UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
(Amendment No. )
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HOLOGIC, INC.Hologic Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant)
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OurPURPOSE—to enable healthier lives
everywhere, every day—is driven by aPASSION
to become global champions for women’s health.
We succeed by fulfilling ourPROMISE to bring
The Science of Sure® alive through product quality,
clinical differentiation, customer relationships and
our team’s talent and engagement.
At Hologic, ourpurpose is to enable healthier lives, everywhere, every day. The more lives we touch, the more our profits will grow over the long term. | January 18,2019 DEAR FELLOW STOCKHOLDERS: Over the past few years, there has been increasing discussion, and often debate, over the role of the corporation in society, fueled by the rapid pace of social, political, economic and technological change. This dialogue has been carried on by business analysts, governance experts and academics around the world, but also by employees at companies large and small. In addition, large institutional investors are increasingly analyzing environmental, social and governance factors – sometimes known as ESG – as part of their investment process. For example, the CEO of BlackRock, the world’s largest investment management company, wrote to CEOs in 2018: Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society… Without a sense of purpose, no company, either public or private, can achieve its full potential. As Hologic has evolved through organic growth, international expansion, acquisitions and divestitures, we’ve been talking about these issues too, alongside our board and with employees at all levels. As a public company, we recognize that we have a fundamental obligation to create value for shareholders through profitable, long-term growth. Indeed, public firms have helped create higher standards of living and longer lifespans over many generations and geographies. But this cannot be the whole story. To focus solely on financial outcomes would be to ignore the multifaceted, instrumental role that corporations play in our world. Indeed, most of our employees are motivated by a sense of higher purpose. Russell Pearlman of the Korn Ferry Institute said it well when he wrote, “purpose and profit not only peacefully co-exist, but purpose can drive profit.” I completely agree. At Hologic, ourpurposeis to enable healthier lives, everywhere, every day. The more lives we touch, the more our profits will grow over the long term. Within this purpose, we place special emphasis on the healthcare needs of women. Ourpassion, therefore, is to become global champions for women’s health. We believe that early detection of disease leads to better, more cost-effective health outcomes. In fact, no company in the world has done more to fight cervical and breast cancer than we have through our innovative diagnostic solutions. While women’s health is not our only focus – we have introduced many products that also benefit men – it is our rallying cry. We believe our unique passion is urgently needed today. For far too long, women’s healthcare needs have been minimized by governments and healthcare systems in emerging – and developed – countries around the world. So we are inspired by the deep belief that our success as a company will fundamentally improve the health of millions of women and families globally. |
www.hologic.com 3
NoticeAs a healthcare company, we believe we make a specialpromiseto our customers and patients, a promise that is rooted in a concept called the Science of Annual MeetingSure. The Science of Stockholders and Proxy Statement Wednesday, March 14, 2018 8:00 a.m. Eastern Time
January 26, 2018
Dear Fellow Stockholders:
HologicSure is an innovative medical technology company primarily focused on improving women’s health and well-being through early detection and treatment. Every day,about progressive certainty. It’s a commitment to help healthcare professionals minimize doubt and maximize the confidence they have in their decisions and diagnoses.
How do we do this? To bring the Science of Sure to life and provide value to patients, we focus on:
Product quality | Clinical differentiation | |
Our customers – radiologists, lab technicians, OB/GYNs and many other important healthcare professionals – count on our products to perform as we say they will, when lives and livelihood are at stake. We must never compromise this trust. | Our R&D programs are geared to generate products that provide a meaningful benefit for customers and patients. For example, our Genius 3D mammograms detect more invasive breast cancers while reducing the false alarms that can lead to unnecessary patient call-backs. | |
Customer relationships | Our people | |
We partner with our customers over the long term, to help build their businesses and to ensure that patients have access to our products. We sell with integrity, help generate patient demand, fight for appropriate reimbursement, and advocate for preventive healthcare. | We believe that focusing on two simple factors – talent and engagement – helps our employees serve customers more effectively, as well as drive profitable growth. |
In summary, at Hologic we believe that public companies play a complex and indispensable role in society. For us, creating long-term shareholder value is critical, buthowwe create that value is also important. By focusing on our unique purpose, passion and promise, we strive to generate long-term, profitable growth that benefits not just our shareholders, but also our customers and patients around the world use our products to find breast cancer, cervical cancer and infectious diseases early, when patient outcomes arebest and associated healthcare costs areleast.
Hologic is also agrowth company, one that aspires to deliver superior investment returns over time. So as we approach our 2018 Annual Meeting of Stockholders, I’d like to update you on the significant progress we’ve made to generate sustainable, profitable growth.
In fiscal 2017, we strengthened our product leadership positions in mammography, molecular diagnostics, liquid cytology, and gynecologic surgery by providing differentiated value to our customers. As a result, we delivered solid revenue and earnings growth in line with our external guidance.
At the same time, we took three important steps to increase growth for the long term. First, we laid the foundations for sustainableinternational growth through new leadership, new products and better commercial execution. Second, we shifted our business portfolio toward higher-growth segments by divesting our blood screening business and acquiring the leading medical aesthetics company, Cynosure, Inc. And third, we accelerated our launch of new products that reflect increasing innovation from our revitalized research and development pipeline.
As a result of these efforts, we reported GAAP revenue of $3,059 million in fiscal 2017, up 8% versus the prior year, and GAAP earnings per share (“EPS”) of $2.64, up 128% versus the prior year. These results include the effects of divesting blood screening and acquiring Cynosure. Excluding these effects, adjusted revenue increased 5% on a constant currency basis, and adjusted EPS, as calculated under our 2017 Short-Term Incentive Plan, increased 12%. These good financial results also enabled us to strengthen our balance sheet and repurchase shares during the fiscal year.
Underlying our financial performance are our employees, who are motivated and inspired by the knowledge that we are enabling healthier lives, everywhere, every day. I’d like to thank these employees, as well as our board of directors, for their dedication and contributions throughout fiscal 2017. And I’d like to acknowledge our stockholders for their ongoing interest and support. We look forward to hearing from you at our Annual Meeting and throughout the year.
globe.
Sincerely,
Steve MacMillan
Chairman, President and Chief Executive Officer
At Hologic, we believe that public companies play a complex and indispensable role in society. For us, creating long-term shareholder value is critical, buthow we create that value is also important.
4 2019 Proxy Statement
NOTICE OF ANNUAL MEETINGOF STOCKHOLDERS
THURSDAY, MARCH 7, 2019
8:00 A.M. PACIFIC TIME
10210 GENETIC CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
Wednesday, March 14, 2018
8:00 a.m. Eastern Time
250 Campus Drive, Marlborough, Massachusetts 01752
To Our Stockholders:
The Annual Meeting of Stockholders of Hologic, Inc., a Delaware corporation (“Hologic” or the “Company”), will be held on March 14, 2018 at 8:00 a.m., Eastern Time, at the offices of the Company, 250 Campus Drive, Marlborough, Massachusetts 01752 for the following purposes:
The foregoing items of business are more fully described in the proxy statement accompanying this Notice.
Our Board of Directors has fixed the close of business on January 16, 2018 as the record date. Only stockholders of record at the close of business on the record date are entitled to notice of, and to vote at, the meeting and any adjournment or postponement thereof. All stockholders are cordially invited to attend the meeting. Stockholders who plan to attend the meeting must present valid photo identification. Stockholders of record will be verified against an official list available at the registration area. If your shares are held in the name of a bank, broker or other holder of record, please also bring to the Annual Meeting your bank or brokerage statement evidencing your beneficial ownership of Hologic stock to gain admission to the meeting. We reserve the right to deny admittance to anyone who cannot show valid identification or sufficient proof of share ownership as of the record date.
We are pleased to continue utilizing the Securities and Exchange Commission (“SEC”) rules that allow issuers to furnish proxy materials to their stockholders on the internet. We believe these rules allow us to provide you with the information you need while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting. On or about January 26, 2018, we will mail to our stockholders of record as of January 16, 2018 (other than those who previously requested electronic or paper delivery on an ongoing basis) a Notice of Meeting and Important Notice Regarding the Availability of Proxy Materials containing instructions on how to access our proxy statement and our Annual Report on Form 10-K.
Our Board of Directors appreciates and encourages stockholder participation in the Company’s affairs. Whether or not you plan to attend the meeting, it is important that your shares be represented.
January 26, 2018
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MARCH The Proxy Statement, the Hologic Annual Report on Form 10-K for the fiscal year ended September | TO OUR STOCKHOLDERS: The Annual Meeting of Stockholders of Hologic, Inc., a Delaware corporation (“Hologic” or the “Company”), will be held on March 7, 2019 at 8:00 a.m., Pacific Time, at the offices of the Company, 10210 Genetic Center Drive, San Diego, California, 92121 for the following purposes: 1.To consider and act upon the election of the eight (8) nominees identified in the accompanying proxy statement to serve as directors for the ensuing year(Proposal No. 1); 2.To conduct an advisory vote to approve our executive compensation(Proposal No. 2); 3.To ratify the appointment of Ernst & Young LLP as our independent registeredpublic accounting firm for fiscal 2019(Proposal No. 3); and 4.To transact such other business as may properly come before the meeting or any adjournment thereof. The foregoing items of business are more fully described in the proxy statement accompanying this Notice. Our Board of Directors has fixed the close of business on January 7, 2019 as the record date. Only stockholders of record at the close of business on the record date are entitled to notice of, and to vote at, the meeting and any adjournment or postponement thereof. All stockholders are cordially invited to attend the meeting. Stockholders who plan to attend the meeting must present valid photo identification. Stockholders of record will be verified against an official list available at the registration area. If your shares are held in the name of a bank, broker or other holder of record, please also bring to the Annual Meeting your bank or brokerage statement evidencing your beneficial ownership of Hologic stock to gain admission to the meeting. We reserve the right to deny admittance to anyone who cannot show valid identification or sufficient proof of share ownership as of the record date. We are pleased to continue utilizing the Securities and Exchange Commission (“SEC”) rules that allow issuers to furnish proxy materials to their stockholders on the internet. We believe these rules allow us to provide you with the information you need while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting. On or about January 18, 2019, we will mail to our stockholders of record as of January 7, 2019 (other than those who previously requested electronic or paper delivery on an ongoing basis) a Notice of Meeting and Important Notice Regarding the Availability of Proxy Materials containing instructions on how to access our proxy statement and our Annual Report on Form 10-K. Our Board of Directors appreciates and encourages stockholder participation in the Company’s affairs. Whether or not you plan to attend the meeting, it is important that your shares be represented. January 18, 2019 By order of the Board of Directors, Patricia K. Dolan |
www.hologic.com 5
6 2019 Proxy Statement
Your Vote is Important
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement and the Company’s Annual Report on Form 10-K before casting your vote. References to “Hologic,” the “Company,” “we,” “us” or “our” refer to Hologic, Inc.
20182019 Annual Meeting of Stockholders
TIME AND DATE:
8:00 a.m. Pacific Time
Thursday, March 7, 2019
PLACE:
Hologic, Inc.
10210 Genetic Center Drive
San Diego, California
RECORD DATE:
January 7, 2019
MEETING AGENDA AND VOTING RECOMMENDATIONS
|
Meeting Agenda and Voting Recommendations
Board Recommendation | Page | ||||
Election of | FOR | 19 | |||
Say-on-Pay: Advisory Vote to Approve Executive Compensation | FOR | ||||
38 | |||||
Ratification of the Appointment of Ernst & Young LLP for fiscal | FOR |
ATTENDANCE:
All stockholders may attend the meeting. Stockholders who plan to attend the meeting must present a valid government-issued picture identification such as a driver’s license or passport. Stockholders of record will be verified against an official list available at the registration area. If your shares are held in the name of a bank, broker or other holder of record, please also bring your bank or brokerage statement evidencing your beneficial ownership of Hologic stock to gain admission. We reserve the right to deny admittance to anyone who cannot show valid identification or sufficient proof of share ownership as of the record date.
VOTING:
Stockholders as of January 7, 2019, the record date, are entitled to vote. Each share of common stock is entitled to one vote for each of the proposals presented at the meeting.
VOTE BY INTERNET
Go towww.proxyvote.comand enter the 12-digit control number provided on your proxy card or voting instruction form.
VOTE BY TELEPHONE
Call 800-690-6903 or the number on your proxy card or voting instruction form. You will need the 12-digit control number provided on your proxy card or voting instruction form.
VOTE BY MAIL
Complete, sign and date the proxy card or voting instruction form and mail it in the accompanying pre-addressed envelope.
Electronic Stockholder Document Delivery |
Stockholders can help us reduce costs and the impact on the environment by electing to Contents
Director Nominees
Director | |||||||||
Nominee and Principal Occupation | Age | Since | Independent | Current Committee Membership | |||||
Stephen P. MacMillan | 54 | 2013 | ● | N/A | |||||
Chairman, President and Chief Executive Officer | |||||||||
Hologic, Inc. | |||||||||
Sally W. Crawford | 64 | 2007 | ✔ | ● | Lead Independent Director | ||||
Former Chief Operating Officer | ● | Compensation | |||||||
Healthsource, Inc. | ● | Nominating and Corporate Governance (Chair) | |||||||
Charles J. Dockendorff | 63 | 2017 | ✔ | ● | Audit and Finance (Chair) | ||||
Former Chief Financial Officer and Executive | ● | Nominating and Corporate Governance | |||||||
Vice President | |||||||||
Covidien plc | |||||||||
Scott T. Garrett | 68 | 2013 | ✔ | ● | Compensation (Chair) | ||||
Senior Operating Partner | ● | Nominating and Corporate Governance | |||||||
Water Street Healthcare Partners | |||||||||
Namal Nawana | 47 | 2018 | ✔ | ● | N/A | ||||
Former Chief Executive Officer and President | |||||||||
Alere, Inc. | |||||||||
Christiana Stamoulis | 47 | 2011 | ✔ | ● | Audit and Finance | ||||
Chief Financial Officer and Head of Corporate | ● | Nominating and Corporate Governance | |||||||
Development | |||||||||
Unum Therapeutics | |||||||||
Amy M. Wendell | 57 | 2016 | ✔ | ● | Audit and Finance | ||||
Former Senior Vice President, Strategy & BD&L | ● | Nominating and Corporate Governance | |||||||
Covidien plc |
receive and access future copies of our proxy statements, annual reports and other stockholder materials electronically. We encourage stockholders to elect to receive an email that will provide electronic links to our proxy materials as well as to the proxy voting site. For further information on how to sign up for electronic delivery, please see page 89 of this proxy statement.
Business and Financialwww.hologic.com 7
Proxy Statement Summary
Performance Highlights
Hologic, Inc. is an innovative medical technology company primarily focused on improving women’s health and well-being through early detection and treatment. The Company operates in four main areas: Breast & Skeletal Health, Diagnostics, GYN Surgical and Medical Aesthetics.
Our market-leading products include our innovative Genius™ 3D MAMMOGRAPHY™ technology, our Affirm™ prone biopsy system, our new Brevera® breast biopsy system, our ThinPrep® papPap test, our Aptima® infectious disease tests, our Panther® and Panther Fusion® fully automated molecular diagnostics instruments, our NovaSure® device for endometrial ablation, our MyoSure® system for intrauterine tissue removal, and our Cynosure® brands.
Over the past fourfive years, under the guidance of a focused and motivated senior management team, almost all of whom joined the Company in fiscal 2014 or later, we have made great progress toward building a sustainable growth company. Our solid financial results in fiscal 20172018 reflect the progress we have made. In the short term, we strengthened our product leadership positions, enabling us to deliver solid revenue and earnings growth in lineThe year started slowly, with our external guidance. Atcore domestic businesses (excluding the same time, we took three important steps to solidify our growth profile for the long term. First, we laid the foundations for sustainable international growth through new leadership, new productsacquired medical aesthetics and better commercial execution. Second, we shifted our business portfolio toward higher-growth segments by divesting ourdivested blood screening businessfranchises) declining slightly in the first half of the year. However, our performance improved significantly over the course of fiscal 2018, led by our domestic Breast Health and acquiring Cynosure. And third, we acceleratedMolecular Diagnostics businesses as well as our launch of new products that reflect increasing innovationInternational businesses. Operational highlights from our revitalized research and development pipeline. the year include:
● | Growth rates in our domestic Breast Health and Surgical businesses improved over the course of the year. |
● | Our international franchises showed strong, consistent growth, reflecting the investments we have made in new leadership, capabilities and infrastructure and contributions from distributor acquisitions in the Breast Health business. |
● | Breast Health emerged as a more diversified, sustainable growth business, evolving from a domestic capital franchise into a steady, global growth business across the continuum of breast health care. For example, we recently acquired Faxitron Bioptics and, just after fiscal year end, Focal Therapeutics, to expand into the adjacent growth market of breast-conserving surgery. |
● | Our Molecular Diagnostics business continued to perform well as we placed more fully automated Panther systems and increased the number of assays that customers can run on the platform. |
● | Research and development pipelines matured across our businesses, and sales of new products increased significantly. |
Financial highlights from fiscal 2017, all of which include the effects of divesting our blood screening business and acquiring Cynosure,2018 are shown below:
Worldwide Revenue | International Revenue | Share Repurchases | Debt | Stock Price |
Full-year GAAP revenue increased |
5%, in part due to the acquisition of Cynosure and contributions from two distributor acquisitions. |
International revenue increased | Our strong cash flow enabled us to repurchase 7.3 million shares of our stock during fiscal |
2018, and we ended the year with fewer diluted shares outstanding. | Even with share repurchases and several acquisitions, debt declined slightly |
balance sheet. | The price per share of our common stock increased |
2018.
Looking ahead, we are focused on driving sustainable, long-term growth, and believe we have significant opportunities ahead of us.
✓ | We remain significantly under-penetrated internationally, as only |
2018. | We have many opportunities to leverage our commercial strengths – such as our large Genius 3D and Panther installed bases – for future growth. | ✓ | We continue our commitment to fuel growth by enhancing the research and development pipelines in each area of our business |
and by executing focused acquisitions. |
Multiple opportunities to increase operational efficiency and |
8 2019 Proxy Statement
Proxy Statement Summary
Corporate Governance Highlights
Director Nominees
Nominee and Principal Occupation | Age | Director Since | Independent | Current Committee Membership | ||||
Stephen P. MacMillan Chairman, President and Chief Executive Officer Hologic, Inc. | 55 | 2013 | ●N/A | |||||
Sally W. Crawford | 65 | 2007 | ✓ | ●Lead Independent Director ●Compensation ●Nominating and Corporate Governance(CHAIR) | ||||
Charles J. Dockendorff | 64 | 2017 | ✓ | ●Audit and Finance(CHAIR) | ||||
Scott T. Garrett | 69 | 2013 | ✓ | ●Compensation(CHAIR) ●Nominating and Corporate Governance | ||||
Ludwig N. Hantson | 56 | 2018 | ✓ | ●Compensation ●Nominating and Corporate Governance | ||||
Namal Nawana | 48 | 2018 | ✓ | ●Compensation ●Nominating and Corporate Governance | ||||
Christiana Stamoulis | 48 | 2011 | ✓ | ●Audit and Finance | ||||
Amy M. Wendell | 58 | 2016 | ✓ | ●Audit and Finance |
Our Board consists of a uniquely strong group of proven leaders in diverse healthcare companies. It is also exceptionally balanced by age (two directors in their 40s, three directors in their 50s and three directors in their 60s), gender (38% female) and geographic experience (38% born outside of the country). Given its smaller size, the Board is a collegial group, with each member contributing and having his or her voice heard while supporting and appropriately challenging management. The mix of experience, diversity and fresh perspectives on the Board serves to strengthen management and the Company. |
GENDER DIVERSITY | DIRECTOR TENURE | DIRECTOR AGE |
www.hologic.com 9
Proxy Statement Summary
Hologic is committed to good corporate governance, which we believe will help us to sustain our success and build long-term stockholder value. In fiscal 2017, we continued to improve our corporate governance structure, focusing on the following:
Board Assessment Composition and StructureRefreshment
Our Nominating and Corporate Governance Committee is continually evaluating our Board composition. In 2015, our Nominating and Corporate Governance Committee led a Board assessment which included a Board peer review, managed by our general counsel. In 2016, the Nominating and Corporate Governance Committee continued to spearhead the assessment process by leading a facilitated discussion to evaluate the functioning and composition of the Board and its committees. In 2017 and 2018, the full Board and each Board committee completed anonymous written evaluations, the results of which were shared with the Board and each respective committee. All evaluations were reviewed in detail by the Chairman and the Lead Independent Director, who led a discussion with the full Board highlighting both areas of strength and areas of opportunity. The Board also assesses annually the efficacy of having a Lead Independent Director and a combined Chairman/CEO. In both 2016 and 2017, the Board affirmed its June 2015 decision to combine the Chairman and CEO roles and to appoint a Lead Independent Director.
Our Board continueshas shown an ongoing commitment to evolve.Board refreshment and to having highly qualified, independent voices in the boardroom. Our Nominating and Corporate Governance Committee recognizes that board refreshment is essential to ensuring that the composition of our Board evolves to meet the needs of an evolving Company. Since March 2016, eight directors have rotated off of our Board, including two representatives from the Icahn group, one director who resigned due to a conflict with another board, and five who were among our longest-tenured directors (one of whom had reached retirement age). Since March 2016, five new independent directors have been elected to our Board. Currently, 75 percent of our directors have been on our Board for five years or less.
● | MARCH 2016 | ||
●Two of our long-tenured directors did not stand for re-election at our 2016 Annual Meeting |
● |
● |
● | DECEMBER 2016 | |||
The Board appointed a new director, Amy M. Wendell |
● | MARCH 2017 | |||
●Our then longest-tenured director did not stand for re-election at our 2017 Annual Meeting |
● |
● | MAY 2017 | |||
●The Board appointed a new director, Charles J. Dockendorff |
● | DECEMBER 2017 | |||
● | ●The Board appointed Sally W. Crawford as our new Lead Independent Director |
● | JANUARY 2018 | |||
●The Board appointed a new director, Namal Nawana |
● | MARCH 2018 | |||
●Our then longest-tenured director |
The Board assesses the structure and composition of its committees at least annually. In December 2017, the Board appointed Mr. Dockendorff as chair of the Audit and Finance Committee, Mr. Garrett as chair of the Compensation Committee and Ms. Crawford as Lead Director and chair of the Nominating and Corporate Governance Committee. Given the current size of the Board and the desire of the full Board to fully participate in the search for a new director, in December 2017, the Board also expanded the Nominating and Corporate Governance Committee to include all existing independent members of the Board.
Risk Management Process
Our general counsel continues to strengthen the Company’s risk management process, presenting a comprehensive but targeted annual enterprise risk management report to the Board as well as a report from time to time on evolving risks and mitigating actions, as warranted. Additionally, the Compensation Committee worked with Mr. MacMillan to align the executive leadership team’s individual performance objectives with the top risks identified in the annual Enterprise Risk Management process.
Continued Stockholder Outreach
In fiscal 2017, we continued the year-round approach to stockholder engagement we implemented in 2015. In addition to discussions that take place before our Annual Meeting, we initiated discussions in early fall 2017 during a quieter period, reaching out to our largest stockholders, representing over 50% of our shares. We ultimately met with six of our investors as
part of this outreach to discuss business highlights, as well as compensation and governance matters, including proxy access. Details of stockholder feedback are incorporated throughout this proxy statement. We reached out to shareholders again following the announcement of Mr. MacMillan’s special equity retention grant and received positive feedback, as discussed in the Compensation Discussion and Analysis section of this proxy statement.
Sustainability
We are committed to improving the health of our communities, customers, patients and employees, and to ensuring that the decisions we make today have a positive effect on future generations. In October 2016, we made our first sustainability disclosure, posting information on our website in four initial areas of focus: Energy and Greenhouse Gas Efficiency, Recycling/ Reuse, Supply Chain and Workplace Health and Safety. Our sustainability program is evolving and we are continuing to build on this initial foundation.
Election and Removal of Directors
In March 2016, we amended our Bylaws to permit stockholders holding a majority of shares entitled to vote to remove directors with or without cause, in accordance with Delaware law.
In March 2017, management proposed, and stockholders approved, amending our Bylaws to provide for a majority vote standard in the case of uncontested elections of directors.
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| |
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Our Board Profile*
Our Director nominees exhibit an effective mix of skills, experience, diversity and fresh perspectives. All Director nominees exhibit:
●The Board appointed a new director, Ludwig N. Hantson, who is standing for election at this Annual Meeting |
BOARD CHANGES SINCE 2016
Four new highly skilled independent directors have joined our Board |
Eight directors have left our Board |
2015 Average | 6.4years |
2019 Average Tenure | 4.8years |
SKILLS OF DIRECTORS JOINING THE BOARD SINCE 2016
10 2019 Proxy Statement
Proxy Statement Summary
*Director nominees
Compensation Highlights
The Compensation Committee has responsibility for oversight of the Company’s executive compensation framework, and within that framework, works with management to align pay with performance.
The Board annually assesses the efficacy of having a Lead Independent | |||
Director and a combined Chairman/CEO. In each of 2018, 2017 | ||
*Numbers in millions
Note About Forward-Looking Statements
This proxy statement includes estimates, projections and statements relating to our business plans, objectives and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this proxy statement, including but not limited to this Proxy Statement Summary and the Compensation Discussion and Analysis. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We describe risks and uncertainties that could cause actual results and events to differ materially in “Risk Factors,” “Quantitative and Qualitative Disclosures about Market Risk,” and “Management’s Discussion and Analysis” sections of our Forms 10-K and 10-Q. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.
Hologic’s governance responsibilities are built on a foundation of interactive dialogue with stockholders, written principles and continuous improvement, which we believe will help us sustain our success, build trust in the Company and continue to create long-term stockholder value. To that end, the Company has in place Corporate Governance Guidelines which are designed to assist the Company and the Board in implementing effective corporate governance practices. The Board has also adopted a Code of Conduct that applies to all of our employees, officers and directors and a Code of Ethics (included as Appendix A to our Code of Conduct) that applies specifically to senior financial officers. These policies are publicly available on our website atinvestors.hologic.com. Hologic posts additional information on our website from time to time as the Board makes changes to our corporate governance practices.
Our Board believes that good governance requires not only an effective set of specific practices, but also a culture of responsibility and accountability throughout the organization. Governance at Hologic is intended to achieve both. Good governance ultimately depends on the quality of an organization’s leadership, and our Board is committed to recruiting and retaining directors and officers with proven leadership ability and personal integrity.
The Board has implemented corporate governance practices that it believes are both in the best interests of Hologic and our stockholders as well as compliant with the rules and regulations of the SEC and the listing standards of NASDAQ. The Board reviews these practices on an ongoing basis. Highlights of our corporate governance practices are summarized below.
Chairman and Lead Director Roles
Our Bylaws and Corporate Governance Guidelines permit the roles of Chairman and Chief Executive Officer to be filled by the same or different individuals. This allows the Board flexibility to determine whether the two roles should be combined or separated based upon our needs and the Board’s assessment of its leadership from time to time. The Board and the Nominating and Corporate Governance Committee review the structure of the Board and Hologic leadership as part of the succession planning process on an ongoing basis. The Board also reviews its structure during its annual self-assessment. The Board believes that Hologic and its stockholders are best served at this time by having our CEO, Stephen P. MacMillan, also serve as our Chairman, and Sally W. Crawford, an independent director, serve as our Lead Director. Combining the roles of Chairman and CEO makes clear that we have a single leader who is directly accountable to the Board and, through the Board, to our stockholders. It establishes one voice who speaks for the Company to customers, employees, stockholders and other stakeholders. This structure reinforces Mr. MacMillan’s overall responsibility for the Company’s business and strategy, under the oversight and subject to the review of the Board. It strengthens the Board and the Board’s decision-making process because Mr. MacMillan, who has first-hand knowledge of our operations and the major issues facing Hologic, chairs the Board meetings where the Board discusses strategic and business issues. This structure also enables Mr. MacMillan to act as the key link between the Board and other members of management and facilitate an efficient Board process.
The Board recognizes the importance of having a strong independent Board leadership structure to ensure accountability. Accordingly, our Corporate Governance Guidelines provide that if the Chairman is not an independent director, then the independent directors will select a Lead Director. The Board believes that a Lead Director is an integral part of our Board structure and facilitates the effective performance of the Board in its role of providing governance and oversight. After serving as Lead Director since June 2015 and as a member of our Board since 2007, Ms. Ullian has decided to retire and not seek re-election. We thank her for her exceptional leadership and unyielding dedication to the Company and its stockholders. In December 2017, the Board appointed Sally W. Crawford to serve as Lead Director.
Ms. Crawford, as Lead Director, has significant responsibilities. Certain specific responsibilities are set forth in Hologic’s Corporate Governance Guidelines and include:
COMMITTEE ROTATION The Board assesses the structure and composition of its committees at least annually. In December 2017, the |
Mr. MacMillan’s responsibilities as Chairman of the Board are also set forth in our Corporate Governance Guidelines and include:
BOARD RETIREMENT AGE POLICY The Board believes that a mix of longer-tenured directors and newer directors with fresh perspectives contributes to an effective Board. In order to promote thoughtful Board refreshment, the Board adopted a retirement age policy in 2015. Independent directors may not stand for | |||
In addition to discharging the specific responsibilities identified above, Mr. MacMillan consults with Ms. Crawford on a variety of matters, including governance and strategy. As Lead Director and Chair of the Nominating and Corporate Governance Committee, Ms. Crawford takes the lead in Board structure and composition. In addition, Ms. Crawford’s ability to assert independent leadership while working collaboratively with other directors, particularly evident when she served as chair of the Compensation Committee, as well as her diligence and preparedness enable her to serve effectively as our Lead Director and as Chair of our Nominating and Corporate Governance Committee. During 2017, the Board again considered and affirmed the current efficacy of the Lead Director and combined Chairman/CEO structure for the Company. We have also discussed this structure with a number of our largest stockholders. While several advised that they do scrutinize combined Chair/CEO structures as a matter of practice, none expressed concern over this structure for Hologic.
Independent Directors and Committees
In evaluating its leadership structure, the Board also considered that, other than Mr. MacMillan, all of our directors are independent. Our independent directors appropriately challenge management and demonstrate independent judgment in making important decisions for our Company. In addition, each of the Board’s standing committees – Audit and Finance, Compensation, and Nominating and Corporate Governance – is comprised entirely of independent directors. As a result, oversight of key matters, such as the integrity of Hologic’s financial statements, executive compensation, the nomination of directors and evaluation of the Board and its committees, is entrusted to independent directors. Finally, the Board meets in executive session without the CEO in connection with each regularly-scheduled Board meeting as well as any other times it deems appropriate. The active involvement of the independent directors, combined with the qualifications and significant responsibilities of our Lead Director, promote strong, independent oversight of Hologic’s management and affairs.
Our Board is responsible for risk oversight. A fundamental part of risk oversight is understanding the risks that we face, the steps management is taking to manage those risks and assessing our appetite for risk. Risk management systems, including our internal auditing procedures, internal control over financial reporting and corporate compliance programs, are designed in part to inform management about our material risks. It is management’s responsibility to manage risk and bring to the Board’s attention material risks facing the Company. Our Board receives regular reports from management on matters relating to strategic and operational initiatives, financial performance and legal developments, including the related enterprise-risk exposures. The involvement of the Board in the oversight of our strategic planning process is a key part of its assessment of the risks inherent in our corporate strategy. Our general counsel leadsand corporate secretary lead the Company’s annual enterprise risk assessment, presenting a comprehensive but targeted risk management process.report to the Board each year, and, along with the CEO, report on evolving risks and mitigation actions throughout the year, as warranted. As part of thisthe annual process, risk is assessed throughout the business on a three-year horizon, focusing on three primary areas: financial risk, legal/compliance risk and operational/strategic risk. The resulting enterprise risk management report (“ERM report”) details the Company’s top ten10 risks, as well as mitigating actions and plans relating to those risks,risks. The ERM report includes a rolling three-year evaluation period reflecting mitigation activity progress and risk rating changes and is presented to and discussed with the Board on an annual basis. This year, the ERM report highlighted changes in the risks identified in the prior year’s report as well as mitigating actions.Board. Underscoring the Board’s and management’s focus on enterprise risk are the individual performance objectives of the executive leadership team for fiscal 2018,2019, which are again aligned with the Company’s top enterprise risks, as identified in the ERM report.
Leadership Restructure and Succession Planning
WhileThe Board, as well as Mr. MacMillan, have a fundamental belief that people matter. At the end of fiscal 2017, Mr. MacMillan re-evaluated the Company’s management structure and eliminated the position of Chief Operating Officer. This change brings Mr. MacMillan closer to the businesses – fostering more transparency and accountability. With Division Presidents reporting directly to him, Mr. MacMillan is driving even more urgency in commercial execution and also has a broader range of business development opportunities coming to him more quickly. As part of the leadership restructuring, Mr. MacMillan expanded his executive leadership team, forming the Global Leadership Team (GLT). This expanded group gives more leaders direct access to Mr. MacMillan. He also assumed responsibility from the Chief Operating Officer to conduct business reviews and leads quarterly business reviews with each division, including in the reviews members of the GLT along with the leadership team for the applicable division. Following this leadership restructuring, growth rates for the Company’s largest businesses significantly accelerated over the course of the year, and the Company initiated and executed on two key tuck-in acquisitions in the Breast Health division.
Following Mr. MacMillan’s potential departure last fall, the Board has overall responsibility for risk oversight, each of the three standing committees of the Board regularly assesses risk in connectionand Mr. MacMillan intensified their focus on succession planning. Succession planning starts with executing their responsibilities. In particular, the Audit and Finance Committee focuses on financial risk, including internal controls, and receives an annual risk assessment report
from the Company’s internal auditors. At the Compensation Committee’s direction, the Compensation Committee’s independent compensation consultant conducts a risk assessment of our executive compensation programs, and members of our internal legal, human resources and sales operations departments evaluate our other compensation programs. The Committee and its independent compensation consultant reviewed and discussed these assessments for fiscal 2017,Mr. MacMillan, his team and the Compensation Committee, concurredbut is continued with the assessmentfull Board. The Board devotes significant time on its agenda to succession planning, reviewing and discussing the succession
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Proxy Statement Summary
plans for the CEO and each of his direct reports. With the departure this summer of Bob McMahon, the Company’s former CFO, such succession planning became more evident. Karleen Oberton, our current CFO, joined the GLT last fall, when she was the Corporate Vice President, Finance and Accounting, Chief Accounting Officer and Corporate Controller. Her participation on the GLT gave her additional exposure to Mr. MacMillan and other members of the leadership team. This helped Mr. MacMillan and the Board feel confident in the succession plan in place and enabled a smooth transition for Ms. Oberton as she assumed the role of CFO - another benefit of Mr. MacMillan’s leadership restructure.
Diversity and Inclusion
As our passion is to be global champions for women’s health, Hologic is committed to creating an inclusive and diverse work environment that promotes equal opportunity, dignity and respect, starting with our Board and our leadership team. As noted above, three of our directors, representing 38% of the Board, are women. Also, three of our directors were born outside of the United States, and two were predominantly educated outside of the United States, which promotes global diversity for our Board. Hologic seeks to identify and develop high-potential women within the Company, and we are now beginning to see our next generation of leaders emerge. For example, in August 2018, Karleen Oberton was promoted to the position of CFO. Ms. Oberton has been with the Company for over 12 years and has a deep knowledge of our business. She has been instrumental in our efforts to both drive profitable growth and to strengthen our balance sheet and cash flows. Additionally, over the last 18 months, several women leaders were appointed to key commercial roles in our businesses. Our focus on talent development, engagement and succession planning is paying off.
Governance
Hologic is committed to good corporate governance, which we believe will help us to sustain our success and build long-term stockholder value.
WE BELIEVE IN GOOD CORPORATE GOVERNANCE
BOARD PRACTICES | STOCKHOLDER MATTERS | |
✓Annual election of directors ✓Seven of our eight director nominees are independent ✓All committees consist solely of independent directors ✓Regular executive sessions of independent directors ✓Lead Independent Director ✓38% of our board nominees are women, including our Lead Independent Director | ✓Active stockholder engagement ✓Stockholders permitted to act by written consent ✓Stockholder right to request a special meeting ✓Annual say-on-pay advisory vote ✓No shareholder rights plan (“poison pill”) ✓Majority vote standard in uncontested elections of directors |
✓No hedging or pledging of our securities by executive officers or directors permitted ✓Robust executive and director stock ownership guidelines ✓Majority of shares may remove directors with or without cause |
We are committed to improving the health of our communities, customers, patients and employees, and to ensuring that the decisions we make today have a positive effect on future generations. We understand that creating value for our shareholders is one of our fundamental obligations as a public company, but we know that how we create that value is important. In October 2016, we made our first sustainability disclosure, posting information on our website in four initial areas of focus: Energy and Greenhouse Gas Efficiency, Recycling/ Reuse, Supply Chain and Workplace Health and Safety. Beyond numbers and statistics, we look for deeper meaning in our work. As articulated in Mr. MacMillan’s letter to shareholders – a letter which was also mailed to each Hologic employee -- we focus on our purpose as a company: to enable healthier lives, everywhere, every day. Within this purpose, we place a special emphasis on the healthcare needs of women – it is our passion to become global champions for women’s health. We are inspired by the deep belief that our success as a company will fundamentally improve the health of millions of women and families globally. By focusing on our unique purpose, passion and promise, we strive to generate long-term, profitable growth that benefits not just our shareholders, but also our customers and patients around the globe. |
12 2019 Proxy Statement
Proxy Statement Summary
Executive Compensation Highlights
The Compensation Committee has responsibility for oversight of the Company’s executive compensation programs doframework, and within that framework, works with management to align pay with performance.
2018 Executive Compensation Framework
Component | % of Total Target(1) | Rationale | Key Characteristics | ||||||||
Base Salary | ●Attract and retain talent with a competitive level of pay that reflects executive’s experience, role and responsibilities | ●Cash Award | |||||||||
Short-Term Incentive Plan (“STIP”) Award | ●Incentivize and reward for corporate and individual performance ●Drive achievement of specific goals | ●Cash Award Based primarily on two metrics: ●Adjusted Revenue ●Adjusted EPS | |||||||||
Restricted Stock Units | ●Encourage long-term focus ●Align interests of executives with stockholders ●Attract and retain talent | ●Equity Award ●Annual vesting over three years | |||||||||
Stock Options | ●Encourage long-term focus ●Align interests of executives with stockholders ●Attract and retain talent | ●Equity Award ●Annual vesting over four years | |||||||||
Performance Stock Units | ●Encourage long-term focus ●Incentivize and reward for performance ●Align interests of executives with stockholders ●Attract and retain talent ●Drive achievement of specific goals | ●Equity Award ●Cliff vest after three years, based on performance ●ROIC ●Relative TSR | |||||||||
Deferred Compensation Program (“DCP”) Contributions | ●Incentivize and reward for performance ●Attract and retain talent | ●Cash Award ●Annual vesting over three years |
(1) | Based on the average of the target direct annual compensation elements for all of the named executives in 2018. |
2018 ANNUAL TARGET CEO PAY
($ in millions)
2018 ANNUAL TARGET AVERAGE NEO PAY
($ in millions)
The charts above, which reflect target total direct compensation, exclude the value of other benefits and perquisites and, for Mr. MacMillan, exclude his special retention and matching equity grants, as those were not create risks thatconsidered when setting his annual compensation.
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Proxy Statement Summary
CEO Pay for Performance Alignment
2013 | 2018 | |||
●$4.0 billion net debt ●Declining organic sales and earnings ●No meaningful product pipeline | NET DEBT DECREASED TO $2.6 BILLION ✓Disciplined approach to strengthening the balance sheet ✓Eliminated all convertible debt from our balance sheet | GROWTH IN SALES ✓Significant contributions by our commercial teams and international businesses drive sustainable growth, with our largest businesses gaining momentum | ACQUISITIONS AND MULTIPLE NEW PRODUCT LAUNCHES ✓Significantly improved the product pipeline from 2013 to 2018, resulting in numerous new product launches ✓Executed on several smaller tuck-in acquisitions | |
As a result SHARE PRICE HAS INCREASED BY 96% SINCE 2013 |
LONG-TERM FOCUS
Financial results for one year are reasonably likely to have a material adverse effectsnapshot of short-term performance. Our focus is on the long term. Since Mr. MacMillan joined the company in 2013, the Company has invested significantly in its people, infrastructure and products. The power of focused, motivated people is evident, and has driven growth in revenue and profits over the past five years.
NOVEMBER 2013
Before the current management team was in place, our organic sales and earnings were declining, we had $4.0 billion in debt, and we had no meaningful product pipeline. Our interest expense on our business. As wedebt was higher than our expenditures on research and development (R&D).
SEPTEMBER 2018
Under the stewardship of our management team, with significant contributions by our commercial teams, our sales have not only stopped declining, but our largest divisions are indriving growth. In fiscal 2018, organic growth (growth excluding the processimpact of integrating Cynosure, including its compensation programs, we did not include the Cynosure compensation programs inacquisition and disposition of the blood screening business) was led by our formal annual review. However, in the course ofinternational businesses, our ongoing integration,molecular diagnostics products including Panther and APTIMA, and our new management team at Cynosure has not identified compensation programs at Cynosure that we believe create risks that are reasonably likely to have a material adverse effect on ourBreast Health business.
While the Board, through the Nominating and Corporate Governance Committee, oversees stockholder matters and participates in meetings with stockholders, as appropriate, management has the principal responsibility for stockholder communications and engagement. As discussed below, management provides regular feedback to the Board concerning stockholder feedback.
During 2017, we continued the year-round approach to stockholder engagement we implemented in 2015. In addition to revenue growth, the Company’s disciplined approach to strengthening the balance sheet also has paid off. From fiscal 2013 to fiscal 2018 our net debt, which is total debt minus cash, decreased from $4.0 billion to $2.6 billion, our ROIC improved significantly, and our strong free cash flow enabled us to repurchase shares of our common stock.
While decreasing our debt, we also have increased our R&D spending by double-digits since 2013. This investment is yielding benefits, as evidenced by the multiple new product launches in 2018. New product sales tripled from 2017 to 2018.
These improvements have helped drive our share price. Our share price has increased by 96% since 2013, based on a comparison of the closing price on the last trading day of fiscal 2013 to the closing price on the last trading day of fiscal 2018. We are committed to bringing value to our stockholders, as well as to our employees and customers, over the long term.
SPECIAL RETENTION EQUITY GRANT
In light of his long track record of success, other larger medical device and healthcare companies have expressed interest over time in hiring Mr. MacMillan to serve as Chief Executive Officer. In October 2017, Mr. MacMillan received such an offer from a larger medical device company. The independent members of the Company’s Board of Directors considered the potential for disruption to Hologic and its business as well as the impact on stockholder value should Mr. MacMillan leave, and determined that it was in the best interests of Hologic and its stockholders to retain him as Chairman, President and Chief Executive Officer. Accordingly, the independent members of the Board, after careful consideration and discussions just beforewith Mr. MacMillan and the Compensation Committee’s compensation consultant, awarded Mr. MacMillan a $30 million special retention equity grant, effective December 1, 2017.
14 2019 Proxy Statement
Proxy Statement Summary
Rather than attempt to match the sign-on bonus offered to Mr. MacMillan by the other medical device company by making a one-time cash award, the independent members of the Board chose to make an equity grant, two-thirds of which is subject to a three-year performance period (PSUs) and one third of which vests in equal installments over four years (options). If the Company does not meet the minimum ROIC and relative TSR threshold targets for the PSUs, none of the PSUs granted to Mr. MacMillan as part of this retention grant will vest. If the Company’s share price does not exceed the exercise price of the options, they will have no value. Mr. MacMillan was afforded no special treatment with respect to the structure of the grants, including performance goals, which are identical to those set for the fiscal 2018 annual grants awarded to senior executives. This grant serves the dual purpose of retaining Mr. MacMillan and continuing to incentivize performance. For additional information regarding this special retention equity grant, please see the “Compensation Discussion and Analysis” and “Message from the Compensation Committee”, beginning on page 40.
A Unique Asset – Investment Analysts Agree The day after our post-market close announcement of Mr. MacMillan’s special retention equity grant, the response from stockholders and investment analysts was overwhelmingly positive. In the words of several analysts: “We believe the possibility of CEO MacMillan leaving has been an overhang on the stock and we would expect HOLX shares to be up on this news. . . The Board believed (appropriately in our view) it was in the best interest of HOLX shareholders after considering the disruption to HOLX and the business should he leave to issue a retention package. . .” “We view the retention of Mr. MacMillan as positive for HOLX as he has been a key architect behind the company’s turnaround. Since he joined the firm in December 2013, the stock has returned ~75%, outperforming the S&P by ~30%. Quarterly earnings results and sales growth have stabilized during his tenure . . . in our opinion this news underscores the difficulty of hiring talented managers in the medtech space.” “ . . .faith in the execution capabilities of the HOLX management team (many personally recruited by the CEO) is a material component of our and others’ investment theses in HOLX. A leadership change would have been disruptive.” These views expressed by the investment analysts are consistent with and reflect issues discussed by the Board as it considered whether or not to award the special retention equity grant. Additionally, the Company publicly announced the grant on November 2, 2017, after the close of market. The Company’s stock price increased 3% on the next day, adding over $300 million in value in just that day, and from November 2, 2017 to November 30, 2017, the Company’s stock price increased 8.6%, adding almost $900 million in value in a month. | ||
Executive Compensation Best Practices
WHAT WE DO | WHAT WE DON’T DO | |
✓Double-trigger for accelerated equity vesting upon a change of control ✓Golden parachute policy ✓Compensation recoupment (“clawback”) policy ✓Heavy emphasis on performance-based compensation ✓Meaningful stock ownership guidelines for our CEO, non-employee directors and executive officers ✓Independent compensation consultant ✓Annual risk assessments | ✕No tax gross-ups on severance or change of control payments ✕No hedging/pledging of Hologic stock ✕No option repricing without stockholder approval ✕No excessive perquisites for executives |
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Proxy Statement Summary
Stockholder Engagement
Targeted Outreach (Winter 2017 and Spring 2018)
Following disclosure of the special performance-based retention equity grant to Mr. MacMillan noted above, we reached out to 10 of our Annual Meeting,largest stockholders, representing more than 50% of our outstanding shares, to discuss the grant. In addition, we initiated discussions duringhad numerous conversations on the subject with stockholders and investment analysts as part of our normal investor relations activities.
After we filed our proxy statement and, following a quieter period several months later, reachingnegative say-on-pay vote recommendation from one proxy advisory firm, we filed additional soliciting materials to respond to concerns raised by the proxy advisory firm. We then reached out again to a number of our largest stockholders, representing over 50%investors to discuss the materials and answer any questions they might have.
While during the course of our outstanding shares. Topics discussed withdiscussions, several investors expressed some concern over the investors with whom we met included business highlights, Board composition, executive compensation, proxy accessgrant, feedback from stockholders and other governance practices.investment analysts was overwhelmingly positive.
Annual Outreach (Fall 2018)
OUTREACH During the “offseason”, we reached out to ten stockholders representing over 62% of our shares | MEETINGS We ultimately met with eight of our largest investors as part of this outreach | MATTERS DISCUSSED We discussed business highlights as well as compensation and governance matters, including Board composition and refreshment, compensation design, the fall 2017 special CEO retention equity grant and other governance matters. Details of stockholder feedback are incorporated throughout this proxy statement. |
Annual Outreach Feedback
WHAT WE HEARD | WHAT WE DID | ||
Board Composition ●All investors with whom we spoke appreciated our continued Board assessment and refreshment process, ●All expressed support for the current Board composition and | The leadership structure of our Board is designed to ensure robust oversight, independent viewpoints, and the promotion of the overall effectiveness of the Board. At least annually, the Board reviews its leadership structure as part of the process described on page 27. Based on the Board self-assessment in 2017, the Board added two new members in 2018, both with strong global experience and perspectives. |
16 2019 Proxy Statement
Proxy Statement Summary
WHAT WE HEARD | |||
Compensation ●We know that the special CEO retention equity grant is top of mind for many investors and we discussed this at all of our meetings with stockholders. Most investors were supportive of the special CEO equity retention grant and understood the rationale for the grant, including the unique nature of the situation. ●Investors with whom we spoke were uniformly supportive of our focus on performance-based compensation and the metrics that we use; particularly the use | Following the announcement of Mr. MacMillan’s special retention equity grant in the fall of 2017, we reached out to our stockholders and received positive feedback. We further committed to reach out again after this proxy statement is filed for additional dialogue. As noted below, investment analysts also understood the Additionally, we Please see the “Compensation Discussion and Analysis” and the “Message from the Compensation Committee” beginning on page |
Corporate Purpose, Culture and Proxy Access ●Investors ●A number of investors asked about Board and Company culture below the C-suite and how the Board was exposed to Company culture. ●One investor asked about our plans to adopt proxy | The Board has kept its size relatively small, which has bolstered the collegial nature of the The Board is exposed to Company culture in several ways: ●Review results of the Company’s annual employee engagement survey ●Facility tours during Board meetings at various company locations, generally once a year, led by employees ●Presentations by Division and Regional Presidents at Board meetings ●Engagement outside of meetings, including individual consultations with division teams, informal mentoring of our CFO by the Audit and Finance Committee Chair, and joining employees for the ringing of the opening bell at NASDAQ for breast cancer awareness month, including lunch and dinner with employees The Nominating and Corporate Governance Committee |
Note About Forward-Looking Statements
This proxy contains forward-looking information that involves risks and uncertainties, including statements about the Company’s plans, objectives, expectations and intentions. Such statements include, without limitation: financial or other information included herein based upon or otherwise incorporating judgments or estimates relating to future performance, events or expectations; the Company’s strategies, positioning, resources, capabilities, and expectations for future performance; and the Company's business and financial outlook. These forward-looking statements are based upon current expectations and assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated.
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Proxy Statement Summary
These risks and uncertainties include, without limitation: the ability of the Company to inputsuccessfully manage leadership and organizational changes, including the ability of the Company to attract, motivate and retain key employees; U.S., European and general worldwide economic conditions, trade relations and related uncertainties; the Company’s reliance on current governancethird-party reimbursement policies to support the sales and executive compensation topics specificmarket acceptance of its products; changes to Hologic, we invite discussion on anyapplicable laws and regulations, including tax laws, global health care reform, and import/export trade laws; changes in guidelines, recommendations and studies published by various organizations that could affect the use of the Company’s products; uncertainties inherent in the development of new products and the enhancement of existing products, including FDA approval and/or clearance and other topicsregulatory risks, technical risks, cost overruns and delays; the risk that products may contain undetected errors or trends stockholdersdefects or otherwise not perform as anticipated; risks associated with strategic alliances and the ability of the Company to realize anticipated benefits of those alliances; risks associated with acquisitions, including, without limitation, the Company’s ability to successfully integrate acquired businesses, the risks that the acquired businesses may wish to share with us. We believenot operate as effectively and efficiently as expected even if otherwise successfully integrated, and the risks that positive, two-way dialogue builds informed relationships that promote transparency and accountability. Management provides written and oral updatesacquisitions may involve unexpected costs or unexpected liabilities; the risks of conducting business internationally; the risk of adverse exchange rate fluctuations on the discussionsCompany’s international activities and businesses; manufacturing risks, including the Company’s reliance on a single or limited source of supply for key components, the need to comply with stockholdersespecially high standards for the manufacture of many of its products and risks associated with utilizing third party manufacturers; the Company’s ability to our Lead Director, Chairmanpredict accurately the demand for its products, and products under development, and to develop strategies to address its markets successfully; the early stage of market development for certain of the Company’s products; the Company’s leverage risks, including the Company’s obligation to meet payment obligations and financial covenants associated with its debt; cybersecurity risks; risks related to the use and protection of intellectual property; expenses, uncertainties and potential liabilities relating to litigation, including, without limitation, commercial, intellectual property, employment and product liability litigation; technical innovations that could render products marketed or under development by the Company obsolete; and competition.
The risks included above are not exhaustive. Other factors that could adversely affect the Company's business and prospects are described in the filings made by the Company with the SEC. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements presented herein to reflect any change in expectations or any change in events, conditions or circumstances on which any such statements are based.
18 2019 Proxy Statement
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Eight directors are to be elected at the Annual Meeting. Our Board of Directors (referred to herein as the “Board”), upon the recommendation of the Nominating and Corporate Governance Committee. TheCommittee, has nominated the individuals listed below for election as directors. All of the director nominees, other than Dr. Hantson, were previously elected by our stockholders. While the Board has recruited members based on personal recommendations in the past, in 2018, the Board used a professional search firm to identify potential directors. They reviewed a number of qualified candidates and, after considering his qualifications and conducting personal interviews, the Nominating and Corporate Governance Committee in turn allocates specific issuesunanimously recommended that Dr. Hantson be appointed to relevantthe Board. In November 2018, the Board committeesof Directors unanimously appointed him to the Board.
Unless otherwise instructed, the proxy holders will vote the proxies received by them for further consideration. Each Board committee reviews relevant feedback and determinesthe Board’s nominees named below. In the event that any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for the nominee, if additional discussion and actions are necessaryany, who shall be designated by the respective committeepresent Board to fill the vacancy. Each nominee has consented to serving as a director if elected. The proposed nominees are being nominated in accordance with the provisions of our Bylaws. The term of office of each person elected as a director will continue until the next Annual Meeting of Stockholders or full Board. Theuntil a successor has been elected and qualified.
Vote Required
Under our Bylaws, a nominee will be elected to the Board considers shareholder perspectives, as well asof Directors if the interestsvotes cast “for” the nominee’s election exceed the votes cast “against” the nominee’s election. Abstentions and broker non-votes will not have any effect on this proposal.
Recommendation of all stakeholders, when overseeing company strategy, formulating governance practicesthe Board
Our Board unanimously recommends that you vote“FOR”the nominees listed below. Management proxy holders will vote all duly submitted proxies FOR the nominees listed below unless instructed otherwise. |
Composition, Assessment and designing compensation programs.Qualifications
Director Nomination Process and Board Assessment
Understanding the importance of its responsibility to provide effective oversight, our Board strives to maintain an appropriate balance of tenure, diversity, skills and experience on the Board. As provided in its charter, the Nominating and Corporate Governance Committee is responsible for identifying individuals qualified to become directors. The Nominating and Corporate Governance Committee seeks to identify and evaluate director candidates and may rely on input provided by a number of sources, including the Nominating and Corporate Governance Committee members, our other directors or officers, our stockholders, and third parties such as professional search and screening firms.
In evaluating potential candidates for director, the Nominating and Corporate Governance Committee considers the entirety of each candidate’s credentials, including: character and integrity, business acumen, experience, commitment and diligence. The Nominating and Corporate Governance Committee considers diversity as one of a number of factors in identifying nominees for director. It does not, however, have a formal policy in this regard. The Nominating and Corporate Governance Committee views diversity broadly to include diversity of experience, skills and viewpoint, as well as diversity of gender and race. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Nominating and Corporate Governance Committee believes that the backgrounds and qualifications of the directors considered as a whole should provide a significant breadth of experience, knowledge and abilities to assist the Board in fulfilling its responsibilities. Generally, directors should be individuals who
have succeeded in their particular fieldfields and who demonstrate integrity, reliability, knowledge of corporate affairs and collegiality. The Nominating and Corporate Governance Committee also considers such other relevant factors as it deems appropriate, including the current composition of the Board.
In 2015,The Board has employed a variety of assessment formats, depending on the Nominating and Corporate Governance Committee led aperceived needs of the Board assessment initiative, whichat the time. Formats over the past few years have included a Board peer review managed by the general counsel. In 2016, the Nominating and Corporate Governance Committee determined thatcounsel, a facilitated discussion with the full Board, would beand individual Board and committee written evaluations followed by a discussion at each committee level and with the most effective form of evaluation.full Board. As a part of this discussion,these evaluations, the Nominating and Corporate Governance Committee as well as the
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Proposal No. 1 - Election of Directors
Board examined several keyexamine characteristics which it believed wouldthey believe will augment the current skill set of the Board. In 2016, the Board includingidentified as key skill sets: experience as a senior executive in a large, complex, global company; extensive operational and transactional experience; deep understanding of the Company’s markets and/or customers; and a product background. In 2017, the Board and each Board committee completed written evaluations.
The Chairman and the Lead Director led a discussion of the results of these written evaluations with the full Board, highlighting areas of strength as well as areas of opportunity. All members of the Board agreeddetermined that the Board would benefit from the addition ofadding another director with extensive global experience would benefit the Board.
In 2017, Ms. Wendell and Mr. Dockendorff joined the Board, both of whom had been senior executives in a large, complex, global medical device company, had operational and transactional experience and an understanding of the Company’s markets and customers. Ms. Wendell brings particular expertise in business development and strategy, which is key at a time when the Company is increasing its business development activity. Mr. Dockendorff brings extensive financial expertise for complex global healthcare organizations. In 2018, Mr. Nawana and Dr. Hantson joined the Board, bringing with them a strong global perspective and executive leadership experience.
Role of the Nominating and Corporate Governance Committee
As provided in its charter, the Nominating and Corporate Governance Committee is responsible for identifying individuals qualified to become directors. The Nominating and Corporate Governance Committee seeks to identify and evaluate director candidates and may rely on input provided by a number of sources, including the Nominating and Corporate Governance Committee members, our other directors or officers, our stockholders, and third parties such as professional search and screening firms.
The Nominating and Corporate Governance Committee will consider stockholder recommendations for candidates for the Board using the criteria described in the preceding paragraphs. The name of any recommended candidate for director, together with a brief biographical sketch, a document indicating the candidate’s willingness to serve, if elected, and evidence of the nominating stockholder’s ownership of the Company’s stock should be sent to the attention of our Corporate Secretary, Hologic, Inc., 250 Campus Drive, Marlborough, MA 01752. If you wish to formally nominate a candidate, you must follow the procedures described in Section 1.4 of our Bylaws.
ALIGNMENT OF DIRECTOR SKILLS AND STRATEGY Hologic is an innovative medical technology company primarily focused on improving women’s health and well-being through early detection and treatment. We are focused on generating long-term, sustainable growth through commercial and operational execution, targeted acquisitions and international expansion, among other things. Our Nominating and Corporate Governance Committee has determined that each of our director nominees possesses the appropriate qualifications, skills and experience to effectively oversee our long-term business strategy. | ||
20 2019 Proxy Statement
Proposal No. 1 - Election of Directors
Set forth below is certain biographical information regarding the nominees as of January 7, 2019, as well as the experiences, qualifications, attributes or skills that caused the Nominating and Corporate Governance Committee and the Board to determine that the person should serve as a director.
Stephen P. MacMillan | ||
Age:55 Director Since: |
| KEY EXPERIENCE AND QUALIFICATIONS |
Mr. MacMillan was appointed as President, Chief Executive Officer and a director in December 2013 and was elected Chairman of the Board in June 2015. From October 2012 to December 2013, Mr. MacMillan was the Chief Executive Officer of sBioMed, LLC, a biomedical research company. From 2003 to 2012, he served in various roles at Stryker Corporation, including Chief Operating Officer from 2003 to 2005, Chief Executive Officer from 2005 to 2012 and Chairman from 2010 to 2012. Prior to 2003, Mr. MacMillan was a senior executive with Pharmacia Corporation, where he oversaw five global businesses. Prior to joining Pharmacia, Mr. MacMillan spent 11 years with Johnson & Johnson in a variety of senior roles in both the U.S. and Europe, including as President of its consumer pharmaceuticals joint venture with Merck. Mr. MacMillan began his career with Procter & Gamble in 1985. Mr. MacMillan currently serves on the Board of Trustees of Davidson College. Mr. MacMillan holds a Bachelor of Arts degree in economics from Davidson College, and is a graduate of Harvard Business School’s Advanced Management Program. OTHER CURRENT PUBLIC COMPANY BOARDS ●Boston Scientific Corporation FORMER PUBLIC COMPANY BOARDS ●Alere, Inc. ●Stryker Corporation ●Texas Instruments Incorporated |
www.hologic.com 21
Proposal No. 1 - Election of Directors
Sally W. Crawford | ||
Age:65 Director Since: Lead Independent Director Since: Committees: ●Compensation ●Nominating and Corporate Governance (Chair) | KEY EXPERIENCE AND QUALIFICATIONS | |
Ms. Crawford became one of our directors effective upon our merger with Cytyc Corporation in October 2007, having previously served as a director of Cytyc since January 1998. From April 1985 until January 1997, Ms. Crawford served as Chief Operating Officer of Healthsource, Inc., a publicly held managed care organization headquartered in New Hampshire. During her tenure at Healthsource, Inc., Ms. Crawford held a variety of positions and responsibilities, including leading that company’s Northern Region operations and marketing efforts. Since January 1997, Ms. Crawford has been a healthcare consultant in New Hampshire. Ms. Crawford earned a bachelor’s degree from Smith College and a master’s degree in communications from Boston University. OTHER CURRENT PUBLIC COMPANY BOARDS ●Insulet Corporation FORMER PUBLIC COMPANY BOARDS ●Exact Sciences Corporation ●Universal American Corporation ●Zalicus Inc. (now EPIRUS Biopharmaceuticals, Inc.) | ||
Charles J. Dockendorff | ||
Age:64 Director Since: Committees: ●Audit and Finance (Chair) | KEY EXPERIENCE AND QUALIFICATIONS | |
Mr. Dockendorff was appointed to our Board in May 2017. He was formerly Executive Vice President and Chief Financial Officer of Covidien plc, a global medical device and supplies company. He was CFO at Covidien and its predecessor, Tyco Healthcare, from 1995 to 2015. Mr. Dockendorff joined the Kendall Healthcare Products Company, the foundation of the Tyco Healthcare business, in 1989 as Controller and was named Vice President and Controller in 1994. He was appointed Chief Financial Officer of Tyco Healthcare in 1995. Prior to joining Kendall/Tyco Healthcare, Mr. Dockendorff was the Chief Financial Officer, Vice President of Finance and Treasurer of Epsco Inc. and Infrared Industries, Inc. In addition, Mr. Dockendorff worked as an accountant for Arthur Young & Company (now Ernst & Young) and the General Motors Corporation. Mr. Dockendorff holds a bachelor’s degree in accounting from the University of Massachusetts at Amherst and a Master of Science in finance from Bentley College. OTHER CURRENT PUBLIC COMPANY BOARDS ●Boston Scientific Corporation ●Haemonetics Corporation ●Keysight Technologies, Inc. | ||
22 2019 Proxy Statement
Proposal No. 1 - Election of Directors
Scott T. Garrett | ||
Age:69 Director Since: Committees: ●Compensation (Chair) ●Nominating and Corporate Governance | KEY EXPERIENCE AND QUALIFICATIONS | |
Mr. Garrett joined our Board in May 2013. Mr. Garrett is currently a Senior Operating Partner at Water Street Healthcare Partners. He joined Water Street in 2011 after approximately 35 years in the global healthcare industry. Prior to joining Water Street, Mr. Garrett served as Chairman, President and Chief Executive Officer of Beckman Coulter, a leading biomedical company, from 2008 to 2011. Mr. Garrett joined Beckman Coulter in 2002 as President, Clinical Diagnostics Division and was promoted in 2003 to President and Chief Operating Officer. In January 2005, he became Chief Executive Officer, adding the position of Chairman in 2008. Prior to that, Mr. Garrett served as Vice Chairman and Interim Chief Executive Officer of Kendro Laboratory Products from 1999 to 2001. From 1994 to 1998, he served as Chairman, President and Chief Executive Officer of Dade Behring, a leading diagnostics company. He began his career at American Hospital Supply Corporation and continued there after that company was acquired by Baxter International, ultimately serving as Chief Executive of Baxter’s global laboratory business, Baxter Diagnostics. Mr. Garrett received a Bachelor of Science in mechanical engineering from Valparaiso University and a Master of Business Administration from Lake Forest Graduate School of Management. OTHER CURRENT COMPANY BOARDS ●Immucor, Inc. ●Mr. Garrett also serves on the boards of companies in which Water Street has an ownership interest, including MarketLab Inc. and Orgentec Diagnostics. | ||
Ludwig N. Hantson | ||
Age:56 Director Since: Committees: ●Compensation ●Nominating and Corporate Governance | KEY EXPERIENCE AND QUALIFICATIONS | |
Dr. Hantson was appointed to our Board in November 2018. Since March 2017, Dr. Hantson has been the Chief Executive Officer of Alexion Pharmaceuticals, Inc. Prior to joining Alexion, he was President and Chief Executive Officer of Baxalta Incorporated. In July 2015, Dr. Hantson led Baxalta’s successful spin-off as a public company from Baxter International Inc., where he was President of Baxter BioScience. He joined Baxter in May 2010 and established the BioScience division as an innovative specialty and rare disease company. Prior to Baxter, from 2001 to 2010, Dr. Hantson held several leadership roles at Novartis AG, including CEO of Pharma North America, CEO of Europe, and President of Pharma Canada. Prior to Novartis, he spent 13 years with Johnson & Johnson in roles of increasing responsibility in marketing and R&D. Dr. Hantson received his Ph.D. in motor rehabilitation and physical therapy, master’s degree in physical education, and a certification in high secondary education, all from the University of Louvain in Belgium. OTHER CURRENT PUBLIC COMPANY BOARDS ●Alexion Pharmaceuticals, Inc. FORMER PUBLIC COMPANY BOARDS ●Baxalta Incorporated | ||
www.hologic.com 23
Proposal No. 1 - Election of Directors
Namal Nawana | ||
Age:48 Director Since: Committees: ●Compensation ●Nominating and Corporate Governance | KEY EXPERIENCE AND QUALIFICATIONS | |
Mr. Nawana joined our Board in January 2018. Mr. Nawana is currently Chief Executive Officer and a member of the Board of Directors of Smith & Nephew plc. Prior to joining Smith & Nephew, he was Chief Executive Officer, President and a member of the Board of Directors of Alere, Inc. from October 2014 until October 2017, when Alere was acquired by Abbott Laboratories. Mr. Nawana joined Alere as Chief Operating Officer in December 2012 before being named Interim Chief Executive Officer in July 2014. Before joining Alere, Mr. Nawana spent 15 years at Johnson & Johnson in various leadership roles. Most recently, he served as the Worldwide President of DePuy Synthes Spine, a Johnson & Johnson company, from February 2011 to November 2012. Prior to that, Mr. Nawana served as Area Vice President for Johnson & Johnson Medical in Australia and New Zealand from January 2009 to February 2011, Chairman of the DePuy Asia Pacific Franchise Council, General Manager for DePuy Australia from 2007 to December 2008 and General Manager for DePuy Canada from 2004 to 2007. Mr. Nawana holds an Honors degree in Mechanical Engineering and a Master of Medical Science from the University of Adelaide, South Australia, and an MBA from Henley Management College. OTHER CURRENT PUBLIC COMPANY BOARDS ●Smith & Nephew plc FORMER PUBLIC COMPANY BOARDS ●Alere, Inc. | ||
Christiana Stamoulis | ||
Age:48 Director Since: Committees: ●Audit and Finance | KEY EXPERIENCE AND QUALIFICATIONS | |
Ms. Stamoulis has been a director since November 2011. Effective February 2019, Ms. Stamoulis will be the Executive Vice President and Chief Financial Officer of Incyte Corporation. From January 2015 to the end of January 2019, Ms. Stamoulis served as Chief Financial Officer of Unum Therapeutics, adding the role of President in February 2018. Prior to Unum, she was an independent advisor to biopharmaceutical companies from January 2014 to December 2014. Prior to that, Ms. Stamoulis served as Senior Vice President of Corporate Strategy and Business Development at Vertex Pharmaceuticals Incorporated from 2009 until December 2013. Ms. Stamoulis joined Vertex in 2009 with approximately 15 years of experience in the investment banking and management consulting industries where she advised global pharmaceutical and biotechnology companies on strategic and corporate finance decisions. Prior to joining Vertex, she was a Managing Director in the Investment Banking division of Citigroup from 2006 to 2009 where she led the building of the firm’s U.S. Life Sciences investment banking practice. Prior to her role at Citigroup, she was at Goldman, Sachs & Co. where she spent the majority of her investment banking career. Ms. Stamoulis started her career as a strategy consultant at The Boston Consulting Group. Ms. Stamoulis holds a Bachelor of Science in economics and a Bachelor of Science in architecture from the Massachusetts Institute of Technology (MIT). Additionally, she holds a Master of Business Administration from the MIT Sloan School of Management where she focused on applied economics and finance. | ||
24 2019 Proxy Statement
Proposal No. 1 - Election of Directors
Amy M. Wendell | ||
Age:58 Director Since: Committees: ●Audit and Finance | KEY EXPERIENCE AND QUALIFICATIONS | |
Ms. Wendell was appointed to our Board in December 2016. Since January 2016, Ms. Wendell has been a Senior Advisor for Perella Weinberg Partner’s Healthcare Investment Banking Practice. Her scope of responsibilities involves providing guidance and advice with respect to mergers and acquisitions and divestures for clients and assisting the firm in connection with firm-level transactions. From 2015 until September 2018, Ms. Wendell served as a Senior Advisor for McKinsey’s Strategy and Corporate Finance Practice and also served as a member of McKinsey’s Transactions Advisory Board to help define trends in mergers and acquisitions, as well as help shape McKinsey’s knowledge agenda. From 1986 until January 2015, Ms. Wendell held various roles of increasing responsibility at Covidien plc (including its predecessors, Tyco Healthcare and Kendall Healthcare Products), including engineering, product management and business development. Most recently, from December 2006 until Covidien’s acquisition by Medtronic plc in January 2015, she served as Senior Vice President of Strategy and Business Development, where she led the company’s strategy and portfolio management initiatives and managed all business development, including acquisitions, equity investments, divestitures and licensing/distribution. She is Chairman of the Board of Por Cristo, a non-profit charitable medical service organization involved in health care work for at-risk women and children in Latin America. Ms. Wendell holds a Bachelor of Science in mechanical engineering from Lawrence Technological University and a Master of Science degree in biomedical engineering from the University of Illinois. OTHER CURRENT PUBLIC COMPANY BOARDS ●AxoGen, Inc. ●Baxter International Inc. FORMER PUBLIC COMPANY BOARDS ●Ekso Bionics |
www.hologic.com 25
Proposal No. 1 - Election of Directors
Our Board’s Role and Responsibilities
Pursuant to Section 406The Board, on behalf of the Sarbanes-Oxley ActCompany and its stockholders, oversees the management of 2002,the Company. While the Company’s senior officers, under the direction of the Chief Executive Officer, are responsible for the day-to-day operations of the Company, implementation of the strategic, financial and management policies of the Company, and preparation of financial statements and other reports that accurately reflect requisite information about the Company, the Board oversees these activities. Taking an active role in the Company’s strategic direction, the Board continually educates itself on the Company’s products, markets, customers, competition and culture. The Board assesses risk, evaluates management’s performance, plans for successors and provides overall guidance and direction to the Company.
Hologic’s governance responsibilities are built on a foundation of interactive dialogue with stockholders, written principles and continuous improvement, which we havebelieve will help us sustain our success, build trust in the Company and continue to create long-term stockholder value. To that end, the Company has in place Corporate Governance Guidelines which are designed to assist the Company and the Board in implementing effective corporate governance practices. The Board has also adopted a Code of Ethics for Senior Financial OfficersConduct that applies to all of our principal executive officer and principal financial officer, principal accounting officer and controller, and other persons performing similar functions. The Company’s Code of Conduct applies to all directors,employees, officers and employees. The Company requires all of its directors officers and employees to adhere to this code in addressing legal and ethical issues that they encounter in the course of doing their work. This code requires our directors, officers, and employees to avoid conflicts of interest, comply with all laws and regulations, conduct business in an honest and ethical manner and otherwise act with integrity and in the Company’s best interest. All newly hired employees are required to certify that they have reviewed and understand this code. Oura Code of Ethics for Senior Financial Officers isthat applies specifically to senior financial officers (included as Appendix A to our Code of Conduct). These policies are publicly available on our website atinvestors.hologic.com as Appendix A to our Code of Conduct. We intend to satisfy the disclosure requirement under Item 5.05 of Current Report on Form 8-K regarding an amendment to, or waiver from, a provision of this code by posting such. Hologic posts additional information on our website atfrom time to time as the address specified above.Board makes changes to our corporate governance practices.
Attendance by Directors at the Annual Meeting of Stockholders
Our Board believes that good governance requires not only an effective set of specific practices, but also a culture of responsibility and accountability throughout the organization. Governance at Hologic is intended to achieve both. Good governance ultimately depends on the quality of an organization’s leadership, and our Board is committed to recruiting and retaining directors and officers with proven leadership ability and personal integrity.
The Board has scheduled a Board meetingimplemented corporate governance practices that it believes are both in conjunctionthe best interests of Hologic and our stockholders as well as compliant with the Annual Meetingrules and regulations of Stockholders. the SEC and the listing standards of NASDAQ. The Board reviews these practices on an ongoing basis.
Our directorsBoard is responsible for risk oversight. A fundamental part of risk oversight is understanding the risks that we face, the steps management is taking to manage those risks, and assessing our appetite for risk. Risk management systems, including our internal auditing procedures, internal control over financial reporting and corporate compliance programs, are encourageddesigned in part to attendinform management about our material risks. It is management’s responsibility to manage risk and bring to the Annual MeetingBoard’s attention material risks facing the Company. Our Board receives regular reports from management on matters relating to strategic and operational initiatives, financial performance and legal developments, including the related enterprise-risk exposures. The involvement of Stockholders on March 14, 2018. Allthe Board in the oversight of our current directors who were nominatedstrategic planning process is a key part of its assessment of the risks inherent in our corporate strategy. Our general counsel and corporate secretary lead the Company’s enterprise risk management process. As part of this process, risk is assessed throughout the business over a three-year horizon, focusing on financial risk, legal/compliance risk and operational/strategic risk. The resulting enterprise risk management report (“ERM report”) details the Company’s top 10 risks, as well as mitigating actions and plans relating to those risks. The ERM report includes a rolling three-year evaluation period reflecting mitigation activity progress and risk rating changes and is presented to and discussed with the Board each year. Underscoring the Board’s and management’s focus on enterprise risk are the individual performance objectives of the executive leadership team for electionfiscal 2019, which are again aligned with the Company’s top enterprise risks, as identified in the ERM report.
While the Board has overall responsibility for risk oversight, each of the three standing committees of the Board regularly assesses risk in connection with executing their responsibilities. In particular, the Audit and Finance Committee focuses on financial risk, including internal controls, and receives an annual risk assessment report from the Company’s internal auditors. At the Compensation Committee’s direction, the Compensation Committee’s independent compensation consultant conducts a risk assessment of our executive compensation programs, and members of our internal legal, human resources and sales operations departments evaluate our other compensation programs. The Compensation Committee and its independent compensation consultant reviewed and discussed these assessments for fiscal 2018, and the Compensation Committee concurred with the assessment that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on our business.
26 2019 Proxy Statement
Proposal No. 1 - Election of Directors
The Board is responsible for overseeing management and planning for management successors. Succession planning starts with Mr. MacMillan, his team and the Compensation Committee, but is continued with the full Board. The Board devotes significant time on its agenda to succession planning, reviewing and discussing the succession plans for the CEO and each of his direct reports. Following Mr. MacMillan’s potential departure in November 2017, the Board and Mr. MacMillan intensified their focus on succession planning. Mr. MacMillan provides a talent update at every Board and Compensation Committee meeting and the Board reviews in-depth succession plans at least annually. The Board also has exposure to succession candidates through their periodic participation in Board meetings and/or engagement outside of Board meetings.
While the Board, through the Nominating and Corporate Governance Committee, oversees stockholder matters and participates in meetings with stockholders, as appropriate, management has the principal responsibility for stockholder communications and engagement. As discussed below, management provides regular feedback to the Board concerning stockholder feedback.
During 2018, we continued the year-round approach to stockholder engagement we implemented in 2015. In addition to discussions just before our Annual Meeting, we initiated discussions during a quieter period several months later, reaching out to a number of Stockholders heldour largest stockholders, approximately 62% of our outstanding shares. This year, our Lead Independent Director participated in a number of the meetings.
YEAR-ROUND STOCKHOLDER ENGAGEMENT
SPRING/WINTER | SUMMER/FALL | |
We conduct stockholder outreach before the Annual Meeting | During the quieter period, we seek stockholder feedback on governance, compensation and other matters for consideration by our Board | |
In addition to input on March 8, 2017 attendedcurrent governance and executive compensation topics specific to Hologic, we invite discussion on any other topics or trends stockholders may wish to share with us. We believe that Annual Meeting.positive, two-way dialogue builds informed relationships that promote transparency and accountability. Management provides written and oral updates on the discussions with stockholders to our Lead Independent Director, Chairman, and the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee in turn allocates specific issues to relevant Board committees for further consideration. Each Board committee reviews relevant feedback and determines if additional discussion and actions are necessary by the respective committee or full Board. The Board considers shareholder perspectives, as well as the interests of all stakeholders, when overseeing company strategy, formulating governance practices and designing compensation programs.
Stockholder Communications with the Directors
In general, any stockholder communication directed to our Board or a committee thereofone of its committees will be delivered to our Board or the appropriate committee. However, the Company reserves the right not to forward to our Board any abusive, threatening or otherwise inappropriate materials. Stockholders may contact our Board and committees thereof by writing to them in care of Corporate Secretary, Hologic, Inc., 250 Campus Drive, Marlborough, MA 01752.
Chairman and Lead Independent Director Roles
Our Bylaws and Corporate Governance Guidelines permit the roles of Chairman and Chief Executive Officer to be filled by the same or different individuals. This allows the Board flexibility to determine whether the two roles should be combined or separated based upon our needs and the Board’s assessment of its leadership from time to time. The Board and the Nominating and Corporate Governance Committee review the structure of the Board and Hologic leadership as part of the succession planning process on an ongoing basis. The Board also reviews its structure during its annual self-assessment.
www.hologic.com 27
Proposal No. 1 - Election of Directors
The Board believes that Hologic and its stockholders are best served at this time by having our CEO, Stephen P. MacMillan, also serve as our Chairman, and Sally W. Crawford, an independent director, serve as our Lead Independent Director. Combining the roles of Chairman and CEO makes clear that we have a single leader who is directly accountable to the Board and, through the Board, to our stockholders. It establishes one voice who speaks for the Company to customers, employees, stockholders and other stakeholders. This structure reinforces Mr. MacMillan’s overall responsibility for the Company’s business and strategy, under the oversight and subject to the review of the Board. It strengthens the Board and the Board’s decision-making process because Mr. MacMillan, who has first-hand knowledge of our operations and the major issues facing Hologic, chairs the Board meetings where the Board discusses strategic and business issues. The combined roles facilitate a Board process that is able to identify and respond to challenges and opportunities in a more timely and efficient manner than a non-executive chairman structure would provide. This structure also enables Mr. MacMillan to act as the key link between the Board and other members of management and facilitate an efficient Board process.
The Board recognizes the importance of having a strong independent Board leadership structure to ensure accountability. Accordingly, our Corporate Governance Guidelines provide that if the Chairman is not an independent director, then the independent directors will select a Lead Independent Director. The Board believes that a Lead Independent Director is an integral part of our Board structure and facilitates the effective performance of the Board in its role of providing governance and oversight. In December 2017, the Board appointed Sally W. Crawford to serve as Lead Independent Director.
Ms. Crawford, as Lead Independent Director, has significant responsibilities. Certain specific responsibilities are set forth in Hologic’s Corporate Governance Guidelines and include: ●convening meetings of the independent directors, including executive sessions held in conjunction with each regularly-scheduled Board meeting; ●serving as the principal liaison between the Chairman and the independent directors, including with respect to matters arising in executive sessions of the independent directors; ●working with the Chairman and the Nominating and Corporate Governance Committee to establish processes to assist the Board in the efficient discharge of its duties; ●approving Board meeting agendas as well as the quality, quantity and timeliness of information sent to the Board; ●approving Board meeting schedules to assure that there is sufficient time for discussion of all agenda items; ●recommending to the Chairman the retention of outside advisors, as appropriate, who report directly to the Board on board-wide matters; ●being available, if requested by stockholders, and when appropriate, for consultation and direct communication; and ●coordinating with the other independent directors in respect of each of the foregoing and performing such other duties as may be properly requested by the Board. Mr. MacMillan’s responsibilities as Chairman of the Board are also set forth in our Corporate Governance Guidelines and include: ●presiding at meetings of the Board of Directors and stockholders; ●establishing processes to assist the Board in the efficient discharge of its duties; ●organizing and presenting agendas for Board meetings based on advice from the Lead Independent Director, Committee Chairs, directors and members of senior management; ●facilitating the proper flow of information to the Board and working to see that meetings are efficient and informative; ●working with the Nominating and Corporate Governance Committee to develop processes for structuring Committees and overseeing their functions, including assignments of Committee members and Chairs; ●working with the Nominating and Corporate Governance Committee to develop processes for development and succession planning for senior executives; and ●performing such other duties as may be properly requested by the Board. | ||
In addition to discharging the specific responsibilities identified above, Mr. MacMillan consults with Ms. Crawford on a variety of matters, including governance and strategy. As Lead Independent Director and Chair of the Nominating and Corporate Governance Committee, Ms. Crawford takes the lead in Board structure and composition. In addition, Ms. Crawford’s ability to assert independent leadership while working collaboratively with other directors, particularly evident when she served as chair of the Compensation Committee, as well as her diligence and preparedness, enable her to serve effectively as our Lead Independent Director and as Chair of our Nominating and Corporate Governance Committee. During 2018, the Board again
28 2019 Proxy Statement
Table of ContentsBOARD COMMITTEES
Proposal No. 1 - Election of Directors
considered and affirmed the current efficacy of the Lead Independent Director and combined Chairman/CEO structure for the Company. We have also discussed this structure with a number of our largest stockholders. While several advised that they do scrutinize combined Chair/CEO structures as a matter of practice, none expressed concern over this structure for Hologic.
Independent Directors and Committees
In evaluating its leadership structure, the Board also considered that, other than Mr. MacMillan, all of our directors are independent. Our independent directors appropriately challenge management and demonstrate independent judgment in making important decisions for our Company. In addition, each of the Board’s standing committees – Audit and Finance, Compensation, and Nominating and Corporate Governance – is composed entirely of independent directors. As a result, oversight of key matters, such as the integrity of Hologic’s financial statements, executive compensation, the nomination of directors and evaluation of the Board and its committees, is entrusted to independent directors.
The Board meets in executive session without the CEO in connection with each regularly-scheduled Board meeting as well as any other times it deems appropriate. The active involvement of the independent directors, combined with the qualifications and significant responsibilities of our Lead Independent Director, promote strong, independent oversight of Hologic’s management and affairs.
The standing committees of the Board currently are the Audit and Finance Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. The Board has adopted a charter for each of the three standing committees that addresses the make-up and functioning of such committee. The charters for each of the three standing committees are publicly available on our website atinvestors.hologic.com.
The Board is composed of a majority of “independent” directors, and all of the committees are composed entirely of “independent” directors, as such term is defined in the listing standards of NASDAQ. The Board has determined that the following current directors are “independent,” according to the above definition: Sally W. Crawford, Charles J. Dockendorff, Scott T. Garrett, Lawrence M. Levy,Namal Nawana, Christiana Stamoulis, Elaine S. Ullian, Amy M. Wendell and Namal Nawana.Ludwig N. Hantson. Our former directors, Christopher J. CoughlinLawrence Levy and Nancy L. Leaming,Elaine Ullian, were also determined to be independent while serving as members of our Board during the beginning of fiscal 2017.2018. Mr. MacMillan is not considered independent because he is an active officer of the Company. In addition, both the Audit and Finance Committee and the Compensation Committee are composed entirely of “independent” directors as such term is defined in Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The current membership of each committee is listed below.
Board Committees | ||||||||||||
Name |
Age |
Position | Director Since | Audit and Finance |
Compensation | Nominating and Corporate Governance | ||||||
Sally W. Crawford | 64 | Director | 2007 | ✔ | Chair | |||||||
Charles J. Dockendorff | 63 | Director | 2017 | Chair | ✔ | |||||||
Scott T. Garrett | 68 | Director | 2013 | Chair | ✔ | |||||||
Lawrence M. Levy(1) | 79 | Director | 2005 | ✔ | ||||||||
Christiana Stamoulis | 47 | Director | 2011 | ✔ | ✔ | |||||||
Elaine S. Ullian(1) | 70 | Lead Director | 2007 | ✔ | ✔ | |||||||
Amy M. Wendell | 57 | Director | 2016 | ✔ | ✔ | |||||||
Number of Meetings in Fiscal 2017 | 9 | 5 | 6 |
(1) Not standing for re-election.
Meetings of the Board and its Committees
The Board met ten (10) times during the fiscal year ended September 30, 2017 and each of our directors attended over 80% of the total number of meetings of the Board and all committees of the Board on which he or she served. During fiscal 2017, the independent directors of the Board met in executive session during each of the Board’s regular quarterly meetings and at such other Board and committee meetings as the independent directors elected.
Board Committees | ||||||||||||
Name | Age | Position | Director Since | Audit and Finance | Compensation | Nominating and Corporate Governance | ||||||
Sally W. Crawford | 65 | Director | 2007 | ✓ | Chair | |||||||
Charles J. Dockendorff | 64 | Director | 2017 | Chair | ||||||||
Scott T. Garrett | 69 | Director | 2013 | Chair | ✓ | |||||||
Namal Nawana | 48 | Director | 2018 | ✓ | ✓ | |||||||
Christiana Stamoulis | 48 | Director | 2011 | ✓ | ||||||||
Amy M. Wendell | 58 | Director | 2016 | ✓ | ||||||||
Ludwig N. Hantson(1) | 56 | Director | 2018 | ✓ | ✓ | |||||||
Number of Meetings in Fiscal 2018 | 10 | 5 | 4 |
www.hologic.com 29
Proposal No. 1 - Election of Directors
Mr. Dockendorff MEMBERS
10 | The Audit and Finance Committee is responsible for assisting our Board in the oversight of (i) our financial reporting process, accounting functions, internal audit functions and internal control over financial reporting, and (ii) the qualifications, independence, appointment, retention, compensation and performance of our independent registered public accounting firm. The Audit and Finance Committee also oversees financing and capital allocation strategies, reviews and approves financing transactions to the extent delegated by the Board, reviews the Company’s ability to enter into swaps and other derivatives transactions, and reviews the Company’s tax structure, among other things. The Audit and Finance Committee also reviews and approves related-party transactions (unless such review and approval has been delegated to another committee consisting solely of independent directors). None of the current or former members of the Audit and Finance Committee are employees of the Company and our Board has determined that each such member of the Audit and Finance Committee is independent (as independence is defined in the current listing standards of NASDAQ and Section 10A(m)(3) of the Exchange Act). Audit Committee Financial Expert. The Board has determined that Mr. Dockendorff and Ms. Stamoulis each qualify as an “audit committee financial expert,” as that term is defined in Item 407(d)(5) of Regulation S-K. 2018 KEY FOCUS AREAS ●Integration of Cynosure business, including financial systems and internal controls ●Preparing for adoption of new revenue recognition rules (ASC 606) ●Cybersecurity ●Capital allocation and debt structure ●Accounting for tax reform and tax planning |
Nominating and Corporate Governance Committee
Ms. Crawford
MEMBERS
Nawana
| The Nominating and Corporate Governance Committee is responsible for recommending to the Board potential candidates for director and considering various corporate governance issues, including evaluating the performance of the Board and its committees, developing and periodically reviewing our Corporate Governance Guidelines, reviewing and recommending to the Board any changes to the committee charters, recommending the composition and chair of our Board committees, monitoring compliance with our stock ownership guidelines, evaluating the performance of our CEO annually and leading the succession planning and process for our CEO. The Nominating and Corporate Governance Committee also considers suggestions regarding possible candidates for director as described under 2018 KEY FOCUS AREAS ●Board composition and refreshment ●Board ●CEO succession planning ●Governance structures and |
30 2019 Proxy Statement
Proposal No. 1 - Election of Directors
Mr. Garrett MEMBERS
| The primary functions of the Compensation Committee include: (i) reviewing and approving the compensation for each of our executive officers and 2018 KEY FOCUS AREAS ●Talent development and succession planning ●Executive compensation and pay for performance alignment ●Compensation program design structure, including appropriate metrics and goals for the Short-Term Cash Incentive Program and Performance Share Units |
Board Practices, Processes and Policies
Director Orientation and Continuing Education
When a new director joins the Board, or just before joining (assuming entry into a confidentiality agreement), he or she is provided with a Business Briefing Book, which gives an overview of the Company, its products, its markets, its strategy and its risks. Materials in the book generally include our current strategic plan, a description of our divisions and products, our current product pipeline, the most recent enterprise risk management report, current budget, market dynamics study, biographies for the senior management team, investment analyst reports and the like. Once elected to the Board, the new director generally has the opportunity to have individual meetings with members of the senior management team. They also receive a Governance Handbook, which includes general Board information, Board committee charters, the Company’s charter and Bylaws and all of the Company’s governance policies. Directors also have opportunities for continuing education, including access to third-party programs as well as regular presentations at Board meetings.
Meetings of the Board and its Committees
The Board met 13 times during the fiscal year ended September 29, 2018 and each of our directors attended over 90% of the total number of meetings of the Board and all committees of the Board on which he or she served. During fiscal 2018, the independent directors of the Board met in executive session during each of the Board’s regular quarterly meetings and at such other Board and committee meetings as the independent directors elected.
Attendance by Directors at the Annual Meeting of Stockholders
Our Board has scheduled a Board meeting in conjunction with the Annual Meeting of Stockholders. Our directors are encouraged to attend the Annual Meeting of Stockholders on March 7, 2019. Last year, all of our directors who were nominated for election attended the Annual Meeting of Stockholders held on March 14, 2018.
www.hologic.com 31
Proposal No. 1 - Election of Directors
Pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, we have adopted a Code of Ethics for Senior Financial Officers that applies to our principal executive officer and principal financial officer, principal accounting officer and controller, and other persons performing similar functions. The Company’s Code of Conduct applies to all directors, officers and employees. The Company requires all of its directors, officers and employees to adhere to this code in addressing legal and ethical issues that they encounter in the course of doing their work. This code requires our directors, officers, and employees to avoid conflicts of interest, comply with all laws and regulations, conduct business in an honest and ethical manner and otherwise act with integrity and in the Company’s best interest. All newly hired employees are required to certify that they have reviewed and understand this code. Our Code of Ethics for Senior Financial Officers is publicly available on our website atinvestors.hologic.comas Appendix A to our Code of Conduct. We intend to satisfy the disclosure requirement under Item 5.05 of Current Report on Form 8-K regarding an amendment to, or waiver from, a provision of this code by posting such information on our website, at the address specified above.
Certain Relationships and Related-Party Transactions
Policies and Procedures Regarding Transactions with Related Persons. As provided in the charter of our Audit and Finance Committee, the Audit and Finance Committee reviews and approves related-party transactions (unless such review and approval has been delegated to another committee consisting solely of disinterested independent directors). The non-exclusivity of this delegation provides the Board with flexibility to address the particular circumstances of any related-party transaction. For example, certain related-party transactions involving compensation are approved by the Compensation Committee. Additionally, if one or more members of the Audit and Finance Committee Interlocksare otherwise conflicted, or for any other reason, the Board reserves the right to establish a separate committee of disinterested independent directors to review a particular transaction. Regardless of the deliberative body of disinterested independent directors reviewing a related-party transaction, the standard applied in reviewing such transaction is whether the transaction is on terms no less favorable to the Company than terms generally available from an unaffiliated third party under the same or similar circumstances. The Board generally considers related-party transactions to be those transactions that are required to be disclosed pursuant to Item 404 of Regulation S-K.
The Board of Directors has a compensation structure consisting of a cash retainer, an annual equity award and, Insider Participationfor some positions, a supplemental cash retainer, as described below. For fiscal 2018, the cash retainer was $70,000, the annual equity award value was $185,000, and our Lead Independent Director received a supplemental annual equity grant valued at $60,000.
BENCHMARKING The Compensation Committee, in conjunction with the Board of Directors, periodically reviews compensation paid to non-employee directors and makes recommendations for adjustments, as appropriate. In December 2018, the Compensation Committee recommended, and the Board approved, the following changes to take effect in the second quarter of fiscal 2019: ●elimination of fees for serving on Board committees, other than for committee chairs; ●$10,000 increase in Board annual cash retainer (from $70,000 to $80,000); ●$15,000 increase in Board equity compensation (from $185,000 to $200,000); ●$2,500 increase in the supplemental cash retainer for the chair of the Audit and Finance Committee; and ●change in the compensation for the Lead Independent Director from a $60,000 equity grant to a $40,000 supplemental cash retainer. These compensation changes were recommended by and reviewed with the Compensation Committee’s independent compensation consultant and place the Board’s compensation solidly in the market median. | ||
32 2019 Proxy Statement
Proposal No. 1 - Election of Directors
No currentThe Company reimburses all directors for reasonable travel expenses incurred in connection with Board and committee meetings. We also extend coverage to them under our directors’ and officers’ indemnity insurance policies and have entered into our standard form of Indemnification Agreement with each director. We do not provide any other benefits, including retirement benefits or formerperquisites, to our non-employee directors.
CASH RETAINERS | ||
BOARD MEMBERS | COMMITTEE MEMBERS | |
In fiscal 2018, the non-employee director annual cash retainer was $70,000. This annual cash retainer will increase to $80,000, beginning in the second fiscal quarter of 2019. | Not including the Chairs, each member of the Audit and Finance Committee and the Compensation Committee received a supplemental annual cash retainer of $10,000, one-fourth of which was paid each quarter. Not including the Chairs, each member of the Nominating and Corporate Governance Committee received a supplemental annual cash retainer of $6,000, one-fourth of which was paid each quarter. These supplemental retainers were eliminated in the second fiscal quarter of 2019. | |
LEAD INDEPENDENT DIRECTOR | COMMITTEE CHAIRS | |
In 2018, the Lead Independent Director was compensated for her additional service as the Lead Independent Director with a $60,000 supplemental equity grant. In fiscal 2019, the Lead Independent Director will receive a $40,000 supplemental cash retainer rather than a supplemental equity grant. | The Chair of each of the Audit and Finance Committee and the Compensation Committee received a supplemental annual cash retainer of $20,000, one-fourth of which was paid each quarter. The Chair of the Nominating and Corporate Governance Committee received a supplemental annual cash retainer of $12,000, one-fourth of which was paid each quarter. The supplemental cash retainer for the Chair of the Audit and Finance Committee has been increased by $2,500, beginning in the second fiscal quarter of 2019. | |
EQUITY AWARDS | ||
LEAD INDEPENDENT DIRECTOR | BOARD MEMBERS | |
In fiscal 2018, our Lead Independent Director received, in addition to the annual board grant, an annual Lead Independent Director grant having a value of $60,000 (as determined under generally accepted accounting principles). Of this award, $30,000 consisted of RSUs and $30,000 consisted of options to purchase common stock of the Company. The RSUs and options vest over a one-year period and the options have a term of 10 years. This supplemental equity grant has been eliminated, beginning in fiscal 2019. | Each non-employee director received an annual equity grant having a value of $185,000 (as determined under generally accepted accounting principles) on the date of the grant. Of this award, $92,500 consisted of restricted stock units (“RSUs”) and $92,500 consisted of options to purchase common stock of the Company. The RSUs and options are granted on the date of each Annual Meeting and vest on the date of the next year’s Annual Meeting; options have a term of 10 years. A non-employee director who joins the Board after the date of an Annual Meeting receives a pro-rated grant based on the number of days served through the next Annual Meeting. This annual grant has been increased to $200,000, beginning in fiscal 2019. |
Beginning in fiscal 2016, the Compensation Committee listed above is or has ever been an executive officer or employeeapproved awarding the annual equity grants on the date of the Company (or anyAnnual Meeting of its subsidiaries) and no “compensation committee interlocks” existed during fiscal 2017.
For further information aboutStockholders following the election or re-election of directors. Each of our processes and procedures for the consideration and determination of executive and director compensation, including the Compensation Committee’s retention of an independent compensation consultant, please see “Compensation Discussion and Analysis” beginning on page 21.
Proposal No. 1 Election of Directors
Sevennon-employee directors are to be elected at theour Annual Meeting. Our Board of Directors (referred to herein as the “Board”), upon the recommendation of the NominatingMeeting in March 2018 received an annual equity grant, and Corporate Governance Committee, has nominated the persons listed below for election as directors. All of the director nominees, other than Mr. Dockendorff and Mr. Nawana, were previously elected by our stockholders. Mr. DockendorffDr. Hantson received a pro-rated equity grant when he was recommended initially by a non-management director as well as our CEO, while Mr. Nawana was recommended initially by non-management directors. After considering his qualifications and conducting personal interviews, the Nominating and Corporate Governance Committee unanimously recommended that Mr. Dockendorff be appointed to the Board and in May 2017, the BoardNovember 2018.
www.hologic.com 33
Proposal No. 1 - Election of Directors unanimously appointed him to the Board. After also considering the qualifications of Mr. Nawana and conducting personal interviews, in January 2018, the Board unanimously appointed him to the Board. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Board’s nominees named below. In the event that any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for the nominee, if any, who shall be designated by the present Board to fill the vacancy. Each nominee has consented to serving as a director if elected. The proposed nominees are being nominated in accordance with the provisions of our Bylaws. The term of office of each person elected as a director will continue until the next Annual Meeting of Stockholders or until a successor has been elected and qualified.
Neither Mr. Levy nor Ms. Ullian is standing for re-election at the Annual Meeting. Our Board extends its sincere gratitude to both for their many years of dedicated service.
Vote Required
Under our Bylaws, a nominee will be elected to the Board of Directors if the votes cast “for” the nominee’s election exceed the votes cast “against” the nominee’s election. Abstentions and broker non-votes will not have any effect on this proposal.
We believe that stock ownership by our non-employee directors aligns the interests of our directors with the long-term interests of our stockholders. Accordingly, the Company has significant stock ownership guidelines in place. In June 2015, the Board of Directors strengthened these ownership guidelines by increasing them for non-employee directors from three times annual base cash retainer to five times annual base cash retainer. Each non-employee director is expected to meet this ownership guideline within five years of his or her election to the Board or June 2020, whichever is later. For purposes of meeting these guidelines, only the value of shares which are issued and outstanding, or restricted stock units which have vested but as to which settlement has been deferred, will be counted. All of our non-employee directors either currently meet our director stock ownership guidelines or are on track to meet the guidelines. | ||
Recommendation ofour non-employee directors for service on our Board during the Board
Our Board unanimously recommends that you vote “FOR” the nominees listed below. Management proxy holders will vote all duly submitted proxies FOR the nominees listed below unless instructed otherwise.
Set forth below is certain biographical information regarding the nominees as of January 16, 2018, as well as the experiences, qualifications, attributes or skills that caused the Nominating and Corporate Governance Committee and the Board to determine that the person should serve as a director.
Director Since: 2013
Age: 54
Mr. MacMillan was appointed as President, Chief Executive Officer and a director in December 2013 and was elected Chairman of the Board in June 2015. From October 2012 to December 2013, Mr. MacMillan was the Chief Executive Officer of sBioMed, LLC, a biomedical research company. From 2003 to 2012, he served in various roles at Stryker Corporation, including Chief Operating Officer from 2003 to 2005, Chief Executive Officer from 2005 to 2012 and Chairman from 2010 to 2012. Prior to 2003, Mr. MacMillan was a senior executive with Pharmacia Corporation, where he oversaw five global businesses. Prior to joining Pharmacia, Mr. MacMillan spent 11 years with Johnson & Johnson in a variety of senior roles in both the U.S. and Europe, including as President of its consumer pharmaceuticals joint venture with Merck. Mr. MacMillan began his career with Procter & Gamble in 1985. Mr. MacMillan currently serves on the board of directors of Boston Scientific Corporation, where he is a member of the Executive Compensation and Human Resources Committee and the Nominating and Governance Committee and on the Board of Trustees of Davidson College. Mr. MacMillan previously served on the board of directors of Alere, Inc. from 2013 to 2015 and Texas Instruments Incorporated from 2008 to 2012. Mr. MacMillan holds a Bachelor of Arts degree in economics from Davidson College, and is a graduate of the Harvard Business School’s Advanced Management Program. As our Chairman, President and Chief Executive Officer, is set forth in the Summary Compensation Table on page 66. Mr. MacMillan has direct responsibilitydoes not receive any additional compensation for the Company’s strategy and operations. During his tenure at Hologic, Mr. MacMillan has led the company through a period of dramatic transformation and revitalization, continued market share gains and sustained revenue growth. Through his leadership, he has positioned Hologic to drive sustainable growth. His performance as CEO, together with his many years of experience in the healthcare industry, make him an invaluable contributor to the Board and uniquely qualified to serve as Chairman.
Director Since: 2007
Age: 64
Ms. Crawford became one of our directors effective upon our merger with Cytyc Corporation (“Cytyc”) in October 2007, having previously servedservice as a director of Cytyc since January 1998. From April 1985 until January 1997, Ms. Crawford served as Chief Operating Officer of Healthsource, Inc., a publicly held managed care organization headquartered in New Hampshire. During her tenure at Healthsource, Inc., Ms. Crawford held a variety of positions and responsibilities, including leading that company’s Northern Region operations and marketing efforts. Since January 1997, Ms. Crawford has been a healthcare consultant in New Hampshire. Ms. Crawford serves as a director of Insulet Corporation, where she is a member of the Compensation and Nominating, Corporate Governance and Risk Committees. Ms. Crawford previously served as a director of Universal American Corporation, Exact Sciences Corporation, Chittenden Corporation and Zalicus Inc. (now EPIRUS Biopharmaceuticals, Inc.) Ms. Crawford earned a bachelor’s degree from Smith College and a master’s degree in communications from Boston University. Ms. Crawford’s service in various senior executive positions in the managed care sector and her continuing healthcare consulting practice contribute to her significant management and leadership experience and expertise in operational, regulatory and related disciplines applicable to our business and operations.
Director Since: 2017
Age: 63
Mr. Dockendorffdirector. Additionally, Ludwig N. Hantson was appointedelected to our Board in 2017. He was formerly Executive Vice Presidentfiscal 2019 and Chief Financial Officerthus did not receive any compensation in fiscal 2018.
2018 Director Compensation Table
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Total ($) | ||||||
Sally W. Crawford | 96,500 | 130,581 | 130,597 | 357,678 | ||||||
Charles J. Dockendorff | 89,000 | 92,487 | 92,500 | 273,987 | ||||||
Scott T. Garrett | 93,500 | 92,487 | 92,500 | 278,487 | ||||||
Lawrence M. Levy(2) | 38,000 | — | (3) | — | (3) | 38,000 | ||||
Namal Nawana | 64,500 | 92,487 | 107,948 | (4) | 264,935 | |||||
Christiana Stamoulis | 81,500 | 92,487 | 92,500 | 266,287 | ||||||
Elaine S. Ullian(2) | 44,500 | — | (3) | — | (3) | 44,500 | ||||
Amy M. Wendell | 81,500 | 92,487 | 92,500 | 266,487 |
(1) | The value of Stock Awards and Option Awards represents the grant date fair value of such award. The fair value of Stock Awards, which are RSUs, is based on the closing price of our common stock on the grant date. The fair value of Option Awards, which are stock options, is determined by use of a binomial lattice model. For a detailed description of the assumptions used to calculate the grant date fair value of stock options, see Note 8 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 29, 2018. |
(2) | Served as a director for a portion of fiscal 2018. This former director did not have any Stock Awards or Option Awards outstanding as of fiscal year end. |
(3) | As this individual did not stand for re-election at our March 2018 Annual Meeting, he/she did not receive the annual equity award granted to directors in March 2018 following our Annual Meeting. |
(4) | Includes a pro-rated equity award granted when Mr. Nawana joined the Board in January 2018. |
34 2019 Proxy Statement
Table of Covidien plc, a global medical deviceContents
Proposal No. 1 - Election of Directors
The following table sets forth the aggregate number of Stock Awards and supplies company. He was CFOOption Awards (representing unexercised option awards, both exercisable and unexercisable, and unvested RSUs) held at Covidien and its predecessor, Tyco Healthcare, from 1995 to 2015.September 29, 2018 by each person (other than Mr. Dockendorff joined the Kendall Healthcare Products Company, the foundation of the Tyco Healthcare business, in 1989 as Controller and was named Vice President and Controller in 1994. He was appointed Chief Financial Officer of Tyco Healthcare in 1995. Prior to joining Kendall/Tyco Healthcare, Mr. Dockendorff was the Chief Financial Officer, Vice President of Finance and Treasurer of Epsco Inc. and Infrared Industries, Inc. In addition, Mr. Dockendorff worked as an accountant for Arthur Young & Company (now Ernst & Young) and the General Motors Corporation. Mr. Dockendorff is a director of Boston Scientific Corporation, where he is Chair of the Audit Committee and a member of the Finance Committee, Haemonetics Corporation, where he is Chair of the Audit Committee, and Keysight Technologies, Inc., where he is Chair of the Audit and Finance Committee. Mr. Dockendorff holds a bachelor’s degree in accounting from the University of Massachusetts at Amherst and a Master of Science in finance from Bentley College. Mr. Dockendorff brings a strong track record of value creation, financial acumen and depth of experience in operations and strategy to our Board.
Director Since: 2013
Age: 68
Mr. Garrett joined our Board in May 2013. Mr. Garrett is currently a Senior Operating Partner at Water Street Healthcare Partners. He joined Water Street in 2011 after approximately 35 years in the global healthcare industry. Prior to joining Water Street, Mr. Garrett served as Chairman, President and Chief Executive Officer of Beckman Coulter, a leading biomedical company, from 2008 to 2011. Mr. Garrett joined Beckman Coulter in 2002 as President, Clinical Diagnostics Division and was promoted in 2003 to President and Chief Operating Officer. In January 2005, he became Chief Executive Officer, adding the position of Chairman in 2008. Prior to that, Mr. Garrett served as Vice Chairman and Interim Chief Executive Officer of Kendro Laboratory Products from 1999 to 2001. From 1994 to 1998, he served as Chairman, President and Chief Executive Officer of Dade Behring, a leading diagnostics company. He began his career at American Hospital Supply Corporation and continued there after that company was acquired by Baxter International, ultimatelyMacMillan) then serving as Chief Executivea director.
Name | Number of Units of Stock that have not Vested (#) | Number of Shares Subject to Option Awards Held (#) | ||
Sally W. Crawford | 3,397 | 57,370 | ||
Charles J. Dockendorff | 2,406 | 12,947 | ||
Scott T. Garrett | 2,406 | 66,158 | ||
Namal Nawana | 2,406 | 8,664 | ||
Christiana Stamoulis | 2,406 | 98,484 | ||
Amy S. Wendell | 2,406 | 15,867 |
www.hologic.com 35
Director Since: 2011
Age: 47
Ms. Stamoulis has been a director since November 2011. In January 2015, Ms. Stamoulis was appointed Chief Financial Officer and Head of Corporate Development at Unum Therapeutics. Prior to Unum, she was an independent advisor to biopharmaceutical companies from January 2014 to December 2014. Prior to that, Ms. Stamoulis served as Senior Vice President of Corporate Strategy and Business Development at Vertex Pharmaceuticals Incorporated from 2009 until December 2013. Ms. Stamoulis joined Vertex in 2009 with approximately 15 years of experience in the investment banking and management consulting industries where she advised global pharmaceutical and biotechnology companies on strategic and corporate finance decisions. Prior to joining Vertex, she was a Managing Director in the Investment Banking division of Citigroup from 2006 to 2009 where she led the building of the firm’s U.S. Life Sciences investment banking practice. Prior to her role at Citigroup, she was at Goldman, Sachs & Co. where she spent the majority of her investment banking career. Ms. Stamoulis started her career as a strategy consultant at The Boston Consulting Group. Ms. Stamoulis holds a Bachelor of Science in economics and a Bachelor of Science in architecture from the Massachusetts Institute of Technology (MIT). Additionally, she holds a Master of Business Administration from the MIT Sloan School of Management where she focused on applied economics and finance. Ms. Stamoulis’ solid foundation in strategic development, coupled with her extensive experience in executing initiatives for growth in the medical products field and related industries, enable her to provide valuable insights to the Board.
Director Since: 2016
Age: 57
Ms. Wendell was appointed to our Board in December 2016. Since January 2016, Ms. Wendell has been a Senior Advisor for Perella Weinberg Partner’s Healthcare Investment Banking Practice. Her scope of responsibilities involves providing guidance and advice with respect to mergers and acquisitions and divestures for clients and assisting the firm in connection with firm-level transactions. Since 2015, Ms. Wendell has been a Senior Advisor for McKinsey’s Strategy and Corporate Finance Practice and also serves as a member of McKinsey’s Transactions Advisory Board to help define trends in mergers and acquisitions, as well as help shape McKinsey’s knowledge agenda. From 1986 until January 2015, Ms. Wendell held various roles of increasing responsibility at Covidien plc (including its predecessors, Tyco Healthcare and Kendall Healthcare Products), including engineering, product management and business development. Most recently, from December 2006 until Covidien’s acquisition by Medtronic plc in January 2015, she served as Senior Vice President of Strategy and Business Development, where she led the company’s strategy and portfolio management initiatives and managed all business development, including acquisitions, equity investments, divestitures and licensing/distribution. Ms. Wendell also serves as a director of AxoGen, Inc. and Ekso Bionics, where she is a member of the Compensation Committee and the Nominating and Governance Committee. She is Chairman of the Board of Por Cristo, a non-profit charitable medical service organization involved in health care work for at-risk women and children in Latin America. Ms. Wendell holds a Bachelor of Science in mechanical engineering from Lawrence Technological University and a Master of Science degree in biomedical engineering from the University of Illinois. Ms. Wendell brings deep expertise in all areas of mergers and acquisitions, portfolio management, resource allocation and identification of new market opportunities. This expertise, together with her deep knowledge in developed and emerging markets as well as in early stage technologies, make her a valuable contributor to our Board.
Director Since: 2018
Age: 47
Mr. Nawana was appointed to our Board in January 2017. Mr. Nawana was Chief Executive Officer, President and a member of the Board of Directors of Alere, Inc. from October 2014 until October 2017, when Alere was acquired by Abbott Laboratories. Mr. Nawana joined Alere as Chief Operating Officer in December 2012 before being named Interim Chief Executive Officer in July 2014. Before joining Alere, Mr. Nawana spent 15 years at Johnson & Johnson in various leadership roles. Most recently, he served as the Worldwide President of DePuy Synthes Spine, a Johnson & Johnson company, from February 2011 to November 2012. Prior to that, Mr. Nawana served as Area Vice President for Johnson & Johnson Medical in Australia and New Zealand from January 2009 to February 2011, Chairman of the DePuy Asia Pacific Franchise Council, General Manager for DePuy Australia from 2007 to December 2008 and General Manager for DePuy Canada from 2004 to 2007. Mr. Nawana holds an Honors degree in mechanical engineering and a Master of Medical Science from the University of Adelaide, South Australia, and an MBA from Henley Management College. Given his past positions, Mr. Nawana brings to our Board deep global experience in the industry as well as operating expertise.
Executive officers are chosen by and serve at the discretion of the Board. Set forth below are the names and ages of our executive officers, as of January 1, 2018,2019, along with certain biographical information for all but Stephen P. MacMillan, our Chairman, President and Chief Executive Officer. For Mr. MacMillan’s biographical information, please see page 17.
21.
Name | Age | Title | ||
Stephen P. MacMillan | 55 | Chairman, President and Chief Executive Officer | ||
49 | Chief Financial Officer | |||
John M. Griffin | 58 | General Counsel | ||
Allison P. Bebo | 50 | Senior Vice President, Human Resources | ||
Peter J. Valenti, III | 55 | Division President, Breast and Skeletal Health | ||
Thomas A. West | 54 | Division President, Diagnostics |
Ms. Oberton | Chief Financial Officer |
Ms. Oberton became our Chief Financial Officer in August 2018. She joined Hologic in 2006 as corporate controller and was promoted to Chief Accounting Officer in 2015. Before joining Hologic, Ms. Oberton served as senior corporate controller of Immunogen from 2004 to 2006. Prior to that, she was an Audit Senior Manager in Ernst & Young’s Life Science practice and in Arthur Andersen’s High Technology practice. Ms. Oberton was an active Certified Public Accountant for more than 18 years and holds a Bachelor of Science in Business Administration from Merrimack College. She is a member of Merrimack College’s Leadership Council. | |
Mr. Griffin | General Counsel |
Mr. Griffin joined us in February 2015 as General Counsel with nearly 30 years of experience across a broad spectrum of legal matters. Mr. Griffin worked at Covidien from 2000 to 2015 where he most recently served as Vice President, Deputy General Counsel. Previously, from 1994 to 2000, Mr. Griffin served as Assistant United States Attorney in Boston, Massachusetts, and prosecuted complex criminal cases. He began his career at Nutter, McClennen & Fish in Boston. Mr. Griffin currently serves on the board of directors for Por Cristo in Boston and New England Legal Foundation. He also serves as Treasurer and on the Board of Directors for Health Care Volunteers International. He has a Juris Doctor degree from Harvard Law School and a Bachelor of Arts in political science from Columbia University. | |
Ms. Bebo | Senior Vice President, Human Resources |
Ms. Bebo joined us in February 2015 as Senior Vice President, Human Resources with 15 years of human resources experience. From 2000 to 2015, Mrs. Bebo held various human resources leadership positions within ANN INC., primarily focused on talent acquisition, associate relations, and talent management. She most recently served as Vice President, Talent Management. From 2007 to 2012, she served as the Vice President, Human Resources for the Ann Taylor and LOFT field organization. She served as Director of Organizational Effectiveness from 2004 to 2007 and as Director of Talent Resources from 2000 to 2004. She holds a Bachelor of Arts in political science from the University of California, Los Angeles. |
36 2019 Proxy Statement
Mr. McMahonjoined us in May 2014 as Chief Financial Officer with more than 20 years of healthcare finance experience. From 1993 to 2014, Mr. McMahon worked at Johnson & Johnson in executive finance roles of increasing responsibility. Most recently, Mr. McMahonExecutive Officers
Mr. Valenti | Division President, Breast and Skeletal Health |
Mr. Valenti joined us in May 2014 as Division President, Breast and Skeletal Health, with approximately 30 years of sales, brand and product management experience, including 20 years focused on healthcare products. Prior to joining the Company, Mr. Valenti was a Principal at The New England Consulting Group where he served as a consultant to numerous healthcare companies, including Johnson & Johnson, Alcon, Cardinal Health, Align Technology, Inc. and Bausch + Lomb Inc. Mr. Valenti assumed his consulting role following his four-year tenure in the North American and Global President roles of Bausch + Lomb’s Vision Care business from 2009 to 2013. From 2007 to 2009, Mr. Valenti was the General Manager, U.S. Region for Covidien’s Surgical Devices business. From 1995 to 2007, Mr. Valenti was with Johnson & Johnson and held positions of increasing responsibility including Vice President, Global Franchise for the Vistakon business and Executive Director, Women’s Health for Johnson & Johnson’s Personal Products business.Mr. Valenti began his career at Procter & Gamble. He received a Master of Business Administration from Cornell University and a Bachelor of Science in business administration from the University of Connecticut. | |
Mr. West | Division President, Diagnostics |
Mr. West joined us in October 2014 as Division President, Diagnostics with more than 20 years of healthcare experience. As of March 2018, he also oversees all Hologic businesses in Latin America. From 1992 to 2014, Mr. West worked at Johnson & Johnson in various roles of increasing responsibility across the globe. Most recently, he served as the Worldwide Vice President – Strategy and Business Development for Johnson & Johnson’s Diabetes Solutions Companies. Previously, he served as President of LifeScan North America and as President of LifeScan EMEA. Mr. West has a proven track record in formulating and implementing growth strategies in the life sciences and consumer healthcare industries globally. He has a bachelor’s degree in politics and economics from Princeton University and a Master of Business Administration in marketing and strategic management from the University of Pennsylvania’s Wharton School. |
www.hologic.com 37
PROPOSAL NO. 2 - NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the provisions of Section 14A of the Exchange Act, require that we provide our stockholders with the opportunity to vote to approve, on a non-binding advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC. Our Board has determined to provide our stockholders this opportunity on an annual basis.
As described in the Compensation Discussion and Analysis (the “CD&A”), our executive compensation philosophy is to provide appropriate competitive compensation opportunities to our executives with actual pay outcomes heavily influenced by the achievement of Company performance targets and individual performance objectives (in other words, “pay for performance”) in support of our business strategy and creation of long-term stockholder value.
The Company’s management team has been embracing a performance culture and driving growth of the business. We finished fiscal 2018 with solid performance, but also strengthened our future. Our largest businesses gained momentum in the second half of the year, likely due in large part to changes in leadership structure. At the end of fiscal 2017, Mr. MacMillan re-evaluated the Company’s leadership structure, eliminating the position of Chief Operating Officer and expanding his leadership team. These changes give Mr. MacMillan direct access to commercial leadership and help to drive urgency in commercial execution as well as in business development.
Each year, we take into account the result of the “say-on-pay” vote cast by our stockholders. During the tenure of our current management team, we have seen our say-on-pay vote approval increase from 34% at our 2014 Annual Meeting of Stockholders to 95% at our 2017 Annual Meeting of Stockholders. At our 2018 Annual Meeting of Stockholders, our say-on-pay vote approval was 74%, a decrease from the prior year. The only significant changes to our annual compensation program from fiscal 2016 to fiscal 2017 were the addition of relative TSR as a PSU performance measure and the amendment of our CEO’s Employment Agreement to add adjusted net income as a check on adjusted EPS for determination of the value of his annual long-term incentive grant, both of which are stockholder-friendly changes. We believe the decrease in say-on-pay approval was related to the special CEO retention equity grant as well as a negative say-on-pay vote recommendation from one proxy advisory firm, which did not appear to take into account the unique nature of the situation surrounding the grant. Please see the “Message from the Compensation Committee” and “Compensation Discussion and Analysis” beginning on page 40 for additional information.
Our Compensation Committee continually evaluates the design and direction of our compensation structure. Previously, in response to stockholder feedback, we introduced performance stock units (“PSUs”) tied to return on invested capital (“ROIC”) as a significant component of long-term equity awards. After careful consideration, effective for fiscal 2017 long-term equity awards, the Compensation Committee determined to add relative total shareholder return (“TSR”) as an additional performance metric applicable to the PSUs. In our discussions with stockholders in connection with last year’s Annual Meeting, as well as our continued stockholder outreach later in the year, there was strong support for this structure. Stockholders expressed appreciation for the considered, balanced approach in utilizing one consistent absolute metric (ROIC) and one relative metric (TSR) for PSUs, and also were strongly in favor of keeping ROIC as a performance metric.
Stockholders are urged to read our CD&A, beginning on page 42, and the section entitled “Executive Compensation Tables” beginning on page 66 for additional details about our executive compensation programs, including information about the fiscal 2018 compensation of our NEOs.
38 2019 Proxy Statement
Proposal No. 2 - Non-Binding Advisory Vote to Approve Executive Compensation
We are asking our stockholders to indicate their support for our NEO compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives you as a stockholder the opportunity to express your views on our NEOs’ compensation. This vote is not intended to address any specific element of our compensation programs, but rather to address our overall approach to the compensation of our NEOs described in this proxy statement. To that end, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
RESOLVED, that stockholders of Hologic, Inc., hereby approve the compensation paid to the Company’s named executive officers, as described in this proxy statement under the “Compensation Discussion and Analysis” section, the “Executive Compensation Tables” section and other narrative disclosure contained therein, pursuant to the SEC’s compensation disclosure rules.
Because your vote is advisory, it will not be binding upon the Company, the Compensation Committee or our Board. However, the Company values the opinions expressed by stockholders in their vote on this proposal and the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs.
Vote Required
Approval of this proposal requires the affirmative vote of a majority of shares present, in person or represented by proxy, and voting on this proposal at the Annual Meeting. Abstentions and broker “non-votes” will not have any effect on the proposal to approve executive compensation as disclosed in this proxy statement.
Recommendation of the Board
Our Board of Directors unanimously recommends that you vote“FOR”the approval of this resolution. Management proxy holders will vote all duly submitted proxies FOR approval unless instructed otherwise. |
www.hologic.com 39
MESSAGE FROM THE COMPENSATION COMMITTEE
Dear Fellow Stockholders:
As a Compensation Committee, we are committed to overseeing the design and implementation of executive compensation programs that align with the interests of our stockholders and adhere to our pay-for-performance philosophy, while allowing us the flexibility to attract, retain and incentivize executives to execute Hologic’s long-term strategy.
Stockholder Approval. We have made significant progress in our compensation programs over the last several years – as the Company has evolved, so have our programs. Much of the evolution was in response to feedback from stockholders – and stockholder support for our executive compensation programs has increased significantly, with our say-on-pay approval improving from 34% at our 2014 Annual Meeting of Stockholders to 95% at our 2017 Annual Meeting of Stockholders. At our 2018 Annual Meeting of Stockholders, our say-on-pay vote approval was 74%, a decrease from the prior year. We believe this decrease was related to the one-time $30 million equity retention grant made to our CEO in the fall of 2017, and we’d like to address this grant.
Special Equity Retention Grant. While this grant is significant and certainly puts Mr. MacMillan’s total compensation for fiscal 2018 well in excess of peer compensation, the independent members of the Board of Directors determined, after careful consideration and debate, that it was in the best interests of the Company and its stockholders to retain Mr. MacMillan – and that this equity grant, which is 100% performance-based, was the best way to do so. This decision was not made lightly.
To understand how the independent members of the Board came to this conclusion, it helps to have context, including understanding the role that Mr. MacMillan has played, and continues to play, in the Company’s journey in building a sustainable growth company. The appointment of Mr. MacMillan as Hologic’s CEO in fiscal 2014 is a critical part of our current success story. Since joining Hologic, Mr. MacMillan has led a dramatic turnaround, returning the business to growth and winning the support of Carl Icahn and other activists. Not only did he personally recruit the Company’s four Division Presidents and other senior executives, but he is one of the 25 largest stockholders of the Company, when taking into account his vested but deferred equity. His interests are very much aligned with those of our stockholders, and we believe he is critical to the Company’s long-term success. His leadership and vision are at the core of our significantly improved performance, and we believe it is his continued commitment to driving sustainable long-term growth and investing in our people, infrastructure and products that will drive our success as we move into the future.
In light of his long track record of success, other larger medical device and healthcare companies have expressed interest over time in hiring Mr. MacMillan to serve as Chief Executive Officer. In October 2017, Mr. MacMillan received such an offer from a larger medical device company. The independent members of the Company’s Board of Directors considered the potential for disruption to Hologic and its business as well as the impact on stockholder value should Mr. MacMillan leave, and determined that it was in the best interests of Hologic and its stockholders to retain him as Chairman, President and Chief Executive Officer. Accordingly, the independent members of the Board, after careful consideration and discussions with Mr. MacMillan and the Compensation Committee’s compensation consultant, awarded Mr. MacMillan a $30 million special retention equity grant, effective December 1, 2017, all of which is performance-based and on the same terms as the Company’s annual equity grants for other executives for fiscal 2018. Mr. MacMillan formally declined the other more substantial offer and reaffirmed his commitment to Hologic, continuing to serve as Hologic’s Chairman, President and Chief Executive Officer.
To realize any value from the special retention equity grant, the Company – and Mr. MacMillan – must perform. If the Company does not meet the minimum ROIC and relative TSR threshold targets for the performance stock units (PSUs), none of the PSUs granted to Mr. MacMillan as part of this retention grant will vest. If the Company’s share price does not exceed the exercise price of the options, they will have no value. Of note, during the month between the grant approval date (November 1, 2017) and the grant effective date (December 1, 2017), the Company’s stock price increased 6.9%, reflecting in part the market’s support for the grant and resulting in an effective option price premium due to the higher exercise price.
The Board believes that the special retention equity grant to Mr. MacMillan was appropriate in light of the potential for business disruption and decrease in stockholder value were Mr. MacMillan to accept the offer of employment elsewhere and leave the Company. See “Say-on-Pay and Stockholder Feedback” in the “Compensation Discussion and Analysis” for information regarding the positive reception the grant received from stockholders and investment analysts.
40 2019 Proxy Statement
Message from the Compensation Committee
Fiscal 2018 and beyond. We should note that this special retention equity grant is a one-time event, and we don’t envision making any further special retention grants to Mr. MacMillan. We should also note that, when setting his compensation for fiscal 2018 and fiscal 2019, we did not take the special retention equity grant into consideration. Mr. MacMillan’s compensation generally is set in accordance with the terms of his Employment Agreement, with the exception of awards under the Short-Term Incentive Plan (STIP). For fiscal 2018, the Compensation Committee exercised negative discretion when setting the overall funding of the STIP at 100% and also approved funding Mr. MacMillan’s STIP award at 90%. The funding of Mr. MacMillan’s STIP award below 100% was due primarily to the disappointing performance of the Medical Aesthetics business in 2018, although we do recognize that all of the other businesses significantly improved and strengthened over the course of the year.
While fiscal 2017 was an overtly transformative year, with the divestiture of our blood screening business and the acquisition of Cynosure, which is our Medical Aesthetics business, fiscal 2018 has also been a transformative year, albeit a less obvious one. We touch on performance highlights in the CD&A, including the continued strength of our Breast Health and International businesses as well as acceleration of growth in our molecular diagnostics business and the stabilization of our U.S. Surgical business. The Company also ramped up business development activities, completing three tuck-in acquisitions during or just after the end of fiscal 2018. But what you may not realize is that a restructuring of the executive leadership team is helping drive the momentum in financial results and business development activity.
Leadership restructure. At the end of fiscal 2017, Mr. MacMillan re-evaluated the Company’s management structure and eliminated the position of Chief Operating Officer. This change brings Mr. MacMillan closer to the businesses – fostering more transparency and accountability, with Division Presidents reporting directly to him and a broader range of business development opportunities coming to him more quickly. Mr. MacMillan also expanded his executive leadership team, forming the Global Leadership Team (GLT). This expanded group gives more leaders direct access to Mr. MacMillan and Mr. MacMillan direct access to more leaders. He also assumed responsibility from the Chief Operating Officer to conduct business reviews and leads quarterly business reviews with each division, which include members of the GLT along with the leadership team for the applicable division.
Succession Planning. Following Mr. MacMillan’s potential departure in November 2017, the Board and Mr. MacMillan intensified their focus on succession planning. Succession planning starts with Mr. MacMillan, his team and the Compensation Committee, but is continued with the full Board. The Board devotes significant time on its agenda to succession planning, reviewing and discussing the succession plans for the CEO and each of his direct reports. With the departure of Bob McMahon, the Company’s former CFO, this summer, such succession planning became more evident. Karleen Oberton, our current CFO, joined the GLT last fall, when she was the Corporate Vice President, Finance and Business Development, Ortho Clinical Diagnostics for Johnson & Johnson. From 2006 to 2011, Mr. McMahon served as Vice President, Finance, Consumer GroupAccounting, Chief Accounting Officer and from 2004 to 2006 he served as Vice President, Finance, Networking & Computing Services. Earlier in his career at Johnson & Johnson, Mr. McMahon worked in various financial roles at the divisional and corporate headquarters levels. Mr. McMahon began his career in 1991 at Harris Corporation in Florida. Mr. McMahon is a Certified Management Accountant and holds a Master of Business Administration from the University of Central Florida and a Bachelor of Science in business administration from the University of Florida.
Mr. Griffinjoined us in February 2015 as General Counsel with nearly 30 years of experience across a broad spectrum of legal matters. Mr. Griffin worked at Covidien from 2000 to 2015 where he most recently served as Vice President, Deputy General Counsel. Previously, from 1994 to 2000, Mr. Griffin served as Assistant United States Attorney in Boston, Massachusetts, and prosecuted complex criminal cases. He began his career at Nutter, McClennen & Fish in Boston. Mr. Griffin currently servesCorporate Controller. Her participation on the boardGLT gave her additional exposure to Mr. MacMillan and other members of directors for Por Cristo in Bostonthe leadership team. This helped Mr. MacMillan and New England Legal Foundation. He also serves as Treasurer and on the Board feel confident in the succession plan in place and enabled a smooth transition for Ms. Oberton as she assumed the role of Directors for Health Care Volunteers International. HeCFO - another benefit of Mr. MacMillan’s leadership restructure.
Mr. MacMillan has a Juris Doctor degree from Harvard Law Schoolfundamental belief that people matter. We couldn’t agree more. There were a few bumps along the road in fiscal 2018, but we continue to be excited about Hologic, its people and a Bachelorthe progress it is making in achieving its strategic vision, with Mr. MacMillan leading the charge. At the same time, we are committed to doing all that we can to ensure that we have the compensation programs in place to drive long-term stockholder value. Please do let us know if you have any questions, concerns or feedback regarding Mr. MacMillan’s special retention equity grant or our compensation programs in general. We thank you for your investment in Hologic and your continued support!
Respectfully,
The Compensation Committee
Scott T. Garrett, Chair | Sally W. Crawford | Ludwig N. Hantson | Namal Nawana |
www.hologic.com 41
Table of Arts in political science from Columbia University.Contents
Ms. Bebojoined us in February 2015 as Senior Vice President, Human Resources with 15 years of human resources experience. From 2000 to 2015, Mrs. Bebo held various human resources leadership positions within ANN INC., primarily focused on talent acquisition, associate relations, and talent management. She most recently served as Vice President, Talent Management. From 2007 to 2012, she served as the Vice President, Human Resources for the Ann Taylor and LOFT field organization. She served as Director of Organizational Effectiveness from 2004 to 2007 and as Director of Talent Resources from 2000 to 2004. From 1997 to 2000, she served as the District Manager for the Northeast Region for Ann Taylor and from 1994 to 1997 she served as Store Manager for Ann Taylor in Stamford, CT. She holds a Bachelor of Arts in political science from the University of California, Los Angeles.
Mr. Valentijoined us in May 2014 as Division President, Breast and Skeletal Health Solutions with approximately 30 years of sales, brand and product management experience, including 23 years focused on healthcare products. Prior to joining the Company, Mr. Valenti was a Principal at The New England Consulting Group where he served as a consultant to numerous healthcare companies, including Johnson & Johnson, Alcon, Cardinal Health, Align Technology, Inc. and Bausch + Lomb Inc. Mr. Valenti assumed his consulting role following his four-year tenure in the North American and Global President roles of Bausch + Lomb’s Vision Care business from 2009 to 2013. From 2007 to 2009, Mr. Valenti was the General Manager, U.S. Region for Covidien’s Surgical Devices business. From 1995 to 2007, Mr. Valenti was with Johnson & Johnson and held positions of increasing responsibility including Vice President, Global Franchise for the Vistakon business and Executive Director, Women’s Health for Johnson & Johnson’s Personal Products business. Mr. Valenti began his career at Procter & Gamble. He received a Master of Business Administration from Cornell University and a Bachelor of Science in business administration from the University of Connecticut.
Mr. Westjoined us in October 2014 as Division President, Diagnostics Solutions with more than 20 years of healthcare experience. From 1992 to 2014, Mr. West worked at Johnson & Johnson in various roles of increasing responsibility across the globe. Most recently, he served as the Worldwide Vice President – Strategy and Business Development for Johnson & Johnson’s Diabetes Solutions Companies. Previously, he served as President of LifeScan North America and as President of LifeScan EMEA. Mr. West has a proven track record in formulating and implementing growth strategies in the life sciences and consumer healthcare industries in the U.S., Canada, Europe, the Middle East, Africa and Latin America. He has a bachelor’s degree in politics and economics from Princeton University and a Master of Business Administration in marketing and strategic management from the University of Pennsylvania, Wharton School.
COMPENSATION DISCUSSION AND ANALYSIS
In this Compensation Discussion and Analysis section (“CD&A”)(CD&A), we describe the executive compensation program for our CEO and CFO, our three other most highly compensated executive officers serving as of September 29, 2018, and our former CFO (collectively, our named executive officers, (“NEOs”)or NEOs). We also explain how the Compensation Committee of the Board of Directors (the “Committee”) determined the pay of our NEOs and its rationale for specific decisions related to fiscal 2018 compensation. As a reminder, our fiscal year generally ends on the last Saturday in September. Fiscal 2018 began on October 1, 2017 (September 25, 2016 –and ended on September 30, 2017) compensation.29, 2018.
Our Named Executive Officers (NEOs) for Fiscal 20172018
Name | Title | |
Stephen P. MacMillan | Chairman, President and Chief Executive Officer | |
Chief Financial Officer | ||
John M. Griffin | General Counsel | |
Peter J. Valenti, III | Division President, Breast and Skeletal Health | |
Thomas A. West | Division President, Diagnostics | |
Robert W. McMahon(1) | Former CFO |
(1) | Ms. Oberton succeeded Mr. |
20172018 Business Strategy & Performance Highlights
Fiscal 20172018 was a very productivesolid year for Hologic both strategically and operationally. Although the year got off to a rocky start with weaknesses in a number of our U.S. businesses, we finished the year in which we made excellent progress toward buildingon a very different trajectory, with our major domestic franchises performing well. We also built a sustainable growth company. engine internationally, launched several key new products, and acquired two companies, plus another just after fiscal year end. Although our share price lagged our peers’ over the last 12 months, we believe we are a much healthier company today than a year ago, and that each of our major businesses is stronger.
In our largest division, Breast Health, domestic growth improved in each quarter of 2018, driven by strong commercial execution, market share gains for our clinically differentiated Genius 3D mammograms, and important new products. These include our state-of-the-art 3Dimensions mammography system, which we believe is the short term,fastest, highest resolution breast tomosynthesis system on the market, and the innovative Brevera biopsy system, which streamlines biopsy procedures for an optimal patient and physician experience.
In Diagnostics, we strengthenedgenerated solid growth by placing more of our product leadership positions, enabling usfully automated Panther and Panther Fusion molecular diagnostics systems, launching more women’s health, virology and respiratory tests to deliver soliddrive revenue and earnings growth in linesystem utilization, and solidifying our relationships with our external guidance. Atlargest customers. In addition, our ThinPrep Pap cervical cancer test remains the same time,leader in the U.S. liquid cytology market.
In Surgical, a revamped and more competitive sales force under new sales leadership helped quarterly results improve. Our MyoSure system for hysteroscopic tissue removal and our NovaSure product for endometrial ablation continue to lead their respective categories and improve women’s lives worldwide.
In Medical Aesthetics, we took three important steps to solidifyposted weak revenue results, which we believe weighed on our growth profile forshare price. But behind the long term. First,scenes, we improved our commercial capabilities and upgraded talent across the business. We also launched the innovative TempSure radiofrequency platform. Although the numbers don’t show it yet, we believe we laid the foundations for a more successful 2019.
42 2019 Proxy Statement
Compensation Discussion and Analysis
Internationally, we built a solid infrastructure for sustainable international growth throughwith new leadership, new products, and better commercial execution. Second,new capabilities. We also acquired Emsor, the distributor of our Breast and Skeletal Health products in Spain and Portugal. Total international revenue of $800 million grew 17.0% on a reported GAAP basis, and 12.9% in constant currency, and we shifted our business portfolio toward higher-growth segments by divesting our blood screening business and acquiring Cynosure. And third,have tremendous runway ahead for future growth.
Based on all these activities, we accelerated our launch of new products that reflect increasing innovation from our revitalized research and development pipeline.
Product leadership. Hologic is focused primarily on improving women’s health and well-being through early detection and treatment. Throughoutposted solid revenue growth in fiscal 2017, we strengthened our leadership positions in important women’s health markets with products such as Selenia Dimensions and 3Dimensions Mammography Systems, the Panther system and APTIMA assays in molecular diagnostics, the ThinPrep Pap test to detect cervical cancer, and the MyoSure system to remove uterine fibroids.
Revenue and earnings growth. In fiscal 2017, we2018. We generated GAAP revenue of $3,059$3,218 million, up 8%5.2% versus 2016, and GAAP earnings per share (“EPS”) of $2.64, up 128% versus the prior year. These results include the effects of divesting blood screening and acquiring Cynosure. Excluding these effects, adjusted revenue increased 5%2017, or 4.3% on a constant currency basis, and adjusted EPS,basis.
And finally, as calculated pursuant towe eliminated all the provisions ofconvertible debt from our 2017 Short-Term Incentive Plan, increased 12%.
International.After struggling in fiscal 2016,balance sheet, we simultaneously enhanced our international franchises rebounded in 2017 behind new leadership, new products, and better commercial execution. On a GAAP basis, international revenue of $684 million increased 16% in fiscal 2017. Excluding the effects of divesting blood screening and acquiring Cynosure, international revenue increased 11% on a constant currency basis.
Portfolio enhancement. In January 2017, we divested our share of our blood screening business to long-time partner Grifols for $1.865 billion. Laterdevelopment efforts, resulting in the acquisitions of Faxitron Bioptics for $89 million and, just after fiscal year end, of Focal Therapeutics for $125 million. Faxitron and Focal will help us expand into the adjacent growth market of breast-conserving surgery and enable us to help women throughout their continuum of breast health care, from screening to treatment.
Even as we acquired Cynosure, a leader in the medical aesthetics industry, for an enterprise value of $1.47 billion. Together, we believe these transactions will accelerateseveral companies, our revenue and EPS growth rates over time.
Innovation.We launched multiple new products in each of our divisions, reflecting increasing productivity from our research and development (“R&D”) teams. Most notably, we introduced improvements to our MyoSure and NovaSure gynecological surgical devices, innovative biopsy and mammography systems in our Breast Health division, and new assays to quantify viral load in our molecular diagnostics business.
Our strong financial performance in fiscal 2017cash flow enabled us to continue to improve our capital structure. Early in the year, we redeemed the remaining balance of our most dilutive convertible notes, eliminating them from our balance sheet. In addition, we repurchased $286 million in principal of our other convertible notes, further decreasing total debt outstanding. Finally, we bought 5.3buy back 7.3 million shares of our common stock for $200$276 million. As a result, we ended the year with less debt and fewer diluted shares outstanding than a year ago.
In terms of GAAP earnings per share (EPS), we recorded a loss of ($0.40) in fiscal 2018 due to a significant goodwill impairment charge related to our acquired Cynosure business. However, excluding this write-down and other expenses and charges excluded pursuant to the calculations in our 2018 Short-Term Incentive Plan, adjusted EPS increased 9.9%, benefiting from U.S. tax reform.
Two of the three financial performance metrics we utilize in our compensation plans, adjusted revenue(1) revenue(1)and adjusted EPS(2)EPS(2), improved from fiscal 20162017 to fiscal 2017.2018. Return on invested capital (“ROIC”)(ROIC)(3) declined slightly, from 12.7%was flat at 12.6%.
We overcame several challenges in fiscal 2018 to 12.6%.
Our Journey to Sustainable Growth
Financialpost good results, for one yearand believe we are a snapshot of short-term performance. Our focus is on the long term. Since Mr. MacMillan joined the Company in 2013, the Company has invested significantly in its people, infrastructureentering 2019 with improved momentum both strategically and products. The power of focused, motivated people is evident, and has driven strong growth in annual revenue and profits, among other things.
The financial information in the charts to the right is presented on a GAAP basis. For fiscal 2017, these results include the impact of the divestiture of our blood screening business and the acquisition of Cynosure.
November 2013
Before the current management team was in place, our sales and earnings were declining, we had $4.4 billion in debt, and we had no meaningful product pipeline. Our interest expense on our debt was higher than our expenditures on R&D.
September 2017
Under the stewardship of our management team, with significant contributions by our commercial teams, our sales have not only stopped declining, but have returned to growth. In fiscal 2017, organic growth (growth excluding the impact of the Cynosure acquisition and disposition of the blood screening business) was led by our international franchises, by molecular diagnostics products including Panther and APTIMA, and by MyoSure in our GYN Surgical business.
In addition to revenue growth, the Company’s disciplined approach to strengthening the balance sheet also has paid off. From fiscal 2013 to fiscal 2017 our net debt, which is total debt minus cash, decreased from $4.0 billion to $2.8 billion, and our ROIC improved significantly.
While decreasing our debt, we also have increased our GAAP R&D spending by 17.8% since 2013. This investment is beginning to yield benefits, as evidenced by the multiple new product launches in 2017.
These improvements have helped drive our share price. Our share price has increased by 75.5% since 2013, based on a comparison of the closing price on the last trading day of fiscal 2013 to the closing price on the last trading day of fiscal 2017. We are committed to bringing value to our stockholders, as well as to our employees and customers, over the long term.
GAAP EPS
GAAP Revenue (in millions)
GAAP Operating Margin
operationally.
OUR JOURNEY TO SUSTAINABLE GROWTH Financial results for one year are a snapshot of short-term performance. Our focus is on the long term. Since Mr. MacMillan joined the Company in 2013, the Company has invested significantly in its people, infrastructure and products. The power of focused, motivated people is evident, and has driven growth in annual revenue and profits, among other things. The financial information in the charts below is presented on a GAAP basis. For fiscal 2017 and 2018, these results include the impact of the divestiture of our blood screening business and the acquisition of Cynosure. | ||
GAAP REVENUE | GAAP EPS |
(1) | The definition of our |
(2) | The definition of our |
(3) | ROIC means adjusted net operating profit after tax divided by the sum of average net debt and average stockholders’ equity. See “Why |
www.hologic.com 43
Compensation Discussion and Analysis
Fiscal 2018 Executive Compensation Highlights
In establishing the executive compensation program for fiscal 2018, the Committee continued to focus on pay for performance and competitive pay, with a focus on total direct compensation.
EMPHASIS ON PERFORMANCE-BASED TOTAL DIRECT COMPENSATION
The components of Total Direct Compensation (TDC) are Base Salary, Short-Term Incentives, Long-Term Incentives and Deferred Compensation Awards.
● | Short-Term Incentivestake the form of annual cash bonuses under our Short-Term Incentive Plan (STIP), which are paid only if the Company achieves adjusted revenue and adjusted earnings per share (EPS) performance above a pre-determined threshold. |
● | Long-Term Incentivestake the form of equity awards which are granted based on performance and, in the case of performance share units (PSUs), vest only if the Company achieves return on invested capital (ROIC) and/or relative total shareholder return (TSR) above pre-determined thresholds. |
● | Deferred Compensationtakes the form of a cash award under our Deferred Compensation Plan (DCP) which vests over three years and is awarded based on Company performance under the STIP as well as individual performance. |
The charts below, which show the TDC of our CEO and our other NEOs for fiscal 2018, illustrate that a majority of NEO TDC is performance based (91.5% for our CEO and an average of 76.1% for our other NEOs). These charts exclude the value of other benefits and perquisites and, for Mr. MacMillan, exclude his special retention and matching equity grants, as those were not considered when setting his annual compensation.
2018 ANNUAL TARGET CEO PAY
($ in millions)
2018 ANNUAL TARGET AVERAGE NEO PAY
($ in millions)
PERFORMANCE MEASURES LINK TO STRATEGY
In setting performance measures for the incentive compensation plans, the Committee first considers the Company’s strategy, contemplating the Company’s long- and short-term goals and how those goals are measured.
As the Company has been focused on growth as well as efficient use of capital and creating value for stockholders, the Committee determined that using the measures of adjusted revenue, adjusted EPS and ROIC were appropriate for the incentive compensation plans. These are all non-GAAP measures that are used by management to facilitate its operational decision-making and provide key insights into the Company and management’s achievements. Additionally, the use of ROIC was specifically supported in discussions with stockholders. The Company added the measure of relative TSR in fiscal 2017 to provide an external performance measure and also link executive compensation directly to the creation of stockholder value.
BALANCED APPROACH TO LONG-TERM INCENTIVES
The Committee takes a balanced approach to long-term incentives, and, for fiscal 2018 annual grants:
44 2019 Proxy Statement
Compensation Discussion and Analysis
Determined to utilize relative TSR as well as ROIC as performance measures for PSUs awarded as long-term incentive compensation to provide a more balanced approach with one consistent absolute metric (ROIC) and one relative metric (TSR), as in | ||
● | Approved grants of stock options, RSUs, PSUs and Deferred Compensation Program (DCP) contributions in |
PAY-FOR-PERFORMANCE ALIGNMENT
| Based on Company performance in fiscal | |
● | Based on Company performance
| |
● | The | |
● | The Committee exercised negative discretion in setting the | |
● | Based on fiscal 2018 performance against individual objectives, payout for | |
● | Decrease in fiscal 2018 LTIP grant values for Division Presidents, based on fiscal 2017 performance. | |
● | Mr. MacMillan’s LTIP grant value is based on the Company’s adjusted net income and adjusted EPS performance pursuant to the terms of his Employment Agreement – if adjusted EPS and adjusted net income both increase from the prior year (which they did), so does the value of Mr. MacMillan’s LTIP grant. | |
● | Set challenging ROIC goals for PSU awards and continued use of relative TSR as a metric for PSU awards. |
CEO SPECIAL PERFORMANCE-BASED RETENTION EQUITY GRANT
In early fiscal 2018, Mr. MacMillan received a significant offer from a large medical device company. The independent members of the Board of Directors determined, after careful consideration and debate, that it was in the best interests of the Company and its stockholders to retain Mr. MacMillan. Rather than attempt to match the sign-on bonus offered to Mr. MacMillan by the other medical device company by making a one-time cash award, the independent members of the Board of Directors approved a special, one-time retention equity grant to Mr. MacMillan, all of which is performance-based. The grant consists of:
● | $10 million in the |
● | $10 million in the
|
● | $10 million in the
|
the same performance goals as all fiscal 2018 annual long-term incentive awards, cliff vest at the end of three years, provided the executive is employed and the measurement objectives are achieved. The stock options vest in four equal installments over four years. If the threshold measurement objectives are not achieved, the PSUs will not vest at all.
See the “Message from the Compensation Committee” at the beginning of this CD&A for additional details and background.
“Say-On-Pay” and Stockholder Feedback
Each year, we take into account the result of the say-on-pay vote cast by our stockholders. As our journey to sustainable growth continues, so does the evolution of our compensation program. During the tenure of our current management team, we have seen our say-on-pay vote approval increase from 34% at our 2014 Annual Meeting of Stockholders to 95% at our 2017 Annual Meeting of Stockholders. At our 2018 Annual Meeting of Stockholders, our say-on-pay vote approval was 74%, a decrease from the prior year. The only significant changes to our compensation program from fiscal 2016 to fiscal 2017 were the addition of relative TSR as a PSU performance measure and the amendment of our CEO’s Employment Agreement to add adjusted net income as a check on adjusted EPS for determination of the value of his annual long-term incentive grant, both of which are stockholder-friendly changes. We are makingbelieve this decrease in say-on-pay approval was related to the special CEO retention equity grant, including a negative say-on-pay recommendation from one proxy advisory firm, who did not appear to take into account the unique nature of the situation surrounding the special retention equity grant.
We have made good progress in our compensation design and view the increasingly positive support from stockholders as a continuing endorsement of our compensation program’s evolving design and direction. Our Compensation Committee regularly evaluates our executive compensation structure and assesses its effectiveness to ensure the design is incenting performance that is in the best interests of the Company as well as our stockholders.
www.hologic.com 45
Compensation Discussion and Analysis
While say-on-pay is a key indicator of stockholder feedback, we also are committed to maintaining an open dialogue with our institutional investors and stockholders throughout the year. We reach out to discuss business topics, seek feedback on our performance and address other matters of importance to our stockholders, such as executive compensation. Since our 20172018 Annual Meeting, we have actively engaged with a number of our largest institutional investors specifically on governance issues, reaching out to holders of more than 50%60% of our outstanding shares. Through this dialogue, we received additional validation on the design of our executive compensation program as well as strong support for our senior management team, particularly Mr. MacMillan. Investors continued to be supportive of the special retention equity grant made to Mr. MacMillan, recognizing the unique nature of the situation. See below for additional information regardingabout our discussions with investors regardingon performance metrics.
Following disclosure of the special performance-based retention equity grant tometrics and Mr. MacMillan noted above, the Company reached out to ten of its largest stockholders, representing more than 50% of our outstanding shares, to discuss the grant. In addition, the Company had numerous conversations on the subject with stockholders and investment analysts as part of its normal investor relations activities. Feedback from stockholders and investment analysts has been overwhelmingly positive. Stockholders recognize Mr. MacMillan’s value to the Company and support the decision of the independent members of the Board to award the performance-based grant and retain Mr. MacMillan, and acknowledge the negative effect his departure could have had on the Company and its valuation. The Company publicly announced the grant on November 2, 2017, after the close of market. The Company’s stock price increased 3% on the next day, and from November 2, 2017 to November 30, 2017, the Company’s stock price increased 8.6%.
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WHAT WE HEARD – DESIGN OF COMPENSATION PROGRAM The Committee spent time during 2018 reviewing incentive plan performance metrics and goal setting, as it does every year. We also discussed incentive plan performance metrics with our investors in the fall of 2018. We discussed our current use of ROIC as a performance metric as well as the recent addition of relative TSR. Investors were strongly in favor of continuing to use ROIC as a performance-based metric for our long-term incentive awards and also were supportive of the addition of relative TSR as a performance-based metric. Several expressed a preference for ROIC, with one investor sharing the view that compensation should be company and strategy-specific and expressing satisfaction that Hologic utilized ROIC exclusively when it made sense and then added relative TSR as the Company evolved. Another investor appreciated the balanced nature of our compensation program, including the use of one absolute and one relative metric for long-term incentives. In our 2017 discussions with investors, we also discussed the amendment to Mr. MacMillan’s
46 2019 Proxy Statement Compensation Discussion and Analysis The Committee has made several decisions relating to executive pay for fiscal 2019, including:
Executive Compensation Best Practices Highlights of our executive compensation governance practices are set forth in our Proxy Statement Summary on page 15.
The ability to compete effectively in the markets within which we operate depends to a large extent on our success in identifying, recruiting, developing and retaining management talent. We also need to remain focused on creating sustainable long-term growth and stockholder value. To this end, the design of our executive compensation program and the decisions made by the Committee are guided by the following principles:
Our compensation philosophy is supported by the following principal elements in our annual executive compensation program:
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Analysis
BASE SALARY Base salary represents annual fixed compensation and is a standard element of compensation necessary to attract and retain talent. It is the minimum payment for a satisfactory level of individual performance as long as the executive remains employed with us. Base salary is set at the Committee’s discretion after taking into account the competitive landscape including the compensation practices of the companies in our selected peer groups (and where appropriate, survey data from a broader index of comparable public companies), our business strategy, our short- and long-term performance goals and certain individual factors, such as position, salary history, individual performance and contribution, length of service with the Company and placement within the general base salary range offered to our NEOs. Mr. MacMillan’s base salary is set and adjusts in accordance with the term of his Employment 48 2019 Proxy Statement Compensation Discussion and Analysis The base salaries for our NEOs for fiscal
The STIP provided our NEOs the opportunity to earn a performance-based cash bonus based on the achievement of a combination of financial and non-financial corporate, divisional, and/or individual goals. Targeted payout levels are expressed as a percentage of base salary and established for each participant. An individual’s bonus components are determined by such individual’s title and/or role. Bonus payouts could range from 0% to 200% of targeted payout levels (e.g., the maximum bonus payout for an individual with a targeted payout level of 50% of annual base salary would be 100% of annual base salary). The corporate financial goals under the The overall funding level of the INDIVIDUAL BONUS OPPORTUNITY RANGES(1)
Other NEOs
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Compensation Discussion and Analysis 2018 PERFORMANCE OBJECTIVES AND RESULTS The Committee believed the financial performance components of the
50 2019 Proxy Statement Compensation Discussion and Analysis 2018 STIP AWARDS For fiscal 2018, the Company exceeded the target for adjusted EPS under the STIP but missed the adjusted revenue target. Adjusted EPS
Individual performance objectives for our NEOs reflected the top priorities for our NEOs and were aligned with the top
Performance Objectives and Outcomes
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Performance Objectives and
following goals:
52 2019 Proxy Statement Compensation Discussion and Analysis
Performance Objectives and Outcomes
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Performance Objectives and
54 2019 Proxy Statement Compensation Discussion and Analysis
Performance Objectives and Outcomes Mr. West’s individual performance objectives were designed to
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LONG-TERM EQUITY INCENTIVES We believe that strong sustainable corporate performance is achieved with a culture that encourages long-term focus by our NEOs and aligns the interests of our NEOs with those of our stockholders. We also use our long-term awards to attract and retain critical employee talent by providing a competitive market-based opportunity. To achieve these objectives, we award long-term incentives on an annual basis in the form of equity. For fiscal PERFORMANCE STOCK UNITS ROIC PSUs.Half of the PSUs granted use ROIC as a metric and vest only if the Company achieves a pre-determined ROIC three-year average minimum threshold (the ROIC PSUs) at the end of a three-year performance period. If the minimum three-year average ROIC threshold is not achieved, none of the ROIC PSUs granted for that three-year performance period will vest and all will be forfeited. If the target three-year average ROIC goal is achieved, 100% of the ROIC PSUs granted will vest. The maximum payout for ROIC PSUs is limited to 200% of the target number of ROIC PSUs granted and is earned only if we achieve the maximum three-year average ROIC goal. At the vesting date, earned PSU awards are settled in shares of Hologic common stock, unless settlement has been deferred pursuant to the Company’s Deferred Equity Plan. For details about our use of ROIC as a performance measure, please see “Why ROIC and Relative TSR?” below. ROIC PSUs also are subject to the terms and conditions set forth in the form of ROIC Performance Stock Unit Award Agreement. In fiscal 2016, the Committee eliminated annual ROIC hurdles for fiscal 2016 PSU grants while retaining the more challenging three-year average ROIC minimum threshold for the performance period. The Committee viewed the annual hurdles as having the potential to penalize recipients for executing value-enhancing acquisitions but believes retaining the three-year average ROIC minimum threshold incents management to remain disciplined on value creation. For fiscal 2018 PSU grants, the Committee continued to utilize the three-year average ROIC minimum threshold for the performance period. The following table outlines the threshold, minimum, target, 125% and maximum three-year average ROIC goals for the ROIC PSUs granted as fiscal 2018 long-term incentive awards (see “2018 Long-Term Annual Incentive Award Grants” below):
56 2019 Proxy Statement Compensation Discussion and Analysis TSR PSUs.The other 50% of PSUs vest based on the Company’s total shareholder return as compared to the total shareholder return of companies in the TSR PSU Peer Group, measured over a three-year performance period (the TSR PSUs). The fiscal 2018 TSR PSU awards vest at target and at 200% of target upon achievement of relative total shareholder return at the 50thand 95thpercentile, respectively. If the Company’s relative total shareholder return is below the 25thpercentile, then no TSR PSUs will vest. At the vesting date,
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STOCK OPTIONS
RESTRICTED STOCK UNITS RSUs vest in three equal annual installments, becoming fully vested on the third anniversary of the grant date. Only vested RSUs can be exchanged for shares of Hologic common stock. RSUs also are subject to the terms and conditions set forth in the form of Restricted Stock Unit Award Agreement. 2018 LONG-TERM ANNUAL INCENTIVE AWARD GRANTS The annual long-term incentive awards granted to our NEOs in November of
58 2019 Proxy Statement Compensation Discussion and Analysis
The 6.0% increase in the value of Mr. MacMillan’s equity grant from fiscal 2017 to fiscal 2018 is calculated in accordance with the terms of his Employment Agreement, as described above. For fiscal 2017, adjusted net income grew 12.0% and adjusted EPS grew 12.2%. As adjusted net income grew slightly less than adjusted EPS, adjusted net income is the applicable metric. Half of the 12.0% adjusted net income growth yields a 6.0% increase in grant value. The decrease in value of 2019 LONG-TERM ANNUAL INCENTIVE AWARD GRANTS The annual long-term incentive awards granted to our NEOs in November of 2018 (fiscal 2019) as compared to awards for fiscal 2018 are as follows:
The 2.2% decrease in the value of Mr. MacMillan’s fiscal 2019 long-term incentive award annual grant value as compared to his fiscal 2018 annual grant value is calculated in accordance with the terms of his Employment Agreement, as described above. For fiscal 2018 as compared to fiscal 2017, adjusted net income decreased 2.2% and adjusted EPS increased 0.5%. Although adjusted EPS increased, because Mr. MacMillan’s grant value adjusts based on the lower result, the applicable metric is adjusted net income. While Mr. MacMillan’s grant value increases 0.5% for every 1% increase in the applicable metric, the value decreases 1% for every 1% decrease in the applicable metric. Accordingly, Mr. MacMillan’s grant value decreased 2.2% for fiscal 2019 as compared to fiscal 2018, equal to the decrease in the Company’s fiscal 2018 adjusted net income. The increase in value of Mr. Valenti’s fiscal 2019 long-term incentive award grant as compared to his fiscal 2018 grant was due in large part to the performance of the Breast Health division in fiscal 2018 as well as the key role the division plays and is expected to play in the Company’s growth. The increase in Mr. West’s grant value is based on the performance of the Diagnostics division, particularly in the last quarter of fiscal 2018, as well as the key role the division plays and is expected to play in the Company’s growth. The increase in Mr. Griffin’s grant is based on his continued role as a valued advisor, as well as the additional responsibility he assumed during the year overseeing business development activities as well as for retention purposes. The significant increase in Ms. Oberton’s fiscal 2019 grant value is related to her assumption of the role of CFO in August 2018. Her fiscal 2019 grant value is in-line with early grants awarded to Mr. McMahon when he was a first-time public company CFO.
Compensation Discussion and Analysis
The PSU awards granted in November 2014 (fiscal 2015) vested in November 2017 (fiscal 2018). These ROIC PSUs were subject to a three-year cliff vesting period with vesting contingent on the Company achieving an average ROIC of 11% for the three-year performance period as well as annual performance hurdles for fiscal 2015, 2016 and 2017 of 8.5%, 9.5% and 10.5%, respectively. If performance was below any of these levels, none of the PSUs would vest. Actual performance was 12.04% for the three-year performance period and 10.88%, 12.7% and 12.55% for fiscal 2015, 2016 and 2017, respectively. Accordingly, these PSUs vested at 200% of target. DEFERRED COMPENSATION The Company’s Non-Qualified Deferred Compensation Plan (the The DCP allows NEOs to contribute up to 75% of their base salary and 100% of their annual bonus to a supplemental retirement account. In addition, the Company has the ability to make annual
DEFERRED EQUITY PLAN The Hologic, Inc. Deferred Equity Plan, as amended (the DEP) is designed to allow executives and non-employee directors to accumulate Hologic stock in a tax-efficient manner and assist them in meeting their long-term equity accumulation goals and stock ownership guidelines. Participants may elect to defer the settlement of RSUs and PSUs granted under the Amended and Restated 2008 Equity Incentive Plan until separation from service or separation from service plus a fixed number of years. Participants may defer settlement by vesting tranche. Although the equity will vest on schedule, if deferral of settlement is elected, no shares will be issued until the settlement date. The settlement date will be the earlier of death, disability, change in control or separation from service/separation from service plus number of years elected. All of our NEOs, other than Ms. Oberton, who just became an NEO, have elected to participate in the DEP. 60 2019 Proxy Statement Compensation Discussion and Analysis RETIREMENT BENEFITS The Committee maintains retirement benefits to help the Company attract and retain the most highly talented senior executives. Over the years, the Committee has modified these programs to ensure competitive alignment with an evolving market. We believe the overall value of our retirement programs is consistent with our industry peers. 401(k) SAVINGS AND INVESTMENT PLAN The Company sponsors a 401(k) Savings and Investment Plan, which is a qualified retirement plan offered to all eligible employees, including our NEOs. The Plan allows participants to elect to defer a portion of their compensation on a pre-tax basis, up to the limits imposed by the Internal Revenue Code of 1986, as amended. In 2018, which includes the first three months of the Company’s fiscal 2019, the Company matched 100% of the first 3% and 50% of the next 2% of each participant’s deferrals, up to an amount equal to 4% of the first $275,000 earned by a participant. EQUITY RETIREMENT PROVISION After considering market trends in retirement program practices as well as the needs of the Company, during fiscal 2016, the Committee approved the addition of a retirement provision to its equity compensation program. The provision, which applies solely to U.S. employees, provides for the continued vesting of RSUs and stock options and pro-rata vesting of PSUs when a person retires, if the individual is either 65 years of age or older, or at least 55 years of age with 10 years of continuous service with the Company. While RSUs and stock options continue to vest on their original vesting schedule following retirement, PSUs vest on their original vesting date on a pro-rata basis (based on number of days employed during the applicable performance period) based on actual performance during the performance period (assuming threshold performance is achieved). If threshold performance is not achieved during the applicable performance period, no PSUs will vest. This equity retirement provision is applicable to equity grants made from November 5, 2015 forward. OTHER BENEFITS AND PERQUISITES Our NEOs also generally participate in other benefit plans on the same terms as all of our other employees. These plans include our employee stock purchase plan, medical and dental insurance, life insurance, short- and long-term disability insurance programs, as well as customary vacation, leave of absence and other similar policies. We also provide limited perquisites and personal benefits based on considerations unique to each NEO position. During fiscal 2018, we provided each of the NEOs with an automobile allowance. In addition, Mr. MacMillan has access to private air transportation for business purposes and limited non-entertainment personal use. The non-entertainment personal use is subject to a maximum aggregate incremental cost to the Company of $150,000 per fiscal year. The values of all perquisites and other personal benefits provided to our NEOs are included in the “All Other Compensation” column of the Summary Compensation Table on page 66. The Compensation Committee oversees the compensation and benefits programs for our NEOs. The Committee is comprised solely of independent, non-employee members of the Board of Directors. The Committee works very closely with its independent compensation consultant and management to examine the effectiveness of the Company’s executive compensation program throughout the year. Details of the Committee’s authority and responsibilities are specified in the Committee’s charter, which may be accessed throughinvestors.hologic.com. THE ROLE OF THE COMMITTEE The Committee seeks to ensure that the links between our executive compensation program and our business goals are responsible, appropriate and strongly aligned with stockholder interests. The Committee annually determines the compensation levels of our NEOs by considering several factors, including:
www.hologic.com 61 Compensation Discussion and Analysis THE ROLE OF MANAGEMENT During fiscal 2018, Mr. MacMillan reviewed the performance and compensation of the NEOs, other than himself, and made recommendations as to their compensation to the Committee. No executive officer participates in the deliberations of the Committee regarding his or her own compensation. THE ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT The Committee retained Pearl Meyer & Partners, LLC (Pearl Meyer) to serve as its executive compensation consultant for fiscal 2018. Pearl Meyer did not perform any services for us other than as directed by the Committee. During fiscal 2018, Pearl Meyer advised the Committee on a variety of subjects such as compensation plan design and trends, pay for performance analytics, benchmarking norms, and other such matters. Pearl Meyer also conducted a risk assessment of our executive compensation practices for fiscal 2018, as described in “Risk Oversight” on page 26. Pearl Meyer reports directly to the Committee, participates in meetings as requested and communicates with the Committee Chair between meetings as necessary. Prior to engaging Pearl Meyer, the Committee reviewed the firm’s qualifications as well as its independence and any potential conflicts of interest. The Committee has the sole authority to modify or approve Pearl Meyer’s compensation, determine the nature and scope of its services, evaluate its performance, and terminate the engagement and hire a replacement or additional consultant at any time. PEER GROUP The Committee compares our executive compensation program to a group of companies that are comparable in terms of size and industry (the Primary Peer Group). The overall purpose of this peer group is to provide a market frame of reference for evaluating our compensation arrangements (current or proposed), understanding compensation trends among comparable companies, and reviewing other compensation and governance-related topics that may arise during the course of the year. For setting target compensation levels for NEOs in fiscal 2018, the Company examined the practices of the following 13 companies (as well as other relevant data):
Each year, Pearl Meyer conducts and presents to the Committee an executive compensation competitive assessment to assist the Committee in assessing whether executive target pay levels by element and in the aggregate are competitive in the marketplace. With the exception of Mr. MacMillan, the fiscal 2018 target annual TDC opportunities, comprised of base salary, target annual STIP, annual long-term incentive awards and deferred compensation contributions, were determined to be, on average, competitive with the market median. The Committee recognizes that Mr. MacMillan is a seasoned, 62 2019 Proxy Statement Compensation Discussion and Analysis accomplished CEO whose market for prospective employment opportunities includes larger organizations, as evidenced by the substantial offer he received from one such company in October 2017. As such, Mr. MacMillan’s fiscal 2018 target annual TDC opportunity, which does not include his special equity retention grant, is positioned in the upper quartile of the Primary Peer Group, which the Compensation Committee believes is warranted given his value to the Company. Although the Committee does not use the Supplemental Peer Practices Group (discussed below) in setting compensation, we note that Mr. MacMillan’s fiscal 2018 target annual TDC opportunity, which does not include his special equity retention grant, is in the lowest quartile of the Supplementary Practices Peer Group. CHANGES TO THE PRIMARY PEER GROUP Pearl Meyer reviews our Primary Peer Group annually for appropriateness based on a variety of factors including: similarities in revenue levels and size of market capitalization and enterprise value, similarities to the industries in which we operate, the overlapping labor market for top management talent, our status as a publicly traded, U.S.-based, non-subsidiary company, and various other characteristics. The Company uses enterprise value in addition to market capitalization for comparative purposes because of its capital structure. Following each of the 2017 and the 2018 reviews by Pearl Meyer of our Primary Peer Group, the Committee changed the Primary Peer Group utilized for purposes of fiscal 2018 compensation and for fiscal 2019 compensation, respectively, as follows:
Pearl Meyer also developed a Supplemental Practices Peer Group of larger companies to serve as a reference point in understanding design characteristics of compensation programs at larger companies. The group was not used to set compensation levels for the NEOs. The group consists of both direct product competitors and recent sources of executive talent. Below is the Supplemental Practices Peer Group which the Company referenced while assessing compensation design for fiscal 2018 compensation. SUPPLEMENTAL PRACTICES PEER GROUP COMPOSITION
www.hologic.com 63 Compensation Discussion and Analysis TSR PEER GROUP The Company uses a custom TSR Peer Group comprised of select companies from the Company investor relations performance benchmarking group and the executive compensation Peer Groups discussed above. The TSR Peer Group is approved by the Compensation Committee each year at the time the TSR PSU awards are granted. Companies which are acquired or otherwise delisted during the performance period are excluded from the final calculation. For the fiscal 2018 TSR PSU awards, the following companies were set as the TSR Peer Group: 2018 TSR PEER GROUP COMPOSITION
Additional Compensation Practices, Policies & Guidelines OUR POSITION ON EMPLOYMENT, CHANGE OF CONTROL AND SEVERANCE AGREEMENTS Our ability to build the exceptional leadership team in place today was due in large part to our having a full complement of compensation tools available to us and the flexibility to use them. This includes the ability to leverage employment, change of control and severance agreements. The Committee believes that together, our employment, change of control and severance agreements, which are guided by our compensation philosophy and governance practices and policies (e.g., double-trigger change of control provisions, no tax gross-ups), are well aligned with those of our peers. More importantly, they foster stability within senior management by helping our executives maintain continued focus and dedication to their responsibilities to maximize stockholder value, including in the event of a transaction that could result in a change in control of our Company. The Committee believes that providing change of control and severance benefits eliminates, or at least reduces, any reluctance of senior management to pursue potential change of control transactions that may be in the best interests of stockholders. We also understand the concern of our stockholders regarding severance arrangements, and in 2015, the Committee adopted a Policy on Executive Severance Agreements. This policy limits severance benefits under any new severance or employment agreements entered into with executive officers to 2.99 times the sum of the executive officer’s base salary and non-equity incentive plan payment or other annual non-equity bonus or award; any benefits in excess of this amount must be ratified by stockholders. For purposes of this policy “severance benefits” do not include the value of accelerated vesting of any outstanding equity awards or payments under the Company’s retirement and deferred compensation plans. Details about the specific arrangements made with our NEOs are set forth on pages 76-78. 64 2019 Proxy Statement Compensation Discussion and Analysis EXECUTIVE STOCK OWNERSHIP GUIDELINES Our Board believes that our directors and officers should hold a meaningful financial stake in the Company in order to further align their interests with those of our stockholders. Our CEO is expected to achieve equity ownership in the Company with a value of five times his then current base salary and each of our other NEOs and executive officers is expected to achieve equity ownership in the Company with a value of two times his or her then current base salary, within five years of employment or five years from the adoption of the guideline, whichever is later. Only shares of stock issued and outstanding (or vested and deferred under our deferred equity plan) are credited towards the ownership goals. All of our NEOs have achieved ownership in excess of the guideline, except for Ms. Oberton who just became subject to the ownership guidelines this year. Information about ownership guidelines for our non-employee directors can be found in the “Director Compensation” section on page 34 of this proxy statement.
COMPENSATION RECOUPMENT POLICY Under our compensation recoupment, or clawback, policy, if our Board determines that an officer engaged in fraud or willful misconduct that resulted in a restatement of the Company’s financial results, then the Board may review all performance-based compensation – both cash and equity – awarded to or earned by that officer on the basis of performance during the fiscal periods materially affected by the restatement. If, in the view of our Board, the performance-based compensation would have been lower if it had been based on the restated financial results, the Board may, to the extent permitted by applicable TAX AND ACCOUNTING CONSIDERATIONS The Committee considers tax and accounting implications in determining all elements of our compensation plans, programs and arrangements, although they are not the only factors considered. In some cases, other important considerations may outweigh tax or accounting considerations, and the Committee maintains the flexibility to compensate its officers in accordance with the Company’s compensation philosophy. Section 162(m) of the Internal Revenue Code of 1986, as amended, generally limits the deductibility of compensation to $1 million per year for certain named executive officers of the Company, except that historically Section 162(m) provided for an exemption for compensation that qualified as “performance-based compensation.” In the past, several elements of our named executive officers’ compensation were intended to be deductible under Section 162(m) as performance-based compensation. The Tax Cuts and Jobs Act of 2017 repealed the exemption from the Section 162(m) deduction limit for performance-based compensation, effective for taxable years beginning after December 31, 2017, but provides a transition rule with respect to remuneration that is provided pursuant to a written binding contract which was in effect on November 2, 2017 and which was not materially modified after that date. As a result, we expect that, subject to www.hologic.com 65 We, the Compensation Committee The following table presents information regarding compensation of each of the NEOs for services rendered during the fiscal years indicated. A description of our compensation policies and practices as well as a description of the components of compensation payable to our NEOs is included above under “Compensation Discussion and Analysis.”
66 2019 Proxy Statement Executive Compensation Tables
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68 2019 Proxy Statement Executive Compensation Tables
www.hologic.com 69 Executive Compensation Tables Outstanding Equity Awards at Fiscal Year-End
70 2019 Proxy Statement Executive Compensation Tables
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72 2019 Proxy Statement Executive Compensation Tables Option Exercises and Stock Vested
Non-Qualified Deferred Compensation
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Non-Qualified Deferred Compensation Plan.Effective as of March 15, 2006, we adopted a Non-Qualified Deferred Compensation Plan (the “DCP”), to provide non-qualified retirement benefits to a select group of our senior management and highly compensated employees including the NEOs. The DCP was amended and restated on each of October 15, 2011, November 5, 2013 (effective as of October 15, 2013) and September 17, 2015. The DCP is a deferred compensation plan that permits our NEOs to contribute up to 75% of their annual base salary and 100% of their annual bonus to a supplemental retirement account. In addition, the Company retains the ability to make annual discretionary contributions to the DCP on behalf of participants. Each DCP contribution the Company makes on behalf of our NEOs is subject to a three-year vesting schedule, such that one-third of each contribution vests annually and each contribution is fully-vested three years after the contribution is made. In addition, Company contributions become fully vested upon (1) death, disability or a change of control, (2) retirement after the attainment of certain age and/or service milestones, or (3) as otherwise provided by the Compensation Committee in its sole discretion. Elective contributions made by the NEOs are 100% vested. A separate DCP account is established for each NEO and each account is credited with earnings or losses based on the performance of mutual funds selected by each participant in which the account is invested. The obligations under the DCP are our general unsecured obligations to pay money in the future. We established a rabbi trust as a source of funds which can satisfy the obligations under the DCP. An NEO has no rights to any assets held by the rabbi trust, except as general creditors. An NEO’s rights to any amounts credited to his DCP account may not be alienated, sold, transferred, assigned, pledged, attached or otherwise encumbered by the NEO, but may pass upon his death pursuant to a beneficiary designation in accordance with the terms of the DCP. DCP benefits are paid in lump sum, or at the NEO’s election, in annual installments for a period of up to fifteen years. Distributions of DCP benefits will begin following the earlier of the NEO’s normal retirement date or a date-certain distribution date elected by the participant. In certain instances, the Internal Revenue Code of 1986, as amended (the “Code”), requires that distribution not be made to an NEO until six months after his separation from service. An NEO may also receive a distribution if he or she suffers an unforeseeable emergency in accordance with the Code. Deferred Equity The Hologic, Inc. Deferred Equity Plan, as amended (the “DEP”) is designed to allow executives and non-employee directors to accumulate Hologic stock in a tax-efficient manner and assist them in meeting their long-term equity accumulation goals and stock ownership guidelines. Participants may elect to defer the settlement of RSUs and PSUs granted under the Amended and Restated 2008 Equity Incentive Plan until separation from service or separation from service plus a fixed number of years. Participants may defer settlement by vesting tranche. Although the equity will vest on schedule, if deferral of settlement is elected, no shares will be issued until the settlement date. The settlement date will be the earlier of death, disability, change in control or separation from service/separation from service plus number of years elected. 74 2019 Proxy Statement Table of Executive Compensation Tables
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Change of Control and The Company has entered into change of control Mr. MacMillan As described in the
Change of Control
product of 2.99 times the sum of his annual base salary for the fiscal year preceding the date of termination and highest annual bonus; and (iv) immediate and full vesting of all stock options, RSUs, PSUs and other equity awards, with any options (or other similar awards) remaining exercisable for the shorter of the remaining term of the award or a period of one year following the executive’s termination. The term “highest annual bonus” is defined as the greater of (i) the average of annual bonuses paid to the executive over the three fiscal years preceding the fiscal year in which the change of control occurs; (ii) the annual bonus paid to the executive in the fiscal year preceding the fiscal year in which the change of control occurs; or (iii) the target bonus award opportunity associated with the Company achieving its 100 percent target payout level as determined in accordance with the Company’s bonus plan for the fiscal year preceding the fiscal year in which the change of control occurs. Mr. MacMillan will continue 76 2019 Proxy Statement Executive Compensation Tables to receive health and dental benefits for the remaining term of the Employment Period. Mr. MacMillan’s Change of Control Agreement does not provide for any change of control benefits, including the acceleration of equity awards, if he remains employed by the Company, is terminated by the Company for cause or voluntarily terminates his employment (other than a resignation for good reason). If Mr. MacMillan dies or his employment is terminated by reason of disability during the Employment Period, then he, or his heirs or estate, is entitled to receive (i) a lump sum cash payment equal to all accrued and unpaid compensation through the date of termination (or death) plus a pro-rata highest annual bonus based on the number of days elapsed during the fiscal year through the date of termination (or death); (ii) continuation of certain welfare benefits for the remaining term of the Employment Period; and (iii) a lump sum cash payment equal to the sum of his annual base salary and the highest annual bonus. In the event any payments and benefits provided under the Change of Control Agreement is subject to excise taxes under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), then the payment shall be reduced so that no payment to be made or benefit to be provided to the executive shall be subject to the excise tax.
The Company has entered into a Severance and Change of Control Agreement with each of Severance. Each agreement provides that if the executive is terminated by the Company without cause or resigns for good reason, then Change of Control. Terms relating to benefits payable In the event any payments and benefits provided under the Severance and Change of Control Agreements are subject to excise taxes under Section 280G of the Code, then the payment shall be reduced so that no payment to be made or benefit to be provided to the executive shall be subject to the excise tax.
Mr. Valenti and Mr. West The Company has entered into a Severance Agreement as well as a Change of Control Agreement with Messrs. Valenti and West. Severance. The severance pay and benefits provided under www.hologic.com 77 Executive Compensation Tables Change of Control. The amount of the estimated payments and benefits payable to NEOs, assuming a change of control of the Company as of the last day of fiscal
Our
high-quality, stable workforce. Under
For 2018, our last completed fiscal year:
Based on this information, for 2018, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees (other than our CEO) was estimated to be approximately 137 to 1 when excluding the special retention equity grant and 478 to 1 when including the special retention equity grant. The pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. The SEC rules for identifying the “median employee” and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratio reported by us, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. To identify the “median employee” from our employee population, we 78 2019 Proxy Statement
The Audit and Finance Committee has appointed Ernst & Young LLP (“Ernst & Young”), an independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending September Ernst & Young has continuously served as our independent registered public accounting firm since June 24, 2002. A representative of Ernst & Young will be available during the meeting to make a statement if such representative desires to do so and to respond to appropriate questions. Vote Required The affirmative vote of a majority of shares present, in person or represented by proxy, and voting on this proposal at the Annual Meeting is required to ratify the appointment of Ernst & Young. Abstentions and broker “non-votes” will not have any effect on the proposal to ratify the appointment of Ernst & Young. If the stockholders do not ratify the selection of Ernst & Young, the Audit and Finance Committee will review the Company’s relationship with Ernst & Young and take such action as it deems appropriate, which may include continuing to retain Ernst & Young as the Company’s independent registered public accounting firm. Recommendation of the Board
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