LTI awards that requiresubject to achievement of (i) an absolute adjusted cash flow per share goal, (ii) a relative growth in adjusted cash flow per share goal and (iii) a scorecard related to ESG goals. The award is composed ofearned in cash in four tranches, and, subject to performance and continuing service, such tranches may be earnedinstallments on the first anniversary of grant (July 31, 2021) and each of January 15, 2022, 2024 and 2026, respectively.2026. The goals underlying the 2020 LTI award are subject to both performance-based and service-based conditions. The target award can be earned based on attainment of the absolute adjusted cash flow per share goals of $3.04, $6.03, $6.93$4.51, $5.35 and $7.63$5.95 for each of the second half of 2020 and full year 2021, 2022 and 2023, respectively (50% of award); the relative growth in adjusted cash flow per share goal at the 55th percentile (25% of award); or achievement against goals related to ESG as outlined in a comprehensive scorecard (25% of award). The award is earned based on a sliding scale with a minimum payout of 0% and a maximum payout of 200%.
(4) As discussed in more detail in Modification of the Outstanding 2020 Performance-Based Cash LTI Grant, on February 9, 2023, in connection with the RXO spin-off, the Committee approved the cancellation and replacement of 100% of the target amount of the 2023 tranche of the 2020 LTI award for Mr. Jacobs and Mr. Harik with PSUs (“PSU Replacement Awards”). Each PSU Replacement Award had a target grant date value equal to the canceled portion of Messrs. Jacobs’ and Harik’s LTI award. The PSU Replacement Awards are subject to a replacement of the absolute adjusted cash flow per share and relative growth in adjusted cash flow per share performance goals from the LTI awards’ final tranche with a relative TSR performance goal, weighted at 75%, and a continuation of the ESG scorecard goal, weighted at 25% and adjusted in connection with the RXO spin-off. The number of PSUs granted pursuant to the PSU Replacement Award for each of Mr. Jacobs and Mr. Harik was determined based on the grant value of the LTI awards final tranche for each of Messrs. Jacobs and Harik and the closing price of a share of the company’s common stock on February 9, 2023. The PSU Replacement Awards have an additional time-based vesting condition that generally requires continued service through February 9, 2025, or an earlier qualifying termination of service, and are subject to a restriction on the sale or transfer of shares until January 15, 2026 (which generally aligns with the vesting period for the corresponding canceled portion of the LTI awards). Also Mr. Tulsyan received $93,550 in connection with a Cash LTI award granted on January 15, 2020. (5)
The components of "All“All Other Compensation"Compensation” for 20202022 are detailed in the "All“All Other Compensation"Compensation” table.
(5) (6)
Effective as of November 1, 2022, Mr. Jacobs, chairman and CEO, assumed the role of executive chairman. Mr. Jacobs’ 2022 amounts reflect all of his compensation for the full fiscal year. Mr. Jacobs did not receive any additional compensation for his service as a director.
(6)In June (7)
On November 1, in connection with the completion of the RXO spin-off, the outstanding PSUs granted in 2018 and 2019 the Committee awardedto both Mr. Jacobs Mr. Cooper,and Mr. Harik were modified by converting the 2018 PSU award and Ms. Glickman PRSUs that require achievement of both a high-growth performance and TSR goal, and cannot be earned until after the six-year performance period ending December 31, 2024.2019 PSU awards held by each into time-based vesting RSU awards (“2022 Converted RSUs”). The goals underlying these PRSUs include:2022 Converted RSUs (i) $9.08 adjusted earnings per share (CAGR of 19%) byvest on December 31, 2024 generally subject to continued employment by the executive (or, in the case of Mr. Jacobs, willingness to serve on the company’s board of directors) through the vesting date and (ii) exceed the S&P Transportation Select Industry Index TSR by at least 34% (CAGRafter-tax shares received upon the settlement of 500 basis points) bythe 2022 Converted RSUs are subject to a lock up which prohibits transfers of such shares through December 31, 2024. Both goals must be attained for the award to be earned; there is no threshold level of payment for below-target performance and no upside leverage for exceeding the targets. The amount for Ms. Glickman also includes an equity award of 1,900 time-based RSUs with2025. With respect to the previously awarded PSUs in 2018 granted on April 18, 2019.
(7)In August 2018, the Committee awardedand 2019 for Mr. Jacobs Mr. Cooper and Mr. Harik, PRSUs that require achievement of both a high-growth performance and stock price goal, and cannot be earned until after the four-year performance period ending December 31, 2022. The goals underlying these PRSUs include: (i) achievement of an average stock price of $225 over a 20-trading day period by December 31, 2022, and (ii) Adjusted Cash Flow Per Share (as defined in the relevant award agreements) of $14.00 by December 31, 2022. Both goals must be attained for the award to be earned; there is no threshold level of payment for below-target performance and no upside leverage for exceeding the targets.
(8)The amounts for Mr. Wyshner and Mr. Rogers reflect RSU and PRSU awards granted upon hire on March 2, 2020 and February 3, 2020, respectively. The Committee awarded Mr. Wyshner and Mr. Rogers PRSUs that require achievement of both a high-growth performance and TSR goal, and cannot be earned until after the six-year performance period ending December 31, 2024. The goals underlying these PRSUs include: (i) $9.08 adjusted earnings per share (CAGR of 19%) by December 31, 2024, and (ii) exceed the S&P Transportation Select Industry Index TSR by at least 34% (CAGR of 500 basis points) by December 31, 2024. Both goals must be attained for the award to be earned; there is no threshold level of payment for below-target performance and no upside leverage for exceeding the targets.
(9)Effective April 13, 2020, Ms. Glickman terminated employment with the company without cause. Between March 2, 2020 and her termination, Ms. Glickman served as SVP, Corporate Finance and Transformation. As a result of her termination without cause, 1,430 RSUs from the award granted on April 18, 2019 and 11,793 RSUs from the award granted on June 8, 2018 were accelerated and became fully vested. The April 2019 RSUs had (i) an intrinsic value of $97,812 on the acceleration date and (ii) a grant date fair value of $94,423 onreported the grant date (which amount is included in this table under 2019 and in the Summary Compensation Tables in the prior year proxy statement). As a result, the table above includes $3,389values of incremental compensation for Ms. Glickman in respect of the April 2019
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Table of Contents
RSUs. The June 2018 RSUs had (i) an intrinsic value of $806,641 on the acceleration date and (ii) a grant date fair value of $1,312,325 on the grant date (which amount is included in this table under 2018 and in the Summary Compensation Tables in prior year proxy statements). As a result, the table above does not include incremental compensation for Ms. Glickman in respect of the June 2018 RSUs.
(10)Effective March 11, 2020, Mr. Rogers terminated employment with the company without cause. As a result of his termination without cause, 4,968 RSUs from the award granted on February 3, 2020 were accelerated and became fully vested. The February 2020 RSUs had (i) an intrinsic value of $288,790 on the acceleration date and (ii) a grant date fair value of $448,064 on the grant date (which amount is included in this table under 2020). As a result, the table above does not include incremental compensation for Mr. Rogers in respect of the February 2020 RSUs.
We compensate our NEOs pursuant to the terms of their respective employment agreements and the information reportedthose awards in the Summary Compensation Table reflects(and Grants of Plan-Based Award Table) in the termsyear of such agreements. For moregrant as if the performance conditions associated with those awards were probable. The performance conditions were not probable and the amounts that should have been reflected were $0. In 2022, these awards were modified and converted to time-based RSUs. The fair value of the awards immediately prior to the 2022 modification were zero as the awards were not probable. The amount shown in this column represents the incremental fair value of the modified awards calculated in accordance with ASC 718 at the 2022 modification date over the sum of the amounts previously reported in respect of the awards in our 2018 and 2019 proxy statements ($12,690,463 and $7,007,415 for Mr. Jacobs, and $1,230,004 and $1,648,799 for Mr. Harik for 2018 and 2019, respectively). The values shown in this column (when taken together with the previously reported values) are equal to the full amount of compensation expense to be taken for these awards under FASB ASC Topic 718. The financial statements properly reflect the accounting for these awards in accordance with ASC 718 for all periods.
(8)
Effective as of November 1, 2022, Mr. Harik, chief information about our NEOs' employment agreements,officer, chief customer officer, and president, North American LTL, assumed the role of CEO and was appointed a director of the company. Mr. Harik’s 2022 amounts reflect all of his compensation for the full fiscal year. Mr. Harik did not receive any additional compensation for his service as a director. (9)
Effective as of November 8, 2022, Mr. Anderson assumed the role of CFO. Mr. Anderson’s 2022 amounts reflect all of his compensation for the full fiscal year. (10)
The amounts for Mr. Anderson reflect RSU and PSU awards granted upon his appointment to CFO on November 8, 2022. The Committee awarded Mr. Anderson PSUs subject to achievement based on TSR of the shares of the company over the performance period relative to the S&P Midcap 400 Index, with a multiplier based on the company’s TSR over the performance period compared to the aggregate weighted TSR of certain pre-selected transportation peers. The award is eligible to be earned in equity in one installment on November 8, 2026. The goals underlying these PSUs are subject to both performance-based and service-based conditions. The award is earned based on a sliding scale with a minimum payout of 0% and a maximum payout of 200%. (11)
On November 8, 2022, Mr. Tulsyan transitioned from the company’s CFO to senior advisor, finance. Also, on January 23, 2023, the company entered into a separation agreement and general release with Mr. Tulsyan in connection with his termination as senior advisor, effective January 6, 2023. Please see the discussionPotential Payments Upon Termination or Change in this proxy statement under the heading "Employment AgreementsControl table below for severance payments paid to Mr. Tulsyan in connection with NEOs."All Other Compensation Table
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All Other Compensation Table The following table sets forth the amounts included in the "All“All Other Compensation"Compensation” column in the "Summary Compensation" tableSummary Compensation Table for our NEOs in 2020.2022. | | Name | | | | Matching
Contributions
to
401(k) Plan(1) ($) | | | | Company-
Paid Life
Insurance
Premiums(2) ($) | | | | Total ($) | | | | Brad Jacobs | | | | | $ | 12,200 | | | | | | $ | 1,680 | | | | | | $ | 13,880 | | | | | Mario Harik | | | | | $ | 12,200 | | | | | | $ | 1,263 | | | | | | $ | 13,463 | | | | | Carl Anderson(3) | | | | | | — | | | | | | | — | | | | | | | — | | | | | Ravi Tulsyan | | | | | $ | 12,200 | | | | | | $ | 1,263 | | | | | | $ | 13,463 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | | | | Matching
Contributions
to
401(k) Plan(1)
($) | | | | | Company-
Paid Life
Insurance
Premiums(2)
($) | | | | | Perquisites
and Other
Personal
Benefits
($) | | | | | Payout
of Paid
Time Off(3)
($) | | | | | Severance(4)
($) | | | | | Relocation(5)
($) | | | | | Relocation
Gross-up(6)
($) | | | | | Continuation
of Medical /
Dental
Benefits(7)
($) | | | | | Total
($)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Brad Jacobs | | | | | $11,400 | | | | | $1,260 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | $12,660 | | Troy Cooper | | | | | $11,400 | | | | | $1,260 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | $12,660 | | Mario Harik | | | | | $11,400 | | | | | $1,260 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | $12,660 | | David Wyshner | | | | | — | | | | | $1,050 | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | $1,050 | | Sarah Glickman | | | | | $5,907 | | | | | $358 | | | | | — | | | | | $7,100 | | | | | $300,769 | | | | | — | | | | | — | | | | | $10,434 | | | | | $324,568 | | Kurt Rogers | | | | | — | | | | | $210 | | | | | — | | | | | — | | | | | $164,038 | | | | | $23,317 | | | | | $7,793 | | | | | — | | | | | $195,358 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)- Amounts in this column represent matching contributions made by XPO to the
company'scompany’s 401(k) plan. Only amounts contributed directly by our NEOs are eligible for matching contributions, and our NEOs are eligible for matching contributions on the same basis as all other eligible employees of our company.
(2)
Amounts in this column include the company-paid premiums for basic life insurance.
(3)Amounts
Effective as of November 8, 2022, Mr. Anderson assumed the role of CFO. Perquisites and personal benefits did not equal or exceed $10,000 for Mr. Anderson in this column reflect a payout of paid time off provided to Ms. Glickman in connection with her termination of employment with the company.
(4)Amounts in this column reflect a payout of severance provided to each of Ms. Glickman and Mr. Rogers in connection with their termination of employment with the company.
(5)Amounts in this column reflect relocation benefits provided by the company to Mr. Rogers in connection with his commencement of employment in 2020.
(6)Amounts in this column reflect the tax gross-up provided to Mr. Rogers in respect of the relocation benefits provided by the company.
(7)Amounts in this column reflect the continuation of medical and dental benefits provided by the company to Ms. Glickman in connection with her termination of employment with the company.2022.Grants of Plan-Based Awards
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Grants of Plan-Based Awards The following table sets forth additional details regarding grants of equity and non-equity plan-based awards. | | | | | | | | | | | | | | Estimated Future Payouts
Under Equity Incentive Plan Awards(1) | | | | All Other Stock Awards:
Number of Shares of
Stock or
Units (#)(1) | | | | Grant Date
Fair Value
of Stock
Awards ($)(3) | | | | Name | | | | Grant
Date | | | | Grant
Type | | | | Threshold (#) | | | | Target (#)(2) | | | | Maximum (#) | | | | | Brad Jacobs | | | | 3/7/2022 | | | | PSU | | | | | | — | | | | | | | 82,932 | | | | | | | 165,864 | | | | | | | — | | | | | | | — | | | | | 11/1/2022 | | | | RSU | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 1,174,495 | | | | | | $ | 34,600,992 | | | | | Mario Harik | | | | 3/7/2022 | | | | PSU | | | | | | — | | | | | | | 37,320 | | | | | | | 74,640 | | | | | | | — | | | | | | | — | | | | | 3/7/2022 | | | | PSU | | | | | | — | | | | | | | 53,906 | | | | | | | 107,812 | | | | | | | — | | | | | | | — | | | | | 8/5/2022 | | | | PSU | | | | | | — | | | | | | | 172,871 | | | | | | | 345,742 | | | | | | | — | | | | | | | — | | | | | 11/1/2022 | | | | RSU | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 221,923 | | | | | | $ | 7,381,069 | | | | | Carl Anderson(4) | | | | 11/8/2022 | | | | RSU | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 14,112 | | | | | | $ | 499,988 | | | | | 11/8/2022 | | | | PSU | | | | | | — | | | | | | | 14,112 | | | | | | | 28,224 | | | | | | | — | | | | | | $ | 591,857 | | | | | Ravi Tulsyan | | | | 3/7/2022 | | | | PSU | | | | | | — | | | | | | | 49,759 | | | | | | | 99,518 | | | | | | | — | | | | | | | — | | | | | 3/7/2022 | | | | PSU | | | | | | — | | | | | | | 82,932 | | | | | | | 82,932 | | | | | | | — | | | | | | | — | | |
(1)
In order to preserve the value of the awards held by employees continuing with XPO following each of the GXO and RXO spin-offs, as applicable, including our NEOs, the number of outstanding shares underlying outstanding awards were adjusted using the ratios and methodologies outlined in each Employee Matters Agreement, as applicable. The GXO ratio was based on the closing price per share of XPO common stock on July 30, 2021 compared to the closing price per share of XPO common stock on August 2, 2021. The RXO ratio was based on either (i) the closing price per share of XPO common stock on October 31, 2022 compared to the closing price per share of XPO common stock on November 1, 2022 or (ii) a distribution ratio of one share of RXO common stock for every share of XPO common stock. The modification of these awards in connection with either spin-off did not result in incremental compensation cost. (2)
PSUs are reflected at the target level, which is also the threshold level. There is no threshold level of payment for below target performance and the maximum level that may be paid is 200% of target. (3)
Amounts in this column reflect the grant date fair value of awards calculated in accordance with FASB ASC Topic 718, using the valuation methodology set forth in Note 15 to the financial statements included in our 2022 Form 10-K. Please see Note 7 to the Summary Compensation Table for additional details of the values reflected for Mr. Jacobs and Mr. Harik. (4)
The amount for Mr. Anderson reflects awards granted upon his appointment to CFO on November 8, 2022. Additional information relevant to the awards shown in the above table (including a discussion of the applicable performance criteria and the actual payouts under such awards) is included under the heading Outstanding Equity Awards at Fiscal Year-End. Outstanding Equity Awards at Fiscal Year-End The following table sets forth the outstanding equity awards held by our NEOs as of December 31, 2022. | | | | | | Stock Awards | | | | Name | | | | Number of
Shares or
Units of Stock
That Have
Not Vested (#)(1)(2) | | | | Market Value of
Shares or
Units of Stock
That Have Not
Vested ($)(3) | | | | Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or
Other Rights That
Have Not Vested (#)(1)(4) | | | | Equity Incentive
Plan Awards:
Market or Payout Value
of Unearned Shares,
Units or Other Rights That
Have Not Vested ($)(3) | | | | Brad Jacobs | | | | | | 1,174,495(5) | | | | | | $ | 39,098,939(5) | | | | | | | 82,932(6) | | | | | | $ | 2,760,806(6) | | | | | Mario Harik | | | | | | 221,923(7) | | | | | | $ | 7,387,817(7) | | | | | | | 264,097(8) | | | | | | $ | 8,791,789(8) | | | | | Carl Anderson | | | | | | 14,112(9) | | | | | | $ | 469,788(9) | | | | | | | 14,112(10) | | | | | | $ | 469,788(10) | | | | | Ravi Tulsyan | | | | | | 23,296(11) | | | | | | $ | 775,524(11) | | | | | | | 153,161(12) | | | | | | $ | 5,098,738(12) | | |
Note: Vesting of all outstanding equity awards is subject to continued employment by the NEO on the applicable vesting date, subject to certain exceptions in connection with a qualifying termination of employment. Please see the Potential Payments Upon Termination or Change in Control table below for more details. (1)
In order to preserve the value of the awards held by employees continuing with XPO following each of the GXO and RXO spin-offs, as applicable, including our NEOs, the number of outstanding shares underlying outstanding awards were adjusted using the ratios and methodologies outlined in each Employee Matters Agreement, as applicable. The GXO ratio was based on the closing price per share of XPO common stock on July 30, 2021 compared to the closing price per share of XPO common stock on August 2, 2021. The RXO ratio was based on either (i) the closing price per share of XPO common stock on October 31, 2022 compared to the closing price per share of XPO common stock on November 1, 2022 or (ii) a distribution ratio of one share of RXO common stock for every share of XPO common stock. The modification of these awards in connection with either spin-off did not result in incremental compensation cost. (2)
In accordance with the RXO spin-off distribution ratio, certain outstanding RSUs on November 1, 2022, received additional time-based RSUs covering shares of stock of RXO, Inc. The outstanding RXO RSUs are as follows: Mr. Jacobs received 1,174,495 RXO RSUs valued at $20,201,314; Mr. Harik received 221,923 RXO RSUs valued at $3,817,076; Mr. Tulsyan received 23,296 RXO RSUs valued at $400,691 calculated using $17.20, the closing price of RXO common stock on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. The value of these RXO RSUs are not reflected in the table above. (3)
The values reflected in this column were calculated using $33.29, the closing price of a company share on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. | | | | | 59 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts
Under Non-Equity Incentive Plan Awards(1) | | | | | Estimated Future
Payouts Under
Equity | | | | | All Other
Stock
Awards:
Number of | | | | | Grant Date
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | | | Grant
Date | | | | Grant
Type | | | | | Threshold ($) | | | | | Target ($) | | | | | Maximum ($) | | | | | Incentive
Plan Awards(2)
Target (#)(3) | | | | | Shares of
Stock or
Units (#) | | | | | Fair Value
of Stock
Awards ($)(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Brad Jacobs | | | | 7/31/2020 | | | | Cash LTI | | | | | — | | | | | $40,000,000 | | | | | $80,000,000 | | | | | — | | | | | — | | | | | — | | Troy Cooper | | | | 7/31/2020 | | | | Cash LTI | | | | | — | | | | | $13,400,000 | | | | | $26,800,000 | | | | | — | | | | | — | | | | | — | | Mario Harik | | | | 7/31/2020 | | | | Cash LTI | | | | | — | | | | | $9,000,000 | | | | | $18,000,000 | | | | | — | | | | | — | | | | | — | | David Wyshner | | | | 3/2/2020 | | | | PSU | | | | | — | | | | | — | | | | | — | | | | | 26,319 | | | | | — | | | | | $1,032,231 | | | | | | 3/2/2020 | | | | RSU | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 26,319 | | | | | $1,999,981 | | Sarah Glickman(5) | | | | 5/11/2020 | | | | RSU | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 1,430 | | | | | $3,389 | | Kurt Rogers(6) | | | | 2/3/2020 | | | | PSU | | | | | — | | | | | — | | | | | — | | | | | 27,719 | | | | | — | | | | | $1,549,769 | | | | | | 2/3/2020 | | | | RSU | | | | | — | | | | | — | | | | | — | | | | | — | | | | | 22,175 | | | | | $1,999,963 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(4)
(1)On July 31, 2020,In accordance with the Committee awardedRXO spin-off distribution ratio, certain outstanding PSUs on November 1, 2022, received additional PSUs covering shares of stock of RXO, Inc. The outstanding RXO PSUs are as follows: Mr. Jacobs Mr. Cooper andreceived 82,932 RXO PSUs valued at $1,426,430; Mr. Harik 2020 six-year cash LTI awards that requirereceived 91,226 RXO PSUs valued at $1,569,087; Mr. Tulsyan received 145,350 RXO PSUs valued at $2,500,020 calculated using $17.20, the closing price of RXO common stock on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. The value of these RXO PSUs are not reflected in the table above.
(5)
Consists of 1,174,495 RSUs which vest on December 31, 2024 and are restricted from sale until December 31, 2025. (6)
Consists of 82,932 PSUs which vest on December 31, 2023, subject to achievement of (i) an absolutethe 2022 Performance Criteria (defined below). PSUs are reflected at the target level, which is also the threshold level. There is no threshold level of payment for below target performance and the maximum level that may be paid is 200% of target. The target award can be earned based on attainment of the LTL adjusted cash flow per shareEBITDA goal (ii) a relative growth inof $1 billion for the fiscal year 2022 (50% of award) or attainment of the LTL adjusted cash flow per shareoperating ratio goal and (iii) a scorecard related to ESG goals.of 100 basis points of improvement for the fiscal year 2022 (50% of award) (collectively, the “2022 Performance Criteria”). The award is composedearned based on a sliding scale with a minimum payout of four 0% and a maximum payout of 200%. See the CD&A 2022 Performance-Based LTI Outcomes – LTL Performance Stock Units for a description of the 2022 Performance Criteria.
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(7)
TableConsists of Contents221,923 RSUs which vest on December 31, 2024 and are restricted from sale until December 31, 2025. (8)
Consists of 37,320 PSUs which are eligible to vest on December 31, 2023, 53,906 PSUs which are eligible to vest on March 7, 2025 and 172,871 PSUs which are eligible to vest on August 5, 2026, subject to the TSR Performance Goal (defined below) with a relative TSR Multiplier (defined below). The PSUs which vest on August 5, 2026 are restricted from sale until one-year after the settlement date except in death or change-in-control termination. PSUs are reflected at the target level, which is also the threshold level. There is no threshold level of payment for below target performance and continuing service, such tranchesthe maximum level that may be paid is 200%. The target award can be earned based on individual or aggregate attainment of the first anniversaryperformance goals as further detailed below. The award is earned based on a sliding scale with a minimum payout of grant (July0% and a maximum payout of 200% of target. a.
The PSUs noted as vesting on December 31, 2021)2023 and eachMarch 7, 2025, subject to achievement of January 15,the 2022 2024Performance Criteria. See footnote 6 above for additional terms of these PSUs. b.
The PSUs noted as vesting on August 5, 2026, subject to achievement of a relative TSR goal with a relative TSR multiplier, and 2026, respectively.cannot be earned until after the four-year performance period ending August 5, 2026. The goals underlying these PSUs are: (i) company TSR ranking at the 2020 LTI arecompletion of the Performance Period relative to each company in the S&P Midcap 400 Index TSR at the completion of the Performance Period (in the order of lowest to highest TSR) at a minimum of the 67th percentile (the “TSR Performance Goal”), and (ii) a multiplier of company TSR over the Performance Period exceeds the aggregate weighted TSR of certain pre-selected transportation peers over the Performance Period by a minimum of 200 basis points (the “TSR Multiplier”). (9)
Consists of 14,112 RSUs which vest on November 8, 2024. (10)
Consists of 14,112 PSUs which vest on November 8, 2026, subject to bothachievement of the TSR Performance Goal with a relative TSR Multiplier. PSUs are reflected at the target level, which is also the threshold level. There is no threshold level of payment for below target performance and the maximum level that may be paid is 200% of target. The target award can be earned based on individual or aggregate attainment of the performance goals as further detailed below. The award is earned based on a sliding scale with a minimum payout of 0% and a maximum payout of 200%. (11)
Consists of 1,867 RSUs which vest on January 15, 2023, 6,653 RSUs which vest on March 15, 2023; 6,864 RSUs which vest on December 8, 2023; 3,526 RSUs which vest ratably on March 10, 2023, 2024 and 2025; and 4,386 RSUs which vest on September 8, 2023. (12)
Consists of 20,470 PSUs which remain eligible to vest on December 31, 2024, and 132,691 PSUs which remain eligible to vest on March 7, 2025, subject to achievement of the performance criteria set forth below. Both goals must be attained for the award to be earned; there is no threshold level of payment for below-target performance and no upside leverage for exceeding the targets, generally reflecting the same features included in previously awarded performance-based equity grants. a.
2,244 PSUs noted as vesting on December 31, 2024 which were certified as achieved at 175% performance, respective of the 2021 performance period. b.
18,226 PSUs noted as vesting on December 31, 2024, subject to achievement of certain performance criteria. PSUs are reflected at 175% estimated performance achievement. There is no threshold level of payment for below target performance and service-based conditions.the maximum level that may be paid is 200%. The target award can be earned based on attainment of the absolute adjusted cash flow per share goalsgoal of $3.04, $6.03, $6.93 and $7.63$5.95 for each of the second half of 2020 and full year 2021, 2022 and 2023 respectively (50% of award); the relative growth in adjusted cash flow per share goal at the 55th percentile (25% of award); or achievement against goals related to ESG as outlined in a comprehensive scorecard (25% of award). The award is earned based on a sliding scale with a minimum payout of 0% and a maximum payout of 200%. (2)The amount for Mr. Wyshner reflects awards granted upon hire
c.
82,932 PSUs noted as vesting on March 2, 2020. The amount for Mr. Rogers reflects awards granted upon hire on February 3, 2020.
(3)PRSUs7, 2025, subject to achievement of the completion of the RXO spin-off, which was completed in November 2022. PSUs are reflected at the target level, which is also the threshold and maximum level. There is no threshold level of payment for below target performance and no upside leverage for exceeding the targets.
(4)Amounts in this column reflect the grant date fair value of awards calculated in accordance with FASB ASC Topic 718, using the valuation methodology set forth in Note 15 to the financial statements included in our Annual Report
d.
49,759 PSUs noted as vesting on Form 10-K for the year ended December 31, 2020, and for Ms. Glickman, the 2020 amount includes incremental compensation earned in respect of RSUs that were accelerated in connection with her termination of employment with the company. For information related to Ms. Glickman's incremental compensation see footnote 5 of this table.
(5)Effective April 13, 2020, Ms. Glickman terminated employment with the company without cause. Between March 2, 2020 and her termination, Ms. Glickman served as SVP, Corporate Finance and Transformation. As a result of her termination without cause, 1,430 RSUs from the award granted on April 18, 2019 and 11,793 RSUs from the award granted on June 8, 2018 were accelerated and became fully vested. The April 2019 RSUs had (i) an intrinsic value of $97,812 on the acceleration date and (ii) a grant date fair value of $94,423 on the grant date (which amount is included in this table under 2019 and in the Summary Compensation Tables in the prior year proxy statement). As a result, the table above includes $3,389 of incremental compensation for Ms. Glickman in respect of the April 2019 RSUs. The June 2018 RSUs had (i) an intrinsic value of $806,641 on the acceleration date and (ii) a grant date fair value of $1,312,325 on the grant date (which amount is included in this table under 2018 and in the Summary Compensation Tables in prior year proxy statements). As a result, the table above does not include incremental compensation for Ms. Glickman in respect of the June 2018 RSUs.
(6)Effective March 11, 2020, Mr. Rogers terminated employment with the company without cause. As a result of his termination without cause, 4,968 RSUs from the award granted on February 3, 2020 were accelerated and became fully vested. The February 2020 RSUs had (i) an intrinsic value of $288,790 on the acceleration date and (ii) a grant date fair value of $448,064 on the grant date (which amount is included in this table under 2020). As a result, the table above does not include incremental compensation for Mr. Rogers in respect of the February 2020 RSUs.Additional information relevant to the awards shown in the above table (including a discussion of the applicable performance criteria and the actual payouts under such awards) is included under the heading "Outstanding Equity Awards at Fiscal Year-End".
Outstanding Equity Awards at Fiscal Year-End
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The following table sets forth the outstanding equity awards held by our NEOs as of December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | Stock Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | Number of
Shares or
Units of Stock | | | | Market Value
of Shares or
Units of Stock | | | | | Equity Incentive
Plan Awards:
Number of Unearned
Shares Units or | | | | | Equity Incentive
Plan Awards:
Market or Payout Value
of Unearned Shares, | | Name
| | | | That Have
Not Vested (#) | | | | That Have Not
Vested ($) | | | | | Other Rights That
Have Not Vested (#) | | | | | Units or Other Rights
That Have Not Vested ($)(1)
| | | | | | | | | | | | | | | | | | | | | | Brad Jacobs
| | | | — | | | | — | | | | | 710,930(2) | | | | | $84,742,856(2) | | Troy Cooper
| | | | — | | | | — | | | | | 299,260(3) | | | | | $35,671,792(3) | | Mario Harik
| | | | — | | | | — | | | | | 134,332(4) | | | | | $16,012,374(4) | | David Wyshner
| | | | — | | | | — | | | | | 52,638(5) | | | | | $6,274,450(5) | | Sarah Glickman
| | | | — | | | | — | | | | | 19,262(6) | | | | | $2,296,030(6) | | Kurt Rogers
| | | | — | | | | — | | | | | 587(7) | | | | | $69,970(7) | | | | | | | | | | | | | | | | | | | | | |
Note: Vesting of all outstanding equity awards is subject to continued employment by the NEO on the applicable vesting date, subject to certain exceptions in connection with a qualifying termination of employment.
(1)The values reflected in this column were calculated using $119.20, the closing price of a company share on the NYSE on December 31, 2020, the last trading day of our fiscal year 2020.
(2)Consists of 238,095 PRSUs which vest on December 31, 2022, and 472,835 PRSUs which vest on December 31, 20247, 2025, subject to achievement of certain performance criteria. PRSUs are reflected at the target level, which is also the threshold2022 Performance Criteria. See footnote 6 above for additional terms of these PSUs.
Option Exercises and maximum level. Both goals must be attained for the award to be earned; there is no threshold level of payment for below-target performance and no upside leverage for exceeding the targets, generally reflecting the same features included in previously awarded performance-based equity grants.a.The PRSUs noted as vesting on December 31, 2022 require achievement of both a high-growth performance and stock price goal, and cannot be earned until after the four-year performance period ending December 31, 2022. The goals underlying these PRSUs include: (i) achievement of an average stock price of $225 over a 20-trading day period by December 31, 2022, and (ii) Adjusted Cash Flow Per Share (as defined in the relevant award agreements) of $14.00 by December 31, 2022.
b.The PRSUs noted as vesting on December 31, 2024 require achievement of both a high-growth performance and TSR goal, and cannot be earned until after the six-year performance period ending December 31, 2024. The goals underlying these PRSUs include: (i) $9.08 adjusted earnings per share (CAGR of 19%) by December 31, 2024, and (ii) exceed the S&P Transportation Select Industry Index TSR by at least 34% (CAGR of 500 basis points) by December 31, 2024. Both goals must be attained for the award to be earned.
Stock Vested
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Table of Contents
(3)Consists of 46,154 PRSUs which vest on December 31, 2022, and 253,106 PRSUs which vest on December 31, 2024 subject to achievement of certain performance criteria. PRSUs are reflected at the target level, which is also the threshold and maximum level. Both goals must be attained for the award to be earned; there is no threshold level of payment for below-target performance and no upside leverage for exceeding the targets, generally reflecting the same features included in previously awarded performance-based equity grants.
a.The PRSUs noted as vesting on December 31, 2022 require achievement of both a high-growth performance and stock price goal, and cannot be earned until after the four-year performance period ending December 31, 2022. The goals underlying these PRSUs include: (i) achievement of an average stock price of $225 over a 20-trading day period by December 31, 2022, and (ii) Adjusted Cash Flow Per Share (as defined in the relevant award agreements) of $14.00 by December 31, 2022.
b.The PRSUs noted as vesting on December 31, 2024 require achievement of both a high-growth performance and TSR goal, and cannot be earned until after the six-year performance period ending December 31, 2024. The goals underlying these PRSUs include: (i) $9.08 adjusted earnings per share (CAGR of 19%) by December 31, 2024, and (ii) exceed the S&P Transportation Select Industry Index TSR by at least 34% (CAGR of 500 basis points) by December 31, 2024. Both goals must be attained for the award to be earned.
(4)Consists of 23,077 PRSUs which vest on December 31, 2022, and 111,255 PRSUs which vest on December 31, 2024 subject to achievement of certain performance criteria. PRSUs are reflected at the target level, which is also the threshold and maximum level. Both goals must be attained for the award to be earned; there is no threshold level of payment for below-target performance and no upside leverage for exceeding the targets, generally reflecting the same features included in previously awarded performance-based equity grants.
a.The PRSUs noted as vesting on December 31, 2022 require achievement of both a high-growth performance and stock price goal, and cannot be earned until after the four-year performance period ending December 31, 2022. The goals underlying these PRSUs include: (i) achievement of an average stock price of $225 over a 20-trading day period by December 31, 2022, and (ii) Adjusted Cash Flow Per Share (as defined in the relevant award agreements) of $14.00 by December 31, 2022.
b.The PRSUs noted as vesting on December 31, 2024 require achievement of both a high-growth performance and TSR goal, and cannot be earned until after the six-year performance period ending December 31, 2024. The goals underlying these PRSUs include: (i) $9.08 adjusted earnings per share (CAGR of 19%) by December 31, 2024, and (ii) exceed the S&P Transportation Select Industry Index TSR by at least 34% (CAGR of 500 basis points) by December 31, 2024. Both goals must be attained for the award to be earned.
(5)Consists of 26,319 RSUs which vest ratably on March 2, 2021, 2022 and 2023. Consists of 26,319 PRSUs which vest on December 31, 2024 subject to achievement of certain performance criteria. PRSUs are reflected at the target level, which is also the threshold and maximum level. Both goals must be attained for the award to be earned; there is no threshold level of payment for below-target performance and no upside leverage for exceeding the targets, generally reflecting the same features included in previously awarded performance-based equity grants.
a.The PRSUs noted as vesting on December 31, 2024 require achievement of both a high-growth performance and TSR goal, and cannot be earned until after the six-year performance period ending December 31, 2024. The goals underlying these PRSUs include: (i) $9.08 adjusted earnings per share (CAGR of 19%) by December 31, 2024, and (ii) exceed the S&P Transportation Select Industry Index TSR by at least 34% (CAGR of 500 basis points) by December 31, 2024. Both goals must be attained for the award to be earned.
(6)Consists of 13,311 PRSUs which remain eligible to vest on August 9, 2021, and 5,951 PRSUs which remain eligible to vest on December 31, 2024 subject to achievement of certain performance criteria. PRSUs are reflected at the target level, which is also the threshold and maximum level. There is no threshold level of payment for below target performance and no upside leverage for exceeding the targets.
a.The PRSUs noted as vesting on August 9, 2021 require achievement of a closing stock price of $200 per share over a period of 20 consecutive trading days prior to August 2023.
b.The PRSUs noted as vesting on December 31, 2024 require achievement of both a high-growth performance and TSR goal, and cannot be earned until after the six-year performance period ending December 31, 2024. The goals underlying these PRSUs include: (i) $9.08 adjusted earnings per share (CAGR of 19%) by December 31, 2024, and (ii) exceed the S&P Transportation Select Industry Index TSR by at least 34% (CAGR of 500 basis points) by December 31, 2024. Both goals must be attained for the award to be earned.
(7)Consists of 587 PRSUs which remain eligible to vest on December 31, 2024 subject to achievement of certain performance criteria. PRSUs are reflected at the target level, which is also the threshold and maximum level. There is no threshold level of payment for below target performance and no upside leverage for exceeding the targets.
a.The PRSUs noted as vesting on December 31, 2024 require achievement of both a high-growth performance and TSR goal, and cannot be earned until after the six-year performance period ending December 31, 2024. The goals underlying these PRSUs include: (i) $9.08 adjusted earnings per share (CAGR of 19%) by December 31, 2024, and (ii) exceed the S&P Transportation Select Industry Index TSR by at least 34% (CAGR of 500 basis points) by December 31, 2024. Both goals must be attained for the award to be earned.
Option Exercises and Stock Vested
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The following table sets forth the options exercised and stock vested for our NEOs during 2020. 2022.| | | | | | Stock Awards(1) | | | | Name | | | | Number of Shares
Acquired on Vesting (#) | | | | Value Realized on
Vesting ($)(2) | | | | Brad Jacobs | | | | | | — | | | | | | | — | | | | | Mario Harik | | | | | | — | | | | | | | — | | | | | Carl Anderson | | | | | | — | | | | | | | — | | | | | Ravi Tulsyan | | | | | | 20,949 | | | | | | $ | 1,163,477 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | | | Stock Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | | | | Number of Shares
Acquired on Exercise (#) | | | | | Value Realized on
Exercise ($) | | | | | Number of Shares
Acquired on Vesting (#) | | | | | Value Realized on
Vesting ($)(1)
| | | | | | | | | | | | | | | | | | | | | | | | | Brad Jacobs | | | | | 250,000 | | | | | $26,985,000 | | | | | 218,150 | | | | | $21,263,081 | | Troy Cooper | | | | | 25,000 | | | | | $2,644,000 | | | | | 49,084 | | | | | $4,784,217 | | Mario Harik | | | | | 135,000 | | | | | $14,503,050 | | | | | 35,450 | | | | | $3,455,312 | | David Wyshner | | | | | — | | | | | — | | | | | — | | | | | — | | Sarah Glickman(2) | | | | | — | | | | | — | | | | | 16,108 | | | | | $1,072,158 | | Kurt Rogers(3) | | | | | — | | | | | — | | | | | 5,544 | | | | | $318,414 | | | | | | | | | | | | | | | | | | | | | | | | |
(2)
The values reflected in this column were calculated by multiplying the number of shares that vested in 20202022 by the closing price of one share of XPO common stock on the NYSE on each applicable vesting or settlement date. In the case of the cash-settled PRSUs, for each of Mr. Jacobs, Mr. Cooper and Mr. Harik, which settled on February 19, 2020, the closing price of one share of XPO common stock on the NYSE was $97.47.
(2)Effective April 13, 2020, Ms. Glickman terminated employment with the company without cause. As a result of her termination without cause, Ms. Glickman received 1,900 RSUs of the award granted on April 18, 2019 and 14,208 RSUs of the award granted on June 8, 2018.
(3)Effective March 11, 2020, Mr. Rogers terminated employment with the company without cause. As a result of his termination without cause, Mr. Rogers received 5,544 RSUs, reflecting a pro-rated portion of the award granted on February 3, 2020. |
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Table of Contents
Potential Payments Upon Termination or Change of Control
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Potential Payments Upon Termination or Change of Control The following table sets forth the amounts of compensation that would be due to Messrs. Jacobs, Cooper,Jacob and Harik and Wyshner pursuant to their respective employment agreements (or in the cases of Messrs. Anderson and Tulsyan, pursuant to their Change in Control and Severance Agreement), as applicable, upon the termination events as summarized below, as if each such event had occurred on December 31, 2020.2022. The amounts shown below are estimates of the payments that each NEO would receive in certain instances. The actual amounts payable will only be determined upon the actual occurrence of any such event. For Ms. Glickman and Mr. Rogers,Tulsyan, the following table sets forth the amountsamount of compensation that werewas due in connection with theirhis actual terminationsseparation of employment. | | | | | | Brad Jacobs | | | | Mario Harik | | | | Carl Anderson | | | | Ravi Tulsyan(1) | | | | Termination without Cause: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation(2)(3)(4)(5) | | | | | $ | 4,500,000 | | | | | | $ | 3,400,000 | | | | | | $ | 1,875,000 | | | | | | $ | 1,745,892(6) | | | | | Acceleration of equity-based awards(7)(8)(9) | | | | | $ | 41,859,745(14) | | | | | | $ | 8,420,006 | | | | | | $ | 52,066 | | | | | | $ | 4,914,722(10) | | | | | Outstanding performance-based equity awards(11) | | | | | | — | | | | | | | — | | | | | | | — | | | | | | $ | 92,926 | | | | | Acceleration of 2020 LTI(12) | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Continuation of medical / dental benefits(13) | | | | | $ | 16,632 | | | | | | $ | 23,220 | | | | | | $ | 9,684 | | | | | | $ | 9,684 | | | | | Total | | | | | $ | 55,210,079 | | | | | | $ | 11,843,226 | | | | | | $ | 1,936,750 | | | | | | $ | 6,763,225 | | | | | Voluntary Termination with Good Reason: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation(2)(5) | | | | | $ | 4,500,000 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Acceleration of equity-based awards(7)(8)(9) | | | | | $ | 41,859,745 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Acceleration of 2020 LTI(12) | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Continuation of medical / dental benefits(13) | | | | | $ | 16,632 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Total | | | | | $ | 55,210,079 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Termination for Cause or Voluntary Termination without Good Reason: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Acceleration of equity-based awards | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Acceleration of 2020 LTI | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Continuation of medical / dental benefits | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Total | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Disability: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation(2)(5) | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Acceleration of equity-based awards(8) | | | | | $ | 39,098,939 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Acceleration of 2020 LTI | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Continuation of medical / dental benefits | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Total | | | | | $ | 39,098,939 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Death: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Acceleration of equity-based awards(7)(8)(9) | | | | | $ | 41,859,745 | | | | | | $ | 16,179,606 | | | | | | $ | 939,577 | | | | | | | — | | | | | Acceleration of 2020 LTI(12) | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Continuation of medical / dental benefits | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Total | | | | | $ | 50,693,447 | | | | | | $ | 16,179,606 | | | | | | $ | 939,577 | | | | | | | — | | | | | Change of Control and No Termination: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Acceleration of equity-based awards | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Acceleration of 2020 LTI(12) | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Continuation of medical / dental benefits | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Total | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Change of Control and Termination without Cause or for Good Reason: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Continuation of cash compensation(2)(3)(4)(5) | | | | | $ | 5,400,000 | | | | | | $ | 9,324,500 | | | | | | $ | 3,125,000 | | | | | | | — | | | | | Acceleration of equity-based awards(7)(8)(9) | | | | | $ | 41,859,745 | | | | | | $ | 16,179,606 | | | | | | $ | 939,577 | | | | | | | — | | | | | Acceleration of 2020 LTI(12) | | | | | $ | 8,833,702 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | Continuation of medical / dental benefits(13) | | | | | $ | 33,264 | | | | | | $ | 46,440 | | | | | | $ | 38,736 | | | | | | | — | | | | | Total | | | | | $ | 56,126,711 | | | | | | $ | 25,550,546 | | | | | | $ | 4,103,313 | | | | | | | — | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Brad Jacobs | | | | | Troy Cooper | | | | | Mario Harik | | | | | David Wyshner | | | | | Sarah Glickman(1) | | | | | Kurt Rogers(2) | | Termination without Cause: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash severance(3)(4)(5) | | | | | $1,000,000 | | | | | $650,000 | | | | | $500,000 | | | | | $635,000 | | | | | $300,769 | | | | | $164,038 | | Acceleration of equity-based awards(6) | | | | | $32,996,110 | | | | | $12,814,000 | | | | | $5,798,842 | | | | | $2,235,954 | | | | | $1,075,547 | (7) | | | | $318,414 | | Outstanding performance-based equity awards(8) | | | | | — | | | | | — | | | | | — | | | | | — | | | | | $2,296,030 | | | | | $69,970 | | Acceleration of 2020 LTI(9) | | | | | $10,000,000 | | | | | $3,350,000 | | | | | $2,250,000 | | | | | — | | | | | — | | | | | — | | Continuation of medical / dental benefits(10) | | | | | $7,932 | | | | | $7,932 | | | | | $11,076 | | | | | $9,786 | | | | | $10,434 | | | | | — | | Total | | | | | $44,004,042 | | | | | $16,821,932 | | | | | $8,559,918 | | | | | $2,880,740 | | | | | $3,682,781 | | | | | $552,422 | | Voluntary Termination with Good Reason: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash severance(3)(5) | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Acceleration of equity-based award | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Acceleration of 2020 LTI | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Continuation of medical / dental benefits | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Total | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Termination for Cause or Voluntary Termination without Good Reason: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash severance(3)(5) | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Acceleration of equity-based awards | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Acceleration of 2020 LTI | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Continuation of medical / dental benefits | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Total | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Disability: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash severance(3)(5) | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Acceleration of equity-based award | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Acceleration of 2020 LTI | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Continuation of medical / dental benefits | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Total | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Death: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash severance(3) | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Acceleration of equity-based awards(6) | | | | | $84,742,856 | | | | | $35,671,792 | | | | | $16,012,374 | | | | | — | | | | | — | | | | | — | | Acceleration of 2020 LTI(9) | | | | | $40,000,000 | | | | | $13,400,000 | | | | | $9,000,000 | | | | | — | | | | | — | | | | | — | | Continuation of medical / dental benefits | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Total | | | | | $124,742,856 | | | | | $49,071,792 | | | | | $25,012,374 | | | | | — | | | | | — | | | | | — | | Change of Control and No Termination: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash severance(3) | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Acceleration of equity-based awards(6) | | | | | $84,742,856 | | | | | $35,671,792 | | | | | $16,012,374 | | | | | — | | | | | — | | | | | — | | Acceleration of 2020 LTI(9) | | | | | $40,000,000 | | | | | $13,400,000 | | | | | $9,000,000 | | | | | — | | | | | — | | | | | — | | Continuation of medical / dental benefits | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | | Total | | | | | $124,742,856 | | | | | $49,071,792 | | | | | $25,012,374 | | | | | — | | | | | — | | | | | — | | Change of Control and Termination without Cause or for Good Reason: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash severance(3) | | | | | $8,970,000 | | | | | $3,900,000 | | | | | $2,250,000 | | | | | $3,175,000 | | | | | — | | | | | — | | Acceleration of equity-based awards(6) | | | | | $84,742,856 | | | | | $35,671,792 | | | | | $16,012,374 | | | | | $6,274,450 | | | | | — | | | | | — | | Acceleration of 2020 LTI(9) | | | | | $40,000,000 | | | | | $13,400,000 | | | | | $9,000,000 | | | | | — | | | | | — | | | | | — | | Continuation of medical / dental benefits(10) | | | | | $31,728 | | | | | $31,728 | | | | | $44,304 | | | | | $39,144 | | | | | — | | | | | — | | Total | | | | | $133,744,584 | | | | | $53,003,520 | | | | | $27,306,678 | | | | | $9,488,594 | | | | | — | | | | | —'] | |
(1)Effective April 13, 2020, Ms. Glickman terminated employment withOn November 8, 2022, Mr. Tulsyan transitioned from the company’s CFO to senior advisor, finance. On January 23, 2023, the company without cause. The values reflected in this column are the actual payments madeentered into a separation agreement and general release with Mr. Tulsyan in connection with her separation. The value reflected for the acceleration of equity-based awards is calculated using $58.13, the closing price of a company share on the NYSE on April 15, 2020, and $68.40, the closing price of a company share on the NYSE on May 11, 2020, the respective dates of settlement.
(2)Effective March 11, 2020, Mr. Rogers terminated employment with the company without cause.his termination as senior advisor, finance, effective January 6, 2023. The values reflected in this column are the actual payments made in connection with his separation. Theseparation; the value reflected for the acceleration of equity-based awards is calculated using $51.43,$35.99, the closing price of a company share on the NYSE on March 31, 2020, and $58.13, the closing price of a company share on the NYSE on April 15, 2020, the respective dates of settlement.
(3)- January 6, 2023.
(2)
Amounts shown do not include any payments for accrued and unpaid salary, bonuses or vacation.
(4) (3)
In the event of a termination by our company without Cause,cause, continuation of cash severancecompensation payable to each of Mr. Jacobs,Harik, Mr. Cooper, Mr. HarikAnderson and Mr. Wyshner mayTulsyan will be reduced, dollar for dollar, by other income earned by such NEO in accordance with the terms of their employment agreement. The calculations of severancecontinuation of cash compensation pay for each of Mr. Harik and Mr. Anderson in the above table for Mr. Jacobs, Mr. Cooper, Mr. Harik and Mr. Wyshner use the NEO'sapplicable NEO’s base salary and target bonus amounts effective as of December 31, 2020.
(5)2022. (4)
In the event of a termination for any reason, our company has the right to extend the period during which each of our NEOsMr. Harik, Mr. Anderson and Mr. Tulsyan is bound by the non-competition covenant in their employment agreement for up to 12 additional months whichfor Mr. Harik and Mr. Tulsyan, and up to 18 additional months for Mr. Anderson. This would extend the non-compete period from three years to four years following termination for Mr. Jacobs, Mr. CooperHarik and Mr. HarikTulsyan, and from two years18 months to three years following termination for Mr. Wyshner, Ms. Glickman and Mr. Rogers.Anderson. During
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Table of Contents
the period the non-compete is extended, the NEO would be entitled to receive cash compensation equal toconsisting of a portion of his or her monthly base salary as in effect on the date employment is terminated, reduced dollar for dollar by any other income earned at the time by the NEO. Fully extending the non-compete provisionperiod would increase the amounts shown as "Cash Severance"continuation of cash compensation by up to $1,000,000$850,000 for Mr. Jacobs, $650,000Harik, $937,500 for Mr. Cooper,Anderson and $500,000 for Mr. Harik, $635,000 for Mr. Wyshner, $425,000 for Ms. Glickman and $550,000 for Mr. Rogers.
(6)- Tulsyan.
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(5)
The values reflected in this columnrow for Mr. Jacobs consist of non-compete payments in accordance with the terms of his employment agreement, including upon termination due to mutual agreement by our company and Mr. Jacobs. In the event of a termination for any reason, our company has the right to extend the period during which Mr. Jacobs is bound by the non-competition covenant in his employment agreement for up to 12 additional months. This would extend the non-compete period from three years to four years following termination. During the period the non-compete is extended, Mr. Jacobs would be entitled to receive cash compensation consisting of a portion of his monthly base salary and 1/12th of his target bonus as in effect on the date employment is terminated, reduced dollar for dollar by any other income earned at the time by Mr. Jacobs. Fully extending the non-compete period would increase the amount shown as continuation of cash compensation by up to $1,500,000 for Mr. Jacobs. (6)
Pursuant to the separation agreement, the severance agreement, and the transition agreement, Mr. Tulsyan received the following payments and benefits from the company in exchange for agreeing to a general release of claims in favor of the company and other promises by Mr. Tulsyan in the separation agreement: (i) cash severance payments equal to 12 months of Mr. Tulsyan’s base salary in effect on the separation date, totaling a gross amount of $500,000, less applicable taxes and withholdings, payable in equal installments over a 12-month period on the Ccompany’s normal payroll dates with the first installment to be paid within 65 days after the separation date, (ii) a lump sum payment of $8,200, less applicable taxes and withholdings, equal to the estimated prorated target bonus for the 2023 performance year, (iii) a lump sum payment, less applicable taxes and withholdings, equivalent to any unused carryover paid time off for 2022 that Mr. Tulsyan would have otherwise forfeited upon separation, (iv) a lump sum payment of $700,000, less applicable taxes and withholdings, equivalent to what Mr. Tulsyan would have received as the funded bonus amount for the company’s 2022 annual incentive plan year if Mr. Tulsyan had remained employed through the payout date, calculated based on Mr. Tulsyan’s base salary as of the separation date multiplied by his bonus target percentage multiplied by the bonus funding percentage for his incentive plan, and (v) nine (9) months of outplacement services. In connection with (iv) above, Mr. Tulsyan received a payment of $700,000 in March 2023. Pursuant to the transition agreement, Mr. Tulsyan will receive a lump sum transition payment of $480,000, less applicable taxes and withholdings, to be paid on July 7, 2023. (7)
In order to preserve the value of the awards held by employees continuing with XPO following each of the GXO and RXO spin-offs, as applicable, including our NEOs, the number of outstanding shares underlying outstanding awards were adjusted using the ratios and methodologies outlined in each Employee Matters Agreement, as applicable. The GXO ratio was based on the closing price per share of XPO common stock on July 30, 2021 compared to the closing price per share of XPO common stock on August 2, 2021. The RXO ratio was based on either (i) the closing price per share of XPO common stock on October 31, 2022 compared to the closing price per share of XPO common stock on November 1, 2022 or (ii) a distribution ratio of one share of RXO common stock for every share of XPO common stock. The modification of these awards in connection with either spin-off did not result in incremental compensation cost. (8)
The values reflected in this row for Mr. Jacobs, Mr. Harik and Mr. Anderson, as applicable, were calculated using $119.20,$33.29, the closing price of a company share on the NYSE on December 31, 2020,30, 2022, the last trading day of our fiscal year 2020.2022. The values reflected in this row for Mr. Tulsyan were calculated using $35.99, the closing price of a company share on the NYSE on January 6, 2023. Except for Mr. Tulsyan, the amounts shown for PRSUsPSUs have been estimated assuming that the applicable performance goals are met at target levels. Although the PRSUsPSUs would no longer be subject to a continued service requirement upon the occurrence of a termination by our company without Cause,cause, payment of such award would remain subject to the actual achievement of the applicable performance goals. As of December 31, 2020,2022, none of the NEOs had any unvested stock options.
(7)Includes $3,389 Values applicable to all individuals include standard pro-rata vesting upon termination pursuant to the applicable award agreement. (9)
In accordance with the RXO spin-off distribution ratio, certain outstanding RSUs and PSUs on November 1, 2022, received additional time-based RSUs and PSUs, as applicable, covering shares of incremental compensationstock of RXO, Inc. These outstanding RXO RSUs and PSUs would accelerate upon termination as follows: Mr. Jacobs would accelerate in 1,174,495 RXO RSUs valued at $20,201,314 and 82,932 RXO PSUs valued at $1,426,430; and Mr. Harik (except in the case of a termination without cause or a voluntary termination for Ms. Glickman that was earnedgood reason not in connection with a change of control) would accelerate in 221,923 RXO RSUs valued at $3,817,076 and 91,226 RXO PSUs valued at $1,569,087, calculated using $17.20, the accelerationclosing price of her April 2019 RSUs. For additional information relatedRXO common stock on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. In the event of a termination without cause for Mr. Harik, these outstanding RXO RSUs and PSUs would accelerate as follows: 144,073 RXO RSUs valued at $2,478,056 and 91,226 RXO PSUs valued at $1,569,087 calculated using $17.20, the closing price of RXO common stock on the NYSE on December 30, 2022, the last trading day of our fiscal year 2022. Mr. Tulsyan accelerated in (i) 10,430 RXO RSUs valued at $175,954, (ii) 5,876 RXO RSUs valued at $99,128, pursuant to the incremental compensation see footnote 9terms of Mr. Tulsyan’s separation agreement and transition agreement, and (iii) 120,252 RXO PSUs valued at $2,028,651 calculated using $16.87, the closing price of RXO common stock on the NYSE on January 6, 2023. The value of these RXO RSUs and PSUs are not reflected in the table above. The amounts shown for Mr. Jacobs’ and Mr. Harik’s PSUs have been estimated assuming that the applicable performance goals are met at target levels. (10)
Pursuant to the terms of the Summary Compensation Table.
(8)separation agreement, the transition agreement, and the equity award agreements, Mr. Tulsyan is entitled to pro-rata vesting as if his employment was terminated on June 30, 2023. Amount shown includes standard pro-rata vesting upon termination pursuant to the applicable award agreements and additionally includes 5,876 time-based restricted stock units subject to accelerated vesting, pursuant to the terms of Mr. Tulsyan’s separation agreement and transition agreement. (11)
Amount shown for Ms. GlickmanMr. Tulsyan consists of 13,311 PRSUs which remain eligible(i) 86 PSUs subject to vest on August 9, 2021,standard pro-rata vesting upon termination pursuant to the applicable award agreement, and 5,951 PRSUs which(ii) 2,496 PSUs subject to accelerated vesting, pursuant to the terms of Mr. Tulsyan’s separation agreement and transition agreement. All PSUs remain eligible to vest on December 31, 2024, subject to achievement of certain performance criteria (for further details related to the performance criteria see footnote 6 in the Outstanding Equity Awards Table at Fiscal Year-end table). Amount shown for Mr. Rogers consists of 587 PRSUs which remain eligible to vest on December 31, 2024 subject to achievement of certain performance criteria (for further details related to the performance conditions see footnote 712 in the Outstanding Equity Awards Table at Fiscal Year-end table). The amounts shown for Ms. Glickman and Mr. Rogers assume that all performance criteria are actually met or are deemed met upon a change of control pursuant to the terms of the PRSUs.
(9)PSUs. In accordance with the RXO spin-off distribution ratio, certain outstanding PSUs on November 1, 2022, received additional PSUs covering shares of stock of RXO, Inc. Mr. Tulsyan remains eligible to vest in 2,582 RXO PSUs that are valued at $43,558, calculated using $16.87, the closing price of RXO common stock on the NYSE on January 6, 2023. The amountsvalue of these RXO PSUs are not reflected in the table above. (12)
The amount shown for 2020 LTI have been estimated assuming that the applicable performance goals are met at target levels. Although the 2020 LTI Award, applicable to Mr. Jacobs, reflects the earned amount that is eligible to vest on January 15, 2024 and would no longer be subject to a continued service requirement upon the occurrence of a termination by our company without Cause, payment of such award would remain subjectcause. Please see Note 4 to the actual achievementSummary Compensation Table for additional details of the applicable performance goals.
(10)cancellation and replacement of 100% of the target amount of the 2023 tranche of the 2020 LTI award for Mr. Jacobs and Mr. Harik. (13)
The amounts of continued medical and dental benefits shown in the table (i) have been calculated based upon our current actual costs of providing the benefits through COBRA and (ii) have not been discounted for the time value of money. In the event of a termination without Cause,cause, continued medical and dental benefits would cease for Mr. Jacobs when the NEOhe receives medical or dental coverage, as applicable, in connection with other employment, for Mr. Harik when he commences employment with a new employer, for Messrs. Anderson and Tulsyan when they become eligible for any medical and dental benefits through a new employer. As
(14)
The values reflected in this column for Mr. Jacobs include acceleration of December 31, 2020, each of Mr. Jacobs', Mr. Cooper's, Mr. Harik'sequity-based awards upon termination without cause and termination due to mutual agreement between our company and Mr. Wyshner's employment agreement, which is described in detail in this Proxy Statement under the heading "Employment Agreements with NEOs," generally provided that, in the event of a termination without Cause (as defined below) either prior to a Change of Control (as defined below) or more than two years following a Change of Control, cash severance payments and continued benefits would be made ratably over the six month period following the executive's termination (subject to any delays required pursuant to Section 409A of the Code). The employment agreements generally did not provide for payments other than accrued benefits if employment is terminated due to death or disability. Generally, in the event of a termination upon or within two years following a Change of Control, cash severance payments would be made in one lump sum (subject to any delays required pursuant to Section 409A of the Code). The severance payments set forth in the table are generally subject to and conditioned upon the NEO signing and not revoking a waiver and release and continued compliance with certain restrictive covenants.Jacobs. For more information regarding the payments and benefits to which our NEOs are entitled upon certain termination events or upon a Change of Control, see the discussion in this Proxy Statement under the heading "EmploymentEmployment Agreements with NEOs."
As required by Item 402(u) of the SEC'sSEC’s Regulation S K,S-K, we are providing the following information about the relationship of the annual total compensation of our CEO to that of our median employee. The pay ratio and annual total compensation amount disclosed in this section are reasonable estimates that have been calculated using methodologies and assumptions permitted by SEC rules.Identifying the Median Employee
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Although there was no change
Identifying the Median Employee Due to XPO'smaterial changes to XPO’s employee population or compensation arrangements thatfollowing the company believes would significantly impact the pay ratio disclosure,RXO spin-off in 2022, we reidentifiednewly identified our median employee due to a change in our 2019 median employee's circumstances in 2020. Our 2019 median employee received a salary increase as a result of his promotion to supervisor which the company believes would result in a significant change to the pay ratio disclosure. As permitted underemployee. In accordance with the SEC executive compensation disclosure rules, we elected to run a full analysis to identify a new median employee using ourand selected December 31, 2019 analysis used to identify our 2019 median employee. For2022 as the 2020measurement date for the median. The median employee we chose an adjacent employee whose compensation is substantially similar to the 2019 median employeewas identified based on the same compensation measuresparameters used to select the 20192021 median employee, as follows: ■Our original analysis selected December 31, 2019 as the date on which to determine our 2019 median employee, which we continued to utilize for the selection of our 2020 median employee.
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As of December 31, 2019,2022, we had 96,98537,636 employees globally, including 44,75022,705 US employees and 52,23514,931 non-US employees. In determining the identity of our median employee, we excluded 911 employees from: China (431), Hong Kong (23), Ireland (174), and Singapore (283). After excluding the countries and employees described above, weWe determined the identity of our median employee from a population of 96,074 employees (44,750 US employees and 51,324 non-US-employees);using this employee group, includedincluding full-time, part-time and seasonal employees.
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Table of Contents
■The median employee was identified by calculating the 20192022 cash compensation for the population of 96,07437,636 employees excluding the CEO. For this purpose, cash compensation included all earnings paid to each employee during the calendar year, including base salary and wages, bonuses, commissions, overtime and holiday or PTO pay. Compensation was converted into US dollars using currency conversion rates as of December 31, 2019.Annual Compensation of Median Employee using Summary Compensation Table Methodology
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Annual Compensation of Median Employee using Summary Compensation Table Methodology After identifying the median employee as described above, we calculated annual total compensation for this employee using the same methodology we use for our CEO in the 20202022 Summary Compensation Table. This compensation calculation includes, where applicable, base salary and wages, bonuses, commissions, overtime, holiday or PTO pay, equity awards, 401(k) company match and company-paid life insurance premiums, as applicable. The compensation for our median employee was $34,663$48,416 and the compensation for our company'scompany’s CEO was $21,812,660.$9,027,723. We note for informational purposes that the compensation for our median employee in North American LTL was approximately $70,000. Based on the above information, the ratio of the annual total compensation of our CEO to the median employee is 629:186:1. The pay ratio reported by other companies may not be comparable to the pay ratio reported above, due to variances in business mix, proportion of seasonal and part-time employees and distribution of employees across geographies. In comparison to peer firms, XPO has a unique business mix with approximately 60% of our employee population working in our supply chain business; in addition, XPO operates globally with approximately 55%40% of our population located outside of the United States. We seek to attract, incentivize and retain our employees through a combination of competitive base pay, bonus opportunities, 401(k) matching employer contributions the opportunity to participate in our employee stock purchase plan and other benefits.
PAY VERSUS PERFORMANCE As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid and the company’s financial performance. For further information on the company’s executive compensation, please see the CD&A beginning on page 30. EMPLOYMENT AGREEMENTS WITH NEOS
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Required Tabular Disclosure of Compensation Actually Paid versus Performance The following table discloses information on “compensation actually paid” (CAP) to our principal executive officers (PEOs) and (on average) to our other NEOs (non-PEO NEOs) during the specified years alongside TSR and net income metrics, as well as a company-selected measure of adjusted EBITDA. The company selected this measure as the most important in linking compensation actually paid to our NEOs for 2022 to company performance, as adjusted EBITDA represents a 50% weighting in the March 7, 2022 PSU awards as well as our 2022 annual incentive plan. | | | Fiscal
Year | | | | Summary
Compensation
Table Total
for PEO 1(1) | | | | Compensation
Actually Paid
to PEO 1(2) | | | | Summary
Compensation
Table Total
for PEO 2(1) | | | | Compensation
Actually Paid
to PEO 2(2) | | | | Average
Summary
Compensation
Table Total
for non-PEO
NEOs | | | | Average
Compensation
Actually Paid
to non-PEO
NEOs | | | | Value of Initial Fixed $100
Investment Based On: | | | | Net
Income ($
in millions) | | | | Company-
Selected
Measure:
Adjusted
EBITDA
($ in
millions)(4) | | | | | Total
Shareholder
Return | | | | Peer Group(3)
Total
Shareholder
Return | | | | | | (a) | | | | (b) | | | | (c) | | | | (b) | | | | (c) | | | | (d) | | | | (e) | | | | (f) | | | | (g) | | | | (h) | | | | (i) | | | | | | 2022 | | | | | $ | 46,990,957 | | | | | | $ | 66,874,224 | | | | | | $ | 9,027,723 | | | | | | $ | 19,687,049 | | | | | | $ | 1,310,474 | | | | | | $ | 3,184,179 | | | | | | $ | 116.26 | | | | | | $ | 122.85 | | | | | | $ | 666 | | | | | | $ | 997 | | | | | | | 2021 | | | | | $ | 22,043,280 | | | | | | $ | 22,043,280 | | | | | | $ | — | | | | | | $ | — | | | | | | $ | 3,990,800 | | | | | | $ | 3,600,679 | | | | | | $ | 164.27 | | | | | | $ | 151.16 | | | | | | $ | 341 | | | | | | $ | 812 | | | | | | | 2020 | | | | | $ | 21,812,660 | | | | | | $ | 25,043,462 | | | | | | $ | — | | | | | | $ | — | | | | | | $ | 4,638,287 | | | | | | $ | 4,255,500 | | | | | | $ | 149.56 | | | | | | $ | 114.73 | | | | | | $ | 117 | | | | | | $ | 609 | | | |
(1)
Reflects the total compensation of our executive chairman and former CEO, Mr. Jacobs, who served as our PEO (PEO 1) from January 1, 2022 until November 1, 2022, and the total compensation of our CEO and former president, North American Less-Than-Truckload and CIO, Mario Harik, who is serving as our PEO (PEO 2), effective on November 1, 2022, and is therefore included in this table as an additional PEO in accordance with SEC rules. Amounts shown are as calculated in the Summary Compensation Table for each of the years shown (and for Mr. Harik, solely reflect compensation for the year of his service as our CEO). (2)
The dollar amounts shown in these columns reflect “compensation actually paid” to Mr. Jacobs and Mr. Harik, respectively, calculated in accordance with SEC rules. As required, the dollar amounts include (among other items) unpaid amounts of equity compensation that may be realizable in future periods, and as such, the dollar amounts shown do not fully represent the actual final amount of compensation earned or actually paid to either individual during the applicable years. The adjustments made to each officer’s total compensation for each year to determine CAP are shown in the tables below. For Mr. Harik, information is only included with respect to 2022. (3)
Our peer group is represented by the Dow Jones Transportation Average. (4)
Our company-selected measure is adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which we define as income from continuing operations before debt extinguishment loss, interest expense, income tax, depreciation and amortization expense, goodwill impairment charges, transaction and integration costs, restructuring costs and other adjustments. Adjusted EBITDA is a non-GAAP financial measure. See Annex A for reconciliations of non-GAAP measures. | | | | | | | PEO 1 | | | | | | Prior FYE
Current FYE
Fiscal Year | | | | 12/31/2019
12/31/2020
2020 | | | 12/31/2020
12/31/2021
2021 | | | 12/31/2021
12/31/2022
2022(a) | | | | | | Summary Compensation Table Total | | | | | $ | 21,812,660 | | | | | $ | 22,043,280 | | | | | $ | 46,990,957 | | | | | | | - Grant Date Fair Value of Modified Awards Disclosed in Fiscal Year (FASB ASC 718) | | | | | | | | | | | | | | | | | | (54,298,870) | | | | | | | + Previously Reported Grant Date Fair Value of Modified Awards | | | | | | | | | | | | | | | | | | 19,697,878 | | | | | | | - Grant Date Fair Value of Modified Awards over Previously Reported Grant Date Fair Value of Modified Awards | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | (34,600,992) | | | | | | | + Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 54,484,259 | | | | | | | + Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal Years | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | | + Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal
Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | | + Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years
For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | | | | | $ | 3,230,802 | | | | | $ | 0 | | | | | $ | 0 | | | | | | | - Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | | Compensation Actually Paid | | | | | $ | 25,043,462 | | | | | $ | 22,043,280 | | | | | $ | 66,874,224 | | | |
(a)
For a description of the modifications and valuations of awards held by PEO 1, see footnote 7 of the Summary Compensation Table above. EMPLOYMENT AGREEMENTS WITH MESSRS. JACOBS, COOPER, HARIK, AND WYSHNER
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Effective as
| | | | | | | PEO 2 | | | | | | Prior FYE
Current FYE
Fiscal Year | | | | 12/31/2019
12/31/2020
2020 | | | 12/31/2020
12/31/2021
2021 | | | 12/31/2021
12/31/2022
2022(a) | | | | | | Summary Compensation Table Total | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 9,027,723 | | | | | | | - Grant Date Fair Value of Modified Awards Disclosed in Fiscal Year (FASB ASC 718) | | | | | | | | | | | | | | | | | | (10,259,872) | | | | | | | + Previously Reported Grant Date Fair Value of Modified Awards | | | | | | | | | | | | | | | | | | 2,878,803 | | | | | | | - Grant Date Fair Value of Modified Awards over Previously Reported Grant Date Fair Value of Modified Awards | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | (7,381,069) | | | | | | | + Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 18,040,395 | | | | | | | + Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal
Years | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | | + Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | | + Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For
Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | | - Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | | | Compensation Actually Paid | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 19,687,049 | | | |
(a)
For a description of July 31, 2020,the modifications and valuations of awards held by PEO 2, see footnote 7 of the Summary Compensation Table above. | | | | | | | NEO | | | | | | Prior FYE
Current FYE
Fiscal Year | | | | 12/31/2019
12/31/2020
2020 | | | 12/31/2020
12/31/2021
2021 | | | 12/31/2021
12/31/2022
2022 | | | | | | Summary Compensation Table Total | | | | | $ | 4,638,287 | | | | | $ | 3,990,800 | | | | | $ | 1,310,474 | | | | | | | - Grant Date Fair Value of Option Awards and Stock Awards Granted in Fiscal Year | | | | | $ | (1,317,067) | | | | | $ | (521,238) | | | | | $ | (545,923) | | | | | | | + Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year | | | | | $ | 627,445 | | | | | $ | 1,199,280 | | | | | $ | 4,175,040 | | | | | | | + Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal
Years | | | | | $ | 124,838 | | | | | $ | 0 | | | | | $ | 0 | | | | | | | + Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | | | | | $ | 61,561 | | | | | $ | 0 | | | | | $ | 184,257 | | | | | | | + Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | | | | | $ | 180,900 | | | | | $ | 9,732 | | | | | $ | (86,372) | | | | | | | - Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | | | | | $ | (60,464) | | | | | $ | (1,077,895) | | | | | $ | (1,853,297) | | | | | | | Compensation Actually Paid | | | | | $ | 4,255,500 | | | | | $ | 3,600,679 | | | | | $ | 3,184,179 | | | |
Required Tabular Disclosure of Most Important Measures Linking Compensation Actually Paid During 2022 to Company Performance As required, we entered into employment agreementsdisclose below the most important measures used by the company to link compensation actually paid to our NEOs for 2022 to company performance. For further information regarding these performance metrics and their function in our executive compensation program, please see the CD&A beginning on page 30. | | 2022 Most Important Measures (Unranked) | | | | ■
Adjusted EBITDA | | | ■
Relative TSR | | | | ■
Adjusted Operating Ratio LTL | | | ■
ESG Scorecard | | | | ■
Adjusted Cash Flow per Share | | | ■
Relative Adjusted Cash Flow per Share | |
Required Disclosure of the Relationship Between Compensation Actually Paid and Financial Performance Measures The following graphs further illustrate the relationship between the pay and performance figures that are included in the pay versus performance tabular disclosure above. In addition, the first graph below further illustrates the relationship between company TSR and that of the Dow Jones Transportation Average Index. As noted above, “compensation actually paid” for purposes of the tabular | | | | | 65 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
disclosure and the following graphs were calculated in accordance with Messrs. Jacobs, CooperSEC rules and Harik that replacedo not fully represent the 2016 employment agreements between XPO and each such NEO, which expiredactual final amount of compensation earned by their terms on February 9, 2020. or actually paid to our NEOs during the applicable years. | | | | | 66 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
(1)
Adjusted EBITDA is a non-GAAP financial measure. See Annex A for reconciliations of non-GAAP measures. EMPLOYMENT AGREEMENTS WITH NEOS On March 2, 2020,September 13, 2022, in connection with the transition of Mr. Jacobs’ role to executive chairman, we entered into an employment agreement with Mr. Wyshner. TheJacobs, which, effective November 1, 2022, replaced his prior employment agreementsagreement with Messrs.XPO dated July 31, 2020. Effective November 1, 2022, we entered into an amendment to the employment agreement with Mr. Jacobs, Cooper,amending the non-solicitation covenant in the employment agreement. On August 11, 2022, in connection with the transition of Mr. Harik’s role to CEO, we entered into an employment agreement with Mr. Harik, which, effective November 1, 2022, replaced his prior employment agreement with XPO dated July 31, 2020. On October 9, 2022, in connection with hiring Mr. Anderson as CFO, effective November 8, 2022, we entered into an offer letter, Change in Control and WyshnerSeverance Agreement (“Severance Agreement”), and Confidential Information Protection Agreement with Mr. Anderson (collectively, “Mr. Anderson’s NEO Agreement”). Mr. Anderson’s NEO Agreement together with the employment agreement with Mr. Jacobs, as amended, and the employment agreement with Mr. Harik are referred to in this section as the "NEO Employment Agreements".The NEO Employment Agreements with Messrs. Jacobs Cooper and Harik each provide for ahave five-year and four-year termterms, respectively, commencing on July 31, 2020.November 1, 2022. The NEO Employment Agreement with Mr. WyshnerAnderson provides for a three-yearno term, commencingas he is employed on March 2, 2020.Severance Payments and Benefits
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Severance Payments and BenefitsThe severance payments pursuant to the NEO Employment Agreements are generally subject to and conditioned upon the applicable NEO signing and not revoking a waiver and general release agreement (which, for Mr. Jacobs, such agreement shall exclude certain claims from Mr. Jacobs’ general release and include a general release by the company with certain exclusions), and also complying with the restrictive covenants contained in his NEO Employment Agreement.In the event that we terminate the applicable NEO's employment without cause (as defined inNEO Agreement. The material terms of the applicable 2020 NEO Employment Agreement), either prior to a change of control (as defined in the company's 2016 Omnibus Incentive Compensation Plan) or more than two years following a change of control, such NEO will be entitled to the following severance payments and benefits:
■Twelve months' base salary, atbenefits under the level in effect on the date of termination, which will be paid in equal installments over the six months following the date of termination (subject to any delay required by Section 409A of the Code), and which generally will be reduced, dollar-for-dollar, by other earned income; and
■Medical and dental coverage for a period of up to six months from the date of termination.
The NEO Employment Agreements do not provide for accelerated vesting of equity, equity-based or other long term incentive compensation awards other than as set forth in the applicable award agreements.
In the event that, upon or within two years following a change of control, the applicable NEO's employment is terminated by our company without cause or such NEO resigns for good reason (as defined in the applicable NEO Employment Agreement), he will receive the following severance payments and benefits:
■A lump-sum cash payment equal to two (or 2.99, in the case of the Mr. Jacobs) times the sum of his annual base salary and target annual bonus, in each case at the level in effect on the date of termination (subject to any delay required by Section 409A of the Code);
■A prorated target bonus for the year of termination; and
are described below.
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■Medical and dental coverage for a period of 24 months from the date of termination.
In the event that any amounts payable to the applicable NEO in connection with a change of control constitute "parachute payments"“parachute payments” within the meaning of Section 280G of the Code, then any such amounts will be reduced to avoid triggering the excise tax imposed by Section 4999 of the Code, if such reduction would be more favorable to the NEO on a net after-tax basis. No NEO is entitled to a gross-up payment for excise taxes imposed by Section 4999 of the Code on "excess“excess parachute payments,"” as defined in Section 280G of the Code. Mr. Jacobs’ NEO Agreement Non-Change of Control. In the event (i) of termination of Mr. Jacobs’ employment by reason of his death, (ii) we terminate Mr. Jacobs’ employment without cause (as defined in Mr. Jacobs’ NEO Agreement) either prior to a change of control of the company (as defined in the company’s 2016 Omnibus Incentive Compensation Plan) or more than two years after a change of Clawbacks
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control of the company occurs, or (iii) Mr. Jacobs resigns due to certain events of good reason (as defined in Mr. Jacobs’ NEO Agreement), Mr. Jacobs will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): ■
Any annual bonus that the company has notified Mr. Jacobs in writing that he earned prior to the date of termination but is unpaid as of the date of termination; ■
Except in the event of termination by reason of Mr. Jacobs’ death, medical and dental coverage for a period of up to 12 months from the date of termination, or, if earlier, until Mr. Jacobs begins to receive medical or dental coverage, as applicable, in connection with other employment; and ■
Accelerated vesting of all equity-based or other LTI compensation awards then outstanding. Change of Control. In the event that upon or within the two-year period following a change of control of the company, Mr. Jacobs’ employment is terminated by the company without cause or he resigns due to good reason, Mr. Jacobs will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): · ■
A cash payment equal to the pro rata target bonus for the year of termination; · ■
A cash payment equal to any annual bonus that the company has notified Mr. Jacobs in writing that he earned prior to the date of termination but is unpaid as of the date of termination; ■
Medical and dental coverage for a period of 24 months from the date of termination; and ■
Accelerated vesting of all equity-based or other lLTI compensation awards then outstanding. Disability. In the event that Mr. Jacobs’ employment is terminated due to disability (as defined in Mr. Jacobs’ NEO Agreement), Mr. Jacobs shall become vested in a pro-rata portion of all outstanding equity-based or other LTI compensation awards granted to him on or after the effective date of the NEO Agreement, subject to Mr. Jacobs’ continued compliance with the terms and conditions of the NEO Agreement. Mutual Agreement. In the event that Mr. Jacobs’ employment is terminated by mutual agreement between us and Mr. Jacobs, Mr. Jacobs shall become fully vested in all of his outstanding equity-based or other LTI compensation awards, subject to Mr. Jacobs’ continued compliance with the terms and conditions of his NEO Agreement. Mr. Harik’s NEO Agreement Non-Change of Control. If we terminate Mr. Harik’s employment without cause (as defined in Mr. Harik’s NEO Agreement) or Mr. Harik’s employment is terminated by reason of his death, in either event either prior to a change in control of the company or more than two years after a change of control of the company, Mr. Harik will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): ■
Except in the event of termination by reason of Mr. Harik’s death, a cash payment, payable in equal installments over the twelve-month period following the date of termination, equal to the sum of (i) 24 months of Mr. Harik’s base salary in effect on the date of termination, (ii) the pro rata target bonus for the year of termination, and (iii) any annual bonus that we have notified Mr. Harik in writing that he earned prior to the date of termination but is unpaid as of the date of termination; provided, however, any monies Mr. Harik earns from any other work while he is receiving any such payments shall reduce, on a dollar-for-dollar basis, the amount that we are obligated to pay Mr. Harik; ■
Except in the event of termination by reason of Mr. Harik’s death, medical and dental coverage for a period of up to 12 months from the date of termination, or, if earlier, until Mr. Harik secures other employment; and ■
Vesting of equity based or other LTI compensation awards solely to the extent set forth in the applicable award agreement. Change of Control. If we terminate Mr. Harik’s employment without cause or he resigns for good reason (as defined in Mr. Harik’s NEO Agreement), in either event, upon or within the two-year period following a change of control of the company, Mr. Harik will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): ■
A cash lump-sum payment equal to 2.99 times the sum of (i) Mr. Harik’s base salary in effect on the date of termination and (ii) the target bonus in effect on the date of termination; ■
A cash lump-sum payment equal to the pro rata target bonus for the year of termination; ■
Any annual bonus that we have notified Mr. Harik in writing that he earned prior to the date of termination but is unpaid as of the date of termination; ■
Medical and dental coverage for a period of 24 months from the date of termination; and ■
Vesting of equity based or other LTI compensation awards solely to the extent set forth in the applicable award agreement. Mr. Anderson’s NEO Agreement Non-Change of Control. If we terminate Mr. Anderson’s employment without cause (as defined in the Severance Agreement) either prior to a change of control of the company or more than two years following a change of control of the company, Mr. Anderson will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): | | | | | 68 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
■
A cash payment, payable in equal installments over the twelve-month period following the date of termination, equal to the sum of (i) 12 months of Mr. Anderson’s base salary in effect on the date of termination and (ii) the target bonus in effect on the date of termination; provided, however, that certain monies earned by Mr. Anderson while he is receiving such payments shall reduce, on a dollar-for-dollar basis, the amount we are obligated to pay him. ■
A cash payment equal to the pro rata target bonus for the year of termination; and ■
Medical and dental coverage for a period of six months from the date of termination, or, if earlier, until Mr. Anderson becomes eligible for medical and dental benefits through another employer. Change of Control. If we terminate Mr. Anderson’s employment without cause or he resigns for good reason (as defined in the Severance Agreement), in either event, upon or within the two-year period following a change of control of the company, Mr. Anderson will be entitled to the following severance payments and benefits (subject to any delay required by Section 409A of the Code): ■
A cash lump-sum payment equal to two (2) times the sum of his base salary and the target bonus; ■
A cash lump-sum payment equal to the pro rata target bonus for the year of termination; ■
A cash lump-sum payment equal to any annual bonus that we have notified Mr. Anderson in writing that he earned prior to the date of termination but is unpaid as of the date of termination; ■
Medical and dental coverage for a period of 24 months from the date of termination. Clawbacks Under the NEO Employment Agreements for Messrs. Jacobs and Harik, the applicable NEO is subject to certain long-term incentiveLTI compensation forfeiture and clawback provisions in the event of: (1) a breach of the restrictive covenants, (2) termination of his employment by our company for cause, or (3) histhe applicable NEO’s engagement in fraud or willful misconduct that contributes materially to any financial restatement or material loss to our company or its affiliates. Furthermore, under the NEO Employment Agreements for Messrs. Jacobs and Harik, the applicable NEO is subject to certain annual bonus forfeiture and clawback provisions in the event that the applicable NEO engages in fraud or other willful misconduct that contributes materially to any financial restatement or material loss to our company. In addition, in the event that the applicable NEO breaches any restrictive covenant, such NEO will be required, upon written notice from us, to forfeit or repay to our company histhe applicable NEO’s severance payments.payments, extended non-compete payments, and, with respect to Mr. Jacobs, the Non-Compete Payment (as defined below). In certain circumstances, the triggering event must have occurred within a certain period in order for us to be able to cause the forfeiture or clawback the equity-based awards, annual bonus, or severance payments.payments, extended non-compete payments, and the Non-Compete Payment, as applicable. Each NEO shall also be subject to any other clawback or recoupment policy of the company as may be in effect from time to time or any clawback or recoupment as may be required by applicable law.Under the NEO Employment Agreements, the applicable NEO is generally subject to the following restrictive covenants: employee and customer non-solicitation during employment and for a period of two years thereafter (in the case of Messrs. Jacobs, Cooper and Harik) or three years thereafter (in the case of Mr. Wyshner);thereafter; confidentiality and non-disparagement during employment and thereafter; and non-competition during employment and for a period of three years thereafter (in the case of Messrs. Jacobs Cooper and Harik) or two yearseighteen months thereafter (in the case of Mr. Wyshner)Anderson). Non-Compete Payments. In the event Mr. Jacobs’ employment is terminated for any reason (including due to mutual agreement by our company and Mr. Jacobs) other than (x) due to his death, (y) by the company for cause, or (z) Mr. Jacobs’ voluntary resignation (A) prior to a change of control or more than two years following a change of control, other than due to certain events of good reason, or (B) upon or during the two years following a change of control, other than for good reason, then Mr. Jacobs will be entitled to receive payments for each year of the three year non-compete period in an amount equal to one times the sum of (i) Mr. Jacobs’ base salary in effect on the date of termination and (ii) the target bonus in effect on the date of termination (collectively, the “Non-Compete Payment”). Extended Non-Compete Payments. In addition, we havethe company has the option to extend the non-competition period in Messrs. Jacobs and Harik’s NEO Agreement for up to an additional year following a termination12 months and in Mr. Anderson’s NEO Agreement for any reason,up to an additional 18 months; provided, however, that, in the case of Messrs. Harik and Anderson, we continue to pay the applicable NEO'sNEO’s base salary as in effect on the date of termination during each month of the extended non-competition period, and, in the case of Mr. Jacobs, we continue to pay him an amount equal to one-twelfth of the Non-Compete Payment during each month of the extended non-compete period.
The extended non-compete payments for Messrs. Harik and Anderson will be offset by any monies the applicable NEO earns from any other work during such period. Our right to extend the non-compete for each NEO lapses upon a change of control. EMPLOYMENT AGREEMENT WITH MS. GLICKMAN
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Ms. Glickman and the company entered into an employment agreement effective June 5, 2019 with terms and conditions substantially similar to those described above for Mr. Wyshner, except that Ms. Glickman's employment agreement provided for a severance payment of six months' base salary upon termination of employment without cause (other than during the two years following a change of control). In connection with her termination of employment with the company on April 13, 2020, Ms. Glickman received cash severance equal to 12 months' base salary (consistent with the level of severance payment provided for in the NEO Employment Agreements), the medical and dental benefit continuation provided for her in her employment agreement, and certain equity award vesting. For further details related to the equity award vesting see footnote 9 in the Summary Compensation Table.
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Mr. Rogers and the company entered into an employment agreement in February 2020, which was subsequently amended in April 2020. The amended agreement includes terms and conditions substantially similar to those described above for Mr. Wyshner, except that Mr. Rogers's amended agreement provided for a severance payment of nine months' base salary upon termination of employment without cause and employee and customer nonsolicitation provisions that apply during employment and for two years thereafter. In connection with his termination of employment with the company on March 11, 2020, Mr. Rogers received the severance payments and benefits due under his amended employment agreement upon a termination of employment without cause, and certain equity award vesting. For further details related to the equity award vesting see footnote 10 in the Summary Compensation Table.
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EQUITY COMPENSATION PLAN INFORMATION
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EQUITY COMPENSATION PLAN INFORMATION The following table gives information as of December 31, 2020,2022, with respect to the company'scompany’s compensation plans, under which equity securities are authorized for issuance. | | Plan Category | | | | Number of Securities to be Issued
Upon Exercise of Outstanding
Options, Warrants and Rights
(a) | | | | Weighted-Average Exercise
Price of Outstanding Options,
Warrants and Rights
(b) | | | | Number of Securities Remaining
Available for Future Issuance Under
Equity Compensation Plans (Excluding
Securities Reflected in Column (a))
(c) | | | | Equity compensation plans approved by security holders | | | | | | 3,446,708(1) | | | | | | | — | | | | | | | 6,628,280(2) | | | | | Equity compensation plans not approved by security holders | | | | | | — | | | | | | | — | | | | | | | — | | | | | Total | | | | | | 3,446,708 | | | | | | | — | | | | | | | 6,628,280 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plan Category | | | | | Number of Securities to be Issued
Upon Exercise of Outstanding
Options, Warrants and Rights
(a) | | | | | Weighted-Average Exercise
Price of Outstanding Options,
Warrants and Rights(1)
(b) | | | | | Number of Securities Remaining
Available for Future Issuance Under
Equity Compensation Plans (Excluding
Securities Reflected in Column (a))
(c)
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(1)The weighted average exercise price is based solely on the outstanding options.
(2)Includes 42,755 stock options outstanding under the XPO Logistics, Inc. Amended and Restated 2011 Omnibus Incentive Compensation Plan. Also includes an aggregateConsists of 3,381,5993,446,708 RSUs and PRSUsPSUs granted under the XPO Logistics, Inc. 2016 Omnibus Incentive Compensation Plan and 90,774 RSUs granted under the XPO Logistics, Inc. Amended and Restated 2011 Omnibus Incentive Compensation Plan.
(3)
(2)
Includes 1,782,1105,007,389 securities available for issuance under the XPO Logistics, Inc. 2016 Omnibus Incentive Compensation Plan and 1,776,8111,620,891 securities available for issuance under the XPO Logistics, Inc. Employee Stock Purchase Plan. |
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| | | AUDIT-RELATED MATTERS | | | | | | | | 70 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
DELINQUENT SECTION 16(a) Section 16(a) of the Securities Exchange Act of 1934 requires that XPO’s directors, executive officers, chief accounting officer and persons who beneficially own 10% or more of XPO’s common stock file with the SEC initial reports of ownership and reports of changes in ownership of our stock and our other equity securities. To XPO’s knowledge, based solely on a review of the copies of such reports furnished to XPO and written representations that no other reports were required, during the year ended December 31, 2022, all such filing requirements applicable to XPO’s directors, executive officers, chief accounting officer and greater than 10% beneficial owners were complied with, except that each of Ravi Tulsyan and Christopher Brown filed one late report for one transaction. AUDIT COMMITTEE REPORT
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AUDIT COMMITTEE REPORT The following statement made by our Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate such statement by reference.
The Audit Committee ("we"(“we” in this Audit Committee Report) currently consists of Mr. Shaffer (chairman)Aiken (chair), Ms. Ashe, Mr. Jesselson and Dr. Papastavrou.Ms. Moshouris. The Board of Directors has determined that each current member of the Audit Committee has the requisite independence and other qualifications for audit committee membership under SEC rules, the listing standards of NYSE, our Audit Committee charter, and the independence standards set forth in the XPO, Logistics, Inc. Corporate Governance Guidelines. The Board of Directors has also determined that Mr. Shaffer and Dr. Papastavrou each qualifyAiken qualifies as an "audit“audit committee financial expert"expert” as defined under Item 407(d)(5) of Regulation S-K of the Exchange Act. As described more fully below, in carrying out its responsibilities, the Audit Committee relies on management and XPO'sXPO’s independent registered public accounting firm (the "outside auditors"(“KPMG” or the “outside auditors”). The Audit Committee members are not professionally engaged in the practice of accounting or auditing. The Audit Committee operates under a written charter that is reviewed annually and is available at www.xpo.com. In accordance with our charter, the Audit Committee assists the Board of Directors in fulfilling its responsibilities in a number of areas. These responsibilities include, among others, oversight of: (i) XPO'sXPO’s accounting and financial reporting processes, including the company'scompany’s systems of internal controls over financial reporting and disclosure controls, (ii) the integrity of XPO'sXPO’s financial statements, (iii) XPO'sXPO’s compliance with legal and regulatory requirements, (iv) the qualifications and independence of XPO'sXPO’s outside auditors, and (v) the performance of XPO'sXPO’s outside auditors and internal audit function. Management is responsible for XPO'sXPO’s financial statements and the financial reporting process, including the system of internal controls over financial reporting. We are solely responsible for selecting and reviewing the performance of XPO'sXPO’s outside auditors and, if we deem appropriate in our sole discretion, terminating and replacing the outside auditors. We also are responsible for reviewing and approving the terms of the annual engagement of XPO'sXPO’s outside auditors, including the scope of audit and non-audit services to be provided by the outside auditors and the fees to be paid for such services, and discussing with the outside auditors any relationships or services that may impact the objectivity and independence of the outside auditors. In fulfilling our oversight role, we met and held discussions, both together and separately, with the company'scompany’s management and our outside auditor KPMG. Management advised us that the company'scompany’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and we reviewed and discussed the consolidated financial statements and key accounting and reporting issues with management and KPMG, both together and separately, in advance of the public release of operating results and filing of annual and quarterly reports with the SEC. We discussed with KPMG the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board Auditing ("PCAOB"(“PCAOB”) and the Commission,SEC, and reviewed a letter from KPMG disclosing such matters. KPMG also provided us with the written disclosures and letter required by applicable requirements of the PCAOB regarding the outside auditors'auditors’ communications with the Audit Committee concerning independence, and we discussed with KPMG matters relating to their independence and considered whether their provision of certain non-audit services is compatible with maintaining their independence. KPMG has confirmed its independence, and we determined that KPMG'sKPMG’s provision of non-audit services to XPO is compatible with maintaining its independence. We also reviewed a report by KPMG describing the firm'sfirm’s internal quality-control procedures and any material issues raised in the most recent internal quality-control review or external peer review or inspection performed by the PCAOB. Based on our review and discussion of XPO'sXPO’s audited consolidated financial statements with management and KPMG, and KPMG'sKPMG’s report on such financial statements, and based on the discussions and written disclosures described above, and our business judgment, we recommended to the Board of Directors, and the Board approved, that the audited consolidated financial statements be included in XPO's Annual Report onXPO’s 2022 Form 10-K, for the year ended December 31, 2020, for filing with the SEC.
AUDIT COMMITTEE: Jason Aiken, chair Michael Jesselson, member Irene Moshouris, member (since November 1, 2022) Oren Shaffer (chairman)
Gena Ashe
Michael Jesselson
Jason Papastavrou
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POLICY REGARDING PRE-APPROVAL OF SERVICES PROVIDED BY THE OUTSIDE AUDITORS
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POLICY REGARDING PRE-APPROVAL OF SERVICES PROVIDED BY THE OUTSIDE AUDITORS The Audit Committee'sCommittee’s charter requires review and pre-approval by the Audit Committee of all audit services provided by our outside auditors and, subject to the de minimis exception under applicable SEC rules, all permissible non-audit services provided by our outside auditors. The Audit Committee has delegated to its chairman the authority to approve, within guidelines and limits established by the Audit Committee, specific services to be provided by our outside auditors and the fees to be paid. Any such approval must be reported to the Audit Committee at the next scheduled meeting. As required by Section 10A of the Exchange Act, the Audit Committee pre-approved all audit and non-audit services provided by our outside auditors during 20202022 and 2019,2021, and the fees paid for such services.
SERVICES PROVIDED BY THE OUTSIDE AUDITORS
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SERVICES PROVIDED BY THE OUTSIDE AUDITORSAs described above, the Audit Committee is responsible for the appointment, compensation, oversight, evaluation and termination of our outside auditors. Accordingly, the Audit Committee retainedappointed KPMG to serve as our independent registered public accounting firm for fiscal year 20212023 on April 8, 2021.12, 2023. The following table shows the fees for audit and other services provided by KPMG for fiscal years 20202022 and 2019.2021. | | Fee Category | | | | 2022 | | | | 2021 | | | | Audit Fees | | | | | $ | 6,963,000 | | | | | | $ | 5,306,000 | | | | | Audit-Related Fees | | | | | | 3,386,200 | | | | | | | 4,815,197 | | | | | Tax Fees | | | | | | 11,213 | | | | | | | 5,893 | | | | | All Other Fees | | | | | | — | | | | | | | — | | | | | Total Fees | | | | | $ | 10,360,413 | | | | | | $ | 10,127,090 | | | | |
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| Fee Category | | | | 2020 | | | | 2019 | | | | | | | | | | | | Audit Fees | | | | $5,849,335 | | | | $5,315,000 | | Audit-Related Fees | | | | 8,664,528 | | | | 753,500 | | Tax Fees | | | | — | | | | 265,322 | | All Other Fees | | | | — | | | | — | | Total Fees | | | | $14,513,863 | | | | $6,333,822 | | | | | | | | | | |
Audit Fees. This category includes fees for professional services rendered by KPMG for 20202022 and 2019,2021, for the audits of our financial statements included in our Annual Report on2022 Form 10-K, and reviews of the financial statements included in our Quarterly Reports on Form 10-Q.Audit-Related Fees. The 2019 Audit fees also include comfort letters, accounting consultation related to new accounting standards,letter fees for 2022.
Audit-Related Fees. The 2022 and other audit related services. The 20202021 fees include transaction-related carve-out audit and other work, comfort letters and other audit relatedaudit-related services.
Tax Fees. This category includes fees billed for professional services rendered by KPMG in connection with general tax consultation and tax complianceconsulting services in 2019.2022 and 2021. All Other Fees. This category represents fees for all other services or products provided and not covered by the categories above. There were no such fees for 20202022 and 2019.
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| | | | | 73 | | | | | | © 2023 XPO, Inc. | | PROPOSALS TO BE PRESENTED | | | | | | | | | | | |
QUESTIONS AND ANSWERS | ABOUT OUR ANNUAL MEETING | |
This Proxy Statement sets forth information relating to the solicitation of proxies by XPO’s Board of Directors in connection with our Annual Meeting or any adjournment or postponement thereof. This Proxy Statement is being furnished by our Board for use at the Annual Meeting to be held on May 17, 2023 at 10:00 a.m. Eastern Time. The meeting will be held exclusively as a live webcast. You can access the meeting at meetnow.global/MU5KPDC. You are required to have a control number to access the Annual Meeting. Please follow the instructions below to receive your control number. This Proxy Statement and form of proxy are first being mailed on or about April 20, 2023, to our stockholders of record as of the close of business on March 31, 2023 (the “Record Date”). The following answers address some questions you may have regarding our Annual Meeting. These questions and answers may not include all of the information that may be important to you as a stockholder of our company. Please refer to the more detailed information contained elsewhere in this Proxy Statement. What items of business will be voted on at the Annual Meeting? We expect that the business put forth for a vote at the Annual Meeting will be as follows: ■
To elect nine (9) members of our Board of Directors for a term to expire at the 2024 Annual Meeting of Stockholders or until their successors are duly elected and qualified (Proposal 1); ■
To ratify the appointment of KPMG LLP (“KPMG”) as our independent registered public accounting firm for fiscal year 2023 (Proposal 2); ■
To conduct an advisory vote to approve the executive compensation of our named executive officers (“NEOs”) as disclosed in this Proxy Statement (Proposal 3); ■
To consider and transact other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. Senior management of XPO and representatives of our outside auditor, KPMG, will be available to respond to appropriate questions. Who can attend and vote at the Annual Meeting? You are entitled to receive notice of, attend and vote at the Annual Meeting, or any adjournment or postponement thereof, if, as of the close of business on March 31, 2023, the Record Date, you were a holder of record of our common stock. We have designed the virtual Annual Meeting to provide substantially the same opportunities to participate as stockholders would have at an in-person meeting. Our virtual Annual Meeting will be conducted on the internet via live webcast. You can access the Annual Meeting at meetnow.global/MU5KPDC. You will be required to provide the control number on your proxy card to access the Annual Meeting. If the shares of common stock you hold are in an account at a broker, dealer, commercial bank, trust company or other nominee (i.e., in “street name”), you must register in advance to participate in the Annual Meeting, vote electronically and submit questions during the live webcast of the meeting. To register, you must obtain a legal proxy from the bank, broker or other nominee that holds your shares giving you the right to vote the shares. Requests for registration should be directed to Computershare by email at legalproxy@computershare.com no later than 5:00 p.m. Eastern Time on Thursday, May 11, 2023. You will receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to meetnow.global/MU5KPDC and enter your control number. Can I ask questions during the Annual Meeting? The virtual Annual Meeting format allows stockholders to communicate with XPO during the Annual Meeting so they can ask questions of XPO’s management and Board of Directors, as appropriate. Stockholders (or their proxy holders) may submit questions for the Annual Meeting’s question and answer session in advance by logging on to the meeting website at meetnow.global/MU5KPDC. You will need the control number on your proxy card or confirmation email from Computershare in order to submit a question. Click on the “Q&A” icon in the top right corner of the screen and submit your question. You may provide your name, address and organization, and, if applicable, the specific proposal to which your question relates. Questions can be submitted in advance of the Annual Meeting beginning at 9:00 a.m. Eastern Time on May 15, 2023. Questions may also be submitted during the Annual Meeting through the meeting website. We will answer as many questions during the meeting as time will allow and will group questions together where appropriate. We reserve the right to exclude questions regarding topics that are not pertinent to the Annual Meeting matters or company business or are inappropriate. | | | | | 74 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
What if I have trouble accessing the Annual Meeting virtually? The virtual meeting platform is fully supported across browsers (MS Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Note: Internet Explorer is not a supported browser. Participants should ensure that they have a strong internet connection wherever they intend to participate in the Annual Meeting. We encourage you to access the meeting prior to the start time. Should you need further assistance prior to or during the meeting, you may call 1-888-724-2416. How many shares of XPO common stock must be present to conduct business at the Annual Meeting? As of the Record Date, there were 115,750,166 shares of common stock issued and outstanding, with each share entitled to one vote on each matter to come before the Annual Meeting. Therefore, 115,750,166 votes are eligible to be cast at the Annual Meeting. A quorum is necessary to hold a valid meeting of stockholders. Pursuant to the company’s bylaws, the presence, in person or by proxy, of the holders of a majority of the shares issued and outstanding and entitled to vote is necessary for each of the proposals to be presented at the Annual Meeting. Accordingly, holders of shares of our common stock representing 57,875,084 votes must be present at the Annual Meeting. If you vote by internet, telephone or proxy card, the shares you vote will be counted toward the quorum for the Annual Meeting. Abstentions and broker non-votes are counted as present for the purpose of determining a quorum. What are my voting choices? With respect to the election of directors, you may vote “FOR” or “AGAINST” each of the director nominees, or you may “ABSTAIN” from voting for one or more of such nominees. With respect to the other proposals to be considered at the Annual Meeting, you may vote “FOR” or “AGAINST” or you may “ABSTAIN” from voting on any proposal. If you sign your proxy without giving specific instructions, your shares will be voted in accordance with the recommendations of our Board of Directors with respect to the specific proposals described in this Proxy Statement and at the discretion of the proxy holders on any other matters that properly come before the Annual Meeting. What vote is required to approve the proposals being considered at the Annual Meeting? ■
Proposal 1: Election of nine (9) directors. The election of each of the nine (9) director nominees named in this Proxy Statement requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted “for” a nominee must exceed the number of shares voted “against” such nominee) by holders of shares of our common stock at the Annual Meeting at which a quorum is present. If any incumbent director standing for re-election receives a greater number of votes “against” his or her election than votes “for” such election, our bylaws require that such person must promptly tender his or her resignation to our Board of Directors. You may not accumulate your votes for the election of directors. Brokers may not use discretionary authority to vote shares of our common stock on the election of directors if they have not received specific instructions from their clients. If you are a beneficial owner of shares of our common stock, in order for your vote to be counted in the election of directors, you will need to communicate your voting decisions to your bank, broker or other nominee before the date of the Annual Meeting in accordance with their specific instructions. Abstentions and broker non-votes are not considered votes cast for purposes of tabulation and will have no effect on the election of director nominees. ■
Proposal 2: Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2023. Ratification of the appointment of KPMG as our independent registered public accounting firm for the year ending December 31, 2023 requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted “for” such proposal must exceed the number of shares voted “against” such proposal) by holders of shares of our common stock at the Annual Meeting at which a quorum is present. Abstentions are not considered votes cast for purposes of tabulation and will have no effect on the proposed ratification of KPMG. We do not expect any broker non-votes, as brokers have discretionary authority to vote on this proposal. ■
Proposal 3: Advisory vote to approve executive compensation. Advisory approval of the resolution on executive compensation of our NEOs as disclosed in this Proxy Statement requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted “for” such proposal must exceed the number of shares voted “against” such proposal) by holders of shares of our common stock at the Annual Meeting at which a quorum is present. This resolution, commonly referred to as a “say-on-pay” resolution, is not binding on our Board of Directors. Although it is non-binding, our Board and the Compensation Committee will consider the voting results when making future decisions regarding our executive compensation program. Brokers may not use discretionary authority to vote shares of our common stock on the advisory vote to approve executive compensation if they have not received specific instructions from their clients. If you are a beneficial owner of shares of our common stock, in order for your vote to be counted in the advisory vote to approve executive compensation, you will need to communicate your voting decisions to your bank, broker or other nominee before the date of the Annual Meeting in accordance with their specific instructions. Abstentions and broker non-votes are not considered votes cast for purposes of tabulation and will have no effect on the advisory vote to approve executive compensation. | | | | | 75 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
In general, other business properly brought before the Annual Meeting at which a quorum is present requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted “for” such proposal must exceed the number of shares voted “against” such proposal) by holders of shares of our common stock. How does the Board of Directors recommend that I vote? Our Board of Directors, after careful consideration, recommends that our stockholders vote “FOR” the election of each director nominee named in this Proxy Statement, “FOR” the ratification of KPMG as our independent registered public accounting firm for fiscal year 2023, and “FOR” the advisory approval of the resolution to approve executive compensation. What do I need to do now? We urge you to read this Proxy Statement carefully, then vote via internet or by telephone by following the instructions on the proxy card, or mail your completed, dated and signed proxy card in the enclosed return envelope as soon as possible, so that your shares of our common stock can be voted at the Annual Meeting. How do I cast my vote? Registered Stockholders. If you are a registered stockholder (i.e., you hold your shares in your own name through our transfer agent, Computershare Trust Company, N.A., and not through a broker, bank or other nominee that holds shares for your account in “street name”), you may vote by proxy via internet or by telephone by following the instructions provided on the proxy card, or mail your completed, dated and signed proxy card in the enclosed return envelope. Proxies submitted via internet or by telephone must be received by 1:00 a.m. Eastern Time on May 17, 2023. Please see the proxy card provided to you for instructions on how to submit your proxy via internet or by telephone. Stockholders of record who attend the Annual Meeting may vote directly at the Annual Meeting by following the instructions provided during the Annual Meeting. Beneficial Owners. If you are a beneficial owner of shares (i.e., your shares are held in the name of a brokerage firm, bank or a trustee), you may vote by proxy by following the instructions provided in the voting instruction form or other materials provided to you by the brokerage firm, bank or other nominee that holds your shares. To vote directly at the Annual Meeting, you must obtain a legal proxy from the brokerage firm, bank or other nominee that holds your shares. Follow the instructions provided above to obtain a control number and the voting instructions provided during the Annual Meeting. What is the deadline to vote? If you hold shares as the stockholder of record, your vote by proxy must be received before the polls close at the Annual Meeting. As indicated on the proxy card provided to you, proxies submitted prior to the Annual Meeting via internet or by telephone must be received by 1:00 a.m. Eastern Time on May 17, 2023. If you are the beneficial owner of shares of our common stock, please follow the voting instructions provided by your broker, trustee or other nominee. What happens if I do not respond, or if I respond and fail to indicate my voting preference, or if I abstain from voting? If you fail to vote via internet or by telephone as indicated on your proxy card, or fail to properly sign, date and return your proxy card, your shares will not be counted towards establishing a quorum for the Annual Meeting, which requires holders representing a majority of the outstanding shares of our common stock to be present in person or by proxy. Failure to vote, assuming the presence of a quorum, will have no effect on the tabulation of the votes on the proposals. If you are a stockholder of record and you properly sign, date and return your proxy card, but do not indicate your voting preference, we will count your proxy as a vote “FOR” the election of the nine nominees for director named in “Proposal 1 — Election of Directors,” “FOR” the ratification of KPMG as our independent registered public accounting firm for fiscal year 2023, and “FOR” the advisory approval of the resolution to approve executive compensation. If my shares are held in “street name” by my broker, dealer, commercial bank, trust company or other nominee, will my broker or other nominee vote my shares for me? You should instruct your broker or other nominee on how to vote your shares of our common stock using the instructions they provide to you. Brokers or other nominees who hold shares of our common stock in “street name” for customers are prevented by the rules set forth in the Listed Company Manual (the “NYSE Rules”) of the New York Stock Exchange (the “NYSE”) from exercising voting discretion with respect to non-routine or contested matters (i.e., they must receive specific voting instructions from a stockholder in order to vote that stockholder’s shares on non-routine or contested matters). Shares not voted by a broker or other nominee, because they did not receive specific voting instructions from the stockholder on one or more proposals, are referred to as “broker non-votes.” We expect that when the NYSE determines whether each of the three proposals to be voted on at our Annual Meeting is a routine or non-routine matter, only “Proposal 2 — Ratification of the Appointment of KPMG LLP as Our Independent Registered Public | | | | | 76 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
Accounting Firm for Fiscal Year 2023” will be determined to be routine. It is important that you instruct your broker or other nominee on how to vote your shares of our common stock held in “street name” by following the instructions provided to you by your broker or other nominee. What if I want to change my vote? Whether you attend the Annual Meeting or not, you may revoke a proxy at any time before your proxy is voted at the Annual Meeting. You may do so by properly delivering a later-dated proxy either via internet, by telephone, by mail, or by attending the Annual Meeting virtually and voting. Please note, however, that your attendance at the Annual Meeting will not automatically revoke any prior proxy, unless you vote again at the Annual Meeting or specifically request in writing that your prior proxy be revoked. You also may revoke your proxy by delivering a notice of revocation to Corporate Secretary, XPO, Inc., Five American Lane, Greenwich, Connecticut 06831 prior to the vote at the Annual Meeting. If you hold your shares through a broker, dealer, commercial bank, trust company or other nominee, you should follow the instructions of your broker or other nominee regarding revocation of proxies. How will the persons named as proxies vote? If you are a registered stockholder (i.e., if you hold your shares of our common stock in your own name through our transfer agent, Computershare Trust Company, N.A., and not through a broker, bank or other nominee that holds shares for your account in “street name”) and you complete and submit a proxy, the persons named as proxies will follow your instructions. If you submit a proxy but do not provide voting instructions, or if your instructions are unclear, the persons named as proxies will vote as recommended by our Board of Directors or, if no recommendation is given, by using their own discretion. Where can I find the results of the voting? We intend to announce preliminary voting results at the Annual Meeting and will publish final results on a Current Report on Form 8-K to be filed with the U.S. Securities and Exchange Commission (the “SEC”) within four (4) business days after the Annual Meeting. The Current Report on Form 8-K will also be available on our website, www.xpo.com. Who will pay for the cost of soliciting proxies? The company will pay for the cost of soliciting proxies. We have engaged Innisfree M&A Incorporated to assist us in soliciting proxies in connection with the Annual Meeting and have agreed to pay them approximately $15,000 plus their expenses for providing such services. As is customary, we will reimburse brokerage firms, fiduciaries, voting trustees and other nominees for forwarding our proxy materials to each beneficial owner of shares of our common stock held through them as of the Record Date. Our directors, officers and other employees, without additional compensation, may solicit proxies personally, in writing, by telephone, by email or otherwise. What is “householding” and how does it affect me? In cases where multiple company stockholders share the same address, and the shares are held through a bank, broker or other holder of record in a street-name account, only one copy of our proxy materials will be delivered to that address unless a stockholder at that address requests otherwise. This practice, known as “householding,” is intended to reduce our printing and postage costs. However, any such street-name stockholders residing at the same address who wish to receive a separate copy of our proxy materials may request a copy by contacting their bank, broker or other holder of record, or by sending a written request to Investor Relations, XPO, Inc., Five American Lane, Greenwich, Connecticut 06831, or by contacting Investor Relations by email at investors@xpo.com. The voting instruction form sent to a street-name stockholder should provide information on how to request a separate copy of future materials for each company stockholder at that address, if that is your preference. Similarly, if you currently receive separate copies of our proxy materials but which to participate in householding, please contact us through the method described above. Can I obtain an electronic copy of the company’s proxy materials? Yes, this Proxy Statement and our 2022 Annual Report are available on the internet at www.edocumentview.com/XPO. | | | | | 77 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
PROPOSALS TO BE PRESENTED
Proposal 1: Election of Directors Proposal 1: Election of Directors
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Our Board of Directors has nominated for election at the Annual Meeting each of the following persons to serve until the 20222024 Annual Meeting of Stockholders or until their successors are duly elected and qualified:
Brad Jacobs Gena AsheMarlene ColucciAnnaMaria DeSalva
Jason Aiken
Bella Allaire
Wes Frye
Mario Harik
Michael Jesselson Adrian KingshottJason PapastavrouOren ShafferAll of the nominees for director listed above
Allison Landry
Irene Moshouris
Johnny C. Taylor, Jr.
Mr. Jacobs, Mr. Aiken, Mr. Jesselson, Ms. Landry and Mr. Taylor were elected as directors by our stockholders at our 20202022 Annual Meeting of Stockholders. As a result of the RXO spin-off, three of our directors resigned from the XPO Board and became directors of RXO. To fill the vacancies, the Board engaged an independent third party to conduct a search to find highly qualified candidates who bring relevant experience and diverse perspectives to the Board. Ms. Allaire and Mr. Moshouris were identified as such candidates and, upon the recommendation of the Nominating, Corporate Governance and Sustainability Committee, appointed directors by the Board on November 1, 2022. Also on November 1, 2022, Mr. Harik became a director and the CEO of the company. On March 8, 2023, upon the recommendation of the executive chairman and the Nominating, Corporate Governance and Sustainability Committee, the Board appointed Mr. Frye as a director of the company. Information about the nominees is set forth above under the heading "BoardBoard of Directors and Corporate Governance—Directors."Governance — Directors . In the event that any of these nominees is unable or declines to serve as a director at the time of the 2021 Annual Meeting, the proxies voting for his or her election will be voted for any nominee who shall be designated by the Board of Directors to fill the vacancy. As of the date of this Proxy Statement, we are not aware that any of the nominees is unable or will decline to serve as a director if elected.
The election of each of the eight (8)nine (9) director nominees named in this Proxy Statement requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for"“for” a nominee must exceed the number of shares voted "against"“against” such nominee) by holders of shares of our common stock (including those shares that would be issued if all of our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date).stock. If any incumbent director standing for election receives a greater number of votes "against"“against” his or her election than votes "for"“for” his or her election, our bylaws require that such person must promptly tender his or her resignation to the Board of Directors, subject to acceptance by the Board of Directors.
Our Board of Directors recommends a vote "FOR"“FOR” the election of each of the nominees listed above to our Board of Directors.
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Proposal 2: Ratification of the Appointment of KPMG LLP as our Independent Registered Public Accounting Firm for Fiscal Year 2021
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Proposal 2: Ratification of the Appointment of KPMG LLP as our Independent Registered Public Accounting Firm for Fiscal Year 2023 The Audit Committee of our Board of Directors has appointed KPMG LLP ("KPMG"(“KPMG”) to serve as our independent registered public accounting firm for the year ending December 31, 2021.2023. KPMG has served in this capacity since 2011. We are asking our stockholders to ratify the appointment of KPMG as our independent registered public accounting firm for the year ending December 31, 2021.2023. Although ratification is not required by our bylaws or otherwise, our Board of Directors is submitting the appointment of KPMG to our stockholders for ratification as a matter of good corporate governance. If our stockholders fail to ratify the appointment of KPMG, the Audit Committee will consider whether it is appropriate and advisable to appoint a different independent registered public accounting firm. Even if our stockholders ratify the appointment of KPMG, the Audit Committee in its discretion may appoint a different registered public accounting firm at any time if it determines that such a change would be in the best interests of our company and our stockholders. Representatives of KPMG are expected to be present at the annual meetingAnnual Meeting and will have an opportunity to make a statement if they desire to do so, and to respond to appropriate questions.
Ratification of the appointment of KPMG as our independent registered public accounting firm for the year ending December 31, 20212023 requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for"“for” such proposal must exceed the number of shares voted "against"“against” such proposal) by holders of shares of our common stock (including those shares that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the annual meeting at which a quorum is present.
Our Board of Directors recommends a vote "FOR"“FOR” the ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal year 2021.
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Proposal 3: Advisory Vote to Approve Executive Compensation
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Proposal 3: Advisory Vote to Approve Executive Compensation The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, and Section 14A of the Securities Exchange Act of 1934, require that we provide our stockholders with the opportunity to vote to approve, on a non-binding advisory basis, the compensation of our NEOs as disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. Accordingly, we are asking our stockholders to approve the following advisory resolution: “RESOLVED, that the stockholders of XPO, Logistics, Inc. (the "company"“company”) hereby approve, on an advisory basis, the compensation of the company'scompany’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in the Proxy Statement for the company's 2021company’s 2023 Annual Meeting of Stockholders."” We encourage stockholders to review the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosures included in this Proxy Statement. As described in detail under the heading "Executive Compensation—Executive Compensation — Compensation Discussion and Analysis", we believe that our compensation programs appropriately reward executive performance and align the interests of our NEOs and key employees with the long-term interests of our stockholders, while also enabling us to attract and retain talented executives. This resolution, commonly referred to as a "say-on-pay"“say-on-pay” resolution, is not binding on our Board of Directors. Although non-binding, our Board of Directors and the Compensation Committee will consider the voting results when making future decisions regarding our executive compensation program. At the 2018 Annual Meeting of Stockholders, our stockholders voted to approve an annual holding of the advisory vote on executive compensation. This frequency will continue until the next required non-binding, advisory vote is held on the frequency of advisory votes on executive compensation in 2024, as per the SEC rules.
Approval of this advisory resolution, commonly referred to as a "say-on-pay"“say-on-pay” resolution, requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for"“for” such proposal must exceed the number of shares voted "against"“against” such proposal) by holders of shares of our common stock (including those shares that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the annual meeting at which a quorum is present.
Our Board of Directors recommends a vote "FOR"“FOR” approval of the advisory resolution to approve executive compensation set forth above.
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Proposal 4: Stockholder Proposal Regarding Additional Disclosure of the Company's Political Activities
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We have been notified that the Service Employees International Union Pension Plans Master Trust, 1800 Massachusetts Ave NW, Suite 301, Washington, D.C. 20036, expects to introduce and support the following proposal at the 2021 Annual Meeting. This stockholder proponent has provided certification indicating that, as of December 16, 2020, it was the beneficial owner of 2,915 shares of the company's common stock, with an approximate value of $360,260, and that it intends to maintain such ownership through the date of the Annual Meeting. We are not responsible for the content of the stockholder proposal and the stockholder proponent's supporting statement, which are set forth below as they were submitted to us.
WHEREAS, we believe full disclosure of XPO's direct and indirect lobbying activities and expenditures is required to assess whether XPO's lobbying is consistent with its expressed goals and in stockholder interests.
RESOLVED: The stockholders of XPO request the preparation of a report, updated annually, disclosing:
1.Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications.
2.Payments by XPO used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient.
3.XPO's membership in and payments to any tax-exempt organization that writes and endorses model legislation.
4.Description of management's and the Board's decision-making process and oversight for making payments described in section 2 and 3 above.
For purposes of this proposal, a "grassroots lobbying communication" is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. "Indirect lobbying" is lobbying engaged in by a trade association or other organization of which XPO is a member.
Both "direct and indirect lobbying" and "grassroots lobbying communications" include efforts at the local, state and federal levels.
The report shall be presented to the Audit Committee and posted on XPO's website.
SUPPORTING STATEMENT:
XPO spent $360,000 on federal lobbying in 2019. This does not include state lobbying, where XPO also lobbies but disclosure is uneven or absent. The need for transparency has been heightened by scrutiny of former XPO CEO Louis DeJoy's role as Postmaster General.1
XPO belongs to the Business Roundtable (BRT), which spent $43,150,000 on federal lobbying for 2018 and 2019, and also the Road Haulage Association (RHA) in the United Kingdom. XPO does not disclose its memberships in, or payments to, trade associations and social welfare organizations, or the amounts used for lobbying, including grassroots. Grassroots lobbying does not get reported at the federal level under the Lobbying Disclosure Act, and disclosure is uneven or absent in states.
We are concerned XPO's payments to third party groups may be used for undisclosed grassroots lobbying. For example, XPO belongs to the American Legislative Exchange Council, which supports ending government regulation over private contracting.2
We believe XPO's lack of disclosure presents reputational risks when its lobbying contradicts company public positions. For example, CEO Jacobs signed the BRT's Statement on the Purpose of a Corporation, committing to invest in its employees with fair wages and important benefits, yet XPO has been accused of a business model "based on exploitation, illegal underpayments, and a callous approach to safety" for workers.3
And, XPO is committed to environmental sustainability, yet the RHA has reportedly lobbied to undermine clean air goals in the UK.4
We believe the reputational damage stemming from these misalignments harms long-term value creation, and we urge XPO to expand its lobbying disclosure.
1https://www.nytimes.com/article/general-louis-dejoy-postmaster.html
2https://www.exposedbycmd.org/2020/12/03/alec-holds-virtual-states-and-national-policy-summit/.
3https://www.jacobinmag.com/2020/10/xpo-logistics-worker-report-delivering-injustice.
4https://www.desmog.co.uk/2020/10/05/revealed-lobby-groups-backed-big-brands-fighting-against-air-pollution.
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STATEMENT IN OPPOSITION BY OUR BOARD OF DIRECTORS
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The XPO Board of Directors Unanimously Recommends a Vote Against Stockholder Proposal No. 4
The Board of Directors recommends a vote AGAINST this proposal for the reasons outlined below. XPO regularly reviews its disclosures relating to political activity and lobbying expenditures and believes these disclosures are appropriate and adequate. The additional detailed disclosures contemplated by this proposal represent an unnecessary expenditure of resources and would, in the opinion of the Board, not provide a corresponding benefit to stockholders. The company notes that contrary to the assertions in the supporting statement, Louis DeJoy never served as CEO of XPO and our CEO Jacobs did not sign the BRT's Statement on the Purpose of a Corporation.
XPO's Participation in the Public Policy Making Process is Limited
XPO is fully committed to providing transparency to stockholders on matters material to the company. XPO does not participate in direct political activities and its very minimal government affairs activities are limited to supporting initiatives that are relevant to the company's business almost exclusively through participation in relevant trade associations. The company does not have a political action committee and does not make corporate contributions to groups organized under section 501(c)(4) or section 527 of the Internal Revenue Code.
XPO does participate, on a limited basis, in organizations that represent the industries of which we are a part, as well as organizations that represent broader interests that are relevant to our business where we believe it is beneficial to stockholders. Our participation is oriented toward the ways in which such organizations can help promote and protect long-term stockholder value, and the company regularly evaluates the effectiveness of these organizations toward that goal. These organizations provide important insight into industry concerns and policy issues critical to our industry, our company, our customers and our communities. These organizations may also represent other interests not relevant to XPO, and the organizations and other members may take positions with which XPO, or individual stockholders, do not agree. Our participation in these organizations is evaluated appropriately with these considerations in mind..
XPO Maintains a Rigorous Oversight Process of Advocacy Efforts
XPO's advocacy efforts are managed by our vice president, corporate affairs, who reviews relevant legislative and regulatory initiatives with members of senior management. At least annually, XPO conducts a review of any trade association participation. Any material or significant issues that arise from these reviews are shared with the Board of Directors, which oversees lobbying expenditures as part of its oversight role of risks associated with the company's broader stakeholder engagement efforts.
XPO Complies with Reporting Requirements
XPO is subject to extensive federal, state and local lobbying registration and public disclosure requirements, with which the company fully complies. XPO's service partners file required federal Lobbying Disclosure Act reports with Congress, and these reports are publicly available at http://disclosures.house.gov. These reports provide XPO's total federal lobbying expenditures, the issue that is the topic of the stockholder proposal, disclosure of XPO individuals who act as lobbyists on behalf of the company and identification of the legislative body or executive branch agency that was contacted.
The Board believes that the company currently provides stockholders with adequate transparency and visibility into the company's political activities, and the Board does not believe that additional detailed disclosures would be beneficial to stockholders.
For these reasons, the Board of Directors unanimously urges stockholders to vote AGAINST Proposal No. 4.
Approval of a requirement that the company issue an annual report disclosing the company's political activities and related expenditures requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those shares that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
Our Board of Directors recommends a vote "AGAINST" this stockholder proposal.
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Proposal 5: Stockholder Proposal Regarding the Requirement that the Chairman of the Board be an Independent Director
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We have been notified that the International Brotherhood of Teamsters, 25 Louisiana Avenue, NW, Washington, D.C. 20001, expects to introduce and support the following proposal at the 2021 Annual Meeting. This stockholder proponent has provided certification indicating that, as of December 18, 2020, it was the beneficial owner of 160 shares of the company's common stock, with an approximate value of $14,000, and that it intends to maintain such ownership through the date of the Annual Meeting. We are not responsible for the content of the stockholder proposal and the stockholder proponent's supporting statement, which are set forth below as they were submitted to us.
RESOLVED: That shareholders of XPO Logistics, Inc. ("the Company"), urge the Board of Directors (the "Board") to take the steps necessary to adopt a policy, with amendments to governing documents as needed, so that, to the extent feasible, the Chairman of the Board shall be an independent director who has not previously served as an executive officer of the Company. The policy should be implemented so as not to violate any contractual obligations and should specify the process for selecting a new independent chairman if the chairman ceases to be independent between annual meetings of shareholders or if no independent director is available and willing to serve as chairman.
SUPPORTING STATEMENT: XPO's CEO currently serves as Board Chairman. In our view, the chairman should be an independent director, who has not previously served as an executive, in order to provide robust oversight and accountability of management, and to facilitate effective deliberation of corporate strategy, which we believe, is difficult to accomplish when the CEO serves as chairman. Even with robust responsibilities, we believe the position of a lead independent director is inadequate to this task because ultimate responsibility for board leadership remains with the chairman/CEO. We also do not believe the recent creation of a vice-chair role remedies the situation, with the position confusing rather than enhancing the board leadership structure.
In our opinion, these considerations are especially critical at XPO given concerns over the company's governance, culture and human capital management practices.
We note that at three of the past four annual shareholder meetings, "Say-on-Pay" has received less that seventy percent support from the votes cast. Incredibly, despite approximately thirty three percent of shares being against Say-on-Pay last year, XPO, nevertheless, went ahead and granted, in July, an award worth up to $80 million to the CEO.
XPO also continues to face considerable political and media scrutiny over allegations of pregnancy discrimination, sexual harassment and hazardous working conditions in its operation, following a New York Times investigation, in 2018, into a spate of miscarriages at an XPO facility in Memphis, TN. Similar concerns, we note, are raised by XPO's response to the COVID-19 pandemic. Workers, for instance, at an XPO facility in the United Kingdom were "terrified" to go back to work after 64 workers contracted Covid-19 and the company refused to quarantine the facility (https://www/bbc/com/news/uk-england-wiltshire-53610084).
Finally, the fairness and economic sustainability of XPO's use of independent contractors raise serious risks for investors. XPO faces numerous lawsuits and government enforcement actions alleging driver misclassification, wage theft, and the violation of labor law protections. XPO has already paid millions to drivers for similar past cases, including $16.5 million in June 2019. Critically, in its 10-K, XPO concedes that misclassification claims or changes to state law governing worker classification could have "material adverse" effect on the company's financial condition.
We urge fellow shareholders to vote FOR this proposal.
STATEMENT IN OPPOSITION BY OUR BOARD OF DIRECTORS
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The XPO Board of Directors Unanimously Recommends a Vote Against the Stockholder Proposal No. 5
XPO Has a Robust Governance Structure that Ensures Independent Oversight of Management
XPO has a robust corporate governance structure that enables the Board to strike the right balance between decisive leadership, effective decision-making and rigorous independent oversight of management. The current composition of our Board is highly independent. Currently seven out of XPO's eight directors are independent, three of whom have been added to the Board since 2016. Furthermore, the Board's committees and the committee chairs are comprised solely of independent directors. The charter of each committee requires that all members be independent, with the sole exception of the Acquisition Committee. However, the current members of the Acquisition Committee are also all independent.
To complement the roles of the committees and the committee chairs in providing effective independent oversight, the Board has established two leadership positions for independent directors—the lead independent director and the vice chairman.
The authorities and duties of the lead independent director include, among others: (i) presiding at executive sessions of outside directors and at meetings of the Board where the chairman is not present; (ii) coordinating with the chairman with respect to meeting agendas and approving final meeting agendas; (iii) coordinating with the chairman as to appropriate Board
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meeting schedules to ensure sufficient time for discussion of all agenda items; (iv) coordinating with the chairman on the materials sent to the Board and approving final meeting materials; (v) calling and chairing sessions of the independent directors; (vi) ensuring availability for direct stockholder communication as appropriate, if requested by major stockholders; and (vii) serving as a liaison between the chairman and the non-management directors.
Michael Jesselson, an independent director who has an exemplary record as a director of XPO and who has substantial public company board experience, has served as our lead independent director since 2016. The Board believes that the position of lead independent director has served as an effective balance to the dual role served by Brad Jacobs.
In early 2019, the Board established an independent vice chairman position as part of its ongoing commitment to strong corporate governance. The position of vice chairman is defined as an independent director with authorities and duties that include, among others: (i) presiding at meetings of the Board where the chairman and the lead independent director are not present; (ii) assisting the chairman, when appropriate, in carrying out his or her duties; (iii) assisting the lead independent director, when appropriate, in carrying out his or her duties; and (iv) such other duties, responsibilities and assistance as the Board or the chairman may determine.
AnnaMaria DeSalva, an independent director who has a wealth of experience with public policy development, has served as vice chairman of the Board since February 2019. In this role, Ms. DeSalva provides support on key governance matters to the chairman, the lead independent director and the rest of the Board and also serves as the primary independent director to engage with our stockholders.
To encourage open discussion without management's influence, XPO's Corporate Governance Guidelines (available on the Company's corporate website at www.xpo.com under the Investors tab) require that non-management directors meet one or more times annually without the presence of management. To further facilitate independent oversight, the Corporate Governance Guidelines provide for Board members' unfettered access to senior XPO officers and outside advisors, and also require directors to "exercise appropriate diligence in making decisions and in overseeing management of the Company . . . based on the best interests of the Company and its stockholders and without regard to any personal interest."
As a result of these strong governance practices, the independent oversight of management and of issues of fundamental importance to the company is already delegated to the Board's independent directors, including two independent directors who are part of the Board's mandated leadership structure.
XPO's Existing Governance Structure Strikes the Right Balance Between Ensuring Independent Oversight of Management and Preserving the Board's Imperative Flexibility
As the company's Board of Directors has repeatedly demonstrated over the years, the Board takes matters of corporate governance very seriously and believes that an appropriate balance exists between Mr. Jacobs' effective leadership and the robust corporate governance practices currently in effect. The Board understands the importance of determining the appropriate leadership structure for the company and reviews the company's existing board structure on an annual basis. The proposal, which requires that the chairman be an independent director who has not previously served as an executive officer of the company, would unduly restrict the Board from determining the best structure at a particular time and, thus, would not be in the best interests of the company and its stockholders. The Board's opinion on this matter is the product of its regular evaluations of Board policies, management performance, and its careful consideration of the proposal at hand.
Mr. Jacobs' Continued Service in these Roles has the Support of our Stockholders
Over the past several years, XPO has met with stockholders representing a significant portion of our outstanding shares to discuss a range of topics, including our board composition and leadership structure. Through these conversations, we have heard consistent feedback that stockholders are comfortable with our current board leadership structure and in support of Mr. Jacobs' continued service as both chairman and CEO. We have also discussed and made responsive changes to our disclosure around the roles and responsibilities of our independent leadership on the Board.
Mr. Jacobs' Combined Role of Chairman and CEO is in the Best Interests of XPO's Stockholders
The Board believes that the short-term and long-term interests of the company's stockholders are best served by Brad Jacobs continuing to serve as both Board chairman and chief executive officer. Mr. Jacobs has a long track record of creating significant value for stockholders. Since Mr. Jacobs joined XPO as chairman and CEO in 2011, XPO's annual revenue has grown from less than $200 million to more than $16 billion and XPO's stock has been the seventh best-performing stock of the prior decade among the Fortune 500, based on Bloomberg market data ending December 31, 2019. Under Mr. Jacobs' leadership, the company has won numerous accolades, including being named one of the "World's Most Admired Companies" by Fortune magazine and one of "America's Best Employers" by Forbes magazine. On December 2, 2020, Mr. Jacobs underscored his commitment to maximizing shareholder value when XPO announced that the Board authorized a spinoff of XPO's logistics segment into an independent, publicly-traded company. The planned spinoff demonstrates Mr. Jacobs' ability to focus on creating value for stockholders and also remain intensely committed to the satisfaction of our customers and employees. The Board believes that Mr. Jacobs' leadership in both his Board and executive roles has been critical to the success of XPO's business and culture, and that separating the roles would be deleterious in both the near-term and the long-term and would unduly risk the speed and quality of the company's decision-making process.
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Therefore, the Board believes that this proposal is both unnecessary and contrary to the best interests of XPO's stockholders, particularly because it would deprive the Board of the flexibility to exercise its business judgment in selecting the most qualified and appropriate individuals to lead the Board.
For these reasons, the Board of Directors unanimously urges stockholders to vote AGAINST Proposal No. 5.
Approval of a stockholder proposal regarding the requirement that the chairman of the board be an independent director requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
Our Board of Directors recommends a vote "AGAINST" this stockholder proposal.
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Proposal 6: Stockholder Proposal Regarding Acceleration of Executive Equity Awards in the Case of a Change in Control
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We have been notified that the CtW Investment Group, 1900 L Street NW, Suite 900, Washington, D.C. 20036 expects to introduce and support the following proposal at the 2021 Annual Meeting. This stockholder proponent has provided certification indicating that, as of December 18, 2020, it was the beneficial owner of at least $2,000 worth of the company's common stock, and that it intends to hold at least the minimum number of shares of the company's common stock required by the SEC through the date of the Annual Meeting. We are not responsible for the content of the stockholder proposal and the stockholder proponent's supporting statement, which are set forth below as they were submitted to us.
RESOLVED: The shareholders ask the Board of Directors of XPO Logistics, Inc. to adopt a policy that in the event of a change in control (as defined under any applicable employment agreement, equity incentive plan or other plan), there shall be no acceleration of vesting of any equity award granted to any senior executive officer, provided, however, that the Board's Compensation Committee may provide in an applicable grant or purchase agreement that any unvested award will vest on a partial, pro rata basis up to the time of the senior executive officer's termination, with such qualifications for an award as the Committee may determine.
For purposes of this Policy, "equity award" means an award granted under an equity incentive plan as defined in Item 402 of the SEC's Regulation S-K, which addresses elements of executive compensation to be disclosed to shareholders. This resolution shall be implemented so as not to affect any contractual rights in existence on the date this proposal is adopted, and it shall apply only to equity awards made under equity incentive plans or plan amendments that shareholders approve after the date of the 2021 annual meeting.
SUPPORTING STATEMENT: XPO Logistics ("Company") allows senior executives to receive an accelerated award of unearned equity under certain conditions after a change of control of the Company. We do not question that some form of severance payments may be appropriate in that situation. We are concerned, however, that current practices at the Company may permit windfall awards that have nothing to do with an executive's performance.
According to last year's proxy statement, a change in control could have accelerated the vesting of approximately $120 million worth of long-term equity to the Company's five senior executives, with Chairman and Chief Executive Officer Bradley Jacobs entitled to over $74 million.
We are unpersuaded by the argument that executives somehow "deserve" to receive unvested awards. To accelerate the vesting of unearned equity on the theory that an executive was denied the opportunity to earn those shares seems inconsistent with a "pay for performance" philosophy worthy of the name. Additionally, we note that shareholders have repeatedly expressed their concern regarding excessive executive compensation at the Company, with over 30 percent opposition to the Say-on-Pay proposal over several years (2020, 2019, and 2017).
We do believe, however, that an affected executive should be eligible to receive an accelerated vesting of equity awards on a pro rata basis as of his or her termination date, with the details of any pro rata award to be determined by the Compensation Committee.
According to Institutional Shareholder Services, 38% of Russell 3000 companies prohibited equity acceleration of performance-based shares upon a change of control in 2018.
We urge you to vote FOR this proposal.
STATEMENT IN OPPOSITION BY OUR BOARD OF DIRECTORS
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The XPO Board of Directors Unanimously Recommends a Vote Against Stockholder Proposal No. 6
The Current Structure of Equity Awards Aligns the Interests of our Senior Executives and Stockholders, Encourages Stability During a Potential Change in Control, and Rewards Executives for their Performance
As we describe in detail in the section of this Proxy Statement titled "Executive Compensation—Compensation Discussion and Analysis," our compensation program for senior executives is premised on our pay-for-performance culture and our commitment to align executive compensation with long-term stockholder value. We believe that our Compensation Committee, which is composed entirely of independent directors, is best positioned to design and implement executive compensation arrangements that are appropriate for our company and our stockholders, including with respect to the treatment of equity awards in connection with a change in control.
The Proponent attempts to preemptively bind the Compensation Committee with respect to a singular element of our executive compensation program. The proposal would prohibit the Compensation Committee from providing for accelerated vesting of unvested equity awards held by senior executive officers upon the occurrence of a change in control and permit only pro rata vesting of equity awards up to the time of a senior executive officer's termination of employment following a change in control. In the context of a potential change in control, any perceived lack of protection of the value of unvested equity awards can
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create conflicts of interest and distractions because of uncertainty that may arise for executives, such as loss of job security. Accelerated equity award vesting can eliminate potential disincentives for executives to forego pursuing a change in control transaction that would benefit stockholders. In particular, accelerated vesting aligns the interests of stockholders and executives by allowing key decision makers to remain objective and focused on maximizing stockholder value up to and following a potential change in control. The Compensation Committee should be able to exercise its business judgment to determine whether, and under what circumstances, the accelerated vesting of equity awards is in the best interest of the company and our stockholders.
Adopting the Proposal Would Limit the Company's Ability to Attract and Retain Talented Executives
As indicated in the Proponent's Supporting Statement, pro rata vesting is not market practice—in fact, approximately 86% of companies in the Russell 3000 in 2019 did not prohibit accelerated vesting of performance-based equity awards upon a change in control according to Institutional Shareholder Services. Therefore, limiting the business judgment of the Compensation Committee and adopting the Proponent's one-size-fits-all approach could place us at a competitive disadvantage in attracting and retaining senior executives, particularly if a change in control transaction is pending or contemplated.
Further, accelerated vesting of equity awards is an effective way for us to retain our leadership team up to and following a change in control transaction. Retaining senior executives while a change in control transaction is pending can be particularly important to the company's continued success because the loss of such executives could jeopardize a pending transaction or adversely affect the company's business prospects or operations if the transaction is not completed. Adopting the proposal could create a significant disadvantage in retaining key executives, which could result in executive turnover that would be detrimental to the company and our stockholders.
The Company's Demonstrated Commitment to Pay-For-Performance Refutes the Allegations Made in the Proposal
Although we believe many of the assertions in the Proponent's Supporting Statement are irrelevant to the proposal itself, we want to specifically add context to several misleading statements related to our commitment to our pay-for-performance philosophy. The Proponent suggests that accelerated vesting of equity awards is premised on our belief that executives are denied the opportunity to earn those shares in the event of a change in control transaction. However, it is for the reasons articulated above and in the Compensation Discussion & Analysis section of our proxy statement that our Board believes that the current structure of the company's executive compensation awards is appropriate and effective. Moreover, the Proponent fails to acknowledge our continued commitment to our pay-for-performance philosophy. For example, the company's executive compensation program consists of fixed base salaries and variable incentive compensation in the form of annual cash incentives and equity grants that emphasize pay for performance. In addition, the total reward package for each named executive officer reflects an assessment of individual responsibilities, contributions to corporate performance, the company's trend on total stockholder return, and the company's overall success in achieving its strategic goals. Further, all of the outstanding equity awards granted to Mr. Jacobs, Mr. Cooper and Mr. Harik are performance-based, demonstrating our company's strong commitment to aligning executive compensation with long-term stockholder value.
As evidence of this commitment, in 2020, the Compensation Committee reviewed the pay-for-performance alignment of XPO's compensation program on a realizable basis, using a four-year period to align with XPO's performance periods. This analysis demonstrated that pay has been extremely well-aligned with performance. From 2016-2019, XPO's realizable pay was at the 82nd percentile versus peers, while TSR performance was at the 91st percentile.
Accordingly, our Board believes that the current structure of our executive compensation program, including the provisions related to accelerated vesting of equity awards, appropriately reflects our pay-for-performance philosophy, aligning the interests of our executives with those of our stockholders and allowing us to attract and retain talented executives.
For these reasons, the Board of Directors unanimously urges stockholders to vote AGAINST Proposal No. 6.
Approval of a stockholder proposal regarding acceleration of executive equity awards in the case of a change in control requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
Our Board of Directors recommends a vote "AGAINST" this stockholder proposal.
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We do not expect that any matter other than the foregoing proposals will be brought before the 2021 Annual Meeting. If, however, such a matter is properly presented at the Annual Meeting or any adjournment or postponement of the Annual Meeting, the persons appointed as proxies will vote as recommended by our Board of Directors or, if no recommendation is given, in accordance with their judgment.
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| | | ADDITIONAL INFORMATION | | | | | | | | 80 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
AVAILABILITY OF ANNUAL REPORT AND PROXY STATEMENT
ADDITIONAL INFORMATION | |
AVAILABILITY OF ANNUAL REPORT AND PROXY STATEMENT If you would like to receive a copy of our 20202022 Annual Report or this Proxy Statement, please contact us at:at Investor Relations, XPO, Logistics, Inc., Five American Lane, Greenwich, CTConnecticut 06831 or by telephoneemail at 1-855-976-6951,investors@xpo.com, and we will send a copy to you without charge.
Although we include references to our website, www.xpo.com, and certain additional third-party websites, throughout this Proxy Statement, information that is included on our website is not incorporated by reference into, and is not a part of, this Proxy Statement. Our website address is included as an inactive textual reference only. We use our website as one means of disclosing material non-public information and for complying with our disclosure obligations under the SEC'sSEC’s Regulation FD. Such disclosures typically will be included within the Investor Relations section of our website. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
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| | | ANNEX A—
RECONCILIATION OF NON-GAAP MEASURES | | | | | | | | 81 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
ANNEX A— | RECONCILIATION OF NON-GAAP MEASURES | |
CONSOLIDATED RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA Unaudited
$ in millions | | | | | | Years Ended December 31, | | | | | | | | 2022 | | | | 2021 | | | | 2020 | | | | Income (loss) from continuing operations | | | | | $ | 184 | | | | | | $ | 96 | | | | | | $ | (110) | | | | | Debt extinguishment loss | | | | | | 39 | | | | | | | 54 | | | | | | | — | | | | | Interest expense | | | | | | 135 | | | | | | | 211 | | | | | | | 308 | | | | | Income tax provision (benefit) | | | | | | 74 | | | | | | | 11 | | | | | | | (54) | | | | | Depreciation and amortization expense | | | | | | 392 | | | | | | | 385 | | | | | | | 378 | | | | | Goodwill impairment(1) | | | | | | 64 | | | | | | | — | | | | | | | — | | | | | Transaction and integration costs | | | | | | 58 | | | | | | | 36 | | | | | | | 67 | | | | | Restructuring costs | | | | | | 50 | | | | | | | 19 | | | | | | | 22 | | | | | Other | | | | | | 1 | | | | | | | — | | | | | | | (2) | | | | | Adjusted EBITDA | | | | | $ | 997 | | | | | | $ | 812 | | | | | | $ | 609 | | | | | | | | | | | | | | | | | | |
(1)
The goodwill impairment relates to the European Transportation reportable segment CONSOLIDATED RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS AND ADJUSTED DILUTED EARNINGS FROM CONTINUING OPERATIONS PER SHARE (“ADJUSTED DILUTED EPS”) Unaudited
$ in millions, except per share data | | | | | | Years Ended December 31, | | | | | | | | 2022 | | | | 2021 | | | | Net income from continuing operations attributable to common shareholders | | | | | $ | 184 | | | | | | $ | 96 | | | | | Debt extinguishment loss | | | | | | 39 | | | | | | | 54 | | | | | Unrealized loss on foreign currency option and forward contracts | | | | | | — | | | | | | | 1 | | | | | Amortization of acquisition-related intangible assets | | | | | | 54 | | | | | | | 55 | | | | | ABL amendment cost | | | | | | — | | | | | | | 1 | | | | | Goodwill impairment(1) | | | | | | 64 | | | | | | | — | | | | | Transaction and integration costs | | | | | | 58 | | | | | | | 36 | | | | | Restructuring costs | | | | | | 50 | | | | | | | 19 | | | | | Income tax associated with the adjustments above | | | | | | (41) | | | | | | | (35) | | | | | Discrete and other tax-related adjustments | | | | | | — | | | | | | | (5) | | | | | Adjusted net income from continuing operations attributable to common shareholders | | | | | $ | 408 | | | | | | $ | 222 | | | | | Adjusted diluted earnings from continuing operations per share | | | | | $ | 3.53 | | | | | | $ | 1.94 | | | | | Weighted-average common shares outstanding | | | | | | | | | | | | | | | | | | Diluted weighted-average common shares outstanding | | | | | | 116 | | | | | | | 114 | | |
(1)
The goodwill impairment relates to the European Transportation reportable segment. CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
$ in millions
| | | | 82 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
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Net income attributable to common shareholders | | | | | $93 | | | | | $96 | | | | | $79 | | | | | $379 | | Preferred stock conversion charge(1) | | | | | 22 | | | | | — | | | | | 22 | | | | | — | | Distributed and undistributed net income | | | | | 10 | | | | | 11 | | | | | 9 | | | | | 40 | | Net income attributable to noncontrolling interests | | | | | 3 | | | | | — | | | | | 7 | | | | | 21 | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | | | 128 | | | | | 107 | | | | | 117 | | | | | 440 | | | | | | | | | | | | | | | | | | | | | | | | | Debt extinguishment loss | | | | | — | | | | | — | | | | | — | | | | | 5 | | Interest expense | | | | | 85 | | | | | 74 | | | | | 325 | | | | | 292 | | Income tax provision | | | | | 33 | | | | | 30 | | | | | 31 | | | | | 129 | | Depreciation and amortization expense | | | | | 194 | | | | | 193 | | | | | 766 | | | | | 739 | | Unrealized (gain) loss on foreign currency option and forward contracts | | | | | (1 | ) | | | | 4 | | | | | (2 | ) | | | | 9 | | Transaction and integration costs | | | | | 7 | | | | | 3 | | | | | 100 | | | | | 5 | | Restructuring costs | | | | | 3 | | | | | 21 | | | | | 56 | | | | | 49 | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted EBITDA | | | | | $449 | | | | | $432 | | | | | $1,393 | | | | | $1,668 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CONSOLIDATED RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS TO FREE CASH FLOW | | | | | | Years Ended December 31, | | | | | | | | 2022 | | | | 2021 | | | | Net cash provided by operating activities from continuing operations | | | | | $ | 824 | | | | | | $ | 490 | | | | | Payment for purchases of property and equipment | | | | | | (521) | | | | | | | (269) | | | | | Proceeds from sales of property and equipment | | | | | | 88 | | | | | | | 131 | | | | | Free cash flow | | | | | $ | 391 | | | | | | $ | 352 | | | | | | | | | | | | | | |
CONSOLIDATED RECONCILIATION OF NET LEVERAGE AND NET DEBT Unaudited
$ in millions | | | | | | December 31, 2022 | | | | March 31, 2022
As Reported(1) | | | | December 31, 2021
As Reported(1) | | | | Reconciliation of Net Debt | | | | | | | | | | | | | | | | | | | | | | | | | Total debt | | | | | $ | 2,532 | | | | | | $ | 3,559 | | | | | | $ | 3,572 | | | | | Less: Cash and cash equivalents | | | | | | 460 | | | | | | | 1,004 | | | | | | | 260 | | | | | Net debt | | | | | $ | 2,072 | | | | | | $ | 2,555 | | | | | | $ | 3,312 | | | | | | | | | | | | | | | | | | |
| | | | | | Year Ended
December 31, 2022 | | | | Three Months Ended
March 31, 2022
As Reported(1) | | | | Year Ended
December 31, 2021
As Reported(1) | | | | Reconciliation of Net Leverage | | | | | | | | | | | | | | | | | | | | | | | | | Net debt | | | | | $ | 2,072 | | | | | | $ | 2,555 | | | | | | $ | 3,312 | | | | | Trailing twelve months adjusted EBITDA | | | | | $ | 997 | | | | | | $ | 1,281 | | | | | | $ | 1,239 | | | | | Net leverage | | | | | | 2.1x | | | | | | | 2.0x | | | | | | | 2.7x | | |
| | | | | | Trailing Twelve
Months Ended
March 31, | | | | Three Months
Ended
March 31, | | | | Twelve Months
Ended
December 31, | | | | Three Months
Ended
March 31, | | | | | | | | 2022(1) | | | | 2022(1) | | | | 2021(1) | | | | 2021(1) | | | | Reconciliation of Income from Continuing Operations to Adjusted EBITDA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income from continuing operations | | | | | $ | 749 | | | | | | $ | 489 | | | | | | $ | 323 | | | | | | $ | 63 | | | | | Debt extinguishment loss | | | | | | 46 | | | | | | | — | | | | | | | 54 | | | | | | | 8 | | | | | Interest expense | | | | | | 183 | | | | | | | 37 | | | | | | | 211 | | | | | | | 65 | | | | | Income tax provision | | | | | | 181 | | | | | | | 113 | | | | | | | 87 | | | | | | | 19 | | | | | Depreciation and amortization expense | | | | | | 473 | | | | | | | 116 | | | | | | | 476 | | | | | | | 119 | | | | | Unrealized (gain) loss on foreign currency option and forward contracts | | | | | | 2 | | | | | | | — | | | | | | | 1 | | | | | | | (1) | | | | | Gain on sale of business | | | | | | (450) | | | | | | | (450) | | | | | | | — | | | | | | | — | | | | | Litigation settlements | | | | | | 31 | | | | | | | — | | | | | | | 31 | | | | | | | — | | | | | Transaction and integration costs | | | | | | 42 | | | | | | | 10 | | | | | | | 37 | | | | | | | 5 | | | | | Restructuring costs | | | | | | 24 | | | | | | | 6 | | | | | | | 19 | | | | | | | 1 | | | | | Adjusted EBITDA | | | | | $ | 1,281 | | | | | | $ | 321 | | | | | | $ | 1,239 | | | | | | $ | 279 | | | | | | | | | | | | | | | | | | | | | | |
(1)Relates
Represents amounts previously reported for the periods presented, prior to the conversion of 69,445 shares of the company's Series A Preferred Stock.RXO spin-off
CONSOLIDATED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
$ in millions
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Net income (loss) | | | | | ($109 | ) | | | | $197 | | | | | $226 | | | | | $243 | | | | | | | | | | | | | | | | | | | | | | | | | Debt extinguishment loss | | | | | — | | | | | 5 | | | | | — | | | | | — | | Interest expense | | | | | 154 | | | | | 143 | | | | | 171 | | | | | 149 | | Income tax provision (benefit) | | | | | (61 | ) | | | | 65 | | | | | 92 | | | | | 64 | | Depreciation and amortization expense | | | | | 379 | | | | | 360 | | | | | 387 | | | | | 379 | | Unrealized (gain) loss on foreign currency option and forward contracts | | | | | (1 | ) | | | | 9 | | | | | (1 | ) | | | | — | | Transaction and integration costs | | | | | 90 | | | | | 2 | | | | | 10 | | | | | 3 | | Restructuring costs | | | | | 53 | | | | | 17 | | | | | 3 | | | | | 32 | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted EBITDA | | | | | $505 | | | | | $798 | | | | | $888 | | | | | $870 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
RECONCILIATION OF CONSTANT CURRENCY REVENUE FOR EUROPEAN TRANSPORTATION SEGMENT Unaudited
$ in millions | | | | | | Years Ended December 31, | | | | | | | | 2022 | | | | 2021 | | | | Revenue | | | | | $ | 3,073 | | | | | | $ | 3,077 | | | | | Foreign exchange rates | | | | | | 379 | | | | | | | — | | | | | Constant currency revenue | | | | | $ | 3,452 | | | | | | $ | 3,077 | | | | | Constant currency revenue growth(1) | | | | | | 12.2% | | | | | | | | | | | | | | | | | | | | | |
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(1)
TableConstant currency revenue growth is calculated as the relative change in year-over-year constant currency revenue, expressed as a percentage of Contents
2021 constant currency revenue CONSOLIDATED RECONCILIATION OF GAAP NET INCOME AND NET INCOME PER SHARE TO ADJUSTED NET INCOME AND ADJUSTED NET INCOME PER SHARE
$ in millions, except per-share data
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RECONCILIATION OF NORTH AMERICAN LTL SEGMENT ADJUSTED OPERATING RATIO AND ADJUSTED EBITDA Unaudited
$ in millions | | | | | | Years Ended December 31, | | | | | | | | 2022 | | | | 2021 | | | | Revenue (excluding fuel surcharge revenue) | | | | | $ | 3,631 | | | | | | $ | 3,493 | | | | | Fuel surcharge revenue | | | | | | 1,014 | | | | | | | 632 | | | | | Revenue | | | | | | 4,645 | | | | | | | 4,125 | | | | | Salaries, wages and employee benefits | | | | | | 2,079 | | | | | | | 1,909 | | | | | Purchased transportation | | | | | | 499 | | | | | | | 452 | | | | | Fuel and fuel-related taxes | | | | | | 424 | | | | | | | 282 | | | | | Other operating expenses | | | | | | 601 | | | | | | | 556 | | | | | Depreciation and amortization | | | | | | 239 | | | | | | | 227 | | | | | Rents and leases | | | | | | 92 | | | | | | | 79 | | | | | Transaction and integration costs | | | | | | 3 | | | | | | | 1 | | | | | Restructuring costs | | | | | | 5 | | | | | | | — | | | | | Operating income | | | | | | 703 | | | | | | | 619 | | | | | Operating ratio(1) | | | | | | 84.9% | | | | | | | 85.0% | | | | | Other income(2) | | | | | | 60 | | | | | | | 58 | | | | | Amortization expense | | | | | | 34 | | | | | | | 34 | | | | | Transaction and integration costs | | | | | | 3 | | | | | | | 1 | | | | | Restructuring costs | | | | | | 5 | | | | | | | — | | | | | Adjusted operating income | | | | | $ | 805 | | | | | | $ | 712 | | | | | Adjusted operating ratio(3) | | | | | | 82.7% | | | | | | | 82.7% | | | | | Depreciation expense | | | | | | 205 | | | | | | | 193 | | | | | Other | | | | | | 2 | | | | | | | 1 | | | | | Adjusted EBITDA(4) | | | | | $ | 1,012 | | | | | | $ | 906 | | | | | Gains on real estate transactions | | | | | | (55) | | | | | | | (62) | | | | | Adjusted EBITDA, excluding gains on real estate transactions | | | | | $ | 957 | | | | | | $ | 844 | | | | | Adjusted operating income, excluding gains on real estate transactions | | | | | $ | 750 | | | | | | $ | 650 | | | | | Adjusted operating ratio, excluding gains on real estate transactions(3) | | | | | | 83.9% | | | | | | | 84.3% | | | | | | | | | | | | | | |
The above table reflects the results of our North American LTL segment as reported in our 2022 Form 10-K, we subsequently filed a Current Report on Form 8-K on April 11, 2023 that recast these amounts to reflect incremental Corporate costs. Please see the following table for further information | | | | | | | | | | | | | | | | | | | | | |
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December 31,
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | | | | 2019 | | | | | 2020 | | | | | 2019 | | GAAP net income attributable to common shareholders | | | | | $93 | | | | | $96 | | | | | $79 | | | | | $379 | | Preferred stock conversion charge(1) | | | | | 22 | | | | | — | | | | | 22 | | | | | — | | Debt extinguishment loss | | | | | — | | | | | — | | | | | — | | | | | 5 | | Unrealized (gain) loss on foreign currency option and forward contracts | | | | | (1 | ) | | | | 4 | | | | | (2 | ) | | | | 9 | | Impairment of customer relationship intangibles | | | | | — | | | | | — | | | | | — | | | | | 6 | | Transaction and integration costs | | | | | 7 | | | | | 3 | | | | | 100 | | | | | 5 | | Restructuring costs | | | | | 3 | | | | | 21 | | | | | 56 | | | | | 49 | | Income tax associated with the adjustments above | | | | | 1 | | | | | (6 | ) | | | | (35 | ) | | | | (18 | ) | Impact of noncontrolling interests on above adjustments | | | | | — | | | | | (1 | ) | | | | (1 | ) | | | | (2 | ) | Allocation of undistributed earnings | | | | | (4 | ) | | | | (2 | ) | | | | (14 | ) | | | | (5 | ) | | | | | | | | | | | | | | | | | | | | | | | | Adjusted net income attributable to common shareholders | | | | | $121 | | | | | $115 | | | | | $205 | | | | | $428 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted basic earnings per share | | | | | $1.32 | | | | | $1.25 | | | | | $2.24 | | | | | $4.46 | | Adjusted diluted earnings per share | | | | | $1.19 | | | | | $1.12 | | | | | $2.01 | | | | | $4.03 | | Weighted-average common shares outstanding | | | | | | | | | | | | | | | | | | | | | | Basic weighted-average common shares outstanding | | | | | 92 | | | | | 92 | | | | | 92 | | | | | 96 | | Diluted weighted-average common shares outstanding | | | | | 102 | | | | | 103 | | | | | 102 | | | | | 106 | | | | | | | | | | | | | | | | | | | | | | | | |
(1)Relates to the conversion of 69,445 shares of the company's Series A Preferred Stock.
RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES TO FREE CASH FLOW
$ in millions
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| Net cash provided by operating activities | | | | | $885 | | | | | $791 | | | Cash collected on deferred purchase price receivable | | | | | — | | | | | 186 | | | | | | | | | | | | | | | Adjusted net cash provided by operating activities | | | | | 885 | | | | | 977 | | | | | | | | | | | | | | | | Payment for purchases of property and equipment | | | | | (526 | ) | | | | (601 | ) | | Proceeds from sale of property and equipment | | | | | 195 | | | | | 252 | | | | | | | | | | | | | | | | Free Cash Flow | | | | | $554 | | | | | $628 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES TO FREE CASH FLOW
$ in millions
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Net cash provided by operating activities | | | | | $394 | | | | | $164 | | | | | $491 | | | | | $627 | | Cash collected on deferred purchase price receivable | | | | | — | | | | | 137 | | | | | — | | | | | 49 | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted net cash provided by operating activities | | | | | 394 | | | | | 301 | | | | | 491 | | | | | 676 | | | | | | | | | | | | | | | | | | | | | | | | | Payment for purchases of property and equipment | | | | | (255 | ) | | | | (236 | ) | | | | (271 | ) | | | | (365 | ) | Proceeds from sale of property and equipment | | | | | 77 | | | | | 85 | | | | | 118 | | | | | 167 | | | | | | | | | | | | | | | | | | | | | | | | | Free Cash Flow | | | | | $216 | | | | | $150 | | | | | $338 | | | | | $478 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Table of Contents
XPO LOGISTICS NORTH AMERICAN LESS-THAN-TRUCKLOAD RECONCILIATION OF ADJUSTED OPERATING RATIO
$ in millions
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| | | | | | | | | | | | | | | | | | | | | 2020 | | | | | 2019 | | | Revenue (excluding fuel surcharge revenue) | | | | | $806 | | | | | $777 | | | Fuel surcharge revenue | | | | | 110 | | | | | 128 | | | | | | | | | | | | | | | | Revenue | | | | | 916 | | | | | 905 | | | Salaries, wages and employee benefits | | | | | 452 | | | | | 436 | | | Purchased transportation | | | | | 88 | | | | | 92 | | | Fuel and fuel-related taxes | | | | | 48 | | | | | 59 | | | Other operating expenses | | | | | 117 | | | | | 101 | | | Depreciation and amortization | | | | | 55 | | | | | 58 | | | Rents and leases | | | | | 18 | | | | | 13 | | | | | | | | | | | | | | | | Operating income | | | | | 138 | | | | | 146 | | | | | | | | | | | | | | | | Operating ratio | | | | | 84.9% | | | | | 83.9% | | | | | | | | | | | | | | | | Restructuring costs | | | | | (1 | ) | | | | — | | | Amortization expense | | | | | 9 | | | | | 9 | | | Other income | | | | | 10 | | | | | 5 | | | | | | | | | | | | | | | | Adjusted operating income | | | | | $156 | | | | | $160 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted operating ratio(1) | | | | | 83.0% | | | | | 82.3% | | | | | | | | | | | | | | |
(1)Excluding the impact of gains on real estate transactions from both periods, the adjusted operating ratio decreased by 130 basis points from 85.8%Effective in the fourth quarter 2022, the financial results of 2019 to 84.5%the company’s trailer manufacturing operations are reported in the fourth quarterNorth American LTL segment and prior period results have been recast to reflect the current presentation
(1)
Operating ratio is calculated as (1 – (operating income divided by revenue)) (2)
Other income primarily consists of 2020. pension income
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(3)
TableAdjusted operating ratio is calculated as (1 – (adjusted operating income divided by revenue)); adjusted operating margin is the inverse of Contents
adjusted operating ratio (4)
Adjusted EBITDA is used by the company’s chief operating decision maker to evaluate segment profit (loss) in accordance with ASC 280
NON-GAAP FINANCIAL MEASURES
| | | | 84 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
RECONCILIATION OF NORTH AMERICAN LTL SEGMENT ADJUSTED OPERATING RATIO AND ADJUSTED EBITDA REFLECTING INCREMENTAL CORPORATE COSTS Unaudited
$ in millions | | | | | | Years Ended December 31, | | | | | | | | 2022 | | | | 2021 | | | | Revenue (excluding fuel surcharge revenue) | | | | | $ | 3,631 | | | | | | $ | 3,493 | | | | | Fuel surcharge revenue | | | | | | 1,014 | | | | | | | 632 | | | | | Revenue | | | | | | 4,645 | | | | | | | 4,125 | | | | | Salaries, wages and employee benefits | | | | | | 2,176 | | | | | | | 2,028 | | | | | Purchased transportation | | | | | | 499 | | | | | | | 452 | | | | | Fuel, operating expenses and supplies(1) | | | | | | 983 | | | | | | | 782 | | | | | Operating taxes and licenses | | | | | | 48 | | | | | | | 44 | | | | | Insurance and claims | | | | | | 123 | | | | | | | 113 | | | | | Gains on sales of property and equipment | | | | | | (54) | | | | | | | (61) | | | | | Depreciation and amortization | | | | | | 239 | | | | | | | 227 | | | | | Transaction and integration costs | | | | | | 3 | | | | | | | 1 | | | | | Restructuring costs | | | | | | 5 | | | | | | | — | | | | | Operating income | | | | | | 623 | | | | | | | 539 | | | | | Operating ratio(2) | | | | | | 86.6% | | | | | | | 86.9% | | | | | Other income | | | | | | 1 | | | | | | | — | | | | | Amortization expense | | | | | | 34 | | | | | | | 34 | | | | | Transaction and integration costs | | | | | | 3 | | | | | | | 1 | | | | | Restructuring costs | | | | | | 5 | | | | | | | — | | | | | Gains on real estate transactions | | | | | | (55) | | | | | | | (62) | | | | | Adjusted operating income | | | | | $ | 611 | | | | | | $ | 512 | | | | | Adjusted operating ratio(3) | | | | | | 86.8% | | | | | | | 87.6% | | | | | Depreciation expense | | | | | | 205 | | | | | | | 193 | | | | | Pension income | | | | | | 59 | | | | | | | 58 | | | | | Gains on real estate transactions | | | | | | 55 | | | | | | | 62 | | | | | Other | | | | | | 2 | | | | | | | 1 | | | | | Adjusted EBITDA(4) | | | | | $ | 932 | | | | | | $ | 826 | | | | | Adjusted EBITDA Margin(5) | | | | | | 20.1% | | | | | | | 20.0% | | | | | | | | | | | | | | |
Effective in the first quarter of 2023, XPO began allocating incremental Corporate costs to its North American LTL segment. The above table reflects a recast of our previously reported results to reflect incremental allocations of approximately $80 million annually. (1)
Fuel, operating expenses and supplies includes fuel-related taxes (2)
Operating ratio is calculated as (1 – (operating income divided by revenue)) (3)
Adjusted operating ratio is calculated as (1 – (adjusted operating income divided by revenue)); adjusted operating margin is the inverse of adjusted operating ratio (4)
Adjusted EBITDA is used by our chief operating decision maker to evaluate segment profit (loss) in accordance with ASC 280 (5)
Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue | | | | | 85 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
NORTH AMERICAN LTL SEGMENT RETURN ON INVESTED CAPITAL Unaudited
$ in millions | | | | | | Year Ended | | | | Select income statement items | | | | December 31, 2022 | | | | Adjusted EBITDA | | | | | $ | 1,012 | | | | | (-) Corporate costs(1) | | | | | | 80 | | | | | (-) Depreciation | | | | | | 205 | | | | | (-) Pension income | | | | | | 59 | | | | | (-) Real estate gains | | | | | | 55 | | | | | (+) Operating lease interest(2) | | | | | | 12 | | | | | (-) Cash taxes(3) | | | | | | 83 | | | | | Net operating profit after tax (NOPAT) | | | | | $ | 542 | | | | |
| | | | | | As of December 31, | | | | Select balance sheet items | | | | 2022 | | | | Total assets (excluding intercompany and investment in affiliates) | | | | | $ | 3,288 | | | | | (-) Cash | | | | | | (5) | | | | | (-) Goodwill and intangibles | | | | | | 1,024 | | | | | Operating assets | | | | | | 2,269 | | | | | Total liabilities (excluding intercompany) | | | | | | 1,119 | | | | | (-) Short-term debt | | | | | | 18 | | | | | (-) Operating lease liabilities | | | | | | 417 | | | | | (-) Long-term debt | | | | | | 27 | | | | | Non-debt liabilities | | | | | | 657 | | | | | Invested capital | | | | | $ | 1,612 | | | | | Return on invested capital | | | | | | 34% | | | | |
(1)
Effective in the first quarter of 2023, XPO began allocating incremental Corporate costs to its North American LTL segment. The return on invested capital calculation reflects these incremental allocations of approximately $80 million annually (2)
Operating lease interest is calculated as period end operating lease assets multiplied by XPO’s incremental borrowing rate, net of tax (3)
Cash taxes is calculated as the ratio of the North American LTL segment’s adjusted EBITDA, excluding real estate gains, to XPO adjusted EBITDA, multiplied by XPO’s cash paid for taxes | | | | | 86 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
NON-GAAP FINANCIAL MEASURES As required by the rules of the Securities and Exchange Commission ("SEC"(“SEC”), we provide reconciliations of the non-GAAP financial measures contained in this proxy statementProxy Statement to the most directly comparable measure under GAAP, which are set forth in the financial tables above.XPO's
XPO’s non-GAAP financial measures used in this proxy statementProxy Statement include: adjusted earnings before interest, taxes, depreciation and amortization ("(“adjusted EBITDA"EBITDA”); free cash flow; adjusted net income from continuing operations attributable to common shareholders and adjusted earnings per share (basic and diluted) ("from continuing operations (diluted) (“adjusted EPS"EPS”) on a consolidated basis; and adjusted operating income and adjusted operating ratio for our North American less-than-truckload business.basis. We believe that the above adjusted financial measures facilitate analysis of our ongoing business operations because they exclude items that may not be reflective of, or are unrelated to, XPO and its business segments'segments’ core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. Other companies may calculate these non-GAAP financial measures differently, and therefore our measures may not be comparable to similarly titled measures of other companies. These non-GAAP financial measures should only be used as supplemental measures of our operating performance. Adjusted EBITDA, adjusted net income from continuing operations attributable to common shareholders and adjusted EPS include adjustments for transaction and integration costs and restructuring costs. Transaction and integration adjustments are generally incremental costs that result from an actual or planned acquisition and include transaction costs, acquisition and integration consulting fees, internal salaries and wages (to the extent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and converging IT systems. Restructuring costs primarily relate to severance costs associated with business optimization initiatives. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating XPO'sXPO’s and each business segment'ssegment’s ongoing performance. We believe that free cash flow is an important measure of our ability to repay maturing debt or fund other uses of capital that we believe will enhance stockholder value. We believe that adjusted EBITDA improves comparability from period to period by removing the impact of our capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables that management has determined are not reflective of core operating activities and thereby assist investors with assessing trends in our underlying businesses. We believe that adjusted net income attributable to common shareholders and adjusted EPS improve the comparability of our operating results from period to period by removing the impact of certain costs and gains that management has determined are not reflective of our core operating activities. We believe that adjusted operating income and adjusted operating ratio for our North American less-than-truckloadLess-Than-Truckload business improve the comparability of our operating results from period to period by (i) removing the impact of certain transaction, integration and restructuring costs and amortization expenses and, (ii) including the impact of pension income incurred in the reporting period as set out in the attached tables. With respect to our full year 2021 financial target for adjusted EBITDA, a reconciliation of this non-GAAP measure to the corresponding GAAP measure is not available without unreasonable effort due to the variability and complexity of the reconciling items described above that we exclude from this non-GAAP target measure. The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward-looking statement of income and statement of cash flows prepared in accordance with GAAP that would be required to produce such a reconciliation.
FORWARD-LOOKING STATEMENTS This Proxy Statement includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include our ability to achieve the expected benefits of RXO spin-off, the risks discussed in our filings with the SEC, and the following: economic conditions generally; the severity, magnitude, duration and aftereffects of the COVID-19 pandemic, including supply chain disruptions due to plant and port shutdowns and transportation delays, the global shortage of certain components such as semiconductor chips, strains on production or extraction of raw materials, cost inflation and labor and equipment shortages, which may lower levels of service, including the timeliness, productivity and quality of service, and government responses to these factors; our ability to align our investments in capital assets, including equipment, service centers, and warehouses and other network facilities, to our customers’ demands; our ability to implement our cost and revenue initiatives; the effectiveness of our action plan, and other management actions, to improve our North | | | | 87 | | | | | | © 2023 XPO, Inc. |
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MMMMMMMMMMMM MMMMMMMMMMMMMMM C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 ENDORSEMENT_LINE______________ SACKPACK_____________ MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Your voteAmerican LTL business; our ability to benefit from a sale or other divestiture of one or more business units; our ability to successfully integrate and realize anticipated synergies, cost savings and profit improvement opportunities with respect to acquired companies; goodwill impairment, including in connection with a business unit sale or other divestiture; matters – here’s howrelated to vote! our intellectual property rights; fluctuations in currency exchange rates; fuel price and fuel surcharge changes; natural disasters, terrorist attacks, wars or similar incidents, including the conflict between Russia and Ukraine and increased tensions between Taiwan and China; the impact of the prior spin-offs of GXO and RXO on the size and business diversity of our company; the ability of the spin-off of a business unit to qualify for tax-free treatment for U.S. federal income tax purposes; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems; our indebtedness; our ability to raise debt and equity capital; fluctuations in fixed and floating interest rates; our ability to maintain positive relationships with our network of third-party transportation providers; our ability to attract and retain qualified drivers; labor matters; litigation; risks associated with our self-insured claims; risks associated with defined benefit plans for our current and former employees; the impact of potential sales of common stock by our chairman; governmental regulation, including trade compliance laws, as well as changes in international trade policies, sanctions and tax regimes; governmental or political actions, including the United Kingdom’s exit from the European Union; and competition and pricing pressures.
All forward-looking statements set forth in this Proxy Statement are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Forward-looking statements set forth in this Proxy Statement speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law. | | | | | 88 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
ANNEX B—
ESG SCORECARD—2022 DELIVERABLES | | | | | | | | | | | | | | | ESG INITIATIVE | | | | 2022 TARGET | | | | ACHIEVED? | | | | # POINTS
EARNED | | | | COMMENTS | | |
| | | 1 | | | | WORKFORCE / TALENT | | | | | | 1 | | | | Average Job Satisfaction Score: Aggregate of all XPO engagement surveys conducted within the year, measured on a 1-10 scale | | | | ≥ 7.0 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 2 | | | | Average Job Satisfaction Score:
Annual Hourly LTL Engagement Survey (North America), measured on a 1-10 scale | | | | Prior year +10 basis points or
≥ 7.0 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 3 | | | | Global Retention Rate of High Performers:
Annualized rate based on performance management process, among the professional population | | | | ≥ 85% | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 4 | | | | Succession Planning:
For designated levels globally | | | | All vice presidents and above have a succession plan | | | | | | | | 2.3 | | | | Met goal | | | | | | 5 | | | | Annualized Voluntary Turnover Rate:
North American LTL drivers, excluding retirees | | | | Reduction of three percentage points versus prior year | | | | | | | | 0.0 | | | | Improved consecutively each quarter, but fell short of a 3% improvement year-over-year | | | | | | 6 | | | | Employee Training Hours:
Number of hours completed by employees per year globally, tracked via time-keeping system and XPO University | | | | 600,000 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 7 | | | | Employee Training Courses:
Number of courses completed by employees per year globally, tracked via XPO University | | | | 700,000 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 8 | | | | Performance Goals for Salaried Employees:
As defined and tracked for eligible salaried employees | | | | ≥ 80% of eligible employees | | | | | | | | 2.3 | | | | Surpassed goal | | |
| | | | | 89 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | ESG INITIATIVE | | | | 2022 TARGET | | | | ACHIEVED? | | | | # POINTS
EARNED | | | | COMMENTS | | |
| | | 2 | | | | EMPLOYEE AND COMMUNITY SAFETY | | | | | | 9 | | | | US DOT-Recordable Preventable Accident Frequency Rate:
North American managed transportation (when holding number of miles driven constant to full-year 2020) | | | | + 3% improvement over prior year | | | | | | | | 2.3 | | | | Surpassed goal
(measured through Q3, the pre-spin-off period) | | | | | | 10 | | | | Lost Workday Rate:
North American transportation | | | | < 62 | | | | | | | | 2.3 | | | | Surpassed goal
(measured through Q3, the pre-spin-off period) | | | | | | 11 | | | | US DOT-Recordable Accident Frequency Rate:
North American LTL (when holding number of miles driven constant to full-year 2021) | | | | + 2% improvement over prior year | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 12 | | | | Total Recordable Incident Rate (TRIR):
North American transportation | | | | < 1.00 | | | | | | | | 2.3 | | | | Surpassed goal
(measured through Q3, the pre-spin-off period) | | | | | | 13 | | | | Million Mile Driver Achievement Awards:
North American LTL | | | | ≥ 250 awards for achieving 1 million to 3 million miles driven without a preventable accident | | | | | | | | 2.3 | | | | Surpassed goal slightly | | | | | | 14 | | | | Lost Workday Rate:
North American transportation | | | | + 2% improvement over prior year | | | | | | | | 0.0 | | | | Improved on a quarterly basis, but not enough to meet the full-year target (measured through Q3, the pre-spin-off period) | | | | | | 15 | | | | Driver Training School Graduates:
North American LTL | | | | ≥ 500 employees graduate from our driver schools and earn their CDL | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 16 | | | | Lost Time Incident Rate in Europe:
Number of workplace incidents resulting in employees losing time from work (excluding the day of the incident) / total hours worked x 200,000 | | | | Minimum 5% improvement from prior year | | | | | | | | 2.3 | | | | Met goal | | | | | | 17 | | | | Registered Additional Training Hours in Europe:
Hours outside of mandatory and on-boarding trainings (i.e., qualifying training hours covering health, safety and security matters | | | | Minimum of three hours or more per employee | | | | | | | | 2.3 | | | | Met goal | | | | | | 18 | | | | Safety Actions Completion Rate in Europe:
Preventive or corrective actions completed, measured by number of actionable safety cards | | | | Minimum of 60% of safety cards
completed/closed | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 19 | | | | Crash Rate in Europe:
Preventable accidents per 1,000,000 kilometers driven (includes all preventable incidents reported to insurance/third party claims) | | | | Minimum of 5% improvement from prior year | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 20 | | | | Health Safety Audits in Europe:
Audits to be conducted across all European sites over a span of two years | | | | Minimum of 50% of sites audited | | | | | | | | 2.3 | | | | Surpassed goal | | |
| | | | | 90 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | ESG INITIATIVE | | | | 2022 TARGET | | | | ACHIEVED? | | | | # POINTS
EARNED | | | | COMMENTS | | |
| | | 3 | | | | DIVERSITY, EQUITY AND INCLUSION | | | | | | 21 | | | | Diversity in Hiring:
Overall annual percentage of diverse US employee hires | | | | ≥ 50% | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 22 | | | | Diversity in Management:
Expansion of women pipeline for managerial positions | | | | Cumulative growth of ≥10% from
2020 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 23 | | | | Diversity in Management:
Expansion of ethnic and/or racial groups’ pipeline for managerial positions | | | | Cumulative growth of ≥10% from
2020 | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 24 | | | | Diversity in Graduate Programs: Percentage of diverse Graduate Program hires globally | | | | ≥ 50% | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 25 | | | | Female Representation in Graded Positions in Europe:
Number of females in graded positions as a percentage of the total graded XPO population | | | | Increase representation to minimum 42.2% | | | | | | | | 0.0 | | | | Missed goal by a narrow margin
of 0.1% | | | | | | 26 | | | | European Diversity Recruitment
Strategy and Process:
Director level and above | | | | Diversity/sensitivity training attended by entire European leadership team | | | | | | | | 2.3 | | | | European leadership team training
was completed on
November 29, 2022 | | | | | | 27 | | | | HRC Corporate Equality Index | | | | Score of at least 80 to 85 out of 100 | | | | | | | | 2.3 | | | | Met goal
Scored 85, at high end of range | | | | | | 4 | | | | INFORMATION SECURITY | | | | | | 28 | | | | Information Security Compliance and Training:
Compliance with information security policy and related training mandates for eligible employees with access to email | | | | 75% to 85% compliance | | | | | | | | 2.3 | | | | Surpassed goal range | | | | | | 29 | | | | Information Security Benchmark Assessment:
Annual independent third-party information security health check/benchmark assessment | | | | Score within the top two quartiles and supersede the average for
the industry | | | | | | | | 2.3 | | | | Met goal
Compared to transportation peers, XPO is comfortably in the upper quartile | | | | | | 30 | | | | Efficacy in Blocking Email Threats:
Percent blocked containing malicious attachments | | | | ≥ 95% | | | | | | | | 2.3 | | | | Met goal
Maintained over 99% throughout year | | | | | | 31 | | | | Target Mean Time to Resolve (MTTR):
Industry average 1.85 days | | | | Maintain MTTR below industry
average | | | | | | | | 2.3 | | | | Met goal
MTTR was usually less than one day | | | | | | 32 | | | | Impact of Security Breaches on Customers | | | | No security breaches that could
impact at least 25% of customers | | | | | | | | 2.3 | | | | Surpassed goal | | |
| | | | | 91 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | ESG INITIATIVE | | | | 2022 TARGET | | | | ACHIEVED? | | | | # POINTS
EARNED | | | | COMMENTS | | |
| | | 5 | | | | ENVIRONMENT AND SUSTAINABILITY | | | | | | 33 | | | | Fuel Efficiency Improvement: North American managed transportation | | | | Maintain 7.1 miles per gallon or higher by year-end | | | | | | | | 2.3 | | | | Surpassed goal
(measured through Q3, the pre-spin-off period) | | | | | | 34 | | | | Registration as a Smartway* Approved Carrier Partner:
Helps to maintain “gold standard” in fuel efficiency and emissions | | | | Maintain partnership | | | | | | | | 2.3 | | | | Met goal
(measured through Q3, the pre-spin-off period) | | | | | | 35 | | | | LTL Fuel Efficiency:
Annual average improvement in miles per gallon (mpg) for drivers in North America | | | | Maintain flat efficiency relative to the same quarter of prior year | | | | | | | | 0.0 | | | | Narrowly missed by 0.02 mpg due to fuel additive, which accounts for an average mpg loss of 0.5 | | | | | | 36 | | | | Annual Tractor Replacement Rate:
North American LTL | | | | Replace at least 450 tractors with newer units, emitting less nitrogen oxide | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 37 | | | | Average Tractors Age: North American managed transportation | | | | 2.5 years | | | | | | | | 0.0 | | | | Missed due to ongoing supply chain constraints that cause delays in getting new tractor orders filled (measured through Q3, the pre-spin-off period) | | | | | | 38 | | | | Carbon Emissions Reduction by Equipment Usage:
Percentage of fleet supplied with carbon reducing equipment
(i.e., trailer side skirts, engine and transmission upgrades) | | | | At least 3%
increase in tractors with carbon-reducing equipment versus prior year | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 39 | | | | Load Factor Change Rate:
North American LTL | | | | At minimum, maintain prior year
achievement level | | | | | | | | 0.0 | | | | Missed due to: (i) some internal
initiatives that improved service but decreased load factor; (ii) a strategic decision to reduce reliance on high-cost third-party linehaul providers and instead utilize XPO equipment; and (iii) lower tonnage levels in 2H 2022 resulting from macroeconomic
pressure on industrywide shipping demand | | | | | | 40 | | | | CO2 Emissions Control in Europe:
Includes machinery equipment, installations, and road truck emissions | | | | Minimum 5% improvement from prior year | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 41 | | | | LTL Trailer Recycle Rate:
Percentage of retired LTL trailers that are recycled in North America | | | | Pre-2016 trailers: ≥ 95%
2016+trailers: ≥ 85% | | | | | | | | 2.3 | | | | Met goal | | | | | | 6 | | | | CORPORATE GOVERNANCE | | | | | | 42 | | | | Compliance Course Completion Rate:
Completion of mandatory compliance training courses on an annual basis (e.g., diversity and inclusion, sexual harassment, anti-discrimination, etc.) | | | | ≥ 85% | | | | | | | | 2.3 | | | | Surpassed goal | | | | | | 43 | | | | Board of Directors’ oversight of ESG matters | | | | Review, calibration and approval of annual ESG goals and/or ESG
goal revisions | | | | | | | | 2.3 | | | | Met goal | | |
| | | | | 92 | | | | | | © 2023 XPO, Inc. | | | | | | | | | | | | | | |
![[MISSING IMAGE: px_page1proxy2-bw.gif]](/files/DEF 14A/0001104659-23-047333/px_page1proxy2-bw.gif) –You may vote online or by phone instead of mailing this card. Online GIof ntoo welwewct.reonnviicsivoontrienpgo, rts.com/card.OnlineGo to www.envisionreports.com/XPO or delete QR code and control # scan the QR code — login details are located in the shaded bar below. Phone Callbelow.PhoneCall toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/XPO UsingCanadaUsing a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. qareas.q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + The Boardq+ 1.Election of Directors recommends a vote FOR all nominees listed below 1. Election of Directors:01 - Brad Jacobs 04 - Wes Frye07 - Allison Landry For AgainstAbstainFor02 - Jason Aiken 05 - Mario Harik08 - Irene Moshouris Abstain For Against Abstain For Against Abstain 02 - Gena Ashe 03 - Marlene Colucci 04 - AnnaMaria DeSalva 05Bella Allaire06 - Michael Jesselson 0609 - Adrian Kingshott 07 - Jason Papastavrou 08 - Oren Shaffer The BoardJohnny C. Taylor, Jr. For Abstain 2.Ratification of Directors recommends a vote FOR proposals 2 and 3. For Against Abstain For Against Abstain 2. Ratificationthe appointment of KPMG as our independent auditorsregistered public accounting firm for fiscal year 2021. 3. Advisory2023. For Abstain 3.Advisory vote to approve executive compensation. The Board of Directors recommends a vote AGAINST proposals 4, 5, and 6. For Against Abstain For Against Abstain 4. Stockholder proposal regarding additional disclosure of the company’s political activities. 6. Stockholder proposal regarding acceleration of executive equity awards in the case of a change of control. 5. Stockholder proposal regarding appointment of independent chairman of the board. MMMMMMM 03FXKB C 1234567890 J N T 0 2 7 3 7 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND +
03S97D 1 U P X 5 MMMMMMMMM A Proposals 2021 Annual Meeting of Stockholders Proxy Card1234 5678 9012 345
X+ YOUR VOTE IS IMPORTANT RegardlessIMPORTANTRegardless of whether you plan to attend the Annual Meeting of Stockholders,you can be sure your shares are represented at the meeting by promptly returning your proxy in the enclosed envelope. The 2021envelope.The 2023 Annual Meeting of Stockholders of XPO, Logistics, Inc. will be held on May 11, 2021onMay 17, 2023 at 10:00 a.m. EDT,Eastern Time, virtually via the internet at www.meetingcenter.io/260352583. Tomeetnow.global/MU5KPDC.To access the virtual meeting, you must have the control number that is printed in the shaded bar located on the reverse side of this form. The password for this meeting is — XPO2021. Importantform.Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 11, 2021: 17, 2023:The Proxy Statement and our Annual Report on Form 10-K for the YeartheYear Ended on December 31, 20202022 are available at www.edocumentview.com/XPO qXPOq IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + PROXYqPROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 11, 2021 This17, 2023This Proxy is solicited on behalf of the Board of Directors of XPO, Logistics, Inc. TheInc.The undersigned hereby acknowledges receipt of the XPO, Logistics, Inc. Notice of Annual Meeting and Proxy Statement and hereby constitutes and appoints Brad Jacobs and Karlis Kirsis,Wendy Cassity, and each of them, its true and lawful agents and proxies, with full power of substitution in each, to attend the Annual Meeting of Stockholders of XPO, Logistics, Inc. on Tuesday,Wednesday, May 11, 202117, 2023 held as a virtual meeting via webcast, and any postponement or adjournment thereof, and to vote on the matters indicated all shares of Common Stock, par value $0.001, per share, or Series A Convertible Perpetual Preferred Stock, par value $0.001 per share, that the undersigned would be entitled to vote if personally present. You can access the meeting at www.meetingcenter.io/260352583 with password XPO2021.meetnow.global/MU5KPDC. You will need to enter your control number to access the meeting. The control number is located in the shaded area on the opposite side of this proxy card. THIScard.THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. PLEASERECOMMENDATIONS.PLEASE PROMPTLY COMPLETE, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND MAIL IN THE ENCLOSED POSTAGE-PAID ENVELOPE. PleaseENVELOPE.Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Datetitle.Date (mm/dd/yyyy) — Please print date below. Signaturebelow.Signature 1 — Please keep signature within the box. Signaturebox.Signature 2 — Please keep signature within the box. Change of Address — Please print new address below. Commentsbelow.Comments — Please print your comments below.+ C Non-Voting Items B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. XPO Logistics, Inc. Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/XPO 
0001166003 6 2022-01-01 2022-12-31
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