WASHINGTON, D.C. 20549
CHEGG, INC.
We have elected to deliver our proxy materials to our stockholders over the Internet in accordance with Securities and Exchange CommissionSEC rules. We believe that this delivery process reduces our environmental impact and lowers the costs of printing and distributing our proxy materials without impacting our stockholders’ timely access to this important information. On April 26, 2018,17, 2020, we sent a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders, which contains instructions on how to access our proxy materials for our 2018 Annual Meeting, of Stockholders, including our proxy statement and annual report to stockholders. The Notice also provides instructions on how to vote by telephone or via the Internet and includes instructions on how to receive a paper copy of the proxy materials by mail.
Please use this opportunity to take part in our company’s affairs by voting on the business to come before the meeting. Whether or not you plan to attend the meeting, please vote by telephone or via the Internet or request, sign and return a proxy card to ensure your representation at the meeting. Your vote is important.
CHEGG, INC.
We are holding the meeting for the following purposes, which are more fully described in the accompanying proxy statement:
1. To elect twothe Class III directors, of Chegg, Inc., each to serve until the third annual meetingAnnual Meeting of stockholdersStockholders following this meeting and until his successor has beentheir successors are elected and qualified or until his earliertheir resignation or removal.
2. Vote,To vote, on a non-binding advisory basis, on the compensation paid by us to our named executive officersNamed Executive Officers for the year ended December 31, 2017.2019.
3. Vote, on a non-binding advisory basis, on the frequency of future advisory votes on executive compensation.
In addition, stockholders may be asked to consider and vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof.
Whether or not you expect to attend the meeting, we encourage you to read the proxy statement and vote by telephone or via the Internet or request, sign and return your proxy card as soon as possible, so that your shares may be represented at the meeting. For specific instructions on how to vote your shares, please refer to the section entitled “General Information About the Meeting” beginning on page 5 of the proxy statement and the instructions on the Notice of Internet Availability of Proxy Materials that was mailed to you.
CHEGG, INC.
PROXY STATEMENT FOR 20182020 ANNUAL MEETING OF STOCKHOLDERS
CHEGG, INC.
3990 Freedom Circle
Santa Clara, CA 95054
PROXY STATEMENT FOR THE 20182020 ANNUAL MEETING OF STOCKHOLDERS
April 26, 201817, 2020
Information About Solicitation and Voting
The accompanying proxy is solicited on behalf of the boardBoard of directorsDirectors (“Board of Directors”) of Chegg, Inc. (“Chegg,” “Company,” “we,” “us”or “our”), for use at Chegg’s 2018the Company’s 2020 Annual Meeting of Stockholders (the “meeting”“Annual Meeting”) to be held at 3990 Freedom Circle, Santa Clara, California on June 7, 2018,3, 2020, at 9:00 a.m. (Pacific Time),Pacific Time, and any adjournment or postponement thereof.
The Annual Meeting is expected to be held at the Company’s offices at 3900 Freedom Circle, Santa Clara, California 95054. Though we currently intend to hold our Annual Meeting in person, we are actively monitoring the coronavirus (COVID-19) pandemic and are sensitive to the public health and travel concerns our stockholders may have and the protocols and legal regulations that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. If we take this step, we will announce the decision in advance, and provide details on how to participate in a press release, posted on our website at https://investor.chegg.com, under “Press Releases”, which we will also file with the Securities and Exchange Commission (“SEC”) as proxy material.
Internet Availability of Proxy Materials
Under rules adopted by the U.S. Securities and Exchange Commission (the “SEC”),SEC, we are furnishing proxy materials to our stockholders primarily via the Internet instead of mailing printed copies of those materials to each stockholder. OnAs a result, on or about April 26, 2018,17, 2020, we sent our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”“Notice”) to our stockholders, which containscontaining instructions on how to access our proxy materials, including our proxy statement and our annual report.Annual Report. The Notice of Internet Availability also provides instructions on how to access your proxy card to vote by telephone or via the Internet and includes instructions on how to receive a paper copy of the proxy materials by mail.Internet.
This process is designed to reduce our environmental impact and lowers the costs of printing and distributing our proxy materials without impacting our stockholders’ timely access to this important information. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability.Notice.
General Information About the Meeting
Purpose of the Meeting
At the meeting, stockholders will act upon the proposals described in this proxy statement. In addition, we will consider any other matters that are properly presented for a vote at the meeting. As of April 26, 2018,17, 2020, we are not aware of any other matters to be submitted for consideration at the meeting. If any other matters are properly presented for a vote at the meeting, the persons named in the proxy, who are our officers, have the authority in their discretion to vote the shares of our common stock represented by the proxy. Following the meeting, management will respond to questions from stockholders.
Record Date and Shares Outstanding
Only holdersStockholders of record of our common stock at the close of business on April 10, 2018, the record date, will be6, 2020 (the “Record Date”) are entitled to notice of, and to vote at, the meeting.Annual Meeting. At the close of business on April 10, 2018, we6, 2020, the Company had 111,867,529123,555,333 shares of our common stock outstandingissued and entitled to vote.outstanding.
Quorum
The holders of a majority of the voting power of the shares of our common stock entitled to vote at the meeting as of
the record date must be present (whether in person or online) at the meeting in order to hold the meeting and conduct business. This presence is called a quorum. Your shares are counted as present at the meeting if you are present and vote in person (or, in the case of a virtual meeting, online) at the meeting or if you have properly submitted a proxy.
Voting Rights
Each holder of shares of our common stock is entitled to one vote for each share of our common stock held as of the close of business on April 10, 2018,6, 2020, the record date.Record Date. You may vote all shares owned by you as of April 10, 2018,6, 2020, including (1) shares held directly in your name as the stockholder of record, and (2) shares held for you as the beneficial owner in street name through a broker, bank, trustee, or other nominee (collectively referred to in this proxy statement as your “broker”“Broker”).
Stockholder of Record: Shares Registered in Your Name. If, on April 10, 2018,6, 2020, your shares of our common stock were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, then you are considered the stockholder of record with respect to those shares. As a stockholder of record, you may vote at the meeting or vote by telephone, via the Internet, or if you request or receive paper proxy materials by mail, by filling out and returning the proxy card.
Beneficial Owner: Shares Registered in the Name of a Broker. If, on April 10, 2018,6, 2020, your shares of our common stock were held in an account with a broker,Broker, then you are the beneficial owner of the shares held in street name. As a beneficial owner, you have the right to direct your brokerBroker on how to vote the shares of our common stock held in your account. However, the brokerBroker that holds your shares of our common stock is considered the stockholder of record for purposes of voting at the meeting. Because you are not the stockholder of record, you may not vote your shares at the meeting unless you request and obtain a valid proxy from the brokerBroker that holds your shares giving you the right to vote the shares at the meeting.
Required Vote
Proposal No. 1. Each director nominated in Proposal No. 1 will be elected by a plurality of the votes cast, which means that the twothree individuals nominated for election to the boardBoard of directorsDirectors at the meeting receiving the highest number of “FOR” votes will be elected. YouStockholders may either vote “FOR” one or more nomineesthe nominee or “WITHHOLD” yourthe vote with respect to one or more nominees.the nominee.
Proposal No. 2. The affirmative “FOR” vote of a majority of the shares present, represented and entitled to vote on the proposal is required to approve, on an advisory and non-binding basis, the compensation awarded to our named executive officers for the year ended December 31, 2017.2019. You may vote “FOR,” “AGAINST,” or “ABSTAIN” on this proposal. Abstentions are deemed to be votes cast and have the same effect as a vote against the proposal. Although this say-on-pay vote is advisory and, therefore, will not be binding on us, our compensation committee and our boardBoard of directorsDirectors value the opinions of our stockholders. Accordingly, to the extent there is a significant vote against the compensation of our named executive officers, we will consider our stockholders’ concerns and the compensation committee will evaluate what actions may be necessary or appropriate to address those concerns.
Proposal No. 3. The choice of frequency that receives the highest number of affirmative “FOR” votes will be considered the advisory vote of our stockholders. You may vote for “ONE YEAR,” “TWO YEARS” or “THREE YEARS” or “ABSTAIN.” A properly executed proxy marked “ABSTAIN” with respect to the frequency of the stockholder vote on executive compensation will not be voted with respect to such proposal, although it will be counted for purposes of determining whether there is a quorum. Even though your vote is advisory and, therefore, will not be binding on us, our board of directors and compensation committee value the opinions expressed by our stockholders in their vote on this proposal and will consider the outcome of the vote when making future decisions regarding the frequency of holding future non-binding advisory votes on the compensation program of our named executive officers.
Proposal No. 4.3. Approval of Proposal No. 43 will be obtained if the number of votes cast “FOR” the proposal at the meetingAnnual Meeting exceeds the number of votes cast “AGAINST” the proposal. Abstentions (shares of ourthe Company’s common stock present at the meetingAnnual Meeting and voted “ABSTAIN”) are counted for purposes of determining whether a quorum is present, and have no effect on the outcome of the matters voted upon.
“Broker non-votes” occur when shares of our common stock held by a brokerBroker for a beneficial owner are not voted either because (i) the brokerBroker did not receive voting instructions from the beneficial owner, or (ii) the brokerBroker lacked discretionary authority to vote the shares. Broker non-votes are counted for purposes of determining whether a quorum is present, and have no effect on the outcome of the matters voted upon. Note that if you are a beneficial holder and do not provide specific voting instructions to your broker,Broker, the brokerBroker that holds your shares of our common stock will not be authorized to vote on the election of the directors. Accordingly, we encourage you to provide voting instructions to your broker,Broker, whether or not you plan to attend the meeting.
Recommendations of the Board of Directors on Each of the Proposals Scheduled to be Voted on at the Meeting
The boardBoard of directorsDirectors recommends that you vote:
•Proposal No. 1 - FOR each of the Class III directors named in this proxy statement.
•Proposal No. 2 - FOR the approval of the compensation of our named executive officers as disclosed in this proxy statement.Named Executive Officers.
•Proposal No. 3 - FOR “ONE YEAR” as the frequency with which stockholders are provided an advisory vote on executive compensation.
•Proposal No. 4 - FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2018.2020.
Voting Instructions; Voting of Proxies
If you are a stockholderStockholders as of record, youthe Record Date may:
vote in person – wethe Company will provide a ballot to stockholdersany stockholder who is planning to attend the meeting and wish to vote in person;
vote via telephone or via the Internet – in order to do so, please follow the instructions shown on your Notice of Internet Availability or proxy card; or
vote by mail – if youany individual stockholders request orand receive a paper proxy card and voting instructions by mail, simply complete, sign and date the enclosed proxy card and return it before the meetingAnnual Meeting in the envelope provided.
Votes submitted by telephone or via the Internet must be received by 11:59 p.m., Eastern Time, on June 6, 2018.2, 2020. Submitting your proxy (whether by telephone, via the Internet or by mail if you request or received a paper proxy card) will not affect your right to vote in person should you decide to attend the meeting. If you are not the stockholder of record, please refer to the voting instructions provided by your nominee to direct it how to vote your shares. For Proposal No. 1, you may either vote “FOR” all of the nominees to the boardBoard of directors,Directors, or you may “WITHHOLD” your vote from any nominee you specify. For Proposal No. 2, you may vote “FOR” or “AGAINST” or “ABSTAIN” from voting. For Proposal No. 3, you may vote for “ONE YEAR,” “TWO YEARS” or “THREE YEARS” or “ABSTAIN” from voting. For Proposal No. 4, you may vote “FOR” or “AGAINST” or “ABSTAIN” from voting. Your vote is important. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure that your vote is counted.
All proxies will be voted in accordance with the instructions specified on the proxy card. If you sign a physical proxy card and return it without instructions as to how your shares of our common stock should be voted on a particular proposal at the meeting, your shares will be voted in accordance with the recommendations of our boardBoard of directorsDirectors stated above.
If you received athe Notice, of Internet Availability, please follow the instructions included on the noticeNotice on how to access your proxy card and vote by telephone or via the Internet. If you do not vote and you hold your shares of our common stock in street name, and your brokerBroker does not have discretionary power to vote your shares, your shares may constitute “broker non-votes”(as (as described above) and will not be counted in determining the number of shares necessary for approval of the proposals. However, shares of our common stock that constitute broker non-votes will be counted for the purpose of establishing a quorum for the meeting.
If you receive more than one proxy card or the Notice, of Internet Availability, your shares of our common stock are registered in more than one name or are registered in different accounts. To make certain all of your shares of our common stock are voted, please follow the instructions included on the Notice of Internet Availability on how to access each proxy card and vote each proxy card by telephone or via the Internet. If you requested or received paper proxy materials by mail, please complete, sign and return each proxy card to ensure that all of your shares are voted.
In light of the COVID-19 pandemic, we strongly recommend that you vote your shares in advance of the Annual Meeting as instructed above, even if you plan to attend the meeting.
Expenses of Soliciting Proxies
The expenses of soliciting proxies will be paid by Chegg.the Company. Following the original mailing of the soliciting materials, Chegg and its agents may solicit proxies by mail, email, telephone, facsimile, by other similar means, or in person.person (or, in the case of a virtual meeting, online). Our directors, officers, and other employees, without additional compensation, may solicit proxies personally or in writing, by telephone, email, or otherwise. Following the original mailing of the soliciting materials, Chegg will request brokersBrokers to forward copies of the soliciting materials to persons for whom they hold shares of our common stock and to request authority for the exercise of proxies. In such cases, Chegg, upon the request of the record holders, will reimburse such holders for their reasonable expenses. If you choose to access the proxy materials and/or vote via the Internet, you are responsible for any Internet access charges you may incur.
Revocability of Proxies
A stockholder of record who has given a proxy may revoke it at any time before it is exercised at the meeting by:
delivering to the Corporate Secretary of Cheggthe Company (by any means, including facsimile) a written notice stating that the proxy is revoked;
signing and delivering a proxy bearing a later date;
voting again by telephone or via the Internet; or
attending and voting at the meeting (although attendance at the meeting will not, by itself, revoke a proxy).
Please note, however, that if your shares of our common stock are held of record by a brokerBroker and you wish to revoke a proxy, you must contact that firm to revoke any prior voting instructions. In the event of multiple online or telephone votes by a stockholder, each vote will supersede the previous vote and the previous vote and the last vote cast will be deemed to be the final vote of the stockholder unless revoked in person (or, in the case of a virtual meeting, online) at the meeting.
Electronic Access to the Proxy Materials
The Notice of Internet Availability will provide you with instructions regarding how to:
view our proxy materials for the meeting via the Internet; and
instruct us to send our future proxy materials to you electronically by email.
Choosing to receive your future proxy materials by email will reduce the impact of our annual meetingsAnnual Meetings of stockholdersStockholders on the environment and lower the costs of printing and distributing our proxy materials. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
Voting Results
Voting results will be tabulated and certified by the inspector of elections appointed for the meeting. The preliminary voting results will be announced at the meeting and posted on our website at investor.chegg.com.https://investor.chegg.com. The final results will be tallied by the inspector of elections and filed with the SEC in a Current Report on Form 8-K within four business days of the meeting.
CORPORATE GOVERNANCE STANDARDS AND DIRECTOR INDEPENDENCE
Chegg is strongly committed to good corporate governance practices. These practices provide an important framework within which our boardBoard of directorsDirectors and management can pursue our strategic objectives for the benefit of our stockholders.
Corporate Governance Guidelines
Our boardBoard of directorsDirectors has adopted Corporate Governance Guidelines that set forth our expectations for directors, director independence standards, board committee structure and functions, and other policies regarding our corporate governance. Our Corporate Governance Guidelines are available without charge on the Investor Relations section of our website, which is located at http:https://investor.chegg.com, under “Corporate Governance.” The Corporate Governance Guidelines are reviewed at least annually by our nominatingNominating and corporate governance committee,Corporate Governance Committee, and any warranted changes are recommended to our boardBoard of directors.Directors.
Board Leadership Structure
Our Corporate Governance Guidelines provide that our boardBoard of directorsDirectors shall be free to choose its chairmanChairperson, or Co-Chairperson, in any way that it considers in the best interests of our company, and that the nominatingNominating and corporate governance committeeCorporate Governance Committee shall periodically consider the leadership structure of our boardBoard of directorsDirectors and make such recommendations related thereto to our boardBoard of directors with respect theretoDirectors as the nominatingNominating and corporate governance committeeCorporate Governance Committee deems appropriate. Our boardBoard of directorsDirectors does not have a policy on whether the role of the chairmanChairperson, or of the Co-Chairperson, and chief executive officerChief Executive Officer should be separate and believes that it should maintain flexibility in determining a board leadership structure appropriate for us from time to time.
Our boardBoard of directorsDirectors believes that we and our stockholders currently are best served by having Dan Rosensweig, our chief executive officer,President and Chief Executive Officer, serve as chairmana Co-Chairperson of our boardBoard of directors,Directors, considering his experience, expertise, knowledge of our business and operations and strategic vision. As chairmanCo-Chairperson of our boardBoard of directors,Directors, Mr. Rosensweig presides over meetings of the boardBoard of directors,Directors along with the other Co-Chairperson, and holds such other powers and carries out such other duties as are customarily carried out by the chairmanCo-Chairpersons of a boardthe Board of directors.Directors. Our boardBoard of directorsDirectors believes that its independence and oversight of management is maintained effectively through this leadership structure, the composition of our boardBoard of directorsDirectors and sound corporate governance policies and practices.
Our Board of Directors’ Role in Risk Oversight
Our boardBoard of directors,Directors, as a whole, has responsibility for risk oversight, although the committees of our boardBoard of directorsDirectors oversee and review risk areas which are particularly relevant to them. The risk oversight responsibility of our boardBoard of directorsDirectors and its committees is supported by our management reporting processes, which are designed to provide visibility to the boardBoard of directorsDirectors and to our personnel that are responsible for risk assessment and information management about the identification, assessment and management of critical risks and management’s risk mitigation strategies. These areas of focus include, but are not limited to, competitive, economic, operational, financial (accounting, credit, liquidity and tax), legal, regulatory, compliance and reputational risks.
Each committee of the boardBoard of directorsDirectors meets in executive session with key management personnel and representatives of outside advisorsadvisers to oversee risks associated with their respective principal areas of focus. The audit committeeAudit Committee reviews our major financial risk exposures and the steps management has taken to monitor and control such exposures, including our risk assessment and risk management policies and guidelines. The nominatingNominating and corporate governance committeeCorporate Governance Committee reviews our major legal compliance risk exposures and monitors the steps management has taken to mitigate these exposures, including our legal risk assessment and legal risk management policies and guidelines.
The compensation committeeCompensation Committee reviews our major compensation-related risk exposures, including consideration of whether compensation rewards and incentives encourage undue or inappropriate risk taking by our personnel, and the steps management has taken to monitor or mitigate such exposures.
Independence of Directors
The rules, regulations and listing standards of the New York Stock Exchange (the “NYSE”) generally require that a majority of the members of our boardBoard of directorsDirectors be independent. In addition, the NYSE rules, regulations and listing standards generally require that, subject to specified exceptions, each member of a listed company’s audit, compensationAudit, Compensation and governance committeesNominating and Corporate Governance Committees be independent.
Our boardBoard of directorsDirectors determines the independence of our directors by applying the independence principles and standards established by the NYSE. These provide that a director is independent only if the boardBoard of directorsDirectors affirmatively determines that the director has no direct or indirect material relationship with ourthe company. They also specify various relationships that preclude a determination of director independence. Material relationships may include commercial, industrial, consulting, legal, accounting, charitable, family and other business, professional and personal relationships.
Applying these standards, our boardBoard of directorsDirectors annually reviews the independence of our directors, taking into account all relevant facts and circumstances. In its most recent review, the boardBoard of Directors considered, among other things, the relationships that each non-employee director has with our company and all other facts and circumstances our boardBoard of directorsDirectors deemed relevant in determining their independence, including the beneficial ownership of our capitalcommon stock by each non-employee director.
Based upon this review, our boardBoard of directorsDirectors has determined that none of the members of our boardBoard of directors,Directors, other than Mr. Rosensweig, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of the members of our boardBoard of directors,Directors, other than Mr. Rosensweig, is “independent” as that term is defined under the rules, regulations and listing standards of the NYSE.
All members of our audit committee, compensation committee,Audit Committee, Compensation Committee, and nominatingNominating and corporate governance committeeCorporate Governance Committee must be independent directors as defined by our Corporate Governance Guidelines. Members of the audit committeeAudit Committee must also satisfy a separate SEC independence requirement, which provides that they may not accept directly or indirectly any consulting, advisory or other compensatory fee from Chegg or any of its subsidiaries other than their directors’ compensation (including in connection with such member’s service as a partner, member ofor principal of a law firm, accounting firm or investment banking firm that accepts consulting or advisory fees from Chegg or any of its subsidiaries). Our boardBoard of directorsDirectors has determined that all members of our audit committee, compensation committeeAudit Committee, Compensation Committee and nominatingNominating and corporate governance committeeCorporate Governance Committee are independent and all members of our audit committeeAudit Committee satisfy the relevant SEC additional independence requirements for the members of such committee.
Committees of Our Board of Directors
Our boardBoard of directorsDirectors has established an audit committee,Audit Committee, a compensation committeeCompensation Committee and a nominatingNominating and corporate governance committee.Corporate Governance Committee. The composition and responsibilities of each committee are described below. Each committee is governed by a charter. The charters for each committee can be obtained, without charge, on the investor relations section of our website, http:https://investor.chegg.com, under “Corporate Governance.” Members serve on these committees until their resignations or until otherwise determined by our boardBoard of directors.Directors.
Audit Committee
Our audit committeeAudit Committee is comprised of Reneé Budig, who has served asis the chairChair of the audit committee since her appointment to our board of directors in November 2015,Audit Committee, Richard Sarnoff and John York.Ted Schlein. The composition of our audit committeeAudit Committee meets the requirements for independence under the rules, regulations and listing standards of the NYSE and the rules and regulations of the SEC. Each member of our audit committeeAudit Committee is financially literate as required by the rules, regulations and listing standards of the NYSE. In addition, our boardBoard of directorsDirectors has determined that Ms. Budig is an audit committeeAudit Committee financial expert within the meaning of Item 407(d) of Regulation S-K of the Securities Act of 1933, as amended.amended (Regulation S-K of the Securities Act of 1933, as amended, shall be referred to herein as "Regulation S-K").
Our audit committee,Audit Committee, among other things:
selects a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;
reviews the continuing independence and performance of and oversees our company’s relationship with the independent registered public accounting firm;
discusses the scope, audit planning, and staffing of the independent registered public accounting firm;
discusses the results of the audit with the independent registered public accounting firm, and reviews, with management and the independent registered public accounting firm, our interim and year-end operating results;
develops procedures for employees to submit concerns anonymously about questionable accounting or auditing matters;
considers and reviews the adequacy of our internal accounting controls and audit procedures;
oversees the activities of the internal audit function within the company; and
approves or, as required, pre-approves all audit and non-audit services not prohibited by law to be performed by the independent registered public accounting firm.
Compensation Committee
Our compensation committeeCompensation Committee is comprised of Ted Schlein,John York, who is the chairChair of the compensation committee,Compensation Committee, Marne Levine and Melanie Whelan. Ms. Whelan joined our Board of Directors in June 2019 and Compensation Committee in July 2019. Jeffrey Housenbold departed from the Board of Directors and Marne Levine.Compensation Committee in April 2019. The composition of our compensation committeeCompensation Committee meets the requirements for independence under the rules, regulations and listing standards of the NYSE and the rules and regulations of the SEC. Each member of our compensation committeeCompensation Committee is a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Securities Act of 1934, as amended, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended. The purpose of our compensation committeeCompensation Committee is to discharge the responsibilities of our boardBoard of directorsDirectors relating to the compensation of our executive officersExecutive Officers and directors.Directors. Our compensation committee,Compensation Committee, among other things:
reviews and determines the compensation of our executive officersExecutive Officers and recommends to our boardBoard of directorsDirectors the compensation for our directors;
administers our stock and equity incentive plans;
reviews and approves and makes recommendations to our boardBoard of directorsDirectors regarding incentive compensation equity-based grants and equity plans; and
establishes and reviews our company’s overall compensation strategy.
At least annually, our compensation committeeCompensation Committee reviews and approves our executive compensation strategy and principles to assure that they promote stockholder interests and supportssupport our strategic and tactical objectives, and that they provide for appropriate rewards and incentives for our executives. Our compensation committeeCompensation Committee also reviews and makes recommendations to our boardBoard of directorsDirectors regarding the compensation of our non-employee directors and executive officers. The compensation committeeCompensation Committee retains and does not delegate any of its exclusive power to determine all matters of executive compensation and benefits. In determining the compensation of each of our executive officers, other than our chief executive officer,Chief Executive Officer, our compensation committeeCompensation Committee considers the recommendations of our chief executive officerChief Executive Officer and our human resources department. In the case of the chief executive officer,Chief Executive Officer, our compensation committeeCompensation Committee evaluates his performance and independently determines whether to make any adjustments to his compensation.
Our compensation committeeCompensation Committee retained an independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”), to assist in structuring our executive officer compensation and non-employee director compensation for 2017.2019. FW Cook provided our compensation committeeCompensation Committee with market data and analyses from a peer group of similarly-sized technology companies with similar business and financial characteristics. Other than the services described above, FW Cook has not provided our company or our compensation committeeCompensation Committee with any other services. No work performed by FW Cook during 20172019 raised a conflict of interest.
The compensation committeeCompensation Committee has delegated in accordance with applicable law, rules and regulations, and our certificate of incorporation and bylaws, authority to an equity awards committee comprised of certain of our executive officers,Executive Officers, including our chief executive officer,Chief Executive Officer, who is also a member of the boardBoard of directors,Directors, the authority to make certain types of equity award grants under the Chegg, Inc. 2013 Equity Incentive Plan to any employee who is not an executive officer or director subject to the terms of such plan and equity award guidelines approved by our compensation committee.Compensation Committee.
Nominating and Corporate Governance Committee
Our nominatingNominating and corporate governance committeeCorporate Governance Committee is comprised of Ms.Marne Levine, who is the chairChair of the nominatingNominating and corporate governance committee,Corporate Governance Committee, Ted Schlein, John York and Messrs. SchleinPaul LeBlanc. Mr. LeBlanc joined our Board of Directors and York.Nominating and Corporate Governance Committee in July 2019. The composition of our nominatingNominating and corporate governance committeeCorporate Governance Committee meets the requirements for independence under the rules, regulations and listing standards of the NYSE. Our nominatingNominating and corporate governance committee,Corporate Governance Committee, among other things:
identifies, recruits, evaluates and recommends nominees to our boardBoard of directorsDirectors and committees of our boardBoard of directors;
Directors;
conducts searches for qualified directors;
annually evaluates the performance of our boardBoard of directorsDirectors and of individual directors;
considers and makes recommendations to the boardBoard of directorsDirectors regarding the composition and leadership structure of the boardBoard of directorsDirectors and its committees;
reviews developments in corporate governance practices;
evaluates the adequacy of our corporate governance practices and reporting; and
makes recommendations to our boardBoard of directorsDirectors concerning corporate governance matters.
Compensation Committee Interlocks and Insider Participation
The members of our compensation committeethe Compensation Committee during 20172019 were Ms.Mses. Levine and Whelan, and Messrs. Schlein, York and Housenbold. Mr. Housenbold departed our Board of Directors and Schlein.Compensation Committee in April 2019. Ms. Whelan joined our Board of Directors in June 2019 and Compensation Committee in July 2019. None of the members of our compensation committeeCompensation Committee in 2017 was2019 were at any time during the last fiscal year2019, or at any other time, an officer or employee of Chegg or any of its subsidiaries, and none had or has any relationships with Chegg that are required to be disclosed under Item 404 of Regulation S-K. None of our executive officers has served as a member of the boardBoard of directors,Directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our boardBoard of directorsDirectors or compensation committeeCompensation Committee during 2017.2019.
Board and Committee Meetings and Attendance
Our boardBoard of directorsDirectors is responsible for the management and direction of Chegg and for establishing broad corporate policies. The boardBoard of directorsDirectors meets periodically during our fiscal year to review significant developments affecting us and to act on matters requiring the boardBoard of directors’Directors approval. The boardBoard of directorsDirectors held four meetings during 20172019 and acted threefive times by unanimous written consent,consent; the audit committeeAudit Committee held fivesix meetings; the Compensation Committee held three meetings, and acted four time by unanimous written consent, the compensation committee held three meeting, and also acted fourseven times by unanimous written consent,consent; and the nominatingNominating and corporate governance committeeCorporate Governance Committee held two meetings, and acted one timetwo times by unanimous written consent. During 2017,2019, each member of the boardBoard of directorsDirectors participated in at least 75% of the aggregate of all meetings of the boardBoard of directorsDirectors and of all meetings of committees on which such member served that were held during the period in which such director served.
Board Attendance at Annual Stockholders’ Meeting
Our policy is to invite and encourage each member of our boardBoard of directorsDirectors to be present at our annual meetingsAnnual Meeting of stockholders.Stockholders. All of our then servingthen-serving directors, other than Messrs. Housenbold and Schlein and Ms. Levine, attended our last annual meetingAnnual Meeting of our stockholdersStockholders held on June 1, 2017.5, 2019.
Presiding Director of Non-Employee Director Meetings
The non-employee directors meet in regularly scheduled executive sessions without management to promote open and honest discussion. Ms. Levine, chairMr. Sarnoff, Co-Chairperson of the nominating and corporate governance committee,Board of Directors, is the presiding director at these meetings.
Communication with Directors
Stockholders and interested parties who wish to communicate with our boardBoard of directors,Directors, non-management members of our boardBoard of directorsDirectors as a group, a committee of the boardBoard of directorsDirectors or a specific member of our boardBoard of directorsDirectors (including our chairmanCo-Chairpersons or lead independent director, if any) may do so by letters addressed to the attention of our Corporate Secretary.
All communications are reviewed by the Corporate Secretary and provided to the members of the boardBoard of directorsDirectors consistent with a screening policy providing that unsolicited items, sales materials, and other routine items and items unrelated to the duties and responsibilities of the boardBoard of directorsDirectors not be relayed on to directors. Any communication that is not relayed is recorded in a log and made available to our boardBoard of directors.Directors.
The address for these communications is:
Corporate Secretary
Chegg, Inc.
3990 Freedom Circle
Santa Clara, California 95054
Code of Business Conduct and Ethics
We have adopted Codesa Code of Business Conduct and Ethics that applyapplies to all of our board members,directors, officers and employees. Our Code of Business Conduct and Ethics is posted on the investor relations section of our website located at http:https://investor.chegg.com, under “Corporate Governance.” To satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendments or waivers of our Code of Business Conduct and Ethics pertaining to a member of our boardBoard of directorsDirectors or one of our executive officers will be disclosed on our website at the above-referenced address.
NOMINATIONS PROCESS AND DIRECTOR QUALIFICATIONS
Nomination to the Board of Directors
Candidates for nomination to our boardBoard of directorsDirectors are selected by our boardBoard of directorsDirectors based on the recommendation of our nominatingNominating and corporate governance committeeCorporate Governance Committee in accordance with thesuch committee’s charter, our certificateCertificate of incorporationIncorporation and bylaws,Bylaws, our Corporate Governance Guidelines and criteria adopted by our boardBoard of directorsDirectors regarding director candidate qualifications. In recommending candidates for nomination, the nominatingNominating and corporate governance committeeCorporate Governance Committee considers candidates recommended by directors, officers, employees, stockholders and others, using the same criteria to evaluate all candidates. Evaluations of candidates generally involve a review of background materials, internal discussions and interviews with selected candidates as appropriate and, in addition, the committee may engage consultants or third-party search firms to assist in identifying and evaluating potential nominees.
Additional information regarding the process for properly submitting stockholder nominations for candidates for membership on our boardBoard of directorsDirectors is set forth below under “Stockholder Proposals to Be Presented at the Next Annual Meeting.”
Director Qualifications
With the goal of developing a diverse, experienced and highly-qualified boardBoard of directors,Directors, the nominatingNominating and corporate governance committeeCorporate Governance Committee is responsible for developing and recommending to our boardBoard of directorsDirectors the desired qualifications, expertise and characteristics of members of our boardBoard of directors,Directors, including the specific minimum qualifications that the committee believes must be met by a committee-recommended nominee for membership to our boardBoard of directorsDirectors and any specific qualities or skills that the committee believes are necessary for one or more of the members of our boardBoard of directorsDirectors to possess.
Since the identification, evaluation and selection of qualified directors is a complex and subjective process that requires consideration of many intangible factors, and will be significantly influenced by the particular needs of the boardBoard of directorsDirectors from time to time, our boardBoard of directorsDirectors has not adopted a specific set of minimum qualifications, qualities or skills that are necessary for a nominee to possess, other than those that are necessary to meet U.S. legal and regulatory andrequirements, the listing rules of the NYSE, and the provisions of our certificate of incorporation, bylaws, Corporate Governance Guidelines, and charters of the board committees. In addition, neither our boardBoard of directorsDirectors nor our nominatingNominating and corporate governance committeeCorporate Governance Committee has a formal policy with regard to the consideration of diversity in identifying nominees. When considering candidates for nomination, the nominatingNominating and corporate governance committeeCorporate Governance Committee may take into consideration many factors including, among other things, a candidate’s independence, integrity, skills, financial and other expertise, breadth of experience, knowledge about our business or industry and ability to devote adequate time and effort to responsibilities of the boardBoard of directorsDirectors in the context of its existing composition. Through the nomination process, the nominatingNominating and corporate governance committeeCorporate Governance Committee seeks to promote board membership that reflects a diversity of business experience, expertise, viewpoints, personal backgrounds and other characteristics that are expected to contribute to the boardBoard of directors’Directors overall effectiveness. The brief biographical description of each directorthe nominee set forth in Proposal No. 1 below includes the primary individual experience, qualifications, attributes and skills of each of our director nomineesnominee that led to the conclusion that eachsuch director nominee should serve as a member of our boardBoard of directorsDirectors at this time.
Board Evaluations
Each year, our directors complete an assessment of Board of Directors and committee performance through evaluations facilitated by our Nominating and Corporate Governance Committee and our outside counsel. The assessment includes a written evaluation, as well as director interviews conducted by our outside counsel and the Chair of our Nominating and Corporate Governance Committee and one-on-one interview sessions with only our outside counsel. The evaluation and interview process are designed to assess board and committee meeting content, structure, processes, practices, and performance; an individual director’s own performance as well as the performance of such director’s fellow board members; and the leadership structure of the Board of Directors and its committees. To protect the anonymity and the integrity of the Board of Directors and committee evaluation process, our outside counsel compiles the information obtained in the evaluations and interviews into a report for review by our Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee and the full Board of Directors then discusses the results of the evaluations and determines if any follow-up actions are appropriate. If follow-up action is needed, the Board of Directors and any applicable committee develops a plan to address matters raised in the report, as appropriate.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Our boardBoard of directorsDirectors currently consists of seveneight directors and is divided into three classes, with each class serving for three years and with the terms of office of the respective classes expiring in successive years. Directors in Class III will stand for election at this meeting. The terms of office of directors in Class IIIII and Class IIII do not expire until the annual meetingsAnnual Meetings of stockholdersStockholders to be held in 20192021 and 2020,2022, respectively. At the recommendation of our nominatingNominating and corporate governance committee,Corporate Governance Committee, our boardBoard of directorsDirectors proposes that each of the twothree Class III nominees named below be elected as a Class III director for a three-year term expiring at the annual meetingAnnual Meeting of stockholdersStockholders to be held in 20212023 and until such director’s successor is duly elected and qualified, or until such director’s earlier resignation or removal.
Shares of our common stock represented by proxies will be voted “FOR” the election of each of the twothree nominees named below, unless the proxy is marked to withhold authority to so vote. If any nomineeof the nominees for any reason isare unable to serve or for good cause will not serve, the proxies may be voted for such substitute nominee as the proxy holder may determine. Each nominee has consented to being named in this proxy statement and to serve if elected. Proxies may not be voted for more than twothree directors. Stockholders may not cumulate votes in the election of directors.
NomineesNominee to the Board of Directors
The nominees, and their ages, occupations, and length of service on our boardBoard of directorsDirectors are provided in the table below. Additional biographical descriptions of each nominee are set forth in the text below the table. These descriptions includeThis description includes the primary individual experience, qualifications, qualities and skills of each of ourthe nominees that led to the conclusion that each nomineethe nominees should serve as a membermembers of our boardBoard of directorsDirectors at this time.
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| | | |
Name of Director/Nominee | Age | Principal Occupation | Director Since |
Marne LevineReneé Budig(1)(2)
| 47 | Chief Operating Officer, Instagram (a subsidiary of Facebook, Inc.) | May 2013 |
Richard Sarnoff(3)
| 59 | Managing DirectorExecutive Vice President and HeadChief Financial Officer of the Media & Communications industry group, for the Pointe Equity platformCBS Interactive (a division of Kohlberg Kravis Roberts & Co.CBS Corporation) | August 2012November 2015 |
Dan Rosensweig(2) | 58 | President, Chief Executive Officer and Co-Chairperson | March 2010 |
Ted Schlein(1)(3) | 56 | General Partner of Kleiner Perkins | December 2008 |
|
| |
(1) | Member of the nominating and corporate governance committeeAudit Committee. |
(2) | MemberCo-Chairperson of the compensation committeeour Board of Directors. |
(3) | Member of the audit committeeNominating and Corporate Governance Committee. |
Marne Levine has served on our board of directors since May 2013. Since January 2015, Ms. Levine has served as the Chief Operating Officer of Instagram, a social media company and wholly-owned subsidiary of Facebook, Inc. Previously, Ms. Levine served as Vice President, Global Public Policy for Facebook, a social media company, from June 2010 to January 2015. Prior to those roles, Ms. Levine served as Chief of Staff at the White House National Economic Council and Special Assistant to the President for Economic Policy, from 2009 to 2010. She began her career at the U.S. Department of Treasury, where she served in a variety of positions, including as the Deputy Assistant Secretary for banking and finance in the Office of Legislative Affairs and Public Liaison. Ms. Levine holds a B.A. in political science and communications from Miami University and an M.B.A. from Harvard Business School. We believe that Ms. Levine should continue to serve on our board of directors due to her extensive experience in the policy, communications and technology fields.
Richard SarnoffReneé Budig has served on our boardBoard of directorsDirectors since August 2012.November 2015. Since July 2014, Mr. SarnoffSeptember 2012, Ms. Budig has served as the Managing Director and Head of the Media & Communications industry group for the Private Equity platform of Kohlberg Kravis Roberts & Co., a private equity firm. From 2011 to July 2014, Mr. Sarnoff was a Senior Adviser to Kohlberg Kravis Roberts & Co. Prior to that role, Mr. Sarnoff was employed by Bertelsmann, Inc., a diversified media and services company, where he served as the Co-Chairman of Bertelsmann from 2008 to 2011, the President of Bertelsmann Digital Media Investments from 2006 to 2011, and the Executive Vice President and Chief Financial Officer of Random House,CBS Interactive, Inc., an online content network for information and entertainment and a subsidiarydivision of BertelsmannCBS Corporation. From 2010 to September 2012, Ms. Budig served as Chief Financial Officer of Hightail, Inc. (formerly branded YouSendIt and acquired by OpenText), a cloud service that allowed users to send, receive, digitally sign and synchronize files. From 2006 to 2010, Ms. Budig was the Vice President of Finance at Netflix, Inc., a multinational provider of on-demand Internet streaming media. Ms. Budig holds a B.S. in Business Administration from 1998the University of California, Berkeley. We believe that Ms. Budig should continue to 2006.serve on our Board of Directors due to her extensive background in consumer technology companies and her financial expertise through her service as a Chief Financial Officer.
Dan Rosensweig has served as our President and Chief Executive Officer since February 2010, as Co-Chairperson of our Board of Directors since July 2018, and served as the Chairperson of our Board of Directors from March 2010 to July 2018. From 2009 to 2010, Mr. Sarnoff alsoRosensweig served as President and Chief Executive Officer of RedOctane, a business unit of Activision Publishing, Inc. and developer, publisher, and distributor of Guitar Hero. From 2007 to 2009, Mr. Rosensweig was an Operating Principal at the Quadrangle Group, a private investment firm. From 2002 to 2009, Mr. Rosensweig served as Chief Operating Officer of Yahoo! Inc., an internet content and service provider. Prior to serving at Yahoo!, Mr. Rosensweig served as the President of CNET Networks and prior to that as Chief Executive Officer and President of ZDNet, until it was acquired by CNET Networks. Mr. Rosensweig currently serves on the board of directors of Adobe Systems Incorporated. Mr. Rosensweig holds a B.A. in Political Science from Hobart and William Smith Colleges. We believe that Mr. Rosensweig should continue to serve on our Board of Directors due to the perspective and experience he brings as our Chief Executive Officer and his extensive experience with high-growth consumer internet and media companies.
Ted Schlein has served on our Board of Directors since December 2008. Mr. Schlein has served as a memberGeneral Partner of the supervisory boardKleiner Perkins, a venture capital firm, since November 1996. From 1986 to 1996, Mr. Schlein served in various executive positions at Symantec Corporation, a provider of Bertelsmann from 2002 to 2008internet security technology and servedbusiness management technology solutions, including as a memberVice President of the boards of directors of The Princeton Review from 2000 to 2009, of Audible from 2001 to 2008 and of Amdocs from 2009 to 2011.Enterprise Products. Mr. SarnoffSchlein currently serves on the boards of directors of several privately-helda number of privately held companies. Mr. SarnoffSchlein holds a B.A. in art and archeologyEconomics from Princetonthe University and an M.B.A. from Harvard Business School.of Pennsylvania. We believe that Mr. SarnoffSchlein should continue to serve on our boardBoard of directorsDirectors due to his extensive experience servingworking with early-stage technology companies in senior leadership roles,the infrastructure markets, including chief financial officer, and onventures within the boards of directors of media and digital technology companies.network arena.
Continuing Directors
The directors who are serving for terms that end in 20192021 and 2020,2022, and their ages, principal occupations and length of service on our boardBoard of directorsDirectors are provided in the table below. Additional biographical descriptions of each continuing director are set forth in the text below the table. These descriptions include the primary individual experience, qualifications, qualities and skills of each continuing director that led to the conclusion that each director should continue to serve as a member of our boardBoard of directorsDirectors at this time.
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| | | |
Name of Director | Age | Principal Occupation | Director Since |
Class IIIII Directors - Terms Expiring 2019:2021: | | | |
Jeffrey HousenboldMarne Levine(1)(3)(4)
| 4849 | Managing Partner, Softbank Investment AdvisersVice President, Global Partnership and Business Development of Facebook, Inc. | May 2013 |
Richard Sarnoff(1)(2) | 61 | Partner and Chairman of Media, Entertainment, and Education Investing of Kohlberg Kravis Roberts & Co., and Co-Chairperson of Chegg, Inc. | August 2012 |
Paul LeBlanc(3)(5) | 62 | President of Southern New Hampshire University | July 2019 |
Class III Directors - Terms Expiring 2022: | | | |
John York(2)(3)(4) | 3739 | Chief Executive Officer of the San Francisco 49ers | June 2013 |
| | | |
Class I Directors - Terms Expiring 2020:
| | | |
Reneé BudigMelanie Whelan(3)(4)(6)
| 5742 | Executive Vice President and Chief Financial Officer, CBS Interactive (a divisionin Residence of CBS Corporation)Summit Partners | November 2015 |
Dan Rosensweig | 56 | President and Chief Executive Officer of Chegg | March 2010 |
Ted Schlein(1)(2)
| 54 | General Partner of Kleiner Perkins Caufield & Byers | December 2008June 2019 |
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| |
(1) | Member of the compensation committeeAudit Committee. |
(2) | MemberCo-Chairperson of the nominating and corporate governance committeeour Board of Directors. |
(3) | Member of the audit committeeNominating and Corporate Governance Committee. |
(4) | Member of the Compensation Committee. |
(5) | Mr. LeBlanc was appointed to the Board of Directors and to the Nominating and Corporate Governance Committee on July 25, 2019. |
(6) | Ms. Whelan was appointed to the Board of Directors on June 5, 2019 and appointed to the Compensation Committee on July 25, 2019. |
Jeffrey HousenboldMarne Levine has served on our boardBoard of directorsDirectors since May 2013. Since June 2017, Mr. HousenboldFebruary 2019, Ms. Levine has been a Founding Managing Partner at Softbank Investment Advisers, a venture capital fund. From February 2016 to June 2017, Mr. Housenbold was an Entrepreneur-in-Residence at Sutter Hill Ventures, a venture capital fund. From 2005 to February 2016, Mr. Housenbold served as the President, Chief Executive Officer and a director of Shutterfly, Inc., a manufacturer and digital retailer of personalized products and services. From 2001 to 2005, Mr. Housenbold held several executive leadership roles eBay Inc., an online marketplace for the sale of goods and services, including Vice President of Business Development & Internet, Vice President & General Manager, Business-to-Consumer Group and as the Vice President Mergersof Global Partnerships and Business Development at Facebook, Inc., a social media company. From December 2014 to February 2019, Ms. Levine served as Chief Operating Officer of Instagram, a social media company and wholly owned subsidiary of Facebook, Inc. From 2010 to December 2014, Ms. Levine served as Vice President of Global Public Policy for Facebook, Inc. From 2009 to 2010, Ms. Levine served as Chief of Staff of the National Economic Council at the White House and Special Assistant to the President for Economic Policy. Ms. Levine holds a B.A. in Political Science and Communications from Miami University and an M.B.A. from Harvard Business School. We believe that Ms. Levine should continue to serve on our Board of Directors due to her extensive experience in the policy, communications and technology fields.
Richard Sarnoff has served on our Board of Directors since August 2012 and as a Co-Chairperson of our Board of Directors since July 2018. Since July 2014, Mr. Sarnoff has served as the Managing Director and Head of the Media & Acquisitions.Communications industry team for the Private Equity platform of Kohlberg Kravis Roberts & Company, a private equity firm,
and since January 2018 has served as Partner and Chairman of that team. From 2012 to 2014, Mr. HousenboldSarnoff was a Senior Adviser to Kohlberg Kravis Roberts & Company. Prior to that role, Mr. Sarnoff was employed by Bertelsmann AG, a diversified media and services company, where he served as the Co-Chairman of Bertelsmann, Inc., from 2008 to 2011, the President of Bertelsmann Digital Media Investments from 2006 to 2011, and the Executive Vice President and Chief Financial Officer of Random House, a subsidiary of Bertelsmann, from 1998 to 2006. Mr. Sarnoff also served as a member of the supervisory board of Bertelsmann from 2002 to 2008 and served as a member of the Board of Directors of The Princeton Review from 2000 to 2009, of Audible Inc. from 2001 to 2008, and of Amdocs Limited from 2009 to 2011. Mr. Sarnoff currently serves on the boardBoard of directorsDirectors of several private companies and is on the board of trustees for Carnegie Mellon University.privately held companies. Mr. HousenboldSarnoff holds a B.S.B.A. in economicsArt and a B.S. in business administrationArcheology from Carnegie MellonPrinceton University and an M.B.A. from Harvard Business School. We believe that Mr. Housenbold is qualifiedSarnoff should continue to serve on our boardBoard of directorsDirectors due to his more than 20 yearsextensive experience serving in senior leadership roles, including chief financial officer, and on the boards of directors of media and digital technology companies.
Paul LeBlanc has served on our Board of Directors since July 2019. Since 2003, Mr. LeBlanc has served as the President of Southern New Hampshire University, a private non-profit university. From 1996 to 2003, Mr. LeBlanc served as the President of Marlboro College, a private liberal arts college. Prior to Marlboro College, Mr. LeBlanc served as Director of Sixth Floor Media, a division of Houghton Mifflin Harcourt Publishing Company. Mr. LeBlanc holds a B.A. in English from Framingham State University, a M.A. in English Language, Literature and Letters from Boston College, and a Ph.D. in Rhetoric, Composition and Technology from the University of Massachusetts, Amherst. We believe that Mr. LeBlanc should continue to serve on our Board of Directors due to his extensive experience in the consumer industrytechnological innovation in senior roles at large, complex companies.higher education.
John York has served on our boardBoard of directorsDirectors since June 2013. Since February 2012, Mr. York has served as the Chief Executive Officer of the San Francisco 49ers, a professional football team in the National Football League, where he previously served as Team President from 2008 to February 2012 and as Vice President of Strategic Planning from 2005 to 2008. Prior to those roles, Mr. York served as a financial analyst at Guggenheim Partners. Mr. York holds a B.A. in financeFinance from the University of Notre Dame. We believe that Mr. York is qualifiedshould continue to serve on our boardBoard of directorsDirectors due to his extensive leadership experience and strong corporate development background.
Reneé BudigMelanie Whelan has served on our boardBoard of directorsDirectors since November 2015 and was appointed to fill the vacancy created by the resignation of Mr. McCarthy.June 2019. Since September of 2012,January 2020, Ms. BudigWhelan has served as thean Executive Vice President and Chief Financial Officer of CBS Interactive, an online content network for information and entertainment andin Residence at Summit Partners, a division of CBS Corporation. From May 2010 to September 2012,private equity investment firm. Previously, Ms. BudigWhelan served as Chief FinancialExecutive Officer of Hightail,SoulCycle Inc. (formerly branded YouSendIt), a cloud service that lets users send, receive, digitally signan indoor cycling fitness company, from June 2015 to November 2019 and synchronize files. Fromas Chief Operating Officer from April 2012 until May 20062015. Prior to June 2010,joining SoulCycle, Ms. BudigWhelan was the Vice President of FinanceBusiness Development at Netflix,Equinox Holdings, Inc., a multinational providerluxury fitness company, from January 2007 to April 2012. Prior to Equinox, she also held leadership positions with Virgin Management, where she was on the founding team of on-demand Internet streaming media. From 2002 to 2005, Ms. Budig was the Vice President of Finance for Veritas Software, an Internet softwareVirgin America, and Starwood Hotels & Resorts Worldwide, a hospitality company. Ms. BudigWhelan holds a B.S.B.A. in Business AdministrationEngineering and Economics from the University of California, Berkeley.Brown University. We believe that Ms. BudigWhelan should continue to serve on our boardBoard of directorsDirectors due to her extensive backgroundexperience in business operations, international growth, and consumer technology companies and her financial expertise through her service as a chief financial officer.marketing.
Dan Rosensweig has served as our President and Chief Executive Officer since February 2010 and as the chairman of our board of directors since March 2010. From 2009 to 2010, Mr. Rosensweig served as President and Chief Executive Officer of RedOctane, a business unit of Activision Publishing, Inc. and developer, publisher and distributor of Guitar Hero. From 2007 to 2009, Mr. Rosensweig was an Operating Principal at the Quadrangle Group, a private investment firm. From 2002 to 2007, Mr. Rosensweig served as Chief Operating Officer of Yahoo! Inc., an Internet content and service provider. Prior to serving at Yahoo!, Mr. Rosensweig served as the President of CNET Networks and prior to that as Chief Executive Officer and President of ZDNet, until it was acquired by CNET Networks. Mr. Rosensweig also currently serves on the board of directors of Adobe Systems Incorporated. Mr. Rosensweig holds a B.A. in political science from Hobart and William Smith Colleges. We believe that Mr. Rosensweig should continue to serve on our board of directors due to the perspective and experience he brings as our chief executive officer and his extensive experience with high-growth consumer Internet and media companies.
Ted Schlein has served on our board of directors since December 2008. Mr. Schlein has served as a General Partner of Kleiner Perkins Caufield & Byers, a venture capital firm, since November 1996. From 1986 to 1996, Mr. Schlein served in various executive positions at Symantec Corporation, a provider of Internet security technology and business management technology solutions, including as Vice President of Enterprise Products. Mr. Schlein currently serves on the boards of directors of a number of privately held companies. Mr. Schlein holds a B.A. in economics from the University of Pennsylvania. We believe that Mr. Schlein should continue to serve on our board of directors due to his extensive experience working with early-stage technology companies in the infrastructure markets, including ventures within the network arena.
There are no familial relationships among our directors and officers.
Director Compensation
We compensate our non-employee directors with a combination of cash and equity. The form and amount of compensation paid to our non-employee directors for serving on our boardBoard of directorsDirectors and its committees is designed to be competitive in light of industry practices and the obligations imposed by such service. In order to align the long-term interests of our directors with those of our stockholders, a portion of the director compensation is provided in equity-based compensation. The value of the annualized compensation of our non-employee directors is targeted to be at approximately at 50% and 75% of a peer group of similarly-sized technology companies with similar business and financial characteristics for cash and equity, respectively. The director compensation practices of this peer group of companies was the benchmark used when considering the competitiveness of our non-employee director compensation in 2017.2019. Our compensation committee’sCompensation Committee’s independent compensation consultant, FW Cook, collected and developed the competitive data and analyses for benchmarking independent director compensation.
Annual Fees. Our non-employee directors were compensated in 20172019 as follows:
an annual cash retainer for serving on our boardBoard of directorsDirectors of $40,000;
an annual cash retainer for serving in a non-chair position on the audit committeeAudit Committee of $10,000, on the compensation committeeCompensation Committee of $10,000 and on the nominatingNominating and corporate governance committeeCorporate Governance Committee of $5,000;$10,000; and
an annual cash retainer for serving as the chairChair of the audit committeeAudit Committee of $20,000, for serving as the chairChair of the compensation committeeCompensation Committee of $20,000 and for serving as the chairChair of the nominatingNominating and corporate governance committeeCorporate Governance Committee of $10,000.$20,000.
We pay the annual retainer fee and any additional fees to each director in arrears in equal quarterly installments.
Equity Awards. Our non-employee director equity compensation policy provides that upon initial appointment to the boardBoard of directors,Directors, a non-employee director will be granted a restricted stock unit awardRestricted Stock Unit Award (“RSUs”) having a fair market value on the grant date equal to $300,000 that vests in equal quarterly installments over three years from the date of grant. After 2019, this initial grant practice will be discontinued. Thereafter, upon completion of each full year of service, each non-employee director will be granted, immediately following our annual meetingAnnual Meeting of stockholders,Stockholders, an additional restricted stock unit awardRSU having a fair market value on the date of grant equal to $200,000 that vests in full on the one-year anniversary of the date of grant.
In connection with the adoption of the Co-Chairperson of the Board structure we adopted a compensation program to provide for an initial RSU grant for a non-employee Co-Chairperson of the Board, having a fair market value on the grant date equal to $150,000 that vests in full on the one-year anniversary of the date of grant. This grant is in addition to any other annual board service compensation and thereafter, upon completion of each full year of service, each non-employee Co-Chairperson of the Board of Directors will be granted, immediately following our Annual Meeting of Stockholders, additional RSUs having a fair market value on the date of grant equal to $150,000 that vests in full on the earlier of the one-year anniversary of the date of grant or immediately prior to the first annual meeting of our stockholders to occur after the date of grant. Awards granted to non-employee directors under the policypolicies described above will accelerate and vest in full in the event of a change of control. In addition to the awards provided for above, non-employee directors are eligible to receive discretionary equity awards.
Non-employee directors receive no other form of remuneration, perquisites or benefits, but are reimbursed for their expenses in attending meetings, including travel, meals and other expenses incurred to attend meetings solely among the non-employee directors.
Stock Ownership Guidelines for Directors. In 2019, our Board of Directors established minimum Stock Ownership Guidelines for non-employee directors that require each director to own Chegg equity having a value of at least three times his or her base annual cash retainer of $40,000. Each non-employee director has until May 2023 to reach this ownership level. Going forward, each newly elected director shall have five years from the year elected to reach the ownership level.
The following table provides information for the year ended December 31, 20172019 regarding all compensation awarded to, earned by or paid to each person who served as a non-employee director for some portion or all of 2017.2019. Mr. Rosensweig, our current President, and Chief Executive Officer and Co-Chairperson of the Board of Directors, did not receive any compensation for his service as a director during the fiscal year ended December 31, 2017.2019.
2017
2019 Director Compensation Table
| | Name | | Fees Earned or Paid in Cash ($) | | All Other Compensation ($) | | RSU Awards ($)(2) | | Option Awards ($)(2) | | Total ($) | | Fees Earned or Paid in Cash ($) | | All Other Compensation ($) | | RSU Awards ($)(1) | | Option Awards ($)(1) | | Total ($) |
Reneé Budig | | 60,000 |
| | 149,990 |
| | — |
| | 209,990 |
| | 60,000 | | — | | 199,963 | | — | | 259,963 |
Jeffrey Housenbold(2) | | 50,000 |
| | | 149,990 |
| | — |
| | 199,990 |
| | 14,231 | | — | | — | | — | | 14,231 |
Paul LeBlanc(3) | | | 21,739 | | — | | 299,989 | | — | | 321,728 |
Marne Levine | | 60,000 |
| | | 149,990 |
| | — |
| | 209,990 |
| | 67,500 | | — | | 199,963 | | — | | 267,463 |
Richard Sarnoff | | 50,000 |
| | 4,501.58(1) | | 149,990 |
| | — |
| | 204,492 |
| | 50,000 | | $8,108(4) | | 349,945 | | — | | 408,053 |
Ted Schlein | | 65,000 |
| | | 149,990 |
| | — |
| | 214,990 |
| | 58,750 | | — | | 199,963 | | — | | 258,713 |
Melanie Whelan(5) | | | 27,204 | | 710(6) | | 299,964 | | — | | 327,878 |
John York | | 55,000 |
| | | 149,990 |
| | — |
| | 204,990 |
| | 68,750 | | — | | 199,963 | | — | | 268,713 |
|
| |
(1) | (1) Represents reimbursement(s) to Mr. Sarnoff for travel expenses incurred to attend Board Meeting(s) in fiscal year 2017. |
| (2) Amounts shown in this column do not reflect dollar amounts actually received by non-employee directors. Instead these amounts reflect the aggregate grant date fair value calculated in accordance with Financial Accounting Standards Board, Accounting Standards Codification Topic 718, Compensation-Stock Compensation, (formerly SFAS 123R) (“ASC 718”), for awards granted during 2017.2019. During 2017,2019, each non-employee member of the boardBoard of Directors, who were directors who wasas of the close of our 2019 Annual Meeting of Stockholders on June 5, 2019, were granted an RSU award covering 5,321 shares of our common stock with an aggregate grant date fair value of $200,000. Due to his appointment as non-executive Co-Chairperson of the Board, Richard Sarnoff received an additional RSU award covering 3,991 shares of our common stock with an aggregate grant date fair value of $150,000. Concurrent with Melanie Whelan's election as a directormember of our Board of Directors on June 5, 2019, after the close of our annual meeting2019 Annual Meeting of stockholders on June 1, 2017Stockholders, she was granted a restricted stock unit (“RSU”)an RSU award covering 11,9807,982 shares of our common stock. Forstock, and for purposes of determining the number of shares of common stock subject to thethis RSU, award, an aggregate grant date fair value of $150,000$300,000 was used. Concurrent with Paul LeBlanc's election as a member of our Board of Directors on July 25, 2019, he was granted an RSU award covering 7,014 shares of our common stock with and aggregate grant date fair value of $300,000. The grant date fair value for RSU awardsRSUs was determined using the closing share price of our common stock on the date of grant. For information on other valuation assumptions with respect to stock awards, refer to note 1315 of the notes to consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2019. There can be no assurance that this grant date fair value will ever be realized by the non-employee director.
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(2) | Mr. Housenbold resigned from the Board of Directors effective April 11, 2019. |
(3) | Mr. LeBlanc was appointed to the Board of Directors effective July 25, 2019. |
(4) | Represents reimbursements to Mr. Sarnoff for travel expenses incurred to attend meetings of the Board of Directors during the year ended December 31, 2019. |
(5) | Ms. Whelan was appointed to the Board of Directors effective June 5, 2019. |
(6) | Represents reimbursement to Ms. Whelan for travel expenses incurred to attend meetings of the Board of Directors during the year ended December 31, 2019. |
Our non-employee directors held the following number of stock options and unvested RSU awards as of December 31, 2017. 2019. |
| | | |
Name | Option Awards | | RSU Awards |
Reneé Budig | 43,445 | | 5,321 |
Jeffrey Housenbold(1) | — | | — |
Paul LeBlanc(2) | — | | 6,430 |
Marne Levine | 161,967 | | 5,321 |
Richard Sarnoff | 203,587 | | 9,312 |
Ted Schlein | — | | 5,321 |
Melanie Whelan(3) | — | | 6,652 |
John York | 128,956 | | 5,321 |
|
| | | | | |
| | | |
Name | Option Awards | | RSU Awards |
Reneé Budig | 146,620 |
| | 11,980 |
|
Jeffrey Housenbold | 116,917 |
| | 11,980 |
|
Marne Levine | 175,092 |
| | 11,980 |
|
Richard Sarnoff | 243,586 |
| | 11,980 |
|
Ted Schlein | — |
| | 11,980 |
|
John York | 216,456 |
| | 11,980 |
|
|
| |
(1) | Mr. Housenbold resigned from the Board of Directors effective April 11, 2019. |
(2) | Mr. LeBlanc was appointed to the Board of Directors effective July 25, 2019. |
(3) | Ms. Whelan was appointed to the Board of Directors effective June 5, 2019. |
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH
OF THE TWO DIRECTORTHREE DIRECTORS NOMINEES.
PROPOSAL NO. 2 - NON-BINDING ADVISORY VOTE
ON EXECUTIVE COMPENSATION
TheIn accordance with Section 14A of the Securities Exchange Act of 1934 and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted on July 21, 2010, requires that we are required to seek, on a non-binding advisory basis, stockholder approval of the compensation of our named executive officers as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers.
Compensation Program and Philosophy
Our executive compensation program is designed to:
Attract, motivate and retain highly-qualified executive officers in a competitive market;
Provide compensation to our executives that are competitive and reward the achievement of challenging business objectives; and
Align our executive officers’ interests with those of our stockholders by providing a significant portion of total compensation in the form of equity awards.
Our boardBoard of directorsDirectors believes that our current executive compensation program has been effective at aligning our executive officers’ interests with those of our stockholders. Stockholders are urged to read the “Executive Compensation” section of this proxy statement, which further discusses how our executive compensation policies and procedures implement our compensation philosophy and contains tabular information and narrative discussion about the compensation of our named executive officers.
The compensation committeeCompensation Committee and the boardBoard of directorsDirectors believe that these policies and procedures are effective in implementing our compensation philosophy and in achieving our goals. Accordingly, we are asking our stockholders to indicate their support for the compensation of our named executive officers as described in this proxy statement by voting in favor of the following resolution:
“RESOLVED, that the stockholders approve, on a non-binding advisory basis, the compensation of Chegg, Inc.’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables, and the accompanying narrative disclosures set forth in the proxy statement relating to Chegg, Inc.’s 2018 annual meeting2020 Annual Meeting of stockholders.Stockholders.”
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.
PROPOSAL NO. 3 - NON-BINDING ADVISORY VOTE ON
THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
As required by the Dodd-Frank Act, we also are asking our stockholders to provide their input with regard to the frequency of future stockholder advisory votes on the compensation program for our named executive officers, such as Proposal No. 2 of this proxy statement. In particular, we are asking whether the advisory vote on executive compensation should occur once every year, every two years or every three years. This non-binding advisory vote as to whether the advisory vote on executive compensation should occur once every year, every two years or every three years must be submitted to stockholders at least once every six years.
After careful consideration of the frequency alternatives, our board of directors has determined that an annual advisory vote on executive compensation is the most appropriate alternative for us and our stockholders at this time. The board of director’s determination was influenced by the fact that the compensation of our named executive officers is evaluated, adjusted and approved on an annual basis. As part of the annual review process, the board of directors believes that stockholder sentiment should be a factor that is taken into consideration by the board of directors and the compensation committee in making decisions with respect to executive compensation. By providing an advisory vote on executive compensation on an annual basis, our stockholders will be able to provide us with direct input on our compensation philosophy, policies and practices as disclosed in the proxy statement every year. We understand that our stockholders may have different views as to what is the best approach for us and we look forward to hearing from our stockholders on this agenda item every year.
Stockholders are not voting to approve or disapprove the board of directors’ recommendation. Instead, stockholders may indicate their preference regarding the frequency of future non-binding advisory “say-on-pay” votes by selecting one year, two years or three years. Stockholders that do not have a preference regarding the frequency of future advisory votes may abstain from voting on the proposal. For the reasons discussed above, we are asking our stockholders to vote to hold advisory votes on the compensation for our named executive officers every year.
You may cast your vote by choosing the option of one year, two years, three years, or abstain from voting in response to the resolution set forth below:
“RESOLVED, that the option of once every year, two years or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which Chegg, Inc. is to hold an advisory vote by stockholders to approve the compensation of Chegg, Inc. named executive officers as set forth in the proxy statement relating to Chegg, Inc.’s Annual Meeting of Stockholders under the caption “Executive Compensation,” including the section captioned “Compensation Discussion and Analysis,” the tabular disclosure regarding executive compensation and the accompanying narrative disclosure.”
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” “ONE YEAR” AS THE FREQUENCY WITH WHICH STOCKHOLDERS ARE PROVIDED AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
PROPOSAL NO. 4
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our audit committeeAudit Committee is responsible for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm. Our audit committee of the board of directors (the “audit committee”)Audit Committee has selected Deloitte & Touche LLP (“Deloitte”) as our principal independent registered public accounting firm to perform the integrated audit of our consolidated financial statements and our internal control over financial reporting for thefiscal year ending December 31, 2018.2020.
As previously disclosed by us in a Current Report on Form 8-K filed with the SEC on March 12, 2018 (the “March Form 8-K”), on February 27, 2018, our management, at the direction of our audit committee,Audit Committee, issued a request for proposal for audit services for the 2018 fiscal year and beyond (the “RFP”) to several independent registered public accounting firms, including our then-current independent registered public accounting firm, Ernst &Young LLP (“EY”), to provide us with the opportunity to review auditor service levels, audit fees, and evaluate the benefits and risks of changing independent registered public accounting firms. Responses to the RFP were due on March 8, 2018 and EY submitted a proposal. Our management and the Audit Committee evaluated the proposals and met with all of the participants in the RFP on March 9, 2018. Following such meetings on March 9, 2018, the audit committeeAudit Committee approved the appointment of Deloitte as our independent registered public accounting firm effective as of March 12, 2018 (the “Effective Date”). On March 10, 2018, our management, at the direction of the audit committee,Audit Committee, notified EY that it was terminating EY’s engagement as our independent registered public accounting firm, effective as of the Effective Date.
During our two most recentthe fiscal years ended December 31, 2017 and 2016, respectively, and the subsequent interim period through March 12, 2018, neither we nor anyone acting on our behalf consulted with Deloitte regarding any of the matters described in Item 304(a)(2)(i) and (ii) of Regulation S-K.
EY’s reports on our financial statements for the twofiscal years ended December 31, 2017 and 2016, respectively, did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles.
During our two most recentthe fiscal years ended December 31, 2017 and 2016, respectively, and the subsequent interim period through March 12, 2018, there were no disagreements, within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions thereto, with EY on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of EY, would have caused it to make reference to the subject matter of the disagreements in connection with its reports. Also during this same period, there were no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K and the related instructions thereto.
We provided EY with the disclosures made in the March Form 8-K prior to the time that the March Form 8-K was filed with the SEC, and requested that EY to furnish us with a letter addressed to the SEC stating whether it agrees with the above statements made by us in the March Form 8-K and, if not, stating the respects in which it does not agree. EY’s letter was filed as Exhibit 16.01 to the March Form 8-K.
As a matter of good corporate governance, our audit committeeAudit Committee has decided to submit its selection of its principal independent registered public accounting firm to stockholders for ratification. In the event that the appointment of Deloitte is not ratified by our stockholders, the audit committeeAudit Committee will review its future selection of Deloitte as our principal independent registered public accounting firm.
Deloitte audited our financial statements for the fiscal year ended December 31, 2019. Representatives of Deloitte are expected to be present at the annual meeting, in which caseAnnual Meeting and they will be given an opportunity to make a statement at the annual meeting if they desire to do so, and will be available to respond to appropriate questions.
Principal AccountantIndependent Registered Public Accounting Firm’s Fees and ServicesReport
We regularly review the services and fees of our independent registered public accounting firm. These services and fees are also reviewed with our audit committeeAudit Committee annually.
In addition to performing the audit of Chegg’sour consolidated financial statements, EYDeloitte, the member firm of Deloitte Touche Tohmatsu Limited and their respective affiliates (the “Deloitte Group”), provided various other services during 20172019 and 2016.2018. Our audit committeeAudit Committee has determined that EY’sthe Deloitte Group’s provisioning of these services, which are described below, does not impair EY’sDeloitte’s, or the Deloitte Group’s, independence from Chegg. The aggregate fees for 2017 and 2016 for each of the following categories of services are as follows:
Fees Paid to Independent Registered Public Accounting Firm
The following table provides information regarding the fees billed by the Deloitte Group for the fiscal years ended December 31, 2019 and December 31, 2018.
| | Fees Billed to Chegg | | Fiscal Year 2017 | | Fiscal Year 2016 | | Fiscal Year 2019 | | Fiscal Year 2018 |
Audit fees(1) | | $ | 3,155,177 |
| | $ | 1,487,090 |
| | $ | 1,840,700 |
| | $ | 2,000,159 |
|
Audit related fees(2) | | — |
| | — |
| | — |
| | — |
|
Tax fees(3) | | 15,000 |
| | 64,518 |
| | $ | 62,549 |
| | $ | 35,490 |
|
All other fees(2) | | — |
| | — |
| | — |
| | — |
|
Total fees | | $ | 3,170,177 |
| | $ | 1,551,608 |
| | $ | 1,903,249 |
| | $ | 2,035,649 |
|
|
| |
(1) | “Audit fees” include fees for professional services rendered in connection with the audit of our annual financial statementAudit Fees
Audit Fees include the aggregate fees incurred for the audits of the annual consolidated financial statements and the effectiveness of our internal control over financial reporting, including adoption of Financial Accounting Standards Board, Accounting Standards Codification Section (“ASC Topic”) 842 and 606, and reviews of our quarterly financial statements. In addition, this category also includes fees for services that were incurred in connection with statutory and regulatory filings or engagements. |
(2) | We did not have any “Audit related fees” or “All other fees” in fiscal years 2016 and 2017.
|
(3) | “Tax fees” include fees in connection with statutory and regulatory filings or engagements.
Audit-Related Fees and All Other Fees
We did not have any “Audit related fees” or “All other fees” in the fiscal years ended December 31, 2019 and 2018.
Tax Fees
Tax fees of the Deloitte Group for the fiscal years ended December 31, 2019 and 2018 primarily included tax compliance, and tax advisory and consulting services. |
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Our audit committee’sAudit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the audit committeeAudit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. Our audit committeeAudit Committee may also pre-approve particular services on a case-by-case basis. All of the services relating to the fees described in the table above were approved by our audit committee.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL NO. 43.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 10, 2018,6, 2020, by:
each stockholder known by us to be the beneficial owner of more than 5% of our common stock;
each of our directors or director nominees;
each of our named executive officers; and
all of our directors and executive officers as a group.
Percentage ownership of our common stock is based on 111,867,529123,555,333 shares of our common stock outstanding on April 10, 2018.6, 2020. We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed shares of our common stock subject to equity awards that are currently vested or will become vested within 60 days of April 10, 20186, 2020 to be outstanding and to be beneficially owned by the person holding the award for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person.
Unless otherwise indicated, the address of each of the individuals and entities named below is c/o Chegg, Inc., 3990 Freedom Circle, Santa Clara, California 95054.
|
| | | | | | |
Name of Beneficial Owner | | Number of Shares Beneficially Owned | | Percentage Owned |
Named Executive Officers and Directors: | | | | |
Dan Rosensweig(1) | | 4,246,739 |
| | 3.7 | % |
Andrew Brown(2) | | 974,671 |
| | * |
|
Nathan Schultz(3) | | 518,150 |
| | * |
|
Mike Osier(4) | | 485,765 |
| | * |
|
Esther Lem(5) | | 507,298 |
| | * |
|
Charles Geiger(6) | | — |
| | * |
|
Renee Budig(7) | | 143,859 |
| | * |
|
Jeffrey Housenbold(8) | | 128,897 |
| | * |
|
Marne Levine(9) | | 206,679 |
| | * |
|
Richard Sarnoff(10) | | 285,566 |
| | * |
|
Ted Schlein(11) | | 3,847,375 |
| | 3.4 | % |
John York(12) | | 230,436 |
| | * |
|
All executive officers and directors as a group (15 persons)(13) | | 12,509,603 |
| | 10.8 | % |
5% Stockholders: | | | |
|
|
Gilder, Gagnon, Howe & Co. LLC(14) | | 7,337,758 |
| | 6.6 | % |
PAR Investment Partners, L.P.(15) | | 6,241,298 |
| | 5.6 | % |
PRIMECAP Mgmt Co(16) | | 10,195,390 |
| | 9.1 | % |
Sylebra HK Company Limited(17) | | 6,956,896 |
| | 6.2 | % |
T. Rowe Price Associates, Inc.(18) | | 8,897,311 |
| | 8.0 | % |
|
| | | | |
Name of Beneficial Owner | | Number of Shares Beneficially Owned | | Percentage Owned |
Named Executive Officers and Directors: | | | | |
Dan Rosensweig(1) | | 1,914,874 | | 1.5% |
Andrew Brown(2) | | 52,133 | | * |
Nathan Schultz(3) | | 343,444 | | * |
Michael Osier(4) | | 254,203 | | * |
John Fillmore(5) | | 167,032 | | * |
Renee Budig(6) | | 66,960 | | * |
Paul LeBlanc(7) | | 1,753 | | * |
Marne Levine(8) | | 154,163 | | * |
Richard Sarnoff(9) | | 263,667 | | * |
Ted Schlein(10) | | 228,861 | | * |
Melanie Whelan(11) | | 1,995 | | * |
John York(12) | | 122,491 | | * |
All executive officers and directors as a group (16 persons)(13) | | 3,876,241 | | 3.1% |
5% Stockholders: | | | |
|
BlackRock, Inc., as nominee(14) | | 9,067,226 | | 7.3% |
Baillie Gifford & Co(15) | | 14,494,521 | | 11.7% |
The Vanguard Group, Inc.(16) | | 10,485,757 | | 8.5% |
|
| |
* | Represents beneficial ownership of less than 1% of our outstanding shares of common stock. |
(1) Consists of (a) 1,214,737 shares held by Mr. Rosensweig, (b) 69,346 shares held by The Daniel Lee and Linda Rosensweig, Co-Trustees of the Rosensweig Family Revocable Trust U/A/D03-12-07, (c) 7,166 shares held by The Rachel Rosensweig 2007 Irrevocable Trust U/A/D 03-12-07, (d) 7,166 shares held by The Samantha Rosensweig 2007 Irrevocable Trust U/A/D 03-12-2007, (e) 68,251 shares subject to nonqualified options transferred to Daniel Lee Rosensweig and Linda Rosensweig Co-Trustees of the Rosensweig 2012 Irrevocable Children’s Trust u/a/d 11/6/2012 on November 8, 2013, but reported under Mr. Rosensweig’s name for financial reporting purposes, and (f) 2,963,751 shares subject to stock options held by Mr. Rosensweig that are exercisable within 60 days of April 10, 2018.
(1) | Consists of (a) 1,849,810 shares held by Mr. Rosensweig, (b) 48,842 shares held by Daniel Lee Rosensweig and Linda Rosensweig, Co-Trustees of the Rosensweig Family Revocable Trust U/A/D03-12-07, and (c) 16,222 RSUs which are subject to vesting conditions expected to occur within 60 days of April 6, 2020. |
(2) | Consists of (a) 127,53088 shares held by Mr. Brown, (b) 17,11744,559 shares held by The Andy and Pam Brown Family Trust, of which Mr. Brown is a Co-Trustee, and (c) 5,000 shares held by Kevin Brown, Mr. Brown’s son, and (e) 825,024 shares7,486 RSUs which are subject to stock options held by Mr. Brown that are exercisablevesting conditions expected to occur within 60 days of April 10, 2018. |
| 6, 2020. |
(3) | Consists of (a) 170,77488,582 shares held by Mr. Schultz, and (b) 347,376247,376 shares subject to stock options held by Mr. Schultz that are exercisable within 60 days of April 10, 2018. |
| 6, 2020, and (c) 7,486 RSUs which are subject to vesting conditions expected to occur within 60 days of April 6, 2020. |
(4) | Consists of (a) 245,284248,964 shares held by Mr. Osier, and (b) 240,4815,239 RSUs which are subject to vesting conditions expected to occur within 60 days of April 6, 2020. |
(5) | Consists of (a) 142,079 shares held by Mr. Fillmore, (b) 19,714 shares subject to stock options held by Mr. OsierFillmore that are exercisable within 60 days of April 10, 2018. |
| |
(5) | Consists of (a) 141,323 shares held by Ms. Lem,6, 2020, and (b) 365,975 shares(c) 5,239 RSUs which are subject to stock options held by Ms. Lem that are exercisablevesting conditions expected to occur within 60 days of April 10, 2018. |
| 6, 2020. |
(6) | Mr. Geiger stepped down as Chief Product Officer on September 29, 2017 and departed from Chegg on April 9, 2018. |
| |
(7) | Consists of (a) 131,87918,194 shares held by Ms. Budig, (b) 43,445 shares subject to stock options held by Ms. Budig that are exercisable within 60 days of April 10, 2018,6, 2020, and (b) 11,980(c) 5,321 RSUs which are subject to vesting conditions expected to occur within 60 days of April 10, 2018. |
| 6, 2020. |
(8)(7) | Consists of (a) 116,9171,169 shares subject to stock options held by Mr. Housenbold that are exercisable within 60 days of April 10, 2018,LeBlanc, and (b) 11,980584 RSUs which are subject to vesting conditions expected to occur within 60 days of April 10, 2018. |
| 6, 2020. |
(9)(8) | Consists of (a) 19,607 shares held by Ms. Levine, (b) 175,092148,842 shares subject to stock options held by Ms. Levine that are exercisable within 60 days of April 10, 2018,6, 2020, and (c) 11,980(b) 5,321 RSUs which are subject to vesting conditions expected to occur within 60 days of April 10, 2018.6, 2020. |
(9) | Consists of (a) 50,768 shares held by Mr. Sarnoff, (b) 203,587 shares subject to stock options held by Mr. Sarnoff that are exercisable within 60 days of April 6, 2020, and (c) 9,312 RSUs which are subject to vesting conditions expected to occur within 60 days of April 6, 2020. |
(10) | Consists of (a) 178,540 shares held by Mr. Schlein, (b) 45,000 shares held by the Schlein Family Trust Dtd 4/20/99, and (c) 5,321 RSUs which are subject to vesting conditions expected to occur within 60 days of April 6, 2020. |
(11) | Consists of (a) 1,330 shares held by Ms. Whelan, and (b) 665 RSUs which are subject to vesting conditions expected to occur within 60 days of April 6, 2020. |
(12) | Consists of (a) 8,214 shares held by Mr. York, (b) 108,956 shares subject to stock options held by Mr. York that are exercisable within 60 days of April 6, 2020, and (c) 5,321 RSUs which are subject to vesting conditions expected to occur within 60 days of April 6, 2020. |
(13) | Consists of (a) 2,995,101 shares, (b) 801,948 shares subject to stock options that are exercisable within 60 days of April 6, 2020, and (c) 79,192 RSUs which are subject to vesting conditions expected to occur within 60 days of April 6, 2020, each of which are held by our directors and officers as a group. |
(14) | Consists of 9,067,226 shares held by BlackRock, Inc. The principal business address for all entities affiliated with BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. |
(15) | Consists of 14,494,521 shares owned by Baillie Gifford & Company. Securities reported on this Schedule 13G as being beneficially owned by Baillie Gifford & Co. are held by Baillie Gifford & Co. and/or one or more of its investment adviser subsidiaries, which may include Baillie Gifford Overseas Limited, on behalf of investment advisory clients, and which may include investment companies registered under the Investment Company Act, employee benefit plans, pension funds or other institutional clients. The principal business address for all entities affiliated with Baillie Gifford & Co is Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland, UK. |
(16) | Consists of 10,485,757 shares held by The Vanguard Group, Inc. Vanguard Fiduciary Trust Company ("VFTC"), a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 233,471 shares or 0.19% of the Common Stock outstanding of the Company as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd. ("VIA"), a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 36,529 shares or 0.03% of the Common Stock outstanding of the Company as a result of its serving as investment manager of Australian investment offerings. The principal business address for all entities affiliated with The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355. |
(10) Consists of (a) 30,000 shares held by Mr. Sarnoff, (b) 243,586 shares subject to stock options held by Mr. Sarnoff that are exercisable within 60 days of April 10, 2018, and (c) 11,980 RSUs which are subject to vesting conditions expected to occur within 60 days of April 10, 2018.
(11) Consists of (a) 195,096 shares held by Mr. Schlein, (b) 45,000 shares held by the Schlein Family Trust Dtd 4/20/99, (c) 11,980 RSUs which are subject to vesting conditions expected to occur within 60 days of April 10, 2018, and (d) 3,595,299 shares owned by Kleiner Perkins Caufield & Byers XIII, LLC (KPCB XIII). All shares are held for convenience in the name of “KPCB Holdings, Inc. as nominee,” for the accounts of such individuals and entities who each exercise their own voting and dispositive control over such shares. The managing member of KPCB XIII is KPCB XIII Associates, LLC (KPCB XIII Associates). Brook H. Byers, L. John Doerr, Joseph Lacob, Raymond J. Lane and Ted Schlein, a member of our board of directors, are the managing directors of KPCB XIII Associates and exercise shared voting and investment power over the shares directly held by KPCB XIII. The principal business address for all entities and individuals affiliated with Kleiner Perkins Caufield & Byers is 2750 Sand Hill Road, Menlo Park, CA 94025.
(12) Consists of (a) 2,000 shares held by Mr. York, (b) 216,456 shares subject to stock options held by Mr. York that are exercisable within 60 days of April 10, 2018, and (c) 11,980 RSUs which are subject to vesting conditions expected to occur within 60 days of April 10, 2018.
(13) Consists of (a) 6,392,908 shares, (b) 6,044,815 shares subject to stock options that are exercisable within 60 days of April 10, 2018, and (c) 71,880 RSUs which are subject to vesting conditions expected to occur within 60 days of April 10, 2018, each of which are held by our directors and officers as a group.
(14) Based on information contained in Schedule 13G filed with the SEC by Gilder, Gagnon, Howe & Co. LLC on February 14, 2018, consists of 5,771,967 shares held in customer accounts over which partners and/or employees of Gilder, Gagnon, Howe & Co. LLC have discretionary authority to dispose of or direct the disposition of the shares, 81,188 shares held in the account of the profit sharing plan of Gilder, Gagnon, Howe & Co. LLC, and 1,484,603 shares held in accounts owned by the partners of the Reporting Person and their families. The principal business address for all entities affiliated with Gilder, Gagnon, Howe & Co. LLC is 475 10th Avenue, New York, NY 10018.
(15) Based on information contained in Amendment No. 4 to Schedule 13G/A filed with the SEC by PAR Investment Partners, L.P. and its affiliates on February 14, 2018. The sole general partner of PAR Investment Partners, L.P. is PAR Group, L.P. The sole general partner of PAR Group L.P., is PAR Capital Management, Inc. Each of PAR Group, L.P. and PAR Capital Management, Inc. may be deemed to be the beneficial owner of all 6,241,298 shares held directly by PAR Investment Partners, L.P.
(16) Based on information contained in Amendment No. 5 to Schedule 13G/A filed with the SEC by PRIMECAP Management Company and its affiliates on February 27, 2018, consists of 10,195,390 shares held by PRIMECAP Management Company. The principal business address for all entities affiliated with PRIMECAP Management Company is 177 E. Colorado Blvd., 11th Floor, Pasadena, CA 91105.
(17) Based on information contained in Amendment No. 2 to Schedule 13G/A filed with the SEC by Sylebra HK Capital Limited and its affiliates on February 15, 2018, consists of 6,956,896 shares owned by Sylebra Capital Management. Sylebra HK Company Limited may be deemed to beneficially own the Shares by virtue of its position as the investment advisor to Sylebra Capital Management in relation to Sylebra Capital Partners Master Fund, Ltd and other advisory clients. The principal business address for all entitites affiliated with Sylebra HK Company Limited is 28 Hennessy Road, 20th Floor, Wan Chai, Hong Kong (SAR).
(18) Based on information contained in Schedule 13G filed with the SEC by T. Rowe Price Associates, Inc. on February 14, 2018, consists of 8,897,311 shares held by T. Rowe Price Associates, Inc. Price Associates does not serve as custodian of the assets of any of its clients; accordingly, in each instance only the client or the client's custodian or trustee bank has the right to receive dividends paid with respect to, and proceeds from the sale of, such securities. The ultimate power to direct the receipt of dividends paid with respect to, and the proceeds from the sale of, such securities, is vested in the individual and institutional clients which Price Associates serves as investment adviser. Any and all discretionary authority which has been delegated to Price Associates may be revoked in whole or in part at any time. The principal business address for all entities affiliated with T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, MD 21202.
OUR MANAGEMENT
The names of our executive officers, their ages as of April 10, 2018,6, 2020, and their positions are shown below.
|
| | | | |
Name | | Age | | Position(s) |
Dan Rosensweig | | 5658 | | President, Chief Executive Officer and Chairman |
Dave Borders Jr. | | 44 | | General Counsel |
Jenny Brandemuehl | | 54 | | Chief People OfficerCo-Chairperson |
Andrew Brown | | 5860 | | Chief Financial Officer |
John Fillmore | | 40 | | Chief Business Officer |
Esther Lem | | 6264 | | Chief Marketing Officer |
Michael Osier | | 55 | | Chief Outcomes Officer |
Nathan Schultz | | 4042 | | ChiefPresident of Learning OfficerServices |
The boardBoard of directorsDirectors chooses executive officers, who then serve at the discretion of the boardBoard of directors.Directors. There are no familial relationships between any of our executive officers and directors.
For information regarding Mr. Rosensweig, please refer to Proposal“Proposal No. 1 –“Election–Election of Directors” above.
Dave Borders Jr. has served as our General Counsel since April 2016. From May 2013 until to March 2016, Mr. Borders served as our Associate General Counsel and from March 2011 until April 2013, he served as our Senior Corporate Counsel. Mr. Borders earned a B.S. in Economics and Business Administration from Trinity University and holds a J.D. from Harvard Law School.
Jenny Brandemuehl has served as our Chief People Officer since August 2016. From January 2013 to July 2016, Ms. Brandemuehl served as our Vice President, Human Resources. Previously, Ms. Brandemuehl served as the Vice President, Global Talent Management at JDS Uniphase Corporation, a telecommunications equipment company from January 2009 to November 2010. Prior to serving at JDS Uniphase, Ms. Brandemuehl held various management positions at Gap Inc. and Hewlett Packard. Ms. Brandemuehl holds a B.A. in in Psychology from Wellesley College and a Master of Human Resource and Organizational Development (M.H.R.O.D.) from the University of San Francisco.
Andrew Brown has served as our Chief Financial Officer since October 2011. From 2004 to 2009, Mr. Brown served as the Chief Financial Officer of Palm, Inc., a smartphone provider. Mr. Brown was semi-retired following his departure from Palm before he joined us. Prior to serving at Palm, Mr. Brown served as the Chief Financial Officer of Pillar Data Systems, Inc., a computer data storage company, Legato Systems, Inc., a storage management company subsequently acquired by Dell EMC (formerly EMC Corporation), and ADPT Corporation (formerly Adaptec, Inc.). Mr. Brown also serves on the business school advisory board at Eastern Illinois University. Mr. Brown holds a B.S. in accounting from Eastern Illinois University.
John Fillmore has served as our Chief Business Officer since December 2018 and previously served as our Chief of Business Operations from October 2015 to December 2018 and our Business Leader for Required Materials from June 2013 to October 2015. Prior to Chegg, Mr. Fillmore’s experience included service at Bain & Company, a management consulting firm, and as Chief Deputy Director for the Office of Planning and Research under then-California Governor Arnold Schwarzenegger, where he focused on education and economic development. Mr. Fillmore holds a B.S. from the University of Oregon Robert D. Clark Honors College and an M.B.A. from Harvard Business School.
Esther Lem has served as our Chief Marketing Officer since December 2010. In 2009, Ms. Lem served as the Vice President, Hair Projects, Global Hair Category at Unilever N.V., a global supplier of food, home and personal care products. From 2000 to 2009, Ms. Lem served as the Vice President of Brand Development for Unilever North America on the deodorants and hair categories, a division of Unilever. Prior to 2000, Ms. Lem served as the Vice President of Marketing for Unilever Canada. Ms. Lem also currently serves on the Board of Directors of Aceable, Inc. Ms. Lem holds an Honors Business Administration degree (H.B.A.) in business from the University of Western Ontario.
Michael Osier has served as our Chief Outcomes Officer since November 2015 and previously served as our Chief Information Officer from October 2012 to November 2015 and our Vice President of Operations and Internet Technology from 2009 to October 2012. From 2000 to 2009, Mr. Osier served in various positions, including Vice President, Internet Technology Operations at Netflix, Inc., a multinational provider of on-demand Internet streaming media. Prior to serving at Netflix, Mr. Osier served in various senior management positions at Conner Peripherals, Seagate Technology and Quantum Corporation.
Nathan Schultz has served as our ChiefPresident of Learning OfficerServices since June 2014December 2018 and previously served as our Chief Learning Officer from June 2014 until December 2018, our Chief Content Officer from May 2012 until June 2014, our Vice President of Content Management from 2010 to May 2012 and our Director of Textbook Strategy from 2008 to 2010. Prior to joining us, Mr. Schultz served in various management positions at R.R. Bowker LLC, a provider of bibliographic information and management solutions; Monument Information Resource, a marketing intelligence resource acquired by R.R. Bowker; Pearson Education, an education publishing and assessment service; and Jones & Bartlett Learning LLC, a division of Ascend Learning Company and provider of education solutions. Mr. Schultz holds a B.A. in historyHistory from Elon University.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE SUMMARY
In this Compensation Discussion and Analysis, we address our compensation program for our executive officers and specifically the compensation paid or awarded to the following executive officers of our company for the year ended December 31, 20172019 who are listed in the Summary Compensation Table that follows this discussion and who we refer to as our “named executive officers” or “NEOs”:
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| |
Name | Title |
Dan Rosensweig | President, Chief Executive Officer and ChairmanCo-Chairperson |
Andrew Brown | Chief Financial Officer |
Nathan Schultz | President of Learning Services |
Michael Osier(1) | Chief Information Officer and Chief Outcomes Officer |
Nathan SchultzJohn Fillmore | Chief LearningBusiness Officer |
Esther Lem | Chief Marketing Officer |
Charles Geiger | Former Chief Product Officer(1)
|
(1) Mr. Geiger stepped down as Chief Product Officer on September 29, 2017 and departed from Chegg on
April 9, 2018. |
| | | | |
(1) | On March 18, 2020, our Board of Directors evaluated the designations of our current executive officers (as that term is defined under Rule 3b-7 of the Exchange Act) and determined that Mr. Osier would no longer be designated as an executive officer of Chegg, effective March 18, 2020. |
References in this section to “fiscal year 2017”2019”, “fiscal year 2016”2018” and “fiscal year 2015”2017” refer to our fiscal years ended December 31, 2017,2019, December 31, 2016,2018, and December 31, 20152017 respectively.
Business & Compensation Highlights for Fiscal Year 20172019
Our 2017 fiscal year wasFinancial Performance Highlights. As reflected in our best year for the company, including in terms of stock price appreciation, growth in Chegg Services revenuesRevenue (as described in greater detail in the section titled “Elements of Fiscal Year 2019 Compensation-Equity Incentive Compensation-Performance-Based Restricted Stock Units”), and earnings. For theour adjusted EBITDA, fiscal year 2017, we:2019 was another successful year for Chegg.
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Achieved absolute 1-year stock price appreciation of 121% |
Chegg Services revenues grew 44% year-over-year to $185.7 million, or 73% of total net revenues, compared to 51% in 2016
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Net loss of $20.3 million, with adjusted EBITDA of $46.4 million(1)
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Chegg Services Revenue and adjusted EBITDA are key financial metrics for measuring our performance and success because both are primary components of our overall revenue growth and profitability. Consequently, our long-term incentive compensation is linked to these two metrics. As a result of our strong fiscal year 2019 performance on these metrics, our long-term incentive performance-based equity awards were earned at 142.1% of target. Our financial success in these key metrics has translated into significant value creation for our stockholders. As of December 31, 2019, our one-year stock price appreciation was 33% and our three-year stock price appreciation was 414%, which ranked at the 71st percentile and at the 87th percentile, respectively, relative to our 2019 compensation peer group.
(1) Adjusted EBITDA is a non-GAAP financial measure. We define adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, or EBITDA, adjusted to exclude share-based compensation expense, other income, net restructuring charges, and acquisition-related compensation costs and the donation from Chegg Foundation. For a reconciliation of adjusted EBITDA to its most
directly comparable financial measurenet loss prepared in accordance with generally accepted accounting principles generally accepted in the United States (“GAAP��GAAP”), please refer to Appendix A to this proxy statement.
Stockholder Engagement. During fiscal year 2019, we conducted a stockholder outreach campaign to understand stockholder concerns with our executive compensation program. A summary of these efforts was presented to the compensation committee prior to their review and approval of our 2019 executive compensation programs. In response to our stockholders and to maintain strong compensation governance, during fiscal year 2019, the compensation committee approved stock ownership guidelines and a compensation recoupment and forfeiture policy for our executive officers. For further information, see the section “Stockholder Engagement and Results of 2019 Stockholder Advisory Vote on Executive Compensation.”
Stockholder Engagement and Results of 2019 Stockholder Advisory Vote on Executive Compensation
We value the input of our stockholders on our compensation program and we critically assess our compensation program taking into account such input. We hold an advisory vote on executive compensation, or say-on-pay vote, on an annual basis. At the Annual Meeting of Stockholders on June 5, 2019, 97% of the votes cast were in favor of our advisory vote to approve our executive compensation program.
During fiscal year 2019, members of our management team reached out to stockholders representing approximately 60% of our outstanding common stock to facilitate a discussion on corporate governance, executive compensation, and related topics concerning stockholders, including feedback on potential compensation program improvements. A summary of these efforts and the feedback provided by these stockholders was presented to the compensation committee prior to their review and approval of our 2019 executive compensation programs. The 2019 say-on-pay vote reflected strong support for our compensation practices; however, in response to our stockholders and to maintain strong compensation governance, the compensation committee implemented stock ownership guidelines and a compensation recoupment and forfeiture policy for our executive officers in 2019.
We expect to continue our dialogue with stockholders and take their feedback into account when evaluating our executive compensation program going forward.
Compensation Practices
We designed our executive compensation program with the intention of aligning pay with performance while balancing risk and reward. To help us accomplish these key objectives, we have adopted the following policies and practices:
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What We Do | What We Don't Do |
Maintain a compensation committeeCompensation Committee comprised solely of independent directors | Provide defined benefit or contribution retirement plans or arrangements, other than our Section 401(k) plan which is generally available to all employees.
employees |
Use an independent compensation consultant | Provide excise tax gross-ups on change of control severance payments |
Use a representative and relevant peer group for assessing compensation | Provide excessive benefits and/or perquisites to our executive officers, |
Prohibit hedging of our stock by executive officers and directors | including retiree post-termination benefits |
Consider stockholder dilution and burn rate in our equity compensation decisions | Include “single-trigger” vesting change of control provisions in equity awards |
Prioritize stockholder alignment with a high percent of pay mix allocated to equity compensation, half of which is performance-conditioned
| Allow hedging or monetization transactions, such as zero cost collars and forward sale transactions |
Set a maximum payout on performance-based equity incentive awards at 150% of target | Provide dividends or credits on unvested incentive awards |
Maintain a recoupment policy on cash or equity incentive awards in the event of a financial restatement | |
Maintain stock ownership guidelines for our executive officers and non-employee directors | |
Conduct ongoing stockholder outreach | |
Conduct an annual Say-On-Pay Vote | |
PROCESS FOR SETTING EXECUTIVE COMPENSATION
Compensation Philosophy and Objectives
Our executive compensation program is designed to:
Attract, motivate and retain highly-qualified executive officers in a competitive market;
Provide compensation to our executives that is competitive;
Reward the achievement of challenging business objectives; and
Align our executive officers’ interests with those of our stockholders by providing a significant portion of total compensation in the form of equity awards.
We operate in a fast-paced, innovative education software and services industry, which is an emerging category with very few public company peers in the United States. We are the largest direct-to-student education learning platform. Our executive team possesses a unique mix of education software industry experience and the ability to scale for high growth and profitability. Our leaders are difficult to replace, and we compete for talent in athe highly competitive, San Francisco Bay Area labor market. To retain key talent and remain competitive in our environment,labor market, we set the total target directprovide compensation ofto our executives to be within 60th to 90th percentile of our compensation peer group, with any individual executive officer potentially falling above or below this range due to the executive’s individual contribution, scope of responsibilities, level of experienceemployees that recognizes and tenure with our company. incentivizes high performance.
Our total direct compensation to our executive officers consists of two components: base salaries and equity incentive compensation. Our base salaries provide a stable source of income and keep our compensation competitive and our time and performance-based equity compensation provides an incentive for our executive officers to achieve both short-term and long-term corporate goals. We generally do not grant cash bonuses to our executives. While our base salaries are above the 75th percentile of our peer group companies, base salaries for our executive officers are generally positioned below the market median total cash compensation to account for the absence of an annual bonus opportunity and to allocateWe believe that allocating a highermeaningful percentage of compensation to at-risk equity awards.equity-based opportunities motivates our executive officers to create long-term stockholder value. Our equity incentivetotal direct compensation is generally targeted at market competitive ranges, and further takes into account the company’s and each individual’s performance.
Competitivewhile competitive market data informs the pay decisions of the compensation committee of the Board of Directors (the “compensation committee”) butCompensation Committee, it is not the determinative factor in determiningsetting our executive’sexecutives’ compensation. In setting compensation levels, the Compensation Committee further takes into account our financial and market performance on an absolute basis and relative to our peer group, as well as individual factors, including but not limited to: job responsibilities and complexity of the role, contributions to Chegg, market competition for talent, experience and tenure.
Role of Our Compensation Committee, Management and Independent Compensation Consultant
Role of Our Compensation Committee
The compensation committeeCompensation Committee is responsible for developing, implementing, and overseeing our compensation and benefit programs and policies, including administering our equity incentive plans and performing assessments on compensation-related risk. On an annual basis, the compensation committeeCompensation Committee reviews and approves compensation decisions relating to our executive officers, including our CEO. To determine each executive officer’s compensation, the compensation committee reviewsCEO; compensation on a role-specific basis as well as relative to positions at a similar level and for the executive team overall. The compensation committee also reviewsoverall; and our corporate financial performance and overall financial condition.
The compensation committeeCompensation Committee also evaluates risk as it relates to our compensation programs, including our executive compensation.
compensation program. As discussed under “Risk Considerations” below, the compensation committeeCompensation Committee does not believe that our compensation and benefits programs and policies encourage excessive or inappropriate risk taking.
Role of Our Management
TheOur CEO reviews the annual performance of each executive (except the CEO’shis own performance) and makes recommendations to the compensation committeeCompensation Committee regarding each executive’s base salary and equity compensation.compensation (other than for himself). The CEO does not make recommendations for his own compensation. The compensation committeeCompensation Committee may modify individual compensation levels and components for executive officers and is not bound to accept theour CEO’s recommendations.
Role of Our ExternalIndependent Compensation Consultant
The compensation committee has the authority under its charter to retain the services of an external consulting firm or advisor to assist it in making its compensation decisions. For fiscal year 2017,2019, the compensation committeeCompensation Committee retained Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent compensation consultant. The compensation committeeCompensation Committee determined that FW Cook is an independent compensation advisor including for purposes of the Dodd-Frank Act and other applicable SEC and NYSE regulations. During fiscal year 2017,2019, FW Cook was retained to review our compensation philosophy and objectives, to develop a compensation peer group, to gather and analyze compensation data for our compensation peer group, and to evaluate its executive compensation practices and pay levels.levels for our executives and non-employee directors, to review certain compensation arrangements with our executives, and to assist with our disclosure in this Compensation Discussion and Analysis. In the course of fulfilling these r
esponsibilities, representatives of FW Cook attended Compensation Committee meetings and met with management from time to time to gather relevant information. FW Cook performs no other services for the Companyus, other than its work for the compensation committee.Compensation Committee and only reports to the Compensation Committee and does not provide services to our management.
20172019 Compensation Peer Group
Each year, the compensation committee, with the assistance ofOur Compensation Committee generally considers market data compiled by FW Cook conducts an annual reviewto better inform its determination of the key components of our executive compensation practicesprogram and to develop a program that it believes will enable us to compete effectively for new executives and retain existing executives. In general, this market data consists of the competitive market usingcompensation information from both broad-based third-party compensation surveys and a compensation “peer group.” Our peer group for purposes of similarly-sizedmaking determinations with respect to 2019 compensation consists of software companies based onthat are similar to us in revenue, that maymarket capitalization, market capitalization to revenue ratio, and relevant geographic locations where we compete with Chegg for executive talent. As part of the review, the compensation committee assesses the compensation peer group to ensure the constituents continue to be suitable for compensation benchmarking purposes. In September 2016, the compensation committee approved a compensation peer group based on the following industrytalent (generally San Francisco Bay Area, Los Angeles, and New York). Industry and financial size criteria:criteria include:
GICS Industries: Internet & Catalog Retail and Internet Software & Services
Financial Size: One-thirdApproximately one-third to three times Chegg’s then-currentour total revenues and under threeone-fourth to four times Chegg’s then-currentour market capitalization value
Market Capitalization to Revenue Ratio: Greater than 3.0
Each year, the Compensation Committee, with the assistance of FW Cook, conducts an annual review of the compensation levels and practices of peer companies. As part of the review, the Compensation Committee assesses the compensation peer group to ensure the constituents continue to meet the criteria for compensation assessment purposes. Mulesoft, Pandora Media, and XO Group were removed from our 2019 compensation peer group due to acquisitions, and Blucora was removed due to differences in business and financial growth. The Compensation Committee approved the addition of eight peers to our 2019 compensation peer group that meet the peer selection criteria: 8x8, Etsy, Guidewire Software, Paylocity Holding, Qualys, RingCentral, The Trade Desk, and Zillow Group.
For 2017,our 2019 compensation decisions, our compensation peer group consisted of the 1723 companies set forth below:
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2U | InstructureLivePerson | Shutterstock |
Angie's List*8x8 | LivePersonLogMeIn | Stamps.com |
Bankrate*Box | LogMeInNew Relic | WebMD Health*The Trade Desk |
BlucoraCornerstone OnDemand | Pandora MediaNutanix | XO GroupTrueCar |
Blue Nile*Coupa Software | Paylocity Holding | Twilio |
Etsy | Qualys | Yelp |
Guidewire Software | Quotient Technology | YelpZillow Group |
BoxInstructure | RetailMeNot*RingCentral | |
*These peer companies have subsequently been acquired as of December 31, 2017.
The compensation committeeCompensation Committee also references surveys from Radford, an Aon Hewitt company (“Radford”), covering general technology companies with annual revenues of between $200 million and $500 million. These surveys, as well as the peer group information, serve as data points in determining the appropriate components of and overall compensation, but the compensation committeeCompensation Committee does not benchmark its compensation to any particular level or against any specific member of our compensation peer group or such surveys.
ELEMENTS OF FISCAL YEAR 20172019 COMPENSATION
Fiscal Year 20172019 Pay Mix
Consistent with our compensation philosophy and objectives, we provide compensation to our CEO and our executive officers in the form of base salaries, time-vestingtime-based restricted stock units (“RSUs”), and performance-based stock unitsRSUs (“PSUs”). We generally do not provide annual cash incentive opportunities to our executive officers, which are typically provided by our peer companies, as our equity incentive compensation is intended to tie the majority of our executive officer’s pay withto the delivery of long-term stockholder value. We include one-year performance periods on our PSUs to incentivize the achievement of critical short-term goals and we include a multi-year time-based vesting component to these awards to keep
deliveringthe focus on the creation of long-term stockholder value. Equity compensation constitutes 86%87% of the total pay mix for our CEO and 80%82% on average for our other NEOs.
*Target pay mix represents annual base salary rates, RSUs at grant date fair value, and PSUs at grant date fair value, whenassuming the target performance level is achieved.
Base Salaries
We pay an annual base salary to each of our executive officers in order to attract and retain executive talent and provide them with a fixed and stable rate of cash compensation during the year. Base salaries for our executive officers are reviewed by the compensation committeeCompensation Committee annually during the first or last quarter of the calendar year. The compensation committeeCompensation Committee takes into consideration a variety of factors when determining base salary adjustments, including our compensation objectives, each executive’s responsibilities and individual performance, and the compensation peer group and Radford survey market analysis provided by FW Cook.
The compensation committeeIn 2019, the Compensation Committee approved the following base salary adjustments for our NEOs effective asbased on the Compensation Committee’s assessment of March 1, 2017:individual performance and a market analysis of our compensation peer group.
Mr. Fillmore’s salary was increased to $500,000 in March 2019 in connection with his promotion from Chief of Business Operations to Chief Business Officer in December 2018.
Mr. Schultz’s salary was increased to $600,000 in March 2019 in connection with his promotion from Chief Learning Officer to President of Learning Services in December 2018.
| | Named Executive Officer | Fiscal Year 2016 | Fiscal Year 2017 | Change | Fiscal Year 2019(1) | Fiscal Year 2018(2) | Change |
Dan Rosensweig | $920,000 | —% | $1,000,000 | —% |
Andrew Brown | $520,000 | —% | $600,000 | —% |
Nathan Schultz | | $600,000 | $500,000 | 20.0% |
Michael Osier | $426,720 | $450,000 | 5.5% | $500,000 | —% |
Nathan Schultz | $426,720 | $450,000 | 5.5% | |
Esther Lem | $390,000 | —% | |
Charles Geiger(1) | $426,720 | $450,000 | 5.5% | |
John Fillmore | | $500,000 | $370,000 | 35% |
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(1) | Effective as of March 1, 2019. |
(2) | Effective as of March 1, 2018. |
(1) Mr. Geiger’s base salary remained at $450,000 through the remainder of fiscal year 2017.
Equity Incentive Compensation
The compensation committeeCompensation Committee believes that equity compensation should represent a significant amount of our executive officers’ total compensation so that the interests of our executive officers are aligned with those of our stockholders. Like base salary, the compensation committeeThe Compensation Committee determines the amount of equity compensation appropriate for each NEO based on a variety of factors, including our compensation objectives,objectives; corporate operational and financial performance and relative stockholder return; each executive’s responsibilities, andresponsibilities; the compensation peer group and Radford survey market analysis provided by FW Cook. In determining the long-term incentive grant for the CEO, the compensation committee considers our corporate operational and financial performance and relative stockholder return, CEO incentive awards at companies in our compensation peer group, andCook; historical equity grants and equity holdings; and internal parity and, for executive officers other than the CEO, from recommendations from the CEO.
Executive officers are initially granted an equity award, generally in the form of RSUs, when they join us, based on their position and their relevant prior experience. These initial RSUs vest over four years and no shares vest before the one-year anniversary of the date of grant. We spread the vesting of new hire equity grants over four years to compensate our executives for their contributions over time and to encourage retention and focus on long-term value creation. Thereafter, equity awards are generally granted annually to eligible executive officers around March of each year. The Compensation Committee has the discretion to grant equity awards in addition to these annual grants based on, among other factors, changes in job responsibilities, performance and experience, or material changes in market compensation. No new hire or discretionary grants were made to the CEO.our NEOs in 2019.
In 2017,March 2019, the compensation committeeCompensation Committee granted long- termlong-term equity compensation to our NEOs with a target mix of 50% time-vesting restricted stock units (“RSUs”)RSUs and 50% PSUs. The Compensation Committee believes that a 50/50 mix of time-based and performance-based RSUs (“PSUs”).equity awards for 2019 continues to be the most effective incentive for retaining our executive officers and rewarding them for short-term company performance while also creating long-term incentives to sustain that performance. The compensation committeeCompensation Committee routinely evaluates and considers the type of awards granted under our equity incentive program and may, in the future, decide that other types of awards or a different mix of awards are appropriate to provide incentives to our executive officers.
Restricted Stock Units
We grant RSUs because they provide retentive value for our executive officers and are linked to creating stockholder value as the award value increases with stock price appreciation. On March 1, 2017,2019, we granted RSUs to each of our NEOs vesting one-third on the first anniversary of grant date and remaining amount vesting in three equal annualquarterly installments over a period of three years.the next 24 months, conditioned on the executive officer's service up to and through the applicable vesting dates.
Performance-Based Restricted Stock Units
We grant PSUs because they are linked to stockholder value creation, like RSUs, but are also leveraged to the Company’sour financial performance.performance and allow us to set appropriate annual goals that we believe are critical to drive long-term success. On March 1, 2017,2019, the compensation committee approvedgranted PSU grantsawards to our NEOs subject to the achievement of certain financial performance goals and conditioned on the executive officer's service up to and through the applicable multi-year, time-based vesting dates.
These PSUs will be earned and eligible to vest contingent on the achievement of two equally weighted performance metrics: (1) 2017fiscal year 2019 Chegg Services Revenue and (2) 2017fiscal year 2019 adjusted EBITDA.EBITDA (both as defined below). These two metrics were selected because the compensation committee believes that revenueChegg Services Revenue growth and adjusted EBITDA, as a non-GAAP measure of profitability, are the most important drivers of increasing stockholder value.value for Chegg Services is thein 2019 as they are primary componentcomponents of the Company’sour overall revenue growth and profitability. The selection of these two measures as PSU metrics ensures our executive officers are incentivized in accordance with the long-term interests of our stockholders. In addition, because we generally do not have an annual cash incentive bonus plan as another form of compensation, a one-year financial measurement designed to reward annual financial performance is appropriate as a PSU metric. The performance metrics and their timing are synchronized with the Board-approvedboard-approved corporate strategic plan and associated metrics and targets.
We currently use a one-year performance period (with a multi-year time-based vesting schedule) to allow us the flexibility to set appropriate annual goals to drive stockholder value given our high growth expectations and the rapidly changing nature of the industry in which we operate. Because of the potential risks to performance and motivation that are associated with improperly setting goals in a high-growth environment, the compensation committee has not adopted multi-year performance goals at this time but will continually monitor this topic. As discussed below, the PSUs include a three-year time-based vesting schedule which provides an incentive for executive officers to focus on multi-year performance.
Upon the determination of the attainment of the performance metrics, a percentage of PSUs wouldwill be earned based on actual achievement and will be eligible to vest over a three-year time-based vesting schedule. Any PSUs that are not earned will be forfeited at the actual achievement.end of the performance period and will not be eligible to vest. One-third of the earned PSUs vest on the later of the one-year anniversary of the grant date or the date our compensation committee determines the 2017 performance metrics have been met, the Initial“Initial Vesting Date. One-third of the” The remaining earned PSUs vest onin quarterly installments over the second anniversary of the Initial Vesting Date and the remaining one-third on the three-year anniversary of24 months following the Initial Vesting Date. Vesting is subject to the executive officer’s continued service up to and through the applicable vesting dates. The time-based vesting element of the allocated PSUs provides additional retention of our executive officers.officers and an alignment with stockholders on creating long-term value.
The number of PSUs that may be earned range from 0% to 100%150% of the total award depending on the level of performance achieved for each goal. No payout will be made for performance below the threshold levelslevel. The metrics are equally weighted (each representing 50% of the target number of shares) and measured separately and the maximum amountresulting number of earned PSUs with respect to each metric are added together for the total number of earned PSUs that mayare eligible to vest is 100% of the total award.over time. If actual performance falls between the threshold, target, or maximum levels, linear interpolation will be used to determine the amountnumber of PSUs earned, as set forth in the table below: |
| | | |
Performance Level | Threshold | Target | Maximum |
Payout % of Award | 50% | 100% | 150% |
Chegg Services Revenue | $310,000,000 | $326,000,000 | $335,000,000 |
Adjusted EBITDA* | $100,000,000 | $112,000,000 | $123,000,000 |
|
| | | | | | | | | |
Performance Level | Threshold | Target | Maximum |
Payout % of Award | 33% |
| 66% |
| 100% |
|
Chegg Services Revenue | $ | 160,000,000 |
| $ | 172,000,000 |
| $ | 184,000,000 |
|
Adjusted EBITDA* | $ | 30,000,000 |
| $ | 35,000,000 |
| $ | 45,000,000 |
|
*Adjusted EBITDA is a financial measure not prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), and is further defined and reconciled to the most directly comparable GAAP financial measures in Appendix A to this proxy statement.GAAP.
“Chegg Services Revenue” includesencompasses all revenue other than revenue derived from our Required Materials products and consists primarily of Chegg Study, service, our Chegg Writing, service, our Chegg Tutors, service, Test Prep, through our partnership with Kaplan, Internship services, Brand Partnership services that we offerChegg Math Solver and Thinkful. The Chegg Services Revenue target increased from 240,000,000 in 2018 to brands and Enrollment Marketing services to colleges, through our strategic partnership with NRCCUA, provided that any revenue streams generated through acquisitions finalized326,000,000 in fiscal year 2017 was not included.2019.
“Adjusted EBITDA” means earnings before interest, taxes, depreciation and amortization, or EBITDA, adjusted to exclude share-based compensation expense, other income, net, restructuring charges, and acquisition-related compensation costs restructuring charges, and other income, net, provided that any expenses relatedthe donation from Chegg Foundation. We use an adjusted EBTIDA number to acquisitions finalizedaccurately measure operating profitability excluding the impacts from financing capital expenditures and stock-based compensation. The Adjusted EBITDA target increased from $74,000,000 in fiscal year 2017 was not included.2018 to $112,000,000 in 2019.
We granted RSUs and PSUs at target to our NEOs induring fiscal year 20172019 and the grant date fair value in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718 (“ASC 718”) asis set forth in the table below, denominated at target and maximum payout levels:
levels.
| | | Number of Shares Granted | Grant Date Value of Awards | Number of Shares Granted | | Grant Date Fair Value of Awards | |
Named Executive Officer | Time-Vesting RSUs | PSUs (Target)* | Time-Vesting RSUs | PSUs (Target)* | Time-Vesting RSUs | PSUs (Target)* | PSUs (Maximum) | Time-Vesting RSUs | PSUs (Target)* | PSUs (Maximum) |
Dan Rosensweig | 349,264 | $2,849,994 | 80,405 | 120,608 | $3,249,970 | $4,874,975 |
Andrew Brown | 136,504 | $1,113,873 | 37,110 | 55,665 | $1,499,986 | $2,249,979 |
Nathan Schultz | | 37,110 | 55,665 | $1,499,986 | $2,249,979 |
Michael Osier | 109,145 | $890,623 | 25,977 | 38,965 | $1,049,990 | $1,574,965 |
Nathan Schultz | 109,145 | $890,623 | |
Esther Lem | 87,316 | $712,499 | |
Charles Geiger | 109,145 | $890,623 | |
John Fillmore | | 25,977 | 38,965 | $1,049,990 | $1,574,965 |
*PSUs (Target) represents approximately 66%two-thirds of the total potential maximum grant size. In As described below, in the first quarter of 2018,2020, the compensation committee certified that, based on theour Chegg Services Revenue and adjusted EBITDA performance of the Company in fiscal year 2017, the maximum number of PSUs granted in fiscal year 2017 (i.e., 100%2019, 142.1% of the grant size or approximately 150% of thetarget amounts listed in the table above)above were allocated toearned by each NEO, and eligible to be vested.vest contingent upon time-based service conditions as described further below:
Fiscal Year 2019 Performance-Based Restricted Stock Units Payout
In February 2020, the compensation committee certified our financial performance in 2019 with respect to the 2019 PSU metrics. We achieved $332.2 million in Chegg Services Revenue, resulting in a payout percentage of 134.3% of Target of the 2019 Chegg Services Revenues performance goal and we achieved $125.0 million in adjusted EBITDA, resulting in an
attainment of 150% of Target of the 2019 adjusted EBITDA performance goal. The weighted average of the percentage achieved for the two 2019 PSU metrics is 142.1% of Target. As noted above, our financial success in these key metrics has translated into significant value creation for our stockholders.
The PSUs that were so earned vest over a three-year, time-based vesting schedule as follows: one-third vested on March 1, 2020 and the remaining earned PSUs vest in quarterly installments over the 24-month period following March 1, 2020. Vesting is subject to the executive officer's continued service up to and through the applicable vesting dates.
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Number of PSUs Earned |
Named Executive Officer | Chegg Services Revenue (134.3% of Target) | Adjusted EBITDA (150.0% of Target) | Total Number of PSUs Earned (142.1% of Target) |
Dan Rosensweig | 53,969 | 60,304 | 114,273 |
Andrew Brown | 24,906 | 27,832 | 52,738 |
Nathan Schultz | 24,906 | 27,832 | 52,738 |
Michael Osier | 17,433 | 19,482 | 36,915 |
John Fillmore | 17,433 | 19,482 | 36,915 |
Other Programs and Policies
Benefits and Perquisites
Our executive officersNEOs participate in the same employee benefit and retirement programs that are generally provided to all other employees.employees, including our 401(k) plan, employee stock purchase plan, health care plans, life insurance plan and other welfare benefit programs. We do not provide additional benefits or perquisites to our NEOs that are not made available to other employees.
Severance and Change-in-ControlChange-of-Control Arrangements
To enable us to attract talented executives, as well as ensure ongoing retention when considering potential corporate transactions that may create uncertainty as to future employment, we offer certain post-employment and change-of-control payments and benefits to certain NEOs. Given the nature and competitiveness of our industry, the Compensation Committee believes these severance and change-of-control protections are essential elements of our NEOs compensation program and assist us in recruiting, retaining and developing key management talent. Our change-of-control benefits are intended to allow key employees, including our NEOs, to focus their attention on the business operations of our company in the face of the potentially disruptive impact of a rumored, or actual change-of-control transaction, to assess takeover bids objectively without regard to the potential impact on their own job security and to allow for a smooth transition in the event of a change-of-control.
We have entered into an offer letter agreementsagreement with Messrs.Mr. Rosensweig Brown and Geiger thatadopted a Change-of-Control Severance Plan in which each of the NEOs, other than Mr. Rosensweig participate. These arrangements provide, as applicable, cash severance benefits includingand equity award vesting acceleration if termination occursin the event of certain terminations of employment both outside a change-of-control and in connection with a change of controlchange-of-control (i.e., double-trigger severance protections). We do not provide “single trigger” protections or tax gross-ups if an executive is subject to excise taxes as a result of severance or change ofchange-of- control benefits. A detailed description of the terms of Mr. Rosensweig’s offer letter and the agreementsChange-of-Control Severance Plan can be found under the section titled “Termination and Change of ControlChange-of-Control Arrangements.”
Insider Trading and Hedging Policies
We have adopted an insider tradinga policy whereby our employees, officers and directors, members of their immediate families and others living in their households and associated entities (e.g. venture capital funds, partnerships, trusts, corporations), and consultants are prohibited from insider trading and hedging our securities. We alsoUnder this policy, we prohibit any of the individuals from hedging or monetization transactions, such as zero cost collars and forward sale transactions, and transactions relating to
the future price of our common stock, such as put or call options and short sales. Additionally, no individual may use Chegg securities by our executive officers and directors.as collateral in a margin account or pledge Chegg securities as collateral for a loan or modify an existing pledge unless the individual wishing to pledge securities submits a request for pre-clearance to the Insider Trading Compliance Officer in advance.
Rule 10b5-1 Plans
Certain of our directors and executive officers have adopted written plans, known as Rule 10b5-1 plans, in which they have contracted with a brokerBroker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a brokerBroker executes trades pursuant to parameters established by the director or executive officer when entering into the plan, without further direction from the director or executive officer. The director or executive officer may amend or terminate the plan in some circumstances. The adoption, amendment, termination and certain other actions with respect to Rule 10b5-1 plans must comply with the terms of our insider trading policy.
Compensation Recoupment (“Clawback”) Policy
In February 2019, we adopted a compensation recoupment and forfeiture, or “clawback,” policy that applies to our executive officers. Under this policy, in the event of a material restatement of financial results, the Board of Directors or Compensation Committee will, in such circumstances as it deems appropriate, recoup or require forfeiture of cash or equity award incentive payments in excess of any compensation that would have been earned by the executive officer based upon the restated financial results.
Executive and Director Stock Ownership Guidelines
In February 2019, we implemented stock ownership guidelines for our executive officers, and in June 2019 we increased our stock ownership guidelines for non-employee members of our board of directors. These guidelines are intended to align the economic interests of our executive officers and non-employee members of our Board of Directors with our stockholders by requiring our executive officers and non-employee directors to acquire and maintain a meaningful ownership interest in our common stock. Executive officers and non-employee members of our Board of Directors are required to acquire and hold an amount of our common stock equal to a multiple of base salary or cash retainer, as applicable, within five years of the later of (i) the effective date of these stock ownership guidelines or (ii) the commencement of employment service or service of the Board of Directors:
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Position | Stock Ownership Requirement |
CEO | Three times annual cash salary |
Other Executive Officers | One times annual cash salary |
Non-Employee Directors | Three times annual cash retainer for service as a board member* |
*Excludes any additional cash retainer paid as a result of service as a board Co-Chairperson, lead independent director, committee chair or committee member or meeting fees (if any).
As of December 31, 2019, four of our seven non-employee directors would have met the thresholds under the stock ownership guidelines, if the thresholds were already required. As noted above, satisfaction of the thresholds is not yet required and therefore any directors who have not yet met the thresholds have time to come into compliance with the guidelines. If the stock ownership guidelines had been in place and required as of December 31, 2019, all of our executive officers would have met such thresholds.
Accounting and Tax Considerations
PriorWhile our Compensation Committee considers the deductibility of awards as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions, as noted above, and retains the flexibility to its amendmentaward compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not deductible by the Tax Cuts and Jobs Act (the “TCJA”), which was enacted December 22, 2017, section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), disallowed aus for tax deduction to public companies for compensation paid in excess of $1 million to “covered employees” under Section 162(m) (generally, such company’s chief executive officer and its three other highest paid executive officers other than its chief financial officer). Prior to this amendment, there was an exception to this $1 million limitation for performance-based compensation if certain requirements set forth in Section 162(m) and the applicable regulations were met.
The Tax Cuts and Jobs Act of 2017 generally amended Section 162(m) to eliminate the exception for performance-based compensation, effective for taxable years following December 31, 2017. The $1 million compensation limit was also expanded to apply to a public company's chief financial officer and apply to certain individuals who were covered employees in years other than the then-current taxable year. Although certain transition relief may apply with respect to compensation paidpurposes.
pursuant to certain contracts in effect as of November 2, 2017, ambiguities in the TCJA prevent the compensation committee from being able to definitively determine what compensation, if any, payable to the covered employees in excess of $1 million will be deductible in future years. Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the control of the compensation committee can affect deductibility of compensation, and there can be no assurance that
We account for equity compensation paid to our executive officers in excess of $1 million who are covered by Section 162(m) will be deductible. As in prior years,employees under FASB ASC 718, which requires us to estimate and record an expense over the compensation committee will continue to take into account the tax and accounting implications (including with respect to the expected lack of deductibility under the revised Section 162(m)) when making compensation decisions, but reserves its right to make compensation decisions based on other factors as well if the compensation committee determines it is in its best interests to do so. Further, taking into account the eliminationservice period of the exception for performance-basedaward. FASB ASC Topic 710 also requires us to record cash compensation the compensation committee may determine to make changes or amendments to its existing compensation programs in order to revise aspects of our programs that were initially designed to comply with Section 162(m) but that may no longer serve as an appropriate incentive measure for our executive officers.expense at the time the obligation is accrued.
Risk Considerations
The compensation committeeCompensation Committee has discussed the concept of risk as it relates to our compensation programs, including our executive compensation program, and the compensation committeeCompensation Committee does not believe that our compensation programs encourage excessive or inappropriate risk taking. As described in further detail in this “Compensation Discussion and Analysis,” we structure our pay to consist of both fixed and variable compensation. In fiscal year 2017,2019, the compensation committeeCompensation Committee and management considered whether our compensation programs for employees created incentives for employees to take excessive or unreasonable risks that could materially harm our company. The compensation committeeCompensation Committee believes that our compensation programs are typical for companies in our industry and that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on the company.
REPORT OF THE COMPENSATION COMMITTEE
The information contained in the following report of our compensation committeeCompensation Committee is not considered to be “soliciting material,” “filed” or incorporated by reference in any past or future filing by us under the Securities Exchange Act of 1934 or the Securities Act of 1933, as amended, unless and only to the extent that we specifically incorporate it by reference.
The compensation committeeCompensation Committee oversees our compensation policies, plans and benefit programs. The compensation committeeCompensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the compensation committeeCompensation Committee has recommended to the boardBoard of directorsDirectors that the “Compensation Discussion and Analysis” be included in this proxy statement.
Submitted by the Compensation Committee
Ted Schlein,John York, Chair
Marne Levine
Melanie Whelan*
Jeff Housenbold**
*Ms. Whelan joined our Board of Directors on June 5, 2019 and Compensation Committee on July 27, 2019.
**Mr. Housenbold departed our Board of Directors and Compensation Committee on April 11, 2019.
SUMMARY COMPENSATION TABLE
The following table provides information regarding all compensation awarded to, earned by or paid to our named executive officersNEOs for all services rendered in all capacities to us during fiscal years 2017, 20162019, 2018 and 2015.2017.
| | Name and Principal Position(1) | Year | Salary ($) | Bonus ($) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | Year | Salary ($) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) |
Dan Rosensweig | 2017 | 920,000 |
| | 7,124,994 |
| — |
| 8,044,994 |
| 2019 | 1,000,000 | 8,124,945 | 6,126 | 9,131,071 |
President and Chief Executive Officer | 2016 | 905,417 |
| | 5,609,900 |
| — |
| 6,515,317 |
| 2018 | 986,667 | 8,124,969 | 5,871 | 9,117,507 |
| 2015 | 837,500 |
| | 8,999,989 |
| — |
| 9,837,489 |
| 2017 | 920,000 | 7,124,994 | — | 8,044,994 |
Andrew Brown | 2017 | 520,000 |
| | 2,784,681 |
| 6,000 |
| 3,310,681 |
| 2019 | 600,000 | 3,749,966 | 6,250 | 4,356,216 |
Chief Financial Officer | 2016 | 514,792 |
| | 2,152,831 |
| 6,000 |
| 2,673,623 |
| 2018 | 586,667 | 3,249,968 | 6,000 | 3,842,635 |
| 2015 | 487,917 |
| | 2,999,992 |
| 6,000 |
| 3,493,909 |
| 2017 | 520,000 | 2,784,681 | 6,000 | 3,310,681 |
Nathan Schultz | 2017 | 446,120 |
| | 2,226,553 |
| 4,500 |
| 2,677,173 |
| 2019 | 583,333 | 3,749,966 | 4,750 | 4,338,049 |
Chief Learning Officer | 2016 | 419,100 |
| | 1,568,750 |
| 4,500 |
| 1,992,350 |
| |
President of Learning Services | | 2018 | 491,667 | 2,624,985 | 4,625 | 3,121,277 |
| 2015 | 378,354 |
| 30,000(4) | 1,999,999 |
| 4,500 |
| 2,412,853 |
| 2017 | 446,120 | 2,226,553 | 4,500 | 2,677,173 |
Michael Osier | 2017 | 446,120 |
| | 2,226,553 |
| — |
| 2,672,673 |
| 2019 | 500,000 | 2,624,956 | — | 3,124,956 |
Chief Outcomes Officer | 2016 | 419,100 |
| | 1,568,750 |
| — |
| 1,987,850 |
| |
Chief Information Officer and Chief Outcomes Officer | | 2018 | 491,667 | 2,624,985 | — | 3,116,652 |
| 2015 | 381,000 |
| | 1,999,999 |
| — |
| 2,380,999 |
| 2017 | 446,120 | 2,226,553 | — | 2,672,673 |
Esther Lem | 2017 | 390,000 |
| | 1,781,246 |
| 6,000 |
| 2,177,246 |
| |
Chief Marketing Officer | 2016 | 383,207 |
| | 1,255,000 |
| — |
| 1,638,207 |
| |
John Fillmore | | 2019 | 478,333 | 2,624,956 | 4,750 | 3,108,039 |
Chief Business Officer | | — |
| 2015 | 346,595 |
| | 1,499,989 |
| — |
| 1,846,584 |
| — |
Charles Geiger(5) | 2017 | 446,120 |
| | 2,226,553 |
| 4,500 |
| 2,677,173 |
| |
Former Chief Product Officer | 2016 | 426,720 |
| 200,000(6) | 1,568,750 |
| 4,500 |
| 2,199,970 |
| |
| 2015 | 426,720 |
| | 1,999,999 |
| 4,500 |
| 2,431,219 |
| |