UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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☐ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | |
☒ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material under§240.14a-12 |
Kelly Services, Inc.
(Name of Registrant as Specified In Its Charter)
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LETTER FROM THE CHAIRMAN OF THE BOARD
April 8, 20196, 2020
To Our Shareholders:
You
Dear Stockholders:
2019 saw a leadership transition for our Company and continued progress in corporate governance.
On October 1, 2019, Peter Quigley became our new President and CEO and joined our Board of Directors. George Corona stepped down as President and CEO for his planned retirement on June 30, 2020. Peter was selected following an extensive succession process conducted by the Board, involving internal and external candidates. Prior to becoming President and CEO, Peter spent 17 years in varied and demanding leadership roles at Kelly. With the support of the Board, Peter is leading the Company’s strategic transformation into a specialty talent company.
On behalf of the Board, I want to express our gratitude to George for his exceptional leadership. He has helped Kelly become a more focused company, make solid investments in technology and the future of work, and stay aligned with our Noble Purpose of connecting people to work in ways that enrich their lives. We are cordially invitedgrateful for his 25 years of service to attendKelly and pleased that George will remain on our Board and will be contributing his experience to Peter’s transition.
I would also like to take this opportunity to thank Takao Wada for his distinguished service on the Board. Mr. Wada served as the designated representative of Persol Holdings, LLC, Kelly’s strategic partner in the Asia-Pacific region, and is not standing forre-election.
The Board is committed to sound corporate governance as a means of enhancing long-term stockholder value. We have a majority independent Board and fully independent Audit and Compensation Committees. Following our Annual Meeting, when we will make new committee assignments, our Corporate Governance and Nominating Committee will be fully independent. That will bring us to the important milestone of satisfying all the Nasdaq independence requirements for board and board committees that are applicable tonon-controlled companies.
As of this writing, like most businesses throughout the world, we are confronting serious challenges raised by COVID – 19 (“Coronavirus”) for our Company, employees, and business partners. In response, Kelly implemented its emergency management procedures under which a cross-functional Emergency Management Team was assembled to coordinate crisis management for the organization, including containment measures, policies, communications, and resources. We have implemented measures designed to protect the health and safety of Kelly employees, including initiating travel restrictions, barringin-person attendance at conferences and large events, and restricting nonessential visitors from our buildings. Kelly’s adoption of information technology systems and policies that enable remote work are proving to be extremely beneficial during this time, and Kelly workers are able to perform nearly all essential functions remotely. When possible, Kelly is also working with its customers to implement remote work plans for temporary employees. Kelly will continue to adapt its approach in light of government actions, best practices, and the recommendations of public health officials. As we get closer to the date of the Annual Meeting, of Shareholders of Kelly Services, Inc., whichwe will determine whether it is advisable to hold our Annual Meeting as a virtual meeting. Whatever format it ultimately takes, I hope you will be held at 11:00 a.m. Eastern Daylight Time on Wednesday, May 8, 2019. The meeting will be held in the Auditorium located on the first floor of our headquarters building at 999 West Big Beaver Road, Troy, Michigan 48084-4716.
YOUR VOTE IS IMPORTANT TO US
As explained in the enclosed Proxy Statement, at this year’s meeting Class B Shareholders will be asked to vote on the election of directors, anon-binding advisory vote on executive compensation, and the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2019.
Whether you planable to attend or not, please date, sign and return the proxy card in the accompanying envelope, or vote by telephone or via the Internet as soon as possible so that your shares can be voted at the meeting in accordance with your instructions. You may, of course, withdraw your proxy and change your vote prior to or at theour Annual Meeting by following the steps described in the Proxy Statement.
STRENGTHENING CORPORATE GOVERNANCE
The Kelly board is committed to high governance standards for the benefit of our shareholders and stakeholders. Using governance best practices as a guide, we carefully examine governance matters and make recommendations that would further strengthen the board and its relationship with Kelly’s executive management team. Here are some key actions and accomplishments we have achieved together in 2018:
Our Board of Directors elected a new Independent Chairman. This was an important transition of leadership responsibilities to help ensure business continuity at Kelly into the future.
We worked with executive management to establish an aggressive new strategic direction for the company, one that would benefit shareholders and other Kelly stakeholders long into the future.
We continue to work closely with Kelly leadership to encourage ongoing improvements, to take actions in support of a strongpay-for-performance program for executive management, and instill a robust culture of accountability for both the board and management.
We voluntarily adhere to the more stringent Nasdaq requirements for traditional, publicly held companies, despite being considered a “controlled public company” by Nasdaq (as more than 90% of our voting shares are held in trust in the name of a founding family member).
We work hard to ensure that Kelly’s board of directors remains a diverse body comprised of experienced individuals of various professional backgrounds, genders, ages and ethnicities. More than 30% of our directors are women; more than 20% are ethnically diverse; nearly 70% are independent; and 44% are former or sitting CEOs.
Most importantly, we all strive to exemplify the bedrock values established by Kelly’s founder, William Russell Kelly, who insisted that everyone at the company act with integrity, treat every person with respect, and always do the right thing.
We appreciate the strong support of our shareholders over the years and we look forward to seeing you at the meeting.on May 6, 2020.
Sincerely, |
DONALD R. PARFET |
Chairman of the Board |
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KELLY SERVICES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS
To the Shareholders ofApril 6, 2020
Kelly Services, Inc.:Dear fellow Stockholders:
We are pleased to invite you to join our Board, senior leadership, and other associates of Kelly Services, Inc., a Delaware corporation (the “Company”), for the Annual Meeting of Shareholders,Stockholders, to be held at the offices of the Company, 999 West Big Beaver Road, Troy, Michigan 48084-4716, on Wednesday, May 8, 20196, 2020 at 11:00 a.m., Eastern Daylight Time.
As a precaution regarding the Coronavirus orCOVID-19, we may hold our annual meeting over the web in a virtual meeting format instead of holding the meeting in Michigan. If we take this step, we would publicly announce a determination to hold a Virtual Annual Meeting in a press release available at kellyservices.com as soon as practicable before the meeting. The purposespress release would include instructions as well as a webcast link from which to access the 2020 Annual Meeting of Stockholders on the above date and time, via live audio webcast, but only if the meeting is not held in Michigan.
At the Annual Meeting, are:you will be asked to consider the following proposals:
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THE BOARD OF DIRECTORS RECOMMENDS THAT CLASS B SHAREHOLDERS VOTE FOR EACH DIRECTOR NOMINEE AS SET FORTH IN PROPOSAL 1, FOR THE APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION AS SET FORTH IN PROPOSAL 2, AND FOR RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AS SET FORTH IN PROPOSAL 3.
Only holdersIf you were a holder of record of the Company’s Class B common stockCommon Stock at the close of business on the Record Date, March 18, 2019,16, 2020, you are entitled to notice of and to vote at the Annual Meeting.
Please promptly submit your vote your shares by Internet,internet, telephone, or by mail usingsigning, dating, and returning the enclosed proxy card or voting instruction form in the postage-paid envelope which requires no postage. We encourageprovided so that your shares will be represented and voted at the meeting.
Thank you to vote promptly.for your interest in Kelly.
By Order of the Board of Directors | ||
| JAMES M. POLEHNA | |
Corporate Secretary |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of to be held May |
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The following materials, also included with the Notice of Annual Meeting of Stockholders, are available for view on the Internet:
Proxy Statement for the Annual Meeting of Stockholders
Annual Report to Stockholders, includingForm 10-K, for the year ended December 29, 2019
To view the Proxy Statement or Annual Report visit: www.envisionreports.com/kelyb.
Please refer to the enclosed Proxy Card and Proxy Statement for information on voting options:
Internet — Scan QR Code — Telephone — Mail
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Questions and Answers About the Proxy Statement and the Annual Meeting | 65 |
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Proxy Summary
We provide belowThis summary highlights of certain information contained elsewhere in this Proxy Statement. As it is only a summary, pleasePlease refer to the complete Proxy Statement and Kelly’s 20182019 Annual Report before you vote.
Date and Time: | Wednesday, May | |
6, 2020 at 11:00 a.m., Eastern Daylight Time | ||
Place: | Kelly Services, Inc., 999 West Big Beaver Road, Troy, Michigan 48084-4716 | |
Record Date: | Close of Business, Eastern Daylight Time, March | |
Voting: | Class B | |
Admission: | All holders of the Company’s Class A and Class B |
Voting Matters | Board’s | Page Reference (for more detail) | ||||||
Proposal 1. | Election of nine directors | ✓ FOR Each Nominee | 12 | |||||
Proposal 2. | Advisory vote to approve the Company’s executive compensation | ✓ FOR | 30 | |||||
Proposal 3. | Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the 2020 fiscal year | ✓ FOR | 63 |
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Internet at www.envisionreports.com/kelyb | QR code - Scan and vote with your mobile device | Calling 1-800-652-VOTE (8683) within the U.S., U.S. territories & Canada on a touch tone telephone | Mail - Return the signed proxy card |
Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Central Daylight Time, on May 7, 2019.5, 2020. If you vote by mail, your proxy card must be received before the Annual Meeting.
Beneficial owners, who own shares through a bank, brokerage firm, or other financial institution, can vote by returning the voting instruction form, or by following the instructions for voting via telephone or the Internet, provided by the bank, broker, or other organization. If you own shares in different accounts or in more than one name, you may receive different voting instructions for each type of ownership. Please vote all your shares.
If you are ashareholderstockholder of record or a beneficial owner who has alegal proxy to vote the shares, you may choose to vote in person at the Annual Meeting. If you plan to vote your shares at the meeting, please promptly request a legal proxy from your broker, as you will need to bring this with you to the meeting in order to vote your shares.Even if you plan to attend our Annual Meeting in person, please cast your vote as soon as possible.
Proxy Summary
MEETING AGENDA AND VOTING RECOMMENDATIONSpossible.
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Proxy Summary
The following table provides summary information about each Directordirector nominee. Each Directordirector is elected annually by a plurality vote.
Name | Age | Director Since | Principal Occupation | Independent | Committee Memberships | Other Public Company Boards | Age | Director Since | Principal Occupation | Independent | Other Public Company Boards | |||||||||||||||||||||
Donald R. Parfet | 66 | 2004 | Managing Director, Apjohn Group, LLC (2001 – present); General Partner, Apjohn Ventures Fund (2003 – present); General Partner, Apjohn Ventures Annex Fund (2010-present); Director, Rockwell Automation, Inc. (2008 – present); Director, MASCO Corporation (2012 – present); Director, Sierra Oncology, Inc. (2015 – present). | Yes | (Chairman of the Board since 2018); Audit; Compensation; Governance | 3 | 67 | 2004 | Managing Director, Apjohn Group, LLC | Yes | 2 | |||||||||||||||||||||
George S. Corona | 60 | 2017 | President and Chief Executive Officer, Kelly Services, Inc. (2017 – present); Executive Vice President and Chief Operating Officer, Kelly Services, Inc. (2009 – 2017). | No | — | — | ||||||||||||||||||||||||||
Peter W. Quigley | 58 | 2019 | President and Chief Executive Officer, Kelly Services, Inc. | No | — | |||||||||||||||||||||||||||
Carol M. Adderley | 59 | 2010 | Writer and Researcher in the Humanities. | No | Governance (Vice Chair) | — | 60 | 2010 | Writer and Researcher in the Humanities | No | — | |||||||||||||||||||||
Gerald S. Adolph | 65 | 2018 | Director, NAACP Legal Defense and Education Fund (1998 – present); Director, Cintas Corporation (2006 – present); Director, Cardinal Spellman High School Board (2010 – present); Senior Partner and other executive positions, Booz & Co. (1981 – 2016). | Yes | Audit; Compensation; Governance | 1 | 66 | 2018 | Retired Senior Partner, Booz & Co.;Co-Chair, NAACP Legal Defense and Education Fund | Yes | 1 | |||||||||||||||||||||
George S. Corona | 61 | 2017 | Retired President and Chief Executive Officer, Kelly Services, Inc. | No | — | |||||||||||||||||||||||||||
Robert S. Cubbin | 61 | 2014 | Director, Huntington Bancshares Incorporated (2017 – present); Director, First Merit Corporation (2013 – 2017); President and Chief Executive Officer, Meadowbrook Insurance Group, Inc. (2002 – 2016). | Yes | Audit; Compensation (Chair); Governance | 1 | 62 | 2014 | Retired President and Chief Executive Officer, Meadowbrook Insurance Group, Inc. | Yes | 1 | |||||||||||||||||||||
Jane E. Dutton | 66 | 2004 | Robert L. Kahn Distinguished University Professor Emeritus of Business Administration and Psychology, The University of Michigan Business School (2017 – present); Robert L. Kahn Distinguished University Professor of Business Administration and Psychology, The University of Michigan Business School (2007 – 2017). | Yes | Compensation; Governance (Chair) | — | 67 | 2004 | Robert L. Kahn Distinguished University Professor Emeritus of Business Administration and Psychology, The University of Michigan Business School | Yes | — | |||||||||||||||||||||
Terrence B. Larkin | 64 | 2010 | Executive Vice President, Business Development, General Counsel and Corporate Secretary, Lear Corporation (2008 – present). | Yes | Audit (Vice Chair); Compensation | — | 65 | 2010 | Retired Executive Vice President, Business Development, General Counsel and Corporate Secretary, Lear Corporation | Yes | — | |||||||||||||||||||||
Leslie A. Murphy | 67 | 2008 | President and CEO, Murphy Consulting, Inc. (2008 – present); Certified Public Accountant; Member of AICPA’s Governing Council (2000 – present); Member of NACD Advisory Councils on Audit Committee Issues and Risk Oversight (2012 – present); Director, Detroit Legal News Company (2012 – present); Director, Loop Industries, Inc. (2017 - present). | Yes | Audit (Chair); Compensation (Vice Chair) | 2 | 68 | 2008 | President and CEO, Murphy Consulting, Inc.; Former Chair, American Institute of Certified Public Accountants | Yes | 1 | |||||||||||||||||||||
Takao Wada | 56 | 2019 | Director and Senior Executive Officer, PERSOL HOLDINGS CO., LTD. (2016—present); President and Representative Director, PERSOL TEMPSTAFF CO., LTD. (2016 – present); Executive Vice President and Representative Director, PERSOL TEMPSTAFF CO., LTD. (2015-2016); Executive Vice President and Director, PERSOL TEMPSTAFF CO., LTD. (2013 – 2015). | No | — | 1 |
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Proxy Summary
CORPORATE GOVERNANCE HIGHLIGHTS
The CompanyKelly is committed to goodsound corporate governance which we believe is important to the successas a means of enhancing long-term stockholder value. Highlights of our business and in advancing shareholder interests. Our corporate governance practices are described in greater detail in the Corporate Governance section. Highlights include:below.
Independence | Accountability | Best Practices | ||
• Majority independent Board | • Annual election of all directors | • A diverse Board in terms of experience, skills, background, gender, and ethnicity | ||
• Independent Chairman of the Board | • Annual election of the Chairman of the Board | • Average Board attendance of 96% during 2019 | ||
• Audit and Compensation Committees composed entirely of independent directors | • Annual evaluation of the CEO (including compensation) by independent directors | • Strong oversight of Enterprise Risk Management by the Board and Audit Committee | ||
• Majority independent Corporate Governance and Nominating Committee – to be composed entirely of independent directors after the 2020 Annual Meeting | • Annual Board and Committee self-evaluations | • CEO and executive leadership succession planning by the Board and Compensation Committee | ||
• Regular executive sessions of independent directors | • Annual review of governance documents | • Long-standing commitment to sustainability and corporate social responsibility, including ESG updates to Board | ||
• Committees may hire independent advisors | • Clawback policy that applies to short-term and long-term incentive plans for senior management | • Policies prohibiting short-sales, hedging, pledging and margin accounts | ||
• Stock ownership guidelines for directors and senior management |
annual election of all Directors
added an independent Director in 2018
six out of nine Board members are independent
independent Chairman of the Board
experienced, diverse Board membership
executive sessions of independent Directors held in connection with the majority of regular Board meeting
average Board attendance of 92% during 2018
independent Audit and Compensation Committees, and a majority-independent Corporate Governance and Nominating Committee
strong Board and Audit Committee leadership in the oversight of enterprise risk management
annual review of committee charters, Corporate Governance Principles, and Code of Business Conduct and Ethics to maintain effective oversight and governance practices
annual Board and Committee self-evaluations
oversight of the development and assessment of Senior Officers and key senior management
CEO and Senior Officer succession plans overseen by the Board and Compensation Committee
long-standing commitment to sustainability and corporate social responsibility
policy prohibiting short sales, hedging, pledging, and margin accounts
Committees may engage independent advisors at their sole discretion
CONNECTING PEOPLE TO WORK IN WAYS THAT ENRICH THEIR LIVES
Proxy Summary
FINANCIAL AND OPERATING HIGHLIGHTS
Kelly delivered a solid year in 2018 despite a tight labor market. A growing U.S. economy and historic low unemployment rates made recruiting more challenging in 2018 and increased the time and expense required to fill positions. The ability to deliver good results, in a challenging business environment, is a testament to the flexibility and resourcefulness of Kelly’s teams.
2018 TOTAL COMPANY
2018 OPERATING EARNINGS BY SEGMENT
Kelly’s business is aligned into three segments to reflect customer buying behavior and the Company’s operational structure.73 YEARS OF INDUSTRY LEADERSHIP
Leading | Principal | Top 5 | Leading | |||
staffing provider in targeted U.S. specialties. | provider ofK-12 educational staffing in U.S. | science, engineering, and office talent provider in the U.S. | managed services provider with $8.3 billion spend under management. | |||
![]() | Supported | 91% | Helping | |||
staffing, outsourcing and consulting across Americas, | by 4,600+ supplier partners globally. | of Fortune 100 companies use our services. | people thrive in the |
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Proxy Summary
Corporate Sustainability Strategy
We consider sustainability to be a guiding principle in strengthening the relationship with our global workforce, suppliers, and customers. As a leading provider of global workforce solutions, we connect people with employment opportunities and make a difference in the communities in which we live and work. Through our programs and initiatives, we seek to contribute to improving the quality of life of our employees, their families, as well as the communities in which we operate. Given the worldwide span of our workers, clients, suppliers, and partners, we recognize the global reach of both our business practices and our public accountability.
Since 2017,we embarked on a transformation from Corporate Social Responsibility initiatives, toward a long-term Corporate Sustainability Strategy aligned to our business core which contributes to the Sustainable Development Goals.
This new sustainability approach, rather than being philanthropic, is strategic to our business values. It is based on the concept of social investment, which, instead of aiding on isolated occasions, ensures the creation of future development capacities. We aim to guide all our subsidiaries and collaborators in the planning, management, and implementation of sustainable strategic approaches that create measured and impactful shared value to all our stakeholders.
Our Corporate Sustainability Strategy is defined as an integrated decision-making strategy that provides comprehensive guidelines for implementing internal actions toward these ends. These guidelines provide procedures and tools to ensure the applicability of the strategy on a worldwide basis–guaranteeing the same standards, metrics, and objectives for all our operations.
This strategy has been developed with consideration given to the perceptions of our stakeholders, as well as its impact on business operations.In early 2018,we conducted a material assessment that helped us define the policies and guidelines of our Corporate Sustainability Strategy.
Permanent monitoring of our sustainable performance is conducted on an annual basis by means of an interdisciplinary perspective assessment involving cross-functional areas within the company. Progress in our Corporate Sustainability Strategy are reported on an annual basis through the Global Reporting Initiative Standard (GRI), and Communications of Progress (following the UN Global Compact), which we support sinceFebruary 2019.
Sustainability is an integral part of our company’s strategy and operations. To learn more about our ESG program, please view our website athttps://www.kellyservices.com/global/about-us/corporate-sustainability/corporate-sustainability-program/.
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Proxy Summary
Assessments, Recognition & Awards
![]() • KellyOCG was recognized as the best of the best by IAQP®. 2020. | • Kelly is named among Forbes’ list of America’s best recruiting firms for 2019. | |
• America’s top corporations for women’s business enterprises (WBES) awards. 2019. | • Intel® Supplier Continuous Quality Improvement awards. 2018. | |
• Kelly was named to Flexjobs®. 2014-2020. | • Women’s Business Enterprises National Council (WBENC). 2019. | |
• Human Resources vendor of the year 2019. | • CEI Corporate Equality Index 100/100 for 2018 and 2020. | |
• Michigan Minority Supplier Diversity Council (MMSDC) Ace Awards. 2019. |
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Proxy Summary
FULL YEAR 2019 FINANCIAL MEASURESSUMMARY
The constant currency(As Reported)
Actual Results | Change | Constant Currency Change(1) | ||||||||||
Revenue | $ | 5.4B | (2.9 | %) | (1.9 | %) | ||||||
Gross Profit (“GP”)% | 18.1 | % | 50 bps | |||||||||
Earnings from Operations | $ | 81.8M | (6.5 | %) | (5.0 | %) | ||||||
Return on Sales (“ROS”)% | 1.5 | % | (10 | ) bps | ||||||||
Earnings per Share (“EPS”) | $ | 2.84 | $ | 2.26 |
Revenue declined in Americas Staffing and International Staffing in the face of a weakening manufacturing sector in the U.S. and softening demand in Europe, respectively. Global Talent Solutions (“CC”GTS”) change amounts referrevenue improved year-over-year
GP rate improved from the impact of higher margin acquisitions and structural improvement in product mix in GTS
Earnings from Operations declined compared to the year-over-year percentage changes resulting from translating 2018 financial data into U.S. dollars using the same foreign currency exchange rates used to translate financial data for 2017. We believe that CC measurements are a useful measure, indicating the actual trends of our operations without distortion due to currency fluctuations. We use CC results when analyzing the performance of our segments and measuring our results against those of our competitors. Additionally, substantially all of our foreign subsidiaries derive revenues and incur cost of services and selling, general and administrative expenses (“SG&A”) within a single country and currency which,last year as a result, provideshigher GP rate on lower revenue resulted in lower gross profit. The decline was partially offset by lower performance-based incentive expenses and expense control efforts. Asset impairment and restructuring charges were partially offset by gain on sale of assets
EPS favorably impacted by a natural hedge against currency risks$0.63 gain on equity investment in connection with their normal business operations.
CC measures arenon-GAAP (Generally Accepted Accounting Principles) measures and are used2019 compared to supplement measuresa $1.69 loss in accordance with GAAP. Ournon-GAAP measures may be calculated differently from those provided by other companies, limiting their usefulness for comparison purposes.Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Reported and CC percentage changes in the following tables were computed based on actual amounts in thousands of dollars.2018
Return on sales (earnings from operations divided by revenue from services) and conversion rate (earnings from operations divided by gross profit) in the following tables are ratios used to measure the Company’s operating efficiency.
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FULL YEAR 2019 FINANCIAL SUMMARY
(Excluding Gain/Loss on investment in Persol Holdings, Acquisitions, Asset Impairment Charge, Restructuring, and Gain on Sale of Assets)
Actual Results | Change | Constant Currency Change(4) | ||||||||||
Revenue(1) | $ | 5.2B | (5.4 | %) | (4.4 | %) | ||||||
Gross Profit %(1) | 17.8 | % | 20 bps | |||||||||
Earnings from Operations(1),(2) | $ | 78.9M | (9.7 | %) | (8.1 | %) | ||||||
Return on Sales %(1),(2),(3) | 1.5 | % | (10 | ) bps | ||||||||
Earnings per Share(1),(2),(3) | $ | 2.16 | ($ | 0.11 | ) |
Revenue declined in Americas Staffing and International Staffing in the face of a weakening manufacturing sector in the U.S. and softening demand in Europe, respectively
GP rate improved due to structural improvement in product mix in GTS, partially offset by lower perm fees
Earnings from Operations declined as the effect of declining revenues was only partially offset by improving GP rate and reduced expenses from lower performance-based incentive expenses and efforts to align costs with revenue trends
EPS declined on lower earnings
(1) | Excludes 2019 results from the NextGen and GTA acquisitions, which were acquired on January 2, 2019, and were included in the reported results of operations |
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2019 asset impairment charge of $15.8 million, $11.8 million net of tax or $0.30 per share;
2019 restructuring charges of $5.5 million, $4.1 million net of tax or $0.10 per share
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2019 gain on investment in Persol Holdings of $35.8 million, $24.8 million net of tax or $0.63 per share;
2018 loss on investment in Persol Holdings of $96.2 million, $66.8 million net of tax or $1.69 per share
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Proxy Summary
EXECUTIVE COMPENSATION HIGHLIGHTS
What We Do | What We Don’t Do | |
• Align pay with performance through the use of balanced performance measures across strategic business objectives in both short- and long-term incentives for |
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• Align executive compensation with
• Annual review of performance measures and goals for our annual and long-term incentive plans by the independent Compensation Committee to ensure we use diversified measures with challenging, but attainable targets
• Require the achievement of a minimum acceptable level of financial performance in order for any payment to be made pursuant to the Short-Term Incentive Plan (“STIP”)
• Include caps on individual incentive payouts in incentive plans
• Require stock ownership and retention of a portion of equity-based awards by
• Hold an annual“say-on-pay”
• Retain an independent executive compensation consultant to the Compensation Committee of the Board of Directors
• Regular review of executive compensation governance market practices, particularly when considering the adoption of new practices or changes in existing programs or policies
• Conduct annual assessments of any potential risks in our incentive compensation programs and policies and related internal controls
• Annually review with the Compensation Committee share utilization, burn rate and dilution levels resulting from our compensation practices
• Maintain an insider trading policy that requires
• Maintain a double-trigger for the accelerated vesting provisions under the Equity Incentive Plan (“EIP”) and the Senior Executive Severance Plan
• Condition severance benefits for | • Provide employment agreements for senior officers • Guarantee bonus arrangements with our senior officers • Allow
• Allow the repricing or backdating of equity awards
• Beginning with 2017 grants to
• Pay dividends on performance share awards
• Provide excise taxgross-ups uponchange-in-control
• Grant incentive awards to
• Accrue additional retirement benefits under any supplemental executive retirement plans (“SERPs”)
• Provide excessive perquisites |
Proposal 1: Election of Directors
PROPOSAL 1 - ELECTION OF DIRECTORS
Under our Restated Certificate of Incorporation, the Board of Directors is to consist of no fewer than five and no more than eleven members, the exact number of Directors to be determined from time to time by the Board. As of the date of the mailing of this Proxy Statement, the number of Directors constituting the whole Board has been fixed at nine. Directors are elected annually forone-year terms. Each of the current Directors is a nominee for election at the Annual Meeting, except for Mr. Takahashi who will not stand forre-election. In his place, Mr. Takao Wada of Persol has been nominated for election as a director at the Annual Meeting.
Director Independence and Tenure
Our Board of Directors is responsible for overseeing the management of the business of the Company.
On February 14, 2019, our Board affirmatively determined that Directors G.S. Adolph, R.S. Cubbin, J.E. Dutton, T.B. Larkin, L.A. Murphy, and D.R. Parfet, representing a majority of the Board, are independent pursuant to the Nasdaq Global Market (“Nasdaq”) listing standards, and that none of them had a material relationship with the Company.
The following table illustrates the tenure of our Director nominees. Director tenure is distributed fairly evenly, resulting in a Board that provides us with both new perspectives and long-standing experience with the Company.
Director Qualifications, Background, and Diversity
The Corporate Governance and Nominating Committee makes recommendations to the Board of Directors regarding the Board’s size and composition. The Committee annually reviews with the Board the composition of the Board as a whole and proposes nominees for election to the Board, with a view towards achieving a Board that has a range of relevant qualifications, skills and experience, outstanding personal attributes and diversity of thought. Recommendations made by the Committee of candidates for consideration as director nominees are based upon specific criteria as well as other considerations that the Committee may from time to time deem appropriate, including the Company’s strategic objectives and Board composition factors such as the balance of independent andnon-independent directors or the need for financial experts on the Audit Committee. The Committee may engage third parties to assist in the search for director candidates or to assist in gathering information regarding a candidate’s background and experience.
Director candidates should possess the following competencies and attributes: the highest personal and professional ethics, integrity and values; a reputation, both personal and professional, for maturity, strength of character, and sound judgment; the ability to comply with the Company’s Code of Business Conduct and Ethics; a high level of accomplishment in his or her respective field; an understanding of the complexities of business organizations and demonstrated leadership skills; and flexibility and independence of thought, with the ability to offer independent opinions in a constructive manner. Director candidates should be leaders with relevant expertise and experience with complex organizations of similar size and global scope. In the past, the Board has sought active and former chief executive officers, chief operating officers, or substantially equivalent level executive officers of a complex organization such as a corporation, university, or major unit of government, or a professional who regularly advises such organizations. In recognition of the nature of the Company’s business, the Board has also sought to have some directors with experience in the business services industry or human resources and workforce solutions field.
Director candidates must also have financial acumen and the ability to read and understand fundamental financial statements; a willingness to devote sufficient time to become knowledgeable about the Company’s business and to carry out the duties and responsibilities of the office; and an intention to serve a sufficient period of time to make a meaningful
Proposal 1: Election of Directors
contribution to the Board and the Company. Independent director candidates must meet the independence requirements established by Nasdaq and the SEC, and all director candidates must review with the Corporate Governance and Nominating Committee any relationships that might be construed as a conflict of interest. The resulting Board is a diverse body in terms of gender, age, race, ethnic background, and professional experience.
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Proposal 1: Election of Directors
PROPOSAL 1 – ELECTION OF DIRECTORS
The Corporate GovernanceBoard has nominated nine individuals for election as directors at the Annual Meeting, each to serve for one year and Nominating Committee works withuntil his or her successor is elected and qualified. All of these individuals are currently serving on the BoardBoard. The other current director, Mr. Takao Wada, is the designated representative of Directors to determineour joint venture partner Persol Holdings Co., Ltd. (“Persol”). Mr. Wada is not standing forre-election and, following the appropriate mix of experience, qualifications, skills, and attributes that enable a Director to make significant contributions to the Company. We doAnnual Meeting, Persol will not have a formal policy with regard to diversity. However, the Board values diversity highly and takes it into consideration, including diversity in gender, ethnicity, race, and age, as we strive to maintain a Board that is strong collectively in its backgrounds, knowledge, and experience. The following table highlights the breadth of experience that is representedrepresentative on the Board. A particular Director may possess other skills, knowledge, or experience in addition to those noted below.
Listed on the following pages are the names of the persons nominated for election as Directors of the Company, their ages, principal occupations, other public companies at which they are Directors, occupations held during the past five years (unless otherwise stated, the occupations listed have been held during the entire past five years), and the year in which they first became a Director of the Company.
The Board of Directors is responsible for approving Director nominees based on the recommendation of the Corporate Governance and Nominating Committee. Our controlling shareholder has indicated its support and intention to vote for each of the director nominees.
If a nominee is unavailable for election for any reason on the date of the election of the Director (which is not anticipated), the persons named in the enclosed form of proxy may vote for the election of a person designated by the Board of Directors or the Board may reduce the number of Directors constituting the whole Board.
Directors will be elected by a plurality of the votes cast by holders of Class B common stockCommon Stock who are present in person, or represented by proxy, and entitled to vote at the Annual Meeting. Withheld votesOur controlling stockholder has indicated its support and brokerintention to vote for each of the director nominees.
We do not contemplate that any of the nominees will be unavailable to serve at the time of the Annual Meeting; in that event, however, the persons named in the enclosed form of proxy may vote for the election of a substitute selected by the Board or the Board may reduce its size.
On February 12, 2020, our Board affirmatively determined that directors Gerald S. Adolph, Robert S. Cubbin, Jane E. Dutton, Terrence B. Larkin, Leslie A. Murphy, and Donald R. Parfet, representing a majority of the Board, are independent. The Board’s guidelines for director independence conform to the listing standards of the Nasdaq Global Market (“Nasdaq”) on which the Company’s common stock is listed.
The Corporate Governance and Nominating Committee is responsible for identifying and recommending to the Board qualified candidates for Board membership with the goal of building a Board that is effective, collegial, diverse, and responsive to the current and anticipated needs of the Company. The Committee considers the following criteria: (i) ethics, character, and judgment; (ii) business and other experience, expertise, skills, and knowledge relevant to the Company’s business and strategy; (iii) objectivity and independence of thought; (iv) diversity of background, experience, and personal characteristics such as gender, race, ethnicity, sexual orientation, and age; and (v) the interplay of the candidate’s qualities with those of other members of the Board. In determining whether to recommend a director fornon-votesre-nomination, will not count towards a nominees’ achievementthe Committee also considers the director’s recent contributions and potential for continuing contributions to the work of plurality.
the Board. The Board has not adopted a policy whereby shareholdersstockholders may recommend nominees to the Board because of the Company’s status as a controlled company.
Proposal 1: Election of Directors
After a review of the individual qualifications and experience of eachEach of our Directordirector nominees has been recommended for election by our Corporate Governance and their contributionsNominating Committee and nominated by our Board. Together, they bring to our Board broad diversity in terms of experience, skills, and personal attributes. The Board believes that this diversity strengthens the Board’s ability to carry out its oversight role on behalf of stockholders. While we do not have a formal diversity policy, the Board will seek to build upon its diversity in connection with future refreshment.
The following graphics highlight the personal diversity and breadth of Directors unanimously recommendsskills, knowledge, and experience that shareholders vote “FOR”are represented on the election of all Director nomineesBoard. A particular director may possess other skills, knowledge, or experience in addition to serve for theone-year term ending at the Annual Meeting of Shareholders held after the close of the fiscal year ending December 29, 2019.
Set forth below are the nominees for election at the 2019 Annual Meeting of Shareholders.those noted below.
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Proposal 1: Election of Directors
Biographical Information About Director Nominees
![]() | Donald R. Parfet Age: Director since: 2004 Chairman of the Board | ![]() | Peter W. Quigley Age: 58 Director since: 2019 Chief Executive Officer | |||
Board Committees: • None | Board Committees: • None | |||||
Principal Occupation and Directorships: • Managing Director, Apjohn Group, LLC (2001 - present) • General Partner, Apjohn Ventures Fund (2003 - present) • General Partner, Apjohn Ventures Annex Fund (2010 - present) • Director, Rockwell Automation, Inc. (2008 - present) • Director, MASCO Corporation (2012 - present) • Director, Sierra Oncology Inc. (2015 - 2019) | Principal Occupation and Directorships: • President and Chief Executive Officer, Kelly Services, Inc. (2019 - present) • Executive Vice President, President of Global Staffing and General Manager of IT, Global Service, and Global Business Services, Kelly Services, Inc. (2017 - 2019) • Senior Vice President, General Counsel, Chief Administrative Officer and Assistant Secretary, Kelly Services, Inc. (2015 - 2017) | |||||
Education: • University of Michigan, MBA, Finance • University of Arizona, BA, Economics | Education: • National Law Center at George Washington University, JD • University of Michigan, BA | |||||
Don was appointed Chairman of the Board in 2018. Prior to being appointed to the Chairman role, he had served as the Board’s Lead Director since 2012. Don brings extensive financial and operating experience to the Board as an executive with responsibilities for numerous global businesses. He currently leads a business development company and a venture capital firm focused on the development of emerging medicines. He also serves as a director of two large publicly held companies and is a director and Trustee of a number of charitable and civic organizations. Don brings to the Board global operating experience, strong financial background, and proven leadership capabilities. | Peter was appointed President and Chief Executive Officer of Kelly in October 2019. Peter has 17 years of experience in a variety of roles at Kelly and has served as an officer of the Company since 2004. Prior to joining Kelly, Peter held an array of roles at Lucent Technologies and AT&T Corporation. He earned a Juris Doctorate (J.D.) from the National Law Center at George Washington University and a bachelor’s degree from the University of Michigan. He is a member of the State Bar of Michigan and the District of Columbia Bar. Peter also serves on American Staffing Association’s and the Detroit Regional Chamber’s Board of Directors. |
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Proposal 1: Election of Directors
![]() | Carol M. Adderley Age: 60 Director since: 2010 | ![]() | Gerald S. Adolph Age: 66 Director since: 2018 | |||
Board Committees: • Governance and Nominating | Board Committees:
• Audit
• Compensation
• Governance and Nominating | |||||
Principal Occupation and Directorships:
•
Writer and Researcher in the Humanities | ||||||
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Donald R. Parfet was appointed Chairman of the Board in 2018. Prior to being appointed to the Chairman role, he had served as the Board’s Lead Director since 2012. He brings extensive financial and operating experiences to the Board as an executive with responsibilities for numerous global businesses. He currently leads business development and venture capital firms focused on the development of emerging medicines. He also serves as a Director of two large publicly held companies, as the Chairman of the Board of a small publicly held company, and is on the board of several private companies and charitable organizations. He brings to the Board global operating experience, strong financial background, and proven leadership capabilities.
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George Corona was named President and Chief Executive Officer of Kelly Services in May 2017, after more than 20 years of experience in a variety of executive roles, including eight years as Executive Vice President and Chief Operating Officer. Prior to joining Kelly in 1994, Mr. Corona held management roles at Digital Equipment Professional Services Group and Burroughs Corporation. Mr. Corona also serves on the boards of severalnot-for-profit organizations.
Proposal 1: Election of Directors
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Principal Occupation and Directorships:
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• • Director, Cintas Corporation (2006 - present) • Trustee, Cardinal Spellman High School Board (2010 - present) • Senior Partner and other executive positions, Booz & Co. (1981 - 2016) | ||||||
Education:
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• University of Iowa, MA, English Literature
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• University of Chicago, AM, General Studies in Humanities, Literature and Social Change
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• University of Western Ontario, BA (Honors), English and Philosophy | ||||||
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Education:
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• Harvard Business School, MBS
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• Massachusetts Institute of Technology, MS, Chemical Engineering
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• Massachusetts Institute of Technology, BS, Management Science (Concentration in Organizational Psychology)
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• Massachusetts Institute of Technology, BS, Chemical Engineering | ||||||
Carol is the granddaughter of William R. Kelly, the Company’s founder, and the daughter of Terence E. Adderley, who served for many years as Chief Executive Officer and as Chairman of the Board. Carol holds advanced degrees in the humanities and is a published author. | Gerald, |
Proposal 1: Election of Directors
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Proposal 1: Election of Directors
![]() | George S. Corona Age: 61 Director since: 2017 | ![]() | Robert S. Cubbin Age: Director since: 2014 | |||
Board Committees:
• None | Board Committees:
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• Audit
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• Compensation (Chair)
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• Governance and Nominating | ||||||
Principal Occupation and Directorships:
• President and Chief Executive Officer, Kelly Services, Inc. (2017 - 2019) • Executive Vice President and Chief Operating Officer, Kelly Services, Inc. (2009 - 2017) | ||||||
Principal Occupation and Directorships:
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• Director, Huntington Bancshares Incorporated (2017
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• Director, First Merit Corporation (2013
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• President and Chief Executive Officer, Meadowbrook Insurance Group, Inc. (2002 | ||||||
Education: • Oakland University, MBA • Wayne State University, BSBA | Education: | |||||
• Detroit College of Law, JD
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• Wayne State University, BA, Psychology | ||||||
George served as President and Chief Executive Officer of Kelly from May 2017 until his retirement in September 2019. George had more than 20 years of experience in a variety of executive roles with Kelly, including eight years as Executive Vice President and Chief Operating Officer. Prior to joining Kelly in 1994, he held management roles at Digital Equipment Professional Services Group and Burroughs Corporation. George also serves on the boards of severalnot-for-profit organizations. | Bob is an attorney with |
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Proposal 1: Election of Directors
![]() | Jane E. Dutton Age: Director since: 2004 | ![]() | Terrence B. Larkin
Director since: 2010 | ||||
Board Committees: • Compensation • Governance and Nominating (Chair) | Board Committees:
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• Audit • Compensation | |||||||
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Principal Occupation and Directorships:
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• Robert L. Kahn Distinguished University Professor Emeritus of Business Administration and Psychology, The University of Michigan Business School (2017
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• Robert L. Kahn Distinguished University Professor of Business Administration and Psychology, The University of Michigan Business School (2007 | Principal Occupation and Directorships:
• Executive Vice President, Business Development, General Counsel and Corporate Secretary, Lear Corporation (2008 - 2020) | ||||||
Education:
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• Northwestern University, Ph.D. and MS, Organizational Behavior
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• Colby College, BA Sociology | Education: • Wayne State University Law School, JD cum laude • Michigan State University, BA (High Honors), Finance | ||||||
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Proposal 1: Election of Directors
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Proposal 1: Election of Directors
![]() | Leslie A. Murphy | |||||
Age: Director since: 2008 | ||||||
Board Committees:
• Audit (Chair)
• Compensation | ||||||
Principal Occupation and Directorships:
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• President and CEO, Murphy Consulting, Inc. (2008
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• Certified Public Accountant
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• Member of AICPA’s Governing Council (2000
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• Member of NACD Advisory Councils on Audit Committee Issues and Risk Oversight (2012
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• Director, Detroit Legal News Company (2012 | ||||||
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Education:
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• University of Michigan, BBA, Accounting | ||||||
Leslie |
Proposal 1: Election of Directors
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Corporate Governance
UnderCompliance with Nasdaq Independence Standards forNon-Controlled Companies
Nasdaq, on which the listing standardsCompany’s common stock is listed, has established exemptions from its governance requirements for “controlled companies,” defined as companies in which a single person, entity, or group holds 50% of the Nasdaq, we are deemedvoting power for the election of its directors. The Company is a “controlled company” because trusts established by the late Terence E. Adderley, the former Chairman of our Board of Directors, have voting power with respect to more than 50% of our outstanding voting stock. As such, the Company may avail itself to exemptions relating to the independencevirtue of the Board, the Compensation Committee, and the nominating process.
Although we are a controlled company, the Company’s approach to leadership is intended to serve the interests of all shareholders, and the Company has historically recognized the importance of having a Board composed of a majority of independent Directors. Despite the availability of controlled company exemptions, a majority of our Board is independent and we maintain an independent Audit Committee and Compensation Committee. In addition, our Corporate Governance and Nominating Committee is majority independent.
In September 2018, the Company announcedfact that Terence E. Adderley had retired as the Chairman of the Board of Directors of the Company. Lead Director Donald R. Parfet was elected to replace Mr. Adderley as Chairman of the Board of Directors. The Board of Directors determined in accordance with our Corporate Governance Principles that because Mr. Parfet is an independent director, the Board of Directors will not have an independent lead director during Mr. Parfet’s tenure as Chairman.
On October 9, 2018, Mr. Adderley passed away at age 85. Mr. Adderley, son of the Company’s founder, William Russell Kelly, joined Kelly Services in 1958 and became Chief Executive Officer in 1989. He served on the Company’s Board of Directors beginning in 1962 and served as Chairman of the Board from 1998 until his retirement in September 2018.
Prior to his death, Mr. Adderley was the beneficial owner of 1,514,686 shares of the Company’s Class A Common Stock, representing approximately 4.2% of the outstanding Class A shares, and 3,213,265 shares of Class B Common Stock, representing approximately 93.6% of the outstanding Class B shares. Upon Mr. Adderley’s death, the Terence E. Adderley Revocable Trust K (“Trust K”), discussed below, has the power to vote approximately 91.6% of the Company’s outstanding shares of Class B Common Stock.
In keeping with the Company’s historic recognition of the importance of having a majority of independent directors, the Company has elected to comply voluntarily with all the Nasdaq listing standards that otherwise do not apply to controlled companies. Thus, a majority of the Board are independent directors, all members of the Compensation Committee are independent directors and all members of the Audit Committee are independent directors (which is a Nasdaq requirement for all listed companies). Commencing with the Annual Meeting of the Board to be held on May 6, 2020, when committee assignments will be made, all members of the Corporate Governance and Nominating Committee will be independent directors and the Company will fully satisfy the Nasdaq independence standards for boards and board committees ofnon-controlled companies.
Prior to his death in October 2018, Mr. Adderley was the trustee of Trust K. Upon his death, Trust K became irrevocable. Inirrevocable and, in accordance with the provisions of Trust K, William U. Parfet,the trust, Andrew H. Curoe, David M. Hempstead, and Andrew H. CuroeWilliam U. Parfet were appointed as successor trustees of(the“co-trustees”). Theco-trustees are required to act by a majority vote, in voting and making investment decisions with respect to the trust. Mr.Class B Common Stock held by Trust K.
William U. Parfet, aco-trustee, is the brother of Donald R. Parfet, the Chairman of the Board. In determining that Donald R. Parfet is an independent director, the Board considered, among other things, that Donald R. Parfet and William U. Parfet are financially independent of Directors ofone another, that the Company. The trustees, actingco-trustees are required to act by majority vote have sole investment and voting powerthat none of the sharesco-trustees serves as an officer or director of Class B Common Stock heldthe Company or has any personal financial interest in Trust K that could benefit from actions taken by the Trust K. The Class B Common Stock held by Trust K represents approximately 91.5% of the outstanding Class B shares; therefore, Trust K is the controlling shareholder of the Company.Board.
Board Leadership and Governance Structure
The Company’sBoard is responsible for establishing and maintaining the most effective leadership is vested in astructure for the Company. At the present time, the Board has determined that the roles of the Chairman of the Board of Directors and the Chief Executive Officer (“CEO”), subjectshould be separate, with the Chairman an independent director, because that structure affords independent Board leadership and allows the Chief Executive Officer to concentrate on the overall authorityCompany’s business. Donald R. Parfet serves as Chairman of the Board.Board and Peter W. Quigley serves as Chief Executive Officer.
The Chairman of the Board’s duties include consulting with our Chief Executive Officer, reviewing the agendas for Board meetings, presiding over meetings of the Board and, together with our Chief Executive Officer, presiding over meetings of shareholders.stockholders. The Chairman of the Board’s duties also include serving as liaison among the Chief Executive Officer and the independent Directors,directors, establishing the schedule for Board meetings (in consultation with the Chief Executive Officer), developing and approving agendas for Board meetings, approving the information sent to the Board for meetings, establishing the schedule and agendas for and to presidepresiding over meetings of the independent Directorsdirectors in executive session, and to provideproviding feedback to the Chief Executive Officer on those executive sessions, and facilitating discussions among independent Directorsdirectors on key issues outside of Board meetings,meetings.
In the event that the Chairman of the Board is not an independent director, the Company’s Corporate Governance Principles provide that the independent directors will elect one of their number to serve as Lead Director and being available for consultation withfulfill many of the Chief Executive Officer.Chairman of the Board’s current responsibilities.
The Chief Executive Officer is responsible for managing the business and affairs of the Company, subject to the oversight of the Board. The Chief Executive Officer’s duties include leading the management team, representing the Company externally, consulting with the Chairman of the Board about developments in the Company, and communicating with all Directorsdirectors about key issues outside of Board meetings.
Corporate Governance
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Corporate Governance
Board of Directors | ||||||||||
Majority Independent | ||||||||||
Independent Chairman of the | ||||||||||
Audit Committee | Compensation Committee | Governance and Nominating Committee | ||||||||
All Independent | All Independent | |||||||||
Majority Independent (All Independent in May 2020) |
The full text of our Board’s Corporate Governance Principles and the charters of the Board’sBoard has established three standing committees, which are thecommittees: an Audit Committee, a Compensation Committee, and a Corporate Governance and Nominating Committee, areCommittee. Each committee functions under a written charter adopted by the Board, which is available on the Company’s website atkellyservices.com.kellyservices.com or to any stockholder who requests a copy. The following table sets forth the Board committeescurrent members, responsibilities, and the members of each committee.
Audit | Compensation | Governance and | ||||
Donald R. Parfet * (Chairman) | ✓ | ✓ | ✓ | |||
George S. Corona | ||||||
Carol M. Adderley | Vice Chair | |||||
Gerald S. Adolph * | ✓ | ✓ | ✓ | |||
Robert S. Cubbin* | ✓ | Chair | ✓ | |||
Jane E. Dutton * | ✓ | Chair | ||||
Terrence B. Larkin * | Vice Chair | ✓ | ||||
Leslie A. Murphy * | Chair | Vice Chair | ||||
Takao Wada | ||||||
Number of Meetings Held in Fiscal Year 2018 | 5 | 5 | 4 | |||
* Independent Director |
Directors are expected to attend the Annual Meeting of the Shareholders, all Board meetings, and all meetings of the committees on which they individually serve. The Board held seven meetings during 2018. Eight of the nine Directors then in office attended the 2018 Annual Meeting of Shareholders. Director attendance averaged 92% of the aggregate number of meetings each of the Board of Directors and thethese committees on which they served during 2018. Hirotoshi Takahashi, the Deputy Vice President and Chief Operating Officer of PERSOL HOLDINGS CO., LTD. (“Persol”), who residesheld in Japan, attended fewer than 75% of the aggregate number of meetings of the Board of Directors during 2018. He did not serve on any Board committee. Mr. Takahashi will complete his service as a director as of the date of the 2019 Annual Meeting. Mr. Wada has been nominated for election as a director at the 2019 Annual Meeting as the representative of Persol. The independent Directors met in executive sessions at which only they were present at least six times during 2018.
The Audit Committee is composed of G.S. Adolph, R.S. Cubbin, T.B. Larkin (Vice Chair), L.A. Murphy (Chair), and D.R. Parfet, all of whom are independent Directors. The Audit Committee held five meetings in 2018. The Audit Committee’s purpose is to oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. The Audit Committee’s responsibilities are detailed in its charter and include: monitoring the integrity of the Company’s financial statements, accounting and financial reporting processes, and financial statement audits; the qualifications, independence, and performance of the Company’s independent registered public accounting firm; the qualifications and performance of the Company’s Internal Audit group; the Company’s compliance with legal and regulatory requirements; and the Company’s Enterprise Risk Management program that includes systems of disclosure controls and procedures, internal controls over financial reporting, and compliance with ethical standards adopted by the Company.
The Audit Committee approves (or ratifies fee adjustments onpre-approved services approved under authority delegated to the Chief Financial Officer (“CFO”)) all audit, audit-related, internal control-related, tax, and permittednon-auditshown below.
Audit Committee | ||
Members: All Independent Leslie A. Murphy (Chair) Terrence B. Larkin Gerald S. Adolph Robert S. Cubbin Meetings in 2019: 7 The Board has unanimously determined that each member of the Audit Committee meets Nasdaq’s “financial sophistication” requirements and that Mr. Cubbin, Mr. Larkin, and Ms. Murphy each has the financial education and experience to qualify as an “Audit Committee financial expert” within the meaning of SEC regulations. | Key Responsibilities: • Oversees and reports to the Board with respect to the quality and integrity of the Company’s financial statements, accounting, and financial reporting processes, and audits of the financial statements and internal controls over financial reporting • Appoints, compensates, and evaluates the qualifications, independence, and performance of the independent auditor • Oversees the performance of the internal audit function • Oversees the Company’s Enterprise Risk Management Program • Monitors the Company’s compliance with legal and regulatory requirements • Reviews and approves related party transactions • Serves as the Company’s Qualified Legal Compliance Committee |
Compensation Committee | ||
Members: All Independent Robert S. Cubbin (Chair) Leslie A. Murphy Gerald S. Adolph Jane E. Dutton Terrence B. Larkin Meetings in 2019: 6 During 2019, none of the Company’s executive officers served on the Board of Directors of any entities whose directors or officers served on the Company’s Compensation Committee. No current or past executive officers of the Company or its subsidiaries serve on the Compensation Committee. | Key Responsibilities: • Develops the Company’s compensation philosophy • Designs and administers the Company’s executive compensation programs and policies that are aligned with business and compensation objectives • Determines and approves the annual compensation of the CEO, all senior officers, and Section 16 officers • Reviews stock ownership requirements for Senior Officers and compliance with the guidelines • Reviews and makes recommendations to the Board concerning director compensation • Reviews and advises the Board concerning CEO and senior officer succession planning |
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Corporate Governance
services of the independent registered public accounting firm prior to engagement. The Audit Committee also serves as the Company’s Qualified Legal Compliance Committee.
The Board has unanimously determined that each member of the Audit Committee meets the “financial sophistication” requirements under current Nasdaq Global Market listing standards and that R.S. Cubbin, T.B. Larkin, L.A. Murphy and D.R. Parfet each have the financial education and experience to qualify as an “Audit Committee financial expert” within the meaning of SEC regulations.
The Compensation Committee’s current members are G.S. Adolph, R.S. Cubbin (Chair), J.E. Dutton, T.B. Larkin, L.A. Murphy (Vice Chair), and D.R. Parfet, all of whom are independent Directors. The Compensation Committee is charged with developing the Company’s compensation philosophy and establishing and monitoring compensation programs for all employees. The Compensation Committee held five meetings in 2018.
The Compensation Committee determines the compensation of the CEO and, taking into account the CEO’s recommendations, determines the compensation for all Senior Officers, which includes officers as defined in Section 16a- 1(f) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Compensation Committee is responsible for the administration of base salaries, short-term incentive awards under the Company’s Short-Term Incentive Plan (“STIP”), and long-term incentive awards under the Company’s Equity Incentive Plan (“EIP”) for Senior Officers. Our twelve current Senior Officers, a group that includes our Executive Officers, are listed under Kelly Leadership on the Company’s website atkellyservices.com. The authority of the Compensation Committee is detailed in its charter.
To assist the Compensation Committee in making compensation recommendations for Senior Officers, the Company’s Executive Compensation group provides the Compensation Committee with historical, survey, and benchmark compensation data. The Compensation Committee also relies on the CEO and the other Executive Officers to provide performance evaluations and compensation recommendations to assist in its decisions regarding the total compensation of Senior Officers. The Compensation Committee has delegated to the CEO the authority to approve salary recommendations and incentive awards to the Company’s Officers below the Senior Officer group who are not subject to Section 16 of the Exchange Act.
The Compensation Committee has the authority to retain independent consultants. Retained consultants report directly to the Compensation Committee, which determines the consultants’ scope of work and fees. In 2018, the Compensation Committee retained Pay Governance LLC (“Pay Governance”) to provide assistance with the review of Executive and Director compensation. The Compensation Committee conducted an assessment of Pay Governance’s independence using factors established by the SEC and Nasdaq Global Market, and affirmed the independence of Pay Governance.
Compensation Committee Interlocks and Insider Participation
During 2018, none of the Company’s Executive Officers served on the Board of Directors of any entities whose
Directors or Officers served on the Company’s Compensation Committee. No current or past Executive Officers of the
Company or its subsidiaries serve on the Compensation Committee.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee, whose current members are C.M. Adderley (Vice Chair), G.S. Adolph, R.S. Cubbin, J.E. Dutton (Chair), and D.R. Parfet, held four meetings during 2018. The Corporate Governance and Nominating Committee’s responsibilities include: assisting the Board of Directors in identifying individuals qualified to become Directors; recommending to the Board the nominees for the next Annual Meeting of Shareholders or to otherwise fill vacancies and newly created directorships; overseeing the composition, organization, and governance of the Board and its committees; overseeing an annual evaluation of Board and committee effectiveness; developing and overseeing compliance with the Board’s Corporate Governance Principles; and advising and making recommendations to the Board with respect to corporate governance matters.
Corporate Governance and Nominating Committee | ||
Members: Majority Independent* Jane E. Dutton (Chair) Carol M. Adderley Gerald S. Adolph Robert S. Cubbin Meetings in 2019: 4 * The Committee will become fully independent following the Annual Meeting. | Key Responsibilities: • Identifies and recommends to the Board, nominees to serve on the Board • Monitors the independence of directors of the Board and Board Committees • Oversees the Board and Board Committees annual evaluation process • Develops and oversees compliance with the Company’s Corporate Governance Principles • Reviews and makes recommendations to the Board with respect to corporate governance matters generally • Reviews and reports to the Board concerning the development of the Company’s Corporate Sustainability Strategy |
While management is responsible for managing risk, one of the Board’simportant functions of the Board and its committees’ important functionscommittees is oversight responsibilities forof risk management. This includes consideration of strategic issues and risks to the Company as well as management’s actions to address and mitigate those risks. Risk is inherent in business, and the Board’s oversight, assessment, and decisions regarding risks occur in conjunction with the other activities of the Board and its committees.
Risk Governance and Oversight Responsibilities
Board of Directors
Corporate Governance
Oversees consideration of strategic issues and risks to the Company as well as management’s actions to address and mitigate those risks. The Board is kept apprised of its committees’ risk oversight activities through reports from the committee chairs to the full Board presented at regular Board meetings. Focuses on risk management strategy and risks of greatest significance, and seeks to ensure that risks assumed by the Company are consistent with the Company’s risk tolerance and risk appetite. Risk oversight is also addressed as part of the full Board’s regular oversight of strategic planning.
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Audit Committee | Compensation Committee | Corporate Governance and Nominating Committee | ||
• Plays a key role in the Board’s risk oversight process, particularly with respect to risks that could have a financial impact, such as financial reporting and disclosure, accounting practices, internal controls,
| • Oversees our compensation plans, policies, and practices to ensure alignment with our Executive Compensation Risk Assessment Framework. | • Manages risk associated with governance issues, such as the independence of the Board and its Committees, Board and Committee effectiveness and organization, corporate governance, and director succession planning. | ||
• Responsible for overseeing the Company’s risk assessment and enterprise risk management processes. | • Responsible for reviewing the Company’s compensation program risk assessment for employee compensation programs and reporting to the Board any compensation program that is reasonably likely to have a material adverse effect on the Company. | • Maintains corporate governance principles and procedures designed to assure compliance with all applicable legal and regulatory requirements and governance standards and the Company’s Code of Conduct and Insider Trading Policy. |
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Corporate Governance
Audit Committee | Compensation Committee | Corporate Governance and Nominating Committee | ||
• Reviews all quarterly and annual reports, including any disclosure of risk factors affecting our business. | • Together with the compensation committee’s independent consultant, provides input to management in conjunction with their annual assessment of potential risks that may be created by our compensation plans, policies and practices. | • Reviews the skills and experience of the Board and its committees on a regular basis, and as needed for potential candidates to serve on the Board, to ensure the diversity and relevant experience necessary for an effective Board. | ||
• Receives quarterly updates on the Company’s proactive approach to cyber security from the Information Technology and Internal Audit groups. | • Sets performance goals under our annual and long-term incentive plans that provide an appropriate balance between the achievement of both short and long-term performance objectives, with emphasis on managing the sustainability of the business and mitigation of risk. |
• Evaluates annually the independence of each director under the independence requirements of Nasdaq and applicable SEC regulations. | ||
• Oversees the performance of the Company’s Internal Audit function. | • Oversees the orientation and education of | |||
• Monitors the | ||||
Management
Corporate Governance
Management assesses and manages critical risks, including the execution of the Company’s Enterprise Risk Management (“ERM”) program. The Company’s risk-related departments and functions are under the direction of the Vice President and Chief Risk, Compliance, and Privacy Officer (“Chief Risk Officer”). With respect to the risk assessment of the Company’s compensation programs, management is responsible for the framework and approach as outlined below under, “Risk Assessment of Compensation Programs.”
Enterprise Risk Management (“ERM”) Program
The Company’s ERM program serves as the primary means of identifying and managing the Company’s key risks. The Company’s ERM team has, among other activities, performed assessments of risks to the Company, participated in the development and execution of mitigation programs for critical risks, facilitated the establishment of a corporate risk appetite and tolerance statement, inclusive of an oversight and monitoring mechanism, established a privacy governance function, and assisted in the integration of risk concepts within the Company’s strategic planning process.
The ERM team reports its findings to the Audit Committee on a quarterly basis, providing both written reports and periodicin-person presentations. Its current activities remain focused on mitigation and oversight of specific risk exposures, analysis of the breadth and effectiveness of existing risk management practices, and maturation of measurement and monitoring practices concerning high-priority strategic and operational risks. Current areas of particular emphasis include cyber security, data privacy, wage-hour risk management, and improvements to the Company’s compliance governance and incident reporting practices. The Company’s Information Technology and Internal Audit groups provide regular quarterly updates to the Audit Committee with respect to the Company’s proactive approach to cyber security. Controls are reviewed for operational effectiveness and to provide reasonable assurance that: business risk is managed and assets are safeguarded; security of information, processing infrastructure, and applications are maintained; and all risks are mitigated to the extent practicable.
In addition to the reports submitted quarterly by the Company’s Chief Risk Officer, the Vice President of Internal Audit independently assesses the Company’s risk management process and separately reports on the effectiveness of the Company’s risk identification, prioritization, and mitigation processes to the Audit Committee.
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Corporate Governance
Risk Assessment of Employee Compensation Programs
Annually, at its February meeting, the Compensation Committee reviews management’s Compensation Program Risk Assessment Report. The report is prepared by the Company’s Executive Compensation and Human Resources groups in collaboration withand is reviewed by the Company’s Internal Audit Department.Chief Risk Officer. The Company’s Executive Compensation Program Risk Assessment Framework is reviewed and updated as needed to ensure a robust and comprehensive assessment process. In addition, the ConsultantBoard’s independent compensation consultant reviewed the assessment prepared for the executive compensation section of the report.
The Company’s Executive Compensation Program Risk Assessment
Framework takes into consideration the following guiding factors:
Short- and long-term incentive performance measures and equity award types do not encourage excessive risk-taking
A balanced structure with a mix of compensation that includes an appropriate mix of fixed and variable cash and equity; and, for variable compensation, a balance of short- and long-term incentive opportunities
Performance criteria and corresponding objectives include a balance of performance and the quality of such performance; include the appropriate use oftop-line vs. bottom-line metrics; and use annual and long-term measures that complement each other
Plans are well-designed and do not include steep payout curves, uncapped incentive payouts, and misaligned payout timing
Incentive plans are tested for multiple scenarios under realistic assumptions to ensure that potential payouts are reasonable relative to results
A thorough and qualitative assessment of how results were achieved, and the quality and sustainability of the results is conducted
Validation of the relationship between performance and incentive plan payouts to ensure it falls within the range of competitive practices determined by comparison with a representative peer group and general industry
Implementation of risk-mitigating features such as a clawback policy that applies in certain circumstances involving the restatement of financial results and a policy that requires a portion of the shares received from incentive award payouts to be retained by the participants through ownership/retention approaches
Incentive plan governance includes involvement at a variety of levels from the Compensation Committee to various corporate functions including Corporate Governance, Executive Compensation, Finance, HR, Legal, and the Board’s outside consultant, Pay Governance
Potential risk is discussed with the Compensation Committee, recorded in Committee minutes, and discussed in the Compensation Discussion and Analysis section of the Company’s Annual Proxy Statement
To assess the risk of employee compensation programs below the executive level, the Company’s Human Resources group has implemented a Governance Committee to review and approve plan design and address any significant issues that arise. The Governance Committee utilizes its Global Incentive Plan Design and Risk Mitigation Framework to consider links to strategy and any risks associated with the design of each incentive plan. The risks associated with each of the following elements of the design and implementation of an incentive plan are considered, as well as the steps in place to mitigate risk and ensure alignment with the Company’s strategic plan:
Linkage of incentive measures with business objectives, analysis of total compensation market data, determination of design elements/payout threshold levels, potential range of payouts, and timely and accurate tracking of performance data;
Corporate Governance
Modeling, approval, and communication of incentive plans;
Calculation, audit, approval, and communication of incentive payments; and
Annual plan reviews to ensure planned design updates align with business goals and budgets, and do not present a material risk to the Company.
After due consideration of management’s 20182019 Compensation Program Risk Assessment Report, the Compensation Committee concluded that the Company’s compensation programs do not create a reasonable likelihood of a material adverse effect on the Company.
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Corporate Governance
Directors are expected to attend the Annual Meeting of the Stockholders, all Board meetings, and all meetings of the committees on which they individually serve. The Board held nine meetings during 2019. All directors then in office attended the 2019 Annual Meeting of Stockholders. Director attendance averaged 96% of the aggregate number of meetings of the Board of Directors and the committees on which they served during 2019. Mr. Wada’s attendance averaged 86% of the aggregate number of meeting of the Board of Directors on which he served during 2019. The independent directors met in executive sessions at which only they were present at least six times during 2019.
Under the Company’s Amended and Restated Bylaws (the “Bylaws”), the number of directors constituting the Board may be fixed by the Board within the range of five to eleven directors. The size of the Board should not exceed a number that, as determined by the Board, will permit it to function efficiently in discharging its duties.
The Board does not have term or age limits. The Board believes that the perceived value of such limits is outweighed by the contributions of directors who have been able to develop, over a period of time, increasing insight into the Company’s operations and strategic direction and, therefore, provide an increasing contribution to the effectiveness of the Board as a whole.
Director Service on Outside Public Company Boards
While there is no specified limit on the number of other public company boards on which a director may serve, the number of board memberships is a consideration, along with any other time commitments a director or nominee may have, in determining his or her ability to serve effectively. Directors must be willing and able to devote sufficient time to carrying out their duties and responsibilities effectively and have an intention to serve an appropriate length of time in order to make a meaningful contribution to the Board and the Company. A director should engage in discussion with the Chair of the Corporate Governance and Nominating Committee prior to accepting an invitation to serve on an additional public company board or accepting an invitation to chair a committee of a public company board on which he or she currently serves.
Director Orientation and Continuing Education
Management, working with the Corporate Governance and Nominating Committee, provides an orientation program for new directors. The program addresses the Company’s business, history, vision, strategic direction, competitive landscape, core values, ethics, corporate governance practices, financial matters, key policies, and senior leadership. The program is conducted by means of, as appropriate, written materials, briefings by the senior management, and visits to Company facilities. Directors are also encouraged to participate in continuing director education programs that include presentations on business, financial, accounting, legal, and other subjects relevant to the Company’s business. Reasonable costs and expenses incurred for continuing education are reimbursed by the Company.
Board and Committee Evaluation
Annually, theThe Corporate Governance and Nominating Committee organizes and oversees the Board’s and Committees’an annual evaluation processes and reports results to the Board. The Board and each Committee conduct an evaluation of their respective performance through the use of a questionnaire, sharing of a summary of results and subsequent discussions, the purpose of which is to increase the effectiveness of the committees and the Board as a whole. The process includes an assessment ofby the Board and each Committee’s effectiveness and independence, access to and reviewits committees of information from management, responsiveness to shareholder concerns, maintenance of standards of business conduct and ethics, and relationship with management.their performance. The evaluation is intended to facilitate an examination and discussion by the entire Board and each Committee of its effectiveness as a group in fulfilling its charter requirements and other responsibilities. Some ofresponsibilities, its performance as measured against the Company’s Corporate Governance Principles, and areas reviewed as part offor improvement. From time to time the evaluation include: Director obligations, roles and responsibilities, Board member qualifications, Committee member qualifications, Board structure, Committee structure, corporate governance, organization performance, culture and ethics, and educational opportunities. The Company’s Corporate Secretary aggregates and summarizes the Directors’ responses to the questionnaires, highlighting comments. Responses are not attributed to specific Board members in order to promote candor. Summaries of the questionnaire responses are shared with Board members to inform their review and discussions. With the goal of encouraging continuous improvement, in 2018 a tool was provided and time was set aside during each committee’s executive session to facilitate discussion and actionable feedback about potential opportunities to improve performance. Past evaluations have resulted in the Committee revising its criteria for Director candidates, extending the length of various meetings to ensure sufficient discussion time, holding more frequent executive sessions, discussion of potential future Committee participation, establishment of the roles of Committee Vice Chairs, and Committee Chair succession.may also include individual director assessments.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) that applies to all Directors, Officers,directors, officers, and employees to help them recognize and deal with ethical issues, deter wrongdoing, provide mechanisms to report dishonest or unethicalany concerns, promote honest and ethical conduct, provide full, fair and timely disclosure, comply with applicable law and regulations, and help foster a culture of honesty and accountability. The Code of Conduct addresses conflicts of interest; anti-bribery/anti-corruption; insider trading; corporate opportunities; confidentiality and privacy; external communications; protection and proper use of assets; fair dealing; contract management; acceptable behavior in the workplace; corporate sustainability; compliance with laws, rules and regulations; Company policies; risk tolerance; anti-human trafficking;trafficking and slavery; seeking advice and reporting dishonest or unethical behavior; andconcerns; outside activities; political contributions; public company reporting requirements.requirements; and other policies. The Code of Conduct includes an enforcement mechanism.
The full text of the Code of Conduct is posted on the Company’s website atkellyservices.com. This information is available in print to any shareholderstockholder who requests it from the Company’s Investor Relations Department.department. The Company will disclose future amendments to the Code of Conduct for its Directorsdirectors and Executive Officersexecutive officers on its website or by filing a current report on Form8-K within four business days following the date of amendment, or such earlier period as may be prescribed by Nasdaq or the SEC.
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Corporate Governance
Related Person Transactions and Certain Relationships
Pursuant to the Company’s Code of Conduct, any situation that involves, or may reasonably be expected to involve, a conflict of interest with the Company must be disclosed immediately to the Vice President of Internal Audit or to the General Counsel. In addition, Directorsdirectors and Executive Officersexecutive officers are required to complete an annual questionnaire that solicits information regarding any transactions or relationships between themselves or their immediate family members and the Company of the types described in Item 404(a) of SEC RegulationS-K (“Related Party Transactions”). Directors and Executive Officersexecutive officers must seek a determination and obtain prior authorization or approval of any potential conflict of interest (including any Related Party Transaction) from the independent Audit Committee. The Audit Committee, pursuant to its charter, is tasked, among other things, with the responsibility to review Related Party Transactions and other conflicts of interest involving Directorsdirectors and Executiveexecutive and Senior Officers.senior officers. The Company maintains a formal written policy addressing the reporting, review, and approval or ratification of transactions with related persons.
Corporate Governance
During 2018, Mr. Adderley, the former Chairman of our Board of Directors and controlling shareholder, received compensation from the Company, as described below under “Director Compensation,” which was approved by the independent Compensation Committee. Mr. Takahashi,Wada, a Directordirector of the Company whose term expires prior toas of the date of the Company’s 20192020 Annual Meeting, served as the designated representative of Persol, which owns 4.4% of the Company’s Class A Common Stock, and with which the Company has a strategic alliance, as described in the Company’s Annual Report on Form10-K for the periodfiscal year ended December 30, 2018.29, 2019. Mr. TakahashiWada received no compensation for his service as a Director.
Since our founding in 1946, Kelly has embodied the true spirit of corporate sustainability, and we are committed to the highest standards of corporate citizenship. Our culture and values are rooted in service, integrity, and taking personal responsibility for our actions, outcomes, and reputation. As a leading global workforce solutions provider, we connect people with employment opportunities and make a difference in the communities in which we live and work. Given the worldwide span of our workers, clients, suppliers, and partners, we recognize the global reach of our business practices and our public accountability.
Beginning in 2017, Kelly has embarked on a transformation of its social responsibility program and proposed a Corporate Sustainability strategy, focused on six pillars of development.director.
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We believe Kelly has a responsibility to do the right thing and we welcome the opportunity to make a difference. For more information, visit our website,www.kellyservices.com, to read more about our corporate sustainability strategy.
Director Compensation
Our approach to director compensation is to appropriately compensate ournon-employee Directorsdirectors for the time, expertise, and effort required to serve as a director of a large, complex global company and to align the interests of directors with those of shareholders.stockholders. Compensation levels for ournon-employee Directorsdirectors are periodically reviewed for market competitiveness. Compensation payments are made after thenon-employee Directorsdirectors are elected by shareholdersstockholders at the annual meeting.Annual Meeting.Non-employee Directorsdirectors who begin their Board or committee chair service other than at the annual meeting of shareholdersAnnual Meeting receive a prorated amount of annual compensation.
InThe Compensation Committee typically reviewsnon-employee director compensation in alternating years.In 2018, the Compensation Committee engaged its independent compensation consultant, Pay Governance, to evaluate itsnon-employee Director compensation, which was last increased in 2017. Prior to the 2017 increase, Director compensation had remained constant since 2012, preceded by three years of reduced compensation due to economic and business conditions. At the time of the 2017 increase, a conservative adjustment was made with agreement from the Committee to review again in 2018.director compensation. Pay Governance conducted a comprehensive review of the most recent proxy filings of the Company’s peer group and general industry to assess the competitiveness of the Company’snon-employee Directordirector compensation. The Committee determined that basedBased on the results of the market analysis,review, the Committee approved an increase in the value of the equity portion of the annual retainer of $30,000, from $80,000 to $110,000, was warranted.in 2018. No other changes were made tonon-employee director compensation in 2019. The compensation of ournon-employee directors will next be reviewed in 2020, with the cash portionassistance of the annual base retainer or the additional retainers (for Lead Director and Committee Chairs).Pay Governance. The following table illustrates our 20182019non-employee Directordirector compensation:
Board Leadership Positions - Additional Retainer | ||||||||||||||||||||||||
(Lead Director and Committee Chairs) | ||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||
Governance | ||||||||||||||||||||||||
Chairman | & | |||||||||||||||||||||||
of the | Lead | Audit | Compensation | Nominating | ||||||||||||||||||||
Annual Base Retainer | Board | Director | Committee | Committee | Committee | |||||||||||||||||||
Cash | $ | 100,000 | $ | 150,000 | $ | 20,000 | $ | 20,000 | $ | 15,000 | $ | 10,000 | ||||||||||||
Equity (Kelly Class A Stock) | $ | 110,000 | $ | 165,000 | — | — | — | — | ||||||||||||||||
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TOTAL | $ | 210,000 | $ | 315,000 | $ | 20,000 | $ | 20,000 | $ | 15,000 | $ | 10,000 | ||||||||||||
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As noted above, the increase in the equity portion of the annual base retainer resulted in the total annual base retainer fornon-employee Directors (other than Mr. Takahashi, who received no compensation for his service as a Director) increasing from $180,000 to $210,000. The additional retainers associated with Board leadership positions were $40,000 for the Lead Director, $20,000 for the Chair of the Audit Committee, $15,000 for the Chair of the Compensation Committee and $10,000 for the Chair of the Corporate Governance and Nominating Committee. The Committee believes the annual base retainer and additional Board leadership retainers to be at market competitive levels.
Annual Base Retainer | Board Leadership Positions - Additional Retainer (Committee Chairs) | |||||||||||||||||||
Non-Employee Directors | Chairman of the Board | Audit Committee | Compensation Committee | Corporate Governance & Nominating Committee | ||||||||||||||||
Cash | $ | 100,000 | $ | 150,000 | $ | 20,000 | $ | 15,000 | $ | 10,000 | ||||||||||
Equity (Kelly Class A Stock - $ Value) | $ | 110,000 | $ | 165,000 | — | — | — | |||||||||||||
TOTAL | $ | 210,000 | $ | 315,000 | $ | 20,000 | $ | 15,000 | $ | 10,000 |
Under the Company’s amended and restated Equity Incentive Plan (“EIP”), the Board of Directors is required to periodically determine the percentage of the base retainer that will be issued tonon-employee Directorsdirectors in shares of Class A common stock.Common Stock. The Compensation Committee and Board of Directors have approved fixing the portion of the annual base retainer that is paid in cash at $100,000, and the portion paid in equity at $110,000.
Chairman$110,000 (cash portion of the Board Transition
Prior to the retirement$150,000 and equity portion of Terence E. Adderley as Chairman of the Board in September 2018, the office of the Chairman was anon-officer employee position. Effective May 2018, annual compensation$160,000 for the role of Chairman of the Board was established at 150% of the annual base retainer payable tonon-employee directors, inclusive of the cost ofbenefits-in-kind provided to Mr. Adderley as disclosed in footnote (3) below, with the remaining amount payable to him in cash. During the period prior to his retirement, the Company also furnished administrative staff support to Mr. Adderley related to his duties as Chairman of the Board.
Following Mr. Adderley’s retirement in September 2018, Donald R. Parfet, who was then serving as independent Lead Director, was elected as the Chairman of the Board. Upon Mr. Parfet’s election, the office of the Chairman of the Board became anon-employee Director position. Mr. Parfet’s director compensation waspro-rated during 2018 to reflect his change in Board leadership positions in September 2018, taking into consideration the initial portion of the year he served as Lead Director and the balance of the year during which he served as Chairman of the Board. Mr. Parfet’s total director compensation for 2018 was $292,000.
Director Compensation
Board).
Following a review of current market practices, the Committee approved updated stock ownership requirements fornon-employee Directors in 2018.Non-employee Directorsdirectors are subject to a stock ownership requirement that is a minimum fair market value of four times the value of the cash portion of the annual retainer (which currently equates to $400,000).
Non-Employee Directors Deferred Compensation Plan
The Company has established theNon-Employee Directors Deferred Compensation Plan (“DDCP”), which providesnon-employee Directorsdirectors with the opportunity to defer all or a portion of all fees payable to them, pursuant to a valid deferral election. The DDCP is anon-qualified plan that allows for the deferral of all or a portion of annual cash payments to a notional account with investment fund choices that mirror those provided to participants in the Company’s Management Retirement Plan (“MRP”). In addition to those fund choices the Plan also includes the option to defer annual cash payments into Company common stock units.Non-employee Directorsdirectors may also elect to defer all or a portion of their annual stock retainer into Company common stock units. Participants may elect to receive distributions from their DDCP account at the time they cease to be a Directordirector of the Company or at a future date that is between one and ten years following the date they cease to be a Directordirector of the Company.Non-employee Directorsdirectors can elect to have distributions from the DDCP made in either a lump sum or in annual installment payments made over atwo-to-ten-year period.
The following table sets forth the compensation paid during 20182019 to the Directors other thanCompany’snon-employee directors. Mr. Corona, who receivesQuigley received no compensation for his services as a Directordirector in 2019, for the period of time he served as our President and whoseChief Executive Officer. Mr. Quigley’s compensation as our President and Chief Executive Officer is disclosed in the Compensation Discussion & Analysis section of this Proxy Statement.
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Director Compensation
20182019 Director Compensation
Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||
T.E. Adderley | — | — | — | — | — | $ | 497,277 | $ | 497,277 | (3) | ||||||||||||||||||
C.M. Adderley | $ | 100,000 | $ | 110,000 | — | — | ($ | 9,004 | ) | — | $ | 200,996 | ||||||||||||||||
G.S. Adolph | $ | 100,000 | $ | 110,000 | — | — | — | — | $ | 210,000 | ||||||||||||||||||
R.S. Cubbin | $ | 115,000 | $ | 110,000 | — | — | ($ | 96,147 | ) | — | $ | 128,853 | ||||||||||||||||
J.E. Dutton | $ | 110,000 | $ | 110,000 | — | — | ($ | 68,060 | ) | — | $ | 151,940 | ||||||||||||||||
T.B. Larkin | $ | 100,000 | $ | 110,000 | — | — | — | — | $ | 210,000 | ||||||||||||||||||
L.A. Murphy | $ | 120,000 | $ | 110,000 | — | — | ($ | 36,018 | ) | — | $ | 193,982 | ||||||||||||||||
D.R. Parfet | $ | 182,000 | $ | 110,000 | — | — | — | — | $ | 292,000 | ||||||||||||||||||
H. Takahashi(4) | — | — | — | — | — | — | — |
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||
Carol M. Adderley | $ | 100,000 | $ | 110,000 | — | — | ($ | 340 | ) | — | $ | 209,660 | ||||||||||||||||
Gerald S. Adolph | $ | 100,000 | $ | 110,000 | — | — | ($ | 10,006 | ) | — | $ | 199,994 | ||||||||||||||||
George S. Corona(3) | — | — | — | — | — | — | — | |||||||||||||||||||||
Robert S. Cubbin | $ | 115,000 | $ | 110,000 | — | — | $ | 16,012 | — | $ | 241,012 | |||||||||||||||||
Jane E. Dutton | $ | 110,000 | $ | 110,000 | — | — | $ | 75,470 | — | $ | 295,470 | |||||||||||||||||
Terrence B. Larkin | $ | 100,000 | $ | 110,000 | — | — | — | — | $ | 210,000 | ||||||||||||||||||
Leslie A. Murphy | $ | 120,000 | $ | 110,000 | — | — | ($ | 1,359 | ) | — | $ | 228,641 | ||||||||||||||||
Donald R. Parfet | $ | 150,000 | $ | 165,000 | — | — | — | — | $ | 315,000 | ||||||||||||||||||
Takao Wada(4) | — | — | — | — | — | — | — |
(1) |
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(2) | Represents the aggregate fair market value of grants awarded on May |
(3) | Mr. |
Mr. |
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Beneficial Ownership of Shares
BENEFICIAL OWNERSHIP OF SHARES
Under regulations of the Securities and Exchange Commission, persons who have power to vote or dispose of common stock of the Company, either alone or jointly with others, are deemed to be beneficial owners of the common stock.
Set forth in theThe following table issets forth, as of March 16, 2020, (i) the beneficial ownership of the Company’s Class A and Class B common stock on March 18, 2019 of (i)Common Stock by each person known by the Company to own beneficially more than 5% of the Class B Common stock,Stock, and (ii) the beneficial ownership of the Company’s Class A and Class B Common Stock by (a) each Directordirector (each of whom, other than Mr. Wada, is a nominee for election as a Directordirector at the Annual Meeting of Shareholders)Meeting), (iii)(b) each of the Named Executive Officers,named executive officers, and (iv)(c) all Directorsdirectors and Executive Officersexecutive officers as a group.
Class B Common Stock | ||||||||
Greater than Five Percent Class B Shareholders | Number of Shares and Nature of Beneficial Ownership | Percent of Class | ||||||
Terence E. Adderley Revocable Trust K(1) Andrew H. Curoe,Co-Trustee | 3,139,940 | 91.5% | ||||||
David M. Hempstead,Co-Trustee | ||||||||
William U. Parfet,Co-Trustee | ||||||||
c/o Andrew H. Curoe,Co-Trustee | ||||||||
6thFloor at Ford Field | ||||||||
1901 St. Antoine Street | ||||||||
Detroit, Michigan 48226 |
Greater than Five Percent Class B Stockholders | Class B Common Stock | |||||||
Number of Shares and Nature of Beneficial Ownership(1) | Percent of Class | |||||||
Terence E. Adderley Revocable Trust K | 3,139,940 | 91.6 | % |
Class A Common Stock | Class B Common Stock | |||||||||||
Directors and Named Executive Officers(1) | Number of Shares and Nature of Beneficial Ownership | Percent of Class | Number of Shares and Nature of Beneficial Ownership | Percent of Class | ||||||||
C.M. Adderley, Director | 343,986 | (2)(3) | 1.0 | 425 | (2) | * | ||||||
G.S. Adolph, Director(5) | 4,027 | * | 100 | * | ||||||||
G.S. Corona, Director and Executive Officer | 243,437 | * | 100 | * | ||||||||
R.S. Cubbin, Director | 21,734 | (3) | * | 100 | * | |||||||
J.E. Dutton, Director | 31,385 | (3) | * | 100 | * | |||||||
T.B. Larkin, Director | 26,826 | * | 100 | * | ||||||||
L.A. Murphy, Director | 26,319 | (3) | * | 100 | * | |||||||
D.R. Parfet, Chairman | 27,097 | * | 100 | * | ||||||||
H. Takahashi, Director | 1,576,169 | (4) | 4.4 | 1,475 | * | |||||||
T.S. Carroll, Executive Officer | 104,568 | * | 100 | * | ||||||||
P.W. Quigley, Executive Officer | 117,429 | * | 100 | * | ||||||||
O.G. Thirot, Executive Officer | 73,801 | * | 10 | * | ||||||||
H.S.Lim-Johnson, Executive Officer | 8,970 | * | — | * | ||||||||
All Directors and Executive Officers as a Group (13 persons) | 2,605,748 | 7.2 | 2,810 | 0.0 |
Class A Common Stock | Class B Common Stock | |||||||||||||||
Directors and Named Executive Officers | Number of Shares and Nature of Beneficial Ownership | Percent of Class | Number of Shares and Nature of Beneficial Ownership | Percent of Class | ||||||||||||
Directors: | ||||||||||||||||
Carol M. Adderley | 343,401 | (2)(3) | 1.0 | 425 | (2) | * | ||||||||||
Gerald S. Adolph | 8,478 | (3) | * | 100 | * | |||||||||||
George S. Corona | 153,018 | * | 100 | * | ||||||||||||
Robert S. Cubbin | 26,348 | (3) | * | 100 | * | |||||||||||
Jane E. Dutton | 31,899 | (3) | * | 100 | * | |||||||||||
Terrence B. Larkin | 31,211 | * | 100 | * | ||||||||||||
Leslie A. Murphy | 30,824 | (3) | * | 100 | * | |||||||||||
Donald R. Parfet | 33,675 | * | 100 | * | ||||||||||||
Takao Wada | 1,576,169 | (4) | 4.4 | 1,475 | * | |||||||||||
Named Executive Officers: | ||||||||||||||||
Peter W. Quigley (also a director) | 132,634 | * | 100 | * | ||||||||||||
Olivier G. Thirot | 87,266 | * | 10 | * | ||||||||||||
Peter M. Boland | 9,636 | * | — | * | ||||||||||||
James H. Bradley | 24,452 | * | — | * | ||||||||||||
HannahLim-Johnson(5) | 11,490 | * | — | * | ||||||||||||
All directors and executive officers as a Group (14 persons) | 2,500,501 | 7.0 | 2,710 | 0.0 |
* | Less than 1% |
Beneficial Ownership of Shares
(1) |
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Beneficial Ownership of Shares
(2) | Includes 190,306 shares of Class A stock and 200 shares of Class B stock held in two separate trusts of which Ms. Adderley is one of two individual trustees with Comerica Bank & Trust, N.A. as Corporate Trustee. |
(3) | Includes |
(4) | Mr. |
(5) |
|
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Under the securities lawsSection 16(a) of the United States,Exchange Act requires the Company’s Directors, Executive Officers,directors and any personcertain officers, as well as persons who beneficially ownsown more than 10% of the outstanding shares of common stock, (collectively, the “Reporting Persons”), are required to reportfile reports regarding their initial stock ownership and subsequent changes to their ownership of the common stock and any changes in that ownership towith the SEC. Specific due dates
Based solely upon a review of filings for these reports have been established and pursuant to applicable rules, the Company is required to report in its Proxy Statement any failure to file by these due dates. Based on certifications received from the Reporting Persons, and on copies of the reports that such persons have filedfiscal year 2019 with the SEC and related written representations that no other reports were required, we believe that all requiredSection 16(a) reports of Reporting Persons were filed on a timely with the SECbasis, except a Form 4 for 2018.Ms. Adderley due April 5, 2019, which was filed on February 18, 2020 to report her sale of 5,000 shares of Class A Common Stock on April 3, 2019.
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Proposal 2:2 – Advisory Vote to Approve the Company’s Executive Compensation
PROPOSAL 2 -– ADVISORY VOTE TO APPROVE THE COMPANY’S EXECUTIVE COMPENSATION
As described in the following Compensation Discussion and Analysis, our executive compensation programs are designed to align the interests of our Executive Officersexecutive officers with those of our shareholdersstockholders by tying a significant portion of the compensation they receive to Company performance, and by providing a competitive level of compensation in order to attract, retain, and reward Executive Officers,executive officers, who are critical to the long-term success of our business. Under these programs, our Named Executive Officersnamed executive officers are rewarded for the Company’s financial performance, individual performance, and long-term value creation, as well as to facilitate retention, and reflect market realities. Please read the Compensation Discussion and Analysis for additional details about our executive compensation programs, including information about the fiscal year 20182019 compensation of our Named Executive Officers.named executive officers.
As required by Section 14A of the Exchange Act, this proposal, commonly referred to as a “say on pay” proposal, seeks a shareholderstockholder advisory vote on our Named Executive Officers’named executive officers’ compensation, as disclosed in this Proxy Statement pursuant to Item 402 of RegulationS-K and in the Compensation Discussion and Analysis, through the following resolution:
“RESOLVED, that the Company’s shareholdersstockholders approve, on an advisory basis, the compensation of the Named Executive Officers,named executive officers, as disclosed in the Company’s Proxy Statement for the 20192020 Annual Meeting of ShareholdersStockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the 20182019 Summary Compensation Table, and the other related tables and disclosure.”
Thesay-on-pay vote is advisory;advisory and, therefore, not binding on the Company. Our Board of Directors and our Compensation Committee value the opinions of our shareholdersstockholders and considersconsider the result of the advisory vote in designing and evaluating our executive compensation programs.
The Board of Directors recommends a vote “FOR” the approval of the compensation of our Named Executive Officers,named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC.
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Compensation Discussion and Analysis
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Discussion and Analysis section of this Proxy Statement provides an overview of our executive compensation philosophy and objectives and describes the material elements of our executive compensation programs, the compensation decisions the Compensation Committee (the “Committee”) has made under those programs, key factors that were considered, and provides details of the compensation paid to our Named Executive Officers.named executive officers.
The Compensation Discussion and Analysis is organized in the following sections:
1. 2018 Named Executive Officers
1. | 2019 Named Executive Officers |
2. Executive Summary
2. | Executive Summary |
3. Executive Compensation Philosophy, Objectives and Design
3. | Executive Compensation Philosophy, Objectives, and Design |
4. Process for Determining Executive Compensation
4. | Process for Determining Executive Compensation |
5. Compensation Programs: Decisions and Actions in 2018
5. | Compensation Programs: Decisions and Actions in 2019 |
6. Governance of Executive Compensation Programs
6. | Governance of Executive Compensation Programs |
7.
7. | Tax and Accounting Considerations |
8. | Compensation Committee Report |
20182019 Named Executive Officers
Our Named Executive Officersnamed executive officers for 2018,2019, as defined by the SEC, were as follows:
Name | Title | |
| Executive Vice President, and President, Global Staffing and General Manager, Global Information Technology, Global Service and Global Business Services (through 9/30/19); President and Chief Executive Officer (commencing 10/1/19) | |
Olivier G. Thirot | Executive Vice President and Chief Financial Officer | |
Peter M. Boland | Senior Vice President and Chief Marketing Officer | |
James H. Bradley | Senior Vice President, Global Business Services and Global Talent Solutions | |
George S. Corona(1) | Former President and Chief Executive Officer | |
Teresa S. Carroll(2) | Former Executive Vice President, and President, Global Talent Solutions and General Manager, Global Solutions, Marketing and Human Resources | |
| ||
Hannah S.Lim-Johnson (3) | Former Senior Vice President and Chief Legal Officer |
(1) | Mr. Corona stepped down as President and CEO and an officer of the Company effective September 30, 2019. |
(2) | Ms. Carroll separated as an officer and an employee of the Company effective September 30, 2019. |
(3) | Effective March 19, 2020,Ms. Lim-Johnson, Senior Vice President and Chief Legal Officer, separated from Kelly Services, Inc. |
As previously disclosed, following his resignation as CEO, Mr. Corona became anon-executive employee of the Company, in a transition and advisory role until his expected retirement from the Company on or about June 30, 2020. Effective October 1, 2019, Mr. Quigley assumed the role of President and CEO. A description of the compensation arrangements for Messrs. Corona and Quigley in connection with the transition can be found under the heading “CEO Transition” in the section Compensation Programs: Decisions and Actions in 2019 below.
KellyKelly’s philosophy as a talent company is committed to being a leading talent solutions providerrooted in the markets we choose to competeconviction that our business makes a difference on a daily basis – in which is the foundationlives of our strategy.employees and talent networks, for our customers, in the local communities we serve and in the broader economy. As work has evolved so has our range of solutions, growing over the years to reflect the changing needs of our customers and the changing nature of work itself. We have progressed from a traditional office staffing company into a workforce solutions leader delivering expertise in a portfolio of specialty services. As workforcetalent management has become more complex, we have developed a talent supply chain management approachinnovative solutions to help many of the world’s largest companies plan for and manage their workforces.workforce through outsourcing, consulting, recruitment, talent advisory, career transition, and supplier management services. We offer innovative outsourcing and consulting services, as well as staffing on a temporary,temporary-to-hire, and direct-hire basis. We also provide a suite of talent fulfillment and outcome-based solutions, delivering integrated talent solutions on a global basis. In doing so, we enable companies to access skilled talent that can move their businesses forward.
2018 was
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Compensation Discussion and Analysis
Kelly is committed to being a yearleading talent solutions provider among the talent with whom we choose to specialize and in the markets we choose to compete, which is the foundation of our strategy in 2019 and beyond. This strategic intent is underpinned by our Noble Purpose, “We connect people to work in ways that enrich their lives,” and operational progress that demonstratedis brought to life by our commitment to profitable growth. We delivered solid full-year performanceexpected behaviors and actions:
Employ a talent-first mentality
Relentlessly deliver for customers
Grow through discipline and focus
Deliver efficiency and effectiveness in a tight labor market, effectively managing costs while alsoeverything we do
By aligning ourselves with our Noble Purpose, executing against these strategic pillars, and investing in our future. A growing U.S. economyadditional innovation, we intend to reap the benefits of operating as a more agile and historic low unemployment rates made recruiting more challenging this yearfocused organization and we experienced increased timeexpect to achieve new levels of growth and expense to fill positions. Nevertheless,profitability as we made steadydevelop further specializations across our portfolio of business.
During 2019, we continued our progress against our strategic intent, creating opportunities to improve margins through organicas a talent solutions company and identified several specialty growth while seeking new paths to growth through inorganic investments. We also initiated a comprehensive review of our commercial staffing operations, particularly the U.S. branch network, which will enable us to place additional focus on improving operational efficiency and creating growth through specialization.
In 2018platforms for investment. Early in 2019, we also became a more focused company. We sold our healthcare and legal specialty operations, which allows us to place a greater focus on our commercial, education, engineering and science specialties. In education, we successfully integrated our 2017 acquisition, Teachers On Call. In engineering, we identified two companies that will immediately expandexpanded our engineering portfolio: on January 2, 2019, we acquiredportfolio with the acquisition of Global Technology Associates, LLC (“GTA”) and NextGen Global Resources LLC (“NextGen”), leaders in the growing 5G telecomtelecommunications market. These acquisitions position Kelly as one of the leading engineering workforce solutions companies in this fast-growing technology space. Both companies provide servicesmarket. And in January 2020, we acquired Insight Workforce Solutions LLC (“Insight”), an educational staffing company, to the largest carriers and OEMs in the telecommunication industry.
Compensation Discussion and Analysis
Other investments this year includedexpand our ongoing commitment to embracing the future of work, as the Kelly Innovation Fund participated in the seed fundraising round for Kenzie Academy, a U.S. tech apprenticeship program that develops modern tech workers. To strengthen ourleadership position in the portion of the workforceU.S. education talent solutions industry. We intend to further accelerate our efforts to drive revenue and earnings growth through additional inorganic growth platforms, making smart acquisitions that participates as independent contractors, we made a minority equity investment in Business Talent Group (“BTG”), a U.S.-based marketplace that connects highly-skilled independent talent to some of the world’s largest businesses.align with Kelly’s focus on specialization.
We also continuedcontinue to make investments in technology, during 2018, particularly those which support greater efficiency in finding talent to answer customer needs. We are making substantial investments inaccelerating the implementation of our front and middle office platforms, which when fully deployed inmid-2020, will streamline the processes and workflows associated with recruiting, onboarding, and reassigning workers. These investmentsThis investment will create the platform from which we canwill deploy additional operational improvements over the next several years that will enhance the experience of the hundreds of thousands of job seekers who interact and work with Kelly each year.
Our review of the commercial staffing operations delivered by our U.S. branch network in the first quarter of 2019 resulted in the reorganization of our operations to improve geographic coverage and operational efficiency. The new structure will allow us to refine our focus on specialties within the commercial staffing portfolio, including light industrial, electronic assembly, office professionals, and contact center staffing. During 2019, we recorded total restructuring charges of $5.5 million as a result of these actions. While we have already gained efficiency from the restructure, the growth we anticipated has not yet occurred. We remain committed to delivering revenue growth in our U.S. market and have initiated further actions to modernize our operations and deliver on that commitment.
Key performance highlights for 2018 include increases in most2019 incentive plan financial measures:measures were lower than the prior year and resulted in below target payouts:
Earnings from Operations | Totaled | |
| ||
| ||
Conversion Rate (Return on | ||
| ||
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Our performance improved overWhile faced with market conditions that may hamper our efforts, including a sluggish manufacturing sector and a tight labor market, and the last year but fell short of target expectations.recent business challenges arising from the Coronavirus, Kelly continues to focus on accelerating the execution of our strategic plan and making the necessary investments and adjustments to advance that strategy. Our objective is to become an even more competitive,agile, consultative, and profitable company, and we are reshaping our business to make that visiongoal a reality. We will measure our progress againstusing financial measures, including: revenue growth (both organic and inorganic); gross profit growth, earnings from operationsrate improvement; and conversion rate. rate and EBITDA margin.
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Compensation Discussion and Analysis
We expect:are acting with urgency to achieve the following:
To growGrow higher-margin specialty and outsourced solutions, creating a more balanced portfolio that yields benefits from improved mix;
To integrateIntegrate our investments in specialty solutions with significant growth opportunities, such as our acquisitions of Global Technology AssociatesGTA, NextGen, and NextGen Global Resources;Insight;
To deliverDeliver long-term structural improvements in costs through investments in technology and process automation; and
To continue to improveImprove our conversion rate.financial results.
Key Executive Compensation Program Highlights for Fiscal 20182019
We continue to evaluate our executive compensation program and make changes to further align it with our strategic priorities and to reward both short- and long-term business success. We believe we have designed a program that aligns with shareholderstockholder interests, incentivizes growth and operational excellence, and demonstrates a clear linkage between compensation and performance. The program continues to seek to minimize incentives for management to take excessive risks. The Committee worked with management and its independent compensation consultant, as described later in this document, to review current compensation programs, including the incentive plans, and made the decisions described below in 2018.2019.
Compensation Discussion and Analysis
Reflecting the Company’s commitment to driving a high-performance culture, our executive compensation program emphasizesat-risk incentive awards that can be earned over one and three-year periods. As our business evolves and we strive for performance that is better than the prior year, the design of our incentive plans has changed to ensure continued alignment to our business strategy for driving long-term shareholderstockholder value. The executive compensation program, particularly the annual and long-term incentive plans, are designed to directly support the Company’s strategic intent to become a more efficient, profitable, growth-focused, and performance-driven organization. Incentive payouts earned for performance cycles ending in 20182019 are commensurate with the earnings, gross profit, expense management, and total shareholderstockholder return results that were achieved. Annual incentive awards for 20182019 corporate performance were earned at approximately 46.80%45.60% of target, commensurate with our performance on earnings, gross profit, and expense goals. Long-term incentive awards for the performance share period 2016-20182017-2019 were earned at an aggregate funding of 78.76%36.62% of target for gross profit and return on sales and earnings before taxes plus Joint Venture (“JV”) income results, and our total shareholderstockholder return relative to the market. The 2019 incentive designs, which are briefly summarized below and will be discussed in further detail in next year’s proxy filing, are similar to the 2018 incentive design for annual incentives. Key design changes have been approved for the 2019 long-term incentives. The requirement for performance under both the 2019 annual and long-term plans are set meaningfully above 2018 actual results to earn the target award.
The Board has adopted two plans that provide the framework for incentive compensation opportunities for our Senior Officers,senior officers, a group that includes our Executive Officers.executive officers.
The Short-Term Incentive Plan (“STIP”) provides for annual cash-based incentive opportunities that are based upon the achievement of one or more performance measures, as established by the Committee.
The Equity Incentive Plan (“EIP”) provides the Committee the ability to grant long-term incentive (“LTI”) opportunities, in various award types, that focus on the long-term performance of the Company and align the interests of Senior Officerssenior officers with those of shareholders.stockholders.
20182019 STIP Design and Results
Approved multiple, balanced performance measures for the corporate component of the 20182019 STIP. 20182019 target goals for each measure were set at budgeted numbers, which were substantially higher than 20172018 actual results:
Earnings from Operations (weighted 50%);
Return on Gross Profit (Conversion Rate) (weighted 25%); and
Total Gross Profit (weighted 25%).
Maintained “gatekeeper” goal that must be achieved in order to earn a payout under any STIP measure (Earnings from Operations measure must achieve at least 60% of target).
Executive Officersofficers who are responsible for providing direct leadership to a business unit have at least 50%30% of their STIP award opportunity based on the achievement of specific business unit measures and the remainder of their award based on the corporate component.
Based upon 20182019 results for the three performance measures of the corporate component of the STIP, the Committee approved payouts on the 20182019 STIP corporate component equal to 46.80%45.60% of target.
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Compensation Discussion and Analysis
Maintained LTI grant mix for Senior Officers,senior officers, including our Executive Officers,executive officers, that heavily emphasizesat-risk performance-based pay opportunities through the following equity vehicles:
Performance Share Units –= 75% of LTI mix; and
Restricted Stock Awards/Units (RSAs/RSUs) –= 25% of LTI mix.
Approved threetwo new LTI performance measures for the 2018-20202019-2021 Performance Share Awards maintainingthat management and the sameCommittee believe to be strong drivers of Kelly’s long-term value.
Gross Profit Growth (weighted 50%)
Improvement in Return on Gross Profit (Conversion Rate) (weighted 50%)
Retained a Relative Total Shareholder Return (“TSR”) performance component; however, it will now be applied as a modifier to the outcome of the 2019-2021 financial performance measures as the prior year. 2018to strengthen accountability to financial results and enhance alignment between earned awards and expense. The TSR modifier can have either a positive or negative impact of up to 25% on overall financial results.
Established goals for full three-year performance periods for all measures. 2019-2021 target financial goals for each measure were set at budgeted numbers, which were substantially higher than 20172016-2018 actual results. Awards earned, if any, are based on performance assessed over the three-year period.
Return on Sales (weighted 33.3%);
Earnings Before Taxes plus Joint Venture Income (weighted 33.3%); and
Relative Total Shareholder Return (“TSR”) (weighted 33.4%).
NOTE: The “Earnings Before Taxes plus Joint Venture Income” measure includes a“bottom-line” earnings measure to capture Joint Venture earnings in support of our business strategy.
Compensation Discussion and Analysis
MaintainMaintained a performance hurdle of “Positive Net Income” to the restricted stock units awarded to Executive Officersexecutive officers in 2018.2019. Dividend equivalents on restricted stock units granted during 20182019 are not paid to Executive Officersexecutive officers until both the performance hurdle and vesting requirements are met.
2016-20182017-2019 LTI Results
Performance share awards based upon 2016-20182017-2019 financial measures, “Return on Sales”, “Gross Profit: OCG and PT as a percentage of total Company Gross Profit”, and “Gross Profit: Global Commercial”“Earnings Before Taxes plus Joint Venture (“JV”) Income” achieved an average funding level of approximately 70.38%54.99% of target and vested on February 13, 2019.11, 2020.
Based on theThe Company’s relatively strong stock price performance over the three-year period 2016-2018 (35.6%2017-2019 (2.3%) as compared to the stock price performance of the S&P SmallCap 600 Index (34.4%(25%) for the same period, the Committee approved the funding ofresulted in below threshold results for the Relative TSR measure for the 2016-20182017-2019 LTI awards at 103.89% of target andawards. As a result, shares vestedbased on February 13, 2019.this performance measure were not eligible for vesting.
2018 Base Salary2019 Individual Compensation Decisions
Mr.Messrs. Thirot, Boland and Bradley andMs. Lim-Johnson received base salary increases of approximately 3%averaging 3.6%, effective March 1, 2018. Messrs.2019.
Mr. Corona and Quigley, and Ms. Carroll did not receive base salary increases in 20182019 as the Committee believed their compensation to be appropriate based on market competitive levels and other factors.
To begin moving target pay closer to market median, at the time of Mr. Quigley’s promotion to President and CEO, he received a base salary increase of 46%, an increase to his STIP target from 85% to 110% of base salary earnings, and an additional LTI award grant, effective October 1, 2019. Messrs. Thirot and Boland received salary increases of 5% in recognition of additional responsibilities each of them took on effective October 1, 2019. Further explanation can be found under “Base Salary.”“Compensation Programs: Decisions and Actions in 2019”.
The Committee believes these actions support the strategic direction of the Company and help position it for long-term success in achieving its goals. These compensation decisions and actions are discussed in more detail below.
Executive Compensation Philosophy, Objectives, and Design
Our executive compensation philosophy is to provide market-based pay opportunities with incentive payouts aligned with the achievement of the Company’s overall short- and long-term business strategies and results. The design of our executive compensation programs allocates total compensation to fixed and variable pay elements resulting in a mix of short-term and long-term pay elements. The Committee continually evaluates our executive compensation programs to ensure that the Company provides market-competitive opportunities that enable us to attract and retain highly qualified individuals to lead the organization and drive business success in the competitive and ever-changing business environment in which we operate. Our executive compensation programs are designed to achieve the following objectives:
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Compensation Discussion and Analysis
Align a significant portion of compensation with the achievement of multiple performance goals that motivate and reward executives based on Company, business unit, and individual performance results;
Attract and retain world-class talent with the leadership abilities and experience necessary to develop and execute business strategies, achieve outstanding results, and build long-term shareholderstockholder value;
Support the achievement of the Company’s vision and strategy;
Create an ownership mindset that closely aligns the interests of management with those of shareholders;stockholders; and
Provide an appropriate balance between the achievement of both short- and long-term performance objectives, with clear emphasis on managing the sustainability of the business and mitigation of risk.
The Committee believes that a majority of a Senior Officer’ssenior officer’s compensation should be “at risk” and based upon the achievement of corporate and business unit results, the Company’s share price performance, as well as individualan individual’s performance. As a result, Senior Officerssenior officers participate in incentive programs that provide them with the opportunity to earn awards that are directly tied to the Company’s performance and that drive sustainable long-term shareholderstockholder value. The Company’s compensation programs provide an incentive for Senior Officerssenior officers to meet and exceed performance goals. Executives are held accountable for results and rewarded with above target payout amounts for performance that exceeds target goals. When target goals are not met, award payouts are designed to deliver below target payouts or no payouts. We believe the combination of our annual short-term incentive awards and long-term equity incentive awards align the interests of our Senior Officerssenior officers with the interests of our shareholders.stockholders.
CEO and Other Named Executive Officers Pay Mix
While we believe that a majority of an Executive Officer’sexecutive officer’s target compensation opportunity should be performance-based, we do not have a specified formula that defines the overall weighting of each element. We believe that the higher a role is positioned within the organizational structure, the greater the emphasis on performance-based compensation should be. As such, the Chief Executive Officer (“CEO”) has a greater percentage of his compensation opportunity that is
Compensation Discussion and Analysis
performance-based through higher target opportunities for STIP and LTI, as compared to the compensation opportunities of the other Named Executive Officersnamed executive officers (“NEOs”).At-risk compensation consists of annual cash incentive awards and long-term equity awards (restricted shares and performance shares) that are contingent upon the achievement ofpre-established performance goals. The following charts illustrate the 20182019 Target Total Direct Compensation mix for our President and CEO and the other Named Executive Officersnamed executive officers combined (as of December 31, 2019) and includes the pay elements of base salary, STIP (at target), restricted shares, and performance shares (at target):
FY Target Compensation Mix | FY Target Compensation Mix | |
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Compensation Discussion and Analysis
Elements of Compensation for Named Executive Officers
The Committee determines the elements of total direct compensation that we provide to our Senior Officers,senior officers, a group that includes the Named Executive Officers.named executive officers. The elements of our fiscal 20182019 executive compensation program and the objectives for each are as follows:
COMPENSATION | TYPE | FORM | CONSIDERATIONS | OBJECTIVES | ||||||
Base Salary | Fixed Compensation | Cash | • Reviewed annually and adjusted when appropriate
• Determined based on role and scope of responsibilities, skills, experience, sustained individual contribution, and comparison to market-comparable jobs | • Provide competitive compensation forday-to-day responsibilities
• Attract and retain qualified • Balance risk-taking | ||||||
Variable At-Risk Performance- Based Compensation | Cash | • Annual performance period
• Target payout opportunity established as percentage of earnings for each
• Performance measures selected to align with our business strategy
• Multiple performance measures that reflect key operational and financial measures of success
• Payout based on achievement of predetermined goals
• “Gatekeeper” goal must be achieved for any award to be earned | • Motivate and reward | |||||||
Long Term Incentives (LTI) | Variable At-Risk Compensation | Stock- Settled | Restricted Stock
• Accounts for 25% of total LTI award opportunity
|
• Align interests of
• Support retention
• Support meaningful stock ownership | ||||||
Long Term Incentives (LTI) | Variable At-Risk Performance- Based Compensation | Stock- Settled |
| • Accounts for 75% of total LTI award opportunity
• Provides opportunity to earn shares based on achievement of multiple specific performance goals
• Relative TSR measure is for a
• Financial measures for 2017-2019 and 2018-2020 LTI awards are based on three years of performance (payouts, if any, are based on the aggregation of threeone-year performance goals compared to three years of results) • Financial measures for 2019-2021 LTI awards are for a three-year period with full goals set in early 2019 | • Drive long-term value creation for
• Motivate and reward
• Align the interests of |
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Compensation Discussion and Analysis
20192020 Executive Incentive Plans – Overview
For the 20192020 incentive plan designs, the Company continues to focus onpay-for-performance alignment by using multiple financial measures and Relative TSR to strongly drive our key business objectives and shareholderstockholder value. In support of this strategy, the Committee has approved the following:
Raised threshold payouts from 25% to 50% of target and eliminated the “Intermediate” level of performance under both the STIP and LTI Performance Awards;
Maintained STIP performance measures that are a combination of gross profit and earnings from operations measures;
Set goals for the full three-year performance period for the 2019-2021 Long-Term Incentives with gross profit growth and conversion rate average improvement performance measures, and Relative TSR is now applied as a modifier to financial results rather than a separate measure;
Continued a performance hurdle for the 2019 grant of RSUs for Executive Officers that must be achieved before shares become earned. Dividends on these shares will only be paid upon achievement of the performance hurdle and time vesting requirements; and
Maintained voluntarily, many of the practices previously required for performance-based compensation under the former requirements of Section 162(m) of the Internal Revenue Code (the “Code”) as good governance of our performance-based plans.
Additional details regarding the 20192020 incentive plan designs will be presented in our 20202021 proxy filing.statement.
Process for Determining Executive Compensation
Role of the Compensation Committee
The Committee designs and administers the Company’s executive compensation programs and policies, and regularly reviews these programs and policies relative to its objectives, applicable new legal and regulatory practices, evolving best practices, and corporate governance trends. The Committee and members of the Board of Directors determine the compensation of the CEO. The CEO’s total compensation is comprised of base salary, STIP, and LTI award opportunities, and is the same design as the other Named Executive Officers.named executive officers. The CEO does not participate in recommendations or discussions related to his own compensation levels. As part of its responsibility for executive compensation, the Committee annually reviews and determines the compensation of each of our Senior Officers,senior officers, including the Named Executive Officersnamed executive officers listed in the Summary Compensation Table of this Proxy Statement, based on each individual’s performance including consideration of ethical behavior, achievement of planned goals, relevant market comparisons, the recommendations of the CEO, and other factors. The Committee reviews the costs and short- and long-term benefits of the compensation arrangements it considers and approves for Senior Officers.senior officers.
AllThe responsibilities of the Committee responsibilities are defined in its charter, which can be found on the Company’s website atkellyservices.com.kellyservices.com.
Role of the Independent Compensation Consultant
Since October 2014, the Committee has engaged Pay Governance LLC as its independent compensation consultant (the “Consultant”). The Committee considers analysis and guidance from the Consultant when making compensation decisions on plan design; the merits of various incentive plan performance measures; Senior Officersenior officer pay levels, including that of the CEO and our Executive Officers,other executive officers, relative to peer group and other market data; composition of peer group companies; stock ownership requirements; and other pay practices. In addition, the Consultant updates the Committee on market trends and best practices in executive compensation and, as requested, provides data and guidance on other items such as Director compensation. The Committee uses its own independent judgment to make all decisions related to the compensation of the Company’s Senior Officers.senior officers.
During 2018,2019, the Consultant regularly attended Committee meetings and communicated with the Chairman of the Board, the Committee Chairman, and the Committee Vice Chairman outside of Committee meetings. The Committee regularly meets with the Consultant in private session (without members of management). As directed by the Compensation Committee, the Consultant also met with the Senior Vice President and Corporate Secretary (“Corporate Secretary”) and members of the Executive Compensation, Finance, and Corporate Governance teams of the Company. The Consultant maintains a direct reporting relationship to the Committee on all compensation matters.
Compensation Discussion and Analysis
The Committee conducts an annual assessment of the Consultant’s independence, using factors established by Nasdaq. The Consultant provided no services to the Company in 20182019 other than services to the Committee. The Committee reviewed and affirmed the independence of the Consultant as the Compensation Consultant to the Committee and concluded the work performed by the Consultant did not raise a conflict of interest.
The Committee consults with the CEO and the Corporate Secretary to obtain feedback with respect to the strategic direction of our executive compensation programs.
The CEO makes recommendations for each of the Executive Officersexecutive officers about elements of their total compensation. He bases his recommendations on the assessment of each Executive Officer’sexecutive officer’s performance, as well as the performance of their respective business or function and other factors. The Committee takes into consideration the recommendations of the CEO when determining the compensation of the other Executive Officers.executive officers.
In addition, the CFO provides periodic financial updates and information to the Committee, to aid in establishing incentive plan goals and determining payout amounts.
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Compensation Discussion and Analysis
The Committee uses third-party survey data for comparably sized general industry companies and available data from a select group of peer companies, in determining the competitive positioning of our compensation programs, and the individual compensation opportunities of each of our Senior Officers,senior officers, including the Named Executive Officers.named executive officers.
Each Senior Officer’ssenior officer’s performance is reviewed (see Senior Officer Performance Reviews and Succession Planning below) and compensation decisions are made on an annual basis (or as a Senior Officer’ssenior officer’s duties and responsibilities change). Base salaries, target STIP, and target long-term incentive opportunities are benchmarked against a group of comparable executive positions in general industry companies of similar revenue size as reflected in multiple third-party surveys. We seek to establish target total direct compensation opportunities (defined as base salary, target STIP, and target long-term incentive) for our Named Executive Officersnamed executive officers that are near a competitive range of the median of the competitive market data. Compensation ultimately earned from these opportunities can vary from the targeted levels based on the company, business unit, and individual performance. Various other factors are taken into consideration and in certain circumstances, we may target pay above or below the competitive median. Individual target total direct compensation may be above or below the median depending on Company performance, cost considerations, the role’s scope of responsibilities, individual experience and performance, and any succession, retention or internal equity considerations. Prior to 2015, theThe Company hadhas taken a conservative approach to target long-term incentive opportunities for Senior Officers that were generally well below market median. The 2015 LTI design brought target total direct compensation opportunities, on average, closer to market median levels for our Senior Officers. Insenior officers. This approach is in support of the Company’s efforts to reduce costs in connection with its investment strategy beginning in 2016 management voluntarily requested and the Committee agreed, that LTI levels for Senior Officers would be reduced from the 2015 levels, as explained further in the Long-Term Incentive section of this Proxy Statement.its goal to become more profitable.
In 2018,2019, a competitive executive compensation analysis was performed which included both an analysis of third-party survey data prepared internally by the Company’s Executive Compensation group, and a peer group review of CEO pay prepared by the Consultant. Third-party general industry survey data from Aon Hewitt, Mercer, and Willis Towers Watson was used to prepare the survey analysis. Specific companies that participated in the third-party surveys were unknown and not a factor in the Committee’s deliberations. The survey analysis was reviewed by the Consultant for the Committee.
The Company considersConsultant worked with the officerCommittee and management to develop an updated group of peer companies to be used for market comparison purposes in terms of CEO pay practiceslevels and executive pay practices. We do not believe many companies compete directly with us in all areas of our business or are of similar size. However, in order to have a comparator peerreference group prepared byof publicly-traded comparators, the Consultant which was selected using the following criteria: industry, annual revenues, andnon-staffinghas identified a group of relevant companies considered by shareholder advisory groups as peers. The majority are multi-national/global companies headquarteredthat compare to Kelly in U.S.at least some areas of our business. The resulting group of fifteentwelve comparator companies includes direct peers supplemented by other people-intensive businesses with similar margins. This group of companies includes eight companies used by Institutional Shareholder Services (“ISS”) in their 2018 report, which means 53% of companies in our peer group are shared with ISS. The Company’s 2017 revenue of $5.37 billion was on par with the median peer group revenue of $5.27 billion for the same period. The following comparator group of fifteen companies was unchanged from last year and used by the Committee as another reference point when reviewing 2018 officer pay practices and CEO pay levels:
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Compensation Discussion and Analysis
For 2019 pay benchmarking, the Committee approved a revised peer group that consists solely of staffing andHR-focused companies with generally similar annual revenues and recent market cap. ThisThe majority are multi-national/global companies headquartered in U.S. The following updated group of 12 companies listed below, includes more direct peers and a balanced mix of some significantly smaller and larger companies in similar industries. The peer group was used by the Committee and management as another reference point when assessing 2019 executive pay practices and CEO pay levels:
2019 Peer Group | ||||
• ABM Industries Incorporated | • Barrett Business Services, Inc. | • ManpowerGroup Inc. | ||
• Adecco Group AG | • Heidrick & Struggles International, Inc. | • Randstad NV | ||
• AMN Healthcare Services, Inc. | • Insperity, Inc. | • Robert Half International Inc. | ||
• ASGN Inc. | • Kforce Inc. | • TrueBlue, Inc. |
The Committee considers peer group and general industry survey data as a point of reference, not the sole factor in determining Senior Officers’senior officers’ compensation. The third-party survey data and peer group analysis represent “Market Data” when referenced throughout this Compensation Discussion and Analysis. The Committee considers all of the resources provided as part of a holistic process that also includes officer performance and the recommendations of the Company’s CEO regarding total compensation for Senior Officers.senior officers.
In addition to Market Data and for use as background information, the Executive Compensation group provides the Committee with comprehensive tally sheets for each Executive Officer,executive officer, summarizing up to four years of historical target and actual total compensation data and long-term incentive grant detail that includes grant date fair value as well as the intrinsic value of outstanding award opportunities. The Committee reviews tally sheets for the Executive Officersexecutive officers and believes they are a useful multi-year reference tool, along with other perspectives, when considering whether compensation decisions reflect the Company’s executive compensation philosophy and performance.
Senior Officer Performance Reviews and Succession Planning
Annually, the Committee conducts a comprehensive Senior Officersenior officer performance review that includes succession planning and identification of officer developmental opportunities. Updated performance evaluation templates were developed in 2019 for use with the senior officers. Detailed executive performance review information for each of the Senior Officers,senior
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Compensation Discussion and Analysis
officers, including the Named Executive Officers,named executive officers, is prepared by the Chief Human Resources Officer (“CHRO”). During 2018,Methodology that had been implemented the CHRO implemented new methodologyprior year was enhanced for 2019 and used to identify and develop the Company’s talent, including the establishment of a framework to assess future leadership needs, evaluate talent, and a succession planning and talent development system. Sessions were held with multiple layerslevels of the organization to discuss talent and development, increasing transparency with the sharing of information, and understanding of key talent across leadership teams and business units. Individual development plans are beingcontinue to be prepared to identify future opportunities for emerging leaders.leaders, including increased development through experiential learning opportunities and formal coaching.
The performance review information for each of the Senior Officerssenior officers includes key annual initiatives, performance results, strengths, and development opportunities. Senior Officersofficers with high technical knowledge in one area of functional expertise and those with the ability to have cross functional potential and serve in many capacities were identified. The CEO reviews the performance of the other Executive Officersexecutive officers and presents their individual performance assessments, development plans, and succession strategies to the Committee. Executive Officersofficers who have direct reports who are Senior Officers,senior officers, present the individual performance assessments, development plans, and succession strategies to the Committee for each of those Senior Officers.senior officers. During the individual performance assessments, the Committee asks questions, renders advice, and makes recommendations on matters that include individual development needs, succession planning, and retention. The Company’s Chairman of the Board and the Committee Chair present the performance review for the CEO to the other Committee members. None of the Senior Officerssenior officers are present when their performance is being discussed by the Committee. Each executive’s individual performance assessment is used by the Committee, together with the compensation analysis discussed in the previous section and the recommendations of the CEO, to determine compensation for the Senior Officers.senior officers.
The Company’s succession plan is updated annually in connection with the performance assessments and is approved by the Board. The plan documentation includes all executives at the Senior Officersenior officer level, as well as their potential successors from within the Company in case of an unexpected disability or departure of a Senior Officer.senior officer. Documentation includes detailed executive performance review information as discussed above, readiness assessments, and at least one potential successor for each role. Any changes to the plan during the year also require the approval of the Board.
Compensation Discussion and Analysis
Compensation Programs: Decisions and Actions in 20182019
As previously disclosed, effective September 30, 2019, Mr. Corona resigned as President and CEO of the Company. Mr. Corona continues to serve as a director of the Company through his current term and thereafter as provided by the Board. He currently serves as anon-executive employee in a transition and advisory role, until his expected retirement on or about June 30, 2020. In connection with the transition, the Company and Mr. Corona entered into a transition employment agreement, which sets forth the terms of Mr. Corona’s employment in anon-executive capacity until his retirement. During the transition period, Mr. Corona assists with the leadership transition and receives a base salary of $15,000 per month. Mr. Corona received a prorated payout under the STIP with respect to his service for the first nine months of 2019 as President and CEO as disclosed in the section, Annual Cash Incentives below. Mr. Corona received shares earned under the 2017-2019 LTI awards as disclosed in the Long-Term Incentives section below. He remains eligible to receive prorated shares that become earned under certain conditions for the 2018-2020 LTI awards and the 2019-2021 LTI awards. Upon Mr. Corona’s retirement, he will forfeit any outstanding restricted shares that have not vested. Effective September 30, 2019, Mr. Corona is not eligible for severance benefits from the Company.
Effective October 1, 2019, Mr. Quigley assumed the role of President and CEO and became a director of the Company. The Committee approved an increased base salary of $840,000 for Mr. Quigley, an increased STIP target opportunity from 85% to 110% of base salary earnings, and his long-term incentive target opportunity was increased from 140% to 200% of base salary. The committee also approved an additional grant of 2019 LTI awards with a total grant date value of $218,750. Mr. Quigley’s benefits under the Company’s Senior Executive Severance Plan increased from a Tier 2 participant to a Tier 1 participant. Mr. Quigley’s severance eligibility can be found in the section below titled, Potential Payments upon Termination or Change in Control.
Base salaries for Senior Officers,senior officers, including the Named Executive Officersnamed executive officers are intended to be competitive with Market Data to ensure that the Company can attract and retain the executives necessary to successfully lead and manage the organization. Base salaries generally fall within a range (+/- 15%) around the median of salaries in the Market Data, as individual base salaries will vary based upon the factors described below. Based on Market Data available at the time the review was conducted in November 2017,2018, we determined that the base salaries of our Named Executive Officersnamed executive officers were within this competitive range of the market medians for comparable roles. Base salary is only one component of target total direct compensation and may be affected by other components to ensure that target total direct compensation meets compensation objectives.
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Compensation Discussion and Analysis
The Committee reviews the base salaries of Senior Officers,senior officers, including the Named Executive Officers,named executive officers, on an annual basis (or as a Senior Officer’ssenior officer’s duties and responsibilities change). Base salaries are determined by the Committee for each of the Senior Officerssenior officers based on various factors, including the scope and responsibilities of the role, an individual’s experience and performance in the role, their current level of pay compared to Market Data, internal pay equity, the recommendations of the CEO, and consideration of the Company’s salary adjustment budget.
The Company’s annual total compensation review process for all employees, including the Senior Officers,senior officers, typically occurs during the first quarter to coincide with the timing of any potential incentive award payouts. The timing alignment of compensation elements is intended to reinforce the Company’s pay for performance philosophy and provide each employee with their “total compensation” overview. In November 2017,2018, the Committee conducted its annual review of base salaries of the Senior Officers,senior officers, including Named Executive Officers.named executive officers. In February 20182019, it was determined that no changes would be made to base salary levels for Messrs. Corona and Quigley and Ms. Carroll as the Committee believes currentbelieved their salary levels are competitive in thewere market for talent.competitive. Salaries for Mr.Messrs. Thirot, Boland and Bradley andMs. Lim-Johnson were increased 3.1%on average 3.6%, to recognize performance and 2.9% respectively,move market competitiveness closer to improve market competitiveness. At this time,median.
Effective with his promotion to President and CEO on October 1, 2019, the Committee also approved a base salary increase of 46% for Mr. Quigley to move his salary closer to competitive market levels for the CEO position. At the same time, Messrs. Thirot as an Executive Vice Presidentand Boland each received base salary increases of the Company.5% in recognition of additional responsibilities.
In consideration of the factors noted above, the following base salaries for the Named Executive Officersnamed executive officers were approved by the Committee in 2018:2019:
2017 Base | 2018 Base | Adjustment | 2018 Base | 2019 Base | Adjustment | |||||||||||||||||||
Named Executive Officer | Salary | Salary | % | Salary | Salary | % | ||||||||||||||||||
Peter W. Quigley | $ | 575,000 | $ | 840,000 | 46.1 | % | ||||||||||||||||||
Olivier G. Thirot | $ | 550,000 | $ | 588,000 | 6.9 | % | ||||||||||||||||||
Peter M. Boland | $ | 350,000 | $ | 376,600 | 7.6 | % | ||||||||||||||||||
James H. Bradley | $ | 315,500 | $ | 333,500 | 5.7 | % | ||||||||||||||||||
George S. Corona | $ | 1,000,000 | $ | 1,000,000 | 0.0 | % | $ | 1,000,000 | $ | 1,000,000 | 0.0 | % | ||||||||||||
Olivier G. Thirot | $ | 533,500 | $ | 550,000 | 3.1 | % | ||||||||||||||||||
Teresa S. Carroll | $ | 575,000 | $ | 575,000 | 0.0 | % | ||||||||||||||||||
Peter W. Quigley | $ | 575,000 | $ | 575,000 | 0.0 | % | ||||||||||||||||||
Hannah S.Lim-Johnson | $ | 340,000 | $ | 350,000 | 2.9 | % | $ | 350,000 | $ | 365,000 | 4.3 | % |
Notes:
Amounts represent base salaries in effect on December 31 of each applicable year.
20182019 total compensation review salary adjustments were effective March 1, 2018.2019.
Promotional increase for Mr. Quigley was effective October 1, 2019.
Special increases for Messrs. Thirot and Boland were effective October 1, 2019.
Mr. Corona’s base salary was reduced to $180,000 effective October 1, 2019 through June 30, 2020, per the terms of his Transition Employment Agreement.
Ms. Carroll separated as an officer and an employee of the Company effective September 30, 2019.
The Committee believes that the Named Executive Officersnamed executive officers should have a meaningful percentage of their total compensation earned through annual “at risk” performance-based incentives. The percentage of target total compensation at risk under the terms of the STIP increases significantly as the individual executive’s responsibilities and influence on overall corporate performance results increase. The STIP is designed to encourage executives to meet and exceed the Company’s short-term goals that align with overall corporate strategy and improve shareholderstockholder value.
The STIP target opportunity is established as a percentage of each individual’s actual base salary earnings and is targeted near the median Market Data, but may vary based upon individual factors, internal equity, and other considerations. STIP payments for all participants are capped at 200% of the target incentive award opportunity. In November 2017,2018, the Committee reviewed the target incentive opportunity for each of the Named Executive Officersnamed executive officers and found that all but one were appropriately positioned relative to the Market Data. The Committee approved increasing Mr. Thirot’s STIP target opportunity from 75% to 80%, effective January 1, 2019.
Mr. Quigley’s STIP target opportunity was increased from 85% to 110% of base salary effective Januarywith his promotion to President and CEO on October 1, 2018.2019. His 2019 STIP award amount was prorated between the time he spent in each role and the associated STIP goals, target percentage, and base salary earnings.
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Compensation Discussion and Analysis
The following table shows the 20172018 and 20182019 STIP target opportunities, as a percent of base salary, for our Named Executive Officers:named executive officers:
Named Executive Officer | 2017 STIP Target % | 2018 STIP Target % | 2018 STIP Target % | 2019 STIP Target % | ||||||||||||
Peter W. Quigley | 85 | % | 110 | % | ||||||||||||
Olivier G. Thirot | 75 | % | 80 | % | ||||||||||||
Peter M. Boland | 55 | % | 55 | % | ||||||||||||
James H. Bradley | 65 | % | 65 | % | ||||||||||||
George S. Corona | 130 | % | 130 | % | 130 | % | 130 | % | ||||||||
Olivier G. Thirot | 75 | % | 80 | % | ||||||||||||
Teresa S. Carroll | 85 | % | 85 | % | ||||||||||||
Peter W. Quigley | 85 | % | 85 | % | ||||||||||||
Hannah S.Lim-Johnson | 65 | % | 65 | % | 65 | % | 65 | % |
In the months leading up to year end, the Committee reviews and determines the objectives, performance measures, and other terms and conditions of the STIP for the following plan year. For 2018,2019, the Committee approved the use of the same multiple performance measures as were used in 20172018 to comprise the corporate component of the STIP. The Committee selected these multiple financial measures again for the STIP because they aligned with business objectives and value creation, provided balance, ensured a strongpay-performance linkage, and improved line of sight for Senior Officers,senior officers, including the Named Executive Officers.named executive officers. Measures selected for 20182019 STIP were:
Earnings from Operations, to focus on improving the Company’s earnings;
Total Gross Profit, to maximize growth for all Kelly businesses; and
Return on Gross Profit (also referred to as “conversion rate”“Conversion Rate”), to focus on expense control; and
Total Gross Profit, to maximize growth for all of our businesses.control.
Payout for threshold performance under the corporate component of STIP is 25%50% of a Named Executive Officer’snamed executive officer’s target payout opportunity, with zero payout earned for performance below threshold. Achievement of the intermediate level, which is halfway between threshold and target performance levels, results in payouts that are 75% of target. Achievement of target performance results in target payouts for the Named Executive Officers.named executive officers. Performance above target earns incentive payouts above target and up to the maximum of 200% of target. As in prior years, the 20182019 STIP design includes a ‘gatekeeper’ goal which must be achieved to earn a payout under any measure. The gatekeeper goal is earnings from operations with a required level of achievement of at least 60% of target.
Performance measures used for purposes of STIP are the same as defined in the Company’s GAAP financial statements, excluding special items such as: changes in accounting principles, gains or losses on acquisitions or divestitures, changes in budget due to acquisitions or divestitures, restructuring expenses, and other unusual items, which are defined as such and quantified in the financial statements and/or footnotes to the Company’s Annual Report on Form10-K. Adjustments would apply only to unbudgeted items. For the total gross profit measure, constant currency (using the Company’s 20182019 budgeted currency exchange rate) was used to determine values in establishing achievement of the incentive plan goals for 2018.2019.
In February 2018,2019, the Committee determined and approved threshold, intermediate, target, and maximum performance goal levels for the 20182019 STIP. The threshold goals were set at levels for which the Committee believed it was appropriate to start earning incentives; intermediate goals were set halfway between threshold and target amounts; target goals were set at the budgeted levels, which the Committee considered were “challenging but achievable”; maximum goals were set at significant stretch levels for which the Committee believed the earning of two times target payouts was warranted. In approving the performance goals in February, the Committee determined it would review goals again at the May meeting that would include the estimated impact of the Company’s January 2019 acquisitions. In May 2019, the Committee approved higher performance goals, as shown in the table below, that reflected the impact of the acquisitions. For the Corporate measures, straight line interpolation occurs for achievement of performance between threshold and intermediate, intermediate and target, and between target and maximum. For the business unit measures for Mr. Quigley and Ms. Carroll, there is no straight-line interpolation between payout levels of the payout schedule. For the business unit goal for Mr. Bradley, straight line interpolation occurs for achievement between payout levels. The goals at threshold, target, intermediate and maximum for the 20182019 STIP, as well as resulting performance for each measure of the corporate component were as follows:
2018 Performance Goals | ||||||||||||||||||||||||||||
Corporate Component Performance Measures | Weighting | Threshold | Intermediate | Target | Maximum | 2018 Actual Results | Weighted 2018 Payout (% of Target) | |||||||||||||||||||||
Earnings from Operations | 50.0 | % | $ | 85.529 | $ | 91.015 | $ | 96.500 | $ | 125.450 | $ | 87.465 | 21.3 | % | ||||||||||||||
Return on Gross Profit | 25.0 | % | 8.994 | % | 9.297 | % | 9.600 | % | 11.100 | % | 9.000 | % | 6.3 | % | ||||||||||||||
Total Gross Profit | 25.0 | % | $ | 948.945 | $ | 977.083 | $ | 1,005.221 | $ | 1,105.743 | $ | 978.700 | 19.1 | % | ||||||||||||||
100 | % | 46.8 | % |
$ in millions
2019 Performance Goals | ||||||||||||||||||||||||
Corporate Component Performance Measures | Weighting | Threshold | Target | Maximum | 2019 Actual Results | Weighted 2019 Payout (% of Target) | ||||||||||||||||||
Earnings from Operations | 50.0 | % | $ | 87.465 | $ | 106.524 | $ | 138.482 | $ | 90.646 | 29.2 | % | ||||||||||||
Return on Gross Profit | 25.0 | % | 8.996 | % | 10.148 | % | 11.993 | % | 9.361 | % | 16.5 | % | ||||||||||||
Total Gross Profit | 25.0 | % | $ | 978.722 | $ | 1,049.693 | $ | 1,154.662 | $ | 973.427 | 0.0 | % | ||||||||||||
$ in millions | 100 | % | 45.6 | % |
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Compensation Discussion and Analysis
Total Company revenue from services for 2019 declined, due to revenue decreases in Americas Staffing and International Staffing, partially offset by an increase in GTS revenue. The Company’s gross profit rate increased across all business segments from the prior year. The Company’s return on gross profit and earnings from operations were down from 2018 due to restructuring expense.
Messrs. Corona, Thirot, and Thirot,Boland, andMs. Lim-Johnson’s STIP opportunities were based 100% upon the performance measures of the corporate component, as shown above.
Ms. Carroll’s STIP opportunity was based 50% on the corporate component measures and 50% on the business unit measures for which she iswas accountable. Payout results for the business unit measures for Ms. Carroll were positively impacted by increased revenue, primarily due to the GTA acquisition and program expansion in theour Business Process Outsourcing (“BPO”), and KellyConnect and Contingent Workforce Outsourcing (“CWO”) businesses, and the increase in Global Talent solutions (“GTS”) Gross Profit rate due to improving product mix,products. These increases were partially offset by increases in employee-related healthcare costs, and were negatively impacted by lower demand in centrally delivered staffingstaffing. The GTS gross profit rate increased due to improving product mix coupled with lower employee-related costs. Total SG&A expenses decreased due to proactive cost management as we continue to align our resources and Payroll Process Outsourcing (“PPO”).spending levels with volume and gross profit in our products. Decreases were partially offset by an increase in SG&A expenses related to the January 2019 acquisition of GTA. The measure, “Contribution” that appears below for Ms. Carroll and Mr. Quigley is defined as income from operations.
Performance results for each of Ms. Carroll’s business unit measures are as follows:
Teresa Carroll
2018 Performance Goals | ||||||||||||||||||||||||
Corporate Component and | 2018 | Payout | ||||||||||||||||||||||
Business Unit | Actual | (% of | ||||||||||||||||||||||
Performance Measures | Weighting | Threshold | Target | Maximum | Results | Target) | ||||||||||||||||||
Corporate Component Performance Measures | 50.0 | % | see details above | 46.80 | % | |||||||||||||||||||
Global Talent Solutions (GTS) Staffing GP $ | 12.5 | % | $ | 130.568 | $ | 145.076 | $ | 181.345 | $ | 142.610 | 75.00 | % | ||||||||||||
Global OCG GP $ | 12.5 | % | $ | 218.410 | $ | 242.678 | $ | 291.214 | $ | 239.986 | 90.00 | % | ||||||||||||
Global Talent Solutions (GTS) Contribution | 25.0 | % | $ | 62.410 | $ | 78.012 | $ | 117.018 | $ | 84.547 | 110.00 | % | ||||||||||||
$ in millions | Weighted Payout: | 71.53% |
2019 Performance Goals | ||||||||||||||||||||||||
Corporate Component and | 2019 | Payout | ||||||||||||||||||||||
Business Unit | Actual | (% of | ||||||||||||||||||||||
Performance Measures | Weighting | Threshold | Target | Maximum | Results | Target) | ||||||||||||||||||
Corporate Component Performance Measures | 50.0 | % | see details above | 45.6 | % | |||||||||||||||||||
Global Talent Solutions (GTS) Staffing GP $ | 12.5 | % | $ | 118.291 | $ | 131.435 | $ | 164.293 | $ | 129.903 | 75.0 | % | ||||||||||||
Global OCG GP $ | 12.5 | % | $ | 250.119 | $ | 277.910 | $ | 333.492 | $ | 271.760 | 90.0 | % | ||||||||||||
Global Talent Solutions (GTS) Contribution | 25.0 | % | $ | 81.056 | $ | 101.320 | $ | 151.980 | $ | 108.213 | 110.0 | % | ||||||||||||
$ in millions | 100.0 | % | Weighted Payout: | 70.9 | % |
Mr. Quigley’s STIP opportunity for the first nine months of 2019 was based 50% on the corporate component measures and 50% on the business unit measures for which he is accountable.was accountable in his role as Executive Vice President and President, Global Staffing and General Manager, Global IT, Global Service, and Global Business Services. Payout results for the America’s Staffing business unit measures for Mr. Quigley were positively impacted by the acquisition of NextGen in January 2019. Revenue from services was down, reflecting a decrease in hours volume and an increase in average bill ratesrates. The decrease in hours volume was primarily due to the disruption resulting from the restructure of the U.S. branch-based staffing in the first quarter of 2019 and slower achievement of the related benefits. The increase in average bill rates was the result of wage increases and stronger revenue growth in our servicesservice lines with higher pay ratesrates. The change in revenues reflects decreases in volume in our light industrial and were negatively impacted by increased SG&A expenses due primarily to higher costs for recruiting and sales resources and additional effort to attract and place candidates in the current talent environment. Payout results for the EMEA business unit measures were positively impactedoffice services specialties, partially offset by an increase in average bill rates resulting from changesengineering, educational staffing and science specialties. The Americas gross profit rate increased in country and customer mix and were negativelycomparison to the prior year, having been positively impacted by the unfavorable customer mixaddition of NextGen. SG&A expenses increased due to the addition of NextGen and also restructuring expenses related to U.S. branch-based staffing operations severance costs. International Staffing revenue from services decreased from the effectprior year, primarily due to revenue declines in France and Germany, reflecting current staffing market conditions. These decreases were partially offset by increased revenue in Russia, due to higher hours volume. International Staffing gross profit decreased as a result of French payroll tax adjustments.declining revenue. Total SG&A expenses for International Staffing decreased due to continued effective cost management to align to revenue trends. Mr. Quigley’s STIP opportunity for the last three months of 2019, in his role as President and CEO, was based 100% on the corporate component.
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Compensation Discussion and Analysis
Performance results for each of Mr. Quigley’s business unit measures are as follows:
Peter Quigley
2018 Performance Goals | ||||||||||||||||||||||||
Corporate Component and | 2018 | Payout | ||||||||||||||||||||||
Business Unit | Actual | (% of | ||||||||||||||||||||||
Performance Measures | Weighting | Threshold | Target | Maximum | Results | Target) | ||||||||||||||||||
Corporate Component Performance Measures | 50.0 | % | see details above | 46.80 | % | |||||||||||||||||||
Americas Staffing Gross Profit | 20.0 | % | $ | 412.128 | $ | 457.920 | $ | 572.400 | $ | 443.475 | 50.00 | % | ||||||||||||
Americas Staffing Contribution | 20.0 | % | $ | 71.430 | $ | 89.288 | $ | 133.932 | $ | 77.275 | 35.00 | % | ||||||||||||
EMEA Staffing Gross Profit | 5.0 | % | $ | 145.787 | $ | 161.985 | $ | 202.481 | $ | 155.378 | 50.00 | % | ||||||||||||
EMEA Staffiing Contribution | 5.0 | % | $ | 19.680 | $ | 24.600 | $ | 36.900 | $ | 20.428 | 20.00 | % | ||||||||||||
$ in millions | Weighted Payout: | 43.90% |
2019 Performance Goals | ||||||||||||||||||||||||||||
Job Title | Period | Corporate Component and Performance Measures | Weighting | Threshold | Target | Maximum | 2019 Actual Results | Payout (% of Target) | ||||||||||||||||||||
EVP & President, Global Staffing and GM, Global IT, Global Business Services & Global Service | 1/1/19 - 9/30/19 | Corporate Component Performance Measures | 50.0 | % | see details above | 45.6 | % | |||||||||||||||||||||
Americas Staffing Gross Profit | 20.0 | % | $ | 435.100 | $ | 483.444 | $ | 604.305 | $ | 429.853 | 0.0 | % | ||||||||||||||||
Americas Staffing Contribution | 20.0 | % | $ | 65.694 | $ | 82.118 | $ | 123.177 | $ | 62.313 | 0.0 | % | ||||||||||||||||
EMEA Staffing Gross Profit | 5.0 | % | $ | 143.470 | $ | 159.411 | $ | 199.263 | $ | 144.050 | 0.0 | %(1) | ||||||||||||||||
EMEA Staffiing Contribution | 5.0 | % | $ | 18.731 | $ | 23.414 | $ | 35.121 | $ | 15.204 | 0.0 | % | ||||||||||||||||
President & CEO | 10/1/19-12/31/19 | Corporate Component Performance Measures | 100.0 | % | see details above | 45.6 | % | |||||||||||||||||||||
$ in millions | Weighted | Payout: | 31.5 | % |
(1) | No payout on GP measure if Contribution measure does not achieve at least a threshold level of performance. |
Mr. Bradley’s STIP opportunity was based 70% on the corporate component measures and 30% on the business unit measure, days sales outstanding (“DSO”) Americas for which he was accountable. For the DSO measure, a lower value reflects better performance. Payout results for the business unit measure for Mr. Bradley were just above threshold, resulting in a payout of 7.5%.
Performance result for Mr. Bradley’s business unit measure is as follows:
James Bradley
2019 Performance Goals | ||||||||||||||||||||||||
Corporate Component and | Weighting | Threshold | Target | Maximum | 2019 Actual Results | Payout (% of Target) | ||||||||||||||||||
Corporate Component Performance Measures | 70.0 | % | see details above | 45.6 | % | |||||||||||||||||||
Americas DSO | 30.0 | % | 49.84 | 47.84 | 44.84 | 49.69 | 7.5 | % | ||||||||||||||||
100.0 | % | Weighted Payout: | 34.2 | % |
Under the terms of the STIP, the Committee retains the right in its discretion to reduce a STIP award based on Company, business unit, or individual performance. The Committee has no discretion to increase a STIP award for Named Executive Officersnamed executive officers (though the Committee may approve a special bonus for Named Executives Officersnamed executives officers on a discretionary basis to recognize exceptional performance or actions not related to objectives set forth in the STIP; in 2018,2019, no discretionary bonus awards were made to Named Executive Officers)named executive officers). STIP awards made in 20182019 to Named Executive Officersnamed executive officers are subject to the Company’s Clawback Policy.
Based on these performance results, at its February 13, 201911, 2020 meeting, the Committee reviewed and approved payments to the Named Executive Officersnamed executive officers in accordance with the STIP provisions as follows:
Compensation Discussion and Analysis
Named Executive Officer | 2018 Base Salary Earnings | 2018 STIP Target as % of Salary | 2018 STIP Payout at Target | 2018 Payout as a Percentage of Target | 2018 STIP Payout | 2019 Base Salary Earnings | 2019 STIP Target as % of Salary | 2019 STIP Payout at Target | 2019 Payout as a Percentage of Target | 2019 STIP Payout | ||||||||||||||||||||||||||||||||||
Peter W. Quigley | $ | 640,231 | 85%/110 | % | $ | 595,889 | 31.5 | % | $ | 187,720 | ||||||||||||||||||||||||||||||||||
Olivier G. Thirot | $ | 565,200 | 80 | % | $ | 452,160 | 45.6 | % | $ | 206,185 | ||||||||||||||||||||||||||||||||||
Peter M. Boland | $ | 361,634 | 55 | % | $ | 198,899 | 45.6 | % | $ | 90,698 | ||||||||||||||||||||||||||||||||||
James H. Bradley | $ | 330,454 | 65 | % | $ | 214,795 | 34.2 | % | $ | 73,395 | ||||||||||||||||||||||||||||||||||
George S. Corona | $ | 1,000,000 | 130 | % | $ | 1,300,000 | 46.80 | % | $ | 608,400 | $ | 750,000 | 130 | % | $ | 975,000 | 45.6 | % | $ | 444,600 | ||||||||||||||||||||||||
Olivier G. Thirot | $ | 547,271 | 80 | % | $ | 437,817 | 46.80 | % | $ | 204,898 | ||||||||||||||||||||||||||||||||||
Teresa S. Carroll | $ | 575,000 | 85 | % | $ | 488,750 | 71.53 | % | $ | 349,578 | $ | 431,250 | 85 | % | $ | 366,563 | 70.9 | % | $ | 259,984 | ||||||||||||||||||||||||
Peter W. Quigley | $ | 575,000 | 85 | % | $ | 488,750 | 43.90 | % | $ | 214,561 | ||||||||||||||||||||||||||||||||||
Hannah S.Lim-Johnson | $ | 348,346 | 65 | % | $ | 226,425 | 46.80 | % | $ | 105,967 | $ | 362,462 | 65 | % | $ | 235,600 | 45.6 | % | $ | 107,434 |
The EIP provides for long-term incentives that reward executives for achieving the Company’s long-term growth and profitability goals. Long-term incentive compensation is also intended to help the Company retain key employees, and provide those employees shared financial interests with the Company’s shareholdersstockholders and positively influence their job performance and longer-term strategic focus. The EIP allows for grants of equity andnon-equity awards to key employees. The Committee approved a redesign of the Company’s long-term incentives in 2015 that included updated performance measures, a greater portion of variableat-risk performance-based compensation,
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Compensation Discussion and target opportunities for the Named Executive Officers that were set, on average, to be near market competitive levels.Analysis
The Committee believes that compensation programs for the Company’s Senior Officerssenior officers should include strong alignment between pay and performance, with a significant portion of “at risk” pay. As a result, since 2015 the design of the 2018Committee has provided long-term incentives for Senior Officers,senior officers, including the Named Executive Officers, mirrored the 2017 grants,named executive officers with grant levels based 75% on performance shares (at target) and 25% on restricted stock in order to create award opportunities that heavily emphasize performance. The current incentive mix emphasizes performance-contingent awards that are delivered through performance shares and places a reducedlower weighting on restricted shares.
In 2015 we implemented a significant design change from the Company’spre-2015 long-term incentive awards. PriorOn average, target LTI awards granted to 2015, target long-term incentive opportunities for Senior Officers were generally significantlysenior officers have historically been and currently remain below market median and provided primarily in time vesting restricted stock. The overall target number of shares granted to Senior Officers under the 2015 long-term incentive awards brought target total direct compensation opportunities, on average, to be closer to market median levels.median. The target number of shares granted toLTI award amounts for each Senior Officersenior officer in 2015,2019, including the Named Executive Officers,named executive officers, were based on an established value for each officer level. Target LTI grant levels, in terms of the number of shares, for nearly all Senior Officers were reduced for the 2016 grant by approximately 15% from the 2015 target share grant levels. This change was made at the request of management and with the approval of the Committee, as both believed it was an approach that supported the Company’s investment strategy and efforts to reduce cost. This reduced grant value was maintained for the 2017 and 2018 LTI grants, with grant values approximately the same as they were in 2016 (for those executives in the same position each year). Due to increases in position responsibilities and promotions, the grant values of the LTI award opportunities for most of the Named Executive Officers increased over the last three years. The number of target shares granted to each Named Executive Officernamed executive officer is based on the grant value and closing stock price on the date of grant and can be found in the “Grants of Plan-Based Awards” table, later in this document. TheFor performance share awards, the actual value realized, if any, for the grant will be based upon achievement of the performance measures of the performance share awardsthree-year goals as determined in early 2022 and the price of the Company’s stock.
Compensation Discussion and Analysis
Under the terms of the EIP, the Committee retains the right in its discretion to reduce an LTI award based on individual performance. The Committee has no discretion to increase an LTI award for Named Executive Officers.named executive officers. LTI grants made in 2017 and prior years were designed to comply with the requirements of Section 162(m) of the Code and any performance-based awards made under the EIP are subject to the Company’s Clawback Policy.
Performance shares provide Senior Officerssenior officers with the opportunity to earn shares, from zero to 200% of their target opportunity, based on achievement ofpre-established measures and goals. For 2018,the 2019-2021 performance period, the Committee selected the following two new equally weighted financial performance measures for the performance shares: return on sales,gross profit growth and average conversion rate improvement in order to maximize margins from revenues; earnings before taxes plus joint venture (“JV”) income,reinforce the Company’s focus on profitable growth and expense control. The Committee also elected to include an operating earnings measure that also captures JV earnings; andcontinue to use TSR relative to the S&P SmallCap 600 Index to reward relative TSR performance.performance, however determined that it would be applied as a modifier for the 2019-2021 LTI awards (not a separate measure). Using the relative TSR measure as a modifier strengthens accountability to financial results and enhances alignment between earned awards and expense. Financial measure outcomes can be impacted by the TSR modifier either positively or negatively as a multiplier from between zero to 25%, with overall payouts under the plan capped at 200% of target. The Committee believed that these performance measures were aligned with the business strategy and shareholderstockholder interests and also provided balance with STIP measures across the strategic business objectives of the Company.measures.
For the 20182019-2021 grant of performance shares, the two financial measures, return on salesgross profit growth and earnings before taxes plus JV income,average conversion rate improvement, as well as the Relative TSR modifier, were established to have three-year goals which would be developed by aggregatingone-year performance goals for each of the years in thefull performance period 2018-2020.2019-2021. This design was selected due to the desire to haveprovides multi-year accountability for performance results, while recognizing the challenges, at this time, of establishing traditional three-year goals in an uncertain environment.results. In February 2018,2019, the Committee approved goals at threshold, intermediate, target, and maximum levels of performance for each of the measures for 2018. Goals for the measures in subsequent years of the performance period will be established within the first ninety days of each of the years, 2019 and 2020.2019-2021. At the end of the three-year performance period 2018-2020 (i.e., in early 2021), goals and2022, results will be aggregated and/or averaged as appropriate, for each of the two financial measures, toplus the TSR modifier, will determine achievement and earning, if any, of shares. The Relative TSR measure of the performance shares is a three-year goal with vesting at the end of the 2018-2020 performance period, provided that a threshold level of performance for this measure is achieved. The following table illustrates performance periods for each of the measures for the 2018-20202019-2021 performance shares:
Measures | 2018 | 2019 | 2020 | |||
• Return on Sales (ROS)
• Earnings Before Taxes plus JV Income | Three-year performance is assessed based on the average (for the ROS measure) or sum (for the earnings measure) of the annual goals set at the start of each year, relative to three years of results | |||||
• Relative TSR | Three-calendar year Performance Period |
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Compensation Discussion and Analysis
Measures | 2019 | 2020 | 2021 | |||
• Gross Profit Growth
• Improvement in Return on Gross Profit (Conversion Rate) | Three-fiscal year Performance Period | |||||
• Relative TSR (applied as modifier) | Three-calendar year Performance Period |
The following target number of performance shares were awarded for each performance measure to the Named Executive Officersnamed executive officers in 2018:2019:
Target Number of 2018-2020 Performance Shares Awarded | ||||||||||||||||
Financial Measures | Total Number | |||||||||||||||
Name | Return on Sales | Earnings | Relative Measure | of Shares @ Target | ||||||||||||
George S. Corona | 19,218 | 19,218 | 19,218 | 57,654 | ||||||||||||
Olivier G. Thirot | 6,876 | 6,876 | 6,876 | 20,628 | ||||||||||||
Teresa S. Carroll | 6,876 | 6,876 | 6,876 | 20,628 | ||||||||||||
Peter W. Quigley | 6,876 | 6,876 | 6,876 | 20,628 | ||||||||||||
Hannah S.Lim-Johnson | 2,904 | 2,904 | 2,904 | 8,712 |
Target Number of 2019-2021 Performance Shares Awarded | ||||||||||||
Financial Measures(1) | Total Number of | |||||||||||
Name | Gross | Average | Performance | |||||||||
Peter W. Quigley(2) | 15,751 | 15,751 | 31,502 | |||||||||
Olivier G. Thirot | 12,266 | 12,266 | 24,532 | |||||||||
Peter M. Boland | 3,474 | 3,474 | 6,948 | |||||||||
James H. Bradley | 3,611 | 3,611 | 7,222 | |||||||||
George S. Corona | 34,285 | 34,285 | 68,570 | |||||||||
Teresa S. Carroll(3) | 12,266 | 12,266 | 24,532 | |||||||||
Hannah S.Lim-Johnson(4) | 5,333 | 5,333 | 10,666 |
(1) | Results for the two financial measures may be increased or decreased up to 25% based on the Company’s Relative TSR results in the form of a modifier. |
(2) | Amounts include additional shares granted to Mr. Quigley following his promotion to President and CEO. |
(3) | Effective with her separation from the Company and per the terms of the EIP, Ms. Carroll’s 2019-2021 Performance Shares were forfeited. |
(4) | Effective with her separation from the Company and per the terms of the EIP,Ms. Lim-Johnson may be eligible for a prorated 2019-2021 Performance Share award, if any, based upon achievement of performance goals. |
For achievement of threshold performance, 25% of target performance shares would be earned; for achievement of intermediate performance, 75%50% of target performance shares would be earned; for achievement of target performance, 100% of target performance shares would be earned; and for achievement of maximum performance or higher, 200% of target performance shares would be earned under the 20182019-2021 long-term incentive design. The threshold goals were set at levels for which the Committee believed it was appropriate to start earning incentives; intermediate goals were set halfway between threshold and target levels of performance; target goals were set at budgeted levels, which the Committee considered were “challenging but achievable”; maximum goals were set at significant stretch levels for which the Committee believed the earning of two times target payout was warranted. Straight line interpolation occurs for achievement of performance between threshold and intermediate, intermediate and target, and between target and maximum.
Compensation Discussion and Analysis
Shares that are subject to theThe Relative TSR measure have a three-year performance period, 2018-2020. TSR combines share price appreciation plus the value of reinvestedex-date dividends and is expressed as a percentage. For the 20182019-2021 performance shares, TSR will be calculated based on the average adjusted closing stock price for the twenty consecutive trading days immediately prior to the beginning and end of the three-year measurement period, January 1, 20182019 to December 31, 2020. Shares are earned based on2021. Results of the Company’s TSR at the end of the three-year performance period relative to that of the S&P SmallCap 600 Index.Index will be applied as a modifier to the outcomes of the two financial measures in order to determine the number of shares earned. To encourage appreciation of the Company’s share price, the calculated award will not be reducedpositively impacted by 50%the modifier if at the end of the performance period the Company’s TSR is negative, indicating it has declined over the three-year period.negative.
Performance awards are granted in the form of Performance Share Units. Performance shares are not eligible for dividends or dividend equivalents. Any 2018-20202019-2021 performance shares earned under any measure will vest in early 2021,2022, following approval by the Committee.
In the event of a Senior Officer’ssenior officer’s termination of employment due to death, disability, normal retirement, or termination not for cause, theythe officer will receive a prorated award of performance shares based on actual results achieved, if any. Normal retirement is defined as age 62 with at least five years of service.service, or a combination of age plus years of service equal to 70, with a minimum age of 60. In order to be eligible for a prorated award due to termination by the Company not for cause, a Senior Officersenior officer must have been employed for at least one year after the date the grants were approved by the Committee. The prorated amount is based on the number of whole months in the performance period that were worked by the Senior Officersenior officer prior to termination divided by 36. In the case of termination not for cause in connection with a change in control, performance shares vest immediately at target amounts.
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Compensation Discussion and Analysis
Restricted stock is considered by the Committee to be an effective vehicle to support the Company’s long-term compensation objectives:
Alignment with shareholderstockholder interests;
Facilitate retention through an extended pro rata vesting structure; and
Support meaningful stock ownership.
At its February 14, 201813, 2019 meeting, the Committee approved restricted stock grants for Senior Officers,senior officers, including the Named Executive Officers,named executive officers, which vest ratably over four years, as detailed in the Summary Compensation Table and the Grants of Plan Based Awards Table. This grant of restricted shares represents 25% of each Senior Officer’ssenior officer’s target long-term incentive grant. Grants of restricted stock made to our Executive Officersexecutive officers have a performance hurdle of “Positive Net Income” that must be achieved for 20182019 in order for shares to become earned and eligible for vesting. Dividend equivalents are not paid to Executive Officersexecutive officers until the performance hurdle is achieved and each tranche of shares vest. The Company believes that restricted stock is an important component of total compensation for our Named Executive Officersnamed executive officers and the four-year, pro rata vesting feature supports the Company’s retention objective. Any remaining unvested portion of restricted stock awards are forfeited upon voluntary termination, normal retirement, and involuntary termination for cause or not for cause, unless termination not for cause is in connection with a change in control. In the case of termination not for cause in connection with a change in control, all restricted stock shares or units vest immediately. Restricted stock is prorated in the event of termination due to death or disability.
All of the Senior Officers’ 2018senior officers’ 2019 long-term incentive awards were granted in a mix of 75% performance shares and 25% restricted stock, and there were no other special grants.
2016-20182017-2019 Long-Term Incentive Performance Results
As outlined in the Company’s 20172018 Proxy Statement, 2016-20182017-2019 performance shares become earned based on threetwo financial measures and a Relative TSR measure. The threetwo financial performance measures for the 2016-20182017-2019 award, return on sales; gross profit for the combined Outsourcingsales, and Consulting Group (OCG) and PT businesses as a percentage of total Company gross profit; and gross profit for the Global Commercial business,earnings before taxes plus JV income, were established to have three-year goals, which would be developed by aggregatingone-year performance goals for each of the years in the performance period 2016-2018.2017-2019. Goals for the performance measures were established and approved by the Committee within the first ninety days of each of the years 2016, 2017, 2018 and 2018.2019. At the end of the performance period 2016-20182017-2019 (i.e., in early 2019)2020), goals and results were aggregated and averaged as appropriate, for each of the threetwo financial measures, to determine achievement and earning, if any, of shares. The relative TSR measure of the performance shares is a three-year goal with vesting at the end of the 2016-20182017-2019 performance period, provided that a threshold level of performance for this measure is achieved. Upon achievement of at least a threshold level of performance for each measure, shares would be earned subject to approval by the Committee in early 2019.2020. Performance results achieved for the awards that were based on 2016-20182017-2019 financial measures were 60.15%68.42% of target for the return on sales measure; 52.00%and 41.56% of target for the gross profit for the OCG and PT businesses as a percentage of total Company gross profit; and 98.98% of target for the gross profit for the Global
Compensation Discussion and Analysis
Commercial business.earnings before taxes plus JV income measure. For performance awards based on the Relative TSR performance measure for the period 2016-2018,2017-2019, results were based on the Company’s stock price appreciation and dividend reinvestment over the three-year period as compared to the performance of the S&P SmallCap 600 Index for the same period. The beginning stock price was the average dividend-adjusted closing stock price for the twenty consecutive trading days ending December 31, 2015.2016. The ending stock price was the average dividend-adjusted closing stock price for the twenty consecutive trading days ending December 31, 2018.2019. The Company’s 2016-20182017-2019 TSR of 35.6%2.3% is 1.2% higher22.7% lower than the 2016-20182017-2019 TSR for the S&P SmallCap 600 Index, which was 34.4%25.0%, resulting in ano payout of 103.89% of target.shares for this measure. Award amounts earned are based on the level of achievement for each of the performance measures. The aggregateAggregate funding for all performance measures of the 2016-20182017-2019 LTI performance awards is 78.76%was 36.62% of target. These levels and final performance results for the 2016-20182017-2019 performance period are provided in the following chart:
2016-2018 Performance Goals | 2016-2018 | Payout | 2017-2019 Performance Goals | 2017-2019 | Payout | |||||||||||||||||||||||||||||||||||||||||||||||
Threshold | Target | Maximum | Actual | as % of | Threshold | Intermediate | Target | Maximum | Actual | as % of | ||||||||||||||||||||||||||||||||||||||||||
Financial Performance Measures | Weighting | 50% | 100% | 200% | Results | Target | Weighting | 50% | 75% | 100% | 200% | Results | Target | |||||||||||||||||||||||||||||||||||||||
Return on Sales | 25.0 | % | 1.442 | % | 1.641 | % | 2.007 | % | 1.482 | % | 60.15 | % | 33.3 | % | 1.469 | % | 1.583 | % | 1.697 | % | 1.997 | % | 1.568 | % | 68.42 | % | ||||||||||||||||||||||||||
Gross Profit: OCG + PT as % of Total GP | 25.0 | % | 42.865 | % | 44.017 | % | 46.517 | % | 42.911 | % | 52.00 | % | ||||||||||||||||||||||||||||||||||||||||
Gross Profit $: Global Commercial | 25.0 | % | $ | 1,583.531 | $ | 1,629.660 | $ | 2,037.075 | $ | 1,628.721 | 98.98 | % | ||||||||||||||||||||||||||||||||||||||||
Earnings Before Taxes plus JV Income | 33.3 | % | $ | 247.768 | $ | 267.512 | $ | 287.255 | $ | 373.434 | $ | 254.307 | 41.56 | % | ||||||||||||||||||||||||||||||||||||||
Relative TSR | 25.0 | % | -15 | % | 0 | % | +30 | % | +1.2 | % | �� | 103.89 | % | 33.4 | % | -15 | % | -7.5 | % | 0 | % | +30 | % | -22.7 | % | 0.00 | % | |||||||||||||||||||||||||
$ in millions | Weighted Payout: | 78.76% | Weighted Payout: | 36.62 | % |
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Compensation Discussion and Analysis
As a result of the above level of achievement for each of the performance measures of the 2016-20182017-2019 LTI award, the Committee approved the vesting of the following number of earned performance shares for each Named Executive Officer:named executive officer(1):
Financial Measure: Return on Sales | Financial Measure: Gross Profit: OCG +PT as % of Total GP | Financial Measure: Gross Profit $: Global | Total Shareholder Return (T SR ) | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payout as % of Target: | Payout as % of Target: | Payout as %of Target: | Payout as % of Target: | Number of | Financial Measure: Return on Sales | Financial Measure: Earnings Before Taxes plus JV Income | Total Shareholder Return (TSR) | Total Number of Performance Shares Earned | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
60.15% | 52.00% | 98.98% | 103.89% | Performance | Payout as % of Target: 68.42% | Payout as % of Target: 41.56% | Payout as % of Target: 0.00% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Target # | # of Shares | Target # | # of Shares | Target # | # of Shares Earned | Target # of Shares | # of Shares | Shares | Target # Shares | # of Shares Earned | Target # of Shares | # of Shares Earned | Target # of Shares | # of Shares Earned | |||||||||||||||||||||||||||||||||||||||||||||||||
Peter W. Quigley | 9,317 | 6,375 | 9,317 | 3,872 | 9,316 | 0 | 10,247 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Olivier G. Thirot | 8,325 | 5,696 | 8,325 | 3,460 | 8,325 | 0 | 9,156 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James H. Bradley | 3,100 | 2,121 | 3,100 | 1,288 | 3,100 | 0 | 3,409 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
George S. Corona | 11,156 | 6,710 | 11,156 | 5,801 | 11,156 | 11,042 | 11,157 | 11,591 | 35,144 | 23,297 | 15,940 | 23,297 | 9,682 | 23,297 | 0 | 25,622 | ||||||||||||||||||||||||||||||||||||||||||||||||
Olivier G. Thirot | 6,375 | 3,835 | 6,375 | 3,315 | 6,375 | 6,310 | 6,375 | 6,623 | 20,083 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Teresa S. Carroll | 6,375 | 3,835 | 6,375 | 3,315 | 6,375 | 6,310 | 6,375 | 6,623 | 20,083 | 8,540 | 5,843 | 8,540 | 3,549 | 8,541 | 0 | 9,392 | ||||||||||||||||||||||||||||||||||||||||||||||||
Peter W. Quigley | 6,375 | 3,835 | 6,375 | 3,315 | 6,375 | 6,310 | 6,375 | 6,623 | 20,083 |
(1) | Ms. Lim-Johnson and Mr. Boland were not participants in the 2017-2019 LTI award. |
Highly compensated employees in the U.S. are not eligible to participate in the Company’s qualified 401(k) plan. In order to provide a competitive total compensation package, the Company has established the Management Retirement Plan (the “MRP”). The MRP is a U.S. nonqualified defined contribution/deferred compensation plan available to all highly compensated employees, including the Named Executive Officers,named executive officers, as outlined by Section 414(q)(1)(B)(i) of the Code. Employees who are working in the U.S. while on an international assignment are not eligible to participate in the MRP. All participants in the MRP can elect to defer from 2% to 25% of their annual base earnings and 2% to 50% of their annual cash incentive earnings. Matching contributions by the Company equal 50% of the first 10% of base salary and annual cash incentives deferred by a participant. Other than the MRP, there are no other retirement income plans available to the Company’s highly compensated employees in the U.S. The MRP provides all participants, including the Named Executive Officers,named executive officers, with a taxgross-up of Medicare taxes incurred on contributions to the plan. The Medicare taxgross-up provides for parity with other employees who are eligible to participate in the Company’stax-qualified 401(k) plan and therefore do not pay Medicare tax on Company contributions.
Mr. Thirot’s Retirement Benefits
As a result of his move from Swiss payroll and benefits to U.S. payroll and benefits effective January 1, 2017, Mr. Thirot is now a participant in the MRP. He retains a Swiss retirement benefit from his employment in Switzerland that includes contributions that he made to the fund, as well as company contributions that were made to the fund on his behalf. Company contributions to Mr. Thirot’s Swiss retirement account stopped at the end of 2016 and no company contributions were made to his Swiss retirement account in 2017, 2018, or 2018.
Compensation Discussion and Analysis
2019.
The health and welfare plans, including Company-provided life insurance, provided to the Named Executive Officersnamed executive officers are the same plans available to all regular staff employees.
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Compensation Discussion and Analysis
A modest level of perquisites is available to Named Executive Officers:named executive officers:
Perquisite | Benefit | Usage in | ||
Company Aircraft | To facilitate conducting the Company’s business and provide a competitive advantage, a private aircraft service is available. Senior | No personal use of private aircraft by | ||
Executive Physical | To ensure | Three | ||
Vacation Facility | Two Company-owned condominiums are available on a limited basis to employees at the Vice President level and above. |
The aggregate amount of perquisites provided in 20182019 for each of the Named Executive Officers,named executive officers, with the exception of Mr. Thirot,Boland, was less than $10,000 and therefore only Mr. Thirot’s usage isBoland’s perquisites are reported in the Summary Compensation Table.
Mr. Thirot’s International Assignment
In light of his transition to be a U.S.-based employee, the initial international assignment benefits provided to Mr. Thirot were reduced for 2016, and then were eliminated when he moved to U.S. payroll and benefits at the beginning of 2017. The Company continues to provide tax support to Mr. Thirot as it relates to carryover costs related to his assignment and these amounts are included in the “All Other Compensation” column of the Summary Compensation Table and are explained in detail in the footnotes of that table.
Senior Executive Severance Plan
To encourage the retention of certain key executives of the Company and thereby promote the stability and continuity of management, the Senior Executive Severance Plan (“Severance Plan”) was established by the Company and approved by the Committee effective March 31, 2017. Participation in the planSeverance Plan is limited to certain Executive Officers,executive officers, namely Messrs. Corona, Thirot and Quigley, and Ms. Carroll.Carroll during 2019. The Severance Plan provides severance benefits in the event a participant’s employment is terminated under certain circumstances as explained and illustrated in Potential Payments Upon Termination.Termination (below). The Plan does not provide excise taxgross-ups to participants under Section 280G of the Code. The Company’s EIP provides for the immediate vesting of restricted stock and performance awards upon a qualified termination in connection with a change in control, andwhich is also explained in Potential Payments Upon Termination.
Under the terms of the Severance Plan covering the eligible Named Executive Officers,named executive officers, each would be entitled to severance payments and benefits in the event that he or she experiences a “qualifying termination” (i.e., any termination of the participant by the Company other than for cause, disability or death: or for good reason by a participant in connection with a change in control as is defined in the Severance Plan). A change in control will not automatically entitle an eligible Named Executive Officernamed executive officer to severance benefits or equity acceleration; instead, the executive must also lose his or her job, or suffer a significant adverse change to employment terms or conditions in order to be eligible for benefits under the Severance Plan. In the event of a termination for any reason, eligible Named Executive Officersnamed executive officers would be entitled to any earned compensation owed but not yet paid as of the date of termination. Eligible Named Executive Officersnamed executive officers would also be entitled to payment of vested benefits, if any. Details of the Severance Plan are provided in the Potential Payments Upon Termination section of this Proxy Statement.
Compensation Discussion and Analysis
The General Severance Plan was amended and restated effective March 27, 2017 to include the Senior Officerssenior officers not covered by the Senior Executive Severance Plan. The General Severance Plan is designed to provide severance benefits in the event of an involuntary termination of employment as a result of general separation of employment or general reduction in force, as provided for under the plan.Plan. During 2019, Mr. Boland, Mr. Bradley, andMs. Lim-Johnson iswere covered by the General Severance Plan and benefits under this plan are explained and illustrated in Potential Payments Upon Termination.
Governance of Executive Compensation Programs
The frequency of the Company’s Say on Pay vote is annual and, as such, the Committee considers the shareholderstockholder advisory vote on executive compensation as disclosed in the Company’s proxy statement each year. In 2018, 99.65%2019, 99.82% of the shares represented at the meeting approved the Say on Pay proposal. The Committee considered this result as a factor in its decision to maintain the general design of the Company’s compensation programs.
Executive Stock Ownership and Retention Requirements
The Committee seeksimplemented minimum stock ownership and retention requirements to encourage meaningful stock ownership by the Company’s executives so as to alignthat aligns their interests more closely with shareholders’stockholders’ interests. The Committee periodically reviews the Executive Stock Ownership Requirements to ensure the design is consistent with market practice. In consideration of the Company’s LTI design that provides Senior Officers with the opportunity to earn a greater number of shares through the addition of performance share awards and to ensure guidelines are in line with current market practice and those of our peers, as determined by research performed by the Committee approved the current executive stock ownership and retention requirements.Consultant. The requirements are expressed as a multiple of base salary for each level of Senior Officer and more closely reflect current market practices,senior officer, as determined by research performed byshown in the Consultant.table below.
| 48 | ![]() |
Compensation Discussion and Analysis
2019 Minimum Stock Ownership Requirements | ||||
Multiple of Base Salary | ||||
CEO | EVP | Other Senior Officers | ||
6x | 3x |
Under the ownership requirements, Senior Officerssenior officers are required to hold all (100%) of theafter-tax shares acquired upon equity award vesting until compliance with the requirements is achieved. Shares counted toward achievement of ownership requirements include: directly owned shares (including those held in retirement plans), shares held by family or trusts, and 60% of unvested restricted stock awards, restricted stock units, and earned unvested performance shares. Although there is not a fixed compliance period, it is expected that new Senior Officerssenior officers will likely reach the guidelines within five years from their start date. The Committee reviews each executive’s progress towards and compliance with the share ownership requirements on an annual basis. If the required level of ownership is not achieved within a reasonable period of time or an executive falls out of compliance with the requirements, the Committee can eliminate or adjust the amount of any future equity awards. Stock ownership levels must be maintained as long as the executive is employed by the Company as a Senior Officersenior officer and is subject to the terms of the Executive Stock Ownership Requirements.
As of March 19, 2018,17, 2019, all Named Executive Officersnamed executive officers were in compliance with their stock ownership requirement, other thanor if they have not yet achieved their current stock ownership guideline, the stock retention requirement. Three officers areon-track to achieve their stock ownership guideline as they retainafter-tax shares to increase their stock holdings to move closer to their ownership guideline. This includes one officer who had been in compliance until their requirementshis ownership requirement substantially increased as a result of being promoted during 20172019 and anothertwo officers due to the length of time they have beenhad served in their current role.roles. Following a review of competitive market practices, the stock ownership requirement forMs. Lim-Johnson has beenwas increased from 1.5 to 2 times her annual base salary beginning in 2019.
Incentive Compensation Recovery (“Clawback”) Policy
The Company’s Clawback policy applies to awards granted under the STIP and EIP on or after January 1, 2011 to officers of the Company who are subject to Section 16 of the Securities Exchange Act of 1934. In early 2019, the application of the “Clawback” Policy was broadened to include all Senior Officers.senior officers. These officers are required to repay or forfeit, to the fullest extent permitted by law and as directed by the Committee, any performance-based annual or long-term incentive compensation, based on the achievement of financial results that were subsequently restated due to the Company’s materialnon-compliance with the financial disclosure requirements of the federal securities laws, provided the amount of incentive compensation that would have been received or earned would have been lower had the financial results been properly reported. If necessary, we plan to modify our policy to comply with the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, when the SEC or Nasdaq implements rules and regulations. The Clawback policy wasPolicy is included as part of the Company’s updated Insider Trading Policy and Section 16 Compliance Procedures in 2018.
Compensation Discussion and Analysis
Procedures.
Hedging and Pledging of Shares
The Company’s Insider Trading Policy and Section 16 Compliance Procedures strictly prohibit the Company’s Directorsdirectors and all employees, including the Named Executive Officers,named executive officers, from engaging in hedging, monetization or other derivativesderivative or speculative transactions in securities of the Company. This includes short sales, failing to deliver Company securities sold, put or call options, equity swaps, collars, forward sale contracts, exchange funds, holding Company securities in a margin account, or pledging Company securities as collateral for a loan. The EIP does not allow the pledging, sale, assignment or transfer of shares in any manner, except if the Committee determines that a transfer will not violate any requirements of the SEC or IRS. The Committee may permit an inter vivos transfer by gift to, or for the benefit of, a family member of the grantee.
Tax and Accounting Considerations
Deductibility of Executive Compensation
Prior to 2018, Section 162(m) of the Code placed a limit of $1 million on the amount of nonperformance-based compensation that could be deducted for tax purposes for the CEO and the other three highest paid executives (excluding the CFO) listed in the Summary Compensation Table. The Company’s compensation programs were generally designed to qualify for the performance-based exception to this limit. Beginning in 2018, effective with the Tax Cuts and Jobs Act (‘the Act”) that was enacted in December 2017, the corporate tax deduction previously available for performance-based compensation above $1 million for Named Executive Officersnamed executive officers has been eliminated. This means that pay to each Named Executive Officernamed executive officer in excess of $1 million will no longer be tax deductible. Transitional relief is available under the new tax rules where a written, binding contract was in effect on November 2, 2017 and is not materially modified after that date. We will continue to comply with the requirements of Section 162(m) to the extent to which our outstanding LTI awards are
49 | ![]() |
Compensation Discussion and Analysis
determined to be tax deductible under the transitional relief. Now that the performance-based exception is no longer available, the Company will no longer include reference to Section 162(m) related limitations or provisions or shareholderstockholder approval for this purpose. However, management and the Committee have decidedcurrently intend to retain as good governance, certain practices that had been in place previously for Section 162(m) purposes. These practices include: specification of guidelines for the adjustment of special items, establishing performance goals within the first ninety days of a performance period, and requiring the Committee’s certification of results prior to the payout of any award.
Prior to and at the Board of DirectorsCompensation Committee meeting held on March 19, 2019,23, 2020, the Compensation Committee members reviewed and discussed the Compensation Discussion and Analysis presented in this Proxy Statement. Based on its review and subsequent discussions with management, the Committee and Board approved the Compensation Discussion and Analysis and directed management to include it in this Proxy Statement.
This report is submitted by the Compensation Committee of the Board of Directors.
ROBERT S. CUBBIN, CHAIR |
LESLIE A. MURPHY |
GERALD S. ADOLPH |
JANE E. DUTTON |
TERRENCE B. LARKIN |
50 | ![]() |
20182019 Executive Compensation Tables
Summary Compensation Table 20182019
Name and Principal Position | Year | Salary(1) ($) | Bonus ( $) | Stock Awards (2) (3) ( $) | Option Awards ( $) | Non-Equity Incentive Plan Compensation ( $) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation(4) ($ ) | Total ( $) | ||||||||||||||||||||||||||||||||||||
George S. Corona | 2018 | 1,000,000 | — | 2,257,096 | — | 608,400 | — | 43,689 | 3,909,185 | ||||||||||||||||||||||||||||||||||||
President and Chief Executive Officer | 2017 | 875,852 | — | 1,893,664 | — | 1,051,064 | — | 38,438 | 3,859,019 | ||||||||||||||||||||||||||||||||||||
2016 | 655,000 | — | 995,138 | — | — | — | 58,260 | 1,708,397 | |||||||||||||||||||||||||||||||||||||
Olivier G. Thirot | 2018 | 547,271 | 807,586 | 204,898 | 73,482 | 1,633,238 | |||||||||||||||||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2017 | 533,500 | 701,381 | 400,045 | 45,867 | 1,680,793 | |||||||||||||||||||||||||||||||||||||||
2016 | 515,000 | — | 568,650 | — | — | — | 729,947 | 1,813,597 | |||||||||||||||||||||||||||||||||||||
Teresa S. Carroll | 2018 | 575,000 | 807,586 | 349,578 | 54,267 | 1,786,432 | |||||||||||||||||||||||||||||||||||||||
EVP and President of Global Talent Solutions and General Manager - Global Solutions, Marketing, and HR | 2017 | 548,011 | — | 784,666 | — | 437,723 | — | 35,542 | 1,805,942 | ||||||||||||||||||||||||||||||||||||
2016 | 500,000 | — | 568,650 | — | 104,125 | — | 39,439 | 1,212,214 | |||||||||||||||||||||||||||||||||||||
Peter W. Quigley | 2018 | 575,000 | 807,586 | 214,561 | 53,173 | 1,650,321 | |||||||||||||||||||||||||||||||||||||||
EVP and President of Global Staffing and General Manager-Global IT, Global Service, and Global Business Services | 2017 | 548,011 | 784,666 | 416,443 | 30,077 | 1,779,197 | |||||||||||||||||||||||||||||||||||||||
2016 | 500,000 | — | 568,650 | — | — | — | 48,032 | 1,116,682 | |||||||||||||||||||||||||||||||||||||
Hannah S.Lim-Johnson | 2018 | 348,346 | — | 341,075 | 105,967 | — | 18,355 | 813,743 | |||||||||||||||||||||||||||||||||||||
Senior Vice President and Chief Legal Officer |
Name and Principal Position | Year | Salary(1) ( $) | Bonus ($) | Stock Awards (2)(3) ( $) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation (4) ( $) | Total ($) | |||||||||||||||||||||||||||
Peter W. Quigley | 2019 | 640,231 | — | 1,053,933 | — | 187,720 | 44,112 | 1,925,996 | ||||||||||||||||||||||||||||
President and Chief Executive | 2018 | 575,000 | — | 807,586 | — | 214,561 | — | 53,173 | 1,650,321 | |||||||||||||||||||||||||||
Officer | 2017 | 548,011 | — | 784,666 | — | 416,443 | — | 30,077 | 1,779,197 | |||||||||||||||||||||||||||
Olivier G. Thirot | 2019 | 565,200 | — | 828,740 | — | 206,185 | — | 39,744 | 1,639,869 | |||||||||||||||||||||||||||
Executive Vice President and | 2018 | 547,271 | — | 807,586 | — | 204,898 | — | 73,482 | 1,633,238 | |||||||||||||||||||||||||||
Chief Financial Officer | 2017 | 533,500 | — | 701,381 | — | 400,045 | — | 45,867 | 1,680,793 | |||||||||||||||||||||||||||
Peter M. Boland | 2019 | 361,634 | — | 234,727 | — | 90,698 | — | 57,560 | 744,618 | |||||||||||||||||||||||||||
Senior Vice President and | ||||||||||||||||||||||||||||||||||||
Chief Marketing Officer | ||||||||||||||||||||||||||||||||||||
James H. Bradley | 2019 | 330,454 | — | 244,000 | — | 73,395 | — | 18,909 | 666,758 | |||||||||||||||||||||||||||
Senior Vice President, Global | ||||||||||||||||||||||||||||||||||||
Business Services and Global Talent | ||||||||||||||||||||||||||||||||||||
Solutions | ||||||||||||||||||||||||||||||||||||
George S. Corona | 2019 | 798,154 | — | 2,316,507 | — | 444,600 | — | 33,374 | 3,592,635 | |||||||||||||||||||||||||||
Former President and Chief | 2018 | 1,000,000 | — | 2,257,096 | — | 608,400 | — | 43,689 | 3,909,185 | |||||||||||||||||||||||||||
Executive Officer | 2017 | 875,852 | — | 1,893,664 | — | 1,051,064 | — | 38,438 | 3,859,019 | |||||||||||||||||||||||||||
Teresa S. Carroll | 2019 | 433,461 | — | 828,740 | — | 259,984 | 46,148 | 170,951 | 1,739,284 | |||||||||||||||||||||||||||
Former EVP and President of Global | 2018 | 575,000 | — | 807,586 | — | 349,578 | — | 54,267 | 1,786,432 | |||||||||||||||||||||||||||
Talent Solutions and General | 2017 | 548,011 | — | 784,666 | — | 437,723 | — | 35,542 | 1,805,942 | |||||||||||||||||||||||||||
Manager - Global Solutions, | ||||||||||||||||||||||||||||||||||||
Marketing, and HR | — | |||||||||||||||||||||||||||||||||||
Hannah S. Lim-Johnson | 2019 | 362,462 | — | 360,349 | — | 107,434 | — | 18,123 | 848,368 | |||||||||||||||||||||||||||
Former Senior Vice President | 2018 | 348,346 | — | 341,075 | — | 105,967 | — | 18,355 | 813,743 | |||||||||||||||||||||||||||
and Chief Legal Officer |
(1) | Represents |
(2) | Grant date fair value is determined by multiplying the number of shares granted by the Market Value (MV) on the grant date. MV is determined by the closing price on the date of grant. The MV for the Restricted Stock |
(3) | The maximum number of shares and award value for Performance Share awards for the |
51 | ![]() |
20182019 Executive Compensation Tables
Name | Maximum Number of Performance Shares | Maximum Value of Performance Shares | Maximum Number of Performance Shares | Maximum Value of Performance Shares | ||||||||||||
Peter W. Quigley | 63,004 | $ | 1,596,030 | |||||||||||||
Olivier G. Thirot | 49,064 | $ | 1,255,057 | |||||||||||||
Peter M. Boland | 13,896 | $ | 355,460 | |||||||||||||
James H. Bradley | 14,444 | $ | 369,478 | |||||||||||||
George S. Corona | 115,308 | $ | 3,389,286 | 137,140 | $ | 3,508,041 | ||||||||||
Olivier G. Thirot | 41,256 | $ | 1,212,651 | |||||||||||||
Teresa S. Carroll | 41,256 | $ | 1,212,651 | 49,064 | $ | 1,255,057 | ||||||||||
Peter W. Quigley | 41,256 | $ | 1,212,651 | |||||||||||||
Hannah S. Lim-Johnson | 17,424 | $ | 512,149 | 21,332 | $ | 545,673 |
(4) | Amounts for named executive officers include |
Name | Group Term Life Premiums | Company Matching MRP Contributions | MRP Medicare Gross-ups | Use of Vacation Property | International Assignment Carryover Cost | Total All Other Compensation | Company Matching MRP Contributions | MRP Medicare Gross-ups | Commuting Expenses | Payments Made Upon Termination | Total All Other Compensation | |||||||||||||||||||||||||||||||||
Peter W. Quigley | $ | 42,740 | $ | 1,372 | — | — | $ | 44,112 | ||||||||||||||||||||||||||||||||||||
Olivier G. Thirot | $ | 38,505 | $ | 1,239 | — | — | $ | 39,744 | ||||||||||||||||||||||||||||||||||||
Peter M. Boland | $ | 18,082 | — | $ | 39,478 | — | $ | 57,560 | ||||||||||||||||||||||||||||||||||||
James H. Bradley | $ | 18,307 | $ | 602 | — | — | $ | 18,909 | ||||||||||||||||||||||||||||||||||||
George S. Corona | $ | 2,070 | $ | 40,000 | $ | 1,619 | — | — | $ | 43,689 | $ | 31,926 | $ | 1,448 | — | — | $ | 33,374 | ||||||||||||||||||||||||||
Olivier G. Thirot | $ | 1,472 | $ | 47,366 | $ | 1,915 | $ | 98 | $ | 22,631 | $ | 73,482 | ||||||||||||||||||||||||||||||||
Teresa S. Carroll | $ | 1,587 | $ | 50,636 | $ | 2,044 | — | — | $ | 54,267 | $ | 23,332 | $ | 1,010 | — | $ | 146,609 | $ | 170,951 | |||||||||||||||||||||||||
Peter W. Quigley | $ | 1,587 | $ | 49,572 | $ | 2,014 | — | — | $ | 53,173 | ||||||||||||||||||||||||||||||||||
Hannah S. Lim-Johnson | $ | 938 | $ | 17,417 | $ | 0 | — | — | $ | 18,355 | $ | 18,123 | — | — | — | $ | 18,123 |
52 | ![]() |
20182019 Executive Compensation Tables
Grants of Plan-Based Awards 20182019(1)
All Other | Grant | |||||||||||||||||||||||||||||||||
Stock | Date Fair | |||||||||||||||||||||||||||||||||
Awards: | Value of | |||||||||||||||||||||||||||||||||
Estimated Future Payouts | Estimated Future Payouts | Number | Stock | |||||||||||||||||||||||||||||||
Under Non-Equity Incentive | Under Equity Incentive Plan | of Shares | and | |||||||||||||||||||||||||||||||
Plan Awards (3) | Awards (4) | of Stock | Option | |||||||||||||||||||||||||||||||
Name | Grant Date (2) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (5) (#) | Awards (6) ($) | |||||||||||||||||||||||||
George S. Corona | STIP | 325,000 | 1,300,000 | 2,600,000 | ||||||||||||||||||||||||||||||
2/14/2018 | 14,415 | 57,654 | 115,308 | 1,694,643 | ||||||||||||||||||||||||||||||
2/14/2018 | 19,216 | 562,452 | ||||||||||||||||||||||||||||||||
Olivier G. Thirot | STIP | 109,454 | 437,817 | 875,634 | ||||||||||||||||||||||||||||||
2/14/2018 | 5,157 | 20,628 | 41,256 | 606,326 | ||||||||||||||||||||||||||||||
2/14/2018 | 6,876 | 201,261 | ||||||||||||||||||||||||||||||||
Teresa S. Carroll | STIP | 128,297 | 488,750 | 977,500 | ||||||||||||||||||||||||||||||
2/14/2018 | 5,157 | 20,628 | 41,256 | 606,326 | ||||||||||||||||||||||||||||||
2/14/2018 | 6,876 | 201,261 | ||||||||||||||||||||||||||||||||
Peter W. Quigley | STIP | 109,969 | 488,750 | 977,500 | ||||||||||||||||||||||||||||||
2/14/2018 | 5,157 | 20,628 | 41,256 | 606,326 | ||||||||||||||||||||||||||||||
2/14/2018 | 6,876 | 201,261 | ||||||||||||||||||||||||||||||||
Hannah S. Lim-Johnson | STIP | 56,606 | 226,425 | 452,850 | ||||||||||||||||||||||||||||||
2/14/2018 | 2,178 | 8,712 | 17,424 | 256,075 | ||||||||||||||||||||||||||||||
2/14/2018 | 2,904 | 85,000 |
All Other | Grant | |||||||||||||||||||||||||||||||||||
Stock | Date Fair | |||||||||||||||||||||||||||||||||||
Awards: | Value of | |||||||||||||||||||||||||||||||||||
Estimated Future Payouts | Estimated Future Payouts | Number | Stock | |||||||||||||||||||||||||||||||||
Under Non-Equity Incentive | Under Equity Incentive Plan | of Shares | and | |||||||||||||||||||||||||||||||||
Plan Awards (4) | Awards (5) | of Stock | Option | |||||||||||||||||||||||||||||||||
Name | Grant Date (2) | Approval Date (3) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (6) (#) | Awards (7) ($) | ||||||||||||||||||||||||||
Peter W. Quigley | STIP | 242,678 | 595,889 | 1,191,777 | ||||||||||||||||||||||||||||||||
2/13/2019 | 12,266 | 24,532 | 49,064 | 627,529 | ||||||||||||||||||||||||||||||||
2/13/2019 | 8,176 | 201,211 | ||||||||||||||||||||||||||||||||||
10/1/2019 | 8/6/2019 | 3,486 | 6,970 | 13,940 | 170,486 | |||||||||||||||||||||||||||||||
10/1/2019 | 8/6/2019 | 2,324 | 54,707 | |||||||||||||||||||||||||||||||||
Olivier G. Thirot | STIP | 226,080 | 452,160 | 904,320 | ||||||||||||||||||||||||||||||||
2/13/2019 | 12,266 | 24,532 | 49,064 | 627,529 | ||||||||||||||||||||||||||||||||
2/13/2019 | 8,176 | 201,211 | ||||||||||||||||||||||||||||||||||
Peter M. Boland | STIP | 99,449 | 198,899 | 397,797 | ||||||||||||||||||||||||||||||||
2/13/2019 | 3,474 | 6,948 | 13,896 | 177,730 | ||||||||||||||||||||||||||||||||
2/13/2019 | 2,316 | 56,997 | ||||||||||||||||||||||||||||||||||
James H. Bradley | STIP | 91,288 | 214,795 | 429,590 | ||||||||||||||||||||||||||||||||
2/13/2019 | 3,612 | 7,222 | 14,444 | 184,739 | ||||||||||||||||||||||||||||||||
2/13/2019 | 2,408 | 59,261 | ||||||||||||||||||||||||||||||||||
George S. Corona | STIP | 487,500 | 975,000 | 1,950,000 | ||||||||||||||||||||||||||||||||
2/13/2019 | 34,286 | 68,570 | 137,140 | 1,754,021 | ||||||||||||||||||||||||||||||||
2/13/2019 | 22,856 | 562,486 | ||||||||||||||||||||||||||||||||||
Teresa S. Carroll | STIP | 142,043 | 366,563 | 733,125 | ||||||||||||||||||||||||||||||||
2/13/2019 | 12,266 | 24,532 | 49,064 | 627,529 | ||||||||||||||||||||||||||||||||
2/13/2019 | 8,176 | 201,211 | ||||||||||||||||||||||||||||||||||
Hannah S.Lim-Johnson | STIP | 117,800 | 235,600 | 471,201 | ||||||||||||||||||||||||||||||||
2/13/2019 | 5,334 | 10,666 | 21,332 | 272,836 | ||||||||||||||||||||||||||||||||
2/13/2019 | 3,556 | 87,513 |
(1) | The Company has not granted stock options since 2004, including |
(2) | Long-term incentive grants to named executive officers, consisting of Restricted Share Units and Performance Shares, were approved by the Committee at its February |
(3) | On August 6, 2019, the Committee approved an additional long-term incentive grant to Mr. Quigley due to his promotion to CEO, with an effective date of October 1, 2019. |
(4) | Payout for threshold performance under the STIP for Messrs. |
Performance Shares granted in |
53 | ![]() |
2019 Executive Compensation Tables
(6) | Restricted Stock Awards granted February 13, 2019 vest ratably on each of the first four anniversaries of the date of grant (25% per year). |
|
Grant date fair value is determined by multiplying the target number of shares granted by the MV on the grant date. For restricted stock, MV is determined by the closing price on the date of grant. The MV for |
2018 Executive Compensation Tables
Outstanding Equity Awards at Fiscal Year End 20182019(1)
Stock Awards | Stock Awards | |||||||||||||||||||||||||||||
Name | Grant Year | Number of Shares or Units of Stock That Have Not Vested(2)(3) (#) | Market Value of Shares or Units of Stock That Have Not Vested(4) ($) | Equity Incentive Plan (#) | Equity Incentive Plan Awards: Market or Unearned Shares , ($) | Grant Year | Number of Shares or Units of Stock That Have Not Vested (2)(3) (#) | Market Value of Shares or Units of Stock That Have Not Vested(4) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(4) ($) | ||||||||||||||||||||
2019 | 10,500 | 233,205 | 31,502 | 699,659 | ||||||||||||||||||||||||||
2018 | 5,157 | 114,537 | — | — | ||||||||||||||||||||||||||
2017 | 14,905 | 331,040 | ||||||||||||||||||||||||||||
2016 | 2,125 | 47,196 | ||||||||||||||||||||||||||||
Olivier G. Thirot | 2019 | 8,176 | 181,589 | 24,532 | 544,856 | |||||||||||||||||||||||||
2018 | 5,157 | 114,537 | — | — | ||||||||||||||||||||||||||
2017 | 13,319 | 295,815 | ||||||||||||||||||||||||||||
2016 | 2,125 | 47,196 | ||||||||||||||||||||||||||||
Peter M. Boland | 2019 | 2,316 | 51,438 | 6,948 | 154,315 | |||||||||||||||||||||||||
2018 | 6,599 | 146,564 | — | — | ||||||||||||||||||||||||||
James H. Bradley | 2019 | 2,408 | 53,482 | 7,222 | 160,401 | |||||||||||||||||||||||||
2018 | 1,455 | 32,316 | — | — | ||||||||||||||||||||||||||
2017 | 4,959 | 110,139 | ||||||||||||||||||||||||||||
2016 | 1,063 | 23,609 | ||||||||||||||||||||||||||||
George S. Corona | 2018 2017 2016 2015 | 19,216 15,144 42,582 4,375 | 389,316 306,817 862,711 88,638 | 24,024 64,067 | 486,726 1,297,997 | 2019 | 22,856 | 507,632 | 68,570 | 1,522,940 | ||||||||||||||||||||
Olivier G. Thirot | 2018 2017 2016 2015 | 6,876 6,244 24,333 1,250 | 139,308 126,503 492,987 25,325 | 8,595 22,894 | 174,135 463,832 | |||||||||||||||||||||||||
2018 | 14,412 | 320,091 | — | — | ||||||||||||||||||||||||||
2017 | 35,718 | 793,297 | ||||||||||||||||||||||||||||
2016 | 3,719 | 82,599 | ||||||||||||||||||||||||||||
Teresa S. Carroll | 2018 2017 2016 2015 | 6,876 6,987 24,333 2,500 | 139,308 141,557 492,987 50,650 | 8,595 25,621 | 174,135 519,081 | 2019 | — | — | — | — | ||||||||||||||||||||
Peter W. Quigley | 2018 2017 2016 2015 | 6,876 6,987 24,333 2,500 | 139,308 141,557 492,987 50,650 | 8,595 25,621 | 174,135 519,081 | |||||||||||||||||||||||||
2018 | — | — | — | — | ||||||||||||||||||||||||||
2017 | 9,392 | 208,596 | ||||||||||||||||||||||||||||
2016 | — | — | ||||||||||||||||||||||||||||
Hannah S.Lim-Johnson | 2018 2017 | 2,904 5,100 | 58,835 103,326 | 3,630 | 73,544 | 2019 | 3,556 | 78,979 | 10,666 | 236,892 | ||||||||||||||||||||
2018 | 2,178 | 48,373 | — | — | ||||||||||||||||||||||||||
2017 | 3,400 | 75,514 |
(1) | The Company did not grant stock options during the |
(2) | All outstanding restricted stock awards/unit grants vest ratably over 4 years. The number of outstanding shares has been determined as of December |
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(3) |
|
(4) | The market value is determined based on the closing market price of our common shares on the last trading day of the |
(5) | Performance shares granted in |
2018 Executive Compensation Tables
Option ExercisesOption-Exercises and Stock Vested 20182019
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1)($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (1) ($) | ||||||||||||||||||||||||||||
Peter W. Quigley | — | — | 28,756 | 707,428 | ||||||||||||||||||||||||||||||||
Olivier G. Thirot | — | — | 27,258 | 672,065 | ||||||||||||||||||||||||||||||||
Peter M. Boland | — | — | 2,199 | 47,270 | ||||||||||||||||||||||||||||||||
James H. Bradley | — | — | 13,614 | 334,777 | ||||||||||||||||||||||||||||||||
George S. Corona | — | — | 100,946 | 2,865,076 | — | — | 53,090 | 1,306,311 | ||||||||||||||||||||||||||||
Olivier G. Thirot | — | — | 31,222 | 890,454 | ||||||||||||||||||||||||||||||||
Teresa S. Carroll | — | — | 53,736 | 1,544,450 | — | — | 28,756 | 707,428 | ||||||||||||||||||||||||||||
Peter W. Quigley | — | — | 53,736 | 1,544,450 | ||||||||||||||||||||||||||||||||
Hannah S.Lim-Johnson | — | — | 1,700 | 43,163 | — | — | 2,426 | 58,922 |
(1) | Value Realized on Vesting is calculated by multiplying the shares vested times the stock closing price on the day of vesting. |
Nonqualified Deferred Compensation 20182019
Name | Executive Contributions in Last Fiscal Year(1) ($) | Registrant Contributions in Last Fiscal Year(2) ($) | Aggregate Earnings in Last Fiscal Year(3) ($) | Aggregate Withdrawals / Distributions (4) ($) | Aggregate Balance at Last Fiscal Year End(5) ($) | Executive Contributions in Last Fiscal Year(1) ($) | Registrant Contributions in Last Fiscal Year(2) ($) | Aggregate Earnings in Last Fiscal Year(3) ($) | Aggregate Withdrawals/ Distributions(4) ($) | Aggregate Balance at Last Fiscal Year End(5) ($) | ||||||||||||||||||||||||||||||
Peter W. Quigley | 85,479 | 42,740 | 314,226 | — | 1,821,668 | |||||||||||||||||||||||||||||||||||
Olivier G. Thirot | 158,969 | 38,505 | 11,522 | — | 590,962 | |||||||||||||||||||||||||||||||||||
Peter M. Boland | 36,163 | 18,082 | 8,729 | — | 111,332 | |||||||||||||||||||||||||||||||||||
James H. Bradley | 36,615 | 18,307 | 230,857 | — | 1,644,412 | |||||||||||||||||||||||||||||||||||
George S. Corona | 80,000 | 40,000 | 40,376 | — | 2,071,289 | 63,852 | 31,926 | 47,861 | — | 2,214,928 | ||||||||||||||||||||||||||||||
Olivier G. Thirot | 254,750 | 47,366 | (5,180 | ) | — | 381,965 | ||||||||||||||||||||||||||||||||||
Teresa S. Carroll | 101,272 | 50,636 | (87,603 | ) | (24,123 | ) | 1,725,534 | 46,663 | 23,332 | 323,041 | (46,148 | ) | 2,072,423 | |||||||||||||||||||||||||||
Peter W. Quigley | 99,144 | 49,572 | (57,540 | ) | — | 1,379,224 | ||||||||||||||||||||||||||||||||||
Hannah S.Lim-Johnson | 52,252 | 17,417 | (7,765 | ) | — | 82,197 | 54,369 | 18,123 | 28,792 | — | 183,482 |
(1) | Executives may defer a percentage of their base salary (up to 25%) and |
(2) | Registrant Contributions in Last Fiscal Year above represent Company matching contributions (50% of the first 10% of salary and annual incentive deferrals), and they are also reported as All Other Compensation in the Summary Compensation Table. All but |
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(3) | Represents actual earnings (or loss) from the investment of the prior year aggregate balance plus the earnings on current year executive and Company contributions. The aggregate earnings are based on investment options that are also offered to employees who participate in the Company’stax-qualified 401(k) plan. As these earnings are not “above market” interest payments or preferential earnings, they are not included in the Summary Compensation Table. |
(4) | Participants may elect to receive distributions after separation from service, the later of a specified age and separation of service or a scheduledin-service distribution. Amounts may be paid as a lump sum, monthly installments for up to 20 years, or a combination of the two as elected by the participant. Ms. Carroll received a scheduledin-service distribution from her account in |
(5) | Amounts reported in this column include the following amounts that have been reported in the Summary Compensation Table for fiscal years |
Potential Payments Upon Termination 20182019
This section describes the potential additional payments and benefits under our compensation and benefit plans and arrangements to which the Named Executive Officersnamed executive officers would be entitled upon termination of employment under certain circumstances. Named Executive Officersexecutive officers would also be entitled to vested benefits and generally available benefits under our various plans and arrangements, as discussed after the Potential Payments Upon Termination table. The Company
2018 Executive Compensation Tables
does not maintain employment agreements with our Named Executive Officers.named executive officers. The table following the narrative discussion summarizes the amounts payable upon termination under certain circumstances to our Named Executive Officers,named executive officers, assuming that the executive’s employment terminated on December 30, 2018,29, 2019, the last day of our fiscal year.
Senior Executive Severance Plan
The Company implemented the Senior Executive Severance Plan (“Severance Plan”) for a limited number of Executive Officersexecutive officers in March 2017. Messrs. Corona, Thirot and Quigley, and Ms. Carroll are the only participants in the plan. Described below and illustrated in the table, Potential Payouts Upon Termination, are the different elements payable under the Severance Plan if a Named Executive Officernamed executive officer who iswas a party to the Severance Plan would experience a qualifying termination. All continuation amounts would be paid over the salary continuation period in compliance with Section 409A of the Code. Messrs. Thirot and Quigley are the only current participants in the Severance Plan. Ms. Carroll had been a participant in the Severance Plan and effective with her separation on September 30, 2019 began receiving benefits under the qualifying termination, “involuntary termination other than for cause”. Under the terms of Mr. Corona’s Transition Employment Agreement, he ceased being a participant in the Severance Plan following September 30, 2019, when he stepped down as the company’s CEO. He is no longer eligible to receive severance benefits of any kind. Messrs. Boland and Bradley andMs. Lim-Johnson iswere covered in the General Severance Plan in 2019 as outlined in the next section.
If one of the eligible Named Executive Officersnamed executive officers were to have experienced a qualifying termination under the Severance Plan in 2018,2019, the Named Executive Officernamed executive officer would have been entitled to severance benefits based on the type of qualified termination and whether they were a Tier 1 or a Tier 2 participant. Mr. Corona isQuigley was the only Tier 1 participant in the Severance Plan. Messrs.Mr. Thirot and Quigley, and Ms. Carroll arewere Tier 2 participants in the Severance Plan. A “qualified termination” is any termination of a participant’s employment: by the Company other than for cause, disability or death; or for “good reason” by a participant in connection with a change in control.
For a qualified termination that occurs not in connection with a change in control, a Tier 1 participant would receive severance payments in the form of base salary continuation for a period of twenty-four months, and a Tier 2 participant would receive severance payments in the form of base salary continuation for a period of eighteen months. In addition, Tier 1 and Tier 2 participants would receive a prorated portion of their annual incentive compensation for the fiscal year in which the termination occurred, based on the actual performance results for the year. The pro rata annual incentive payout will be determined based on the number of calendar days the eligible Named Executive Officernamed executive officer was actually employed during such plan year. Prorated annual incentive awards are paid at the same time that incentive compensation for the same year are paid to the other Senior Officerssenior officers of the Company, following certification by the Committee that applicable performance goals have been attained. Salary continuation amounts would be paid by the Company in installments over the severance period and in accordance with the Company’s standard payroll practice, subject to the requirements of Section 409A.
For a qualified termination that occurs in connection with a change in control, a Tier 1 participant would receive a single lump sum severance payment equal to two (2) times the sum of the participant’s annual base salary and target annual incentive compensation. A Tier 2 participant would receive a single lump sum severance payment equal to one andone-half (1.5) times the sum of the participant’s annual base salary and target annual incentive compensation. In addition, Tier 1 and Tier 2 participants would receive a prorated portion of their annual incentive compensation. If the qualifying termination
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occurred in the same year as the change in control, a prorated portion of the participant’s annual incentive compensation is paid based on achievement of a target level of performance. If the qualifying termination occurred in the two years following a change in control, a prorated portion of the participant’s annual incentive compensation is paid based on the actual performance results achieved for the year. Any pro rata annual incentive payout will be determined based on the number of calendar days the eligible Named Executive Officernamed executive officer was actually employed during such plan year. Prorated annual incentive awards are paid in a lump sum at the same time that incentive compensation for the same year are paid to the other Senior Officerssenior officers of the Company, following certification by the Committee that applicable performance goals have been attained. Participants are subject to abest-net cutback for 280G excise tax calculations with no excise taxgross-ups provided under the Severance Plan.
Subject to the participant’s timely election of continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company would provide comparable medical (including prescription drug), dental, vision, and hospitalization benefits to the eligible Named Executive Officernamed executive officer and his or her eligible dependents for the severance period, provided the Named Executive Officernamed executive officer continues to pay the applicable employee rate for such coverage and the Named Executive Officernamed executive officer remains eligible for COBRA coverage. The severance period for a Tier 1 participant is 24 months and for a Tier 2 participant is 18 months.
The eligible Named Executive Officernamed executive officer will be entitled to receive reimbursement for professional outplacement services actually incurred during the initial12-month period following termination, not to exceed $10,000.
The eligible Named Executive Officers,named executive officers, as a condition to receiving payments under the Severance Plan, are required to sign a general release of claims relating to their employment. In addition, they are required to agree not to directly or indirectly, individually or in any capacity or relationship, engage in any business or employment, or aid or endeavor to assist any business or legal entity, that is in direct competition with the business of the Company for the 12 months following termination.
During the 12 months following termination, the eligible Named Executive Officersnamed executive officers must also agree to not induce any employee of the Company to terminate employment with the Company, nor knowingly offer employment to any person who 2018 Executive Compensation Tables is or who was employed by the Company unless such person has ceased to be employed by the Company for a period of at least six months.
2018 Executive Compensation Tables
Named Executive Officersexecutive officers covered under the Severance Plan may not disparage, slander, or injure the business reputation or goodwill of the Company.
Named Executive Officersexecutive officers must maintain as secret and confidential all protected information such as trade secrets, confidential and proprietary business information of the Company, and any other information of the Company, including but not limited to customer lists, sources of supply, processes, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its agents or employees, including the Named Executive Officer.named executive officer.
Noncompliance with any of the above may result in the loss of severance benefits.
The General Severance Plan was amended and restated effective March 27, 2017 to include the Senior Officerssenior officers who are not covered by the Senior Executive Severance Plan. Mr. Boland, Mr. Bradley, andMs. Lim-Johnson iswere the only Named Executive Officernamed executive officers in 20182019 who participatesparticipated in this plan.Plan. Described below and illustrated in the table, Potential Payouts Upon Termination, are the different elements payable under the General Severance Plan if Mr. Boland, Mr. Bradley, orMs. Lim-Johnson would experiencehad experienced an involuntary termination of employment. All continuation amounts would be paid over the salary continuation period in compliance with Section 409A.
If Mr. Boland, Mr. Bradley, orMs. Lim-Johnson were to have experienced an “involuntary termination of employment” under the General Severance Plan in 2018, she2019, they would have been entitled to severance benefits. “Involuntary termination of employment” is defined in the General Severance Plan as the termination of employment of an eligible employee by the employer, other than: for cause; as a result of his or her failure to accept such additional or revised responsibilities as communicated by the employer; by reason of the sale of his employer or any portion of the employer’s assets or divisions (whether by asset or stock sale), provided he or she is offered employment with the purchaser thereof; or a voluntary termination of employment of any kind.
For an involuntary termination, an eligible employee would receive severance payments in the form of base salary continuation for a period of weeks that is determined based on his or her job title/level and years of service. Mr. Boland andMs. Lim-Johnson would have been eligible for 26 weeks of severance as of December 30, 2018.29, 2019. Mr. Bradley would have been eligible for 46 weeks of severance as of December 29, 2019. Salary continuation amounts would be paid by the Company in installments and in accordance with the Company’s standard payroll practice, subject to the requirements of Section 409A.
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Subject to the eligible employee’s timely election of continued coverage under COBRA and the Company’s receipt of the signed severance agreement, the Company would provide comparable medical (including prescription drug), dental, vision, and hospitalization benefits to the eligible Named Executive Officernamed executive officer and his or her eligible dependents for a period of time that is determined based on the number of weeks of severance that the employee is eligible for. The Company pays the full cost of COBRA during the severance period. Following completion of the severance period, the employee is responsible for the full cost of maintaining COBRA benefits. Based on the number of weeks of severance thatMs. Lim-Johnson they would have been eligible for, sheMr. Boland andMs. Lim-Johnson would have received six months of company-paid COBRA premiums, and Mr. Bradley would have received twelve months of company-paid COBRA premiums.
The eligible Named Executive Officernamed executive officer will be entitled to receive reimbursement for professional outplacement services actually incurred during the initial6-month period following termination, not to exceed $7,500.
Severance benefits under the General Severance Plan are conditioned upon the terms of the severance agreement that require the employee to sign a general release of claims relating to their employment and also include:non-competition;non-solicitation of employees or customers; maintaining confidentiality of information and trade secrets of the Company and all affiliates; andnon-disparagement of the Company and all officers and employees. The Benefit Plans Committee has the authority to make any determinations with respect to benefits payable under the Plan and the amount and duration of such benefits.
Treatment of Long-Term Incentive Awards
Each equity-based award is conditioned upon the grantee’s acceptance of the terms of the EIP and the grant agreement, which includes restrictive covenants such as post-employment conditions not to solicit the Company’s employees or customers and not to compete against the Company for twelve months following any termination of employment, and indefinite covenants coveringnon-disparagement and confidentiality terms. Each of our Named Executive Officer’snamed executive officer’s performance-based equity awards is subject to the Company’s Clawback Policy, which was described earlier in this document. Provisions for the treatment of long-term incentive awards upon various termination scenarios are outlined in the table below.
2018 Executive Compensation Tables
Termination | Restricted Stock/Units
| Performance Shares (Performance and Time Vesting) | ||
Termination not for Cause in connection with aChange-in-Control | Immediate Vesting | Immediate Vesting at Target | ||
Other Termination not for Cause | Forfeit | Prorated based on actual results (as determined at the end of the cycle), subject to employment for at least one year after the date grant was approved | ||
Termination for Good Reason in connection with aChange-in-Control | Forfeit | Forfeit | ||
Termination for Cause | Forfeit | Forfeit | ||
Voluntarily Quit | Forfeit | Forfeit | ||
Retirement | Forfeit | Prorated based on actual results (as determined at the end of the cycle) for “Normal Retirement” defined as age 62 with 5 years of service and beginning with the 2019 grants is also defined as a combination of age plus years of service equal to 70, with a minimum age of 60 | ||
Death or Disability | Prorated | Prorated based on actual results |
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Based on the terms of the severance plans and treatment of LTI awards for each upon termination of employment as outlined above, the table below illustrates the amounts that each Named Executive Officernamed executive officer would receive in each of the potential termination scenarios.
2018 Executive Compensation Tables
Event and Amounts | Event and Amounts | George S. Corona ($) | Olivier G. Thirot ($) | Teresa S. Carroll ($) | Peter W. Quigley ($) | Hannah S. Lim-Johnson ($) | Peter W. Quigley ($) | Olivier G. Thirot ($) | Peter M. Boland ($) | James H. Bradley ($) | George S. Corona ($) | Teresa S. Carroll ($) | Hannah S. Lim-Johnson ($) | |||||||||||||||||||||||||||||||||||||
Involuntary Termination (For Cause ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination (For Cause) | ||||||||||||||||||||||||||||||||||||||||||||||||||
No other payments due | No other payments due | |||||||||||||||||||||||||||||||||||||||||||||||||
Voluntary Termination | Voluntary Termination | |||||||||||||||||||||||||||||||||||||||||||||||||
No other payments due | No other payments due | |||||||||||||||||||||||||||||||||||||||||||||||||
Death or Disability | Death or Disability | |||||||||||||||||||||||||||||||||||||||||||||||||
Performance Shares (Equity-Based)(1) | Performance Shares (Equity-Based)(1) | 2,045,369 | 883,518 | 923,701 | 923,701 | 58,835 | 766,238 | 690,405 | 137,924 | 215,311 | 1,930,375 | — | 207,960 | |||||||||||||||||||||||||||||||||||||
Restricted Shares(2) | Restricted Shares(2) | 304,609 | 125,936 | 148,870 | 148,870 | 23,866 | 156,514 | 152,672 | 55,635 | 55,947 | 357,825 | — | 43,132 | |||||||||||||||||||||||||||||||||||||
Total | Total | 2,349,978 | 1,009,454 | 1,072,571 | 1,072,571 | 82,701 | 922,752 | 843,077 | 193,559 | 271,258 | 2,288,200 | — | 251,092 | |||||||||||||||||||||||||||||||||||||
Normal Retirement (Age 62 and 5 Years of Service) | ||||||||||||||||||||||||||||||||||||||||||||||||||
No other payments due | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination (Not For Cause ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Normal Retirement (Age 62 and 5 Years of Service or any Combination of Age + Service³ 70 with Minimum Age of 60) | Normal Retirement (Age 62 and 5 Years of Service or any Combination of Age + Service³ 70 with Minimum Age of 60) |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Performance Shares (Equity-Based)(1) | n/a | n/a | n/a | n/a | 507,647 | n/a | n/a | |||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination (Not For Cause) | Involuntary Termination (Not For Cause) |
| ||||||||||||||||||||||||||||||||||||||||||||||||
Cash Severance(3) | Cash Severance(3) | 2,000,000 | 825,000 | 862,500 | 862,500 | 175,000 | 1,680,000 | 882,000 | 188,300 | 295,019 | — | 862,500 | 182,500 | |||||||||||||||||||||||||||||||||||||
Pro-Rated Annual Incentive(4) | Pro-Rated Annual Incentive(4) | 608,400 | 204,898 | 349,578 | 214,561 | — | 187,720 | 206,185 | 90,698 | 73,395 | — | 259,984 | 107,434 | |||||||||||||||||||||||||||||||||||||
Performance Shares (Equity-Based)(1) | Performance Shares (Equity-Based)(1) | 1,656,012 | 744,211 | 784,393 | 784,393 | — | 533,018 | 508,787 | 86,486 | 161,844 | — | 386,765 | 128,996 | |||||||||||||||||||||||||||||||||||||
Restricted Shares(2) | Restricted Shares(2) | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Benefits Continuation(5) | Benefits Continuation(5) | 26,435 | 19,772 | 25,798 | 19,511 | 8,634 | 16,582 | 17,912 | 10,146 | 11,560 | — | 13,318 | 7,542 | |||||||||||||||||||||||||||||||||||||
Outplacement Services(6) | Outplacement Services(6) | 10,000 | 10,000 | 10,000 | 10,000 | 7,500 | 10,000 | 10,000 | 7,500 | 7,500 | — | 10,000 | 7,500 | |||||||||||||||||||||||||||||||||||||
Total | Total | 4,300,847 | 1,803,881 | 2,032,270 | 1,890,966 | 191,134 | 2,427,320 | 1,624,883 | 383,130 | 549,319 | — | 1,532,567 | 433,971 | |||||||||||||||||||||||||||||||||||||
Termination in Connection with aChange-in-Control - For Good Reason | Termination in Connection with aChange-in-Control - For Good Reason | |||||||||||||||||||||||||||||||||||||||||||||||||
Cash Severance(3) | Cash Severance(3) | 4,600,000 | 1,485,000 | 1,595,625 | 1,595,625 | — | 3,528,000 | 1,587,600 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Pro-Rated Annual Incentive(4) | Pro-Rated Annual Incentive(4) | 1,300,000 | 440,000 | 488,750 | 488,750 | — | 924,000 | 470,400 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Performance Shares (Equity-Based)(1) | Performance Shares (Equity-Based)(1) | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Restricted Shares(2) | Restricted Shares(2) | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Benefits Continuation(5) | Benefits Continuation(5) | 26,435 | 19,772 | 25,798 | 19,511 | — | 16,582 | 17,912 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Outplacement Services(6) | Outplacement Services(6) | 10,000 | 10,000 | 10,000 | 10,000 | — | 10,000 | 10,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Total | Total | 5,936,435 | 1,954,772 | 2,120,173 | 2,113,886 | — | 4,478,582 | 2,085,912 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Termination in Connection with aChange-in-Control - Not For Cause | Termination in Connection with aChange-in-Control - Not For Cause | |||||||||||||||||||||||||||||||||||||||||||||||||
Cash Severance(3) | Cash Severance(3) | 4,600,000 | 1,485,000 | 1,595,625 | 1,595,625 | 175,000 | 3,528,000 | 1,587,600 | 188,300 | 295,019 | — | — | 182,500 | |||||||||||||||||||||||||||||||||||||
Pro-Rated Annual Incentive(4) | Pro-Rated Annual Incentive(4) | 1,300,000 | 440,000 | 488,750 | 488,750 | — | 924,000 | 470,400 | 90,698 | 73,395 | — | — | 107,434 | |||||||||||||||||||||||||||||||||||||
Performance Shares (Equity-Based)(1) | Performance Shares (Equity-Based)(1) | 3,296,079 | 1,330,798 | 1,391,072 | 1,391,072 | 176,505 | 1,385,393 | 1,206,358 | 284,044 | 365,310 | — | — | 430,385 | |||||||||||||||||||||||||||||||||||||
Restricted Shares(2) | Restricted Shares(2) | 935,441 | 377,236 | 417,620 | 417,620 | 162,161 | 498,392 | 435,771 | 197,991 | 143,822 | — | — | 202,866 | |||||||||||||||||||||||||||||||||||||
Benefits Continuation(5) | Benefits Continuation(5) | 26,435 | 19,772 | 25,798 | 19,511 | 8,634 | 16,582 | 17,912 | 10,146 | 11,560 | — | — | 7,542 | |||||||||||||||||||||||||||||||||||||
Outplacement Services(6) | Outplacement Services(6) | 10,000 | 10,000 | 10,000 | 10,000 | 7,500 | 10,000 | 10,000 | 7,500 | 7,500 | — | — | 7,500 | |||||||||||||||||||||||||||||||||||||
Total | Total | 10,167,955 | 3,662,806 | 3,928,865 | 3,922,578 | 529,800 | 6,362,367 | 3,728,041 | 778,678 | 896,607 | — | — | 938,227 |
(1) | In the event of a |
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(2) | In the event of a |
(3) | Per the Kelly Services Inc. Senior Executive Severance Plan, for involuntary termination by the Company without cause, |
(4) | In the event of an involuntary termination by the Company without cause |
(5) | The value of the health care benefit provided is calculated as the Company-paid portion of the medical plan cost, times the number of months eligible according to the applicable severance plan. Coverage can include medical, dental, and vision (assumes no change in Health Plan or coverage type) and assumes a 10% health care coverage cost increase in second year (as applicable). |
(6) | Represents the maximum allowed benefit for reimbursement of outplacement services for participants in the applicable |
The Named Executive Officersnamed executive officers would also be entitled to the vested benefits included in the Outstanding Equity Awards at FiscalYear-End table and the Nonqualified Deferred Compensation table. In addition, the amounts shown in the table above do not include payments and benefits to the extent they are provided on anon-discriminatory basis to salaried employees generally upon termination of employment or certain types of termination of employment. These include accrued salary and vacation pay, and life insurance benefits.
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CEO Pay Ratio
As required by Section 953(b) of Dodd-Frank and Item 402(u) of RegulationS-K, we are providing the required information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Corona,Quigley, our President and Chief Executive Officer (the “CEO”), as follows:
For fiscal 2018,2019, our last completed fiscal year:
The median of the annual total compensation of all employees of our company (other than Mr. Corona,Quigley, our President and CEO), was $7,985;$8,627;
The annualannualized total compensation of Mr. Corona,Quigley, our President and CEO, was $3,909,185;$2,997,834; and
Based on this information, the ratio of the annual total compensation for our President and CEO to the median of the annual total compensation of all employees is 490347 to 1.
The pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. The SEC rules for determining the employee population and identifying the median employee provide companies with flexibility surrounding the elements of compensation to be included and various methodologies for gathering the employee population for inclusion in the analysis. The pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices, and may utilize different methodologies, exclusions, estimates, samplings and assumptions in calculating their own pay ratios.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee, the methodology that we used and the material assumptions and adjustments that we used to identify the median and determine annual total compensation are outlined below:
Our workforce consists of regular employees (employees who provide services to the Company) and those employees for whom we find employment as temporary workers. While services may be provided inside the facilities of our customers, we remain the employer of record for our temporary employees. We retain responsibility for employee assignments, the employer’s share of all applicable payroll taxes and the administration of the employee’s share of these taxes. In most cases, we determine the compensation for our temporary employees.
Our median employee in 20172018 was a temporary employee, and as such we determined to not use that same employee in determining our 20182019 CEO pay ratio. Due to the variance in assignment lengths, the number of assignments worked in a year, and potentially the compensation rate for each assignment, it is unlikely that the median employee in 20172018 would be the median employee again in 2018.2019. As a result, we conducted a similar compensation data gathering exercise for 20182019 as we had for 20172018 to determine the median employee.
We selected December 30, 2018,29, 2019, which is a date within the last three months of fiscal 2018,2019, as the date we would use to both gather compensation for the year and identify our median employee. We did this to ensure we had a full year of earnings for our temporary employees as we are not able to estimate what earnings for that group would be under a partial year scenario.
As of December 30, 2018,29, 2019, our employee population totaled 133,466120,624 and consisted of all regular and temporary employees that were actively on assignment and being paid as of that date.
Category | U.S. | Non U.S. | Total | U.S. | Non-U.S. | Total | ||||||||||||||||||
Regular | 4,809 | 2,883 | 7,692 | 4,467 | 3,301 | 7,768 | ||||||||||||||||||
Temporary | 66,662 | 59,112 | 125,774 | 55,282 | 57,574 | 112,856 | ||||||||||||||||||
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TOTAL | 71,471 | 61,995 | 133,466 | 59,749 | 60,875 | 120,624 | ||||||||||||||||||
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The vast majority of our employees, about 94%, are temporary employees who work anywhere from one week tofifty-two weeks in a calendar year.
Approximately 46%50.5% of our employee population areis located intwenty-two twenty-three countries outside of the U.S.
CEO Pay Ratio
To identify the “median employee” we collected actual base salary earnings and overtime paid for the12-month period ending December 30, 2018.29, 2019. We used actual base salary earnings and overtime paid as our consistently applied compensation measure. Based on our demographics and the likelihood that our median employee would come from our temporary workforce, we believe this to be the appropriate compensation measure most effectively applied to our employee population.
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CEO Pay Ratio
In making this determination, the compensation for all regular employees hired after January 1, 20182019 was annualized.
Compensation for temporary workers, pursuant to SEC rules, was not annualized, but all earnings for the12-month period were collected and included all assignments that a temporary employee would have been paid for throughout the year.
We did not utilize either the Data Privacy Exemption or the De Minimis Exemption.
We did not make anycost-of-living adjustments in identifying the median employee.
For purposes of making the determination, employee compensation from locations outside the U.S. was converted to U.S. dollars using the Company’s exchange rates in effect on January 1, 2019, consistent with our current financial reporting.
Using this methodology, we determined that our median employee was a temporary employee located in the U.S. with base salary and overtime earnings in the amount of $7,985.$8,627. This temporary employee worked approximately thirteenfifteen weeks during 2018.2019. Our median employee did not receive any other compensation or benefits required under Item 402(u) to be included in the employee’s annual total compensation.
The Company had two individuals that served in the role of CEO during the12-month period ending December 31, 2019. Pursuant to the instructions under Item 402(u), we have used the compensation of Mr. Quigley for our analysis, as he was serving as CEO on the last day of our fiscal year, December 29, 2019. Mr. Quigley was appointed as Kelly’s CEO on October 1, 2019. In determining Mr. Quigley’s compensation to be included in the analysis, we adjusted his compensation as reported in the Summary Compensation Table to reflect his compensation as if he were CEO for the full calendar year, by increasing his base salary, STIP award amount, and LTI grant value. His base salary was annualized at his full year CEO salary of $840,000. The STIP award amount was adjusted based on his annualized CEO base salary and his incentive target as CEO of 110% of base salary, and based 100% on Corporate measures, resulting in a STIP award of $421,344. His LTI award value was determined based on his annualized base salary and higher target level as CEO. All other compensation, as included in the Summary Compensation Table, was adjusted, where appropriate to reflect annualized amounts.
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Proposal 3: Ratification of the Appointment of PricewaterhouseCoopers LLP
PROPOSAL 3 -– RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 20192020 FISCAL YEAR
On an annual basis, the Audit Committee approves and appoints the independent registered public accounting firm. During its February 13, 201911, 2020 meeting, PricewaterhouseCoopers LLP (“PwC”) was appointed to audit the consolidated financial statements of the Company for the year ending December 29, 2019.January 3, 2021. This firm has served as the Company’s independent registered public accounting firm since 1960 and is considered to be well qualified. The reappointment process for the independent registered public accounting firm includes an annual assessment that takes into consideration, but is not limited to, a review of the following:
1. | Quality of services and sufficiency of resources provided by the auditor | |||
• | Knowledge and skills to meet the Company’s audit requirements | |||
• | Partner rotation (every 5 years) | |||
• | Appropriate audit engagement partner | |||
• | Engagement letter compliance | |||
• | Industry experience | |||
• | Results of consultations | |||
• | Audit cost (fee negotiations included) | |||
• | Long tenure and familiarity with the Company’s accounting policies | |||
2. | Communication and interaction during the engagements | |||
• | Professional and open dialog | |||
• | Accessibility | |||
• | Current accounting developments conversations | |||
3. | Independence, objectivity, and professional skepticism | |||
• | Assessment of audit evidence | |||
• | Internal Audit reliance |
The Board of Directors seeks ratification of the appointment of PwC. The representatives of the firm are expected to be present at the Annual Meeting and will be available to respond to all appropriate questions.
The Audit Committee is responsible for the compensation (including negotiations) of the independent registered public accounting firm and requirespre-approval of all audit andnon-audit services prior to engagement by the Company. In conjunction with thepre-approval, the Committee considers whethernon-audit services are consistent with the rules and regulations of the SEC on auditor independence. The authority of the Audit Committee is detailed in its charter, which is posted on the Company’s website atkellyservices.com.kellyservices.com.
The table below displays the fees incurred from the audit andnon-audit services provided by PwC.
2017 | 2018 | |||||||||||||||
($) | ($) | 2018 ($) | 2019 ($) | |||||||||||||
Audit Fees | 4,118,778 | 3,872,647 | 3,872,647 | 3,968,500 | ||||||||||||
Audit Related Fees | 56,800 | 0 | 0 | 0 | ||||||||||||
Tax Fees | 101,300 | 66,000 | 66,000 | 159,000 | ||||||||||||
All Other Fees | 1,800 | 1,800 | 1,800 | 2,800 | ||||||||||||
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Total | 4,278,678 | 3,940,447 | 3,940,447 | 4,130,300 | ||||||||||||
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Audit Fees: Audits and quarterly reviews of our consolidated financial statements, statutory audits, attestation of controls, issuance of consent, and assistance with review of documents filed with the SEC.
Audit Related Fees:Technical assistance with new accounting standards and services associated with international regulatory reporting.
Tax Fees:Tax and transfer pricing consulting.
All Other Fees: Accounting research.
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Proposal 3: Ratification of the Appointment of PricewaterhouseCoopers LLP
In connectionManagement is responsible for the preparation, presentation and integrity of Kelly’s financial statements, for its accounting and financial reporting principles, and for the establishment and effectiveness of internal controls and procedures designed to ensure compliance with generally accepted accounting principles and applicable laws and regulations. The independent registered public accounting firm is responsible for performing an independent audit of Kelly’s financial statements and of its internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (the “PCAOB”) and expressing an opinion as to the conformity of Kelly’s financial statements with generally accepted accounting principles and the effectiveness of its internal control over financial reporting. The independent registered public accounting firm has free access to the Committee to discuss any matters it deems appropriate.
In performing its oversight role, the Committee has considered and discussed the audited financial statements of Kelly for the fiscal year ended December 30, 2018,29, 2019 with each of management and PwC, the Auditindependent registered public accounting firm. The Committee has:
(1) reviewed and discussed the audited financial statements with management;
(2)has also discussed with PwC the matters required to be discussed by applicable requirements of the statement on Public Company Accounting Oversight Board AU Section 380 Communication With Audit Committees; and
(3)PCAOB. The Committee has received the written disclosures and the letter from PwC required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding PwC’s communications with the Audit Committee concerningauditors’ independence and has discussed with PwC its independence.
Based upon these reviewson the reports and discussions described in this Report, the Audit Committee recommended to the Board at its February 13, 2019 meeting that the Company’s audited financial statements of Kelly for 2019 be included in the 2019 Annual Report on Form10-K10-K. for the year ended
December 30, 2018 filed with the SEC. The Board approved this inclusion.
THE AUDIT COMMITTEE |
LESLIE A. MURPHY, CHAIR |
TERRENCE B. LARKIN |
GERALD S. ADOLPH |
ROBERT S. CUBBIN |
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Annex A
KELLY SERVICES, INC.
999 West Big Beaver Road
Troy, Michigan 48084-4716
April 8, 20196, 2020
QUESTIONS AND ANSWERS ABOUT THE PROXY STATEMENT AND THE ANNUAL MEETING
Q)
Q) | WHERE ARE WE HOLDING THE ANNUAL MEETING AND COULD EMERGING DEVELOPMENTS REGARDING THE CORONAVIRUS AFFECT OUR ABILITY TO HOLD ANIN-PERSON ANNUAL MEETING? |
A) | We are currently planning to hold the 2020 Annual Meeting of Stockholders at the offices of the Company, 999 West Big Beaver Road, Troy, Michigan 48084-4716. However, we are monitoring the coronavirus situation closely and if we determine that holding anin-person annual meeting could pose a risk to the health and safety of our stockholders, employees, and directors, the Company may decide to instead hold a Virtual Annual Meeting. If we decide to use that format, we will make a public announcement via a press release as soon as practicable prior to the meeting. |
In such event, to attend and participate in the Virtual Annual Meeting, stockholders will need to access the live audio webcast of the meeting. To do so, stockholders of record will need to visitkellyservices.com for instructions and use their16-digit Control Number provided in the Notice to log in to this website. Beneficial holders will need to obtain a “legal proxy” from their broker if they want to vote during the virtual meeting. Beneficial holders will need to send our transfer agent, Computershare, the legal proxy before the meeting and they will then issue via email, an authorized control number. Instructions will be available on the Company’s website following the press release.
Q) | WHO IS MAKING THE SOLICITATION IN THIS PROXY STATEMENT? |
A) | This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors |
Q)
Q) | WHO WILL BEAR THE COST OF THE PROXY SOLICITATION? |
A) | The cost of soliciting proxies will be borne by the Company. The solicitation of proxies will be made primarily by mail. The Company may also make arrangements with brokerage houses, custodians, banks, nominees, and fiduciaries to forward solicitation material to beneficial owners of Class B stock held of record by them and to obtain authorization to execute proxies. The Company may reimburse such institutional holders for reasonable expenses incurred by them in connection therewith. |
A copy of the Company’s Annual Report and Annual Report onForm10-K as of December 30, 2018,29, 2019, the close of the Company’s latest fiscal year, has been mailed or otherwise made available to each shareholderstockholder of record. The expense of preparing, printing, assembling, and mailing the accompanying form of proxy and the material used in the solicitation of proxies will be paid by the Company. In addition, the Company may reimburse brokers or nominees for their expenses in transmitting proxies and proxy material to principals.
Q)
Q) | WHO IS ENTITLED TO VOTE? |
A) | Only |
At the close of business on March 18, 2019,16, 2020, the number of issued and outstanding voting securities (exclusive of treasury shares) was 3,432,072 shares of the Class B common stock.Common Stock. Class B shareholdersstockholders on the record date will be entitled to one vote for each share held of record.
Q)
Q) | HOW DO I VOTE? |
A) | We encourage Class B |
Q)
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Questions and Answers
Q) | HOW IS MY VOTE COUNTED? |
A) | If a proxy in the accompanying form is properly executed, returned to the Company and not revoked, the shares represented by the proxy will be voted in accordance with the instructions set forth thereon. If no instructions are given with respect to the matters to be acted upon, the shares represented by the proxy will be voted in accordance with the recommendation of the Company’s Board of Directors on each of the proposals set forth in the accompanying Notice of Annual Meeting of |
Q)
Q) | CAN I REVOKE MY PROXY AFTER I HAVE SUBMITTED IT? |
A) | If the enclosed form of proxy is executed and returned by the |
Q) |
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A) | Pursuant to the Company’s |
Q) |
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A) | A “brokernon-vote” occurs if a broker or other nominee indicates on the enclosed proxy that it does not have discretionary authority as to certain shares to vote on a particular proposal, but otherwise has authority to vote at the Annual Meeting. Abstentions and shares subject to brokernon-votes will be considered as present for purposes of determining the presence or absence of a quorum at the Annual Meeting. |
Q)
Q) | HOW IS IT DETERMINED IF A MATTER HAS BEEN APPROVED? |
A) | Under |
For Proposal 2 and Proposal 3, theThe affirmative vote of a majority of the Class B shares present in person (provided meeting is held in Michigan) or by proxy at the Annual Meeting and entitled to vote on such proposal will be required to approve each of the other proposals to be considered at the Annual Meeting.Proposal 2 and Proposal 3. Abstentions will have the effect of negative votes with respect to these proposals.
Brokernon-votes will not be taken into account for purposes of these proposals.
Q) | WHAT HAPPENS IF ADDITIONAL MATTERS (OTHER THAN THE PROPOSALS DESCRIBED IN THIS PROXY STATEMENT) ARE PRESENTED AT THE ANNUAL MEETING? |
A) | If any other matters do properly come before the Annual Meeting, all proxies signed and returned by holders of the Class B |
Q)
Q) | HOW CAN I COMMUNICATE WITH THE BOARD? |
A) |
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Q) | WHAT IS THE DEADLINE TO SUBMIT |
A) | If a Class B |
The Company’s Amended
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Questions and RestatedAnswers
Our Bylaws providecontain an advance notice procedures with regard to certain matters, including shareholder proposalsof stockholder business and nominations requirement, which generally prescribes the procedures that a stockholder of individualsthe Company must follow if the stockholder intends at an annual meeting of stockholders to nominate a person for the election to the Board or to propose other business to be considered by stockholders. These procedures include, among other things, that the stockholder give timely notice to the Corporate Secretary of Directors, outside the process of Rule14a-8, beginningnomination or other proposed business, that the notice contain specified information, and that the stockholder comply with certain other requirements. If a stockholder’s nomination or proposal is not in connectioncompliance with the 2020 Annual Meetingprocedures set forth in our Bylaws, the Company may disregard such nomination or proposal. Generally, in the case of Shareholders. In general,an annual meeting of stockholders, a stockholder’s notice of a shareholder proposal or director nominationin order to be timely must be received bydelivered in writing to the CompanyCorporate Secretary, at its principal executive office, not lesslater than 90the close of business on the 90th day nor moreearlier than 120 daysthe close of business on the 120th day prior to the first anniversary of the previousdate of the proceeding year’s annual meeting, and must contain specified information to conform to the requirements set forth in the bylaws.meeting. To be timely for the 20202021 Annual Meeting of Shareholders,Stockholders, the notice must be received by the CompanyCorporate Secretary no earlier than January 8, 20206, 2021 and no later than February 7, 2020. If the chair of the meeting of shareholders determines that a shareholder proposal or director nomination was not made in accordance with the bylaws, the Company may disregard such proposal or nomination.5, 2021. In addition, if a shareholderstockholder submits a proposal outside of Rule14a-8 for the 2020Company’s 2021 Annual Meeting of ShareholdersStockholders and such proposal is not delivered within the proposal fails to comply with the advance notice procedures under the Amended and Restatedtime frame specified in our Bylaws, then the Company’s proxy may confer discretionary authority on the persons being appointed as proxies on behalf of the BoardCompany to vote on thesuch proposal.
In each case, proposals made under Rule14a-8 and nominations for director nominees and/or an item of business to be introduced at an annual meeting of stockholders must be submitted in writing and received by the Corporate Secretary, Kelly Services, Inc., 999 West Big Beaver Road, Troy, Michigan 48084-4716.
67 | ![]() |
999 West Big Beaver Road
Troy, Michigan 48084-4716
248.362.4444
kellyservices.com
C1234567S9 KELLY SERVICES ENDORSEMENT_LINE____ 000004 ENDORSEMENT LINE SACKPACKSACKPACK. MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4A ADD 5 ADD 6 C123456789 000000000.000000OCOOOCOOO.OOOCOD ext 000000000.000000OCOOOCOOO.OOOCOD ext 000000000.000000OCOOOCOOO.OOOCOD ext 000000000.000000OOOOOOOCO.COOOCO ext 000000000.000000OOOODDOCO.CODOCO ext 000000000.000000OOOOOOOCO.COOOCO ext Your vote matters – here’s- here's how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be received by 11:59 p.m.pm., Central Time, on May 7, 20195,2020 Online Go to www.envisionreports.com/kelyb or scan the QR code —- login details are located in the shaded bar below. Using a black pen, mark your votes with an X as shown in this example. Please do not write outside the designated ares. X Phone Call toll free 1-800-652-VOTE1-800-652-V0TE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/kelyb Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Annual Meeting Proxy Card ( 1234 5678 9012 345 ) IF VOTING BY MAIL,MAIL. SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.EMOOSEO ENVELOPE A Proposals —- The Board of Directors recommend a vote FOR all the nominees listed and FOR Proposals 2 and 3. 1. Election of Directors: 1. Election of Directors:Oirectors: 01 - D.R. Parfet 04For ? Withhold ? 02 - P.W. Curley For ? Withhold ? 03 - C.W. Adderley For ? + Withhold ? 0-4 - G.S. AdolphAdotph ? ? OS - G.S. Corona ? ? 06 - R.S. Cubbin ? ? 07 - J.E. Outlon ? ? 08 - T.B. Larkin For Withhold 02 - G.S. Corona 05 - R.S. Cubbin 08? ? 09 - L.A. Murphy For Withhold 03 - C.M. Adderley 06 - J.E. Dutton 09 - T. Wada For Withhold? ? 2. Non-binding advisory vote on executive compensation. For Against Abstain 3. Ratification of PricewaterhouseCoopersol PricewaterhouseCocpers LLP as independent accountants for the 20192020 fiscal year. For Against Abstain 4. Transacting any other business as may properly come before the Meeting or any postponement or adjournments thereof. B Authorized Signatures —- This section must be completed for your vote to be counted. - Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,adminisVator. corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) —- Please print date below. Signature 1 —- Please keep signature within the box. Signature 2 —- Please keep signature within the box. C 1234567890 92BV 413183 J N T 02ZZQCJNT 9 2 B V 454973 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND + 03725B
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders. The material is available at: www.envisionreports.com/kelyb Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/kelyb IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy - Kelly Services, Inc. + Notice of Annual Meeting of Shareholders Proxy Solicited by Board of Directors for Annual Meeting —- May 8, 20196, 2020 The undersigned hereby names, constitutes and appoints Teresa S. CarrollOlivier G . Thirot and Peter W. Quigley,James M. Polehna, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-factattorneys - in - fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Kelly Services, Inc.Inc . Class B Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Shareholders of the Company to be held May 8, 20196 , 2020 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting. THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED "FOR"“FOR” THE PROPOSALS. (Continued to be marked, dated and signed, on the other side.) C Non-VotingNon - Voting Items Change of Address — Please print new address below. Comments — Please print your comments below. IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD +