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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☒ | Definitive Proxy Statement | |
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☐ | Soliciting Material Pursuant to §240.14a-12 |
Conduent Incorporated
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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April 22, 20196, 2020
Dear Shareholders:
You are cordially invited to attend the annual meeting2020 Annual Meeting of shareholdersShareholders of Conduent Incorporated on Tuesday, May 21, 201919, 2020 at 9:00 a.m., Eastern Time. TheWe intend to hold our Annual Meeting in person. However, we are actively monitoring the novel coronavirus(COVID-19) and we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting in person and by means of remote communication or solely by means or remote communication. Please monitor our Investor website at https://investor.conduent.com and our Securities and Exchange Commission filings for updated information. As always, we encourage you to vote your shares prior to the Annual Meeting. Our Annual Meeting, if held in-person, will be held at Conduent Corporate Headquarters, 100 Campus Drive, Suite 200, Florham Park, New Jersey.Jersey 07932.
The attached notice of the 20192020 Annual Meeting of Shareholders and proxy statement provide important information about the meeting and will serve as your guide to the business to be conducted at the meeting. We urge you to carefully read the accompanying materials regarding the matters to be voted on at the meeting.
At the Annual Meeting of Shareholders, you will be asked to vote upon:
A proposal to elect nineseven directors;
A proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2019;2020; and
A proposal to approve, on an advisory basis, the 20182019 compensation of our named executive officers.
The Board of Directors unanimously recommends that you vote in favor of these proposals.
It is important that your shares be represented and voted at the Annual Meeting of Shareholders, regardless of whether or not you plan to attend in person. Therefore, you are urged to vote your shares using one of the methods described on page 1 under “How do I vote?”.
Thank you for your continued support of, and ongoing interest in, Conduent Incorporated.
For the Board of Directors,
William G. ParrettCourtney Mather
Chairman of the Board
Notice of 20192020 Annual Meeting of Shareholders
Date and Time: | Tuesday, May | |
Location: | Conduent Corporate Headquarters 100 Campus Drive, Suite 200 Florham Park, New Jersey 07932 | |
Purpose: | Our shareholders will be asked
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(4) Consider such other business as may properly come before the meeting. | |
Record Date: | March | |
Proxy Voting: | (1) Telephone;
(2) Internet; or
(3) Proxy Card.
For voting instructions, please review the Notice of Internet Availability of Proxy Materials or, if you requested and received a printed copy of the proxy materials, accompanying proxy card. | |
Importance of Vote: | Whether or not you plan to attend the Annual Meeting, please submit your proxy as soon as possible to ensure that your shares are represented. Voting now will not limit your right to change your vote or to attend the Annual Meeting. |
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Shareholders to be Held on May 21, 2019.19, 2020.
The Proxy Statement and 20182019 Annual Report are available at
www.envisionreports.com/CNDTorhttps://investor.conduent.com.
By order of the Board of Directors,
J. Michael PefferKrawitz
Executive Vice President, General Counsel and Secretary
April 22, 20196, 2020
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PROPOSAL 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||||
PROPOSAL 3 — PROPOSAL TO APPROVE, ON AN ADVISORY BASIS, THE |
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PROXY STATEMENT
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
The 20192020 Annual Meeting of Shareholders (the “Annual Meeting”) of Conduent Incorporated (the(“Conduent,” the “Company,” “we,” “us,” or “our”) will be held on Tuesday, May 21, 2019,19, 2020, at 9:00 a.m., Eastern Time, at Conduent Corporate Headquarters, 100 Campus Drive, Suite 200, Florham Park, New Jersey.Jersey 07932. We intend to hold our Annual Meeting in person. However, we are actively monitoring the novel coronavirus(COVID-19) and we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting in person and by means of remote communication or solely by means or remote communication. Please monitor our Investor website at https://investor.conduent.com and our Securities and Exchange Commission (“SEC”) filings for updated information. We intend, in future years, to resume holding in person or hybrid meetings under normal circumstances.
What is the purpose of the Annual Meeting?
At the Annual Meeting, shareholders will consider and vote on the following matters:
1. | Election of the |
2. | Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
3. | Approval, on an advisory basis, of the |
Shareholders will also act on any other business that may properly come before the meeting.Annual Meeting. In addition, our management will report on the Company’s performance during fiscal 2018 and respond to questions from shareholders.
Owners of our common stock, par value $0.01 per share (the “Common Stock”), as of the close of business on the record date, March 27, 201925, 2020 (the “Record Date”), are entitled to vote at the Annual Meeting. The shares owned as of that date includeinclude: (1) shares you held directly in your name as the shareholder of record (registered shareholder); and/or (2) shares held in the name of a broker, bank or other holder of record for you as the beneficial owner (beneficial owner). Each share of Common Stock is entitled to one vote on each matter to be voted on. As of the Record Date, there were 210,392,926209,058,215 shares of our Common Stock outstanding and entitled to vote.
Beneficial owners will receive a separate Notice of Internet Availability of Proxy Materials (the “Notice”) with a voting instruction form from the bank, broker or other holder ofor nominee that must be followed in order for their shares to be voted. If you hold your shares through a broker, bank or other holder or nominee, you must obtain a proxy from such holder or nominee to vote in person at the Annual Meeting.
Registered shareholders can vote in any one of four ways:
BY INTERNET
| BY TELEPHONE
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If you have Internet access, you may vote your shares by following the “Vote by Internet” instructions included in the Notice or on the enclosed proxy card. If you vote via the Internet,do not return your proxy card.
| You may vote your shares by following the “Vote by Telephone” instructions on the enclosed proxy card. If you vote by telephone,do not return your proxy card.
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| IN PERSON
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| If you submit a proxy or voting instructions via the Internet, telephone or by mail, youdo not need to vote at the Annual Meeting. We will pass out written ballots to any shareholder of record or authorized representative of a shareholder of record who wants to vote in person at the Annual Meeting instead of by proxy. Voting in person will revoke any proxy previously given. If you hold your shares through a broker, bank or nominee, you must obtain a proxy from your broker, bank or nominee to vote in person.
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If you usevote your proxy to vote by Internet, telephone or mail, you authorize each of the two directors, whose names are listed on the accompanying proxy card, or any substitution thereof, to act as your proxies to represent you and vote your shares as you direct.
How does the Board recommend that I vote?
The Board recommends that you vote:
• | FOR the election of each of the |
• | FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
• | FOR the approval, on an advisory basis, of the |
How can I attend the Annual Meeting?
All shareholders on the Record Date may attend. In order toRegistered owners will be admitted to the meeting, please obtain an admission ticket in advance and bringAnnual Meeting upon providing a form of personalgovernment-issued photo identification, such as a driver’s license. license, and an admission ticket. Beneficial owners will be admitted to the Annual Meeting upon providing your most recent brokerage statement, along with a form of government-issued photo identification, and an admission ticket. We will use your brokerage statement to verify your ownership of Common Stock and to admit you to the Annual Meeting. If you own shares in street name and wish to vote those shares at the Annual Meeting, you must obtain a proxy from your broker, bank or nominee.
To obtain an admission ticket:
If you are aregistered shareholder:
If you vote via the Internet or by telephone, you will be asked if you would like to receive an admission ticket.
If you vote by proxy card, please mark the appropriate box on the proxy card and an admission ticket will be sent to you.
If you are abeneficial owner:
Please request an admission ticket in advance by calling Shareholder Services at973-526-7158973-261-7244 or by mailing a written request, along with proof of your ownership of Conduent Common Stock as of the Record Date, to Conduent Incorporated, Shareholder Services, 100 Campus Drive, Suite 200, Florham Park, New Jersey 07932. All calls and written requests for admission tickets must be received no later than the close of business on May 10, 2019.2020.
You can find directions to the meeting online at www.envisionreports.com/CNDT. If you have any further questions regarding admission or directions to the Annual Meeting, please call Shareholder Services at973-526-7158.973-261-7244.
We intend to hold our Annual Meeting in person. However, we are actively monitoring the novel coronavirus(COVID-19) and we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting in person and by means of remote communication or solely by means of remote communication. We intend, in future years, to resume holding in person or hybrid meetings under normal circumstances. Please monitor our Investor website at https://investor.conduent.com and our SEC filings for updated information.
How many shares are required to be present to hold the Annual Meeting?
A quorum is necessary to hold a valid meeting of shareholders. For each of the proposals to be presented at the meeting, the presence at the meeting, in person or by proxy, of the holders of a majority of the shares of our Common Stock outstanding on the Record Date will constitute a quorum. As of the Record Date, there were 210,392,926209,058,215 shares of our Common Stock outstanding. If you vote — including by Internet, telephone or proxy card — your shares will be counted towards the quorum for the Annual Meeting. Brokernon-votes and abstentions are counted as present for the purpose of determining a quorum.
How many votes are required to approve each proposal?
Election of Directors. Under ourby-laws, directors are elected by majority vote, meaning that in an uncontested director election, the votes cast “for” the nominee’s election must exceed the votes cast “against” the nominee’s election, with abstentions and brokernon-votes not counting as votes “for” or “against.” Ourby-laws require that any incumbent nominee for director who receives a greater number of votes cast “against” his or her election than “for” his or her election shall tender his or her resignation promptly after such election. The independent directors, other than any director receiving less than a majority of “for” votes, will then evaluate and determine, based on the relevant facts and circumstances, whether to accept or reject the resignation. The Board’s explanation of its decision will be promptly disclosed on a Form8-K filed with the Securities and Exchange Commission (“SEC”).SEC.
Other Items
The affirmative vote of a majority of the votes cast at the meetingAnnual Meeting will be required for approval of the following proposals, meaning these proposals will be approved if the number of votes cast “for” the proposal exceed the number of votes cast “against” the resolution:proposal:
Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020; and
Approval, on an advisory basis, of the 20182019 compensation of our named executive officersofficers.
Abstentions and brokernon-votes are not counted asconsidered votes “for” or “against” for the purpose of determiningcast and therefore have no effect on the outcome of the other above matters. For additional information regarding brokernon-votes, see below under “What is a brokernon-vote and how will it affect the voting?”
Although the advisory vote on the 20182019 compensation of our named executive officers isnon-binding, the Board and Compensation Committee value the opinions of shareholders and will consider the outcome of the vote on this proposal when making future decisions regarding executive compensation.
At present, the Board does not intend to present any other matters at this meeting and knows of no matters other than these to be presented for shareholder action at the Annual Meeting. If any other matters properly come before the meeting,Annual Meeting, the persons named in the accompanying proxy intend to vote the proxies in accordance with their best judgment.judgment, to the extent permitted by Rule14a-4(c) under the Securities Exchange Act of 1934, as amended (“Exchange Act”).
What is a brokernon-vote and how will it affect the voting?
Under NYSE rules, brokersBrokers are not permitted to vote the shares they hold on behalf of beneficial owners without the beneficial owner’s voting instruction for matters that are deemed to be“non-routine.” A brokernon-vote occurs with respect tonon-routine matters when the beneficial owner of the shares fails to furnish timely voting instructions to the broker, and the broker is not permitted under applicable NYSE rules to vote the shares in its discretion. ElectionThe election of directors and the advisory vote on executive compensation are considerednon-routine matters. If you do not instruct your broker on how to vote your shares with respect to thesenon-routine matters, your broker will not be able to cast a vote on these proposals. Accordingly, we urge you to provide voting instructions to your bank, broker or other holder of record so that you may vote on these important matters. Shares constituting brokernon-votes, while counted towards the quorum, are not counted as votes cast “for” or “against” for the purpose of determining whether shareholders have approved anon-routine matter. As a result, brokernon-votes will have no impact on the outcome of these matters.
Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm (sometimes referred to as our “independent auditors”) is aroutine matter, and, therefore, brokers would have discretion to vote on this proposal without having received timely voting instructions. Accordingly, there will be no brokernon-votes with respect to this proposal.
Yes. You may revoke your proxy at any time before the Annual Meeting by delivering a later dated proxy card, by a later telephone oron-line vote, by notifying the Secretary of the Company in writing that you have revoked your proxy or by attending the Annual Meeting and either giving notice of revocation or voting in person.
Who will count the vote? Is my vote confidential?
RepresentativesA representative of Computershare will act as Inspector of Election, supervise the voting, decide the validity of proxies and receive and tabulate proxies. As a matter of policy, we keep confidential all shareholder meeting
proxies, ballots and voting tabulations that identify individual shareholders. In addition, the vote of any shareholder is not disclosed except as may be necessary to meet legal requirements.
The solicitation of proxies is made by our Board and will be conducted primarily by mail. We also request brokerage firms, nominees, custodians and fiduciaries to forward soliciting material to the beneficial owners of stock held of record and reimburse such persons for the cost of forwarding the material. We have engaged Innisfree M&A Incorporated to handle the distribution of soliciting material to, and the collection of proxies from, such entities. We will pay Innisfree M&A Incorporated a fee of $17,500, plus reimbursement ofout-of-pocket expenses for this service. Proxies may also be solicited on our behalf by our directors, officers or employees by telephone, electronic or facsimile transmission or in person, without compensation. We bear the cost of preparing all proxy materials and proxy solicitation.
Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a full set of printed proxy materials?
Pursuant to rules adopted by the SEC, the Company has elected to provide access to its proxy materials over the Internet. Accordingly, on or about April 6, 2020, a Notice is being sent to all of the Company’s registered shareholders and beneficial owners of record as of March 25, 2020. The Notice contains instructions on how to access the proxy materials over the Internet and how to vote. It also contains instructions on how to request a paper copy of the proxy materials, including a proxy card, as well as how shareholders may request to receive proxy materials in printed form by mail, or electronically by email, on a going forward basis.
How can I electronically access the proxy materials?
You can access the proxy materials online atwww.envisionreports.com/CNDT orhttps://investor.conduent.com. Shareholders may receive Proxy Statements, Annual Reports and other shareholder materials via electronic delivery. Registered shareholders can sign up for electronic delivery atwww.computershare.com/investor. Beneficial owners can sign up for electronic delivery athttp://enroll.icsdelivery.com/cndt or by checking the information provided in the proxy materials mailed to you by your bank or broker regarding the availability of this service. Opting to receive future proxy materials electronically by email will provide the Company cost savings relating to printing and postage and reduce the environmental impact of delivering documents to you.
What are the deadlines and requirements for shareholder submission of proposals, director nominations and other business for the 20202021 Annual Meeting?
We expect to hold our 20202021 Annual Meeting of Shareholders during the second half of May 20202021 and to file and make available or mail, as applicable, our Proxy Statement for that meeting during the first half of April 2020.2021. Under SEC proxy rules, if a shareholder wants us to include a proposal in our Proxy Statement and proxy card for the 20202021 Annual Meeting of Shareholders, the proposal must be received by us no later than December 10, 2019.7, 2020.
Any shareholder wishing to make a nomination for director or wishing to introduce any business at the 20202021 Annual Meeting of Shareholders (other than a proposal submitted for inclusion in the Company’s proxy materials) must provide the Company advance notice of such nominee or business which must be received by the Company no earlier than November 10, 20197, 2020 and no later than December 10, 2019.7, 2020. Any such notice must comply with requirements set forth in ourby-laws. Nominations for director must be accompanied by a written consent of the nominee consenting to being named as a nominee and serving as a director if elected. Proposals and other items of business should be directed to Conduent Incorporated, 100 Campus Drive, Suite 200, Florham Park, NJ 07932, Attention: Corporate Secretary.
Under our Corporate Governance Guidelines, shareholders and other interested parties may contact thenon-management members of the Board by contacting the Chairman of the Board, c/o Conduent Incorporated Corporate Governance Committee using the “Contact the Board” link posted on our Company’s website atwww.conduent.com/corporate-governance.
What if multiple shareholders have the same address?
To reduce the expenses of delivering duplicate proxy materials, where multiple shareholders reside in the same household, we will deliver a single Notice, or for shareholders who receive paper copies of our proxy materials, a single Proxy Statement and Annual Report to multiple shareholders who reside in the same householdalong with separate proxy cards, unless we have received instructions otherwise. If you share a household with one or more other shareholders and (i) would like to receive separate copies of the Notice or printed proxy materials, or (ii) you and another shareholder residing inare receiving multiple copies of the same household each receive a set ofNotice or printed proxy materials and, as a household, wish to receive only one Notice or one set of printed proxy materials, or (ii) you share a household with another shareholder and received a single set of printed proxy materials and would like to receive separate copies of the proxy materials,then you may request a change in delivery preferences. We will deliver promptly, upon written or oral request, a separate copy of the Notice or printed proxy materials, as applicable, to a shareholder at a shared address to which a single copy was delivered. For registered shareholders, you may contact our transfer agent at866-574-5496 or write them at Computershare, P.O. Box 505000, Louisville, KY 40233. For beneficial owners, you may call the bank, broker or other nominee where your shares are held in street name or call800-542-1061.
How may I get additional copies of the Annual Report and Proxy Statement?
Copies of the 2019 Annual Report and 2020 Proxy Statement have been distributed to shareholders (unless you have received a copy of the Notice or have consented to electronic delivery). Additional paper copies of these documents are available at no cost upon request made to Conduent Incorporated, 100 Campus Drive, Suite 200, Florham Park, NJ 07932, Attention: Corporate Secretary. The 2019 Annual Report and 2020 Proxy Statement are also available on the Company’s website athttps://investor.conduent.com orwww.envisionreports.com/CNDT. The Notice also provides you with instructions on how to request paper copies of the proxy materials. There is no charge to receive any such materials by mail. You may request paper copies of the materials until one year after the date of the Annual Meeting.
Is there a list of shareholders entitled to vote at the Annual Meeting?
A list of registered shareholders entitled to vote at the Annual Meeting will be available at the Annual Meeting and for ten days prior to the Annual Meeting at our offices located atupon written request made by a shareholder to: Conduent Corporate Headquarters,Incorporated, 100 Campus Drive, Suite 200, Florham Park, NJ 07932.07932, Attention: Corporate Secretary.
PROPOSAL 1 — ELECTION OF DIRECTORS
Shareholders annually elect directors to serve for one year and until their successors have been duly elected and qualified. Based on the director nomination process described below, the nineseven persons whose biographies appear below have been nominated by the Board to serve as directors based on the recommendation of the Corporate Governance Committee. Each nominee brings to us valuable experience from a variety of fields. The biographical information presents each nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusionconclude that he or she should serve as a director. All of our incumbent director nominees have demonstrated business acumen and an ability to exercise independent and sound judgment, as well as an understanding of the Company’s business environment and a commitment to serve the Company and our Board. We also value the significant experience of each of our nominees on other public company boards of directors and board committees.
All nomineesScott Letier, Jesse A. Lynn and Courtney Mather are currently directors of the Company and were elected by our shareholders at the 2018 annual meeting2019 Annual Meeting of shareholders, except Scott Letier, whoShareholders. Clifford Skelton, our CEO, was elected to the Board effective December 18, 2018,August 6, 2019 to replace Ashok Vemuri, our former CEO, who resigned effective August 6, 2019. Kathy Higgins Victor and Jesse A. Lynn, who wasMargaritaPaláu-Hernández were elected to the Board effective April 18, 2019. Mr. Letier was electedAugust 26, 2019 to replace Paul S. GalantWilliam G. Parrett and Joie Gregor who both resigned effective August 26, 2019. Ms. Higgins Victor and Ms. Paláu-Hernández were recommended as directors by a non-management director. Two current directors, Michael A. Nutter and Virginia M. Wilson, have decided not to seekre-election to the Board at the Annual Meeting. At its February 25, 2020 meeting, the Board reduced the size of the board to eight members, effective May 19, 2020, and, acting on the recommendation of the Corporate Governance Committee, nominated Michael Montelongo to stand for election at the Annual Meeting. Mr. Montelongo was recommended as a nominee by anon-management director. On March 30, 2020, Nicholas Graziano tendered his resignation in accordance withand on March 31, 2020, the Company’s Corporate Governance Guidelines dueBoard further reduced the size of the board to a substantial change in his position of principal employment. Mr. Lynn was elected to replace Michael Nevin, who tendered his resignation on April 8, 2019.seven members, effective May 19, 2020.
On December 31, 2016, the Company entered into a Joinder Agreement to a letter agreement, dated as of January 28, 2016, entered into by Xerox Corporation, our former parent company, (“Xerox”), with Icahn Partners Master Fund LP, Icahn Partners LP, Icahn Onshore LP, Icahn Offshore LP, Icahn Capital LP, IPH GP LLC, Icahn Enterprises Holdings LP, Icahn Enterprises G.P. Inc., Beckton Corp., High River Limited Partnership, Hopper Investments LLC, Barberry Corp., Jonathan Christodoro and Carl C. Icahn (collectively, the “Icahn Group”) pursuant to which, among other things, Nicholas Graziano, Jesse A. Lynn and Courtney Mather were appointed to the Board (“Icahn Agreement”). Additionally, the Company is a third party beneficiary to a letter agreement, dated as of June 27, 2016, entered into by Xerox with the Icahn Group, pursuant to which, among other things, the Icahn Group has the right to appoint three designees to the Board (the “Icahn Agreement”). The Icahn Group currently has two designees, Jesse A. Lynn and Courtney Mather, appointed to the Board and has the right pursuant to the Icahn Agreement to appoint a third designee to the Board if it chooses to do so. The Icahn Group is required pursuant to the Icahn Agreement to vote in favor of the directors nominated by the Board at the Company’s 2019 Annual Meeting.
On December 18, 2018, the Company entered into a Shareholder Agreement with Darwin Deason (“Deason Agreement”Agreement”) pursuant to which, among other things, Scott Letier was appointed to the Board and Darwin Deason is required to vote in favor of the directors nominated by the Board at the Company’s 2019 Annual Meeting.
The Board has determined that each of the nominees (other than Ashok Vemuri, Chief Executive OfficerClifford Skelton, CEO of the Company) is independent under NYSE Corporate Governance RulesNasdaq rules and the Company’s more stringent independence standards. Although not anticipated, if for any reason, a nominee is unable to serve, the individuals named as proxies may use their discretion to vote for a substitute nominated by the Board.
The table below summarizes key qualifications, skills and attributes that each of our director nominees possesses which were most relevant to the decision to nominate him or her to serve on the Board. The lack of a mark does not mean the director nominee does not possess that qualification or skill or that other qualities were not also considered; rather, a mark indicates a specific area of focus or expertise on which the Board relies most heavily. Each director nominee’s biography below describes his or her qualifications and relevant experience in more detail.
Skills and Qualifications of our Board of Director Nominees
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In addition to the qualifications and skills referenced above, we have provided below the principal occupation and other information about the relevant experience, qualifications, attributes or skills that the Board has concluded qualify each of the nominees to serve as a director of the Company.
For purposes of the below biographies,Conduent securities owned means the Company’s Common Stock, including Deferred Stock Units (“DSUs”) issued under the Conduent Incorporated Equity Compensation Plan forNon-Employee Directors, as amended (the “Director Equity Plan”). For Mr. Vemuri,Skelton,Rightsrefers to his outstanding restricted shares, restricted stock units and performance shares at target.
Unless otherwise noted, allConduent securities owned are beneficially owned by the nominee. Beneficial ownership means he or she has or shares voting power and/or investment power with respect to the securities, even though another name (that of a broker, for example) may appear in the Company’s records. All ownership figures are as of February 28, 2019.29, 2020.
Age: Conduent securities owned: Occupation: Chief Executive Officer, Conduent Incorporated Other Directorships: |
Other Background: On February 25, 2020, the Board appointed Mr. Vemuri hasSkelton to serve as our Chief Executive Officer. Mr. Skelton had served in this role on an interim basis since August 2019. He previously served as our Chief ExecutiveOperating Officer since January 2017. He previouslyfrom June 2019 to August 2019. Prior to joining Conduent, Mr. Skelton served as Chief Executive OfficerPresident of Xerox Business Services, LLCFiserv Output Solutions from March 2017 to June 2019 and as an Executive Vicethe Group President of Xerox Corporationand Chief Information Officer at Fiserv from July 2016 to JanuaryApril 2012 until March 2017. Mr. Vemuri previously was President, Chief Executive Officer and a member of the Board of Directors of IGATE Corporation, a New Jersey-based global technology and services company now part of global technology and outsourcing company Capgemini, from 2013 to 2015. Before joining IGATE, Mr. Vemuri spent 14 years at Infosys Limited, a multinational consulting and IT services company, inSkelton also held a variety of leadership and business development roles including Member of the Executive Council, Head of Americas, Global Head ofat companies such as Ally Financial Services from 2003 to 2012 and Global Head of Manufacturing and Engineering Services from 2012 to 2013. Prior to joining Infosys in 1999, Mr. Vemuri worked in the investment banking industry at Deutsche Bank(formerly General Motors Acceptance Corporation) and Bank of America. Mr. Skelton is a former Navy fighter pilot and served in the Navy for over 20 years.
Mr. VemuriSkelton brings to the Board unique operational,client services, financial and clientoperational experience and a proven track record of leading growth and corporate transformations through his leadership positions with IGATEFiserv, Ally Financial and Infosys.
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Other Background: Mr. Graziano has served as Portfolio ManagerBank of Icahn Capital LP, the entity through which Carl C. Icahn manages investment funds, since February 2018, and prior to joining Icahn Capital, was previously the Founding Partner and Chief Investment Officer of the hedge fund Venetus Partners LP from June 2015 to August 2017, where he was responsible for portfolio and risk management, along withday-to-day firm management. Prior to founding Venetus, Mr. Graziano was a Partner and Senior Managing Director at the hedge fund Corvex Management LP from December 2010 to March 2015. At Corvex, Mr. Graziano played a key role in investment management and analysis, hiring and training of analysts and risk management. Prior to Corvex, Mr. Graziano was a Portfolio Manager at the hedge fund Omega Advisors, Inc., where he managed a proprietary equity portfolio and made investment recommendations, from September 2009 until December 2010. Before Omega, Mr. Graziano served as a Managing Director and Head of Special Situations Equity at the hedge fund Sandell Asset Management, where he helped build and lead the special situations team responsible for managing a portfolio of concentrated equity and activist investments, from July 2006 to July 2009.
Mr. Graziano is a director nominee selected by the Icahn Group pursuant to the Icahn Agreement. He brings to the Board financial expertise and extensive experience offering strategic advice and guidance to companies from his management experience and his service as a director on various company boards.America.
Age: Conduent securities Occupation: Other Directorships: |
Other Background:Ms. GregorVictor has served as the first Managing DirectorPresident, CEO and Founder of Centera Corporation, an executive development and leadership coaching firm since 1995, where she advises CEOs andC-suites on leadership effectiveness, executive and CEO succession and corporate governance. Prior to founding Centera, Ms. Victor served as Chief Human Resources Officer at Northwest Airlines, Inc., where she was responsible for Leadership Development at Warburg Pincus LLC beginning in 2014 until her retirement in 2016. In this role, she provided organizational guidanceexecutive compensation, employee benefits and strategic direction across all firm investing areas and assisted with bothpre- and post-investment opportunities, focusing on strategy, organizational structure, operating initiatives, and talent identification and development.labor relations. She also worked within the firm on professional development and effective organizational alignment.
Prior to joining Warburg Pincus, Ms. Gregor served as the Assistant to the President of the United States for Presidential Personnel, a role she assumed in October 2007. Before joining the President’s senior staff, Ms. Gregor served as Vice Chairman of the executive search firm Heidrick & Struggles, Inc. beginning in 2002. After joining as a Partner in 1993, she served in a number of seniorheld Human Resource-related leadership roles including President, North America, the firm’s largest business unit. She also served as Managing Partner of the firm’s New York office,at The Pillsbury Co., Grand Metropolitan PLC and as a member of the firm’s Management Committee. Prior toBurger King Corp. earlier in her work in executive search, Ms. Gregor was with the IBM Corporation, where she held a variety of leadership positions of increasing responsibility over a13-year period. Ms. Gregor also currently serves on the Board of Directors of a private company, TriMark USA.career.
Ms. GregorHiggins Victor brings to the Board significant experience in human capital development, market development, financeresources, talent management, organizational culture and succession planning product strategy, sales and service, and global account management from her roles at Warburg Pincus, Heidrick & Struggles, IBMCentera, Northwest Airlines Inc., The Pillsbury Co., Grand Metropolitan PLC and other advisory positions for major organizations.Burger King Corp. She also brings corporate governance expertise from her decades of experience working closely with majorat Centera and public company boards to implement best practices in corporate governance, director selection and succession planning.board experience.
Scott Letier Age: Conduent securities owned: Occupation: Managing Director of Deason Capital Services, LLC, the family office for Darwin Deason Other Directorships: Xerox Holding Corporation (since 2018). Darwin Deason has anon-controlling interest in Xerox Holding Corporation through the ownership of securities. |
Other Background:Scott Letier has been Managing Director of Deason Capital Services, LLC (“DCS”) since July 2014. Prior to joining DCS, Mr. Letier was the Managing Director of JFO Group, LLC, the family office for the Jensen family from September 2006 to July 2014. Mr. Letier has over 20 years of prior leadership roles serving as a private equity investment professional and chief financial officer, and began his career in the audit group at Ernst & Whinney (now Ernst & Young). Mr. Letier has served on numerous boards in the past, and in addition to Xerox Holding Corporation, he currently serves on the Board of Directors for a number of private companies including: MV Transportation, Inc, the leading provider of paratransit services and the largest privately-owned passenger transportation contracting firm in the United States, Stellar Global, LLC, an Australian and U.S. based BPO/CRM Call Center Company, Colvin Resources Group, a Dallas based search and staffing firm, Grow 52, LLC (dba, Gardenuity), a tech enabled retailer, and serves on the fund advisory board of Griffis Residential, a Denver based multi-family real estate management and investment firm. Mr. Letier also serves as Treasurer, board member, executive committee member, and is Chairman of the audit and finance committees of the Dallas County Community College District Foundation. Mr. Letier is a Certified Public Accountant and has a BBA with a concentration in accounting from the Southern Methodist University – Cox School of Business.
Mr. Letier is a director selected by Darwin Deason pursuant to the Deason Agreement. With his over 20 years of prior leadership roles and service on other company boards and committees, Mr. Letier brings to the Board expertise relevant to Conduent, including his significant audit experience and his investment and financial expertise gained from serving as a private equity and investment professional and chief financial officer.
Jesse A. Lynn Age: Conduent securities owned: Occupation: General Counsel, Icahn Enterprises L.P. Other Directorships: Cloudera, Inc. (since 2019); Herbalife Nutrition LTD. (since 2014); and The Manitowoc Company, Inc. (2015-2018). Carl C. Icahn has anon-controlling interest in Cloudera, Inc. and Herbalife Nutrition LTD through the ownership of securities. |
Other Background: Mr. Lynn has been General Counsel of Icahn Enterprises L.P., a diversified holding company engaged in a variety of businesses, including investment, automotive, energy, food packaging, metals, mining, real estate and home fashion, since 2014. From 2004 to 2014, Mr. Lynn was Assistant General Counsel of Icahn Enterprises. Prior to joining Icahn Enterprises, Mr. Lynn worked as an associate in the New York office of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. in its business and finance department from 2000 until 2004. From 1996 until 2000, Mr. Lynn was an associate in the corporate group at Gordon Altman Butowsky Weitzen Shalov & Wein. Mr. Lynn has been a director of Herbalife Ltd., a nutrition company, since 2014.2014 and a director of Cloudera, Inc. since 2019. Mr. Lynn was previously a director of The Manitowoc Company, Inc., a capital goods manufacturer, from 2015 to 2018. Mr. Lynn has been a Board Observer at each of Xerox Holdings Corporation a provider of document management solutions, since May 2018 and SandRidge Energy, Inc., an oil and natural gas company with a principal focus on exploration and production activities in the U.S.Mid-Continent and North Park Basin of Colorado, since June 2018. Carl C. Icahn has or previously had non-controlling interests in each of SandRidge, Xerox, Herbalife and Manitowoc through the ownership of securities. Mr. Lynn received a B.A. from the University of Michigan and a J.D. from the Boston University School of Law.
Mr. Lynn is a director selected by the Icahn Group pursuant to the Icahn Agreement. He brings to the Board legal and finance expertise gained both in private practice as well as his positions with Icahn Enterprises and his experience as a director of other public companies.
Courtney Mather Age: Conduent securities owned: Occupation: Former Portfolio Manager, Icahn Capital LP Other Directorships: Caesars Entertainment (since 2019); Cheniere Energy Inc. (since 2018); Newell Brands Inc. (since 2018); |
Other Background: Mr. Mather has served as Portfolio Manager of Icahn Capital LP, the entity through which Carl C. Icahn manages investment funds, sincefrom December 2016 to March 2019, and was previously Managing Director from 2014 to 2016. Prior to joining Icahn Capital, Mr. Mather was at Goldman Sachs & Co from 1998 to 2012, most recently as Managing Director responsible for Private Distressed Trading and Investing, where he focused on identifying and analyzing investment opportunities for both Goldman Sachs and clients. Mr. Mather received a B.A. from Rutgers College and attended the United States Naval Academy. Mr. Mather holds the Chartered Alternative Investment Analyst (CAIA), Chartered Financial Analyst (CFA) and Certified Financial Risk Manager (FRM) professional designations.
Mr. Mather is a director selected by the Icahn Group pursuant to the Icahn Agreement. He brings to the Board significant experience in finance and experience providing strategic advice and guidance to companies through his service as a director on various public company boards.
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Other Background: Mr. Nutter was elected Mayor of Philadelphia, Pennsylvania in 2007, serving from 2008 until the conclusion of his second term in 2016. During his tenure as Mayor of Philadelphia, Mr. Nutter served as President of the United States Conference of Mayors from 2012 until 2013. Since the conclusion of his second mayoral term, he has served as a member of the Homeland Security Advisory Council, as chairman of the Airbnb Mayor’s Advisory Council, as the inaugural David N. Dinkins Professor of Professional Practice in Urban and Public Policy at Columbia University and in various other advisory, academic and media commentary positions consistent with his longstanding commitment to public policy, government and civic life. Prior to entering politics, Mr. Nutter held various roles of increasing responsibility at the financial services firm Pryor, Counts & Co.
Mr. Nutter brings to the Board nearly 25 years of financial stewardship and leadership experience as an elected official and public manager.
Age: Conduent securities owned: Occupation: Other Directorships: |
Other Background: Mr. ParrettMontelongo served as thePresident and Chief Executive Officer of Deloitte Touche Tohmatsu.GRC Advisory Services, LLC, a board governance firm, since July 2016, and was previously Chief Administrative Officer and Senior Vice President, Public Policy and Corporate Affairs for Sodexo, Inc., a quality of life services enterprise, from January 2008 to July 2016. He joined Deloitte in 1967is a former George W. Bush White House appointee serving as the 19th Assistant Secretary for Financial Management and served inChief Financial Officer of the U.S. Air Force from August 2001 to March 2005 and concluded his tenure at the Pentagon as acting Secretary of the Air Force. Mr. Montelongo is a series of roles of increasing responsibility, including Managing Partner of Deloitte & Touche USA LLP. Mr. Parrett is alifetime member of the Board of Directors of Eastman Kodak Company, where he chairsCouncil on Foreign Relations and was an executive with a global management consulting firm and a regional telecommunications company. He completed a career in the financeU.S. Army that included line and audit committee; Oraclestaff assignments, a Congressional Fellowship in the U.S. Senate and service as an assistant professor teaching economics and political science at West Point. Mr. Montelongo is also a senior advisor atleadershipForward, Inc., a premier leadership performance firm, and serves on the Herbalife Nutrition LTD board as well as private company boards, including the Larry H. Miller Management Corporation where heand Exostar LLC. Mr. Montelongo earned his B.S. from West Point and an M.B.A. from Harvard Business School.
Mr. Montelongo is a member of the finance and audit committee; and Blackstone Group LP, where he chairs the audit and the conflicts committees. Mr. Parrett is a past member of the Board of Trustees of Carnegie Hall, a Senior Trustee of the United States Council for International Business and a past Chairman of the Board of Trustees of United Way Worldwide. Mr. Parrett is a Certified Public Accountant with an active license.
Mr. Parrett bringsdirector nominee who will bring to the Board extensive global businesssignificant experience strong management skills and extensive knowledge of complexa cross-industry background in board governance, strategy, financial and risk management, policymaking and operational issues, demonstrated byexcellence from his experienceroles as Chief Executive Officer of Deloitte Touche Tohmatsu.a business services executive and corporate governance leader at GRC Advisory Services, LLC, Sodexo, Inc. and the Pentagon. He also brings to the Board publicfinancial and audit committee experience from serving as a director on other company governance experience through his membership on boards of other public companies.boards.
Age: Conduent securities owned: Occupation: Other Directorships: |
Other Background:Ms. Wilson served asPaláu-Hernández is the Senior Executive Vice Presidentfounder and Chief FinancialExecutive Officer of Teachers Insurance and Annuity Association (TIAA),Hernández Ventures, a financial services organization that is a leading retirement provider for people who workprivate firm engaged in the academic, research, medicalacquisition and cultural field, from 2010 to 2018.management of a variety of business interests in the United States and Mexico, a position she has held since November 1988. Prior to joining TIAA,founding Hernández Ventures,Ms. Paláu-Hernández was an attorney with the law firm of McCutcheon, Black, Verleger & Shea, where she focused on domestic and international business and real estate transactions from September 1985 until August 1988. In September 2018,Ms. Paláu-Hernándezwas Executive Vicenominated by President Donald Trump to serve as United States Representative to the Seventy-Third Session of the General Assembly of the United Nations.Ms. Paláu-Hernández serves as an independent Board member of the Herbalife Nutrition LTD Board and Chief Financial Officerthe Occidental Petroleum Corporation Board (Carl C. lcahn has a non-controlling interest in each of Wyndham Worldwide Corporation, which was the holding company for Wyndham Hotels & Resorts, RCIHerbalife Nutrition LTD and other hospitality brands, from 2006 to 2009. She has also served as a financial officer at Cendant, MetLife and Transamerica Life Insurance,Occidental Petroleum Corporation), and was an audit partner at Deloitte earlier in her career. previously a member of the ALJ Regional Holdings, Inc. Board from 2015 to 2019.Ms. Wilson isPaláu-Hernández earned a Certified Public Accountant with an active license.Bachelor of Arts degree from the University of San Diego and a J.D. from the UCLA School of Law.
Ms. WilsonPaláu-Hernández brings to the Board extensive financialsignificant knowledge and experience demonstrated byregarding international business and legal matters from her role in overseeing financial managementroles at Hernández Ventures and planning, actuarial, tax, accounting, corporate services, sourcing and financial reporting functions for TIAA and herMcCutcheon, Black, Verleger & Shea. She also brings to the Board experience as a chief financial officer of afrom other public company.company boards.
The Board recommends a vote
FOR
the election of the nine (9)seven (7) Directors nominated by the Board
The Company is committed to the highest standards of business integrity and corporate governance. All of our directors, executives and employees must act ethically. In addition, our directors must act in accordance with our Code of Business Conduct and Ethics for Members of the Board;Board of Directors; our principal executive officer, principal financial officer and principal accounting officer, among others, must act in accordance with our Finance Code of Conduct; and all of our executives and employees must act in accordance with our Code of Business Conduct. Each of these codes of conduct, as well as our Corporate Governance Guidelines and the charters of our Audit, Compensation, Corporate Governance and Finance Committees can be accessed through our website atwww.conduent.com/corporate-governance. They are also available to any shareholder who requests them in writing addressed to Conduent Incorporated, 100 Campus Drive, Suite 200, Florham Park, NJ 07932, Attention: Corporate Secretary. We will disclose any future amendments to, or waivers from, provisions of our Code of Business Conduct and Ethics for members of the Board and our Code of Business Conduct and our Finance Code of Conduct for our officers on our website as promptly as practicable, and consistent with the requirements of applicable SEC and NYSENasdaq rules. The Corporate Governance Committee of the Board periodically reviews and reassesses the adequacy of our overall corporate governance and Corporate Governance Guidelines.
The Corporate Governance Committee considers candidates for Board membership recommended by Board members, management and shareholders (see below). The Corporate Governance Guidelines require that a substantial majority of the Board consist of independent directors and that management representation on the Board should be limited to senior Company management. There are no specific minimum qualifications that the Corporate Governance Committee believes must be met by prospective candidates; however, the Corporate Governance Committee applies the criteria set forth in our Corporate Governance Guidelines. These criteria include, among other things, the candidate’s broad perspective, integrity, independence of judgment, experience, expertise, diversity, ability to make independent analytical inquiries, understanding of the Company’s business environment and willingness to devote adequate time and effort to Board responsibilities. The Corporate Governance Committee does not assign specific weight to particular criteria and no particular criterion is necessarily applicable to all prospective nominees.
Our Corporate Governance Guidelines dictate that diversity should be considered by the Corporate Governance Committee in the director identification and nomination process. This means that the Corporate Governance Committee seeks nominees who bring a variety of business backgrounds, experiences and perspectives to the Board. We believe that the backgrounds and qualifications of the directors, considered as a group, should provide a broad diversity of experience, professions, skills, geographic representations, knowledge and abilities that will allow the Board to fulfill its responsibilities.
Shareholders who wish to recommend individuals for consideration by the Corporate Governance Committee as director nominees may do so by submitting a written recommendation to the Secretary of the Company at Conduent Incorporated, 100 Campus Drive, Suite 200, Florham Park, NJ 07932. Submissions must include sufficient biographical information concerning the recommended individual, including age, employment and current board memberships (if any), for the Corporate Governance Committee to consider. The submission must be accompanied by the written consent of the nominee to stand for election if nominated by the Board and to serve if elected by the shareholders. All submissions are reviewed by the Corporate Governance Committee. Recommendations received no earlier than November 10, 20197, 2020 and no later than December 10, 20197, 2020 will be considered for nomination at the 2020Company’s 2021 Annual Meeting of Shareholders.
We believe that the most effective board structure is one that emphasizes Board independence and ensures that the Board’s deliberations are not dominated by management while also ensuring that the Board and senior management act with a common purpose and in the best interest of the Company. At this time, we believe this balance is achieved through the appointment of an independent Chairman of the Board. Accordingly, William G. Parrett,Courtney Mather, an independent director, serves as Chairman of the Board. Under our Corporate Governance Guidelines, each regularly scheduled Board meeting must include an executive session of all directors and the CEO and a separate executive session attended only by the independent directors. In termsAs of our Boardthe date of this Proxy Statement, all
composition, 89% of our current directors and director nominees qualify as independent directors, except for Mr. Skelton, and each of our standing Board committees is comprised solely of independent directors, including our Corporate Governance Committee, which establishes our corporate governance policy and monitors the effectiveness of this policy at the Board level. You can find more information on our Board leadership structure in the Corporate Governance Guidelines posted on the Company’s website atwww.conduent.com/corporate-governance.
Our Board has ultimate oversight responsibility for our Enterprise Risk Management (“ERM”) program. The Board oversees our ERM program primarily through the Audit Committee of the Board, which previews the ERM program, assessments and remediation plans for subsequent review by the Board. Our ERM program is designed to strengthen our risk-management capability by developing and implementing a governance structure, policy and standards necessary to identify, assess, monitor and manage all categories of business risk, including strategic, operational, compliance and financial reporting. The ERM program is also designed to preserve and create organizational value through effective control management and integration of risk practices into strategic planning and day to day decision making. Enterprise Risk Management operates within our ChiefLegal & Compliance Officedepartment and is headed by theour Global Head of ERM director who chairs anthe Enterprise Risk Management Committee (“ERMC”). The ERMC is comprised of the Chief Financial Officer,Officer; General Counsel; Enterprise PMO Executive; Business Operations Executive; Chief Accounting Officer; Associate General Counsel, Chief People Officer, ChiefCorporate Governance & SEC; Associate General Counsel, Labor, Employment & Ethics; Corporate Auditor; and the Global Heads of each of the following departments and operating businesses: Human Resources, Corporate Strategy & Development, Risk Compliance & Privacy, Marketing, Sales, HR Services, Healthcare, Transportation and Government Sector Solutions, Transaction Processing, End User Experience, Technology & Operations and Information Officer, Chief Accounting Officer, Chief Compliance Officer, Chief Ethics Officer, Chief Privacy Officer, Sector Group Executives and Corporate Auditor.Security. The ERMC reviews and establishes risk tolerances, prioritizes the remediation of risks, inspects risk mitigation plans and progress, identifies and addresses emerging risks, shares mitigation best practices across the Company and promotes risk mitigation practices within their lines of business.
A director is not considered independent unless the Board determines that he or she has no material relationship with the Company. The Board has adopted categorical standards to assist in both its determination and the Corporate Governance Committee’s recommendation as to each director’s independence. Under these categorical standards, a director will be presumed not to have a material relationship with the Company if:
1) | he or she satisfies the bright-line independence and other applicable requirements under the listing standards of |
2) | he or she is not a current employee (and none of his or her “immediate family members” is employed as an “executive officer,” each as defined by the |
3) | in the event that he or she serves as an executive officer or director of a charitable organization, the Company and its consolidated subsidiaries donated less than five percent of that organization’s charitable receipts (provided that if within the preceding three years the Company and its consolidated subsidiaries donated annual aggregate contributions in excess of $1 million or two percent of the annual consolidated gross revenue of the charitable organization, such contributions must be disclosed in the Company’s Proxy Statement). |
In addition, the Corporate Governance Committee reviews relationships involving members of the Board, their immediate family members and affiliates, and transactions in which members of the Board, their immediate family members and their affiliates have a direct or indirect interest in which the Company is a participant to determine whether such relationship or transaction is material and could impair a director’s independence. In making independence determinations, the Board considers all relevant facts and circumstances from the point of view of both the director and the persons or organizations with which the director has relationships. See“Certain Relationships and Related Person Transactions”.
As a result of the aforementionedthis review, our Board has determined that all of the nominees for election as directors at the 2019 Annual Meeting, as well as all directors who previously served on our Board during 2019, are independent under the NYSENasdaq Corporate Governance Rules and our Corporate Governance Guidelines, with the exception of Ashok Vemuri,Clifford Skelton, our Chief Executive Officer.CEO.
Certain Relationships and Related Person Transactions
Related Person Transactions Policy
The Board has adopted a policy addressing the Company’s procedures with respect to the review, approval and ratification of “related person transactions” that are required to be disclosed pursuant to Item 404(a) of RegulationS-K. The policy, which is administered by the Corporate Governance Committee, provides that any transaction, arrangement or relationship, or series of similar transactions, in which the Company will participate or has participated and a “related person” (as defined in Item 404(a) of RegulationS-K) has or will have a direct or indirect material interest, and where the amount involved exceeds $120,000 in the aggregate, is subject to review (each such transaction, a “Related Person Transaction”). In its review of Related Person Transactions, the Corporate Governance Committee reviews the material facts and circumstances of the transaction and takes into account certain factors, where appropriate, based on the particular facts and circumstances, including: (i) the nature of the “related person’s” interest in the transaction; (ii) the significance of the transaction to the Company and to the “related person”; and (iii) whether the transaction is likely to impair the judgment of the “related person” to act in the best interest of the Company.
No member of the Corporate Governance Committee may participate in the review, approval or ratification of a transaction with respect to which he or she is a “related person.”
During the third quarter of 2019, we hiredCarl C. Icahn and his affiliates (collectively, the law firm“Icahn shareholders”) increased their ownership interest in the Company. In the normal course of King and Spalding LLP (King & Spalding) to representbusiness, the Company provides services to (human resources,end-user support and other services and solutions), and purchases from (office equipment and related services and supplies), certain parties in a lawsuit filed againstwhich the CompanyIcahn shareholders have an ownership interest. Total transactions with these parties in 2019 (Nelson et.al v. Comerica Bank and Conduent Business Services LLClitigation). James C. Woolery, an equity partner at King & Spalding, is thebrother-in-law of our Executive Vice President, General Counsel and Secretary, J. Michael Peffer. Mr. Peffer’s son is also an associate at King & Spalding. The Corporate Governance Committee reviewed and approved this relationship under our related party transaction policy.were as follows: revenue from these parties was approximately $33 million; purchases from these parties was approximately $46 million.
Icahn Agreements and Deason Agreement
See above under “Proposal 1 – Election of Directors” for information regarding our interest in (1) agreements between Xerox and the Icahn Group and (2) the agreement with Darwin Deason.
Certain Employment Arrangements
We actively recruit qualified candidates for our employment needs. Relatives of our executive officers and other employees are eligible for hire. In 2018,2019, no immediate family member of our current executive officers or directors was employed by the Company or one of its subsidiaries and received more than $120,000 in annual compensation (salary, incentive cash awards, equity awards and commissions).
BOARD OF DIRECTORS AND BOARD COMMITTEES
Committee Functions, Membership and Meetings
Our Board has four standing committees: Audit, Compensation, Corporate Governance and Finance. Set forth below is a list of the committees of our Board, a summary of the responsibilities of each committee, the number of committee meetings held during 20182019 for each committee and a list of the members of each committee.
Audit Committee (10(9 meetings)
A copy of the charter of the Audit Committee is posted on the Company’s website atwww.conduent.com/corporate-governance.
The responsibilities of the Audit Committee include:
directly appoint, compensate, retain and oversee the work of our independent auditor;
oversee the integrity of the Company’s financial statements;
oversee the Company’s compliance with legal and regulatory requirements;
oversee the Company’s risk assessment policies and practices, including the ERM process, and preview the ERM assessment and process for subsequent review by the Board;
assess independent auditor’s qualifications and independence;
assess performance of the Company’s independent auditors and the internal audit function;
review the Company’s audited financial statements, including the Company’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and recommend to the Board their inclusion in the Company’s Annual Report on Form10-K; and
review and approve the Company’s Code of Business Conduct and Ethics.
The Audit Committee is also responsible for the preparation of the Audit Committee Report that is included in this Proxy Statement beginning on page 53.56.
Members: JoieScott Letier, Michael A. Gregor; Nicholas Graziano;Nutter and Virginia M. Wilson
Chair: Ms. Wilson
The Board has determined thatthat: (1) all of the members of the Audit Committee are independent under the Company’s Corporate Governance Guidelines and under the applicable SEC and NYSE RulesNasdaq rules and are financially literateable to read and understand financial statements; and (2) Ms. Wilson and Mr. GrazianoLetier are “audit committee financial experts,” as defined in the applicable SEC rules. Designation or identification of a person as an audit committee financial expert does not impose any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit Committee and the Board in the absence of such designation or identification.
Compensation Committee (8 meetings)
A copy of the charter of the Compensation Committee is posted on the Company’s website atwww.conduent.com/corporate-governance.
The responsibilities of the Compensation Committee include:
oversee development and administration of the Company’s executive compensation plans;
set the compensation of the CEO and other executive officers;
review and approve the performance goals and objectives with respect to the compensation of the CEO and other executive officers;
oversee the evaluation of the CEO and other executive officers;
have sole authority to retain and terminate the consulting firms engaged to assist the Compensation Committee in the evaluation of the compensation of the CEO and other executive officers;
oversee the work of the compensation consultants, including determination of compensation to be paid to any such consultant by the Company;
conduct an independence assessment of any compensation consultants, including consideration of the six independence factors required under SEC rules and NYSENasdaq listing standards; and
review and approve employment, severance,change-in-control, termination and retirement arrangements for executive officers.
The Compensation Committee is also responsible for reviewing and discussing the Compensation Discussion and Analysis (“CD&A”) with management, and has recommended to the Board that the CD&A be included in this Proxy Statement (beginning on page 22)21) and incorporated by reference ininto the Company’s 20182019 Annual Report on Form10-K. The CD&A discusses the material aspects of the Company’s compensation objectives, policies and practices. The Compensation Committee’s report appears on page 3639 of this Proxy Statement.
The Compensation Committee has not delegated its authority with respect to executive compensation decisions. The Compensation Committee has, however, delegated authority under the Company’s equity plan to the CEO to grant equity awards to employees who are not executive officers. The CEO is also responsible for setting the compensation of, reviewing performance goals and objectives for, and evaluating officers who are not executive officers.
Executive officer compensation decisions are made by the Compensation Committee after discussing recommendations with the CEO and the Chief People Officer.Global Head of Human Resources. The Chief Financial Officer confirms the Company’s financial results used by the Compensation Committee to make compensation
decisions. The Chief Financial Officer attends Compensation Committee meetings to discuss financial targets and results for the
Annual Performance Incentive Plan and the Executive Long-Term Incentive Program as described in the CD&A. The Compensation Committee meets in executive session to review and approve compensation actions for the CEO.
The Compensation Committee has retained Frederic W. Cook & Co. (“F.W. Cook”) as an independent consultant to the Compensation Committee. F.W. Cook provides no services to management and provides an annual letter to the Compensation Committee regarding its independence, which the Compensation Committee reviews and determines whether there is any conflict of interest. Based on its review for 2018,2019, the Compensation Committee determined that F.W. Cook’s work has not raised any conflict of interest and that such firm is independent. The consultant’s responsibilities are discussed on page 2627 of this Proxy Statement.
Members: JoieKathy Higgins Victor, Michael A. GregorNutter and William G. ParrettMargaritaPaláu-Hernández
Chair: Ms. GregorHiggins Victor
The Board has determined that all of the members of the Compensation Committee are independent under the Company’s Corporate Governance Guidelines and the applicable NYSENasdaq rules and that each Committee member is a“non-employee director” as defined in Rule16b-3 under the Securities Exchange Act of 1934 (“Exchange Act”).Act.
Compensation Committee Interlocks and Insider Participation
During 2018,2019, Mr. Galant,Graziano, Ms. Gregor, Mr. Mather,Ms. Higgins Victor, Mr. Nevin, Mr. Nutter,Ms. Paláu-Hernández and Mr. Parrett served on our Compensation Committee. No member of the Compensation Committee was or is an officer or employee of the Company or any of its subsidiaries. In addition, during the last fiscal year, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on our Board or Compensation Committee.
Corporate Governance Committee (5(7 meetings)
A copy of the charter of the Corporate Governance Committee is posted on the Company’s website atwww.conduent.com/corporate-governance.
The responsibilities of the Corporate Governance Committee include:
identify and recommend to the Board individuals to serve as directors of the Company and on Board committees;
develop and recommend to the Board director qualification criteria and establish procedures for evaluating the suitability of director nominees;
advise the Board regarding Board composition, procedures and committees;
develop, recommend to the Board and annually review the corporate governance principles applicable to the Company;
review significant environmental and corporate social responsibility matters;
administer the Company’s Related Person Transactions Policy;
evaluate and recommend director compensation to the Board; and
oversee the annual Board and committee evaluation processes.
The Corporate Governance Committee recommends to the Board nominees for election as directors of the Company and considers the performance of incumbent directors in determining whether to recommend their nomination.
Members: Nicholas Graziano; Michael A. NutterJesse Lynn, Courtney Mather and William G. ParrettMargaritaPaláu-Hernández
Chair: Mr. NutterMs. Paláu-Hernández
The Board has determined that all of the members of the Corporate Governance Committee are independent under the Company’s Corporate Governance Guidelines and the applicable NYSENasdaq rules.
Finance Committee (5 meetings)
A copy of the charter of the Finance Committee is posted on the Company’s website atwww.conduent.com/corporate-governance.
The responsibilities of the Finance Committee include:
review the Company’s cash position, capital structure, status of credit ratings and strategies, financing strategies and insurance coverage and report to the full Board with respect thereto as appropriate;
review and make recommendations to the management and the full Board as appropriate with respect to the Company’s dividend policy and capital allocation policy;
review the adequacy of the funding of the Company’s funded retirement plans and welfare benefits plans (other than those plans maintained pursuant to a collective agreement that names the Joint Administrative Board as the governing plan fiduciary) in terms of the Company’s corporate purposes;
review the Company’s policy on derivatives;
• | approve, at least annually, whether the Company and its subsidiaries shall enter into swap and security-based swap transactions that are not cleared with a Commodity Exchange Act registered clearing organization in reliance on the exemptions provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act and rules and regulations thereunder (the “ |
Review and approve the three yearthree-year strategic plan and the annual capital budget; and
Review and approve (1) acquisitions in excess of $75M or involving the issuance of Company stock and (2) dispositions of assets or stock of a subsidiary in excess of $50M.
Members: Scott Letier;Letier, Courtney Mather; Michael A. Nutter;Mather and Virginia M. Wilson (Mr. Parrett was reassigned by the Board from the Finance Committee to the Compensation Committee on December 18, 2018 and the Board appointed Mr. Letier to the Finance Committee on his election to the Board on that date.)
Chair: Mr. Mather.Letier
The Board has determined that all of the members of the Finance Committee are independent under the Company’s Corporate Governance Guidelines and the applicable NYSENasdaq rules.
Board and Committee Meetings; Annual Meeting Attendance
Board and Committee Meeting Attendance: 1112 meetings of the Board of Directors were held in 2018.2019. The number of meetings held by each of our Board committees is noted above under “Committee Functions, Membership and Meetings.” All incumbent directors attended at least 95%99% of the total number of meetings of the Board and Board committees on which they served. We believe that attendance at meetings is only one means by which directors may contribute to the effective management of the Company and that the contributions of all directors have been substantial and are highly valued.
Annual Meeting Attendance Policy: The Company’s policy generally is for all members of the Board to attend the Annual Meeting of Shareholders. All nominees who were serving as directors at the time attended the 20182019 Annual Meeting of Shareholders.
Our Board, upon the review and recommendation of our Corporate Governance Committee, previously adopted a compensation program for ournon-employee directors effective January 1, 2018. The following is a brief summary of the material elements of the program.
Cash Compensation
Under the program,non-employee directors receive $80,000 per year as an annual cash retainer for their service on the Board. In addition,non-employee directors receive additional cash retainers for the following roles:
TheNon-Executive Chairman receives $125,000 per year;
The Chair of the Audit Committee receives $25,000 per year and each other member of the Audit Committee receives $15,000 per year;
The Chair of the Compensation Committee receives $20,000 per year and each other member of the Compensation Committee receives $12,000 per year;
The Chair of the Corporate Governance Committee receives $15,000 per year and each other member of the Corporate Governance Committee receives $10,000 per year,year; and
The Chair of the Finance Committee receives $15,000 per year and each other member of the Finance Committee receives $10,000 per year.
All directors are also reimbursed for reasonable expenses incurred in connection with service on the Board or any of its Committees.
Equity Compensation
Under the program, eachnon-employee director is automatically eligible for an annual equity award granted in the form of DSUs under the Director Equity Plan. A DSU is a bookkeeping entry that represents the right to receive one share of our Common Stock at a future date. DSUs are vested on the date of grant and include the right to receive dividend equivalents, which are credited in the form of additional DSUs, at the same time and in approximately the same amounts that the holder of an equivalent number of shares of our Common Stock would be entitled to receive in dividends. For 2018,2019, ournon-employee directors received awere entitled to an annual grant of DSUs with a grant date fair value of $190,000. Each of Ms. Higgins,Ms. Paláu-Hernández and Mr. Lynn received a prorated grant of DSUs in connection with their appointment to the Board. If a director separates from service prior toyear-end, DSU grants include a clawback provision allowing for recovery of DSUs granted during the year of separation from service on a pro rata basis.
Deferral of Retainer Fees
Board members can elect to receive up to 100% of their $80,000 annual cash retainer in the form of DSUs, the payout of which are deferred for a specified number of years following grant, as determined by the director, or until any earlier separation from service.
Director Stock Ownership Guidelines
The program includes stock ownership guidelines that require directors to own Common Stock in a minimum amount equal to 6 times the annual cash retainer ($80,000 x 6 = $480,000) within 3 years of adoption of the guidelines (or within 35 years of appointment to the Board. In August 2019, this requirement was changed by the Board for directors elected after 2017).from 3 to 5 years. Directors are required to hold all shares of Common Stock granted to the director until compliance with the guidelines are met.
20182019 Director Compensation Table
The following table shows the compensation paid by Conduent to itsnon-employee directors for the fiscal year ended December 31, 2018 to itsnon-employee directors. Ashok Vemuri,2019. Clifford Skelton, Chief Executive Officer, isand Ashok Vemuri, former Chief Executive Officer, are not included in this table because he is an employeethey were employees of the Company during 2019 and receivesreceived no additional compensation for histheir service as a director. The compensation received by Mr.Messrs. Skelton and Vemuri as an employeeemployees is shown in the 20182019 Summary Compensation Table.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2) | All Other Compensation ($) | Total ($) | ||||||||||||||
Nicholas Graziano (2) | $ 55,417 | $110,842 |
— | $166,259 | ||||||||||||||||||
Paul S. Galant(2) | $ 92,000 | $190,000 |
— | $282,000 | ||||||||||||||||||
Nicholas Graziano | 101,000 | 190,000 |
— | 291,000 | ||||||||||||||||||
Joie Gregor | $115,000 | $190,000 |
— | $305,000 | 115,000 | 190,000 |
— | 305,000 | ||||||||||||||
Vincent J. Intrieri (4) | $ 52,500 | $190,000 |
— | $242,500 | ||||||||||||||||||
Scott Letier(2) | $ 7,500 | $ 15,833 |
— | $ 23,333 | ||||||||||||||||||
Kathy Higgins Victor | 36,666 | 79,167 |
— | 115,833 | ||||||||||||||||||
Scott Letier | 102,500 | (3) | 190,000 |
— | 292,500 | |||||||||||||||||
Jesse Lynn | 76,500 | 142,500 |
— | 219,000 | ||||||||||||||||||
Courtney Mather | $ 92,000(3) | $190,000 |
— | $282,000 | 156,667 | (3) | 190,000 |
— | 346,667 | |||||||||||||
Michael Nevin(5) | $ 95,000 | $190,000 |
— | $285,000 | ||||||||||||||||||
Michael Nevin | 51,000 | 190,000 |
— | 241,000 | ||||||||||||||||||
Michael A. Nutter | $105,000 | $190,000 |
— | $295,000 | 106,000 | 190,000 |
— | 296,000 | ||||||||||||||
William G. Parrett | $225,000(3) | $190,000 |
— | $415,000 | 147,000 | (3) | 190,000 |
— | 337,000 | |||||||||||||
MargaritaPaláu-Hernández | 37,833 | 79,167 |
— | 117,000 | ||||||||||||||||||
Virginia M. Wilson | $115,000 | $190,000 |
— | $305,000 | 115,000 | 190,000 |
— | 305,000 |
(1) | Ms. Gregor, Ms. Higgins Victor, Mr. Lynn, Mr. Nevin, Mr. Parrett andMs. Paláu-Hernández did not serve on the Board for the full year. Ms. Higgins Victor andMs. Paláu-Hernández joined the Board on August 26, 2019 and received a prorated grant of DSUs on September 1, 2019 as well as a prorated annual cash |
retainer. Mr. Lynn joined the Board on April 19, 2019 and received a prorated grant of DSUs on April 30, 2019 as well as a prorated cash retainer. Mr. Nevin resigned from the Board effective April 8, 2019 and a prorated portion of his DSUs was forfeited. Ms. Gregor and Mr. Parrett resigned from the Board effective August 26, 2019 and a prorated portion of their DSUs were forfeited. |
(2) | This column reflects the aggregate grant date fair value of the annual equity grant made tonon-employee directors in the form of DSUs ($190,000) |
|
(3) |
|
DSUs as follows: Messrs. Mather and Parrett, $80,000, Mr. |
|
The total number of all DSUs held by each director as of December 31, 20182019 is as follows: Mr. Graziano, 5,758;15,807; Ms. Gregor, 20,984;9,687; Ms. Higgins Victor, 12,708; Mr. Letier, 0 (Mr. Letier’s DSUs for his 2018 service were awarded in January 2019);19,697; Mr. Lynn, 11,151; Mr. Mather, 25,515;49,100; Mr. Nevin, 20,984;9,687; Mr. Nutter, 20,984;25,494; Mr. Parrett, 25,515;9,687;Ms. Paláu-Hernández, 12,708; and Ms. Wilson, 20,984.25,494.
Security Ownership of Company SecuritiesCertain Beneficial Owners (1)
We are not aware of any person who, or group which, owns beneficially more than 5% of any class of the Company’s equity securities as of December 31, 2018,2019, except as set forth below.
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||||||||
Common Stock | FMR, LLC (2) 245 Summer St. Boston, MA 02210 | 21,646,167 | 10.244 | % | Mr. Carl C. Icahn (2) c/o Icahn Capital LP 767 Fifth Avenue, 47th Floor New York, NY 10153 | 38,149,336 | 18.00 | % | ||||||||||||
Common Stock | Mr. Carl C. Icahn (3) c/o Icahn Capital LP 767 Fifth Avenue, 47th Floor New York, NY 10153 | 24,586,540 | 11.64 | % | The Vanguard Group (3) 100 Vanguard Blvd. Malvern, PA 19355 | 15,774,277 | 7.44 | % | ||||||||||||
Common Stock | The Vanguard Group (4) 100 Vanguard Blvd. Malvern, PA 19355 | 16,507,528 | 7.81 | % | BlackRock, Inc. (4) 55 East 52nd Street New York, NY 10055 | 12,751,853 | 6.02 | % | ||||||||||||
Common Stock | Mr. Darwin A. Deason (5) 5956 Sherry Ln., Suite 800 Dallas, TX 75225 | 12,320,307 | 5.8 | % | Mr. Darwin A. Deason (5) 5956 Sherry Ln., Suite 800 Dallas, TX 75225 | 12,320,307 | 5.81 | % |
(1) | The words “group” and “beneficial” are as defined in regulations issued by the SEC. Beneficial ownership under such definition means possession of sole voting power, shared voting power, sole dispositive power or shared dispositive power. The information provided in this table is based solely upon the information contained in the most recent Schedule 13G or 13G/A (or in the case of Mr. Icahn and Mr. Deason, the most recent Schedule 13D or 13D/A) filed by the named entity with the SEC. |
(2) | Based on a Schedule |
|
Represents shares of Common Stock held by the following group of entities associated with Carl C. Icahn: High River Limited Partnership (“High River”), Hopper Investments LLC (“Hopper”), Barberry Corp. (“Barberry”), Icahn Partners Master Fund LP (“Icahn Master”), Icahn Offshore LP (“Icahn Offshore”), Icahn Partners LP (“Icahn Partners”), Icahn Onshore LP (“Icahn Onshore”), Icahn Capital LP (“Icahn Capital”), IPH GP LLC (“IPH”), Icahn Enterprises Holdings L.P. (“Icahn Enterprises Holdings”), Icahn Enterprises G.P. Inc. (“Icahn Enterprises GP”) and Beckton Corp. (“Beckton”)(collectively, (collectively, the “Reporting Persons”). The principal business address of (i) each of High River, Hopper, Barberry, Icahn Offshore, Icahn Partners, Icahn Master, Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP and Becktonthe Reporting Persons is White Plains Plaza, 445 Hamilton Avenue - Suite 1210, White Plains, NY 10601, and (ii) Mr. Icahn is c/o Icahn Associates Holding LLC, 767 Fifth Avenue, 47th Floor, New York, NY 10153.
High River has sole voting power and sole dispositive power with regard to 4,917,3087,629,868 shares of Common Stock. Each of Hopper, Barberry and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of Common Stock. Icahn Master has sole voting power and sole dispositive power with regard to 8,156,43312,672,483 shares of Common Stock. Each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of Common Stock. Icahn Partners has sole voting power and
sole dispositive power with regard to 11,512,79917,846,985 shares of Common Stock. Each of Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares of Common Stock.
Each of Hopper, Barberry and Mr. Icahn, by virtue of their relationships to High River, may be deemed to indirectly beneficially own the shares of Common Stock which High River directly beneficially owns. Each of Hopper, Barberry and Mr. Icahn disclaims beneficial ownership of such shares of Common Stock for all other purposes. Each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises
GP, Beckton and Mr. Icahn, by virtue of their relationships to Icahn Master, may be deemed to indirectly beneficially own the shares of Common Stock which Icahn Master directly beneficially owns. Each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn disclaims beneficial ownership of such shares of Common Stock for all other purposes. Each of Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn, by virtue of their relationships to Icahn Partners, may be deemed to indirectly beneficially own the shares of Common Stock which Icahn Partners directly beneficially owns. Each of Icahn Onshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn disclaims beneficial ownership of such shares of Common Stock for all other purposes.
Based on a Schedule |
(4) | Based on a Schedule 13G filed with the SEC on February 7, 2020 by BlackRock, Inc. (“BlackRock”), BlackRock has sole voting power for 12,239,020 shares of Common Stock, sole dispositive power for 12,751,853 shares of Common Stock and has no shared voting power or shared dispositive power for any shares of Common Stock. |
(5) | Based on a Schedule |
Shares of Common Stock of the Company owned beneficially by the directors and nominees for director, each of the currentnamed executive officers named in the Summary Compensation Table and all current directors and current executive officers as a group, as of February 28, 2019,29, 2020, were as follows. These individuals have sole voting and dispositive power with respect to the reported shares.
Name of Beneficial Owner | Amount Beneficially Owned | ||||
| |||||
Clifford Skelton |
| 0 | |||
| |||||
Mark Brewer |
| 0 | |||
Jeffrey Friedel |
| 128,970 | |||
| |||||
Kathy Higgins Victor |
| 45,524 | |||
| |||||
Michael Krawitz |
| 0 | |||
Scott Letier |
| 65,238 | |||
Jesse A. Lynn |
| 43,967 | |||
Courtney Mather |
| 79,137 | |||
Michael Montelongo | 0 | ||||
Michael A. Nutter |
| 59,920 | |||
| |||||
MargaritaPaláu-Hernández |
| 45,524 | |||
J. Michael Peffer |
| 162,164 | |||
| |||||
Mario Pompeo |
| 6,051 | |||
Ashok Vemuri | 401,684 | ||||
Brian Webb-Walsh | 151,508 | ||||
Virginia M. Wilson |
| 59,920 | |||
All directors and executive officers as a group |
| 556,789 |
Percent Owned by Directors and Executive Officers: Each director and executive officer beneficially owned less than 1% of the aggregate number of shares of Common Stock outstanding as of February 28, 2019.29, 2020. The amount beneficially owned by all directors and executive officers as a group also amounted to less than 1%.
Amount Beneficially Owned: The numbers shown are the shares of Common Stock considered beneficially owned by the directors and executive officers in accordance with SEC rules and includes shares held indirectly.
Shares of Common Stock which executive officers, directors and nominees have a right, within 60 days of February 28, 2019,29, 2020, to acquire upon the exercise of options or rights or upon vesting of performance shares, DSUs or restricted stock units are also required to be included for purposes of determining beneficial ownership. None of our executive officers, directors or nominees hold any Company securities which are exercisable or scheduled to vest within 60 days of February 28, 201929, 2020 with the exception of DSUs as follows: Graziano, 5,758; Gregor, 11,297;Higgins Victor, 43,524; Letier, 59,421; Mather, 13,675;79,137; Nutter, 48,623;Paláu-Hernández, 45,524; and Parrett, 13,675.Wilson, 48,623.
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Section 16(a) of the Exchange Act (“Section 16”) requires the Company’s directors, executive officers and persons who own more than ten percent of the Common Stock of the Company, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of Common Stock of the Company. Based solely on review of these reports, or written representations from these persons that no other reports were required to be filed with the SEC, the Company believes that all reports for the Company’s directors, executive officers and ten percent shareholders that were required to be filed under Section 16 during the fiscal year ended December 31, 20182019 were timely filed, with the exception ofexcept for one Form 4 reporting onea single transaction filed jointly by Carl C. Icahn, High River Limited Partnership, Icahn Partners LPfor each of Messrs. Vemuri, Walsh, Peffer and Icahn Partners Master Fund LP.Friedel.
COMPENSATION DISCUSSION AND ANALYSIS
In this Compensation Discussion and Analysis (“CD&A”), we discuss the compensation philosophy, programs and practices adopted by the Compensation Committee of the Board of Directors of Conduent (the “Compensation Committee”“Compensation Committee”) for our named executive officers and review the various objectives and elements of our executive compensation program, its alignment with performance and the 20182019 compensation decisions regarding our named executive officers.
For purposes of this CD&A and the disclosure that follows, the following are our named executive officers for 2018:2019:
Ashok Vemuri, Chief Executive Officer
• | Clifford Skelton1, Chief Executive Officer |
Brian Webb-Walsh, Executive Vice President & Chief Financial Officer
• |
|
• | Mark Brewer3, Executive Vice President & President, Global Public Sector Solutions |
• | Mario Pompeo4, Chief Accounting Officer |
• | Ashok Vemuri5, Former Chief Executive Officer |
• | James Michael Peffer6, Former Executive Vice President, General Counsel & Secretary |
• | Jeffrey Friedel7, Former Executive Vice President & Global Head, Human Resources |
1 Mr. Skelton initially joined Conduent as our Chief Operating Officer on June 17, 2019. In August 2019, in connection with the departure of Mr. Vemuri, Mr. Skelton was appointed as our Chief Executive Officer on an interim basis and a member of our Board. One February 25, 2020, the Board appointed Mr. Skelton as our Chief Executive Officer.
2 Mr. Krawitz was newly hired as our Executive Vice President, General Counsel & Secretary effective November 18, 2019.
Jeffrey Friedel,3 Mr. Brewer initially joined Conduent as our COO, Transportation effective June 10, 2019. Effective September 7, 2019, Mr. Brewer was appointed as Executive Vice President & President, Global Public Sector Solutions, and on November 12, 2019, he was appointed as an executive officer of the Company.
4 Effective June 14, 2019, Mr. Pompeo, then serving as our Head of Internal Audit, was appointed as our Chief PeopleAccounting Officer and an executive officer of the Company.
15 Mr. Amoriell retired fromVemuri was no longer considered an executive officer on August 6, 2019 and ceased employment with the Company on August 31, 2019.
6 Mr. Peffer was no longer considered an executive officer on November 18, 2019 and ceased employment with the Company on December 31, 2019.
7 Mr. Friedel was no longer considered an executive officer on November 12, 2019 and ceased employment with the Company on January 11, 2019.24, 2020.
EXECUTIVE SUMMARY
Conduent continued to make progress in 2018 by transforming2019. The Company had a leadership transition, launched an operational transformation program and commenced a strategic review of its assets, which was completed in meaningful waysearly 2020. With respect to our leadership transition, our CEO initially joined the Company as our Chief Operating Officer in June 2019, at which time his compensation was negotiated as part of his offer letter, and positioning itselfwas appointed as our interim CEO in August 2019. In February 2020, he was appointed as our CEO and at that time, the Compensation Committee approved an amendment to his offer letter, providing for sustainable, profitable growthincreased compensation commensurate with his new position.
In 2019 and early 2020, the Company began to see early indications of improvement in the future. We achieved successbusiness driven by new leadership and programs in place as a result of the transformational program. More than ever, the Company increased its focus on a number of fronts, including strengthening our balance sheet, completingensuring that the programright people, processes and technology are in place to divest ournon-core businesses, exceedingimprove performance, retain revenues, reduce employee attrition and grow the goals under our3-year transformation program, completingCompany, while most recently responding to the tender offer of our senior unsecured high-yield notes, and completingimpact from the Company’s first acquisition. However, duecoronavirus pandemic.
Due to continued pressure on revenue growth and operational challenges, during the third and fourth quarters of fiscal 2018, we achieved lower than target financial performance on two measures: revenue (at constant currency) and adjusted EBITDA. As a result, the named executive officers achieved lower than target variable compensation payouts commensurate with our results. We are addressingresults – for example, the challenges that we faced in 2018 head-on and have made significant investments in technology modernization and standardization to supportpayout under our long-term strategy and focus on digital interactions. We
ended the year with a strong balance sheet, a portfolio of core businesses and offerings, a refreshed sales team andgo-to-market strategy,2019 Annual Performance Incentive Program (“APIP”) and the right team2019 segment of our outstanding performance-based LTI awards was 0%. For 2020, we have designed our 2020 incentive compensation plans to leadalign with our new transformation program to better incentivize improvements in the organization to the next phase –core operations of our pivot to growth.business and sustainable shareholder value.
20182019 Financial AchievementsResults
Revenue of $5,393$4,467 million
Net incomeloss from continuing operations of $(416)$(1,934) million, including goodwill impairment charges totaling $(1,952) million; pre-tax income of $(2.106) million
• | Adjusted net income |
• | Adjusted EBITDA |
• | $ |
2018 Operational Achievements
Exceeded3-year transformation initiative targets; achieved ~$730 million of cumulative savings
Completed divestiture plan of $1 billion ofnon-core business revenue
Divested four businesses (Commercial Vehicle Operations,Off-Street Parking, Actuarial and HR Consulting, and select Local Government Services) in 2018 for aggregate proceeds of ~$700 million in cash
Announced an agreement to sell a select portfolio of our stand-alone customer care contracts and completed the sale of those contracts in early 2019
Paid down $476 million of high-interest notes from ourspin-off
Invested in platform and IT infrastructure technology
Acquired Health Solutions Plus in January 2019 (leading digital healthcare core administrative processing system)
2*Please see“Non-GAAP Financial Measures” and“Non-GAAP Reconciliations” on pages 47-5150-54 in this Proxy Statement for information on ournon-GAAP financial measures.
Shareholder2019 Operational Achievements
We continued to focus on transformation and optimization throughout the business. We saw significant optimization from our real estate consolidation efforts. Going forward, we intend to transform the business through an intense focus on Growth, Quality, and Efficiency – utilizing a programmatic, project management approach. We became focused on hiring and organizingtop-talent, instituting and instilling processes and investing in and upgrading our technology. We strengthened our process to identify the biggest gaps and prioritize actions to ensure success.
Growth:In 2019, we hired a Global Head of Sales andre-organized our sales team by centralizing the sales executives from the business delivery operations. We believe bringing our sales executives under a single
organization and leader focused solely on selling will enable the team to benefit from increased focus and shared sales knowledge transfer. Additionally, we simplified ourgo-to-market strategy to align our focus on solution-based selling. We increased our focus on taking a client-centric approach to strengthen our relationships and better understand our clients’ business needs. We began examining the entire “sales to service continuum” to improve our performance and have a dedicated client retention program. We measure “Growth” through both revenue retention and new business signings in our 2020 APIP. |
Quality:In 2019, we continued to improve processes and procedures to address our technology infrastructure and our client delivery. We hired new executive leadership in thetechnology organization and continued the consolidation process of our data centers. We have also established a new, centralized command center to boost proactive management and monitoring of infrastructure incidents. We believe these changes will provide a streamlined delivery of services to our clients and theirend-users. In addition to optimizing the quality and stability of our service delivery, we continued to invest to upgrade our solutions to enable better outcomes for our clients and theirend-users as we worked to standardize the service delivery processes. We measure “Quality” by service level agreement performance, severity 1 outages, and client satisfaction in our 2020 APIP.
Efficiency:In 2019, we continued to find ways to reduce costs via increased efficiencies. We began implementing standardized processes and a singular operating model across thebusiness, which we believe will eliminate silos and improve our leadership across the Company. We believe greater efficiencies will be driven through simplified, standardized processes and a motivated workforce. We continued to find efficiencies from the ongoing consolidation of our data centers and real estate footprint. We are making steady progress in reshaping our culture and enhanced associate engagement programs as well as improvements to our work environments across our global locations. We measure “Efficiency” by associate retention and adjusted earnings before interest, depreciation and amortization (Adjusted EBITDA) margin in our 2020 APIP.
Advisory Say on Pay Vote & Shareholder Engagement
Our executive compensation is subject to an annual advisory vote of shareholders at our Annual Meeting. The Compensation Committee considers the outcome of say on pay votes when making compensation decisions for our named executive officers. At the 20182019 Annual Meeting of Shareholders, 98.7%89.5% of shares voted were in favor of our executive compensation.compensation program. Our Board and the Compensation Committee greatly value the benefits of maintaining a dialogue with our shareholders and understanding their views. The executive management team of Conduent established and participated in various shareholder engagement activities in 2018.2019. Conduent’s investor relations function proactively engages with our shareholders to provide updates on the performance of the Company and solicit feedback on various topics.
OUR EXECUTIVE COMPENSATION PROGRAM
Compensation Philosophy
Our Executive Compensation Programs areexecutive compensation program is designed to attract, motivate, reward and retain the world classtop talent necessary to drive our business strategy, creating shareholder value. Our programs are designed to follow these principles:
provide competitive compensation to attract and retain executives critical to our long-term success;
align executive and shareholder interests using both short-term and long-term financial and strategic objectives that build a sustainable Company;
recognize and reward collective accountability and individual contribution to ensuredrive enterprise results;
instill high standards of corporate governance and best practices; and
mitigate excess risk taking and/or behavior that is inconsistent with the Company’s strategic plans and high ethical standards.
Checklist of Compensation Practices
What We Do | What We Don’t Do | |||||
✓ | Deliver a significant portion of compensation through long-term incentives tied directly to shareholder value creation. | X | Permitre-pricing of underwater stock options. | |||
✓ | Balance short- and long-term incentives with multiple performance metrics. | X | Provide defined-benefit pension plan or SERPs to executives (onlyall-employee 401(k) plan). | |||
✓ | Maintain | X | Provide excessive perquisites or excessive termination payments. | |||
✓ | Maintain stock ownership requirements for all our named executive officers. | X | Allow hedging or pledging of Company stock. | |||
✓ | Conduct an annual review of programs to ensure they do not encourage risks that have a material adverse effect on the Company. | X | Permit taxgross-ups on change in control or other severance payments. | |||
✓ | Maintainnon-competition andnon-solicitation agreements with our named executive officers that prohibit competing against Conduent and soliciting our customers or current employees after termination. | X | Maintain written employment contracts with our executive officers | |||
✓ | Employ an Independent Consultant under the direction of the Compensation Committee. | X | Allow single-trigger vesting change in control arrangements. |
20182019 Total Direct Compensation Targets for Named Executive Officers
The Compensation Committee approved the annual target compensation levels for all executive officers.officers for 2019. To reinforce the Company’s pay for performance philosophy, 86%77% of our current CEO’s targeted total directordirect compensation, and on average 70%67% for our current active other named executive officers, is variable and “at risk.” Additionally, 53%50% of targeted total direct compensation for our Chief Executive OfficerCEO and, on average, 46%45% for our other current active named executive officers is subject to achievement of performance goals.
Executive
|
Title
|
Base Salary
| Target Short- Term Incentive (% of Salary)
| Target Long- Term Incentive (Grant Date Value on 4/1/18)
|
Title
|
Annual Salary
| Target Short- Term Incentive (% of Salary)
| Target Long- Term Incentive | ||||||||||||||||||||||||||
Clifford Skelton
|
Chief Executive Officer (CEO)
|
$
|
650,000
|
|
|
100
|
%
|
$
|
1,500,000
|
| ||||||||||||||||||||||||
Brian Webb-Walsh
|
Executive Vice President and Chief Financial Officer (CFO)
|
$
|
510,000
|
|
|
75
|
%
|
$
|
975,000
|
| ||||||||||||||||||||||||
Michael Krawitz
|
Executive Vice President, General Counsel & Secretary
|
$
|
450,000
|
|
|
70
|
%
|
$
|
735,000
|
| ||||||||||||||||||||||||
Mark Brewer
|
Executive Vice President & President, Global Public Sector Solutions
|
$
|
450,000
|
|
|
75
|
%
|
$
|
350,000
|
| ||||||||||||||||||||||||
Mario Pompeo
|
Chief Accounting Officer
|
$
|
350,000
|
|
|
50
|
%
|
$
|
150,000
|
| ||||||||||||||||||||||||
Ashok Vemuri
|
Chief Executive Officer (CEO)
|
$
|
1,000,000
|
|
|
150
|
%
|
$
|
5,000,000
|
|
Former Chief Executive Officer
|
$
|
1,000,000
|
|
|
150
|
%
|
$
|
5,000,000
|
| ||||||||||||||
Brian Webb-Walsh
|
Executive Vice President and Chief Financial Officer (CFO)
|
$
|
450,000
|
|
|
75
|
%
|
$
|
975,000
|
| ||||||||||||||||||||||||
Dave Amoriell
|
President
|
$
|
536,000
|
|
|
75
|
%
|
$
|
800,000
|
| ||||||||||||||||||||||||
J. Michael Peffer
|
Executive Vice President, General Counsel and Secretary
|
$
|
500,000
|
|
|
75
|
%
|
$
|
800,000
|
|
Former Executive Vice President, General Counsel and Secretary
|
$
|
500,000
|
|
|
75
|
%
|
$
|
800,000
|
| ||||||||||||||
Jeffrey Friedel
|
Executive Vice President, Chief People Officer
|
$
|
425,000
|
|
|
75
|
%
|
$
|
500,000
|
|
Former Executive Vice President & Global Head, Human Resources
|
$
|
425,000
|
|
|
75
|
%
|
$
|
500,000
|
|
The table does not reflect the specialone-time strategic leadership grant awarded to Mr. Pompeo or thesign-on grants awarded to Messrs. VemuriSkelton and Webb-Walsh.Krawitz. In addition, the variable incentives shown for Mr. Krawitz, who joined the Company in November 2019, represent his 2020 award opportunities. Additional information regarding these awards can be found under “Strategic Leadership RSU Grant”“SpecialOne-Time Restricted Stock Unit Grants” on page 31.32.
The charts below reflect the 20182019 pay mix for our current CEO and other named executive officers who were serving as executives on December 31, 2019 and the portion of their targeted total direct compensation that is variable pay. Basing this variable compensation upon financial results and share price directly aligns our executives with shareholder value creation.
CEO - Pay Mix | All Other Named Executive Officers – Pay Mix |
Linking Pay with Performance
Short-Term Incentives
In early 2019, the Compensation Committee reviewed peer group data and approved an Annual Performance Incentive Program (APIP) that aligned with the interests of shareholders and the Company. Each of our named executive officers participated in the Annual Performance Incentive Program (“APIP”) which focused on theour business priorities for 2018.2019. The 20182019 performance measures and weightings for APIP were: Adjusted EBITDA (50%), and Revenue (at constant currency) (40%) and an M&A Strategic Goal (10%(50%). For 2018, the Committee determined to use an M&A Goal as a performance metric to replace Revenue Productivity to more closely align our named executive officers’ incentive compensation with our strategic priorities.
Additional information regarding short-term incentives can be found under “2018“2019 Compensation for the Named Executive Officers—Short-Term Incentives.”
Long-Term Incentives
In early 2018,2019, the Compensation Committee reviewed peer group data and approved a Long-Term Incentive Program (“LTIP”) that aligned with the interests of shareholders and the Company. The 20182019 annual LTIP award includes a mix of 50% performance-based awards (Performance Stock Units) and 50% time-based awards (Restricted Stock Units). This approach balances the need to motivate and drive future behaviorperformance while being retentivealso fostering retention and fostering stock ownership. Performance Stock Units are measured over three years. Performance for each year is measured againstpre-established annual goals and performance achievement is averaged over the three-year performance period (2018—2020)(2019-2021). Vesting occurs atfollowing the end of the three-year performance period. Restricted Stock Units are subject to three-year ratable vesting.
The Compensation Committee approved annual LTIP awards with a grant date of April 1, 2018.2019, and June 28, 2019 for certain newly-hired executives. Officers participated at their individual LTIP target level. The 20182019 performance measures and weightings are as follows: Adjusted Profit Before Tax (“PBT”) (50%) and Free Cash Flow, as adjusted (50%). Additional information regarding long-term incentives can be found under “2018“2019 Compensation for the Named Executive Officers—Long-Term Incentives.”
In additionAdditional Restricted Stock Unit grants were also made to the annual LTIP award, Messrs. VemuriSkelton and Webb-Walsh each received aKrawitz in connection with their hire and to Mr. Pompeo for his strategic leadership, as described below under “Specialone-timeOne-Time Restricted Stock Unit award in recognition of their strategic leadership in establishing Conduent as a successful stand-alone company and exceeding transformational goals.Grants”.
PROCESS FOR DETERMINING COMPENSATION
Role of the Compensation Committee
The Compensation Committee administers the executive compensation program for our named executive officers on behalf of our Board and shareholders. All members of the Compensation Committee are independent directors in accordance with applicable SEC and NYSENasdaq standards, including heightened independence requirements for Compensation Committee members. The biographies of the Compensation Committee members appear beginning on page 7 of this Proxy Statement.
The Compensation Committee retains an independent consultant for the purpose of reviewing and providing guidance related to executive compensation programs. The Compensation Committee’s responsibilities are discussed beginning on page 1514 of this Proxy Statement. A complete description of the Compensation Committee’s responsibilities and functions appears in its charter, which can be found on our website atwww.conduent.com/corporate-governance.
The Compensation Committee evaluates many factors when designing and establishing the executive compensation plans and targets. In determining the appropriate compensation levels, the Compensation Committee considers the scope and impact of the executive’s role within the organization, experience, sustained performance and future potential. The Committee also reviews the compensation levels of similarly positioned executives at peer companies, general industry compensation data, and internal pay considerations.
Role of the CEO
While the Compensation Committee is ultimately responsible for making all compensation decisions affecting compensation of our named executive officers, the CEO participates in the process by:
Periodically discussing the performance of the Company and each executive officer with the Compensation Committee.
Making recommendations on the components of compensation for the other executive officers.
After receiving input from the CEO, the Compensation Committee makes its own assessments and formulates compensation amounts for each of our executive officers, including our named executive officers, ensuring that the total target compensation for each is appropriate and competitive.
Role of the Independent Consultant
The Compensation Committee has retained the services of an independent compensation consulting firm, Frederic W. Cook & Co., Inc. (the “Consultant”), to assist with its responsibilities. The Consultant reports only to the Compensation Committee and has not performed any other work for Conduent since being retained as an independent consultant to the Compensation Committee, except in its capacity as an independent advisor to the Corporate Governance Committee onnon-employee director compensation matters. As provided in its charter, the Compensation Committee has the authority to determine the scope of the Consultant’s services and may terminate the Consultant’s engagement at any time. The Compensation Committee evaluated the independence of the consultant and concluded that no conflict of interest existed that would prevent the consultant from independently advising the Compensation Committee.
During 2018,2019, the Consultant provided the following services:
regularly updated the Compensation Committee on trends in executive compensation, including providing proactive advice on emerging trends and best practices;
reviewed officer compensation levels and overall performance compared to a peer group made up of organizations with which Conduent is likely to compete for business, investor capital and/or executive talent;
reviewed incentive compensation designs for short-term and long-term programs;
advised the Compensation Committee on peer group companies for pay and performance comparisons;
reviewed the Compensation Discussion and Analysis and related compensation tables for inclusion in this Proxy Statement;
reviewed Compensation Committee meeting materials with management before distribution;
attended Compensation Committee meetings, including meetings in executive session, as requested by the Compensation Committee chair; and
offered independent analysis and input on CEO compensation.
Peer Group
The Compensation Committee approved a peer group of companies with whom Conduent competes for business, investor capital and/or executive talent. The peer group is used to benchmark compensation for our named executive officers as well as for general pay practices and trends. The 2018 peer group consisted of the following companies:
|
|
| ||
|
|
| ||
|
|
| ||
|
|
|
In November 2018, the Compensation Committee approved a new peer group for 2019, which the Committee believes more closely aligns with Conduent, considering the Company’s currentthen-current industry profile, size and market capitalization.
The 2019 peer group will consist of the following companies:companies were added: Booz Allen Hamilton Holding Corporation, CACI International Inc., Cerner Corporation, CGI Group Inc., Cognizant Technology Solutions Corporation, Fidelity National Information Services, Inc., First Data Corporation, Genpact Limited, Global Payments Inc., IQVIA Holdings Inc., Leidos Holdings, Inc., MAXIMUS, Inc., Roper Technologies, Inc. and Willis Towers Watson Public Limited Company.Company Limited; and the following companies were removed: Aon, plc., Automatic Data Processing, Convergys Corporation, DXC Technology and Paychex, Inc. The peer group was used to benchmark compensation for our named executive officers as well as for general pay practices and trends. The 2019 peer group consisted of the following companies:
Booz Allen Hamilton Holding Corporation | Cognizant Technology Solutions Corp. | Global Payments Inc. | Roper Technologies, Inc. | |||
CACI International Inc. | Fidelity National Information Services, Inc. | IQVIA Holdings Inc. | Willis Towers Watson Public Limited Company | |||
Cerner Corporation | First Data Corporation | Leidos Holdings, Inc. | ||||
CGI Group Inc. | Genpact Limited | Maximus, Inc. |
Competitive Market Information
In 2018,2019, the Compensation Committee received a report comparing the compensation of its named executive officers with the compensation of executives in comparable positions at our peer group companies based on the most recent proxy filings (primarily used for the CEO, CFO and General Counsel) as well as general
industry survey data to recognizesupplement the limitations ofpeer group proxy data (Willis Tower’s Watson CDB General Industry Executive Compensation survey).data. This comparison included compensation data for these elements of pay:
base salary;
short-term incentives;
total target cash compensation (base salary plus target short-term incentives);
target long-term incentives; and
total direct compensation (total target cash compensation plus target long-term incentives).
The competitive market data is prepared, analyzed and presented to the Compensation Committee by the Committee’s Consultant. The market pay range is viewed as a competitive reference point, but that data is not used to match a specific percentile of the market. Emphasis is placed on total direct compensation. In 2018,2019, the Compensation Committee reviewed total direct compensation against the market data using the 50th percentile as a reference point. The Compensation Committee exercises discretion in setting individual compensation levels to reflect an assessment of the executive’s impact, responsibilities and expected contributions to Conduent, as well as potential for advancement.
20182019 COMPENSATION FOR THE NAMED EXECUTIVE OFFICERS
20182019 Total Direct Compensation
Total direct compensation includes base salary, target annual short-term incentives and target annual long-term incentives, including Performance Stock Units at target. The majority of our named executive officers’ compensation is provided under our variable incentive compensation programs. Variable pay increases with responsibility while long-term incentive compensation represents the greatest component of pay. The 20182019 total direct compensation of our named executive officers can be found under the heading “Executive Summary—20182019 Total Direct Compensation Targets for Named Executive Officers.” For further information regarding the process the Compensation Committee used to determine compensation for our named executive officers, please see above under “Process for Determining Compensation.”
More complete compensation information appears in the “Summary Compensation Table” on page 37.40.
Base Salary
Base salary is the fixed pay element of our compensation program that reflects the level and scope of responsibility within the Company. The Compensation Committee reviews each named executive officer’s base salary annually as well as in connection with a promotion or other change in responsibility. The 20182019 base salaries for our named executive officers, then serving, were unchanged from 2017.2018, with the exception of Mr. Webb-Walsh, given the relative positioning of his pay versus the peer group. His annual base salary rate was increased from $450,000 to $510,000 effective April 1, 2019. In addition, in connection with his appointment as our Chief Accounting Officer and an executive officer of the Company, Mr. Pompeo’s annual base salary rate was increased from $335,000 to $350,000 effective June 14, 2019. The base salaries for our named executive officers appointed during 2019 were established in connection with their hiring and appointment. The 2019 annual base salary rates for our named executive officers are disclosed above under “2019 Total Direct Compensation Targets for Named Executive Officers.”
Short-Term Incentives
The Annual Performance Incentive Plan (“APIP”) provides for short-term incentive awards that reward performance against our annual operating plan, paid in the form of cash to our named executive officers and other eligible employees. Each year, the Compensation Committee reviews the target short-term incentive award opportunity, scaled to the executive’s level of responsibility and stated as a percentage of base salary, and the maximum payout opportunity.
The following chart reflects Conduent’s process for setting short-term incentive awards. This process typically takes place in the first quarter of the year.
Short-Term Incentive Target Award Opportunity for the Named Executive Officers
The annual short-term incentive target award opportunity for each of our named executive officers takes into accountconsiders many factors, including scope of responsibility, expected contributions, internal pay equity and competitive executive compensation practices. If an executive’s role or responsibilities change after the terms of the award are approved, the Compensation Committee is permitted to adjust the short-term incentive target award opportunity at that time.
The 20182019 APIP target award opportunities for our named executive officers, then serving, remain unchanged from 2017.2018, and the APIP target award opportunities for our newly appointed named executive officers were established in connection with their hiring and appointment. In connection with his appointment as our Chief Accounting Officer and an executive officer of the Company, Mr. Pompeo’s APIP target award opportunity was increased from 45% to 50%, effective June 14, 2019. The target award opportunities for our named executive officers for 2019 APIP are disclosed above under “2019 Total Direct Compensation Targets for Named Executive Officers.”
Short-Term Incentive Performance Measures
The Compensation Committee established the APIP for 20182019 pursuant to which each named executive officer is entitled to receive an incentive payout assuming Conduent attains certainpre-established performance goals. In 2018,2019, the performance goals for the APIP were based on Adjusted EBITDA and Revenue (at constant currency) and an M&A strategic goal.our targets were consistent with our operating plan for the year. For this purpose, Adjusted EBITDA represents income or loss before income taxes adjusted for interest expense, depreciation and amortization, restructuring and related costs, (gain) loss on divestitures and
transaction costs related to divestitures and acquisitions, settlements/reserves/insurance recoveries associated with litigation costs (recoveries)matters (includes internal and external counsel legal costs), net, loss on extinguishment of debt, other (income) expenses and legacy charges/credits such as New York Medicaid Management Information System (NY MMIS) and, Health Enterprise (HE). and goodwill impairment. Revenue is measured at constant currency which excludes the impact of changes in the translation of foreign currencies into U.S. Dollars and certain other discrete adjustments. The M&A strategic goal required completion of three of five planned divestitures.
Results of performance may be adjusted plus or minus 20% on a discretionary basis to recognize individual performance, but in no event wouldmay an APIP payout exceed the maximum payout (200%). With respect to our financial performance measures,Adjusted EBITDA goal, payout for achieving threshold performance is 50% of target, payout for achieving target performance is 100% of target and payout for achieving maximum performance is 200% of target. Performance
below threshold results in zero payout. With respect to our Revenue goal, the Compensation Committee incorporated a new minimum payout level for 2019. Payout for achieving minimum performance was 25% of target, payout for achieving threshold performance was 50%, payout for achieving target performance was 100% of target and payout for achieving maximum performance was 200% of target. Performance below minimum results in zero payouts. Performance results and payouts are interpolated between these points. There is no required payout for business performance below threshold levels.
The measures, weightings, goals and target and maximum payout ranges set by the Compensation Committee for 20182019 (in millions) were as follows:
Performance Measure
| Weighting | Target (100% payout) | Maximum (200% payout) | Weighting | Target (100% payout) | Maximum (200% payout) | ||||||
Adjusted EBITDA
|
50%
|
$721
|
$ 739
|
50%
|
$600
|
$615
| ||||||
Revenue (at constant currency)
|
40%
|
$5,739
|
$5,800
|
50%
|
$4,676
|
$4,770
| ||||||
M&A Strategic Goal
|
10%
| Completing 3 of 5 planned divestitures |
Completing 4 or more planned
|
These goals were aligned with Conduent’s 20182019 operating plan at the time they were established and designed to be challenging yet achievable. As discussed below, our performance did not meet our minimum performance metrics.
Determining Short-Term Incentive Award Payouts
After the end of the fiscal year, the CFO confirms the financial results and communicates the results to the Compensation Committee. Subject to the Compensation Committee’s review and approval, any material unusual charges or gains are reviewed with the Compensation Committee for possible impact on APIP calculations.
Each performance measure is assessed and calculated independently. The weighted results of each measure are added together to determine overall performance results. Payouts are made proportionately for achievement at levels between the goals. Even ifpre-established performance measures are achieved, the Compensation Committee retains discretion to determine a lesser short-term incentive than the calculated incentive payout, or no short-term incentive at all, as it deems appropriate. The Compensation Committee also retains its discretion to increase or decrease an APIP award (plus or minus 20% as described above) based on individual performance, provided that the named executive officer’s award may never exceed their maximum payout target.
20182019 Performance for Short-Term Incentive Award Payouts
Performance results for 20182019 against the APIP performance measures (in millions) were:
Performance Measures | Target | Actual (as adjusted) | Performance Achievement | Weighting | Payout Percentage | Target | Actual (as adjusted) | Performance Achievement (as a % of potential payout) | Weighting | Payout Percentage | ||||||||||||||||||||||||||
Adjusted EBITDA(1)
|
|
$ 721
|
|
|
$ 700
|
|
63%
|
50%
|
32%
|
|
$ 600
|
|
|
$ 481
|
|
0%
|
50%
|
0%
| ||||||||||||||||||
Revenue(2)
|
|
$5,739
|
|
|
$5,658
|
|
0%
|
40%
|
0%
|
|
$4,676
|
|
|
$4,455
|
|
0%
|
50%
|
0%
| ||||||||||||||||||
M&A Strategic Goal(3)
|
|
3 of 5
|
|
|
4 of 5
|
|
200%
|
10%
|
20%
| |||||||||||||||||||||||||||
Final Calculated Payout =>
|
52%
|
Final Calculated Payout =>
|
0%
|
(1) | Adjusted EBITDA: |
(2) | Revenue (at constant currency): |
|
Following the certification of the financial results for 2018,2019, the Compensation Committee reviewed the achievement of the performance measures onunder the 2019 APIP. Based on this the Committee approved a 52% payout factor.
Our named executive officers received payouts at or below the approved payout factor, as set forth below, except for Mr. Webb-Walsh, who was increased to 62% reflecting his contribution in Real Estate consolidation and Finance transformation projects and Mr. Friedel who was increased to 57% reflecting his contribution to the successful Accushoring™, effort.
Executive
| 2018 APIP
| 2018 APIP Actual
| ||||||||
Ashok Vemuri
|
|
$1,500,000
|
|
|
$780,000
|
| ||||
Brian Webb-Walsh
|
|
$ 337,500
|
|
|
$210,600
|
| ||||
Dave Amoriell
|
|
$ 402,000
|
|
|
$188,136
|
| ||||
J. Michael Peffer
|
|
$ 375,000
|
|
|
$195,000
|
| ||||
Jeffrey Friedel
|
|
$ 318,750
|
|
|
$182,325
|
|
|
Given Conduent’s 2018 achievements, the Compensation Committee concluded the APIP payments resulted in reasonable and appropriate performance-related incentive payments to our named executive officers. The annual incentives paid toreview, our named executive officers indid not receive a payout under the APIP, demonstrating payout commensurate with our performance under the 2019 for 2018 performance are shown in the “Summary Compensation Table.” APIP.
Additional information about the short-term incentive opportunities is shown in the “Grants of Plan-Based Awards in 2018”2019” table.
Long-Term Incentives
We provide long-term incentives to reward our named executive officers for sustained performance, as a retention incentive and to align executive’s interests with shareholders to drive long-term value creation. Awards are intended to encourage a strong ownership stake in the Company to drive superior performance on long-term Company objectives. The Committee considers peer data, relative impact of the executive’s position, responsibilities and role at Conduent and each named executive officer’s performance when determining long-term incentive awards.
Long-Term Incentive Program and Performance Measures
Long-term incentive awards are made pursuant to the Conduent Incorporated Performance Incentive Plan.Plan in the form of Restricted Stock Units and Performance Stock Units. Restricted Stock Units vest ratably over a three-year period.
Performance Stock Units are measured over a three-year performance period. Performance for each year is measured againstpre-established annual goals and performance achievement is averaged over the three-year performance period (2018—2020)(2019-2021). The 20182019 performance measures and weightings are as follows: Adjusted PBT (50%) and Free Cash Flow, as adjusted (50%). Adjusted PBT is defined as income or loss before income taxes as reported on the Consolidated Statements of Income (Loss), less amortization of acquired intangible assets; restructuring and related costs; (gain) loss on divestitures and transaction costs; settlements/reserves/insurance recoveries associated with litigation costs (recoveries)matters (includes internal and external counsel legal costs), net; loss on extinguishment of debt and other (income) expenses, net, business and assets, currency (gains) losses, net, litigation matters and all other expenses, net.net, including goodwill impairment. Free Cash Flow is defined as cash flow from operating activities as reported on the Consolidated Statements of Cash Flows, less cost of additions to land, buildings and equipment and cost of additions to internal use software and vendor financed capital lease additions plus proceeds from sales of land, building and equipment partial year adjustments for divestitures
and tax payments related to divestitures completed in 2018. Adjusted2019. Free Cash Flow, as adjusted, is defined as the free cash flow from above plus deferred compensationlitigation payments and transaction costs and other identified items.costs. The entire award vests at the end of the three-year performance period, subject to Compensation Committee certification of performance results.
Once vested, Restricted Stock Units and Performance Stock Units are paid out in the form of shares of Conduent Common Stock. Any dividends during the vesting period would be accrued and paid on vesting in an amount equal to the dividends the executive would have earned from owning the same amount of Conduent Common Stock which vested under the award throughout the vesting period.
Although equity awards generally are granted on a regular annual cycle, the Compensation Committee may grantoff-cycle equity awards for special purposes, such as new hire, promotion, retention, and recognition. See below under “SpecialOne-Time Restricted Stock Unit Grants” for information regarding special grants made in 2019.
Compensation Committee Actions Relating to LTIP Awards
During the first fiscal quarter of 2018,2019, the Compensation Committee approved LTIP grants for our named executive officers. As part of this approval, the Compensation Committee established performance goals and award values, a payout range of 50% to 200% of target and an April 1, 20182019 grant date. Additional information regarding the 20182019 LTIP awards can be found in the “Summary Compensation Table” and the “Grants of Plan-Based Awards in 2018”2019” table.
The 20182019 LTIP award was granted in 50% Performance Stock Units and 50% Restricted Stock Units. The target number of units granted to our named executive officers in April 20182019 was determined by dividing the approved target award value by the closing price of Conduent Common Stock on the grant effective date. Messrs. Skelton and Brewer were each granted a 2019 LTIP award in the form of 50% Performance Stock Units and 50% Restricted Stock Units in June 2019 following their commencement of employment with the Company, with the target number of units determined by dividing the approved target award value by the closing price of Conduent Common Stock on the grant effective date.
For 2018the April 2019 Restricted Stock Units,one-third vested on 12/31/18,19, and the balance will vestone-third on 12/31/1920 andone-third on 12/31/21, subject to continued employment. The June 2019 Restricted Stock Units will vest inone-third increments on 6/28/20, 6/28/21 and 6/28/22, subject to continued employment. The performance
period for the 20182019 Performance Stock Units is January 1, 20182019 – December 31, 2020.2021. Performance for each year is measured againstpre-established annual goals and performance achievement is averaged over thethree-year performance period. The entire award does not vest until following the end of the three-year performance period on December 31, 20202021 with payout in the first quarter of 2021,2022, following Compensation Committee certification of the performance results.
The payout for achieving threshold performance is 50%, the payout for achieving target performance is 100%, and the payout for achieving maximum performance is 200%. Payouts are made proportionately for achievement at levels between these goals. There is no payout if performance falls below each of the threshold goals established by the Compensation Committee.
Payout Range
| ||||||||
Performance Measures
| Weighting
| Threshold
| Target
| Maximum
| ||||
Adjusted PBT
|
50%
|
50%
|
100%
|
200%
| ||||
Free Cash Flow, as adjusted
|
50%
|
50%
|
100%
|
200%
|
The performance goals were aligned with Conduent’s 20182019 three-year financial model at the time the goals were established. Target performance levels are challenging but achievable with a level of performance that is in line with the Board-approved operating plan, whereas maximum performance levels represent stretch goals which can only be achieved with exceptional performance.
Strategic Leadership RSU GrantSpecialOne-Time Restricted Stock Unit Grants
Messrs. Vemuri and Webb-Walsh eachCertain of our named executive officers also received aspecialone-time Restricted Stock Unit awardgrants outside of the 2019 LTIP. Mr. Skelton was awarded a grant of Restricted Stock Units with a grant date fair value of $2,500,000 effective June 28, 2019 for the purpose of buying out equity awards from his previous employer that were forfeited upon his departure. Mr. Krawitz was awarded asign-on grant of Restricted Stock Units with a grant date fair value of $200,000 effective November 18, 2019. These specialone-time grants vest in equal annual increments on the first three anniversaries of the grant date. Mr. Pompeo was awarded a strategic leadership grant of Restricted Stock Units effective December 31, 2019 for retention and in recognition of their leadership in establishing Conduent as a successful stand-alone company and exceeding transformational goals. Mr. Vemuri received anhis significant contribution to the Company’s strategic review process. This award of 12,875 Restricted Stock Units, vestingone-thirdvests on 12/31/18,one-third on 12/31/19 andone-third on 12/31/20. Mr. Webb-Walsh received an award of 10,000 Restricted Stock Units, vesting 50% on 12/31/18, 25% on 12/31/19 and 25% on 12/31/December 31, 2020.
PERFORMANCE RESULTS AND PAYOUTS UNDER PRIOR EQUITY AWARDS
2017 – 2019 Performance Share Grant
In February 2020, our performance shares granted under the 2017 LTIP vested at 120% based on achievement of performance metrics measured over the three-year performance period ending December 31, 2019. The measures, weightings and threshold to maximum payout ranges set by the Compensation Committee for the 2017 performance share grants were as follows:
Payout Range
| ||||||||
Performance Measures
| Weighting
| Threshold
| Target
| Maximum
| ||||
Adjusted PBT
|
50%
|
50%
|
100%
|
200%
| ||||
Free Cash Flow, as adjusted
|
50%
|
50%
|
100%
|
200%
|
The performance goals and results for the 2017-2019 performance share grants (in millions) were:
Performance Measures
| Year
| Target
| Actual
| Adjustments*
| Adjusted Results
| Performance
| Weighting
| |||||||
Adjusted PBT
|
2017
|
$236
|
$281
|
-
|
$281
|
200%
|
50%
| |||||||
2018
|
$310
|
$307
|
$39
|
$344
|
200%
|
50%
| ||||||||
2019
|
$405
|
$200
|
$15
|
$215
|
0%
|
50%
| ||||||||
Free Cash Flow, as adjusted
|
2017
|
$150
|
$213
|
$17
|
$204
|
200%
|
50%
| |||||||
2018
|
$225
|
$218
|
$164
|
$236
|
122%
|
50%
| ||||||||
2019
|
$250
|
($57)
|
$145
|
$64
|
0%
|
50%
|
* | Adjusted PBT is defined as income or loss before income taxes as reported on the Consolidated Statements of Income (Loss), less amortization of intangible assets; restructuring and related costs; (gain) loss on divestitures and transaction costs; settlements/reserves/insurance recoveries associated with litigation matters (includes internal and external counsel legal costs), net; loss on extinguishment of debt and other (income) expenses, net, business and assets, currency (gains) losses, net, litigation matters and all other expenses, net, including goodwill impairment. Further adjustments to Adjusted PBT include upward adjustments for transaction costs and strategic contract exits and downward adjustments for interest benefit, stranded cost removal and 401(k) savings. |
Free Cash Flow is defined as cash flow from operating activities as reported in the Consolidated Statements of Cash Flows, adjusted downward for costs of additions and equipment, costs of internal use software and vendor financed capital leases and adjusted upward for proceeds from the sale of, land, buildings and equipment and tax payments related to divestitures. Further adjustments to Free Cash Flow include transaction costs, deferred compensation payments and tax payments related to transaction costs, debt extinguishment and deferred compensation payments and stranded cost removal.
The cumulative performance results and payout against these goals effective December 31, 2019 were as follows:
Metric
| 2017
| 2018
| 2019
| Cumulative
| ||||
Adjusted PBT
|
100%
|
100%
|
0%
| |||||
Free Cash Flow, as Adjusted
|
100%
|
61%
|
0%
| |||||
Total
|
200%
|
161%
|
0%
|
120% Payout
|
Based on cumulative performance, our 2017 performance share grants were paid out at 120% of target, reflective of above-target performance in 2017 and 2018 and below-threshold performance in 2019. The number of shares paid out to our named executive officers is reported in the 2019 Option Exercises and Stock Vested Table below.
2017 – 2019 Strategic Initiative Grant
In 2017, the Compensation Committee approved a special stock award (“Strategic Initiative Grant” or “SIG”) for eachcertain executives of the named executive officers.Company, at that time, including Messrs. Webb-Walsh, Vemuri, Peffer and Friedel. The key program objectives were to strengthen the alignment of management with
shareholders, accelerate the growth of stock ownership levels among the new officer team, motivate and promote the successful and expedited business turnaround, facilitate cultural change and talent upgrade, and retain key executives. The SIG was granted in 50% performance-based awards (performance shares) and 50% time-based awards (restricted shares). The performance shares includeincluded two cost-transformation and two client-outcome metrics, all equally weighted. These measures are:were: Cost Transformation – Information Technology (25%), Cost Transformation – Real Estate, General & Administrative (25%), Service Line Penetration (25%) and New Business Signing Growth (25%). Information Technology, Real Estate and General & Administrative representrepresented substantial optimization
and savings opportunities. Service Line Penetration measuresmeasured the ability to cross-sell additional service lines to the top commercial clients. New Business Signings growth measuresmeasured the total contract value of new business signings based on Compound Annual Growth Rate (CAGR) over the 2016 baseline.
Although the goals reflected three-year cumulative performance (2017 – 2019), there was an opportunity for up to 50% of the award to be earned and paid at the end of the second year (December 31, 2018). While because, while the performance targets reflectreflected challenging three-year goals aligned with the Company’s multi-year transformation plan, the Compensation Committee believed it would benefit Conduent and shareholders to further incentivize management to expedite the achievement of these critical milestones. Performance against goals will bewas measured again at the end of 2019 and the payoutpayouts earned will bewere reduced by the awards that vested at the end of 2018.
The measures, weightings and threshold to maximum payout ranges set by the Compensation Committee for the SIG arewere as follows:
Payout Range
| ||||||||
Performance Measure
|
Weighting
|
Threshold
|
Target
|
Maximum
| ||||
Cost Transformation – IT
|
25%
|
50%
|
100%
|
200%
| ||||
Cost Transformation – Real Estate and G&A
|
25%
|
50%
|
100%
|
200%
| ||||
Service Line Penetration
|
25%
|
50%
|
100%
|
200%
| ||||
New Business Signings
|
25%
|
50%
|
100%
|
200%
|
The cumulative performance results and payout against these goals effective December 31, 20182019 were as follows:follows. The Cost Transformation – Information Technology and Cost Transformation – Real Estate, General & Administrative goals were fully achieved by December 31, 2018, with 50% of the payout attributable to those goals made in 2019 and the remaining 50% paid out in 2020.
Performance Measure
| Performance
| Weighting
| Payout
| Payout
| Payout
| Performance
| Weighting
| Payout
| Payout
| Payout
| ||||||||||
Cost Transformation – IT
|
200%
|
25%
|
50%
|
25%
|
25%
|
200%
|
25%
|
50%
|
25%
|
25%
| ||||||||||
Cost Transformation – Real Estate and G&A
|
200%
|
25%
|
50%
|
25%
|
25%
|
200%
|
25%
|
50%
|
25%
|
25%
| ||||||||||
Service Line Penetration
|
0%
|
25%
|
0%
|
0%
|
TBD
|
0%
|
25%
|
0%
|
0%
|
0%
| ||||||||||
New Business Signings
|
0%
|
25%
|
0%
|
0%
|
TBD
|
0%
|
25%
|
0%
|
0%
|
0%
| ||||||||||
Final Calculated Payout =>
|
Final Calculated Payout =>
|
50%
|
TBD
|
Final Calculated Payout =>
|
50%
|
50%
|
The Outstanding Equity Awards at 2018 FiscalYear-End table provides additional information regarding the results of our performance through 2018year-end with respect to outstanding performance based stock awards. The Option Exercises and Stock Vested in 20182019 table provides additional information regarding the portion of our Strategic Initiative Grants (“SIG”) awarded on April 1, 2017, which partiallyfully vested on December 31, 2018.2019.
NAMED EXECUTIVE OFFICERS WITH UNIQUE COMPENSATION ARRANGEMENTS
Certain of our named executive officers commenced employment with Conduent during 2019 and entered into offer letters setting forth certain terms of their compensation.
Mr. Skelton.Mr. Skelton initially joined Conduent on June 17, 2019 as our Chief Operating Officer. His offer letter, dated May 21, 2019, provided for an annual base salary rate of $650,000, subject to annual review by the Compensation Committee; a target bonus opportunity under our APIP of 100% of base salary (non-prorated for 2019); a 2019 LTIP award with a target value of $1,500,000 (granted in the form of 50% Performance Stock Units and 50% Restricted Stock Units, as described above); and a special Restricted Stock Unit grant with a value of $2,500,000 to buyout equity awards from his previous employer that were forfeited upon his departure. This special equity grant is scheduled to vest in equal annual installments over three years, subject to possible earlier accelerated vesting in the event of Mr. Skelton’s termination without cause, death or disability, or termination by Mr. Skelton for good reason.
The offer letter also provides for enhanced severance benefits in the event of certain qualifying termination events within 12 months of his commencement of employment with Conduent. If Mr. Skelton’s employment is terminated without cause or for good reason, he will be entitled to salary continuation and health and welfare benefit continuation (subject to his continued payment of the employee premium contributions) for a period of
12 months. The offer letter also provides for enhanced severance benefits in the event of his termination without cause or for good reason in connection with a change in control which benefits are generally consistent with those provided under the CIC Plan, as described below under“Change-in-Control Benefits”.
In August 2019, in connection with the departure of Mr. Vemuri, Mr. Skelton was appointed as our CEO on an interim basis and as a member of our Board. On February 25, 2020, the Board appointed Mr. Skelton as our CEO. In connection with this appointment, the Company and Mr. Skelton entered into an amendment to his offer letter, dated February 25, 2020, which provides for a new annual base salary rate of $750,000, a target award opportunity under the APIP of 125% of his base salary and a target award value under our annual LTIP of $3,000,000.
Mr. Krawitz. Mr. Krawitz was appointed as our Executive Vice President, General Counsel and Secretary effective November 18, 2019. His offer letter, dated November 5, 2019, provides for an annual base salary rate of $450,000, subject to annual review by the Compensation Committee; a target bonus opportunity under the APIP of 70% of base salary commencing with our 2020 APIP; and a target award value under our annual LTIP of $735,000 commencing with our 2020 LTIP. Mr. Krawitz also received asign-on grant of Restricted Stock Units with a value of $200,000 which is scheduled to vest in equal annual increments over three-years.
Mr. Brewer.Mr. Brewer initially joined Conduent as our COO, Transportation, effective June 10, 2019. His offer letter, dated May 15, 2019, provided for an annual base salary rate of $400,000, subject to annual review by the Compensation Committee; a target bonus opportunity under our APIP of 60% of base salary, with a prorated annual incentive award for 2019; and a target award value under our annual LTIP of $350,000. Mr. Brewer also received a cashsign-on award of $100,000, payable in two equal installments on the30-day anniversary andsix-month anniversary of his start date. This award is subject to clawback in the event of Mr. Brewer’s termination for cause or voluntary resignation within 12 months of payment of the initial installment. Effective September 7, 2019, Mr. Brewer was appointed as Executive Vice President & President, Global Public Sector Solutions. In connection with his appointment, his annual base salary rate was increased to $450,000 and his APIP target was increased to 75% of base salary. On November 12, 2019, Mr. Brewer was appointed as an executive officer of the Company.
Mr. Pompeo. Prior to becoming an executive officer, Mr. Pompeo was awarded a one-time bonus of $60,300 associated with the successful completion of M&A activities. This one-time bonus was paid in April 2019.
SAVINGS PLANS
Conduent Savings Plan (401(k))
All our named executive officers are eligible to participate in the Conduent Savings Plan in the same manner as all U.S. employees. After one year of service, participants are eligible for a 100% match on 3% of eligible pay saved, subject toIRS-qualified plan compensation limits and highly compensated threshold limits and may not receive 401(k) benefits in excess of these limits. Mr. Vemuri, Mr. Webb-Walsh, Mr. Amoriell, Mr. Peffer and Mr. Friedel elected to save inFor 2019, Conduent suspended all matching contributions under the Conduent Savings Plan in 2018, and all received a Company matching
contribution under the plan. The Company does not maintain anynon-qualified deferred compensation plans or other retirement plans.
PERQUISITES AND OTHER BENEFITS
General Benefits
We generally maintain medical and dental coverage, life insurance, accidental death insurance and disability benefits programs or plans for all of our full-time employees, as well as customary vacation, leave of absence and other similar policies. Our named executive officers are eligible to participate in these programs and plans on the same basis as all other salaried employees, except as otherwise disclosed.
Perquisites
In August 2018, the Compensation Committee reviewed and approved ourOur named executive officers are generally eligible for limited perquisites which are intended to support thetheir health, safety and productivity of our named executive officers.productivity. Our 2019 perquisite program remained consistent with 2018. Conduent does not provide taxgross-ups in connection with perquisites (except in relation to relocation per the U.S. relocation policy).policy.)
In 2018, all2019, our named executive officers were generally eligible to receive Company-paid financial and tax planning assistance of up to $15,000 per year. Financial planning by experts reduces the amount of time and attention that named executive officers devote to their personal finances. To safeguard their health, all named executive officers
were also eligible to receive an annual physical examination through our preferred provider or reimbursement of up to $5,000 for the cost of a physical should the named executive officer chosechoose to use their own physician. In addition, to assist with managing financial security, all named executive officers were eligible for annual credit monitoring up to $350. While employed with the Company, Mr. Vemuri also receivesreceived home security benefits. TheFor a portion of 2019, the Company also holdscontinued to hold corporate club memberships in the names of Messrs. Vemuri Walsh and Peffer primarilyWebb-Walsh for business purposes although personal use is permitted. The Company paysand paid the annual dues and other fixed costs associated with club membership, but all costs attributable directly tothese memberships. Although permitted, there was no personal use of the club membership, such as meals and other incidentals, are reimbursed by the executive.these memberships in early 2019. The Company discontinued these memberships in early 2019. The total cost to Conduent for providing perquisites and personal benefits to the named executive officers during 2018 are2019 is shown in the “Summary Compensation Table.”
CHANGE-IN-CONTROL BENEFITS
The Compensation Committee approved the Executive Change in Control Severance Plan (“CIC Plan”), effective October 1, 2017. All named executive officersMessrs. Skelton, Webb-Walsh, Krawitz, Brewer and Friedel were covered under the CIC Plan as of January 1, 2018.in 2019. The CIC Plan replaced prior individual change in control agreements entered into with Xerox prior to January 1, 2017 with a consistent and standardized design. The CIC Plan provides certain enhanced benefits to key management employees who the Company determines are most likely to be impacted by a change in control (primarily the Company’s executive officers), so that they can continue to exercise their judgment and legal responsibilities without the potential for distraction and bias that can arise from concerns regarding their personal circumstances.
Eligible employees are selected by the Compensation Committee to participate in the CIC Plan. The CIC Plan provides eligible employees with severance payments and benefits in the event that an eligible employee’s employment with the Company is terminated and such termination is a “qualifying termination” within the period beginning 90 days prior to a “change in control” and ending for our CEO,24-months following, or for any other participant, one year immediately following, a “change in control.” A “qualifying termination” means a participant’s termination of employment (a) by the employer company for any reason other than “cause”, “disability” or death or (b) by the eligible employee for “good reason”. The severance payments and benefits to be provided, subject to the employee’s execution of a release of claims, are as follows:
(1) | A lump sum payment, in cash, equal to the sum of (a) unpaid salary with respect to any paid time off accrued but not taken as of the date of termination, (b) accrued but unpaid salary through the date of termination and (c) any earned but unpaid annual incentive bonus from the fiscal year immediately preceding the year in which the date of termination occurs; |
(2) | A lump sum payment, in cash, equal to the product of (a) the participant’s annual rate of base salary in effect on the date that notice of termination is given and the annual target bonus applicable to the participant for the year in which notice of termination is given, multiplied by (b) a “factor” which in the case of each of our named executive officers is two; |
(3) | Participant shall continue to be entitled to receive all benefits payable under any other plan or agreement relating to retirement benefits or to compensation previously earned and not yet |
(4) | Participant shall continue to be eligible to participate in the medical, dental and health care reimbursement account coverage in effect at the date of termination as if the participant had continued in employment for the lesser of (a) the severance period or (b) twelve months. |
Conduent does not provide excise tax reimbursement on severance payments. Benefits under the CIC Plan are contingent upon signing a release of claims against Conduent.
Additional information and the amount of the estimated payments and benefits payable to the named executive officers assuming a change in control of Conduent and a qualifying termination of employment is presented in the “Potential Payments Upon Termination or Change in Control” table.
EMPLOYMENT AND SEPARATION
Named executive officers serve at the will of the Board. This enables the Board to remove a named executive officer whenever it is in the best interests of Conduent, with full discretion of the Compensation Committee to decide on an appropriate severance package (except in the case of the CEO, who is entitled to certain severance benefits for a qualifying termination during the first year of his employment as per his offer letter, or in the case of a change in control). When a named executive officer is removed from his or her position, the Compensation Committee exercises its business judgment in considering whether to approve a severance arrangement in light of all relevant circumstances, including how long the officer was with the Company, past accomplishments and the reasons for separation. If the Compensation Committee does not approve a special severance arrangement for a named executive officer whose position has been eliminated, that officer will be covered under the Company’s U.S. Executive Severance Policy, as applicable.
For separations due to the elimination of the executive’s position, the U.S. Executive Severance Policy entitles executives, including our named executive officers, to 26 weeks of base pay, paid out over the severance period, with continued health benefits (excluding disability and 401(k) participation). This payment is contingent upon signing a release of claims against Conduent as may be required.
Messrs. Vermuri and Peffer terminated employment with the Company during 2019, and Mr. Friedel terminated employment in January 2020. For information regarding Messrs. Vemuri and Peffer’s entitlement to severance payments and benefits, see below under “Summary Compensation Table.” For information regarding Mr. Friedel’s entitlement to severance payments and benefits, see below under “Potential Payments upon Termination or Change in Control.”
GOVERNANCE OF THE EXECUTIVE COMPENSATION PROGRAMS
Risk Assessment
The Compensation Committee believes that its programs encourage positive behavior while balancing risk and reward, consistent with the interests of its shareholders. Conduent management conducts risk assessments each year and presents the findings to the Compensation Committee. Based on the assessment of programs covering its employees and executives for 2018,2019, the Compensation Committee determined that its compensation plans, programs and practices do not motivate behavior that is reasonably likely to have a material adverse impact on Conduent, based on the following factors:
Key Program Features:
Program weighted towards long-term incentives
Balanced mix of performance measures (financial and operational) approved by the Compensation Committee in advance
Financial goals tied to the operating plan approved by the Board
Payout limitations/caps
Overlapping performance periods for long-term incentives
Risk Mitigators:
Independent Compensation Committee oversight
Officer stock ownership guidelines
Pay recoupment policy
Anti-hedging policy
Ownership Requirements
The Company maintains a stock ownership policy for the named executive officers in order to ensure they build and maintain a meaningful level of stock ownership. The stock ownership guidelines are as follows:
Ownership requirements of 5x, 3x and 1x base salary, for the CEO, CEO’s direct reports and all other officers, respectively.
Required to meet the applicable level of ownership by the end of the fifth full calendar year after becoming an executive.
If executive fails to reach compliance within five years, there will be a mandatory retention of 50% of all vested shares received upon the vesting of equity awards (net of taxes) until the threshold is achieved.
CEO (or, with respect to the CEO, the Board) has the authority to permit discretionary hardship exceptions from the ownership and holding requirements (the Board has the authority to permit discretionary hardship exceptions for the CEO).requirements.
The following types of awards will count toward the guidelines described above: Common Stock held outright and unvested Restricted Stock and Restricted Stock Units. The following types of equity awards willdo not count toward the stock ownership guidelines: unexercised stock options, unearned Performance Stock Units and any cash-settled units. Once stock ownership levels are achieved, named executive officers are required to continue to hold that amount of stock as long as they remain with Conduent.
Trading, Hedging and Pledging
Our executiveAll directors, officers and employees are prohibited from engaging in short-swing trading and trading in puts and calls with respect to our Common Stock. In addition, our executive officers are prohibitedStock and from using any strategies or products to hedge against potential changes in the value of our Common Stock.
Under our insider trading policy, our executive officers may purchase or sell Conduent securities only during “window” periods, which are generally the periods commencing on the second business day following the date of each quarterly earnings announcement and ending on the close of business on the 15th day of the month before the end of the then-current quarter. The only exception to this restriction is for our named executive officers who have entered into trading plans pursuant to SEC Rule10b5-1.
As a result, our executive officers are effectively precluded from pledging our Common Stock as collateral, including holding our Common Stock in a margin account, since their stock can only be sold during “window” periods and trading plans pursuant to SEC Rule10b5-1, and therefore is not available to be sold at any time.
Compensation Recovery Policy (Clawbacks)
Under the Conduent Performance Incentive Plan, if the Compensation Committee deems a named executive officer to have engaged in activity that is detrimental to Conduent, it may cancel any awards granted to that individual. In addition, if such a determination is made before any change in control of Conduent, the Compensation Committee may rescind any payment or delivery of any equity and annual cash incentive award that occurred within the six months preceding the detrimental activity. For this purpose, detrimental activity may include a violation of anon-compete agreement with Conduent, disclosing confidential information (except for reporting and other communications protected by “whistleblower” provisions of the Dodd- Frank Wall Street Reform and Consumer Protection Act), soliciting an employee to terminate employment with Conduent, or soliciting a customer to reduce its level of business with Conduent. If a payment or award is rescinded, the named executive officer will be expected to pay Conduent the amount of any gain realized or payment received in a manner the Compensation Committee or its delegate requires.
Conduent’s stock award agreements include a clawback provision that applies if an accounting restatement is required to correct any materialnon-compliance with financial reporting requirements. Under this provision,
Conduent can recover, for the three prior years, any excess incentive-based compensation (the excess over what would have been paid under the accounting restatement) from executive officers or former executive officers.
In addition, the Compensation Committee implemented a compensation recovery policy that is applicable to our named executive officers. If an accounting restatement is required to correct any materialnon-compliance with financial reporting requirements under relevant securities laws, Conduent may recover from the executive officer or former executive officer any incentive-based compensation paid to him or her during the three-year period preceding the date on which Conduent is required to prepare the accounting restatement that was in excess of what would have been paid based on the restated results. Conduent may implement any policy or take any action with respect to the recovery of excess incentive-based compensation that Conduent determines to be necessary or advisable in order to comply with the requirements of the Dodd-Frank Act, including the recoupment of shares of Common Stock issued upon the vesting of a long-term incentive award.
CERTAIN TAX IMPLICATIONS OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code generally limits to $1 million per year the federal income tax deduction available to corporations for compensation paid in any fiscal year to the corporation’s named executive officers and certain former named executive officers included in the Summary Compensation Table in the corporation’s proxy statement. Pursuant to Section 162(m), as in effect for 2017,prior to 2018, compensation in excess of $1 million per year paid to Conduent’s CEO and three other highest paid executive officers (other than the CFO) was not deductible unless it qualified as “performance-based” compensation. The Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, eliminated thethis exception for “performance-based” compensation with respect to 2018 and future years. As a result, Conduent expects that compensation over $1 million per year paid to any named executive officer, including our CFO (and any person who was a named executive officer for any year beginning with 2017), will beis nondeductible under Section 162(m).
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Conduent management. Based upon its review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be incorporated by reference in the Company’s Annual Report on Form10-K for the year ended December 31, 20182019 and be included in the Proxy Statement for the 20192020 Annual Meeting of Shareholders.
Joie A. Gregor,Kathy Higgins Victor, Chair
William ParrettMichael Nutter
Margarita Palau-Hernandez
The Summary Compensation Table below provides compensation information for the Company’s Chief Executive Officer, Chief Financial Officer and three other most highly compensated executive officers as well as our prior Chief Executive Officer and two former executive officers who served during the fiscal year ended December 31, 20182019 (collectively referred to as namedour “named executive officers)officers”).
Name & Principal Position
| Year
| Salary
| Bonus
| Stock
| Option
| Non-Equity
| Change in and
| All Other
| Total ($)
| ||||||||||||||||||||||||||||||||||||
Ashok Vemuri, Chief Executive Officer |
|
2018
2017
2016 |
|
|
1,000,000
1,000,000
503,846 |
|
|
-
-
1,750,000 |
|
|
5,239,984
9,614,470
2,500,004 |
|
|
-
-
- |
|
|
780,000
1,200,000
702,865 |
|
|
-
-
- |
|
|
46,033
28,588
22,192 |
|
|
7,066,017
11,843,058
5,478,907 |
| ||||||||||||||||||
Brian Webb-Walsh, Executive Vice President and Chief Financial Officer |
|
2018
2017
2016 |
|
|
450,000
450,000
333,750 |
|
|
100,000
-
- |
|
|
1,161,384
3,911,486
500,000 |
|
|
-
-
- |
|
|
210,600
324,000
187,256 |
|
|
-
-
29,004 |
|
|
39,289
119,732
34,753 |
|
|
1,961,273
4,805,218
1,084,763 |
| ||||||||||||||||||
David Amoriell, President |
|
2018
2017
2016 |
|
|
536,000
536,000
532,869 |
|
|
300,000
-
- |
|
|
799,992
3,736,470
800,005 |
|
|
-
- |
|
|
188,136
361,800
359,944 |
|
|
-
- |
|
|
20,075
11,852
11,663 |
|
|
1,844,203
4,646,122
1,704,481 |
| ||||||||||||||||||
J. Michael Peffer, Executive Vice President, General Counsel and Secretary |
|
2018
2017 |
|
|
500,000
500,000 |
|
|
- |
|
|
799,992
3,736,470 |
|
|
- |
|
|
195,000
337,500 |
|
|
- |
|
|
31,970
50,647 |
|
|
1,526,962
4,624,617 |
| ||||||||||||||||||
Jeffrey Friedel, Executive Vice President, Chief People Officer |
|
2018
2017 |
|
|
425,000
407,769 |
|
|
150,000 |
|
|
499,999
3,436,476 |
|
|
- |
|
|
182,325
243,250 |
|
|
- |
|
|
10,006
8,620 |
|
|
1,117,330
4,246,115 |
|
Name & Principal Position
| Year
| Salary
| Bonus
| Stock
| Non-Equity
| All Other
| Total ($)
| ||||||||||||||||||||||||||||
Clifford Skelton Chief Executive Officer |
|
2019 |
|
|
325,000 |
|
|
- |
|
|
3,999,990 |
|
|
0 |
|
|
16,929 |
|
|
4,341,919 |
| ||||||||||||||
Brian Webb-Walsh, Executive Vice President and Chief Financial Officer |
|
2019
2018
2017 |
|
|
492,692
450,000
450,000 |
|
|
-
100,000
- |
|
|
974,994
1,161,384
3,911,486 |
|
|
0
210,600
324,000 |
|
|
18,466
39,289
119,732 |
|
|
1,486,152
1,961,273
4,805,218 |
| ||||||||||||||
Michael Krawitz Executive Vice President, General Counsel and Secretary |
|
2019 |
|
|
34,615 |
|
|
- |
|
|
199,994 |
|
|
- |
|
|
130 |
|
|
234,739 |
| ||||||||||||||
Mark Brewer Executive Vice President & President, Global Public Sector Solutions |
|
2019 |
|
|
220,765 |
|
|
100,000 |
|
|
349,996 |
|
|
0 |
|
|
541 |
|
|
671,302 |
| ||||||||||||||
Mario Pompeo Chief Accounting Officer |
|
2019 |
|
|
342,558 |
|
|
60,300 |
|
|
249,978 |
|
|
0 |
|
|
789 |
|
|
653,625 |
| ||||||||||||||
Ashok Vemuri, Former Chief Executive Officer |
|
2019
2018
2017 |
|
|
711,538
1,000,000
1,000,000 |
|
|
- |
|
|
4,999,974
5,239,984
9,614,470 |
|
|
0
780,000
1,200,000 |
|
|
946,224
46,033
28,588 |
|
|
6,657,736
7,066,017
11,843,058 |
| ||||||||||||||
J. Michael Peffer, Former Executive Vice President, General Counsel and Secretary |
|
2019
2018
2017 |
|
|
500,000
500,000
500,000 |
|
|
- |
|
|
799,992
799,992
3,736,470 |
|
|
0
195,000
337,500 |
|
|
262,874
31,970
50,647 |
|
|
1,562,866
1,526,962
4,624,617 |
| ||||||||||||||
Jeffrey Friedel, Former Executive Vice President & Global Head, Human Resources |
|
2019
2018
2017 |
|
|
425,000
425,000
407,769 |
|
|
150,000 |
|
|
499,980
499,999
3,436,476 |
|
|
0
182,325
243,250 |
|
|
1,773
10,006
8,620 |
|
|
926,753
1,117,330
4,246,115 |
|
Compensation reported in this table is in U.S. dollars and rounded to the nearest dollar.
(A) | Amounts |
(B) |
|
(C) | Included in this column are the aggregate grant date fair values of equity awards made to our named executive officers in fiscal year |
Three-year Performance Stock Unit awards under the 20182019 LTIP were granted on April 1, 2018.2019 and June 28, 2019. The grant date value of these awards is based on the probable outcome of the performance conditions as of the grant date, or target, as follows: Mr. VemuriSkelton - $2,499,997;$749,996; Mr. Webb-Walsh - $487,492;$487,497; Mr. AmoriellBrewer - $399,996;$174,998; Mr. Pompeo – $74,989; Mr. Vemuri - $2,499,987; Mr. Peffer - $399,996; and Mr. Friedel - $250,000.$249,990. The grant date fair value of these awards assuming maximum performance achievement is as follows: Mr. VemuriSkelton - $4,999,994;$1,499,992; Mr. Webb-Walsh - $974,985;$974,994; Mr. AmoriellBrewer - $799,970;$349,996; Mr. Pompeo – $149,978; Mr. Vemuri - $4,999,974; Mr. Peffer - $799,970;$799,992; and Mr. Friedel - $499,999.$499,980.
Restricted Stock Unit awards under the 20182019 LTIP were granted on April 1, 20182019 and June 28, 2019 with the grant date values as follows: Mr. VemuriSkelton - $2,499,997;$749,996; Mr. Webb-Walsh - $487,492;$487,497; Mr. AmoriellBrewer - $399,996;$174,998; Mr. Pompeo – 74,989; Mr. Vemuri - $2,499,987; Mr. Peffer - $399,996; and Mr. Friedel - $250,000.$249,990.
The Strategic Leadership RSU grants for Mr. Vemuri and Mr. Webb-WalshSkelton also received aone-time buyout of his equity from his prior employer in connection with his hiring. 260,688 Restricted Stock Units were granted on April 1, 2018 as follows: June 28, 2019 with a grant date fair value of $2,499,998.
Mr. VemuriKrawitz received an awardasign-on grant in connection with his hiring. 31,055 Restricted Stock Units were granted to Mr. Krawitz on November 18, 2019 with a grant date fair value of 12,875$199,994. He was not eligible for a grant under the 2019 LTIP due to his November start date.
Mr. Pompeo received aone-time strategic grant of 16,129 Restricted Stock Units with a grant date fair value of
$239,990, and Mr. Webb-Walsh received an award of 10,000 Restricted Stock Units with a grant date fair value of $186,400. $100,000 on December 31, 2019.
(D) |
|
Included in this column are payments to our named executive officers under the |
|
The table below provides additional data on the amounts included under the “All Other Compensation” column. |
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Name
| Year
| Life Insurance Premiums Paid by Registrant ($) (1)
| Tax Related
| 401(K) Match ($) (3)
| Severance ($) (4)
| Miscellaneous ($) (5)
| Total All Other Compensation ($)
| |||||||||||||||||||
Clifford Skelton |
2019 |
|
1,929 |
|
|
- |
|
|
- |
|
|
- |
|
|
15,000 |
|
|
16,929 |
| |||||||
Brian Webb-Walsh |
2019 |
|
480 |
|
|
- |
|
|
0 |
|
|
- |
|
|
17,986 |
|
|
18,466 |
| |||||||
2018 | 480 | - | 8,250 | - | 30,559 | 39,289 | ||||||||||||||||||||
2017 | 480 | 26,553 | 7,581 | - | 85,118 | 119,732 | ||||||||||||||||||||
Michael Krawitz |
2019 |
|
130 |
|
|
- |
| - | - | 0 |
|
130 |
| |||||||||||||
Mark Brewer |
2019 |
|
541 |
|
|
- |
|
|
0 |
|
|
- |
|
|
0 |
|
|
541 |
| |||||||
Mario Pompeo |
2019 |
|
789 |
|
|
- |
|
|
0 |
|
|
- |
|
|
0 |
|
|
789 |
| |||||||
Ashok Vemuri |
2019 |
|
955 |
|
|
- |
|
|
0 |
|
|
930,777 |
|
|
14,492 |
|
|
946,224 |
| |||||||
2018 | 1,242 | - | 8,250 | - | 36,541 | 46,033 | ||||||||||||||||||||
2017 | 810 | - | - | - | 27,778 | 28,588 | ||||||||||||||||||||
J. Michael Peffer |
2019 |
|
2,322 |
|
|
- |
|
|
0 |
|
|
255,155 |
|
|
5,397 |
|
|
262,874 |
| |||||||
2018 | 2,322 | - | 8,250 | - | 21,398 | 31,970 | ||||||||||||||||||||
2017 | 2,322 | 8,125 | 8,100 | - | 32,100 | 50,647 | ||||||||||||||||||||
Jeffrey Friedel |
2019 |
|
1,035 |
|
|
- |
|
|
0 |
|
|
- |
|
|
738 |
|
|
1,773 |
| |||||||
2018 | 1,035 | - | 3,433 | - | 5,538 | 10,006 | ||||||||||||||||||||
2017 | 971 | - | - | - | 7,649 | 8,620 |
(1) | This column includes imputed income for group life insurance for |
(2) | There were no taxgross-ups in connection with relocation expenses for our named executive officers in |
(3) |
|
(4) | This column includes the 6 months of severance and continued benefits that Messrs. Vemuri and Peffer became entitled to upon their terminations on August 31, 2019 and December 31, 2019, respectively. |
Additionally, in accordance with the terms of the award agreements, Mr. Vemuri had 64,937 shares of Restricted Stock accelerate upon his termination with a vesting value of $422,740 (calculated based on the closing price of Conduent Common Stock on August 31, 2019), which is reflected here. |
(5) | Amounts in this column for |
GRANTS OF PLAN-BASED AWARDS IN 20182019
The following table provides information regarding our named executive officers’ equity grants and annual cash incentive awards in 2019, including additional detail for each ofregarding the named executive officers on potential amounts payable under the 2018 APIP and LTIP, as presented in the “Summary Compensation Table.” Threshold,threshold, target and maximum award opportunities are provided.payable under the 2019 APIP and Performance Stock Units under the LTIP. No stock options were awarded in fiscal year 2018.2019.
Name | Award (A) | Grant (A) | Approval (A) | Estimated Future Payout Under Non-Equity Incentive Awards (B) | Estimated Future Payout Under Equity Incentive Awards (C) |
All Other Number | Grant Date Fair Value of Stock Awards ($)(E) | Award (A) | Grant (A) | Approval (A) | Estimated Future Payout Under Non-Equity Incentive Awards (B) | Estimated Future Payout Under Equity Incentive Awards (C) |
All Other Number | Grant Date Fair Value of Stock Awards ($)(E) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ashok Vemuri |
75,000 |
1,500,000 |
3,000,000 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Clifford Skelton |
|
81,250 |
|
|
650,000 |
|
|
1,300,000 |
| - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Strategic RSU | 4/1/18 | 3/7/18 | - | - | - | - | - | - | 12,875 | 239,990 | Special RSU | 6/28/19 | 5/23/19 | 260,688 | 2,499,998 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP RSU | 4/1/18 | 3/7/18 | - | - | - | - | - | - | 134,120 | 2,499,997 | LTIP RSU | 6/28/19 | 5/23/19 | - | - | - | - | - | - | 78,206 | 749,996 | |||||||||||||||||||||||||||||||||||||||||||||||
LTIP PSU
| 4/1/18
| 3/7/18
| -
| -
| -
| 33,530
| 134,120
| 268,240
| -
| 2,499,997
| LTIP PSU
|
| 6/28/19
|
|
| 5/23/19
|
|
| -
|
|
| -
|
|
| -
|
|
| 19,552
|
|
| 78,206
|
|
| 156,412
|
|
| -
|
|
| 749,996
|
| |||||||||||||||||||||||||||
Brian Webb-Walsh |
16,875 |
337,500 |
675,000 |
- |
- |
- |
- |
- |
|
46,426 |
|
|
371,404 |
|
|
742,808 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
| ||||||||||||||||||||||||||||||||||||
Strategic RSU | 4/1/18 | 3/7/18 | - | - | - | - | - | - | 10,000 | 186,400 | LTIP RSU | 4/1/19 | 2/26/19 | - | - | - | - | - | - | 34,871 | 487,497 | |||||||||||||||||||||||||||||||||||||||||||||||
LTIP RSU | 4/1/18 | 3/7/18 | - | - | - | - | - | - | 26,153 | 487,492 | LTIP PSU
|
| 4/1/19
|
|
| 2/26/19
|
|
| -
|
|
| -
|
|
| -
|
|
| 8,718
|
|
| 34,871
|
|
| 69,742
|
|
| -
|
|
| 487,497
|
| |||||||||||||||||||||||||||
Michael Krawitz | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP PSU
| 4/1/18
| 3/7/18
| -
| -
| -
| 6,538
| 26,153
| 52,306
| -
| 487,492
| Special RSU
|
| 11/18/19
|
|
| 10/31/19
|
|
| -
|
|
| -
|
|
| -
|
|
| -
|
|
| -
|
|
| -
|
|
| 31,055
|
|
| 199,994
|
| |||||||||||||||||||||||||||
David Amoriell |
20,100 |
402,000 |
804,000 |
- |
- |
- |
- |
- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mark Brewer |
|
33,873 |
|
|
270,981 |
| 541,961 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP RSU | 6/28/19 | 5/15/19 | - | - | - | - | - | - | 18,248 | 174,998 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP PSU | 6/28/19 | 5/15/19 | - | - | - | 4,562 | 18,248 | 36,496 | - | 174,998 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mario Pompeo | 20,513 | 164,104 | 328,208 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP RSU | 4/1/19 | 3/31/19 | - | - | - | 5,364 | 74,989 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP PSU | 4/1/19 | 3/31/19 | - | - | - | 1,341 | 5,364 | 10,728 | - | 74,989 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special RSU | 12/31/19 | 12/09/19 | - | - | - | - | - | - | 16,129 | 100,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ashok Vemuri | 187,500 | 1,500,000 | 3,000,000 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP RSU | 4/1/19 | 2/26/19 | - | - | - | - | - | - | 178,826 | 2,499,987 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP RSU | 4/1/18 | 3/7/18 | - | - | - | - | - | - | 21,459 | 399,996 | LTIP PSU | 4/1/19 | 2/26/19 | - | - | - | 44,707 | 178,826 | 357,652 | - | 2,499,987 | |||||||||||||||||||||||||||||||||||||||||||||||
LTIP PSU
| 4/1/18
| 3/7/18
| -
| -
| -
| 5,365
| 21,459
| 42,918
| -
| 399,996
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Michael Peffer |
18,750 |
375,000 |
750,000 |
- |
- |
- |
- |
- | 46,875 | 375,000 | 750,000 | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP RSU | 4/1/18 | 3/7/18 | - | - | - | - | - | - | 21,459 | 399,996 | LTIP RSU | 4/1/19 | 2/26/19 | - | - | - | - | - | - | 28,612 | 399,996 | |||||||||||||||||||||||||||||||||||||||||||||||
LTIP PSU
| 4/1/18
| 3/7/18
| -
| -
| -
| 5,365
| 21,459
| 42,918
| -
| 399,996
| LTIP PSU | 4/1/19 | 2/26/19 | - | - | - | 7,153 | 28,612 | 57,224 | - | 399,996 | |||||||||||||||||||||||||||||||||||||||||||||||
Jeffrey Friedel |
15,938 |
318,750 |
637.500 |
- |
- |
- |
- |
- | 39,844 | 318,750 | 637,500 | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||
LTIP RSU | 4/1/18 | 3/7/18 | - | - | - | - | - | - | 13,412 | 250,000 | LTIP RSU | 4/1/19 | 2/26/19 | - | - | - | - | - | - | 17,882 | 249,990 | |||||||||||||||||||||||||||||||||||||||||||||||
LTIP PSU
| 4/1/18
| 3/7/18
| -
| -
| -
| 3,353
| 13,412
| 26,824
| -
| 250,000
| LTIP PSU | 4/1/19 | 2/26/19 | - | - | - | 4,471 | 17,882 | 35,764 | - | 249,990 |
(A) | RSU refers to Restricted Stock Units subject to service-based vesting conditions and PSU refers to Performance Stock Units subject to service-based and performance-based vesting conditions. The “Grant Date” is the effective date of the LTIP awards. The “Approval Date” is the date on which the Compensation Committee, or CEO where awards were granted prior to executive officer status, took action to approve these awards. |
(B) | These columns reflect the threshold, target and maximum payout opportunities for the performance measures under the |
Mr. Krawitz commenced employment in November 2019, and therefore, was not eligible to participate in our 2019 APIP. Mr. Brewer commenced employment in May 2019 and would have been entitled to a prorated award under the 2019 APIP in the event of any payout thereunder.
(C) | The threshold, target and maximum payout opportunities for the |
Performance Stock Units awarded under the 20182019 LTIP are earned by achieving three-year cumulative performance goals between threshold and maximum. The performance measures and weightings for the 20182019 LTIP are Adjusted Profit before Tax (50%) and Free Cash Flow, as adjusted (50%). The performance period for the 20182019 LTIP is January 1, 20182019 through December 31, 2020.2021. Performance Stock Units that are earned will vest atfollowing the end of the three-year performance period followingupon Compensation Committee certification of performance results.
The target column reflects the number of Performance Stock Units that can be earned if target performance is achieved on all performance measures. The maximum column reflects the greatest number of Performance Stock Units that can be earned if maximum or higher performance is achieved on all performance measures. The threshold column reflects the lowest number of Performance Stock Units that can be earned assuming that performance is achieved at the minimum level for only one of the performance measures. The number of Performance Stock Units earned will be interpolated in the event that Conduent’s performance varies between threshold and maximum, as determined by the Compensation Committee. If threshold performance is not achieved for both performance measures, no Performance Stock Units will be earned.
(D) | This column includes Restricted Stock Units granted under the |
(E) | The value reported in this column |
For a description of the material features of the compensation disclosed in the 20182019 Grants of Plan-Based Awards table see the “Short-Term Incentives” and the “Long-Term Incentives” section of the CD&A.
OUTSTANDING EQUITY AWARDS AT 20182019 FISCALYEAR-END
The following table summarizes the unvested stock awards held by the named executive officers at the end of fiscal year 2018.2019. There are no outstanding stock option awards.
Name
| Grant Date
| Number of Shares or Units of Stock That Have Not Vested (#)(1)
| Market Value of Shares or Units of Stock That Have Not Vested ($) (2)
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (3)
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2)
| Grant Date
| Number of Shares or Units of Stock That Have Not Vested (#)(1)
| Market Value of Shares or Units of Stock That Have Not Vested ($) (2)
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (3)
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2)
| ||||||||||||||||||||||||||||||||||||||||
Clifford Skelton
|
|
6/28/19
|
|
|
338,894
|
(7)
|
|
2,101,143
|
|
|
19,552
|
|
|
121,219
|
| |||||||||||||||||||||||||||||||||||
Brian Webb-Walsh |
|
4/1/18 |
|
|
8,719 |
(5) |
|
54,058 |
|
|
26,153 |
|
|
162,149 |
| |||||||||||||||||||||||||||||||||||
4/1/18 | 2,500 | (5) | 15,500 | |||||||||||||||||||||||||||||||||||||||||||||||
| 4/1/19
|
|
| 23,248
| (6)
|
| 144,138
|
|
| 8,718
|
|
| 54,050
|
| ||||||||||||||||||||||||||||||||||||
Michael Krawitz
|
|
11/18/19
|
|
|
31,055
|
(8)
|
|
192,541
|
|
|
-
|
|
|
-
|
| |||||||||||||||||||||||||||||||||||
Mark Brewer
|
|
6/28/19
|
|
|
18,248
|
(7)
|
|
113,138
|
|
|
4,562
|
|
|
28,284
|
| |||||||||||||||||||||||||||||||||||
Mario Pompeo |
|
9/29/17 |
|
|
1,063 |
(4) |
|
6,591 |
| - | - | |||||||||||||||||||||||||||||||||||||||
4/1/18 | 1,117 | (5) | 6,925 | 3,353 | 20,789 | |||||||||||||||||||||||||||||||||||||||||||||
4/1/19 | 3,576 | (6) | 22,171 | 1,341 | 8,314 | |||||||||||||||||||||||||||||||||||||||||||||
| 12/31/19
|
|
| 16,129
| (5)
|
| 100,000
|
|
| -
|
|
| -
|
| ||||||||||||||||||||||||||||||||||||
Ashok Vemuri |
|
7/1/16 |
|
|
163,614 |
(4) |
|
td,739,217 |
|
|
- |
|
|
- |
|
|
4/1/18
|
|
|
-
|
|
|
-
|
|
|
74,511
|
|
|
461,968
|
| ||||||||||||||||||||
4/1/17 | 166,155 | (8) | td,766,228 | 435,472 | $4,629,067 | |||||||||||||||||||||||||||||||||||||||||||||
| 4/1/18
|
|
| 98,000
| (9)
|
| td,041,740
|
|
| 134,120
|
|
| td,425,696
|
| ||||||||||||||||||||||||||||||||||||
Brian Webb-Walsh |
|
7/1/16 |
|
|
16,361 |
(4) |
|
$ 173,917 |
|
|
- |
|
|
- |
| |||||||||||||||||||||||||||||||||||
10/1/16 | 15,402 | (7) | $ 163,723 | - | - | |||||||||||||||||||||||||||||||||||||||||||||
4/1/17 | 83,377 | (8) | $ 886,298 | 145,604 | td,547,771 | |||||||||||||||||||||||||||||||||||||||||||||
4/1/18 | 17,436 | (9) | $ 185,345 | 26,153 | $ 278,006 | |||||||||||||||||||||||||||||||||||||||||||||
| 4/1/18
|
|
| 5,000
| (10)
|
| $ 53,150
|
|
| -
|
|
| -
|
| ||||||||||||||||||||||||||||||||||||
David Amoriell |
|
7/1/16 |
|
|
52,357 |
(4) |
|
$ 556,555 |
|
|
- |
|
|
- |
| |||||||||||||||||||||||||||||||||||
4/1/17 | 81,604 | (8) | $ 867,451 | 135,174 | td,436,900 | |||||||||||||||||||||||||||||||||||||||||||||
| 4/1/18
|
|
| 14,306
| (9)
|
| $ 152,073
|
|
| 21,459
|
|
| $ 228,109
|
| ||||||||||||||||||||||||||||||||||||
J. Michael Peffer |
|
1/1/16 |
|
|
18,098 |
(5) |
|
$ 192,382 |
|
|
- |
|
|
- |
| |||||||||||||||||||||||||||||||||||
7/1/16 | 24,704 | (4) | $ 262,604 | - | - | |||||||||||||||||||||||||||||||||||||||||||||
8/1/16 | 18,464 | (6) | $ 196,272 | - | - | |||||||||||||||||||||||||||||||||||||||||||||
4/1/17 | 81,604 | (8) | $ 867,451 | 135,174 | td,436,900 |
|
4/1/18 |
|
|
- |
|
|
- |
|
|
14,306 |
|
|
88,697 |
| ||||||||||||||||||||||||||||||
| 4/1/18
|
|
| 14,306
| (9)
|
| $ 152,073
|
|
| 21,459
|
|
| $ 228,109
|
|
| 4/1/19
|
|
| 0
| (6)
|
| -
|
|
| 2,384
|
|
| 14,783
|
| |||||||||||||||||||||
Jeffrey Friedel |
|
10/1/16 |
|
|
21,563 |
(7) |
|
$ 229,215 |
|
|
- |
|
|
- |
|
|
4/1/18 |
|
|
4,471 |
(5) |
|
27,720 |
|
|
13,412 |
(9) |
|
83,154 |
| ||||||||||||||||||||
4/1/17 | 78,565 | (8) | $ 835,146 | 117,656 | td,250,683 |
| 4/1/19
|
|
| 11,921
| (6)
|
| 73,910
|
|
| 4,471
| (9)
|
| 27,717
|
| ||||||||||||||||||||||||||||||
| 4/1/18
|
|
| 8,941
| (9)
|
| $ 95,043
|
|
| 13,412
|
|
| $ 142,570
|
|
(1) | The awards presented in this column include earned unvested |
(2) | The market value is based on the December 31, |
(3) | The awards presented in this column consist of unearned performance |
(4) |
|
(5) | Represents |
(6) |
|
|
|
These |
These |
(8) | These Restricted Stock Units will vest in equal installments on November 18, 2020, November 18, 2021 and November 18, 2022. |
(9) | Mr. Friedel will be eligible for two-thirds of the 2018 PSUs and one-third of the 2019 PSUs in connection with his departure in January 2020. |
OPTION EXERCISES AND STOCK VESTED IN 20182019
The following table shows the amount realized by named executive officers upon the vesting of stock awards during 2018.2019. No stock options were exercised during 2018.2019.
Stock Awards | Option Awards | Stock Awards | ||||||||||||||||
Name | Number of Shares Acquired on Vesting (#) (A)
| Value Realized on Vesting ($) (B)
| Number of Shares Acquired on Exercise (#)
| Value Realized on Exercise ($)
| Number of Shares Acquired on Vesting (#) (A)
| Value Realized on Vesting ($) (B)
| ||||||||||||
Clifford Skelton |
| -
|
|
| -
|
| ||||||||||||
Brian Webb-Walsh
|
| 172,842
|
|
| 929,968
|
| ||||||||||||
Michael Krawitz |
| -
|
|
| -
|
| ||||||||||||
Mark Brewer
|
| -
|
|
| -
|
| ||||||||||||
Mario Pompeo
|
| 7,797
|
|
| 38,786
|
| ||||||||||||
Ashok Vemuri | 212,285
|
| 2,256,590
|
| -
| -
|
| 473,603
|
|
| 3,000,526
|
| ||||||
Brian Webb-Walsh
| 102,990
|
| 1,148,024
|
| -
| -
| ||||||||||||
David Amoriell | 103,230
|
| 1,214,853
|
| -
| -
| ||||||||||||
J. Michael Peffer
| 93,196
|
| 1,032,536
|
| -
| -
|
| 188,163
|
|
| 1,204,490
|
| ||||||
Jeffrey Friedel
| 82,012
|
| 871,788
|
| -
| -
|
| 128,437
|
|
| 639,220
|
|
(A) | The shares shown in this column include (i) performance shares that vested on July 1, |
(B) | Amounts shown are based on the number of shares that vested and the fair market value of our Common Stock on the applicable vesting date. The aggregate dollar value realized upon vesting includes the value of shares withheld to pay taxes. |
NON-QUALIFIED DEFERRED COMPENSATION FOR THE 2018 FISCAL YEAR
In September 2017, Conduent terminated the Supplemental Savings Plan (“SSP”), at which time all balances were fully vested. As required under the Supplemental Savings Plan, these balances were paid to participants in October 2018. Messrs. Amoriell and Peffer received their distributions at that time, leaving their aggregate balance at zero at the end of the 2018 fiscal year.
Name
| Plan Name
| Executive Contributions in Last FY ($)
| Registrant Contributions in Last FY ($)
| Aggregate Earnings in Last FY ($)
| Aggregate Withdrawals/ Distributions ($)
| Aggregate Balance at Last FY ($)
| ||||||||||
Ashok Vemuri
| SSP
| -
| -
| -
|
| -
|
|
| -
|
| ||||||
Brian Webb-Walsh
| SSP
| -
| -
| -
|
| -
|
|
| -
|
| ||||||
David Amoriell | SSP
| -
| -
| -
|
| 1,335,405
|
| $
| 0
|
| ||||||
J. Michael Peffer | SSP
| -
| -
| -
|
| 70,817
|
| $
| 0
|
| ||||||
Jeffrey Friedel | SSP
| -
| -
| -
|
| -
|
|
| -
|
|
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Conduent has entered into certain agreements and maintains certain plans that provide compensation to named executive officers in the event of a termination of employment or a change in control. The amount of compensation payable to each named executive officer, assuming that each hypothetical termination orchange-in-control situation occurred on December 31, 2018,2019, is listed in the table below. The values for equity incentive awards presented in this table reflect the acceleration of grants not vested as of December 31, 20182019 and are based on the closing market price of Conduent Common Stock of $10.63$6.20 as of December 31, 2018.2019. Messrs. Vemuri and Peffer terminated employment with the Company on August 31, 2019 and December 31, 2019, respectively. For information regarding their severance payments and other benefits, see the “All other Compensation” table and related footnotes.
Termination for Retirement (A) | Involuntary (B) | Involuntary Change in Control (C) | Death (D) | Disability (E) | Termination for (A) | Involuntary (B) | Involuntary Change in Control (C) | Death (D) | Disability (E) | |||||||||||||||||||||||||||||||||||||||||
Ashok Vemuri
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Clifford Skelton
| ||||||||||||||||||||||||||||||||||||||||||||||||||
• Cash Severance ($)
|
|
500,000
|
|
|
500,000
|
|
|
5,000,000
|
|
|
-
|
|
|
-
|
|
|
650,000
|
|
|
650,000
|
|
|
2,600,000
|
|
|
-
|
|
|
-
|
| ||||||||||||||||||||
• Non-Equity Incentive Awards ($)
|
|
780,000
|
|
|
780,000
|
|
|
780,000
|
|
|
780,000
|
|
|
780,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
| ||||||||||||||||||||
• Equity Incentive Awards ($)
|
|
3,224,005
|
|
|
3,224,005
|
|
|
7,556,601
|
|
|
6,541,489
|
|
|
6,251,620
|
|
|
1,616,266
|
|
|
1,616,266
|
|
|
2,586,020
|
|
|
2,586,020
|
|
|
2,586,020
|
| ||||||||||||||||||||
• Healthcare/Life Insurance Benefits ($)
|
|
-
|
|
|
7,864
|
|
|
30,090
|
|
|
500,000
|
|
|
-
|
|
|
629
|
|
|
629
|
|
|
0
|
|
|
500,000
|
|
|
-
|
| ||||||||||||||||||||
Ashok Vemuri Total Termination Benefits ($)
|
| 4,504,005
|
|
| 4,511,869
|
|
| 13,366,691
|
|
| 7,821,489
|
|
| 7,031,620
|
| |||||||||||||||||||||||||||||||||||
Clifford Skelton Total Termination Benefits ($)
|
| 2,266,895
|
|
| 2,266,895
|
|
| 5,186,020
|
|
| 3,086,020
|
|
| 2,586,020
|
| |||||||||||||||||||||||||||||||||||
Brian Webb-Walsh
| ||||||||||||||||||||||||||||||||||||||||||||||||||
• Cash Severance ($)
|
|
-
|
|
|
225,000
|
|
|
1,575,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
255,000
|
|
|
1,785,000
|
|
|
-
|
|
|
-
|
| ||||||||||||||||||||
• Non-Equity Incentive Awards ($)
|
|
-
|
|
|
210,600
|
|
|
210,600
|
|
|
210,600
|
|
|
210,600
|
|
|
-
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
| ||||||||||||||||||||
• Equity Incentive Awards ($)
|
|
-
|
|
|
721,309
|
|
|
2,049,262
|
|
|
1,636,276
|
|
|
1,566,373
|
|
|
-
|
|
|
180,166
|
|
|
592,044
|
|
|
592,044
|
|
|
592,044
|
| ||||||||||||||||||||
• Healthcare/Life Insurance Benefits ($)
|
|
-
|
|
|
5,171
|
|
|
19,454
|
|
|
450,000
|
|
|
-
|
|
|
-
|
|
|
5,048
|
|
|
18,232
|
|
|
500,000
|
|
|
-
|
| ||||||||||||||||||||
Brian Webb-Walsh Total Termination Benefits ($)
|
| -
|
|
| 1,162,080
|
|
| 3,854,316
|
|
| 2,296,876
|
|
| 1,776,973
|
|
| -
|
|
| 440,214
|
|
| 2,395,276
|
|
| 1,092,044
|
|
| 592,044
|
| ||||||||||||||||||||
David Amoriell (F)
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Michael Krawitz
| ||||||||||||||||||||||||||||||||||||||||||||||||||
• Cash Severance ($)
|
| -
|
|
| 268,000
|
|
| 1,876,000
|
|
| -
|
|
| -
|
|
|
-
|
|
|
225,000
|
|
|
1,530,000
|
|
|
-
|
|
|
-
|
| ||||||||||||||||||||
• Non-Equity Incentive Awards ($)
|
|
188,136
|
|
|
188,136
|
|
|
188,136
|
|
|
188,136
|
|
|
188,136
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
| ||||||||||||||||||||
• Equity Incentive Awards ($)
|
|
787,736
|
|
|
863,773
|
|
|
2,057,575
|
|
|
1,663,064
|
|
|
1,570,306
|
|
|
-
|
|
|
0
|
|
|
192,541
|
|
|
192,541
|
|
|
192,541
|
| ||||||||||||||||||||
• Healthcare/Life Insurance Benefits ($)
|
|
-
|
|
|
5,206
|
|
|
19,454
|
|
|
500,000
|
|
|
-
|
|
|
-
|
|
|
2,681
|
|
|
9,611
|
|
|
450,000
|
|
|
-
|
| ||||||||||||||||||||
David Amoriell Total Termination Benefits ($)
|
| 975,872
|
|
| 1,325,115
|
|
| 4,141,165
|
|
| 2,351,200
|
|
| 1,758,442
|
| |||||||||||||||||||||||||||||||||||
Michael Krawitz Total Termination Benefits ($)
|
| -
|
|
| 227,681
|
|
| 1,723,152
|
|
| 642,541
|
|
| 192,541
|
| |||||||||||||||||||||||||||||||||||
J. Michael Peffer
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Mark Brewer
| ||||||||||||||||||||||||||||||||||||||||||||||||||
• Cash Severance ($)
|
| -
|
|
| 250,000
|
|
| 1,750,000
|
|
| -
|
|
| -
|
|
|
-
|
|
|
225,000
|
|
|
1,575,000
|
|
|
-
|
|
|
-
|
| ||||||||||||||||||||
• Non-Equity Incentive Awards ($)
|
|
-
|
|
|
195,000
|
|
|
195,000
|
|
|
195,000
|
|
|
195,000
|
|
|
-
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
| ||||||||||||||||||||
• Equity Incentive Awards ($)
|
|
-
|
|
|
985,954
|
|
|
2,202,175
|
|
|
1,807,663
|
|
|
1,725,749
|
|
|
-
|
|
|
0
|
|
|
226,275
|
|
|
226,275
|
|
|
226,275
|
| ||||||||||||||||||||
• Healthcare/Life Insurance Benefits $)
|
|
-
|
|
|
4,919
|
|
|
18,309
|
|
|
500,000
|
|
|
-
|
|
|
-
|
|
|
6,931
|
|
|
26,826
|
|
|
450,000
|
|
|
-
|
| ||||||||||||||||||||
J. Michael Peffer Total Termination Benefits ($)
|
| -
|
|
| 1,435,873
|
|
| 4,165,484
|
|
| 2,502,663
|
|
| 1,920,749
|
| |||||||||||||||||||||||||||||||||||
Mark Brewer Total Termination Benefits ($)
|
| -
|
|
| 231,931
|
|
| 1,828,101
|
|
| 676,275
|
|
| 226,275
|
| |||||||||||||||||||||||||||||||||||
Mario Pompeo
| ||||||||||||||||||||||||||||||||||||||||||||||||||
• Cash Severance ($)
|
|
-
|
|
|
175,000
|
|
|
175,000
|
|
|
-
|
|
|
-
|
| |||||||||||||||||||||||||||||||||||
• Non-Equity Incentive Awards ($)
|
|
-
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
| |||||||||||||||||||||||||||||||||||
• Equity Incentive Awards ($)
|
|
-
|
|
|
26,592
|
|
|
189,732
|
|
|
189,732
|
|
|
189,732
|
| |||||||||||||||||||||||||||||||||||
• Healthcare/Life Insurance Benefits ($)
|
|
-
|
|
|
5,807
|
|
|
22,376
|
|
|
350,000
|
|
|
-
|
| |||||||||||||||||||||||||||||||||||
Mario Pompeo Total Termination Benefits ($)
|
| -
|
|
| 207,399
|
|
| 387,108
|
|
| 539,732
|
|
| 189,732
|
| |||||||||||||||||||||||||||||||||||
Jeffrey Friedel
| ||||||||||||||||||||||||||||||||||||||||||||||||||
• Cash Severance ($)
|
| -
|
|
| 212,500
|
|
| 1,487,500
|
|
| -
|
|
| -
|
|
|
-
|
|
|
212,500
|
|
|
1,487,500
|
|
|
-
|
|
|
-
|
| ||||||||||||||||||||
• Non-Equity Incentive Awards ($)
|
|
-
|
|
|
182,325
|
|
|
182,325
|
|
|
182,325
|
|
|
182,325
|
|
|
-
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
| ||||||||||||||||||||
• Equity Incentive Awards ($)
|
|
-
|
|
|
499,132
|
|
|
1,460,339
|
|
|
1,097,505
|
|
|
1,059,301
|
|
|
-
|
|
|
92,392
|
|
|
295,653
|
|
|
295,653
|
|
|
295,653
|
| ||||||||||||||||||||
• Healthcare/Life Insurance Benefits ($)
|
|
-
|
|
|
7,251
|
|
|
27,840
|
|
|
425,000
|
|
|
-
|
|
|
-
|
|
|
7,099
|
|
|
27,136
|
|
|
425,000
|
|
|
-
|
| ||||||||||||||||||||
Jeffrey Friedel Total Termination Benefits ($)
|
| -
|
|
| 901,208
|
|
| 3,158,004
|
|
| 1,704,830
|
|
| 1,241,626
|
|
| -
|
|
| 311,991
|
|
| 1,810,289
|
|
| 720,653
|
|
| 295,653
|
|
(A) |
|
Per Mr. Vemuri’sPer Mr. Skelton’s offer letter, if he voluntarily terminated his employment for Good Reason, he would be entitled to salary continuation for 6 months at his then base salary rate. In addition, Mr. Vemuri would receive a short-term incentive payment(Non-Equity Incentive Award) for 2018 performance, reflected above at actual achievement against performance goals, as well aspro-rated vesting of restricted stock and performance shares (based on the number of full months of service as an employee during the vesting period per the terms of the applicable award agreements), with the number of performance shares earned
based on actual performance achievement (the amount shown here is based on target). If Mr. Vemuri left voluntarily not for Good Reason, he would be entitled to salary continuation for 12 months at his then base salary rate. In addition, Mr. Skelton would
receive a non-prorated short-term incentive payment(Non-Equity Incentive Award) for 2019 performance, reflected above at actual achievement against performance goals ($0 payout for 2019). Under Mr. Skelton’s offer letter, the specialone-time Restricted Stock Unit grant awarded in connection with his hiring, vests in full upon termination for good reason or involuntary termination not for cause. For Mr. Skelton’s other equity awards, pursuant to the terms of the grant agreements, after 9 months of employment with the Company, Mr. Skelton would be entitled topro-rated vesting of Restricted Stock Units and Performance Stock Units (based on the number of full months of service as an employee during the vesting period), with the number of Performance Stock Units earned based on actual performance achievement. |
The other named executive officers would not receive any payments.
Mr. Amoriell is retirement eligible under our short-term program and long-term incentive award programs before 2018. As a result, he would receive a short-term incentive payment(Non-Equity Incentive Award) for 2018 performance, reflected above at actual achievement against performance goals, as well aspro-rated vesting of restricted stock and performance shares granted prior to 2018 (based on the number of full months of service as an employee during the vesting period per the applicable award agreements), with the number of performance shares earned based on actual performance achievement (the amount shown here is based on target).payments if they left voluntarily.
Long-term incentive awards and short-term incentive awards are subject to clawback provisions as described in the “Governance of the Executive Compensation Programs—Compensation Recovery Policy (Clawbacks)” section in the CD&A.
(B) |
|
(C) | If there was a change in control on December 31, |
Change in controlCIC severance benefits for allthese named executive officers include:
A lump sum cash payment equal to two times the then-current annual base salary and short-term incentive award target.
Continuation | of specified welfare benefits at active employee rates for a period of 24 months. |
Payment of reasonable legal fees and expenses incurred when the named executive officer, in good faith, is involved in a dispute while seeking to enforce the benefits and rights provided by the severance agreement.
Pursuant to the terms of the applicable agreements, accelerated vesting of stock awards, including performance sharesstock units at target, and a short-term incentive(Non-Equity Incentive Award) payment for the 20182019 performance reflected above at actual achievement against performance goals.goals ($0 for 2019).
If excise tax is payable by any of the named executives,executive officers, Conduent will reduce the named executive officer’s CIC payment to a level that will not trigger an excise tax payment if it is determined that doing so will result in a greater netafter-tax amount for the executive.
In the event of a termination in connection with a CIC, Mr. Pompeo would be covered under the Executive Severance Policy and would receive salary continuance payments and continued benefits coverage (excluding disability and 401(k) contributions) for 26 weeks. Pursuant to the terms of the applicable agreements, he would also receive accelerated vesting of stock awards, including Performance Stock Units at target.
(D) | Following death, the estates or, with respect to certain types of payments and elections made, the spouses of all named executive officers would receive payment of a |
(E) | Assuming termination following disability on December 31, |
(F) | Mr. |
Involuntary Termination for Cause
Assuming involuntary termination for cause due to engagement in detrimental activity against Conduent, there would be no payments to the named executive officers other than their deferred compensation balance, if any. All unvested shares would be immediately cancelled upon termination for cause. See the “Governance of the Executive Compensation Programs—Compensation Recovery Policy (Clawbacks)” section of the CD&A for additional information.
Definitions Under the CIC Plan
Generally, for purposes of the CIC Plan, a change in control is deemed to have occurred, subject to specific exceptions, if:
Any person becomes a beneficial owner representing 50 percent or more of the combined voting power of the outstanding securities of Conduent.
A majority of the Conduent Board is replaced under specific circumstances.
There is a merger or consolidation involving Conduent unless (i) the directors of Conduent who were members of the Board immediately before the merger/consolidation continue to constitute a majority of the Conduent Board of Directors or (ii) the merger/consolidation is affected to implement a recapitalization and no person becomes the beneficial owner representing 50 percent or more of the combined voting power of Conduent’s then outstanding voting securities.
All or substantially all of Conduent’s assets are sold, or Conduent’s shareholders approve a plan of complete liquidation or dissolution.
A voluntary termination for good reason in the event of a change in controlCIC includes:
The material diminution of authority, duties, or responsibilities, including being an executive officer of Conduent before a change in control and ceasing to be an executive officer of the surviving company. Thechange-in-control benefits for this provision will only be triggered if the executive officer has not voluntarily terminated his/her employment and the “material diminution of authority, duties, or responsibilities” has occurred and not been remedied.
A material reduction in annual base salary, annual target short-term incentive or employee benefits in the aggregate, except to the extent such reduction is consistent with anacross-the-board reduction for employees.
A material change in the geographic location where the executive is required to be based.
Failure of Conduent to obtain a satisfactory agreement from any successor to assume and agree to perform in a manner consistent with the change in control agreement.
Definitions Under Mr. Skelton’s Offer Letter
Under Mr. Skelton’s offer letter, a voluntary termination for good reason includes:
A material decrease in his base salary, other than a decrease that is applicable to all other similarly situated executives.
A material diminution in his authority, duties, or responsibilities, or a demotion that is not commensurate with his credentials and experience.
The Company’s breach of any of its material obligations under the offer letter.
The relocation of his position by more than 50 miles.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information with respect to equity awards under Conduent’s equity compensation plans as of December 31, 2018:2019:
Plan Category
| (A) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1)
| (B) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights(1)
| (C) Number of Securities Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)(2)
| (A) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1)
| (B) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights(1)
| (C) Number of Securities Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A))(2)
| ||||||
Equity compensation plans approved by security holders
|
3,379,082 |
$10.15 |
15,027,768 |
2,850,348 |
- |
14,884,302 | ||||||
Equity compensation plans not approved by security holders
|
-
|
-
|
-
|
-
|
-
|
-
| ||||||
Total | 3,379,082 | $10.15 | 15,027,768 | 2,850,348 | - | 14,884,302 |
(1) | Column (A) includes (i) |
(2) | The 2007 ACS Plan was discontinued as of February 5, 2010. No further grants can be made under this plan. Any shares that are cancelled, forfeited or lapse under the Performance Incentive Plan become available again for issuance under the Performance Incentive Plan. Any shares that are cancelled, forfeited or lapse under the Conduent Director Equity Plan become available again for issuance under the Director Equity Plan. |
CEO Pay Ratio Disclosure
For 2018,2019, the median of the annual total compensation of all employees of ourthe Company (other than our CEO), was $31,308. The 2018$27,311. With respect to the annual total compensation of our CEO, who joined the Company effective June 17, 2019, we used the amount reported in the Total column in the 2019 Summary Compensation Table, substituting his annualized base salary amount and life insurance premiums to reflect these elements of compensation as if he had served as our CEO for the full year. Based on this, the 2019 annual total compensation of our CEO was $7,066,017, as reported in the “Total” column of the “Summary Compensation Table” included above in this Proxy Statement. Based on$4,668,546. Using this information, we estimate the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees for 20182019 was 226:171:1. This represents a reasonable estimate calculated in a manner consistent with SEC regulations.
For 2018, we did not use the same median employee identified for our 2017 pay ratio disclosure because this individual is no longer employed by the Company. As permitted by SEC rules, for purposes of our 2018 pay ratio disclosure, we identified an employee whose position and compensation were substantially similar to our median employee identified for 2017 based on the same consistently applied compensation measure used to select our 2017 median employee, as described below. There has otherwise been no material change in our employee population or compensation arrangements in 2018 that would result in a significant change in our pay ratio disclosure or median employee.
To determine our median employee, we ascertained that, as of the December 31, 20172019 determination date, our total employee population consisted of 90,51167,144 employees, which included 43,57230,035 U.S. employees and 46,939 37,109non-U.S. employees. As is permitted under the SEC rules, we excluded employees from the following countries: Germany (2,079
(1,175 employees) and Turkey (1,521(1,007 employees), which represented less than 5% of our
total employee population as of the determination date. We then determined our “median employee” using the remaining employee population of 86,911,64,962, which included 43,57230,035 U.S. employees and 43,839 34,927non-U.S. employees.
We chose to use annual base compensation as our consistently applied compensation measure to determine our “median employee”. We determined annual base compensation for our salaried employees using base salary paid for 2017.2019. We determined annual base compensation for our hourly paid employees by multiplying the hourly rate by the scheduled hours for the year. We annualized the compensation of all permanent employees in our population who were hired in 20172019 but did not work for us the entire year. Once we identified our median employee, we determined that person’s annual total compensation in accordance with the requirements of the Summary Compensation Table.
The Company’sby-laws provide for indemnification of officers and directors to the fullest extent permitted by New York law. The Company has not advanced any counsel fees or other reasonable fees and expenses to any officer or director under ourby-laws. In accordance with the requirements of the Business Corporation Law of the State of New York (the “BCL”), in the event the Company advances counsel fees or other reasonable fees and expenses, the individuals on whose behalf any such expenditures are made are required to execute an undertaking to repay such expenses if they are finally found not to be entitled to indemnification under the Company’sby-laws or the BCL.
Directors and Officers Liability Insurance and Indemnity
On June 1, 2018,2019, the Company renewedextended its policies for directors’ and officers’ liability insurance. The policies are issued by Chubb insurance Company of New Jersey, XL Specialty Insurance Company, Travelers Casualty and Surety Company of America, Twin City Fire Insurance Company, U.S. Specialty Insurance Company, Arch Insurance Company, Zurich Excess Select insurance Policy, Marsh Alpha (Lloyd’s of London), Allied World Assurance Company Ltd, Axis Insurance Company, and Union Fire Insurance Company of Pittsburgh PA.PA, Pioneer, and Wesco Insurance Company. The policies expireare scheduled for renewal on June 1, 2019,2020 and the total annual premium is approximately $1,290,000.$2,680,000.
We have reported our financial results in accordance with U.S. GAAP. In addition, we have discussed our results usingnon-GAAP measures.
We believe thesenon-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related tax effects. Management believes that thesenon-GAAP financial measures provide an additional means of analyzing the results of the current periods’ resultsperiod against the corresponding prior periods’ results.period. However, thesenon-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with U.S. GAAP. Ournon-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures and should be read only in conjunction with our Consolidated Financial Statements prepared in accordance with U.S. GAAP. Our management regularly uses our supplementalnon-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions, and providing suchnon-GAAP financial measures to investors allows for a further level of transparency as to how management reviews and evaluates our business results and trends. Thesenon-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on thesecertain non-GAAP measures.
A reconciliation of thenon-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP isare provided below.
These reconciliations also include the income tax effects for ournon-GAAP performance measures in total, to the extent applicable. The income tax effects are calculated under the same accounting principles as applied to
our reportedpre-tax performance measures under ASC 740, which employs an annual effective tax rate method. The noted income tax effect for ournon-GAAP performance measures is effectively the difference in
income taxes for reported and adjustedpre-tax income calculated under the annual effective tax rate method. The tax effect of thenon-GAAP adjustments was calculated based upon evaluation of the statutory tax treatment and the applicable statutory tax rate in the jurisdictions in which such charges were incurred.
Adjusted PBT and Adjusted Net Income (Loss)
We make adjustments to Income (Loss) before Income TaxesPBT for the following items, as applicable to the particular financial measure, for the purpose of calculating Adjusted Net Income (Loss):
Amortization of acquired intangible assets. The amortization of acquired intangible assets is driven by acquisition activity, which can vary in size, nature and timing as compared to other companies within our industry and from period to period.
Restructuring and related costs. Restructuring and related costs include restructuring and asset impairment charges as well as costs associated with our strategic transformation program.
Goodwill impairment. This represents Goodwill impairment charge related to the unanticipated losses of certain customer contracts, lower potential future volumes and lower than expected new customer contracts for all reporting units.
(Gain) loss on divestitures and transaction costs. Represents (gain) loss on divested businesses and transaction costs.
Litigation costs (recoveries), net. Litigation costs (recoveries), net primarily represents reservesaccruals for the State of Texas litigation, Student Loan Service exposures and certain significant terminated contracts that are subject to litigation.
(Gain) loss on extinguishment of debt. Represents premium on debt extinguishment and write down of the associated unamortized discount and issuance costs.
Other (income) expenses, net. Othercharge (credit). This comprises other (income) expenses, net, includes currency (gains) losses, net and all other (income) expenses, net.
NY Medicaid Management Information System (NY MMIS) charge (credit). Costsas well as costs associated with the Company not fully completing the State of New York Health Enterprise platform project.
Health Enterprise (HE) charge (credit). Cost associated with not fully completingPlatform project and the Health Enterprise Medical platform implementation projects in California and Montana.Montana and other adjustments.
2019 divestitures. Revenue/(Income) loss from divestitures.
Income tax adjustments. This represents the net of the GAAP income tax expense/benefits and difference in income taxes for reported and adjusted pre-tax income calculated under the annual effective tax rate method.
The Company provides adjusted PBT and net income and adjusted EPS financial measures to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods, by adjusting for certain items which may be recurring ornon-recurring and which in our view do not necessarily reflect ongoing performance. We also internally use these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions.
Adjusted EBITDARevenue
We use Adjusted EBITDAmake adjustments to revenue for the following items, as an additional way of assessing certain aspects of our operations that, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of ouron-going business:
2019 divestitures.
Effect of currency changes. To better understand trends in our business, we believe that it is helpful to adjust revenue to exclude the impact of changes in the translation of foreign currencies into U.S. Dollars.
Adjusted EBITDA and EBITDA Margin
We use Adjusted EBITDA and Adjusted EBITDA Margin as an additional way of assessing certain aspects of our operations that, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our on-going business. Adjusted revenue represents Adjusted EBITDA represents income (loss) before interest, expense, income taxes,
depreciation and amortization and contract inducement amortization adjusted for the following items:items. Adjusted EBITDA margin is Adjusted EBITDA divided by revenue or adjusted revenue, as applicable.
Restructuring and related costs.
Goodwill impairment.
(Gain) loss on extinguishment of debt.
(Gain) loss on divestitures and transaction costs.
Litigation costs (recoveries), net.
(Gain) loss on extinguishment of debt.
Other (income) expenses, net.
NY MMIS charge (credit).
HE charge (credit).2019 and 2018 divestitures.
Savings from suspension of 401(k) match. Reflects savings from suspension of 401(k) match in 2019.
Adjusted EBITDA is not intended to represent cash flows from operations, operating income (loss) or net income (loss) as defined by U.S. GAAP as indicators of operating performances. Management cautions that amounts presented in accordance with Conduent’s definition of Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similar measures disclosed by other companies because not all companies calculate Adjusted EBITDA and Adjusted EBITDA margin in the same manner.
Free Cash Flow
Free Cash Flowcash flow is defined as cash flows from operating activities as reported on the consolidated statement of cash flows, less cost of additions to land, buildings and equipment, cost of additions to internal use software, and vendor financed capital lease additions plus tax payments related to divestitures, vendor financed capital lease and proceeds from sales of land, buildings and equipment. We use thenon-GAAP measure of Free Cash Flowfree cash flow as a criterion of liquidity and performance-based components of employee compensation. We use Free Cash Flowfree cash flow as a measure of liquidity to determine after required principal payment on debt, amounts we can reinvest in our core businesses, such as amounts available to make acquisitions and invest in land, buildings and equipment and internal use software.software, after required payments on debt. In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flowfree cash flow reconciled to cash flow provided by operating activities, which we believe to be the most directly comparable measure under U.S. GAAP. Adjusted free cash flow is defined as free cash flow from above plus deferred compensation payments, Texas litigation payments and transaction costs and other identified items.
Adjusted Profit Before Tax (PBT) and Adjusted Net Income (Loss) Reconciliation:
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(in millions) | Year Ended December 31, 2019 | |||
GAAP Income (Loss) Before Income Taxes | $ | (2,106 | ) | |
Adjustments: | ||||
Amortization of acquired intangible assets | 246 | |||
Restructuring and related costs | 71 | |||
Goodwill impairment | 1,952 | |||
(Gain) loss on divestitures and transaction costs | 25 | |||
Litigation costs (recoveries), net | 17 | |||
Other charges (credits)(1) | (5 | ) | ||
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Adjusted PBT | $ | 200 | ||
Less: Income tax adjustments(2) | (60 | ) | ||
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Adjusted Net Income | 140 | |||
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(1) | This comprises other (income) expenses, net, as well as costs associated with the Company not fully completing the State of New York Health Enterprise Platform project and the Health Enterprise Medical platform projects in California and Montana and other adjustments. |
(2) | Income Tax |
Year Ended
| ||||
GAAP Income tax Expense as Reported | $ | (172 | ) | |
| 232 | |||
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| 60 | ||
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Adjusted Revenue and Adjusted EBITDA Reconciliations:
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(in millions) | Year Ended December 31, 2019 | |||
Reconciliation to Adjusted Revenue | ||||
Revenue | $ | 4,467 | ||
2019 Divestiture(3) | (36 | ) | ||
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Adjusted Revenue | $ | 4,431 | ||
Effect of currency changes(3) | 24 | |||
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Adjusted Revenue at Constant Currency | $ | 4,455 | ||
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Reconciliation to Adjusted EBITDA | ||||
Net Income (Loss) from Continuing Operations | $ | (1,934 | ) | |
Interest Expense | 78 | |||
Income tax expense | (172 | ) | ||
Depreciation and amortization | 459 | |||
Contract inducement amortization | 3 | |||
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EBITDA | $ | (1,566 | ) | |
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EBITDA Margin | -35.1 | % | ||
EBITDA | $ | (1,566 | ) | |
Adjustments: | ||||
Restructuring | 71 | |||
Goodwill | 1,952 | |||
(Gain) loss on divestitures and transaction costs | 25 | |||
Litigation costs (recoveries), net | 17 | |||
Other charges (credits) | (5 | ) | ||
2019 Divestitures | (1 | ) | ||
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Adjusted EBITDA | $ | 493 | ||
Saving from suspension of 401(k) match(4) | (12 | ) | ||
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Defined Adjusted EBITDA(4) | $ | 481 | ||
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(1) | Reflects |
(2) | Reflects savings of |
Free Cash Flow/Flow / Adjusted Free Cash Flow Reconciliation:
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(in millions) | Year Ended | |||
Operating Cash Flow | $ | 132 | ||
Cost of additions to land, buildings and equipment | (148 | ) | ||
Proceeds from sales of land, buildings and equipment | 2 | |||
Cost of additions to internal use software | (67 | ) | ||
Tax payment related to divestitures | 9 | |||
Vendor financed capital leases | (3 | ) | ||
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Free Cash Flow | $ | (75 | ) | |
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Free Cash Flow | $ | (75 | ) | |
Transaction costs | 14 | |||
Texas litigation payments | 118 | |||
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Adjusted Free Cash Flow | $ | 57 | ||
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PROPOSAL 2 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PWCPwC”), an independent registered public accounting firm, to act as independent auditors of the Company for 2019.2020. PwC has served as the Company’s independent auditors since 2016. Representatives of the firm are expected to be at the Annual Meeting to respond to appropriate questions and to make a statement, if they wish.
Principal Auditor Fees and Services
Aggregate fees for professional services rendered for the Company by PwC were ($ in millions):
2018
|
2017
|
2019
|
2018
| |||||
Audit Fees(1)
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$6.2
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$ 7.0
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$6.6
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$6.2
| ||||
Audit Related Fees(2)
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$2.6
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$ 4.6
|
$1.3
|
$2.6
| ||||
Tax Fees(3)
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$0.6
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$ 0.7
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$0.4
|
$0.6
| ||||
All Other Fees(4)
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$0.1
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$ 0.2
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$0.1
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$0.1
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Total Fees
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$9.5
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$12.5
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$8.3
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$9.5
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(1) | These audit fees were for professional services rendered for the audits of consolidated financial statements, reviews of interim financial statements included in periodic reports, audits related to internal control over financial reporting and statutory audits. |
(2) | These audit-related fees were for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and are not reported under the “audit fees” category above. These services include SOC 1 engagements and other service organization reports, implementation of new accounting standards and regulations, technical accounting advice and agreed-upon procedures. |
(3) | Tax fees were for tax compliance, tax advice and tax planning. These services included the preparation and review of required tax return compliance filings, assistance with tax audits and transfer pricing matters, advisory services relating to federal, state, provincial and international tax compliance, customs and duties, and restructurings, mergers and acquisitions. |
(4) | Fees disclosed in the tables above under the item “All Other Fees” were for services other than the audit fees, audit-related fees and tax fees described above. |
Pursuant to its charter, the Audit Committee is directly responsible for the appointment, retention, compensation and oversight of the Company’s independent auditors. In addition to assuring the regular rotation of the lead audit partner as required by applicable rules, the Audit Committee is involved in the evaluation and selection of the lead audit partner and considers whether there should be regular rotation of the independent auditors.
The Audit Committee is also required to review andpre-approve all of the audit andnon-audit services to be performed by the Company’s independent auditors, including the firm’s engagement letter for the annual audit of the Company, the proposed fees in connection with such audit services, and any additional services that management chooses to hire the independent auditors to perform. The authority for suchpre-approval may be delegated to one or more members of the Audit Committee, provided that the decisions of any member to whompre-approval authority is delegated must be presented to the full Audit Committee at its next meeting. Additionally, the Audit Committee can establishpre-approval policies and procedures with respect to the engagement of the Company’s independent auditors for permittednon-audit services. In accordance with the Audit Committee Charter, all of the foregoing audit andnon-audit fees paid to, and the related service provided by PwC, werepre-approved by the Audit Committee.
At least annually, the Audit Committee reviews the Company’s independent registered public accounting firm to decide whether to retain such firm on behalf of the Company.
When conducting its latest review of PwC, the Audit Committee considered the following factors:
The professional qualifications of PwC, the lead audit partner and other key engagement partners on the engagement;
The appropriateness of PwC’s fees relative to both efficiency and audit quality;
PwC’s independence policies and processes for maintaining its independence;
PwC’s capability, expertise and efficiency in handling the breadth and complexity of the Company’s operations across the globe; and
PwC’s demonstrated professional integrity and objectivity.
The Audit Committee and the Board believe that the continued retention of PwC to serve as our independent auditors is in the best interests of the Company and its shareholders.
The responsibilities of the Audit Committee are discussed under “Committee Functions, Membership and Meetings” beginning on page 1413 and can also be found on our website atwww.conduent.com/corporate-governance. Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an audit of the Company’s consolidated financial statements and the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and to issue a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.
Consistent with the foregoing, the Audit Committee has:
Reviewed and discussed with the management of the Company and PwC the audited consolidated financial statements of the Company for the year ended December 31, 2018,2019, including the specific disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s key accounting policies and use of estimates;
Discussed with PwC the matters required to be communicated in PCAOB Auditing Standards Nos. 1301 (Communication with Audit Committees) and 2410 (Related Parties); and
Received the written disclosures and the letter from PwC required by the applicable PCAOB independence rules and New York Stock ExchangeNasdaq Rule 303A.07 (Auditor Quality Control Procedures)5605(b)(2) andIM-5605-2 (Executive Sessions of Independent Directors) and has discussed with PwC that firm’s independence and quality control procedures.
Based upon the foregoing review and discussions, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s 20182019 Annual Report to Shareholders and in the Company’s Annual Report on Form10-K for the year ended December 31, 20182019 for filing by the Company with the SEC.
Virginia M. Wilson, Chair
Nicholas GrazianoScott Letier
JoieMichael A. GregorNutter
The Board recommends a vote
FOR
the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent
registered public accounting firm for the year 20192020
PROPOSAL 3 — PROPOSAL TO APPROVE, ON AN ADVISORY BASIS, THE 20182019 COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
As required by the Dodd-Frank Act, under Section 14A of the Exchange Act, we are seeking your vote, on anon-binding advisory basis, on the compensation of our named executive officers as described in the Compensation Discussion and Analysis, compensation tables and narrative disclosure, as provided in this Proxy Statement. Specifically, shareholders are being asked to vote upon, and the Board has approved and unanimously recommends approval of, the followingnon-binding advisory resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Company’s Proxy Statement for the 20192020 Annual Meeting of Shareholders pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED. “
The Board believes that our executive compensation program is well designed, appropriately aligns executive pay with Company performance and incentivizes desirable executive performance. This proposal gives you an opportunity to express your own view of our 20182019 executive compensation practices. We provide shareholders with the opportunity to cast their advisory vote on our executive compensation practices on an annual basis, in accordance with the preference expressed by our shareholders at the 2017 annual meeting regarding the frequency of our advisory vote on executive compensation.
While this vote does not address any specific item of compensation and is not binding on the Board, the Board and its Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions.
The Board recommends a vote
FOR
the proposal to approve the compensation of the named executive officers as disclosed in this Proxy
Statement
01—Nicholas GrazianoKathy Higgins Victor 04—Courtney Mather 07—Clifford Skelton 02—Scott Letier 05—Michael Montelongo 03—Jesse A. Lynn 07—William G. Parrett 02—Joie Gregor 05—Courtney Mather 08—Ashok Vemuri 03—Scott Letier 06—Michael A. Nutter 09—Virginia M. WilsonMargarita Paláu- Hernández For Against Abstain For Against Abstain For Against Abstain 97 2 B M Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. 0313CE037WQF + + Proposals — The Board of Directors recommends a vote FOR all the nominees listed A and FOR Proposals 2 and 3. 2. Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm.firm for 2020. 3. Approve, on an advisory basis, the 20182019 compensation of our named executive officers. 1. Election of Directors: For Against Abstain Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, 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. B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q 20192020 Annual Meeting Proxy Card For Against Abstain 000004 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 ENDORSEMENT_LINE SACKPACK 1234 5678 9012 345 MMMMMMMMM MMMMMMMMMMMMMMM 4 15 7 8 8 2 9 7 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND C 1234567890 J N T C123456789 MMMMMMMMMMMM MMMMMMM 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext If no electronic voting, delete QR code and control # Δ â‰^ You may vote online or by phone instead of mailing this card. Online Go to www.envisionreports.com/CNDT or scan the QR code — login details are located in the shaded bar below. Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/CNDT Phone Call toll free1-800-652-VOTE (8683) within the USA, US territories and Canada Votes submitted electronically must be received by 9:00 a.m., Eastern Time, on May 21, 2019.19, 2020. Your vote matters – here’s how to vote!
Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/CNDT Notice of 20192020 Annual Meeting of Shareholders Proxy Solicited by Board of Directors for Annual Meeting — May 21, 2019 Ashok Vemuri19, 2020 Clifford Skelton and William G. Parrett,Courtney Mather, or either of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Conduent Incorporated to be held at Conduent Corporate Headquarters, 100 Campus Drive, Suite 200, Florham Park, NJ 07932 on May 21, 201919, 2020 at 9:00 a.m. (ET) or at any postponement or adjournment thereof. We intend to hold our annual meeting in person. However, we are actively monitoring the novel coronavirus(COVID-19) and we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting in person and by means of remote communication, or solely by means of remote communication. Please monitor our Investor website at https://investor.conduent.com and our SEC filings for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date. As always, wwe encourage you to vote your shares prior to the annual meeting. Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR all Nominees and FOR Proposals 2 and 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side) Proxy — Conduent Incorporated qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q CNon-Voting Items + + Change of Address — Please print new address below. Comments — Please print your comments below. Meeting Attendance Mark box to the right if you plan to attend the Annual Meeting. 20192020 Annual Meeting Admission Ticket 20192020 Annual Meeting of Conduent Incorporated Shareholders May 21, 201919, 2020 at 9:00 a.m. Eastern Time Conduent Corporate Headquarters 100 Campus Drive, Suite 200 Florham Park, NJ 07932 Upon arrival, please present this admission ticket and photo identification at the registration desk.