UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x
☒ Filed by a Party other than the Registrant ¨
☐
Check the appropriate box:
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| ☐ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the CommissionOnly (as permitted by Rule 14a-6(e)(2)) | |
Rule 14a-6(e)(2))
| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting | |
S&P Global Inc.
McGraw Hill Financial, Inc.
(Name of Registrant as Specified In Its Certificate)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required.
| ☒ | No Fee Required. | |||
| ☐ | Fee computed on table below per Exchange Act Rules14a-6(i)(4) and0-11. | |||
| (1) | Title of each class of securities to which transaction applies: | |||
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| ☐ | Fee paid previously with preliminary materials. | |||
| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
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Notes:
Reg. §240.14a-101.
SEC 1913 (3-99)
55 Water Street
New York, NY 10041-0003
March 18, 2015
13, 2017
Dear Fellow Shareholder:
On behalf of our Board of Directors and management, we cordially invite you to attend our Annual Meeting of Shareholders on Wednesday, April 29, 2015.26, 2017. The Meeting will be held at the Conrad New York Hotel, 102 North End Avenue,55 Water Street, New York, New York, 10282,10041, at 11:00 a.m. (EDT). If you are unable to attend the Annual Meeting in New York, please join us via live Webcastwebcast on the Company’s Websitewebsite at www.mhfi.com.www.spglobal.com.
The Notice of Meeting and Proxy Statement accompanying this letter describe the business we will consider at the Meeting. Your vote is very important. We urge you to vote to be certain your shares are represented at the Meeting even if you plan to attend. Most shareholders have a choice of voting over the Internet, by telephone or by using a traditional proxy card. Please refer to your proxy materials or the information forwarded by your bank, broker or other holder of record to see which methods are available to you.
We look forward to seeing you at the Meeting.
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Chairman of the Board | Douglas L. Peterson President and Chief Executive Officer |
 | 55 Water Street
New York, NY 10041-0003 |
Notice of Annual Meeting of Shareholders
To Be Held Wednesday, April 29, 201526, 2017
The Annual Meeting of Shareholders of McGraw Hill Financial,S&P Global Inc. will be held onWednesday, April 29, 2015,26, 2017, at11:00 a.m. (EDT)at the Conrad New York Hotel, 102 North End Avenue, 55 Water Street, New York, New York, 10282.10041. At the Meeting, shareholders will be asked to:
elect 12 Directors;
Items of Business | Board’s Recommendation | |||||
1. Elect 12 Directors; |
| FOR each Director Nominee | ||||
2. Approve, on an advisory basis, the executive compensation program for the Company’s named executive officers, as described in this Proxy Statement; |  | FOR | ||||
3. Vote, on an advisory basis, on the frequency on which the Company conducts an advisory vote on the executive compensation program for the Company’s named executive officers; | | 1 YEAR | ||||
4. Ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for 2017; and | | FOR | ||||
5. Consider any other business, if properly raised. | ||||||
approveThis notice and proxy statement is being mailed or made available on the performance goals underInternet to shareholders on or about March 13, 2017. These materials describe the Company’s 2002 Stock Incentive Plan, as amendedmatters being voted on at the Annual Meeting and restated;
approve, on an advisory basis, the executive compensation program for the Company’s named executive officers, as described in this Proxy Statement;
ratify the appointmentcontain certain other information. In addition, these materials are accompanied by a copy of the Company’s independent Registered Public Accounting Firm2016 Annual Report, which includes financial statements as of and for 2015;
vote on one shareholder proposal, if properly presented at the Meeting; andfiscal year ended December 31, 2016.
consider any other business, if properly raised.
You may vote at the Meeting if you were a shareholderOnly shareholders of the Company at therecord as of close of business on March 9, 2015,6, 2017 may vote, in person or by proxy, at the Annual Meeting. If you plan to attend the Meeting in person and you are a shareholder of record, date foryou will need your admission ticket in order to enter the Meeting. YourIf you plan to attend the Meeting in person and you are a beneficial owner, you will need proof of beneficial ownership of the Company’s common stock as of that date in order to enter the Meeting. If you are unable to attend the Annual Meeting in New York, please join us via live webcast on the Company’s website at www.spglobal.com.
Whether or not you plan to attend the Meeting, your vote is very important.We urge you to participate in electing directors and deciding the other items on the agenda for the Annual Meeting. Please sign and returncast your votes by one of the enclosedfollowing methods:
The Internet |
Signing and Returning a Proxy Card |
Toll-Free Telephone |
If You Are a Shareholder of Record (as of March 6, 2017), in Person or by Proxy at the Annual Meeting |
If you accessed this proxy cardstatement through the Internet after receiving a Notice of Internet Availability of Proxy Materials, you may cast your vote over the Internet by following the instructions in that Notice.
If you received this proxy statement by mail, you may cast your vote by mail, by telephone or over the postage-paid envelope provided or, if you prefer, please followInternet by following the instructions on the enclosed proxy card for voting by telephone or via the Internet. You may access the Company’s Investor Relations Website at http://investor.mhfi.com for further Internet voting instructions.card.
By Order of the Board of Directors.
Scott L. BennettKatherine J. Brennan
Senior Vice President, AssociateDeputy General Counsel
Counsel and& Corporate Secretary
New York, New York
March 18, 201513, 2017
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS MEETING TO BE HELD ON APRIL 29, 2015.
THE COMPANY’S ANNUAL REPORT, LETTER TO SHAREHOLDERS, NOTICE OF MEETING, PROXY STATEMENT AND PROXY CARD ARE AVAILABLE AT www.mhfi.com/proxy/2015.
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GENERAL INFORMATION |
McGraw Hill Financial,S&P Global Inc.
Proxy Statement
20152017 Annual Meeting of Shareholders
Why did I receive this Proxy Statement?
The Board of Directors of McGraw Hill Financial,S&P Global Inc. (the “Company,” “we” or “us”) is soliciting proxies for the 20152017 Annual Meeting of Shareholders (the “Annual Meeting” or “Meeting”) to be held on Wednesday, April 29, 2015,26, 2017, at the Conrad New York Hotel, 102 North End Avenue,55 Water Street, New York, New York 10282,10041, at 11:00 a.m. (EDT) and at any adjournment of the Meeting. When the Company asks for your proxy, we must provide you with a Proxy Statement that contains certain information specified by law. This Proxy Statement summarizes the information you need in order to vote at the Meeting.
The Company’s Annual Report, LetterWhy have I received a Notice Regarding Internet Availability of Proxy Materials instead of printed copies of these materials in the mail?
In accordance with rules promulgated by the Securities and Exchange Commission (“SEC”), we have elected to Shareholders,furnish our proxy materials to shareholders over the Internet. Most shareholders are receiving by mail a Notice of Internet Availability of Proxy Materials (“Notice”), which provides general information about the Annual Meeting, Proxy Statementthe address of the website on which our proxy statement and annual report are available for review, printing and downloading and instructions on how to submit proxy card are being mailedvotes. For those who wish to shareholders beginningreceive their materials in a different format (e.g., paper copy by mail or electronic copy bye-mail), the Notice contains instructions on or about March 18, 2015.how to do so. Shareholders who have previously consented to electronic delivery will receive ane-mail with a web address to view the proxy statement and annual report online, along with instructions on how to vote.
What will I vote on?
The following items:
election of 12 Directors;
| 1. | election of 12 Directors; |
approval of the performance goals under the Company’s 2002 Stock Incentive Plan, as amended and restated;
| 2. | approval, on an advisory basis, of the executive compensation program for the Company’s named executive officers, as described in this Proxy Statement; |
approval, on an advisory basis, of the executive compensation program for the Company’s named executive officers, as described in this Proxy Statement;
| 3. | vote, on an advisory basis, on the frequency on which the Company conducts an advisory vote on the executive compensation program for the Company’s named executive officers; |
ratification of the appointment of the Company’s independent Registered Public Accounting Firm for 2015;
| 4. | ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for 2017; and |
one shareholder proposal, provided the proposal is properly presented at the Meeting; and
| 5. | other matters that may properly be brought before the Meeting. |
other matters that may properly be brought before the Meeting.
Will there be any other items of business on the agenda?
We do not expect any other items of business at the Annual Meeting. Nonetheless, if there is an unforeseen need, your proxy will give discretionary authority to the persons named on the proxy to vote on any other matters that may be properly brought before the Meeting. These persons will use their best judgment in voting your proxy.
Who can vote?
Shareholders as of the close of business on the record date, which is March 9, 2015,6, 2017, may vote at the Annual Meeting.
How many votes do I have?
You have one vote at the Meeting for each share of common stock you held on the record date.
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GENERAL INFORMATION (continued) |
What does it mean to be a “shareholder of record?”record”?
If, as of the close of business on the record date, your shares were registered directly in your name with the Company’sour transfer agent, Computershare, then you are a “shareholdershareholder of record. As a shareholder of record,” also known you may vote in person at the Meeting or by proxy. The Company is incorporated in New York and, in accordance with New York law, a list of the Company’s common shareholders of record as a “registered shareholder.”of the record date will be available for inspection at the Annual Meeting upon request.
What does it mean to beneficially own shares in “street name?”name”?
If, as of the close of business on the record date, your shares were not held directly in your name but rather were held in an account at a broker,brokerage firm, bank or other holder of record (collectively referred to as “broker”),similar intermediary organization, then you are the beneficial ownerholder of shares held in “street name” and these proxy materials are being forwardedname.” The intermediary is considered to you by that broker. The broker holding your account is consideredbe the shareholder of record for purposes of voting at the Annual Meeting.
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How do I vote my shares of Company common stock?
If you are ashareholder of record, you can vote in the following ways:
| • | By |
| • | By Telephone. |
| • | By Mail. |
| • | In Person. |
If you are abeneficial owner, you can vote in the following ways:
As the beneficial owner, you have the right to direct your broker on how to vote the shares in your account. Your broker should give you instructions for voting your shares by Internet, telephone or mail. As a beneficial owner, you are invited to attend the Annual Meeting, but you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid proxy from your broker giving you the legal right to vote the shares at the Annual Meeting.
How will my shares be voted if I do not give specific voting instructions when I deliver my proxy?
Shareholders of Record.Record
If you are a shareholder of record and you return a signed proxy card without indicating your vote for some or all of the matters, your shares will be voted as follows for any matter you did not vote on:
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| • | “1 YEAR”for the frequency on which, on an advisory basis, the Company conducts an advisory vote on the executive compensation program for the Company’s named executive officers with a frequency of every one year; and |
| • | “FOR”the ratification of the |
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Beneficial Owners.Owners
As noted above, as the beneficial owner of shares held in street name, your broker is required to vote your shares in accordance with your instructions. If you do not give instructions, one of two things can happen depending on whether the proposal is considered “routine” or “non-routine”“non-routine” under the rules of the New York Stock Exchange (the “NYSE”):
If the proposal is considered “routine” under the rules of the NYSE, the broker may vote your shares in its discretion.
If the proposal is considered “non-routine”“non-routine” under the rules of the NYSE, the broker may not vote your shares without your instructions. When a broker refrains from voting your shares because the broker has not received your instructions, it is called a “brokernon-vote.”
Item 4 in this Proxy Statement (ratification of the appointmentselection of the Company’sErnst & Young LLP as our independent Registered Public Accounting Firmregistered public accounting firm for 2015)2017) will be considered routine under the rules of the NYSE and the broker may vote your shares for this Item in its discretion. The broker is not entitled to vote your shares on the other Items unless the broker has received instructions from you.
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What should I do if I want to attend the Annual Meeting?
All shareholdersShareholders (of record or beneficial) and employees of the Companytheir proxy holders may attend the Meeting.
If you are a shareholder of record and receive your proxy materials by mail, you will find an admission ticket attached as part of the proxy card or Notice sent to you. If you plan to attend the Annual Meeting, please bring your admission ticket with you to the Meeting. If you are a shareholder of record and receive your materials electronically, and vote via the Internet, please print out the admission ticket you will find online and bring it with you.
If your shares are held in street name (i.e., you are a beneficial owner), you must bring to the Meeting an account statement or letter from the record holder (i.e., the broker, bank, trustee or other intermediary organization that holds your shares) indicating that you were the beneficial owner of the shares on March 6, 2017.
When you arrive at the Annual Meeting, you may be asked to present photo identification, such as a driver’s license, to be admitted. McGraw Hill Financial,S&P Global Inc. employees wishing to attend the Annual Meeting can present their current employee identification card to be admitted.
Shareholders of Record. If you are a shareholder of record, you will find an admission ticket attached as part of the proxy card sent to you. If you plan to attend the Annual Meeting, please bring this portion of the proxy card with you to the Meeting. If you opted to receive your proxy materials electronically, please print out the admission ticket you will find online and bring it with you.
Beneficial Owners. If you are a beneficial owner, please bring proof of ownership to be admitted to the Annual Meeting. A recent brokerage statement or letter from your broker is an example of proof of ownership.
For safety and security reasons, no cameras, large bags, briefcases, packages, recording equipment or other electronic devices will be permitted in the Annual Meeting.
Whether you hold shares as a shareholder of record or are a beneficial owner, we urge you to vote in advance even ifby Internet, telephone or mail so that your vote will be counted in the event you planlater decide not to attend the Annual Meeting so we will know as soon as possible that enough votes will be present for us to hold the Annual Meeting.
How do I vote my shares in the Company’s Dividend Reinvestment Plan?
If you participate in the Company’s Dividend Reinvestment Plan, any proxy you give will also govern the voting of all shares you hold in this Plan, unless you give us other instructions.Plan.
How do I vote my shares in the Company’s Employee Stock Purchase Plan?
If you participate in the Company’s Employee Stock Purchase Plan, any proxy you give will also govern the voting of any shares you hold in
this Plan. Any Plan shares for which we do not receive instructions from the employee will not be voted. Plan shares cannot be voted in person at the Meeting.
How do I vote my shares in the Company’s 401(k) Savings and Profit Sharing Plans?
If you received this Proxy Statement because you are an employee of the Company who participates in one of the Company’s 401(k) Savings and Profit Sharing Plans and you have shares of common stock of the Company
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GENERAL INFORMATION (continued) |
allocated to your account under one of these Plans, you may vote your shares held in these Plans as of March 9, 20156, 2017 by mail, by telephone or via the Internet. Instructions are provided on the proxy card you received from Computershare. Computershare must receive your instructions by 2:00 p.m. (EDT) on April27, 2015April 24, 2017 in order to communicate your instructions to the Plans’ Trustee, who will vote your shares. Any Plan shares for which we do not receive instructions from the employee will be voted by the Trustee in the same proportion as the shares for which we have received instructions. Plan shares cannot be voted in person at the Meeting.
Can I revoke or change my vote?
Yes. If you are a shareholder of record, you have the right to revoke your proxy at any time before the Annual Meeting by sending a signed notice to the Corporate Secretary, c/o Office of the General Counsel, McGraw Hill Financial,S&P Global Inc., 55 Water Street, New York, New York 10041-0003.10041-0003 or by sending an e-mail to the Corporate Secretary at corporate.secretary@spglobal.com. If you want to change your vote before the Meeting, you must deliver a later dated proxy by telephone, via the Internet or in writing. You may also change your proxy by voting in person at the Meeting.
If you are a beneficial owner, please refer to the information forwarded by your broker for procedures on revoking or changing your proxy.
What are the requirements to conduct business at the Annual Meeting?
In order to conduct business at the Annual Meeting, we must have a quorum. This means at least a majority of the outstanding shares entitled to vote must be present in person or represented by proxy at the Annual Meeting. You are
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part of the quorum if you have voted by proxy. As of the record date, 274,084,154258,562,581 shares of Company common stock were outstanding and eligible to vote.
Are abstentions and brokernon-votes part of the quorum?
Yes. Abstentions and brokernon-votes count as “shares present” at the Annual Meeting for purposes of determining a quorum.
What are the costs of soliciting these proxies and who will pay them?
The Company will pay all costs of soliciting these proxies. In addition, some of our officers and employees may solicit proxies by telephone or in person. We will reimburse brokers for the expenses they incur in forwarding the proxy materials to you. The Company has retained Georgeson Inc.LLC to assist us with the solicitation of proxies for a fee not to exceed $18,000, plus reimbursement forout-of-pocket expenses.
How many votes are required for the approval of each Item?
Item One – A nominee will be elected as a Director if he or she receives a majority of the votes cast at the Annual Meeting. A majority of votes cast means that the number of shares voted “for” a Director’s election exceeds the number of votes cast “against” that Director’s election. If an incumbent Director who has been nominated forre-election fails to receive a majority of the votes cast in an uncontested election, New York law provides that the Director continues to serve as a Director in a hold-over capacity. The Company’sBy-Laws provide that, in such circumstances, the Director is required to promptly tender his or her resignation to the Board of Directors. The Board’s Nominating and Corporate Governance Committee is then required to make a recommendation to the Board as to whether to accept or reject the tendered resignation. The Board will act on the tendered resignation and will publicly disclose its decision and rationale within 90 days following certification of the election results. If a Director’s resignation is accepted by the Board, the Board may fill the vacancy or decrease the size of the Board. Abstentions and brokernon-votes, if any, will not be counted either for or against the election of a Director nominee.
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Item Two – The affirmative vote of the holders of a majority of the votes cast is required to approve, the performance goals under the Company’s 2002 Stock Incentive Plan, as amended and restated. Abstentions and broker non-votes, if any, will not be counted either for or against this proposal.
Item Three – The affirmative vote of the holders of a majority of the votes cast is required to approve, on an advisorynon-binding basis, the executive compensation program for the Company’s named executive officers, as described in this Proxy Statement. Abstentions and brokernon-votes, if any, will not be counted either for or against this proposal.
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GENERAL INFORMATION (continued) |
Item Three – The advisory vote on the frequency of the advisory vote on the executive compensation program for the Company’s named executive officers is anon-binding vote and the Company will consider the results of the vote in determining whether to hold the advisory vote on the executive compensation program for the Company’s named executive officers every one, two or three years. Abstentions and brokernon-votes, if any, will not be counted in favor of any frequency in the vote.
Item Four – The affirmative vote of the holders of a majority of the votes cast is required to ratify the appointmentselection of the Company’sErnst & Young LLP as our independent Registered Public Accounting Firmregistered public accounting firm for 2015.2017. Abstentions and brokernon-votes, if any, will not be counted either for or against this proposal.
Item Five– The affirmative vote of the holders of a majority of the votes cast is required to approve the shareholder proposal.Abstentions and broker non-votes, if any, will not be counted either for or against this proposal.
Who will count the vote?
Votes at the Annual Meeting will be counted by twoone or more independent inspectors of election appointed by the Board.
How do I submit a shareholder proposal for the 20162018 Annual Meeting?
The Company’s 20162018 Annual Meeting is currently scheduled for April 27, 2016.25, 2018. There are twothree different deadlines for submitting shareholder proposals. First, if a shareholder wishes to have a proposal considered for inclusion in next year’s Proxy Statement, he or she must submit the proposal in writing so that we receive it by 5:00 p.m. (EST) on November 19, 2015.13, 2017. Proposals should be addressed to the Corporate Secretary, c/o Office of the General Counsel, McGraw Hill Financial,S&P Global Inc., 55 Water Street, New York,
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New York 10041-0003.10041-0003 or by sending an e-mail to the Corporate Secretary at corporate.secretary@spglobal.com. If you submit a proposal, it must comply with applicable laws, including Rule14a-8 of the Securities Exchange Act of 1934.
On January 27, 2016, we amended ourBy-Laws to include a proxy access provision. The Company’sBy-Laws now permit a shareholder, or group of up to 20 shareholders, owning continuously for at least three years shares of common stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in next year’s Proxy Statement director nominees constituting up to two individuals or 20% of the Company’s Board of Directors, whichever is greater, provided that the shareholder(s) and nominee(s) satisfy the requirements in the Company’sBy-Laws. Notice of proxy access director nominees must be received no earlier than October 14, 2017, and no later than November 13, 2017.
In addition, the Company’sBy-Laws provide that any shareholder wishing to nominate a candidate for Director or to propose any other business at the Annual Meeting, but not intending to have such nomination or business included in next year’s Proxy Statement, must give the Company written notice no earlier than December 30, 201527, 2017 and no later thanJanuary 29, 2016.26, 2018. This notice must comply with applicable laws and the Company’sBy-Laws. Copies of theBy-Laws are available to shareholders free of charge on request to the Corporate Secretary, c/o Office of the General Counsel, McGraw Hill Financial,S&P Global Inc., 55 Water Street, New York, New York 10041-0003.10041-0003 or by sending an e-mail to the Corporate Secretary at corporate.secretary@spglobal.com. You may also download theBy-Laws from the Corporate Governance section of the Company’s Investor Relations Websitewebsite at http://investor.mhfi.com.investor.spglobal.com.
May I view future proxy materials online instead of receiving them by mail?
Yes. Shareholders may provide their consent to electronic delivery of Proxy Statements and Annual Reports instead of receiving them by postal mail. If you elect this feature, you will receive ane-mail notice which will include the Webweb address for viewing the materials online. Thee-mail notice will also include instructions so you can vote your proxy online or by telephone. If you have more than one account, you may receive separatee-mails for each account. Costs normally associated with electronic delivery, such as usage and telephone charges, as well as any costs incurred in printing documents, will be your responsibility.
During the 20152017 proxy voting period, the Internet voting systems will automatically provide shareholders the option to consent to electronic delivery of future years’ materials.
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GENERAL INFORMATION (continued) |
During the year, shareholders may provide their consent to electronic delivery by going to the appropriate website:
Shareholders of record go to www.computershare.com/investor
Beneficial owners go to https://enroll.icsdelivery.com/mhfispgi
Owners of shares through one of the Company’s 401(k) Savings and Profit Sharing Plans go to www.mhfibenefits.comwww.spglobalbenefits.com
What are the benefits of electronic delivery?
Electronic delivery benefits the environment and saves the Company money by reducing printing and mailing costs. It will also make it convenient for you to view your proxy materials and vote your shares online. If you have shares in more than one account, it is also an easy way to eliminate receiving duplicate copies of proxy materials.
What are the costs of electronic delivery?
The Company charges nothing for electronic delivery. You may, of course, incur expenses associated with Internet access such as telephone charges or charges from your Internet service provider.
How do Iopt-out of electronic delivery?
At any time, shareholders may revoke their consent to electronic delivery and resume postal mail delivery of the Proxy Statement and Annual Report by going to the appropriate website:
Shareholders of record go to www.computershare.com/investor
Beneficial owners go to https://enroll.icsdelivery.com/mhfispgi
Owners of shares through one of the Company’s 401(k) Savings and Profit Sharing Plans go to www.mhfibenefits.comwww.spglobalbenefits.com
Will I receive a print copy of the Company’s Annual Report?
Unless you previously elected to view our Annual Report via the Internet, we mailed our 2014 Annual Report to shareholders beginning on or about March 18, 2015.
What is “householding?”“householding”?
We have adopted “householding,” a procedure under which beneficial owners who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of our Annual Report and Proxy Statement unless one or more of these shareholders notifies us that they wish to
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continue receiving individual copies. This procedure reduces duplicate mailings and thus reduces our printing costs and postage fees. Shareholders who participate in householding will continue to receive separate proxy cards. Householding does not affect dividend check mailings.
How do I request a separate paper ore-mail copy of the Proxy Statement or Annual Report at no charge?
If you wish to receive a separate paper ore-mail copy of the 20142016 Annual Report or this Proxy Statement at no charge, please call us toll-free at(866) 436-8502, or send ane-mail to investor.relations@mhfi.com,investor.relations@spglobal.com, or write to: Investor Relations, McGraw Hill Financial,S&P Global Inc., 1221 Avenue of the Americas,55 Water Street, New York, New York 10020-1095.10041-0003. We will promptly deliver to you the documents you requested. Please make your request for documents on or before April 15, 201513, 2017 to facilitate timely delivery of the documents to you prior to the Annual Meeting.
Where can I find the voting results?
We expect to announce preliminary voting results at the Annual Meeting. We will also publish voting results in aForm 8-K which we will file with the SEC on or before May 5, 2015.2, 2017. To view thisForm 8-K online, log on to the Company’s Investor Relations Websitewebsite at http://investor.mhfi.com,investor.spglobal.com, and click on the SEC Filings link located in the Digital Investor Kit.link.
Can shareholders and other interested parties communicate directly with our Board? If so, how?
Yes. You may communicate directly with one or more members of the Board by writing to the Corporate Secretary, c/o Office of the General Counsel, McGraw Hill Financial,S&P Global Inc., 55 Water Street, New York, New York 10041-0003, or by sending ane-mail to the Corporate Secretary at corporate.secretary@mhfi.com.corporate.secretary@spglobal.com. The Corporate Secretary will then forward all questions or comments directly to our Board or a specific Director, as the case may be.
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE |
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
The Company’s business and affairs are overseen by our Board pursuant to the New York Business Corporation Law and our Restated and Amended Certificate of Incorporation andBy-Laws. We currently have 1314 Directors, all12 of whom with the exception of Mr. Harold McGraw III, are being nominated at this Annual Meeting for a one-year term terms which will expire at the Annual Meeting in 2016.2018. (See Item 1 on page 84.96.)
On February 25, 2015, Mr. McGraw informed the Board of his decision not to stand for re-election as a Director at this Annual Meeting. Mr. McGraw has been Non-Executive Chairman of the Board since his retirement from the Company on November 1, 2013. Prior to his retirement, he had been Chairman of the Board since 2000, President and Chief Executive Officer of the Company since 1998 and a Director of the Company for 27 years. In recognition of Mr. McGraw’s many significant contributions to the Company, the Board will confer upon him the honorary title of Chairman Emeritus when he retires as a Director on April 29, 2015.
The Company’s normal retirement age for Directors is 72. Based on the recommendation of the Nominating and Corporate Governance Committee, this policy has beenwas waived last year with respect to Sir Winfried Bischoff, who turned 73 this year. Accordingly,Bischoff. Sir Winfried Bischoff will retire from the Board at the 2017 Annual Meeting and will not stand forre-election at the Meeting. Ms. Ochoa-Brillembourg will also retire from the Board at the 2017 Annual Meeting and will not stand for re-election at the meeting.
Governance Highlights
Snapshot: Board of Directors
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Enhanced Corporate Governance Environment
The Board of Directors has taken a series of actions designed to enhance the Company’s corporate governance environment. The Company’s current corporate governance structure reflects an ongoing commitment to strong and effective governance practices and a willingness to be responsive and accountable to shareholders. We regularly assess and refine our corporate governance policies and procedures to take into account evolving best practices and the interest of our shareholders. Our corporate governance structure includes:
Board Structure / Declassification of Board
| ü | Board Independence. All of the Company’s director nominees are independent, with the exception of our CEO, who is the only member of management serving on the Board. |
| ü | Independent Chairman. The Company currently maintains separate roles of chief executive officer and chairman of the Board. An independent director acts as chairman of the Board. |
| ü | Offer to Resign upon Change in Circumstances. Pursuant to our Corporate Governance Guidelines, any director undergoing a significant change in personal or professional circumstances must offer to resign from the Board. |
Board Refreshment and Diversity
| ü | Board Membership. Since 2016, we have added four new independent directors who have brought valuable and varied experience in distinct and critical areas, each providing a fresh perspective to our Board. Their appointments underscore the Company’s commitment to inviting diverse backgrounds, perspectives, skills and experience into the Board room to guide the growth and performance of the Company. |
| ü | Board Skills. Throughout 2016, the Nominating and Corporate Governance Committee undertook a comprehensive review of the skills and qualifications of the Board, and the critical skills necessary to guide the Company forward. In 2016 and 2017, we added important skills to our Board in the areas of technology, international operations and commodity markets. |
| ü | Diversity. We believe that diversity is an important attribute of a well-functioning Board. While diversity can be measured in many ways, we note that our 12 Director nominees include 4 women and 2 African-Americans. |
| ü | Board Tenure. Since 2011, we have reduced the average tenure of our Board from 11.3 years to 5.5 years. |
Election of Directors / Right of Shareholders to Call Special Meetings
| ü | Annual Election of Directors. The Company’s charter provides for the annual election of directors. |
| ü | Majority Voting in Director Elections. The Company’sBy-Laws provide that in uncontested elections, director candidates must be elected by a majority of the votes cast. In uncontested director elections, a director who does not receive a majority of the votes cast must offer to submit his or her resignation for consideration. |
| ü | Shareholder Right to Call Special Meetings. The Company’sBy-laws allow shareholders of record of twenty-five percent (25%) or more of the voting power of the Company’s outstanding common stock to call a special meeting. |
Shareholder Recommendations / Proxy Access
| ü | Shareholder Recommendations. Shareholders can submit recommendations of director candidates for consideration by the Nominating and Corporate Governance Committee. |
| ü | Proxy Access. A shareholder, or group of up to 20 shareholders, owning continuously for at least three years shares of common stock representing an aggregate of at least 3% of our outstanding shares, may nominate and include in the Company’s Proxy Statement director nominees constituting up to two individuals or 20% of the Company’s Board of Directors, whichever is greater. |
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Management Succession Planning
| ü | CEO Succession Planning. The Board believes that one of its primary responsibilities is to oversee the development and retention of executive talent and to ensure that an appropriate succession plan is in place for our Chief Executive Officer and other members of management. Additional information can be found beginning on page 12 of this Proxy Statement. |
| ü | Board Talent Agenda. In 2017, the full Board added specific talent management topics as standing agenda items at four out of six of its scheduled in-person meetings. |
Compensation Practices
| ü | “Double-Trigger” Condition for Vesting of Equity-Based Awards upon a Change in Control. Awards granted under the Company’s 2002 Stock Incentive Plan after December 31, 2014 are subject to “double-trigger” treatment in the case of achange-in-control. Additional information can be found in our Compensation Discussion and Analysis section, beginning on page 32 of this Proxy Statement. |
| ü | Pay Recovery Policy. The Company may recover (or “claw back”) cash incentive and long-term incentive award payments received by covered active and former employees and executives under various circumstances, including misconduct and financial restatements, under the applicable Company policy and S&P Global Ratings policy. Additional information can be found beginning on page 63 of this Proxy Statement. |
Equity Ownership Requirements
| ü | Senior Executive Equity Ownership Requirements. The Company maintains equity ownership standards requiring senior management to hold shares or stock units of our common stock with a value equal to a multiple of base salary. Until the guidelines for ownership levels are attained, senior executives must retain 100% of the net shares received (after payment of taxes and any exercise price) upon the exercise of stock options, the payment of PSU and RSU awards and the vesting of any restricted stock awards. Additional information can be found on page 62 of this Proxy Statement. |
| ü | Director Equity Ownership Requirements. Each Director is required to hold 400 shares of the Company’s common stock within 90 days of his or her election to the Board and to hold such shares through his or her tenure as a Director. Additionally, under the Company’sNon-Employee Director Stock Ownership Guidelines, eachnon-employee Director is required to own or acquire, within five years of election to the Company’s Board of Directors, shares of common stock of the Company having a market value of at least five times the annual cash retainer for serving as a Director of the Company. Additional information can be found on page 89 of this Proxy Statement. |
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Corporate Governance Materials
The following corporate governance materials are available and can be viewed and downloaded from the Corporate Governance section of the 12Company’s Investor Relations website at http://investor.spglobal.com:
the Company’s Amended and Restated Certificate of Incorporation;
the Company’sBy-Laws;
the Company’s Corporate Governance Guidelines;
Board Committee Charters for the Company’s Audit, Compensation and Leadership Development, Executive, Financial Policy and Nominating and Corporate Governance Committees;
the Code of Business Ethics applicable to all Company employees;
the Code of Ethics applicable to the Company’s Chief Executive Officer and Senior Financial Officers;
the Code of Business Conduct and Ethics for Directors who has been nominated byapplicable to all the Board for election to a one-year term of office that will expire at Company’s Directors; and
the next Annual Meeting or until his successor is electedAudit Committee’s Policy concerning Employee Complaint Procedures Regarding Accounting and otherwise qualifies for service.Auditing Matters.
The Board has determined that all of the Company’s current Directors, with the exception of Messrs. Harold McGraw III (the Company’s Non-Executive Chairman),Mr. Douglas L. Peterson (the Company’s President and Chief Executive Officer) and Robert P. McGraw (the brother of Harold McGraw III), have met the independence requirements of the New York Stock Exchange based upon the application of objective categorical standards adopted by the Board. In addition,
Ms. Lorimer was considered to be independent as well during the portion of the 2014 year during which she served on our Board. To be considered independent, a Director must have no material relationship (other than as a Director) with the Company, or any of its subsidiaries, either directly or as a partner, shareholder or officer of an organization that has a material relationship with the Company or any of its subsidiaries. In making independence determinations, the Board broadly considers all relevant facts and circumstances.
In accordance withaddition, members of the Company’s Corporate Governance Guidelines,Audit Committee must also satisfy a Director willseparate SEC and NYSE independence requirement, which provides that they may not be an independent Directoraffiliates and may not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries, other than their directors’ compensation. The Board evaluated each member of the Company if:
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For purposesCompensation Committee under the additional NYSE compensation committee member standards and also determined that these members qualify as“non-employee directors” (as defined under Rule16b-3 under the Securities Exchange Act of sub-paragraphs (i) through (v) above, an “immediate family member” includes a person’s spouse, parents, children, siblings, mothers1934) and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law and anyone (other than domestic employees) who shares such person’s home. Individuals who are no longer immediate family members as a result“outside directors” (as defined in Section 162(m) of legal separation or divorce, or those who have died or become incapacitated are not taken into consideration with respect to the determination of a Director’s independence.Internal Revenue Code).
Additional Information Regarding Director Independence
In making its independence determinations with respect to our Directors, the Board considered the following transactions that the Company engages in from time to time with organizations in which our independent Directors serve as executive officers or otherwise have a material interest:
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| • | Cisco Systems, Inc. Ms. Rebecca Jacoby is the |
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| • | MetLife, Inc. Ms. Maria R. Morris is the Executive Vice President leading MetLife, Inc.’s Global Employee Benefits business. The Company and |
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services from time to time to |
| • | Snam S.p.A. Mr. Marco Alverà is the Chief Executive Officer of Snam S.p.A. The Company and its divisions provide the following types of products and services from time to time to Snam S.p.A.: credit ratings services. |
All of these transactions are entered into in the ordinary course of business and on terms that are substantially equivalent to those prevailing at the time for comparable transactions with other similarly situated customers or vendors of the Company. None of the transactions described above exceeds 1% of the Company’s consolidated gross revenue or that of such other company.
In making its independence determinations with respect to our Directors, the Board reviews the materiality of these transactions not only from the standpoint of the applicable Director but also from the standpoint of the organizations in which they serve. Based on this review, the Board has concluded that these transactions do not, and in
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the case of Ms. Lorimer, did not interfere with the ability of each such Director to exercise independent judgment in carrying out his or her Board responsibilities.
It is the Company’s policy that, subject to illness or an unavoidable schedule conflict, all Directors will attend and be introduced at the Annual Meeting. All of our Directors attended the 20142016 Annual Meeting.
Leadership Structure of the Board of Directors
The Company’s business and affairs are overseen by its Board of Directors which currently has 13 members. There is one management representative on the Board and, of the 12 remaining Directors, 10 are independent. As mentioned above, Mr. Harold McGraw III informed the Board on February 25, 2015 of his decision not to stand for re-election to the Board at this Annual Meeting.
The Board has standing Nominating and Corporate Governance, Audit and Compensation and Leadership Development Committees composed solely of outside independent Directors. The Chair of each Committee reports to the full Board as appropriate from time to time. In addition to these three standing Committees, the Board has an Executive Committee and a Financial Policy Committee.
The Company’s Corporate Governance Guidelines provide that the Board shall select annually the Chairman of the Board based upon such criteria as the Company’s independent Nominating and Corporate Governance Committee recommends and what the Directors believe to be in the best interests of the Company at a given point in time. This process shall include consideration of whether the roles of Chairman and Chief Executive Officer should be combined or separated based upon the Company’s needs and the strengths and talents of its executives at any given time.
Based on these criteriaAlthough the Board regularly considers and is open to different structures as part of its ongoing reviewcircumstances may warrant, the Board believes that it is in the best interests of the Board leadership structureCompany and suc-
cession planning process, the Board determinedits shareholders at this time that the positions of Chairman and Chief Executive Officer and Chairman should be held by separate individuals. Accordingly, effective April 30, 2014, the Board appointed Mr. Douglas L. Peterson President and Chief Executive Officer and Mr. Harold McGraw III Non-Executive Chairman of the Board. In this role, Mr. McGraw has provided leadership to the Board by, among other things, chairing meetings of the Board and working with the Chief Executive Officer, the Presiding Director (discussed below) and the Corporate Secretary to: set Board calendars; determine agendas for Board meetings; ensure proper flow of information to Board members; facilitate effective operation of the Board and its Committees; help promote Board succession planning and the orientation of new Directors; and assist in consideration and Board adoption of the Company’s long-term and annual operating plans.
The Company’s Corporate Governance Guidelines further provide that, in the event that the Chairman of the Board is not an independent Director, the Board shall designate an independent Director to serve as Presiding Director. The position of Presiding Director is intended to provide a check and balance on the role and responsibilities of the Chief Executive Officer. The selection of the Presiding Director shall be made at a meeting (or that portion of a meeting) at which only independent Directors are present. The Board determined to continue to designate a Presiding Director for as long as Mr. McGraw served as Non-Executive Chairman in view of the fact that Mr. McGraw does not meet the New York Stock Exchange standards of independence due to his prior service as our President and Chief Executive Officer. Accordingly, on April 30, 2014, the Board appointed Mr. Edward B. Rust, Jr., the Chairman of the Nominating and Corporate Governance Committee, the Presiding Director of the Board for the period April 30, 2014 through April 29, 2015. As contemplated by our Corporate Governance Guidelines, the Presiding Director has the following responsibilities:
(i) be readily available to be consulted by any of the senior executives of the Company as to any concerns they may have about the Company; (ii) be readily available to all Directors to communicate
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their issues and concerns to the Chairman or the Chief Executive Officer; (iii) be readily available to the Chief Executive Officer to offer counsel; (iv) preside at all meetings of the Board at which the Chairman is not present, including all meetings of non-management Directors and all executive sessions of the independent Directors; (v) authority to call meetings of the independent Directors including in the event of a crisis and/or the incapacitation of the Chief Executive Officer; (vi) communicate Directors’ feedback to the Chief Executive Officer from the meetings of the non-management Directors and from informal conversations with Directors; (vii) communicate Directors’ feedback to the Chairman and the Chief Executive Officer from the executive sessions of the independent Directors; (viii) review the proposed agenda for each upcoming Board meeting and the annual Board calendar; (ix) review and approve meeting schedules to assure there is sufficient time for discussion of all agenda items; (x) consult with the other Directors and advise the Chief Executive Officer about the quality and timeliness of the materials distributed to the Board; (xi) review and approve the materials and information sent to the Board; (xii) interview, along with the Chief Executive Officer, the Chairman and the Nominating and Corporate Governance Committee, candidates for the Board; and (xiii) assist the Nominating and Corporate Governance Committee with broad issues of corporate governance.
As a result of Mr. McGraw’s decision not to stand for re-election as a Director at this Annual Meeting, the Board will propose that Mr. Charles E. Haldeman, Jr. serve as Chairman of the Board following the 2015 Annual Meeting. Mr. Haldeman has been an independent Director of the Company since 2012. Further, consistent with the Company’s Corporate Governance Guidelines, the Board has determined that it is no longer necessary to continue to designate a Presiding Director following Mr. Haldeman’s appointment as an independent Chairman of the Board.
The Board believes that this leadership structure will continue to assure the appropriate level of management oversight and independence for the Company.
Mr. Charles E. Haldeman is currently the Board’s independent chairman. The only member of management who serves on the Board is Mr. Douglas L. Peterson, the Company’s President and Chief Executive Officer. The position of chairman of the Board has been held by an independent director since 2015. The Board will continue to periodically evaluate whether the structure is in the best interests of shareholders.
Role of Board of Directors in Risk Oversight
The Board has oversight responsibility for the Company’s risk management framework, which is designed to identify, measure, assess, prioritize, mitigate, monitor and communicate risks across the Company’s operations, and foster a corporate culture of Directors administers itsintegrity and risk oversight role through its Committee structureawareness. Consistent with this approach, one of the Board’s primary responsibilities is interacting with senior management with respect to risk assessment and risk mitigation of the Committees’ regular reports to the Board at each Board meeting.Company’s top risks. The Board’s Audit Committee meets frequently during the yearreviews and discusses with management the Company’s Enterprise Risk Management process, including its risk governance framework and risk management practices. In addition, the Board has tasked designated Committees of the Board with certain categories of risk management, and the Committees report to the Board regularly on these matters.
Audit Committee
The Audit Committee considers the Company’s Enterprise Risk Management and also risks related to financial reporting and internal control risks. The Committee discusses with management, the Company’s chief audit
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
executive, and the Company’s independent external auditor: (a) current business trends affecting the Company; (b) the major risk exposures facing the Company; (c) the steps management has taken to monitor and controlmitigate such risk factors; and (d) the adequacy of internal controls that could significantly affect the Company’s financial statements. The Chair of the Audit Committee provides the Board with a report concerning its risk oversight activities at each Board meeting.
In 2014, theCompensation and Leadership Development Committee
The Compensation and Leadership Development Committee establishedconsiders risks related to compensation policies and practices and incentive-related risks. The Committee establishes performance metrics that focused on net income, revenuereward our executives for creating shareholder value, and earnings per share growth, and establishedestablishes goals and payment schedules for each metric that wereare designed to provide a balance to motivate the achievement of the established goals without the need for inappropriate or excessive risk taking by providing a range of payment opportunities for achievement both below and above the target goals established for the short and long-term incentives.taking. In addition, the Committee reviews and assesses plan design, performance metrics, and goals for the annual incentive plans within the Company’s business unitsdivisions to ensure that thetheir designs of those annual incentive plansare appropriately aligned with business and regulatory considerations and do not encourage inappropriate or excessive risk taking.
In 2014, the Compensation and Leadership Development Committee adopted amendments to the Company’s Pay Recovery Policy (the “Policy”). The amended Policy is more robust, expanding the compensation that may be clawed back to most variable compensation and
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covering a greater number of executives. The amended Policy applies to incentive plan participants from Managing Director/Vice President levels across the Company and provides a claw-back opportunity for financial restatements and other circumstances where an executive’s behavior has resulted in damaging the Company’s reputation. The Committee approved the amended Policy effective January 1, 2015.
In 2015,2017, management updated its prior review of the Company’s incentive compensation plans as well as the Company’s other compensation policies and practices. The findingspractices regarding whether the Company’s compensation plans, programs and conclusions of the updated review arepolicies encourage excessive risk taking and determined that the Company’s compensation policiesplans, programs and practicespolicies do not encourage excessive risk taking and are not reasonably likely to have a material adverse effect on the Company. Management then reviewed itsthese findings with the Committee.Committee who concurred. Pay Governance LLC, the Committee’s independent compensation advisor,consultant, also advised the Committee on this matter and concurred in these findings and conclusions.
Financial Policy Committee
The Financial Policy Committee oversees financial risks, with particular emphasis on the Company’s financial
position, its capital structure, its dividend policy, its share repurchase policy and its capital expenditure program.
Succession Planning
The Board believes that one of its primary responsibilities is to oversee the development and retention of executive talent and to ensure that an appropriate succession plan is in place for our Chief Executive Officer and other members of management.
The Nominating and Corporate Governance Committee reviews with the Chief Executive Officer, on an annual basis, the Chief Executive Officer’s recommendations concerning an emergency succession plan for the Chief Executive Officer in the event of extraordinary circumstances such as the death or disability of the Chief Executive Officer, as well as succession planning in general for the Chief Executive Officer.
The Compensation and Leadership Development Committee oversees the process for succession planning for senior management positions from a talent management perspective. The Compensation and Leadership Development Committee holds a formal succession planning and talent review session annually which includes succession planning for all senior management positions, and the Chief Executive Officer presents an overview to the full Board. These talent review and succession planning discussions take into account desired leadership skills, key capabilities and experience in light of our current and evolving business and strategic direction. Our Directors also have exposure to leaders through Board and committee presentations and discussions, as well as informal events and interactions with key talent throughout the year. Further, the Compensation and Leadership Development Committee periodically reviews the overall composition of the qualifications, tenure and experience of members of senior management. The Compensation and Leadership Development Committee reports on its succession planning efforts to the full Board, and the full Board reviews succession planning at least annually at a regularly scheduled Board meeting.
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
In 2017, the full Board added specific talent management topics as standing agenda items at four out of six of its scheduled in-person meetings.
Process for Identifying and Evaluating Directors and Nominees
The Nominating and Corporate Governance Committee reviews with the Board, on an annual basis, the appropriate skills and qualifications required of Board members in the context of the then-current composition of the Board.members. The Committee also recommends to the Board the general criteria for selection of proposed nominees for election as Directors and the slate of individuals who will constitute the nominees of the Board for election as Directors at each Annual Meeting. In addition to qualities of intellect, integrity and judgment, this assessment by the Committee takes into consideration diversity, background, senior management experience and an understanding of some combination of marketing, finance, technology, international business matters, government regulation, public policy and the global capital and commodity markets. The Committee makes
this determination inevaluates the context of an assessmentskills and qualifications of the perceived needs of theexisting Board at that point in time.and potential candidates on a continuing basis.
The Board is responsible for selecting all members of the Board and for recommending such members for election by the shareholders. The Board delegates the screening process to the Committee with direct input from the Chairman of the Board or, if the Chairman is not an independent Director, the Presiding Director.Board. The Committee evaluates all nominees for Director based on the above criteria, including nominees recommended by shareholders. Although the Committee considers diversity as a factor in assessing the appropriate skills and qualifications required of Board members, the Board does not have a formal policy with regard to diversity in identifying Director nominees. The Committee has sole authority to retain and terminate search firms to assist the Board in identifying and reviewing prospective Director nominees and to approve the fees and other retention terms of any such search firms. In 2016, the Company engaged Spencer Stuart, a third-party director search firm, to identify and evaluate potential director candidates. Mr. Alverà, Ms. Hill, Ms. Leroux and Ms. Morris were identified and recommended to the Nominating and Corporate Governance Committee by Spencer Stuart.
Specific Experience, Qualifications, Attributes and Skills of Directors
The Nominating and Corporate Governance Committee has reviewed with the Board the specific experience, qualifications, attributes and skills of each Director nominee standing forre-election as a Director at this Annual Meeting. The Committee has concluded that each Director nominee has the appropriate skills and qualifications required of Board membership and that each possesses anin-depth knowledge of the Company’s complex global businesses and strategy. The Committee further believes that our Board is composed of well-qualified and well-respected Directors who are prominent in business, finance, and the global capital and commodity markets. The experience and key competencies of each Director nominee, as reviewed and considered by the Committee, are discussed on pages 1214 through 2325 of this Proxy Statement.
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
The following 12 Director nominees are currently serving as Directors of the Company and have been nominated to stand forre-election at this Annual Meeting to serveone-year terms that will expire at the 20162018 Annual Meeting. Set forth below is information regarding each of the 12 Director nominees. Please see pages1 through6 and page84 96 of this Proxy Statement for voting information. Following each Director nominee’s biography below, we have highlighted certain notable skills and qualifications that the Nominating and Corporate Governance Committee reviewed and considered when recommending the Director nominee. Committee membership is identified for the one-year term expiring at the 2017 Annual Meeting.
| MARCO ALVERÀ | ||||
Director Since:
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Board Committees: Compensation and Leadership Development (Chair) Nominating and Corporate Governance Executive |
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William D. Green, age
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Skills and Qualifications We believe Mr. Green’s qualifications to sit on our Board of Directors and Chair our Compensation and Leadership Development Committee include his extensive leadership and management experience gained as the chief executive of a global professional services company providing a range of strategy, consulting, digital, technology and operations services and solutions and his deep understanding of the information technology industry. |
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Director Since:2012
Board Committees:
| CHARLES E. HALDEMAN, JR. | |||
Charles E. Haldeman, Jr., age
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Board Committees: Financial Policy | STEPHANIE C. HILL | |||
Stephanie C. Hill, age 52, is Vice President and General Manager of Lockheed Martin’s Cyber, Ships & Advanced Technologies (CSAT) line of business for Rotary and Mission Systems. Ms. Hill serves as chair of the Greater Baltimore Committee and is a member of the University of Maryland, Baltimore County’s Board of Visitors. Additionally, she sits on the Boards of Directors of the U.S. Coast Guard Foundation and Project Lead the Way, the nation’s leading provider ofK-12 Science, Technology, Engineering and Mathematics (STEM) programs. Ms. Hill has been recognized for her career achievements and community outreach, especially in the advancement of STEM education. She was recognized as one of Computerworld’s 2015 Premier 100 IT Leaders and one of Maryland’s 19th Annual International Leadership Awardees by the World Trade Center Institute. In 2014, Ms. Hill was named the U.S. Black Engineer of the Year by Career Communications Group and included on Ebony Magazine’s Power 100 list, recognizing the achievements of African-Americans in a variety of fields. | ||||
We believe Ms. Hill’s qualifications to sit on our Board of Directors include her exceptional and consistent business and community leadership and technical experience, as well as her experience working with the government on issues of critical importance and her leadership in corporate governance. |
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Director Since:2014
Board Committees:
| REBECCA JACOBY | |||||
Rebecca Jacoby, age
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Board Committees: Audit | MONIQUE F. LEROUX | |||
Monique F. Leroux, age 62, is President of the International Cooperative Alliance (ICA), representing the cooperative movement in more than 100 countries. From March 2008 to April 2016, Ms. Leroux was the Chair of the Board, President and Chief Executive Officer of Desjardins Group, the leading cooperative financial group in Canada. Before joining Desjardins Group in 2001, Ms. Leroux held positions as the Chief Operating Officer at Québecor Inc., Senior Vice President of Finance and Senior Vice President Quebec at RBC (Royal Bank) and Partner at Ernst & Young. Ms. Leroux serves on the Boards of Alimentation Couche-Tard, Michelin, Crédit Mutuel/CIC and BCE/Bell. Ms. Leroux serves as Chair of the Board of Investissement Québec, nominated by the Quebec Government in April 2016. She is also Chair of the Quebec Economic and Innovation Council and chairs the High Level Contact Group of the European Association ofCo-operative Banks (EACB). She is the founder and Chair of the International Summit of Cooperatives and chairs the Board of Governors of the Society for the Celebrations of Montreal’s 375th anniversary. Ms. Leroux is also a member of the Order of Canada and the Canadian Prime Minister’s Advisory Committee on the Public Service, the Business Council of Canada, the Founders’ Council of the Quebec Global 100 Network and the Asia Business Leaders Advisory Council. She is an Officer of the Ordre National du Québec and a Chevalier of the Légion d’Honneur (France). She is also the recipient of the Woodrow Wilson Award (United States), the Outstanding Achievement Award from the Quebec CPA Order and the Institute of Corporate Directors Fellowship Award. She holds honorary doctorates from eight Canadian universities. | ||||
We believe Ms. Leroux’s qualifications to sit on our Board
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Director Since:2016 Board Committees: Audit | MARIA R. MORRIS | |||
Maria R. Morris, age 54, is Executive Vice President, MetLife, Inc., a member of MetLife’s Executive Group and leads MetLife’s Global Employee Benefits (GEB) business. She also is the interim Head of MetLife’s U.S. Business. In her role leading MetLife’s GEB business since 2012, Ms. Morris is responsible for expanding MetLife’s employee benefits business in more than 40 countries, broadening relationships and fueling growth across the globe via local solutions and partnerships with multinational corporations as well as through distribution relationships with financial institutions. In her interim role as Head of the U.S. Business she leads MetLife’s Retirement Income Solutions, Group Benefits, Holdings, Property & Casualty; and U.S. Direct businesses. Ms. Morris joined MetLife in 1984, and has since held a number of senior leadership roles. Ms. Morris serves on the Boards of Directors of MetLife Property and Casualty Insurance Company, the MetLife Foundation and the American Council of Life Insurers. She is also a member of the Board of Trustees for the Catholic Charities Archdiocese of New York and is Vice Chair of the All Stars Project, Inc. | ||||
Skills and Qualifications We believe Ms. Morris’s qualifications to sit on our Board of Directors include her executive leadership and management experience in the financial services industry, her technology expertise and her experience in growing a multinational company in more than 40 countries. |
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Director Since:2013
President and Chief Executive Officer
Board Committees:
| DOUGLAS L. PETERSON | |||
Douglas L. Peterson, age Mr. Peterson was elected President and CEO effective November Previously, Mr. Peterson was the Chief Operating Officer of Citibank, N.A., Citigroup’s principal banking entity that operates in more than 100 countries. Mr. Peterson was with Citigroup for 26 years, during which time he transformed businesses and drove performance in investment and corporate banking, brokerage, asset management, private equity and retail banking. His prior roles include CEO of Citigroup Japan, Country Manager for Costa Rica and Uruguay and Chief Auditor of Citigroup. Mr. Peterson is a steward of the World Economic Forum’s Global Strategic Infrastructure Initiative andco-chairs the Bipartisan Policy Center’s CEO Council on Infrastructure. He serves on
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Board Committees: Audit (Chair) Executive Financial Policy | |
| SIR MICHAEL RAKE | ||||
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Sir Michael Rake, age
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Skills and Qualifications We believe Sir Michael’s qualifications to sit on our Board of Directors and Chair our Audit Committee include his executive leadership and management experience, his expertise in financial accounting and corporate finance, his extensive international business experience and his overall knowledge of global markets. |
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
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Director Since:2001
Corporate Governance (Chair)
Leadership Development
| EDWARD B. RUST, JR. | |||
Edward B. Rust, Jr., age | ||||
Skills and Qualifications
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Board Committees: Nominating and Corporate Governance Compensation and Leadership Development | |
| KURT L. SCHMOKE | ||||
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Kurt L. Schmoke, age
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Board Committees: Audit Financial Policy (Chair) Executive |
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Richard E. Thornburgh, age
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Skills and Qualifications We believe Mr. Thornburgh’s qualifications to sit on our Board of Directors and Chair our Financial Policy Committee include his financial expertise, his extensive experience in the global financial services industry and his familiarity with strategic transactions acquired through executive-level positions in investment banking and private equity. |
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Corporate Governance Materials
The following corporate governance materials are available and can be viewed and downloaded from the Corporate Governance section of the Company’s Investor Relations Website at http://investor.mhfi.com: (i) the Company’s Amended and Restated Certificate of Incorporation; (ii) the Company’s By-Laws; (iii) the Company’s Corporate Governance Guidelines; (iv) Board Committee Charters for the Company’s Audit, Compensation and Leadership Development, Executive, Financial
Policy and Nominating and Corporate Governance Committees; (v) the Code of Business Ethics applicable to all Company employees; (vi) the Code of Ethics applicable to the Company’s Chief Executive Officer and Senior Financial Officers; (vii) the Code of Business Conduct and Ethics for Directors applicable to all the Company’s Directors; and (viii) the Audit Committee’s Policy concerning Employee Complaint Procedures Regarding Accounting and Auditing Matters.
| BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Committees of the Board of Directors
The Company has standing Nominating and Corporate Governance, Audit, and Compensation and Leadership Development Committees. The Chair of each Committee reports to the full Board as appropriate from time to time. Each Committee has a Charter that is reviewed by the Nominating and Corporate Governance Committee on a regular basis. In addition to these three standing Committees, the Board has an Executive Committee and a Financial Policy Committee. A brief description of the Nominating and Corporate Governance, Audit and Compensation and Leadership Development Committees follows.
Nominating and Corporate Governance Committee
The functions performed by the Nominating and Corporate Governance Committee include, among other matters:
recommending to the Board the general criteria for selection of Director nominees and evaluating possible candidates to serve on the Board;
recommending to the Board appropriate compensation to be paid to Directors;
determining whether any material relationship between a non-managementnonmanagement Director and the Company might exist that would affect that Director’s status as independent;
making recommendations, from time to time, to the Board as to matters of corporate governance and periodically monitoring the Board’s performance; and
reviewing with the Board succession plans for the Chief Executive Officer and the direct reports to the Chief Executive Officer.
Additional information about the Nominating and Corporate Governance Committee follows:
The Committee has a Charter whichthat can be viewed and downloaded from the Corporate Governance section of the Company’s Investor Relations Websitewebsite at http://investor.mhfi.com.investor.spglobal.com.
All current members of the Committee are independent as defined in the rules of the New York Stock Exchange.NYSE.
The Committee will consider nominees for Director recommended by shareholders. If a shareholder wishes to recommend a candidate for Director, the shareholder should submit a written nomination to the Nominating and Corporate Governance Committee by sending it to the Corporate Secretary, c/o Office of the General Counsel, McGraw Hill Financial, Inc., 55 Water Street, New York, New York 10041-0003. In general, a shareholder wishing to nominate a Director at an Annual Meeting must deliver written notice of the nomination to the Corporate Secretary no earlier than 120 days and no later than 90 days prior to the first anniversary of the preceding year’s Annual Meeting. The notice must: (a) set forth the name and address of the nominating shareholder, the number of shares owned by such shareholder, and any other information relating to such shareholder that would be required to be disclosed in a Proxy Statement in connection with a contested election for Directors pursuant to Section 14 of the Securities Exchange Act of 1934 (the “Exchange Act”); (b) set forth all information relating to the Director nominee that would be required to be disclosed in a Proxy Statement in connection with a contested election for Directors pursuant to Section 14 of the Exchange Act (including such person’s consent to being named as a nominee and to serving as a Director if elected), and a description of all compensation and other material relationships between the nominating shareholder and the Director nominee; and (c) include a completed questionnaire, representation and agreement signed by the Director nominee, copies of which may be obtained from the Company’s Secretary. These requirements are more fully described in the Company’s By-Laws. The By-Laws can be viewed and downloaded from the Corporate Governance section of the Company’s Investor Relations Website at http://investor.mhfi.com.
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The Committee reviews with the Board on an annual basis the appropriate skills and characteristics required of Board members in the context of the then-current composition of the Board. In addition to qualities of intellect, integrity and judgment, this assessment takes into consideration diversity, background, senior management experience and an understanding of some combination of marketing, finance, technology, international business matters, government regulation, public policy and the global capital and commodity markets. The Committee makes this determination inevaluates the context of an assessmentskills and qualifications of the perceived needs of theexisting Board at that point in time.and potential candidates on a continuing basis.
The Committee evaluates all nominees for Director based on these criteria, including nominees recommended by shareholders.
All nominees for Director included on the Company’s proxy card are currently serving as Directors of the Company.
The Committee may retain and terminate search firms to identify Director candidates. The Committee has the sole authority to approve the fees and other retention terms of any such firms.
Processes and Procedures for Determining Director Compensation
The Nominating and Corporate Governance Committee is comprised of four Directors, all of whom meet the independence requirements of the New York Stock Exchange. The Board of Directors appoints the Committee Chair and determines which Directors serve on the Committee.
The Committee is solely responsible for determining all matters concerning compensation for the independent members of the Board. It is not authorized to delegate its authority to determine Director compensation. All compensation recommendations by the Committee are submitted to the full Board for review and approval. Directors who are employees of the Company do not receive any compensation for their Board services.
The Committee has sole authority to directly retain external consultants and to commission surveys or analyses that it determines necessary to fulfill its responsibilities.
Executive officers play no role in determining the amount or form of Director compensation. The Committee annually reviews the competitiveness of the Company’s Director compensation based on pay practices among the Company’s proxy peer group. During 2014, the Committee engaged Pay Governance LLC to review this compensation survey data and advise the Committee on changes, if any, to Director compensation.
The Company has an Audit Committee currently comprised of fivesix Directors that has been established by the Board of Directors for the purpose of overseeing the accounting and financial reporting processes of the Company and the audits of the Company’s financial statements. The Board of Directors appoints the Committee Chair and determines which Directors serve on the Committee. The Audit Committee’s duties include, among other matters, assisting the Board’s oversight of:
the integrity of the Company’s financial statements;
the Company’s compliance with legal and regulatory requirements;
the Company’s enterprise risk management process;
the qualifications and independence of the Company’s independent Registered Public Accounting Firm; and
the performance of the Company’s internal and external auditors.
Additional information about the Audit Committee follows:
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
the qualifications and independence of the Company’s independent auditors;
the performance of the Company’ internal and external auditors; and
the critical key risks of the Company.
Additional information about the Audit Committee follows:
The Audit Committee Report, beginning on page 94 of this Proxy Statement, summarizes certain important actions of the Committee taken during the Company’s 2016 fiscal year.
The Committee has a Charter whichthat can be viewed and downloaded from the Corporate Governance section of the Company’s Investor Relations Websitewebsite at http://investor.mhfi.com.investor.spglobal.com.
All current members of the Committee are independent as defined in the rules of the New York Stock Exchange. In addition,
The Board has determined that all current members of the Audit Committee are independentqualify as “financial experts” as defined byin the following additional SEC independence criteria applicable to Audit Committee members:
No Audit Committee member may accept directly or indirectly any consulting, advisory or other compensatory fee from the Company.
No Audit Committee member may be an affiliated personrules of the Company.SEC and the New York Stock Exchange. There is a brief listing of the qualifications of the Director nominees who are Committee members in their respective biographies found on pages 14 through 25 of this Proxy Statement.
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Compensation and Leadership Development Committee
The Compensation and Leadership Development Committee’s duties include, among other matters:
establishing an overall total compensation philosophy for the Company;
establishing and approving the compensation to be paid to the Company’s senior management;
administering the Company’s incentive compensation plans;
establishing performance objectives and approving awards and payments in connection with the Company’s incentive compensation plans to ensure consistency with the Company’s financial and strategic plans and objectives; and
reviewing the succession and development plans for executives and other key talent below the direct reports to the Chief Executive Officer.
Additional information about the Compensation and Leadership Development Committee follows:
All current members of the Committee are independent as defined in the rules of the New York Stock Exchange.
The Committee has a Charter whichthat can be viewed and downloaded from the Corporate Governance section of the Company’s Investor Relations Websitewebsite at http://investor.mhfi.com.investor.spglobal.com.
Processes and Procedures for Determining Executive Compensation
The Compensation and Leadership Development Committee is currently comprised of fivefour Directors, all of whom meet the independence requirements of the New York Stock Exchange. The Board of Directors appoints the Committee Chair and determines the composition of the Committee members. For a further discussion of the independence determinations with respect to our Directors, see pages 10 and 11 of this Proxy Statement.
The Committee is responsible for approving all matters concerning the Company’s total compensation philosophy, including conducting periodic reviews of the philosophy to ensure it supports the Committee’s objectives and shareholder interests. The Committee is responsible for administering and interpreting the Key Executive Short-Term Incentive Compensation Plan, the 2002 Stock Incentive Plan and all other compensation and benefits plans in which the Company’s senior management participate.participates.
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
The Committee annually reviews and approves the corporate goals and objectives for the Chief Executive Officer’s compensation, evaluates the Chief Executive Officer’s performance in light of those goals and objectives, establishes the Chief Executive Officer’s total compensation and refers its recommendations to the independent Directors of the Board of Directors for ratification.
The Committee annually reviews and approves the individual compensation actions for the direct reports to the Chief Executive Officer (including the other named executive officers). Below this level, the Committee approves the overall design of the total executive compensation program and delegates the discretion to approve individual compensation decisions to the Chief Executive Officer. The other named executive officers, who are identified on page 33 of this Proxy Statement, recommend compensation actions for the senior executives in their organizations and these compensation actions are then approved by the Chief Executive Officer.
The Committee has sole authority to retain and terminate all external consultants and to commission surveys or analyses that it determines necessary to fulfill its responsibilities. Additionally, the Committee has sole authority to approve the fees of the external consultants. The Committee utilizes the services of Pay Governance LLC as its external compensation advisor for all matters concerning the Company’s senior management compensation programs. Pay Governance LLC provides no other executive compensation consulting or other services to the Company or its management. Pay Governance LLC works in
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cooperation with Company management on matters that come before the Committee but always in its capacity as the Committee’s independent advisor and representative. The Committee has entered into a consulting agreement with Pay Governance LLC that specifies the nature and scope of its responsibilities, which include: (1) reviewing Committee agendas and supporting materials in advance of each meeting and raising questions or issues with management and the Committee Chair, as appropriate; (2) at the Committee’s direction, working with management on major proposals in advance of finalization by, and presentation to, the Committee; (3) reviewing drafts of the Company’s Compensation Discussion and Analysis and the Compensation Committee Report and related tables for inclusion in the Company’s Proxy Statement each year; (4) evaluating the chosen compensation peer group and survey data for competitive comparisons; (5) reviewing comparative data on the compensation of the Chief Executive Officer and providing independent analyses and recommendations on the Chief Executive Officer’s compensation to the Committee Chair;Committee; and (6) proactively advising the Committee on best practices for Board governance of executive compensation.
The Committee annually reviews and approves the corporate goals and objectives for the Chief Executive Officer’s compensation, evaluates the Chief Executive Officer’s performance in light of those goals and objectives, establishes the Chief Executive Officer’s total compensation and refers its recommendations to the independent Directors of the Board of Directors for ratification.
The Committee annually reviews and approves the individual compensation actions for the direct reports to the Chief Executive Officer. Below this level, the Committee approves the overall design of the total executive compensation program and delegates the discretion to approve individual compensation decisions to the Chief Executive Officer. The other named executive officers, who are identified on page 34 of this Proxy Statement, recommend compensation actions for the senior executives in their organizations and these compensation actions are then approved by the Chief Executive Officer.
During 2014, Pay Governance LLC was also engaged by the Nominating and Corporate Governance Committee to advise on compensation paid to the non-employee Directors. In this capacity, Pay Governance LLC works solely for the Board and provides no services to management.
In accordance with the Committee’s policy on assessing advisor independence, the Committee determined in 20142016 that there were no conflicts of interest or issues related to independence that would impact the advice to the Committee from the firm of Pay Governance LLC and the representatives of Pay Governance LLC who advise both the Committee on executive compensation matters and the Nominating &and Corporate Governance Committee on Director compensation matters.
For a further discussion of the independence assessment policy,role of the Committee in assessing performance and determining compensation with respect to our named executive officers see pagepages 39 through 42 of this Proxy Statement.
CompensationExecutive Committee Report
The Compensation and Leadership DevelopmentCompany has an Executive Committee currently comprised of six Directors that has been established by the Board of Directors. The Chairman of the Board serves as the Chairman of the Executive Committee. The Executive Committee has reviewed and discussed withall the authority of the Board, except for those actions not permitted by Section 712 of the Business Corporation Law of the State of New York.
The Company management the Compensation Discussion and Analysis found on pages 34 through 55has a Financial Policy Committee currently comprised of this Proxy Statement, and based on this review and discussion, the Compensation and Leadership Development Committeesix Directors that has recommended tobeen established by the Board of Directors thatfor the Compensation Discussion and Analysis be included inpurpose of overseeing the Company’s Proxy Statement.
The foregoing report has been furnished on behalf of the Board of Directors by the members of its Compensation and Leadership Development Committee.
Sidney Taurel (Chair)
Sir Winfried Bischoff
William D. Green
Charles E. Haldeman, Jr.
Edward B. Rust, Jr.
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
on the Company’s financial position, its capital structure, its dividend policy, its share repurchase policy and its capital expenditure program. The Board of Directors appoints the Committee Chair and determines which Directors serve on the Committee.
The Financial Policy Committee’s duties include, among other matters:
reviewing the Company’s financial affairs with management, particularly the Company’s Medium Range Plan and the investment performance of the Company’s retirement and profit-sharing funds;
reviewing management’s proposals and recommendations to the Board, including those relating to share repurchases, mergers and acquisitions, divestitures, and major capital expenditures; and
reviewing management’s proposals with regard to the payment (or non-payment) of dividends and approving or making a recommendation to the Board on such matters.
Membership and Meetings of the Board and Its Committees
In 2014,2016, no Director attended fewer than 75 percent of the aggregate of the total number of meetings of the Board and the Committees on which he or she served. Committee membership and the number of meetings of the full Board and each Committee held during 20142016 are shown in the table below. Messrs. McGraw and Taurel retired from the Board at the 2016 Annual Meeting. Ms. Ochoa-Brillembourg and Sir Winfried Bischoff will retire from the Board at the 2017 Annual Meeting and will not stand forre-election at the Meeting. Ms. Hill and Mr. Alverà are not included in this table as they became Directors effective as of January 25, 2017 and March 10, 2017, respectively.
| Board | Audit | Compensation & Leadership Development | Executive | Financial Policy | Nominating & Corporate Governance | |||||||
Sir Winfried Bischoff | ü | ü | ü | Chair | ||||||||
William D. Green | ü | ü | ü | |||||||||
Charles E. Haldeman, Jr. (a) | ü | ü | ü | |||||||||
Rebecca Jacoby (b) | ü | ü | ||||||||||
Linda Koch Lorimer (c) | ü | ü | ü | |||||||||
Harold McGraw III (d) | Chair | Chair | ||||||||||
Robert P. McGraw | ü | ü | ||||||||||
Hilda Ochoa-Brillembourg | ü | ü | ü | |||||||||
Douglas L. Peterson | ü | ü | ||||||||||
Sir Michael Rake | ü | Chair | ü | ü | ||||||||
Edward B. Rust, Jr. | ü | ü | ü | ü | Chair | |||||||
Kurt L. Schmoke | ü | ü | ü | |||||||||
Sidney Taurel | ü | Chair | ü | ü | ||||||||
Richard E. Thornburgh | ü | ü | ü | |||||||||
Number of 2014 Meetings | 10 | 10 | 7 | 0 | 8 | 7 |
| Board | Audit | Compensation Development | Executive | Financial Policy | Nominating & Corporate Governance | |||||||||||||||||||
Sir Winfried Bischoff |  | | | | ||||||||||||||||||||
William D. Green | | Chair | | | ||||||||||||||||||||
Charles E. Haldeman, Jr. | | | Chair | | ||||||||||||||||||||
Rebecca Jacoby | | | ||||||||||||||||||||||
Monique F. Leroux | | | ||||||||||||||||||||||
Maria R. Morris | | | ||||||||||||||||||||||
Robert P. McGraw | | | ||||||||||||||||||||||
Hilda Ochoa-Brillembourg | | | | |||||||||||||||||||||
Douglas L. Peterson | | | ||||||||||||||||||||||
Sir Michael Rake | | Chair | | | ||||||||||||||||||||
Edward B. Rust, Jr. | | | | Chair | ||||||||||||||||||||
Kurt L. Schmoke | | | | |||||||||||||||||||||
Sidney Taurel | | | | | ||||||||||||||||||||
Richard E. Thornburgh | | | | Chair | ||||||||||||||||||||
Number of 2016 Meetings | 8 | 10 | 7 | 0 | 8 | 6 | ||||||||||||||||||
= Chairperson of the Board Chair = Committee Chair = Member
In 2014,2016, the non-managementindependent Directors met in executive sessionstwice 6 times without any member of management present. Mr. Robert P. McGraw, who is not an independent Director as defined in the rules of the New York Stock Exchange due to his familial relationship with Mr. Harold McGraw III, the Company’s Chairman and former President and Chief Executive Officer, was not present at one of these non-management Director executive sessions.
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
Compensation Committee Interlocks and Insider Participation
No member of the Compensation and Leadership Development Committee has served as one of our officers or employees at any time. None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board of Directors or Compensation and Leadership Development Committee. None of our executive officers serves as a member of the board of directors of any other company that has an executive officer serving as a member of our Board’s Compensation and Leadership Development Committee.
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Director and Officer Indemnification and Insurance
Each Director and certain of our executive officers have entered into an indemnification agreement with the Company which provides indemnification for judgments and amounts paid in settlement and related expenses to the fullest extent permitted under the applicable provisions of the New York Business Corporation Law (“NYBCL”). This indemnification will be reduced to the extent that a Director or executive officer is indemnified by the Company’s Directors’ and Officers’ liability insurance.
The Company has for many years had an insurance program in place that provides Directors’ and Officers’ liability insurance coverage. The Company’s current insurance coverage was purchased for the period May 15, 20142016 to May 15, 20152017 for a premium of approximately $3,073,000.$2.4 million. This insurance is provided by a consortium of carriers, which includes: Illinois National Insurance Company; Federal Insurance Co.; Great American Insurance Co.; Freedom Specialty Insurance Co.; AXIS Insurance Company;Berkshire Hathaway Specialty Insurance; Travelers Casualty & Surety Company of America; and ArchAXIS Insurance Co.Company. This program also includes additional capacity dedicated to provid-
ingproviding excess coverage for Directors and certain of our executive officers when the Company cannot indemnify them. The additional capacity is provided by the following consortium of carriers: RLI Insurance Company; National Liability & Fire Insurance Company;Berkshire Hathaway Specialty Insurance; Continental Casualty Company; Berkeley Insurance Company; XL Specialty Insurance Company; and Illinois National Insurance Company.Company; U.S. Specialty Insurance Company; Zurich American Insurance Company; and Aspen American Insurance Co.
The Company also maintains a fiduciary liability insurance program that covers Directors and employees who serve as fiduciaries for our employee benefit plans. This coverage, subject to a number of standard exclusions and certain deductibles, indemnifies the Directors and employees from alleged breaches of fiduciary or administrative duties, as defined in the Employee Retirement Income Security Act of 1974 or similar laws or regulations outside the United States. The Company’s current fiduciary liability coverage was purchased for the period May 15, 20142016 to May 15, 20152017 for a premium of approximately $272,000.$277,000. This insurance is provided by a consortium of carriers, which includesincludes: Illinois National Insurance Company; ArchFederal Insurance Co.;Company; and XL Specialty Insurance Company.
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The Audit Committee (the “Committee”) reviews the Company’s financial reporting process on behalf of the Board. All of the members of the Committee are independent Directors as defined in the rules of the New York Stock Exchange. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls. The Board has adopted a written Charter for the Audit Committee.
In this context, the Committee has met and held discussions with management and the Company’s Independent Registered Public Accounting Firm, Ernst & Young LLP (“EY”). Management represented to the Committee that it is responsible for the financial reporting process, including the system of internal controls, for the preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles and for the report on the Company’s internal controls over financial reporting. The Committee has reviewed and discussed the consolidated financial statements with management and EY, which review included a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Committee also discussed with management the process used to support the certifications required by the Sarbanes-Oxley Act of 2002 and to support management’s annual report on the Company’s internal controls over financial reporting. The Committee discussed with EY the integrated audit results as required by the Public Company Accounting Oversight Board (“PCAOB”), rules of the Securities and Exchange Commission, and other applicable regulations.
In addition, the Committee has reviewed and discussed with EY the firm’s independence from the Company and its management. The Committee received from EY the written disclosures and the letter regarding its independence as required by the PCAOB’s applicable requirements.
The Committee is directly responsible for the appointment, compensation, retention and over-
sight of the work of EY for the purposes of preparing or issuing the audit report or performing the audit of the Company. The Committee has also considered whether the provision of services by EY, not related to the audit of the financial statements, is compatible with maintaining EY’s independence. The Committee pre-approves all fees for services provided by EY.
The Committee evaluates EY’s performance, taking into consideration the following factors: management’s perception of expertise and past performance, external data relating to audit quality, independence, appropriateness of fees and global reach relative to the Company’s business. The Committee periodically reviews and evaluates the performance of EY’s lead audit partner, ensures the audit partner rotation as required by law and, through the Committee Chair as representative of the Committee, reviews and considers the selection of the lead audit partner.
The Committee discussed with EY the overall scope and plans for its respective audits. The Committee met with the internal auditors and EY, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board that the audited financial statements be included in the Company’s Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission. The Committee and the Board believe that the continued retention of EY to serve as the Company’s Independent Registered Public Accounting Firm is in the best interest of the Company and its shareholders and have recommended that shareholders ratify the appointment of EY as the Company’s Independent Registered Public Accounting Firm for 2015.
Sir Michael Rake (Chair)
Charles E. Haldeman, Jr.
Hilda Ochoa-Brillembourg
Edward B. Rust, Jr.
Richard E. Thornburgh
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Transactions With Related Persons
Under SEC rules, we are required to disclose material transactions with the Company in which “related persons” have a direct or indirect material interest. Related persons include any Director, nominee for Director, executive officer of the Company, any immediate family members of such persons, and any persons known by the Company to be beneficial owners of more than five percent of the Company’s voting securities. The term “transaction” is broadly defined under SEC rules to include any financial transaction, arrangement or relationship, including any indebtedness transaction or guarantee of indebtedness.
Based on information available to us and provided to us by our Directors and executive officers and other than the items referred to below, we do not believe that there were any such material transactions in effect since January 1, 2014,2016, or any such material transactions proposed to be entered into during 2015.2017.
For security reasons, duringAs of April 29, 2015, the period thatCompany and Mr. Harold McGraw III served as our President and Chief Executive Officer, he was required to use Company provided aircraft for all air travel. Mr. McGraw’s arrangement as Non-Executive Chairman permitted him to continue to use, through May 16, 2014, Company provided aircraft under the same guidelines that applied to him prior to his retirement as President and Chief Executive Officer.
When using Company provided aircraft for personal travel, Mr. McGraw was required to reimburse(Chairman Emeritus of the Company for the equivalent of first class commercial airfare for himself and for each passenger traveling with him. If the incremental cost of personal travel to the Company exceeded $200,000 in any calendar year (excluding, for this purpose, the cost of travel to Board meetings of third party companies), in lieu of reimbursement equivalent to first class commercial airfare, Mr. McGraw was required to reimburse the Company for the full incremental cost of such travel. Mr. McGraw and the brother of Robert P. McGraw, a Company director during 2016 who resigned effective April 27, 2016) entered into an Aircraft Time Sharing Agreement, dated as of September 15, 2004,
which provided for such reimbursement. This Agreement was approved by the Compensation and Leadership Development Committee and the Nominating and Corporate Governance Committee of the Company’s Board of Directors. During 2014, Mr. McGraw made payments to the Company of $30,581 under this Agreement.
On July 31, 2014, the Company completed the sale of its aircraft to Mr. Harold McGraw III for a purchase price of $20 million, which is modestly higher than an independent appraisal obtained by the Company. This transaction was approved by the Nominating and Corporate Governance Committee of the Company’s Board of Directors after consultation with members of the Financial Policy Committee.
On June 25, 2014, the Company repurchased 0.5 million shares of the Company’s common stock from the personal holdings of Mr. Harold McGraw III. The shares were purchased at a discount of 0.35% from the June 24, 2014 New York Stock Exchange closing price pursuant to a private transaction with Mr. McGraw. The Company repurchased these shares with cash for $41 million at an average price of $82.66 per share. This transaction was approved by the Nominating and Corporate Governance Committee of the Company’s Board of Directors after consultation with members of the Financial Policy Committee.
Mr. Whit McGraw, the son of Mr. Harold McGraw III, is employed by the Company as an executive in its S&P Capital IQ business unit. During 2014, Mr. Whit McGraw received cash compensation of $420,000 (which included a base salary of $200,000 and an incentive payment of $220,000) as well as equity compensation consisting of performance share units (“PSUs”) and stock options with an aggregate grant date fair value of $80,000. In addition, Mr. Whit McGraw participated in our employee benefit plans on the same basis as other similarly situated employees. His compensation (including base salary and long-term and short-term incentive opportunities) is reviewed on an annual basis in accordance with the Company’s regular pay practices.
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE (continued) |
In 2014,
into a letter agreement under which Mr. McGraw’s honorary title as Chairman Emeritus was confirmed and he agreed to provide the Company’s Board of Directors with written quarterly reports outlining global trade developments which may present potential opportunities for the Company. Beginning on such date and ending on April 29, 2019, Mr. McGraw will be: (1) provided with reasonable office accommodations and two full-time support staff and (2) transported by a Company-provided vehicle driven by a member of the Company’s security group for travel within the New York metropolitan area. Mr. McGraw was also provided with one Company employee to assist him with global free trade activities during his current term as Chairman of the International Chamber of Commerce, which ended on June 15, 2016 when he became Honorary Chairman. The total costs and expenses incurred by the Company from January 1, 2016 through December 31, 2016 in connection with the foregoing arrangements were $1,696,402.
From time to time, shareholders that own more than five percent of our common stock subscribe to, license or otherwise purchase, in the normal course of business, certain of our products and services. These transactions are negotiated on anarm’s-length basis and are subject to review by the Company’s Nominating and Corporate Governance Committee reviewedas described below. During 2016, State Street Corporation, BlackRock, Inc., The Vanguard Group, Inc. and consideredFidelity Investments (FMR LLC) and/or their respective affiliates subscribed to, licensed or otherwise purchased in the normal course of business, certain of our products and services. Revenues recognized by us from subscriptions, licenses and other fees related to our products and services by State Street Corporation, BlackRock, Inc., The Vanguard Group, Inc. and Fidelity Investments (FMR LLC) and/or their respective affiliates for fiscal 2016 were approximately $125.9 million, $63.4 million, $23.6 million and $13.0 million, respectively. The Company paid fees to Fidelity Investments (FMR LLC), The Vanguard Group, Inc. and State Street Global Advisors, Inc. in the amount of $349,000, $213,000 and $5,000, respectively, in 2016 in connection with investment management and certain marketing and business promotion services.
The Company’s Nominating and Corporate Governance Committee reviews and considers transactions with related persons under the Company’s written policy that requires the Committee to review and approve any related person transactions. Under the policy, as in effect during 2014, management presented to the Committee specific information with respect to any such transaction expected to be entered into or continued during that calendar year at the Committee’s first regularly scheduled meeting in 2014. After reviewing this information, the Committee approved such transactions only if the following two conditions were met: (1) the transaction was in the best interests (or not inconsistent with the best interests) of the Company and its shareholders; and (2) the transaction was entered or was proposed to be entered into by the Company on terms that were comparable to those that would be obtained in an arm’s-length transaction with an unrelated third party. The policy required any additional related person transactions proposed to be entered into subsequent to the Committee’s first 2014 meeting to be presented to the Committee for approval or ratification at a subsequent meeting of the Committee.
Effective as of February 25, 2015, the Company’s Board of Directors amended our related person transactions policy to provide that all related persons are required to promptly notify our Corporate Secretary of any proposed related person transaction. Following notice to our Corporate Secretary, the proposed transaction is then presented to the Nominating and Corporate Governance Committee for its review and consideration at the next Committee meeting. Any ongoing and previously approved related person transactions will be reviewed by the Committee on an annual basis. In reviewing any proposed (or previously approved and ongoing) related person transaction, the Committee must consider all relevant facts and circumstances, including, without limitation, the commercial reasonableness of the terms, the benefit and perceived benefit, or lack thereof, to the Company, opportunity costs of alternate transactions, the materiality and character of the related person’s direct or indirect interest, and the actual or apparent conflict of interest of the related person. Approval of a related person transaction (or ratification of a previously approved and ongoing related person transaction) will be given only if it is determined by the Committee that such transaction is in (or not inconsistent with) the best interests of the Company and its shareholders.
Board and Committee Self-Evaluations
The Board assesses annually the performance and effectiveness of the Board and its Committees (“Committees”). The Nominating and Corporate Governance Committee oversees the evaluation process, including determining the format, and presents to the Board the results of the self-evaluations to identify opportunities to enhance effectiveness. Self-evaluation topics generally include, among other matters, Board composition and structure, meeting topics and process, information flow, Board oversight of risk management and strategic planning, succession planning and access to management. The Board discusses the results of each annual self-evaluation and, as appropriate, implements enhancements and other modifications identified during the self-evaluation.
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COMPENSATION DISCUSSION AND ANALYSIS |
EXECUTIVE COMPENSATION MATTERS
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation and Leadership Development Committee of our Board of Directors (the “Compensation Committee”), comprised of independent Directors, oversees our compensation program for senior executives on behalf of our Board. This section contains information on various aspects ofCompensation Discussion and Analysis (“CD&A”) describes our named executive officer compensation ofprogram and the Company’s “namedbasis for the compensation paid to our named executive officers.” officers for 2016, as well as certain key compensation decisions that have been approved for our named executive officers for 2017.
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| V. RISK MANAGEMENT AND GOVERNANCE FEATURES | |||||
SeverancePlans (Regular and Change-in-Control) | 61 | |||||
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| * | Our CD&A, found on pages 32 through 64 of this Proxy Statement, includes adjusted financial information. For a reconciliation of the adjustments to comparable financial measures calculated in accordance with generally accepted accounting principles (“GAAP”) in the U.S., please see Exhibit A. Thenon-GAAP financial information included on Exhibit A has been provided in order to show investors how our Compensation Committee views the Company’s performance as it relates to the compensation program for our named executive officers. |
| 32 | 2017 Proxy Statement | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
The named executive officers (“NEOs”) of the Company for 2014 include the Chief Executive Officer (“CEO”), Mr. Douglas L. Peterson, and the Chief Financial Officer (“CFO”), Mr. Jack F. Callahan, Jr. The named executive officers also include the Company’s three most highly compensated executive officers other than the CEO and CFO who were serving2016 are as executive officers on December 31, 2014, namely: Mr. Neeraj Sahai (President, Standard & Poor’s Ratings Services); Mr. John L. Berisford (Executive Vice President, Human Resources); and Ms. Imogen Dillon Hatcher (President, S&P Capital IQ). Onfollows:
February 10, 2015, Mr. Berisford informed the Company of his decision to leave the Company and ceased serving in an executive officer capacity effective as of such date. Mr. Berisford remained in a non-executive capacity with the Company through March 13, 2015. In addition, the named executive officers of the Company include Mr. Louis Eccleston, who served as President, S&P Capital IQ, and Chairman of the Board, S&P Dow Jones Indices, through July 14, 2014, and Mr. Kenneth M. Vittor, who served as Executive Vice President and General Counsel of the Company through August 4, 2014. Both Messrs. Eccleston and Vittor remained in a non-executive capacity with the Company through December 31, 2014.
| Executive | Position | |
Douglas L. Peterson | President and Chief Executive Officer (“CEO”) | |
Ewout L. Steenbergen(1) | Executive Vice President, Chief Financial Officer (“CFO”) | |
Robert J. MacKay(2) | Interim Chief Financial Officer (“Interim CFO”) | |
John L. Berisford | President, S&P Global Ratings | |
Steven J. Kemps | Executive Vice President, General Counsel | |
Alexander J. Matturri | Chief Executive Officer, S&P Dow Jones Indices | |
Jack Callahan(3) | Former Executive Vice President and Chief Financial Officer (“Former CFO”) | |
| (1) | Mr. Steenbergen joined the Company as Executive Vice President, Chief Financial Officer, effective November 14, 2016. |
| (2) | Mr. MacKay, our Senior Vice President, Corporate Controller, was appointed Interim CFO effective August 5, 2016 through November 14, 2016, Mr. Steenbergen’s hire date. |
| (3) | Mr. Callahan voluntarily resigned from his position during 2016. |
Executive SummaryCompensation Philosophy
Compensation Philosophy
Our compensation philosophy is to reward our executives for creating shareholder value by linking a significant portion of pay to one or more performance metrics tied to value creation. We implement our compensation practices within
the framework ofpay-for-performance and in a manner that we believe helps us attract the highest quality talent to our executive ranks and retain these individuals by rewarding excellence in leadership and success in the implementation of our business strategy while driving shareholder value.
Named Executive Officers (“NEOs”)
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Total Shareholder Return
TheFinancial Performance Highlights
Total Shareholder Return
In 2016, S&P Global increased its share price by 9%, which was generally in line with the share price performance of our peer group and the overall market. As indicated in the performance graph below comparesto the right, our cumulative total shareholder return during the previous five years with ais 13% higher than our Form 10-K peer group and 37% higher than the performance indicator of the overall market (i.e., S&P 500) and our peer group. Beginning in fiscal 2014, the Company selected a new.
The Form 10-K peer group to more accurately reflect the Company’s peersincluded in terms of industry after completing the portfolio rationalization of media businesses. The new peer groupthis graph consists of the following companies: Thomson Reuters Corporation, Moody’s Corporation, CME Group Inc., MSCI Inc., FactSet Research Systems Inc. and IHS Inc. The prior peer group consists of the following companies: Thomson Reuters Corporation, Thomson Reuters PLC (through September 2009), Reed Elsevier NV, Reed Elsevier PLC, Pearson PLC, Moody’s Corporation and Wolters Kluwer. Markit Ltd.
Returns assume $100 invested on December 31, 20092011 and total return includes reinvestment of dividends through December 31, 2014.
| | 2017 Proxy Statement | 33 |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Company Financial Performance
The Company demonstrated strong operating performance in 2016 by showing year-over-year (“YOY”) growth across three key financial measures that the Compensation Committee uses to assess executive officer performance: Incentive Compensation Program (“ICP”) Adjusted Revenue, ICP Adjusted Earnings before Interest, Taxes and Amortization (“ICP Adjusted EBITA”) and ICP Adjusted Earnings Per Share (“ICP Adjusted EPS”):
| (1) | Key Executive Short-Term Incentive Compensation Plan (“STIC”). |
| (2) | Long-Term Incentive Plan (“LTIP”). |
| (3) | For a reconciliation of the adjustments to comparable financial measures calculated in accordance with U.S. GAAP, please see Exhibit A. |
Significant Business Milestones
In addition to the above strong financials, other 2016 highlights include:
Increased engagement with customers,end-users, market participants, industry leaders, policy makers and regulators through our brandroll-out.
Progress towards optimizing the Company’s portfolio, including the successful divestiture of the J.D. Power, Standard & Poor’s Securities Evaluations, Inc. (“SPSE”) and Credit Market Analysis (“CMA”) businesses.
Completed selective acquisitions in S&P Dow Jones Indices (TruCost Plc), S&P Global Platts (PIRA Energy Group and RigData) and S&P Global Ratings (TRIS Rating).
Positive headway on the SNL integration efforts and the realization of synergies.
2016 STIC Funding and 2014-2016 Long-Term Incentive Payouts
S&P Global had strong stock price and financial performance in 2016 and strategically repositioned itself to achieve continued performance in the future. The Company’s achievements in 2016 resulted in above-target funding for the Key Executive Short-Term Incentive Compensation Plan (“STIC”), and the Company’s sustained performance during the 2014-2016 performance cycle resulted in Long-Term Incentive awards earning and paying out above target. STIC funding for 2016 was 170% of target (see page 54) and the 2014 Long-Term Incentive Awards earned and paid out at 160% of target (see page 58).
| 34 | 2017 Proxy Statement | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
CEO Target Compensation
In the graphic to the right, we have shown Target Total Direct Compensation (“TDC”), which is equal to base salary, target annual incentive award opportunity and long-term incentive grants, assuming target performance, for our CEO, Mr. Peterson, in 2015, 2016 and 2017. As discussed in further detail in the “Setting Compensation” section beginning on page 40 of this Proxy Statement, in consultation with the independent compensation consultant, the Compensation Committee considered several factors such as individual performance and market competitiveness and approved a 17% increase to Mr. Peterson’s target TDC for 2017 as compared to 2016. |
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Say-on-Pay and Engagement with Shareholders
The Company values shareholder perspectives on our executive compensation program. As part of the Compensation Committee’s annual review of the program, it considers the outcome of the Company’s annual shareholder advisory vote on the executive compensation program for the Company’s NEOs – the“say-on-pay”. Approximately 98% of the votes cast were in favor of our“say-on-pay” last year. Although this indicated strong support for our executive compensation program, the Company believes it is important to engage with our shareholders, regardless of our approval rating. We did so this year by continuing our active dialogue with investors, attending 12 investor conferences, visiting investors in 33 cities and in total conducting over 700 investor meetings. No significant concerns relating to the Company’s compensation program were raised by investors this year.
Examples of prior compensation program changes made in response to shareholder feedback are highlighted on page 43 of this Proxy Statement and affirm our responsiveness to and alignment with our shareholders.
New for 2017 and Other Recent Changes
In connection with the annual review of the Company’s executive compensation program, the Compensation Committee modified the vesting schedule for awards of restricted share units (“RSUs”) so that all future RSU grants beginning in 2017 will vest ratably over three years rather than vest after three years. This change is intended to provide the Company with a more effective recruitment tool, conforms to industry practice and is appropriately balanced by the three-year vesting schedule for PSU awards, which generally represent 70% of the total long-term grant value for NEOs.
For 2016, the Compensation Committee also increased the CEO share ownership guideline from five times (5x) to six times (6x) base salary to require a more meaningful level of ownership in keeping with best practices and further align the interest of the CEO with those of our shareholders.
Key prior executive compensation program design changes are highlighted on page 43 of this Proxy Statement.
| | 2017 Proxy Statement | 35 |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Financial PerformanceOverview of Key Best Practices: What We Do and Don’t Do
The CompanyCompensation Committee regularly reviews best practices in executive compensation and governance and has demonstrated strong performance in 2014 by showing improvement across three key financial measures on a year-over-year basis: Adjusted Revenue, Adjusted Net Incomerevised our policies and adjusted earnings per share (“Adjusted EPS”):practices over time. Today these practices include:
Alignment with Shareholders (What We Do) | ||||||
COMPENSATION PRACTICE | COMPANY POLICY | MORE DETAIL | ||||
| ü | Pay-for- Performance & | Approximately 87% of CEO and 71% of other NEOs’(1) total compensation opportunity is variable, incentive-based pay contingent on meeting challenging,top-line and bottom-line short-term and long-term performance objectives. We also include caps on individual payouts under Long-term incentive compensation opportunities for NEOs are equity-based and tied to business plan performance metrics. | Pgs. 37 & 38 | |||
| ü | Robust Stock Ownership Guidelines | We have meaningful stock ownership guidelines for our Directors and executive officers. The executive guidelines also require 100% retention until the guidelines are met and a | Pgs. 62 & 89 | |||
| ü | Annual Shareholder Say-on-Pay | We value our shareholders’ input and seek an annualnon-binding advisory vote from shareholders on our executive compensation program for our named executive officers. | Pg. 35 | |||
| ü | Shareholder Outreach and Input | Our outreach program gives institutional shareholders the opportunity to provide ongoing input on our programs and policies. We carefully reviewsay-on-pay results and all shareholder feedback when structuring executive compensation. | Pgs. 35 & 39 | |||
| ü | Clawback Policy | Our clawback policy gives us the right to recoup and cancel cash incentive and long-term incentive award payments received by covered active and former employees under various circumstances, including misconduct and financial restatements. | Pg. 63 | |||
| ü | Anti-Hedging and Anti-Pledging Policy | Our anti-hedging and anti-pledging policy prohibits Directors, officers and other designated employees from engaging in hedging and pledging transactions related to Company stock. | Pg. 64 | |||
| (1) | Calculation excludes Messrs. Steenbergen and Callahan as their compensation mixes do not reflect full-year amounts. |
In addition to the above strong financials, other highlights include:
Sound Governance Practices (What We Don’t Do) | ||||||
COMPENSATION PRACTICE | COMPANY POLICY | MORE DETAIL | ||||
| × | No Single Trigger Change-in-Control | Our Long-Term Incentive Plan awards are subject to “double-trigger” treatment in the case of achange-in-control (i.e., unvested awards are accelerated only if there is both achange-in-control and an involuntary termination of employment). | Pg. 61 | |||
| × | No Excessive Perquisites | We do not provide excessive executive perquisites to our NEOs and we believe our limited perquisites are reasonable and competitive. | Pg. 59 | |||
× | No Tax Gross-Ups | We do not provide taxgross-ups in connection with any perquisites or in the event of any “golden parachute payment” in connection with achange-in-control. | Pgs. 59 & 62 | |||
| × | No Dividends on Unearned Awards | We do not pay dividends on unearned PSUs or RSUs. | Pg. 38 | |||
| × | No Employment Contracts | None of our NEOs has a formal employment contract. | Pg. 64 | |||
| × | Pension Benefits Frozen | We froze both our defined benefit pension plans to new participants and future accruals, effective as of April 1, 2012. | Pg. 60 | |||
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COMPENSATION DISCUSSION AND ANALYSIS (continued) |
CEO Compensation at a GlanceObjectives
2014 marked Mr. Peterson’s first full year as PresidentThe main objectives of our executive compensation program are:
To hire and Chief Executive Officer. We have shown Total Direct Compensation (“TDC”), which is equalretain high-caliber executive talent with the leadership abilities and experience necessary to base salary, target bonus opportunityimplement our business strategy while driving shareholder value;
To pay for performance and sustainable,long-term growth by rewarding the achievement of challenging business and individual performance goals;
To build value for shareholders and encourage growth by linking a significant portion of compensation to Company performance with an appropriate balance of short-term and long-term incentives, for Mr. McGraw (former CEO) in 2013 and for Mr. Peterson in 2013, 2014, and reflecting decisions made for 2015. Mr. Peterson took over as CEO on November 1, 2013. Mr. Peterson’s 2014 TDC represents a 14% decrease from his predecessor Mr. McGraw. Note that Mr. McGraw was employed for 10 out of 12 months in 2013. When comparedobjectives to Mr. McGraw’s annualized 2013 target TDC of $7,431,180, Mr. Peterson’s target TDC represents a 19% decrease. 2015 is a 20% increase in target TDC over 2014, which is arounddeepen the medianalignment of our relevant peer groupexecutives to our shareholders; and is consistent
To manage risk through oversight and compensation design to ensure that our incentive programs appropriately motivate our executives to encourage prudent, but not excessive, risk-taking.
In establishing an appropriate mix of fixed and variable pay to reward Company, line of business and individual performance, the Compensation Committee balances the importance of meeting our short-term business goals and maintaining a competitive compensation package designed to attract, motivate and retain experienced and talented executive officers with the need to create shareholder value and drive growth over the longer-term.
Our integrated compensation framework heavily weights variable compensation to reward achievements againstpre-established, quantifiable financial performance objectives and individual strategic performance objectives. In addition, because a significant portion of variable compensation is delivered in the form of equity-based awards, which vest over three years, the value ultimately realized by our executives from these awards depends on stockholder value creation, as measured by the future performance of our prior CEO.stock price.
| * | Excludes our CFO, who is not entitled to an annual incentive or long-term incentive award in 2016 due to his date of hire, and Former CFO, who left the Company mid-way through 2016. |
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COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Changes to Performance Management and Short-Term Incentive PlansOverview of Pay Elements
In 2014,For 2016, guided by our compensation philosophy and objectives, the Company made several strategic enhancements to the incentive plans. These included formalized measuring of management against individual qualitative and quantitative goals, behaviors and competencies. At the beginning of each year, enterprise goals, aligned with the Company’s strategic plan, are set and cascaded down through the organization. This process starts with the CEO, flows to each business leader and is then cascaded respectively to all levelsexecutive compensation program consisted of the organization, driving an aligned enterprise.elements listed below. The goals reflect financial targets inclusive of short-term operating goals, long-term value creation, human capital initiatives, and risk and compliance expectations. Supporting this new process, we implemented a company-wide performance evaluation system to enable full transparency of goal setting, goal tracking and performance assessment with performance feedback. In addition, as described on page 46 of this Proxy Statement, we implemented a new bonus formula to have bonus awards directly linked to both financial and individual performance.
Compensation Actions for 2014 Short-Term Bonuses
The Compensation and Leadership Development Committee was pleased with the Company’s strong financial and strategic performance during 2014, as summarized on page 43 of this Proxy Statement, and the achievements of our management team, as summarized on pages 44 through 46 of this Proxy Statement. These achievements contributed to this strong performance and have positioned the Company for continued growth. However, the Committee believes that annual bonuseach compensation paidelement, and all of these elements combined, are important to our management should align with shareholder interestsmaintain an executive compensation program that is competitive, performance-based and therefore, should, in view of the sizable legal settlements related to Standard & Poor’s Ratings Services that were reached this year, be reduced to reflect these settlements’ negative impact on the Company’s
results, even if the underlying events largely transpired prior to the hiring of many members of the current management team.shareholder-focused.
Specifically, after considerable review, the Committee in consultation with management determined that the 2014 actual performance factor for the Company should be reduced by 25% from the actual funding of 161.7% to calculate cash incentive payments to our management team, consisting of our named executive officers and our other executives and presidents of various business units. For amounts of actual cash incentive payments received by our named executive officers for 2014, see a discussion of the 2014 Short-Term Bonus Plan on pages 46 through 48 of this Proxy Statement and the 2014 Summary Compensation Table on page 56 of this Proxy Statement. The Committee and management view the 25% reduction of the Company performance achievement factor as an appropriate balance between accounting for the negative impact of the settlements and rewarding our management team for its and the Company’s otherwise strong performance. In addition, because these settlements related to our Standard & Poor’s Ratings Services business, the Committee and management also decided that it would be appropriate to reduce the funding for the cash bonuses payable to the Standard & Poor’s Ratings Services Executive Committee’s members by 15%.
New for 2015: Changes to Long-Term Incentive Plans
The Company reviews the long-term incentive (“LTI”) program every year, and this year we have decided to make the following change: instead of performance share units and stock options, our named executive officers will receive a combination of performance share units and restricted stock units. Specifically, this change shifts from 70%-30% performance shares / options to 70%-30% performance share units / restricted stock units. The rationale for this switch is to reduce dilution, align with market practice, and to acknowledge input from shareholders. LTI is intended to cover multiple years and to relate directly to stock price growth.
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COMPENSATION DISCUSSION AND ANALYSIS (continued) |
2014 Say-on-PayStakeholder Roles and Engagement with ShareholdersResponsibilities
The Company received an 88% favorable vote for “say-on-pay” last year. Although this indicated strong support for our executive compensation program, the Company thinks it is important to continue engaging shareholders. We did so this year by holding an Investor Day, and the input from this and other discussions were taken into account, including the decision to change our mix of LTI as noted on page 38 of this Proxy Statement. In addition, Messrs. Callahan and Berisford met with a number of shareholders during the year to discuss our executive compensation program.
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COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Setting Compensation Discussion and Analysis
The Compensation Committee considers the following factors in using its discretion to determine the amount and Leadership Development Committeeform of compensation to be awarded to each of our NEOs.
Use of Market Data
Our Compensation Committee independently evaluates the performance of the CEO and establishes the CEO’s total annual target compensation so that his base salary, target annual incentive opportunity and target long-term incentive awards are competitive against market data for our Proxy Peer Group (detailed below) in addition to compensation survey data (described below) regarding compensation from financial services and general industry firms. The Compensation Committee refers its recommendations to the independent Directors of the Board of Directors (the “Committee”) oversees ourfor review and ratification. For more information on CEO historical and current target total direct compensation, program for senior executives on behalf of our Board. Information about the Committee and its members who are Director nominees can be found on pages 27 and 28 and pages 12 through 22see page 35 of this Proxy Statement.
This Compensation Discussion and Analysis (“CD&A”) describes our named executive officer compensation program, the basis for the com-
pensation paid to our named executive officers for 2014 and the approved compensation opportunities for our named executive officers for 2015. Our CD&A and the Executive Summary found on pages 34 through 55 of this Proxy Statement include adjusted financial information. Please see our 2014 year-end earnings release filed on Form 8-K dated February 13, 2015 for exhibits that reconcile the differences between the non-GAAP measures in the CD&A and comparable financial measures calculated in accordance with U.S. GAAP.
Overview
In 2014, the three key elements of our pay program continued to be base salary, annual cash short-term incentive awards (pursuant to the Company’s Key Executive Short-Term Incentive Compensation Plan, also referred to as the “STIC”) and long-term incentive plan awards linked to our common stock (pursuant to the Company’s 2002 Stock Incentive Plan).
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Use of Market Data in Setting Compensation Levels
For our named executive officersNEOs other than the CEO, we review the range of market compensation between the 25th and 75th percentiles for the companiesour Proxy Peer Group as well as company data provided in the compensation surveys described below to develop an understanding of market practicepay levels for each position. In general, we design our executive compensation program to pay median levels of compensation for target levels of achievement, to pay below median for achievement below target, and to pay above median compensation for significantly higher levels of achievement versus target goals.
We annually review compensation market data in setting base salaries and short-term and long-term incentive opportunities for all our named executive officers.NEOs. However, we do not limit or increase individual incentive payments based solely on
these market reference points; wepoints. We also consider factors such as internal pay equity, performance, the critical skills and experience of the named executive officerNEO and the strategic importance of his or her role to the Company.Company, as described in this section of our Proxy Statement.
For purposes of setting compensation targets for 20142016 and 2015,2017, the Compensation Committee was provided with competitive data for our Proxy Peer Group by Pay Governance as well as information from two compensation surveys in which the Company participates: the McLagan Financial Services Survey and the Willis Towers Watson General Industry Executive Compensation Survey.
| 40 | 2017 Proxy Statement | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Proxy Peer Group
The Compensation Committee reviews the composition of the Proxy Peer Group each year to ensure it remains appropriate to use in competitive analysis of executive compensation from size, industry and business model perspectives.
In reviewing and identifying our 2016 Proxy Peer Group, the Compensation Committee considered a number of factors including shareholder advisor methodologies to identify peer groups, and the annual revenue, market capitalization and mix of businesses of the companies considered and selected. With the assistance of Pay Governance, LLC also provided competitive datathe Compensation Committee identified companies (listed below) to serve as market reference points for our proxycompensation comparison purposes for 2016, with particular reference to industry, revenue and market capitalization. In terms of size, as shown in the table below, at the end of 2016, the Company’s annual revenue was between the median and the 75th percentile and the Company’s market capitalization was above the 75th percentile of the Proxy Peer Group.
| Proxy Peer Group | Revenue ($ billions) | Market Cap. ($ billions) | ||||||
25th Percentile | $ | 3.60 | $ | 14.97 | ||||
Median | $ | 4.86 | $ | 20.50 | ||||
75th percentile | $ | 7.30 | $ | 27.46 | ||||
S&P Global | $ | 5.66 | $ | 32.00 |
For the purposes of setting 2017 compensation targets, the Compensation Committee determined that the current Proxy Peer Group remained an appropriate comparison group for the Company and, therefore, no changes were necessary.
Survey Peer Groups
The companies that comprise the McLagan survey peer group.group are listed below. The Willis Towers Watson survey does not identify the specific companies that reported compensation information. The McLagan survey included
Survey data allows the following companies:Compensation Committee to compare compensation levels for certain roles to a wider spectrum of companies and benchmark them to a broader market for talent.
Proxy Peer Group Companies
In 2013, we adopted a new peer group of specialty finance companies following our divestiture of McGraw-Hill Education. In 2014, the Committee reviewed this peer group and eliminated
SLM Corporation since it had divested much of its core financial services operations during the year. The following companies make up the Company’s current peer group:
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Compensation Roles and Responsibilities
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Our Committee:
Establishes an overall total compensation philosophy statement for the Company.
Annually reviews and approves goals and objectives for the CEO; meets at least annually with the CEO to discuss the CEO’s self-assessment in achieving individual and corporate goals and objectives; evaluates the CEO’s performance in light of those goals and objectives; and establishes the CEO’s total compensation based on this evaluation.
Ensures that the Company’s executive compensation program is appropriately competitive, supports organization objectives and shareholder interests and creates pay-for-performance linkage.
Reviews and approves the CEO’s recommendations for salary and incentive compensation of the direct reports to the CEO.
Regularly reports to the Board of Directors on the Committee’s activities and any and all compensation matters which should appropriately be brought to the Board’s attention.
Compensation and Leadership Development Committee’s Charter
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In 2014, Pay Governance:
Reviewed Committee agendas and supporting materials in advance of each meeting and raised questions or issues with management and the Committee Chair, as appropriate.
At the Committee’s direction, worked with management on major proposals in advance of finalization by, and presentation to, the Committee.
Reviewed drafts of the Company’s CD&A and the Compensation Committee Report and related tables for inclusion in the Company’s Proxy Statement.
Reviewed competitive data on the compensation of the CEO and provided independent analyses and recommendations on the CEO’s compensation to the Committee.
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Internal Pay Equity The Compensation Committee also takes into account internal equity when making pay decisions. While there is not an established formal policy on internal pay guidelines, the Compensation Committee reviews compensation levels to ensure that the appropriate internal equity exists. This is determined based on various considerations including management of revenue or operating profit, headcount responsibility, geographic scope, and job complexity. | ||||
Performance and Talent Assessment
The Compensation Committee’s consideration is further informed by the Company’s performance evaluation process, which was overhauled in 2014 to strengthen the link topay-for-performance through formalized measuring of management against individual qualitative and quantitative goals, behaviors and competencies aligned with the Company’s strategic plan. The goals reflect financial targets inclusive of short-term operating goals, long-term value creation, human capital initiatives, and risk and compliance expectations. The Compensation Committee along with the entire Board (other than the CEO establisheswith respect to his review) participates in an annual performance goalsreview and discussion of each NEO as well as succession planning for each position. Further information on the Company’s business performance as well as each NEO’s key individual achievements for 2016 can be found beginning on page 44 of this Proxy Statement. Additionally, further information about succession planning can be found beginning on page 9 of this Proxy Statement.
Other Factors
The Compensation Committee also considers input from its independent compensation consultant and our shareholders as well as additional factors, including business and market conditions, leadership skills and experience, risk management and governance, and tax deductibility and accounting considerations. Further information on the role of the NEOs.
The CEO conducts an annual performance evaluationindependent compensation consultant and our shareholders can be found on page 39 of each of the NEOs against pre-established goals.
Based on performance and competitive market data, the CEO makes recommendations to the Compensation and Leadership Development Committee for the total compensation of the other NEOs.
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COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Financial Performance Overview in 2014History of Executive Compensation Program Changes
Our Adjusted Revenue increasedThe changes described below show enhancements to $5,047M (a 7.3% increaseour compensation programs that we have made over prior year),time, and which continue to be in effect in 2016. We believe that these improvements demonstrate our Adjusted Net Income increasedresponsiveness to $1,079M (a 19.6% increase over prior year) and alignment with our Adjusted EPS increasedshareholders and exhibit our commitment to $3.90 (a 21% increase over prior year).pay-for-performance, incorporating best practices, and adapting to market conditions.
Increased our share price by 14%, beating the S&P 500’s 12% growth.
Significant international growth at 8% vs. 7% for U.S.
Continued to focus on our core business strategy and completed the sale of McGraw Hill Construction to Symphony Technology Group for $320M.
Identified approximately $140M in cost savings for delivery in 2014-2016, against an original target of $100M, and the Company is working to identify further opportunities to exceed the $100M target, which will in part be re-invested to drive growth.
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COMPENSATION DISCUSSION AND ANALYSIS (continued) |
DOUG PETERSON: PRESIDENT AND CEOSnapshot: 2016 Financial Performance and Compensation Decisions
Mr. Peterson joinedFinancial Performance Overview in 2016
In 2016, the Company in September 2011 as President, Standard & Poor’s Ratings Services (“S&P Ratings”). He was promoted to his current role in November 2013.had strong annual operational and financial performance, including the following highlights:
Doug Peterson’s Pay-for-Performance
2014 Key Achievements:NEO Compensation Decisions in 2016
The table below shows the Compensation Committee’s compensation decisions for 2016 for the NEOs, and is different from the SEC required disclosure in the “2016 Summary Compensation Table” beginning on page 65. It is a blend of annualized base salary and compensation that is actually paid (incentive payout) or granted (long-term incentive grants), which together reflects the total annual 2016 compensation decision for each NEO.
The Compensation Committee established the calendar year base salary and annual long-term incentive grant amount for each NEO early in the fiscal year or, as applicable, at the time they assumed their position. The annual incentive payout amount was calculated and paid after the fiscal year ended based on the incentive plan funding and the individual performance of each NEO, as described below.
| Actual 2016 Long-Term Incentive Grants | ||||||||||||||||||||||||
| Executive (1) | Annualized Base Salary | Actual 2016 Incentive Payout | RSUs | PSUs (At Target) | Long-Term (At Target) | Total 2016 Annual Decision Compensation | ||||||||||||||||||
D. Peterson | $ | 1,000,000 | $ | 2,890,000 | $ | 1,440,000 | $ | 3,360,000 | $ | — | $ | 8,690,000 | ||||||||||||
E. Steenbergen(2) | $ | 750,000 | $ | — | $ | — | $ | — | $ | — | $ | 750,000 | ||||||||||||
R. MacKay | $ | 425,000 | $ | 650,000 | $ | 157,500 | $ | 367,500 | $ | — | $ | 1,600,000 | ||||||||||||
J. Berisford | $ | 600,000 | $ | 830,000 | $ | 300,000 | $ | 700,000 | $ | — | $ | 2,430,000 | ||||||||||||
S. Kemps | $ | 600,000 | $ | 935,000 | $ | 255,000 | $ | 595,000 | $ | — | $ | 2,385,000 | ||||||||||||
A. Matturri | $ | 500,000 | $ | 830,000 | $ | 96,000 | $ | 224,000 | $ | 480,000 | $ | 2,130,000 | ||||||||||||
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The Company out-performed the S&P 500 and its peer group in return to shareholders.
Held inaugural Investor Day for the Company, and met with over 100 investors during the course of 2014.
Filled a number of key leadership roles in 2014, including a new General Counsel, President of S&P Capital IQ, President of S&P Ratings and Chief Strategy Officer.
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| Due to the timing of his hire, Mr. Steenbergen was not eligible to participate in the 2016 STIC and, therefore, did not receive an annual incentive payout for 2016. Mr. Steenbergen was also not eligible to receive an annual long-term incentive award as part of his 2016 total compensation. Mr. Steenbergen did receive certain new hire compensation payments in connection with his appointment. A description of Mr. Steenbergen’s 2016 new hire compensation payments and grants can be found in the 2016 compensation tables and accompanying footnotes beginning on page 65 of this Proxy Statement. |
JACK CALLAHAN: CHIEF FINANCIAL OFFICER
Mr. Callahan joined the Company in his current role in December 2010.
Jack Callahan’s Pay-for-Performance
2014 Key Achievements:
Led execution of a Productivity Plan to deliver $100 million plus cost savings by the end of 2016.
Prioritized potential target business development opportunities based on strategic fit, synergies and ability to execute.
Under Mr. Callahan’s leadership, the Company experienced strong balance sheet and capital management performance in 2014.
| 44 | | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
CEO Pay Decisions
DOUGLAS PETERSON: PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. Peterson joined the Company in September 2011 as President, Standard & Poor’s Ratings Services. He was promoted to his current role in November 2013.
Mr. Peterson’s 2016Pay-for-Performance
2016 Key Achievements:
Under Mr. Peterson’s leadership, the Company:
Delivered strong performance and exceeded Revenue, EBITA and EPS goals. For 2016, ICP Adjusted Revenue grew 9.4% to $5.811 billion, ICP Adjusted EBITA increased 14.5% to $2.427 billion and ICP Adjusted EPS from continuing operations increased 13.9% to $5.34.
Launched the new S&P Global brand, including purpose and values and strategy for sustained market engagement.
Delivered on the SNL integration and realized cost and revenue synergies.
Deepened customer understanding and refined commercial and pricing strategies.
Continued to develop relationships with investors and market participants and sustained outreach to policy makers and industry leaders.
Deepened employee engagement, advanced diversity and enhanced the global talent pipeline.
2016 Actual
Annual Incentive Payout
For results achieved in 2016, Mr. Peterson received a payout of $2,890,000, representing 170.0% of target.
2016 Long-Term Incentive Awards
For details on his 2016 annual long-term incentive grant, see our Long-Term Incentive Plan discussion and our 2016 Grants of Plan-Based Awards Table below.
| | 2017 Proxy Statement | 45 |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
EWOUT STEENBERGEN: EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
Mr. Steenbergen joined the Company in his current role in November 2016.
Mr. Steenbergen’s 2016Pay-for-Performance
Experience and Qualifications of Newly Appointed NEO:
Under Mr. Steenbergen’s leadership in his prior role as Executive Vice President and CFO of Voya Financial, Inc., Voya successfully strengthened its balance sheet, de-risked its investment portfolio and executed a robust initial public offering in 2013.
Over his career, Mr. Steenbergen has held a number of management roles, both in the United States and internationally.
2016 Compensation Determination:
Mr. Steenbergen’s new hire compensation package reflects an assessment of the market compensation levels at the time of hire as well as the skills and qualifications Mr. Steenbergen brings to the role.
Consistent with the presentation for the other NEOs, the chart to the right represents Mr. Steenbergen’s 2016 annual compensation package at target. Due to the timing of his hire, Mr. Steenbergen was not eligible to participate in the 2016 STIC. Mr. Steenbergen was also not eligible to receive a target long-term incentive award as part of his 2016 total target compensation.
The chart does not include amounts paid or granted to Mr. Steenbergen in connection with his hire. A description of Mr. Steenbergen’s 2016 new hire compensation payments and grants can be found in the 2016 compensation tables and accompanying footnotes beginning on page 65 of this Proxy Statement.
2016 Actual
Annual Incentive Payout
Due to the timing of his hire, Mr. Steenbergen did not receive a 2016 short-term incentive award. For details of payments in connection with his hire, see our 2016 Summary Compensation Table below.
Long-Term Incentive Awards
Mr. Steenbergen also did not receive a 2016 long-term incentive award as part of his 2016 total target compensation. For details on his new hire compensation grant, see our 2016 Grants of Plan-Based Awards Table below.
| 46 | 2017 Proxy Statement | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
ROBERT MACKAY: INTERIM CHIEF FINANCIAL OFFICER
Mr. MacKay joined the Company in April 2015 as Senior Vice President, Corporate Controller. He was appointed Interim Chief Financial Officer effective August 5, 2016 through November 14, 2016, Mr. Steenbergen’s hire date. Effective November 14, 2016, Mr. MacKay resumed his role as Senior Vice President, Corporate Controller.
Mr. MacKay’s 2016Pay-for-Performance
2016 Key Achievements:
As Interim CFO, Mr. MacKay:
Was instrumental in assuring a smooth CFO transition process, including serving as Interim CFO and supporting the onboarding of our new CFO.
Led the project to renew the order-to-cash processes and systems on an enterprise basis.
Supported the strategic planning process for 2017 through 2019.
Successfully led the execution and completion of our debt refinancing and Accelerated Stock Repurchase.
Continued careful cash flow management resulting in solid free cash flow generation.
2016 Actual
Annual Incentive Payout
For results achieved in 2016, Mr. MacKay received a payout of $650,000, representing 179.9% of target.
2016 Long-Term Incentive Awards
For details on his 2016 annual long-term incentive grant, see our Long-Term Incentive Plan discussion and our 2016 Grants of Plan-Based Awards Table below.
| | 2017 Proxy Statement | 47 |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
JOHN BERISFORD: EXECUTIVE VICE PRESIDENT, HUMAN RESOURCESS&P GLOBAL RATINGS
Mr. Berisford joined the Company in January 2011 as Executive Vice President, Human Resources. Effective November 3, 2015, he was appointed to his current role as President, S&P Global Ratings.
Mr. Berisford’s 2016Pay-for-Performance
2016 Key Achievements:
As President, S&P Global Ratings, Mr. Berisford:
John Berisford’s Pay-for-PerformanceDelivered strong financial performance. Revenue of S&P Global Ratings increased 4% to $2,535 million and ICP Adjusted EBITA of S&P Global Ratings increased 7% to $1,235 million.
2014 Key Achievements:Advanced operational workflow and set a path for realizing future productivity gains.
Refined the operating model to further delineate analytical and commercial activities and implemented new commercial strategies.
Established new career framework and job structure to align pay to the market.extended proactive relationships with stakeholders.
2016 Actual
Annual Incentive Payout
For results achieved in 2016, Mr. Berisford received a payout of $830,000, representing 150.9% of target.
2016 Long-Term Incentive Awards
For details on his 2016 annual long-term incentive grant, see our Long-Term Incentive Plan discussion and our 2016 Grants of Plan-Based Awards Table below.
| 48 | 2017 Proxy Statement | |
Implemented new performance management and development processes.
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Elevated succession planning process to drive talent capability transparency for the top 150 executives.
IMOGEN DILLON HATCHER:STEVEN KEMPS: EXECUTIVE VICE PRESIDENT, S&P CAPITAL IQGENERAL COUNSEL
Ms. Dillon HatcherMr. Kemps joined the Company in April 2014 as Chief Commercial Officer, S&P Capital IQ. She was promoted to herhis current role in July 2014.August 2016.
Mr. Kemps’s 2016Pay-for-Performance
Experience and Qualifications of Newly Appointed NEO:
Imogen Dillon Hatcher’s Pay-for-Performance
2014 Key Achievements:
InitiatedIn his prior role, Mr. Kemps served as Executive Vice President and ledGeneral Counsel at Quanta Services, where he oversaw all legal affairs and advised the strategic reset design for S&P Capital IQ.business on regulatory, ethical and compliance matters.
Developed the 2015Mr. Kemps has also held various general counsel and beyond game plan “Connectedness” to deliversenior legal positions with large public companies and previously served as a customer back approach to the market.federal law clerk in a U.S. District Court.
Mr. Kemps’s new hire compensation package reflects an assessment of the market compensation levels at the time of hire as well as the skills and qualifications Mr. Kemps brings to the role.
Consistent with the presentation for the other NEOs, the chart to the right represents Mr. Kemps’s 2016 compensation package at target.
The chart does not include all amounts paid or granted to Mr. Kemps in connection with his hire. A description of Mr. Kemps’s 2016 new hire compensation payments and grants can be found in the 2016 compensation tables and accompanying footnotes beginning on page 65 of this Proxy Statement.
2016 Key Achievements:
As Executive Vice President, General Counsel, Mr. Kemps:
Acted as a trusted advisor to the CEO and quickly built relationships within our divisions and with functional leaders.
Provided strong leadership and oversight to the legal functions.
2016 Actual
Annual Incentive Payout
For results achieved in 2016, Mr. Kemps received a payout of $935,000, representing 170.0% of target.
2016 Long-Term Incentive Awards
For details on his 2016 annual long-term incentive grant, see our Long-Term Incentive Plan discussion and our 2016 Grants of Plan-Based Awards Table below.
| | 2017 Proxy Statement | 49 |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
ALEXANDER MATTURRI: CHIEF EXECUTIVE OFFICER, S&P DOW JONES INDICES
Mr. Matturri joined the Company in his current role in May 2007.
Mr. Matturri’s 2016Pay-for-Performance
2016 Key Achievements:
As Chief Executive Officer, S&P Dow Jones Indices, Mr. Matturri:
Delivered strong financial performance. ICP Adjusted Revenue of S&P Dow Jones Indices increased 7% to $638 million and ICP Adjusted EBITA of S&P Dow Jones Indices increased 6% to $420 million.
Completed the acquisition of TruCost, bringing ESG data and Indices further to the forefront.
Deepened strategic relationships with exchanges and extended global reach with new exchange partnerships such as JPX/S&P CAPEX & Human Capital Index & Bolsa de Santiago.
Strengthened S&P Dow Jones Indices’ position as a leading creator of innovative intellectual property.
2016 Actual
Annual Incentive Payout
For results achieved in 2016, Mr. Matturri received a payout of $830,000, representing 150.9% of target.
2016 Long-Term Incentive Awards
For details on his 2016 annual long-term incentive grant, see our Long-Term Incentive Plan discussion and our 2016 Grants of Plan-Based Awards Table below.
| 50 | 2017 Proxy Statement | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
JACK CALLAHAN: FORMER CHIEF FINANCIAL OFFICER
As noted above, Mr. Callahan ceased serving as one of our executive officers on September 1, 2016. As a result of his voluntary departure from the Company, Mr. Callahan forfeited his participation in the 2016 Key Executive Short-Term Incentive Plan and was not entitled to a 2016 annual incentive payment under the Plan. For further detail on his short-term incentive award, see the 2016 Short-Term Incentive Plan discussion and the 2016 Summary Compensation Table below.
Prior to his departure, Mr. Callahan received an annual equity grant in April 2016 consistent with the terms and conditions of equity grants received by our other NEOs. These unvested and unearned awards were forfeited and canceled upon his voluntary departure. In addition, all of Mr. Callahan’s remaining unvested and unearned long-term equity awards granted to him under the Company’s long-term incentive plans were forfeited and canceled. For details, see our Long-Term Incentive Plan discussion and our 2016 Grants of Plan-Based Awards Table below.
Finally, in connection with his voluntary departure, Mr. Callahan was not entitled to and did not receive any termination payments or termination benefits. For details, see our Potential Payments Upon Termination orChange-in-Control section beginning on page 78 of this Proxy Statement.
Mr. Callahan is not eligible for a long-term incentive equity grant or short-term annual incentive payment for 2017 due to his departure from the Company.
| | | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
NEERAJ SAHAI: PRESIDENT, S&P RATINGSBase Salaries
Mr. Sahai joined the Company in January 2014 in his current role.
Neeraj Sahai’s Pay-for-Performance
2014 Key Achievements:Snapshot: Base Salaries
Established dedicated global infrastructure practiceBase salary is a customary, fixed element of compensation intended to enable S&P Ratings’ position as leading rating agency in the sectorattract and aretain key voice in the global debate on the new paradigm in infrastructure funding.
Initiated a sales transformation initiative to drive a S&P Ratings client-centric, credit risk services company.
Initiated a new Regional-Country Operating Model in EMEA and APAC to augment our external focus and drive international growth.
For a discussion regarding payments and benefits received by Messrs. Eccleston and Vittor, see pages 55, 75 and 76 of this Proxy Statement.
| Executive | 2016 Base Salary | 2017 Base Salary | % Increase | |||||||||
D. Peterson | $ | 1,000,000 | $ | 1,000,000 | 0 | % | ||||||
E. Steenbergen | $ | 750,000 | $ | 750,000 | 0 | % | ||||||
R. MacKay | $ | 425,000 | $ | 435,625 | 3 | % | ||||||
J. Berisford | $ | 600,000 | $ | 600,000 | 0 | % | ||||||
S. Kemps | $ | 600,000 | $ | 600,000 | 0 | % | ||||||
A. Matturri | $ | 500,000 | $ | 550,000 | 10 | % | ||||||
J. Callahan(1) | $ | 750,000 | — | — | ||||||||
Base Salaries
| NEO (1) | 2014 Base Salary | 2015 Base Salary | % Increase | |||||||||
D. L. Peterson | $ | 900,000 | $ | 1,000,000 | 11.1 | % | ||||||
J. F. Callahan, Jr. | $ | 750,000 | $ | 750,000 | — | |||||||
J. L. Berisford (2) | $ | 550,000 | — | — | ||||||||
I. Dillon Hatcher | $ | 400,000 | $ | 450,000 | 12.5 | % | ||||||
N. Sahai | $ | 800,000 | $ | 800,000 | — | |||||||
| (1) |
2017 Base Salary Determination
Our Compensation Committee independently evaluates the performance of the CEO and establishes the CEO’s base salary so that, together with his target annual incentive opportunity and stock-based long-term incentive awards, his total annual target compensation is competitive against our Proxy Peer Group and market data for financial services and general industry. For 2017, the Compensation Committee determined that no increase to Mr. Peterson’s base salary is warranted.
As discussed beginning on page 40, the base salaries for the other NEOs reflect findings from our Proxy Peer Group and annual market surveys as well as considerations of their individual contributions, performance, time in role, scope of responsibility, leadership skills and experience. For 2017, the Compensation Committee determined that Mr. Matturri’s base salary should increase to maintain market alignment. Since he was not an executive officer of the Company as of December 31, 2016, Mr. MacKay’s base salary increase reflects participation in the Company’s annual merit increase program and was not individually determined by the Compensation Committee.
Short-Term Annual Incentive Plan
Snapshot: Short-Term Annual Incentive Cash Compensation
| NEO | 2014 Target Bonus | 2014 Actual Bonus | % of Target Paid | 2015 Target Bonus | ||||||||||||
D. L. Peterson | $ | 1,100,000 | $ | 1,333,737 | 121 | % | $ | 1,500,000 | ||||||||
J. F. Callahan, Jr. | $ | 600,000 | $ | 800,000 | 133 | % | $ | 600,000 | ||||||||
J. L. Berisford (1) | $ | 400,000 | $ | 400,000 | 100 | % | — | |||||||||
I. Dillon Hatcher | $ | 442,740 | $ | 500,000 | 113 | % | $ | 500,000 | ||||||||
N. Sahai | $ | 700,000 | $ | 900,000 | 129 | % | $ | 800,000 | ||||||||
L. Eccleston | $ | 500,000 | $ | 557,094 | 111 | % | — | |||||||||
K. M. Vittor | $ | 400,000 | $ | 450,000 | 113 | % | — | |||||||||
Executive | 2016 | 2017 | ||||||||||||||
| Target Incentive Award | Actual Incentive Award | % of Target Paid | Target Incentive Award | |||||||||||||
D. Peterson | $ | 1,700,000 | $ | 2,890,000 | 170.0% | $ | 1,800,000 | |||||||||
E. Steenbergen(1) | — | — | — | $ | 1,000,000 | |||||||||||
R. MacKay | $ | 361,250 | $ | 650,000 | 179.9% | $ | 370,281 | |||||||||
J. Berisford | $ | 550,000 | $ | 830,000 | 150.9% | $ | 750,000 | |||||||||
S. Kemps | $ | 550,000 | $ | 935,000 | 170.0% | $ | 550,000 | |||||||||
A. Matturri | $ | 550,000 | $ | 830,000 | 150.9% | $ | 750,000 | |||||||||
J. Callahan(2) | $ | 600,000 | $ | 0 | 0% | — | ||||||||||
| (1) |
| (2) | Due to his departure from the Company, Mr. Callahan forfeited any incentive award under the 2016 STIC and was not eligible to participate in the 2017 STIC. |
| 52 | 2017 Proxy Statement | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
2016 Short-Term Annual Incentive Payout Determination Formulas
2016 Short-Term Annual Incentive Plan Design Under the STIC
|
• The incentive target opportunity for each NEO is in part determined based on market data as well as individual performance and experience. For a more detailed description of how we set compensation targets, see pages 40 through 42 of this Proxy Statement. • The enterprise-level Company performance component for
• The individual component is allocated based on an assessment of each participant’s achievement against strategic or developmental goals established at the beginning of the year.
The STIC is designed to comply with Section 162(m) of the Internal Revenue Code by containing maximum performance goals for our CEO and other covered employees, which for 2016 included all of our NEOs other than Messrs. Steenbergen, MacKay and Kemps. |
| | | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
For Section 162(m) covered employees, the maximum incentive award opportunity is capped at the lesser of 200% of each participant’s target award or the maximum payout produced by the applicable Section 162(m) performance goals.
20142016 Short-Term Bonus PlanAnnual Incentive Payouts
2016 Short-Term Annual Incentive Plan Financial Goals and Results
The 20142016 short-term annual incentive paymentspayouts were based 75% on Net IncomeICP Adjusted EBITA growth and 25% on ICP Adjusted Revenue for all of our named executive officers,NEOs, other than Ms. Dillon HatcherMessrs. Berisford and Messrs. Sahai and Eccleston. Matturri.
As the headPresident of S&P Global Ratings, Mr. SahaiBerisford’s annual incentive award was measured 50% on the above-mentioned enterprise goals and 50% on S&P Ratings ICP Adjusted EBITA growth.
As the Chief Executive Officer of S&P Dow Jones Indices, Mr. Matturri’s annual incentive award was measured 50% on the above-mentioned enterprise goals and 50% on a 75% /25%/25% mix of Net Operating Income (“NOI”)S&P Dow Jones Indices ICP Adjusted EBITA and Revenue for his business. Ms. Dillon Hatcher was measured purely on the S&P Capital IQ Net Operating Income, as she was not promoted to President until November 2014. Mr. Eccleston’s bonus was measured 50% on the above-mentioned enterprise goals and 50% on the S&P Capital IQ Net Operating Income, subject to adjustments negotiated in connection with his departure.ICP Adjusted Revenue.
2014 Key Executive2016 Corporate Short-Term Annual Incentive Compensation Plan Funding and Adjustments
Funding | Net Income Growth 75% Weighting | Revenue Growth 25% Weighting | ||||||
0% | 0 | % | 0.00 | % | ||||
50% | 8.8 | % | 3.5 | % | ||||
100% | 13.0 | % | 6.3 | % | ||||
150% | 16.0 | % | 9.1 | % | ||||
200% | 20.4 | % | 13.5 | % | ||||
The Compensation Committee reviewed the reported 20142016 Revenue Net Income and EPSEBITA goals and appliedadjusted for significant unplanned restructuring expenses as well as for the following pre-approved adjustmentsnet impact of significant business dispositions during 2016 net of any benefit from unplanned acquisitions that occurred during the year to determine adjustednon-GAAP financial performance for incentive compensation purposes:purposes.
Restructuring costs;
Legal settlement reserves;
Impairment tied to the sale of one of the Company’s buildings and of the Company plane;
M&A due diligence costs; and
Impact of a mid-year acquisition.
We make these adjustments to Revenue Net Income and EPSEBITA because the resulting figures excludeone-time events and, therefore, more closely approximate continuing operations, which better reflect the performance of the namedNEOs.
For a reconciliation of the adjustments to comparable financial measures calculated in accordance with U.S. GAAP, please see Exhibit A. Thenon-GAAP financial information included on Exhibit A has been provided in order to show investors how our Compensation Committee views the Company’s performance as it relates to the compensation program for our executive officers.
Our 2014 reported Net Income from continuing operations of $1,079 million and our EPS of $3.90 was adjusted to exclude $1,711 million in net pre-tax non-recurring charges. Net non-recurring charges include: restructuring costs of $86 million; legal settlement costs of $1,612 million; $9.0 million non-cash impairment of a data center and aircraft; and $4.0 million related to M&A due diligence costs. Our 2014 reported Revenue from continuing operations of $5,051 million was adjusted to exclude $4.0 million of Revenue from an acquisition.
Based on the adjusted results of 19.6%14.5% growth for Net Income from continuing operationsICP Adjusted EBITA and 7.3%9.4% growth for ICP Adjusted Revenue, the 2014 short-term bonus2016 achievement and funding for the Company’s enterprise-level goals was 161.7%170%. This funding was further adjusted downward as discussed on page 38 of this Proxy Statement.
2016 S&P Global Ratings Short-Term Annual Incentive Funding Goals (50% of STAnnual Incentive Award Funding for Mr. Sahai)
Funding | NOI vs. Budget 75% Weighting | Revenue vs. Budget 25% Weighting | ||||||
0% | 83 | % | 94 | % | ||||
50% | 92 | % | 97 | % | ||||
100% | 100 | % | 100 | % | ||||
150% | 104 | % | 102 | % | ||||
200% | 109 | % | 103 | % | ||||
Based on an adjusted NOI of $1,098.8 million and Revenue of $2,454.9 million, the blended results provided an achievement and funding of 150.8%. This funding was adjusted downward as discussed on page 38 of this Proxy Statement.
S&P Capital IQ Short-Term Funding Goals (100% of ST Funding for Ms. Dillon Hatcher and 50% of ST Funding for Mr. Eccleston)
Funding | NOI vs. Prior Year | |||
0% | 100.0 | % | ||
50% | 105.2 | % | ||
100% | 110.5 | % | ||
150% | 127.9 | % | ||
200% | 145.2 | % | ||
| |
Based on S&P Capital IQ’s NOI achievement, the short-term funding was 124.4%. Ms. Dillon Hatcher’s payment was adjusted downward in a manner similar to adjustments made with respect to the other NEOs as discussed on page 38 of this Proxy Statement.
Individual Strategic GoalsBerisford)
As previously mentioned, 70% of the individual short-term bonus award was determined by financial results (or a blend of the Company funding and business unit results for business unit Presidents). The remaining 30% was allocated based on the achievement of individual strategic goals (our NEOs’ key achievements for 2014 are described on pages 44 through 46 of this Proxy Statement). The sum of the total bonus award for each participant was capped at 200% of their bonus target.
2015 Short-Term Incentive Compensation Plan Funding
The Committee approved a mix of 75% Net Income and 25% Revenue for the performance measures for the 2015 Short-Term Incentive Plan. Ms. Dillon Hatcher and Mr. Sahai will be measured 50% on these enterprise goals and 50% on their business operations.
For the net income performance goal, the Committee established a funding schedule with a 0% funding threshold for 0% growth, 100% funding for mid-teens growth and 200% funding for approximately 20% growth.
For the revenue performance goal, the Committee established a funding schedule with a 0% funding threshold for 0% growth, 100% funding for mid-single digit growth and 200% funding for low-teens growth.
The 2015 business operation goals have not been established yet for Ms. Dillon Hatcher and Mr. Sahai.
Long-Term Incentive
Long-Term Incentive Target Opportunities
| NEO | 2014 Long-Term Incentive Target | 2015 Long-Term Incentive Target | ||||||
D. L. Peterson | $ | 4,000,000 | $ | 4,700,000 | ||||
J. F. Callahan, Jr. | $ | 1,000,000 | $ | 1,200,000 | ||||
J. L. Berisford (1) | $ | 850,000 | — | |||||
I. Dillon Hatcher | $ | 300,000 | $ | 600,000 | ||||
N. Sahai | $ | 1,500,000 | $ | 1,500,000 | ||||
L. Eccleston | $ | 950,000 | — | |||||
K. M. Vittor | $ | 863,000 | — | |||||
Long-Term Incentive Plan Design
The 2014 program under the Long-Term Incentive Plan continued the use of performance share units (PSUs), representing 70% of the participant’s long-term incentive target with the remaining 30% granted as stock options. The mix of PSUs and options balances incentives based on stock appreciation and performance factors not directly related to stock price.
2014 Long-Term Incentive Plan
In 2014, the Company continued to use an EPS growth goal for the 2014-2016 performance period. The Committee set a minimum floor of 3% growth on the achievement of this goal. The following schedule was approved for the 2014 PSU Award:
2014 Long-Term Incentive Plan Funding
Funding | 3-Yr EPS CAGR* | |||
0% | 3.0 | % | ||
50% | 8.3 | % | ||
100% | 12.6 | % | ||
150% | 16.0 | % | ||
200% | 20.0 | % | ||
| | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Payments under
The Compensation Committee reviewed and approved the 2014Division ICP Adjusted EBITA for S&P Global Ratings of $1,235 million. Based on this Division ICP Adjusted EBITA, the 2016 achievement and funding for the S&P Global Ratings division-level goal was 130.4%.
2016 S&P Dow Jones Indices Short-Term Annual Incentive Funding Goals (50% of Annual Incentive Award Funding for Mr. Matturri)
The Compensation Committee reviewed and approved the Division ICP Adjusted Revenue of $638 million and Division ICP Adjusted EBITA of $420 million for S&P Dow Jones Indices. Revenue for S&P Dow Jones Indices was adjusted to account for movements in foreign currency translation that were in excess of plan rates by more than three percent. Based on these blended results, the 2016 achievement and funding for the S&P Dow Jones Indices division-level goals was 130.1%.
Individual Strategic Goals
As discussed in detail above, 70% of the individual short-term annual incentive award will be made duringwas determined by Company financial results (or a blend of the first quarter of 2017,Company funding and division results for division presidents). For all NEOs, including the CEO, the remaining 30% was allocated based on the achievement of individual strategic or developmental goals (our NEOs’ key achievements for 2016 are described on pages 45 through 50 of this Proxy Statement). The sum of the 2014-2016total annual incentive award for each participant was capped at the lesser of 200% of their target annual incentive award and, as applicable, the maximum payout produced by the applicable Section 162(m) performance period.goals.
In addition2016 Payouts Under the STIC
For a list of actual payments made to our regular program,NEOs under the STIC in 2014 we also made one-time grantsrespect of time-vesting RSU awards to Ms. Dillon Hatcher and Mr. Sahai when they were hired, as replacement awards for equity grants that they forfeited in connection with their departure from their prior employers. Ms. Dillon Hatcher also received another RSU award in 2014 in connection with her being named acting President of S&P Capital IQ. For details,2016 performance, see 2014 Grants of Plan-Based Awards Tablethe chart above on page 5952 of this Proxy Statement.
20152017 Short-Term Annual Incentive Plan Design and Targets
2017 Short-Term Annual Incentive Plan Design Under the STIC
The Compensation Committee approved a mix of 75% EBITA growth and 25% Revenue as the performance measures for the corporate 2017 STIC, subject to historicalpre-approved adjustments including deal-related amortization. Messrs. Berisford and Matturri will be measured 50% on these enterprise goals and 50% on their division-level goals. The Compensation Committee believes that these metrics reward performance to draw focus to productivity measures, create greater efficiencies and strengthen the importance of growth and scale to the Company, all of which ultimately drive increased shareholder value.
For the Revenue performance goal, the Compensation Committee established a funding schedule with a 0% funding threshold for a reported 5% decline in revenue, 100% funding for reported revenue unchanged from the prior year and 200% funding for approximately 11% growth. For the EBITA performance goal, the Compensation Committee established a funding schedule with a 0% payout for a 1% decline in reported EBITA, 100% funding for a 5% increase in reported EBITA and 200% funding for an 11% increase in reported EBITA. These levels of funding take into consideration the significant divestitures of J.D. Power, SPSE/CMA and Equity Research businesses during 2016. On an organic basis, 100% funding is associated with 5% revenue growth and 8% EBITA growth. A funding level of 200% is associated with organic revenue growth of 11% and organic EBITA growth of 14%.
The 2017 division-level goals have not yet been established for Messrs. Berisford and Matturri.
| | 2017 Proxy Statement | 55 |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
2017 Short-Term Annual Incentive Award Target Determination
Our Compensation Committee independently evaluates the performance of the CEO and establishes the CEO’s 2017 target annual incentive award so that, together with his base salary and long-term incentive award, his total target annual compensation is market competitive and motivates and rewards him for performance against Company and individual goals. For 2017, the Compensation Committee determined that Mr. Peterson’s target annual incentive award amount should increase from $1,700,000 to $1,800,000 to provide a market-competitive short-term annual incentive award.
As discussed beginning on page 40, the target annual incentive award amounts for the other NEOs reflect findings from our Proxy Peer Group and annual market surveys as well as considerations of their individual contributions and strategic importance. For 2017, the Compensation Committee determined that the target annual incentive award amounts for Messrs. Berisford, Kemps and Matturri should increase to maintain market alignment.
Since he was not an executive officer of the Company as of December 31, 2016, Mr. MacKay’s target annual incentive award is set as a percentage of base salary and, as a result of Mr. MacKay’s base salary increase, even though his target percent remains the same, the dollar value of the target annual incentive award increased.
For a list of the 2017 NEO target annual incentive award amounts under the 2017 STIC, see the chart above on page 52 of this Proxy Statement.
Snapshot: Long-Term Incentive Target Opportunities
| ||||||||
| Executive | 2016 Long-Term | 2017 Long-Term | ||||||
D. Peterson | $ | 4,800,000 | $ | 6,000,000 | ||||
E. Steenbergen | $ | — | $ | 1,800,000 | ||||
R. MacKay | $ | 525,000 | $ | 525,000 | ||||
J. Berisford | $ | 1,000,000 | $ | 1,300,000 | ||||
S. Kemps | $ | 850,000 | $ | 950,000 | ||||
A. Matturri | $ | 800,000 | $ | 1,000,000 | ||||
J. Callahan (1) | $ | 1,700,000 | — | |||||
| (1) | Due to his departure from the Company, Mr. Callahan forfeited all 2016 Long-Term Incentive Plan compensation and is not eligible to participate in the 2017 Long-Term Incentive Plan. |
2016 Long-Term Incentive Plan FundingStructures
Since management intends for its
| 56 | 2017 Proxy Statement | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
2016 Long-Term Incentive Plan to support itsDesign
To ensure that the Long-Term Incentive Plan supports the main objectives of our executive compensation program and the Company’s business strategy, we periodically review our Plan and adjust it as our business needs and strategic marketplace change.
2016 Long-Term Incentive Plan Awards
2016 Long-Term Incentive Plan Goals
In 2016, the Company continued to determineuse an ICP Adjusted EPS growth goal for the stock option awards. Both2016-2018 performance period for PSUs, and RSUs will have three-year cycles but the RSUs will not be tied to performance goals. The 2015 PSU awards will be measured on EPS
growth over a three-year performance cycle, which we believe continues to provide a good measure of return to shareholders and drives long-term value creation. ICP Adjusted EPS, excluding deal-related amortization, is used because the resulting figure excludesone-time events and, therefore, more closely approximates continuing operations, which is consistent with feedback that the Company received from shareholders.
The following payout schedule was approved for the 2016 PSU Awards for the 2016 - 2018 performance period:
The following payout schedule was approved for the 2016 Long-Term Cash Awards for the S&P Dow Jones Indices 2016-2018 performance period:
Any payments under the 2016 PSU and 2016 S&P Dow Jones Indices Long-Term Cash Awards will be made during the first quarter of 2019, based on the achievement through the 2016 - 2018 performance period.
| | 2017 Proxy Statement | 57 |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
2016 Long-Term Incentive Plan Award Grants
For detailed information concerning each grant made to the NEOs in 2016, see the 2016 Grants of Plan-Based Awards Table beginning on page 68 of this Proxy Statement.
2014 Long-Term Incentive Plan Award Achievement
2014 - 2016 PSU Achievement
Our 2014 PSU award for the performance period 2014 - 2016 was based on the achievement of the following ICP Adjusted EPS growth goal during the cycle:
The cumulative compound ICP Adjusted EPS growth during the cycle was 16.8%. Based on this achievement, the 2014 PSU award paid out at 160%.
2014 - 2016 S&P Dow Jones Indices Long-Term Cash Award Achievement
Mr. Matturri’s 2014 long-term cash award for the performance period 2014 - 2016 was based on the achievement of the following cumulative Division ICP Adjusted Net Operating Income (“NOI”) and ICP Adjusted EPS growth goals during the cycle:
During the cycle, cumulative Division ICP Adjusted NOI growth was 12.1%, which resulted in the Division ICP Adjusted NOI portion of the award paying out at 200%. Using the ICP Adjusted EPS achievement approved under the 2014 PSU Award, the funding of the ICP Adjusted EPS portion of the award was 160% as described above. Based on this achievement, the weighted aggregate payout was 188%. For detail on Mr. Matturri’s actual payout, see footnote 4 to the Summary Compensation table on page 65.
2017 Long-Term Incentive Plan Design and Targets
2017 Long-Term Incentive Plan Design
The Compensation Committee approved an EPS growth metric over a three-year performance cycle for the 2017 PSU awards, which it believes provides a good measure of return to our shareholders because it considers capital allocation decisions as well as the importance of continual discipline in operating performance.
Commencing in 2017, the Compensation Committee modified the vesting schedule of RSUs so that all future RSU grants will vest ratably over three years rather than vest after three years. In connection with its annual review of the Company’s compensation program, the Compensation Committee found that this change would provide the Company with a more effective recruitment tool, conformed to industry practice and was appropriately balanced by the three-year vesting schedule for PSU awards, which generally represent 70% of the total long-term grant value for NEOs.
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COMPENSATION DISCUSSION AND ANALYSIS (continued) |
2017 Long-Term Incentive Target Determination
Our Compensation Committee independently evaluates the performance of the CEO and establishes the CEO’s 2017 long-term incentive target so that, together with his base salary and short-term incentive award, his total annual target compensation is market competitive and motivates and rewards him for performance against Company and individual goals. For 2017, the Compensation Committee determined that Mr. Peterson’s long-term incentive target amount should increase from $4,800,000 to $6,000,000 to provide a market-competitive award and increase the long-term incentive portion of his total direct compensation to 68%.
As discussed beginning on page 40, the long-term incentive amounts for the other NEOs reflect findings from our Proxy Peer Group and annual market surveys as well as considerations of their individual contributions and strategic importance. For 2017, the Compensation Committee determined that the long-term target incentive amounts for Messrs. Berisford, Kemps and Matturri should increase to maintain market alignment.
For a list of the three-year adjusted EPS growth goal,2017 NEO targets under the Committee established a funding schedule with a 0% funding threshold for 5% growth, 100% funding for low-teens growth and 200% funding for 20% growth.2017 Long-Term Incentive Plan, see the chart above on page 56 of this Proxy Statement.
Health and Welfare Benefits
The Company provides a uniform healthcare benefit program for all U.S.-based employees, including the named executive officers.NEOs. The employee healthcare contributions are differentiated by salary levels, with higher-paid employees required to make larger contributions for their healthcare coverage. We provide no supplemental executive healthcare benefits other than a Company paid annual physical examination for the named executive officersNEOs and 15certain other senior executives. Additionally, 90the NEOs and certain other executives participate in the Management Supplemental Death and Disability Benefits Plan, which provides a death benefit equal to two times base salary and a supplemental long-term disability benefit equal to 50% of the executive’s monthly earnings, as defined in the Plan, less other Company paidCompany-paid benefits and Social Security benefit payments.
In reference to Ms. Dillon Hatcher, who resides and is employed in the U.K., the Company provides uniform healthcare benefits for all domestic U.K. employees, including Ms. Dillon Hatcher. The Company pays the cost of providing healthcare coverage for all U.K. employees and there is no differentiation of cost based on either seniority or salary level.
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Ms. Dillon Hatcher has access to the same benefit programs as other U.K. employees which include a death benefit, personal accident and critical illness coverage equal to two times base salary, long-term disability benefit of 50% base salary and Company pension contributions of 10% of base salary to the U.K. defined contribution plan. There is no special entitlement in terms of either the cost or range of benefits provided to Ms. Dillon Hatcher.
Perquisites and Other Benefits
We provide the following perquisites, which we believe are reasonable and competitive, to our named executive officersNEOs to enable them to conduct Company business more effectively and to allow greater focus on the demands of their positions:
Tax counseling and tax return preparation expense reimbursement;
Annual reimbursement for a health club membership;Commuting assistance in the form of access to Company-leased parking spaces at our 55 Water Street office; and
Annual executive physical exam.
The CEO is provided a Company car and security personnel. As a grandfathered participant and the only eligible NEO, Mr. Sahai is provided car service. Callahan was reimbursed for an annual health club membership.
We recognize that these costs convey a personal benefit. As such, the incremental cost to the Company for providing these items is reported in the Summary Compensation Table on pages 5665 through 5867 of this Proxy Statement.
We do not provide taxgross-ups in respect of any income recognized by our named executive officersNEOs as a result of receiving the reimbursements or perquisites described above.
Retirement and Other Benefits Followingfollowing Termination of Employment
In connection with their retirement or other termination of employment, our named executive officersNEOs will generally be eligible to receive benefits under our retirement plans and, depending on the circumstances of an executive’s termination,
severance benefits. These post-termination benefits are described below beginning on page 6378 of this Proxy Statement.
| | 2017 Proxy Statement | 59 |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Retirement Benefits
Effective as of April 1, 2012, we froze accruals and participation under both of our defined benefit pension plans under which the named executive officers,NEOs, other than Ms. Dillon Hatcher and Messrs. Peterson, Steenbergen, Kemps and Sahai,MacKay, are entitled to benefits: the Employee Retirement Plan of McGraw Hill Financial,S&P Global Inc. and its Subsidiaries, a pension plan covering most of our U.S. employees, and the McGraw Hill Financial,S&P Global Inc. Employee Retirement Plan Supplement, anon-qualified pension plan. Our defined contribution plans are provided to all employees, including our senior executives, to allow them to accumulate assets for retirement through a combination of individual savings and Company contributions and to allow participants in these plans the opportunity to direct the investment of these retirement assets.
Other Benefits
Our NEOs may also participate in the charitable S&P Global Matching Gift Program, open to all employees and Directors of the Company, which provides the opportunity to help maximize the impact of eligible charitable giving through a corporate matched contribution up to a maximum participant donation of $3,000 (or the currency equivalent) in the aggregate per year. Retirees are also eligible to participate in this program for up to three years after they leave the Company and are no longer active employees or directors.
| 60 | 2017 Proxy Statement | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Severance PlanPlans (Regular andChange-in-Control)
The Compensation Committee believes that maintaining a competitive level of separation benefits is appropriate as part of our overall compensation program and in line with its objective to attract, retain and motivate high caliber management talent. Our severance arrangements with the named executive officers (otherall of our NEOs other than Ms. Dillon Hatcher)Mr. MacKay are governed by our Senior Executive Severance Plan, which was originally adopted byPlan. Mr. MacKay is a participant in our Board of Directors in the late 1980s and is part of a human resources program that has been in place for many years. Our Senior ExecutiveManagement Severance Plan isPlan. These severance programs are designed to promote employee loyalty, to provide employees with security and reasonable compensation upon an involuntary termination of employment, and, in the case of the Senior Executive Severance Plan, to ensure the continued commitment of employees in the event of a potential or actualchange-in-control. The Compensation Committee does not take into account the benefits offered under the Senior Executive Severance Plan or the Management Severance Plan in setting compensation for our named executive officers.NEOs.
The Senior Executive Severance Plan and Management Severance Plan generally providesprovide for base salary and benefits continuation in the event of a Company-initiated termination (including a “constructive” termination).
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Effective January 1, 2015, the Committee revised the Plan to move away from service-based severance payments to fixed severance amounts of 24 months for the CEO and 18 months for the other named executive officers. All severance payments are also now subject to execution and non-revocation of a general release. This change to our severance plan is within market range of our proxy peer companies.
Ms. Dillon Hatcher does not participate in the Senior Executive Severance Plan due to her residency in the U.K. Instead, she is entitled to 12 weeks’ of notice or pay in lieu of notice under the terms of her U.K. contract if her employment terminates with the Company under certain circumstances. For details, see page 69 of this Proxy Statement.
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Discussion of severance payable on certain qualifying terminations (including following achange-in-control of the Company) can be found in the Potential Payments Upon Termination orChange-in-Control section on pages 6878 through 7685 of this Proxy Statement. Payments of annual incentives under the Key Executive Short-Term Incentive Compensation Plan and vesting acceleration or modification of long-term cash awards and equity awards granted under our 2002 Stock Incentive Plan accelerate or are modified on the occurrence of a definedchange-in-control per are described in the table below. Upon certain qualifying terminations not in connection with a definedchange-in-control, a named executive officerNEO may be entitled to a pro rata portion of the named executive officer’sNEO’s annual cash bonusincentive award and certain outstanding equity awards. For details, see pages 7181 through 7385 of this Proxy Statement.
PAY ELEMENTS | TREATMENT OF OUTSTANDING INCENTIVE AWARDS UPONCHANGE-IN-CONTROL (“CIC”) | |
Short-Term Incentive Awards | • Payment is based on the average of the three prior years’ payments. | |
RSU Awards | • Double-trigger treatment: awards do not vest upon the CIC but are generally converted into RSUs of the surviving company (assuming the successor company assumes the awards). | |
PSU Awards, granted during or prior to 2014 | • ICP Adjusted EPS goals are deemed to be fully achieved at target upon CIC occurring during the award’s performance period.
• If applicable, prorated shares, based on the portion of the award cycle elapsed before the date of the CIC, are generally released on the date of the CIC.
• Value of the remaining shares, generally based on the highest price per share paid in the CIC, is generally paid to the executive in a lump sum in the year following the end of the normal maturing date under the awards. | |
PSU Awards, granted post-2014 | • Double-trigger treatment:
• Delivery of shares in respect of converted RSUs will generally occur in the year following the end of the applicable performance period. | |
| | 2017 Proxy Statement | 61 |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
PAY ELEMENTS |
| |
Stock Options, granted during or prior to 2014 | • Options generally vest on the CIC.
• Committee may elect to cash out or convert into options of the surviving company. | |
Stock Options, granted post-2014 | • Double-trigger treatment: awards do not vest upon the CIC and are generally converted into options of the surviving company (assuming the successor company assumes the awards). | |
Long-Term Cash Awards | | • The Board, at its discretion, may modify or waive the applicable performance measures, performance period or cash awards. • Under no circumstances will the timing of the award payment date be accelerated. |
Certain payments that would be provided to our named executive officersNEOs in connection with achange-in-control could be classified as “excess parachute payments” under Section 280G of the Internal Revenue Code, in which case they would not be deductible as compensation by the Company. In addition, Section 4999 of the Internal Revenue Code imposes an excise tax on executives who receive an excess parachute payment equal to 20% of such amount. The excise tax would not be reimbursed or “grossed up” by the Company. Instead, as discussed on page 6980 of this Proxy Statement, in certain circumstances, we would “cut back” the amount of certain benefits and payments to ensure tax deductibility by the Company under Section 280G.
We are committed to ensuring that our executive officers have a significant ownership stake in the Company to strengthen the alignment of our executives’ interests with those of our shareholders.
The Company has formal stock ownership guidelines for senior executives set at fivesix times (6x) base salary for the CEO (increased from five times (5x) in 2016) and three times (3x) base salary for the other named executive officers.NEOs other than Mr. MacKay. These
guidelines are aligned with competitive information on executive stock ownership guidelines. The ownership guidelines will be reduced byone-half for executives covered by these guidelines beginning at age 62. This reduction is intended to permit individuals to begin an orderly process of stock sales to provide for diversification as the executives covered by these guidelines get closer to the Company’s normal retirement age of 65.
Until the guidelines for ownership levels are attained, senior executives must retain 100% of net profit shares realized from the exercise of stock options, the payment of PSU and RSU awards, and the vesting of any restricted stock awards. Upon attainment of the guidelines for ownership levels, senior executives must continue to retain 50% of any future net profit shares acquired from stock option exercises for six months. Further, the CEO and his direct reports who are under the purview of the Compensation Committee are subject to thissix-month holding period following voluntary termination of employment, including retirement. Once the required number of shares is attained, future salary increases and changes in stock price will no longer have an impact, unless the executive is promoted to a higher guideline ownership level.
In 2014, the Compensation Committee clarified the share countingshare-counting principles applied to determine the share ownership level of covered executives under the guidelines.
|
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• 100% of the shares directly owned
• 50% of outstanding vested and unvested RSUs
• 50% of unvested restricted shares
• 50% of PSUs for which attainment of the | • Unexercised options (whether or not vested)
• PSUs for which the performance cycle is ongoing | |
| | | |
COMPENSATION DISCUSSION AND ANALYSIS (continued) |
As of January 5, 2015,1, 2017, all of the NEOs were compliant with the Executive Stock Ownership Guidelines. All of the NEOs who served as executive officers as of December 31, 2014, with the exception of Ms. Dillon HatcherMessrs. Peterson and Mr. Sahai,Berisford own shares in excess of their ownership guidelines. Due to their short tenure withguideline multiples. Mr. Matturri is nearing the Company, Ms. Dillon Hatcherrequired multiple and Mr. Sahai have not yet attained their ownership levels but areis expected to achieve themit within a reasonable time.time but, due to his history of receiving a portion of his long-term incentive in performance-based long-term cash, his equity holdings have increased at a slower pace than other NEOs. Messrs. Steenbergen and Kemps are compliant with the Executive Stock Ownership Guidelines but as new hires they will require some time to accumulate sufficient shares to exceed their base salary multiples. Mr. MacKay was not an executive officer as of December 31, 2016 and, therefore, he was not subject to the ownership guidelines.
Name | Direct Ownership | Value at $82.45 on 1/5/2015(a) | Multiple of Base Salary | Guidelines Achieved | ||||||||||||
D. L. Peterson | 70,641 | $ | 5,824,350 | 6.5 | Yes | |||||||||||
J. F. Callahan, Jr. | 42,607 | $ | 3,512,147 | 4.7 | Yes | |||||||||||
J. L. Berisford | 31,618 | $ | 2,606,904 | 4.7 | Yes | |||||||||||
I. Dillon Hatcher | 5,206 | $ | 429,235 | 1.1 | No | |||||||||||
N. Sahai | 6,271 | $ | 554,146 | .69 | No | |||||||||||
The Compensation Committee considers risks related to compensation policies and practices and incentive-related risks. The Compensation Committee establishes performance metrics that reward our executives for creating shareholder value, and establishes goals and payment schedules for each metric that are designed to provide a balance to motivate the achievement of the established goals without the need for inappropriate or excessive risk taking.
In 2015,2017, management updated its prior review of the Company’s compensation plans. The conclusion of the updated review wasplans as well as Company compensation policies and practices regarding whether they encourage excessive risk taking and determined that the Company’s compensation plans, programs and policies do not present a material risk of causing behavior by management that is reasonably likely to have a material adverse effect on the Company. Management reviewed its findings with the Compensation Committee and Pay Governance (the Compensation Committee’s independent compensation advisor), who each concurred in these findings and conclusions.
In addition, the Compensation Committee annually assesses plan design, performance metrics and goals for the annual incentive plans within the Company’s business unitsdivisions to ensure that their designs are appropriately aligned with business and regulatory considerations and do not encourage inappropriate or excessive risk taking.
Management reviewed its findings with the Committee and Pay Governance LLC, who concurred in these findings and conclusions.
In 2014, the Compensation Committee strengthened its pay recovery (clawback) policy to provide more structure and impact. The Compensation Committee adopted a revised policy providing that annual cash incentive and long-term incentive award payments (PSUs, RSUs, stock options and stock options)long-term incentive cash compensation) could be subject to recovery by the Company if one or more of the following occurs:
For executive officers,senior management, material recalculation or adjustment of the performance measures.
For all individuals covered by this policy, intentional, willful or grossly negligent violationsact or omission that violates one or more of the Company policies that have or will have a material negative impact on the Company’s business, reputation or financial condition.
For all individuals covered by this policy, criminal activity, fraud or other illegal or unlawful activity that has or will have a material negative impact on the business, financial condition or reputation of the Company.
Additionally, a separate Pay Recovery Policy was adopted for S&P Global Ratings (“S&P Policy”). In addition to the recovery items noted above, the S&P Policy has these recovery items:
For all covered individuals, material violations of policy or business unitdivision or product risk parameters, policies or operating procedures resulting from the gross negligence, intentional wrongdoing or willful misconduct of a covered individual that have or will have a material negative impact on the business, financial condition or reputation of S&P Global Ratings.
For all covered individuals, material failure to adequately supervise the administration and implementation of one or more of S&P Global Ratings’ policies or business unitdivision or product risk parameters, policies or operating procedures which results from gross negligence, intentional wrongdoing or willful misconduct that has or will have a material negative impact on S&P Global Ratings’ business, financial condition or reputation.
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COMPENSATION DISCUSSION AND ANALYSIS (continued) |
Senior management and covered individuals include both active and former employees for the covered period.
As President of S&P Global Ratings, Mr. SahaiBerisford is subject to both policies.
Under the Company’s Insider Trading Policy, no shares of Company stock owned by Directors, officers and officersother designated employees may be newly pledged after 2012 as security for a loan. In addition, all previously existing pledges have been unwound as of December 31, 2014. Further, the policy continues to provide that Directors, officers and officersother designated employees are prohibited without exception from engaging in hedging transactions related to Company stock, such as puts, calls, swaps, collars and other arrangements intended to hedge exposure to Company stock or provide protection against declines in the value of Company stock.
None of our NEOs have formal employment agreements with the Company.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code generally limits the amount of compensation paid to each named executive officerNEO other than the Chief Financial Officer who served as an executive officer at the end of the year that may be deducted by the Company to $1 million in any year, unless the compensation qualifies as “performance-based.” Our annual cash bonusesincentive awards and long-term incentive compensation are intended to meet the requirements for performance-based compensation and be fully tax deductible. However, we do not have a policy requiring that all compensation be tax deductible and the Compensation Committee may authorize awards or payments that might not be tax deductible if it believes they are in the best interests of the Company and our shareholders.
The Compensation Committee also considers the effect of certain accounting rules that apply to the various aspects of the compensation program for our NEOs. The Compensation Committee reviews potential accounting effects in determining whether its compensation actions are in the best interests of the Company and our shareholders.
Former ExecutivesCompensation Committee Report
As noted above, Messrs. EcclestonThe Compensation and Vittor ceased serving as our executive officers in 2014Leadership Development Committee has reviewed and subsequently leftdiscussed with Company management the Company atCompensation Discussion and Analysis found on pages 32 through 64 of this Proxy Statement and, based on this review and discussion, the end of 2014. Messrs. EcclestonCompensation and Vittor received equity grants in 2014 consistent with the terms and conditions of equity grants received by our
other named executive officers. For details, see our Long-Term Incentive Plan discussion above and our 2014 Grants of Plan-Based Awards Table below. Messrs. Eccleston and Vittor also received annual cash bonuses for 2014 under our Key Executive Short-Term Incentive Compensation Plan. In connection with Mr. Eccleston’s departure, it was determined that he would receive an annual bonus equalLeadership Development Committee has recommended to the sumBoard of (i) $500,000Directors that the Compensation Discussion and (ii) 50% ofAnalysis be included in the bonus amount over and above $500,000, if any, that he would have received under the STIC had his employment with the Company continued through the payment date, based on the degree of achievement of the established financial objectives under the STIC for the 2014 year. For details, see the 2014 Short-Term Bonus Plan discussion above and our 2014 Summary Compensation Table below. Messrs. Eccleston and Vittor are not eligible for equity grants or cash bonus awards for 2015 due to their departures from the Company. In connection with their departures, they received payments and benefits in accordance with pre-existing plans and awards. In addition, Mr. Eccleston’s other benefits include outplacement services, as well as continuation of specified perquisites for one year following his departure. For details, see our Potential Payments Upon Termination or Change-in-Control section beginning on page 68 of thisCompany’s Proxy Statement.
Shareholder EngagementThe foregoing report has been furnished on behalf of the Board of Directors by the members of its Compensation and Leadership Development Committee.
In 2014, the Company strengthened its relationship with investors by holding an inaugural Investor Day and meeting with over 100 investors over the course of the year. We also made presentations at the Piper Jaffery and William Blair investor conferences. We responded to concerns from two of our investors about our long-term incentive program, and, as a result, we changed our awards for 2015 so that the program will be less dilutive. We will continue to look for opportunities to engage with our shareholders in 2015.D. Green (Chair)
Sir Winfried Bischoff
Edward B. Rust, Jr.
Kurt L. Schmoke
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EXECUTIVE COMPENSATION TABLES |
2014EXECUTIVE COMPENSATION TABLES
2016 Summary Compensation Table
The following table contains information concerning compensation paid or accrued to the named executive officers for services rendered in all capacities to the Company in 2014, 20132016, 2015 and 2012:2014:
| Name and Principal Position | Year | Salary ($) | Bonus ($) (1) | Stock Awards ($) (2) | Option Awards ($) (3) | Non-Equity Incentive Plan Compensation ($) (4) | Change in Pension Value ($) (5) | All Other Compensation ($) (6) | Total ($) | |||||||||||||||||||||||||||
Douglas L. Peterson | 2014 | $900,000 | $2,800,000 | $1,200,000 | $1,333,737 | $ – | $264,379 | $6,498,116 | ||||||||||||||||||||||||||||
President and Chief Executive Officer | 2013 | $846,970 | $1,050,000 | $ 450,000 | $1,360,000 | $ – | $243,368 | $3,950,338 | ||||||||||||||||||||||||||||
Jack F. Callahan, Jr. | 2014 | $750,000 | $ 700,000 | $ 300,000 | $ 800,000 | $ 12,430 | $177,995 | $2,740,425 | ||||||||||||||||||||||||||||
Executive Vice President and | 2013 | $750,000 | $2,200,000 | $ 300,000 | $ 765,000 | $ 0 | $186,654 | $4,201,654 | ||||||||||||||||||||||||||||
Chief Financial Officer | 2012 | $750,000 | $1,000,000 | $ – | $ 900,000 | $ 47,555 | $139,042 | $2,836,597 | ||||||||||||||||||||||||||||
John L. Berisford (7) | 2014 | $550,000 | $ 845,000 | $ 255,000 | $ 400,000 | $ 8,641 | $112,157 | $2,170,798 | ||||||||||||||||||||||||||||
Executive Vice President, | 2013 | $550,000 | $ 595,000 | $ 255,000 | $ 680,000 | $ 0 | $145,368 | $2,225,368 | ||||||||||||||||||||||||||||
Human Resources | 2012 | $550,000 | $ 850,000 | $ – | $ 685,000 | $ 28,864 | $108,486 | $2,222,350 | ||||||||||||||||||||||||||||
Imogen Dillon Hatcher (8),(9) | 2014 | $282,006 | $100,000 | $1,010,000 | $ 90,000 | $ 500,000 | $ – | $ 16,398 | $1,998,404 | |||||||||||||||||||||||||||
President, S&P Capital IQ | ||||||||||||||||||||||||||||||||||||
Neeraj Sahai (8) | 2014 | $800,000 | $450,000 | $2,050,000 | $ 450,000 | $ 900,000 | $ – | $144,470 | $4,794,470 | |||||||||||||||||||||||||||
President, Standard & Poor’s Ratings Services | ||||||||||||||||||||||||||||||||||||
Louis Eccleston | 2014 | $600,000 | $ 665,000 | $ 285,000 | $ 557,094 | $ 68,142 | $949,935 | $3,125,171 | ||||||||||||||||||||||||||||
Former President, S&P Capital IQ/ | ||||||||||||||||||||||||||||||||||||
Former Chairman, S&P Dow Jones Indices | ||||||||||||||||||||||||||||||||||||
Kenneth M. Vittor | 2014 | $610,000 | $ 604,100 | $ 258,900 | $ 450,000 | $213,664 | $135,575 | $2,272,239 | ||||||||||||||||||||||||||||
Former Executive Vice President | 2013 | $610,000 | $ 604,100 | $ 258,900 | $ 575,000 | $ 0 | $127,508 | $2,175,508 | ||||||||||||||||||||||||||||
and General Counsel | 2012 | $610,000 | $ 863,000 | $ – | $ 578,738 | $146,155 | $110,183 | $2,308,076 | ||||||||||||||||||||||||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($) (2) | Option Awards ($) (3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value ($) (5) | All Other Compensation ($)(6) | Total ($) | |||||||||||||||||||||||||
Douglas L. Peterson President and Chief Executive Officer | 2016 2015 2014
|
| $1,000,000 $975,000 $900,000
|
| — — —
| $4,800,000 $4,700,000 $2,800,000
|
| — — $1,200,000
|
| $2,890,000 $1,935,000 $1,333,737
|
| — — —
|
| $355,769 $164,273 $264,379
|
| $9,045,769 $7,774,273 $6,498,116 |
| |||||||||||||||||
Ewout L. Steenbergen(7) | 2016 | $99,432 | $1,500,000 | $4,250,000 | — | — | — | $2,100 | $5,851,532 | |||||||||||||||||||||||||
Executive Vice President, Chief Financial Officer | ||||||||||||||||||||||||||||||||||
Robert J. MacKay(8) Interim Chief Financial Officer | 2016 | $418,750 | — | $525,000 | — | $650,000 | — | $60,167 | $1,653,917 | |||||||||||||||||||||||||
John L. Berisford | 2016 | $600,000 | — | $1,000,000 | — | $830,000 | $3,325 | $129,093 | $2,562,418 | |||||||||||||||||||||||||
President, S&P Global Ratings | 2015 | $514,375 | — | $1,300,000 | — | $580,500 | — | $85,404 | $2,480,279 | |||||||||||||||||||||||||
| 2014 | $550,000 | — | $845,000 | $255,000 | $400,000 | $8,641 | $112,157 | $2,170,798 | ||||||||||||||||||||||||||
Steven J. Kemps(9) Executive Vice President, General Counsel | 2016 | $204,167 | $400,000 | $1,250,000 | — | $935,000 | — | $1,280 | $2,790,447 | |||||||||||||||||||||||||
Alexander J. Matturri(10) | 2016 | $493,750 | — | $320,000 | — | $1,958,000 | $85,527 | $131,176 | $2,988,453 | |||||||||||||||||||||||||
Chief Executive Officer, S&P Dow Jones Indices | 2015 | $466,250 | — | $280,000 | — | $1,646,625 | — | $69,089 | $2,461,964 | |||||||||||||||||||||||||
Jack F. Callahan(11) Former Executive Vice President andChief Financial Officer | 2016 2015 2014 |
| $502,841 $750,000 $750,000 |
| — — — | $1,700,000 $1,200,000 $700,000 |
| — — $300,000 |
| $0 $800,000 $800,000 |
| $4,570 — $12,430 |
| $125,909 $94,690 $177,995 |
| $2,333,320 $2,844,690 $2,740,425 |
| |||||||||||||||||
| (1) |
| (2) | The amounts reported in this column reflect the aggregate grant date fair value of the equity awards granted to the named executive officers in the relevant year, which may include performance share units (“PSUs”), restricted stock units (“RSUs”) and restricted stock awards, as applicable, granted under the Company’s 2002 Stock Incentive Plan. The assumptions used to calculate the awards were in accordance with FASB ASC Topic 718, Stock Compensation, as disclosed in Footnote |
| | 2017 Proxy Statement | 65 |
EXECUTIVE COMPENSATION TABLES (continued) |
| Name | 2014 | 2013 | ||||||
D. L. Peterson | $5,600,000 | $2,100,000 | ||||||
J. F. Callahan, Jr. (a) | $1,400,000 | $4,400,000 | ||||||
J. L. Berisford (b) | $1,690,000 | $1,190,000 | ||||||
I. Dillon Hatcher | $ 420,000 | – | ||||||
N. Sahai | $2,100,000 | – | ||||||
L. Eccleston | $1,330,000 | – | ||||||
K. M. Vittor | $1,208,200 | $1,208,200 | ||||||
The maximum values for the 2016 and 2015 PSUs as of the grant date are as follows:
| Executive | 2016 | 2015 | ||||||
D. Peterson | $ | 6,720,000 | $ | 6,580,000 | ||||
E. Steenbergen(a) | $ | 4,000,000 | — | |||||
R. MacKay | $ | 735,000 | — | |||||
J. Berisford (b) | $ | 1,400,000 | $ | 2,090,000 | ||||
S. Kemps | $ | 1,190,000 | — | |||||
A. Matturri | $ | 448,000 | $ | 392,000 | ||||
J. Callahan(c) | $ | 2,380,000 | $ | 1,680,000 | ||||
| (a) |
| (b) | Mr. Berisford received an additional PSU award in |
| (c) | In connection with Mr. Callahan’s departure, these PSU awards have been forfeited and canceled. Please see page 85 for further detail on the actual treatment of these awards. |
The dollar amounts listed do not necessarily reflect the dollar amounts of compensation actually realized or that may be realized by our named executive officers. These awards are further described on pages 68 through 71 of this Proxy Statement. |
|
| (3) | The amounts reported in this column reflect the aggregate date fair value of stock options granted under the Company’s 2002 Stock Incentive Plan. The assumptions used to calculate the stock option awards values were in accordance with FASB ASC Topic 718, Stock Compensation, as disclosed in Footnote |
| (4) | The amounts reported in this column represent the cash incentive awards paid under the Company’s Key Executive Short-Term Incentive Compensation Plan to all of our named executive |
| (5) | The amounts reported in this column include benefits under the Employee Retirement Plan of |
| 66 | 2017 Proxy Statement | |
EXECUTIVE COMPENSATION TABLES (continued) |
| (6) | The amounts shown in this column include the items described |
The Company made contributions under The 401(k) Savings and Profit Sharing Plan of McGraw Hill Financial,S&P Global Inc. and Its Subsidiaries and the McGraw Hill Financial,S&P Global Inc. 401(k) Savings and Profit Sharing Plan Supplement as follows:
| Name | 401(k) Savings and Profit Sharing Plan | 401(k) Savings and Profit Sharing Plan Supplement | ||||||
D. L. Peterson | $25,675 | $217,111 | ||||||
J. F. Callahan, Jr. | $25,675 | $141,901 | ||||||
J. L. Berisford | $25,675 | $ 75,900 | ||||||
I. Dillon Hatcher (a) | $ – | $ – | ||||||
N. Sahai | $14,500 | $ 85,855 | ||||||
L. Eccleston | $25,675 | $103,757 | ||||||
K. M. Vittor | $25,675 | $ 88,000 | ||||||
| Name | 401(k) Savings and Profit Sharing Plan ($) | 401(k) Savings and Profit Sharing Plan Supplement ($) | ||||||
D. Peterson | $ | 26,188 | $ | 293,700 | ||||
E. Steenbergen | $ | 2,100 | — | |||||
R. MacKay | $ | 26,188 | $ | 33,979 | ||||
J. Berisford | $ | 26,188 | $ | 100,705 | ||||
S. Kemps | — | — | ||||||
A. Matturri | $ | 26,188 | $ | 104,143 | ||||
J. Callahan | $ | 26,188 | $ | 64,001 | ||||
The amount for Mr. Peterson includes the aggregate incremental cost to the Company associated with Mr. Peterson’s personal use of a Company car. The aggregate incremental cost to the Company was determined by multiplying the fuel and depreciation costs incurred by the Company in operating its Company ownedCompany-owned car by a fraction, the numerator of which was the total number of personal miles driven by Mr. Peterson in 20142016 and the denominator of which was the total number of miles that the Company ownedCompany-owned car was driven in 2014.2016. The aggregate incremental cost to the Company does not include fixed costs that would be incurred regardless of Mr. Peterson’s personal use of the CompanyCompany- owned car (e.g., insurance premiums and driver salaries). Additionally, the amount for Mr. Peterson includes the charitable contribution made by the Company in Mr. Peterson’s name under the S&P Global PAC program available to our Directors and the charitable contribution made by the Company in Mr. Peterson’s name under the S&P Global Matching Gift Program.
The amount for Mr. Peterson alsoBerisford includes financial counseling and tax return preparation and an executive physical health exam paid for by the Company.
The amount for Mr. Kemps includes commuting assistance.
The amount for Mr. Matturri includes financial counseling and tax return preparation paid for by the Company.
The amount for Mr. Callahan includes $28,846 for earned but unused vacation days paid in connection with his departure from the Company. It also reflects personal use of car services, financial counseling and tax return preparation paid for by the company, and health club membership reimbursements.
| (7) | Mr. Steenbergen was appointed Executive Vice President, Chief Financial Officer, effective November 14, 2016. His compensation is not reported in this Proxy Statement for 2015 and 2014 since he was not a named executive officer for those years. |
| (8) | Mr. MacKay was appointed Interim Chief Financial Officer, effective August 5, 2016 through November 14, 2016. His compensation is not reported in this Proxy Statement for 2015 and 2014 since he was not a named executive officer for those years. |
| (9) | Mr. Kemps was appointed Executive Vice President, General Counsel, effective August 30, 2016. His compensation is not reported in this Proxy Statement for 2015 and 2014 since he was not a named executive officer for those years. |
| (10) | Mr. Matturri joined the Company in May 2007. His compensation is not reported in this Proxy Statement for 2014 since he was not a named executive officer for that year. |
| (11) | Mr. Callahan ceased serving as one of our executive officers on September 1, 2016. |
| | | |
The amount for Mr. Callahan includes financial counseling and tax return preparation and an executive physical health exam paid for by the Company.
The amount for Mr. Sahai includes $42,801 for personal commuting costs and the cost of an executive physical health exam paid for by the Company.
|
|
|
20142016 Grants of Plan-Based Awards Table
The following table contains information concerning each grant of an award made to the named executive officers in 2014:2016:
Grant Date | Date Approved by Compensation and Leadership Development Committee | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards (a) | All Other of Shares Stock or | All Other of Securities | Exercise or Base Price of Option Awards $/SH | Grant Date Fair and Option | |||||||||||||||||||||||||||||||||
| Name | Target ($) | Maximum ($) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||
D. L. Peterson | 4/1/2014 | 12/3/2013 | $ | 1,100,000 | $ | 2,200,000 | 35,985 | 71,970 | $ | 2,800,000 | ||||||||||||||||||||||||||||||
| 4/1/2014 | 12/3/2013 | 51,304 | $ | 77.81 | $ | 1,200,000 | ||||||||||||||||||||||||||||||||||
J. F. Callahan, Jr. | 4/1/2014 | 12/3/2013 | $ | 600,000 | $ | 1,200,000 | 8,996 | 17,992 | $ | 700,000 | ||||||||||||||||||||||||||||||
| 4/1/2014 | 12/3/2013 | 12,826 | $ | 77.81 | $ | 300,000 | ||||||||||||||||||||||||||||||||||
J. L. Berisford | 4/1/2014 | 12/3/2013 | $ | 400,000 | $ | 800,000 | 7,647 | 15,294 | $ | 595,000 | ||||||||||||||||||||||||||||||
| 4/1/2014 | 12/3/2013 | 3,213 | 6,426 | $ | 250,000 | |||||||||||||||||||||||||||||||||||
| 4/1/2014 | 12/3/2013 | 10,902 | $ | 77.81 | $ | 255,000 | ||||||||||||||||||||||||||||||||||
I. Dillon Hatcher | 5/1/2014 | (e | ) | $ | 442,740 | $ | 885,480 | 2,835 | 5,670 | $ | 210,000 | |||||||||||||||||||||||||||||
| 5/1/2014 | (e | ) | 6,750 | $ | 500,000 | |||||||||||||||||||||||||||||||||||
| 5/1/2014 | (e | ) | 4,029 | $ | 74.07 | $ | 90,000 | |||||||||||||||||||||||||||||||||
| | 9/2/2014 | | (e | ) | 3,661 | $ | 300,000 | |||||||||||||||||||||||||||||||||
N. Sahai | | 2/3/2014 | | 12/3/2013 | 13,443 | $ | 1,000,000 | |||||||||||||||||||||||||||||||||
| 4/1/2014 | 12/3/2013 | $ | 700,000 | $ | 1,400,000 | 13,494 | 26,988 | $ | 1,050,000 | |||||||||||||||||||||||||||||||
| 4/1/2014 | 12/3/2013 | 19,239 | $ | 77.81 | $ | 450,000 | ||||||||||||||||||||||||||||||||||
L. Eccleston | 4/1/2014 | 12/3/2013 | $ | 500,000 | $ | 1,000,000 | 8,546 | 17,092 | $ | 665,000 | ||||||||||||||||||||||||||||||
| 4/1/2014 | 12/3/2013 | 12,185 | $ | 77.81 | $ | 285,000 | ||||||||||||||||||||||||||||||||||
K. M. Vittor | 4/1/2014 | 12/3/2013 | $ | 400,000 | $ | 800,000 | 7,764 | 15,528 | $ | 604,100 | ||||||||||||||||||||||||||||||
| 4/1/2014 | 12/3/2013 | 11,069 | $ | 77.81 | $ | 258,900 | ||||||||||||||||||||||||||||||||||
| Name | Grant Date (mm/dd/ yyyy) | Date Approved by Compensation and Leadership Development Committee (mm/dd/yyyy) | Estimated Future Payouts UnderNon-Equity Incentive Plan Awards (1) (2) | Estimated Future Payouts Under Equity Incentive Plan Awards (1) (3) (4) | All Other Stock Awards: Number of Shares of Stock or Units (#) (5) (6) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/SH) | Grant Date Fair Value of Stock and Option Awards ($)(7) | ||||||||||||
| Target ($) | Maximum ($) | Target (#) | Maximum (#) | |||||||||||||||||
D. Peterson | 4/1/2016 | 1/26/2016 | $ | 1,700,000 | $ | 3,400,000 | 33,837 | 67,674 | $ | 3,360,000 | ||||||||||||||||||||||||||||||
| 4/1/2016 | 1/26/2016 | 14,501 | $ | 1,440,000 | ||||||||||||||||||||||||||||||||||||
E. Steenbergen | 12/1/2016 | 9/27/2016 | — | — | 17,203 | 34,406 | $ | 2,000,000 | ||||||||||||||||||||||||||||||||
| 12/1/2016 | 9/27/2016 | 19,353 | $ | 2,250,000 | ||||||||||||||||||||||||||||||||||||
R. MacKay | 4/1/2016 | 1/26/2016 | $ | 361,250 | $ | 722,500 | 3,701 | 7,402 | $ | 367,500 | ||||||||||||||||||||||||||||||
| 4/1/2016 | 1/26/2016 | 1,586 | $ | 157,500 | ||||||||||||||||||||||||||||||||||||
J. Berisford | 4/1/2016 | 1/26/2016 | $ | 550,000 | $ | 1,100,000 | 7,049 | 14,098 | $ | 700,000 | ||||||||||||||||||||||||||||||
| 4/1/2016 | 1/26/2016 | 3,021 | $ | 300,000 | ||||||||||||||||||||||||||||||||||||
S. Kemps | 9/1/2016 | 6/28/2016 | $ | 550,000 | $ | 1,100,000 | 4,801 | 9,602 | $ | 595,000 | ||||||||||||||||||||||||||||||
| 9/1/2016 | 6/28/2016 | 2,057 | $ | 255,000 | ||||||||||||||||||||||||||||||||||||
| 9/1/2016 | 6/28/2016 | 3,227 | $ | 400,000 | ||||||||||||||||||||||||||||||||||||
A. Matturri | 4/1/2016 | 1/26/2016 | $ | 550,000 | $ | 1,100,000 | 2,256 | 4,512 | $ | 224,000 | ||||||||||||||||||||||||||||||
| 4/1/2016 | 1/26/2016 | 967 | $ | 96,000 | ||||||||||||||||||||||||||||||||||||
| 4/1/2016 | 1/26/2016 | $ | 480,000 | $ | 960,000 | |||||||||||||||||||||||||||||||||||
J. Callahan | 4/1/2016 | 1/26/2016 | $ | 600,000 | $ | 1,200,000 | 11,984 | 23,968 | $ | 1,190,000 | ||||||||||||||||||||||||||||||
| 4/1/2016 | 1/26/2016 | 5,136 | $ | 510,000 |
| (1) | Non-equity and equity incentive plan awards do not have minimum threshold amounts. Consequently, no threshold amounts are listed. The non-equity incentive plan awards reflect target and maximum payouts with respect to the 2016 Key Executive Short-Term Incentive Compensation Plan, which is discussed on page 52 of this Proxy Statement. |
| (2) | Mr. Steenbergen was not eligible to participate in S&P Global’s 2016 Key Executive Short-Term Incentive Compensation Plan. Mr. Callahan forfeited his participation in S&P Global’s 2016 Key Executive Short-Term Incentive Compensation Plan as a result of his voluntary departure from the Company. |
| (3) | Reflects annual PSUs granted under the Company’s 2002 Stock Incentive Plan, which are discussed on pages |
Reflects annual RSUs granted under the Company’s 2002 Stock Incentive |
| 68 | 2017 Proxy Statement | |
| RSU award for the 2016 compensation year. In connection with his departure, Mr. Callahan’s entire annual RSU award was forfeited and canceled. For vesting terms, see |
| Reflects special,one-time RSU awards to Mr. Steenbergen and Mr. Kemps granted on December 1, 2016 and September 1, 2016, respectively. These awards were made in connection with their appointments to their new roles with S&P Global and in consideration of the equity awards forfeited from their previous employers. |
| (7) | The amounts in this column for the |
| | | |
EXECUTIVE COMPENSATION TABLES (continued) |
Outstanding Equity Awards at 20142016 FiscalYear-End Table
The following table contains information concerning unexercised options, stock that has not vested, and other equity incentive plan awards outstanding on December 31, 2014 (other than PSUs that vested on December 31, 2014 but did not settle until 2015)2016 for each of the named executive officers:
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (a) | Market Value of Shares or Units of Stock That Have Not Vested ($) (b) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (c) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (b) | ||||||||||||||||||||||||
D. L. Peterson | 73,368 | $38.13 | 10/2/2021 | |||||||||||||||||||||||||||||
| 10,298 | 20,909 | (d) | $51.55 | 3/31/2023 | ||||||||||||||||||||||||||||
| 51,304 | (e) | $77.81 | 3/31/2024 | 50,075 | $ | 4,455,674 | 112,708 | $10,028,757 | ||||||||||||||||||||||||
J. F. Callahan, Jr. | 49,420 | $37.41 | 3/31/2021 | |||||||||||||||||||||||||||||
| 6,865 | 13,939 | (d) | $51.55 | 3/31/2023 | ||||||||||||||||||||||||||||
| 12,826 | (e) | $77.81 | 3/31/2024 | 8,204 | $ | 729,992 | 93,066 | $ 8,281,013 | ||||||||||||||||||||||||
J. L. Berisford | 42,006 | $37.41 | 3/31/2021 | |||||||||||||||||||||||||||||
| 5,835 | 11,849 | (d) | $51.55 | 3/31/2023 | ||||||||||||||||||||||||||||
| 10,902 | (e) | $77.81 | 3/31/2024 | 0 | $ | 0 | 44,804 | $ 3,986,660 | ||||||||||||||||||||||||
I. Dillon Hatcher | 4,029 | (e) | $74.07 | 4/30/2024 | 10,411 | $ | 926,371 | 5,670 | $ 504,517 | |||||||||||||||||||||||
N. Sahai | 19,239 | (e) | $77.81 | 3/31/2024 | 13,443 | $ | 1,196,158 | 26,988 | $ 2,401,392 | |||||||||||||||||||||||
L. Eccleston (f) | 4,029 | $36.91 | 6/30/2016 | |||||||||||||||||||||||||||||
| 4,835 | $21.95 | 6/30/2016 | ||||||||||||||||||||||||||||||
| 4,701 | $33.98 | 6/30/2016 | ||||||||||||||||||||||||||||||
| 29,652 | $37.41 | 6/30/2016 | ||||||||||||||||||||||||||||||
| 13,044 | $51.55 | 6/30/2016 | ||||||||||||||||||||||||||||||
| 4,021 | $77.81 | 6/30/2016 | 0 | $ | 0 | 22,898 | $ 2,037,464 | |||||||||||||||||||||||||
K. M. Vittor (g) | 27,654 | $55.18 | 4/2/2016 | |||||||||||||||||||||||||||||
| 17,954 | $51.55 | 3/31/2023 | ||||||||||||||||||||||||||||||
| 11,069 | $77.81 | 3/31/2024 | 0 | $ | 0 | 20,802 | $ 1,850,962 | |||||||||||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Price ($) | Option Expiration Date (mm/dd/yyyy) | Number of Shares or Units of Stock That Have Not Vested (#) (1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) (3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | ||||||||||||||||
D. Peterson | 28,368 31,207 33,860
| 17,444 (4)
| $38.13 $51.55 $77.81
| 10/02/2021 3/31/2023 3/31/2024
| 27,941 | $ | 3,004,775 | 96,557 | $ | 10,383,740 | ||||||||||||||
E. Steenbergen | 19,353 | $ | 2,081,222 | 17,203 | $ | 1,850,011 | ||||||||||||||||||
R. MacKay | 6,935 | $ | 745,790 | 10,753 | $ | 1,156,378 | ||||||||||||||||||
J. Berisford | 11,849 | $51.55 | 3/31/2023 | |||||||||||||||||||||
| 7,195 | 3,707 (4) | $77.81 | 3/31/2024 | |||||||||||||||||||||
| 5,468 | $ | 588,029 | 27,141 | $ | 2,918,743 | |||||||||||||||||||
S. Kemps | 5,284 | $ | 568,241 | 4,801 | $ | 516,300 | ||||||||||||||||||
A. Matturri | 5,372 | $21.95 | 3/31/2019 | |||||||||||||||||||||
| 2,014 | $24.23 | 9/30/2019 | ||||||||||||||||||||||
| 5,104 | $33.98 | 3/31/2020 | ||||||||||||||||||||||
| 5,560 | $37.41 | 3/31/2021 | ||||||||||||||||||||||
| 1,777 | $ | 191,099 | 6,034 | $ | 648,896 | |||||||||||||||||||
J. Callahan(5) | ||||||||||||||||||||||||
| Represents unvested restricted stock and RSU awards which are not performance-based. These awards vest as follows: for Mr. Peterson, |
| Value based on closing price on December 31, |
Includes: (i) for all named executive officers other than Mr. Callahan (see footnote (5)), PSUs granted in |
| 70 | 2017 Proxy Statement | |
| December 31, |
|
| compound annual ICP Adjusted diluted earnings per share growth goal; and (iii) for Mr. |
| These unvested options will generally vest |
| As a result of Mr. |
| | | |
EXECUTIVE COMPENSATION TABLES (continued) |
Option Exercises and Stock Vested in 20142016 Table
The following table contains information concerning each exercise of stock options and each vesting of PSUs and restricted stock awards during 2014 (but not including2016 (including PSUs and RSUs that vested on December 31, 20142016 but did not settle until 2015)early 2017) for each of the named executive officers:
Option Awards | Stock Awards | |||||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (a) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (b) | ||||||||||||||
D. L. Peterson | 0 | $ 0 | 39,346 | $3,147,287 | ||||||||||||||
J. F. Callahan, Jr. | 0 | $ 0 | 26,732 | $2,138,293 | ||||||||||||||
J. L. Berisford | 0 | $ 0 | 29,495 | $2,332,560 | ||||||||||||||
I. Dillon Hatcher | 0 | $ 0 | 0 | $ 0 | ||||||||||||||
N. Sahai | 0 | $ 0 | 0 | $ 0 | ||||||||||||||
L. Eccleston | 0 | $ 0 | 16,040 | $1,283,040 | ||||||||||||||
K. M. Vittor | 69,923 | $2,228,598 | 23,070 | $1,845,369 | ||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (2) | ||||||||||||
D. Peterson | 25,000 | $ | 1,838,250 | 95,258 | $ | 10,814,565 | ||||||||||
E. Steenbergen | — | — | — | — | ||||||||||||
R. MacKay | — | — | 3,838 | $ | 412,739 | |||||||||||
J. Berisford | — | — | 38,727 | $ | 4,134,041 | |||||||||||
S. Kemps | — | — | — | — | ||||||||||||
A. Matturri | 5,490 | $ | 403,810 | — | — | |||||||||||
J. Callahan | 78,689 | $ | 5,536,086 | 69,443 | $ | 7,606,749 | ||||||||||
| Represents the amount realized based on the difference between the closing price of the Company’s common stock on the date of exercise and the grant price. |
| Represents the amounts realized based on the closing price of the Company’s common stock on the applicable |
| | |
EXECUTIVE COMPENSATION TABLES (continued) |
PENSION BENEFITSPension Benefits
20142016 Pension Benefits Table
The following table contains information with respect to each Plan of the Company that provides for payments or other benefits to the named executive officers at, following or in connection with retirement:
| Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) (a)(b) | |||||||
D. L. Peterson | ERP | – | $ – | |||||||
| ERPS | – | – | ||||||||
| Total | $ – | |||||||||
J. F. Callahan, Jr. | ERP | 0 | $ 24,267 | |||||||
| ERPS | 0 | 30,584 | ||||||||
| Total | $ 54,851 | |||||||||
J. L. Berisford | ERP | 0 | $ 19,428 | |||||||
| ERPS | 0 | 13,777 | ||||||||
| Total | $ 33,205 | |||||||||
I. Dillon Hatcher (c) | – | – | – | |||||||
N. Sahai | ERP | – | $ – | |||||||
| ERPS | – | – | ||||||||
| Total | $ – | |||||||||
L. Eccleston | ERP | 3 | $ 98,764 | |||||||
| ERPS | 3 | 208,771 | ||||||||
| Total | $ 307,535 | |||||||||
K. M. Vittor | ERP | 29 | $ 717,837 | |||||||
| ERPS | 29 | 1,270,150 | ||||||||
| Total | $1,987,987 | |||||||||
| Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) (1) (2) | |||||
D. Peterson | ERP | — | — | |||||
| ERPS | — | — | ||||||
| Total | — | |||||||
E. Steenbergen | ERP | — | — | |||||
| ERPS | — | — | ||||||
| Total | — | |||||||
R. MacKay | ERP | — | — | |||||
| ERPS | — | — | ||||||
| Total | — | |||||||
J. Berisford | ERP | 0 | $ 20,603 | |||||
| ERPS | 0 | $ 14,640 | ||||||
| Total | $ 35,243 | |||||||
S. Kemps | ERP | — | — | |||||
| ERPS | — | — | ||||||
| Total | — | |||||||
A. Matturri | ERP | 4 | $140,606 | |||||
| ERPS | 4 | $212,152 | ||||||
| Total | $352,758 | |||||||
J. Callahan | ERP | 0 | $ 25,721 | |||||
| ERPS | 0 | $ 32,467 | ||||||
| Total | $ 58,188 | |||||||
| The benefit amounts shown in the table are actuarial present values of the benefits accumulated through December 31, |
| As discussed further on page |
| | | |
The named executive officers, other than Ms. Dillon Hatcher and Messrs. Peterson, Steenbergen, MacKay and Sahai,Kemps, are entitled to retirement benefits under two defined benefit Plansplans of the Company: the Employee Retirement Plan of McGraw Hill Financial,S&P Global, Inc. and Its Subsidiaries (generally referred to as the “ERP”) and the McGraw Hill Financial,S&P Global, Inc. Employee Retirement Plan Supplement (generally referred to as the “ERP Supplement” or “ERPS”). Mr. Peterson, who joined the Company in 2011, and Mr. Sahai,Steenbergen, who joined the Company in 2014,2016, Mr. MacKay, who joined the Company in 2015, and Mr. Kemps, who joined the Company in 2016, were not eligible to participate in these Plans before participation was frozen on April 1, 2012. Ms. Dillon Hatcher is not eligible to participate in the Company’s U.S. benefit plans. Information regarding each of these Plans follows.
On April 1, 2012 the Company “froze”Messrs. Berisford, Matturri and Callahan were not fully vested in their benefits in either the ERP and ERPS. Final benefits for each named executive officer, other than Ms. Dillon Hatcher and Messrs. Peterson and Sahai, are calculated based on that date, and no additional adjustments are made based on additional service or pay after that date.ERPS as of December 31, 2016.
Employee Retirement Plan of McGraw Hill Financial,S&P Global Inc. and Its Subsidiaries (ERP)(“ERP”)
The Company sponsors a qualified defined benefit pension Plan to provide retirement benefits to eligible U.S.-based employees of the Company. The Plan pays benefits at retirement to participants who terminate or retire from the Company after meeting the eligibility requirements for a benefit. The retirement benefit is based on a percentage of a participant’s total Plan compensation during such participant’s employment with the Company (this is called a career pay formula).
A Plan participant’s annual benefit accrual under the ERP is calculated as 1% of Plan compensation. The Plan compensation includes the participant’s base salary and short-term incentive award. Because this is a qualified Plan, the Plan compensation is restricted by the compensation limit imposed by the Internal Revenue Code. In 2012, the last year for which any benefits accrued under the ERP, this compensation limit was $250,000. The retirement benefit payable from this Plan is the sum of each year’s annual
benefit accrual. This amount is available unreduced at the earlier of the Plan’s normal retirement age of 65 or age 62 if a participant has 10 years of service with the Company. If a participant has attained age 55 with 10 years of service with the Company, an early retirement benefit is available. The benefit is reduced by 4% per year for each year of payment prior to age 62 to reflect the earlier payments. Mr. Vittor is eligible for an unreduced benefit under the terms of the ERP.
Participants can choose from among several optional forms of annuity payments under the ERP. A participant receives the highest monthly payment under a single life annuity, while the other payment forms result in a lower monthly benefit generally because payment may be made to a surviving joint annuitant or beneficiary following the participant’s death.
The present value estimates shown in the Pension Benefits Table assume payment of the named executive officers’ accumulated benefits under the ERP, based on pay and service earned through April 1, 2012, in the form of a single life annuity commencing on the earliest date the benefits are available unreduced (age 65 in the case of Messrs. Callahan, EcclestonBerisford and Berisford andCallahan, age 62 in the case of Mr. Vittor)Matturri). The values assume a discount rate of4.15% 4.14% and a mortality assumption based on the 2015 IRS prescribedfully generationalRP-2016 mortality table.table withMP-2016 improvement scale.
McGraw Hill Financial,S&P Global Inc. Employee Retirement Plan Supplement (ERPS)(“ERPS”)
The Company also maintains anon-qualified pension Plan. This Plan is intended to help attract and retain the executive workforce by providing benefits incremental to those permitted under the qualified pension Plan.
The ERPS is designed to restore retirement benefits that cannot be paid from the ERP due to Internal Revenue Code limits. The benefit provided under the ERPS will effectively equal the difference between the benefit that would have been earned under the ERP, without regard to any pay or benefit limits, and the actual benefit payable from the ERP.
|
All Plan participants of the ERP are potentially eligible for the ERPS, including each of the named executive officers other than Ms. Dillon Hatcher and Messrs. Peterson, Steenbergen, MacKay and Sahai,Kemps, provided that their ERP benefits are limitedlim-
| 74 | 2017 Proxy Statement | |
ited by the Internal Revenue Code limits. In general, a participant’s annual accrual under the ERPS is determined based on 1% of the Plan compensation under the ERP in excess of the Internal Revenue Code compensation limit for that year ($250,000 in 2012). The retirement benefit payable under the ERPS is the sum of each year’s
annual benefit accrual. ERPS payments commence one year following separation from service or, if later, age 65, or age 62 with 10 years of service with the Company.
The present value estimates shown in the Pension Benefits Table for accumulated benefits under the ERPS assume a discount rate of 4.13% and are determined using the same payment interest rate and mortality assumptions as were used to estimate the values shown for the ERP.
The following breakdown shows the retirement benefits that would have been payable to each of the named executive officers had they retired on December 31, 2014:
| Name | Plan Name | Present Value of Accumulated Benefit ($) | ||||||
D. L. Peterson(a) | ERP | $ – | ||||||
| ERPS | – | |||||||
| Total | $ – | |||||||
J. F. Callahan, Jr.(b) | ERP | $ – | ||||||
| ERPS | – | |||||||
| Total | $ – | |||||||
J. L. Berisford(b) | ERP | $ – | ||||||
| ERPS | – | |||||||
| Total | $ – | |||||||
I. Dillon Hatcher(c) | – | – | ||||||
N. Sahai(a) | ERP | $ – | ||||||
| ERPS | – | |||||||
| Total | $ – | |||||||
L. Eccleston | ERP | $ 98,764 | ||||||
| ERPS | 208,771 | |||||||
| Total | $ 307,535 | |||||||
K. M. Vittor | ERP | $ 717,837 | ||||||
| ERPS | 1,270,150 | |||||||
| Total | $1,987,987 | |||||||
| | | |
EXECUTIVE COMPENSATION TABLES (continued) |
20142016 Non-Qualified Deferred Compensation Table
The followingNon-Qualified Deferred Compensation Table contains information concerning our variousnon-qualified savings and deferral Plans offered to our named executive officers. The Key Executive Short-Term Incentive Deferred Compensation Plan (“ST Incentive Deferred Comp”) permits executives to defer amounts previously earned on apre-tax basis. The SIPS & ERAPS Plan is the McGraw Hill Financial,S&P Global Inc. 401(k) Savings and Profit Sharing Plan Supplement, also referred to below as the Company’s “401(k) Savings and Profit Sharing Plan Supplement.”
| Name | Plan | Executive Contributions in Last Fiscal Year ($)(a) | Company in Last Fiscal Year ($)(b) | Aggregate Earnings in Last Fiscal | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($)(d) | ||||||||||||||||
D. L. Peterson | SIPS & ERAPS | $200,024 | $217,111 | $ 7,498 | 0 | $ 790,759 | ||||||||||||||||
| ST Incentive Deferred Comp | 0 | 0 | 12,455 | 0 | 324,615 | |||||||||||||||||
| Total: | $200,024 | $217,111 | $19,953 | 0 | $1,115,374 | |||||||||||||||||
J. F. Callahan, Jr. | SIPS & ERAPS | $123,300 | $141,901 | $ 7,546 | 0 | $ 623,743 | ||||||||||||||||
| ST Incentive Deferred Comp | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Total: | $123,300 | $141,901 | $ 7,546 | 0 | $ 623,743 | |||||||||||||||||
J. L. Berisford | SIPS & ERAPS | $ 82,200 | $ 75,900 | $ 5,131 | 0 | $ 422,895 | ||||||||||||||||
| ST Incentive Deferred Comp | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Total: | $ 82,200 | $ 75,900 | $ 5,131 | 0 | $ 422,895 | |||||||||||||||||
I. Dillon Hatcher (e) | $ 14,852 | $ 16,398 | $ 447 | 0 | $ 31,697 | |||||||||||||||||
N. Sahai | SIPS & ERAPS | $ 85,855 | $ 85,855 | $ 491 | 0 | $ 172,201 | ||||||||||||||||
| ST Incentive Deferred Comp | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Total: | $ 85,855 | $ 85,855 | $ 491 | 0 | $ 172,201 | |||||||||||||||||
L. Eccleston | SIPS & ERAPS | $ 98,595 | $103,757 | $ 9,645 | 0 | $ 586,806 | ||||||||||||||||
| ST Incentive Deferred Comp | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Total: | $ 98,595 | $103,757 | $ 9,645 | 0 | $ 586,806 | |||||||||||||||||
K. M. Vittor | SIPS & ERAPS | $ 82,500 | $ 88,000 | $39,578 | 0 | $1,759,268 | ||||||||||||||||
| ST Incentive Deferred Comp | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Total: | $ 82,500 | $ 88,000 | $39,578 | 0 | $1,759,268 | |||||||||||||||||
| Name | Plan | Executive Contributions in Last Fiscal Year ($) (1) | Company Contributions in Last Fiscal Year ($) (2) | Aggregate Earnings in Last Fiscal Year ($) (3) | Aggregate Withdrawals/ Distributions ($) | Aggregate ($) (4) | ||||||||||||||||
D. Peterson | SIPS & ERAPS | $ | 160,200 | $ | 293,700 | $ | 26,393 | — | $ | 1,395,153 | ||||||||||||
| ST Incentive Deferred Comp | — | — | $ | 16,930 | — | $ | 557,734 | |||||||||||||||
| Total | $ | 160,200 | $ | 293,700 | $ | 43,323 | — | $ | 1,952,887 | |||||||||||||
E. Steenbergen | SIPS & ERAPS | — | — | — | — | — | ||||||||||||||||
| ST Incentive Deferred Comp | — | — | — | — | — | |||||||||||||||||
| Total | — | — | — | — | — | |||||||||||||||||
R. MacKay | SIPS & ERAPS | $ | 29,625 | $ | 33,979 | $ | 1,675 | — | $ | 65,279 | ||||||||||||
| ST Incentive Deferred Comp | — | — | — | — | — | |||||||||||||||||
| Total | $ | 29,625 | $ | 33,979 | $ | 1,675 | — | $ | 65,279 | |||||||||||||
J. Berisford | SIPS & ERAPS | $ | 58,413 | $ | 100,705 | $ | 12,517 | — | $ | 646,069 | ||||||||||||
| ST Incentive Deferred Comp | — | — | — | — | — | |||||||||||||||||
| Total | $ | 58,413 | $ | 100,705 | $ | 12,517 | $ | 646,069 | ||||||||||||||
S. Kemps | SIPS & ERAPS | — | — | — | — | — | ||||||||||||||||
| ST Incentive Deferred Comp | — | — | — | — | — | |||||||||||||||||
| Total | — | — | — | — | ||||||||||||||||||
A. Matturri | SIPS & ERAPS | $ | 142,013 | $ | 104,143 | $ | 17,308 | — | $ | 880,742 | ||||||||||||
| ST Incentive Deferred Comp | — | — | — | — | — | |||||||||||||||||
| Total | $ | 142,013 | $ | 104,143 | $ | 17,308 | — | $ | 880,742 | |||||||||||||
J. Callahan | SIPS & ERAPS | $ | 64,001 | $ | 64,001 | $ | 18,569 | — | $ | 847,032 | ||||||||||||
| ST Incentive Deferred Comp | — | — | $ | 9,648 | — | $ | 317,863 | |||||||||||||||
| Total | $ | 64,001 | $ | 64,001 | $ | 28,217 | — | $ | 1,164,895 | |||||||||||||
| (1) | Reflects executive contributions to the Company’s 401(k) Savings and Profit Sharing Plan Supplement for the |
| (2) | Reflects Company contributions to the Company’s 401(k) Savings and Profit Sharing Plan Supplement for the |
| (3) | Reflectsnon-qualified deferred compensation earnings under the Company’s 401(k) Savings and Profit Sharing Plan Supplement and Key Executive Short-Term Incentive Deferred Compensation Plan. |
| (4) | This column includes the following aggregated amounts that were |
| Matturri; and $539,780 for Mr. Callahan. Amounts for Messrs. Steenbergen, MacKay, and Kemps were not previously disclosed. |
The amounts shown as Company contributions represent employer savings and profit sharing contributions under the 401(k) Savings and Profit Sharing Plan Supplement. In 2013, the employer contribution for the savings plan component increased to 6% of eligible compensation above the IRS compensation limit. In 2014 and later
| 76 | 2017 Proxy Statement | |
EXECUTIVE COMPENSATION TABLES (continued) |
years, participants are required to make employee contributions under the 401(k) Savings and Profit Sharing Supplement to receive the employer contributions to the savings plan component, and the amount of the employer contribution will be based on the amount of the employee contribution, up to 6% of eligible compensation above the IRS compensation limit. In 2012 and 2013, participants were required to make the maximumpre-tax contribution under the qualified 401(k) Savings and Profit Sharing Plan in order to receive the savings plan component supplement. These amounts are also included as All Other Compensation in the Summary Compensation Table column on pages56 65 and 5767 of this Proxy Statement. Account balances under the 401(k) Savings and Profit Sharing Plan Supplement are currently credited with interest at the rate earned on the 401(k) Savings and Profit Sharing Plan Stable Assets fund. The annual rate of interest credited under these Plans was 2.52%2.36% for the 20142016 fiscal year. Account balances under the 401(k) Savings and Profit Sharing Plan Supplement are distributed to executives in the year following the year in which the executive separates from service.
Prior to 2014, executives could elect to defer all or part of their annual bonusincentive award payment under the Key Executive Short-Term Incentive Deferred Compensation Plan. Earnings on amounts deferred under the Key Executive Short-Term Incentive Deferred Compensation Plan are credited at a rate equal to 120% of the applicable Federal Long-Term Rate as prescribed by the Internal Revenue Service in December of the year prior to the year in which the bonus compensation is credited under the Plan. The interest rate that applied to outstanding balances during the 20142016 fiscal year was3.99% 3.13%. Account balances under the Key Executive Short-Term Incentive Deferred Compensation Plan are distributed to executives in accordance with their individual elections. Participants may elect to receive their deferred award payments in a singlelump-sum or in up to 15 equal annual installments. Payments may commence within 60 days of retirement or termination or as of January 1 of the year following the year in which such event occurs.
In 2014, the Company enhanced the 401(k) Savings and Profit Sharing Plan Supplement to allow for deferrals of up to 25% of eligible pay above the IRS Compensation limit. As a result of this change, the Company decided to no longer offer a deferral opportunity under the Key Executive Short-Term Incentive Compensation Plan.
| | | |
POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL |
Potential Payments Upon Termination or
Change-in-Control
The named executive officers may be eligible to receive certain payments and benefits under our severance, incentive and retirement plans in connection with the named executive officer’s termination of employment or achange-in-control. Described below are the specific events that would trigger the payments and benefits, and the estimated payments and benefits that would be provided to the named executive officers upon the occurrence of these events. In addition, described below in the section “Payments to Messrs. Eccleston and VittorMr. Callahan in Connection with their Departures”His Departure” are actual payments and benefits that were provided or that will be payable to Messrs. Eccleston and VittorMr. Callahan in connection with their respective departureshis departure from the Company.
Severance Plans
Senior Executive Severance Plan
The named executive officers, (otherother than Ms. Dillon Hatcher)Mr. MacKay, are eligible for severance benefits under our Senior Executive Severance Plan upon the occurrence of the following triggering events:
the Company terminates the executiveexecutive’s employment other than for cause;
the executive resigns due to an adverse change in the executive’s functions, duties or responsibilities that would cause the executive’s position to have substantially less responsibility, importance or scope; or
the executive resigns due to a reduction of the executive’s base salary by 10% or more.
In addition, the executive will be eligible for severance benefits if the executive resigns following achange-in-control because:
the executive’s base salary is reduced (other than a reduction of less than 10% as part of a Company-wide salary reduction) below the highest rate in effect since the beginning of the24-month period prior to thechange-in-control;
the executive’s annual or long-term incentive opportunity is materially less favorable than at any time since the beginning of the24-month period prior to thechange-in-control;
the aggregate value of the executive’s pension and welfare benefits is materially reduced;
the executive is required to transfer to a principal business location that increases the distance to the executive’s residence by more than 35 miles;
there is an adverse change in the executive’s title or reporting relationship or an adverse change by the Company in the executive’s authority, functions, duties or responsibilities (other than that which results solely from the Company ceasing to have a publicly traded class of common stock or the executive no longer serving as the chief executive, or reporting to the chief executive, of an independent, publicly traded company as a result thereof), which change would cause the executive’s position with the Company to become one of substantially less responsibility, importance or scope; or
a successor to the Company fails to adopt the Plan.
A termination for “cause” generally means a termination due to misconduct that results in, or could reasonably be expected to result in, material damage to the Company’s property, business or reputation.
A“change-in-control” generally means:
a person or group acquires 20% or more of the Company’s voting securities;
the members of our Board of Directors, on January 28,1987, together with persons approved by a majority of those members or persons approved by them, no longer make up a majority of the Board;
| 78 | 2017 Proxy Statement | |
POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL (continued) |
consummation of a merger or consolidation involving the Company if our voting securities do not represent more than 50% of the outstanding shares and voting power of the company surviving the transaction; or
our shareholders approve the liquidation or dissolution of the Company.
Achange-in-control by reason of a change in a majority of our Board, as described above, could arise, for example, as a result of a contested election (or elections) in which shareholders elect a majority of the members of the Board from nominees who are not nominated for election by the incumbent Board.
|
Under the Plan, as it was in effect as of December 31, 2014,2016, each named executive officer (other than Ms. Dillon Hatcher)the CEO and Mr. MacKay, whose severance benefits are described below separately) was eligible to receive the following severance benefits:benefits upon the occurrence of one of the termination events described above:
For executives with less than 24 months of service with the Company:
continued payment of the executive’s base salary and participation in the Company’s retirement, life, medical, dental, accidental death and disability insurance benefit plans during a severance period of 12 months.
For executives with at least 24 months of service with the Company:
continued payment of the executive’s base salary and participation in the Company’s retirement, life, medical, dental, accidental death and disability insurance benefit plans during a severance period of 12 months;
a lump sum payment at the end of the severance period of the executive’s base salary for a period of 1.6 months per yearsix months; and
an additional lump sum severance payment at the end of continuous service with the Companyseverance period equal to 10% of the lump sum payment calculated above in excesslieu of 7.5 years, upcontinued benefits.
Under the Plan, as it was in effect as of December 31, 2016, the CEO, Mr. Peterson, was eligible to receive the following severance benefits upon the occurrence of one of the termination events described above:
continued payment of the executive’s base salary and participation in the Company’s retirement, life, medical, dental, accidental death and disability insurance benefit plans during a maximumseverance period of 12 months;
a lump sum payment at the end of the severance period of the executive’s base salary for a period of 12 months; and
an additional lump sum severance payment at the end of the severance period equal to 10% of the lump sum payment calculated above in lieu of continued benefits.
If the triggering event took place following achange-in-control, then the total severance payments during the 12-months12-month severance period would have been equal to the sum of the executive’s annual base salary and annual target bonus,incentive award, and the lump sum payment due at the end of the severance period would have been equal to 100% of the total, increased by an amount equal to 10% of the lump sum in lieu of benefits.
In each case, to receive the full amount of separation pay due under the Plan, the executive would have had to sign a general release of claims against the Company. The executive would have received 50% of the total separation pay if the executive did not sign a release.
AsManagement Severance
Mr. MacKay is eligible for severance benefits under our Management Severance Plan upon the occurrence of January 1, 2015,a termination of employment by the Committee approved certain modificationsCompany other than for cause, and other than by reason of death, disability, voluntary resignation or lawful mandatory retirement at normal retirement age. A termination for “cause” generally means a termination due to misconduct that results in, or could reasonably be expected to result in, material damage to the Company’s property, business or reputation.
| | 2017 Proxy Statement | 79 |
POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL (continued) |
Under the Plan, as it was in effect as of December 31, 2016, Mr. MacKay was eligible to receive continued payment of his base salary and participation in the Company’s retirement, life, medical, dental, accidental death and disability insurance benefit plans during a severance benefits payableperiod of nine months.
To receive the separation pay due under the Plan. There isPlan, Mr. MacKay would have had to sign a brief summarygeneral release of these modifications inclaims against the Compensation Discussion and Analysis on page 51Company.
of this Proxy Statement.General Severance Treatment
In general, if payments under either the Senior Executive Severance Plan or the Management Severance Plan are considered “excess parachute payments” under Section 280G of the Internal Revenue Code, then a deduction to the Company will be disallowed and the executive will be subject to an excise tax equal to 20% of the amount. Because of the way the excise tax is calculated, in certain circumstances, the executive may receive a largerafter-tax amount (and the Company will be entitled to a larger tax deduction) if the gross amount payable to the executive is reduced. In this case, certain of the executive’s payments would be “cut back” to the largest amount that would not result in payment of any excise tax.
Severance payments to the named executive officers that constitutenon-qualified deferred compensation under Section 409A of the Internal Revenue Code will generally be delayed during the first six months following the executive’s termination, as required under Section 409A, and installments that would have otherwise been paid during thesix-month delay will be paid in a lump sum following the end of thesix-month delay.
Ms. Dillon Hatcher’s U.K. Employment ContractEstimated Severance as of December 31, 2016
Ms. Dillon Hatcher does not participate in the Senior Executive Severance Plan due to her residency in the U.K. Instead, she is entitled to 12 weeks’ of notice or pay in lieu of notice under the terms of her U.K. contract if the Company involuntarily terminates her employment other than for cause/misconduct (as provided under her contract). Ms. Dillon Hatcher’s contract otherwise generally provides for the terms of her compensation arrangement, including salary, eligibility to receive annual cash and equity incentive awards and vacation and eligibility for other health and welfare benefits. It also includes confidentiality, return of property and intellectual property covenants and six-month non-compete and non-solicit clauses.
| |
The following table shows the estimated payments and benefits that would have been provided under the Plan to each named executive officer (other than Ms. Dillon Hatcher) and to Ms. Dillon Hatcher under the terms of her U.K. employment contract if the executive’s employment had involuntarily terminated on December 31, 2014:2016:
| Name | Payment on Termination (a) | Payment on Termination Following Change-in-Control (b) | ||||||
D. L. Peterson | $ | 915,199 | $ | 4,400,000 | ||||
J. F. Callahan, Jr. | $ | 765,199 | $ | 2,970,000 | ||||
J. L. Berisford | $ | 565,199 | $ | 2,090,000 | ||||
I. Dillon Hatcher (c) | $ | 122,342 | $ | — | ||||
N. Sahai | $ | 814,375 | $ | 3,300,000 | ||||
L. Eccleston (d) | $ | 615,199 | $ | 2,420,000 | ||||
K. M. Vittor (d) | $ | 1,234,112 | $ | 2,222,000 | ||||
| Name | Payment on Termination ($)(1) | Payment on ($) (2) | ||||||
D. Peterson | $ | 2,115,878 | $ | 5,670,000 | ||||
E. Steenbergen | $ | 765,139 | $ | 1,575,000 | ||||
R. MacKay | $ | 330,104 | $ | 330,104 | ||||
J. Berisford | $ | 945,878 | $ | 2,415,000 | ||||
S. Kemps | $ | 600,853 | $ | 2,415,000 | ||||
A. Matturri | $ | 790,878 | $ | 2,205,000 | ||||
J. Callahan(3) | N/A | N/A | ||||||
| The estimated payment on termination reflects the amount payable, |
| payable in a lump sum reflects his severance benefit payable under the applicable plan. |
| | |
POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL (continued) |
Key Executive Short-Term Incentive Compensation Plan
The named executive officers may receive a portion of their annual bonusincentive award under the Company’s Key Executive Short-Term Incentive Compensation Plan if the executive terminates employment because of death, disability or retirement, or if the Company terminates the executiveexecutive’s employment other than for cause. Payments are prorated for the period the executive was employed during the year and are made to the executive in a lump sum on the regular payment date under the Plan.
If there is achange-in-control, each named executive officer will receive a payment equal to the average of the named executive officer’s annual bonusincentive award payments for the preceding three years, prorated for the period elapsed through the date of thechange-in-control. The Company may also pay the executive any additional amount necessary to reflect the actual achievement of the Company performance objectives and individual performance criteria for the executive through the date of thechange-in-control.
The following table shows the estimated payments that would have been provided under the Key Executive Short-Term Incentive Compensation Plan to each named executive officer if the executive’s employment had terminated on December 31, 2014,2016, or if achange-in-control had occurred on that date:
| Name | Payment on Termination (a) | Payment on Change-in-Control (b) | ||||||
D. L. Peterson | $ | 1,100,000 | $ | 920,000 | ||||
J. F. Callahan, Jr. | $ | 600,000 | $ | 680,850 | ||||
J. L. Berisford | $ | 400,000 | $ | 566,867 | ||||
I. Dillon Hatcher | $ | 422,740 | $ | 366,260 | ||||
N. Sahai | $ | 700,000 | $ | 743,839 | ||||
L. Eccleston (c) | $ | 500,000 | $ | 602,883 | ||||
K. M. Vittor (c) | $ | 400,000 | $ | 478,408 | ||||
| Name | Payment on Termination ($) (1) | Payment on Change-in-Control ($)(2) | ||||||
D. Peterson | $ | 1,700,000 | $ | 1,542,912 | ||||
E. Steenbergen | — | $ | 828,526 | |||||
R. MacKay | $ | 361,250 | $ | 340,000 | ||||
J. Berisford | $ | 550,000 | $ | 533,500 | ||||
S. Kemps | $ | 550,000 | $ | 662,821 | ||||
A. Matturri | $ | 550,000 | $ | 703,333 | ||||
J. Callahan (3) | N/A | N/A | ||||||
| This assumes |
| Reflects the average of the actual payments paid over the last three years, except for |
| receive any payments. |
Stock Incentive Plan
| |
Stock Incentive Plan.Each of the named executive officers has been granted PSUs and stock optionsRSUs under the Company’s 2002 Stock Incentive Plan. These awards are described on pages 5968 through 71 of this Proxy Statement.
Awards Granted after December 31, 2014
Awards granted under the Company’s 2002 Stock Incentive Plan after December 31, 2014 are subject to “double-trigger” treatment in the case of achange-in-control. For details, see pages 61 and 62 of this Proxy Statement.
| | 2017 Proxy Statement | 81 |
POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL (continued) |
Long-Term Performance Awards.For awards granted on or before December 31, 2014, ifAwards
If the named executive officer terminates employment due to retirement, disability or death, or, with the approval of the Compensation and Leadership Development Committee, if the Company terminates the executiveexecutive’s employment other than for cause, the executive is eligible to receive a portion of the shares that are covered by outstanding awards.
IfFor awards granted after December 31, 2014, if the executive terminates employment due to retirement or disability, the executive receives the number of shares that would be payable under the terms of the award based on actual performance for the performance period, prorated for the number of years during the award cycle (including the year of termination) that the executive was employed. Delivery of the awarded shares is madeor in the year following the normal maturity date for the award.
In the event of termination of employment by the Company other than for cause, with the approval of the Compensation and Leadership Development Committee, the executive receives the number of shares that would be payable under the terms of the award based on the actual performance for the performance period, prorated for the number of full months during the award cycle that the executive was employed.employed plus the number of months during which the executive receives separation pay. Delivery of the awarded shares is made in the year following the normal maturity date for the award.
In the case of the executive’s death, the number of shares awarded is based on actual performance throughfor the year of the executive’s death,performance period, prorated for the number of yearsmonths completed during the award cycle (counting the year of the executive’s death as a completed year).cycle. Delivery of the awarded shares is made by March 15 of the year following the executive’s death.
In
For awards granted after December 31, 2015, if the executive terminates employment due to retirement or disability, or in the event of achange-in-control duringtermination of employment by the performance period,Company other than for cause, with the approval of the Compensation and Leadership Development Committee, the executive may receivereceives the number of shares that would be payable upon achievementunder the terms of the higher of the target or actual performance as follows:
a prorated number of shares,award based on the portionactual performance for the performance period, prorated for the number of days during the award cycle elapsed before the date of thechange-in-control, is released tothat the executive onwas employed plus the datenumber of thechange-in-control; and
days during which the valueexecutive receives separation pay. Delivery of the remainingawarded shares generally based on the highest price per share paid in thechange-in-control,is paid to the executive in a lump summade in the year following the end of the normal maturity date underfor the awards.award.
If not already paid,In the cash payment described above will be made to the executive in a lump sum upon terminationcase of the executive’s death, the number of shares awarded is based on the actual performance for the performance period, prorated for the number of days completed during the award cycle. Delivery of the awarded shares is made by March 15 of the year following the executive’s death.
In the event of a change-in-control during the performance period, if assumed on substantially the same terms and conditions, the PSU awards will convert into an award of time-vesting RSUs with respect to a number of shares determined as follows: if less than 50% of the performance period has elapsed, the number of shares will be based on target performance, and if 50% or more of the performance period has elapsed, the number of shares will be based on actual performance as of the change-in-control. The converted RSUs will then continue to vest pursuant to the original vesting schedule of the PSUs, except that they will vest in full if the executive’s employment is terminated due to retirement, disability or death or by the Company without cause. If the awards are not so assumed, they will be deemed to be earned at the higher of target or actual performance as of the change-in-control date, and the award will vest in full.
Restricted Stock Units
If the named executive officer terminates employment due to retirement, disability or death, or, with the approval of the Compensation and Leadership Committee, if the Company terminates the executive other than for cause.cause, the executive is eligible to receive a portion of the shares that are covered by the outstanding RSUs. In the case of the executive’s death, delivery of the awarded shares is made within 60 days following the date of the employee’s passing.
In the event of achange-in-control during the vesting period, if assumed on substantially the same terms and conditions, RSUs will roll over into awards of the successor company’s stock and will remain outstanding subject to their original vesting terms, except that they will vest in full if the executive’s employment is terminated due to retirement, disability or death or by the Company without cause within 24 months following the change-in-control. If RSUs are not so assumed, they will vest in full upon thechange-in-control.
| 82 | 2017 Proxy Statement | |
POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL (continued) |
Stock Options.For awards granted on or before December 31, 2014, if aOptions
If the named executive officer terminates employment due to death, disability or normal retirement, the executive’s stock options will vest in full. In addition, in the case of death, the options will be exercisable for one year following the date of death, and, in the case of disability or retirement, until the end of the option term. If the executive terminates employment due to early retirement, generally, the vesting of the executive’s stock options will not accelerate, but, to the extent they are vested at the time of retirement and the executive is 55 or older with 10 years of continuous service, the options will be exercisable until the end of the option term.
In the event of achange-in-control, all outstanding stock options will vest in full and will either be converted into awards based on the common stock of the surviving company or paid to the executive in cash. Cash payments under options will be equal to the value of the option shares, generally the highest price per share paid in thechange-in-control, less the exercise price of the shares.
Long-Term Cash Awards
|
Restricted Stock Units. IfS&P Dow Jones Indices Long-Term Cash Awards
For awards granted after December 31, 2014, if the named executive officer terminates employment due to retirement disability or death, or,the executive receives the dollar value in cash that would be payable under the terms of the award based on actual performance for the performance period, prorated for the number of months during the award cycle that the executive was employed. In the event of termination of employment by the Company other than for cause, with the approval of the Compensation and Leadership Development Committee, the executive receives the dollar value in cash that would be payable under the terms of the award based on actual performance for the performance period, prorated for the number of months during the award cycle that the executive was employed plus the number of months during which the executive receives separation pay. Payment of the award is made on or before March 15 in the year following the normal maturity date for the award. In the case of the executive’s death, the payment will be made in the year following the executive’s death.
For awards granted after December 31, 2015, if the Companyexecutive terminates employment due to retirement or death, the executive receives the dollar value in cash that would be payable under the terms of the award based on actual performance for the performance period, prorated for the number of days during the award cycle that the executive was employed. In the event of termination by the Company other than for cause, with the approval of the Compensation and Leadership Development Committee, the executive is eligible to receive a portionreceives the dollar value in cash that would be payable under the terms of the sharesaward based on actual performance for the performance period, prorated for the number of days during the award cycle that are covered by the outstanding RSUs. executive was employed plus the number of days during which the executive receives separation pay. Payment of the award is made on or before March 15 in the year following the normal maturity date for the award. In the case of the executive’s death, the payment will be made in the year following the executive’s death.
In the event of achange-in-control during the vestingperformance period, if assumed on substantially the same terms and conditions, RSUs will roll over into awardsBoard of the successor company’s stock andCompany may take all actions it may determine necessary or appropriate to treat the executive equitably, including without limitation the modification or waiver of applicable performance measures, the performance period or cash awards. In no circumstance will remain outstanding subject to their original vesting terms, except that they will vest in full if the executive’s employment is terminated due to retirement, disability or death or bytiming of the Company without cause within 24 months following the change-in-control. If RSUs are not so assumed, they will vest in full upon the change-in-control.
Restricted Stock Awards. For awards granted on or before December 31, 2014, if the named executive officer’s employment is terminated for any reason other than death, restricted stock awards willaward payment date be forfeited. In the case of death, a portion of restricted stock awards will vest on a prorata basis. In the event of a change-in-control during the vesting period, restricted stock awards will vest in full upon the change-in-control.accelerated.
Awards Granted After December 31, 2014.Awards granted under the Company’s 2002 Stock Incentive Plan after December 31, 2014 are subject to “double-trigger” treatment in the case of a change-in-control. For details, see page 52 of this Proxy Statement.
| | | |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL (continued) |
The following table shows the estimated payments and benefits that would have been provided to each named executive officer in respect of stock options and Long-Term Awards under the Company’s 2002 Stock Incentive Plan if the executive’s employment had terminated on December 31, 2014,2016 or if achange-in-control had occurred on that date:
| Termination of Employment | Change-in-Control | |||||||||||||||||||||||
| Name | Stock (a) | Long-Term Awards (b) | Total | Stock (a) | Long-Term Awards (c) | Total | ||||||||||||||||||
D. L. Peterson | $ | 1,355,690 | $ | 10,389,240 | $ | 11,744,930 | $ | 1,355,690 | $ | 13,963,454 | $ | 15,319,144 | ||||||||||||
J. F. Callahan, Jr. | $ | 665,003 | $ | 5,074,470 | $ | 5,739,473 | $ | 665,003 | $ | 7,865,965 | $ | 8,530,968 | ||||||||||||
J. L. Berisford | $ | 565,283 | $ | 3,552,986 | $ | 4,118,269 | $ | 565,283 | $ | 4,539,537 | $ | 5,104,820 | ||||||||||||
I. Dillon Hatcher | $ | 60,072 | $ | 84,086 | $ | 144,158 | $ | 60,072 | $ | 1,238,701 | $ | 1,298,773 | ||||||||||||
N. Sahai | $ | 214,900 | $ | 400,232 | $ | 615,132 | $ | 214,900 | $ | 2,396,854 | $ | 2,611,754 | ||||||||||||
L. Eccleston (d) | $ | 631,755 | $ | 3,864,416 | $ | 4,496,171 | $ | 631,755 | $ | 4,753,979 | $ | 5,385,734 | ||||||||||||
K. M. Vittor (d) | $ | 573,924 | $ | 3,510,632 | $ | 4,084,556 | $ | 573,924 | $ | 4,318,778 | $ | 4,892,702 | ||||||||||||
| Termination of Employment | Change-in-Control | |||||||||||||||||||||||
| Name | Stock Options ($)(1) (2) | Long-Term Awards ($)(1) (3) | Total ($) | Stock Options ($)(1) (2) | Long-Term Awards ($)(1) (4) | Total ($) | ||||||||||||||||||
D. Peterson | $ | 518,610 | $ | 14,476,605 | $ | 14,995,215 | $ | 518,610 | $ | 16,207,784 | $ | 16,726,394 | ||||||||||||
E. Steenbergen | — | $ | 1,291,233 | $ | 1,291,233 | — | $ | 3,931,233 | $ | 3,931,233 | ||||||||||||||
R. MacKay | — | $ | 1,137,666 | $ | 1,137,666 | — | $ | 1,935,720 | $ | 1,935,720 | ||||||||||||||
J. Berisford | $ | 110,209 | $ | 3,934,351 | $ | 4,044,560 | $ | 110,209 | $ | 4,295,040 | $ | 4,405,249 | ||||||||||||
S. Kemps | — | $ | 530,387 | $ | 530,387 | — | $ | 1,084,541 | $ | 1,084,541 | ||||||||||||||
A. Matturri | — | $ | 2,389,607 | $ | 2,389,607 | — | $ | 2,664,852 | $ | 2,664,852 | ||||||||||||||
J. Callahan(5) | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||
| (1) |
| (2) | For all NEOs, reflects accelerated vesting for all unvested stock option awards upon death, disability or with the consent of the Compensation and Leadership Development Committee. |
| (3) |
| (4) |
| (5) | For Mr. Callahan, reflects the actual |
Retirement and Other Benefits
As described on pages 6373 through 6575 of this Proxy Statement, except as noted below, each of the named executive officers is entitled to receive benefits under the Company’s Employee Retirement Plan (the “ERP”) and the Employee Retirement Plan Supplement (the “ERPS”) and, as described below, the Company’s Management
| 84 | 2017 Proxy Statement | |
POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL (continued) |
Supplemental Death & Disability Benefits Plan. As previously noted on page 74, Messrs. Peterson, Steenbergen, MacKay and Sahai joined the Company in 2011 and 2014, respectively, and thus neither wasKemps were not eligible to participate in the ERP and ERPS before theythe plans were frozen on April 1, 2012. Ms. Dillon Hatcher, who also joined the Company in 2014, is not eligible to participate in the Company’s U.S. benefit plans. In addition, the named executive officers other than Ms. Dillon Hatcher, participate in The 401(k) Savings and Profit Sharing Plan of McGraw Hill Financial,S&P Global Inc. and its Subsidiaries, described on page 5767 of this
Proxy Statement, and are eligible to participate in
the McGraw Hill Financial,S&P Global Inc. 401(k) Savings and Profit Sharing Plan Supplement, described on pages 6676 and 6777 of this Proxy Statement, and were eligible to participate in the Key Executive Short-Term Incentive Deferred Compensation Plan, described on page 6777 of this Proxy Statement.
Employee Retirement Plan and Supplement.Supplement
Following termination of their employment, except as noted above, the named executive officers are entitled to receive retirement benefits (described on pages 6373 through 6575 of this Proxy Statement) under the Company’s Employee Retirement PlanERP and Employee Retirement Plan Supplement,ERPS, and have accrued the benefits shown on page 6373 of this Proxy Statement through the end of the 20142016 fiscal year. In the event of achange-in-control, the executives will receive, in a lump sum, the actuarial equivalent of their accrued benefits under the Employee
|
Retirement Plan SupplementERPS as described on pages 6474 and 6575 of this Proxy Statement.
Management Supplemental Death & Disability Benefits Plan.PlanUnder
For all NEOs, under our Management Supplemental Death &Disability Benefits Plan, if ana named executive officer dies before retirement, the executive’s beneficiary will receive a lump sum death benefit equal to 200% of the executive’s base salary in effect at the time of death. In addition, if the executive is disabled prior to age 65, the executive will be entitled to an annual benefit equal to 50% of the greater of: (a) 1.5 times the executive’s base salary in effect immediately preceding the date of the executive’s disability; or (b) the executive’s highest annual base salary and highest annual target bonusincentive award during the preceding 36 months occurring prior to January 1, 2005. The benefit generally will be offset by other disability or qualified retirement benefits payable to the executive and will continue until the executive is no longer disabled or reaches age 65. Ms. Dillon Hatcher is not eligible to participate in this U.S.-based plan.
Non-Qualified Deferred Compensation Plans.Plans
In the event of achange-in-control, the named executive officers, other than Ms. Dillon Hatcher, will receive payment in a lump sum of their account balances under the Company’s 401(k) Savings and Profit Sharing Plan Supplement and the Company’s Key Executive Short-Term Incentive Deferred Compensation Plan. The named executive officers other than Ms. Dillon Hatcher, may also receive these amounts in connection with their termination of employment. Each executive’s account balances under these Plans at the end of the 20142016 fiscal year are shown on page 6676 of this Proxy Statement.
Payments to Messrs. Eccleston and VittorMr. Callahan in Connection with their DeparturesHis Departure
In connection with their departures, Messrs. Eccleston and Vittor received payments and benefits in accordance with pre-existing plans and awards. In addition, Mr. Eccleston received certain other miscellaneous benefits in connection with his departure. These payments and benefits are summarized and quantified below.
Mr. Eccleston.Mr. EcclestonCallahan ceased to serve as an executive officer of the Company on July 14, 2014 but remained inSeptember 1, 2016. As a non-executive officer role withresult of his voluntary departure from the Company until December 31, 2014. In connection with his departure, Company:
Mr. Eccleston receivedCallahan was not entitled to receive severance benefits under our Senior Executive Severance Plan consisting of (i) 12 months of salary continuation for a total of $600,000 and (ii) 12 months ofnor continuation of health and welfare benefits under our benefit plans. Mr. Eccleston executed a general release of claims against the Company in connection withplans;
He forfeited his departure.
In addition, Mr. Eccleston received his bonus for the 2014 yearparticipation in the amount of $557,094. 2016 Key Executive Short-Term Incentive Plan and was not entitled to payments under the Plan;
Mr. Eccleston’s outstandingCallahan forfeited his right to all unearned and unvested equity awards were treated pursuantgranted to the terms of the applicable award agreements as follows:
(i) his unvested options will continue to vest through December 31, 2015, the end of his separation pay period. As of December 31, 2014, Mr. Eccleston held 25,427 unvested options, 10,543 of which are expected to vest by December 31, 2015. As of December 31, 2014, these options were valued at $289,033. The vested options will remain exercisable for six months following the end of the separation pay period. Any unvested options will be forfeited; and
(ii) his unearned PSUs, with a target number of 21,446 shares and with a value at target of $1,908,265 using the closing price of our common stock of $88.98 on December 31, 2014, remained outstanding and will pay out based on the applicable performance criteria on the originally scheduled payment dates, subject to proration through December 31, 2014.
In connection with his departure from the Company, Mr. Eccleston will also receive distributions fromhim under the Company’s non-qualified deferred compensationlong-term incentive plans, as further describedincluding the annual equity award grants he received in the Non-Qualified Deferred Compensation TableApril 2016, and accompanying narrative disclosures found on pages 66all these awards were subsequently canceled; and 67 of this Proxy Statement. Finally,
Mr. Eccleston alsoCallahan received payout of accrued$28,846 for earned but unused vacation ($46,154), outplacement services, as well as continuation of executive health services, tax preparation services and fitness club services for one year following his departure.days.
| | | |
Mr. Vittor. Mr. Vittor retired from his role as Executive Vice President and General Counsel of the Company on August 4, 2014, and remained in a non-executive role with the Company until December 31, 2014. Under the terms of the Key Executive Short-Term Incentive Plan, Mr. Vittor received his bonus for the 2014 year in the amount of $450,000. Mr. Vittor’s outstanding equity awards were treated pursuant to the terms of the applicable award agreements relating to normal retirement as follows:
DIRECTOR COMPENSATION |
(i) his unvested options vested in full for a total of 23,099 shares with a value of
$573,924 using the closing price of our common stock of $88.98 on December 31, 2014, and will remain exercisable through the expiration date of each award; and
(ii) his unearned PSUs, with a target number of 19,483 shares and with a value at target of $1,733,597 using the closing price of our common stock of $88.98 on December 31, 2014, remained outstanding and will pay out based on the applicable performance criteria on the originally scheduled payment dates, subject to proration through December 31, 2014.
|
20142016 DIRECTOR COMPENSATION TABLE
Directors who are employees of the Company receive no additional compensation for serving on the Board or its Committees. Mr. Harold McGraw III received compensation in 2014 for his services as Non-Executive Chairman. The following table contains information regarding the compensation that the Company paid to thenon-employee Directors in 2014, including to2016, excluding Ms. Hill and Mr. McGraw as Non-Executive Chairman.Alverà, who became Directors in 2017.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (a) | All Other Compensation ($) (b) | Total ($) | ||||||||||||
Sir Winfried Bischoff | $116,500 | $115,000 | $ 221 | $231,721 | ||||||||||||
William D. Green | $106,000 | (c) | $115,000 | $ 221 | $221,221 | |||||||||||
Charles E. Haldeman, Jr. | $107,500 | (d) | $115,000 | $ 221 | $222,721 | |||||||||||
Rebecca Jacoby | $ 13,167 | (e) | $ 28,750 | $ 18 | $ 41,935 | |||||||||||
Linda Koch Lorimer | $ 32,333 | (c)(f) | $ 38,333 | $ 74 | $ 70,740 | |||||||||||
Harold McGraw III (g) | $400,000 | – | $511,046 | $911,046 | ||||||||||||
Robert P. McGraw | $ 94,000 | $115,000 | $ 3,221 | $212,221 | ||||||||||||
Hilda Ochoa-Brillembourg | $104,500 | (d) | $115,000 | $ 5,221 | $224,721 | |||||||||||
Sir Michael Rake | $116,500 | (h) | $115,000 | $ 221 | $231,721 | |||||||||||
Edward B. Rust, Jr. | $141,500 | (d) | $115,000 | $ 5,221 | $261,721 | |||||||||||
Kurt L. Schmoke | $106,000 | (i) | $115,000 | $ 1,221 | $222,221 | |||||||||||
Sidney Taurel | $121,000 | $115,000 | $ 3,221 | $239,221 | ||||||||||||
Richard E. Thornburgh | $106,000 | (c) | $115,000 | $ 5,221 | $226,221 | |||||||||||
| Name | Fees Earned ($) | Stock Awards ($) (1) | All Other ($) (2) | Total ($) | ||||||||||||
Sir Winfried Bischoff(3) | $ | 103,500 | $ | 115,000 | $ | 139 | $ | 218,639 | ||||||||
William D. Green | $ | 111,500 | (4) | $ | 115,000 | $ | 139 | $ | 226,639 | |||||||
Charles E. Haldeman, Jr. | $ | 254,500 | (5) | $ | 115,000 | $ | 139 | $ | 369,639 | |||||||
Rebecca Jacoby | $ | 94,000 | $ | 115,000 | $ | 139 | $ | 209,139 | ||||||||
Monique F. Leroux(6) | $ | 17,667 | 28,750 | $ | 12 | $ | 46,429 | |||||||||
Robert P. McGraw(7) | $ | 29,333 | $ | 38,333 | $ | 46 | $ | 67,712 | ||||||||
Maria R. Morris(6) | $ | 16,167 | $ | 28,750 | $ | 12 | $ | 44,929 | ||||||||
Hilda Ochoa-Brillembourg(3) | $ | 106,000 | (5) | $ | 115,000 | $ | 5,139 | $ | 226,139 | |||||||
Sir Michael Rake | $ | 119,500 | (5) | $ | 115,000 | $ | 139 | $ | 234,639 | |||||||
Edward B. Rust, Jr. | $ | 113,500 | (5) | $ | 115,000 | $ | 5,639 | $ | 234,139 | |||||||
Kurt L. Schmoke | $ | 100,000 | (8) | $ | 115,000 | $ | 139 | $ | 215,139 | |||||||
Sidney Taurel(7) | $ | 32,833 | $ | 38,333 | $ | 46 | $ | 71,212 | ||||||||
Richard E. Thornburgh | $ | 114,500 | (5) | $ | 115,000 | $ | 5,139 | $ | 234,639 | |||||||
| (1) | Represents grant date fair value calculated in accordance with FASB ASC Topic 718 for deferred stock credited under the Director Deferred Stock Ownership Plan, as described below. The assumptions used to calculate the grant date fair value of the deferred share credits were in accordance with FASB ASC Topic 718 as disclosed in Footnote |
Name | # of Shares | |||
Sir Winfried Bischoff | ||||
William D. Green | ||||
Charles E. Haldeman, Jr. | ||||
Rebecca | 1,566 | |||
Monique F. Leroux(a) | — | |||
| 36,433 | |||
Maria R. Morris(a) | — | |||
| ||||
Hilda Ochoa-Brillembourg | ||||
Sir Michael Rake | ||||
Edward B. Rust, Jr. | ||||
Kurt L. Schmoke | ||||
Sidney Taurel(b) | ||||
Richard E. Thornburgh | ||||
| 86 | 2017 Proxy Statement | |
DIRECTOR COMPENSATION (continued) |
| (a) | Ms. |
| (b) |
| |
| Represents life insurance |
| (3) | Ms. Ochoa-Brillembourg and Sir Winfried Bischoff plan to retire from the |
| Voluntarily elected to fully defer this payment under the Director Deferred Compensation Plan. |
| (5) | Voluntarily elected to fully defer this payment under the Director Deferred Stock Ownership Plan. |
| (6) | Ms. |
| (7) |
| Voluntarily elected to deferone-half of this payment under the Director Deferred Stock Ownership Plan and the remainingone-half under the Director Deferred Compensation Plan. |
| | 2017 Proxy Statement | 87 |
DIRECTOR COMPENSATION (continued) |
ANNUALDIRECTOR COMPENSATION AND GOVERNANCE
Overview of Key Best Practices
Our Director compensation program continues to align with long-term shareholder interests, including by the following:
COMPENSATION PRACTICE | COMPANY POLICY | MORE DETAIL | ||||
| ü | Emphasis on Equity Compensation | The most significant portion ofnon-employee Director compensation is the annual equity grant payable as an annual deferred share award. | Pg. 88 | |||
| ü | Holding Requirement | Ournon-employee Directors must hold all equity compensation granted to them in the form of deferred share credits during their tenure until they retire, and shares of the Company’s common stock underlying these awards are not delivered until following a Director’s termination of Board membership. | Pg. 89 | |||
| ü | Robust Stock Ownership Guidelines | Our Director stock ownership guidelines require Directors to acquire 400 shares of the Company’s common stock within 90 days and five times (5x) the cash component of the annual Board retainer within five years of election to the Board. | Pg. 89 | |||
| ü | Anti-Hedging and Anti-Pledging Policy | Our anti-hedging and anti-pledging policy prohibits Directors from engaging in hedging and pledging transactions related to Company stock. | Pg. 90 | |||
Director Compensation Program
The Company provides annual compensation tonon-employee Directors as follows:
Cash Compensation in 2015
The Company provides to thenon-employee Directors:
|
an annual cash retainer of $70,000;
$1,500 for each Board meeting attended;
$1,500 for each Committee meeting attended; and
an annual cash retainer of $15,000 to the Chairs of Committees of the Board. Additionally, Board; and
an annual cash retainer of $25,000 will be paid to the Presiding Director. However,Director ($10,000 in the event that the Presiding Director is also athe Chair of a Committee, the annual cash retainer paid to the Presiding Director will be $10,000.Committee).
CompensationThe annual cash compensation to be provided in respect of the Non-Executive Chairman2017 remains unchanged from that provided in respect of 2016.
Share Compensation
The Company’s Corporate Governance Guidelines requiremost significant portion ofnon-employee Director compensation is the Board to select a Chairman onannual equity grant payable as an annual basisdeferred share award. In respect of 2017, eachnon-employee Director will receive an annual deferred share credit of $150,000 pursuant to the Director Deferred Stock Ownership Plan, increased from $115,000 as described below. The earned deferred share credit of $115,000 in respect of fiscal year 2015 was paid in early 2016 under this Plan. This $115,000 was credited as 1,213.08 deferred shares based on the criteria that the Nominating and Corporate Governance Committee recommends and the Directors believe to be in the best interestsclosing price of the Company. Accordingly, the Board appointed Mr. Harold McGraw III to serve as our Non-Executive Chairman for the period from April 30, 2014 through April 29, 2015. As Non-Executive Chairman, Mr. McGraw’s responsibilities are in addition to those of other Directors, as described on page 9 of this Proxy Statement. In consideration of his services, the Nominating and Corporate Governance Committee recommended, and the Board approved, based on a recommendation by Pay Governance LLC, a Non-Executive Chairman retainer at the annual rate of $400,000 for Mr. McGraw, payable in monthly installments in cash in accordance with current payment practices for retainers paid to our Board members. This retainer is in lieu of all other cash retainers, meeting fees and share compensation that we pay to our other non-employee Directors. The
| | |
Board also determined to continue, until the earlier of the 2015 Annual Meeting or Mr. McGraw’s retirement from the Board (which will now be the same date), the security arrangements and car service that were provided to him while he served as our President and Chief Executive Officer, as well as his right to travel on Company provided aircraft through May 16, 2014. Mr. McGraw was required to reimburse the Company for any personal use of Company provided aircraft in accordance with the Company’s practice as described on page 32 of this Proxy Statement. Mr. McGraw made payments to the Company of $30,581 for such use. The Board has also agreed to provide Mr. McGraw with office space and secretarial support for four years following his retirement from the Board.
DIRECTOR COMPENSATION (continued) |
Share Compensation
Eachnon-employee Director, other than Mr. Harold McGraw III, receives an annual deferred share creditCompany’s common stock on January 4, 2016 of $115,000 pursuant to the Director Deferred Stock Ownership Plan.$94.80. The earned deferred share credit of $90,000$115,000 in 2013respect of 2016 was paid in 20142017 under this Plan. This $90,000$115,000 was credited as 1,157.561,060.98 deferred shares based on the closing price of the Company’s common stock on January 2, 20143, 2017 of $77.75.$108.39.
These deferred share credits are payable in shares of the Company’s common stock following a Director’s termination of Board membership. This Plan also permits Directors to elect to receive all or part of their annual cash retainer and Board and Committee fees in deferred shares of common stock in lieu of these cash payments. For 2015,2017, the Company has written agreements with Ms. Ochoa-Brillembourg and Messrs. Haldeman, RustSchmoke and SchmokeThornburgh and Sir Michael Rake to re-
ceivereceive all or part of these cash payments as deferred shares.
Other Director Plans and Other Compensation
Directors may also elect to defer all or part of their annual cash retainer and Board and Committee fees under the Director Deferred Compensation Plan. For 2015,2017, the Company has written agreements to defer cash payments under this Plan with Sir Michael Rake and Messrs. Green and Schmoke. Interest is payable on the deferred cash amount at 120% of the applicable Federal Long-Term Rate as prescribed by the Internal Revenue Service in December of the year prior to the year in which the Director compensation is credited.
Ournon-employee Directors are reimbursed for tuition and related expenses for continuing director education courses. Our Directors may also participate in our director charitable matching program with respect to contributions made to the S&P Global Political Action Committee (“S&P Global PAC”). Under the S&P Global PAC program, the Company contributes funds to a charitable organization of the Director’s choice that match the Director’s contribution to the S&P Global PAC, up to a maximum of $5,000 per annum.
Additionally, our Directors may participate in the charitable S&P Global Matching Gift Program up to a maximum participant donation of $3,000 (or the currency equivalent) in the aggregate per year. This program is generally available to all our employees and Directors as well as retired employees or directors for up to three years following their retirement.
Non-Employee Director Compensation Design Changes
The Nominating and Corporate Governance Committee, comprised of independent Directors, annually reviews the competitiveness of the Company’snon-employee Director compensation based on pay practices among the Company’s Proxy Peer Group, as described on page 41 of this Proxy Statement, and broader general industry practices for similarly sized companies in the S&P 500. During 2016, the Committee engaged Pay Governance LLC, an independent compensation consultant, to review director compensation survey data and advise the Committee on changes, if any, tonon-employee Director compensation.
As a result of that review and the Committee’s discussion, the Committee recommended to the Board, and the Board approved, an increase to the annual equity retainer for eachnon-employee Director from $115,000 to $150,000, effective January 1, 2017. The annual equity retainer, including the increased portion, is mandatorily deferred until a Director’s termination from the Board, as described above. The Board determined that it was appropriate to implement this change to further increase the alignment of eachnon-employee Director’s interests with those of our shareholders and to align the Company’s program more closely with peer companies, bringing our Director compensation from a level that approximates the 25th percentile of the peer group to a level that approximates the median of the peer group.
Director Stock Ownership Guidelines
Under the Company’sBy-Laws, each Director is required to own or acquire 400 shares of the Company’s common stock within 90 days of his or her election to the Board and to hold such shares through his or her entire tenure as a Director. Additionally, under the Company’sNon-Employee Director Stock Ownership Guidelines, eachnon-employee Director is required to own or acquire, within five years of election to the Company’s Board of Directors, shares of common stock of the Company (including deferred share units held under the Director Deferred Stock Ownership Plan) having a market value of at least five times (5x) the annual cash retainer for serving as a Director of the Company. Company at all times during his or her tenure.
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DIRECTOR COMPENSATION (continued) |
Based on the holdings of shares and deferred share units under the Director Deferred Stock Ownership Plan, as of February 25, 2015,24, 2017, each Director was in compliance with the minimum holding requirement under the Company’sNon-Employee Director Stock Ownership Guidelines (taking into account the applicable five-year transition period).
The full policy can be viewed and downloaded from the Corporate Governance section of the Company’s Investor Relations website at http://investor.spglobal.com.
Insider Trading Policy
Under the Company’s Insider Trading Policy, Directors (and officers) are prohibited without exception from pledging Company stock as well as from engaging in hedging transactions related to Company stock, such as puts, calls, swaps, collars and other arrangements intended to hedge exposure to Company stock or provide protection against declines in the value of Company stock. None of our Directors has shares of Company stock subject to a pledge.
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OWNERSHIP OF COMPANY STOCK |
A beneficial owner of stock is a person who has voting power, meaning the power to control voting decisions, or investment power, meaning the power to cause the sale of the stock.
Company Stock Ownership of Management (a),(b)(1)(2)
The following table shows the number of shares of the Company’s common stock beneficially owned on February 25, 201524, 2017 by each of our Directors and Director nominees; the Chief Executive Officer and the other six named executive officers in the Summary Compensation Table; and all individuals who served as Directors or executive officers at February 25, 2015,24, 2017, as a group.
| Name of Beneficial Owner | Sole Voting Power and Sole Investment Power | Shared Voting Power and Shared Investment Power | Right to Acquire Shares within 60 Days by Exercise of Options | Total Number of Shares Beneficially Owned | Percent of Common Stock(a) | Director Deferred Stock Ownership Plan(c) | ||||||||||||||||||
John L. Berisford | 38,851 | 9,433 | 48,284 | (d | ) | |||||||||||||||||||
Sir Winfried Bischoff | 4,000 | 4,000 | (d | ) | 32,404 | |||||||||||||||||||
Jack F. Callahan, Jr. | 42,607 | 67,382 | 109,989 | (d | ) | |||||||||||||||||||
Imogen Dillon Hatcher | 0 | 0 | 0 | (d | ) | |||||||||||||||||||
Louis Eccleston | 40,072 | 60,282 | 100,354 | (d | ) | |||||||||||||||||||
William D. Green | 1,000 | 1,000 | (d | ) | 6,497 | |||||||||||||||||||
Charles E. Haldeman, Jr. | 3,000 | 3,000 | (d | ) | 6,912 | |||||||||||||||||||
Rebecca Jacoby | 400 | 400 | (d | ) | 331 | |||||||||||||||||||
Harold McGraw III | 6,475,971 | 741,055 | 2,104,837 | 9,321,863(e) | 3.4 | % | ||||||||||||||||||
Robert P. McGraw | 452,673 | 607,349 | 1,060,022(f) | (d | ) | 34,720 | ||||||||||||||||||
Hilda Ochoa-Brillembourg | 1,800 | 1,800 | (d | ) | 45,381 | |||||||||||||||||||
Douglas L. Peterson | 95,678 | 110,894 | 206,572 | (d | ) | |||||||||||||||||||
Sir Michael Rake | 400 | 400 | (d | ) | 18,185 | |||||||||||||||||||
Edward B. Rust, Jr. | 2,000 | 2,000 | (d | ) | 63,149 | |||||||||||||||||||
Neeraj Sahai | 13,443 | 6,348 | 19,791 | (d | ) | |||||||||||||||||||
Kurt L. Schmoke | 1,036 | 1,036 | (d | ) | 37,217 | |||||||||||||||||||
Sidney Taurel | 4,000 | 4,000 | (d | ) | 43,366 | |||||||||||||||||||
Richard E. Thornburgh | 5,000 | 5,000 | (d | ) | 4,475 | |||||||||||||||||||
Kenneth M. Vittor | 58,243 | 29,023 | 87,266 | (d | ) | |||||||||||||||||||
All Directors and executive officers of the Company as a group (a total of25, including those named above)(g) | 7,338,510 | 785,755 | 2,580,851 | 10,705,116 | 4 | % | 292,637 | |||||||||||||||||
| Name of Beneficial Owner | Sole Voting Power and Sole Investment Power (#) | Shared Voting Power and Shared Investment Power (#) | Right to Acquire Shares within 60 Days by Exercise of Options (#) | Total Number of Shares Beneficially Owned (#) | Percent of Common Stock (%)(1) | Director Deferred Stock Ownership Plan (#)(3) | ||||||||||||||||||
John L. Berisford | 25,455 | — | — | 25,455 | (4 | ) | — | |||||||||||||||||
Sir Winfried Bischoff | 4,000 | — | — | 4,000 | (4 | ) | 35,613 | |||||||||||||||||
Jack F. Callahan | 41,839 | — | — | 41,839 | (4 | ) | — | |||||||||||||||||
William D. Green | 1,000 | — | — | 1,000 | (4 | ) | 8,996 | |||||||||||||||||
Charles E. Haldeman, Jr. | 3,000 | — | — | 3,000 | (4 | ) | 14,043 | |||||||||||||||||
Rebecca Jacoby | 400 | — | — | 400 | (4 | ) | 2,662 | |||||||||||||||||
Steven J. Kemps | — | — | — | — | (4 | ) | — | |||||||||||||||||
Monique Leroux | 500 | — | — | 500 | (4 | ) | 266 | |||||||||||||||||
Robert J. MacKay | 2,362 | — | — | 2,362 | (4 | ) | — | |||||||||||||||||
Alexander J. Matturri | 13,641 | — | 18,050 | 31,691 | (4 | ) | — | |||||||||||||||||
Maria Morris | 400 | — | — | 400 | (4 | ) | 266 | |||||||||||||||||
Hilda Ochoa-Brillembourg | 1,800 | — | — | 1,800 | (4 | ) | 51,037 | |||||||||||||||||
Douglas L. Peterson | 126,778 | — | 93,435 | 220,213 | (4 | ) | — | |||||||||||||||||
Sir Michael Rake | 400 | — | — | 400 | (4 | ) | 21,327 | |||||||||||||||||
Edward B. Rust, Jr. | 2,000 | — | — | 2,000 | (4 | ) | 69,593 | |||||||||||||||||
Kurt L. Schmoke | 1,036 | — | — | 1,036 | (4 | ) | 41,568 | |||||||||||||||||
Ewout L. Steenbergen | — | — | — | — | (4 | ) | — | |||||||||||||||||
Richard E. Thornburgh | 1,300 | 3,300 | (5) | — | 1,300 | (4 | ) | 7,989 | ||||||||||||||||
All Directors and executive officers of the Company as a group (a total of 26, including those named above)(6) | 272,853 | 3,300 | 134,719 | 407,572 | 0.2 | % | 253,360 | |||||||||||||||||
| (1) | The number of shares of common stock outstanding on February |
| | 2017 Proxy Statement | 91 |
OWNERSHIP OF COMPANY STOCK (continued) |
| (2) | None of the shares included in the above table constitutes Directors’ qualifying shares. |
| (3) | This amount represents the number of shares of the Company’s common stock |
| account maintained for eachnon-employee Director of the Company under the Director Deferred Stock Ownership Plan. This Plan is further described beginning on page |
| (4) | Less than 1%. |
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| With respect to the shares reported in the table above |
| (6) | Spouses and children of some members of this group may own other shares in which the members of this group disclaim any beneficial interest and which are not included in the above table. |
Company Stock Ownership of Certain Beneficial Owners
The following table shows information as to any person known to the Company to be the beneficial owner of more than 5% of the Company’s common stock on the date indicated below.
| Name and Address of Beneficial Owner | Sole or Shared Voting Power | Sole or Shared Dispositive Power | Total Number of Shares Beneficially Owned | Percent of Common Stock(a) | ||||||||||||
FMR LLC | 1,388,190 | 24,129,591 | 24,129,591 | 8.9% | ||||||||||||
The Vanguard Group | 469,213 | 16,307,461 | 16,307,461 | 6.0% | ||||||||||||
BlackRock, Inc. | 12,400,997 | 14,642,785 | 14,642,785 | 5.4% | ||||||||||||
| Name and Address of Beneficial Owner | Sole or Shared Voting Power (#) | Sole or Shared Dispositive Power (#) | Total Number of Shares Beneficially Owned (#) | Percent of Common Stock (%)(1) | ||||||||||||
FMR LLC 245 Summer Street Boston, Massachusetts 02210(2) | 1,360,978 | 13,165,521 | 13,165,521 | 5.081 | ||||||||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, Pennsylvania 19355(3) | 457,574 | 18,654,716 | 18,654,716 | 7.19 | ||||||||||||
BlackRock, Inc. 55 East 52nd Street New York, New York 10022(4) | 12,699,452 | 15,164,765 | 15,164,765 | 5.9 | ||||||||||||
State Street Corporation State Street Financial Center One Lincoln Street Boston, Massachusetts 02111 (5) | 14,174,401 | 14,174,401 | 14,174,401 | 5.47 | ||||||||||||
| (1) | The percent of common stock in footnotes |
| (2) | On February |
| Company. The Schedule 13G does not identify any shares with respect to which there is a right to acquire beneficial ownership. |
| (3) | On February |
| |
| for the purpose of changing or influencing control of the Company. The amended Schedule 13G does not identify any shares with respect to which there is a right to acquire beneficial ownership. |
| (4) | On |
| 92 | 2017 Proxy Statement | |
OWNERSHIP OF COMPANY STOCK (continued) |
| amended Schedule 13G filing that the Company’s common stock was acquired and is held in the ordinary course of business, and was not acquired and is not held for the purpose of changing or influencing control of the Company. The amended Schedule 13G does not identify any shares with respect to which there is a right to acquire beneficial ownership. |
| (5) | On February 8, 2017, State Street Corporation (“State Street”) filed a Schedule 13G with the SEC disclosing its beneficial ownership of the Company’s common stock. State Street has certified in its Schedule 13G filing that the Company’s common stock was acquired and is held in the ordinary course of business, and was not acquired and is not held for the purpose of changing or influencing control of the Company. The amended Schedule 13G does not identify any shares with respect to which there is a right to acquire beneficial ownership. |
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BENEFICIAL OWNERSHIP REPORTING AND ACCOUNTING FIRM FEES AND SERVICES |
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Under SEC rules, our Directors, executive officers and holders of more than 10% of our stock, if any, are required to file with the SEC reports of holdings and changes in beneficial ownership of
Company stock. We have reviewed copies of these SEC reports as well as other records and information. Based on that review, we believe that all reports were timely filed during 2014.2016.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S
FEES AND SERVICES
Shareholders are being asked to ratify the appointment of Ernst & Young LLP as the independent Registered Public Accounting Firm for the Company and its subsidiaries for 2015.2017. Please see page 9399 of this Proxy Statement for voting information. A representative of Ernst & Young LLP is expected to be present at the Annual Meeting with the opportunity to make a statement if the representative desires to do so, and such representative will be available to respond to appropriate questions.
During the years ended December 31, 20142016 and December 31, 2013,2015, Ernst & Young LLP audited the consolidated financial statements of the Company and its subsidiaries. The aggregate fees that Ernst & Young LLP billed the Company for these years for professional services rendered were as follows:
| Services Rendered | Year Ended 12/31/14 | Year Ended 12/31/13 | Year Ended 12/31/16 | Year Ended 12/31/15 | ||||||||||||
Audit Fees | $ | 5,383,600 | $ | 5,860,700 | $ | 6,373,000 | $ | 6,471,800 | ||||||||
Audit-Related Fees | $ | 1,866,400 | $ | 1,561,700 | $ | 3,453,000 | $ | 2,092,100 | ||||||||
Tax Fees | $ | 2,488,200 | $ | 2,565,600 | $ | 2,253,000 | $ | 2,573,000 | ||||||||
All Other Fees | $ | 0 | $ | 0 | — | — | ||||||||||
Audit fees included fees for professional services rendered for the audits of the consolidated financial statements of the Company, audits of the effectiveness of the Company’s internal control over financial reporting, reviews of the quarterly consolidated financial statements, statutory audits, securities registration statements and accounting consultations on matters related to the annual audits or interim reviews.
Audit-related fees generally included fees for benefit plans or other special purposespecial-purpose audits, including fees pertaining to proceduresand other attest services related to the Company’s regulatory environment.
Tax fees included fees primarily for tax compliance and advice.
All other fees generally include fees for advisory services related to accounting principles, rules and regulations.
In addition, the policies and procedures contained in the Audit Committee Charter (which can be viewed and downloaded from the Corporate Governance section of the Company’s Investor Relations Websitewebsite at http://investor.mhfi.com)investor.spglobal.com) provide that the Committee mustpre-approve both the retention of the independent auditor fornon-audit services and the fee for such services in accordance with the Company’s independence guidelines.
The Audit Committee (the “Committee”) reviews the Company’s financial reporting process on behalf of the Board. All of the members of the Committee are independent Directors as defined in the rules of the New York Stock Exchange. Management has the primary responsibility for the financial statements and the reporting
| 94 | 2017 Proxy Statement | |
BENEFICIAL OWNERSHIP REPORTING AND ACCOUNTING FIRM FEES AND SERVICES (continued) |
process, including the system of internal controls. The Board has adopted a written Charter for the Audit Committee.
In this context, the Committee has met and held discussions with management and the Company’s Independent Registered Public Accounting Firm, Ernst & Young LLP (“EY”). Management represented to the Committee that it is responsible for the financial reporting process, including the system of internal controls, for the preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles and for the report on the Company’s internal controls over financial reporting. The Committee has reviewed and discussed the consolidated financial statements with management and EY, which review included a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Committee also discussed with management the process used to support the certifications required by the Sarbanes-Oxley Act of 2002 and to support management’s annual report on the Company’s internal controls over financial reporting. The Committee discussed with EY the integrated audit results as required by the Public Company Accounting Oversight Board (“PCAOB”), rules of the SEC, and other applicable regulations.
In addition, the Committee has reviewed and discussed with EY the firm’s independence from the Company and its management. The Committee received from EY the written disclosures and the letter regarding its independence as required by the PCAOB’s applicable requirements.
The Committee is directly responsible for the appointment, compensation, retention and oversight of the work of EY for the purposes of preparing or issuing the audit report or performing the audit of the Company. The Committee has also considered whether the provision of services by EY not related to the audit of the financial statements is compatible with maintaining EY’s independence. The Committeepre-approves all fees for services provided by EY.
The Committee evaluates EY’s performance, taking into consideration the following factors: management’s perception of expertise and past performance, external data relating to audit quality, independence, appropriateness of fees and global reach relative to the Company’s business. The Committee periodically reviews and evaluates the performance of EY’s lead audit partner, ensures the audit partner rotation as required by law and, through the Committee Chair as representative of the Committee, reviews and considers the selection of the lead audit partner.
The Committee discussed with EY the overall scope and plans for its respective audits. The Committee met with the internal auditors and EY, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board that the audited financial statements be included in the Company’s Form10-K for the year ended December 31, 2016, as filed with the SEC. The Committee and the Board believe that the continued retention of EY to serve as the Company’s Independent Registered Public Accounting Firm is in the best interests of the Company and its shareholders and have recommended that shareholders ratify the appointment of EY as the Company’s Independent Registered Public Accounting Firm for 2017.
Sir Michael Rake (Chair)
Charles E. Haldeman, Jr.
Monique F. Leroux
Maria R. Morris
Hilda Ochoa-Brillembourg
Richard E. Thornburgh
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ITEMS OF BUSINESS TO BE ACTED ON AT THE ANNUAL MEETING |
ITEMS OF BUSINESS TO BE ACTED ON AT THE ANNUAL MEETING
The persons listed below, each of whom is currently a Director of the Company, have been nominated by the Board, on the recommendation of the Nominating and Corporate Governance Committee, for election to aone-year term of office that will expire at the next Annual Meeting or until their successors are elected and qualify. Each nominee listed below has agreed to serve his or her respective term. If any Director is unable to stand for election, the individuals named as the proxies have the right to designate a substitute. If that happens, shares represented by proxies may be voted for a substitute Director.
TheYour Board recommends that you vote FOR each of the following nominees:
Sir Winfried BischoffMarco Alverà
William D. Green
Charles E. Haldeman, Jr.
Stephanie C. Hill
Rebecca Jacoby
Robert P. McGrawMonique F. Leroux
Hilda Ochoa-BrillembourgMaria R. Morris
Douglas L. Peterson
Sir Michael Rake
Edward B. Rust, Jr.
Kurt L. Schmoke
Sidney Taurel
Richard E. Thornburgh
 | Your Board of Directors recommends that you voteFOR the election of each of the Director nominees. |
Unless you specify otherwise, the Board intends the accompanying proxy to be voted for these nominees.
Biographical information about these nominees can be found on pages12pages 14 through 2325 of this Proxy Statement.
Item 2. Proposal to Approve the Performance Goals Under the Company’s 2002 Stock Incentive Plan, as amended and restated
Introduction
The Board is seeking shareholder approval of the material terms of the performance goals under the Company’s 2002 Stock Incentive Plan, as amended and restated (the “Plan”) for purposes of Section 162(m) of the Internal Revenue Code (the “Code”).
The Company is not proposing to add any shares or make any other material revisions to the Plan. Rather, this proposal is being presented to shareholders solely to address the approval requirements of Section 162(m) described below.
Approval of Material Terms of Performance Goals
Section 162(m) limits our ability to deduct for federal income tax purposes any compensation in excess of $1 million paid to the Company’s CEO and the three other highest compensated
executives other than the CFO (the “covered executives”). This $1 million limitation, however, does not apply to “performance-based compensation” under Section 162(m).
To qualify as performance-based compensation under Section 162(m), the compensation must (among other requirements) be subject to attainment of performance goals, the material terms of which have been disclosed to shareholders and approved by a majority shareholder vote. Section 162(m) and related regulations further require that if the compensation committee approving the compensation has authority to vary the performance goals, the material terms of the performance goals must again be disclosed and reapproved by shareholders at least every five years. Our Compensation and Leadership Development Committee (the “Committee”) has authority to vary these performance goals and shareholders last approved the performance
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goals at the 2010 Annual Meeting when shareholders voted to approve the Plan. In addition, our Committee has amended the performance goals, effective as of February 24, 2015, to replace “revenue growth” with “revenue” and “stock price growth” with “stock price” as summarized below. Accordingly, we are asking you at this Annual Meeting to approve the material terms relating to the performance goals under the Plan so that compensation paid to the covered executives will continue to qualify as performance-based compensation under Section 162(m), which will not be subject to the $1 million deduction limitation.
For purposes of Section 162(m), the material terms relating to the performance goals we are asking you to approve consist of: (i) the employees eligible to receive awards under the Plan; (ii) a description of the available performance measures, as amended; and (iii) the maximum amount that can be paid under awards if the performance goals are achieved. If shareholder approval is not received at this Annual Meeting, the Plan will remain effective, but we will not be able to deduct compensation under the Plan that would have otherwise qualified as performance-based compensation under Section 162(m).
The following is a summary of the Plan. This summary is qualified in its entirety by reference to the full text of the Plan, which is attached to this Proxy Statement as Appendix A.
Summary of the Plan
The purpose of the Plan is to provide an opportunity for the Company’s employees to acquire a proprietary interest in the Company and strengthen the mutuality of interests between employees and the Company’s shareholders. We believe this provides an added incentive to employees to contribute to the Company’s future success and prosperity which will enhance the value of the Company for the benefit of the shareholders.
The total number of shares of stock reserved and available for grants of awards under thePlan is equal to the remaining number of shares of stock reserved and available for grants ofawards immediately prior to the date of the 2015Annual Meeting (the “Aggregate Limit”), whichAggregate Limit, as of December 31, 2014, wasequal to31,334,342. The Aggregate Limit will not bereduced by: (i) shares of stock subject to an award payable only in cash or property otherthanstock, orother awards for which shareholder approval is not required under the listing standards of the New York Stock Exchange; or (ii) in the case of awards granted in tandem with each other, shares of stock in excess of the number of shares of stock issuable under the awards.
Administration
The Committee administers the Plan and has authority to:
select employees to be granted awards;
determine the types of awards and the numbers of shares or amount of cash to be covered by such awards;
establish the terms, conditions and provisions of such awards (including, but not limited to, share price, any restriction or limitation, including any restrictive covenant, the granting of dividend equivalents or any vesting acceleration or forfeiture waiver of any recoupment provision);
interpret the Plan;
establish, amend and repeal administrative rules and regulations relating to the Plan; and
otherwise supervise the overall administration of the Plan.
Eligible Employees
Officers and other employees of the Company and its subsidiaries and affiliates are eligible to be participants under the Plan. Outside Directors of the Company, however, are ineligible to participate in the Plan. As of March 1, 2015, approximately 820 officers and employees have received an award under the Plan.
| | ITEMS OF BUSINESS TO BE ACTED ON AT THE ANNUAL MEETING (continued) |
Plan Awards
The Plan permits the granting of any or all of the following types of awards:
non-qualified stock options;
stock appreciation rights (“SARs”);
performance awards;
restricted stock awards; and
other awards valued in whole or in part by reference to, or otherwise based on, the Company’s common stock (“other stock-based awards”).
Stock Options.The Committee fixes the option price at which the common stock may be purchased under the Plan. This price cannot be less than 100% of the fair market value of the stock on the date the option is granted. Options currently vest over a three year period, with 33% vesting on the first and second anniversary of the grant and 34% vesting on the third anniversary of the grant. No options are exercisable prior to the first anniversary of the grant date unless otherwise determined by the Committee. The Committee also fixes the option term, although no option may be exercised more than ten years after it has been granted. The Plan prohibits repricing of options without prior shareholder approval.
The exercise price is paid in cash or, if the Committee permits, through delivery of shares of common stock having a fair market value equal to the purchase price, by withholding shares otherwise payable pursuant to the award, or by a combination of cash and common stock. In the event of retirement, disability or death of a participant, any stock option may be exercised for a specified period of time after such event as described in the Plan or the participant’s award. Unless the Committee determines otherwise, if a participant’s employment with the Company is terminated, except for cause, a stock option that has vested may generally be exercised for six months after termination.
Stock Appreciation Rights (“SARs”). The Committee has the right to grant SARs alone or in tandem with other awards. When a SAR is
exercised, the holder is entitled to receive the excess of the fair market value of the shares for which the SAR is exercised over the option price of the related stock option. The form of payment of a SAR may be specified by the Committee at or after the time of grant. On such exercise, any stock option or other award to which such SAR is related is deemed to have been exercised.
Performance Awards. The Plan permits the Committee to make awards of performance awards. A performance award is an award of shares, cash or performance share units (“PSUs”) whose vesting and forfeiture restrictions are related to the attainment of one or more performance goals and objectives (including the goals and objectives described below under “Section 162(m)”) and such other terms and conditions as the Committee may specify. Recipients of performance awards are not required to provide consideration to the Company, other than the rendering of services. Awards of performance shares or PSUs may include dividends or dividend equivalents, which shall not be paid currently but shall be subject to the same vesting and performance conditions as the underlying awards. Performance awards may not be sold by the recipient while subject to the performance conditions.
Restricted Stock.Restricted stock is an award of shares whose vesting and forfeiture restrictions are related to the participant’s continued service with the Company for a specified period of time and such other terms and conditions as the Committee may specify. The Committee determines the time or times when such awards are subject to forfeiture, and all of the other terms and conditions of such grants. Recipients of restricted stock are not required to provide consideration to the Company, other than the rendering of services.
Restricted stock may not be sold by the recipient during the forfeiture period determined by the Committee. The participant has, with respect to such stock awards, all of the rights of a shareholder of the Company, including the right to vote such shares and the right to receive dividends. Subject to certain exceptions described
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in the Plan, on termination of employment during the restriction period, the participant forfeits all shares still subject to restriction.
Other Stock-Based Awards. The Committee has, in addition to performance stock and restricted stock, the authority under the Plan to make awards of stock and awards payable in cash and stock that are valued in whole or in part by reference to, or are otherwise based on, the Company’s common stock. These awards may include deferred awards, dividend equivalents, cash or stock-settled restricted share units, phantom stock, and similar units. These awards may be granted either alone or in addition to or in tandem with other awards. The terms and conditions of the award are determined at the discretion of the Committee. An award may include a participant’s right to receive, either currently or on a deferred basis, dividends or dividend equivalents with respect to the number of shares covered by the award.
Term
The Plan continues in effect for a period of ten years from the date of the Company’s 2010 Annual Meeting, unless earlier terminated by the Board.
Amendments
The Board and Committee may amend the Plan to the extent permitted by law, however, the Board and Committee may not impair the right of any participant without the participant’s consent. In addition, the Committee may not reduce the option price per share or cancel a stock option or SAR in exchange for a cash payment or another award, including a new option or SAR having a lower option price, without prior shareholder approval.
Change-in-Control
For awards granted prior to January 1, 2015, the Plan provides that, in the event of a change-in-control of the Company, except as otherwise provided in the award documentation:
all SARs outstanding and all stock options granted become fully exercisable and vested;
the restriction and deferral limitations applicable to any grants of performance stock, restricted stock and other stock-based awards will lapse and such shares will be fully vested; and
all outstanding stock options, SARs, performance stock, restricted stock and other such stock-based awards will, at the discretion of the Committee, be either cashed out or converted into awards based upon publicly traded common stock of the company that acquires the Company or which otherwise results from the change-in-control.
For awards granted on or after January 1, 2015, the Plan provides for double-trigger treatment in the event of a change-in-control of the Company, except as otherwise determined by the Committee or provided in the award documentation: Specifically,
to the extent the successor company (or a subsidiary or parent thereof) assumes or provides a substitute for the SARs, stock options, restricted stock awards, RSUs and any other stock-based awards outstanding under the Plan on substantially the same terms and conditions, such awards will remain outstanding and will generally vest and pay out on the earlier of original vesting payment dates or certain qualifying terminations of employment, as applicable. If awards are not assumed or substituted, the awards will fully vest and, in the case of SARs and stock options, become exercisable as of the date of the change-in-control; and
to the extent the successor company (or a subsidiary or parent thereof) assumes or provides a substitute for the performance awards outstanding under the Plan, such performance awards will convert into time-vesting restricted stock or unit awards, as applicable, with otherwise substantially the same terms and conditions (x) at target, to the extent less than 50% of the applicable performance period has been completed or (y) based on performance through the date of such change-in-control, to the extent 50% or more of the applicable performance period has been completed. Such converted awards will otherwise remain
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Section 162(m)
As noted above, Section 162(m) limits the Company’s tax deduction to $1 million per year for certain compensation paid to each of the Company’s covered executives. This limitation does not apply to “performance-based compensation.” Options and SARs may qualify as performance-based compensation if shareholders approve a maximum limit on the number of shares underlying such awards that may be granted to any participant over a specified period. Other awards may qualify as performance-based compensation if payment under such awards is made under the following circumstances:
on account of the achievement of one or more objective performance goals established by a compensation committee consisting exclusively of two or more outside directors;
under certain terms approved by shareholders, including the maximum amount payable to any individual and performance goals to be used; and
following certification by the Committee that the performance goals and other material conditions precedent to payment have been satisfied.
Plan Information and Performance Measures
The Board is seeking shareholder approval of the material terms of the performance goals under the Plan to permit the Company to continue to deduct for tax purposes compensation paid to the Company’s covered executives under awards that qualify as performance-based compensation (“Qualifying Awards”).
The Plan provides that two types of Qualifying Awards may be granted. The first type is stock
options and SARs. No participant may receive stock options or SARs covering more than four million shares of stock in any 60-month period. The second type includes performance awards whose payment is conditioned on attainment of the performance objectives for the performance goals the Committee establishes for a performance cycle in accordance with the provisions of Section 162(m). More than one performance goal may apply to a given performance cycle based on attainment of the performance objectives for any of the performance goals applicable to that cycle. The Committee determines the duration of a performance cycle, and the Committee will be authorized to permit overlapping or consecutive performance cycles. However, the performance cycle may not be shorter than one year.
The performance goals that the Committee may select for a performance cycle include any of the following: diluted earnings per share; net income; operating margin; operating income and net operating income; pretax profit; revenue; return on sales; return on equity; return on assets; return on investment; stock price; total return to shareholders; EBITDA; economic profit; and cash flow. Each of the foregoing may be established on a corporate-wide basis or established with respect to one or more operating units, divisions, acquired businesses, minority investments, partnerships or joint ventures, and may be measured on an absolute basis or relative to selected peer companies or a market index.
The Committee will have the discretion, by participant and by award, to reduce (but not to increase) some or all of the amount that would otherwise be payable under the award if the participant satisfies the performance objectives included in the Qualifying Award.
For any performance award denominated in shares of stock with a duration of 36 months, no participant may receive Qualifying Awards covering more than 600,000 shares of stock or which provide for the payment for such performance cycle of more than 600,000 shares of stock (or cash amounts based on the value of more than 600,000 shares of stock). For a performance cycle that is longer or shorter than 36
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months, the maximum limits set forth in the previous sentence will be adjusted by multiplying such limit by a fraction, the numerator of which is the number of months in the performance cycle and the denominator of which is 36. For any performance award denominated in cash, the maximum dollar amount (or shares of stock having a value equal to such dollar amount) that may be paid to a participant in any 12-month period is $10,000,000. No amounts will be paid in respect of a Qualifying Award unless the Committee has previously certified, in a manner intended to meet the requirements of Section 162(m), that the criteria for the payment of the Qualifying Award related to that cycle have been achieved.
The amount of any future benefits that may be received by any one individual or group of individuals under the Plan is not presently determinable. The awards granted under the Plan to the covered executives for fiscal year 2014 are included in the 2014 Grants of Plan-Based Awards Table on page 59 of this Proxy Statement.
U.S. Federal Income Tax Consequences of Equity Awards
There will be no U.S. federal income tax consequences to the participant or the Company upon the grant of an option under the Plan. Upon exercise of an option that is not an incentive stock option, a participant generally will recognize ordinary income in an amount equal to (i) the fair market value, on the date of exercise, of the acquired shares, less (ii) the exercise price of the option. The Company will generally be entitled to a tax deduction in the same amount.
Upon the exercise of an incentive stock option, a participant recognizes no immediate taxable income. Income recognition is deferred until the participant sells the shares. If the option is exercised no later than three months after the termination of the participant’s employment, and the participant does not dispose of the shares acquired pursuant to the exercise of the option within two years from the date the option was
granted and within one year after the exercise of the option, the gain on the sale will be treated as long-term capital gain. The Company is not entitled to any tax deduction with respect to the grant or exercise of incentive stock options, except that if the shares are not held for the full term of the holding period outlined above, the gain on the sale of such shares, being the lesser of (i) the fair market value of the shares on the date of exercise minus the option price or (ii) the amount realized on disposition minus the exercise price, will be taxed to the participant as ordinary income and the Company will generally be entitled to a deduction in the same amount. The excess of the fair market value of the shares acquired upon exercise of an incentive stock option over the exercise price therefor constitutes a tax preference item for purposes of computing the “alternative minimum tax” under the Code.
There will be no U.S. federal income tax consequences to either the participant or the Company upon the grant of a SAR. However, the participant generally will recognize ordinary income upon the exercise of a SAR in an amount equal to the aggregate amount of cash and the fair market value of the shares received upon exercise. The Company will generally be entitled to a deduction equal to the amount includible in the participant’s income.
Unless a participant makes a “Section 83(b) election” under the Code, there will be no U.S. federal income tax consequences to either the participant or the Company upon the grant of restricted stock until expiration of the restricted period and the satisfaction of any other conditions applicable to the restricted stock. At that time, the participant generally will recognize taxable income equal to the then fair market value for the shares. The Company will generally be entitled to a corresponding tax deduction.
There generally will be no U.S. federal income tax consequences to the participant or the Company upon the grant of performance stock awards (unless the participant makes a “Section 83(b) election” under the Code), RSUs or PSUs. Participants generally will recognize taxable
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income at the time such awards are paid or settled in an amount equal to the aggregate amount of cash and the fair market value of shares acquired. The Company will generally be entitled to a tax deduction equal to the amount includible in the participant’s income.
The above summary is a general summary as of the date of this Proxy Statement of the U.S. federal income tax consequences associated with the Plan. The federal tax laws are complex and subject to change and the tax consequences for any participant will depend on his or her individual circumstances.
Equity Compensation Plans’ Information
The following table details our equity compensation plans as of December 31, 2014:
| Equity Compensation Plans’ Information | ||||||||||||
| (a) | (b) | (c) | ||||||||||
Plan Category | Number of securities | Weighted-average | Number of securities | |||||||||
Equity compensation plans approved by security holders | 8,127,653 | $ | 45.18 | 31,449,167 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 8,127,653 | (1) | $ | 45.18 | 31,449,167 | (2),(3) | ||||||
In addition, the table below sets forth the equity-based awards that have been granted under the Plan in 2014 to our executive officers, as a group, and our other employees who are not executives, as a group:
Name | Shares of Restricted Stock | Stock Options | RSUs | PSUs (at target) | ||||||||||||
All executive officers as a group | 13,443 | 145,346 | 10,411 | 103,448 | ||||||||||||
All other employees as a group | 0 | 691,486 | 74,545 | 505,044 | ||||||||||||
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Approval and Related Matters
The affirmative vote of the holders of a majority of the votes cast is required to approve the material terms relating to the performance goals under the Plan.
The following resolution will be offered by the Board of Directors at the Annual Meeting:
RESOLVED: That the material terms of the performance goals, as summarized above, for
awards under the McGraw Hill Financial, Inc. 2002 Stock Incentive Plan, as amended and restated (and attached hereto as Appendix A), are hereby affirmed, confirmed and approved.
The Board of Directors’ Recommendation
Your Board recommends that you vote FOR this proposal. Unless you specify otherwise, the Board intends the accompanying proxy to be voted for this proposal.
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Item 3.2. Proposal to Approve, on an Advisory Basis, the Executive
Compensation Program for the Company’s Named Executive Officers
Under the rules of the SEC, the Company is required to provide its shareholders with the opportunity to cast an advisory vote on the executive compensation program for the Company’s named executive officers. This proposal is frequently referred to as a “say-on-pay”“say-on-pay” vote. At the 2011 Annual Meeting, shareholders voted, on an advisory basis, in favor of casting the advisorysay-on-pay vote on an annual basis. basis, and this year shareholders will have the opportunity to vote on this topic again (see Item 3).
The Company’s executive compensation program is intended to attract, motivate and reward the executive talent required to achieve our corporate objectives and increase shareholder value. We believe that our executive compensation program is both competitive and strongly focused onpay-for-performance principles, and provides an appropriate balance between risk and rewards. In particular, our executive compensation program:
aligns executive compensation with shareholder value on an annual and long-term basis through a combination of base pay, annual cash incentives and long-term stock-based incentives;
includes a mix of compensation elements that emphasizes performance results, with approximately 87% of the targeted compensation for Douglas L. Peterson, the Company’s Chief Executive Officer, and a significant portion of the targeted compensation for the other named executive officers being performance-based;
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delivers annual incentive payouts to executives based on the achievement of approved quantitative performance goals, which were based on net incomeICP Adjusted EBITA and revenueICP Adjusted Revenue enterprise-level Company goals and, as appropriate, for our division leaders, division-level goals for 2014;2016;
aligns the interests of executives with those of shareholders through long-term stock-based incentives comprised of Performance Share Units that are based on the achievement of earnings per shareICP Adjusted EPS targets. For 2014,2016, the Performance Share Unit award vests at the end of a three-year award cycle, with payment ranging up to a maximum of 200% of the shares based on the achievement of compound annual diluted earnings per shareEPS growth goals; and
has features designed to further align executive compensation with shareholder interests and mitigate risks, including stock ownership requirements, the Senior Executive Pay Recovery Policy (a “claw-back”“claw back” policy), an anti-hedging and pledging policy and limited perquisites.
Our executive compensation program is described in the Compensation Discussion and Analysis (“CD&A”), related compensation tables and other narrative executive compensation disclosures required by the disclosure rules of the SEC, all of which are found in this Proxy Statement. In particular, the CD&A, beginning on page 3432 of this Proxy Statement, describes the Company’s executive compensation program in detail, and we encourage you to review it.
Since the vote on this proposal is advisory, it is not binding on the Company. Nonetheless, the Compensation and Leadership Development Committee, which is responsible for approving the overall design and administering certain aspects of the executive compensation program, will take into account the outcome of the vote when making future executive compensation decisions. The Board of Directors recommends that you approve the following resolution that will be submitted for a shareholder vote at the 20152017 Annual Meeting in support of the Company’s executive compensation program:
RESOLVED: That the shareholders of the Company approve, on an advisory basis, the executive compensation program for the Company’s named executive officers as disclosed pursuant to the rulesItem 402 of the SEC,Regulation S-K, including the Compensation Discussion and Analysis, related compensation tables and other narrative executive compensation disclosures included in the Proxy Statement for this Annual Meeting.
The Board of Directors’
Your Board of Directors recommends that you voteFOR the approval, on an advisory basis, of the executive compensation program for the Company’s named executive officers. ITEMS OF BUSINESS TO BE ACTED ON AT THE ANNUAL MEETING (continued)RecommendationYour Board recommends a vote FOR the approval, on an advisory basis, of this proposal.Unless you specify otherwise, the Board intends the accompanying proxy to be voted for this proposal. 2017 Proxy Statement 97
Item 3. Vote, on an Advisory Basis, on the Frequency on Which the Company
Conducts an Advisory Vote on the Executive Compensation Program for the
Company’s Named Executive Officers
As described in Item 2 on page 97 of this Proxy Statement, under the rules of the SEC, the Company is required to provide shareholders with a“say-on-pay” vote, which is anon-binding advisory vote on the executive compensation program for the named executive officers of the Company. The rules of the SEC also require the Company to provide shareholders with the opportunity to cast an advisory vote on whether thesay-on-pay vote will occur every one, two or three years.
If you are a registered shareholder (that is, if you own shares directly in your own name and they are either kept at our transfer agent or are in your possession) the enclosed proxy card provides you with a choice of voting on the Company holdingsay-on-pay every one, two or three years, or to abstain from voting on this proposal. If you are a beneficial owner (that is, if your shares are held for you by your bank, broker or other holder of record), please refer to the voting instruction card provided by your bank, broker or other holder of record, which should include these same four voting choices.
Our shareholders voted on a similar proposal in 2011, with the majority voting to hold thesay-on-pay vote every year. While this proposal is advisory and is not binding on the Company, the Board appreciates and values shareholders’ views on this issue, and believes that an annualsay-on-pay vote provides the highest level of accountability to the Company and its shareholders. Most elements of our executive compensation program are reviewed and determined annually, including base salary, annual cash incentives under the Company’s Key Executive Short-Term Incentive Compensation Plan, and awards under our Long-Term Incentive Plan. Holding annualsay-on-pay votes would more closely coincide with these decisions and provide valuable feedback to the Board on a more timely basis.
While the Board is recommending that shareholders vote in favor of holdingsay-on-pay every one year, you are not voting to approve or disapprove the Board’s recommendation. The proxy card provides you with a choice of voting for the Company holdingsay-on-pay every one, two or three years (or to abstain from voting on this proposal).
It is expected that the next vote on asay-on-pay frequency proposal will occur at the 2023 annual meeting of shareholders.
| Your Board of Directors recommends that you vote for, on an advisory basis, the Company holding a say-on-pay advisory vote on executive compensation every1 YEAR. |
Unless you specify otherwise, the Board intends the accompanying proxy to be voted in accordance with its recommendation.
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ITEMS OF BUSINESS TO BE ACTED ON AT THE ANNUAL MEETING (continued) |
Item 4. Proposal to Ratify the Appointment of the Company’s
Independent Registered Public Accounting Firm
The Board, after receiving a favorable recommendation from the Audit Committee, has again selected Ernst & Young LLP to serve as the independent Registered Public Accounting Firm of the Company and its subsidiaries for 2015.2017. Although not required to do so, the Board is submitting the selection of this firm for ratification by the Company’s shareholders for their views. Ernst & Young LLP has advised the Company that it has no direct, nor any material indirect, financial interest in the Company or any of its subsidiaries. The Board and the Audit Committee may change the appointment at any time if they determine that a change would be in the best interests of the Company and its shareholders.
The following resolution will be offered by the Board of Directors at the Annual Meeting:
RESOLVED: That the selection by the Board of Directors of Ernst & Young LLP to serve as the independent Registered Public Accounting Firm of the Company and its subsidiaries for 20152017 be, and hereby is, ratified and approved.
The Board of Directors’
Your Board of Directors recommends that you voteFOR the ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2017. RecommendationYour Board recommends that you vote FOR this proposal.Unless you specify otherwise, the Board intends the accompanying proxy to be voted for this proposal.
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Item 5. Shareholder Proposal – Independent Board Chairman
Kenneth Steiner, 14 Stoner Avenue (2M), Great Neck, New York 11021, the beneficial owner of 500 or more shares of McGraw Hill Financial common stock, has notified the Company that he or John Chevedden, his proxy, intends to present the following proposal at the Annual Meeting. Your Board recommends that you vote AGAINST this proposal. Unless you specify otherwise, the Board intends the accompanying proxy to be voted against this proposal.
The shareholder proposal and supporting statement, for which the Board and the Company accept no responsibility, follow:
Proposal 5 – Independent Board Chairman
Resolved: Shareholders request that the Board of Directors adopt a policy that the Chairman of our Board of Directors shall be an independent director who is not a current or former employee of the company, and whose only nontrivial professional, familial or financial connection to the company or its CEO is the directorship. Our board would have discretion to deal with existing agreements in implementing this proposal. Our board would have discretion to encourage any person who had contract rights that might delay full implementation of this proposal to voluntarily waive such contract rights for the benefit of shareholders. This policy should allow for policy departure under extraordinary circumstances such as the unexpected resignation of the chair.
When our CEO is our board chairman, this arrangement can hinder our board’s ability to monitor our CEO’s performance. Many companies already have an independent Chairman. An independent Chairman is the prevailing practice in the United Kingdom and many international markets. This proposal topic won 50%-plus support at 5 major U.S. companies in 2013 including 73%-support at Netflix. This proposal topic, sponsored by Ray T. Chevedden, won 55% support at Sempra Energy.
The Policy of the Council of Institutional Investors, whose members invest over $3 trillion, states: “The board should be chaired by an independent director.” A 2012 report by GMI Rat-
ings, an independent investment research firm, titled “The Costs of a Combined Chair/CEO” found companies with an independent chair provide investors with 5-year shareholder returns 28% higher than those headed by a combined Chair/CEO. The study also found corporations with a combined Chair/CEO are 86% more likely to negatively register as “Aggressive” in their Accounting and Governance Risk model. Our practice of an insider-related chair may result in disadvantages similar to the combined Chair/CEO board structure.
Please vote to protect shareholder value:
Independent Board Chairman – Proposal 5
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Directors’ Statement in Opposition
The Board has considered this proposal and concluded for the reasons described below that its adoption is not in the best interests of the Company and its shareholders.
First, the Board believes that it should retain discretion to designate the Chairman of the Board based on such criteria as it deems appropriate from time to time. To this end, under the Company’s Corporate Governance Guidelines, the Board is required to select its Chairman based upon such criteria as the Nominating and Corporate Governance Committee recommends and the Directors believe to be in the best interests of the Company at a given point in time. This process includes consideration of whether the roles of Chairman and Chief Executive Officer should be combined or separated based upon the Company’s needs and the strengths and talents of its executives at any given time. Should the Board determine that the best interests of the Company would be advanced by asking a Director with more than a “nontrivial professional, familial or financial connection” to the Company to chair the Board, the Board believes it should have the discretion to appoint that individual as Chairman of the Board.
Second, the Board has implemented policies which are intended to promote the Board’s independence. If the Board appoints a Chairman of the Board who is not an independent Director, the Company’s Corporate Governance Guidelines require the Board to designate an independent Director to serve as Presiding Director. The selection of Presiding Director is made at a meeting (or that portion of a meeting) at which only independent Directors are present. The Company’s Corporate Governance Guidelines further require that the independent Directors meet in executive sessions at which the Presiding Director presides. The position of Presiding Director is intended to provide a check and balance on the role and responsibilities of a non-independent Chairman of the Board.
The Company’s current Chairman of the Board is Mr. Harold McGraw III. Because Mr. McGraw does not meet the New York Stock Exchange
standards of independence due to his prior service as our President and Chief Executive Officer, the Board has appointed Mr. Edward B. Rust, Jr., the Chairman of the Nominating and Corporate Governance Committee, as the Presiding Director of the Board for the period April 30, 2014 through April 29, 2015. Under our Corporate Governance Guidelines, the Presiding Director has the following responsibilities: (i) be readily available to be consulted by any of the senior executives of the Company as to any concerns they may have about the Company; (ii) be readily available to all Directors to communicate their issues and concerns to the Chairman or the Chief Executive Officer; (iii) be readily available to the Chief Executive Officer to offer counsel; (iv) preside at all meetings of the Board at which the Chairman is not present, including all meetings of nonmanagement Directors and all executive sessions of the independent Directors; (v) authority to call meetings of the independent Directors including in the event of a crisis and/or the incapacitation of the Chief Executive Officer; (vi) communicate Directors’ feedback to the Chief Executive Officer from the meetings of the non-management Directors and from informal conversations with Directors; (vii) communicate Directors’ feedback to the Chairman and the Chief Executive Officer from the executive sessions of the independent Directors; (viii) review the proposed agenda for each upcoming Board meeting and the annual Board calendar; (ix) review and approve meeting schedules to assure there is sufficient time for discussion of all agenda items; (x) consult with the other Directors and advise the Chief Executive Officer about the quality and timeliness of the materials distributed to the Board; (xi) review and approve the materials and information sent to the Board; (xii) interview, along with the Chief Executive Officer, the Chairman and the Nominating and Corporate Governance Committee, candidates for the Board; and (xiii) assist the Nominating and Corporate Governance Committee with broad issues of corporate governance.
Finally, the Directors believe that the policy supported by the proponent is vague, ill-advised
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and unworkable. The proponent is supporting a policy that would require the appointment of a Chairman “whose only nontrivial professional, familial or financial connection to the company or its CEO is the directorship”. Under this standard, it is impossible to determine what would constitute “a nontrivial professional, familial or financial connection”. If ownership of Company stock would violate this standard, none of the Company’s independent Directors would qualify for service as Chairman of the Board due to the stock ownership requirements of the Company’s Non-Employee Director Stock Ownership Guidelines. The Board believes that the stock ownership requirements of this policy
are important in establishing a commonality of interests between the Company’s Directors and shareholders.
For each of the above-stated reasons, the Directors believe that adoption of this proposal is not in the best interests of the Company and its shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS SHAREHOLDER PROPOSAL. Unless you specify otherwise, the Board intends the accompanying proxy to be voted against this proposal.
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The Board knows of no other matters which may properly be brought before the Annual Meeting. However, if other matters should properly come before the Meeting, it is the intention of those named in the solicited proxy to vote such proxy in accordance with their best judgment.
By Order of the Board of Directors.
SCOTT L. BENNETT
KATHERINE J. BRENNAN
Senior Vice President, AssociateDeputy General
Counsel and& Corporate Secretary
New York, New York
March 18, 201513, 2017
| 100 | 2017 Proxy Statement | |
ITEMS OF BUSINESS TO BE ACTED ON AT THE ANNUAL MEETING (continued) |
Reconciliation ofNon-GAAP Financial Information
The following tables reconcilenon-GAAP financial information included in this Proxy Statement to the most directly comparable measures presented in accordance with generally accepted accounting principles (“GAAP”) and reported in our consolidated financial statements filed with the Securities and Exchange Commission. Thenon-GAAP financial information included in this Proxy Statement has been provided in order to show investors how our Compensation Committee views the Company’s performance as it relates to the compensation program for our executive officers. Thisnon-GAAP financial information may be different from similar measures used by other companies.
| Year ended December 31, 2016* | Revenue | Operating Profit | Diluted Earnings per Share** | |||||||||||||||||
| (dollars in millions, except per share data) | ||||||||||||||||||||
As reported | $ | 5,661 | $ | 3,369 | $ | 7.94 | ||||||||||||||
Non-GAAP Adjustments: | ||||||||||||||||||||
Ratings adjustments, including net legal settlement insurance recoveries, partially offset by restructuring charges | (4 | ) | (0.02 | ) | ||||||||||||||||
Market and Commodities Intelligence adjustments, including gains on dispositions of J.D. Power, SPSE/CMA businesses and fund research business, partially offset by disposition-related costs, a technology-related impairment charge and acquisition-related costs | (1,027 | ) | (3.87 | ) | ||||||||||||||||
Unallocated expense adjustments—disposition-related reserve release | (3 | ) | (0.01 | ) | ||||||||||||||||
Deal-related amortization | 96 | 0.36 | ||||||||||||||||||
Non-GAAP Adjustment Subtotal | — | (938 | ) | (3.54 | ) | |||||||||||||||
Adjusted | $ | 5,661 | $ | 2,431 | $ | 4.40 | ||||||||||||||
FurtherNon-GAAP ICP Adjustments: | ||||||||||||||||||||
Interest expense—redemption related to early payment of senior notes | $ |
0.05 |
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Provision for taxes on income | $ | 0.89 | ||||||||||||||||||
Addback of dispositions | $ | 159 | $ | 33 | $ | 0.09 | ||||||||||||||
Foreign exchange adjustment | (9 | ) | (37 | ) | ($ | 0.10 | ) | |||||||||||||
ICP Adjustment Subtotal | $ | 150 | (4 | ) | $ | 0.94 | ||||||||||||||
ICP Adjusted | $ | 5,811 | $ | 2,427 | $ | 5.34 | ||||||||||||||
| * | Note: Totals may not sum due to rounding. |
| ** | Note: Diluted weighted average shares outstanding of 265 million was used to calculate adjusted diluted earnings per share. |
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McGRAW HILL FINANCIAL, INC.
2002 Stock Incentive Plan
(amended and restated as of February 25, 2015)
| | A-1 |
McGraw Hill Financial, Inc.
EXHIBIT A (continued) |
2002 Stock Incentive Plan
(amended and restated as of February 25, 2015)
Table of Contents
Ratings Year ended December 31, 2016* | Revenue | Operating Profit | ||||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
As reported | $ | 2,535 | $ | 1,262 | ||||||||||||||||
Non-GAAP Adjustments: | ||||||||||||||||||||
Ratings adjustments, including net legal settlement insurance recoveries, partially offset by restructuring charges | (4 | ) | ||||||||||||||||||
Deal-related amortization | 5 | |||||||||||||||||||
Non-GAAP Adjustment Subtotal | — | 1 | ||||||||||||||||||
Adjusted | $ | 2,535 | $ | 1,263 | ||||||||||||||||
FurtherNon-GAAP ICP Adjustments: | ||||||||||||||||||||
Foreign exchange adjustment | (28 | ) | ||||||||||||||||||
ICP Adjusted | $ | 2,535 | $ | 1,235 | ||||||||||||||||
Market and Commodities Intelligence Year ended December 31, 2016* | Revenue | Operating Profit | ||||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
As reported | $ | 2,585 | $ | 1,822 | ||||||||||||||||
Non-GAAP Adjustments: | ||||||||||||||||||||
Market and Commodities Intelligence adjustments, including gains on dispositions of J.D. Power, SPSE/CMA businesses and fund research business, partially offset by disposition-related costs, a technology-related impairment charge and acquisition-related costs | (1,027 | ) | ||||||||||||||||||
Deal-related amortization | — | 85 | ||||||||||||||||||
Non-GAAP Adjustment Subtotal | (942 | ) | ||||||||||||||||||
Adjusted | $ | 2,585 | $ | 881 | ||||||||||||||||
FurtherNon-GAAP ICP Adjustments: | ||||||||||||||||||||
Addback of dispositions net of acquisitions | 151 | 37 | ||||||||||||||||||
Foreign exchange adjustment | (1 | ) | (11 | ) | ||||||||||||||||
ICP Adjusted | $ | 2,735 | $ | 907 | ||||||||||||||||
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| A-2 | | |
EXHIBIT A (continued) |
Indices Year ended December 31, 2016* | Revenue | Operating Profit | ||||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
As reported | $ | 639 | $ | 412 | ||||||||||||||||
Non-GAAP Adjustments: | ||||||||||||||||||||
Deal-related amortization | 6 | |||||||||||||||||||
Non-GAAP Adjustment Subtotal | — | 6 | ||||||||||||||||||
Adjusted | $ | 639 | $ | 417 | ||||||||||||||||
FurtherNon-GAAP ICP Adjustments: | ||||||||||||||||||||
Acquisition of TruCost | (1 | ) | 2 | |||||||||||||||||
ICP Adjusted | $ | 638 | $ | 420 | ||||||||||||||||
| Year ended December 31, 2015* | Revenue | Operating Profit | Diluted Earnings per Share** | |||||||||
| (dollars in millions, except per share data) | ||||||||||||
As reported | $ | 5,313 | $ | 1,917 | $ | 4.21 | ||||||
Non-GAAP Adjustments: | ||||||||||||
Ratings adjustments, including net legal settlements, expenses and restructuring charges, partially offset by insurance recoveries |
| 68 |
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| 0.25 |
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Market and Commodities Intelligence adjustments, including operating efficiencies primarily related to restructuring and acquisition-related costs |
| 70 |
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| 0.25 |
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Unallocated expense adjustments, including a gain on the sale of our interest in a legacy McGraw Hill Construction investment, partially offset by restructuring charges |
| (2 | ) |
| (0.01 | ) | ||||||
Deal-related amortization | 67 | 0.24 | ||||||||||
Provision for taxes on income | (0.26 | ) | ||||||||||
Non-GAAP Adjustment Subtotal | — | 203 | 0.48 | |||||||||
Adjusted*** | $ | 5,313 | $ | 2,121 | $ | 4.69 | ||||||
| * | Note: Totals may not sum due to rounding. |
| Note: Diluted weighted average shares outstanding of 275 million was used to calculate adjusted diluted earnings per share. |
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| | | A-3 |
McGraw Hill Financial, Inc.
2002 Stock Incentive Planspglobal.com
SECTION 1. Purpose; Definitions.
The purpose of McGraw Hill Financial, Inc. 2002 Stock Incentive Plan is to enable the Company to offer its employees long-term performance-based stock and cash incentives and other equity interests in McGraw Hill, thereby attracting, retaining and rewarding such employees, and strengthening the mutuality of interests between employees and McGraw Hill’s shareholders.
For purposes of the Plan, the following terms shall be defined as set forth below:
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SECTION 2. Administration.
In particular, the Committee shall have the authority:
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SECTION 3. Stock Subject to Plan.
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SECTION 4. Eligibility.
Officers and other employees of the Company (but excluding individuals who serve only as a director on the Board) who are responsible for or contribute to the management, growth or profitability of the business of the Company are eligible for Awards. Eligibility under the Plan shall be determined by the Committee.
SECTION 5. Stock Options.
Stock Options may be granted alone or in tandem with other Awards (including Stock Appreciation Rights), and may be granted in addition to, or in substitution for, other types of Awards. Stock Options shall be subject to the following terms and conditions and contain such additional terms and conditions not inconsistent with the terms of the Plan, as the Committee shall determine:
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SECTION 6. Stock Appreciation Rights.
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SECTION 7. Restricted Stock Awards.
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SECTION 8. Performance Awards.
SECTION 9. Other Stock-Based Awards.
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Subject to the provisions of the Plan, the Committee shall have authority to determine the persons to whom and the time or times at which Other Stock-Based Awards shall be made, the number of shares of Stock to be awarded, the cash payment to be made pursuant to, and all other conditions of, Other Stock-Based Awards.
The provisions of Other Stock-Based Awards need not be the same with respect to each recipient.
SECTION 10. Qualifying Awards.
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SECTION 11. Change In Control Provisions.
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To the extent the successor company (or a subsidiary or a parent thereof) assumes or substitutes any of the outstanding Awards (including Qualifying Awards) on substantially the same terms and conditions (with appropriate adjustments pursuant to Section 3(d) to preserve the value of the Awards) as provided in Sections 11(a)(ii)(A) through (C) above, then all no-trading policies and other internal corporate approvals required with respect to the exercise or sale of such Awards (including Qualifying Awards) and/or the underlying shares of Stock shall be waived. To the extent the successor company (or a subsidiary or parent thereof) does not assume or substitute any of the outstanding Awards (including Qualifying Awards) on substantially the same terms and conditions (with appropriate adjustments pursuant to Section 3(d) to preserve the value of the Awards) as provided in Sections 11(a)(ii)(A) through (C) above, the Committee may, to the extent permitted under Section 409A of the Code, determine that all such Awards (including Qualifying Awards) shall be cashed out by the Company on the basis of the Change in Control Price as of the date such Change in Control is determined to have occurred.
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SECTION 12. Amendments and Termination.
The Board may amend, alter, discontinue or terminate the Plan, but no amendment, alteration, discontinuation or termination shall be made which would impair the rights of an optionee or participant
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under an Award theretofore granted, without the optionee’s or participant’s consent. In addition, the Board shall have the right to amend, modify or remove the provisions of the Plan which are included to permit the Plan to comply with the“performance-based” exception to Section 162(m) of the Code if Section 162(m) of the Code is subsequently amended, deleted or rescinded.
The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively; but no such amendment or other action by the Committee shall impair the rights of any holder without the holder’s consent or, subject to Section 3(d), reduce the option price per share of Stock subject to a Stock Option or Stock Appreciation Right, or cancel a Stock Option or Stock Appreciation Right in exchange for a cash payment or another Award, including a new Stock Option or Stock Appreciation Right having a lower option price, without prior shareholder approval.
Unless otherwise expressly provided in the applicable Award Documentation, the Plan and the Awards are not intended to provide for the deferral of compensation within the meaning of Section 409A(d)(1) of the Code, and they shall be interpreted and construed in accordance with such intent. Notwithstanding the foregoing and anything to the contrary in the Plan or any Award, if any provision of the Plan or any Award would cause the requirements of Section 409A of the Code to be violated, or otherwise cause any participant to recognize income under Section 409A of the Code, then such provision may be modified by the Committee or the Board in any reasonable manner that the Committee or the Board, as applicable, deems appropriate;provided that the Committee or the Board, as applicable, shall preserve the intent of such provision to the extent reasonably practicable without violating the requirements of Section 409A of the Code.
Subject to the above provisions, the Board shall have broad authority to amend the Plan to take into account changes in applicable securities and tax laws and accounting rules, as well as other developments.
SECTION 13. Unfunded Status of Plan.
The Plan is intended to constitute an“unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a participant or optionee by the Company, nothing contained herein shall give any such participant or optionee any rights that are greater than those of a general creditor of the Company.
SECTION 14. General Provisions.
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SECTION 15. Plan Effective Date and Duration.
The Plan initially became effective as of the 2002 Plan Effective Date, and, the Plan, as amended and restated at the time, was subsequently approved by shareholders on the 2010 Plan Effective Date. The Plan, as it may be amended from time to time, shall continue in effect for a period of ten years after the 2010 Plan Effective Date, unless earlier terminated by the Board pursuant to Section 12.
February 25, 2015
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mhfi.com
| Using ablack or blue inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. |
Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing this proxy card, you may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE SHADED BAR.by Internet or telephone.
Proxies submitted by the Internet or telephone must be received by 11:59 PM, Eastern Time, on April 28, 2015.25, 2017. 401(k) participants must vote by 2:00 PM, Eastern Time, on April 24, 2017; see note on reverse.
VALIDATION DETAILS ARE LOCATED BELOW IN THE SHADED BAR.
| Vote by Internet
• Go towww.investorvote.com/
• Or scan the QR code with your smartphone
• Follow the steps outlined on the secure website |
Vote by Telephone
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, |
| A | Proposals — | |||
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1. Election of Directors: | For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | |||||||||||||||||||
01 - |
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02 - William D. Green |
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03 - Charles E. Haldeman, Jr. |
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| 04 - | ☐ | ☐ | 06 - | |||||||||||||||||||||||||
| 07 - Maria R. Morris | ☐ | ☐ | ☐ | 08 - Douglas L. Peterson | ||||||||||||||||||||||||
| 10 - Edward B. Rust, Jr. | ||||||||||||||||||||||||||||
| 12 - Richard E. Thornburgh |
| For | Against | Abstain | For | Against | Abstain | |||||||||||||
2. Vote to approve, |
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4. Vote to ratify the appointment of Ernst & Young LLP as our independent Registered Public Accounting Firm for | ||||||||||||||||||
| 1 Year | 2 Years | 3 Years | Abstain | |||||||||||||||
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| ☐ | And, in their discretion, in the transaction of such other business as may properly come before the Meeting. | |||||||||||||||||
| B | Authorized Signatures — This section must be completed for your vote to be counted. — Date and sign below. | |
| Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, custodian or in other representative capacity, please give your full title. | ||||||||||||||||
Date (mm/dd/yyyy) — Please print date below. |
Signature 1 — Please keep signature within the box. |
Signature 2 — Please keep signature within the box. | ||||||
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ADMISSION TICKET
McGraw Hill Financial,S&P Global Inc.
20152017 Annual Meeting of Shareholders
Wednesday, April 29, 201526, 2017
10:00 a.m. (EDT) – Registration opens (West Foyer)(Lobby)
11:00 a.m. (EDT) – Annual Meeting (West Ballroom)(36th floor Conference Center)
Conrad New York Hotel
102 North End Avenue (between Vesey and Murray Streets)
2nd Floor Conference Center55 Water Street
New York, NY 10282New York 10041-0003
If you wish to attend the Annual Meeting of Shareholders in person, please present this admission ticket and a valid picture identification at the door for admission. Cameras, large bags, briefcases, packages, recording equipment and other electronic devices will not be permitted at the Annual Meeting.
Annual Meeting Available by Webcast
To listen to the Annual Meeting, go to www.mhfi.comhttp://investor.spglobal.com and click on the link for the live webcast.
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
Proxy — | + |
Proxy Card Solicited on Behalf of the Board of Directors
The undersigned appoints Scott L. BennettKatherine J. Brennan and Lucy Fato,Steven J. Kemps, and each of them, as proxies with full power of substitution, to vote the shares of stock of McGraw Hill Financial,S&P Global Inc. (the “Company”), which the undersigned is entitled to vote, at the Annual Meeting of Shareholders of the Company to be held at the Conradprincipal executive offices of the Company, 55 Water Street, New York, Hotel, 102 North End Avenue, New York, N.Y. 10282NY 10041 on Wednesday, April 29, 2015,26, 2017, at 11:00 a.m. (EDT), and any adjournment thereof.
McGraw Hill Financial employees.Note to 401(k) Participants.If you are a current or former employee of the Company, this card also provides voting instructions for shares held in The 401(k) Savings and Profit Sharing Plan of McGraw Hill Financial,S&P Global Inc. and Its Subsidiaries and the Standard & Poor’s 401(k) Savings and Profit Sharing Plan for Represented Employees. If you are a participant in either of these Plans and have shares of common stock of the Company allocated to your account under one of these Plans, you have the right to direct The Northern Trust Company, the Trustee of each of these Plans (the “Trustee”), to vote the shares held in your account. The Trustee will vote allocated shares for which no direction is received and unallocated shares, if any (together “Undirected Shares”), in the same proportion as the shares for which direction is received, subject to the Plan documents.Computershare, the Company’s transfer agent, must receive your instructions by 2:00 p.m. (EDT) on April 27, 201524, 2017 in order to communicate your instructions to the Trustee, who will then vote all the shares of common stock of McGraw Hill Financial,S&P Global Inc. which are credited to the undersigned’s account as of March 9, 2015.6, 2017. Under the Plans, you are a “named fiduciary” for the purpose of voting shares in your account and your proportionate share of the Undirected Shares. This means that you have ultimate authority to control the manner in which the shares are voted. By submitting voting instructions by telephone, Internet, or by signing and returning this voting instruction card, you direct the Trustee to vote these shares, in person or by proxy, as designated herein, at the Annual Meeting of Shareholders.
(See reverse side for voting instructions)
| C | Non-Voting Items |
Change of Address —Please print your new address below. |
Comments —Please print your comments below. | Meeting Attendance | ||||||||||
| Mark the box to the right if you plan to attend the Annual Meeting. |
| IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A AND B ON THE REVERSE SIDE OF THIS CARD. | + |
