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H&R BLOCK, INC.
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H&R BLOCK, INC.
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| | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. | ||||
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TO BE HELD SEPTEMBER 12, 2019
The annual meeting of shareholders of H&R Block, Inc., a Missouri corporation (the “Company”), will be held at the H&R Block Center located at One H&R Block Way (corner of 13th and Main Streets), Kansas City, Missouri, on Thursday, September 12, 2019, at 8:00 a.m. Central Time. Shareholders attending the meeting are asked to park in the H&R Block Center parking garage located beneath the H&R Block Center (enter the parking garage from either Main or Walnut Street). The meeting will be held for the following purposes:
| | | Date and Time | | | | | Virtual Meeting Site | | ||
| Friday, November 4, 2022 8:00 a.m. Central Time | | | www.virtualshareholdermeeting.com/HRB2022 | |
| Items of Business: | | | Our Board of Directors Recommends You Vote: | | |||
| 1. | | | Election of the | | | FOR each nominee | |
| 2. | | | Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending | | | FOR the ratification of the appointment | |
| 3. | | | Advisory approval of the Company’s named executive officer compensation (See page | | | FOR approval, on an advisory basis | |
| 4. | | | To transact such other business as may properly come before the meeting and any adjournment or postponement thereof. | | | |
The foregoingThese items of business are more fully described in the proxy statement accompanying this notice.The Board of Directors has fixed the close of business on July 12, 2019September 9, 2022 as the record date for determining shareholders of the Company entitled to receive notice of and vote at the meeting and any adjournment or postponement thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, WE URGE YOU TO VOTE YOUR SHARES VIA THE TOLL-FREE TELEPHONE NUMBER OR OVER THE INTERNET, AS PROVIDED IN THE ENCLOSED MATERIALS. IF YOU REQUESTED
| | | By Order of the Board of Directors, | | |
| | | KATHARINE M. HAYNES | | |
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| Vice President and Secretary | |
Kansas City, MissouriJuly 31, 2019
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETINGOF SHAREHOLDERS TO BE HELD ON SEPTEMBER 12, 2019.
The Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the fiscal year endedApril 30, 2019 are available at www.proxyvote.com.
July 31, 2019
Dear Fellow Shareholders,
It is impossible to reflect on the past year without stating, “we had a great year!” Jeff Jones, our President and CEO, said it in our year-end earnings call on June 11th, at our company-wide town hall on June 14th, and most recently in our 2019 Annual Report. I encourage all of you to read the Annual Report (which you received with this Proxy Statement). It provides a thoughtful and detailed review of where we stand in serving our more than 23 million clients, operating a very successful business, and building and maintaining an exemplary corporate culture.
Why was the year so good? We achieved all of the goals we set in our outlook when we started the year. The hiring of Jeff Jones in the summer of 2017 reflected a clear strategic decision on the part of the Board. Jeff’s mandate was to take a venerable 20th century brand and transform it into a state-of-the-art 21st century company; modernizing our core tax businesses to serve our clients better – how, when, and where they want to be served – and building upon our expertise and professionalism to develop and provide other products and services to serve the economic and financial needs of our existing and future clients.
During the past year, we took a number of significant steps to carry out the multi-year mandate in our new enterprise strategy:
| IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 4, 2022. The Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended June 30, 2022 are available at www.proxyvote.com. |
In devising this program, which was effectively a reset of our business, we knew there would be investments that, in the short-term, would reduce profits. Therefore, in June 2018 we publicly described a broad outline of our new enterprise growth strategy, and provided a revenue and earnings outlook reflecting those investments. I am pleased to report that our results for the year were at the upper end of that outlook, concrete evidence of the success of our efforts. And, needless to say, I’m delighted to report that Total Shareholder Return for the 12 months ended June 30, 2019 was 33.7%, placing us in the top 15% of all the companies in the S&P 500 index.
Another very noteworthy development is our enhanced level of direct communication with our shareholders. Prompted in part by shareholder feedback, we reached out to our 50 largest shareholders, which together held about 80% of our shares. I, along with our Chief Financial Officer and/or our General Counsel and Chief Administrative Officer, met (in person or via phone) with holders of about 50% of our shares, traveling throughout the United States and in parts of Canada and Europe.
While the reduced level of shareholder support on last year’s say-on-pay proposal was an important element of the outreach, we also spent time with shareholders discussing other matters, such as the status of our business, strategy, and ESG considerations. On compensation, we explained our rationale for the element which precipitated the negative vote. Investors, especially those who voted “no” on our say-on-pay proposal in 2018, appreciated the explanation and were pleased to hear that, in response to their concerns, going forward, sign-on equity awards will generally include performance conditions in a manner similar to our state-of-the-art program for vesting regular annual equity grants.
We also discussed at length our proposed approach to short-term incentive compensation for the current year, given the reset on revenue and earnings levels contained in the 2019 financial outlook we had previously shared publicly. We explained that the Compensation Committee had set fiscal year 2019 incentive plan targets at levels consistent with the Company’s Board-approved fiscal year 2019 operating plan and 2019 financial outlook, along with adding certain limitations described in detail in the Compensation Discussion and Analysis section of this proxy statement, thereby ensuring alignment between management payouts and investor expectations. We were extremely gratified that the investors we spoke to supported both the reset and the compensation structure based upon it. As a consequence, and given our results, we hope our “say-on-pay” approval vote returns to its historical level of strong support this year.
Finally, many investors stressed their interest in environmental, social and governance matters. On the social front, investors emphasized that we could do far more to communicate the broad range of societal contributions that have always been a core element of Block’s culture. We describe some of our contributions elsewhere in this document, in our Annual Report, and on our website: www.hrblock.com. On governance, we were pleased to hear that investors generally view our governance practices and principles, including the composition of our Board and our protections for shareholder rights and interests, as state-of-the-art.
As we look ahead to the remainder of our fiscal year 2020, I’m delighted to highlight our recently-completed acquisition of Wave, a rapidly growing financial solutions platform focused on changing the way small business owners manage their finances. This acquisition is a key step in our strategic transformation and we believe it provides a significant growth opportunity going forward. We are very excited about Wave and the synergistic opportunities it will provide.
At this point in the Chairman’s letter, it is customary to solicit your support for the Board’s voting recommendations on the items that will be on the ballot at our upcoming Annual Meeting of Shareholders. I hope you’ll agree that the members of our Board deserve your vote and that our pay practices are appropriate. Needless to say, I (as well as all of the other Board members) am available at any time for questions, comments, or suggestions. Elsewhere in this Proxy Statement (page 18) you will find information about how to contact the Board.
We are pleased and honored that you have shown your confidence in the Company’s future and our stewardship by your investment in H&R Block.
Best regards,
Robert A. GerardChairman of the Board
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | i |
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| Where You Can Find Additional Information | |
| Annual Meeting | |
| Proxy Statement | |
| https://investors.hrblock.com/financial-information/proxy-statements | |
| Annual Report https://investors.hrblock.com/financial-information/annual-reports | |
| Voting via the Internet Before the Annual Meeting: www.proxyvote.com | |
| Attending the Annual Meeting by Internet: | |
| www.virtualshareholdermeeting.com/HRB2022 | |
| Board of Directors | |
| https://www.hrblock.com/tax-center/board-of-directors/ | |
| Governance Documents | |
| https://investors.hrblock.com/corporate-governance | |
| ▪ Amended and Restated Articles of Incorporation | |
| ▪ Amended and Restated Bylaws | |
| ▪ Code of Business Ethics & Conduct | |
| ▪ Board of Directors Independence Standards | |
| ▪ Political Activities Policy and Voluntary Annual Reports | |
| ▪ Corporate Governance Guidelines | |
| ▪ Committee Charters | |
| Investor Relations | |
| https://investors.hrblock.com | |
| Environmental, Social, and Governance Matters | |
| https://investors.hrblock.com/corporate-governance/esg-corporate-responsibility | |
| Definition of Certain Frequently Used Terms or Abbreviations1 | | |||
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| Annual Meeting | | | 2022 annual meeting of shareholders | |
| Articles | | | Amended and Restated Articles of Incorporation of H&R Block, Inc. | |
| Board or Board of Directors | | | H&R Block, Inc. Board of Directors | |
| Bylaws | | | Amended and Restated Bylaws of H&R Block, Inc. | |
| CEO | | | Chief Executive Officer | |
| CFO | | | Chief Financial Officer | |
| Deloitte | | | Deloitte & Touche LLP | |
| IRS | | | Internal Revenue Service | |
| LTI | | | Long-Term Incentive | |
| MSUs | | | Market Stock Units | |
| NEO | | | Named Executive Officer | |
| NYSE | | | New York Stock Exchange | |
| PSUs | | | Performance Share Units | |
| RSUs | | | Restricted Share Units | |
| SEC | | | Securities and Exchange Commission | |
| STI | | | Short-Term Incentive | |
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1 | Additional defined terms may be found throughout this proxy statement. |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | ii |
H&R BLOCK, INC. PROXY STATEMENT FOR THE | | |
September 22, 2022.
Our brand has been synonymous with taxes for decades, and we continue to lead the industry as the only company to offer a complete choice for consumers to get tax help however they want with in person, online, and virtual options. By combining the knowledge of highly trained tax professionals with cognitive computing technology and digital services, we are currently offering clients our most personalized tax experience ever.
Commencing inHorizons 2025
While we expect these changes to position us for long-term, sustainable growth they required important investments inand focuses on the short term. In June 2018, we announced that we would make afollowing three strategic investment in price, resulting in a revenue decline inimperatives:
▪ | In Small Business tax, we had strong growth in clients and mix, and Wave saw 28% revenue growth year-over-year and new leadership joining to drive the next phase of its growth; |
▪ | In Financial Products, we launched our mobile banking platform, SpruceSM; and |
▪ | We drove meaningful results in Block Experience, including tripling virtual adoption year-over-year, maintaining strong tax pro productivity, and funding the future with cost savings, including eliminating approximately 40,000 human labor hours with robotic process automation. |
| 1 |
We believe the
(1) | Excluding Free File Alliance returns. |
(2) |
(3) | All per share amounts are based on weighted average fully diluted shares over the corresponding period. |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 2 |
For additional information regardingTABLE OF CONTENTS
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 3 |
oversight of policies and processes pertaining to the Company’s enterprise risk management (“ERM”) program and specifically considers risks and controls relating to, among other things, data and cyber security. Management briefs the Audit Committee on information security risk matters as a part of regular ERM reports, with a deep dive focused solely on information security at least annually.
Giving Back by Providing Help and Inspiring Confidence
A Historylegacy of Good
The Company has a history of doing good. Our foundersour co-founders, Henry and Richard Bloch, were committed to building stronger communities,be a force for positive change in our local communities. Alongside our strategic goals, we demonstrate our Purpose through our community impact platform Make Every Block Better; commitments to diversity, inclusion, and we carry on that legacy today. Over the last ten years, H&R Block programs have awarded more than $13 million in scholarships to college-bound students and helped more than one million teenagers become more financially literate. In the past year, H&R Blockbelonging through our Belonging@Block initiative for associates; and our associates:
Steps Towards Sustainability
Even small operational changes can have big impacts on our communities and the environment. For instance, by moving to a digital-only version of our annual tax professional training textbooks, H&R Block reduced our energy and paper consumption in that area by more than 80%. We are working to understand how more efforts like this complement our current recycling and material reduction efforts. We envision a sustainable future that is made possible by integrating more environmental efforts into all of our everyday practices.
Moving Forward
H&R Block is committed to enhancing our community engagement efforts, finding more wayscontinuing to improve the environment, and creating a best-in-class workplace for all of our associates.
Associate Diversity, Inclusion, and Belonging – We Are Better Together
H&R Block would not be where it is today without our people. It is our aspiration to foster a culture of belonging where every voice is heard and our associates feel included and inspired to freely share ideas, innovate, serve our clients, and live our purpose by connecting with each other and giving back to their communities. We believe we are solidifying our foundation to facilitate long-term success by creating a workplace that elevates our talent and culture and acknowledges that our people are our greatest asset. We are proud that our efforts regularly are recognized publicly in a variety of ways, including recent appearances on Forbes’s lists of Best Employers for Diversity, Best Employers for Women, and Best Employers for New Graduates, as well as on Mogul’s list of the Top 1,000 Companies with the Strongest Female Leaders.
Corporate Governance
In addition, our commitment to good corporate governance is illustrated by the following practices:
How we Engaged with Our Shareholders
Prompted in part by a lower level of support for our say-on-pay vote at our 2018 annual meeting (61% vs. at least 95% in recent years), at the request of the Board and Compensation Committee, our Chairman led an extensive shareholder outreach initiative during fiscal year 2019 and early fiscal year 2020. This outreach initiative was designed to assist our Board and Compensation Committee in fully understanding the perspectives of our shareholders, including those that did not support our say-on-pay vote in 2018. This effort supplemented the ongoing communications between our management and shareholders, as well as contact with shareholders prior to our 2018 annual meeting, through various engagement channels including in-person or telephonic meetings.
Shareholder Outreach
The focus of our engagement program was our top 50 shareholders, collectively owning about 80% of outstanding shares. Our Chairman, along with our Chief Financial Officer and/or General Counsel and Chief Administrative Officer, held in-person or telephonic meetings with 13 shareholders that collectively owned over 50% of our shares outstanding. An additional five shareholders that collectively owned over 6% of our shares outstanding elected to engage with us via correspondence, indicating that no meeting was necessary at this time. Two shareholders that collectively owned
approximately 2% of our shares outstanding declined our engagement requests. We also supplemented this engagement process by engaging with the two largest proxy advisory firms for additional perspective and clarity on matters they highlighted in their reports to shareholders in connection with our 2018 annual meeting.
Matters Discussed
Matters covered during these meetings included
Outcomes: Executive Compensation
Overall, the shareholders with which we met expressed support ofupon our ongoing executive compensation program. Several of our shareholders expressed concern regarding the lack of performance conditions in the one-time inducement awards provided to Mr. Jones in fiscal year 2018 in connection with his hiring as CEO, discussed below, which we understand was the primary factor in our executive compensation program that contributed to the decreased level of support on our say-on-pay vote in 2018.
The Board and Compensation Committee carefully considered all the input received from shareholders during our fiscal year 2019 engagement. Following such consideration, we have implemented the following regarding our executive compensation program and related disclosures:
In the context of discussing the strategic investments for tax season 2019, we noted that short-term incentive plan targetsESG efforts. Highlights for fiscal year 2019 were set at levels lower than the prior year. Shareholders expressed support for these investments and the strategy, acknowledging and accepting the short-term impact that the strategic decisions would have2022 include:
▪ | Development of policies to guide our stewardship efforts; |
▪ | A second carbon emission inventory on our U.S. operations to estimate and better understand our carbon footprint; and |
▪ | Preparation of SASB disclosures to increase transparency. |
See the “Compensation Discussion and Analysis” section beginning on page 20 for additional information.
Additional disclosure and engagement enhancements made in responseof SASB disclosures, please refer to our fiscal year 2019 shareholder outreach include:
| H&R Block, Inc. |
| | The Board unanimously recommends a vote FOR the election of each nominee | | | ||
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has nominated nine directors for election to serve until next year’s annual meeting and has set the number of directors that constitute the Board at nine, effective upon the commencement of the Annual Meeting. Proxies cannot be voted for a greater number of persons than the number of nominees set forth in this Proposal 1. |
The Articles and Bylaws also provide that all of the directors shall be elected at each annual meeting of shareholders.annually. Under the Bylaws, each director holds office until the earlier of the election and qualification of such director’s successor or the director’s death, resignation, retirement, disqualification, disability, or removal from office. Any vacancy on the Board may be filled by a majority of the surviving ordirectors remaining directors then in office. The Company’s Bylaws provide that any incumbent director who is not elected by a majority of shares entitled to vote on his or herthe election and represented in person or by proxy shall promptly tender his or heran irrevocable resignation to the Company’s Board, subject only to the condition that the Board accept the resignation. The Board and the Governance and Nominating Committee must consider and act on the resignation, as more fully described under “Corporate Governance – Mandatory Director Resignation Policies,” on page 16. To be eligible to be a nominee as a director, whether nominated by the Board or a shareholder, a person must deliver to the Company a written agreement that such person will abide by this director resignation requirement.
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 5 |
Diversity
Both the Board and the Governance and Nominating Committee believe that diversity of skills, perspectives, backgrounds, and experiences among Board members improves the Board’s oversight and evaluation of management on behalf of the shareholders and produces more creative thinking and better strategic solutionsdecision-making by the Board. Although we do not have a formal policy concerning diversity of director nominees, the Governance and Nominating Committee considers, though not exclusively, the distinctive skills, perspectives, backgrounds, and experiences that candidates who are diverse in gender ethnic background,identity, ethnicity, culture and geographic origin, sexual orientation, education, personal background, and professional and industry experience have to offer.
▪ | Operating experience as current or former executives, which gives directors specific insight into, and expertise that will foster active participation in, the development and implementation of our operating plan and business strategy; |
▪ | Executive leadership experience, which gives directors who have served in significant leadership positions strong abilities to motivate and manage others and to identify and develop leadership qualities in others; |
▪ | Accounting or financial expertise, which enables directors to analyze our financial statements, capital structure, and complex financial transactions, and oversee our accounting and financial reporting processes; |
▪ |
▪ | Financial, technology, or retail industry knowledge, which |
▪ | Public company board and corporate governance experience, which provides directors a solid understanding of their extensive and complex oversight responsibilities and furthers our goals of greater transparency, accountability for management and the Board, and protection of our shareholders’ |
▪ | Data security experience, which is valuable in understanding data security risks and contributes to oversight of our data security programs, policies, and procedures; and |
▪ | ESG expertise, which enables directors to analyze ESG risk and oversee our ESG strategy and initiatives. |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 6 |
| | | Cohan | | | Gerard | | | Gupta | | | Johnson | | | Jones | | | Mends | | | Piazza | | | Reich | | | Winter | | | | ||
| Skills and Experience | | | | | | | | | | | | | | | | | | | | | | ||||||||||
| Operating experience | | | • | | | • | | | • | | | • | | | • | | | • | | | • | | | • | | | • | | | | |
| Executive leadership | | | • | | | • | | | • | | | • | | | • | | | • | | | • | | | • | | | • | | | | |
| Accounting/financial expertise | | | • | | | • | | | • | | | • | | | • | | | • | | | | | • | | | • | | | | ||
| ERM experience | | | | | • | | | | | • | | | • | | | | | | | • | | | • | | | | |||||
| Industry knowledge | | | | | • | | | • | | | • | | | • | | | • | | | • | | | | | • | | | | |||
| Public company board and corporate governance | | | | | • | | | | | • | | | • | | | • | | | | | • | | | • | | | | ||||
| Data security experience | | | | | | | • | | | • | | | • | | | | | • | | | | | • | | | | |||||
| ESG expertise | | | | | • | | | | | • | | | • | | | • | | | | | • | | | | | | |||||
| Demographic Information | | | | | | | | | | | | | | | | | | | | | | ||||||||||
| Tenure (years)* | | | 1 | | | 15 | | | 3 | | | 7 | | | 5 | | | 1 | | | 2 | | | 11 | | | 5 | | | | |
| Age* | | | 47 | | | 77 | | | 53 | | | 64 | | | 54 | | | 47 | | | 53 | | | 64 | | | 65 | | | | |
| Gender | | | M | | | M | | | F | | | M | | | M | | | F | | | F | | | F | | | M | | | | |
| Race/Ethnicity | | | | | | | | | | | | | | | | | | | | | | ||||||||||
| Black/African American | | | • | | | | | | | | | | | • | | | | | | | | | | ||||||||
| Asian/Other Pacific Islander | | | | | | | • | | | | | | | | | | | | | | | | |||||||||
| White/Caucasian | | | | | • | | | | | • | | | • | | | | | • | | | • | | | • | |
* | Tenure and age calculated as of the date of this proxy statement; tenure rounded to the nearest whole number of years. |
The following pages present information regarding each director nominee, including information about each nominee’s professional experience, areas of expertise, educational background, and qualifications that led the Board to nominate him or her for election. The following also includes information about all public company directorships each nominee currently holds.
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Director Since: Age: Committee Compensation; Governance and Nominating | | | | |
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Other Boards and Appointments: Mr. | | |
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| Robert A. Gerard Director Since: 2007 Age: Committee Finance (Chair); Governance and Nominating | | | |
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| Other Boards and Appointments: Mr. Gerard served as a director of Gleacher & Company, Inc. from 2009 through May 2013, where he most recently served as Chair of the Executive Compensation Committee and was a member of the Committee on Directors and Corporate Governance. | | ||
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| Director Qualifications: Mr. Gerard brings to the Board extensive experience in the financial services industry and many years of business experience in senior management and finance, as well as experience serving on the boards of other public companies. | |
| Anuradha (Anu) Gupta Director Since: 2019 Age: 53 Committee Memberships: Compensation; Governance and Nominating (Chair) | | | Experience: Ms. Gupta has served as Executive Vice President, Chief Growth Officer of Bed Bath and Beyond Inc., a publicly held home products retailer, since October 2021, where she previously served as the Chief Strategy and Transformation Officer starting in October 2020. Prior to her work at Bed Bath & Beyond, she served as the Chief Operating Officer of Jyve Corporation, a talent marketplace and business optimization platform, from November 2018 to October 2020. Prior to Jyve, she served as Senior Vice President Operational Excellence at Target Corporation, a retail sales company, from 2015 to 2018. From 2013 to 2015, Ms. Gupta was the Senior Operating Executive at Hellman & Friedman LLC, a private equity firm. Prior to that, she was with The Michaels Companies Inc. for five years from 2008 to 2013, serving as Vice President Process and Profit Improvement. Earlier in her career, she served in multiple strategic roles at Safeway Inc. and HCL Technologies Inc. Ms. Gupta received her Bachelor of Science (Honors) and MBA (Financial Management) from the University of Delhi. | |
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| Director Qualifications: Ms. Gupta brings to the Board expertise in strategic transformations and driving operational excellence across multiple industries, including extensive experience in the retail industry. | |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 8 |
| Richard A. Johnson Director Since: 2015 Age: Committee Audit; Compensation | | | |
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| Other Boards and Appointments: Mr. Johnson has served as director and member of the Executive Committee of Foot Locker, Inc. since 2014, and was elected Chairman of the Board in May 2016. During 2013, he served as a director of Maidenform Brands, Inc. Mr. Johnson also serves | | ||
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| Director Qualifications: Mr. Johnson brings to the Board extensive knowledge of brick and mortar and digital/dot.com retail operations, as well as significant leadership, operations, financial management, and enterprise risk management experience. | |
Jeffrey J. Jones II, President and Chief Executive Officer Director Since: 2017 Age: Committee Finance | | | |
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| Other Boards and Appointments: Mr. Jones | | |
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| Director Qualifications: Mr. Jones brings to the Board intimate knowledge of the Company’s daily operations as the Company’s President and | |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 9 |
| Mia F. Mends Director Since: 2021 Age: 47 Committee Memberships: Audit; Governance and Nominating | | | Experience: Ms. Mends serves as Chief Executive, C&W Services at Cushman & Wakefield plc, a leading global real estate services firm. Prior to joining C&W Services, Ms. Mends spent a decade in leadership at Sodexo Inc., including serving as Global Chief Diversity & Inclusion Officer and CEO, Impact Ventures from May 2021 to June 2022; Chief Administrative Officer, North America, and leading SodexoMAGIC, a joint venture between Sodexo and Magic Johnson Enterprise, from July 2019 to May 2021; CEO of Benefits & Rewards Services from 2015 until 2019; and Vice President, Sales, for the Americas Region in Sao Paulo, Brazil from 2012 until 2015. Sodexo provides quality of life services, including dining and meal services, vending and convenience services, integrated facilities management services, and healthier workforce initiatives. Before joining Sodexo, she was General Manager of the Prepaid Debit Card Division of Noventis Inc. Ms. Mends holds a BA in economics from Wellesley College and an MBA from Harvard Business School. | |
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| Yolande G. Piazza Director Since: 2020 Age: 53 Committee Memberships: Compensation; Finance | | | Experience: Ms. Piazza serves as Vice President, Financial Services of Google’s Cloud division at Alphabet Inc., an internet-related services and products company, since June 2020. Prior to her current position, she was at Citigroup, Inc., a diversified financial services holding company, serving as CEO of Citi FinTech from | |
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| Other Boards and Appointments: Ms. Piazza is an advisory member of Reputation.com. | | |||
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| Director Qualifications: Ms. Piazza brings to the | |
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| Victoria J. Reich Director Since: 2011 Age: Committee Memberships: Audit (Chair); Finance | | | |
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| Other Boards and Appointments: Ms. Reich is a director of Ecolab Inc., a publicly held provider of water, hygiene, and | | ||
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| Director Qualifications: Ms. Reich brings to the Board extensive financial management experience, operational experience, and executive leadership abilities. | |||
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| Director Since: Age: Committee Memberships: Audit; Compensation (Chair) | |
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| Other Board and Appointments: Mr. Winter is currently on the board of ADT Inc., a publicly held provider of monitored security and interactive home and business automation solutions, The Hartford Financial Services Group, Inc., a publicly held investment and insurance company, and The Winter-Lehman Family Foundation, and he previously served on the boards of Feeding America, the Leukemia and Lymphoma Society, the Houston Food Bank, and both the Connecticut and Houston Opera Companies. | |
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| Director Qualifications: Mr. Winter brings to the Board extensive leadership experience developed throughout his career at Allstate and with other large financial institutions and insurance providers, as well as significant operations, consumer products, financial services, and enterprise risk management experience. | |
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Unless otherwise instructed, the appointed proxies will vote the shares represented by the proxy cards received by them for each of the nominees named above. All nominees have consented to serve if elected. The Board of Directors has no reason to believe that any of the nominees would be unable to accept the office of director if elected. If any of the nominees becomes unavailable for election for any reason, the Board may provide for a lesser number of directors or designate substitute nominees, and proxies will be voted for the remaining nominees and any substitute nominees, unless otherwise instructed by the shareholder.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE TEN NINE NOMINEES FOR DIRECTOR IN THIS PROPOSAL 1.
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 11 |
| Audit Committee | | | | | | ||
| Committee Members Ms. Reich (Chair) Mr. Johnson Ms. Mends Mr. Winter Ms. Wood 1 Four meetings in fiscal year | | | ▪ | | | Approves the appointment of the Company’s independent registered public accounting firm | |
| ▪ | | | Evaluates the independence and performance of such firm | | |||
| ▪ | | | Reviews the scope of the annual audit | | |||
| ▪ | | | Reviews and evaluates the effectiveness of the Company’s internal audit function | | |||
| ▪ | | | Reviews the effectiveness of the Company’s ERM program and the Company’s major financial risk exposures and the steps management has taken related thereto | | |||
| ▪ | | | Ensures that the Company has established a system to enforce the H&R Block Code of Business Ethics and Conduct | | |||
| ▪ | | | Reviews and discusses with management and the independent registered public accounting firm the audited financial statements and accounting principles | ||||
| ||||||||
| | | | |||||
| | | See the “Audit Committee Report” on page | |
1 | Ms. Wood will cease serving on the Audit Committee upon her departure from the Board effective as of the Annual Meeting. |
| 12 |
| Compensation Committee | | |||||||
| Committee Members Mr. Mr. Cohan Ms. Gupta Mr. Johnson Ms. PiazzaFour meetings in fiscal year | | | ▪ | | | Reviews and approves the Company’s overall executive compensation philosophy, including compensation of the executive officers of the Company and its subsidiaries | | |
| ▪ | | | Reviews and formally evaluates the CEO’s performance against corporate goals and objectives and approves the CEO’s compensation | | ||||
| ▪ | | | Reviews risks related to the Company’s compensation policies and practices | | ||||
| ▪ | | | Administers the Company’s short-term and long-term incentive compensation plans | | ||||
| | ||||||||
| |||||||||
| | See the “Compensation Discussion and Analysis” beginning on page 20. The Compensation Committee may delegate authority to | |
| Governance and Nominating Committee | | ||||||
| Committee Members Ms. Gupta (Chair) Mr. Mr. Gerard Ms. Mends1Four meetings in fiscal year | | | ▪ | | | Reviews and oversees corporate governance matters | |
| ▪ | | | Initiates recommendations of nominations for election as a director of the Company | | |||
| ▪ | | | Evaluates the performance of the Board | | |||
| ▪ | | | Recommends the compensation of the non-employee directors of the Company | | |||
| ▪ | | | Reviews and makes recommendations regarding ESG matters when requested by the Board | | |||
| | | | |||||
| All of the members of the Governance and Nominating Committee are independent under NYSE listing standards and the Independence Standards. | |
| Finance Committee | | |||||||||
| Committee Members Mr. Gerard (Chair) Mr. Jones Ms. Piazza1 Ms. Reich Ms. Wood 2 One meeting in fiscal year | | | ▪ | | | Provides advice to management and the Board of Directors concerning: | | |||
| | | — | | | Financial structure of the Company | | ||||
| | | — | | | Share repurchases, dividends, and other capital allocation decisions | | ||||
| | | — | | | Funding of operations of the Company and its subsidiaries | | ||||
| | | — | | | Investment of Company funds | | ||||
| ▪ | | |
1 | Ms. Piazza was appointed to the Finance Committee on September 9, 2021. |
2 | Ms. Wood will cease serving on the Finance Committee upon her departure from the Board effective as of the Annual Meeting. |
| 13 |
The following chart describes the compensation
| Compensation Element | | | Amount (annual except for meeting fees) | |
| Annual Cash Retainer(1) | | | $70,000 | |
| Annual Equity Retainer(2) | | | $150,000 (payable in deferred stock units (“DSUs”)) | |
| Non-Executive Chairman of the Board Retainer(2) | | | $200,000 (payable in DSUs) | |
| Chair Retainer – Audit Committee(1) | | | $20,000 | |
| Chair Retainer – All Other Committees(1)(3) | | | $15,000 | |
| Board Meeting Fee(4) | | | $2,000 per meeting | |
| Committee Meeting Fee(5) | | | $1,500 per meeting | |
(1) | Paid in quarterly installments. |
(2) | Equity grants are generally made immediately following election of directors at the Annual Meeting. |
(3) | Due to his position as non-executive Chairman of the Board, Mr. Gerard has waived his eligibility for the Chair retainer related to his service as Chair of the Finance Committee. |
(4) | Subject to a maximum of ten Board meetings per year. |
(5) | Subject to a maximum of ten committee meetings per year per committee. |
In addition, in considerationAs previously disclosed, on June 9, 2021, our Board of emerging corporate governance best practices, inDirectors approved a change of our fiscal year 2018end from April 30 to June 30. The Company's 2022 fiscal year began on July 1, 2021 and ended on June 30, 2022 (“fiscal year 2022”). As a result, there was a two-month transition period between the Governanceend of our fiscal year 2021 and Nominating Committee recommended,the start of our fiscal year 2022 (the “Transition Period”). The fiscal year end change also results in our 2022 Annual Meeting, and future annual meetings, being held in November, two months later than the September timeframe of our Board approved, a limit of $750,000 on2021 annual meeting. To account for the amount of equityfiscal year end change and cash compensation that can be paid to acompensate our non-employee director ofdirectors for the Company in a calendar year. The limit does not apply to incremental compensation paid to a director solely in his or her capacity as non-executive Chairman ofTransition Period, the Board provided that such non-executive Chairman does not participate in the decisionapplied a 14/12 proration to award such additional compensation. The non-employee director compensation limit is set forth in the H&R Block, Inc. 2018 Long Term Incentive Plan (the “2018 Plan”), which was approved by our shareholders at the 2017 annual meeting. In setting the non-employee director compensation limit, the Governance and Nominating Committee and the Board reviewed survey data provided by the Compensation Committee’s independent compensation consultant.
InDSUs awarded in fiscal year 2019, DSUs2022. This proration was applied for fiscal year 2022 only, no separate equity awards were granted for the Transition Period and award amounts reverted to non-employee directors under the 2018 Plan. The number of DSUs credited to a non-employee director’s account pursuant to an award under the 2018 Plan is determined by dividing the dollar amountstandard values in fiscal year 2023. Proration of the award bycash retainers was not necessary, as our fiscal year change did not impact the average current market value per sharequarterly timing of the Company’s common stock for the ten consecutive trading days ending on the date the DSUs are granted. The current market value per share generally is the closing sales price of a share of our common stock as reported on the NYSE.
cash payments.
payable.
9, 2021 and ending at the 2022 Annual Meeting on November 4, 2022.
| 14 |
securities.
Current Directors | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | Option Awards ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||
Angela N. Archon | 108,500 | 142,874 | — | — | 251,374 | ||||||||||
Paul J. Brown | 114,500 | 142,874 | — | 10,000 | 267,374 | ||||||||||
Robert A. Gerard | 104,000 | 333,339 | — | 3,500 | 440,839 | ||||||||||
Richard A. Johnson | 109,500 | 142,874 | — | 5,000 | 257,374 | ||||||||||
David Baker Lewis | 108,500 | 142,874 | — | 5,000 | 256,374 | ||||||||||
Victoria J. Reich | 125,500 | 142,874 | — | 3,000 | 271,374 | ||||||||||
Bruce C. Rohde | 123,500 | 142,874 | — | 5,000 | 271,374 | ||||||||||
Matthew E. Winter | 109,833 | 142,874 | — | 5,000 | 257,707 | ||||||||||
Christianna Wood | 107,000 | 142,874 | — | 5,000 | 254,874 | ||||||||||
Former Director | |||||||||||||||
Tom D. Seip(6) | 40,000 | — | — | — | 40,000 |
| Current Directors | | | Time Period | | | Fees Earned or Paid in Cash ($)(1) | | | Stock Awards ($)(2)(3) | | | Option Awards ($)(4) | | | All Other Compensation ($)(5) | | | Total ($) | |
| Sean H. Cohan | | | Fiscal Year 2022 | | | $91,500 | | | $171,253 | | | — | | | — | | | $262,753 | |
| Transition Period | | | $28,000 | | | — | | | — | | | — | | | $28,000 | | |||
| Robert A. Gerard | | | Fiscal Year 2022 | | | $91,500 | | | $399,549 | | | — | | | $4,000 | | | $495,049 | |
| Transition Period | | | $30,000 | | | — | | | — | | | — | | | $30,000 | | |||
| Anuradha (Anu) Gupta | | | Fiscal Year 2022 | | | $111,000 | | | $171,253 | | | — | | | — | | | $282,253 | |
| Transition Period | | | $34,750 | | | — | | | — | | | — | | | $34,750 | | |||
| Richard A. Johnson | | | Fiscal Year 2022 | | | $96,000 | | | $171,253 | | | — | | | $5,000 | | | $272,253 | |
| Transition Period | | | $29,500 | | | — | | | — | | | — | | | $29,500 | | |||
| Mia F. Mends | | | Fiscal Year 2022 | | | $91,500 | | | $171,253 | | | — | | | $5,000 | | | $267,753 | |
| Transition Period | | | $27,000 | | | — | | | — | | | — | | | $27,000 | | |||
| Yolande G. Piazza | | | Fiscal Year 2022 | | | $89,500 | | | $171,253 | | | — | | | $5,000 | | | $265,753 | |
| Transition Period | | | $30,000 | | | — | | | — | | | — | | | $30,000 | | |||
| Victoria J. Reich | | | Fiscal Year 2022 | | | $111,500 | | | $171,253 | | | — | | | $5,000 | | | $287,753 | |
| Transition Period | | | $33,500 | | | — | | | — | | | — | | | $33,500 | | |||
| Matthew E. Winter | | | Fiscal Year 2022 | | | $111,000 | | | $171,253 | | | — | | | $5,000 | | | $287,253 | |
| Transition Period | | | $35,250 | | | — | | | — | | | — | | | $35,250 | | |||
| Christianna Wood(6) | | | Fiscal Year 2022 | | | $91,500 | | | $171,253 | | | — | | | $5,000 | | | $267,753 | |
| Transition Period | | | $28,500 | | | — | | | — | | | — | | | $28,500 | | |||
| Former Directors | | | | ||||||||||||||||
| Paul J. Brown(7) | | | Fiscal Year 2022 | | | $5,500 | | | — | | | — | | | $5,000 | | | $10,500 | |
| Transition Period | | | $26,500 | | | — | | | — | | | — | | | $26,500 | | |||
| Bruce C. Rohde(7) | | | Fiscal Year 2022 | | | $7,000 | | | — | | | — | | | — | | | $7,000 | |
| Transition Period | | | $33,000 | | | — | | | — | | | — | | | $33,000 | |
(1) | This column includes, as applicable, the annual cash retainer, meeting fees for each Board and committee meeting attended, and committee retainers earned or paid for services as a director during fiscal year |
(2) | The dollar amounts represent the grant date fair value under FASB Accounting Standards Codification Topic 718 “Stock Compensation” (“ASC 718”) for DSUs awarded during fiscal year |
(3) | The DSU award value approved by the Board of Directors for fiscal year |
(4) |
(5) | This column represents the H&R Block Foundation matching amount on contributions to 501(c)(3) |
(6) | As previously disclosed, Ms. Wood notified the Board on |
(7) | Mr. |
| 15 |
Board.
resignation.
Independent Chairman
and Board Leadership Structure and Accountability
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 16 |
independent under all applicable standards.
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 17 |
high-potential leaders are given exposure and visibility to Board members through formal presentations and informal events. More broadly, the Board is regularly updated on key talent indicators for the overall workforce, including economic environment, diversity, recruiting, and development programs.
The Company’s Articles, Bylaws, and the Governance Guidelines require that the Chairman of the Board (i) be an independent director pursuant to NYSE listing standards, (ii) not simultaneously be Chief Executive Officer or President of the Company, and (iii) not have previously served as an executive officer of the Company. As such, the Board is led by an independent Chairman, currently Mr. Gerard, who has also been designated as the Board’s Senior Independent Director.
We believe that our current Board structure creates a positive balance in leadership and accountability, as the functions of Chief Executive Officer and Board Chairman are significantly different. In addition to balancing responsibilities, we believe that our current structure enhances the accountability of the Chief Executive Officer to the Board and strengthens the Board’s independence from management. Separating the roles of Board Chairman and Chief Executive Officer also allows the Chief Executive Officer to focus his or her efforts on running our business and managing the Company in the best interests of our shareholders. At the same time, our non-executive Chairman handles the separate responsibilities of Board and committee scheduling, Board agendas, and other Board organizational tasks, as well as leading the Board in discussions concerning CEO employment and performance evaluation and speaking on behalf of the Board and the Company regarding corporate governance- and investor relations-related issues.
The Board is responsible for oversight of risks related to ESG matters and receives regular reports from the Company’s Chief People and Culture Officer, including with respect to people development, associate engagement, workforce diversity, and pay equity, to enable it to assess and manage risk related to the Company’s workforce.
| 18 |
| Committee of the Board | | | Areas of Risk Oversight | | | Additional Information | |
| Audit Committee | | | Responsible for the oversight of policies and processes pertaining to the Company’s | | | The Company’s Audit Services department assists the Audit Committee and the Board in their oversight of enterprise risk management by ensuring that key risks are included in the audit plan, providing objective assurance to the Board on the effectiveness of risk management processes, and reviewing the management of key risks. | |
| Compensation Committee | | | Responsible for reviewing the Company’s compensation policies and practices (including enterprise risks and compensation design risks) and the relationship among the Company’s risk management policies and practices, corporate strategy, and compensation policies and practices. | | | The Compensation Committee conducts an annual risk assessment related to the Company’s compensation programs. For more information, see the discussion | |
| Governance and Nominating Committee | | | Responsible for reviewing the Company’s corporate governance policies and practices and making recommendations to the Board that take into account the management of governance-related risk. Reviews and makes recommendations regarding ESG-related risks when requested by the Board. | | | In addition, the Governance and Nominating Committee’s primary involvement in the director nomination and Board self-evaluation processes assists the Board in reviewing and mitigating risks related to the governance of our Board. | |
| Finance Committee | | | Responsible for reviewing and approving plans and strategies with respect to financing transactions, acquisitions and dispositions, and other transactions involving financial risks. | | | The Finance Committee reviews the Company’s earnings and free cash flow, its sources and uses of liquidity, compliance with financial covenants, and uses of the Company’s cash. | |
Each of the committee chairs regularly reports to the full Board concerning the activities of the applicable committee, the significant issues it has discussed, and the actions taken by that committee.
| 19 |
| | | | | | | | | | | | ||||||
| Jeffrey J. Jones II | | | Tony G. Bowen | | | Karen A. Orosco | | | Dara S. Redler | | | Kellie J. Logerwell | | | Thomas A. Gerke | |
| President and | ||||||||||||||||
| Chief Financial Officer | | |||||||||||||||
| President, Global Consumer Tax and Service Delivery | | | ||||||||||||||
Vice President and Chief Accounting Officer | | ||||||||||||||||
| |||||||||||||||||
New Strategic Framework
Commencing in fiscal year 2019, we adopted a new multi-year enterprise growth strategy designed to guide us toward long-term sustainable growth (see additional details about this new enterprise strategy beginning on page 1). During fiscal year 2018, we objectively examined every aspect of our business and the consumer trends driving our future plans. We inventoried our strategic assets—both tangible and intangible—and reviewed nearly two decades of operational and financial results to gain insight into past challenges and opportunities.
This exercise affirmed that H&R Block is a trusted brand and also identified opportunities to improve, most notably in new client growth. We exited fiscal year 2018 with a large client base and two straight years of improved results in both our Assisted and DIY businesses. Our client retention was strong, but new client growth was suboptimal and this led us to revise our pricing structure, including introducing upfront, transparent pricing for all clients and targeted price reductions for certain of our Assisted clients. These revisions were intended to improve the value proposition in our Assisted business and address challenges and opportunities that arose in our business as a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Legislation”). As a part of our new enterprise strategy, we also announced strategic investments in technology, operations, and our office footprint optimization. Due to these investments, during our June 2018 earnings call we announced that we expected fiscal year 2019 revenues and margins to decrease, and publicly provided to our investors a financial outlook reflecting those expectations. More information about the 2019 financial outlook can be found in the June 2018 earnings call materials available on the Company’s website at www.hrblock.com by clicking the “Investor Relations” link and then clicking the “Webcasts and Presentations” link under the “Financial Info” tab.
In support of the new enterprise strategy, the Compensation Committee set target metrics for fiscal year 2019 short-term incentive (“STI”) and long-term incentive (“LTI”) compensation that aligned with both the operating plan approved by the full Board and the outlook provided to investors. In recognition that these targets were set below the prior year actual results due to the substantial investments described above, the Compensation Committee made several changes to the core design of the variable incentive plans to ensure a shareholder-friendly outcome and protect against possible misperception of a management windfall if the target goals were exceeded. Specifically, the Compensation Committee (i) reduced the cap on the STI payout from 200% to 150% of target and provided that any payout achieved over target would be delivered in restricted share units, and (ii) reduced the cap on the portion of performance share unit performance attributable to fiscal year 2019 from 200% to 150% of target. The Compensation Committee believes that the target goals appropriately incentivized our executives to meet and exceed the Board-approved fiscal year 2019 operating plan and execute on our evolving enterprise strategy, thereby ensuring alignment between management payouts and investor expectations. The Compensation Committee also believes that the changes to both the STI and performance share unit plans, which reduced maximum payouts to below-market levels, reflected an appropriate revision during a year in which all parties – investors and management – made important investments in our Company’s future.
In our meetings with shareholders, we explained in detail our previously disclosed new enterprise strategy, its projected impact on fiscal year 2019 financial results, and the steps proposed by the Compensation Committee with respect to the 2019 STI and LTI plans, as described immediately above. Shareholders were supportive of the Company’s new strategy, acknowledging the lower financial expectations and STI targets and appreciating the limitations placed on potential fiscal year 2019 payouts to support it.
Fiscal year 2019 represented the first year in our multi-year efforts to execute our new enterprise strategy, and we delivered the high end of our revenue and margin outlook. This led to total shareholder return (“TSR”) for the 12 months ending June 30, 2019 of 33.7%, which was in the top 15% of the S&P 500 index,1 and a substantial improvement in share price during that period.
Fiscal year 2020 represents the second year of implementing our new enterprise strategy and we are focused on continuing the progress made in fiscal year 2019. In June 2019, the Compensation Committee set the performance goals in our variable incentive plans for our executive officers for fiscal year 2020. The target performance goals are consistent with the Company’s Board-approved fiscal year 2020 operating plan and fiscal year 2020 external financial outlook publicly provided to investors during our June 2019 earnings call. To ensure continuous improvement and maintain the positive momentum we developed in fiscal year 2019, all target goals exceed fiscal year 2019 actual results after adjustment for the recently announced acquisition of Wave.
Our Engagement with Shareholders
We have followed a consistent approach to the design of our executive compensation program for many years. The results of our annual shareholder advisory votes on executive compensation (commonly known as the “say-on-pay” vote) before 2018 demonstrated strong shareholder support for our program, with support in excess of 95% each year from 2013 to 2017. At our 2018 annual meeting, however, approximately 61% of votes were cast in favor of our say-on-pay proposal. As discussed at pages 3 to 4 above, in response to the lower level of support for our say-on-pay vote at our 2018 annual meeting, at the request of the Board and the Compensation Committee, the Chairman of the Board led an extensive shareholder outreach initiative during fiscal year 2019 and early fiscal year 2020.
This outreach initiative was designed to assist our Board and Compensation Committee in fully understanding the perspectives of our shareholders, including those that did not support our say-on-pay vote in 2018, with respect to our executive compensation program. We also consulted the publicly-available policies of our major shareholders to better understand their views on executive compensation. This effort supplemented the ongoing communications between our management and shareholders, as well as contact with shareholders prior to our 2018 annual meeting, through various engagement channels including in-person or telephonic meetings. These meetings provided the Compensation Committee and the Board with valuable insights into our shareholders’ perspectives on our executive compensation program and potential improvements to the program, as described below.
During this engagement:
|
(1) | Ms. Redler joined the Company as Chief Legal Officer effective January 17, 2022. |
(2) | Mr. Gerke retired as General Counsel and Chief Administrative Officer effective January 17, 2022. |
▪ | In Small Business tax, we had strong growth in clients and mix, and Wave saw 28% revenue growth year-over-year and new leadership joining to drive the next phase of its growth; |
▪ | In Financial Products, we launched our |
▪ | We drove meaningful results in Block Experience, including tripling virtual adoption year-over-year, maintaining strong tax pro productivity, and funding the future with cost savings, including eliminating approximately |
| 20 |
We also supplemented our shareholder engagement process by proactively engaging with the two largest proxy advisory firms for additional perspective and clarity on matters they highlighted
Below is a summary of the processes and actions we have taken to address shareholder feedback received in fiscal year 2022. The chart below illustrates our progress since the year ended June 30, 2019, and early fiscalthe last normal year 2020 and the 2018 say-on-pay vote result. Note that the executive compensation program for fiscal year 2019 was set in June 2018, prior to the say-on-pay vote at our 2018 annual meetingpandemic:
Excluding Free File Alliance returns. |
What We Heard in Our Engagement and How We Responded
We received a range of different perspectives on our executive compensation program from shareholders during our shareholder outreach initiative, all of which were considered by the Compensation Committee.
We received positive feedback from investors about the overall annual executive compensation program and support for our management team, consistent with the support in excess of 95% for our say-on-pay proposal in each year from 2013 to 2017. Therefore, the Compensation Committee retained the overall structure of our annual incentive compensation program for fiscal year 2020, which is largely performance based, as described in more detail on pages 29 to 42 below.
In this engagement, we also shared with our shareholders that short-term incentive plan targets for fiscal year 2019 were set at levels lower than the prior year, given our stated expectations for lower financial results due to investments in our
new enterprise strategy. Our shareholders generally expressed support for the Company’s new enterprise strategy, acknowledging the lower financial expectations contained in our 2019 financial outlook and appreciating the changes made to the executive compensation program in fiscal year 2019 to support it.
As reflected in the say-on-pay results, some shareholders expressed concern regarding the lack of performance conditions in the one-time inducement awards provided to Mr. Jones in fiscal year 2018 in connection with his hiring as CEO. We understand this one-time, isolated issue was the primary factor that led to the decreased level of support. The inducement awards as the primary factor was not unexpected given that we did not make material changes to the ongoing executive compensation program that had been overwhelmingly supported by our shareholders in recent years. We also received feedback requesting additional transparency on certain aspects of our executive compensation program and other proxy statement disclosures. As a result of this feedback, we have made the updates described below.
All per share amounts are based on weighted average fully diluted shares over the | |||
In these responses,Given the Compensation Committee focused on continuing to designstrong results of fiscal year 2022 described above and execution against our executive compensation program to reflect shareholder views and to strengthen our ability to driveBlock Horizons 2025 strategy, the executionfiscal year 2022 STI plan (“2022 STI Plan”) resulted in a total payout of our new enterprise strategy over the long term, support sustained growth, and continue decades of proven success. A detailed discussion200.0% of the Company’s fiscal year 2020 executive compensation program is set forth below under “Fiscal Year 2020 Compensation.”
our executive compensation program:
Alignment with Shareholder Interests
Performance-Based Compensation Framework
As part of our efforts to ensure the alignment of management’s interests with those of our shareholders, a substantial portion of our executives’ total compensation is contingent, or “at-risk,” and will have value commensurate with Company performance, whether below or above the target levels. For fiscal year 2019, 73% of CEO total direct compensation and 62% of the total direct compensation of our other NEOs was performance-based and at-risk. We emphasize performance-based compensation under our STI and LTI programs to motivate our executives to deliver financial, operational, and strategic results that meet, and exceed, pre-established goals.
Stock Ownership Requirements
We aim to further align the interests of our executives with those of shareholders and the long-term interests of the Company through stock ownership requirements. We require our CEO to retain 100% of any equity that he holds and any equity awards that he receives until the value of his shares and certain other vested equity awards is at least six times the value of his annual base salary, as described below under “Stock Ownership Guidelines.” In addition, the restricted share units granted to our CEO in fiscal year 2018 are subject to a further requirement that he hold such shares until he is no longer employed by the Company. The other members of our senior executive team, including our other NEOs, are required to retain at least 50% until the value of their shares and such other equity awards is at least three times the value of their annual base salary.
Our Pay for Performance Compensation
New Strategic Framework
As described above, commencing in fiscal year 2019, we adopted a new multi-year enterprise strategy designed to guide us toward long-term sustainable growth, which included strategic investments in pricing, technology, and operational excellence that resulted in a reset of our revenue and earnings outlook.
Fiscal Year 2019 Compensation Decisions
A primary goal of our executive compensation program is to directly link a significant portion of executive pay to Company performance. Consistent with our shareholders’ historical support of the Company’s compensation practices prior to the 2018 say-on-pay vote, the Compensation Committee decided to retain the core design of our executive compensation program in fiscal year 2019. In structuring fiscal year 2019 compensation, the Compensation Committee aimed to continue to closely align executive pay with Company performance, while taking into account the investments required in fiscal year 2019 under our new strategic framework, by:
| 21 |
The Compensation Committee believes that the levels set for the performance metrics, when paired with the program adjustments described above, appropriately incentivized our executives to meet the Company’s fiscal year 2019 operating plan and execute on our new enterprise strategy by providing realistically achievable metrics, while ensuring that such metrics were sufficiently challenging and limiting the risk of excessive payments.
Additional discussion of fiscal year 2019 compensation decisions can be found beginning on page 30.
Fiscal Year 2019 Results and Impact on Fiscal Year 2019 Performance-Based Compensation and 2020 Compensation Decisions
Fiscal Year 2019 Results
In fiscal year 2019, we focused on executing year one of our enterprise strategy, delivering the high end of our revenue and margin expectations. Key fiscal year 2019 financial results, as compared to our 2019 financial outlook, are as follows:
TSR2022 Target Pay Mix for the 12 months ending June 30, 2019 was 33.7%, which was in the top 15% of the S&P 500 index during that period.
In addition, we continued our record of making quarterly dividend payments, which, along with the Board’s approval in the first quarter of fiscal year 2020 of a 4% increase in the quarterly dividend to $0.26 per share, an annual rate of $1.04, was consistent with our strong history of allocating capital to our shareholders.
Fiscal Year 2019 Performance-Based Compensation
Because management delivered strong performance in fiscal year 2019 as compared to our annual operating plan and long-term enterprise strategy, the Company’s results for fiscal year 2019 resulted in above-target performance of the STI plan metrics of Pre-Tax Earnings from Continuing Operations, Revenues from Continuing Operations, and Market Share. In June 2019, the Compensation Committee reviewed the Company’s performance as compared to the pre-determined performance objectives and approved an overall payout for each of our NEOs of 105.9% of target. However, in order to increase goal rigor and strengthen the alignment with shareholder interests, the fiscal year 2019 STI payouts earned above 100% of target were paid in awards of restricted share units with a grant date of June 30, 2019 that vest ratably over two years.
Additional discussion of fiscal year 2019 STI compensation decisions can be found beginning on page 32.
The performance-based nature of our executives’NEOs’ target total direct compensation (generally, athe total compensation package excluding benefits) is illustrated below:
For
As described above, a primary goal of our executive compensation program is to directly link a significant portion of executive pay to Company performance, thereby aligning our executives’ compensation with the interests of our shareholders. Consistent with the positive feedback receivedthis change in our fiscal year 2019 shareholder outreach,end, there was a two-month transition period between the end of our fiscal year 2021 and the start of our fiscal year 2022 (which we refer to as described in detail beginning on page 21 above,the “Transition Period”). To account for the fiscal year end change and to compensate our NEOs for the Transition Period, the Compensation Committee decidedapplied a 14/12 proration to retain the key componentsexecutives’ individual fiscal year 2022 short-term incentive (“STI”) and long-term incentive (“LTI”) target award opportunities. This proration was applied for fiscal year 2022 only and no separate STI or LTI awards were granted for the Transition Period.
▪ | | | In the STI program, the prior Market Share metric was replaced with a strategic goal, which for fiscal year 2022 was a pre-established cost savings metric tied to our Block Horizons 2025 strategy; | | | |
▪ | | | Incorporated an individual performance modifier of +/- 25% to the funded STI award to further link individual executive’s pay to execution of the Block Horizons strategy; and | | ||
▪ | | | In the LTI program, the equity mix was adjusted, increasing performance share units (“PSUs”) to 65% and eliminating market stock units (“MSUs”), resulting in a mix of 65% PSUs and 35% restricted share units (“RSUs”), and measured cumulative EBITDA from continuing operations over the full three-year performance period for the PSUs. | |
| 22 |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 23 |
| | | | ||
✔ | |||||
✔ | on long-term equity incentives, payments, and clawback | ||||
✔ | double-trigger change in control severance payment | ||||
✔ | the event of a change in | ||||
✔ | compensation program that we believe have a sound benefit to the | ||||
✔ | guidelines ✔ Impose minimum vesting periods for all executives’ equity awards. ✔ Use of an independent compensation consultant by the Compensation Committee. | | | ✘ No executive employment contracts except with | ✘ No excise tax gross-ups. ✘ No individual change in control agreements, except for certain double-trigger provisions in Mr. Jones’s employment agreement. ✘ No dividends on any unvested equity awards; dividend equivalents accrue and are payable only upon vesting of the underlying award. ✘ Expressly prohibit hedging, pledging and the use of margin accounts related to our stock. |
✘ | and stock appreciation rights without shareholder approval. | ||||
✘ | stock appreciation rights with zero intrinsic value. | ||||
| 24 |
For awards that are based on the Company’s performance, our specific decisions regarding the setting of performance goals focus on certain metrics that relate to our business plan and strategic priorities and that we believe are the most critical value drivers of the business, such as revenue from continuing operations, pre-tax earnings from continuing operations, earnings from continuing operations before interest, taxes, depreciation, and amortization, or EBITDA, earnings from continuing operations before interest and taxes, or EBIT, market share, and average return on invested capital. Actual performance goals, as well as strategic priorities, vary from year to year based on the business environment and the Compensation Committee’s determination of goals that it believes are important for a particular year.
Unlike target incentive compensation levels, which are set by the Compensation Committee near the beginning of each fiscal year, actual incentive compensation is a function of the Company’s financial, operational, strategic, and absolute and relative stock performance, as reflected through STI payouts, payouts of LTI performance share units and market stock units, and the value of all LTI awards. A substantial portion of our executives’ actual compensation is at-risk and varies above or below target levels commensurate with Company performance.
The chart below summarizes the elements and objectives of our fiscal year 2019 compensation program for our NEOs. Each of the following compensation components fulfills one or more of our objectives of recruiting, retaining, and motivating a high-performing executive team.
| | | | | | | | ||||
| Fixed | | | Base Salary | | | Compensates for scope and level of responsibility, experience, and sustained individual performance. | | | Fixed | |
| | | STI | | | Motivates and rewards achievement of pre-established annual financial, operational, and strategic performance objectives. | | | |||
| | | Motivates and rewards achievement of multi-year performance objectives that enhance shareholder value. | | |
| | | RSUs | | | | | Time-based, three-year ratable vesting provides meaningful retentive value; improved stock price performance | | ||
| Other | | | Retirement, Health and Welfare Benefits | | | Offers market-competitive health insurance options and income replacement upon retirement, death, or | | | ||
| Perquisites | | | Provides modest benefits | | | |||||
EXECUTIVEFISCAL YEAR 2022 COMPENSATION PROGRAM COMPONENTS
Each of our compensation components fulfills one or more of our objectives of recruiting, retaining, and motivating a high-performing executive team, and the
Except as otherwise noted under “Executive Evaluation Process,” the Compensation Committee’s executive compensation determinations are the result of the Committee’s business judgment, which is informed by the experiences of the Committee members, input from the Committee’s independent compensation consultant, the CEO’s evaluation of performance, and feedback from our shareholders.
The Compensation Committee establishes base salaries atcompensation levels designed to enable us to recruit and retain talented executives and, as part of a broader compensation program, to motivate consistent high performance over a sustained period. The Compensation Committee determines executive base salaries based on the executive’s experience, role and responsibilities, individual performance, and the other factors described above under “Executive Compensation Determination Process” and below under “Compensation Philosophy and Benchmarking” beginning on page 43.Benchmarking.” Annual merit increases for our NEOs, other than the CEO, are based on evaluation of their performance by the CEO and the Compensation Committee, as well as the Company’s performance and outlook for the upcoming fiscal year. Annual merit increases are not automatic or guaranteedyear, and NEO compensation data from our Peer Group companies as well as survey data.
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 25 |
2021. For fiscal year 2019, base salaries2022, total target direct compensation (“TTDC”) levels for our NEOs were as follows:
Officers | Annual Base Salary ($) | % Increase from Fiscal Year 2018 | ||
Jeffrey J. Jones II | $ 995,000 | 0.0% | ||
Tony G. Bowen | $ 550,000 | 14.6% | ||
Thomas A. Gerke | $ 600,000 | 0.0% | ||
Karen A. Orosco | $ 475,000 | n/a | ||
Kellie J. Logerwell | $ 250,000 | 4.2% |
Mr. Jones’s annual base salary remained at $995,000 in fiscal year 2019. Additional information regarding Mr. Jones’s compensation can be found beginning on page 53.
(1) | As described above under CEO Employment Agreement, the LTI Target increase for Mr. Jones is effective for fiscal year 2023, and so is not contemplated in this table. |
(2) | Ms. Redler started employment with the Company on January 17, 2022, and received a pro-rated fiscal year 2022 STI award ($203,425, or 45%) based on her start date. She received cash and LTI sign-on awards but did not receive a fiscal year 2022 annual LTI award. |
(3) | Represents Mr. Gerke’s compensation level as the Company’s General Counsel and Chief Administrative Officer until his retirement on January 17, 2022. |
In November 2017, in connection with his return to his role as General Counsel and Chief Administrative Officer after serving as Interim Chief Executive Officer, the Compensation Committee approved an annual base salary for Mr. Gerke of $600,000 beginning December 1, 2017.survey data. The Compensation Committee retained that base salary level for Mr. Gerke for fiscal year 2019.
In setting Ms. Orosco’s base salary, the Committee considered her contributions to the Company’s financial and operational performance and her individual performance in fiscal year 2018, and also considered her appointment as an executive officer effective May 1, 2018 and the additional responsibilities she took on as of that date. The base salaryTTDC increase for Ms. Logerwell was intended to recognize her contributionsperformance during fiscal year 2021, including her leadership in implementing the Company’s fiscal year end change.
In June 2019,end change was applied to Ms. Redler’s compensation, given her start date after the Compensation Committee approved the annual base salariestransition period.
Officers | Fiscal Year 2020 Salary ($) | % Increase from Fiscal Year 2019 | ||
Jeffrey J. Jones II | $ 995,000 | 0.0% | ||
Tony G. Bowen | $ 600,000 | 9.1% | ||
Thomas A. Gerke | $ 600,000 | 0.0% | ||
Karen A. Orosco | $ 550,000 | 15.8% | ||
Kellie J. Logerwell | $ 260,000 | 4.0% |
| Officers | | | STI Prorated Target ($) | | | LTI Prorated Target ($) | |
| Jeffrey J. Jones II | | | $1,741,250 | | | $6,416,667 | |
| Tony G. Bowen | | | $648,900 | | | $1,866,667 | |
| Karen A. Orosco | | | $630,000 | | | $1,516,667 | |
| Kellie J. Logerwell | | | $157,500 | | | $303,333 | |
| Thomas A. Gerke | | | $560,000 | | | $1,283,333 | |
Mr. Jones continues to receive an annual base salary of $995,000 annually in fiscal year 2020 pursuant to his employment agreement with the Company dated August 21, 2017 (the “Jones Agreement”). Additional information regarding the Jones Agreement can be found beginning on page 53. Mr. Gerke continues to receive an annual base salary of $600,000 in fiscal year 2020.
The base salary increase for Mr. Bowen was intended to recognize his contributions to the Company’s enterprise strategy steps taken in fiscal year 2019, including his leadership of the introduction of upfront, transparent pricing for all tax preparation methods, and his contributions to the Company’s financial and operational performance. The base salary increase for Mr. Bowen also took into account market data for Chief Financial Officer positions within our Peer Group and the general market environment.
The base salary increase for Ms. Orosco was intended to recognize her strong leadership of the Company’s largest operating unit through our strategic transformation, including leadership in the areas of attracting talent, succession planning, and driving operational excellence. The salary increase for Ms. Orosco also took into account market data for comparable positions within our Peer Group and the general market environment.
The base salary increase for Ms. Logerwell took into account her specific role and responsibilities at the Company and individual performance in fiscal year 2019.
Short-Term Incentive Compensation
STI compensation is performance-based and at-risk compensation intended to motivate executives to attain goals that are measured over annual time horizons.
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 26 |
Maximum Performance criteria and threshold performance objectives are set above and below target objectivesmay be adjusted, as necessary, to establishprevent reduction or enlargement of an appropriate relationship between actual Company performance andaward as a result of extraordinary events generally outside the executives’ control.
| | ▪ | | | Retained Revenue from Continuing Operations and Pre-Tax Earnings from Continuing Operations metrics used in prior years. | |
| ▪ | | | Replaced prior Market Share metric with a strategic goal, which for 2022 is a pre-established cost savings metric tied to our Block Horizons 2025 strategy. | ||
| ▪ | | | Incorporated an individual modifier that can adjust the funded payout +/- 25% in order to motivate strong individual performance and tie each executive’s pay to individual execution of the Block Horizons strategy. | ||
| ▪ | | | Maintained our fiscal year 2021 approach to threshold and maximum performance; total payout cannot exceed 200% of target. |
Under the Executive Performance Plan, ultimateopportunities. STI payouts can range from 0% (or 50% if all threshold goals are achieved) to 200% of each NEO’s target STI opportunity, subject to certain limitations contained in the Executive Performance Planbased on performance against pre-established metrics and for Mr. Jones, limitations contained in the Jones Agreement. The terms of the Jones Agreement are set forth below under the heading “Jeffrey J. Jones II Employment Agreement” beginning on page 53. As discussed below under “Actions Pertaining to Fiscal Year 2019 STI Compensation,” for fiscal year 2019, STI payouts were capped at 150% of the target STI opportunity with any payout achieved over target being paid in restricted share units vesting ratably over two years.
curves.
Actions Pertaining to Fiscal Year 2019 STI Compensation
STI compensation for our executive officers has historically been determined under a two-step approach. The two-step approach was initially designed with the intent to qualify STI awardstable below. Additionally, as “performance-based compensation” for purposes of meeting the performance-based exemption under Internal Revenue Code (“IRC”) Section 162(m) and to enable the Company to deduct the amount of STI awards to the greatest extent permitted under IRC Section 162(m) as in effect when such awards were granted. Although the performance-based exemption under IRC Section 162(m) was repealed,described above, the Compensation Committee determinedapplied a 14/12 proration to retain the two-step structure forexecutives’ individual fiscal year 2019.
Under the first step of the methodology, the Compensation Committee would approve a specific2022 STI “initial funding performance target,” or threshold level of performance, within ninety days after the beginning of the fiscal year. In setting the initial funding performance target the Compensation Committee would use one or more of the specific performance criteria identified in the Executive Performance Plan. Under the second step of the methodology, the CEO, in consultation with other senior executives, would propose separate performance objectives that would be reviewed by the Compensation Committee in consultation with its independent compensation consultant. These separate performance objectives would generally be based on our fiscal year business plan. Each fiscal year the Compensation Committee would examine the target levels for each performance metric, with the goal of establishing target levels with an appropriate level of difficulty considering the industry and competitive environment and the Company’s strategic priorities and operating planaward opportunities to account for the fiscal year. After the Compensation Committee had made any changes to these performance objectives that it considered appropriate, the Compensation Committee would approve the objectives for use with respect to our executive officers.
Following the end of the fiscal year, the Compensation Committee would review the Company’s performance measured against the initial funding performance target set in the first step and the separate performance objectives set in the second step. Failure to achieve the initial funding performance target would result in no payouts being made under the Executive Performance Plan. Achievement of the initial funding performance target would result in potential funding of the STI payments for the applicable executive officers at the maximum payout level. The Compensation Committee could then use negative discretion to reduce the actual payout, as it deemed appropriate, based on the Company’s performance relative to the pre-determined performance objectives set in the second step, and on the Compensation Committee’s evaluation of financial, operational, strategic, and individual performance.
Initial Funding Performance Target
Transition Period.
| Officers | | | Target Opportunity (as a % of Base Salary) | | | Annual Target Opportunity ($) | | | Prorated Target Opportunity ($) | |
| Jeffrey J. Jones II | | | 150% | | | $1,492,500 | | | $1,741,250 | |
| Tony G. Bowen | | | 90% | | | $556,200 | | | $648,900 | |
| Karen A. Orosco | | | 90% | | | $540,000 | | | $630,000 | |
| Dara S. Redler(1) | | | 90% | | | $450,000 | | | N/A | |
| Kellie J. Logerwell | | | 50% | | | $135,000 | | | $157,500 | |
| Thomas A. Gerke | | | 80% | | | $480,000 | | | $560,000 | |
(1) | Ms. Redler’s fiscal year 2022 STI target award was not subject to the 14/12 proration, as she commenced employment with the Company after the Transition Period. Consistent with Company policy, Ms. Redler’s 2022 STI target was prorated to $203,425 (45%) based on her January 17, 2022 start date. |
Performance Objectives
As discussed under “New Strategic Framework” above, commencing with fiscal year 2019, we adopted a new enterprise strategy designed to guide us toward long-term sustainable growth. In fiscal year 2019, we implemented a number of initiatives as we began executing this new enterprise strategy. While we expect these changes to position us for long-term growth, they required important investments in the short term. For the performance objectives, the Compensation Committee continued the use of Revenue from Continuing Operations, Pre-Tax Earnings from Continuing Operations, and Market Share (the same metrics as were employed in fiscal year 2018) as the separate fiscal year 2019 STI performance criteria and objectives.
The performance targets were set to motivate strong management performance, and, as indicated above, balance top-line metrics (Revenue from Continuing Operations), bottom-line metrics (Pre-Tax Earnings from Continuing Operations), and further our focus on improving the client trajectory (Market Share). The Compensation Committee believes such a balance drives the appropriate amount of focus on propelling long-term growth through revenue and clients.
In June 2018,2021, the Compensation Committee approved the separate fiscal year 20192022 STI performance objectives applicable to our executive officersexecutives that are summarized in the tablegraphic below.
Goal | Criteria | Threshold | Target | Maximum | Weight | ||||||
Lay foundation for future growth | Revenue from Continuing Operations(1) | $ | 2,958.2 | $ | 3,081.5 | $ | 3,155.4 | 40% | |||
Focus on ultimate performance of the Company as a whole | Pre-Tax Earnings from Continuing Operations(2) | $ | 480.3 | $ | 527.8 | $ | 565.9 | 40% | |||
Improve client trajectory | Market Share(3) | 12.65% | 13.15% | 13.59% | 20% |
These criteria and objectives are disclosed in the limited context of our executive compensation program and should not be deemed to apply in other contexts.
In setting the levels for each performance metric, the Compensation Committee considered the Board’s review and approval of our fiscal year 2019 operating plan, the Company’s 2019 financial outlook, and our new enterprise strategy, taking into account the initiatives to be implemented in fiscal year 2019.
After careful consideration and with the input of the Compensation Committee’s independent compensation consultant, the Compensation Committee determined that it was appropriate to set the Threshold, Target, and Maximum levels for Revenue from Continuing Operations and Pre-Tax Earnings from Continuing Operations at levels lower than the prior fiscal year, but consistent with the Company’s fiscal year 2019 operating plan approved by the Board, 2019 financial outlook, and new enterprise strategy. The Market Share metric was set at a higher level than fiscal year 2018 actual results, reflecting the planned improvement in market share as a result of our new enterprise strategy. The Compensation Committee believes these levels are aligned with shareholder interests and appropriate for the business going forward.
Given the planned strategic investments for fiscal year 2019 included in the Board-approved operating plan, the Compensation Committee determined that the maximum amount each executive could earn is 150% of target for each metric, and 150% of target in the aggregate (reduced from the 200% maximum under the Executive Performance Plan). In addition, the Compensation Committee determined that the portion, if any, of STI earned in excess of 100% of an executive’s target would be paid to the executive in restricted share units, to be granted under the 2018 Plan in June 2019 if applicable, subject to ratable vesting over two years. The Compensation Committee believes that the levels set for the performance metrics, at the time when paired with the program adjustments described above,they were set, appropriately incentivized our executives to meet the Company’s Board-approved fiscal year 20192022 operating plan and execute on our enterprise strategy by providing realistically achievable metrics, while ensuring that such metrics were sufficiently challenging and limiting the risk of excessive payments.
As discussed beginning on page 22 above, we heard in our shareholder outreach that our shareholders generally supported the Company’s new enterprise strategy, acknowledging the lower financial expectations contained in the 2019 financial outlook, and appreciating the limitations placed on potential fiscal year 2019 payouts to support it.
The table below shows the change in target STI opportunity for our NEOs from fiscal year 2018 to fiscal year 2019, as a percentage of base salary:
Officers | Fiscal Year 2019 | Fiscal Year 2018 | |||
Jeffrey J. Jones II | 125 | % | 125% | ||
Tony G. Bowen | 80 | % | 80% | ||
Thomas A. Gerke | 80 | % | 95% | ||
Karen A. Orosco | 80 | % | 75% | ||
Kellie J. Logerwell | 50 | % | 45% |
| 27 |
The Jones Agreement prescribes, for each fiscal year, Mr. Jones’s target opportunity of 125% of his base salary. In determining Mr. Jones’s STI opportunity, the Committee considered Mr. Jones’s experience and role and responsibilities, the STI levels for other Company executives, and market data for President and Chief Executive Officer positions within our Peer Group.
Mr. Gerke’s fiscal year 2018 target opportunity was set as incentive to perform his enhanced duties while serving as Interim CEO. The decrease in target opportunity for fiscal year 2019 reflected his return to the role of General Counsel and Chief Administrative Officer. The increases in target opportunity for each of Mses. Orosco and Logerwell for fiscal year 2019 was in recognition of each executive’s individual performance in the prior fiscal year, specific roles and responsibilities, and overall contributions to the strategic direction of the Company. In setting the levels of STI opportunity for all of our NEOs, the Committee also considered the STI levels for other Company executives and market data for their respective provisions within our Peer Group.
The following formula TargetedThe initial funding metric was achieved for fiscal year 2019, as follows:was thenis used to calculate the payout awarded for fiscal year 20192022 STI compensation (prorated to account for the Transition Period):executive officers: Eachstrong performance in fiscal year 2022, each of our NEOs received fiscal year 20192022 STI compensation of 105.9%200.0% of the NEO’s respective target opportunity. In determining the level of achievement of the performance goals, the calculations of the performance criteria results were adjusted in accordance with the types of adjustments that the Compensation Committee pre-approved when it set the 2019 STI performance goals and objectives. Because management delivered strong performance in fiscal year 2019 as compared to our annual operating plan, the Company’s results for fiscal year 2019 resulted in above-target performance of Pre-Tax Earnings from Continuing Operations, Revenues from Continuing Operations, and Market Share. The Company’s results for each performance metric were as follows:Note: The criteria, objectives, and results in this table are disclosed in the limited context of our executive compensation program and should not be deemed to apply in other contexts. The performance metrics were tied to the 12-month fiscal year 2022 results for consistency with the Company’s Board-approved fiscal year 2022 operating plan, the Company’s fiscal year 2022 financial outlook, and our enterprise strategy. The Revenue and Pre-Tax Earnings from Continuing Operations targets were set at a level below reported results for the prior year period due to the impacts of the 2020 tax season extension on prior year results. Fiscal year 2022 results are not comparable to the prior year period, as the 2020 tax deadline was extended to July 15 of that year due to the pandemic. As a result, 15 days of tax season 2020 were included in reported results for the year ended June 30, 2021. Fiscal year 2022 targets were set at levels higher than normalized prior year results that remove the impacts of the tax season extension and non-recurring stimulus-related card activity. See our fiscal year 2022 earnings release issued on August 9, 2022 for more information on normalized results. Pre-Tax Earnings from Continuing Operations includes consolidated net earnings for fiscal year 2022 attributable to continuing operations before the deduction of income taxes (in millions). The Fund the Future Savings strategic goal is a cost savings metric tied to the Company’s Block Horizons “Fund the Future” enabler. Cost savings is calculated based on cost savings as compared to fiscal year 2021 in specific identified areas tied to Block Horizons, including compensation savings, footprint optimization savings, reductions in client service call center costs, cost savings related to the transition in bank partner, and other miscellaneous cost savings and efficiency efforts.
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 28 |
Criteria | Threshold | Target | Maximum | Weight | Actual | Percentage | Weighted Percentage | |||||||||||||||||
Revenue from Continuing Operations | $ | 2,958.2 | $ | 3,081.5 | $ | 3,155.4 | 40% | $ 3,094.9 | 104.7% | 41.9% | ||||||||||||||
Pre-Tax Earnings from Continuing Operations | $ | 480.3 | $ | 527.8 | $ | 565.9 | 40% | $ 545.1 | 109.0% | 43.6% | ||||||||||||||
Market Share | 12.65% | 13.15% | 13.59% | 20% | 13.21% | 102.4% | 20.5% | |||||||||||||||||
Total Payout | 105.9% | |||||||||||||||||||||||
Officers | Target Opportunity (as a % of Base Salary) | Target Opportunity ($) | Actual Award – Cash Portion ($) | Actual Award – RSU Portion ($) | ||||||||
Jeffrey J. Jones II | 125 | % | $ | 1,243,750 | $ | 1,243,750 | $ | 73,381 | ||||
Tony G. Bowen | 80 | % | $ | 440,000 | $ | 440,000 | $ | 25,960 | ||||
Thomas A. Gerke | 80 | % | $ | 480,000 | $ | 480,000 | $ | 28,320 | ||||
Karen A. Orosco | 80 | % | $ | 380,000 | $ | 380,000 | $ | 22,420 | ||||
Kellie J. Logerwell | 50 | % | $ | 125,000 | $ | 125,000 | $ | 7,375 |
As described above,program with the adjustment for the fiscal year 2019 STI payouts earned over target were paid in awards of restricted share units with a grant date of June 30, 2019 that vest ratably over two years.
Actions Pertaining to Fiscal Year 2020 STI Compensation
In June 2019,end change. Given the 200.0% payout percentage at maximum under the plan, the Compensation Committee approved a target opportunityconsidered, but determined not to apply any individual modifiers to decrease any individual payouts for fiscal year 2022, given the strong individual performance of each of our NEOs for fiscal year 2020 as follows:
Officers | Target Opportunity (as a % of Base Salary) | Target Opportunity ($) | ||||
Jeffrey J. Jones II | 125 | % | $ 1,243,750 | |||
Tony G. Bowen | 90 | % | $ 540,000 | |||
Thomas A. Gerke | 80 | % | $ 480,000 | |||
Karen A. Orosco | 90 | % | $ 495,000 | |||
Kellie J. Logerwell | 50 | % | $ 130,000 |
| Officers | | | Annual Target STI Opportunity ($) | | | Payout at 200% of Target ($) | | | Prorated Annual Target STI Opportunity ($) | | | Final Payout at 200% of Target Prorated for Fiscal Year End Change | |
| Jeffrey J. Jones II | | | $1,492,500 | | | $2,985,000 | | | $1,741,250 | | | $3,483,863 | |
| Tony G. Bowen | | | $556,200 | | | $1,112,400 | | | $648,900 | | | $1,298,308 | |
| Karen A. Orosco | | | $540,000 | | | $1,080,000 | | | $630,000 | | | $1,260,493 | |
| Dara S. Redler(1) | | | $450,000 | | | $406,849 | | | N/A | | | $406,849 | |
| Kellie J. Logerwell | | | $135,000 | | | $270,000 | | | $157,500 | | | $315,123 | |
| Thomas A. Gerke | | | $480,000 | | | $960,000 | | | $560,000 | | | $1,120,438 | |
(1) | Ms. Redler’s 2022 STI was prorated 45% (5.5/12) based on her start date of January 17, 2022. |
The target opportunity increase for Mr. Bowen was intended to recognize his ongoing contributions to the Company as Chief Financial Officer, as described above, and took into account market data for Chief Financial Officer positions within our Peer Group and the general market environment. The fiscal year target opportunity increase for Ms. Orosco was intended to recognize her strong leadership of the Company’s largest operating unit, as described above, and also took into account market data for comparable positions within our Peer Group and the general market environment.
For fiscal year 2020, the Compensation Committee determined to retain the key components and performance-based nature of the plan. In light of the repeal of the performance-based exemption under Section 162(m), however, it took steps to streamline and simplify the plan by eliminating its historic two-step structure. Instead, the Compensation Committee established a one-step process in which the applicable threshold, target, and maximum levels of performance are established within ninety days after the beginning of the fiscal year.
In June 2019, the Compensation Committee set the separate performance objectives applicable to our executive officers for fiscal year 2020, as well as the permitted types of adjustments. The Compensation Committee selected Revenue from Continuing Operations, Pre-Tax Earnings from Continuing Operations, and Market Share as the performance objectives for the fiscal year. This approach continued the balance among the top- and bottom-line metrics, as well as the Company’s desired focus on continuing to improve the client trajectory. To ensure continuous improvement and maintain the positive momentum we developed in fiscal year 2019, all target goals for fiscal year 2020 exceed fiscal year 2019 actual results after adjustment for the recently announced acquisition of Wave. However, the specific levels of each metric are not disclosed at this time given their competitive sensitivity, but will be disclosed upon completion of the performance period in the Compensation Discussion and Analysis section of next year’s proxy statement.
Historically,including:
▪ | aligning management’s interests with those of our shareholders; |
▪ | tying compensation to the attainment of long-term financial and operating goals and strategic objectives to drive long-term value creation; |
▪ | ensuring that realized compensation reflects changes in shareholder value over the long term; and |
▪ | recruiting, retaining, and motivating highly skilled executives. |
For fiscal year 2022, our NEOs received a mix of equity-based incentive awards as shown in the chart, each of which is explained below. At the end of the performance period, the Compensation Committee will certify the performance results and percentage payout for PSUs, as well as the resulting final number of units earned by each executive. There are no dividends paid on outstanding LTI during the vesting period, but dividend equivalents accumulate and are paid to the extent the award ultimately vests. Unvested units do not carry voting rights. As described above, the Compensation Committee applied a 14/12 proration to the executives’ individual fiscal year 2022 LTI target award opportunities to account for the Transition Period. | | | |
| 29 |
Actions Pertaining to Fiscal Year 2019 LTI Compensation
For fiscal year 2019, our NEOs received a mix of equity-based incentive awards consisting of approximately 50% of value in performance share units, 30% of value in market stock units, and 20% of value in time-based restricted share units, each of which are explained below. The Compensation Committee weighted the mix of equity-based compensation so that our NEOs received a greater portion of LTI compensation in performance-based equity vehicles, such as performance share units and market stock units, as compared to time-based equity vehicles, such as restricted share units. As a result, a substantial portion of our NEOs’ equity-based compensation is at-risk and aligned with shareholders’ interests. The portion delivered in time-based restricted share units is intended to serve as an ongoing retention tool and a continuing link to shareholder value, given that the value of the restricted share units increases only to the extent that the Company’s stock price increases. Additional detail regarding the forms of LTI compensation utilized as part of fiscal year 2019 annual LTI compensation is provided below.
For fiscal year 2019, our NEOs received 50% of their annual LTI compensation in the form of performance share units or “PSUs.” We believe the performance share units appropriately reflect our compensation philosophy by establishing a clear connection between the compensation of our NEOs and the achievement of performance goals that are important for long-term value creation.
| | | ▪ | | | PSUs establish a clear connection between NEOs’ compensation and the achievement of goals that are important for long-term value creation. | | |
| ▪ | | | The | ||||
performance period relative to the S&P | |
The TSR modifier increases or decreases the initial payout by up to 25% of the initial payout amount (for a modifier ranging from 75% to 125% of the initial payout amount, as shown in the chart above). However, notwithstanding the result of that calculation, the maximum earned amount is capped at 200%. Payout is not capped at a specific percentage in the event of negative TSR over the performance period because measurement against the S&P 500 Index, rather than a smaller peer group, is more arduous for executives to achieve than performance against a smaller peer group. For example, one-year TSR for the S&P 500 index was approximately 10.7% for our fiscal year 2019 versus 3.5% for the Consumer Services industry group (under the Global Industry Classification Standard), as calculated by the Company using publicly available information. The following formula is used to calculate the final number of earned performance share units, subject to the overall 200% cap:
For performance share unitsPSUs granted in fiscal year 2019, performance is measured over a three-year period beginning on May 1, 2018 and ending on April 30, 2021. The pre-established performance metric is a set level of EBITDA from continuing operations for fiscal year 2019, followed by two years of year-over-year growth in EBITDA from continuing operations (“Annual EBITDA Growth”), with the target for EBITDA from continuing operations for fiscal year 2019 set at $787.2 million,
▪ | Performance is measured over a three-year period beginning on July 1, 2021 and ending on June 30, 2024. |
▪ | The pre-established performance metric is three-year cumulative EBITDA from continuing operations (“EBITDA”). The Compensation |
▪ | The initial payout is then modified based on the Company’s TSR over the performance period relative to the S&P 400 index, as follows, but payouts are capped at 200%: |
the level provided in the fiscal year 2019 operating plan approved by the Board. The specific levels of EBITDA growth in fiscal years 2020 and 2021performance goals for PSUs are not disclosed at this time given their competitive sensitivity, but will be disclosed upon completion of the performance period in the Compensation Discussion and Analysis section of future proxy statements.
A 150% cap was placed on fiscal year 2019 performance, and a 200% cap was placed on performance in each of fiscal year 2020 and 2021.
At the end of the performance period, the Compensation Committee will certify the performance results and percentage payout, as well as the resulting final number of performance share units earned by each executive officer. There are no dividends paid on outstanding performance share units during the vesting period, but dividend equivalents accumulate during the vesting period. Upon vesting of the performance share units, in addition to receiving the number of shares of common stock determined accordingPSUs, subject to the payout calculation, the executive will receive additional shares of common stock equal in valueoverall 200% cap:
Beginning with performance share units granted in fiscal year 2018, a mandatory post-vesting holding requirement was added, which requires that the executive hold at least 50% of the gross shares earned upon vesting of the performance share unitsPSUs for a period of one year after the vesting date. In addition, vested equity is subject to stock ownership guidelines that may extend the one-year period in some cases if the guidelines have not yet been met.
Market Stock Units
For fiscal year 2019, our NEOs received 30% of their annual LTI compensation in the form of market stock units or “MSUs.” If certain performance thresholds are met, a participating executive has the opportunity to earn a payout between 50% and 200% of his or her target number of market stock units based on the ratio of the average of the Company’s stock price for the five consecutive trading days ending on the grant date (“Grant Date Price”) and the average of the Company’s stock price for the five consecutive trading days beginning on the date the Company’s Annual Report on Form 10-K is filed with the SEC for the last fiscal year within the performance period, which is fiscal year 2021 (“Ending Date Price”).
Performance is measured over a three-year performance period beginning on May 1, 2018 and ending on April 30, 2021, with the applicable performance metrics established within ninety days of the beginning of the performance period and the cumulative results for the three-year period determining whether any shares of common stock are payable upon vesting of the market stock units following the end of the three-year period.
The vesting of market stock units is subject to two thresholds, both of which must be satisfied for any payout to occur. First, the Ending Date Price must be greater than or equal to 50% of the Grant Date Price. Second, the Company’s average return on invested capital based on after-tax net operating profit from continuing operations and average invested capital during the three-year performance period, each as defined in the award agreement, must be greater than or equal to 14%. The Compensation Committee determined to utilize average return on invested capital as the second of these thresholds for market stock units, as it believes the investment community considers this metric to be an effective measure of capital efficiency.
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Failure to attain either of these thresholds would result in forfeiture of the entire market stock unit award. The total number of market stock units earned by participating executives, if any, is equal to the number of market stock units granted on the grant date multiplied by the ratio of the Ending Date Price to the Grant Date Price. The following formula is used to calculate the final number of earned market stock units, assuming the initial thresholds are met:
At the end of the performance period, the Compensation Committee will certify the performance results and percentage payout, as well as the resulting number of market stock units earned by each executive officer. There are no dividends paid on outstanding market stock units during the vesting period, but dividend equivalents accumulate during the vesting period. Upon vesting of the market stock units, in addition to receiving the number of shares of common stock determined according to the payout calculation, the executive will receive additional shares of common stock equal in value to the total dividends that would have been paid on the number of shares of common stock that ultimately vest. Market stock units do not carry voting rights.
For fiscal year 2019, our NEOs received 20% of their annual LTI compensation in the form of restricted share units or “RSUs.” There are no dividends paid on outstanding restricted share units during the vesting period, but dividend equivalents accumulate during the vesting period. Upon vesting of the restricted share units, in addition to receiving the applicable number of shares of common stock, the executive will receive additional shares of common stock equal in value to the total dividends that would have been paid on such shares. Restricted share units do not carry voting rights.
| | | ▪ | | | RSUs link our NEOs’ compensation with shareholders’ interests as their value fluctuates with fluctuations in our stock price. | | |
| ▪ | | | The RSUs granted in fiscal year 2022 vest ratably over three years, providing a retention incentive for NEOs. | |
Performance share units and market stock units
An executive generally will forfeit his or her equity award Awards may vest upon a voluntary termination of employment or an involuntary termination for cause prior to the vesting date. However, an executive will be entitled to pro-rata vestingdate under certain circumstances, as described below under “Termination of his or her awards (as determined based upon the attainment of performance goals, when applicable) in the event of the executive’s retirement more than one year following the grant date,Employment, Severance, and will be entitled to a full vesting of his or her awards (as determined based upon the attainment of performance goals, when applicable) in the event of the executive’s death or disability more than one year following the grant date. For performance share units and market stock units, an executive will be entitled to receive pro-rata vesting of the awards, as determined based upon the attainment of applicable performance goals, in the event of the executive’s involuntary termination without cause more than one year following the grant date. Unvested restricted share units are forfeited upon an executive’s involuntary termination without cause.
In the event of a change in control, the Compensation Committee may in its discretion waive the performance goals that apply to performance-based awards. If it does, the units generally will vest as a result of the executive’s continued employment through the third anniversary of the grant date and the executive will be entitled to receive all or a pro-rata portion of the award in the event of certain forms of termination that occur in connection with or following the change in control. For restricted share units, the executive will be entitled to receive full vesting in the event of certain forms of termination (as set forth in the award agreement governing the grant) in connection with a change in control.
Mr. Gerke’s fiscal year 2019 equity-based compensation awards contain modified vesting provisions providing that his voluntary retirement will not result in the forfeiture of any of the equity awards outstanding for more than one year prior to such retirement; rather, the entire equity awards will continue to vest on the stated vesting dates set forth in the applicable award agreement and with performance adjustments (if any) made under such agreement as if he remained employed through such stated vesting dates.
Fiscal Year 20192022 LTI Compensation Awards
Officers | Award Value ($)(1) | Performance Share Units (#)(1) | Market Stock Units (#)(1) | Restricted Share Units (#)(1) | ||||||||
Jeffrey J. Jones II | $ 5,500,000 | 120,456 | 62,548 | 48,288 | ||||||||
Tony G. Bowen | $ 1,000,000 | 21,902 | 11,373 | 8,780 | ||||||||
Thomas A. Gerke | $ 1,100,000 | 24,092 | 12,510 | 9,658 | ||||||||
Karen A. Orosco | $ 900,000 | 19,711 | 10,236 | 7,902 | ||||||||
Kellie J. Logerwell | $ 250,000 | 5,476 | 2,844 | 2,195 |
| Officers | | | Annual Award Value ($) | | | Prorated Award Value ($)(1) | | | PSUs (#)(1) | | | RSUs (#)(1) | |
| Jeffrey J. Jones II | | | $5,500,000 | | | $6,416,667 | | | 154,076 | | | 87,557 | |
| Tony G. Bowen | | | $1,600,000 | | | $1,866,667 | | | 44,823 | | | 25,472 | |
| Karen A. Orosco | | | $1,300,000 | | | $1,516,667 | | | 36,418 | | | 20,696 | |
| Kellie J. Logerwell | | | $260,000 | | | $303,333 | | | 7,284 | | | 4,140 | |
| Thomas A. Gerke | | | $1,100,000 | | | $1,283,333 | | | 30,816 | | | 17,512 | |
(1) | Represents the value of our annual LTI compensation program awards, which are subject to rounding. These award values are converted into: (i) the number of |
Actions Pertaining to Fiscal Year 2020 LTI Compensation
At the beginning of fiscal year 2020, the Compensation Committee considered the mix of equity-based compensation for executive officers and determined that the current equity mix continues to strike the appropriate balance among recruiting, retaining, and motivating our executives. The Committee determined that this equity mix properly motivates our executives to work towards achieving our long-term objectives and enterprise strategy, and further aligns their interests with the interests of our shareholders. As a result, like in fiscal year 2019, our NEOs received 50% of their annual LTI compensation for fiscal year 2020 in performance share units, 30% in market stock units, and 20% in time-based restricted share units. The payment structures, vesting schedules, terms and conditions of the fiscal year 2020 equity-based compensation are substantially similar to those of the fiscal year 2019 equity-based compensation described above under the heading “Actions Pertaining to Fiscal Year 2019 LTI Compensation” beginning on page 36. However, the following changes were made to the fiscal year 2020 LTI awards to further align our executives’ compensation with our multi-year enterprise strategy and the interests of our shareholders:
The fiscal year 2020 award agreements are filed as exhibits to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2019.
Mr. Gerke’s fiscal year 2020 equity-based compensation awards contain the same modified vesting provisions as his fiscal year 2019 equity-based awards, as described above under “Fiscal Year 2019 LTI Vesting Provisions.”
Fiscal Year 2020 LTI Compensation Awards
In June 2019, the Company awarded annual LTI compensation for fiscal year 2020 to our NEOs as set forth in the chart below. The fiscal year 2020 performance share units and market stock units are performance based and will vest, if at all, on June 30, 2022 and the fiscal year 2020 restricted share units will vest, if at all, in one-third annual increments beginning on June 30, 2020.
Officers | Award Value ($)(1) | Performance Share Units (#)(1) | Market Stock Units (#)(1) | Restricted Share Units (#)(1) | ||||||||
Jeffrey J. Jones II | $ 5,500,000 | 90,730 | 47,813 | 37,543 | ||||||||
Tony G. Bowen | $ 1,300,000 | 21,446 | 11,302 | 8,874 | ||||||||
Thomas A. Gerke | $ 1,100,000 | 18,146 | 9,563 | 7,509 | ||||||||
Karen A. Orosco | $ 1,100,000 | 18,146 | 9,563 | 7,509 | ||||||||
Kellie J. Logerwell | $ 250,000 | 4,125 | 2,174 | 1,707 |
The fiscal year LTI award increase for Mr. Bowen
Vesting and Performance-based Payouts of Fiscal Year 2017 Performance Share Units and Market Stock Units
Our executive officers, including certain of our NEOs, received performance share units and market stock units in fiscal year 2017.2020. Performance for these performance share unitsPSUs and market stock unitsMSUs was based on a three-year period beginning on May 1, 20162019 and ending on April 30, 2019. This performance2022. Performance was certified, and the overall payout was approved by the Compensation Committee in July 2019.
August 2022. Measurement of performance for the outstanding PSUs and MSUs awarded prior to fiscal year 2022 continues to be based on our prior fiscal year period (May 1 to April 30), pursuant to the terms of the applicable award agreements and as determined by the Compensation Committee.
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Metric | Threshold | Target | Maximum | |||||||
Each Fiscal Year of the May 1, 2016 – April 30, 2019 Performance Period | EBITDA Annual Growth(1) | -3.0 | % | 4.0 | % | 13.0% | ||||
EBITDA Factor(2) | 0.0 | % | 100.0 | % | 200.0% |
(1) |
(2) | EBITDA from Continuing Operations is defined as earnings of the Company from continuing operations excluding interest expense, taxes, depreciation and amortization. |
(3) | EBITDA Annual Growth means the year-over-year percentage change in EBITDA from Continuing Operations from one fiscal year to the immediately subsequent fiscal year in the Performance Period. |
Based on the Company’s results relative to the above thresholds, targets, and maximums, the Compensation Committee approved the following results and applicable EBITDA Factor:
EBITDA Annual Growth | EBITDA Factor | |||
Fiscal Year 2017 | 11.4% | 154.5% | ||
Fiscal Year 2018 | 4.1% | 100.3% | ||
Fiscal Year 2019 | Below Threshold | 0.0% | ||
EBITDA Percentage | 84.9% |
The Compensation Committee then applied a TSR modifier of 100.1%110.8% based on the Company’s TSR over the performance period.period, which ranked in the 63rd percentile. Based on the performance percentage and the TSR modifier, our NEOs who received performance share unit awards in fiscal year 2017 received 85.0%147.7% of the performance share unitsPSUs they were initially granted, as well as additional shares of common stock equal in value to the total dividends that would have been paidrepresenting dividend equivalents accrued on the number of shares of common stock that vested pursuant to the payout calculation.ultimately vested. The table below shows the target-level opportunity and actual award with respect to the performance share unitsPSUs granted to each of our NEOs in fiscal year 2017:
Officers | PSUs Outstanding (#)(1) | EBITDA Percentage | TSR Modifier | Actual Shares Received (#)(2) | |||||||||||||||||
Jeffrey J. Jones II(3) | n/a | x | n/a | x | n/a | = | n/a | ||||||||||||||
Tony G. Bowen | 19,782.2 | x | 84.9% | x | 100.1% | = | 16,811 | ||||||||||||||
Thomas A. Gerke | 24,178.4 | x | 84.9% | x | 100.1% | = | 20,547 | ||||||||||||||
Karen A. Orosco | 13,188.5 | x | 84.9% | x | 100.1% | = | 11,208 | ||||||||||||||
Kellie J. Logerwell | 4,396.2 | x | 84.9% | x | 100.1% | = | 3,736 |
| Officers | | | PSUs Outstanding (#)(1) | | | | | EBITDA Percentage | | | | | TSR Modifier | | | | | Actual Shares Received (#)(2) | | |||
| Jeffrey J. Jones II | | | 105,148.9 | | | x | | | 133.3% | | | x | | | 110.8% | | | = | | | 155,298 | |
| Tony G. Bowen | | | 24,854.2 | | | 36,709 | | |||||||||||||||
| Karen A. Orosco | | | 21,029.8 | | | 31,060 | | |||||||||||||||
| Kellie J. Logerwell | | | 4,780.6 | | | 7,061 | | |||||||||||||||
| Thomas A. Gerke | | | 21,029.8 | | | 31,060 | |
(1) | The number of PSUs outstanding includes dividend equivalents accrued on the number of PSUs granted in fiscal year |
(2) | The |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 32 |
▪ | First, the Ending Date Price must be greater than or equal to 50% of the Grant Date Price |
○ | “Ending Date Price” is the average of the Company’s stock price for the five consecutive trading days beginning on the date the Company’s Annual Report on Form 10-K is filed with the SEC for the last fiscal year within the performance period. Given the Company’s fiscal year end change, the Compensation Committee determined to use June 16, 2022 (the average historical date for Form 10-K filings) as the beginning date for this calculation, so as to best capture the original intent of the award design |
○ | “Grant Date Price” is the Company’s stock price for the five consecutive trading days ending on the grant date |
▪ | Second, the Company’s average return on invested capital (“ROIC”) must be greater than or equal to 14% |
○ | “ROIC,” as defined in the award agreement, is calculated over the three-year performance period |
○ | The Compensation Committee selected ROIC as it believes the investment community considers this metric to be an effective measure of capital efficiency |
The table below shows the target-leveltarget opportunities and actual awards under our fiscal year 2017 market stock unit2020 MSU program for our NEOs:
Officers | MSUs Outstanding (#)(1) | Performance Percentage | Actual Shares Received (#)(2) | ||||||||||||
Jeffrey J. Jones II(3) | n/a | x | n/a | = | n/a | ||||||||||
Tony G. Bowen | 11,930.4 | x | 122.4% | = | 14,603 | ||||||||||
Thomas A. Gerke | 14,581.9 | x | 122.4% | = | 17,849 | ||||||||||
Karen A. Orosco | 7,953.6 | x | 122.4% | = | 9,736 | ||||||||||
Kellie J. Logerwell | 2,651.6 | x | 122.4% | = | 3,246 |
| Officers | | | MSUs Outstanding (#)(1) | | | | | Performance Percentage | | | | | Actual Shares Received (#)(2) | | ||
| Jeffrey J. Jones II | | | 55,411.5 | | | x | | | 118.5% | | | = | | | 65,688 | |
| Tony G. Bowen | | | 13,098.1 | | | 15,528 | | |||||||||
| Karen A. Orosco | | | 11,082.8 | | | 13,138 | | |||||||||
| Kellie J. Logerwell | | | 2,519.5 | | | 2,987 | | |||||||||
| Thomas A. Gerke | | | 11,082.8 | | | 13,138 | |
(1) | The number of MSUs outstanding includes dividend equivalents accrued on the number of MSUs granted in fiscal year |
(2) | The |
| Officers | | | Annual Base Salary ($) | | | STI Target ($) | | | LTI Target ($) | | | TTDC ($) | | | TTDC % Increase from Fiscal Year 2022 | |
| Jeffrey J. Jones II | | | $995,000 | | | $1,492,500 | | | $6,200,000 | | | $8,687,500 | | | 8.8% | |
| Tony G. Bowen | | | $642,700 | | | $578,430 | | | $1,700,000 | | | $2,921,130 | | | 5.3% | |
| Karen A. Orosco | | | $624,000 | | | $561,600 | | | $1,300,000 | | | $2,485,600 | | | 1.9% | |
| Dara S. Redler | | | $520,000 | | | $468,000 | | | $950,000 | | | $1,938,000 | | | 2.0% | |
| Kellie J. Logerwell | | | $280,800 | | | $140,400 | | | $270,000 | | | $691,200 | | | 3.9% | |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 33 |
TABLE OF CONTENTSRetirement, Health
made no material changes to the plans or equity mix used in fiscal year 2022. The fiscal year 2023 award agreements are filed as exhibits to the Company’s Current Report on Form 8-K filed with the SEC on August 17, 2022. The specific goals for each metric are not disclosed at this time given their competitive sensitivity but will be disclosed upon completion of the performance period in the Compensation Discussion and Analysis section of the applicable proxy statement.
In order to recruit and retain executives, theprogram.
The Company purchases tickets to various cultural, charitable, civic, entertainment, and sporting events for business development and relationship-building purposes, as well as to maintain our involvement in communities in which the Company operates and our employees live. Occasionally, our employees, including our executives, use such tickets for personal purposes when they are not otherwise needed to be used for business purposes.
Perquisites represent an immaterial element of our ongoing executive compensation program. We believe our overall executive perquisites provided in our ongoing executive compensation program are well below the market median relative to our Peer Group.
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Our Board has adopted a “clawback” policy set forth in our Governance Guidelines which provides that, in the event of a restatement of our financial results, the Board has the authority to seek reimbursement of any portion of performance-based or incentive compensation paid, vested, or awarded in any previous year that is greater than the amount that would have been paid or awarded if calculated based on the restated financial results. The Jones Agreement, the Executive Performance Plan, the award agreements applicable to our executive officers under the 2013 Plan and the 2018 Plan, and the Executive Severance Plan each include a clawback provision consistent with the terms of the Board’s clawback policy.
Our award agreements contain restrictive covenants, including non-competition and non-solicitation provisions, which, if violated, authorize the Company to cancel or rescind the award or seek reimbursement of value received by the individual, consistent with applicable law. In addition, the Executive Severance Plan provides that the Board may recover or require reimbursement of all severance, equity compensation awards (including profits from the sale of Company stock acquired pursuant to such awards), and other payments made to a participant under the Executive Severance Plan if the participant violates the provisions of any confidentiality, non-competition, non-solicitation, or similar agreement or policy.
COMPENSATION PHILOSOPHY AND BENCHMARKING
The Compensation Committee holistically considers a variety of factors when making decisions regarding the recruitment, retention and motivation of our executive officers. These factors, as they relate to setting target executive compensation opportunities, include:
The Compensation Committee also considers the Company’s need to recruit and retain people with the skills and experience to establish, monitor and achieve the Company’s strategic plan. Based on this information and with the input of the Committee’s independent compensation consultant, the Compensation Committee members use their individual and collective business judgment to analyze each NEO’s target total direct compensation, and set it at a level that is reasonable and competitive, and that appropriately balances the objectives of recruiting, retaining, and motivating our executives.
We benchmark our executive compensation practices relative to publicly-disclosed information for a defined group of peer companies, which for fiscal year 20192022 is set forth below (the “Peer Group”). We also review compensation data from multiple general industry survey sources, reflective of general industry pay levels forcomparing companies of relevant size based on total revenue as compared tosize and positions of comparable duties for each of the NEOs. For fiscal year 2019,2022, these survey sources were the Aon Hewitt TotalRadford Global Compensation Measurement Executive Survey and the Willis Towers Watson CDB General Industry Executive Compensation Survey. The Compensation Committee reviews summary survey and Peer Group data to confirm that the market references we use are appropriate for our business and the industries in which we compete for executive talent.
With the input of its independent compensation consultant, the Compensation |
With the input of its independent compensation consultant, the Compensation Committee reviews the Peer Group annually and revises it as circumstances warrant. We endeavor to identify companies that are comparable to or competitive with our core businesses, including tax and professional products and services, that have similar strategic plans or outlook, or that are comparable on a variety of relevant metrics. As a result of the Compensation Committee’s annual review in February of 2018, the Compensation Committee determined to retain the same companies in its Peer Group for fiscal year 2019 as were used in the previous year. The Peer Group considered by the Compensation Committee in benchmarking fiscal year 2019 compensation therefore consisted of the following 17 companies:
| ||||||
▪ | Removed Broadridge Financial Solutions, Inc., CoreLogic, Inc., and Robert Half International Inc.; and |
▪ | Added ACI Worldwide Inc., TriNet Group, Inc., and Workday, Inc. |
Use of External Consultant
The Compensation Committee retains Frederic W. Cook & Co. (“FW Cook”)retained CAP as its external, independent compensation consultant for objective advice and assistance on executiveCAP has served in that capacity since that time. The Compensation Committee’s independent compensation matters. FW Cookconsultant reports directly to the Committee and the Committee may replace FW Cookthe consultant or hire additional consultants at any time. FW CookThe independent compensation consultant advises the Compensation Committee on issues pertaining to executive compensation, including the assessment of market-based compensation levels, the selection of our Peer Group, our pay positioning relative to the market, the mix of pay, incentive plan design, and other executive employment matters. FW CookThe independent consultant provides its advice based in part on prevailing and emerging market practices, as well as our specific business context. The Compensation Committee retains sole authority to hire FW Cook, approve its compensation and the appropriate funding by the Company for such compensation,consultants, approve fees, determine the nature and scope of its services, evaluate its performance, and terminate its engagement. The Compensation Committee believes that external compensation consultants for the Compensation Committee should be independent and serve the Compensation Committee exclusively and should not perform any other services for the Company at any time. FW CookCAP performs no other services for the Company.
For fiscal year 2019,
In connection with the Compensation Committee’s review, FW Cook provided the Compensation Committee with appropriate assurances and confirmation of its independent status. The Compensation Committee believes FW Cook has been independent throughout its service for the Committee and that there is no conflict of interest between FW Cook and the Compensation Committee.
Executive Evaluation Process
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| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 36 |
| Covered Executives | | | Ownership Requirement | | | Retention Percentage | |
| | | 6x Base Salary | | | 100% | | |
| Senior | | | 3x Base Salary | | | 50% | |
| Senior Vice Presidents | | | 2x Base Salary | | | 50% | |
| Vice Presidents | | | 1x Base Salary | | | N/A(1) | |
(1) |
Before a covered executive satisfies the applicable ownership requirement, he or she will be subject to the retention requirements described above and may only sell or transfer Covered Shares in a manner that does not violate the applicable retention percentage requirement. AfterOnce the covered executive satisfies the applicable ownership requirement, he or she willthe executive is no longer be subject to the retention requirements, and the stock ownership guidelines will no longer preclude a sale or transfer of any Covered Shares, so long as such executive’s ownership of Covered Shares continues to exceed the applicable
ownership requirement. Mr. Gerke has met the 3x Base Salary ownership requirement applicable to him in his role as General Counsel and Chief Administrative Officer. The other covered executives are progressing toward attaining their applicable ownership requirements.
Accounting for Stock-Based Compensation
The Company recognizes stock-based compensation expense for Each covered executive has five years from the issuance of performance share units, market stock units, and restricted share units, as well as stock purchased under our employee stock purchase plan, pursuantfirst annual ownership assessment after becoming subject to FASB Accounting Standards Codification Topic 718, “Stock Compensation.” Under this accounting methodology, the Company generally recognizes stock-based compensation expense on a straight-line basis overguidelines to achieve the respective ownership requirement. All covered executives are progressing toward attaining their applicable vesting periods. For assumptions used in determining these expenses, refer to Note 9 of the Company’s financial statements in the Company’s Annual Report on Form 10-K for the year ended April 30, 2019, as filed with the SEC.
ownership requirements.
Tax Considerations
As amended by the Tax Cuts and Jobs Act of 2017 (the “Tax Legislation”), for tax years beginning after December 31, 2017, Section 162(m) of the Internal Revenue Code denies us from taking a federal income tax deduction for annual individual compensation over $1 million paid to our Chief Executive Officer, Chief Financial Officer, and certain other current and former executive officers. Prior to the enactment of the Tax Legislation, Section 162(m) included an exception to the $1 million limit for “performance-based” compensation that permitted qualifying compensation to be deductible even if it exceeded the $1 million limit. Our STI awards, stock options, performance share units, and market stock units granted to our NEOs were intended to qualify for the exception. However, as of January 1, 2018, compensation paid to our NEOs in any year in excess of $1 million is not deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Notwithstanding the elimination of the performance-based compensation exception under Section 162(m), the Compensation Committee believes that the primary objective of our compensation programs is to recruit, retain, and motivate highly talented executives and that a significant portion of our NEOs’ compensation should continue to be tied to the Company’s performance. Therefore, the changes to Section 162(m) have not significantly impacted the design of our compensation program to date.
TERMINATION OF EMPLOYMENT, SEVERANCE, AND TRANSITION ARRANGEMENTS
Severance Arrangements
In connection with
| | | PSUs | | | MSUs | | | RSUs | | |
| Voluntary Termination that is not a Retirement | | | Forfeit | | | Forfeit | | | Forfeit | |
| Termination for Cause | | | Forfeit | | | Forfeit | | | Forfeit | |
| Retirement(1)(2) | | | Pro-Rata Vesting(3) | | | Pro-Rata Vesting(3) | | | Pro-Rata Vesting | |
| Death or Disability(1) | | | Full Vesting(3) | | | Full Vesting(3) | | | Full Vesting | |
| Involuntary Termination without Cause(1) | | | Pro-Rata Vesting(3) | | | Pro-Rata Vesting(3) | | | Forfeit | |
(1) | Event must occur more than one year following the grant date for pro-rata or full vesting; event within one year of the grant date results in forfeiture. |
(2) | Mr. Gerke’s fiscal year 2020, 2021, and 2022 equity-based compensation awards provide that, upon his voluntary retirement at least one year after the grant date the entire equity awards will continue to vest on the stated vesting dates set forth in the applicable award agreement and with performance adjustments (if any) made under such agreement as if he remained employed through such stated vesting dates. |
(3) | For performance-based awards, final vesting is determined based on attainment of applicable performance goals. |
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event of a termination under certain circumstances (as set forth in the award agreement governing the grant) in connection with a change in control.
In addition,Mr. Bowen and Mses. Orosco, Redler, and Logerwell are participants in connection withthe Executive Severance Plan. Mr. Gerke has retired, and so is no longer eligible for payments under the Executive Severance Plan. Under the terms of the Employment Agreement, Mr. Jones would only participate in the Executive Severance Plan if and to the extent that the benefits related to equity awards granted pursuant to the 2013 Plan and 2018 Plan, our current NEOs’ award agreements contain provisions providing for vesting of a pro-rated portion of performance share unit and market stock unit awards outstanding for more than a yearthereunder exceeded those contained in the event of involuntary termination without cause, subject to attaining certain performance thresholds. The vesting provisions of our outstanding award agreements are described in detail beginning on page 55 below.
Employment Agreement.
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 38 |
▪ | Utilizing caps on potential payments of cash and equity compensation; |
▪ | Our |
▪ | Our |
▪ | The overall design of our compensation programs, including our focus on at-risk compensation that is directly tied to the Company’s performance and utilization of a balanced mix of performance measures which avoid placing excessive weight on a single performance measure. |
As a result of our analysis, the Compensation Committee believes, and FW Cookits independent compensation consultant concurs, that our compensation policies and practices do not create inappropriate or unintended material risks to the Company as a whole, and that, consequently, our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company
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Name and Principal Position | Fiscal Year(1) | Salary ($)(2) | Bonus ($) | Stock Awards ($)(3) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||
Jeffrey J. Jones II, President and Chief Executive Officer | 2019 | 997,734 | — | 5,500,027 | — | 1,317,131 | 689,128 | 8,504,020 | ||||||||||||||||
2018 | 697,047 | 950,000 | 7,937,065 | 1,375,003 | 941,420 | 34,615 | 11,935,150 | |||||||||||||||||
Tony G. Bowen, Chief Financial Officer | 2019 | 539,973 | — | 1,000,051 | — | 465,960 | 14,489 | 2,020,473 | ||||||||||||||||
2018 | 470,989 | — | 1,000,074 | — | 419,328 | 14,095 | 1,904,486 | |||||||||||||||||
2017 | 399,437 | — | 900,034 | — | 365,400 | 14,384 | 1,679,255 | |||||||||||||||||
Thomas A. Gerke, General Counsel and Chief Administrative Officer | 2019 | 601,648 | — | 1,100,043 | — | 508,320 | 14,689 | 2,224,700 | ||||||||||||||||
2018 | 773,846 | — | 2,500,004 | — | 982,800 | 13,248 | 4,269,898 | |||||||||||||||||
2017 | 554,533 | — | 1,100,050 | — | 535,920 | 12,659 | 2,203,162 | |||||||||||||||||
Karen A. Orosco, Senior Vice President, U.S. Retail(6) | 2019 | 461,470 | — | 900,035 | — | 402,420 | 14,304 | 1,778,229 | ||||||||||||||||
Kellie J. Logerwell, Vice President and Chief Accounting Officer | 2019 | 249,038 | — | 250,044 | — | 132,375 | 12,531 | 643,988 | ||||||||||||||||
2018 | 239,468 | — | 250,059 | — | 117,936 | 12,284 | 619,747 |
| Name and Principal Position | | | Fiscal Year | | | Salary ($)(1) | | | Bonus ($) | | | Stock Awards ($)(2) | | | Option Awards ($) | | | Non-Equity Incentive Plan Compensation ($)(3) | | | All Other Compensation ($)(4) | | | Total ($) | |
| Jeffrey J. Jones II, President and CEO | | | 2022 | | | 997,734 | | | — | | | 6,416,674 | | | — | | | 3,483,863 | | | 141,912 | | | 11,040,183 | |
| TP | | | 166,745 | | | — | | | — | | | — | | | — | | | 24,473 | | | 191,218 | | |||
| 2021 | | | 997,734 | | | — | | | 5,500,021 | | | — | | | 2,304,669 | | | 106,112 | | | 8,908,536 | | |||
| 2020 | | | 1,000,467 | | | — | | | 5,500,063 | | | — | | | 401,731 | | | 18,938 | | | 6,921,199 | | |||
| Tony G. Bowen, Chief Financial Officer | | | 2022 | | | 618,561 | | | — | | | 1,866,715 | | | — | | | 1,298,308 | | | 18,333 | | | 3,801,917 | |
| TP | | | 100,549 | | | — | | | — | | | — | | | — | | | 4,504 | | | 105,053 | | |||
| 2021 | | | 601,649 | | | — | | | 1,300,036 | | | — | | | 1,000,620 | | | 16,896 | | | 2,919,201 | | |||
| 2020 | | | 595,192 | | | — | | | 1,300,068 | | | — | | | 174,420 | | | 20,748 | | | 2,090,428 | | |||
| Karen A. Orosco, President, Global Consumer Tax and Service Delivery | | | 2022 | | | 601,649 | | | — | | | 1,516,688 | | | — | | | 1,260,493 | | | 18,231 | | | 3,397,061 | |
| TP | | | 100,357 | | | — | | | — | | | — | | | — | | | 4,918 | | | 105,275 | | |||
| 2021 | | | 551,511 | | | — | | | 1,100,018 | | | — | | | 917,235 | | | 16,416 | | | 2,585,180 | | |||
| 2020 | | | 540,865 | | | — | | | 1,100,038 | | | — | | | 159,885 | | | 20,344 | | | 1,821,132 | | |||
| Dara S. Redler, Chief Legal Officer(5) | | | 2022 | | | 229,396 | | | 225,000 | | | 475,020 | | | — | | | 406,849 | | | 7,912 | | | 1,344,177 | |
| TP | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |||
| Kellie J. Logerwell, Vice President and Chief Accounting Officer | | | 2022 | | | 270,110 | | | — | | | 303,369 | | | — | | | 315,123 | | | 17,678 | | | 906,280 | |
| TP | | | 43,571 | | | — | | | — | | | — | | | — | | | 2,211 | | | 45,782 | | |||
| 2021 | | | 260,714 | | | — | | | 250,022 | | | — | | | 240,890 | | | 15,856 | | | 767,482 | | |||
| 2020 | | | 259,808 | | | — | | | 250,069 | | | — | | | 41,990 | | | 16,136 | | | 568,003 | | |||
| Thomas A. Gerke, Retired General Counsel and Chief Administrative Officer(6) | | | 2022 | | | 438,660 | | | — | | | 1,283,372 | | | — | | | 1,120,438 | | | 8,506 | | | 2,850,976 | |
| TP | | | 100,549 | | | — | | | — | | | — | | | — | | | 4,115 | | | 104,664 | | |||
| 2021 | | | 601,649 | | | — | | | 1,100,018 | | | — | | | 889,440 | | | 14,467 | | | 2,605,574 | | |||
| 2020 | | | 603,297 | | | — | | | 1,100,038 | | | — | | | 155,040 | | | 19,311 | | | 1,877,686 | |
(1) |
The amounts shown represent base salary amounts accrued by the Company related to the applicable |
(2) | This column represents the grant date fair value under ASC 718 for performance share units |
(3) | This column represents amounts awarded and earned under the Company’s STI compensation program, as discussed beginning on page |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 40 |
(4) | In valuing personal benefits, we use the incremental cost to the Company of the benefit. For fiscal year |
| Name | | | Fiscal Year | | | RSP Contribution Matching ($) | | | Group Life Insurance ($)(a) | | | Personal Usage of Private Aircraft ($)(b) | | | H&R Block Foundation Matching Contribution ($)(c) | | | Holiday Gift ($)(d) | | | Total ($) | |
| Mr. Jones | | | 2022 | | | 15,250 | | | 1,688 | | | 119,324 | | | 5,000 | | | 651 | | | 141,912 | |
| TP | | | — | | | 270 | | | 24,203 | | | — | | | — | | | 24,473 | | |||
| Mr. Bowen | | | 2022 | | | 15,250 | | | 2,430 | | | — | | | — | | | 652 | | | 18,333 | |
| TP | | | 4,115 | | | 389 | | | — | | | — | | | — | | | 4,504 | | |||
| Ms. Orosco | | | 2022 | | | 15,625 | | | 1,949 | | | — | | | — | | | 657 | | | 18,231 | |
| TP | | | 4,606 | | | 312 | | | — | | | — | | | — | | | 4,918 | | |||
| Ms. Redler | | | 2022 | | | 6,731 | | | 1,181 | | | — | | | — | | | — | | | 7,912 | |
| TP | | | — | | | — | | | — | | | — | | | — | | | — | | |||
| Ms. Logerwell | | | 2022 | | | 15,789 | | | 1,365 | | | — | | | — | | | 524 | | | 17,678 | |
| TP | | | 2,000 | | | 211 | | | — | | | — | | | — | | | 2,211 | | |||
| Mr. Gerke | | | 2022 | | | 7,708 | | | 146 | | | — | | | — | | | 652 | | | 8,506 | |
| TP | | | 4,115 | | | — | | | — | | | — | | | — | | | 4,115 | |
(a) | Represents the economic value of the death benefit provided by the Company’s group life insurance |
(b) | Represents the incremental cost to |
(c) |
(d) | Represents de minimis holiday gifts from the Company. |
(5) | Ms. |
(6) | Mr. Gerke retired as General Counsel and Chief Administrative Officer effective January 17, 2022. After his retirement as General Counsel and Chief Administrative Officer, he continued as an |
| 41 |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | |||||||||||||||||||||||||||||||||||
Name of Executive | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards($)(1) | ||||||||||||||||||||||||
Jones | ||||||||||||||||||||||||||||||||||||
- STI Award(2) | — | — | 310,938 | 1,243,750 | 2,487,500 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
- LTI Award(1) | 6/30/18 | 6/25/18 | — | — | — | — | 62,548 | 125,096 | 48,288 | — | — | 2,750,017 | ||||||||||||||||||||||||
- LTI Award(1) | 6/30/18 | 6/25/18 | — | — | — | — | 120,456 | 240,912 | — | — | — | 2,750,010 | ||||||||||||||||||||||||
Bowen | ||||||||||||||||||||||||||||||||||||
- STI Award(2) | — | — | 110,000 | 440,000 | 880,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
- LTI Award(1) | 6/30/18 | 6/25/18 | — | — | — | — | 11,373 | 22,746 | 8,780 | — | — | 500,028 | ||||||||||||||||||||||||
- LTI Award(1) | 6/30/18 | 6/25/18 | — | — | — | — | 21,902 | 43,804 | — | — | — | 500,023 | ||||||||||||||||||||||||
Gerke | ||||||||||||||||||||||||||||||||||||
- STI Award(2) | — | — | 120,000 | 480,000 | 960,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
- LTI Award(1) | 6/30/18 | 6/25/18 | — | — | — | — | 12,510 | 25,020 | 9,658 | — | — | 550,023 | ||||||||||||||||||||||||
- LTI Award(1) | 6/30/18 | 6/19/17 | — | — | — | — | 24,092 | 48,184 | — | — | — | 550,020 | ||||||||||||||||||||||||
Orosco | ||||||||||||||||||||||||||||||||||||
- STI Award(2) | — | — | 95,000 | 380,000 | 760,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
- LTI Award(1) | 6/30/18 | 6/25/18 | — | — | — | — | 10,236 | 20,472 | 7,902 | — | — | 450,033 | ||||||||||||||||||||||||
- LTI Award(1) | 6/30/18 | 6/25/18 | — | — | — | — | 19,711 | 39,422 | — | — | — | 450,002 | ||||||||||||||||||||||||
Logerwell | ||||||||||||||||||||||||||||||||||||
- STI Award(2) | — | — | 31,250 | 125,000 | 250,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
- LTI Award(1) | 6/30/18 | 6/25/18 | — | — | — | — | 2,844 | 5,688 | 2,195 | — | — | 125,027 | ||||||||||||||||||||||||
- LTI Award(1) | 6/30/18 | 6/25/18 | — | — | — | — | 5,476 | 10,952 | — | — | — | 125,017 |
| | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | | | | | | | | |||||||||||||||||||
| Name of Executive | | | Grant Date | | | Approval Date | | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | All Other Option Awards: Number of Securities Underlying Options (#) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock and Option Awards ($)(1) | |
| Jones | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| - STI Award(2) | | | — | | | — | | | 870,966 | | | 1,741,932 | | | 3,483,863 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| - LTI Award(1) | | | 8/31/21 | | | 6/25/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 87,557 | | | — | | | — | | | 2,245,837 | |
| - LTI Award(1) | | | 8/31/21 | | | 6/25/21 | | | — | | | — | | | — | | | — | | | 154,076 | | | 308,152 | | | — | | | — | | | — | | | 4,170,837 | |
| Bowen | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| - STI Award(2) | | | — | | | — | | | 324,577 | | | 649,154 | | | 1,298,308 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| - LTI Award(1) | | | 8/31/21 | | | 6/25/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 25,472 | | | — | | | — | | | 653,357 | |
| - LTI Award(1) | | | 8/31/21 | | | 6/25/21 | | | — | | | — | | | — | | | — | | | 44,823 | | | 89,646 | | | — | | | — | | | — | | | 1,213,359 | |
| Orosco | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| - STI Award(2) | | | — | | | — | | | 315,123 | | | 630,247 | | | 1,260,493 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| - LTI Award(1) | | | 8/31/21 | | | 6/25/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 20,696 | | | — | | | — | | | 530,852 | |
| - LTI Award(1) | | | 8/31/21 | | | 6/25/21 | | | — | | | — | | | — | | | — | | | 36,418 | | | 72,836 | | | — | | | — | | | — | | | 985,835 | |
| Redler(3) | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| - STI Award(2) | | | — | | | — | | | 101,712 | | | 203,425 | | | 406,849 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| - LTI Award(1) | | | 2/1/22 | | | 12/15/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 20,475 | | | — | | | — | | | 475,020 | |
| Logerwell | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| - STI Award(2) | | | — | | | — | | | 78,781 | | | 157,562 | | | 315,123 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| - LTI Award(1) | | | 8/31/21 | | | 6/25/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,140 | | | — | | | — | | | 106,191 | |
| - LTI Award(1) | | | 8/31/21 | | | 6/25/21 | | | — | | | — | | | — | | | — | | | 7,284 | | | 14,568 | | | — | | | — | | | — | | | 197,178 | |
| Gerke | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| - STI Award(2 | | | — | | | — | | | 280,110 | | | 560,219 | | | 1,120,438 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| - LTI Award(1) | | | 8/31/21 | | | 6/25/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 17,512 | | | — | | | — | | | 449,183 | |
| - LTI Award(1) | | | 8/31/21 | | | 6/25/21 | | | — | | | — | | | — | | | — | | | 30,816 | | | 61,632 | | | — | | | — | | | — | | | 834,189 | |
(1) | Amounts represent awards made under the Company’s LTI compensation program and granted pursuant to the 2018 Plan. Amounts reflect prorated target and maximum levels for fiscal year 2022 awards to account for the Transition Period. No separate awards were granted for the Transition Period. Dollar values represent the accounting grant date fair value of performance share |
(2) | Amounts represent the potential value of the payouts under the Company’s STI compensation program. Amounts reflect prorated threshold, target, and maximum levels for fiscal year 2022 awards to account for the Transition Period. No separate awards were granted for the Transition Period. Actual fiscal year |
(3) | Ms. Redler started as Chief Legal Officer on |
| 42 |
Option Awards | Stock Awards | ||||||||||||||||||||||||||
Name of Executive | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | ||||||||||||||||||
Jones | — | — | — | — | — | — | — | 106,428 | 2,895,912 | ||||||||||||||||||
— | — | — | — | — | 117,071 | 3,185,505 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 188,338 | 5,124,687 | |||||||||||||||||||
— | — | — | — | — | 49,696 | 1,352,216 | — | — | |||||||||||||||||||
91,301 | 182,604 | — | $ | 29.73 | 8/21/27 | — | — | — | — | ||||||||||||||||||
Bowen | — | — | — | — | — | — | — | 31,427 | 855,131 | ||||||||||||||||||
— | — | — | — | — | 2,783 | 75,733 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 26,086 | 709,787 | |||||||||||||||||||
— | — | — | — | — | 4,611 | 125,470 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 34,245 | 931,805 | |||||||||||||||||||
— | — | — | — | — | 9,036 | 245,868 | — | — | |||||||||||||||||||
Gerke | — | — | — | — | — | — | — | 38,411 | 1,045,173 | ||||||||||||||||||
— | — | — | — | — | 3,402 | 92,565 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 65,209 | 1,774,350 | |||||||||||||||||||
— | — | — | — | — | 11,521 | 313,491 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 37,669 | 1,024,971 | |||||||||||||||||||
— | — | — | — | — | 9,940 | 270,454 | — | — | |||||||||||||||||||
104,734 | — | — | $ | 17.00 | 2/1/22 | — | — | — | — | ||||||||||||||||||
Orosco | — | — | — | — | — | — | — | 20,952 | 570,097 | ||||||||||||||||||
— | — | — | — | — | 1,856 | 50,499 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 20,868 | 567,829 | |||||||||||||||||||
— | — | — | — | — | 3,688 | 100,348 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 30,820 | 838,610 | |||||||||||||||||||
— | — | — | — | — | 8,132 | 221,281 | — | — | |||||||||||||||||||
Logerwell | — | — | — | — | — | — | — | 6,984 | 190,042 | ||||||||||||||||||
— | — | — | — | — | 619 | 16,833 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 6,522 | 177,476 | |||||||||||||||||||
— | — | — | — | — | 1,154 | 31,403 | — | — | |||||||||||||||||||
— | — | — | — | — | — | — | 8,563 | 232,986 | |||||||||||||||||||
— | — | — | — | — | 2,259 | 61,467 | — | — |
| | | | | | | Option Awards | | | Stock Awards | | ||||||||||||||||||||||||
| Name of Executive | | | Grant Date | | | Vesting Date | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |
| Jones | | | 6/30/20 | | | 6/30/23 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 314,194 | | | 11,097,337 | |
| | | 6/30/20 | | | 6/30/23(3) | | | — | | | — | | | — | | | — | | | — | | | 27,993 | | | 988,702 | | | — | | | — | | |
| | | 8/31/21 | | | 8/31/24 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 159,092 | | | 5,619,138 | | |
| | | 8/31/21 | | | 8/31/24(4) | | | — | | | — | | | — | | | — | | | — | | | 90,407 | | | 3,193,196 | | | — | | | — | | |
| | | 8/21/17 | | | — | | | 273,905 | | | — | | | — | | | $29.73 | | | 8/21/27 | | | — | | | — | | | — | | | — | | |
| Bowen | | | 6/30/20 | | | 6/30/23 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 74,266 | | | 2,623,062 | |
| | | 6/30/20 | | | 6/30/23(3) | | | — | | | — | | | — | | | — | | | — | | | 6,618 | | | 233,725 | | | — | | | — | | |
| | | 8/31/21 | | | 8/31/24 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 46,282 | | | 1,634,691 | | |
| | | 8/31/21 | | | 8/31/24(4) | | | — | | | — | | | — | | | — | | | — | | | 26,301 | | | 928,962 | | | — | | | — | | |
| Orosco | | | 6/30/20 | | | 6/30/23 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 62,839 | | | 2,219,475 | |
| | | 6/30/20 | | | 6/30/23(3) | | | — | | | — | | | — | | | — | | | — | | | 5,599 | | | 197,759 | | | — | | | — | | |
| | | 8/31/21 | | | 8/31/24 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 37,604 | | | 1,328,161 | | |
| | | 8/31/21 | | | 8/31/24(4) | | | — | | | — | | ��� | — | | | — | | | — | | | 21,370 | | | 754,781 | | | — | | | — | | |
| Redler | | | 2/1/22 | | | 2/1/25(5) | | | — | | | — | | | — | | | — | | | — | | | 20,691 | | | 730,792 | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| Logerwell | | | 6/30/20 | | | 6/30/23 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 14,283 | | | 504,454 | |
| | | 6/30/20 | | | 6/30/23(3) | | | — | | | — | | | — | | | — | | | — | | | 1,274 | | | 44,981 | | | — | | | — | | |
| | | 8/31/21 | | | 8/31/24 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,521 | | | 265,647 | | |
| | | 8/31/21 | | | 8/31/24(4) | | | — | | | — | | | — | | | — | | | — | | | 4,274 | | | 150,986 | | | — | | | — | | |
| Gerke | | | 6/30/20 | | | 6/30/23 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 62,839 | | | 2,219,475 | |
| | | 6/30/20 | | | 6/30/23(3) | | | — | | | — | | | — | | | — | | | — | | | 5,599 | | | 197,759 | | | — | | | — | | |
| | | 8/31/21 | | | 8/31/24 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 31,819 | | | 1,123,857 | | |
| | | 8/31/21 | | | 8/31/24(4) | | | — | | | — | | | — | | | — | | | — | | | 18,082 | | | 638,661 | | | — | | | — | |
(1) |
Market value was determined using the closing price of the Company’s common stock of |
(2) | Represents PSUs and |
(3) | These RSUs vest on 6/30/23. |
(4) | These RSUs vest in one-third increments on 8/31/22, 8/31/23, and 8/31/24. |
(5) | These RSUs vest in one-third increments on 2/1/23, 2/1/24, and 2/1/25. |
| 43 |
Option Awards | Stock Awards | |||||||||||
Name of Executive | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($) | ||||||||
Jones | — | — | 10,886 | 255,984 | ||||||||
Bowen | — | — | 7,827 | 178,328 | ||||||||
Gerke | 17,646 | 182,283 | 24,841 | 565,938 | ||||||||
Orosco | — | — | 7,254 | 165,270 | ||||||||
Logerwell | — | — | 3,044 | 69,351 |
| | | Option Awards | | | Stock Awards | | |||||||
| Name of Executive | | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#)(1) | | | Value Realized on Vesting ($) | |
| Jones | | | — | | | — | | | 520,918 | | | 15,353,944 | |
| Bowen | | | — | | | — | | | 111,587 | | | 3,358,228 | |
| Gerke | | | 104,734 | | | 908,213 | | | 104,454 | | | 3,077,202 | |
| Orosco | | | — | | | — | | | 96,531 | | | 2,891,167 | |
| Logerwell | | | — | | | — | | | 23,765 | | | 700,041 | |
(1) |
Amounts in this column reflect restricted share units that vested during the Transition Period and fiscal year ended |
NONQUALIFIED DEFERRED COMPENSATION TABLE
The following table summarizes our NEOs’ compensation under the H&R Block, Inc. Deferred Compensation Plan for Executives during fiscal year 2019.
Name of Executive | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) | Aggregate Earnings (Loss) in Last FY ($)(1) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(2) | ||||||||||
Jones | 16,967 | 103,709 | 8,015 | — | 128,691 | ||||||||||
Bowen | — | — | — | — | — | ||||||||||
Gerke | — | — | — | — | — | ||||||||||
Orosco | — | — | — | — | — | ||||||||||
Logerwell | — | — | — | — | — |
H&R BLOCK DEFERRED COMPENSATION PLAN FOR EXECUTIVES
The Company provides the H&R Block, Inc. Deferred Compensation Plan for Executives, a nonqualified plan (the “DC Plan”), to employees who meet certain eligibility requirements. The DC Plan is intended to pay, out of the general assets of the Company, an amount substantially equal to the deferrals and Company contributions, adjusted for any earnings or losses. The Company does not provide any matching contributions for this plan.
Participants can elect to receive in-service payments or lump-sum or monthly payments over one to 15 years following termination from service or disability. To ensure compliance with IRC Section 409A, the DC Plan provides that the payments following termination shall not be made before a date that isearlier than six months after the termination date. Amounts deferred under the DC Plan by NEOs, if any, are included in the appropriate column of the Summary Compensation Table.
| Name of Executive | | | Executive Contributions in Last FY ($) | | | Registrant Contributions in Last FY ($) | | | Aggregate Earnings (Loss) in Last FY ($)(1) | | | Aggregate Withdrawals/ Distributions ($) | | | Aggregate Balance at Last FYE ($)(2) | |
| Jones | | | 408,711 | | | 57,404 | | | (70,859) | | | — | | | 395,256 | |
| Bowen | | | — | | | — | | | — | | | — | | | — | |
| Orosco | | | — | | | — | | | — | | | — | | | — | |
| Redler | | | — | | | — | | | — | | | — | | | — | |
| Logerwell | | | — | | | — | | | — | | | — | | | — | |
| Gerke | | | — | | | — | | | — | | | — | | | — | |
(1) | The amounts in this column are not included in the Summary Compensation Table because they are not above-market or preferential earnings on deferred compensation. |
(2) | Amounts in this column include NEO contributions previously reflected in Summary Compensation Tables included in the Company’s proxy statements for prior fiscal years and any earnings thereon. |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 44 |
Jeffrey J.
prior employment agreement entered into in August 2017.
fiscal year 2023.
November 4, 2026.
year.
performance.
performance.
(i) | Mr. Jones’s commission of an act materially and demonstrably detrimental to the Company or any affiliate, which act constitutes gross negligence or willful misconduct by Mr. Jones in the performance of his material duties to the Company or any affiliate; |
(ii) | Mr. Jones’s commission of any material act of dishonesty or breach of trust resulting or intending to result in material personal gain or material enrichment of Mr. Jones at the expense of the Company or any affiliate; |
(iii) | Mr. Jones’s violation of certain covenants related to confidentiality, non-hiring of employees, and non-solicitation of customers, and non-competition; or |
(iv) | The inability of the Company or any affiliate to participate in any activity subject to government regulation and material to the Company’s or any affiliate’s business solely as a result of any willful action or inaction by Mr. Jones. |
“Change in Control”: as defined in the 2013 Plan, which includes one or more of the following events, subject to certain exceptions: (i) during any 24-month period, individuals who, as of the beginning of such period, constitute the Board no
longer constitute at least a majority of the Board; (ii) any person is or becomes a beneficial owner of securities representing 35% or more of the combined voting power of the Company’s then outstanding securities; (iii) a merger, consolidation or similar corporate transaction that requires the approval of the Company’s shareholders; and (ii) the sale of 50% or more of the total gross fair market value of the Company’s assets.
“Good Reason”: any one or more of the following grounds unless cured within thirty days of receipt of notice thereof:
(i) | A material diminution in Mr. Jones’s base salary or target bonus opportunity; |
(ii) | Relocation of Mr. Jones’s location of employment outside of the Kansas City, Missouri metropolitan area; |
(iii) | A material diminution in Mr. Jones’s responsibilities, duties or authority, authority as President and |
(iv) | Any other action or inaction that constitutes a material breach by the Company of the |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 45 |
Messrs. Gerke and
The Executive Severance Plan is intended to support a variety of objectives, including (i) standardization of severance policy among the senior officers, which ensures internal parity, simplifies internal administration, and mitigates negotiation at hire and termination, and (ii) the attraction and retention of highly skilled executives by protecting them from the short-term economic consequences associated with unexpected termination of employment in the absence of cause. Based on advice from the Compensation Committee’s independent compensation consultant, we believe the benefits our NEOs would receive under various severance scenarios are modest relative to the market.
Plan.
(i) | In the case of a Change in Control Termination, two times the participant’s annual base salary and STI target amount, and in the case of a Qualifying Termination that is not a Change in Control Termination, one and one-half times annual base salary and STI target amount; and |
(ii) | An amount equal to the participant’s COBRA subsidy multiplied by 12, if the participant was enrolled in the Company’s applicable health, dental, and vision benefits on the termination date. |
(i) | Misconduct that materially interferes with or materially prejudices the proper conduct of the business of the Company; |
(ii) | Commission of an act materially and demonstrably detrimental to the good will of the Company; |
(iii) | Commission of any act of dishonesty or breach of trust resulting or intending to result in material personal gain or enrichment of the participant at the expense of the Company; |
(iv) | Violation of any non-competition, non-solicitation, confidentiality or similar restrictive covenant under any employment-related agreement, plan, or policy with respect to which the participant is a party or is bound; or |
(v) | Conviction of, or plea of guilty or nolo contendere to, a misdemeanor involving an act of moral turpitude or a felony. |
“Change in Control”: generally, the occurrence of one or more of the following events, subject to certain exceptions: (i) any person or group increases their Company stock ownership to more than 50% of the total fair market value or voting power of the Company’s stock; (ii) any person or group acquires (when combined with all acquisitions of the Company’s stock in a 12-month period) ownership of 35% or more of the total voting power of the Company’s stock; (iii) a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not approved in advance by two-thirds of the members of the Board; and (iv) any person or group acquires (when combined with all other acquisitions of the Company’s assets acquired during the prior 12-month period) assets equal to or more than 50% of the total gross fair market value of all of the assets of the Company.
“Good Reason Termination”: a separation from service within 75 days immediately preceding or 18 months immediately following a Change in Control which is initiated by the participant, subject to certain notice requirements, on account of one or more of the following conditions occurring within that same time frame without the consent of the participant that is not substantially remedied by the Company:
(i) | A material diminution in the participant’s base compensation; |
(ii) | A material diminution in the participant’s authority, duties, or responsibilities; |
(iii) |
(iv) | Any other action or interaction that constitutes a material breach by the Company of any written employment-related agreement between the participant and the Company. |
“Qualifying Termination”: the involuntary separation from service by the Company under circumstances not constituting Cause, but does not include the elimination of the participant’s position where the participant was offered a comparable position with the Company or with a party that acquires any assets from the Company, the redefinition of participant’s position to a lower compensation rate or grade, or the participant’s death or disability.
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 46 |
See “Termination of Employment Provisions in LTI Award Agreements” in the Compensation Discussion and Analysis above. Applicable definitions are as follows:
The Compensation Committee utilized alternate forms of award agreements used for Mr. Gerke beginning in fiscal year 2017, which are described in the Company’s Current Report on Form 8-K filed with the SEC on July 1, 2014, that define retirement“Retirement” as voluntary termination at or after reaching age 60. In addition, such alternate forms of award agreements contain modified vesting provisions providing that voluntary retirement after reaching age 60 will not result in the forfeiture of any equity awards outstanding for more than one year prior to such retirement; rather, the entire equity awards will continue to vest on the stated vesting dates set forth in the applicable award agreement and with performance adjustments (if any) made under such agreement as if he remained employed through such stated vesting dates.
situations where such qualifying termination occurs after a change in control, does not include a Good Reason Termination, as defined above under “H&R Block Executive Severance Plan”), death or Disability, that occurs more than one year after the grant date.Plan.” “Disability” means (i) for participants covered by a group long termlong-term disability program, the participant is receiving income replacement benefits for at least three months under the program because of any physical or mental impairment expected to result in death or last for a continuous period of at least twelve12 months (a “qualifying impairment”); or (ii) in all other cases, the participant is unable to engage in any substantial gainful activity for a period of at least nine months because of a qualifying impairment.
| 47 |
Mr. Gerke retired as General Counsel and Chief Administrative Officer prior to the end of fiscal year 2022, and the amounts shown for Mr. Gerke represent the actual value received in connection with his retirement.
Name of Executive | Termination without Cause or for Good Reason ($) | Termination without Cause or for Good Reason in Connection with a Change in Control ($) | Retirement ($) | Death or Disability ($) | ||||||||
Jones(1) | ||||||||||||
Cash | $ | 2,238,750 | $ | 3,233,750 | — | — | ||||||
Restricted Share Units | $ | 3,976,451 | $ | 5,825,615 | — | $ | 4,473,400 | |||||
Market Stock Units | $ | 576,730 | $ | 2,789,654 | — | $ | 1,038,114 | |||||
Performance Share Units | $ | 1,032,110 | $ | 5,230,945 | — | $ | 1,857,798 | |||||
Health and Welfare Plan Benefits | $ | 30,766 | $ | 41,021 | — | — | ||||||
Outplacement Services | — | — | — | — | ||||||||
Total | $ | 7,854,807 | $ | 17,120,985 | — | $ | 7,369,312 | |||||
Bowen(2) | ||||||||||||
Cash | $ | 1,245,411 | $ | 1,245,411 | — | — | ||||||
Restricted Share Units | — | $ | 447,070 | — | $ | 201,203 | ||||||
Market Stock Units | $ | 446,337 | $ | 887,998 | — | $ | 569,518 | |||||
Performance Share Units | $ | 771,291 | $ | 1,608,724 | — | $ | 995,399 | |||||
Health and Welfare Plan Benefits | $ | 13,584 | $ | 13,584 | — | — | ||||||
Outplacement Services | $ | 15,000 | $ | 15,000 | — | — | ||||||
Total | $ | 2,491,623 | $ | 4,217,787 | — | $ | 1,766,120 | |||||
Gerke(2)(3) | ||||||||||||
Cash | $ | 1,080,000 | $ | 1,080,000 | — | — | ||||||
Restricted Share Units | — | $ | 676,510 | $ | 406,056 | $ | 406,056 | |||||
Market Stock Units | $ | 739,006 | $ | 1,363,001 | $ | 1,012,682 | $ | 1,012,682 | ||||
Performance Share Units | $ | 1,303,394 | $ | 2,481,493 | $ | 1,806,841 | $ | 1,806,841 | ||||
Health and Welfare Plan Benefits | $ | 13,584 | $ | 13,584 | — | — | ||||||
Outplacement Services | $ | 15,000 | $ | 15,000 | — | — | ||||||
Total | $ | 3,150,984 | $ | 5,629,588 | $ | 3,225,579 | $ | 3,225,579 | ||||
Orosco(2) | ||||||||||||
Cash | $ | 1,282,500 | $ | 1,282,500 | — | — | ||||||
Restricted Share Units | — | $ | 372,128 | — | $ | 150,847 | ||||||
Market Stock Units | $ | 317,754 | $ | 699,367 | — | $ | 412,726 | |||||
Performance Share Units | $ | 551,842 | $ | 1,277,170 | — | $ | 725,200 | |||||
Health and Welfare Plan Benefits | $ | 13,584 | $ | 13,584 | — | — | ||||||
Outplacement Services | $ | 15,000 | $ | 15,000 | — | — | ||||||
Total | $ | 2,180,680 | $ | 3,659,749 | — | $ | 1,288,773 |
| Name of Executive | | | Termination without Cause ($) | | | Termination for Good Reason ($) | | | Termination without Cause or for Good Reason in Connection with a Change in Control ($) | | | Retirement ($) | | | Death or Disability ($) | |
| Jones(1) | | | | | | | | | | | | |||||
| Cash | | | 4,975,000 | | | 4,975,000 | | | 4,975,000 | | | — | | | — | |
| Restricted Share Units | | | — | | | — | | | 4,220,862 | | | — | | | 1,003,603 | |
| Market Stock Units | | | 2,540,054 | | | — | | | 3,810,081 | | | — | | | 3,810,081 | |
| Performance Share Units | | | 4,894,780 | | | — | | | 13,003,652 | | | — | | | 7,342,169 | |
| Health and Welfare Plan Benefits | | | 50,013 | | | 50,103 | | | 50,013 | | | — | | | — | |
| Outplacement Services | | | — | | | — | | | — | | | — | | | — | |
| Total | | | 12,459,846 | | | 5,025,013 | | | 26,059,607 | | | — | | | 12,155,853 | |
| Bowen(2) | | | | | | | | | | | | |||||
| Cash | | | 1,761,300 | | | 1,761,300 | | | 2,348,400 | | | — | | | — | |
| Restricted Share Units | | | — | | | — | | | 1,173,209 | | | — | | | 237,247 | |
| Market Stock Units | | | 600,390 | | | — | | | 900,586 | | | — | | | 900,586 | |
| Performance Share Units | | | 1,156,970 | | | — | | | 3,382,465 | | | — | | | 1,735,456 | |
| Health and Welfare Plan Benefits | | | 15,912 | | | 15,912 | | | 15,912 | | | — | | | — | |
| Outplacement Services | | | 15,000 | | | 15,000 | | | 15,000 | | | — | | | — | |
| Total | | | 3,549,573 | | | 1,792,212 | | | 7,835,572 | | | — | | | 2,873,289 | |
| Orosco(2) | | | | | | | | | | | | |||||
| Cash | | | 1,710,000 | | | 1,710,000 | | | 2,280,000 | | | — | | | — | |
| Restricted Share Units | | | — | | | — | | | 961,209 | | | — | | | 200,739 | |
| Market Stock Units | | | 508,011 | | | — | | | 762,016 | | | — | | | 762,016 | |
| Performance Share Units | | | 978,961 | | | — | | | 2,806,612 | | | — | | | 1,468,442 | |
| Health and Welfare Plan Benefits | | | 15,912 | | | 15,912 | | | 15,912 | | | — | | | — | |
| Outplacement Services | | | 15,000 | | | 15,000 | | | 15,000 | | | — | | | — | |
| Total | | | 3,227,884 | | | 1,740,912 | | | 6,840,748 | | | — | | | 2,431,197 | |
| Redler(2) | | | | | | | | | | | | |||||
| Cash | | | 1,425,000 | | | 1,425,000 | | | 1,900,000 | | | — | | | — | |
| Restricted Share Units | | | — | | | — | | | 736,299 | | | — | | | — | |
| Market Stock Units | | | — | | | — | | | — | | | — | | | — | |
| Performance Share Units | | | — | | | — | | | — | | | — | | | — | |
| Health and Welfare Plan Benefits | | | — | | | — | | | — | | | — | | | — | |
| Outplacement Services | | | 15,000 | | | 15,000 | | | 15,000 | | | — | | | — | |
| Total | | | 1,440,000 | | | 1,440,00 | | | 2,651,299 | | | — | | | — | |
| 48 |
Name of Executive | Termination without Cause or for Good Reason ($) | Termination without Cause or for Good Reason in Connection with a Change in Control ($) | Retirement ($) | Death or Disability ($) | ||||||||
Logerwell(2) | ||||||||||||
Cash | $ | 562,500 | $ | 562,500 | — | — | ||||||
Restricted Share Units | — | $ | 109,703 | — | $ | 48,236 | ||||||
Market Stock Units | $ | 103,411 | $ | 213,109 | — | $ | 133,468 | |||||
Performance Share Units | $ | 179,252 | $ | 387,395 | — | $ | 234,050 | |||||
Health and Welfare Plan Benefits | $ | 13,584 | $ | 13,584 | — | — | ||||||
Outplacement Services | $ | 15,000 | $ | 15,000 | — | — | ||||||
Total | $ | 873,747 | $ | 1,301,291 | — | $ | 415,754 |
| Name of Executive | | | Termination without Cause ($) | | | Termination for Good Reason ($) | | | Termination without Cause or for Good Reason in Connection with a Change in Control ($) | | | Retirement ($) | | | Death or Disability ($) | |
| Logerwell(2) | | | | | | | | | | | | |||||
| Cash | | | 607,500 | | | 607,500 | | | 810,000 | | | — | | | — | |
| Restricted Share Units | | | — | | | — | | | 197,782 | | | — | | | 45,659 | |
| Market Stock Units | | | 115,475 | | | — | | | 173,212 | | | — | | | 173,212 | |
| Performance Share Units | | | 222,492 | | | — | | | 601,387 | | | — | | | 333,739 | |
| Health and Welfare Plan Benefits | | | 15,912 | | | 15,912 | | | 15,912 | | | — | | | — | |
| Outplacement Services | | | 15,000 | | | 15,000 | | | 15,000 | | | — | | | — | |
| Total | | | 976,379 | | | 638,412 | | | 1,813,293 | | | — | | | 552,609 | |
| Gerke(3) | | | | | | | | | | | | |||||
| Cash | | | — | | | — | | | — | | | — | | | — | |
| Restricted Share Units | | | — | | | — | | | — | | | 200,739 | | | — | |
| Market Stock Units | | | — | | | — | | | — | | | 762,016 | | | — | |
| Performance Share Units | | | — | | | — | | | — | | | 1,468,442 | | | — | |
| Health and Welfare Plan Benefits | | | — | | | — | | | — | | | — | | | — | |
| Outplacement Services | | | — | | | — | | | — | | | — | | | — | |
| Total | | | — | | | — | | | — | | | 2,431,197 | | | — | |
(1) | Payments to Mr. Jones would be made pursuant to the terms of the |
(2) | Payments to Messrs. Bowen and Gerke and Mses. Redler, Orosco and Logerwell would be made pursuant to the terms of the Executive Severance Plan and various equity award agreements described above under “Employment Agreements, Change in Control and Other Arrangements” and |
(3) | Mr. Gerke retired as General Counsel and Chief Administrative Officer effective January 17, 2022. After his retirement as General Counsel and Chief Administrative Officer, he continued as an employee of the Company at a reduced base salary to assist with the transition to the Company’s new Chief Legal Officer, and he has now retired from the Company. Upon his retirement, Mr. Gerke received only the benefits to which he was entitled pursuant to the terms of the award agreements previously entered into with the Company and described above under “Termination of Employment Provisions in LTI Award Agreements.” |
2022.
change in the Company’s fiscal year end.
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 49 |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants, and rights (A) (# 000) | 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) (# 000) | ||||||
Equity compensation plans approved by security holders | 439 | 25.47 | 13,871 | ||||||
Equity compensation plans not approved by security holders | — | — | — | ||||||
Total | 439 | 25.47 | 13,871 |
| Plan Category | | | Number of securities to be issued upon exercise of outstanding options, warrants, and rights (A) (# 000) | | | 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) (# 000) | |
| Equity compensation plans approved by security holders | | | 574 | | | $23.34 | | | 10,935 | |
| Equity compensation plans not approved by security holders | | | — | | | — | | | — | |
| Total | | | 574 | | | $23.34 | | | 10,935 | |
| 50 |
2023.
| 51 |
Fiscal Year | 2019 | 2018 | ||||
Audit Fees | $ | 2,914,386 | $ | 3,037,793 | ||
Audit-Related Fees | $ | 102,000 | $ | 104,695 | ||
Tax Fees | $ | 120,815 | $ | 144,542 | ||
All Other Fees | — | — | ||||
Total Fees | $ | 3,137,201 | $ | 3,287,030 |
| | | Fiscal Year 2022 | | | Transition Period | | | Fiscal Year 2021 | | |
| Audit Fees | | | $2,673,775 | | | $639,300 | | | $2,964,150 | |
| Audit-Related Fees | | | $105,790 | | | — | | | $105,970 | |
| Tax Fees | | | $148,030 | | | $78,750 | | | $161,539 | |
| All Other Fees | | | — | | | — | | | — | |
| Total Fees | | | $2,927,595 | | | $718,050 | | | $3,231,659 | |
Audit Fees consist of fees for professional services rendered for the audit of the Company’s financial statements and review of financial statements included in the Company’s quarterly reports and services normally provided by the independent auditor in connection with statutory and regulatory filings or engagements.
Fees.
| 52 |
| | The Board unanimously recommends a vote FOR Proposal 2 | | | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | |
| The Board’s Audit Committee has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm to audit the Company’s financial statements for the fiscal year ending | |||||
for ratification, and will consider the vote of our | ||||||
shareholders when appointing our independent registered public accounting firm in the future. A representative of Deloitte is expected to attend the Annual Meeting to respond to appropriate questions and will have an opportunity to make a statement, if desired. For additional information regarding the Company’s relationship with Deloitte, please refer to the “Audit Committee Report” and “Audit Fees” sections above. |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL 2.
| 53 |
| | The Board unanimously recommends a vote FOR Proposal 3 | | | PROPOSAL 3 – ADVISORY APPROVAL OF THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION | |
| The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and Section 14A of the Exchange Act require that we permit our shareholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as | |||||
disclosed in the “Compensation | ||||||
Discussion and Analysis” section, the Summary Compensation Table and accompanying executive compensation tables, and the related narrative disclosure beginning on page 20. At our 2017 annual meeting, our shareholders approved, on an advisory basis, that an advisory vote on executive compensation should be held annually. Based on such result, our Board determined that the advisory vote on executive compensation will be held every year until the next advisory vote on the frequency of future advisory votes on executive compensation. |
We believe that our compensation programs and policies reflect an overall pay-for-performance culture that is strongly aligned with the interests of our shareholders. We are committed to utilizing a mix of incentive compensation programs that will reward success in achieving the Company’s financial objectives and growing value for shareholders, and continuingwe will continue to refine these incentives to maximize Company performance. The Compensation Committee of the Board has overseen the development of a compensation program designed to achieve pay-for-performance and alignment with shareholder interests, as described more fully in the “Compensation Discussion and Analysis” section beginning on page 20. The compensation program was designed in a manner that we believe is reasonable, competitive, and appropriately balances the goals of attracting, motivating, rewarding, and retaining our executives.
| “Resolved, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables, narrative discussion and any related material disclosed in this proxy statement, is hereby approved.” | |
Because your vote is advisory, it will not be binding upon the Company, the Board, or the Compensation Committee. However, because we value the views of our shareholders, and the Compensation Committee will continue to consider the outcome of the vote when considering future executive compensation arrangements.
| 54 |
Number of Shares | ||||||||||
Name | Beneficially Owned(1) | Share Units and Share Equivalents(2) | Total | Percent of Class | ||||||
Angela N. Archon | — | 22,625 | 22,625 | * | ||||||
Tony G. Bowen | 42,182 | — | 42,182 | * | ||||||
Paul J. Brown | 5,700 | 56,222 | 61,922 | * | ||||||
Robert A. Gerard | 14,000 | 164,491 | 178,491 | * | ||||||
Thomas A. Gerke | 182,991 | — | 182,991 | * | ||||||
Richard A. Johnson | — | 23,863 | 23,863 | * | ||||||
Jeffrey J. Jones II | 201,425 | 47,762 | 249,187 | * | ||||||
David Baker Lewis | 4,000 | 88,223 | 92,223 | * | ||||||
Kellie J. Logerwell | 4,773 | — | 4,773 | * | ||||||
Karen A. Orosco | 43,120 | — | 43,120 | * | ||||||
Victoria J. Reich | 3,500 | 56,222 | 59,722 | * | ||||||
Bruce C. Rohde | 10,000 | 70,612 | 80,612 | * | ||||||
Matthew E. Winter | — | 11,342 | 11,342 | * | ||||||
Christianna Wood | 12,580 | 83,042 | 95,622 | * | ||||||
All directors and executive officers as a group (14 persons) | 524,271 | (3) | 624,404 | 1,148,675 | * |
| | | Number of Shares | | | | ||||||||
| Name | | | Beneficially Owned(1) | | | Share Units and Share Equivalents(2) | | | Total | | | Percent of Class | |
| Tony G. Bowen | | | 51,473 | | | — | | | 51,473 | | | * | |
| Sean H. Cohan | | | — | | | 10,375 | | | 10,375 | | | * | |
| Robert A. Gerard | | | 26,000 | | | 255,031 | | | 281,031 | | | * | |
| Thomas A. Gerke | | | 32,747 | | | — | | | 32,747 | | | * | |
| Anuradha (Anu) Gupta | | | — | | | 23,919 | | | 23,919 | | | * | |
| Richard A. Johnson | | | — | | | 52,841 | | | 52,841 | | | * | |
| Jeffrey J. Jones II | | | 645,031 | | | 165,726 | | | 810,757 | | | * | |
| Kellie J. Logerwell | | | 14,022 | | | — | | | 14,022 | | | * | |
| Mia F. Mends | | | — | | | 10,375 | | | 10,375 | | | * | |
| Karen A. Orosco | | | 56,512 | | | — | | | 56,512 | | | * | |
| Yolande G. Piazza | | | — | | | 18,100 | | | 18,100 | | | * | |
| Dara S. Redler | | | — | | | — | | | — | | | * | |
| Victoria J. Reich | | | 4,484 | | | 90,282 | | | 94,766 | | | * | |
| Matthew E. Winter | | | — | | | 38,331 | | | 38,331 | | | * | |
| Christianna Wood | | | — | | | 121,802 | | | 121,802 | | | * | |
| All directors and executive officers as a group (15 persons) | | | 830,269 | | | 786,782 | | | 1,617,051 | | | 1.0% | |
* | Does not exceed 1% based on shares of our common stock outstanding as of |
(1) | Includes shares that on |
(2) | These amounts reflect share unit balances in the Company’s Deferred Compensation Plan for Directors, the Company’s Deferred Compensation Plan for Executives, the DSU Plan, the 2013 Plan and/or the 2018 Plan. The value of the share units mirrors the value of the Company’s common stock. The share units do not have voting rights. |
| 55 |
Name and Address of Beneficial Owner | Shares Beneficially Owned | Percent of Common Stock Outstanding(1) | ||
BlackRock, Inc. 55 East 52nd Street New York, New York 10022 | 23,126,808 | (2) | 11.43% | |
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 26,239,106 | (3) | 12.97% | |
State Street Corporation State Street Financial Center One Lincoln Street Boston, MA 02111 | 10,914,508 | (4) | 5.40% |
| Name and Address of Beneficial Owner | | | Shares Beneficially Owned | | | Percent of Common Stock Outstanding(1) | |
| The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | | | 24,452,418(2) | | | 15.4% | |
| BlackRock, Inc. 55 East 52nd Street New York, New York 10022 | | | 22,659,527(3) | | | 14.3% | |
| Jupiter Asset Management Ltd The Zig Zag Building 70 Victoria Street London SW1E 6SQ, United Kingdom | | | 11,088,022(4) | | | 7.0% | |
(1) | Applicable percentages based on shares of our common stock outstanding as of |
(2) |
Information as to the number of shares is furnished in reliance on the Schedule 13G/A of The Vanguard Group, Inc. filed on February |
(3) | Information as to the number of shares is furnished in reliance on the Schedule 13G/A of BlackRock, Inc. filed on February 7, 2022. The Schedule 13G/A indicates that the number of shares beneficially owned includes 21,066,777 shares with sole voting power and 22,659,527 shares with sole dispositive power. |
(4) | Information as to the number of shares furnished in reliance on the Schedule |
| 56 |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 57 |
▪ | By Internet – You can vote via the internet at www.proxyvote.com by following the instructions provided (you will need the Control Number); |
▪ | By Telephone – You can vote by telephone by calling the toll-free telephone number indicated on your proxy card or voting instruction card (you will need the Control Number); |
▪ | By Mail – If you received your proxy materials by mail, you can vote by signing, dating and returning the accompanying proxy card; or |
▪ | At the Virtual Meeting – You can also vote during the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/HRB2022 and following the instructions (you will need the Control Number). A vote at the Annual Meeting will revoke any prior votes. |
▪ | Any holder of record as of the close of business on September 9, 2022, may attend and vote at the Annual Meeting by visiting www.virtualshareholdermeeting.com/HRB2022. If you want to vote during the Annual Meeting any shares you hold in street name, you must obtain instructions from your broker, bank, or other nominee. |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 58 |
▪ | The live audio webcast of the Annual Meeting will begin promptly at 8:00 a.m. (CDT). Online access to the audio webcast will open 15 minutes prior to the start of the Annual Meeting to allow time for you to log-in and test your device's audio system. We encourage you to access the meeting in advance of the designated start time. |
▪ | You are entitled to attend and participate in the Annual Meeting online only if you were a registered shareholder as of September 9, 2022, the record date, or if you hold a valid proxy for the Annual Meeting. |
▪ | Please have the Control Number we have provided to you to join the Annual Meeting. |
▪ | Instructions on how to attend and participate in the Annual Meeting, including how to demonstrate proof of stock ownership, are available at www.virtualshareholdermeeting.com/HRB2022. |
▪ | We Encourage Questions. Our shareholders have multiple opportunities to submit questions for the meeting. Shareholders may submit a question online prior to or during the meeting by following the instructions at www.virtualshareholdermeeting.com/HRB2022. During the meeting, we will answer as many shareholder-submitted questions that are submitted in accordance with the meeting rules of conduct as time permits. |
▪ | We Believe in Transparency. Although the live webcast is available only to shareholders, following completion of the Annual Meeting answers to questions submitted in accordance with the meeting rules of conduct will be posted to our Investor Relations website at https://investors.hrblock.com and remain for at least sixty days. |
▪ | We Proactively Take Steps to Facilitate Your Engagement. We offer separate engagement opportunities with shareholders on appropriate matters of governance or other relevant topics as outlined under the Communications with the Board section of this proxy statement. In addition, we offer live technical support for all shareholders attending the meeting. |
▪ | Election of the |
▪ | Ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending |
▪ | Advisory approval of the Company’s named executive officer compensation (Proposal 3). |
WHO IS ENTITLED TO VOTE?
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 59 |
WHAT ARE THE VOTING RECOMMENDATIONS OF THE BOARD OF DIRECTORS AND THE VOTING REQUIREMENTS?
| Proposal | | | Board Recommendation | | | More Information | | | Broker Discretionary Voting Allowed? | | | Votes Required for Approval | | | Abstentions and Broker Non-Votes | |
| 1. Election of Directors. | | | FOR each Nominee | | | Page 5 | | | No | | | The affirmative vote of a majority of shares present in person or represented by proxy, and entitled to vote on the matter, is necessary for election or for approval of each of the proposals. | | | Abstentions have the same effect as votes AGAINST the relevant proposal. Broker non-votes have no impact on the outcome of the vote for any of the proposals. | |
| | | FOR | | | Page | | | Yes | | |||||||
| 3. Advisory approval of the Company’s named executive officer compensation. | | | FOR | | | Page | | | No | |
Broker Discretionary Voting
HOW DO I VOTE?
If you are a registered shareholder, there are four different ways you can vote:
| 60 |
When your proxy is properly submitted, your shares will be voted as you indicate. If you do not indicate your voting preferences, the appointed proxies (Thomas A. Gerke and Scott W. Andreasen) will vote your shares FOR each of the director nominees included in Proposal 1 and FOR Proposals 2 and 3. If your shares are owned in joint names, all joint owners must vote by the same method, and if joint owners vote by mail, all of the joint owners must sign the proxy card. The deadline for voting by telephone or via the internet, except with respect to shares held through the H&R Block Retirement Savings Plan as described below, is 11:59 p.m. Eastern Time on September 11, 2019.
If you are a beneficial owner of shares held in street name, you may vote by following the voting instructions provided by your broker, bank, or other nominee, and your broker, bank, or other nominee should vote your shares as you have directed. You must have a legal proxy from the shareholder of record in order to vote the shares in person at the Annual Meeting.
If your shares are held through the H&R Block Retirement Savings Plan, you may also vote as set forth above, except that Plan participants may not vote their Plan shares in person at the Annual Meeting. If you provide voting instructions via the internet, by telephone or by written proxy card, Fidelity Management Trust Company, the Plan’s Trustee, will vote your shares as you have directed. If you do not provide specific voting instructions, the Trustee will vote your shares in the same proportion as shares for which the Trustee has received instructions. Please note that you must submit voting instructions to the Trustee no later than September 9, 2019 at 11:59 p.m. Eastern Time in order for your shares to be voted by the Trustee at the Annual Meeting. Your voting instructions will be kept confidential by the Trustee.
MAY I ATTEND THE MEETING?
All shareholders, properly appointed proxy holders, and invited guests of the Company may attend the Annual Meeting. Shareholders who plan to attend the meeting may be required to present valid photo identification. If you hold your shares in street name, please also bring proof of your share ownership, such as a broker’s statement showing that you beneficially owned shares of the Company on the record date of July 12, 2019, or a legal proxy from your broker, bank, or other nominee (a legal proxy is required if you hold your shares in street name and you plan to vote in person at the Annual Meeting). Shareholders of record will be verified against an official list available at the registration area. The Company reserves the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the record date.
WHAT IS HOUSEHOLDING?
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 61 |
| | | By Order of the Board of Directors, | | |
| | | KATHARINE M. HAYNES | | |
| |||||
| Vice President and Secretary | |
| 62 |
| EBITDA | | | (in 000s) | | |||
| Year Ended | | | June 30, 2022 | | | June 30, 2019 | |
| | | | | | |||
| Net income – as reported | | | $553,674 | | | $420,699 | |
| Discontinued operations, net | | | (6,972) | | | (24,812) | |
| Net income from continuing operations – as reported | | | 560,646 | | | 445,511 | |
| Add back: | | | | | | ||
| Income taxes | | | 98,423 | | | 100,431 | |
| Interest expense | | | 88,282 | | | 86,962 | |
| Depreciation and amortization | | | 142,178 | | | 164,649 | |
| | | 328,883 | | | 352,042 | | |
| | | | | | |||
| EBITDA from continuing operations | | | $889,529 | | | $797,553 | |
| Adjusted EPS | | | (in 000s, except per share amounts) | | |||
| Year Ended | | | June 30, 2022 | | | June 30, 2019 | |
| | | | | | |||
| Net income from continuing operations – as reported | | | $560,646 | | | $445,511 | |
| Adjustments: | | | | | | ||
| Amortization of intangibles related to acquisitions (pretax) | | | 56,292 | | | 62,883 | |
| Tax effect of adjustments(1) | | | (13,358) | | | (15,147) | |
| Adjusted net income from continuing operations | | | $603,580 | | | $493,247 | |
| | | | | | |||
| Diluted earnings per share from continuing operations – as reported | | | $3.26 | | | $2.16 | |
| Adjustments, net of tax | | | 0.25 | | | 0.23 | |
| Adjusted diluted earnings per share from continuing operations | | | $3.51 | | | $2.39 | |
(1) | The tax effect of adjustments is the difference between the tax provision calculation on a GAAP basis and on an adjusted non-GAAP basis. |
| H&R Block, Inc. | Notice of Annual Meeting of Shareholders and 2022 Proxy Statement | 63 |