(4)
| Includes 971,503 shares of common stock owned and held by Xiao Guo Trust 2020 as well as 2,958,308shares beneficially owned by it with MAS. GIC is wholly-owned by the GoS and was set up with the sole purpose of managing Singapore’s foreign reserves. GoS disclaims beneficial ownership of these shares. GIC's business address is 168 Robinson Road, #37-01 Capital Tower, Singapore 068912. (4)Includes 918,742 shares of common stock owned and held by Xiao Guo Trust 2020, 154,910 shares of common stock owned directly, and 3,013,400 shares underlying options that are currently exercisable or that will become exercisable within 60 days of April 6, 2023. (5)Includes 737,386 shares of common stock owned directly, as well as 1,445,643 shares underlying options that are currently exercisable or that will become exercisable within 60 days of April 6, 2023. (6)Includes 346,614 shares of common stock owned directly, as well as 1,011,821 shares underlying options that are currently exercisable or that will become exercisable within 60 days of April 6, 2023. (7)Includes 222,809 shares of common stock owned directly, as well as 637,029 shares underlying options that are currently exercisable or that will become exercisable within 60 days of April 6, 2023. (8)Includes 250,000 shares of common stock owned and held by Sai Krishna Mandapaty 2021 Gift Trust, 81,733 shares of common stock owned and held by Mandapaty Family Trust DTD 29/12/2020, 19,704 shares of common stock owned directly, and 1,023,373 shares underlying options that are currently exercisable or that will become exercisable within 60 days of April 6, 2023. (9)Includes 67,724 shares of common stock owned directly, as well as 105,011 shares underlying options that are currently exercisable or that will become exercisable within 60 days of April 6, 2023. (10)Includes 56,555 shares of common stock owned and held by Family Leisure Properties, LLC - Series E, 6,743 shares of common stock owned directly, and 105,011 shares underlying options that are currently exercisable or that will become exercisable within 60 days of April 6, 2023. (11)Includes, with respect to all Directors and NEOs, 3,452,217 shares directly or indirectly beneficially owned and 9,132,049 shares underlying options that are currently exercisable or that will become exercisable within 60 days of April 6, 2023. Equity Compensation Plan Information The following table summarizes our equity compensation plan information as of December 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | | Plan Category | | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans | | Equity compensation plans approved by security holders (1) | | 34,979,933 | | (2) | $ | 3.83 | | (3) | 67,365,573 | | (4) | Equity compensation plans not approved by security holders | | — | | | — | | | — | | | Total | | 34,979,933 | | | $ | 3.83 | | | 67,365,573 | | |
(1)Represents the 2017 Stock Option Plan ("2017 Plan"), the 2021 Omnibus Incentive Plan ("Omnibus Plan") and the Employee Stock Purchase Plan ("ESPP"). (2)Includes shares of common stock underlying 21,607,562 options, 13,013,946 restricted stock units ("RSUs") and 358,425 performance stock units ("PSUs"), based on the actual achievement of 65.9% of target for non-market based PSUs and maximum-level achievement for market-based PSUs. (3)Represents the weighted-average exercise price of stock options outstanding under the 2017 Plan as of December 31, 2022, and excludes RSUs and PSUs, which do not have an exercise price. (4)Includes 2,653,406 shares available for issuance under the 2017 Plan, 55,731,863 shares available for issuance under the Omnibus Plan and 8,980,304 shares available for issuance under the ESPP, in each case as of December 31, 2022. The number of shares reserved for issuance under the Omnibus Plan is subject to an annual increase on the first day of each calendar year beginning January 1, 2022 and ending and including January 1, 2031, with the amount of such increase equal to the lesser of (i) 5% of the total number of shares of our common stock outstanding on the final day of the immediately preceding calendar year and (ii) any such smaller number of shares of our common stock as is determined by the Board. The number of shares reserved for issuance under the ESPP is subject to an annual increase on the first day of each calendar year beginning January 1, 2022 and ending and including January 1, 2031, with the amount of such increase equal to the lesser of (i) 1% of the total number of shares of our common stock outstanding on the final day of the immediately preceding calendar year and (ii) any such smaller number of shares of our common stock as is determined by the Board. As the ESPP has not yet commenced, no shares of our common stock are currently subject to any outstanding participant rights to purchase such shares under the ESPP.
2023 Proxy Report | | | | | | | | | | Proposal 2: Advisory Vote to Approve the Frequency of Future Advisory Votes on Executive Compensation |
Proposal 2 Advisory Vote to Approve the Frequency of Future Advisory Votes on Executive Compensation As required by Section 14A of the Exchange Act, the Company is asking stockholders to vote, on an advisory basis, on whether the advisory vote on executive compensation should be held every one, two or three years.
The Board believes that a frequency of “every one year” for the advisory vote on executive compensation is the optimal interval for conducting and responding to a “say-on-pay” vote. Therefore, as a matter of good corporate governance, the Company recommends stockholders vote for “every one year” at the 2023 Annual Meeting.
Because your vote on this proposal is advisory, it will not be binding on the Board. However, the Company and the Board will consider the outcome of the vote when making future decisions about the frequency of future stockholder advisory votes on the compensation of our Named Executive Officers.
| | | | | | | | | | | | | | | Our Board of Directors recommends a non-binding advisory vote to conduct future non-binding advisory votes on executive compensation “EVERY ONE YEAR.” |
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
Compensation Discussion and Analysis This Compensation Discussion and Analysis describes the material elements of our executive compensation program during our fiscal year ended December 31, 2022 ("fiscal year 2022"). It also provides an overview of our executive compensation philosophy, core principles and objectives. Finally, it analyzes how and why the Compensation and Talent Committee arrived at the specific compensation determinations for our NEOs for fiscal year 2022, including the key factors that the Compensation and Talent Committee considered in deciding their compensation. For fiscal year 2022, our NEOs were: | | | •Guo Xiao (our President and Chief Executive Officer); | | •Rebecca Parsons (our Chief Technology Officer); | | •Christopher Murphy (our Chief Executive Officer of Thoughtworks North America); | | •Erin Cummins (our Chief Financial Officer); and | | •Sai Mandapaty (our Chief Commercial Officer). |
Executive Summary and Fiscal Year Performance Highlights Last year, Thoughtworks celebrated its first full year as a public company. For fiscal year 2022, Thoughtworks reported approximately $1.3 billion in revenue, representing a 21.1% increase on a reported basis, or 26.8% on a constant currency basis, compared to the prior year. We continue to drive our business with rigor and discipline, managing supply and demand and being proactive with clients to help them achieve a better return from their technology budgets. At the core, our revenue growth is from deepening relationships with existing clients and winning new logos, and that is reflected in the number of our clients with full-year revenues greater than $10 million increasing to 35 in 2022, compared to 30 in 2021. The Compensation and Talent Committee believes that the fiscal year 2022 compensation of our NEOs is commensurate with Thoughtworks' size, performance and profitability, the significant scope of their roles and responsibilities and their value-driving leadership. Our executive compensation program is consistent and effective. While remaining true to principles and sound compensation policies and practices, our program also has the flexibility to incorporate feedback and evolving compensation practices that are important to us and our stakeholders. We believe our ability to attract and retain high-performing, world-class and diverse thought leaders enables us to achieve our business objectives, resulting in long-term value creation for our stockholders. In addition to aligning with our business strategy, our executive compensation philosophy supports our mission and collective impact. Executive Compensation Philosophy and Objectives Our executive compensation philosophy is focused on leverage through variable pay, exemplifying our pay for performance culture that rewards executives based on individual, team and financial performance. We strive to manage an executive compensation program that is simple to administer, data driven, aids in equitable treatment globally, prizes risk mitigating attributes and is reasonably predictable and sustainable. Compensation is integrated with the broader Total Rewards programs, as outlined in the table below. We proactively assess our offerings and expect to exhibit flexibility as needed to maintain competitiveness, promote
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
inclusiveness and retain top talent. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives: | | | •Provide market competitive compensation and benefit levels that will become exercisableattract, motivate, reward and retain a highly-talented team of executives within 60 daysthe context of April 18, 2022.responsible cost management; | | •Incent executives to model the Thoughtworks "Why"; | | •Align the interests and objectives of our executives with our stakeholders by linking their long-term incentive compensation opportunities to Thoughtworks' performance; and | | •Offer total compensation opportunities to our executives that, while competitive, are internally consistent and fair. |
Our total compensation packages must be competitive with other companies in our industry to ensure that we can continue to attract, motivate, reward and retain the executive officers who we believe are critical to our success. Keeping this in mind, the Compensation and Talent Committee seeks to accomplish our executive compensation goals while maintaining appropriate levels of internal pay equity, both between our CEO and our other executive officers, and between our executive officers and other non-executive employees. For fiscal year 2022, the Compensation and Talent Committee structured the annual compensation of our executive officers, including our NEOs, using three principal elements: base salary, short-term incentive compensation in the form of an Annual Bonus Program ("ABP") and long-term incentive compensation, in the form of RSU and PSU equity awards. We use equity awards that vest over time to align employee and stockholder interests and provide incentive for continued service. We believe that retaining and developing the best talent over the long-term is a key factor in our business success and ability to continue creating value for our stakeholders. We require our NEOs and other senior executives to maintain certain levels of holdings of Thoughtworks stock. This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt in the future may differ materially from the currently planned programs summarized in this discussion. Our governance standards regarding executive compensation are consistent with our executive compensation policies and practices. The Compensation and Talent Committee evaluates our executive compensation program on a regular basis to ensure that it is consistent with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following summarizes our executive compensation and related policies and practices: | | | What we do | | •Maintain an independent Compensation and Talent Committee with an independent Compensation Consultant. | | •Maintain meaningful stock ownership guidelines for senior management and directors. | | •Perform an annual executive compensation review. | | •Set the compensation package so that a significant portion of our NEOs' compensation is “at-risk,” since the value derived from equity awards is variable in nature based on corporate performance, which aligns the interests of our NEOs and stakeholders. | | •Institute multi-year vesting requirements for equity awards to encourage focus on long term results. | | •Maintain a Compensation Recovery (“Clawback”) Policy. | | •Use double-trigger change in control arrangements. |
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
| | | What we don't do | | 35 •No unique executive retirement plans.
| | •No repricing of underwater stock options. | | •No NEO-specific health, retirement or welfare benefits. | | •No hedging or pledging of our equity securities. | | •No contracts with multi-year guaranteed salary increases, or guaranteed lump-sum payments. | | •No tax gross-ups with respect to Section 4999 of the Internal Revenue Code. |
Determining Competitive Levels of Pay Our Compensation and Talent Committee believes that we must remain competitive in comparison to our industry peers to attract, retain and motivate our executive talent. To that end, the Compensation and Talent Committee evaluates peer companies’ compensation levels and compensation practices to develop a better understanding of market practice. In 2021, in anticipation of the initial public offering, the Compensation and Talent Committee conducted a detailed peer group review. In considering our peer group, our Compensation and Talent Committee reviewed various business attributes and financial metrics. Specifically, identifying other companies operating in IT consulting, software and services and research and consulting services industries. Quantitative factors reviewed included revenues, market capitalization and number of employees, among others. Organizations ranging from approximately ½ to 2 ½ times Thoughtworks’ size were considered for inclusion. Qualitative factors included key competitors for talent, key competitors in the markets we serve and other factors. The Compensation and Talent Committee believes that peer group comparisons are useful guides to measure the competitiveness of our executive compensation program and related policies and practices. The Compensation and Talent Committee will continue to review the composition of the Company’s peer group at least annually and, as appropriate, will update the group to reflect changes among peer companies, industry consolidation and Thoughtworks’ strategic priorities. Decisions regarding the composition of the peer group ultimately rest with the Compensation and Talent Committee. The companies comprising the fiscal year 2022 compensation peer group were as follows: | | | | | | ACI Worldwide, Inc. | Q2 Holdings, Inc. | LiveRamp Holdings, Inc. | Ceridian HCM Holding Inc. | Alteryx, Inc. | TELUS International | Manhattan Associates, Inc. | EPAM Systems, Inc. | Anaplan, Inc. (1) | Teradata Corporation | Pegasystems Inc. | ICF International, Inc. | Avalara, Inc. (2) | TTEC Holdings, Inc. | Perficient, Inc. | Jack Henry & Associates, Inc. | Blackbaud, Inc. | Verint Systems Inc. | (1) Anaplan has since been removed from the peer group due to its acquisition in June 2022. | (2) Avalara has since been removed from the peer group due to its acquisition in October 2022. |
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
Process for Determining Compensation The Role of the Compensation and Talent CommitteeIn discharging its responsibilities, the Compensation and Talent Committee works with our CEO and Chief Talent and Operating Officer ("CTOO"). Our management assists the Compensation and Talent Committee by providing information on corporate and individual performance, market compensation data and management’s perspective on compensation matters. These factors provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each executive officer. No single factor is determinative in setting compensation levels, nor is the impact of any individual factor on the determination of pay levels quantifiable. The Role of the CEO The Compensation and Talent Committee solicits and reviews our CEO’s proposals with respect to program structures, as well as his recommendations for adjustments to annual cash compensation, long-term incentive compensation and other compensation-related matters for our executive officers, including our NEOs (except with respect to his own compensation), based on his evaluation of their performance for the prior fiscal year. The Compensation and Talent Committee then considers any relevant guidance from its independent compensation consultant and reviews peer group information. The Compensation and Talent Committee makes a recommendation to the Board which makes the final decision on compensation for NEOs. Setting CEO Pay Our CEO participates in the same executive compensation programs as our other executive officers, including the other NEOs. In determining the total pay package for our CEO, the Compensation and Talent Committee considers the same information and factors used in determining the packages for the other NEOs, except that our CEO does not make a recommendation to the Compensation and Talent Committee for his own compensation. The Chairman of the Board also provides commentary on performance and leadership to the Compensation and Talent Committee, and with the input on market relevant pay comparisons from our consultant, Deloitte, the package is reviewed and set annually. The Role of the Independent Compensation Consultant Pursuant to its charter, the Compensation and Talent Committee has the authority to engage external advisors, including compensation consultants, legal counsel and other advisors to assist it in discharging the responsibilities of our Board relating to the compensation of our executive officers, including our NEOs. In fiscal year 2022, the Compensation and Talent Committee engaged Deloitte, a global compensation consultant, to advise on various executive and director compensation-related matters, which included providing information, analysis and other advice during fiscal year 2022, including assistance with determining a compensation peer group. During fiscal year 2022, the engagement for executive compensation services totaled approximately $0.3 million. The Company also engaged Deloitte or its affiliates during fiscal year 2022 to provide services unrelated to executive compensation. These engagements primarily consisted of accounting and tax services. Fees paid to Deloitte and its affiliates for these engagements totaled approximately $1.5 million during fiscal year 2022. Management initiated these engagements. The Compensation and Talent Committee has considered the independence of Deloitte, consistent with the requirements of Nasdaq, and has determined that Deloitte is independent. Further, pursuant to SEC rules and Nasdaq listing standards, the Compensation and Talent Committee conducted a conflicts of interest assessment and determined there was no conflict of interest resulting from the services Deloitte provided in fiscal year 2022.
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
Elements of Compensation Our executive compensation program is focused on leverage through variable pay, exemplifying our pay for performance culture that rewards executives based on individual, organizational and financial performance. We strive to manage an executive compensation program that is simple to administer, data driven, aids in equitable treatment globally, espouses risk mitigating attributes and is reasonably predictable and sustainable. Compensation is integrated with the broader Total Rewards programs, as outlined in the table below. We proactively assess our offerings and expect to exhibit flexibility as needed to maintain competitiveness, promote inclusiveness and retain top talent. The fiscal year 2022 executive compensation program applicable to our NEOs consisted of the following: | | | | | | | | | Component | Objective | Link to Strategy & Performance | Base Salary | Provide market competitive rate of fixed compensation to attract and retain highly qualified thought leaders | Fixed and based on individual performance, experience and impact of role | Annual Bonus Program | Encourages annual results that create stockholder value | Linked to annual achievement of predetermined Company objectives – revenue and adjusted net operating income ("NOI") margin | Long-Term Incentives ("LTI")•RSUs 2022 Proxy Report•PSUs
|
Links long-term incentives to stock price appreciation
Aligns compensation with the Company’s long-term strategic growth and profitability goals |
Aligns NEOs’ interest to shareholders over a long-term horizon and provides for retention
Performance-based, tied to Company strategy and requires achieving relative Total Shareholder Return and Adjusted EBITDA goals | Benefits and Perquisites | Provides market competitive benefits to attract and retain NEOs | Provides for the same retirement, health and welfare benefits as offered to all of our employees |
Base Salary Each of our NEOs is paid a base salary commensurate with his or her position, experience, skills, duties and responsibilities. The Compensation and Talent Committee reviews base salaries every year, but increases are not guaranteed. The table below shows the fiscal year 2022 base salaries for our NEOs. | | | | | | | | NEO | | Fiscal Year 2022 Base Salary | | Guo Xiao | | $682,500 | | Rebecca Parsons | | $715,335 | | Christopher Murphy | | $612,850 | | Erin Cummins (1) | | $500,000 | | Sai Mandapaty | | $500,000 | | (1) While Ms. Cummins' base pay was set in USD, she is paid in Great British Pounds ("GBP") so her base salary may be impacted by foreign currency exchange rates. | |
Annual Bonus Program Each of our NEOs has a performance-based annual cash bonus opportunity under our ABP that pays out based on Thoughtworks’ achievement of predetermined corporate financial performance objectives. Payments under the
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
ABP were conditioned upon achievement of revenue and profit type targets set at a level to reward robust growth. For fiscal year 2022, the Compensation and Talent Committee used the following framework: | | | | | | Global Targets | Regional Targets | •Global Revenue (60%) | Corporate Governance•Global Revenue (18%)
| •Global Adjusted NOI Margin (40%) | •Global Adjusted NOI Margin (12%) | | •Country Revenue (42%) | | •Country Adjusted NOI Margin (28%) |
Actual annual bonuses paid to our NEOs, if any, are based on actual achievement of the global financial targets (as well as the regional financial targets, in the case of Mr. Murphy). The Compensation and Talent Committee reviews the performance against the targets and recommends the payout to the Board for approval.
As a result of Thoughtworks' operating results during fiscal year 2022, the Compensation and Talent Committee recommended, and the Board approved, a 67.5% of on-target funding level for annual bonuses for our executives participating in the global ABP, including our NEOs, except for Mr. Murphy. Regional-based executives, including Mr. Murphy, received annual bonuses based on their respective region's performance. For Mr. Murphy, the Compensation and Talent Committee recommended, and the Board approved, a 55% of on-target funding level for annual bonuses. Global Corporate Results | | | | | | | | | | | | | | | | | | | Weighting | Threshold (% of Target) | Target | Maximum (% of Target) | Actual (% of Target) | Global Gross Revenue | 60.0 | % | 90.0 | % | 100.0 | % | 107.0 | % | 97.1 | % | Global Adjusted NOI Margin | 40.0 | % | 94.5 | % | 100.0 | % | 105.2 | % | 96.9 | % | Payout (as a % of target payout) | | 20.0 | % | 100.0 | % | 250.0 | % | 67.5 | % |
North America Results (Mr. Murphy's plan) | | | | | | | | | | | | | | | | | | | Weighting | Threshold (% of Target) | Target | Maximum (% of Target) | Actual (% of Target) | Global Gross Revenue | 18.0 | % | 90.0 | % | 100.0 | % | 107.0 | % | 97.1 | % | Global Adjusted NOI Margin | 12.0 | % | 94.5 | % | 100.0 | % | 105.2 | % | 96.9 | % | North America Gross Sales Revenue | 42.0 | % | 90.0 | % | 100.0 | % | 107.0 | % | 97.8 | % | North America Adjusted NOI Margin | 28.0 | % | 94.5 | % | 100.0 | % | 105.2 | % | 91.0 | % | Payout (as a % of target payout) | | 20.0 | % | 100.0 | % | 250.0 | % | 55.0 | % |
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
The following table sets forth, for each NEO, for fiscal year 2022, the NEO’s target annual bonus and the NEO’s actual annual bonus earned and paid: | | | | | | | | | | | | Name | Fiscal Year 2022 Target Annual Bonus Opportunity (% of Annual Base Salary) | Fiscal Year 2022 Target Annual Bonus Opportunity | Fiscal Year 2022 Actual Annual Bonus Earned and Paid | Guo Xiao | 60 | % | $409,500 | $276,398 | Rebecca Parsons | 33 | % | $236,061 | $159,333 | Christopher Murphy | 33 | % | $202,241 | $111,266 | Erin Cummins (1) | 33 | % | $165,000 | $107,560 | Sai Mandapaty | 33 | % | $165,000 | $111,369 | (1) Ms. Cummins' annual bonus is set and paid in GBP. Ms. Cummins' 2022 Actual Annual Bonus Earned and Paid amount reflects an exchange rate of $1.2305 per GBP, the rate applicable as of March 23, 2023, the payment date of the annual bonus. |
Long-Term Incentive ("LTI") Plan Our NEOs receive a significant proportion of their pay in the form of long-term equity-based awards, specifically both RSUs and PSUs. These awards provide our NEOs with a personal financial interest in Thoughtworks' success through stock ownership, aligning their interests with those of our stockholders. Equity-based incentives also enhance our NEOs' long-term commitment to Thoughtworks' building of stockholder value, as the potential realized value of the awards is determined by stock price appreciation. The Board, taking the recommendation of the Compensation and Talent Committee into consideration, approves awards of long-term equity incentives to our NEOs annually. There is no guaranteed or pre-determined amount. Each year, the amount of the award is considered holistically as part of the total reward package for each NEO. Annual long-term equity incentive awards to our NEOs typically consist of a blend of RSUs and PSUs. During fiscal year 2022, the Compensation and Talent Committee granted PSUs in April 2022 and RSUs in November 2022, with the November grant relating to the 2023 compensation package. As of November 2021, the proportion of RSUs and PSUs to the overall target value of the long-term incentives is a 50/50 mix. Through service-based vesting and forfeiture provisions included in our RSU and PSU award agreements, we believe that we provide an additional incentive to our leadership to act in furtherance of our long-term success and our stockholders’ interests. Before our IPO, Thoughtworks awarded options with time and performance vesting provisions. There were no options awarded during fiscal year 2022, and Thoughtworks does not expect to grant any additional options or other awards under the 2017 Plan. Restricted Stock Units In November 2022, the Compensation and Talent Committee granted RSUs to our NEOs. The Compensation and Talent Committee determined individual grant values and the proportion of the overall target value of each NEO's long-term incentive award that the RSUs comprised. The RSUs will vest in equal installments over a four-year period, with 25% of the RSUs vesting on each anniversary of the grant date. Upon vesting, each RSU will entitle the NEO to receive one share of Thoughtworks' common stock. Performance Stock Units In April 2022, the Compensation and Talent Committee granted PSUs to our NEOs. This was the first grant of PSUs made by Thoughtworks, although Thoughtworks did grant options with performance conditions before our IPO. The Compensation and Talent Committee reviewed different performance measures and selected relative
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
Total Shareholder Return ("rTSR") and Adjusted EBITDA for a three-year period, starting on the date of the grant, as performance measures to determine PSU vesting. The Compensation and Talent Committee determined individual grant values and the proportion of the overall target value of each NEO's long-term incentive award that the PSUs comprised. The PSUs will vest, if at all, based on (i) the TSR performance of Thoughtworks' stock relative to the performance of the stock of companies in a predetermined peer group over a performance period of January 1, 2022, through December 31, 2024 (30% of the PSU award); and (ii) meeting specified Adjusted EBITDA targets each fiscal year from 2022 through 2024, subject to the NEO's continued employment during the vesting period (70% of the PSU award). RTSR determined over a three-year time horizon was selected as a metric to align Executive Officer's and stockholder's long-term interest with the Company's relative market performance. Adjusted EBITDA was selected as a metric that rewards annual growth in operating income and aligns the interest of the Executive Officers with the interest of, and value creation for, stockholders also during that three-year period. Both performance and time vesting criteria must be satisfied in order for the PSUs to be considered vested. Although the performance determination will occur within three months after the end of the relevant fiscal year, vesting does not happen until the third anniversary of the grant date, subject to the NEO's continued employment through such third anniversary date. Depending upon performance, the number of PSUs earned will range from 0% to 200% of the target number of PSUs granted. Upon vesting, each PSU will entitle the NEO to receive one share of Thoughtworks' common stock. The fiscal year 2022 Adjusted EBITDA performance period year ending December 31, 2022 for the Adjusted EBITDA grant resulted in an achievement level of 65.9% of target. Health and Welfare Plans and Retirement Plans Our NEOs are eligible to participate in employee benefit plans, including plans providing for, for example, medical, dental, disability, vision and life insurance benefits. We maintain tax-qualified retirement plans in the relevant countries, which provide all regular employees with an opportunity to save for retirement on a tax-advantaged basis. This includes the United Kingdom ("UK"), where our CFO is based. In the USA, under our 401(k) plan, participants may elect to defer a portion of their compensation on a pre-tax basis and have it contributed to the plan subject to applicable annual limits under the Internal Revenue Code. Pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participant’s directions. Employee elective deferrals are 100% vested at all times. We have the ability to make discretionary matching and profit-sharing contributions to the 401(k) plan, and such match is issued on a quarterly basis and was capped at $5,000 per employee per year for fiscal year 2022. As a U.S. tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan and all contributions are deductible by us when made. Our CFO contributes to our defined contribution retirement plan in the UK on the same basis as other UK-based employees. Participants may elect to defer a portion of their compensation on a pre-tax basis, up to a capped amount, and have such deferred portion be contributed to the plan subject to applicable annual limits under His Majesty's Revenue and Customs regulations. Pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participant’s directions. The employer matching amounts are not discretionary but set in line with the level of elective contribution, and they are applicable to the CFO in the same manner as our other UK-based employees. Other Compensation Information Minimum Stock Ownership Requirements To align our NEOs’ interests with those of our stockholders, our Board has instituted minimum stock ownership requirements under our Corporate Governance Guidelines.
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
Our current minimum stock ownership requirements are as follows: (5)
| Includes 707,221 shares of common stock owned directly as well as 1,426,311 shares underlying options that are currently exercisable or that will become exercisable within 60 days of April 18, 2022. | | | | | Role | Minimum Stock Ownership Requirement | Non-Employee Director | 3x Cash Retainer | CEO | 5x Base Salary | Other (Non-CEO) Section 16 Officer | 2x Base Salary |
Section 16 Officers and Directors have five years from hire or promotion to their respective levels to comply with the minimum stock ownership requirements. The minimum stock ownership levels for each Director and Section 16 Officer will be determined annually using the Director’s cash retainer or Section 16 Officer’s annual base salary as of June 30 of the applicable year (each such date, a “Measurement Date”). Compliance with the Guidelines will be determined by using the greater of (i) the price on the date of grant or (ii) the price on the Measurement Date. A Director's or Section 16 Officer's stock options and PSU grants are not considered toward satisfying the minimum stock ownership requirements. Directors who are employees of Apax Partners, L.L.P. are not subject to these minimum stock ownership requirements. All of our NEOs met the applicable minimum stock ownership requirements as of December 31, 2022. Insider Trading, Hedging and Pledging Policies Our policy against insider trading prohibits all employees and directors from engaging in: (i) short sales, (ii) options trading, (iii) hedging transactions, (iv) trading on margin or pledging and (v) selling vote rights in connection with Thoughtworks securities. In addition, employees deemed "Thoughtworks Insiders" and directors are restricted from trading during specified blackout periods and may be subject to pre-clearance approval prior to being allowed to trade. Executive Employment Agreements In 2017, the Company entered into an employment agreement with each NEO (together, the “Executive Employment Agreements”) that memorialized the NEO’s base salary, performance-based annual cash bonus opportunity and eligibility to receive reimbursement of reasonable business expenses and participate in the Company’s benefit plans generally. Each Executive Employment Agreement provides for an initial three-year term, followed by successive one-year extensions thereafter, unless either party elects not to permit such automatic renewal with at least 30 days’ prior written notice. In addition, each Executive Employment Agreement provides for certain severance benefits upon the NEO's resignation for “good reason” or upon a termination of the NEO's employment by the Company without “cause,” each as defined therein, subject to the NEO’s execution, delivery and non-revocation of a release of claims in favor of the Company and continued compliance with restrictive covenants. However, in connection with the adoption of the Executive Severance Plan (as defined below) and our NEOs’ participation therein, the severance benefits under the Executive Employment Agreements ceased to be and are no longer in effect. Please see “—Potential Payments Upon Termination or Change in Control” below for more details regarding the severance benefits each NEO is eligible to receive. Each Executive Employment Agreement also subjects the NEO to (i) a non-competition covenant during employment and for 12 months thereafter (or such longer period (not to exceed 18 months) that such NEO is receiving severance benefits), (ii) non-interference, non-solicitation and non-hire covenants during employment and for 12 months (in the case of Ms. Cummins and Mr. Murphy) or 18 months (in the case of Mr. Guo, Mr. Mandapaty and Dr. Parsons) thereafter and (iii) assignment of inventions and perpetual confidentiality and non-disparagement covenants.
2023 Proxy Report(6)
| Includes 346,614 shares | | | | | | | | | | Compensation Discussion and Analysis |
Relationship Between Pay and Performance We strive to design our executive compensation program to balance the goals of attracting, motivating, rewarding and retaining our executive officers, including our NEOs, with the goal of promoting the interests of our stakeholders. To ensure this balance and to motivate and reward individual initiative and effort, we seek to ensure that our program is designed so that a meaningful portion of our executive officers’ target total direct compensation is “at-risk” and variable in nature. Generally, this philosophy is reflected in the target total direct compensation opportunities of our NEOs. In fiscal year 2022, a significant portion of the target total direct compensation awarded to our executive officers consisted of variable pay. We use both short-term incentive compensation in the form of cash bonuses and long-term incentive compensation in the form of RSU and PSU awards that may be settled for shares of our common stock. These variable pay elements ensured that our NEOs’ target total direct compensation for fiscal year 2022 was contingent (rather than fixed) in nature, with the amounts ultimately payable subject to variability above or below grant levels commensurate with our actual performance. As we continue to mature as a public company, we believe that the compensation elements provided to all of our executive officers, including our NEOs, will continue to emphasize “at-risk” pay, which enables us to provide a balanced set of incentives for our executive officers to meet our business objectives and drive long-term growth.
2023 Proxy Report(7)
| Includes 64,353 shares | | | | | | | | | | Compensation Discussion and Analysis |
Summary Compensation Table The following table summarizes the compensation of our NEOs for fiscal year 2022 and the fiscal years ended December 31, 2021 ("fiscal year 2021") and December 31, 2020 ("fiscal year 2020"), with the exception of Ms. Cummins and Mr. Mandapaty, for whom only fiscal year 2022 information is provided, as they were not NEOs in fiscal year 2021 or fiscal year 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | Salary ($) | | Stock Awards ($)(1) | | Option Awards ($)(1) | | Non-Equity Incentive Plan Compensation ($)(2) | | All Other Compensation ($)(3) | | Total ($) | Guo Xiao | | 2022 | | 682,500 | | 3,419,708 | | — | | 276,398 | | 6,093 | | 4,384,699 | President and Chief Executive Officer | | 2021 | | 682,500 | | 6,743,541 | | — | | 1,001,700 | | 9,983 | | 8,437,724 | | 2020 | | 633,131 | | — | | 198,657 | | 262,106 | | 4,571 | | 1,098,465 | Rebecca Parsons | | 2022 | | 715,335 | | 1,101,356 | | — | | 159,333 | | 6,093 | | 1,982,116 | Chief Technology Officer | | 2021 | | 715,335 | | 2,900,157 | | — | | 730,476 | | 9,983 | | 4,355,951 | | 2020 | | 676,776 | | — | | 198,657 | | 194,849 | | 4,666 | | 1,074,948 | Christopher Murphy | | 2022 | | 612,850 | | 1,327,987 | | — | | 111,266 | | 9,996 | | 2,062,098 | CEO of Thoughtworks North America | | 2021 | | 612,850 | | 2,559,201 | | — | | 464,852 | | 11,051 | | 3,647,954 | | 2020 | | 580,324 | | — | | 180,597 | | 245,700 | | 5,483 | | 1,012,104 | Erin Cummins (4)(5) | | 2022 | | 500,000 | | 1,214,671 | | — | | 107,560 | | 35,883 | | 1,858,115 | Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sai Mandapaty (4) | | 2022 | | 500,000 | | 1,214,671 | | — | | 111,369 | | 6,093 | | 1,832,133 | Chief Commercial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1) Amounts reflect the aggregate grant date fair value, computed in accordance with FASB ASC 718, of stock or option awards, as applicable, granted to the NEOs. For a description of the assumptions and methodologies used to calculate the amounts in the table, see Note 10, Stock-Based Compensation, in the Notes to the Consolidated Financial Statements in the Annual Report for the year ended December 31, 2022. For the PSUs granted in 2022 and assigned performance goals, this amount reflects 100% of target. The maximum amount eligible to be earned for the PSUs granted in 2022 is $2,760,055 for Mr. Guo, $1,069,555 for Dr. Parsons, $1,069,555 for Mr. Murphy, $1,069,555 for Ms. Cummins and $1,069,555 for Mr. Mandapaty. | (2) Amounts for each year represent performance-based annual cash bonuses earned with respect to such performance year, which bonuses were paid to our NEOs in the first quarter of the year following the respective performance year. | (3) In accordance with the SEC’s disclosure rules, certain other benefits provided to our NEOs, with the exception of Ms. Cummins, during fiscal year 2022 are not included within the table because the aggregate value of these items is less than $10,000 per NEO. The amounts reported in this column include 401(k) matching contributions for Mr. Guo, Dr. Parsons, Mr. Murphy and Mr. Mandapaty and a de minimis amount related to other benefits. The amount reported in this column for Mr. Murphy also includes the cost of providing him with tax assistance. The amount reported in this column for Ms. Cummins includes $29,760 in UK defined contribution plan matching contributions made by the Company on her behalf. The amount reported in this column for Ms. Cummins also includes life, critical illness and disability insurance premiums paid by the Company on her behalf and a global mobility tax preparation fee paid by the Company on her behalf, neither of which exceeds the greater of $25,000 and 10% of the total amount of her perquisites and personal benefits. | (4) Compensation information for Ms. Cummins and Mr. Mandapaty was provided for fiscal year 2022 only, because they were not NEOs for fiscal year 2021 or fiscal year 2020. | (5) Ms. Cummins is paid in GBP. Her salary, non-equity incentive plan compensation (annual bonus) and certain benefits reported in the "All Other Compensation" column (defined contribution plan matching contributions made by the Company on her behalf and life, critical illness and disability insurance premiums paid by the Company on her behalf) are based on the GBP Exchange Rate. Her salary amount and certain amounts included within "All Other Compensation", as noted, was converted from GBP into USD using the exchange rate as of January 1, 2022, the day her salary was set, of $1.27407 USD per GBP. Her annual bonus amount was converted from GBP into USD using the exchange rate of $1.2305 USD per GBP, the rate applicable as of March 23, 2023, the payment date of the annual bonus. |
2023 Proxy Report(8)
| Includes 59,927 shares | | | | | | | | | | Compensation Discussion and held by Family Leisure Properties, LLC - Series E as well as 86,626 shares underlying options that are currently exercisable or that will become exercisable within 60 days of April 18, 2022.Analysis |
Grants of Plan-Based Awards Table The following table sets forth additional information regarding RSUs and PSUs granted to our NEOs during fiscal year 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards (1) | | | | | Name | | Grant Date | | | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | All Other Stock Awards: Number of Shares of Stock or Units (#) (2) | | Grant Date Fair Value of Stock and Option Awards ($) (3) | Guo Xiao | | N/A | | | | 81,900 | | 409,500 | | 1,023,750 | | | | | | | | | | | | 4/18/2022 | | | | | | | | | | 14,286 | | 28,572 | | 57,144 | | | | 574,583 | 4/18/2022 | | | | | | | | | | 14,286 | | 28,572 | | 57,144 | | | | 805,445 | 11/15/2022 | | | | | | | | | | | | | | | | 244,566 | | 2,039,680 | Rebecca Parsons | | N/A | | | | 47,212 | | 236,061 | | 590,153 | | | | | | | | | | | | 4/18/2022 | | | | | | | | | | 5,536 | | 11,072 | | 22,144 | | | | 222,658 | 4/18/2022 | | | | | | | | | | 5,536 | | 11,072 | | 22,144 | | | | 312,120 | 11/15/2022 | | | | | | | | | | | | | | | | 67,935 | | 566,578 | Christopher Murphy | | N/A | | | | 40,448 | | 202,241 | | 505,603 | | | | | | | | | | | | 4/18/2022 | | | | | | | | | | 5,536 | | 11,072 | | 22,144 | | | | 222,658 | 4/18/2022 | | | | | | | | | | 5,536 | | 11,072 | | 22,144 | | | | 312,120 | 11/15/2022 | | | | | | | | | | | | | | | | 95,109 | | 793,209 | Erin Cummins | | N/A | | | | 33,000 | | 165,000 | | 412,500 | | | | | | | | | | | | 4/18/2022 | | | | | | | | | | 5,536 | | 11,072 | | 22,144 | | | | 222,658 | 4/18/2022 | | | | | | | | | | 5,536 | | 11,072 | | 22,144 | | | | 312,120 | 11/15/2022 | | | | | | | | | | | | | | | | 81,522 | | 679,893 | Sai Mandapaty | | N/A | | | | 33,000 | | 165,000 | | 412,500 | | | | | | | | | | | | 4/18/2022 | | | | | | | | | | 5,536 | | 11,072 | | 22,144 | | | | 222,658 | 4/18/2022 | | | | | | | | | | 5,536 | | 11,072 | | 22,144 | | | | 312,120 | 11/15/2022 | | | | | | | | | | | | | | | | 81,522 | | 679,893 | (1) The PSUs granted in fiscal year 2022 consisted of both non-market-based and market-based PSUs. The number of shares presented in the threshold target and maximum columns represents the number of shares that may vest, based on achieved performance at the end of the one-year or three-year performance period applicable to the award and the concurrent three-year service period. The Board also approved on April 18, 2022, 97,144 non-market-based PSUs and the underlying shares are not included in the table as the goals will not be established until 2023 and 2024, as applicable. | (2) The RSUs will vest in equal 25% installments on each of the first four anniversaries of the grant date. | (3) Amounts reflect the aggregate grant date fair value for the NEOs' PSU and RSU awards, calculated in accordance with FASB ASC 718. For a description of the assumptions and methodologies used to calculate the amounts in the table, see Note 10, Stock-Based Compensation, in the Notes to the Consolidated Financial Statements in the Annual Report for the year ended December 31, 2022. For the PSUs granted in 2022 and assigned performance goals, the amount was calculated assuming performance achievement at 100% of target. |
2023 Proxy Report(9)
| Includes with respect to all Directors | | | | | | | | | | Compensation Discussion and NEOs 3,330,022 shares directly or indirectly beneficially owned, 9,277,241 shares underlying options that are currently exercisable or that will become exercisable within 60 daysAnalysis |
Stock Vested Table The following table summarizes the number of shares acquired by each of the NEOs in fiscal year 2022 upon vesting of RSUs: | | | | | | | | | | | | | Stock Awards (1) | Name | | | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Guo Xiao | | | 197,628 | 3,200,162 | Rebecca Parsons | | | 90,250 | 1,474,967 | Christopher Murphy | | | 74,014 | 1,195,951 | Erin Cummins | | | 52,643 | 828,686 | Sai Mandapaty | | | 67,103 | 1,077,181 | (1) Amounts shown in these columns reflect RSU awards that vested during fiscal year 2022. The value of the RSU award was determined by multiplying the number of shares by the closing price of the Company's common stock on the applicable vesting date. |
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
Outstanding Equity Awards At 2022 Fiscal Year End Table The following table summarizes the outstanding equity awards held as of December 31, 2022, the last day of fiscal year 2022, by each of the NEOs: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | Name | | Grant Date | | Number of Securities Underlying Unexercised Options - Exercisable (#)(1) | | Number of Securities Underlying Unexercised Options - Unexercisable (#)(1) | | 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 Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | Guo Xiao | | 10/12/2017 | | 2,445,472 | | — | | 2.29 | | 10/12/2027 | | | | | | | | | 12/19/2018 | | 543,838 | | — | | 2.48 | | 12/19/2028 | | | | | | | | | 9/15/2020 | | 23,311 | | 5,452 | | 5.16 | | 9/15/2030 | | | | | | | | | 11/18/2021 | | | | | | | | | | 71,429 | | 727,862 | | | | | 11/15/2022 | | | | | | | | | | 244,566 | | 2,492,128 | | | | | 4/18/2022 | | | | | | | | | | | | | | 42,858 | | 436,723 | Rebecca Parsons | | 10/12/2017 | | 1,212,367 | | — | | 2.29 | | 10/12/2027 | | | | | | | | | 12/19/2018 | | 209,186 | | — | | 2.48 | | 12/19/2028 | | | | | | | | | 9/15/2020 | | 23,311 | | 5,452 | | 5.16 | | 9/15/2030 | | | | | | | | | 11/18/2021 | | | | | | | | | | 27,678 | | 282,039 | | | | | 11/15/2022 | | | | | | | | | | 67,935 | | 692,258 | | | | | 4/18/2022 | | | | | | | | | | | | | | 16,608 | | 169,236 | Christopher Murphy | | 10/12/2017 | | 789,234 | | — | | 2.29 | | 10/12/2027 | | | | | | | | | 6/8/2018 | | 108,951 | | — | | 2.29 | | 6/8/2028 | | | | | | | | | 12/19/2018 | | 91,736 | | — | | 2.48 | | 12/19/2028 | | | | | | | | | 9/15/2020 | | 21,192 | | 4,956 | | 5.16 | | 9/15/2030 | | | | | | | | | 11/18/2021 | | | | | | | | | | 27,678 | | 282,039 | | | | | 11/15/2022 | | | | | | | | | | 95,109 | | 969,161 | | | | | 4/18/2022 | | | | | | | | | | | | | | 16,608 | | 169,236 | Erin Cummins | | 10/12/2017 | | 230,476 | | — | | 2.29 | | 10/12/2027 | | | | | | | | | 12/19/2018 | | 191,754 | | — | | 2.48 | | 12/19/2028 | | | | | | | | | 12/6/2019 | | 194,298 | | 23,604 | | 5.16 | | 12/6/2029 | | | | | | | | | 9/15/2020 | | 14,128 | | 3,304 | | 5.16 | | 9/15/2030 | | | | | | | | | 11/18/2021 | | | | | | | | | | 27,678 | | 282,039 | | | | | 11/15/2022 | | | | | | | | | | 81,522 | | 830,709 | | | | | 4/18/2022 | | | | | | | | | | | | | | 16,608 | | 169,236 | Sai Mandapaty | | 10/12/2017 | | 849,694 | | — | | 2.29 | | 10/12/2027 | | | | | | | | | 12/19/2018 | | 156,889 | | — | | 2.48 | | 12/19/2028 | | | | | | | | | 9/15/2020 | | 16,247 | | 3,800 | | 5.16 | | 9/15/2030 | | | | | | | | | 11/18/2021 | | | | | | | | | | 27,678 | | 282,039 | | | | | 11/15/2022 | | | | | | | | | | 81,522 | | 830,709 | | | | | 4/18/2022 | | | | | | | | | | | | | | 16,608 | | 169,236 | | | | | | | | | | | | | | | | | | | |
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1) The time-vesting options (43.33% of each option grant) vest over a four-year period, with 37.5% vesting on the 18-month anniversary of the grant date, and an additional 6.25% vesting at the end of every three-month period thereafter, for the remainder of the 48-month vesting period. Vesting is subject to (i) the NEO’s continuous service with us through the applicable vesting date and (ii) full acceleration upon the consummation of a “change in control” (as defined in the 2017 Plan). The performance-vesting options have fully vested. | (2) The RSUs vest annually in equal installments over a four-year period, with 25% vesting on each anniversary of the grant date, subject to the applicable terms and limitations contained in the Omnibus Plan. | (3) Based on the $10.19 closing price of a share of the Company's common stock as reported by Nasdaq on the last day of fiscal year 2022. | (4) The non-market-based PSUs have a performance period of one year and a service period of three years. The market-based PSUs have a performance and service period of three years. The market-based PSUs are reflected at threshold level of performance achievement, and the non-market-based PSUs are reflected at target level of achievement. |
Potential Payments Upon Termination or Change in Control On September 9, 2021, our Board approved a new Executive Severance Plan (the “Executive Severance Plan”), under which each of our NEOs is entitled to severance (the "Severance Benefits”) in the event of a termination of the NEO's employment by the Company without “cause” or by the NEO with “good reason” (each, a “Qualifying Termination”), as each such term is defined in the Executive Severance Plan and summarized below, subject to the NEO's execution of a fully effective release of claims in favor of the Company and continued compliance with applicable restrictive covenants. Generally, the Severance Benefits consist of 18 months of continued base salary payments (“Salary Severance”), a prorated portion of the NEO’s target bonus for the year in which the Qualifying Termination occurs and up to 12 months of continued healthcare coverage at active employee rates (“Healthcare Severance”). In addition, if the Qualifying Termination occurs within three months prior to or 12 months following (or 18 months following, in the case of our Chief Executive Officer) a change in control (as defined in the Omnibus Plan), (i) the Salary Severance will consist of one and one-half times (or two times, in the case of our Chief Executive Officer) the sum of the NEO’s base salary and target bonus, payable in a single lump sum, (ii) the Healthcare Severance will consist of up to 18 months of continued healthcare coverage at active employee rates (or 24 months, in the case of our Chief Executive Officer) and (iii) if the Qualifying Termination occurs within two years following the change in control, the Severance Benefits will also include full acceleration of any then-outstanding equity awards (at the greater of target and actual performance, in the case of performance-based awards) that are assumed or substituted by the successor in the change in control, provided that such equity awards that are not so assumed or substituted in the change in control will immediately become fully vested upon consummation of the change in control. Under the Executive Severance Plan, with respect to each NEO, “cause” and “good reason” have the meaning set forth in the NEO’s Executive Employment Agreement, provided that a material diminution of the NEO’s duties or responsibilities, taken as a whole, without the NEOs consent, will also constitute a basis for “good reason.” The Executive Severance Plan includes a “best-net” provision, pursuant to which any “parachute payments” (within the meaning of Section 280G of the Internal Revenue Code) that become payable to a participant, including an NEO, will either be paid in full or reduced so that such payments are not subject to the excise tax under Section 4999 of the Internal Revenue Code, whichever results in the better after-tax treatment to the participant. The following table sets forth the benefits expected to be received by each NEO in each of the noted termination scenarios. This table assumes a termination date of December 31, 2022. With respect to amounts representing acceleration of unvested RSUs and PSUs, a qualifying termination in relation to a change in control is a termination without cause that occurs at any time beginning on the date of the change in control up to and including the second anniversary of the change in control. With respect to other amounts, a qualifying termination in relation to a change in control is a termination without cause or resignation for good reason, in each case, that occurs at any time beginning three months prior to the date of the change in control and ending on the 18-month anniversary of the change in control (for Mr. Guo) or on the 12-month anniversary of the change in control (for all other NEOs).
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Salary and Bonus (1) | | Value of Continuation of Benefits | | Value of Accelerated Stock Options, RSUs and PSUs (2) | | Total | Guo Xiao | | | | | | | | | Qualifying Termination, in relation to a Change of Control | | $2,593,500 | | $46,896 | | $4,118,611 | (3) | $6,759,007 | Qualifying Termination, not in relation to a Change in Control | | $1,433,250 | | $23,448 | | $— | (4) | $1,456,698 | Death | | $— | | $— | | $4,091,203 | (5) | $4,091,203 | Disability (6) | | $3,249,385 | | $— | | $— | | $3,249,385 | Rebecca Parsons | | | | | | | | | Qualifying Termination, in relation to a Change of Control | | $1,663,154 | | $12,355 | | $1,339,309 | (3) | $3,014,818 | Qualifying Termination, not in relation to a Change in Control | | $1,309,063 | | $8,236 | | $— | (4) | $1,317,299 | Death | | $— | | $— | | $1,311,901 | (5) | $1,311,901 | Disability (6) | | $932,500 | | $— | | $— | | $932,500 | Christopher Murphy | | | | | | | | | Qualifying Termination, in relation to a Change of Control | | $1,424,876 | | $12,466 | | $1,613,719 | (3) | $3,051,061 | Qualifying Termination, not in relation to a Change in Control | | $1,121,516 | | $8,311 | | $— | (4) | $1,129,827 | Death | | $— | | $— | | $1,588,804 | (5) | $1,588,804 | Disability (6) | | $2,959,221 | | $— | | $— | | $2,959,221 | Erin Cummins (7) | | | | | | | | | Qualifying Termination, in relation to a Change of Control | | $1,162,500 | | $— | | $1,585,623 | (3) | $2,748,123 | Qualifying Termination, not in relation to a Change in Control | | $915,000 | | $— | | $— | (4) | $915,000 | Death | | $— | | $— | | $1,450,353 | (5) | $1,450,353 | Disability (6) | | $4,282,291 | | $— | | $— | | $4,282,291 | Sai Mandapaty | | | | | | | | | Qualifying Termination, in relation to a Change of Control | | $1,162,500 | | $31,357 | | $1,469,456 | (3) | $2,663,313 | Qualifying Termination, not in relation to a Change in Control | | $915,000 | | $20,905 | | $— | (4) | $935,905 | Death | | $— | | $— | | $1,450,353 | (5) | $1,450,353 | Disability (6) | | $1,870,861 | | $— | | $— | | $1,870,861 | (1) Based on compensation structure as of December 31, 2022. | (2) Represents the value of vesting acceleration of the unvested RSUs and PSUs, calculated by multiplying the applicable number of shares subject thereto by the Company's closing stock price of $10.19 per share on December 31, 2022, and the value of vesting acceleration of unvested options, calculated by multiplying the applicable number of shares subject thereto by the excess of such Company's closing stock price of $10.19 per share over the applicable exercise price. For purposes of calculating the value of the non-market-based PSUs, the earned number of shares subject to such PSUs was used for the performance period ended on December 31, 2022 and the target number of shares subject to such PSUs was used for the performance periods ending on December 31, 2023 and 2024. With respect to the market-based PSUs, the target number of shares subject to such PSUs was used in the calculation. |
TABLE OF CONTENTS
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
2022 Proxy Report
| | | | | | | | | | | | | | | | | | | | | | | | | | | (3) Represents the value of vesting acceleration of all unvested equity awards. The actual number of PSUs that will vest will be at the greater of actual and target-level performance. | (4) Represents cancellation of all unvested equity awards, such that the NEOs would not receive any value in respect thereof. | (5) Represents the value of vesting acceleration of unvested RSUs and PSUs and cancellation of any unvested options. The actual number of PSUs that will vest, if any, will be based on actual performance. | (6) Disability benefits shown for U.S. based NEOs represent lifetime benefits and are part of the U.S. Disability plan available to all U.S. based employees. If triggered, these benefits would be payable through our Disability benefits provider. In the case of Ms. Cummins, benefits represent lifetime benefits under the Income Protection Plan available to all UK based employees, also payable through the respective benefits provider. | (7) Ms. Cummins is paid in GBP. Her salary, bonus and benefits amounts are based on the GBP Exchange Rate, as described in footnote (5) to the Summary Compensation Table above. |
Risk Assessment of Compensation The Compensation and Talent Committee has assessed our compensation programs and has concluded that they do not create risks that are reasonably likely to have a material adverse effect on the Company. We believe that the combination of different types and amounts of compensation, together with our internal controls and oversight by our Board of Directors, mitigates potential compensation-related risks.
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
Compensation Committee Report This report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent we specifically incorporate this report by reference, and shall not otherwise be deemed filed under such Acts. The Compensation and Talent Committee has reviewed and discussed the Compensation Discussion and Analysis with our management and the Compensation and Talent Committee’s independent consultant. Based on its review and discussions, the Compensation and Talent Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2022. Submitted by the Compensation and Talent Committee Robert Brennan, Chair Jane Chwick Rohan Haldea Gina Loften Roxanne Taylor
2023 Proxy Report | | | | | | | | | | | Compensation Discussion and Analysis |
CEO Pay Ratio In accordance with SEC rules, we are providing the ratio of the annual total compensation of our Chief Executive Officer to the annual total compensation of the Company’s median employee. The ratio is a reasonable estimate calculated in a manner consistent with SEC rules and the methodology described below. To determine the ratio of the total annual compensation of our CEO to the total annual compensation of the median employee, we reviewed the annual base salary of our global workforce as of the last business day of fiscal year 2022. Due to population size, we identified a band of employees with a base salary that approximates the median base salary for the Company. The median base salary reflects our workforce consisting of thousands of international employees from all locations, including active, on leave, temporary, seasonal, fixed term, part-time and full-time employees. It does not include independent contractors, outsourced, third party or hourly-rate workers. We calculated the median employee’s total annual compensation for fiscal year 2022 (which consisted of an increase to base salary, any bonus if relevant and the Company’s contribution to life, pension and disability premiums) and ensured the median employee’s compensation did not contain distortive compensation features. The median Thoughtworker works in India. For fiscal year 2022, the median employee’s total annual compensation was $48,388. Mr. Guo’s total annual compensation, including the Company’s contribution to the same type of benefits, was $4,384,699, resulting in a CEO pay ratio of 91:1. Pay Versus Performance As required by Item 402(v) of Regulation S-K, we are providing the following information regarding the relationship between executive compensation and our financial performance for each of the last two completed calendar years. Our CEO is the principal executive officer ("PEO"). The table below summarizes compensation of our PEO and other NEOs for the fiscal years ending on December 31, 2022 and 2021, including the values previously reported in our Summary Compensation Table ("SCT"), as well as the adjusted values required in this section to show compensation actually paid. It also shows our total shareholder return ("TSR"), our net income and our financial performance measure for compensatory purposes, revenues. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Value of Initial Fixed $100 Investment Based on: | | | | | Year | | Summary Compensation Table Total for PEO (1) | | Compensation Actually Paid to PEO (1)(2)(3) | | Average Summary Compensation Table for Non-PEO NEOs (4) | | Average Compensation Actually Paid to Non-PEO NEOs (2)(3)(4) | | TSR (5) | | Peer Group TSR (5) | | Net Income (in thousands) | | Revenues (in thousands) (6) | 2022 | | $4,384,699 | | $(3,626,017) | | $1,933,616 | | $(1,179,380) | | $35 | | $68 | | $(105,393) | | $1,296,238 | 2021 | | $8,437,724 | | $26,208,809 | | $4,001,953 | | $8,898,289 | | $91 | | $96 | | $(575) | | $1,069,945 | | | | | | | | | | | | | | | | | |
(1) The name of our PEO reflected in these columns for each of the applicable fiscal years is Guo Xiao. (2) The amounts in the following table represent the amounts added to or deducted from the equity award values for the PEO and non-PEO NEOs for the applicable year to compute the "Compensation Actually Paid" amounts shown in this column:
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2022 | | 2021 | | | PEO | | Average Non-PEO NEO | | PEO | | Average Non-PEO NEO | Summary Compensation Table Total | | $4,384,699 | | $1,933,616 | | $8,437,724 | | $4,001,953 | SCT Stock Awards amount | | (3,419,708) | | (1,214,671) | | (6,743,541) | | (2,729,679) | Change in fair value of outstanding equity awards in applicable year | | (1,580,549) | | (765,371) | | 1,625,494 | | 753,449 | Change in fair value of equity awards vested in applicable year | | (3,010,459) | | (1,132,953) | | 22,889,132 | | 6,872,566 | Compensation Actually Paid | | $(3,626,017) | | $(1,179,380) | | $26,208,809 | | $8,898,289 |
(3) The fair value of stock awards and stock options included in the Compensation Actually Paid ("CAP") amounts is calculated as of the required measurement date, consistent with the methodology and assumptions used to value the awards and disclosed at the grant date, as described in Thoughtworks' Annual Report. Any changes to stock award fair values from the grant date, for current year grants, and from prior year-end, for prior year grants, are based on Thoughtworks' stock price on the respective measurement dates. Any changes to stock option and market-based PSU fair values are based upon pricing models for changes in stock price, expected term, volatility and risk-free-rate assumptions on the respective measurement dates. (4) The names of each of our non-PEO NEOs reflected in these columns for each applicable fiscal year are as follows: (i) for fiscal year 2022, Rebecca Parsons, Christopher Murphy, Erin Cummins and Sai Mandapaty; and (ii) for fiscal year 2021, Rebecca Parsons and Christopher Murphy. (5) Our common stock began trading on Nasdaq Global Select Market on September 15, 2021. Therefore, the TSR is calculated using a start date of September 15, 2021 for each respective year. Further, we are unable to calculate TSR for fiscal year 2020 as the stock began trading in fiscal year 2021, as noted. The peer group used for the TSR calculation is the same peer group used by the Compensation and Talent Committee for purposes of disclosing our executive compensation benchmarking practices, as described in the Compensation Discussion and Analysis above. (6) We selected Revenues as our third metric as we believe it provides a good indicator of the financial health of the Company and our business, in addition to being a measure clearly distinct from TSR and Net Income. In line with this, the Company has linked Revenues to certain elements of our NEO's compensation, specifically the ABP, because of its importance to our overall short and long-term goals. Compensation for our PEO and other Non-PEO NEOs is determined by a number of factors, as shown in the Elements of Compensation section of the Compensation Discussion and Analysis. Achievement of annual revenue ("Revenue") and adjusted net operating income margin ("Adjusted NOI Margin") targets determines our ABP payouts as approved by the Board. In addition, achievement of TSR and Adjusted EBITDA annual targets determines the level of payout for PSU awards. These elements combined seek to align our PEO and Non-PEO NEOs' compensation with the short- and long-term strategic growth and profitability goals of the Company.
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The following graph compares the compensation actually paid to our PEO and the average compensation actually paid to our remaining NEOs with TSR (in ones): The following graph compares the compensation actually paid to our PEO and the average compensation actually paid to our remaining NEOs with our net income (in ones, except that net income is in thousands):
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The following graph compares the compensation actually paid to our PEO and the average compensation actually paid to our remaining NEOs with our revenues (in ones, except that revenues are in thousands):
The following table lists the most important financial performance measures we use to link the CAP to our performance for fiscal year 2022. The performance measures included in this table are not ranked by relative importance. | | | Most Important Performance Measures | Relative Total Shareholder Return | Global Adjusted NOI Margin | Global Revenues | Adjusted EBITDA |
2023 Proxy Report | | | | | | | | | | Proposal 3: Ratification of Appointment of Independent Registered Public Accounting Firm |
Proposal 2 3 Ratification of Appointment of Independent Registered Public Accounting Firm Our Audit Committee has appointed Ernst & Young LLP (“EY”) as our independent registered public accounting firm for the fiscal year ending December 31, 2022.2023. Neither the accounting firm nor any of its members has any direct or indirect financial connection with us in any capacity other than as our auditors, providing audit and non-audit related services. EY has served as our independent registered public accounting firm for the fiscal year ended December 31, 2021.since 2017. Although ratification of our appointment of EY is not required, we value the opinions of our stockholders and believe it is good corporate governance that stockholders ratify the appointment of EY. If the appointment of EY is not ratified by the stockholders, the Audit Committee will consider this fact in future appointments of the independent auditors for Thoughtworks. Even if the appointment of EY is ratified, the Audit Committee retains the discretion to appoint a different independent auditor at any time if it determines that such a change is in the best interest of Thoughtworks. Representatives of EY are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they choose to do so and will be available to respond to questions. | | | | | | | | | | | |
| | | Our Board of Directors recommends a vote “FOR” the ratification of the appointment by the Audit Committee of EY as our independent registered public accounting firm for the fiscal year ending December 31, 2022.2023. |
Abstentions are considered shares present and entitled to vote on this proposal and, thus, will have the same effect as a vote “AGAINST” this proposal. Principal Accountant Fees and Services The following table summarizes the fees of EY during the fiscal yearyears ended December 31, 2022 and December 31, 2021 (in thousands): | | | | | | | | | | | | | | | | | 2022 | | 2021 | Audit Fees (1) | | $3,170 | | $5,263 | Audit-Related Fees | | — | | — | Tax Fees (2) | | 274 | | 304 | All Other Fees (3) | | 7 | | 5 | Total | | $3,451 | | $5,572 | (1) Audit fees include professional services rendered in connection with the audit of our consolidated financial statements, quarterly review of the consolidated financial statements, Form S-1 and Form S-8 filings related to our initial public offering and statutory audits required by non-U.S. jurisdictions. | (2) Tax fees relate to tax compliance, state and local tax planning, and consulting related to domestic and international tax matters. | (3) All other fees relate to a subscription to EY’s accounting and reporting research tool. |
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| | | | | | | | | 5,263
| Tax(2)
| | | 304
| Other(3)
| | | 5
| | | | 5,572
|
(1)
| Audit fees include professional services rendered in connection with the auditProposal 3: Ratification of our consolidated financial statements, quarterly reviewAppointment of the consolidated financial statements, Form S-1 and Form S-8 filings related to our initial public offering, and statutory audits required by non-U.S. jurisdictions. |
(2)
| Tax fees relate to tax compliance, state and local tax planning, and consulting related to domestic and international tax matters. |
(3)
| All other fees relate to a subscription to EY’s accounting and reporting research tool.Independent Registered Public Accounting Firm |
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Pre-Approval Policies and Procedures The Audit Committee has adopted a pre-approval policy that sets forth procedures and conditions pursuant to which audit and non-audit services to be performed by the independent auditor may be pre-approved. These services may include audit services, audit-related services, tax services and other services. All of the services relating to the fees described in the table above were approved by our Audit Committee or our Board of Directors.
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| Report of the Audit Committee |
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Report of the Audit Committee Our Audit Committee has reviewed and discussed with our management and Ernst & Young LLP our audited consolidated financial statements for the fiscal year ended December 31, 2021.2022. Our Audit Committee has also discussed with Ernst & Young LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the U.S. Securities and Exchange Commission (“SEC”). Our Audit Committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB regarding the independent accountant’s communications with our Audit Committee concerning independence and has discussed with Ernst & Young LLP its independence from us. Based on the review and discussions referred to above, the Audit Committee recommended to our Board of Directors that the audited consolidated financial statements be included in our annual report on Form 10-K for the fiscal year ended December 31, 2021,2022, for filing with the SEC. Members of our Audit Committee rely without independent verification on the information provided to them and on the representations made by management and the independent auditor. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained the appropriate accounting and financial reporting principles, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s consideration and discussions do not assure that the audit of the Company’s consolidated financial statements have been carried out in accordance with the standards of the PCAOB, that the consolidated financial statements are presented in accordance with the accounting principles generally accepted in the United States and that Ernst & Young LLP is in fact “independent.” Submitted by the Audit Committee
William Parrett, Chair
Rohan Haldea
Gina Loften
Roxanne Taylor The information contained in the following report of our Audit Committee is not considered to be “soliciting material,” “filed” or incorporated by reference into any past or future filing by us under the Securities Act of 1933, as amended, and Securities Exchange Act of 1934, as amended, unless and only to the extent we specifically incorporate it by reference. TABLE OF CONTENTS
For purposes of the SEC’s executive compensation disclosure rules, we qualify as an “emerging growth company” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) and as such, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act.
This section discusses the material components of the executive compensation program for our Chief Executive Officer and our two other most highly compensated executive officers, whom we collectively refer to as our “Named Executive Officers” or “NEOs”. For our fiscal year ended December 31, 2021 (“fiscal year 2021”), our NEOs were Guo Xiao (our President and Chief Executive Officer), Dr. Rebecca Parsons (our Chief Technology Officer) and Christopher Murphy (our Chief Executive Officer of Thoughtworks North America).
This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt in the future may differ materially from the currently planned programs summarized in this discussion.
Summary Compensation TableGuo Xiao | | | 2021 | | | $682,000 | | | $6,743,541 | | | | | | $1,001,700 | | | $9,983 | | | $8,437,224 | President and Chief Executive Officer | | | 2020 | | | $633,131 | | | | | | $198,657 | | | $262,106 | | | $4,571 | | | $1,098,465 | Dr. Rebecca Parsons | | | 2021 | | | $715,014 | | | $2,900,157 | | | | | | $730,476 | | | $9,983 | | | $4,355,630 | Chief Technology Officer | | | 2020 | | | $676,776 | | | | | | $198,657 | | | $194,849 | | | $4,666 | | | $1,074,948 | Christopher Murphy | | | 2021 | | | $612,575 | | | $2,559,201 | | | | | | $464,852 | | | $11,051 | | | $3,647,679 | CEO of Thoughtworks North America | | | 2020 | | | $580,324 | | | | | | $180,597 | | | $245,700 | | | $5,483 | | | $1,012,104 |
(1)
| Amounts reflect the aggregate grant date fair value of stock or option awards, computed in accordance with FASB ASC 718, granted to the NEOs. |
(2)
| Amounts for each year represent performance-based annual cash bonuses earned with respect to such performance year, which were paid to our NEOs in the first quarter of the year following the respective performance year. |
(3)
| In accordance with the SEC’s disclosure rules, other benefits provided to Mr. Guo and Dr. Parsons for fiscal 2021 are not included because the aggregate cost of these items was less than $10,000 per individual. Amounts in this column for Mr. Murphy in respect of fiscal 2021 represent (i) $4,500 in 401(k) plan matching contributions made by us on his behalf, (ii) $4,600 related to an award granted under the 2017 Share Appreciation Rights Plan, when it closed at IPO, (iii) life insurance and disability insurance premiums paid by us and (iv) a global mobility tax preparation fee paid by the company on his behalf. |
Narrative to Summary Compensation Table
For 2021, the compensation of our NEOs consists of base salaries, performance-based annual cash bonus opportunities, long-term incentive compensation in the form of RSUs and other benefits, as described below and in “—Severance Benefits”.
Following the recent completion of our IPO in 2021, the Compensation & Talent Committee is assessing the compensation arrangements to ensure we have the appropriate balance of short
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and long-term variable pay, are market competitive and align the executive compensation structure to connect it with the experience of our stockholders.
Base Salary
Each of our NEOs is paid a base salary commensurate with his or her position, experience, skills, duties and responsibilities. For fiscal year 2021, the amounts received based on annual base salary rates for Mr. Guo, Dr. Parsons and Mr. Murphy were $682,000, $715,014 and $612,575, respectively.
Non-Equity Incentive Compensation – Performance-Based Annual Cash Bonuses
Each of our NEOs has a performance-based annual cash bonus opportunity that pays out upon the Company meeting predetermined corporate performance objectives. Payments under the annual bonus program were conditioned upon achievement of revenue and profit type targets set at a level to reward robust growth. For fiscal year 2021, the target annual cash bonus opportunities for Mr. Guo, Dr. Parsons and Mr. Murphy were 40.8%, 28.4% and 27.5%, respectively, of their annual base salaries. This was unchanged from the prior fiscal year.
Executive Employment Agreements
In 2017, the Company entered into an employment agreement with each NEO (together, the “Executive Employment Agreements”) that memorialized the NEO’s base salary, performance-based annual cash bonus opportunity and eligibility to receive reimbursement of reasonable business expenses and participate in the Company’s benefit plans generally.
Each Executive Employment Agreement also provides for an initial three-year term, subject to successive one-year extensions thereafter, unless either party elects not to permit such automatic non-renewal with at least 30 days’ prior written notice. In addition, each Executive Employment Agreement provides for certain severance benefits upon a resignation by such NEO for “good reason” or upon a termination by the Company without “cause,” each as defined therein, subject to the NEO’s execution, delivery and non-revocation of a release of claims in favor of the Company. In connection with the adoption of the Executive Severance Plan and our NEOs’ participation therein, severance benefits under the Executive Employment Agreements are no longer in effect. Please see “—Severance Benefits” below for more details regarding the severance benefits each NEO is eligible to receive.
Each Executive Employment Agreement also subjects the NEO to (i) a non-competition covenant during employment and for 12 months thereafter (or such longer period (not to exceed 18 months) that such NEO is receiving severance benefits), (ii) non-interference, non-solicitation and non-hire covenants during employment and for 12 months (in the case of Mr. Murphy) or 18 months (in the case of Mr. Guo and Dr. Parsons) thereafter and (iii) assignment of inventions and perpetual confidentiality and non-disparagement covenants.
Health and Welfare Plans and Retirement Plans
Our NEOs are eligible to participate in employee benefit plans, including plans providing for medical, dental, disability, vision and life insurance benefits. We maintain a tax-qualified retirement plan that provides all regular employees with an opportunity to save for retirement on a tax-advantaged basis. Under our 401(k) plan, participants may elect to defer a portion of their compensation on a pre-tax basis and have it contributed to the plan subject to applicable annual limits under the Internal Revenue Code. Pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the
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participant’s directions. Employee elective deferrals are 100% vested at all times. We have the ability to make discretionary matching and profit sharing contributions to the 401(k) plan and such match is issued on a quarterly basis and was capped at $4,500 per employee per year prior to fiscal year 2022. As a U.S. tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan and all contributions are deductible by us when made.
Outstanding Equity Awards At 2021 Fiscal Year EndThe following tables summarize the outstanding equity awards held as of December 31, 2021, the last day of fiscal year 2021, by each of the NEOs.
Guo Xiao | | | 10/12/2017 | | | 2,445,472 | | | — | | | 2.29 | | | 10/12/2027 | | | | | | | | 12/19/2018 | | | 473,498 | | | 70,340 | | | 2.48 | | | 12/19/2028 | | | | | | | | 9/15/2020 | | | 16,300 | | | 12,463 | | | 5.16 | | | 9/15/2030 | | | | | | | | 9/9/2021 | | | | | | | | | | | | | | | 173,818 | | | 4,660,061 | | 11/18/2021 | | | | | | | | | | | | | | | 95,239 | | | 2,553,358 | Dr. Rebecca Parsons | | | 10/12/2017 | | | 1,212,367 | | | — | | | 2.29 | | | 10/12/2027 | | | | | | | | 12/19/2018 | | | 186,526 | | | 22,660 | | | 2.48 | | | 12/19/2028 | | | | | | | | 9/15/2020 | | | 16,300 | | | 12,463 | | | 5.16 | | | 9/15/2030 | | | | | | | | 9/9/2021 | | | | | | | | | | | | | | | 81,023 | | | 2,172,227 | | 11/18/2021 | | | | | | | | | | | | | | | 36,905 | | | 989,423 | Christopher Murphy | | | 10/12/2017 | | | 789,234 | | | — | | | 2.29 | | | 10/12/2027 | | | | | | | | 6/8/2018 | | | 103,051 | | | 5,900 | | | 2.29 | | | 6/8/2028 | | | | | | | | 12/19/2018 | | | 72,854 | | | 18,882 | | | 2.48 | | | 12/19/2028 | | | | | | | | 9/15/2020 | | | 14,819 | | | 11,329 | | | 5.16 | | | 9/15/2030 | | | | | | | | 9/9/2021 | | | | | | | | | | | | | | | 64,787 | | | 1,736,939 | | 11/18/2021 | | | | | | | | | | | | | | | 36,905 | | | 989,423 |
(1)
| The time-vesting Options (43.33% of each Option grant) vest over a four-year period, with 37.5% vesting on the 18-month anniversary of the grant date, and an additional 6.25% vesting every three months for the remainder of the 48-month vesting period. Vesting is subject to (i) the Option holder’s continuous service with us through the applicable vesting date and (ii) full acceleration upon the consummation of a “change in control” (as defined in the Option Plan). The performance-vesting Options (56.67% of each Option grant) have fully vested. |
(2)
| The RSUs granted on September 9, 2021 vest 50% on March 17, 2022 and the remaining 50% on September 17, 2022. The RSUs granted on November 18, 2022 vest annually in equal installments over a four-year period at each anniversary of the grant date, subject to the applicable terms and limitations contained in the Omnibus Plan. |
(3)
| Based on the $26.81 closing price of the Company's common stock as reported by Nasdaq on the last day of our fiscal year 2021. |
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Severance Benefits
On September 9, 2021, our Board approved a new Executive Severance Plan (the “Executive Severance Plan”), under which each of our NEOs is entitled to severance (the “New Severance Benefits”) following a termination of their employment by the Company without “cause” or by the NEO with “good reason” (each a “Qualifying Termination”), each as defined in the Executive Severance Plan and summarized below, subject to their execution of a fully effective release of claims in favor of the Company and continued compliance with applicable restrictive covenants. Generally, the New Severance Benefits consist of 18 months of continued base salary payments (“Salary Severance”), a prorated portion of the NEO’s target bonus for the year in which the Qualifying Termination occurred and up to 12 months of continued healthcare coverage at active employee rates (“Healthcare Severance”).
In addition, if the Qualifying Termination occurs within three months prior to or 12 months following (18 months following, in the case of our Chief Executive Officer) a change in control (as defined in the 2021 Plan described below), (i) the Salary Severance will consist of one and one-half times (or two times, in the case of our Chief Executive Officer) the sum of the NEO’s base salary and target bonus, payable in a single lump sum, (ii) the Healthcare Severance will consist of up to 18 months of continued healthcare coverage at active employee rates (or 24 months, in the case of our Chief Executive Officer) and (iii) if the Qualifying Termination occurs within two years following the change of control, the New Severance Benefits will also include full acceleration of outstanding equity awards (at the greater of target and actual performance, in the case of performance-based awards) that are assumed or substituted by the successor in the change in control, provided that such equity awards that are not so assumed or substituted in the change of control will immediately become fully vested upon consummation of the change in control.
Under the Executive Severance Plan, with respect to each NEO, “cause” and “good reason” have the meaning set forth in the NEO’s Executive Employment Agreement, provided that a material diminution of the NEO’s duties or responsibilities, taken as a whole, without the NEOs consent, will also constitute a basis for “good reason.”
The Executive Severance Plan includes a “best-net” provision pursuant to which any “parachute payments” (within the meaning of Section 280G of the Internal Revenue Code) that become payable to a participant, including a NEO, will either be paid in full or reduced so that such payments are not subject to the excise tax under Section 4999 of the Internal Revenue Code, whichever results in the better after-tax treatment to the participant.
Outstanding Equity Awards
In September 2021, our Board adopted and our stockholders approved, the Thoughtworks Holding, Inc. 2021 Omnibus Incentive Plan (the “Omnibus Plan”), pursuant to which employees, consultants and directors of our company and our affiliates performing services for us, including our executive officers, may be eligible to receive awards in the form of stock options, stock appreciation rights, restricted stock, RSUs, bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards and performance awards intended to align the interests of participants with those of our stockholders. We initially reserved 62,048,123 shares of our common stock for issuance under the Omnibus Plan, which will be subject to an annual increase on the first day of each calendar year beginning January 1, 2022, and ending and
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including January 1, 2031, equal to the lesser of (i) 5% of the total number of shares of our common stock outstanding on the final day of the immediately preceding calendar year and (ii) any such smaller number of shares of our common stock as is determined by the Board.
The Omnibus Plan is administered by our Compensation and Talent Committee, which, concurrent with our Board, has the authority to construe and interpret the Omnibus Plan, grant awards and make all other determinations necessary or advisable for the administration of the Omnibus Plan. Awards under the Omnibus Plan may be made subject to performance conditions and other terms.
Prior to the IPO, the NEOs were granted long-term incentives in the form of Options under our 2017 Stock Option Plan (the “Option Plan”) and in the form of SARs under our 2017 Stock Appreciation Rights Plan (the “SAR Plan”).
The Options are partially subject to time-vesting (43.33% of each grant).The time-vesting Options vest over a four-year period, with 37.5% of the Options vesting on the 18-month anniversary of the grant date, and an additional 6.25% of the Options vesting every three months for the remainder of the 48-month vesting period, subject to (i) the Option holder’s continuous service with us through the applicable vesting date and (ii) full acceleration upon the consummation of a “change in control” (as defined in the Option Plan). The time-vesting Options will continue to be subject to the foregoing vesting terms following consummation of the IPO.
The Options were also partially subject to performance-vesting (56.67% of each grant). In accordance with the Option Plan, 50% of the performance vesting options vested upon a sponsor return of at least two times the sponsor investment. An aggregate of 75% of the performance vesting options vested upon a sponsor return of at least two and a half times the sponsor investment. An aggregate of 100% of Performance Vesting Options vested upon a sponsor return of at least three times the sponsor investment. Vesting was prorated if a sponsor return was between these targets. In addition to the sponsor return targets above, participants must have had at least 18 months of continuous service following the grant date in order to vest. In order for vesting to be considered probable, the sponsor return must have been met as of the reporting date. Sponsor return, as defined in the Option Plan, was determined based on the aggregate amount of all cash, fair market value of marketable securities, including proceeds from the sale of securities of the Company, provided and to the extent such proceeds result in cash dividends and/or cash distributions by the Company to the sponsor.
On September 9, 2021, the Board of Directors approved a modification to the Company's Option Plan which, upon completion of the IPO, a sponsor return of 2.8x times sponsor investment was certified as having been achieved, and the service condition under the Plan that participants must provide at least 18 months of continuous service following the grant date in order for performance vesting options to vest was waived. Additionally, the Board also approved accelerated vesting of all remaining, unvested former Class C performance vesting options, after the achievement of such sponsor return, which resulted in all performance vesting options becoming fully vested in connection with the IPO.
In connection with our IPO, our Board also approved the discontinuation of the SAR Plan and the conversion of outstanding SAR awards thereunder, including those held by the NEOs, into RSUs of equal value granted under the Omnibus Plan in exchange for cancellation of the SAR awards.
The exercise or base prices, as applicable, and number of shares of our common stock subject to the Options and SARs (prior to their conversion to RSUs) were adjusted for the Stock Split effected in connection with our IPO at a ratio of approximately 43.6-to-1.
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Neither we nor our Board of Directors intend to propose any matters of business at the Annual Meeting other than the proposals described in this Proxy Statement. Neither we nor our Board of Directors are aware of any matters to be proposed by others at the Annual Meeting. TABLE OF CONTENTS
Where to Find Additional Information We are subject to the informational requirements of the Exchange Act and in accordance therewith, we file annual, quarterly and current reports and other information with the SEC. Such information may be accessed electronically by means of the SEC's home page on the Internetinternet at www.sec.gov. We are an electronic filer, and the SEC maintains an Internetinternet site at www.sec.gov that contains the reports and other information we file electronically. These filings are also available on our corporate website at https://investors.thoughtworks.com/. Please note that our website address is provided as an inactive textual reference only. We make available free of charge, through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The information provided on or accessible through our website is not part of this Proxy Statement.
2023 Proxy Report
2023 Proxy Report |