UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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XPO LOGISTICS, INC.
(Name of Registrant as Specified in its Charter)
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XPO LOGISTICS, INC. | ||||||||
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XPO LOGISTICS, INC.
Five American Lane
Greenwich, Connecticut 06831
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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To Be Held on May 17, 201814, 2020
To the stockholdersStockholders of XPO Logistics, Inc.:
Notice is hereby given that the annual meeting2020 Annual Meeting of stockholdersStockholders (the "Annual Meeting") of XPO Logistics, Inc. ("XPO" or the "company") will be held on Thursday, May 17, 201814, 2020 at 10:00 a.m. Eastern Daylight Time as a virtual meeting via webcast due to the public health concerns related to the COVID-19 pandemic. You can access the meeting at Doral Arrowwood, 975 Anderson Hill Road, Rye Brook, NY 10573www.meetingcenter.io/229070589 with password XPO2020. You will also be required to have a control number to access the Annual Meeting. Please follow the instructions on pages 7-8 of the Proxy Statement.
The Annual Meeting shall be held for the following purposes, as more fully described in the proxy statement:Company's Proxy Statement accompanying this notice (the "Proxy Statement"):
Only stockholders of record of our common stock, par value $0.001 per share, and our Series A Convertible Perpetual Preferred Stock, par value $0.001 per share, as of the close of business on April 6, 20189, 2020 are entitled to receive notice of, and to vote at, the annual meetingAnnual Meeting or any adjournment or postponement of the annual meeting.Annual Meeting.
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Please note that if you planTable of Contents
On or about April 21, 2020, we will mail a Notice of Internet Availability of Proxy Materials to attendour stockholders of record as of the annual meeting in person, you will need to register in advance and receive an admission ticket in order to be admitted. Please follow therecord date. The notice contains instructions on pages4-8how you can obtain internet access to our Proxy Statement and our Annual Report, which includes our Annual Report on Form 10-K for the 2019 fiscal year. The notice also contains instructions on how you can request a paper copy of the proxy statement.materials, including a form of proxy.
Your vote is important. Whether or not you plan to attend the annual meeting in person,Annual Meeting, it is important that your shares be represented. We ask that you vote your shares as soon as possible.
By Order of the Board of Directors, | ||
Bradley S. Jacobs Chairman and Chief Executive Officer | ||
Greenwich, Connecticut April 21, 2020 |
By Order of the Board of Directors,
Bradley S. Jacobs
Chairman and Chief Executive Officer
Greenwich, Connecticut
April 18, 2018
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to Be Held on May 17, 2018:14, 2020:
ThisThe Proxy Statement and our Annual Report on Form10-K for the Year Ended December 31, 2017
2019 are available atwww.edocumentview.com/XPO
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Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to Be Held on May 17, 2018 :
This Proxy Statement and our Annual Report on Form
are available atwww.edocumentview.com/XPO.
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This proxy statementProxy Statement sets forth information relating to the solicitation of proxies by the Board of Directors (“("Board of Directors”Directors" or “Board”"Board") of XPO Logistics, Inc. in connection with our company’s 2018 annual meeting2020 Annual Meeting of stockholders.Stockholders. This summary highlights information contained elsewhere in this proxy statement.Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statementProxy Statement carefully before voting.
2020 ANNUAL MEETING OF STOCKHOLDERS |
We intend to mail our Notice of Stockholders
Date and Time: May 17, 2018 at 10:00 a.m. Eastern Daylight Time
Place: Doral Arrowwood, 975 Anderson Hill Road, Rye Brook, NY 10573
Record Date: You can vote if you were a stockholderInternet Availability of record of our company as of the close of business on April 6, 2018 (the “Record Date”Proxy Materials ("Notice").
Admission:You will need an admission ticket to enter the annual meeting. You may request an admission ticket by providing the name under which you hold shares of record or, if your shares are held in the name of a bank, broker or other holder of record, the evidence of your beneficial ownership of the shares, the number of admission tickets you are requesting and your contact information. No cameras, mobile phones or other electronic or recording devices will be allowed to be used in the meeting room.
You can submit your request by sending ane-mail tostockholdermeetings@xpo.com OR by calling us toll-free at (855)976-6951.
This proxy statement and form of proxy are first being mailed on or about April 18, 2018,21, 2020, to our stockholders of record as of the close of business on April 6, 2018.9, 2020 (the "Record Date").
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Thursday, May 14, 2020 at 10:00 a.m. Eastern Daylight Time | Virtual Meeting Site: www.meetingcenter.io/229070589 | You can vote if you were a stockholder of record as of the close of business on April 9, 2020 | ||||||||
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Admission: You will not be able to attend the Annual Meeting in person this year. You can access the Annual Meeting at www.meetingcenter.jo/229070589 with password XPO2020. You will need to provide the control number on your notice or proxy card in order to access the Annual Meeting. If the shares of common stock you hold are in an account at a broker, dealer, commercial bank, trust company or other nominee (i.e., in "street name"), you must register in advance to participate in the Annual Meeting, vote electronically and submit questions during the live webcast of the meeting. To register, you must obtain a legal proxy from the bank, broker or other nominee that holds your shares giving you the right to vote the shares. Requests for registration should be directed to our transfer agent, Computershare Trust Company, N.A. ("Computershare"), by email at legalproxy@computershare.com no later than 5:00 p.m. Eastern Time, on Friday, May 11, 2020. You will receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to www.meetingcenter.io/229070589 and enter your control number and the meeting password, XPO2020.
Voting Matters and Board Recommendations
VOTING MATTERS AND BOARD RECOMMENDATIONS |
The Board is not aware of any matter that will be presented for a vote at the 2018 annual meeting2020 Annual Meeting of stockholdersStockholders other than those shown below.
Board Vote Recommendation | Page Reference | ||||||||||||
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PROPOSAL 2:Ratification of the Appointment of our Independent Public Accounting Firm To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year | FOR | 64, 66 | |||||||||||
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PROPOSAL 3: Approval of an Amendment to the Company's Incentive Compensation Plan To approve an amendment to the XPO Logistics, Inc. 2016 Omnibus Incentive Compensation Plan to increase the number of available shares thereunder by 1,150,000 to a total of 6,550,000. | | FOR | 67-74, 91-107 | ||||||||||
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PROPOSAL To conduct an advisory vote to approve the executive compensation of our named executive officers | FOR | 75 | |||||||||||
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PROPOSAL 5:Stockholder proposal regarding integration of ESG metrics into executive compensation To | | AGAINST | | 76-77 | |||||||||
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PROPOSAL 6:Stockholder Proposal Regarding the Requirement that the Chairman of the Board be an Independent Director To adopt a requirement that the chairman of the Board be an | AGAINST | 78-79 | |||||||||||
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PROPOSAL 7: Stockholder Proposal Regarding Ways to Strengthen the Prevention of Workplace Sexual Harassment and Align Senior Executive Compensation Incentives To adopt measures to strengthen the company's prevention of workplace sexual harassment and align senior executive compensation incentives. | | AGAINST | | 80-82 | ||||||||||
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PROPOSAL 8: Stockholder Proposal Regarding Acceleration of Executive Equity Awards in the Case of a Change in Control To adopt a policy that, in the event of a change in control, there shall be no acceleration of vesting of any equity award granted to any senior executive officer. | AGAINST | 83-84 | ||||||||||||
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GOVERNANCE HIGHLIGHTS |
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How to Cast Your Vote
If you are a registered stockholder (i.e., you hold your shares in your own name), you can vote by proxy in three convenient ways:
Telephone and internet voting facilities for stockholders of record will be available 24 hours a day and will close at 1:00 a.m. Eastern Daylight Time on May 17, 2018.
If you are the beneficial owner of shares, please follow the voting instructions provided by your broker, trustee or other nominee.
Board of Directors Nominees
The following table provides summary information about each director nominee. Each director is elected annually by a majority of the votes cast. The average age of our director nominees is 60 years and the average tenure is 5.1 years.
Committee Memberships
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Name
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Age
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Director
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Occupation
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Independent
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AC
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CC
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NCGC
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AcqC
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Bradley S. Jacobs
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| 2011
| Chairman and Chief Executive Officer, XPO Logistics, Inc.
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Gena L. Ashe
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| 2016
| Former Senior Vice President, Chief Legal Officer and Corporate Secretary, Adtalem Global Education Inc.
| Y
| C
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AnnaMaria DeSalva
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| 2017
| Former Global Chief Communications Officer, E.I. du Pont de Nemours & Co. (DuPont)
| Y
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Michael G. Jesselson
| 66
| 2011
| Lead Independent Director, XPO Logistics, Inc. President and Chief Executive Officer, Jesselson Capital Corporation
| Y
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Adrian P. Kingshott
| 58
| 2011
| Chief Executive Officer, AdSon LLC
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| C
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Jason D. Papastavrou*
| 55
| 2011
| Founder and Chief Investment Officer, ARIS Capital Management, LLC
| Y
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| ✓
| C
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Oren G. Shaffer*
| 75
| 2011
| Former Vice Chairman and Chief Financial Officer, Qwest Communications International, Inc.
| Y
| C
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Independence |
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Governance and Compensation Highlights
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| The Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee consist entirely of independent directors. | |
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Independent Board Oversight and Leadership Roles | In 2016, our Board added a robust lead independent director position to its leadership structure to complement the roles of our independent committees and independent committee | |
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Board Refreshment | Our Board is committed to | |
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Committee | As part of its annual review of Board committee composition and committee | |
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Annual Director Elections | All directors are elected annually forone-year terms or until their successors are elected and qualified. | |
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Majority Voting for Director Elections | Our bylaws provide for a majority voting standard in uncontested elections, and further require that a director who fails to receive a majority vote must tender his or her resignation to the Board. | |
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Board Evaluations | Our Board | |
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Risk Oversight and Financial Reporting | Our Board seeks to provide robust oversight of current and potential risks facing our company through regular deliberations and | |
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Active Participation | Our Board held 17 meetings during 2019 and each person currently serving as a director attended at least 88% of the meetings of our Board and any Board committee on which he or she served. | |
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2020 BOARD OF DIRECTORS NOMINEES |
Our Board aims to create a team of directors with diverse experiences and perspectives to provide our complex, global company with thoughtful and engaged board oversight. When selecting new directors, our Board considers, among other things, the nominee's breadth of experience, financial expertise, integrity, ability to make independent analytical inquiries, understanding of our company's business environment, experience in areas relevant to our company's businesses and willingness to devote adequate time to Board duties, all in the context of the needs of the Board at that point in time and with the objective of ensuring a diversity of backgrounds, experience and viewpoints among Board members. Our Board also endeavors to actively seek out highly qualified women and individuals from underrepresented minorities to include in the pool from which Board nominees are chosen and has engaged in a purposeful process of regular refreshment as demonstrated by the following key metrics:
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The following table provides summary information about each director nominee. Each director is elected annually by a majority of the votes cast.
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Name | Director Since | Age | Occupation | Independent | AC | CC | NCGC | AcqC | ||||||||
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Bradley S. Jacobs | 2011 | 63 | Chairman and Chief Executive Officer, XPO Logistics, Inc. | | | | | | ||||||||
Gena L. Ashe | 2016 | 58 | General Counsel and Corporate Secretary, Anterix Inc. | Y | ✓ | ✓ | ||||||||||
Marlene M. Colucci | 2019 | 57 | Executive Director of The Business Council | Y | | ✓ | | ✓ | ||||||||
AnnaMaria DeSalva | 2017 | 51 | Vice Chairman, XPO Logistics, Inc.; | Y | C | |||||||||||
Michael G. Jesselson | 2011 | 68 | Lead Independent Director, XPO Logistics, Inc.; President and Chief Executive Officer, Jesselson Capital Corporation | Y | ✓ | ✓ | ✓ | | ||||||||
Adrian P. Kingshott | 2011 | 60 | Chief Executive Officer, AdSon, LLC; Managing Director, Spotlight Advisors, LLC | Y | C | |||||||||||
Jason D. Papastavrou* | 2011 | 57 | Founder and Chief Investment Officer, ARIS Capital Management, LLC | Y | ✓ | C | ✓ | | ||||||||
Oren G. Shaffer* | 2011 | 77 | Former Vice Chairman and Chief Financial Officer, | Y | C | |||||||||||
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AC = | NCGC = Nominating and Corporate Governance Committee AcqC = Acquisition Committee | C = Committee Chairman ✓ = Committee Member * = Audit Committee Financial Expert |
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The following table provides a summary of the qualifications and experience of our director nominees.
2019 PERFORMANCE HIGHLIGHTS |
XPO realized numerous financial achievements in 2019 under the skilled leadership of our NEOs:
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SUSTAINABILITY EFFORTS |
We are pleased to have published our 2019 Sustainability Report highlighting our initiatives in the following areas:
2019 COMPENSATION HIGHLIGHTS |
Our compensation programs for NEOs align with our company's pay-for-performance culture by linking executive compensation to long-term stockholder value. The Compensation Committee's commitment to a pay-for-performance philosophy ensures that this alignment is reflected in our NEO compensation programs. Under Mr. Jacobs' strong leadership, for its first eight fiscal years combined (2012-2019), the company increased stockholder value by $7.2 billion, as represented by the change in XPO's market capitalization from December 31, 2011 through December 31, 2019. Mr. Jacobs' average annual realized pay from 2012 to 2019 was $9.9 million per year. Cumulatively, this equates to 1.1% of the total value created for stockholders during the eight-year period.
Realized Pay Demonstrates Actual Value of Compensation Earned by Our NEOs |
Realized pay represents the compensation actually received by our executives in a given year and is calculated as the sum of: (i) salary paid; (ii) bonus(es) related to the performance year; and (iii) the value of long-term incentive compensation that vested in the year, calculated based on the closing stock price on the date the award vested. The realized pay measure, utilized consistently, allows our stockholders to assess whether the actual value of the compensation received by our CEO and other executive officers is rightsized relative to stockholders' return on investment in the company over time. In 2019, total realized pay was 92% performance-based for our CEO, Mr. Jacobs, and 77% and 76% performance-based for Mr. Cooper and Mr. Harik, respectively.
Performance Awards Align Interests of NEOs with Stockholders |
The alignment of management's objectives with stockholders' interests is of critical importance, and the Compensation Committee holds our executives accountable for achieving rigorous annual and multi-year growth targets. The underlying premise is that an abundance of organic and inorganic opportunities exist to create incremental value for stockholders. The Compensation Committee believes that optimal compensation incentives motivate executives to balance short-term and long-term initiatives for competitive differentiation, market share gains, and revenue and margin expansion.
In determining the framework for performance-based awards, the Compensation Committee typically selects high-growth stretch goals for key indicators that extend beyond annual targets, and that vest on a long-term basis once the goals are entirely achieved. The awards typically reflect the inherent hurdles in achieving aspirational goals over a long period of time and align executive interests with the interests of our stockholders.
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All Equity Awards are Performance-Based for Mr. Jacobs, Mr. Cooper and Mr. Harik |
Outstanding equity awards for Mr. Jacobs, Mr. Cooper and Mr. Harik are 100% performance-based as summarized below:
Key features of our outstanding equity awards for Mr. Jacobs, Mr. Cooper and Mr. Harik are outlined below:
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Staggered cliff vesting reduces risk and maintains focus on long-term value creation. | ||||||
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There is no threshold level for below-target performance (no payout if targets are not fully met). | ||||||
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Targets emphasize high-growth and high returns, incentivizing NEOs to capitalize on a mix of addressable opportunities. | ||||||
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Recent awards are balanced with two performance measures, including a relative market-based measure for the 2019-2024 PSU award (granted in June 2019). | ||||||
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Performance awards are subject to clawback restrictions. | ||||||
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As executive officers at XPO, Mr. Jacobs, Mr. Cooper and Mr. Harik have not sold any shares from vested equity and have not exercised any stock options. In addition, all vested awards are subject to lock-up restrictions prohibiting the sale of shares or exercise of options until September 2, 2020.
Responsive to Stockholder Feedback |
We believe that strong corporate governance should include year-round engagement with stockholders, including constructive dialogue on our executive compensation program. Feedback received from stockholders in 2019, related to executive compensation matters, was shared with the Committee and incorporated into its decision-making process:
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Increased disclosure about the Committee's decision-making process, including: ■ Inclusion of the new proxy section "Execution of XPO Company Strategy—Effect on Timing of Grants of Equity Awards"; ■ Detailed discussion of outstanding performance stock units (PSUs); ■ Detailed discussion of performance metrics underpinning outstanding PSUs; and ■ Supplemental materials filed with this proxy. | ||||||
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Revised PSU award construct for the 2019-2024 PSU (granted in June 2019), including the addition of a relative market-based measure. | ||||||
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This proxy statementProxy Statement sets forth information relating to the solicitation of proxies by the Board of Directors (our “Board"Board of Directors”Directors" or our “Board”"Board") of XPO Logistics, Inc. (“XPO”("XPO" or our “company”"company") in connection with our company’s 2018 annual meeting2020 Annual Meeting of stockholdersStockholders (the "Annual Meeting") or any adjournment or postponement of the annual meeting.thereof. This proxy statementProxy Statement (the "Proxy Statement") is being furnished by our Board of Directors for use at the annual meeting of stockholdersAnnual Meeting to be held on May 17, 201814, 2020 at 10:00 a.m. Eastern Daylight Time as a virtual meeting via webcast due to the public health concerns related to the COVID-19 pandemic. You can access the meeting at Doral Arrowwood, 975 Anderson Hill Road, Rye Brook, NY 10573.www.meetingcenter.io/2290705989 with password XPO2020. You will also be required to have a control number to access the Annual Meeting. Please follow the instructions below.
This proxy statement and formWe intend to mail our Notice of proxy are first being mailedInternet Availability of Proxy Materials ("Notice") on or about April 18, 2018,21, 2020, to our stockholders of record as of the close of business on April 6, 20189, 2020 (the “Record Date”"Record Date").
Questions And Answers About Our Annual Meeting
The following questions and answers address some questions you may have regarding the annual meeting.our Annual Meeting. These questions and answers may not include all of the information that may be important to you as a stockholder of our company. Please refer to the more detailed information contained elsewhere in this proxy statement.
What items of business will be voted on at the annual meeting?
What items of business will be voted on at the Annual Meeting? |
We expect that the business put forth for a vote at the annual meetingAnnual Meeting will be as follows:
In addition, seniorSenior management of XPO and representatives of our outside auditor, KPMG, will be available to respond to appropriate questions.
Who can attend and vote at the annual meeting?
Who can attend and vote at the Annual Meeting? |
You are entitled to receive notice of and to attend and vote at the annual meeting,Annual Meeting, or any adjournment or postponement thereof, if, as of the close of business on April 6, 2018,9, 2020, the Record Date, you were a holder of record of our common stock or Series A Convertible Perpetual Preferred Stock (the “Series"Series A Preferred Stock”Stock").
You will not be able to attend the Annual Meeting in person this year. You can access the Annual Meeting atwww.meetingcenter.io/229070589 with password XPO2020. You will also be required to have a control number to access the Annual Meeting. Please follow the instructions below. You will need to provide the control number on your notice or proxy card in order to access the Annual Meeting. If the shares of common stock you hold are in an account at a broker, dealer, commercial bank, trust company or other nominee (i.e., in "street name"), you must register in advance to participate in the
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Annual Meeting, vote electronically and submit questions during the live webcast of the meeting. To register, you must obtain a legal proxy from the bank, broker or other nominee that holds your shares giving you the right to vote the shares. Requests for registration should be directed to Computershare by email at legalproxy@computershare.com no later than 5:00 p.m. Eastern Time, on Friday, May 11, 2020. You will receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to www.meetingcenter.io/229070589 and enter your control number and the meeting password, XPO2020.
Can I ask Questions During the Annual Meeting? |
Stockholders (or their proxy holders) may submit questions for the Annual Meeting's question and answer session in advance by logging in to the meeting site at www.meetingcenter.io/229070589 with password XPO2020. You will need the control number on your Notice, proxy card or confirmation email from Computershare in order to submit a question. Click on the "message" icon at the top of the screen and submit your question. Please provide your name, address (city and state) and organization, and, if applicable, the specific proposal to which your question relates. Advance questions can be submitted beginning at 9:00 a.m., Eastern Daylight Time, on May 4, 2020. Questions may also be submitted during the Annual Meeting through the meeting website. We will answer as many questions during the meeting as time will allow and will group questions together where appropriate.
How many shares of XPO common stock or Series A Preferred Stock must be present to conduct business at the Annual Meeting? |
As of the Record Date, there were 120,597,57491,105,728 shares of common stock issued and outstanding, each of which is entitled to one vote on each matter to come before the annual meeting.Annual Meeting. In addition, as of the Record Date, there were 71,510 shares of Series A Preferred Stock issued and outstanding. Eacheach share of Series A Preferred Stock is entitled to vote together with our common stock on each matter to come before the annual meetingAnnual Meeting as if the shares of Series A Preferred Stock were converted into shares of common stock as of the Record Date, meaning that each share of Series A Preferred Stock is entitled to approximately 143 votes on each matter to come before the annual meeting.Annual Meeting. As of the Record Date, there were 71,110 shares of Series A Preferred Stock issued and outstanding, representing 10,158,171 votes. As a result, a total of 130,813,288101,264,299 votes are eligible to be cast at the annual meetingAnnual Meeting based on the number of outstanding shares of our common stock and Series A Preferred Stock, voting together as a single class.
If you wish to attend the annual meeting and your shares are held in an account at a broker, dealer, commercial bank, trust company or other nominee (i.e., in “street name”), you will need to bring a copy of your voting instruction card or statement reflecting your share ownership as of the Record Date, as well as an admission ticket as outlined below. Street name stockholders who wish to vote at the annual meeting will need to obtain a proxy from the broker, dealer, commercial bank, trust company or other nominee that holds their shares.
Do I need a ticket to attend the annual meeting?
Yes, you will need an admission ticket to enter the annual meeting. You may request tickets by providing the name under which you hold shares of record or, if your shares are held in the name of a bank, broker or other holder of record, the evidence of your beneficial ownership of the shares as of the Record Date, the number of tickets you are requesting and your contact information. You can submit your request in the following ways:
Stockholders also must present a form of personal photo identification in order to be admitted to the annual meeting. No cameras, mobile phones or other electronic or recording devices will be allowed to be used in the meeting room.
How many shares must be present to conduct business at the annual meeting?
A quorum is necessary to hold a valid meeting of stockholders. ForPursuant to the company's bylaws, the presence, in person or by proxy, of the holders of a majority of the shares issued and outstanding is necessary for each of the proposals to be presented at the annual meeting,Annual Meeting. Accordingly, the holders of shares of our common stock or Series A Preferred Stock outstanding on the Record Date representing 65,406,64550,632,151 votes must be present at the annual meeting, in person or by proxy.Annual Meeting. If you vote—includingvote by internet, telephone or proxy card—yourcard, the shares votedyou vote will be counted towards the quorum for the annual meeting.Annual Meeting. Abstentions and brokernon-votes are counted as present for the purpose of determining a quorum.
What are my voting choices? |
What are my voting choices?
With respect to the election of directors, you may vote “FOR”"FOR" or“AGAINST”"AGAINST" each of the director nominees, or you may“ABSTAIN”"ABSTAIN" from voting for one or more of such nominees. With respect to the other proposals to be considered at the annual meeting, except the frequency vote on executive compensation,Annual Meeting, you may vote“FOR”"FOR" or“AGAINST”"AGAINST" or you may“ABSTAIN”"ABSTAIN" from voting on any proposal. With respect to the advisory vote on the frequency of future advisory votes to approve executive compensation, you may vote for one of four choices for the proposal on the proxy card or voting instruction:“ONE YEAR,”“TWO YEARS,”“THREE YEARS” or“ABSTAIN.”If you sign your proxy or voting instruction card without giving specific instructions, your shares will be voted in accordance with the recommendations of our Board of Directors with respect to the specific proposals described in this Proxy Statement and at the discretion of the proxy holders on any other matters that properly come before the annual meeting.Annual Meeting.
What vote is required to approve the proposals being considered at the Annual Meeting? |
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Brokers may not use discretionary authority to vote shares on the advisory vote to approve executive compensation if they have not received specific instructions from their clients. If you are a beneficial ownerTable of shares, for your vote to be counted in the advisory vote to approve executive compensation, you will need to communicate your voting decisions to your bank, broker or other nominee before the dateContents
Brokers may not use discretionary authority to vote shares on the advisory vote on frequency of future advisory votes to approve executive compensation if they have not received specific instructions from their clients. If you are a beneficial owner of shares, for your vote to be counted in the advisory vote on frequency of future advisory votes to approve executive compensation, you will need to communicate your voting decisions to your bank, broker or other nominee before the datefiscal year 2020.
Brokers may not use discretionary authority to vote shares on this stockholder proposal if they have not received specific instructions from their clients. If you are a beneficial owner of shares, for your vote to be counted for or against the stockholder proposal regarding annual sustainability reporting, you will need to communicate your voting decision to your bank, broker or other nominee before the date of the annual meeting in accordance with their specific instructions. Abstentions and brokernon-votes are not considered votes cast for purposes of tabulation of such vote, and will have no effect on the vote on this stockholder proposal.
Brokers may not use discretionary authority to vote shares on this stockholder proposal if they have not received specific instructions from their clients. If you are a beneficial owner of shares, for your vote to be counted for or against the stockholder proposal regarding an amendment to the clawback policy, you will need to communicate your voting decision to your bank, broker or other nominee before the date of the annual meeting in accordance with their specific instructions. Abstentions and brokernon-votes are not considered votes cast for purposes of tabulation of such vote, and will have no effect on the vote on this stockholder proposal.
In general, other business properly brought before the annual meetingyear ending December 31, 2020 requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted “for”"for" such proposal must exceed the number of shares voted “against”"against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the annual meetingAnnual Meeting at which a quorum is present. Abstentions are not considered votes cast for purposes of tabulation and will have no effect on the ratification of KPMG. We do not expect any broker non-votes, as brokers have discretionary authority to vote on this proposal.
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In general, other business properly brought before the Annual Meeting requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
How does the Board of Directors recommend that I vote? |
How does the Board of Directors recommend that I vote?
Our Board of Directors, after careful consideration, recommends that our stockholders vote“FOR”"FOR" the election of each director nominee named in this proxy statement,“FOR”"FOR" ratification of KPMG as our independent registered public accounting firm for fiscal year 2018,“FOR”2020,"FOR" approval of an amendment to the company's incentive compensation plan,"FOR" advisory approval of the resolution to approve executive compensation, for the option of every“ONE YEAR” as the preferred frequency for future advisory votes to approve executive compensation,“AGAINST”"AGAINST" the approval of the stockholder proposal regarding annual sustainability reporting,integration of ESG metrics into executive compensation, if such proposal is properly presented at the meeting, and“AGAINST”meeting;"AGAINST" the approval of the stockholder proposal regarding the company’s executive compensation clawback policy,requirement that the chairman of the board be an independent director, if such proposal is properly presented at the meeting;"AGAINST" the approval of the stockholder proposal regarding ways to strengthen the prevention of workplace sexual harassment and align senior executive compensation incentives, if such proposal is properly presented at the meeting; and"AGAINST" the approval of the stockholder proposal regarding acceleration of executive equity awards in the case of a change in control, if such proposal is properly presented at the meeting.
What do I need to do now? |
We urge you to read this proxy statementProxy Statement carefully, then vote via internet or by telephone by following the instructions on the Notice or proxy card, or mail your completed, dated and signed proxy card in the enclosed return envelope as soon as possible so that your shares of our common stock can be voted at the annual meetingAnnual Meeting of stockholders. Holders of record may also vote by telephone or the internet by following the instructions on the proxy card.
How do I cast my vote? |
How do I cast my vote?
Registered Stockholders. If you are a registered stockholder (i.e., you hold your shares in your own name through our transfer agent, Computershare Trust Company, N.A., and not through a broker, bank or other nominee that holds shares for your account in “street name”"street name"), you may vote by proxy via the internet or by telephone or by mail by following the instructions provided on the Notice or proxy card.card, or mail your completed, dated and signed proxy card in the enclosed return envelope. Proxies submitted via telephoneinternet or internetby telephone must be received by 1:00 a.m. Eastern Daylight Time on May 17, 2018.14, 2020. Please see the Notice or proxy card provided to you for instructions on how to submit your proxy via internet or by telephone or the internet.telephone. Stockholders of record who attend the annual meetingAnnual Meeting may vote in persondirectly at the Annual Meeting by obtaining a ballot fromfollowing the inspectorinstructions provided during the Annual Meeting.
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Beneficial Owners. If you are a beneficial owner of shares (i.e., your shares are held in the name of a brokerage firm, bank or a trustee), you may vote by proxy by following the instructions provided in the Notice, voting instruction form or other materials provided to you by the brokerage firm, bank or other nominee that holds your shares. To vote in persondirectly at the annual meeting,Annual Meeting, you must obtain a legal proxy from the brokerage firm, bank or other nominee that holds your shares. Follow the instructions above to obtain a control number and the instructions provided for during the Annual Meeting.
What is the deadline to vote? |
If you hold shares as the stockholder of record, your vote by proxy must be received before the polls close at the annual meeting.Annual Meeting. As indicated on the Notice or proxy card provided to you, proxies submitted via telephoneinternet or internetby telephone must be received by 1:00 a.m. Eastern Daylight Time on May 17, 2018.14, 2020.
If you are the beneficial owner of shares of our common stock, please follow the voting instructions provided by your broker, trustee or other nominee.
What happens if I do not respond, or if I respond and fail to indicate my voting preference, or if I abstain from voting? |
If you fail to vote via internet or by telephone as indicated on your Notice or proxy card, or sign, date and return your proxy card or fail to vote by telephone or internet as provided on your proxy card, your shares will not be counted towards establishing a quorum for the annual meeting,Annual Meeting, which requires holders representing a majority of the outstanding shares of our common stock (including those that would be issued if all of our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) to be present in person or by proxy.
Failure to vote, assuming the presence of a quorum, will have no effect on the tabulation of the votevotes on the proposals.
If you are a stockholder of record and you properly sign, date and return your proxy card, but do not indicate your voting preference, we will count your proxy as a vote“FOR”"FOR" the election of the seveneight nominees for director named in “Proposal"Proposal 1—Election of Directors,”“FOR”""FOR" ratification of KPMG as our independent registered public accounting firm for fiscal year 2018,“FOR”2020,"FOR" approval of an amendment to the company's incentive compensation plan,"FOR" advisory approval of the resolution to approve executive compensation, for a frequency of every“ONE YEAR” as the preferred frequency for future advisory votes to approve executive compensation,“AGAINST”"AGAINST" the approval of the stockholder proposal regarding annual sustainability reporting,integration of ESG metrics into executive compensation, if such proposal is properly presented at the annual meeting, and“AGAINST”"AGAINST" the approval of the stockholder proposal regarding the company’s executive compensation clawback policy,requirement that the chairman of the board be an independent director, if such proposal is properly presented at the annualmeeting,"AGAINST" the approval of the stockholder proposal regarding ways to strengthen the prevention of workplace sexual harassment and align senior executive compensation incentives, if such proposal is properly presented at the meeting, and"AGAINST" the approval of the stockholder proposal regarding acceleration of executive equity awards in the case of a change in control, if such proposal is properly presented at the meeting.
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If my shares are held in “street name”If my shares are held in "street name" by my broker, dealer, commercial bank, trust company or other nominee, will such broker or other nominee vote my shares for me?
You should instruct your broker or other nominee on how to vote your shares of our common stock using the instructions provided by such broker or other nominee. Absent specific voting instructions, brokers or other nominees who hold shares of our common stock in “street name”"street name" for customers are prevented by the rules set forth in the Listed Company Manual (the “NYSE Rules”"NYSE Rules") of the New York Stock Exchange (the “NYSE”"NYSE") from exercising voting discretion inwith respect ofto non-routine or contested matters. We expect that when the NYSE evaluates the proposals to be voted on at the annual meetingAnnual Meeting to determine whether each proposal is a routine ornon-routine matter, only “Proposal"Proposal 2—Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for fiscal year 2018”Fiscal Year 2020" will be determined to be routine. Shares not voted by a broker or other nominee, because such broker or other nominee does not have instructions or cannot exercise discretionary voting power with respect to one or more proposals, are referred to as “broker"broker non-votes.”" It is important that you instruct your broker or other nominee on how to vote your shares of our common stock held in “street name”"street name" in accordance with the voting instructions provided by such broker or other nominee.
Can I change my vote after I have mailed my proxy card?
What if I want to change my vote? |
Yes. Whether you attend the annual meetingAnnual Meeting or not, you may revoke a proxy at any time before your proxy is voted at the annual meeting.Annual Meeting. You may do so by properly delivering a later-dated proxy either via internet, by telephone, by mail, the internet or telephone or by attending the annual meetingAnnual Meeting in person and voting. Please note, however, your attendance at the annual meetingAnnual Meeting will not automatically revoke any prior proxy, unless you vote again at the annual meetingAnnual Meeting or specifically request in writing that your prior proxy be revoked. You also may revoke your proxy by delivering a notice of revocation to our company (Attention: Secretary, XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831) prior to the vote at the annual meeting.Annual Meeting. If you hold your shares through a broker, dealer, commercial bank, trust company or other nominee, you should follow the instructions of such broker or other nominee regarding revocation of proxies.
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How will the persons named as proxies vote?Table of Contents
How will the persons named as proxies vote? |
If you are a registered stockholder (i.e., you hold your shares of our common stock in your own name through our transfer agent, Computershare Trust Company, N.A., and not through a broker, bank or other nominee that holds shares for your account in "street name") and you complete and submit a proxy, the persons named as proxies will follow your instructions. If you submit a proxy but do not provide instructions, or if your instructions are unclear, the persons named as proxies will vote as recommended by our Board of Directors or, if no recommendation is given, by using their own discretion.
Where can I find the results of the voting? |
Where can I find the results of the voting?
We intend to announce preliminary voting results at the annual meetingAnnual Meeting and will publish final results throughon a Current Report on Form8-K to be filed with the U.S. Securities and Exchange Commission (“SEC”("SEC") within four (4) business days after the annual meeting.Annual Meeting. The Current Report on Form8-K will also be available on the internet at our website,www.xpo.com.
Who will pay for
Why did I receive a Notice regarding the internet availability of proxy materials instead of a full set of printed proxy materials? |
We are making our proxy materials available to our stockholders on the costinternet by mailing the Notice to our stockholders instead of soliciting proxies?mailing a full set of proxy materials. The Notice contains instructions on how you may access an electronic copy of our proxy materials. The Notice also contains instructions on how you may request a paper copy of the proxy materials, including a form of proxy. We believe this process allows us to provide you with the information you need in a timely manner, while conserving natural resources and lowering the costs of printing and distributing our proxy materials.
We
Who will pay for the cost of soliciting proxies? |
The company will pay for the cost of soliciting proxies. We have engaged Innisfree M&A Incorporated to assist us in soliciting proxies in connection with the annual meeting,Annual Meeting and have agreed to pay them approximately $12,500$15,000 plus their expenses for providing such services. Our directors, officers and other employees, without additional compensation, may solicit proxies personally, in writing, by telephone, bye-mail or otherwise. As is customary, we will reimburse brokerage firms, fiduciaries, voting trustees and other nominees for forwarding our proxy materials to each beneficial owner of shares of our common stock or Series A Preferred Stock held of record by them.
What is “householding”
What is "householding" and how does it affect me? |
In accordance with notices to many stockholders who hold their shares through a bank, broker or other holder of record (a “street-name stockholder”"street-name stockholder") and share a single address, only one copy of our proxy statement and 2017 annual report to stockholdersmaterials is being delivered to that address unless contrary instructions from any stockholder at that address are received. This practice, known as “householding,”"householding," is intended to reduce our printing and postage costs. However, any such street-name stockholderstockholders residing at the same address who wisheswish to receive a separate copy of thisour proxy statement and annual reportmaterials may request a copy by contacting thetheir bank, broker or other holder of record, or by sending a written request to: Investor Relations, XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831, or by contacting Investor Relations by telephone at (855)976-6951.1-855-976-6951. The voting instruction form sent to a street-name stockholder should provide information on how to request: (1) householding of future company materials, or (2) separate materials if only one set of documents is being sent to a household. A stockholder who would like to make one of these requests should contact us as indicated above.
Can I obtain an electronic copy of the Company's proxy materials? |
Can I obtain an electronic copy of proxy materials?
Yes, this proxy statement, annual reportProxy Statement and proxy cardour 2019 Annual Report are available on the internet atwww.edocumentview.com/XPO.
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CORPORATE GOVERNANCE | ||
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Introduction –An Overview of Our Mission and How Our Board Composition Is Aligned with Our Strategy
AN OVERVIEW OF OUR MISSION AND HOW OUR BOARD COMPOSITION IS ALIGNED WITH OUR STRATEGY |
Our mission is to be the leading provider of cutting-edge supply chain solutions to the most successful companies in the world, and to do this by using our highly integrated network of people, technology and physical assets to help our customers manage their goods moremost efficiently throughout their supply chains. We run our business on a global basis, with over 50,000 customers served by approximately 100,000 employees and employees in over 1,4551,504 locations in 3230 countries, including the United States, France, the United Kingdom and Spain. Our transportation segment offers customers an unmatched network of multiple modes, flexible capacity and route density that transports freight quickly and cost effectively from origin to destination. Through our logistics segment, we provide a range of differentiated and data-intensive services, including highly engineered and customized solutions, value-added warehousing and distribution, omnichannel fulfillment, cold chain distribution, reverse logistics, surge management and other inventory management solutions.
Our blueprint for transforming transportation and logistics is rooted in innovation and revolves around innovationour people. We care deeply about keeping our employees and people. Ourcustomers happy, and we view safety, sustainability, strong governance and a purpose-driven culture as essential components of value creation. In addition, our company is a leading championproponent of technology, with a global team of technologists and data scientists who concentrate their efforts in four areas of innovation: (1) automation and intelligent machines, (2) visibility and customer service, (3) the digital freight marketplace and (4) dynamic data science. Our success depends on our people. We care deeply about keeping our employees and customers happy, and view giving back to communities, focusing on safety and sustainability and maintaining strong governance as essential components of value creation.
Our Board of Directors consists of a highly experiencedskilled group of business leaders who share our values and reflect our culture. Many of our directors have served as executive officers or served on boards and board committees of major companies and have an extensive understanding of the principles of corporate governance. In addition, our directors have a strong owner orientation—approximately 15.4%18.9% of the voting power of our capital stock on a fully-diluted basis is held by our directors or by entities or persons related to our directors (as of the Record Date). As described on page 13,19, our Board as a whole has broad expertise with the following skill sets that are relevant to our company, business, industry and strategies:strategy:
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DIRECTORS |
Our Board of Directors currently consists of eight (8)nine (9) members as set forth in the table below. The current term of each of our directors will expire at the 2018 annual meeting of stockholders.Annual Meeting. Our Board of Directors has nominated seven (7)eight of the current directors to stand forre-election election at the annual meeting,Annual Meeting, as set forth in Proposal 1 on page 5065 of this proxy statement.Proxy Statement.
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Bradley S. Jacobs |
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| Chairman and Chief Executive Officer, XPO Logistics, Inc. | |
Gena L. Ashe |
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AnnaMaria DeSalva | Vice Chairman, XPO Logistics, Inc.; Global Chairman and Chief Executive Officer, | |
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| Lead Independent Director, XPO Logistics, Inc.; President and Chief Executive Officer, Jesselson Capital Corporation | |
Aris Kekedjian | Advisor to global companies on finance and M&A strategies | |
Adrian P. Kingshott | Chief Executive Officer, AdSon, LLC; Managing Director, Spotlight Advisors, LLC | |
Jason D. Papastavrou | Founder and Chief Investment Officer, ARIS Capital Management, LLC | |
Oren G. Shaffer | Former Vice Chairman and Chief Financial Officer, Qwest Communications International, Inc. | |
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While it does not currently exceed the required voting power thresholds, underUnder the terms of an Investment Agreement, dated June 13, 2011 (the “Investment Agreement”"Investment Agreement"), by and among Jacobs Private Equity, LLC (“JPE”("JPE"), the other investors party thereto (collectively with JPE, the “Investors”"Investors"), and our company, JPE has the right to designate certain percentages of the nominees for our Board of Directors so long as JPE owns securities (including preferred stock convertible into, or warrants exercisable for, securities) representing specified percentages of the total voting power of our capital stock on a fully-diluted basis. JPE does not currently own securities representing the required voting power to qualify for the right to designate nominees for our Board of Directors. The foregoing rights of JPE under the Investment Agreement are in addition to, and not in limitation of, JPE’sJPE's voting rights as a holder of capital stock of our company. JPE is controlled by Bradley S. Jacobs, our Chairman of the Boardchairman and Chief Executive Officer.chief executive officer. The Investment Agreement and the terms contemplated therein were approved by our stockholders at a special meeting on September 1, 2011.
None of the foregoing will prevent our Board of Directors from acting in accordance with its fiduciary duties or applicable law or stock exchange requirements or from acting in good faith in accordance with our governing documents, while giving due consideration to the intent of the Investment Agreement.
Set forth below is information regarding each of our director nominees, including the experience, qualifications, attributes or skills that led our Board of Directors to conclude that such person should serve as a director.
Bradley S. Jacobs |
| Chairman and Director since 2011 | ||||||
Age: 63 | ||||||||
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In-depth knowledge of the ■ | ||||||||
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Gena L. Ashe | Director since 2016 | |||||
Age: 58 | ||||||
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Board Committees: ■ Member of ■ Member of Acquisition Committee | ||||||
Other Public Company Boards: None | ||||||
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Ms. Ashe brings to the Board: | ||||||
More than two decades of valuable legal experience with public and private companies, which enables her to provide guidance to the Board and company management on legal matters, compliance and risk assessment and corporate governance best practices; and ■ | ||||||
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Marlene M. Colucci | Director since 2019 | |||||
Age: 57 | ||||||
Ms. Colucci has served as a director of the company since February 7, 2019. She has served as the executive director of The Business Council in Washington, D.C. since July 2013. Previously, she was executive vice president of public policy for the American Hotel & Lodging Association from September 2005 to June 2013, where she provided guidance on regulatory matters. From September 2003 to June 2005, she served in the White House as special assistant to President George W. Bush in the Office of Domestic Policy. In this role, she developed labor, transportation and postal reform policies and advised the president and his staff on related matters. Earlier, Ms. Colucci served as deputy assistant secretary with the U.S. Department of Labor's Office of Congressional and Intergovernmental Affairs. Her law career includes more than 12 years with the firm of Akin Gump Strauss Hauer & Feld LLP, where she served as senior counsel. She holds a juris doctorate degree from the Georgetown University Law Center. | ||||||
Board Committees: ■ Member of Compensation Committee ■ Member of Acquisition Committee | ||||||
Other Public Company Boards: None | ||||||
■ Significant experience with public policy development, including labor and transportation policy, from over two decades of relevant government and private sector experience; and ■ Meaningful perspectives on matters of corporate governance and business operations from her tenure leading the premier association of chief executive officers of the world's most important business enterprises. |
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AnnaMaria DeSalva |
| Director since 2017 | ||||||||
Age: 51 |
| Vice Chairman since 2019 | ||||||||
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Michael G. Jesselson |
| Director since 2011 | ||||||
Age: 68 | Lead Independent Director since 2016 | |||||||
Mr. Jesselson has served as director of the company since September 2, 2011, and as lead independent director since March 20, 2016. He has | ||||||||
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Mr. Jesselson brings to the Board: ■ | ||||||||
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Adrian P. Kingshott |
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Age: 60 | ||||||||
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More than 25 years of experience in the investment banking and investment management industries; and ■ | ||||||||
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Jason D. Papastavrou, Ph.D. | Director since 2011 | |||||||
Age: 57 | ||||||||
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Chairman of ■ | ||||||||
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Financial expertise related to his qualifications as an ■ | ||||||||
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Oren G. Shaffer | Director since 2011 | |||||||
Age: 77 | ||||||||
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Summary of Qualifications and Experience of Director Nominees
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SUMMARY OF QUALIFICATIONS AND EXPERIENCE OF DIRECTOR NOMINEES |
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Role of the Board and Board Leadership Structure
ROLE OF THE BOARD AND BOARD LEADERSHIP STRUCTURE |
Our business and affairs are managed under the direction of our Board of Directors, which is our company’scompany's ultimate decision-making body, except with respect to those matters reserved to our stockholders. Our Board’sBoard's primary responsibility is to seek to maximize long-term stockholder value. Our Board establishes our overall corporate policies, selects and evaluates our senior management team, which is charged with the conduct of our business, monitors the performance of our company and management, and provides advice and counsel to management. In fulfilling the Board’sBoard's responsibilities, our directors have full access to our management, internal and external auditors and outside advisors.
Furthermore, our Board of Directors is committed to independent Board oversight. Our current Board leadership structure includes an executive Chairmanchairman as well as a lead independent director.director and an independent vice chairman. The positions of Chairmanchairman of the Board and Chief Executive Officerchief executive officer are both currently held by Mr. Jacobs. Our Board believes that this combination of roles is appropriate because the structure enables decisive leadership and ensures clear accountability in the context of strong Board practices and a Board culture that facilitates independent oversight. On January 15, 2020, Mr. Jacobs underscored the company's commitment to maximize shareholder value when XPO announced that the Board had authorized a review of strategic alternatives, including the possible sale or spin-off of one or more of XPO's business units. The strategic alternatives review demonstrates the agility with which our executive chairman can focus on creating value for shareholders, while remaining intensely committed to the satisfaction of our customers and employees. However, on March 20, 2020, in light of market conditions resulting from the impact of the COVID-19 pandemic, XPO terminated the strategic review process. Our Board believes the dual roles function well for our company based on our current strategy, governance and ownership structure.
In addition,To assist our Board to further strengthen its independent decision-making, our Board of Directors has approved a set of Corporate Governance Guidelines (the “Guidelines”"Guidelines"), which provide that the independent directors may appoint a lead independent director who presides over executive sessions of the independent directors, and who shall serve a term of at least one year. On March 20, 2016, the independent directors appointed Mr. Jesselson to serve as lead independent director. The position of lead independent director has been structured to serve as an effective balance to the dual roles served by Mr. Jacobs. The lead independent director presides at all meetings of the Board of Directors at which the Chairmanchairman is not present and presides at all executive sessions of the independent directors. The Guidelines require that the independent directors meet at least once a year without members of management present, and the lead independent director is empowered to call additional meetings of the independent directors as necessary. In practice, in 2017,2019, our independent directors met in executive sessions much more frequently. The lead independent director also serves as a liaison between the Chairmanchairman and the independent directors. Together with the Chairman,chairman, the lead independent director develops and approves Board meeting agendas, meeting schedules and meeting materials to be distributed to our Board of Directors in order to assure sufficient time for informed discussion of issues. The lead independent director is also available to meet with significant stockholders as appropriate and required.
In addition, on February 7, 2019, the Board established an independent vice chairman position as part of its ongoing commitment to strong corporate governance. The position of vice chairman is defined as an independent director with authorities and duties that include, among others: (i) presiding at meetings of the Board where the chairman and lead independent director are not present; (ii) assisting the chairman, when appropriate, in carrying out his or her duties; (iii) assisting the lead independent director, when appropriate, in carrying out his or her duties; and (iv) such other duties, responsibilities and assistance as the Board or the chairman may determine. Ms. DeSalva was appointed to serve as vice chairman on February 7, 2019, to provide support on key governance matters and stockholder engagement to the chairman, lead independent director and the Board.
Further information regarding the positionpositions of lead independent director and vice chairman is set forth in the Guidelines. The Guidelines are available on the company’scompany's corporate website atwww.xpo.com under the Investors tab.
Our Board of Directors held seven17 meetings during 2017.2019. In 2017,2019, each person currently serving as a director attended at least 86%88% of the meetings of our Board of Directors and any Board committee on which he or she served. In addition, our Board of Directors also acted fivethree times during 20172019 via unanimous written consent.
Our directors are expected to attend the annual meeting. Any director who is unable to attend the annual meeting is expected to notify the Chairmanchairman of the Board in advance of the annual meeting. Each person who wasSeven of our then eight directors serving as a directorand standing for re-election attended the 20172019 annual meeting of stockholders. Marlene M. Colucci, who was appointed to the Board on February 7, 2019, notified the chairman of the Board in advance that she was unable to attend the 2019 annual meeting due to a prior business commitment.
BOARD RISK OVERSIGHT |
Our Board of Directors provides overall risk oversight, with a focus on the most significant risks facing our company. In addition, the Board is responsible for ensuring that appropriate crisis management and business continuity plans are in place. The management of the risks that we face in the conduct ofto our business, isand the execution of contingency plans, are primarily the responsibility of our senior management team.
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Our Board and senior management team periodically reviews with our Board of Directors any significant risks facing our company. Ourregularly discuss the company's business strategy, operations, policies, controls, and prospects, are regularly discussed by our Board of Directors and management team, including discussions as to current and potential risks andrisks. These discussions include approaches for assessing, monitoring, mitigating and controlling risk exposure. OurThe Board of Directors has delegated responsibility for the oversight of specific risks special committees as follows:
To navigate the evolving COVID-19 pandemic, we have assembled a cross-disciplinary crisis management team that includes all of our executive officers. This team oversees the management of COVID-19 risks to the health and safety of our employees, which is paramount, and to our business operations and financial condition. Board members receive frequent updates from the crisis management team at formal Board meetings and through informal direct participation in crisis management team meetings. Among other topics, these updates cover such matters as follows:the measures we are taking to address the risk of transmission of COVID-19 among our employees and the wider communities in which we operate as well as communications with our employees, customers and other stakeholders to share information on our response to the pandemic.
In addition, ourthe Board of Directors periodically holds special board sessions to discuss and analyzeevaluate topical trends identified as significant risks or items of strategic interest, such as human capitalresources management, information technology and cyber security. OurThe Board of Directors is committed to ensuring that our company has the focus, resources and infrastructure necessary to appropriately address suchall significant risks.
Committees of the Board and Committee Membership
COMMITTEES OF THE BOARD AND COMMITTEE MEMBERSHIP |
Our Board of Directors has established four separately designated standing committees to assist the Board in discharging its responsibilities: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee, and the Acquisition Committee. Our Board of Directors may eliminate or create additional committees as it deems appropriate. Each of our Board Committeescommittees have written charters that are in compliancecomply with applicable SEC rules and the NYSE Listed Company Manual. These charters are available atwww.xpo.com. You may obtain a printed copy of any of these charters, without charge, by sending a request to: Investor Relations,Secretary, XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.
The Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are composed entirely of independent directors within all applicable standards (as further discussed below). Our Board of Directors’Directors' general policy is to review and approve committee assignments annually. The Nominating and Corporate Governance Committee is responsible, after consultation with our Chairmanchairman of the Board and Chief Executive Officer and consideration of appropriate member qualifications, to recommend to our Board of Directors all committee assignments, including designations of the chairs.chairmen. Each committee is authorized to retain, in each committee's sole authority, its own outside counsel and other advisors at the company's expense as it desires. Also, each committee may form and delegate authority to subcommittees when appropriate.
The following table sets forth the current membership of each of our Board committees as of the Record Date. Mr. Jacobs and Ms. DeSalvaMr. Aris Kekedjian do not serve on any Board committees.
Name | | Audit Committee | | Compensation Committee | | Nominating and Corporate Governance Committee | | Acquisition Committee | |||||
| | | | | | | | | |||||
Gena L. Ashe | | ✓ | | | | | | ✓ | |||||
Marlene M. Colucci | | | ✓ | | |||||||||
AnnaMaria DeSalva | |
| |
| |
| |
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| |||||||||||||
Michael G. Jesselson | | ✓ | | ✓ | | ✓ | |||||||
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| | ||||||||||||
Adrian P. Kingshott | | | | C | | | | ✓ | |||||
Jason D. Papastavrou* | | ✓ | | ✓ | | ✓ | | C | |||||
Oren G. Shaffer* | | C | | | | | | | |||||
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C =Committee | | ✓ =Committee member | | * =Audit Committee Financial Expert |
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A brief summary of the committees’committees' responsibilities follows:
Audit Committee.Our Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act"), to assist our Board of Directors in fulfilling its responsibilities in a number of areas, including, without limitation, oversight of: (i) our accounting and financial reporting processes, including our systems of internal controls and disclosure controls, (ii) the integrity of our financial statements, (iii) our compliance with legal and regulatory requirements, (iv) the qualifications and independence of our independent registered public accounting firm, (v) the performance of our independent registered public accounting firm and internal audit function and (vi) related party transactions. Each member of the Audit Committee satisfies all applicable independence standards, has not participated in the preparation of our financial statements at any time during the past three years, and is able to read and understand fundamental financial statements. During 2017,From January 1, 2019 to March 13, 2019, the Audit Committee was comprised of the following three directors: Mr. Shaffer (Chair)(chairman), Mr. Kingshott and Dr. Papastavrou. On March 13, 2019, Mr. Kingshott stepped down as a member of the Audit Committee and Ms. Ashe and Mr. Jesselson were appointed as members of the Audit Committee. The Audit Committee met seveneight times during 2017 and, in addition, acted once via unanimous written consent.2019. Our Board of Directors has determined that Mr. Shaffer and Dr. Papastavrou each qualify as an “audit"audit committee financial expert”expert" as defined under Item 407(d)(5) of RegulationS-K under the Exchange Act.
Compensation Committee.The primary responsibilities of the Compensation Committee are, among other things: (i) to oversee the administration of our compensation programs, (ii) to review and approve the compensation of our executive management, and annual bonus compensation, (iii) to review company contributions to qualified andnon-qualified plans, and (iv) to prepare any report on executive compensation required by SEC rules and regulations. During 2017,regulations, and (v) retain independent compensation consultants and oversee the work of such consultants. The Compensation Committee met eight times during 2019 and, in addition, acted once via unanimous written consent to deliberate on a range of matters relating to compensation, including:
From January 1, 2019 to March 13, 2019, the Compensation Committee was comprised of the following three directors: Mr. Kingshott (Chair)(chairman), Mr. Jesselson and Dr. Papastavrou. TheOn March 13, 2019, Ms. Colucci was appointed as a member of the Compensation Committee. On April 17, 2020, Mr. Kingshott stepped down from the Compensation Committee met five times during 2017 and in addition, acted five times via unanimous written consent.Dr. Papastavrou was appointed the chairman of the committee.
Nominating and Corporate Governance Committee.The primary responsibilities of the Nominating and Corporate Governance Committee are, among other things: (i) to identify individuals qualified to become Board members and recommend that our Board of Directors select such individuals to be presented for stockholder consideration at the annual meeting or to be appointed by the Board of Directors to fill a vacancy, (ii) to make recommendations to our Board of Directors concerning committee appointments, (iii) to develop, recommend to our Board of Directors and annually review the Guidelines and oversee corporate governance matters, and (iv) to oversee an annual evaluation of our Board of Directors and committees. During 2017,2019, the Nominating and Corporate Governance Committee was comprised of the following three directors: Ms. Ashe (Chair)DeSalva (chairman), Mr. Jesselson and Dr. Papastavrou. The Nominating and Corporate Governance Committee met twicethree times during 2017.2019.
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Acquisition Committee.The Acquisition Committee is responsible for reviewing and approving acquisition, divestiture and related transactions proposed by our management in which the total consideration to be paid or received by us, for any particular transaction, does not exceed the limits that may be established by our Board of Directors from time to time. During 2017,From January 1, 2019 to March 13, 2019, the Acquisition Committee was comprised of the following three directors: Dr. Papastavrou (Chair)(chairman), Mr. DeJoyMs. Ashe and Mr. Kingshott. On March 13, 2019, Ms. Colucci was appointed as a member of the Acquisition Committee. On April 17, 2020, Dr. Papastavrou stepped down from the Acquisition Committee and Mr. Kingshott was appointed the chairman of the committee. The Acquisition Committee did not meet during 2017.2019.
DIRECTOR COMPENSATION |
The following table sets forth information concerning the compensation of each person who served as anon-employee director of our company during 2017.2019.
2017 Director Compensation Table(1)
Fees Earned or | Stock Awards(2) | Option Awards | Total | |||||||||
Name
| Paid in Cash ($)
| ($)
| ($)
| ($)
| ||||||||
Gena L. Ashe(3)
|
| $90,000
|
|
| $173,489
|
| –
| $263,489
| ||||
Louis DeJoy(4)
|
| $75,000
|
|
| $173,489
|
| –
| $248,489
| ||||
AnnaMaria DeSalva(5)
|
| $21,196
|
|
| $49,847
|
| –
| $71,043
| ||||
Michael G. Jesselson(6)
|
| $100,000
|
|
| $173,489
|
| –
| $273,489
| ||||
Adrian P. Kingshott(7)
|
| $90,000
|
|
| $173,489
|
| –
| $263,489
| ||||
Jason D. Papastavrou(8)
|
| $90,000
|
|
| $173,489
|
| –
| $263,489
| ||||
Oren G. Shaffer(8)
|
| $100,000
|
|
| $173,489
|
| –
| $273,489
|
2019 Director Compensation |
Name | | Fees Earned or Paid in Cash(2) ($) | | Stock Awards(3) ($) | | Option Awards ($) | | Total ($) | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | ||||||||||
Gena L. Ashe(4) | | | $ | 75,000 | | | | $ | 187,305 | | | | — | | | $ | 262,305 | | |
Marlene Colucci(5) | | | $ | 67,292 | | | | $ | 157,350 | | | | — | | | $ | 224,642 | | |
AnnaMaria DeSalva(6) | | | $ | 112,431 | | | | $ | 187,305 | | | | — | | | $ | 299,736 | | |
Michael G. Jesselson(7) | | | $ | 100,000 | | | | $ | 187,305 | | | | — | | | $ | 287,305 | | |
Aris Kekedjian(8) | | | $ | 17,292 | | | | $ | 40,493 | | | | — | | | $ | 57,785 | | |
Adrian P. Kingshott(9) | | | $ | 90,000 | | | | $ | 187,305 | | | | — | | | $ | 277,305 | | |
Jason D. Papastavrou(10) | | | $ | 90,000 | | | | $ | 187,305 | | | | — | | | $ | 277,305 | | |
Oren G. Shaffer(11) | | | $ | 100,000 | | | | $ | 187,305 | | | | — | | | $ | 287,305 | | |
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The compensation of our directors is subject to the approval of our Board of Directors, which is based, in part, on the review and recommendation of the Compensation Committee. Directors who are employees of our company do not receive additional compensation for service as members of either our Board of Directors or its committees.
For service during calendar years 2017, 2018 and 2019, our non-employee directors received an annual cash retainer of $75,000, payable quarterly in arrears, and time-based RSUs ("Time-Based RSUs") worth $175,000. The annual grant of such Time-Based RSUs was made on the first business day of each year (the "RSU Grant Date") and the number of such units was determined by dividing $175,000 by the average of the closing prices of the company's common stock on the ten trading days immediately preceding the RSU Grant Date. The grant vested on the first anniversary of the RSU Grant Date. The lead independent director also received an additional $25,000 annual cash retainer, payable quarterly in arrears. Under the non-employee director annual compensation program, the chairmen of our Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Acquisition Committee each received an additional cash retainer of $25,000, $15,000, $15,000 and $15,000, respectively, payable quarterly in arrears. On March 14, 2017,February 7, 2019, the company's Board of Directors established the position of vice chairman of the Board, who received a prorated portion of an additional $25,000 annual cash retainer, payable quarterly in arrears.
On December 11, 2019, the Board of Directors, acting upon the recommendation of the Compensation Committee and in consultation with its independent compensation consultant, Semler Brossy Consulting Group, LLC (“("Semler Brossy”Brossy"), approved and adopted a revisednon-employee director annual compensation program for the calendar year 20172020 and subsequent years. Effective January 1, 2017,2020, ournon-employee directors receive an annual cash retainer of $75,000,$80,000, payable quarterly in arrears, and time-based RSUs (“("Time-Based RSUs”RSUs") worth $175,000.$190,000. The annual grant of such Time-Based RSUs is made on the first business day of each year (the “RSU"RSU Grant Date”Date") and the number of such units is determined by dividing $175,000$190,000 by the average of the closing prices of the company’scompany's common stock on the ten trading days immediately preceding the RSU Grant Date. The lead independent director alsogrant vests on the first business day of the following calendar year. The vice chairman of the Board receives aan additional $25,000 annual cash retainer, payable quarterly in arrears. Under the revisednon-employeeThe lead independent director also receives an additional $25,000 annual compensation program, the chairpersonscash retainer, payable quarterly in arrears. The chairmen of our Audit Committee,
Compensation Committee, Nominating and Corporate Governance Committee and Acquisition Committee each receive an additional cash retainer of $25,000, $15,000, $15,000$20,000, $20,000 and $15,000, respectively, payable quarterly in arrears.
No other fees are paid to our directors for their attendance at or participation in meetings of our Board or its committees. We also reimburse our directors for expenses incurred in the performance of their duties, including reimbursement for air travel and hotel expenses.
Under the revisednon-employee director annual compensation program, in 2017, Mr. Jesselson received aone-time cash retainer for his service as lead independent director in 2016 in an amount equal to the pro rata portion of an annualized retainer of $15,000, calculated from the date of his appointment on March 20, 2016. In addition, in 2017, Ms. Ashe received aone-time grant of Time-Based RSUs for her service as a director in 2016 in an amount equal to the pro rata portion of an annual grant of $175,000, calculated from the date of her appointment on March 21, 2016 and determined by dividing the pro rata portion of $175,000 by the average of the closing prices of the company’s common stock on the ten trading days immediately preceding theone-time grant date. Thisone-time grant vested on January 1, 2018. The above compensation was received for services rendered in 2016 and is not included in the table above.
Also, in 2017, Ms. DeSalva received aone-time grant of Time-Based RSUs for her service as a director in 2017 in an amount equal to the pro rata portion of an annual grant of $175,000, calculated from the date of her appointment on September 19, 2017 and determined by dividing the pro rata portion of $175,000 by the closing price of the company’s common stock on theone-time grant date. Thisone-time grant vested date on January 3, 2018 and is included in the table above.
In 2016, our Board adopted a stock ownership policy establishing guidelines and stock retention requirements that apply to ournon-employee directors and executive officers.Non-employee directors are subject to a stock ownership guideline of six (6) times the annual cash retainer. To determine compliance with these guidelines, generally, common shares held directly or indirectly, and unvested restricted stock units subject solely to time-based vesting, count towards meeting the stock ownership guidelines. Stock options, whether vested or unvested, and equity-based awards subject to performance-based vesting conditions, are not counted towards meeting the stock ownership guidelines until they have settled or been exercised, as applicable. Until the guidelines are met, 70% of the net shares (after tax withholding) received upon settlement of equity-based awards are required to be retained by the director. As ofUnder the Record Date, each of ournon-employee directors other than Ms. DeSalva, who joined the Board in September 2017, was in compliance with our stock ownership guidelines. Ms. DeSalva will bepolicy, a newly-appointed director is required to reach the necessaryrequired ownership thresholdlevel no later than three years from the date of his or her appointment as a directorappointment. As of the company.Record Date, five of our non-employee directors were in compliance with our stock ownership policy. Ms. DeSalva, who joined the board in 2018, and Ms. Colucci, who joined the board in 2019, are expected to reach the ownership level by the third anniversary of their respective appointment dates.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION |
From January 1, 2019 to March 13, 2019, the Compensation Committee Interlockswas comprised of the following three directors: Mr. Kingshott (chairman), Mr. Jesselson and Insider Participation
Dr. Papastavrou. On March 13, 2019, Ms. Colucci was appointed as a member of the Compensation Committee. On April 17, 2020, Mr. Kingshott stepped down and Dr. Papastavrou replaced him as chairman of the Compensation Committee. None of the members of our Compensation Committee has been an officer or employee of our company. During our last completed fiscal year,2019, there were no material transactions between the company and the members of the Compensation Committee, and none of our executive officers served as a member of the compensation committee, or the board of directors, of any entity that has one or more executive officers serving on our Compensation Committee.Committee or on our Board of Directors.
Corporate Governance Guidelines and Codes of Ethics
CORPORATE GOVERNANCE GUIDELINES AND CODE OF BUSINESS ETHICS |
Our Board of Directors is committed to sound corporate governance principles and practices. Our Board adopted the Guidelines on January 16, 2012, and most recently adopted amendments to the Guidelines in March 2016,on February 7, 2019, to among otherestablish the position of vice chairman. The vice chairman of the Board provides support on key governance matters (i) provide for a robustand stockholder engagement to the chairman, lead independent director position as described further in “Role ofand the Board and Board Leadership Structure” above, and (ii) reflect the Board’s commitment, when searching for new directors, to actively seek out highly qualified women and individuals from minority groups to include in the pool from which Board nominees are chosen. Our Board continues to seek out highly qualified board candidates who bring relevant expertise and reflect the company’s growing scale and diversity.Board.
The Guidelines serve as a framework within which our Board of Directors conducts its operations. Among other things, the Guidelines include criteria for determining the qualifications and independence of the members of our Board, requirements for the standing committees of our Board, responsibilities for members of our Board, and an annual evaluation of the
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effectiveness of our Board and its committees. The Nominating and Corporate Governance Committee is responsible for reviewing the Guidelines annually, or more frequently as appropriate, and recommending to our Board appropriate changes in light of applicable laws and regulations, the governance standards identified by leading governance authorities, and our company’scompany's evolving needs.
We have a Code of Business Ethics that applies to our directors and executive officers. This code is designed to deter wrongdoing, to promote the honest and ethical conduct of all employees and to promote compliance with applicable governmental laws, rules and regulations, as well as to provide clear channels for reporting concerns. The Code of Business Ethics constitutes a “code"code of ethics”ethics" as defined in Item 406(b) of RegulationS-K. We intend to satisfy the disclosure requirements under applicable SEC rules relating to amendments to the Code of Business Ethics or waivers from any provision thereof applicable to our principal executive officer, our principal financial officer and principal accounting officer by posting such information on our website pursuant to SEC rules.
The Guidelines and our Code of Business Ethics are available on our website atat www.xpo.com. In addition, you may obtain a printed copy of these documents, without charge, by sending a request to: Investor Relations,Secretary, XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.
Exclusive Forum Bylaw Amendment
In March 2017, our Board of Directors approved an amendment of our bylaws in order to provide that certain types of stockholder litigation be litigated exclusively in the Chancery of Court of the State of Delaware, which is our state of incorporation. In adopting the amendment and determining that doing so is in the best interests of our company and our stockholders, our Board considered various factors, including, among others: prevailing market practice and perspectives on such provisions; the importance to our company and our stockholders of reducing litigation costs and preventing corporate resources from being unnecessarily diverted to address duplicative, costly and wasteful multi-forum litigation; the value of facilitating consistency and predictability in litigation outcomes for the benefit of our company and our stockholders; that our company is incorporated under the laws of the state of Delaware; that adopting such an exclusive forum provision covering specified claims does not materially change the substantive legal claims available to stockholders; Section 115 of the Delaware General Corporation Law and case law developments upholding the authority of the board of directors to adopt such a provision and confirming its validity and enforceability; and case law developments outside of Delaware enforcing such provisions.
DIRECTOR INDEPENDENCE Under the Guidelines, our Board of Directors is responsible for making independence determinations annually with the assistance of the Nominating and Corporate Governance Committee. Such independence determinations are made by reference to the independence standard under the Guidelines and the definition of In addition to the independence standards provided in the Guidelines, our Board of Directors has determined that each director who serves on our Audit Committee satisfies standards established by the SEC providing that, in order to qualify as DIRECTOR SELECTION PROCESS The Nominating and Corporate Governance Committee is responsible for recommending to our Board of Directors all nominees for election to the Board, including nominees forre-election to the Board, in each case, after consultation with the Subject to the contractual rights granted to JPE pursuant to the Investment Agreement, the Nominating and Corporate Governance Committee may identify potential nominees for election to our Board of Directors from a variety of sources, including recommendations from current directors or management, recommendations from our stockholders or any other source the committee deems Director Independence“independent director”"independent director" under Section 303A.02 of the NYSE Listed Company Manual. Our Board of Directors has affirmatively determined that each person who served as a director during any part of 2017,2019, except Mr. Jacobs, our Chairmanchairman of the Board and Chief Executive Officer, and Mr. DeJoy,chief executive officer, satisfies the independence standards under the Guidelines and the NYSE Listed Company Manual.“independent”"independent" for the purposes of membership on that committee, members of audit committees may notnot: (1) accept directly or indirectly any consulting, advisory or other compensatory fee from our company other than their director compensation, or (2) be an affiliated person of our company or any of its subsidiaries. Our Board of Directors has also determined that each member of the Compensation Committee satisfies the NYSE standards for independence of Compensation Committee members, which became effective on July 1, 2013. Additionally, our Board of Directors has determined that each member of the Nominating and Corporate Governance Committee satisfies the NYSE standards for independence. In making the independence determinations for each director, our Board of Directors and the Nominating and Corporate Governance Committee analyzed certain relationships of the directors that were not required to be disclosed pursuant to Item 404(a) of RegulationS-K. For Ms. Ashe and Ms. DeSalva,Colucci, those relationships included ordinary course commercial transactions between our company and entities for which they previously served as executives. For Mr. Jesselson, those relationships included ordinary course commercial transactions between our company and anthe entity for which Mr. Jesselson is the president.Ms. Colucci serves as an executive. For Dr. Papastavrou, those relationships included ordinary course commercial transactions between our company and an entity for which Dr. Papastavrou is a director. For Mr. Shaffer, those relationships included ordinary course commercial transactions between our company and an entity for which Mr. Shaffer is a director.Chairmanchairman of the Board and in accordance with our company’scompany's contractual obligations. Pursuant to the Investment Agreement, JPE has had and may in the future have the contractual right based on its securities ownership, as described above under “Directors,”"Directors," to designate for nomination by our Board of Directors a certain percentage of the members of our Board of Directors. Subject to the foregoing, in considering new nominees for election to our Board, the Nominating and Corporate Governance Committee considers, among other things, breadth of experience, financial expertise, wisdom, integrity, an ability to make independent analytical inquiries, an understanding of our company’scompany's business environment, knowledge and experience in such areas as technology and marketing, and other disciplines relevant to our company’scompany's businesses, the nominee’snominee's ownership interest in our company, and a willingness and ability to devote adequate time to Board duties, all in the context of the needs of the Board at that point in time and with the objective of ensuring diversity in the background, experience, and viewpoints of Board members. When searching for new directors, our Board endeavors to actively seek out highly qualified women and individuals from minority groupsunderrepresented minorities to include in the pool from which Board nominees are chosen. Our Board aims to create a team of directors with diverse experiences and backgroundsperspectives to provide our complex, global company with thoughtful and engaged board oversight. The Nominating and Corporate Governance Committee assesses the effectiveness of its diversity efforts through periodic evaluations of the Board’sBoard's composition.appropriate.appropriate, including engaging a third party consulting firm to assist in identifying independent director nominees.182018 XPO Logistics, Inc.
Our Board of Directors will consider nominees submitted by our stockholders, subject to the same factors that are brought to bear when it considers nominees referred by other sources. Our stockholders can nominate candidates for election as directors by following the procedures set forth in our bylaws, which are summarized below. We did not receive any director nominees from our stockholders for the 2018 annual meeting.2020 Annual Meeting.
Our bylaws require that a stockholder who wishes to nominate an individual for election as a director at our annual meeting must give us advance written notice. The notice must be delivered to or mailed and received by the Secretarysecretary of our company not less than 90 days, and not more than 180 days, prior to the earlier of the date of the annual meeting and the first anniversary of the preceding year’syear's annual meeting. As more specifically provided in our bylaws, any nomination must include: (i) the nominator’snominator's name and address and the number of shares of each class of our capital stock that the nominator owns, (ii) the name and address of any person with whom the nominator is acting in concert and the number of shares of each class of our capital stock that any such person owns, (iii) the information with respect to each such proposed director nominee that would be required to be provided in a proxy statement prepared in accordance with applicable SEC rules, and (iv) the consent of the proposed candidate to serve as a member of our Board.
Any stockholder who wishes to nominate a potential director candidate must follow the specific requirements set forth in our bylaws, a copy of which may be obtained by sending a request to: Secretary, XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.
HUMAN RESOURCE MANAGEMENT |
Our talentculture at XPO is about being safe, respectful, entrepreneurial, innovative and inclusive. In response to the evolving COVID-19 pandemic situation, XPO management, efforts go beyondin coordination with and under the directoroversight of our Board of Directors, has moved quickly to deploy comprehensive operating protocols that prioritize employee safety while meeting the company's responsibilities as a designated provider of essential infrastructure services. Among the numerous protocols put in place:
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XPO management and the engagement and satisfactionBoard of all our employees. As we strive to grow our business, weDirectors are committed to maintaining XPO’sXPO's superior work environment. Our efforts in human capitalresource management focus on enhancing the robust training of our workforce, improving management capabilities and harmonizing best practices across our global operations. We tailor the development plan and management of each operating location to its specific type of operation and labor force. We also conduct quarterly surveys to gauge employee sentiment, and conduct local assessments of the workforce at each site.
Our Chief Human Resources Officer, Meghan Henson, leads the company’s global human resources organization. Ms. Henson is a seasoned innovator with over 15 years of senior experience inside notable companies directing domestic and international human resources operations. Our management team and Board of Directors work together in a transparent manner, allowing for open communication, including with respect to human capital-relatedresource-related matters. Our directors have access to all information about our human capitalresource management operations and plans, and our Chief Human Resources Officerchief human resources officer is invited to attend and speak at the meetings of our Board of Directors when appropriate, updating the Board on issues related to talent management and methods used to evaluate the working atmosphere at XPO.appropriate. Our directors also have opportunities to attend and participate in executive leadership meetings with ourmid- mid-level and senior-level operating executives. We aim to integrate our human resources functions with our operational objectives.
BOARD OVERSIGHT OF SUSTAINABILITY MATTERS |
Our approach to sustainability—and all areas of our business—is one of purpose-driven progress rooted in innovation. We work to promote environmental, social and organizational sustainability through the decisions we make and our interactions with colleagues, customers, suppliers and other stakeholders.
We believe that sustainability is essential to our company's long-term viability. It is good business and the right thing to do. It fosters equitable workplaces for our employees, both now and in the future. It is also important to many of our stakeholders who want to do business with partners who participate in the transition to a low-carbon economy.
We are pleased to have published our 2019 Sustainability Report detailing our objectives and progress in the areas of environmental sustainability, social initiatives and governance performance. Our 2019 Sustainability Report is available atwww.xpo.com.
Sustainability features prominently in the deliberations among our directors and informs their overall approach to risk oversight at the Company. In addition, members of the Board have reviewed the contents of our 2019 Sustainability Report and have provided feedback to the Company.
STOCKHOLDER COMMUNICATION WITH THE BOARD |
Stockholders and parties interested in communicating with our Board of Directors, any Board committee, any individual director, including our lead independent director, or any group of directors (such as our independent directors) should send written correspondence to: Board of Directors c/o Secretary, XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831. Please note that we will not forward communications to the Board that arequalify as spam, junk mail, and mass mailings, resumes andor other forms of job inquiries, surveys, business solicitations or advertisements.
Stockholder Proposals for Next Year’s Annual Meeting
STOCKHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING |
Stockholder proposals intended to be presented at our 20192021 annual meeting of stockholders must be received by our Secretary no later than December 19, 2018,21, 2020, to be considered for inclusion in our proxy materials, pursuant to Rule14a-8 under the Exchange Act.
As more specifically provided for in our bylaws, no business may be brought before an annual meeting of our stockholders unless it is specified in the notice of the annual meeting or is otherwise brought before the annual meeting by or at the direction of our Board of Directors or by a stockholder entitled to vote and who has delivered proper notice to us not less than 90 days, and not more than 180 days, prior to the earlier of the date of the annual meeting and the first anniversary of the preceding year’syear's annual meeting. Accordingly, assuming that our 20192021 annual meeting of stockholders is held on or after May 17, 2019,14, 2021, for example, any stockholder proposal to be considered at the 20192021 annual meeting, including nominations of persons for election to our Board of Directors, must be properly submitted to us not earlier than November 18, 2018,15, 2020, nor later than February 16, 2019.13, 2021.
Detailed information for submitting stockholder proposals or nominations of director candidates will be provided upon written request to: Secretary, XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.
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Under its written charter, the Audit Committee of our Board of Directors is responsible for reviewing and approving or ratifying any transaction between our company and a related person (as defined in Item 404 of RegulationS-K) that is required to be disclosed under the rules and regulations of the SEC. Our management is responsible for bringing any such transaction to the attention of the Audit Committee. In approving or rejecting any such transaction, the Audit Committee considers the relevant facts and circumstances, including the material terms of the transaction, risks, benefits, costs, availability of other comparable services or products and, if applicable, the impact on a director’sdirector's independence.
Since January 1, 2017,2019, we have not been a participant in any transaction or series of similar transactions in which the amount exceeded or will exceed $120,000 and in which any current director, executive officer, holder of more than five percent5% of our capital stock, or any member of the immediate family of the foregoing, had or will have a material interest, except for the transactions described below or as previously disclosed in this proxy statement.Proxy Statement.
Pursuant to the Retirement and Release Agreement dated December 7, 2015 between the company and Louis DeJoy, a member of our Board of Directors, the company issued Mr. DeJoy 9,687 shares of the company’s common stock on January 3, 2017.
Also during the year ended December 31, 2017, the company leased office space from three entities partially owned and controlled by Louis DeJoy. In September 2014, in conjunction with the company’s acquisition of New Breed Holding Company, XPO, through certain subsidiaries, entered into four commercial lease agreements covering a total of approximately 142,991 square feet of office space located in High Point, North Carolina, with the entities affiliated with Mr. DeJoy; these lease agreements were set to expire at various dates in 2019. In September 2017, the company entered into four new commercial lease agreements with the entities affiliated with Mr. DeJoy amending and replacing the 2014 lease agreements. The 2017 lease agreements cover a total of approximately 222,060 square feet of office space located in High Point, North Carolina and are set to expire on September 30, 2025. Each of the 2017 lease agreements provide the company, as tenant, with one five-year option period to extend the lease term. The company made rent payments associated with these lease agreements in an aggregate amount of $2.0 million for the year ended December 31, 2017. In addition, the company paid operating expenses in connection with these leased properties of $0.3 million for the year ended December 31, 2017.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
The following table sets forth information concerning the beneficial ownership of our voting securities as of the Record Date by: (i) each person who is known by us, based solely on a review of public filings, to be the beneficial owner of more than 5% of any class of our outstanding voting securities, (ii) each director, (iii) each NEO, and (iv) all executive officers and directors as a group. None of the foregoing persons beneficially owned any shares of equity securities of our subsidiaries as of the Record Date.
Under applicable SEC rules, a person is deemed to be the “beneficial owner”"beneficial owner" of a voting security if such person has (or shares) either investment power or voting power over such security or has (or shares) the right to acquire such security within 60 days by any of a number of means, including upon the exercise of options or warrants or the conversion of convertible securities. A beneficial owner’sowner's percentage ownership is determined by assuming that options, warrants and convertible securities that are held by the beneficial owner, but not those held by any other person, and which are exercisable or convertible within 60 days, have been exercised or converted.
Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all voting securities shown as being owned by them. Unless otherwise indicated, the address of each beneficial owner in the table below is care of XPO Logistics, Inc., Five American Lane, Greenwich, Connecticut 06831.
Shares of | Percentage of | Shares of Series | Percentage of | |||||||||||||||||||||
Common Stock | Common Stock | A Preferred Stock | Series A Preferred | |||||||||||||||||||||
Name of Beneficial Owner
| Beneficially Owned
| Outstanding(1)
| Beneficially Owned(2)
| Stock Outstanding
| ||||||||||||||||||||
Beneficial Ownership of 5% or more: | ||||||||||||||||||||||||
Orbis Investment Management Limited(3) | ||||||||||||||||||||||||
Orbis House, 25 Front Street | ||||||||||||||||||||||||
Hamilton Bermuda HM11 | 19,845,091 | 16.5% | – | – | ||||||||||||||||||||
Jacobs Private Equity, LLC
|
| 19,285,714
| (4)
|
| 13.8%
|
|
| 67,500
|
|
| 94.4%
|
| ||||||||||||
The Vanguard Group(5) 100 Vanguard Blvd. | ||||||||||||||||||||||||
Malvern, PA 19355 | 10,740,976 | 8.9% | – | – | ||||||||||||||||||||
Spruce House Investment Management LLC(6) 435 Hudson Street, 8th Floor, New York, NY 10014 | 7,797,055 | 6.5% | – | – | ||||||||||||||||||||
Directors: | ||||||||||||||||||||||||
Gena L. Ashe | 6,686 | (7) | * | – | – | |||||||||||||||||||
Louis DeJoy | 1,134,686 | (8) | * | – | – | |||||||||||||||||||
AnnaMaria DeSalva | 810 | * | – | – | ||||||||||||||||||||
Michael G. Jesselson | 345,693 | (9) | * | 725 | (10) | 1.0% | ||||||||||||||||||
Adrian P. Kingshott | 131,942 | (11) | * | 300 | * | |||||||||||||||||||
Jason D. Papastavrou | 240,817 | (12) | * | 650 | (13) | * | ||||||||||||||||||
Oren G. Shaffer | 64,728 | (14) | * | – | – | |||||||||||||||||||
NEOs: | ||||||||||||||||||||||||
Bradley S. Jacobs+ | 19,799,601 | (15) | 14.1% | 67,500 | 94.4% | |||||||||||||||||||
Troy A. Cooper | 178,396 | (16) | * | – | – | |||||||||||||||||||
John J. Hardig | 165,598 | (17) | * | – | – | |||||||||||||||||||
Scott B. Malat | 171,525 | (18) | * | – | – | |||||||||||||||||||
Mario A. Harik | 220,163 | (19) | * | – | – | |||||||||||||||||||
Current Executive Officers and | ||||||||||||||||||||||||
Directors as a Group:(12 People) | 22,460,646 | (20) | 15.9% | 69,175 | 96.7% |
Name of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percentage of Common Stock Outstanding(1) | Shares of Series A Preferred Stock Beneficially Owned(2) | Percentage of Series A Preferred Stock Outstanding | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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Beneficial Ownership of 5% or more: | | | | | |||||||||
Jacobs Private Equity, LLC | 19,285,714 | (3) | 17.5 | % | 67,500 | 94.9 | % | ||||||
Orbis Investment Management Limited(4) Orbis House, 25 Front Street Hamilton Bermuda HM11 | | 18,735,423 | | 20.6 | % | | — | | — | ||||
BlackRock, Inc.(5) 55 East 52nd street New York, NY 10055 | 9,245,119 | 10.1 | % | — | — | ||||||||
The Spruce House Partnership LLC(6) 435 Hudson Street, 8th Floor, New York, NY 10014 | | 9,090,601 | | 10.0 | % | | — | | — | ||||
The Vanguard Group(7) 100 Vanguard Blvd., Malvern, PA 19355 | 8,536,007 | 9.4 | % | — | — | ||||||||
Directors: | | | | | |||||||||
Gena L. Ashe | 12,006 | (8) | * | — | — | ||||||||
Marlene M. Colucci | | 2,637 | | * | | — | | — | |||||
AnnaMaria DeSalva | 6,130 | (9) | * | — | — | ||||||||
Michael G. Jesselson | | 351,013 | (10) | | * | | 725 | (11) | | 1.0 | % | ||
Aris Kekedjian | 570 | * | — | — | |||||||||
Adrian P. Kingshott | | 137,262 | (12) | | * | | 300 | | * | ||||
Jason D. Papastavrou | 246,137 | (13) | * | 650 | (14) | * | |||||||
Oren G. Shaffer | | 70,048 | (15) | | * | | — | | — | ||||
NEOs: | |||||||||||||
Bradley S. Jacobs+ | | 19,799,601 | (16) | | 17.9 | % | | 67,500 | | 94.9 | % | ||
Troy A. Cooper | 178,396 | (17) | * | — | — | ||||||||
Sarah J.S. Glickman | | 4,793 | (18) | | * | | — | | — | ||||
Mario A. Harik | 220,163 | (19) | * | — | — | ||||||||
David B. Wyshner | | 1 | (20) | | * | | — | | — | ||||
Current Directors and Executive Officers as a Group: (13 People) | 21,028,758 | (21) | 18.9 | % | 69,175 | 97.3 | % | ||||||
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Compensation Discussion and Analysis
COMPENSATION DISCUSSION AND ANALYSIS |
This Compensation Discussion and Analysis describes XPO’sXPO's executive compensation program for 2017.2019. The Compensation Committee of our Board (referred to as the “Committee” in this section)of Directors (the "Committee") oversees our executive compensation program and practices. In this section, we explain how and why the Committee made its 20172019 compensation decisions for the following NEOs:named executive officers ("NEOs"):
NEO |
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Bradley S. Jacobs | Chairman and Chief Executive Officer | |
Troy A. Cooper |
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Sarah J.S. Glickman | Acting Chief Financial Officer (served as Acting Chief Financial Officer until March 2, 2020) | |
Kenneth R. Wagers III | Chief Operating Officer and Interim President, Less-Than-Truckload — North America (served until March 11, 2019) |
2019 COMPANY PERFORMANCE HIGHLIGHTS |
Executive Summary
Overview |
2017 Highlights
Throughout 2017,In 2019, our NEOs executednavigated the company through a weaker backdrop for our strategyindustry, driving a 24% increase in GAAP diluted earnings per share from the prior year. This gain reflects a significant increase in operating income from $704 million in 2018, to $821 million in 2019, and accretion from approximately $1.9 billion of disciplined share repurchases.
Additional highlights for high growthfull-year 2019 include:
Despite an industrial recession in the world. During this period, we continuedUS, declining growth in Europe and our largest customer substantially downsizing its business portfolio with us starting in the first quarter of 2019, XPO's TSR for 2019 was 40%, reflecting our NEOs' exemplary leadership in the face of significant challenges. This capped a decade in which XPO was the 7th best-performing stock among Fortune 500 companies.
Our NEOs have complementary strengths specific to execute ourXPO's growth strategy and optimize our operations ascompetitive positioning. Our company is a highly efficient,leading global provider of supply chain services with an integrated network of people, technology and physical assets; we enhanced our leadershipassets. We have three main drivers of value creation: critical scale, including leading positions in high-growth sectors suchkey service lines; impactful technology, particularly as last mile logisticsit relates to improving revenue ande-commerce order fulfillment; we helped more than 50,000 customers manage their goods more efficiently throughout their supply chains; we refinanced all margins; and deep expertise that delivers benefits for our customers.
In August 2019, our NEOs led the successful launch of 10 company-specific profit improvement initiatives that, in aggregate, represent a total pool of $700 million to $1 billion of potential profit growth opportunity by 2022. The single most important driver of these initiatives is our bank debt at lower rates;technology. Our technology investment in 2019 was approximately $550 million, among the highest in the industry. We have the ability to deploy our proprietary technology across service lines within our business segments, and we completed a public equity offering that has provided additional funding for future acquisitions. Our success is a result of having strong leadership, excellent operators, a motivated workforce engagedin some cases across segments, to realize widespread efficiencies in our vision, a culture of accountability and meticulous growth plans for each line of business. As of December 31, 2017, our network encompassed over 95,000 employees and 1,455 locations in 32 countries, primarily in North America and Europe.
For the full year 2017, our company:
The significant progress made by our NEOs in 2017 has put us in a position of considerable strength to continue to execute our strategy for high growth and high returns in 2018 and beyond. Our focus remains on further enhancing the value we bring to customers, while optimizing our existing operations by growing our sales force, implementing advanced technology, cross-selling our services, leveraging our company-wide capacity and considering strategic acquisitions.
In 2018, we will continue to benefit from the numerous efficiencies we implemented throughout 2017 in procurement, real estate, back-office operations and workplace technologies. We have more savings to realize in each of these areas. We will also achieve further savings with cross-dock and warehouse automation, labor productivity, and the global adoption of best practices. We are marketing our services with a high-caliber sales organization that draws on our total supply chain offering to help customers operate more efficiently. On the technology front, we have exciting developments underway with intelligent machines, customer service mobility, our digital freight marketplace, has automated shipper-carrier interactions across transportation modes, including our brokerage, intermodal, last mile and managed transportation services. WMx, our cutting-edge logistics platform, integrates advanced automation on the usecloud, while our XPO Smart™ productivity tools have applications in both transportation and logistics.
Importantly, our NEOs and our Board are deeply committed to our culture, which emphasizes safety, innovation, inclusiveness, an entrepreneurial spirit and respect for our planet and for each other. In 2019, the first full year of dynamic data science.
We have met or exceeded every financial targetour enhanced Pregnancy Care Policy, over 600 of our employees received 1,135 accommodations, including more than 34,000 hours of prenatal paid leave. In addition, over 1,200 US employees took advantage of our paid family bonding policy, and 1,555 member-practitioner interactions were arranged through the no-cost supplemental health services we have issued from 2012 through 2017. We expect our 2018 performance to once again outpace the industryintroduced. These supplemental services are delivered via a virtual clinic and deliver at least 17% adjusted EBITDA growth. Our full-year target for adjusted EBITDA is at least $1.6 billion for 2018. We expect our 2017–2018 cumulative free cash flow to be approximately $1 billion, which is $100 million higher than our original target.provider network that covers over 20 different specialties in healthcare and family planning.
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2017 Profit GrowthTable of Contents
The fourth quarterDue in large part to the leadership of 2017 marked the company’s seventh consecutive profitable quarter and the completion of the sixth yearour NEOs, XPO is in a rowstrong position to explore every opportunity to maximize stockholder value. Our NEOs are managing the business efficiently and profitably, with a steadfast focus on results for XPO stakeholders. This is a major reason why nearly 70% of Fortune 100 companies used XPO for supply chain solutions in which we met or2019.
Focus on Profit Growth and Prudent Capital Allocation |
In 2019, the company delivered 26% year-over-year growth in adjusted diluted earnings per share* and 7% growth in adjusted EBITDA*. Free cash flow* generation performed in line with our 2019 financial plan, and exceeded the midpoint of our financial targets.2019 guidance range by $3 million. The company also executed a stock repurchase program from December 14, 2018 through December 31, 2019 that was accretive to adjusted EPS by $0.37 for 2019. Key financial highlightsdata are summarized below.
(below (dollars in millions, except per shareper-share data).
* As defined in Annex A
Total Stockholder Return* See Annex A for reconciliation of this non-GAAP measure
Delivering Significant Total Stockholder Return (TSR) |
The preeminentprimary focus of our company’scompany's leadership team is to deliver meaningful value to our stockholders and other stakeholders through the execution of our strategy. Our steadfast commitment to long-term value creation, operational excellence and effective implementationdisciplined capital allocation have resulted in consistent outperformance of our strategy over the past five-plus years has resulted in significant outperformance intotal stockholder return. XPO’s 112% TSR over 2017 ranked first among its peers and outperformed both the S&P 500 and Dow Jones Transportation Averagereturn relative to comparative indices, (refer to the list of peers delineated under “The Committee’s Compensation Decision-making Process”, Key Factor number 3).as illustrated below.
Note: TSR calculations reflect the relevant trading price of ourXPO common stock and that of the relevant indices as of the last trading day of calendar years 2019, 2018, 2017, 2016, 2015 and 2014, as supplied by Research Data Group. The graph above is not the annual performance graph required by Item 201(e) of Regulation S-K; the required graph can be found in Part II,
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Item 5 of our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 10, 2020.
Our Commitment to Stockholder Value Creation and Alignment with Pay-for-Performance |
On September 2, 2011, Bradley Jacobs began leading XPO as chief executive officer. Under Mr. Jacobs' strong leadership, for its first eight fiscal years combined (2012-2019), the company increased stockholder value by $7.2 billion, as represented by the change in XPO's equity market capitalization from December 31, 2011 through December 31, 2019. Mr. Jacobs' average annual realized pay from 2012 to 2019 was $9.9 million per year. Cumulatively, this equates to 1.1% of the total value created for stockholders during the eight-year period.
Realized pay represents the compensation actually received by our executives in a given year and is calculated as the sum of: (i) salary paid; (ii) bonus(es) related to the performance year; and (iii) the value of long-term incentive compensation that vested in the year, calculated based on the closing stock price on the date(s) the award(s) vested. No stock options were exercised during the period of 2012 to 2019; if stock options had been exercised, these amounts would have been included in realized pay calculations. The realized pay measure, utilized consistently, allows our stockholders to assess whether the actual value of the compensation received by our CEO and other executive officers is rightsized relative to stockholders' return on investment in the company over time.
The Committee's pay-for-performance philosophy has always focused on rewarding our executives for performance that creates substantial, long-term value for our stockholders. In determining the framework for performance-based awards, the Committee typically selects high-growth stretch goals for key operational indicators that extend beyond annual targets, and that vest on a long-term basis once the goals are entirely achieved. Our executives are not rewarded with a multiple of shares for exceeding targets, nor do they receive a threshold amount if they underdeliver. They also do not receive any portion of the award for meeting only some but not all goals required to earn the award. Instead, the amount of the award is typically representative of the hurdles inherent in achieving aspirational goals over a long period of time, and provides motivation for our executives to align their interests with the interests of our stockholders.
Over time, our financial and operational results have demonstrated the merits of this philosophy for our stakeholders. From 2012 to 2019, our leadership has consistently delivered on operational goals and strategic initiatives, resulting in growth of over $400 million of net income and close to $1.7 billion of adjusted EBITDA*. Moreover, our leadership has maintained a flexible and highly liquid balance sheet. We generated free cash flow* in excess of $600 million in each of 2018 and 2019. We ended 2019 with $377 million in cash and over $700 million of availability under our ABL facility. We have no significant debt maturities until 2022. Additionally, headcount has grown from approximately 200 employees as of December 31, 2011 to approximately 100,000 employees as of December 31, 2019, reflecting the significant surge of employment opportunities at XPO.
In further alignment with our stockholders, beneficial ownership as of the Record Date for Mr. Jacobs was 17.9%. In addition, as executive officers at XPO, Mr. Jacobs, Mr. Cooper and Mr. Harik have not sold any shares from vested equity and have not exercised any stock options. Furthermore, all vested awards for Mr. Jacobs, Mr. Cooper and Mr. Harik are subject to lock-up restrictions prohibiting the sale of shares or exercise of options until September 2, 2020.
*See Annex A for reconciliation of this non-GAAP measure
Note: Market capitalization calculations reflect the relevant trading price of XPO common stock as of the last trading day of the calendar years 2017, 2016, 2015, 2014, 20132011 and 2012,2019, as reportedsourced from Bloomberg.
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2019 KEY EXECUTIVE COMPENSATION ACTIONS |
The Committee met eight times during 2019 to discuss executive compensation and other items pursuant to its charter. In addition to the regular responsibilities of the Committee, all members of the Board were invited to attend internal quarterly operating review meetings with business unit management that included in-depth reviews of the company's financial results, as well as discussions about operational execution, sales, customer service, technology initiatives, process innovation, human capital management, safety, the market landscape and business growth trajectories. These meetings also included a review of key performance indicators tracking the company's achievement of financial and non-financial objectives for each business line. Multiple Committee members attended these three-day review sessions throughout the year in order to remain well informed of the company's financial and operational performance.
The Committee authorized several executive compensation actions in 2019, and in the early part of 2020, based upon: (i) evaluation of the company's progress towards the business unit operational and financial goals for each quarter and the full-year 2019; (ii) assessment of the company's long-term organic and inorganic growth outlook and stockholder value creation opportunities; (iii) review of competitive rates of pay for executives; and (iv) the Committee's specified responsibilities, pursuant to its charter. In summary, the highlights of the key decisions made by Bloomberg Finance L.P.the Committee in 2019 and 2020 to date are as follows:
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| | February 2019 | | | ■ Certified the attainment of the $5.38 adjusted cash flow per share goal relating to the third tranche of the February 2016 award of phantom stock (i.e., cash-settled) for Mr. Jacobs, Mr. Cooper and Mr. Harik. While the performance goal was meaningfully exceeded, this third tranche paid out at target as there is no additional upside for exceeding the target. | | ||||
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| | June 2019 | | | ■ Awarded performance stock units (PSUs) that can be earned only upon achievement of adjusted EPS and relative TSR goals that cliff vest over a performance period of six years, with intentionally challenging growth targets that are attainable with particularly strong performance. The award is earned by achieving two targets by year-end 2024: (i) exceeding the S&P Transportation Select Industry Index by 34% (CAGR of 500 bps), and (ii) achieving adjusted earnings per share of $9.08 (CAGR of 19% relative to 2018 adjusted EPS). ■ As with all prior PSUs, the June 2019 award: o Uses a "hit or miss" construct that keeps executives focused on the company's comprehensive strategy for value creation: both performance goals must be achieved for the PSUs to be earned; if either one or both goals are not attained by December 31, 2024, the entire award (100% of PSUs) is forfeited; and o Has no threshold level of payment for below-target performance and no additional upside for exceeding the targets. ■ Increased annual base salary amounts for Mr. Jacobs, Mr. Cooper and Mr. Harik, and raised bonus target percentages for Mr. Jacobs, Mr. Cooper, Mr. Harik and Ms. Glickman, to align their cash compensation with competitive levels in the market for companies of similar revenue scale. Prior to the 2019 increases, Mr. Jacobs, Mr. Cooper and Mr. Harik had not received annual salary or target bonus increases since the inception of their employment agreements in February 2016. | | ||||
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| | February 2020 | | ■ Certified the attainment of the $6.39 adjusted cash flow per share goal relating to the fourth and final tranche of the February 2016 award of phantom stock for Mr. Jacobs, Mr. Cooper and Mr. Harik. While the performance goal was meaningfully exceeded, this fourth tranche paid out at target as there is no additional upside for exceeding the target. | | |||||
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| | March 2020 | | | ■ Determined that no short-term cash incentive ("STI") would be paid to any of the NEOs for performance year 2019 in light of the Committee's evaluation of the total reward amounts already granted or earned for the year, which included consideration of: o The PSU awards previously granted in June 2019; o The meaningful amount realized from the final tranche of the February 2016 award of phantom stock that settled in February 2020 (for Mr. Jacobs, Mr. Cooper and Mr. Harik); o The additional income generated (relative to the prior year) from an increase in base salary, effective June 2019, for Mr. Jacobs, Mr. Cooper and Mr. Harik; and o The below-target average bonus payout for XPO corporate employees, due to the miss on adjusted EBITDA versus the mid-year revised guidance and financial plan. While our NEOs are part of the overall corporate employee bonus pool with respect to STI payouts, the Committee felt that with the factors above taken into account, no additional short-term payout consideration was warranted for our top executives. | |||||
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Taken together, these actions demonstrate the Committee's focus on rewarding our executives for delivering long-term performance that creates substantial appreciation in value for our stockholders. Moreover, 100% of long-term incentive compensation for Mr. Jacobs, Mr. Cooper and Mr. Harik over the past two years has been awarded in the form of PSUs with high-growth stretch goals, and all equity-based compensation for Mr. Jacobs, Mr. Cooper and Mr. Harik is restricted from sale
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ResultTable of Stockholder Advisory Vote and Stockholder OutreachContents
until September 2, 2020. This alignment of management's objectives with our stockholders' interests is critically important. The Committee believes that forward-looking compensation incentives are instrumental in motivating executives to balance short-term and long-term initiatives for competitive differentiation, market share gains, and revenue and margin expansion.
NEO Transitions |
The company completed three executive officer transitions in 2019 and early 2020:
Result of Stockholder Advisory Vote and Stockholder Outreach |
We conductedbelieve that strong corporate governance should include year-round engagement with stockholders, and we recognize the value of engaging in constructive dialogue with stockholders on business strategy, corporate governance, our annualexecutive compensation program, sustainability reporting initiatives and other critical matters. This allows us to better understand stockholders' views and interests, solicit their feedback and share our perspective on these important subjects.
In addition to our formal outreach related to the stockholder advisory vote on compensation, our investor relations team and chief strategy officer engage extensively with our stockholders throughout the year; often together with our CEO. This engagement includes regular dialogue immediately following our quarterly earnings calls, participation at investor conferences and other channels of communication.
With respect to executive compensation atand governance, the stockholder advisory vote we conduct on an annual basis places a significant emphasis on garnering feedback from our 2017 annual meeting of stockholders on May 10, 2017.key stockholders. While thisthe vote wasis not binding on ourthe company, ourits Board or the Committee, we believe that it is important for our stockholders to have an opportunity to vote on this proposal on an annual basis as a means to express their viewsopinions by voting on our executive compensation philosophy, our executive compensation programstructure and policies, and our decisions regarding executive compensation, all asplanned actions each year, which are disclosed in our proxy statement.
At our 2017the 2019 annual meeting, approximately 62.2%67.1% of the votes cast on theour advisory vote on executive compensation were in favor of our NEO compensation program.
We were disappointed by the significant percentage of negative votes, even though the advisory vote obtained majority support. In response, we organized a stockholder outreach effortThe Committee's goal is to gather direct, constructive feedback aboutcontinue to make responsive changes to our executive compensation programs and other governance matters. We asked twelveproxy disclosures on executive pay, while maintaining the emphasis on performance-based compensation opportunities that align with high growth and returns.
During our last set of engagement sessions in 2019, we proactively reached out to institutional investors representing approximately 20% of our most significantcommon stock, ultimately engaging in dialogue with stockholders – who collectively held 56%representing 15% of our outstanding common stock –stock. Our Board's vice chairman was present for the majority of these conversations.
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The table below provides an overview of the key feedback received from our stockholders relevant to discussour executive compensation program, as well as the actions we took in response. Feedback received from stockholders is shared with the Committee and other governance matters with us. Four of these stockholders responded with interestserves as input in having a dialogue on executive compensation and subsequently engaged in discussions with representatives of the company, including our Chief Human Resources Officer, our Senior Vice President, Corporate Counsel, and our Senior Vice President of Compensation and Benefits, and, in one case, upon the request of one stockholder, the Chair of the Committee.its decision-making process.
The following themes emerged from these stockholder discussions in relation to executive compensation:
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Feedback | | |||
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■ Stockholders appreciated the increased disclosure provided on the Committee's compensation decision-making process and choice of | ■ Over the past several years, we have enhanced our CD&A disclosure to explain, in further detail, the Committee's decision-making process for performance award constructs and performance metrics. For 2020, we have continued to include incremental disclosures focused specifically on explaining the Committee's rationale with respect to the | |||
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■ Stockholders inquired about the performance goals and metrics considered for both long-term and short-term incentive compensation, with a focus on the ambitious high-growth goals underlying the August 2018 PSU award. | ■ The Committee created a revised PSU award construct in June 2019 in response to stockholder commentary that ■ The new June 2019 PSU award was predicated on the latest company financial plans, which reflected continued weakness in our markets and the decision of our largest customer to downsize its business portfolio with XPO starting in the first quarter of 2019. | |||
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■ Stockholders suggested introducing a relative performance measure. | ■ The June 2019 PSU award includes a relative market-based measure in the underlying performance goals. A detailed discussion of the June 2019 grant can be found under the heading "June 2019 High-Growth Incentive Award: Cliff 2019-2024 PSUs." | |||
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■ Stockholders requested greater clarity on the timing and cadence of grants of long-term awards, which are more periodic and irregular in comparison to conventional practices for public companies. | ■ A new section entitled "Execution of XPO Company Strategy — Effect on Timing of Grants of Equity Awards", added below, details the Committee's perspective that incentive compensation reviews and grants of equity-based compensation should be considered at critical inflection points in the execution of the company's strategy and performance, rather than on a regular, pre-defined basis. | |||
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In addition to executive compensation, our discussions with stockholders covered XPO's business strategy, capital allocation priorities — such as our share repurchase program initiated in late 2018 — and the Board's role in overseeing the execution of company strategy. We also discussed governance topics, including our Board structure and, specifically, the Board's rationale for creating the lead independent director and vice chairman roles. Stockholders appreciated the Board's focus on diversity and discussed our proactive policy of Board refreshment. Finally, sustainability was another area of focus, with stockholders expressing appreciation for the release of XPO's inaugural Sustainability Report, highlighting its comprehensive overview of XPO's safety culture and agility in evolving benefits programs and workplace policies to meet employees' needs and sharing suggestions for its further development in future.
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Execution of XPO Company Strategy — Effect on Timing of Grants of Equity Awards |
The timing of grants of equity awards to our executive officers is not determined annually or on a predefined basis. Rather, the Committee considers such grants at critical inflection points in the execution of the company's strategy; this affords the Committee year-to-year flexibility in motivating our NEOs to achieve strategic priorities, as summarized below.
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OUR COMPENSATION PHILOSOPHY AND EXECUTIVE COMPENSATION PROGRAM OBJECTIVES |
XPO's executive compensation philosophy is founded on the following core objectives:
OUR EXECUTIVE COMPENSATION GOVERNANCE FRAMEWORK |
The company has adopted a compensation governance framework that includes the components described below, each of which the Committee believes reinforces the company's executive compensation philosophy and objectives.
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WHAT WE DO | WHAT WE DON'T DO | |
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Significant emphasis on variable compensation. Our executive compensation program is heavily weighted toward variable compensation, including long-term incentives that are primarily performance-based, and annual short-term cash incentives. This allows the Committee | No exceptional perquisites. Our NEOs have no guaranteed bonuses, relocation benefits or supplemental pension or retirement savings beyond what is provided broadly to all XPO employees. In addition, our NEOs have no perquisites such as personal use of company aircraft, executive health services, club memberships, stipends or financial planning services. | |
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Substantial portion of compensation subject to creation of stockholder value. Performance-based awards are, and have been, subject to meaningful stock price and/or earnings-related performance goals measured over service-based vesting periods. All outstanding equity awards for Mr. Jacobs, Mr. Cooper and Mr. Harik are performance-based. The Committee also continually reviews the full portfolio of XPO stockholdings for each NEO to ensure there is a sufficient amount of compensation at risk and aligned with stockholder returns and value creation, while sustaining the NEO's focus on the company's strategic objectives. | No pledging or hedging of company stock. Under our insider trading policy, our company's directors and executive officers, including the NEOs, are prohibited from pledging or holding company securities in a margin account without preclearance. In addition, such persons are prohibited from engaging in hedging transactions without preclearance, such as prepaid variable forwards, equity swaps, collars and exchange funds or any other transactions that are designed to or have the effect of hedging or offsetting any decrease in the market value of company equity securities. | |
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Stock ownership policies. The Board has adopted stock ownership guidelines and stock retention requirements that encourage the strong ownership mindset that exists among our executives. | No guaranteed annual | |
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Lock-up restrictions on equity awards. Lock-up restrictions generally prohibit the sale, for a specified period of time, of any shares of our common stock delivered pursuant to equity awards granted to NEOs |
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Clawback policy. Our NEOs are subject to | No golden parachute excise tax gross-ups. XPO does not provide golden parachute excise tax gross-ups. | |
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Restrictive covenants. Our NEOs are subject to comprehensive non-competition and other restrictive covenants. | No consultant conflicts. The Committee retains an | |
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The Committee reviewed and considered these stockholder perspectives and,
Stock Ownership Policies |
We believe that executive equity ownership in response, the discussion that follows providescompany mitigates a more comprehensive reviewnumber of the Committee’s approachrisks, including risks related to executive pay decisions, including detailed performance results that were considered for each NEO. In addition, the Committee has not authorized additional long-term incentive grantsretention and undue risk-taking.
Equity-based awards granted to our NEOs are generally subject to lock-up restrictions, as described in more detail below under the heading "Lock-up Restrictions on Equity Awards." We believe that the combination of executive stock ownership policies and lock-up restrictions is a highly effective way to create meaningful and enduring stock ownership levels.
Guidelines
Stock ownership guidelines are expressed as a multiple of each NEO's annual base salary:
Compliance with our stock ownership guidelines is generally determined using the aggregate count of shares of common stock held directly or indirectly by the NEO, plus unvested restricted stock units ("RSUs") subject solely to time-based vesting. Stock options, whether vested or unvested, and equity-based awards subject to performance-based vesting conditions, are not counted toward meeting the stock ownership guidelines until they have settled or been exercised, as applicable.
Until the stock ownership guidelines are met, an executive is required to retain 70% of the net shares (after tax withholding) received upon settlement of equity-based awards. A newly appointed executive is required to reach his or her stock ownership guideline no later than three years from the date of appointment.
As of the Record Date, Mr. Jacobs, Mr. Cooper and Mr. Harik were in compliance with our stock ownership guidelines and, in particular, Mr. Jacobs exceeded the guidelines by a significant degree: his ownership as a multiple of salary was equal to 1,037. Ownership as a multiple of salary for Mr. Cooper and Mr. Harik as of the Record Date was 13 and 10, respectively. During her service as acting chief financial officer, Ms. Glickman was required to meet the guidelines no later than August 2021, three years from her appointment as acting chief financial officer. Since Ms. Glickman's transition to the role of senior vice president, corporate finance and transformation on March 2, 2020, she is no longer required to meet the guidelines.
Lock-up Restrictions on Equity Awards |
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Clawback Policy |
Our NEOs are subject to clawback restrictions with respect to long-term and annual short-term incentive compensation. The Committee is focused on mitigating risk associated with the company's compensation program for NEOs and believes that clawback provisions are an important tool to achieve this.
Long-term incentive compensation
The NEO employment agreements include a clawback provision under which the NEO may be required, upon certain triggering events, to repay all or a portion of long-term incentive compensation that was previously paid (including proceeds from previously-exercised and vested equity-based awards) and to forfeit unvested equity-based awards during the term of the employment agreements. These clawback provisions are generally triggered if any of the following conditions apply — the NEO:
Annual short-term incentive compensation
In addition, if a NEO has engaged in fraud or other willful misconduct that contributes materially to any financial restatements or material loss to the company or any of its affiliates, the company may require repayment by the NEO of any cash bonus or annual bonus previously paid (net of any taxes paid by the NEO on such bonus), and/or may cancel any earned but unpaid cash bonus or annual bonus, and/or adjust the NEO's future compensation in order to recover an appropriate amount with respect to the restated financial results or the material loss.
Additional provision
To the extent that the rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act are broader than the clawback provisions contained in our NEO employment agreements, and to the extent the company is required to implement a clawback policy pursuant to applicable law, the NEOs will each be subject to additional clawback provisions pursuant to such rules as described under the heading “Executive Compensation Outcomes for 2017—Long-Term Incentive Program,” the equity awards granted in 2016 continue to be subject to high growth financial targets, vesting conditions, and clawback, both during the vesting period and after payout based on the circumstances specified in the terms of the awards."Employment Agreements with NEOs–Clawbacks."
Our Executive Compensation Governance Framework
Compensation Structure
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The general arrangement for NEO compensation at our company includes: (i) fixed base salaries; and (ii) variable incentive compensation consisting of annual cash incentives and equity awards that emphasize pay-for-performance and, in the case of equity-based awards, achievement of long-term performance goals. The Committee has tended to heavily weight our NEOs’ compensation towards variable incentive compensation rather than base salary. The Committee believes that its emphasis on variable annual cash incentives and long-term equity-based awards allows it to retain significant flexibility and discretion from year to year in order to strongly motivate our NEOs. Specifically, the total reward package for each of our NEOs reflects assessments of individual responsibilities, contributions to corporate performance, the company’s trend on total stockholder return and overall company success in reaching strategic goals.
The Committee chooses to weight the pay mix of our NEO compensation heavily toward variable incentive compensation, delivered primarily in the form of long-term equity awards. The Committee believes that this variability provides greater latitude in contemplating all relevant circumstances when making total reward determinations for each NEO, including: the Committee's assessment of individual responsibilities and contributions to corporate performance, the company's trend on total stockholder return, overall company success in achieving strategic goals, the company's position relative to market levels of pay, and the amount of realized and realizable pay in each NEO's compensation profile.
Role of the Committee
The Committee is responsible for approving our compensation practices and overseeing our executive compensation program in a manner consistent with our compensation philosophy. The Committee is tasked with: (i) reviewing the annual and long-term performance goals for our NEOs; (ii) approving awards under incentive compensation and equity-based plans; and (iii) approving all other compensation and benefits for our NEOs. The Committee acts independently but works closely with the full Board and executive management in making many of its decisions. To assist it in discharging its responsibilities, the Committee has retained the services of an independent compensation consultant, Semler Brossy, as discussed below. Role of Management
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Executive management provides input to the Committee, including with respect to the Committee's evaluation of executive compensation practices. In particular, our chief executive officer, Mr. Jacobs, provides recommendations for proposed compensation actions with respect to our executive team, but not with respect to his own compensation. The Committee carefully and independently reviews the recommendations of management without members of management present and consults its independent advisor, Semler Brossy, before making final determinations. We believe this process ensures that our executive compensation program effectively aligns with XPO's compensation philosophy and stockholder interests.
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Role of the
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The Committee directly retained Semler Brossy as its independent advisor for compensation and governance matters during 2019. Semler Brossy supported the Committee with respect to NEO compensation by: (i) reviewing 2019 compensation packages and long-term incentive awards for NEOs and other senior officers; (ii) providing analysis and guidance regarding the CEO's pay level relative to performance; (iii) reviewing this Compensation Discussion and Analysis and the related tables and narratives; (iv) assessing the risks associated with the company's overall compensation policies and practices; (v) monitoring trends and evolving market practices in executive compensation; and (vi) providing general advice and support to the Committee and Committee chairman. Semler Brossy does not provide any other services to the company.
As part of the Committee's annual performance evaluation of its independent compensation consultant, the Committee considered Semler Brossy's independence in light of applicable SEC rules and NYSE listing standards. After taking into account the absence of any Semler Brossy relationships with management and members of the Committee, Semler Brossy's internal policies and other information provided to the Committee, the Committee determined that Semler Brossy's work did not raise any conflicts of interest that would prevent it from serving as an independent compensation consultant to the Committee.
THE COMMITTEE'S COMPENSATION DECISION-MAKING PROCESS |
The Committee believes that its holistic approach to evaluating individual and company performance results in greater alignment with stockholder interests than do overly formulaic programs, which may skew incentives. The decision-making process incorporates an element of discretion, allowing the Committee to utilize a balanced, multi-dimensional approach to NEO compensation that includes a review of performance against goals set at the beginning of the year, as described below.
NEO Compensation-Setting Process |
The Committee resets the stage for compensation determinations annually by evaluating its decision framework for executives at the beginning of each year. This includes determining the maximum short-term incentive payout for that year and the gating threshold for eligibility. The minimum short-term incentive payout is always zero, as the Committee can exercise discretion in its decision-making process to nullify incentives. For 2019, the short-term incentive maximum payout was set at 200% of target, and the gating threshold for eligibility was 90% of the company's 2019 adjusted EBITDA forecast. The Committee utilizes this decision-making framework when determining both short-term and long-term incentives throughout the year, bolstered by the in-depth evaluations described under the heading "Key Factors Considered in Determining Executive Compensation".
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ASSESSMENT OF CEO PERFORMANCE AND CONTRIBUTIONS IN 2019 |
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ASSESSMENT OF OTHER NEOS' PERFORMANCE AND CONTRIBUTIONS IN 2019 |
In considering the NEOs' annual short-term incentive awards for 2019, the Committee evaluated the overall performance of the company, the company's performance against its strategic objectives, the importance of each NEO's role in relation to the holistic operation of the company, and the CEO's assessment of each NEO's performance and contributions to the company. The chart below summarizes key 2019 achievements of each of our NEOs. Mr. Wagers is excluded due to his departure from the company in early 2019.
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EXECUTIVE COMPENSATION OUTCOMES FOR 2019 |
Total Realized Pay |
Realized pay demonstrates the strong interrelation between our NEOs' compensation opportunity and the company's performance. The Committee believes that the mix of pay for NEOs, which is more heavily weighted toward performance-based pay, is appropriate to drive execution of our long-term strategy and further align the interests of our NEOs with those of our stockholders.
To assist stockholders in understanding the compensation earned by our NEOs in 2019, the charts below show the total realized pay mix for each of our NEOs. Realized pay is designed to capture the compensation actually received by our NEOs, and is calculated as the sum of: (i) salary paid in 2019; and (ii) the value of long-term incentive compensation that vested during 2019, calculated based on the closing stock price on the date(s) the award(s) vested. No bonuses were earned with respect to the 2019 performance year and no stock options were exercised during 2019; these amounts would have otherwise been included in the realized pay calculation.
Realized pay differs from the SEC-required disclosure in the Summary Compensation table, which captures the grant date fair value of long-term incentive awards granted in a given year, and does not account for long-term incentive awards that may not vest for several years (or at all).
*Ms. Glickman was hired in June 2018 and did not, therefore, have meaningful stock vesting events in 2019.
Base Salary and Annual Target Bonus Opportunity |
On June 5, 2019, the Committee approved increases to the base salary and target bonus opportunity for each of Mr. Jacobs, Mr. Cooper and Mr. Harik; until this approval, the base salaries and target bonus opportunities had remained unchanged since the inception of our NEOs' employment agreements in February 2016. An increase to Ms. Glickman's target bonus opportunity was also approved on June 5, 2019. The Committee's annual benchmarking review of NEO compensation components prompted these increases, as the cash compensation of our NEOs was notably below market, particularly as compared to executive pay levels for comparable positions across public companies with 2018 revenues ranging from $15 billion to $20 billion.
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The base salary and target bonus amounts approved on June 5, 2019, and the amounts in effect prior to June 5, 2019, are:
Annual Short-Term Incentive |
Gating Threshold to Establish Eligibility for Short-Term Incentive Payout
For the 2019 performance year, the Committee determined that the company's adjusted EBITDA must equal or exceed 90% of the 2019 full-year forecast in order for each NEO who remained employed on the date of payment to become eligible for a short-term incentive award.
Maximum Amount of Bonus
The evaluation of short-term incentive payouts is based on a framework of key performance measures that are of preeminent importance to the company and our stockholders, as well as on the respective contributions of each NEO in his or her role. Based on the Committee's 2019 decision-making framework, cash bonuses are subject to a payout range of 0% to 200% of target.
2019 Short-Term Incentive (STI) Payout
While the company's adjusted EBITDA exceeded the 90% threshold required for STI payout, the Committee used its discretion to award no short-term incentives to our NEOs, despite achieving solid company performance on most of the related key financial and non-financial indicators and making commendable contributions on an individual basis. This decision was premised on the Committee's holistic view of the total rewards granted and realized with respect to 2019. In particular, the Committee took the following into account:
Below is a summary of the total annual cash compensation for each NEO at target and with respect to 2019 final outcomes:
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Long-Term Incentive |
The Committee's goal in granting LTI awards is to focus executives on the execution of our strategy, especially during critical inflection points in the company's growth trajectory. Since 2014, for Mr. Jacobs, Mr. Cooper and Mr. Harik, the Committee has not granted time-based restricted stock awards and has instead granted only performance-based awards subject to the achievement of high-growth goals. Performance-based awards have provided an effective incentive for our NEOs to grow XPO's net income from a net loss of $23 million in 2012, to $379 million in 2019, and to increase adjusted EBITDA* from a loss of $26 million in 2012 to $1.668 billion in 2019.
The Committee believes that LTI awards should be underpinned by future-oriented, high-growth performance and/or market-based goals that promote sustained operational excellence over a reasonable period, creating an incentive to organically grow the business, capitalize on addressable opportunities to gain market share and deliver optimal value to stockholders.
In June 2019, the Committee approved a grant of long-term performance-based incentive awards for each of our NEOs, consisting of both an operational metric and a relative market-based measure, as described below in "Outstanding Equity Awards as of December 31, 2019" under "June 2019 High-Growth Incentive Award: Cliff 2019-2024 PSUs".
* See Annex A for reconciliation of non-GAAP measure
Outstanding Equity Awards as of December 31, 2019 |
February 2016 Phantom Stock Award: Annualized 2016-2019 PSUs |
The fourth and final tranche of the February 2016 phantom stock award, granted to each of Mr. Jacobs, Mr. Cooper and Mr. Harik, and settled in February 2020, was certified by the Committee as earned, given that the associated goal of $6.39 in adjusted cash flow per share for 2019 was achieved. This represented the final payment from the February 2016 phantom stock award and no tranches remain outstanding as of the Record Date. Ms. Glickman was not employed by XPO in 2016 and, as a result, did not receive this award.
August 2018 High-Growth Incentive Award: Cliff 2019-2022 PSUs |
In August 2018, the Committee granted high-growth PSUs with cliff vesting to each of our NEOs, excepting Ms. Glickman*. The Committee's decision was made at a time when XPO's stock price had exceeded $100 for the first time in its history, marking an important milestone in the company's growth prospects. This achievement converged with other factors considered by the Committee: namely, the upcoming lapse in lock-up restrictions in September 2018; and the fact that an aggregate 72% of stockholdings for Mr. Jacobs, Mr. Cooper and Mr. Harik had already vested. The Committee determined that the grant of a high-growth PSU award at this opportune time would galvanize greater profit growth and total stockholder return, and retain Mr. Jacobs, Mr. Cooper and Mr. Harik through a longer performance period. While the operational performance metric chosen for the 2018 award (adjusted cash flow per share) was the same as for the February 2016 award, the 2018 award reflects a higher underlying adjusted EBITDA target.
The August 2018 PSU award will vest if both of the following targets are met or exceeded:
If earned, the August 2018 PSU award will settle in shares in the first quarter of 2023, upon certification of performance achievement by the Committee.
* In recognition of Ms. Glickman assuming the role of acting chief financial officer, the company granted her a performance-based restricted stock unit award on August 9, 2018. This award has a performance goal requiring achievement of a closing stock price of $200 per share over a period of 20 consecutive trading days prior to August 2023, with a minimum three-year service condition.
June 2019 High-Growth Incentive Award: Cliff 2019-2024 PSUs |
In June 2019, the Committee granted a high-growth PSU award with cliff vesting to each of Mr. Jacobs, Mr. Cooper, Mr. Harik and Ms. Glickman, based on the following premises:
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The June 2019 PSU award will vest if both of the following targets are achieved:
If earned, the June 2019 PSU award will settle in shares in the first quarter of 2025, upon certification of performance achievement by the Committee.
Additional information regarding the grant date value of each NEO's June 2019 PSU award can be found in the Grants of Plan-Based Awards table following this Compensation Discussion and Analysis.
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LTI Performance Metrics |
The following table details each of the performance metrics underpinning our long-term incentives, and the significance of these metrics in driving high-growth performance.
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Adjusted Cash Flow Per Share February 2016 Phantom Stock Award August 2018 High-Growth PSU Award | ■ Calculated as: (i) adjusted EBITDA (determined in accordance with the
■ Measures the ■ In computing this metric, the subtraction of capital expenditures from adjusted EBITDA eliminates the possibility of artificially or
This metric is also responsive to ■ In a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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$225 Share Price August 2018 High-Growth | ■ Focuses our NEOs on achieving and reaching for higher levels of total stockholder return. ■ Calculated as the closing share price averaged over a period of 20 consecutive trading days. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Adjusted EPS June 2019 High-Growth | ■ Calculated as net income attributable to common stockholders, adjusted for the impact of certain costs and gains that management has determined are not reflective of our core operating activities, as governed by the company's internal policies and reported externally in the
■ Focuses our NEOs on the company's continuous profit improvement. ■ In a stock buyback scenario, share count would decrease, raising the adjusted EPS calculation, but interest expense would likely rise, thereby lowering the adjusted EPS calculation and creating a reasonable offset. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Relative TSR June 2019 High-Growth | ■ Measures stockholder value creation in relation to our benchmark group. ■ The beginning point for TSR determination (both XPO's and S&P Transportation Select Industry Index) is based on an average of the closing prices during the 20 trading days preceding the first day of the performance period. The ending point will be based on an average of the closing prices during the 20 trading days ending on the last day of the performance period. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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OTHER COMPENSATION-RELATED ITEMS |
Equity Granting Policy
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All equity awards to NEOs are approved by the Committee with a grant date determined at the time of the approval. The Committee does not target a specific time during the year to make equity grants, but grant dates are always on or after the date of Committee approval. The Committee believes that, as a complement to its annual decision-making process, forward-looking stockholder-aligned awards can and should be granted to executives at any point within the year when incentives would galvanize overall performance of the company to benefit our stockholders.
Benefits
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Our NEOs are provided with the same benefits as are generally offered to other eligible employees, including participation in the XPO Logistics, Inc. 401(k) Plan and insurance benefit programs. Our NEOs receive minimal perquisites, as shown in the All Other Compensation table following this Compensation Discussion and Analysis.
Employment Agreements
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We believe that it is in the best interests of our company to enter into multi-year employment agreements with our NEOs, as the agreements promote long-term retention while allowing the Committee to exercise discretion in designing incentive compensation programs. The material compensation-related terms of these agreements are described under the heading "Employment Agreements with NEOs" and the tables that follow this Compensation Discussion and Analysis.
Effective February 9, 2016, the company entered into new employment agreements with Mr. Jacobs, Mr. Cooper and Mr. Harik. Each of these 2016 employment agreements had a term through February 9, 2020 and expired at the end of the term without automatic renewal. The 2016 employment agreements contained comprehensive restrictive covenants that are described under
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the heading "Restrictive Covenants", which survived the expiration of the employment agreements and continue to apply. The company also entered into an employment agreement on similar terms with Mr. Wagers and Ms. Glickman in connection with his hire and her appointment to her former role as acting chief financial officer.
Tax Considerations
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Section 162(m) of the Internal Revenue Code of 1986 as amended (the "Code") disallows a federal income tax deduction to public companies for compensation greater than $1 million paid in any tax year to covered executive officers. Under prior law, there was an exception to the $1 million deduction limitation for compensation that met the requirements of "qualified performance-based compensation." However, for tax years after 2017, this exception has been eliminated, subject to limited transition relief that applies to certain arrangements in place as of November 2, 2017, and the executives covered by Section 162(m) has been expanded. Accordingly, no assurance can be given that awards paid in 2018 and later years that were originally intended to qualify for the "qualified performance-based compensation" exemption, or that were otherwise expected to be deductible prior to the recent tax legislation, will in fact be deductible.
As a general matter, while tax deductibility is one of several relevant factors considered by the Committee in determining compensation, we believe that the tax deduction limitation imposed by Section 162(m) should not compromise the company's access to public companies for compensation greater than $1 million paid in any tax year to covered executive officers unless the compensation meets the requirements of the “qualified performance-based compensation” exemption under that section. In 2017 and in prior years, certain of our compensation plans were designed to permit us to grant awards that may qualify for the “qualified performance-based compensation” exemption. However, this exemption was eliminated by recent tax legislation, effective for taxable years beginning after December 31, 2017. The legislation also expanded the group of executives covered by Section 162(m). Therefore, we expect that compensation awarded to our covered executive officers in excess of $1 million in 2018 and later tax years will not be deductible by the company unless it qualifies for limited transition relief that applies to certain arrangements in place as of November 2, 2017. Because of uncertainties in the application and interpretation of Section 162(m), and the absence at this juncture of regulatory guidance on the scope of the transition relief, no assurance can be given that awards paid in 2018 and later years that were originally intended to qualify for the “qualified performance-based compensation” exemption, or that were otherwise expected to be deductible prior to the recent tax legislation, will in fact be deductible.
We believe that the tax deduction limitation imposed by Section 162(m) should not compromise the company’s ability to design and maintain executive compensation arrangements that will attract and retain a high level of executive talent. Accordingly, the Committee and our Board will take into consideration a multitude of factors in making executive compensation decisions and may approve and authorize executive compensation that is not tax deductible.
Risk Assessment of Incentive Compensation Programs
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In partnership with a third-party compensation advisory group, the company performed an annual assessment for the Committee to determine whether there are material risks that could arise from our fiscal year 2019 compensation plans and programs. This assessment included a review of material elements of executive and non-executive compensation plans. Following this assessment, the Committee concluded that the company's compensation plans and programs are not reasonably likely to have a material adverse effect on the risks that could arise from our employee compensation policies and do not believe that such policies are reasonably likely to have a materially adverse effect on our company. Specific to our executive officer compensation structures, the assessment highlighted the following important elements that support sound governance in our programs:
Our clawback policy, stock ownership guidelines and anti-hedging and pledging policies also serve to mitigate compensation risk.
COMPENSATION COMMITTEE REPORT |
The following statement made by the Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate such statement by reference.
The Committee reviewed the Compensation Discussion and Analysis with management as required by Item 402(b) of Regulation S-K, as set forth above. Based on this review and the resulting discussions with management, the Committee recommended to our Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
COMPENSATION COMMITTEE: |
Jason D. Papastavrou, chairman (since April 17, 2020)
Adrian P. Kingshott, chairman (until April 17, 2020)
Marlene M. Colucci, member (since March 13, 2019)
Michael G. Jesselson, member
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The following statement made by our Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate such statement by reference.
The Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K as set forth above. Based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the company’s Annual Report on Form10-K for the fiscal year ended December 31, 2017.
Committee:
Adrian P. Kingshott (Committee Chair)
Michael G. Jesselson
Jason D. Papastavrou
COMPENSATION TABLES |
Summary Compensation Table |
The following table sets forth information concerning the total compensation awarded to, earned by, or paid to our NEOs for the year ended December 31, 2019.
Name and Principal | | | Year | | | Salary ($) | | | Bonus(1) ($) | | | Stock Awards (2) ($) | | | Option Awards(2) ($) | | | Non-Equity Incentive Plan Compensation ($) | | | All Other Compensation(3) ($) | | | Total ($) | | |||||||||||||||||||||||||||||
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Bradley S. Jacobs(4) | | | | 2019 | | | | | $838,462 | | | | | | – | | | | $7,007,415 | (5) | | | | | – | | | | – | | | | $12,460 | | | | | $7,858,337 | | |||||||||||||||
Chairman and | | | | 2018 | | | | | $625,000 | | | | | | – | | | | $12,690,463 | (6) | | | | | – | | | | – | | | | $12,008 | | | | | $13,327,471 | | |||||||||||||||
Chief Executive Officer | | | | 2017 | | | | | $625,000 | | | | | | – | | | | – | | | | – | | | | $750,000 | | | | | | $9,021 | | | | | $1,384,021 | | |||||||||||||||
Troy A. Cooper | | | 2019 | | | | $601,539 | | | | | – | | | | | $3,751,031 | (5) | | | | – | | | | | – | | | | | $12,460 | | | | $4,365,030 | | |||||||||||||||||
President | | | 2018 | | | | $537,500 | | | | | – | | | | | $2,460,008 | (6) | | | | – | | | | | – | | | | | $12,008 | | | | $3,009,516 | | |||||||||||||||||
| | 2017 | | | | $537,500 | | | | | – | | | | | – | | | | | – | | | | | $645,000 | | | | | $9,021 | | | | $1,191,521 | | ||||||||||||||||||
Mario A. Harik | | | | 2019 | | | | | $467,692 | | | | | | – | | | | $1,648,799 | (5) | | | | | – | | | | – | | | | $12,271 | | | | | $2,128,762 | | |||||||||||||||
Chief Information Officer | | | | 2018 | | | | | $425,000 | | | | | | $276,300 | | | | | | $1,230,004 | (6) | | | | | – | | | | – | | | | $11,857 | | | | | $1,943,161 | | |||||||||||||
| | | 2017 | | | | | $425,000 | | | | | | – | | | | – | | | | – | | | | $490,000 | | | | | | $9,021 | | | | | $924,021 | | ||||||||||||||||
Sarah J.S. Glickman(7) | | | 2019 | | | | $425,000 | | | | | – | | | | | $537,660 | (5) | | | | – | | | | | – | | | | | $17,274 | | | | $979,934 | | |||||||||||||||||
Former Acting Chief Financial Officer | | | 2018 | | | | $246,827 | | | | | $207,200 | | | | | $3,528,923 | | | | | – | | | | | – | | | | | $79,369 | (8) | | | $4,062,319 | | |||||||||||||||||
Kenneth R. Wagers III | | | | 2019 | | | | | $102,981 | | | | | | $285,000 | | | | | | – | | | | – | | | | – | | | | $279,235 | | | | | $667,216 | | |||||||||||||||
Former Chief Operating Officer and | | | | 2018 | | | | | $363,462 | | | | | | – | | | | $10,922,100 | (9) | | | | | – | | | | – | | | | $756 | | | | | $11,286,318 | | |||||||||||||||
Interim President, LTL—North America | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||
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We compensate our NEOs pursuant to the terms of their respective employment agreements and the information reported in the Summary Compensation Table reflects the terms of such agreements. For more information about our NEOs' employment agreements, see the discussion in this proxy statement under the heading "Employment Agreements with NEOs."
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AT THE ANNUAL MEETING | ||
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Proposal 1: Election of Directors
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Our Board of Directors has nominated for election at the Annual Meeting each of the following persons to serve until the 2021 annual meeting of stockholders or until their successors are duly elected and qualified:
Bradley S. Jacobs
Gena L. Ashe
Marlene M. Colucci
AnnaMaria DeSalva
Michael G. Jesselson
Adrian P. Kingshott
Jason D. Papastavrou
Oren G. Shaffer
All of the nominees for directors listed above were elected by our stockholders at our 2019 annual meeting of stockholders. Information about the nominees is set forth above under the heading "Board of Directors and Corporate Governance—Directors."
In the event that any of these nominees is unable or declines to serve as a director at the time of the Annual Meeting, the proxies voting for his or her election will be voted for any nominee who shall be designated by the Board of Directors to fill the vacancy. As of the date of this Proxy Statement, we are not aware that any of the nominees is unable or will decline to serve as a director if elected.
Required Vote
The election of the seven (7) director nominees named in this proxy statement requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted “for” a nominee must exceed the number of shares voted “against” such nominee) by holders of shares of our common stock (including those that would be issued if all of our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date). If any incumbent director standing for election receives a greater number of votes “against” his or her election than votes “for” his or her election, our bylaws require that such person must promptly tender his or her resignation to the Board of Directors.
Recommendation
Our Board of Directors recommends a vote “FOR” the election of each of the nominees listed above to our Board of Directors.
REQUIRED VOTE |
The election of each of the eight (8) director nominees named in this Proxy Statement requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" a nominee must exceed the number of shares voted "against" such nominee) by holders of shares of our common stock (including those that would be issued if all of our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date). If any incumbent director standing for election receives a greater number of votes "against" his or her election than votes "for" his or her election, our bylaws require that such person must promptly tender his or her resignation to the Board of Directors.
RECOMMENDATION |
Our Board of Directors recommends a vote "FOR" the election of each of the nominees listed above to our Board of Directors.
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Proposal 2: Ratification of the Appointment of KPMG LLP as our Independent Registered Public Accounting Firm for Fiscal Year
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The Audit Committee of our Board of Directors has appointed KPMG LLP ("KPMG") to serve as our independent registered public accounting firm for the year ending December 31, 2020. KPMG has served in this capacity since 2011.
We are asking our stockholders to ratify the appointment of KPMG as our independent registered public accounting firm for the year ending December 31, 2020. Although ratification is not required by our bylaws or otherwise, our Board of Directors is submitting the appointment of KPMG to our stockholders for ratification as a matter of good corporate governance. If our stockholders fail to ratify the appointment of KPMG, the Audit Committee will consider whether it is appropriate and advisable to appoint a different independent registered public accounting firm. Even if our stockholders ratify the appointment of KPMG, the Audit Committee in its discretion may appoint a different registered public accounting firm at any time if it determines that such a change would be in the best interests of our company and our stockholders.
Representatives of KPMG are expected to be present at the annual meeting and will have an opportunity to make a statement and to respond to appropriate questions.
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Ratification of the appointment of KPMG as our independent registered public accounting firm for the year ending December 31, 2020 requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the annual meeting at which a quorum is present.
RECOMMENDATION |
Our Board of Directors recommends a vote "FOR" the ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal year 2020.
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Proposal 3: Approval of an Amendment to the XPO Logistics, Inc. 2016 Omnibus Incentive Compensation Plan |
We are asking our stockholders to approve an amendment (the "Amendment") to the company's 2016 Omnibus Incentive Compensation Plan (as amended from time to time, the "2016 Plan") which increases the number of shares of our common stock available for issuance thereunder by 1,150,000 shares to a total of 6,550,000 shares. Our Compensation Committee and our Board believe that this share increase is necessary to ensure that the company has a sufficient reserve of shares available to enable the company to make equity award grants that attract and retain the services of key individuals essential to the company's long-term growth and success. The Amendment was adopted by the Board on April 17, 2020, subject to, and effective upon, approval by our stockholders. Currently, the 2016 Plan provides that the maximum number of shares available for issuance pursuant to awards issued thereunder is 5,400,000 shares of our common stock. If the stockholders do not approve the Amendment, the Amendment will not become effective, the 2016 Plan will continue in effect (without giving effect to the Amendment), and we will be subject to the current share limit set forth in the 2016 Plan.
Background of the Amendment |
Prior to recommending that the Board adopt the Amendment, the Compensation Committee considered the advice and input of management. The Amendment, as approved by our Board, is designed to allow us to continue to use different forms of compensation awards, retain and reward eligible participants under the 2016 Plan and strengthen the alignment of interests between management and our stockholders. The purpose of the Amendment is to continue promoting our interests and those of our stockholders by (1) enabling us to grant awards that attract and retain exceptional directors, officers, employees and consultants (including prospective directors, officers, employees and consultants), and (2) enabling such individuals to participate in, and motivating their efforts toward, our long-term growth and financial success. As of April 9, 2020, 1,270,591 shares of our common stock remained available for future grants under the 2016 Plan, which is our only incentive award plan with shares available for issuance. The Board and the Compensation Committee considered various factors, including (a) the number of shares available for issuance under the 2016 Plan, both currently and after giving effect to the Amendment and (b) the Company's potential burn rate, dilution and overhang data (described below).
Determination of Number of Shares for the Amendment |
As of April 9, 2020, our capital structure consisted of: (i) 91,105,728 shares of outstanding common stock, (ii) 71,110 shares of preferred stock, which presently are convertible into 10,158,571 shares of our common stock and vote together with our common stock on an "as-converted" basis on all matters on which the common stock may vote, except as otherwise required by law, and separately as a class with respect to certain matters implicating the rights of holders of preferred stock, and (iii) warrants presently exercisable for an aggregate of 10,100,537 shares of our common stock at a price of $7.00 per share (the "Warrants"). Due to our capital structure, when calculating potential dilution, or overhang, in determining a reasonable number of shares of common stock to be reserved for issuance under the 2016 Plan and the Amendment, we assume our preferred stock is converted to shares of common stock and we include the Warrants using the treasury stock method, as shown in the table below.
Our Fully-Diluted Capitalization: | | | ||
Shares of common stock | 91,105,728 | |||
Shares of common stock issuable upon conversion of preferred stock | | 10,158,571 | ||
Shares of common stock issuable upon exercise of 10,100,537 Warrants (using the treasury method and assuming a price of $61.90 per share, which was the closing price of our common stock | 8,958,311 | |||
Fully-Diluted Common Stock | | 110,222,610 |
The table below represents our potential overhang levels based on our fully-diluted common stock outstanding, as shown above, and our request for 1,150,000 additional shares to be available for awards pursuant to the Amendment.
Potential Overhang with 1,150,000 Additional Shares: | | | | | ||||
Total equity awards outstanding as of April 9, 2020 | 3,835,957 | |||||||
Options and Stock Appreciation Rights Outstanding* | | 575,755 | | | ||||
Restricted Stock Units and Performance-based Restricted Stock Units Outstanding | 3,260,202 | |||||||
Shares available for grant under the | | | | 1,270,591 | ||||
Additional requested shares | 1,150,000 | |||||||
Total Potential Dilution, or Overhang | | | | 6,256,548 | ||||
Potential Dilution as a Percentage of Fully-Diluted Common Stock Outstanding | 5.68% |
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XPO BURN RATE |
We actively manage our long-term dilution by limiting the number of shares subject to equity awards that we grant, commonly expressed as a percentage of total shares outstanding and referred to as "burn rate." Burn rate is a key measure of dilution that shows how rapidly a company is depleting its shares reserved for equity compensation plans, and differs from annual dilution because it does not take into account cancellations and other shares returned to the reserve. In order to calculate our burn rate, we include the number of stock options granted in any given period, plus the number of full value shares earned during the period and divide the total by the weighted average common shares outstanding.
We have calculated our burn rate under the 2016 Plan for the past three years, as set forth in the following table (share numbers rounded and reported in thousands):
| Fiscal Year Ended December 31, | | | | |||||||||||||||
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| | 2019 | | | 2018 | | | 2017 | | | | ||||||||
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Options Granted | | | | 0 | | | | 0 | | | | 0 | | | | | |||
Restricted Stock Units Granted | | | 1,148 | | | 533 | | | 658 | | | | |||||||
Performance-based Restricted Stock Units Vested | | | | 407 | | | | 1,086 | | | | 155 | | | | | | ||
Weighted Average Common Shares Outstanding | | | 96,000 | | | 123,000 | | | 115,000 | | | | |||||||
Volatility Multiplier | | | | 2.0 | | | | 2.0 | | | | 2.0 | | | | | |
| | | | | | | | 3-Year Average | | ||||||||||
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Burn Rate | | | 3.24% | | | 2.63% | | | 1.42% | | | 2.43% | |
Note: | Burn rate is calculated as (options granted + RSUs granted + Performance-based RSUs vested) / weighted average shares outstanding. All RSUs granted and Performance-based RSUs vested are adjusted using a multiplier of 2.0 options per share (based on the |
The purpose of the Amendment is to increase the number of authorized shares of our common stock available under the 2016 Plan. Our Board believes that this increase in authorized shares represents a reasonable amount of potential equity dilution and allows us to continue awarding equity incentives, which are an important component of our overall compensation program. Our Board and the Compensation Committee considered the following material factors, among others, in determining acceptable and targeted levels of dilution: competitive data from relevant peer companies, the current and future accounting expense associated with our equity award practices, stockholder feedback and the influence of certain proxy advisory firms. Our equity programs are revisited at least annually and assessed against these and other measures.
SUMMARY OF SIGNIFICANT FEATURES OF THE 2016 PLAN |
The 2016 Plan (as modified by the Amendment) contains the following significant features:
HIGHLIGHTS OF KEY CORPORATE GOVERNANCE PRACTICES AND PROVISIONS UNDER THE 2016 PLAN |
The 2016 Plan promotes the interests of our stockholders and is consistent with principles of good corporate governance. The 2016 Plan includes, among other things, the following practices and provisions:
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SUMMARY OF THE 2016 PLAN |
The material terms of the 2016 Plan are summarized below. This summary does not contain all information about the 2016 Plan. This summary is qualified in its entirety by reference to, and should be read together with, the full text of the Amendment, which is attached to this Proxy Statement as Annex B, and full text of the 2016 Plan, which is attached to this Proxy Statement as Annex C.
Types of Awards |
The 2016 Plan provides for the grant of options intended to qualify as incentive stock options ("ISOs") under Section 422 of the Code, nonqualified stock options ("NSOs"), stock appreciation rights ("SARs"), restricted share awards, restricted stock units ("RSUs"), performance compensation awards, performance units, cash incentive awards, deferred share units and other equity-based and equity-related awards, as well as cash-based awards.
Plan Administration |
The 2016 Plan is administered by the Compensation Committee of our Board or such other committee our Board designates to administer the 2016 Plan (the "Committee"). Subject to the terms of the 2016 Plan and applicable law, the Committee has sole authority to administer the 2016 Plan, including, but not limited to, the authority to (1) designate plan participants, (2) determine the type or types of awards to be granted to a participant, (3) determine the number of shares of our common stock to be covered by awards, (4) determine the terms and conditions of awards, (5) determine the vesting schedules of awards and, if certain performance criteria were required to be attained in order for an award to vest or be settled or paid, establish such performance criteria and certify whether, and to what extent, such performance criteria have been attained, (6) interpret, administer, reconcile any inconsistency in, correct any default in and/or supply any omission in, the 2016 Plan, (7) establish, amend, suspend or waive such rules and regulations and appoint such agents as it should deem appropriate for the proper administration of the 2016 Plan, (8) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, awards, and (9) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the 2016 Plan.
Shares Available For Awards |
Subject to adjustment for changes in capitalization, there are 5,400,000 shares of our common stock, in the aggregate, that are currently authorized for delivery pursuant to awards granted under the 2016 Plan, 3,400,000 shares of which may be granted pursuant to ISOs. If the Amendment is approved by stockholders, an additional 1,150,000 shares of our common stock would be available to be delivered pursuant to awards granted under the 2016 Plan so that the total number of shares available to be delivered pursuant to awards granted under the 2016 Plan would be 6,550,000, of which 5,400,000 may be granted pursuant to ISOs. Awards that are settled in cash do not reduce the number of shares available for delivery under the 2016 Plan. If any award granted under the 2016 Plan is forfeited, or otherwise expires, terminates or is canceled without the delivery of all shares subject thereto, then the number of shares subject to such award that were not issued are not treated as issued for purposes of reducing the maximum aggregate number of shares that may be delivered pursuant to the 2016 Plan.
Notwithstanding the foregoing, and for the avoidance of doubt, shares that were surrendered or tendered to us in payment of the exercise price of an award (including with respect to stock-settled SARs) or any taxes required to be withheld in respect of an award and awards based on the fair market value of a share that are settled other than by the delivery of shares (including
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cash settlement) do not become available again to be delivered pursuant to awards under the 2016 Plan or increase the number of shares that may be delivered pursuant to ISOs under the 2016 Plan. Subject to adjustment for changes in capitalization, the maximum number of shares of our common stock that is available to be granted pursuant to awards to any participant in the 2016 Plan in any fiscal year is 2,500,000. In the case of awards settled in cash based on the fair market value of a share, the maximum aggregate amount of cash that is permitted to be paid pursuant to awards granted to any participant in the 2016 Plan in any fiscal year is equal to the per-share fair market value as of the relevant vesting, payment or settlement date multiplied by the maximum number of shares which could be granted, as described above (i.e., 2,500,000 shares). The maximum aggregate amount of cash and other property (valued at fair market value) that is permitted to be paid or delivered pursuant to awards under the 2016 Plan (other than as described in the two immediately preceding sentences) to any participant in any fiscal year is $10,000,000. The maximum value of shares of our common stock that are available to be granted pursuant to awards to any non-employee director in the 2016 Plan in any fiscal year is $350,000 as of the date of grant. Subject to adjustment for changes in capitalization, the maximum number of shares of our common stock that is available to be granted pursuant to ISOs to any participant in the 2016 Plan in any fiscal year is 2,500,000.
Changes in Capitalization |
In the event of any extraordinary dividend or other extraordinary distribution, recapitalization, rights offering, stock split, reverse stock split, split-up or spin-off affecting the shares of our common stock, the Committee shall make equitable adjustments and other substitutions to the 2016 Plan and awards under the 2016 Plan in the manner it determined to be appropriate or desirable. In the event of any reorganization, merger, consolidation, combination, repurchase or exchange of our common stock or other similar corporate transactions, the Committee in its discretion is permitted to make such adjustments and other substitutions to the 2016 Plan and awards under the 2016 Plan as it deems appropriate or desirable.
Substitute Awards |
The Committee is permitted to grant awards in assumption of, or in substitution for, outstanding awards previously granted by us or any of our affiliates or a company that we acquired or with which we combined. Any shares issued by us through the assumption of or substitution for outstanding awards granted by a company that we acquired do not reduce the aggregate number of shares of our common stock available for awards under the 2016 Plan, except that awards issued in substitution for ISOs will reduce the number of shares of our common stock available for ISOs under the 2016 Plan.
Source of Shares |
Any shares of our common stock issued under the 2016 Plan consist, in whole or in part, of authorized and unissued shares or of treasury shares.
Eligible Participants |
Any director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of our company or our affiliates is eligible to participate in the 2016 Plan. As of April 9, 2020, there were eight non-employee directors, three executive officers, approximately 97,000 employees globally, and approximately 9,000 consultants in the United States (the number of consultants engaged in other jurisdictions varies, and the Company generally does not expect to grant awards to consultants in such other jurisdictions).
Stock Options |
The Committee is permitted to grant both ISOs and NSOs under the 2016 Plan. The exercise price for stock options may not be less than the fair market value (as defined in the 2016 Plan) of our common stock on the grant date. The Committee may not reprice any stock option granted under the 2016 Plan without the approval of our stockholders. All stock options granted under the 2016 Plan are NSOs unless the applicable award agreement expressly stated that the stock option was intended to be an ISO. Subject to the provisions of the 2016 Plan (including the minimum vesting period described below) and the applicable award agreement, the Committee determines, at or after the grant of a stock option, the vesting criteria, term, methods of exercise and any other terms and conditions of any stock option. Unless otherwise set forth in the applicable award agreement, each stock option expires upon the earlier of (i) the tenth anniversary of the date the stock option was granted and (ii) three months after the participant who was holding the stock option ceased to be a director, officer, employee or consultant for us or one of our affiliates. The exercise price is permitted to be paid with cash (or its equivalent) or, in the sole discretion of the Committee, with previously acquired shares of our common stock or through delivery of irrevocable instructions to a broker to sell our common stock otherwise deliverable upon the exercise of the stock option (provided that there was a public market for our common stock at such time), or, in the sole discretion of the Committee, a combination of any of the foregoing, provided that the combined value of all cash and cash equivalents and the fair market value of any such shares so tendered to us as of the date of such tender, together with any shares withheld by us in respect of taxes relating to a stock option, was at least equal to such aggregate exercise price.
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Stock Appreciation Rights |
The Committee is permitted to grant SARs under the 2016 Plan. The exercise price for SARs may not be less than the fair market value (as defined in the 2016 Plan) of our common stock on the grant date. The Committee may not reprice any SAR granted under the 2016 Plan without the approval of our stockholders. Upon exercise of a SAR, the holder receives cash, shares of our common stock, other securities, other awards, other property or a combination of any of the foregoing, as determined by the Committee, equal in value to the excess, if any, of the fair market value of a share of our common stock on the date of exercise of the SAR over the exercise price of the SAR. Subject to the provisions of the 2016 Plan (including the minimum vesting period described below) and the applicable award agreement, the Committee determines, at or after the grant of a SAR, the vesting criteria, term, methods of exercise, methods and form of settlement and any other terms and conditions of any SAR. Unless otherwise set forth in the applicable award agreement, each SAR expires upon the earlier of (i) the tenth anniversary of the date the SAR was granted and (ii) three months after the participant who was holding the SAR ceased to be a director, officer, employee or consultant for us or one of our affiliates. Under certain circumstances, the Committee has the ability to substitute, without the consent of the affected participant, SARs for outstanding NSOs. No SAR granted under the 2016 Plan could be exercised more than 10 years after the date of grant.
Restricted Shares and Restricted Stock Units |
Subject to the provisions of the 2016 Plan, the Committee is permitted to grant restricted shares and RSUs. Restricted shares and RSUs are not permitted to be sold, assigned, transferred, pledged or otherwise encumbered except as provided in the 2016 Plan or the applicable award agreement, except that the Committee may determine that restricted shares and RSUs are permitted to be transferred by the participant for no consideration. Restricted shares may be evidenced in such manner as the Committee determines.
An RSU is granted with respect to one share of our common stock or has a value equal to the fair market value of one such share. Upon the lapse of restrictions applicable to an RSU, the RSU may be paid in cash, shares of our common stock, other securities, other awards or other property, as determined by the Committee, or in accordance with the applicable award agreement. In connection with each grant of restricted shares, except as provided in the applicable award agreement, the holder is entitled to the rights of a stockholder (including the right to vote and receive dividends) in respect of such restricted shares. The Committee is permitted to, on such terms and conditions as it might determine, provide a participant who holds RSUs with dividend equivalents, payable in cash, shares of our common stock, other securities, other awards or other property.
Performance Units |
Subject to the provisions of the 2016 Plan, the Committee is permitted to grant performance units to participants. Performance units are awards with an initial value established by the Committee (or that was determined by reference to a valuation formula specified by the Committee) at the time of the grant. In its discretion, the Committee sets performance goals that, depending on the extent to which they were met during a specified performance period, determine the number and/or value of performance units that are paid out to the participant. The Committee, in its sole discretion, is permitted to pay earned performance units in the form of cash, shares of our common stock or any combination thereof that has an aggregate fair market value equal to the value of the earned performance units at the close of the applicable performance period. The determination of the Committee with respect to the form and timing of payout of performance units is set forth in the applicable award agreement. The Committee is permitted to, on such terms and conditions as it might determine, provide a participant who holds performance units with dividends or dividend equivalents, payable in cash, shares of our common stock, other securities, other awards or other property.
Cash Incentive Awards |
Subject to the provisions of the 2016 Plan, the Committee is permitted to grant cash incentive awards to participants. In its discretion, the Committee determines the number of cash incentive awards to be awarded, the duration of the period in which, and any condition under which, the cash incentive awards vest or are forfeited, and any other terms and conditions applicable to the cash incentive awards. Subject to the provisions of the 2016 Plan, the holder of a cash incentive award may receive payment based on the number and value of the cash incentive award earned, which is determined by the Committee, in its discretion, based on the extent to which performance goals or other conditions applicable to the cash incentive award have been achieved.
Other Stock-Based Awards |
Subject to the provisions of the 2016 Plan, the Committee is permitted to grant to participants other equity-based or equity-related compensation awards, including vested stock, which shall be granted pursuant to the five percent limit described below under the header "Minimum Vesting Period." The Committee is permitted to determine the amounts and terms and conditions of any such awards.
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Clawbacks |
The Company may clawback awards provided to eligible employees to the extent required by applicable law and as otherwise determined by the Compensation Committee and set forth in an award agreement.
Minimum Vesting Period |
The 2016 Plan is subject to a designated vesting period of at least one year following the date of grant, except that up to five percent of shares available for grant under the 2016 Plan may be granted without regard to this requirement and the Committee may accelerate the vesting with respect to any such awards.
Amendment and Termination of the 2016 Plan |
Subject to any applicable law or government regulation and to the rules of the applicable national stock exchange or quotation system on which the shares of our common stock may be listed or quoted, the 2016 Plan may be amended, modified or terminated by our Board without the approval of our stockholders, except that stockholder approval is required for any amendment that (i) increases the maximum number of shares of our common stock available for awards under the 2016 Plan or increases the maximum number of shares of our common stock that could be delivered pursuant to ISOs granted under the 2016 Plan, (ii) changes the class of employees or other individuals eligible to participate in the 2016 Plan, (iii) amends or decreases the exercise price of any option or SAR, (iv) cancels or exchanges any option or SAR at a time when its exercise price exceeds the fair market value of the underlying shares, (v) allows repricing of any option or SAR without stockholder approval, or (vi) constitutes a material increase in the benefits to be provided to eligible employees within the meaning of the New York Stock Exchange rules as of the date hereof. Under these provisions, stockholder approval is not be required for all possible amendments that might increase the cost of the 2016 Plan. No modification, amendment or termination of the 2016 Plan that materially and adversely impairs the rights of any participant is effective without the consent of the affected participant, unless otherwise provided by the Committee in the applicable award agreement.
The Committee is permitted to waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate any award previously granted under the 2016 Plan, the Prior Plan or the Stock Option Plan (as defined below), prospectively or retroactively. However, unless otherwise provided by the Committee in the applicable award agreement or in the 2016 Plan, any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that materially and adversely impairs the rights of any participant to any award previously granted is not effective without the consent of the affected participant.
The Committee is authorized to make adjustments in the terms and conditions of awards in the event of any unusual or nonrecurring corporate event (including the occurrence of a change of control of our company) affecting us, any of our affiliates or our financial statements or the financial statements of any of our affiliates, or of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles or law whenever the Committee, in its discretion, determined that those adjustments were appropriate or desirable, including providing for the substitution or assumption of awards, accelerating the exercisability of, lapse of restrictions on, or termination of, awards or providing for a period of time for exercise prior to the occurrence of such event and, in its discretion, the Committee is permitted to provide for a cash payment to the holder of an award in consideration for the cancellation of such award.
Change of Control |
The 2016 Plan provides that, unless otherwise provided in an award agreement, in the event of a change of control of our company, awards will be assumed and replaced by awards of equivalent value in connection with the change of control and such assumed awards will have so-called "double trigger" vesting provisions, such that the awards will vest in full and become immediately exercisable upon qualifying terminations of employment during the two-year period following the change of control. However, in the event that awards are not replaced with awards of equivalent value the vesting of the awards will generally accelerate immediately prior to the change of control.
Unless otherwise provided pursuant to an award agreement, a change of control is defined to mean any of the following events, generally:
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Although award agreements may provide for a different definition of change of control than is provided for in the 2016 Plan, except in the case of a transaction described in the third bullet above, any definition of change of control set forth in any award agreement must provide that a change of control will not occur until consummation or effectiveness of a change of control of our company, rather than upon the announcement, commencement, stockholder approval or other potential occurrence of any event or transaction that, if completed, will result in a change of control of our company.
Term of the 2016 Plan |
No award may be granted under the 2016 Plan after May 15, 2029.
NEW PLAN BENEFITS |
Awards under the 2016 Plan are made at the discretion of the Committee. Therefore, the benefits or amounts that will be received by or allocated to each named executive officer, all current executive officers as a group, all directors who are not executive officers as a group, and all employees who are not executive officers as a group, under the 2016 Plan if the Amendment is approved by stockholders are not presently determinable.
CERTAIN U.S. FEDERAL INCOME TAX ASPECTS OF THE 2016 PLAN |
The following summary describes the U.S. Federal income tax treatment associated with options awarded under the 2016 Plan. The summary is based on the law as in effect on the date of this filing, which is subject to change (possibly retroactively). The summary does not purport to cover federal employment tax or other federal tax consequences that may be associated with the 2016 Plan, nor does it discuss state, local and foreign tax consequences. The tax treatment of participants in the 2016 Plan may vary depending on each participant's particular situation and may, therefore, be subject to special rules not discussed below. Participants are advised to consult with a tax advisor concerning the specific tax consequences of participating in the 2016 Plan.
Incentive Stock Options |
Neither the grant nor the exercise of an ISO results in taxable income to the optionee for regular U.S. federal income tax purposes. However, an amount equal to (i) the per-share fair market value on the exercise date minus the exercise price at the time of grant multiplied by (ii) the number of shares with respect to which the ISO is being exercised will count as "alternative minimum taxable income" which, depending on the particular facts, could result in liability for the "alternative minimum tax" or AMT. If the optionee does not dispose of the shares issued pursuant to the exercise of an ISO until the later of the two-year anniversary of the date of grant of the ISO and the one-year anniversary of the date of the acquisition of those shares, then (a) upon a later sale or taxable exchange of the shares, any recognized gain or loss will be treated for tax purposes as a long-term capital gain or loss and (b) we will not be permitted to take a deduction with respect to that ISO for federal income tax purposes.
If shares acquired upon the exercise of an ISO were disposed of prior to the expiration of the two-year and one-year holding periods described above (a "disqualifying disposition"), generally the optionee will realize ordinary income in the year of disposition in an amount equal to the lesser of (i) any excess of the fair market value of the shares at the time of exercise of the ISO over the amount paid for the shares or (ii) the excess of the amount realized on the disposition of the shares over the participant's aggregate tax basis in the shares (generally, the exercise price). A deduction will generally be available to us equal to the amount of ordinary income recognized by the optionee. Any further gain realized by the optionee will be taxed as short-term or long-term capital gain and will not result in any deduction by us. A disqualifying disposition occurring in the same calendar year as the year of exercise will eliminate the alternative minimum tax effect of the ISO exercise.
Special rules may apply where all or a portion of the exercise price of an ISO is paid by tendering shares, or if the shares acquired upon exercise of an ISO are subject to substantial forfeiture restrictions. The foregoing summary of tax consequences associated with the exercise of an ISO and the disposition of shares acquired upon exercise of an ISO assumes that the ISO is exercised during employment or within three months following termination of employment. The exercise of an ISO more than three months following termination of employment will result in the tax consequences described below for NSOs, except that special rules apply in the case of disability or death. An individual's stock options otherwise qualifying as ISOs will be treated for tax purposes as NSOs (and not as ISOs) to the extent that, in the aggregate, they first become exercisable in any calendar year for stock having a fair market value (determined as of the date of grant) in excess of $100,000.
Nonqualified Stock Options |
An NSO (that is, a stock option that does not qualify as an ISO) results in no taxable income to the optionee or deduction to us at the time it is granted. An optionee exercising an NSO will, at that time, realize taxable compensation equal to (i) the per-share fair market value on the exercise date minus the exercise price at the time of grant multiplied by (ii) the number of shares with respect to which the stock option is being exercised. If the NSO was granted in connection with employment, this taxable income will also constitute "wages" subject to withholding and employment taxes. A corresponding deduction will
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generally be available to us. The foregoing summary assumes that the shares acquired upon exercise of an NSO option are not subject to a substantial risk of forfeiture.
Restricted Stock and Restricted Stock Units |
A restricted stock award results in no taxable income to the grantee or deduction to us at the time it is granted, unless the grantee elected to realize ordinary income in the year the award is granted in an amount equal to the fair market value of the restricted stock awarded, determined without regard to the restrictions. If no such election has been made, when the restrictions lapse with regard to any installment of restricted stock, the grantee will recognize ordinary income in an amount equal to the fair market value of the shares with respect to which the restrictions lapse. A grantee will not recognize income at the time an award of restricted stock units ("RSUs") is granted. The grantee will generally recognize ordinary income at the time the RSUs vest, in an amount equal to the cash paid or to be paid or the fair market value of the shares delivered or to be delivered. If the award of restricted stock or RSUs was granted in connection with employment, this taxable income will also constitute "wages" subject to withholding and employment taxes. A corresponding deduction will generally be available to the company.
Section 162(m) |
In general, Section 162(m) of the Code currently provides that if, in any year, the compensation that is paid to any "covered employee" (as defined under Section 162(m)) exceeds $1,000,000 per person, any amounts that exceed the $1,000,000 threshold will not be deductible by the company for federal income tax purposes.
Section 409A |
Section 409A of the Code imposes restrictions on nonqualified deferred compensation. Failure to satisfy these rules results in accelerated taxation, an additional tax to the holder in an amount equal to 20% of the deferred amount, and a possible interest charge. Stock options granted with an exercise price that is not less than the fair market value of the underlying shares on the date of grant will not give rise to "deferred compensation" for this purpose unless they involve additional deferral features. Stock options that are awarded under the 2016 Plan are intended to be eligible for this exception.
REQUIRED VOTE |
The approval of an amendment to the company's 2016 Omnibus Incentive Compensation Plan requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
Recommendation |
Our Board of Directors recommends a vote "FOR" approval of the resolution to approve the amendment to the company's 2016 Omnibus Incentive Compensation Plan to increase the number of available shares.
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The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, and Section 14A of the Securities Exchange Act of 1934, require that we provide our stockholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our NEOs as disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. Accordingly, we are asking our stockholders to approve the following advisory resolution:
"RESOLVEDnon-binding, advisory basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC. Accordingly, we are asking our stockholders to approve the following advisory resolution:
“RESOLVED, that the stockholders of XPO Logistics, Inc. (the "company") hereby approve, on an advisory basis, the compensation of the company's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in the Proxy Statement for the company's 2020 Annual Meeting of Stockholders."
We encourage stockholders to review the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosures included in this Proxy Statement. As described in detail under the heading "Executive Compensation—Compensation Discussion and Analysis," we believe that our compensation programs appropriately reward executive performance and align the interests of our NEOs and key employees with the long-term interests of our stockholders, while also enabling us to attract and retain talented executives.
This resolution, commonly referred to as a "say-on-pay" resolution, is non-binding on our Board of Directors. Although non-binding, our Board of Directors and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.
At the 2018 annual meeting of stockholders, our stockholders voted to approve an annual holding of the advisory vote on executive compensation. This frequency will continue until the next required non-binding, advisory vote is held on the frequency of advisory votes on executive compensation in 2024, as per the SEC rules.
REQUIRED VOTE |
Approval of this advisory resolution, commonly referred to as a "say-on-pay" resolution, requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the annual meeting at which a quorum is present.
RECOMMENDATION |
Our Board of Directors recommends a vote "FOR" approval of the advisory resolution to approve executive compensation set forth above.
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Proposal 4: Advisory Vote on Frequency of Future Advisory Votes to Approve Executive Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act provide that stockholders must be given the opportunity to vote, on anon-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our NEOs as disclosed in accordance with the SEC’s compensation disclosure rules, which we refer to as an advisory vote to approve executive compensation. By voting with respect to this Proposal 4, stockholders may indicate whether they would prefer that we conduct future advisory votes on executive compensation once every one, two or three years. Stockholders may, if they wish, abstain from casting a vote on Proposal 4. At the 2012 annual meeting of stockholders, our stockholders voted to approve an annual holding of the advisory vote on executive compensation. Pursuant to the SEC rules, public companies are required to hold a“say-on-frequency” vote every six years to give stockholders the opportunity to determine whether a“say-on-pay” vote to approve executive compensation should be held every year, every two years, or every three years. The company is holding the‘”say-on-frequency” vote this year; therefore, the next“say-on-frequency” vote will take place at the 2024 annual meeting.
After careful consideration, our Board has determined that holding an advisory vote to approve executive compensation every year is the most appropriate policy for our company at this time, and recommends that stockholders vote that future advisory votes to approve executive compensation should occur every year. While our company’s executive compensation programs are designed to promote a long-term connection between pay and performance, our Board recognizes that executive compensation disclosures are made annually and that holding an annual advisory vote to approve executive compensation will provide us with more direct and immediate feedback on our compensation disclosures. However, stockholders should note that because the advisory vote to approve executive compensation occurs well after the beginning of the compensation year, and because the different elements of our executive compensation programs are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or feasible to change executive compensation programs in consideration of any one year’s advisory vote on executive compensation by the time of the following year’s annual meeting of stockholders.
Required Vote
Pursuant to this advisory vote on the frequency of future advisory votes to approve executive compensation, stockholders will be able to specify one of four choices for this proposal on the proxy card or voting instruction: one year, two years, three years or abstain. Stockholders are not voting to approve or disapprove the recommendation of our Board. The voting frequency option that receives the highest number of votes cast by stockholders at the annual meeting or any adjournment or postponement of the annual meeting will be the frequency for the advisory vote to approve executive compensation that has been selected by stockholders. However, the vote is not binding on our Board and the Compensation Committee. Althoughnon-binding, our Board and the Compensation Committee will carefully review the voting results. Notwithstanding our Board’s recommendation and the outcome of the stockholder vote, our Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to compensation programs.
Recommendation
Our Board unanimously recommends a vote for the option of every “ONE YEAR” as the preferred frequency for future advisory votes to approve executive compensation.
Proposal 5: Stockholder Proposal Regarding an Annual Sustainability Report
We have been notified that a stockholder proponent expects to introduce and support the following proposal at the annual meeting. This stockholder proponent has provided certification indicating that, asIntegration of December 11, 2017, it was the beneficial owner of 160 shares of the company’s common stock, or approximately 0.0001%, and that it intends to maintain such ownership through the date of the annual meeting. Information regarding the stockholder proponent’s identity will be made available to requesting stockholders following oral or written request.
Proposal
RESOLVED:Shareholders request XPO Logistics, Inc. (“XPO”), issue an annual sustainability report describing the Company’s responses to Environmental, Social, and Governance (“ESG”("ESG") related issues affecting the Company. The report should be prepared at reasonable cost, omitting proprietary information, and be available to shareholders by December 2018.
It should address relevant policies, practices, and metrics on topic, such as human capital management and greenhouse gas emissions, and provide objective quantitative indicators and goals relating to each issue, where feasible.
We recommend using the Global Reporting Initiative’s Sustainability Reporting Guidelines to prepare the report. The Guidelines cover environmental impacts, human rights and labor practices and provide a flexible reporting system that allows omission of content irrelevant to company operations.
SUPPORTING STATEMENT:A global, third-party logistics company providing transportation and logistics services, XPO’s ESG exposure involves a complex set of processes and relationships, including:
In its Sustainability Yearbook 2017, RobecoSAM highlights climate change, human capital and occupational health and safety as among the sustainability issues facing transportation companies.
According to the 2016 Third-Party Logistics Study by C. John Langley, Jr., Ph.D., and Capgemini Consulting, the sector faces unprecedented labor shortages, bringing challenges and opportunities to human capital management. How companies handle human capital management issues, including media and regulatory attention on the classification of independent owner-operators, will help determine competitiveness in the industry, as the Sustainable Accounting Standards Board concluded in its 2014 Air Freight & Logistics Industry Brief. (http://www.sasb.org/wp-content/uploads/2014/09/TR0202_ AirFreightLogistics_Industry_Brief.pdf).Metrics Into Executive Compensation
XPO’s human capital management practices in the port drayage industry are of particular importance to shareholders following a year-long investigation by USA Today into the treatment of independent contractors – including those contracted by XPO – in the ports of Los Angeles and Long Beach. The report, which prompted four U.S. Senators to write to leading U.S. retailers about their knowledge of labor violations in the port trucking industry, called conditions in the sector “modern day indentured serv[itude].” (Seehttps://www.usatoday.com/pages/interactives/news/rigged-forced-into-debt-work-past-exhaustion-left-with-nothing/.)
XPO’s sustainability practices are particularly important to shareholders in light of its rapid expansion. FromFY-end 2013 toFY-end 2016, XPO spent over $6.5 billion on acquisitions and witnessed a twenty-fold increase in revenue.
Although XPO’s website provides some information related to ESG, reporting falls short of a comprehensive sustainability report. Competitors, such as Deutsche Post/DHL and UPS, provide disclosure of strategies, goals and performance around human capital and climate change initiatives.
We have been notified that the Office of the State Comptroller, State of New York, expects to introduce and support the following proposal at the annual meeting. This stockholder proponent has provided certification indicating that, as of November 26, 2019, it was the beneficial owner of 167,600 shares of the company's common stock, with an approximate value of $14,500,000, and that it intends to maintain such ownership through the date of the annual meeting. We are not responsible for the content of the stockholder proposal and the stockholder proponent's supporting statement, which are set forth below as they were submitted to us.
Statement in Opposition by our Board of Directors
XPO is committed to operating in a sustainable way with regard to the environment, human capital management and governance. This stockholder proposal is virtually identical to the one proffered last year by the same proponent. At that time, our response was that the preparation of a comprehensive sustainability report was unnecessary in light of the Company’s demonstrable track record on Environmental, Social and Governance (“ESG”) matters.
As we stated last year, we recognize the value in providing public disclosure regarding the Company’s sustainability focus. We also recognize the importance of meaningful benchmarks and goals that reflect actualESG-related achievements resulting from our business practices. We further stated last year that creating a sustainability report at that time would be a “premature, expensive and time-consuming exercise…especially in light of our continued focus on these topics and the information already available….” We did, however, create a special section on our corporate website dedicated to sustainability matters, the intention of which is to provide transparency about our efforts to continually improve the Company’s practices related to ESG matters.
Because of the Company’s multi-year effort to enhance its reporting on ESG matters, we believe now that the Company is ready to begin the process required to create a comprehensive sustainability report (“ESG Report”). However, we recommend that stockholders vote “AGAINST” this proposal. If affirmed, it would: 1) prevent the Company from completing due diligence to determine the most appropriate reporting framework; 2) require the Company to rush the reporting timeline; 3) place unnecessary financial and operational burdens on the Company; and 4) compromise the thoroughness of the end result.
Recommendation
Our Board of Directors recommends a vote “AGAINST” this stockholder proposal.
PROPOSAL |
RESOLVED: Shareholders of XPO Logistics, Inc. (XPO) urge the Board of Directors to examine and report to shareholders, at reasonable cost and omitting proprietary information, describing if, and how, it plans to integrate ESG metrics into the performance measures of named executive officers under the Company's compensation incentive plans. ESG is defined as how environmental, social, and governance considerations, and related financial impacts, are integrated into corporate strategy over the long term.
SUPPORTING STATEMENT: Strong management of ESG risks has a positive effect on long-term shareholder value and value creation. Failure to adequately manage and disclose performance on ESG issues can pose regulatory, legal, reputational, and financial risks to a company and its shareholders.
Investors are increasingly calling for improved corporate disclosure of performance on material ESG issues. According to the 2019 UN Global Compact CEO Study, 84% of executives from the world's largest companies cited a clear link between sustainability and business value.
Additionally, that study found 66% of CEOs would agree to have their compensation linked to sustainability performance. A recent Mercer survey of 135 U.S. and Canadian companies found 30% of respondents use ESG metrics in their incentive compensation plans and 21% are considering incorporating metrics.
Effectively managing ESG issues offers positive opportunities for companies and should be a key metric by which executives are judged. By integrating ESG metrics into executive compensation, companies can reduce risks related to ESG underperformance by incentivizing executives to meet sustainability goals, thereby achieving greater long-term value for shareholders.
The Sustainability Accounting Standards Board identifies XPO's material ESG issues as labor practices; employee health and safety; supply chain management; accident and safety management; greenhouse gas emissions; and air quality. While XPO has taken steps to address these issues with various sustainability goals, it has not explicitly integrated ESG metrics into executive incentives. Furthermore, XPO has demonstrated poor performance related to the management of these risks, including:
Shareholders have voiced concern regarding XPO executive compensation practices through its most recent advisory vote on executive compensation, which received only 67% support from shareholders.
XPO should provide clarity regarding whether its plan to improve ESG performance includes integrating ESG metrics into executive compensation assessments.
STATEMENT IN OPPOSITION BY OUR BOARD OF DIRECTORS |
The Board of Directors Unanimously Recommends a Vote Against Stockholder Proposal No. 5
We Have a Proven Track Record of Consistently Integrating Environmental, Social and Governance ("ESG") Metrics into Our Long-Term Strategy and Using Those Metrics to Drive Performance.
An effective approach to managing risks associated with ESG objectives requires more than simply tying executive compensation to arbitrary goals. We understand that building a strong ESG footprint depends not just on setting goals, but on making progress towards those goals. That is why our approach to ESG and all areas of our business is one of purpose-driven progress rooted in innovation. This approach is fundamental to how we operate our business for the long-term. Our commitment to this approach is evidenced across our business practices and provides a more holistic and effective approach to these core principles than the limited measure proposed by the proponent.
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Last year we published our first Sustainability Report (the "2018 Sustainability Report"), which details our objectives and progress in the areas of environmental sustainability, social initiatives and governance performance. We intend to issue an updated report annually. As articulated in the 2018 Sustainability Report, the Board and management believe that XPO's "success depends on a strong governance structure, good corporate citizenship, inclusive workplaces, environmental responsibility and ethical business conduct that is beyond reproach." For example, the 2018 Sustainability Report highlighted our focus on environmental protection, particularly with respect to our transportation segment. In Europe, we are using a series of approaches, including alternative-fuel vehicles, multimodal options and technologies, to tailor solutions that minimize environmental impact, and in Iberia, we own high-capacity mega-trucks that reduce road miles and cut CO2 emissions by as much as 20% for the same freight volume. More information on our commitment to ESG initiatives can be found in the 2018 Sustainability Report, which is posted on our website. Another initiative highlighted in the 2018 Sustainability Report was our development of what we view as gold-standard benefits for women and families in the United States. As outlined in the 2018 Sustainability Report, when an XPO employee becomes a new parent through birth or adoption, that individual can qualify for up to six weeks of 100% paid leave as the infant's primary caregiver or up to two weeks' leave at 100% pay as the secondary caregiver. Moreover, while pregnant, a woman can request certain automatic accommodations or alternative work arrangements, with the guarantee that she'll continue to earn her base wage rate while the accommodation(s) is in place. She also receives up to 80 hours of 100% paid prenatal leave for health and wellness preparation for the child's arrival.
XPO's commitment to environmentally responsible practices has also earned it the US EPA SmartWay® Partnership certification. As stated in the Form 10-K for the year ended December 31, 2019, "[the Company] has a strong commitment to sustainability." For example, as disclosed in the Form 10-K for the year ended December 31, 2019, in the United States ("U.S."), XPO has been named a Top 75 Green Supply Chain Partner by Inbound Logistics for four consecutive years, and in 2016 we were awarded the label "Objectif CO2" for outstanding environmental performance of transport operations in Europe by the French Ministry of the Environment and the French Environment and Energy Agency. In Spain, all of our sites meet Leadership in Energy and Environmental Design ("LEED") energy certification standards for 100% consumption of renewable energy. In the United Kingdom ("U.K."), the warehouse of the future we created with Nestlé is scheduled to open in mid-year 2020. It utilizes environmentally friendly ammonia refrigeration systems, energy-saving light-emitting diode ("LED") lighting, air-source heat pumps for administration areas and rainwater harvesting. A number of our logistics facilities are ISO14001-certified, which ensures environmental and other regulatory compliances.
In transportation, we have made substantial investments in fuel-efficient Freightliner Cascadia tractors in North America; these use Environmental Protection Agency ("EPA") 2013-compliant and Greenhouse Gas 2014-compliant Selective Catalytic Reduction technology. In Europe, we own one of the industry's most modern road fleets: 98% compliant with Euro V, EEV and Euro VI standards.
Our Compensation Committee Is Best Positioned to Determine the Appropriate Metrics for Our Executive Compensation Programs.
Our Board believes that our Compensation Committee, which is composed entirely of independent directors, is best positioned to design and implement executive compensation arrangements tailored to our Company that will promote our goals and create long-term shareholder value. Further, the Compensation Committee should be able to exercise its business judgment on these matters at the appropriate times and without obligating itself to one approach through forced disclosure of future plans regarding selection of applicable metrics. The incentive compensation program is structured around financial and operational performance measures that the Compensation Committee believes are most important in driving the responsible, long-term growth of the business. Given that sustainable performance is inherent in our approach, incorporating explicit ESG performance metrics is not necessary at this time. We are fully committed to operating in a sustainable and ethical manner, and our Board believes that the proposal is not necessary.
We are committed to serving the interests of our employees, customers, stockholders and the global community. However, given that ESG goals are inherent in our strategy, we believe our existing compensation program already addresses the objectives of the proposal.
For these reasons, the Board of Directors unanimously urges stockholders to vote AGAINST Proposal No. 5.
REQUIRED VOTE |
Approval of a policy requiring that the company examine and report to stockholders how it plans to integrate ESG metrics into performance measures of named executive officers requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
RECOMMENDATION |
Our Board of Directors recommends a vote "AGAINST" this stockholder proposal.
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Proposal 6: Stockholder Proposal Regarding the |
We have been notified that the International Brotherhood of Teamsters, 25 Louisiana Avenue, NW, Washington, D.C. 20001, expects to introduce and support the following proposal at the annual meeting. This stockholder proponent has provided certification indicating that, as of December 17, 2019, it was the beneficial owner of 160 shares of the company's common stock, with an approximate value of $14,000, and that it intends to maintain such ownership through the date of the annual meeting. We are not responsible for the content of the stockholder proposal and the stockholder proponent's supporting statement, which are set forth below as they were submitted to us.
PROPOSAL |
RESOLVED: That shareholders of XPO Logistics, Inc. ("the Company"), urge the Board of Directors (the "Board") to take the steps necessary to adopt a policy, with amendments to governing documents as needed, so that, to the extent feasible, the Chairman of the Board shall be an independent director who has not previously served as an executive officer of the Company. The policy should be implemented so as not to violate any contractual obligations and should specify the process for selecting a new independent chairman if the chairman ceases to be independent between annual meetings of shareholders or if no independent director is available and willing to serve as chairman.
SUPPORTING STATEMENT: XPO's CEO currently serves as Board Chairman. In our view, the chairman should be an independent director, who has not previously served as an executive, in order to provide robust oversight and accountability of management, and to facilitate effective deliberation of corporate strategy, which we believe, is difficult to accomplish when the CEO serves as chairman. Even with robust responsibilities, we believe the position of a lead independent director is inadequate to this task because ultimate responsibility for board leadership remains with the chairman/CEO. We also do not believe the recent creation of a vice-chair role remedies the situation, with the position confusing rather than enhancing the board leadership structure.
In our opinion, these considerations are especially critical at XPO given the media and political scrutiny of the Company's culture. In 2018, on the heels of a front page New York Times investigation into a spate of miscarriages and allegations of pregnancy discrimination at a Memphis facility owned by XPO and operated on behalf of Verizon, nine U.S. Senators wrote to XPO (and Verizon) calling for immediate changes to the "allegedly deleterious workplace practices." Separately, 97 U.S. House representatives called on the House Committee on Education and the Workforce to investigate allegations of pregnancy discrimination, sexual harassment and hazardous working conditions at the Company. XPO's response included changing its pregnancy care policy and closing the warehouse. Even so, the story continued to generate negative media coverage, notably a July 2019 story on HBO's "Last Week Tonight with John Oliver," which interviewed a former Memphis XPO worker concerning working conditions at the facility as part of a segment on warehouse employment.
In the midst of such scrutiny, we believe an independent chairman can be invaluable in ensuring XPO maintains good communications and credibility with stakeholders. In addition, independent board leadership could strengthen board management dialogue on corporate culture and compliance.
We urge fellow shareholders to vote FOR this proposal.
STATEMENT IN OPPOSITION BY OUR BOARD OF DIRECTORS |
The Board of Directors Unanimously Recommends a Vote Against the Stockholder Proposal No. 6
Mr. Jacobs' Combined Role of Chairman and CEO Serves the Best Interests of XPO's Stockholders.
At this time, the Board believes that the short-term and long-term interests of the Company's stockholders are best served by Bradley S. Jacobs serving as both Board Chairman and Chief Executive Officer. Mr. Jacobs has an important record of creating significant value for stockholders. Since Mr. Jacobs joined XPO as Chairman and CEO in 2011, XPO's annual revenue has grown from less than $200 million to more than $16 billion, making XPO the seventh best-performing stock of the last decade on the Fortune 500, based on Bloomberg market data. Under his leadership, the Company has won numerous accolades, including being named one of the "World's Most Admired Companies" by Fortune magazine and one of "America's Best Employers" by Forbes magazine. On January 15, 2020, Mr. Jacobs underscored his commitment to maximize shareholder value when XPO announced that the Board had authorized a review of strategic alternatives, including the possible sale or spin-off of one or more of XPO's business units. The strategic alternatives review demonstrates the agility with which Mr. Jacobs can focus on creating value for shareholders, while remaining intensely committed to the satisfaction of our customers and employees. The Board believes that Mr. Jacobs' leadership in both his Board and executive roles has been critical to the success of XPO's business and culture, and that separating the roles would be deleterious in both the near-term and the long-term and would unduly risk the speed and quality of the Company's decision-making process.
XPO Has a Robust Governance Structure that Ensures Independent Oversight of Management.
The Company's robust corporate governance structure enables the Board to strike the right balance between decisive leadership and rigorous independent oversight of management. The current Board composition is highly independent. Currently eight out of XPO's nine directors are independent, four of whom have been added to the Board since 2016. Furthermore, the Board's committees and the committee chairs are comprised solely of independent directors. The charters of
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these committees require that all members be independent, with the sole exception of the Acquisition Committee. However, the current members of the Acquisition Committee are also all independent.
To complement the roles of the committees and the committee chairs in providing effective independent oversight, the Board has established two leadership positions for independent directors—the Lead Independent Director and the Vice Chairman.
The authorities and duties of the Lead Independent Director include, among others: (i) presiding at executive sessions of outside directors and at meetings of the Board where the Chairman is not present; (ii) coordinating with the Chairman with respect to meeting agendas and approving final meeting agendas; (iii) coordinating with the Chairman as to appropriate Board meeting schedules to ensure sufficient time for discussion of all agenda items; (iv) coordinating with the Chairman on the materials sent to the Board, and approving final meeting materials; (v) calling and chairing sessions of the Independent Directors; (vi) ensuring availability for direct stockholder communication as appropriate, if requested by major stockholders; and (vii) serving as a liaison between the Chairman and the non-management directors.
Michael Jesselson, an independent director who has an exemplary record as a director of XPO and who has substantial public company board experience, has served as the Lead Independent Director since 2016. The Board believes that the position of Lead Independent Director has served as an effective balance to the dual role served by Mr. Jacobs.
In early 2019, the Board established an independent Vice Chairman position as part of its ongoing commitment to strong corporate governance. The position of Vice Chairman is defined as an independent director with authorities and duties that include, among others: (i) presiding at meetings of the Board where the Chairman and the Lead Independent Director are not present; (ii) assisting the Chairman, when appropriate, in carrying out his or her duties; (iii) assisting the Lead Independent Director, when appropriate, in carrying out his or her duties; and (iv) such other duties, responsibilities and assistance as the Board or the Chairman may determine.
AnnaMaria DeSalva, an independent director who has a wealth of experience with public policy development, has served as Vice Chairman of the Board since February 2019. In this role, Ms. DeSalva provides support on key governance matters and stockholder engagement to the Chairman, the Lead Independent Director and the rest of the Board.
To encourage open discussion without management's influence, XPO's Corporate Governance Guidelines (available on the Company's corporate website at www.xpo.com under the Investors tab) require that non-management directors meet one or more times annually without the presence of management. To further facilitate independent oversight, the Corporate Governance Guidelines provide for Board members' unfettered access to senior XPO officers and outside advisors, and also require directors to "exercise appropriate diligence in making decisions and in overseeing management of the Company . . . based on the best interests of the Company and its stockholders and without regard to any personal interest."
As a result of these strong governance practices, the independent oversight of management and of issues of fundamental importance to the Company is already delegated to the Board's independent directors, including two independent directors who are part of the Board's mandated leadership structure.
XPO's Existing Governance Structure Strikes the Right Balance Between Ensuring Independent Oversight of Management and Not Limiting the Board's Imperative Flexibility.
As the Company's Board of Directors has repeatedly demonstrated over the years, the Board takes matters of corporate governance very seriously and believes that an appropriate balance already exists between Mr. Jacobs' effective leadership and the robust corporate governance practices in effect. The Board of Directors of XPO also believes that the Company should maintain the flexibility to select the most appropriate Board structure based on myriad internal and external factors. The proposal, which requires that the Chairman be an independent director who has not previously served as an executive officer of the Company, would unduly restrict the Board from determining the best structure at a particular time and, thus, would not be in the best interests of the Company and its stockholders. The Board's opinion in this matter is the product of its regular evaluations of Board policies, as well as its careful consideration of the proposal at hand.
Therefore, the Board believes that this proposal is both unnecessary and not in the best interests of XPO's stockholders, particularly as it would deprive the Board of the flexibility required to exercise its business judgment in selecting the most qualified and appropriate individuals to lead the Board.
For these reasons, the Board of Directors unanimously urges stockholders to vote AGAINST Proposal No. 6.
REQUIRED VOTE |
Approval of a policy requiring that the chairman of the Board of Directors be appointed from among independent directors requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
RECOMMENDATION |
Our Board of Directors recommends a vote "AGAINST" this stockholder proposal.
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Proposal 7: Stockholder Proposal Regarding Ways to Strengthen the Prevention of Workplace Sexual Harassment and Align Senior Executive Compensation |
We have been notified that the Service Employees International Union Pension Plans Master Trust, 1800 Massachusetts Ave., NW Washington, D.C. 20036 expects to introduce and support the following proposal at the Annual Meeting. This stockholder proponent has provided certification indicating that, as of December 12, 2019, it was the beneficial owner of 3,015 shares of the company's common stock, with an approximate value of $258,000, and that it intends to hold at least the minimum number of shares of the company's common stock required by the SEC through the date of the Annual Meeting. We are not responsible for the content of the stockholder proposal and the stockholder proponent's supporting statement, which are set forth below as they were submitted to us.
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RESOLVED: That shareholders of XPO Logistics ("XPO") urge the Board of Directors to strengthen XPO's prevention of workplace sexual harassment by formalizing the Board's oversight responsibility, aligning senior executive compensation incentives, reviewing (and if necessary overseeing revision of) company policies, and reporting to shareholders by December 31, 2020 on actions taken (omitting confidential and proprietary information, as well as facts relevant to claims against XPO of which XPO has notice).
SUPPORTING STATEMENT: Recently, workplace sexual harassment has generated substantial attention from the media and policy makers and has spurred significant public debate. The high-profile #metoo social media hashtag, and sexual harassment claims involving public figures like Bill O'Reilly, Steve Wynn, and Les Moonves, have highlighted the prevalence and impact of harassment. The proportion of Americans who believe workplace sexual harassment is a serious problem increased from 47% in 2011 to 64% in 2017. (Cornerstone)
Workplace sexual harassment can damage companies in several ways. First, it may harm corporate reputation, alienating consumers. A recent study reported in the Harvard Business Review found that a single sexual harassment claim makes a company seem less equitable and that sexual harassment, more than financial misconduct, is perceived as evincing a problematic corporate culture. (https://hbr.org/2018/06/research-how-sexual-harassment-affects-a-companys-public-image?utm_source=twitter&utm_campaign=hbr&utm_medium=social)
As well, a company whose corporate culture tolerates sexual harassment tends to have higher turnover and less productive employees. The Center for American Progress estimates median turnover costs at 21% of an employee's annual salary. Productivity can fall due to absenteeism, lower motivation, greater conflict and avoiding interaction with harassers. (https://law.vanderbilt.edu/phd/faculty/joni- hersch/2015_Hersch_Sexual_Harassment_in_the_Workplace_IZAWOL_Oct15.pdf)
Sexual harassment allegations can also lead to declines in share value. For example, the market capitalization of Wynn Resorts dropped by $3 billion over two days after sexual harassment allegations against CEO Steve Wynn surfaced. (https://www.marketwatch.com/story/wynn-resorts-shares-tank-after-report-of-sexual-misconduct-by-owner-steve-wynn-2018-01-26)
Robust board oversight is especially important at XPO following multiple reports of sexual harassment, as well as gender and pregnancy discrimination—prompting calls for an investigation by 97 U.S. House Representatives. In 2018, at least 12 women at three XPO warehouses filed charges with the Equal Employment Opportunity Commission alleging sexual harassment and discrimination by supervisors, and in certain cases retaliation. In September, the New York Times published a front-page investigation into a spate of miscarriages at a Memphis warehouse currently operated by XPO. The report, which prompted inquiries from nine U.S. Senators into pregnancy discrimination at XPO, asserts that many of the women involved were denied doctor requests for modified work. Accounts of sexual harassment, gender bias, and pregnancy discrimination have also arisen at an XPO run warehouse in Guadalajara, Spain. The Memphis XPO Warehouse was featured in a story by John Oliver HBO show "Last Week Tonight" in July 2019, that shows the looseness of the investigation into the issues at the warehouse and how the company finally acknowledges that there is no written reporting on the Memphis investigation (https://www.commercialappeal.com/story/news/2019/07/03/john-oliver-mentions-memphis-xpo-logistics-having-poor-working-conditions-hbo/1637644001/)
We urge shareholders to support this proposal.
STATEMENT IN OPPOSITION BY OUR BOARD OF DIRECTORS |
The Board of Directors Unanimously Recommends a Vote Against the Stockholder Proposal No. 7
The Board of Directors of XPO has reviewed the proposal and the Company's existing policies and practices with respect to the prevention of sexual harassment. As explained in more depth below, XPO's existing policies and procedures already provide a robust framework to prevent any kind of workplace harassment, including sexual harassment, and thus the Board believes the proposal is unnecessary.
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The Board Has Already Formalized Its Oversight Role in the Company's Policies and Public Disclosures.
With regard to the prevention of workplace harassment, including sexual harassment, the Board has already defined its oversight role in a clear and sufficient manner in the Company's policies and public disclosures. The Board has established the Company's Code of Business Ethics and other Business Ethics Policies (including the No Discrimination, Harassment or Retaliation Policy) that expressly focus on preventing sexual harassment and discrimination.
In addition, as disclosed in this Proxy Statement, the Board provides overall risk oversight with a focus on the most significant risks facing the Company, and regularly discusses current and potential risks and approaches for assessing, monitoring, mitigating and controlling risk exposure. To assist with the Board's risk oversight function, the Board has established four committees, including the Audit Committee, which is specifically responsible for supporting the Board's oversight of the Company's compliance with legal and regulatory requirements, including the prevention of sexual harassment. Such responsibility of the Audit Committee is clearly delineated in its charter.
XPO's Executive Compensation Structure Is Aligned with the Interests of XPO's Stockholders.
The Board has already addressed the second request of the proposal; that is, "aligning senior executive compensation incentives." Putting aside the proposal's critical flaw of not providing clarity on what kind of alignment would be expected, the Board has already implemented a compensation structure that strikes an appropriate balance in motivating senior executives to deliver long-term results for the Company's stockholders, while simultaneously holding its senior leadership team accountable. The Company's executive compensation consists of fixed base salaries and variable incentive compensation in the form of annual cash incentives and equity grants that emphasize pay for performance and, in the case of equity-based grants, achievement of long-term performance goals.
Specifically, with regard to the Company's named executive officers (NEOs), the total reward package for each NEO reflects assessments of individual responsibilities, contributions to corporate performance, the company's trend on total stockholder return and overall company success in reaching strategic goals. The Company has also established a broad clawback policy, under which the Company may recoup executive compensation in the event of certain misconduct that violates Company policies. Accordingly, the Company has already aligned its senior executive compensation incentives with the interests of the Company's stockholders.
XPO Has Already Established Policies and Procedures to Prevent Workplace Sexual Harassment.
The Company has already established policies and procedures intended to prevent any kind of workplace harassment, including sexual harassment. The Company's Code of Business Ethics makes it clear that the Company does not tolerate harassment or discrimination on the basis of any protected category or class and that the Company's employees, officers and directors must not engage in any abusive, harassing or offensive conduct, whether verbal, physical or visual. XPO employees are introduced to the Code of Business Ethics during their new-hire orientation process and provided a copy of the Code of Business Ethics as part of their new-hire package of information. In 2019, more than 37,000 employees completed a mandatory training course dedicated to refreshing their awareness and understanding of the Code of Business Ethics.
The Company has a No Discrimination, Harassment or Retaliation Policy (the "Policy") to further reinforce the prevention of workplace harassment. The Policy provides for, among other things, the prohibition of discrimination, harassment or retaliation in the workplace; the prompt investigation of all claims of discrimination, harassment or retaliation; and appropriate remedial action, up to and including dismissal. The Policy, together with the Company's Code of Business Ethics, also sets forth specific reporting procedures that include the Ethics Hotline, where concerns can be reported anonymously if desired by employees. Like the refresher training on the Company's Code of Business Ethics, XPO provided refresher training in 2019 and early 2020 for nearly 70,000 employees on the Policy. The Respect in the Workplace training met federal and state requirements and described the Company's policies regarding workplace harassment, discrimination and retaliation and reinforced the numerous reporting procedures available to all employees.
Taken together, the Code of Business Ethics, Policy, Ethics Hotline, employee training and supporting communications that are posted in XPO workplaces provide a robust framework to continuously address any potential incidence of harassment, discrimination or retaliation throughout the Company.
To ensure that all employees of the Company understand and comply with the Company's values and rules of conduct, the Company distributes an Employee Handbook to each employee upon hiring and makes the Employee Handbook available via an online employee portal. The Employee Handbook explains the internal policies of the Company in detail, including the Code of Business Ethics and the Policy. The Employee Handbook is reviewed annually by Company management; it was most recently reviewed and updated in February 2020.
The Company also regularly reviews and supplements its policies as needed, and the Board participates in various reviews and advises management regarding these topics. For example, when allegations were raised in 2018 related to the Company's pregnancy accommodation practices, the Company engaged Tina Tchen, former Chief of Staff to First Lady Michelle Obama and Executive Director of the White House Council on Women and Girls, to assess the Company's implementation of its accommodation policy. While Ms. Tchen found no wrong-doing by the Company, she recommended
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additional education and training of supervisors and workers, which the Company immediately implemented. In advance of Ms. Tchen's review, the Company adopted a new Pregnancy Care Policy that far exceeds any federal, state or local requirements and is one of the most progressive policies in the country.
Since being enacted on January 1, 2019, the Company has granted more than 1,135 accommodations to over 600 pregnant employees, 85% of whom are hourly employees. In conjunction with the introduction of the new Pregnancy Care Policy, the Company also enacted a Family Bonding Policy on January 1, 2019 to provide paid leave for parents to bond with their newborn or newly adopted child. Primary caregivers receive 100% of pay for six weeks, and secondary caregivers receive 100% of pay for two weeks. In 2019, 1,216 employees utilized the paid parental leave benefit, including 355 primary caregivers, 245 of whom are female and 110 of whom are male.
The Board believes that the Company's policies effectively articulate and implement its longstanding support for, and continued commitment to, the prevention of sexual harassment, and therefore adoption of the proposal would not provide any additional benefits or safeguards. For these reasons, the Board of Directors unanimously urges stockholders to vote AGAINST Proposal No. 7.
REQUIRED VOTE |
Approval of a policy requiring the company to adopt measures to strengthen prevention of workplace sexual harassment and align senior executive compensation incentives requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
RECOMMENDATION |
Our Board of Directors recommends a vote "AGAINST" this stockholder proposal.
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Proposal
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We have been notified that the CtW Investment Group, 1900 L Street NW, Suite 900, Washington, D.C. 20036 expects to introduce and support the following proposal at the Annual Meeting. This stockholder proponent has provided certification indicating that, as of December 20, 2019, it was the beneficial owner of 38 shares of the company's common stock, with an approximate value of $3,300, and that it intends to hold at least the minimum number of shares of the company's common stock required by the SEC through the date of the Annual Meeting. We are not responsible for the content of the stockholder proposal and the stockholder proponent's supporting statement, which are set forth below as they were submitted to us.
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RESOLVED: The shareholders ask the Board of Directors of XPO Logistics, Inc. to adopt a policy that in the event of a change in control (as defined under any applicable employment agreement, equity incentive plan or other plan), there shall be no acceleration of vesting of any equity award granted to any senior executive officer, provided, however, that the Board's Compensation Committee may provide in an applicable grant or purchase agreement that any unvested award will vest on a partial,pro rata basis up to the time of the senior executive officer's termination, with such qualifications for an award as the Committee may determine.
For purposes of this Policy, "equity award" means an award granted under an equity incentive plan as defined in Item 402 of the SEC's Regulation S-K, which addresses elements of executive compensation to be disclosed to shareholders. This resolution shall be implemented so as not to affect any contractual rights in existence on the date this proposal is adopted, and it shall apply only to equity awards made under equity incentive plans or plan amendments that shareholders approve after the date of the 2020 annual meeting.
SUPPORTING STATEMENT: XPO Logistics ("Company") allows senior executives to receive an accelerated award of unearned equity under certain conditions after a change of control of the Company. We do not question that some form of severance payments may be appropriate in that situation. We are concerned, however, that current practices at the Company may permit windfall awards that have nothing to do with an executive's performance.
According to last year's proxy statement, a change in control could have accelerated the vesting of approximately $60 million worth of long-term equity to the Company's five senior executives, with Chairman and Chief Executive Officer Bradley Jacobs entitled to over $38 million.
We are unpersuaded by the argument that executives somehow "deserve" to receive unvested awards. To accelerate the vesting of unearned equity on the theory that an executive was denied the opportunity to earn those shares seems inconsistent with a "pay for performance" philosophy worthy of the name.
We do believe, however, that an affected executive should be eligible to receive an accelerated vesting of equity awards on a pro rata basis as of his or her termination date, with the details of anypro rata award to be determined by the Compensation Committee.
According to Institutional Shareholder Services, 38% of Russell 3000 companies prohibited equity acceleration of performance based shares upon a change of control in 2018.
We urge you to vote FOR this proposal.
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The Board of Directors Unanimously Recommends a Vote Against Stockholder Proposal No. 8
The Current Structure of Equity Awards Aligns the Interests of our Senior Executives and Stockholders, Encourages Stability During a Potential Change in Control, and Rewards Executives for their Performance.
As we describe in detail in the section of this Proxy Statement titled "Executive Compensation—Compensation Discussion and Analysis," our compensation program for senior executives is premised on our dedication to our pay-for-performance culture and our commitment to align executive compensation with long-term stockholder value. We believe that our Compensation Committee, which is composed entirely of independent directors, is best suited to design and implement executive compensation arrangements that are appropriate for our Company and our stockholders, including with respect to the treatment of equity awards in connection with a change in control.
The proponent attempts to preemptively bind the Compensation Committee with respect to a singular element of our executive compensation program. The proposal would prohibit the Compensation Committee from providing for accelerated vesting of unvested equity awards held by senior executive officers upon the occurrence of a change in control and permit only pro rata vesting of equity awards up to the time of a senior executive officer's termination of employment following a change in control. In the context of a potential change in control, any perceived lack of protection of the value of unvested equity awards can create conflicts of interest and distractions because of uncertainty that may arise for executives, such as loss of job security. Accelerated equity award vesting can eliminate potential disincentives for executives to forego pursuing a change in control
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transaction that would benefit stockholders. In particular, accelerated vesting aligns the interests of stockholders and executives by allowing key decision makers to remain objective and focused on maximizing stockholder value up to and following a potential change in control. The Compensation Committee should be able to exercise its business judgment to determine whether, and under what circumstances, the accelerated vesting of equity awards is in the best interest of the Company and our stockholders.
Adopting the Proposal Would Limit the Company's Ability to Attract and Retain Talented Executives.
As indicated in the proponent's supporting statement, pro rata vesting is not market practice—in fact, approximately 86% of companies in the Russell 3000 in 2019 did not prohibit accelerated vesting of performance-based equity awards upon a change in control according to Institutional Shareholder Services. Therefore, limiting the business judgment of the Compensation Committee and adopting the proponent's one-size-fits-all approach could place us at a competitive disadvantage in attracting and retaining senior executives, particularly if a change in control transaction is pending or contemplated.
Further, accelerated vesting of equity awards is an effective way for us to retain our leadership team up to and following a change in control transaction. Retaining senior executives while a change in control transaction is pending can be particularly important to the Company's continued success because the loss of such executives could jeopardize a pending transaction or adversely affect the Company's business prospects or operations if the transaction is not completed. Adopting the proposal could create a significant disadvantage in retaining key executives, which could result in executive turnover that would be detrimental to the Company and our stockholders.
The Company's Demonstrated Commitment to Pay-For-Performance Refutes the Allegations Made in the Proposal
Although we believe many of the assertions in the proponent's supporting statement are irrelevant to the proposal itself, we want to specifically add context to several misleading statements related to our commitment to our pay-for-performance philosophy. The proponent suggests that accelerated vesting of equity awards is premised on our belief that executives are denied the opportunity to earn those shares in the event of a change in control transaction. However, it is for the reasons articulated above and in the Compensation Discussion and Analysis section of our proxy statement that our Board believes that the current structure of the Company's executive compensation awards is appropriate and effective. Moreover, the proponent fails to acknowledge our continued commitment to our pay-for-performance philosophy. For example, the Company's executive compensation program consists of fixed base salaries and variable incentive compensation in the form of annual cash incentives and equity grants that emphasize pay for performance. In addition, the total reward package for each named executive officer reflects an assessment of individual responsibilities, contributions to corporate performance, the Company's trend on total stockholder return, and the Company's overall success in achieving its strategic goals. Further, all of the outstanding equity awards granted to Mr. Jacobs, Mr. Cooper and Mr. Harik are performance-based, demonstrating our Company's strong commitment to aligning executive compensation with long-term stockholder value.
Accordingly, our Board believes that the current structure of our executive compensation program, including the provisions related to accelerated vesting of equity awards, appropriately reflects our pay-for-performance philosophy, aligning the interests of our executives with those of our stockholders and allowing us to attract and retain talented executives.
For these reasons, the Board of Directors unanimously urges stockholders to vote AGAINST Proposal No. 8.
REQUIRED VOTE |
Approval of a policy requiring that in the event of a change in control there shall be no acceleration of vesting of senior executive officers' equity awards requires the affirmative vote of a majority of the votes cast (meaning the number of shares voted "for" such proposal must exceed the number of shares voted "against" such proposal) by holders of shares of our common stock (including those that would be issued if all our outstanding Series A Preferred Stock had converted into shares of our common stock as of the Record Date) at the Annual Meeting at which a quorum is present.
RECOMMENDATION |
Our Board of Directors recommends a vote "AGAINST" this stockholder proposal.
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OTHER MATTERS |
We do not expect that any matter other than the foregoing proposals will be brought before the 2020 Annual Meeting. If, however, such a matter is properly presented at the Annual Meeting or any adjournment or postponement of the Annual Meeting, the persons appointed as proxies will vote as recommended by our Board of Directors or, if no recommendation is given, in accordance with their judgment.
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If you would like to receive a copy of our 2019 Annual Report or this
Although we include references to our website (www.xpo.com) throughout this proxy statement, information that is included on our website is not incorporated by reference into, and is not a part of, this proxy statement. Our website address is included as an inactive textual reference only. We use our website as one means of disclosing material non-public information and for complying with our disclosure obligations under the SEC's Regulation FD. Such disclosures typically will be included within the Investor Relations section of our website. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
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