UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Securities Exchange Act of 1934 (Amendment
(Amendment No. )
Filed by the Registrantx ☒
Filed by a Party other than the Registrant¨ ☐
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Preliminary Proxy Statement |
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
Definitive Proxy Statement |
Definitive Additional Materials |
Soliciting Material Pursuant to |
The NASDAQ OMX Group,Nasdaq, Inc.
(Name of Registrant as Specified In itsIts Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Thanthan the Registrant)
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Fee |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) |
Board Refreshment
One focus area for us in 2021 was our ongoing Board refreshment to ensure that the Board has the right mix of skills and expertise to oversee the Company’s strategy, culture, and risks. In September 2021, we proudly welcomed Toni Townes-Whitley, our seventh new director in the past seven years. Ms. Townes-Whitley, formerly the President of U.S. Regulated Industries at Microsoft, brings extensive experience in the areas of technology, customer success, digital transformation, human capital management and regulation. Going forward, our Nominating & ESG Committee will optimize the skills and expertise of the Board to provide the best possible oversight for the Company as its strategy evolves.
People & Culture
Many companies experienced high turnover in 2021 due to the ongoing macroeconomic trend known as the Great Resignation. At Nasdaq, we renamed the phenomenon the Great Retention, reflecting our emphasis on attracting and retaining high-performing talent. The voluntary attrition rate for our workforce during 2021 was 11.5%, which is lower than average for the financial services and technology sectors, as well as for all industries. Looking forward, we included short- and mid-term investments in our 2022 budget to ensure that our compensation structures remain competitive. In the longer term, Nasdaq will continue to evolve its already-strong culture, with emphasis on inspiring management and leadership, career progression and a sense of belonging.
An essential part of Nasdaq’s culture is its diversity, equity, and inclusion initiatives. For the first time in 2021, the Company published statistics on the composition of its global workforce, including its EEO-1 data, in its Sustainability Report.6 The Company also initiated a pay equity analysis covering both gender and race, strengthened its diversity recruiting efforts and created customized developmental and talent retention programs for underrepresented talent. Reflective of our efforts, Nasdaq was included in the 2022 Bloomberg Gender-Equality Index, recognized as a “Best Place to Work for LGBTQ+ Equality” for the fourth consecutive year and named to Seramount’s list of “Best Companies for Dads.” In addition, our President and CEO, Adena T. Friedman, was included in TIME Magazine’s inaugural Women of the Year List for her role in working toward a more equal world.
Sustainability & ESG Initiatives
In 2021, Nasdaq continued to advance its sustainability and ESG initiatives. Nasdaq received SEC approval for its board diversity disclosure listing rule, which will enhance disclosures and encourage the creation of more diverse boards through a market-led solution. Nasdaq is working with its listed companies to implement the listing rule and set a new standard for corporate governance.
In the environmental area, we signed the Science Based Targets initiative (SBTi) commitment letter and published our first Task Force on Climate-Related Financial Disclosures (TCFD) Report. In recognition of our commitment to sustainability and ESG, Nasdaq was named to the Dow Jones Sustainability Index for the sixth consecutive year, and our new global headquarters in New York City achieved a Green Building LEED Platinum Certification.
Looking Ahead
As we look ahead, the Board is incredibly excited about the future opportunities for the Company. We thank you for your investment in Nasdaq and for the opportunity to serve as your Board of Directors.
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| Melissa M. Arnoldi |
| Charlene T. Begley | Thomas A. Kloet | Jacob Wallenberg | ||
| Steven D. Black | John D. Rainey | Alfred W. Zollar | ||
| Adena T. Friedman | Michael R. Splinter | |||
Diversity data was provided from countries where such data collection is permitted. |
Dear Shareholders, In 2021, we experienced another year largely defined by uncertainty. The world continued to grapple with the impacts of COVID-19, supply chains were hit by disruptions, and inflation accelerated significantly. But amid these challenges, markets and market participation remained strong, and Nasdaq continued to demonstrate its resilience and ability to lead in a complex world. Nasdaq’s enduring growth is a testament to the strength and agility of our team, the diverse composition of our business, our valued partnerships with clients, and our trusted stewardship of a global financial infrastructure rooted in technology. As we look ahead into 2022, opportunities remain untapped for sustainable long-term growth and ever greater global impact. As we strengthen a culture of inclusive growth and prosperity within our organization, we will find new ways to increase collaboration across our entire enterprise to deliver more to our clients, to further increase our value proposition as an employer, and to continue to advance our sustainability practices. Our commitment to anticipating client needs has also pushed us to make important technology investments that will define Nasdaq’s future. Our new multi-year partnership with Amazon Web Services will help us build next-gen cloud-based infrastructure for the world’s capital markets, as well as additional use cases for our clients as we continue our cloud journey. Investing in our next generation solutions to fight financial crime will improve how we can deliver these capabilities to financial institutions globally. In addtion, our artificial intelligence and machine learning efforts have the potential to transform how our clients engage with markets in the years ahead. These client-centered and technology-focused advancements all flow from the same place: a clearly defined sense of purpose and a culture of excellence that pushes us to be better than we were yesterday. We are deeply committed to being champions for inclusive growth and prosperity, and this purpose-oriented mission has helped us attract and retain the best global talent amid historic labor market churn. Nasdaq’s ongoing evolution is also a catalyst for our growing impact within the global financial system. We recognize that capital markets have an essential role to play in creating a more sustainable, inclusive, and equitable economy. But markets are only as impactful as the rules, policies, and mindsets that underpin them. That is why we are advocates for pragmatic idealism, which addresses complex, systemic issues with methodical, consistent action. We are deploying our innovative technology in the global fight against financial crimes. These illicit activities – including human trafficking, illegal narcotics, and terrorism – challenge the sustainability and integrity of the global financial system. Because financial crime is a borderless issue, it is imperative to break down silos and improve data sharing between those on the frontlines. We are committed to leading our industry in these efforts and leveraging the most advanced technology and secure data sharing capabilities to make progress on this $2 trillion problem. | |  |
We are also focused on helping corporate clients and investment managers navigate the complex ESG and climate landscape. Companies are listening to their employees, clients, and shareholders, and they increasingly understand that they have an opportunity to achieve financial success while also managing their business in more sustainable and community-oriented ways. Nasdaq has developed a comprehensive suite of consultative and technology solutions that support companies in building their ESG programs and reporting their progress and measurements to the investment community. Additionally, through our majority investment in the carbon removal marketplace, Puro.earth, we provide key support to companies seeking to reduce their carbon footprint by purchasing high-quality, industrial and nature-based carbon removal credits. In serving the ESG needs of the investment community through our eVestment platform and ecosystem, we gather and provide ESG data related to the asset management industry. We also provide retail and institutional investors with As corporate sustainability matures, the need for accurate measurement will naturally follow, along with investor and regulatory scrutiny. There is a clear need for common, pragmatic tools and frameworks that allow corporate clients to measure their goals and impacts while also empowering investors to make decisions that align with their values. Last year marked Nasdaq’s 50th anniversary, which served as a natural moment to reflect on our legacy and plan for what’s next. This year is about boldly stepping into the future—confident in our people, our innovative client solutions, our foundational markets, and our purpose. Sincerely, Adena T. Friedman President and CEO Nasdaq, Inc. |  |
*Members of the Board as of April 28, 2022
| Adena T. Friedman | ||
| President and CEO | EVP, Anti-Financial Crime Technology | |
| Oliver Albers | Bradley J. Peterson | |
| EVP, Investment Intelligence | EVP and CIO/CTO | |
| Roland Chai | Bjørn Sibbern | |
| EVP, Market Infrastructure Technology | EVP, Nasdaq Europe | |
| Tal Cohen | Jeremy Skule | |
| EVP, Head of North American Markets | EVP and Chief Strategy Officer | |
| Michelle L. Daly | Bryan E. Smith | |
| SVP, Controller and Principal Accounting Officer | EVP and Chief People Officer | |
| Ann M. Dennison | John Zecca | |
| EVP and CFO | EVP and Chief Legal, Risk and Regulatory Officer | |
| P.C. Nelson Griggs | ||
| EVP, Corporate Platforms | ||
Acronyms and Certain Defined Terms
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March •, 2014
Dear Fellow NASDAQ OMX Stockholder:
We are pleased to enclose this year’s proxy statement and to invite you to attend our 2014 annual meeting of stockholders. For your convenience, you may attend the annual meeting in person in Stockholm or New York or via a live webcast on our website athttp://ir.nasdaqomx.com/events.cfm. While we look forward to sharing information about NASDAQ OMX with you at the annual meeting, below is a brief summary of some of the company’s recent significant achievements.
Business and Financial Highlights
The company’s 2013 financial results were impressive as we ended the year with several record numbers in the fourth quarter, including net revenues, non-GAAP net income and non-GAAP earnings per share (EPS).(1) While our transaction business grew, we continued to diversify our business. Non-transaction based revenues now constitute over 70% of net revenues, and the company saw organic revenue growth in 2013 in the majority of our businesses, including Market Data Products, Index Licensing and Services, Market Technology and Corporate Solutions. In addition, we are pleased that the company is able to deliver record results even after making very significant investments in our future. Recent new initiatives include NLX, a London-based market offering a range of both short-term and long-term interest rate derivative products, NASDAQ Private Market, a marketplace for private growth companies, and significant infrastructure investments that will be critical in realizing the full potential of our Corporate Solutions business.
We also are proud of the company’s numerous business accomplishments during 2013. Index Licensing and Services launched the second phase of the NASDAQ Global Index Family, which includes approximately 21,000 indexes, and the company is now one of few providers to have licensed products covering every major asset class. Market Technology announced several very significant new partnerships during the year, including Boerse Stuttgart and Borsa Istanbul, contributing to a record new order intake, and ended the year with a record backlog. Finally, in 2013 we welcomed 126 initial public offerings on The NASDAQ Stock Market and 273 new listings across our global markets, afive-year high.
2013 was also a transformative year for NASDAQ OMX as the company closed the strategic acquisitions of Thomson Reuters’ Investor Relations, Public Relations and Multimedia Solutions businesses and eSpeed, an electronic platform for trading U.S. Treasuries. Both acquisitions were accretive to EPS in 2013, and added to the organic earnings growth the company experienced. More importantly the progress continues on delivering the synergy potential of both transactions, and we are excited about the company’s broadening of its product suite, customer base and cross-selling opportunities as a result of these acquisitions.
Focus on Capital
As a function of NASDAQ OMX’s strong competitive position, focus on results and moderate capital requirements, our businesses generate substantial cash flow. We recognize the importance to stockholders of appropriate allocation of this capital to the best return opportunities, and the board dedicates substantial time and energy to reviewing the alternatives for capital deployment, including reinvestment internally, potential acquisitions and capital return alternatives. The board reviews potential returns on proposed opportunities and monitors actual returns on invested capital by project. The board also strives to determine the best capital structure to support our business and strategies and to optimize stockholder returns. In 2013, the company increased its investment in internal initiatives and made two significant acquisitions that represented attractive return on capital opportunities relative to the cost of capital. We remain committed to effective capital management at NASDAQ OMX.
Continued Emphasis on Technology
The company has continued to improve its infrastructure, particularly in the technology area. NASDAQ OMX is a leading technology solutions provider that powers more than 70 marketplaces in 50 countries around the world. As a technology leader, the company continuously focuses on improving its technology for its customers and internally with its own systems. Recently, the company has taken a number of concrete steps in the technology area to advance its goal of technological excellence. At the board level, we are proposing to add a new director, Ms. Charlene T. Begley, a highly respected leader who previously served as the chief information officer at General Electric Company. Over the past several years, the board has increased its focus on technology issues, and we believe that Ms. Begley’s expertise will enhance the discussions in this area.
Consistent with our pay for performance culture, the management compensation committee and board of directors also are working to expand our executive compensation program’s emphasis on systems resiliency in 2014.
Commitment to Corporate Sustainability and Compliance
In 2013 and early 2014, NASDAQ OMX continued its commitment to corporate sustainability and compliance. The board supports these efforts and notes that efficiency and transparency have long been guiding principles at NASDAQ OMX. In particular, the company uses its leadership position to promote best practices in the sustainability area to fellow exchanges, listed companies and other stakeholders. The company is leading a working group of other exchanges under the auspices of the World Federation of Exchanges and hosts regular events for listed companies and others on environmental, social and corporate governance (ESG) topics. Beyond sustainability, in 2013 the company created a global compliance council, under the leadership of the chief regulatory officer, that manages an overarching program relating to regulatory and corporate compliance. NASDAQ OMX also continues its mandatory education for all employees on ethics and compliance issues, with emphasis on anti-bribery statutes, securities trading policies and conflicts of interest.
Leadership Role on Corporate Governance and Other Policy Issues
Over the past year, NASDAQ OMX played a leadership role in the global financial community by advocating on behalf of both public and private companies on wide ranging policy issues. In the corporate governance area, NASDAQ OMX led efforts to increase the transparency of proxy advisory firms on their voting methodologies and potential conflicts of interest. Notably, NASDAQ OMX filed a petition with the U.S. Securities and Exchange Commission (SEC) to seek action on this topic in October 2013. NASDAQ OMX’s recent public policy agenda also has focused on immigration reform, job growth, capital formation and other issues that affect a wide variety of companies and their stockholders. In the year ahead, we expect to continue to play a role in these and other important policy matters.
Both the board and management value strong, ongoing communication with our stockholders. In particular, we listen and respond to feedback from our own stockholders on corporate governance issues. With the full support of the board, NASDAQ OMX amended its governance documents in early 2014, following SEC approval, in response to such feedback. The amendments replaced the supermajority voting standards in NASDAQ OMX’s governance documents with voting standards requiring the approval of a majority of the outstanding shares of NASDAQ OMX’s common stock. In addition, the amendments implemented the ability for stockholders holding at least 15% of NASDAQ OMX’s voting power to call a special meeting under certain circumstances. NASDAQ OMX also has adopted a prohibition on hedging and pledging by directors and Section 16 officers.
We continue to be optimistic about NASDAQ OMX’s strategy and long-term success. We encourage you to vote your proxy as soon as possible so that your shares will be represented in the voting results.
The Board of Directors of The NASDAQ OMX Group, Inc.
AUM |
THE NASDAQ OMX GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 2014
To the Stockholders of The NASDAQ OMX Group, Inc.:
Please take notice that the annual meeting of stockholders of The NASDAQ OMX Group, Inc., a Delaware corporation, will be held at NASDAQ OMX’s offices located at Tullvaktsvägen 15, 115 56 Stockholm, Sweden, on May 7, 2014, at 4:00 p.m. (CEST). Alternately, stockholders may join the meeting by live videoconference from NASDAQ MarketSite, Four Times Square, New York, New York 10036, at 10:00 a.m. (EDT). We also will offer a live webcast of the annual meeting on our website athttp://ir.nasdaqomx.com/events.cfm.
The annual meeting will be held for the following purposes, all as described in the attached proxy statement:
CEO
CFO
CIO
COBRA | Consolidated Omnibus Budget Reconciliation Act | |
CTO | Chief Technology Officer | |
ECIP | Executive Corporate Incentive Plan | |
EPS | Earnings Per Share | |
Equity Plan | Nasdaq’s Equity Incentive Plan | |
ERM | Enterprise Risk Management | |
ESG | Environmental, Social and Governance | |
ESPP | Employee Stock Purchase Plan | |
ETP | Exchange Traded Products | |
Exchange Act | Securities Exchange Act of 1934, as amended | |
EVP
FASB ASC Topic 718
We urge you to read carefully the attached proxy statement for additional information concerning the matters to be considered at this meeting.
Our board of directors has fixed the close of business on March 17, 2014 as the record date for the determination of stockholders entitled to vote at the annual meeting. Only holders of record at the close of business on the record date will be entitled to notice of, and to vote at, the annual meeting or any postponement or adjournment of the meeting. A list of these holders will be available at the annual meeting, and for at least 10 days prior to the annual meeting, at our principal executive offices at One Liberty Plaza, 50th Floor, New York, New York 10006.
To ensure your representation at the 2014 annual meeting of stockholders, you are urged to vote, whether or not you plan to attend the meeting, by proxy by one of the following methods as promptly as possible:
Form 10-K
GAAP
H.E. | His Excellency | |
IPO | Initial Public Offering | |
M&A | Mergers and | |
NEO | Named Executive Officer | |
PCAOB | Public Company Accounting Oversight Board | |
People@Nasdaq | Nasdaq’s Human Resources Team | |
PSU | Performance Share Unit | |
RSU | Restricted Stock Unit | |
SaaS | Software as a Service | |
SEC | U.S. Securities and | |
S&P | Standard & Poor’s | |
SVP | Senior Vice President | |
TSR | Total Shareholder Return | |
VP | Vice President | |
If you wish to attend the meeting in Stockholm or the live videoconference in New York, you will need to request an admission ticket in advance. You can request a ticket by following the instructions set forth on page 7 of the proxy statement under the heading “What do I need to do to attend the annual meeting or live videoconference?”. If you attend the meeting or live videoconference, you may revoke your proxy and vote in person, even if you have previously submitted a proxy for your NASDAQ OMX shares.
By Order of the Board of Directors,
Robert Greifeld
Chief Executive Officer
New York, New York
March •, 2014
TABLE OF CONTENTSTable Of Contents
This summary highlights information contained elsewhere in this proxy statement. It does not contain all of the information that you should consider, and we invite you to read the entire proxy statement, as well as our annual report on Form 10-K, as filed with the SEC on February 24, 2014 (Form 10-K), carefully before voting.
ANNUAL MEETING INFORMATION
Virtual Meeting Logistics
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ANNUAL MEETING AGENDA AND VOTING RECOMMENDATIONS
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| 8:00 a.m., Eastern Time | www.virtualshareholdermeeting.com/NDAQ2022 | |||||||||
Items of Business
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| 2. | To approve the Company’s executive compensation on an advisory basis |
To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year | |||||||||
THE NASDAQ OMX GROUP, INC. 1
BOARD NOMINEES
The following table provides summary information about each director nominee. Each director nominee is elected annually by a majority of votes cast.
Name | Age | Classification | Director Since | |||
Charlene T. Begley | 47 | Non-Industry; Public | — | |||
Steven D. Black | 61 | Non-Industry; Public | 2011 | |||
Börje E. Ekholm | 51 | Non-Industry | 2011 | |||
Robert Greifeld | 56 | Staff | 2003 | |||
Glenn H. Hutchins | 58 | Industry | 2005 | |||
Essa Kazim | 55 | Non-Industry | 2008 | |||
John D. Markese | 68 | Non-Industry; Public | 1996 | |||
Ellyn A. McColgan | 60 | Non-Industry; Public | 2012 | |||
Thomas F. O’Neill | 67 | Non-Industry | 2003 | |||
Michael R. Splinter | 63 | Non-Industry; Issuer | 2008 | |||
Lars R. Wedenborn | 55 | Non-Industry | 2008 |
FINANCIAL HIGHLIGHTS
2013 was a transformative year for NASDAQ OMX as we continued to diversify our revenue stream, achieved many business successes and closed two strategic acquisitions. The chart below summarizes key NASDAQ OMX financial results for the fiscal year ended December 31, 2013 when compared with the same period in 2012. For additional information, see “Compensation Discussion and Analysis – Executive Summary – 2013 Business Highlights” on page 35.
Year Ended December 31, | ||||||
2013 | 2012 | Percentage | ||||
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| Revenues less transaction rebates, brokerage, clearance and exchange fees | $ 1,895 | $ 1,674 | 13.2% | |||
Diluted EPS | $ 2.25 | $ 2.04 | 10.3% | |||
Stock price per share(1) | $ 39.80 | $ 24.99 | 59.3% | |||
THE NASDAQ OMX GROUP, INC. 2
EXECUTIVE COMPENSATION HIGHLIGHTS
In line with our executive compensation program’s emphasis on pay for performance, compensation awarded to the named executive officers generally increased in 2013 as compared to 2012. The following table shows each named executive officer’s total cash compensation, including salary and cash incentive awards, for 2013. Total cash compensation does not include all of the elements of compensation that comprise total compensation as reported in the Summary Compensation Table. For additional information, see “Compensation Discussion and Analysis” on page 35 and “Executive Compensation” on page 57.
Named Executive Officer | Salary ($) | Cash Incentive Award ($) | 2013 Total Cash Compensation ($) | |||||||||
Robert Greifeld | $ | 1,000,000 | $ | 2,794,050 | $ 3,794,050 | |||||||
Chief Executive Officer | ||||||||||||
Lee Shavel | $ | 500,000 | $ | 1,135,500 | $1,635,500 | |||||||
Chief Financial Officer and Executive Vice President, Corporate Strategy | ||||||||||||
Hans-Ole Jochumsen(1) | $ | 516,096 | $ | 1,383,168 | $1,899,264 | |||||||
Executive Vice President, Transaction Services Nordic | ||||||||||||
Edward S. Knight | $ | 500,000 | $ | 1,106,625 | $1,606,625 | |||||||
Executive Vice President, General Counsel and Chief Regulatory Officer | ||||||||||||
Bradley J. Peterson | $ | 412,885 | $ | 915,300 | $1,728,185(2) | |||||||
Executive Vice President and Chief Information Officer | ||||||||||||
| 4. | To approve an amendment to Nasdaq’s Amended and Restated Certificate of Incorporation to increase the total |
| 5. | To consider a shareholder proposal described in the accompanying Proxy Statement, if properly presented at the meeting |
| 6. | To consider any other business that may properly come before the Annual Meeting or any adjournment or postponement of the meeting |
Important Meeting Information
Record Date
Shareholders of record as of April 25, 2022 will be eligible to vote and participate in the Annual Meeting using the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, voter instruction form or proxy card.
A Notice of Internet Availability of Proxy Materials will be mailed on or about April 28, 2022.
Asking Questions
Prior to the meeting, questions can be submitted at www.proxyvote.com. During the meeting, questions may be submitted in the question box provided at www.virtualshareholdermeeting.com/NDAQ2022.
Replays
A replay of the Annual Meeting will be posted as soon as practical at ir.nasdaq.com along with answers to shareholder questions pertinent to meeting matters that are received before and during the Annual Meeting that cannot be answered due to time constraints. The replay will be available for one year following the Annual Meeting.
THE NASDAQ OMX GROUP, INC. 3
EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE BEST PRACTICES
Voting
Your vote is important to us. Please promptly vote your shares as soon as possible by internet, telephone, or returning your proxy card.
We regularly engage withhave also created an Annual Meeting website to make it easy for you to access our stockholdersAnnual Meeting materials at www.nasdaq.com/annual-meeting. There you will find an overview of voting items, this Proxy Statement, other important information, as well as a link to discuss executive compensation, corporate governance and other issues. As detailed further in this proxy statement,vote your shares.
To express our appreciation for your participation, Nasdaq will make a $1 charitable donation to RespectAbility on behalf of every unique holder that votes.
How to Vote
Use any of the following executive compensationmethods and corporate governance best practices are key aspects of our programs.your 16 digit control number:
| By Internet Using Your Computer | |
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| Visit 24/7 | |
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Call +1 800 690 6903 in the U.S. or | ||
| Canada to vote your shares | ||
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Cast your ballot, sign your proxy card, and return by postage-paid envelope | ||
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THE NASDAQ OMX GROUP, INC. 4
THE NASDAQ OMX GROUP, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 2014
We are furnishing this proxy statement to the stockholders of The NASDAQ OMX Group, Inc., a Delaware corporation, in connection with the solicitation of proxies by our board of directors for use in voting at the annual meeting of stockholders to be held at the time and place and for the purposes set forth in the accompanying notice of annual meeting, and at any and all adjournments or postponements of this meeting.
In accordance with rulesBy Order of the SEC, insteadBoard of mailing printed copies of our proxy materials to each stockholder of record, we are furnishing the proxy materials for the 2014 annual meeting by providing access to these documents on the Internet. A notice of Internet availability of proxy materials is being mailed to our stockholders. We first mailed or delivered this notice on or about March •, 2014. The notice of Internet availability contains instructions for accessingDirectors,
Erika Moore
VP, Deputy General Counsel and reviewing our proxy materials and submitting a proxy over the Internet. Our proxy materials were made available atwww.proxyvote.com on the date that we first mailed or delivered the notice of Internet availability. The notice also will tell you how to request our proxy materials in printed form or by e-mail, at no charge. The notice contains a control number that you will need to submit a proxy for your shares.
When and where is the meeting?The annual meeting is scheduled to be held at NASDAQ OMX’s offices located at Tullvaktsvägen 15, 115 56 Stockholm, Sweden, on May 7, 2014, at 4:00 p.m. (CEST). Alternately, stockholders may join the meeting by live videoconference from NASDAQ MarketSite, Four Times Square, New York, New York 10036, at 10:00 a.m. (EDT). We also will offer a live webcast of the annual meeting on our website athttp://ir.nasdaqomx.com/events.cfm.
Why is the meeting being held in Stockholm? NASDAQ OMX is a global company with stockholders, customers and employees all over the world. Many of our European businesses are located in Stockholm, which is the site of our largest office in terms of headcount. We are pleased to announce that on this basis our 2014 annual meeting will take place in Stockholm. If it is more convenient, stockholders may join the meeting by live videoconference from NASDAQ MarketSite, Four Times Square, New York, New York 10036. Stockholders joining the meeting by live videoconference will have the same opportunity to ask questions as stockholders joining in person in Stockholm. Additionally, stockholders are invited to join the meeting via live webcast.
What is the purpose of the meeting? At the annual meeting, NASDAQ OMX’s stockholders will be asked to consider and vote upon each of the following matters:Corporate Secretary
Important notice regarding the availability of proxy materials for the 2022 Annual Meeting of Shareholders to be held on June 22, 2022. Nasdaq’s 2022 Proxy Statement and 2021 Form 10-K are available at www.nasdaq.com/annual-meeting |
This summary of proposals and recommendations is intended to provide an overview of voting matters and may not contain all the information that is important to you. Please review this entire Proxy Statement, as well as our Form 10-K, prior to voting.
Proposal 1: Election of Directors (page 11)
Elect 10 directors to hold office until the 2023 Annual Meeting.
Board Recommendation: ✓
FOR each director nominee.
We have built a highly engaged, independent Board with broad and diverse experience that is committed to representing the long-term interests of our shareholders.
Proposal 2: Advisory Vote on Executive Compensation (page 63)
Approve, on an advisory (non-binding) basis, the 2021 compensation of the Company’s NEOs.
Board Recommendation: ✓
FOR the approval, on an advisory basis, of our executive compensation.
Compensation decisions are based on Nasdaq’s financial and operational performance and reflect a continued emphasis on variable, at-risk compensation paid over the long-term. Incentives are aligned with strategic priorities, business objectives, and shareholder interests.
Proposal 3: Ratification of Appointment of Independent Registered Public Accounting Firm (page 110)
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022.
Board Recommendation: ✓
FOR the ratification of Ernst & Young LLP.
The Audit & Risk Committee is directly responsible for the annual review, compensation, retention, and oversight of our independent external auditor. The Audit & Risk Committee, and our Board, believe that the continued retention of Ernst & Young LLP is in the best interests of Nasdaq and its shareholders.
Proposal 4: Charter Amendment to Increase the Authorized Shares to Effect a 3-for-1 Stock Split (page 112)
Approve an amendment to the Company’s Amended and Restated Certificate of Incorporation, or charter, to increase the number of authorized shares of common stock to effect a 3-for-1 stock split.
Board Recommendation: ✓
FOR the proposed charter amendment
The Board wishes to effect a 3-for-1 stock split in the form of a stock dividend to our shareholders. In order to have sufficient authorized but unissued shares to effect the stock split, Nasdaq seeks shareholder approval to amend our charter to increase the total number of authorized shares of common stock.
Proposal 5: Shareholder Proposal – Special Shareholder Meeting Improvement (page 116)
A shareholder proposal, if properly presented at the meeting, requesting amendment of the Company’s governing documents to lower the stock ownership threshold to call a special meeting of shareholders.
Board Recommendation: X
AGAINST this proposal.
We provide a shareholder-friendly right for shareholders to call a special meeting. The proposed decrease in the percentage of shares required to call a special meeting from the current 15% to 10% is unnecessary and not in the best interests of the Company and our shareholders.
Accountability to shareholders is not just a mark of good governance, it is a critical component of our success. Fostering long-term relationships and maintaining trust with our shareholders is a key priority for both management and the Board. We are committed to constructive, honest, and year-round engagement with portfolio managers and investment stewardship teams—and our Corporate Governance Guidelines codify our Board’s commitment to oversight of shareholder engagement.
We actively listen to our investors through industry conferences, non-deal roadshows and meetings on a regular basis. Shareholder feedback provides our Board and management with valuable insights on our business strategy and performance, corporate responsibility, executive compensation, ESG initiatives and many other topics. This feedback informs various business decisions and helps us more effectively tailor the information we disclose to the public. Generally, webcasts of management’s presentations at industry or investor conferences are made available to investors and are accessible for a period of time at ir.nasdaq.com.
During 2021, we conducted outreach to a cross-section of shareholders who beneficially owned approximately 75% of our outstanding shares. Our key shareholder engagement activities included four virtual investor (non-deal) road shows, attendance at 15 investor conferences, and our Annual Meeting of Shareholders.
Annual Meeting of Shareholders
Our Annual Meeting of Shareholders is conducted virtually through a live webcast and online shareholder tools. This promotes shareholder attendance and participation, enabling shareholders to participate fully, and equally, from any location around the world, free of charge. Given our global footprint, we believe this is the right choice. The virtual format results in cost savings to the Company and shareholders and is designed to enhance shareholder access, participation, and communication.
For more information on the meeting format and access, see page 3.
Responsiveness to Investors and Stakeholders
Below is a summary of the key themes we recently discussed with the investment stewardship teams of our institutional investors and the actions we have taken in each area.
Our continuous engagement and ongoing dialogue with our shareholders have led to improvements in our corporate governance, corporate strategy, human capital management, ESG, ERM practices, and disclosures. For example, we:
| ✓ | Advanced our strategic positioning to |
| ✓ | Increased our regular quarterly dividend by 10% to |
| ✓ | Received approval from the SEC on the Board Diversity listing rule, which requires Nasdaq listed companies to publicly disclose consistent, transparent diversity statistics regarding their board of |
| ✓ | Published our first TCFD report, committed to |
| ✓ |
THE NASDAQ OMX GROUP, INC. 5
| ✓ |
Who is entitled to vote? Only holders of record listed on the books of NASDAQ OMX at the close of business on March 17, 2014 (record date) of NASDAQ OMX’s common stock, par value $0.01 per share, will be entitled to notice of, and to vote at, the annual meeting. As of the record date, there were outstanding • shares of common stock.
A list of holders entitled to vote at the annual meeting will be available at the annual meeting and for at least 10 days prior to the annual meeting, between the hours of 9:00 a.m. and 5:00 p.m. (EDT), at our principal executive offices, One Liberty Plaza, 50th Floor, New York, New York 10006. You may arrange to review this list by contacting NASDAQ OMX’s corporate secretary, Joan C. Conley (corporatesecretary@nasdaqomx.com).
How many votes do I have? Each share of common stock has one vote, subject to the voting limitation in our Charter that generally prohibits a stockholder from voting in excess of 5% of the total voting power of NASDAQ OMX.
Is my vote confidential? Your individual vote is confidential and will not be disclosed to third parties. Proxies, ballots and voting tabulations are handled on a confidential basis to protect your voting privacy. This information will not be displayed except as required by law.
What constitutes a quorum? The presence of the holders of a majority (greater than 50%) of the votes entitled to be cast at the meeting constitutes a quorum. Presence may be in person or by proxy. You will be considered part of the quorum if you submit a proxy by Internet, by telephone or by returning a signed and dated proxy card (if proxy materials are requested in printed form) or if you vote in person at the annual meeting or live videoconference. Abstentions and broker non-votes are counted as present and entitled to vote at the meeting for purposes of determining a quorum.
Who counts the votes? Broadridge Financial Solutions, Inc. tabulates the votes and acts as inspector of elections.
How do I vote? You can ensure that your NASDAQ OMX shares are voted at the meeting by:
attending the meeting or live videoconference and voting in person, as discussed below;
|
| ✓ | Actively conducted year-round planning for director succession and Board refreshment, including a review and analysis of the skills, attributes and expertise for future Board nominees (see page 21). |
| ✓ | Increased diversity on our board and implemented committee rotations to ensure 100% female representation on each committee (see page 19). |
| ✓ | Continued to strengthen our diversity and inclusion initiatives, resources and leadership training tools by leveraging existing programs, such as our 11 employee-led internal affinity networks and undertaking new initiatives (see page 54). |
| ✓ | Enhanced our Supplier Code of Ethics to improve our supplier diversity and environmental sustainability (see page 57). |
| ✓ | Conducted a global pay equity study covering both gender and race to assess employee base salary and total compensation. |
| ✓ | Administered Nasdaq’s first global human rights assessment to strengthen our understanding of, and enhance our approach to, human rights. |
if you request a printed copy of proxy materials, completing, signing, dating and returning the proxy card in the envelope provided.
Proxy Submission by Internet.Proposal 1: You
Election of Directors
| ✓ | The Board unanimously recommends that shareholders vote FOR each nominee to serve as a director. |
The business and affairs of Nasdaq are managed under the direction of our Board. Our directors have diverse backgrounds, attributes and experiences that provide valuable insights for the option to submit a proxy for your shares through the Internet. The notice of Internet availability of proxy materials contains the website address (www.proxyvote.com) for Internet proxy submission. Internet proxy submission is available 24 hours a day until 11:59 p.m. (EDT) on May 6, 2014. You must enter your control number, which is printed in the lower right hand cornerBoard’s oversight of the noticeCompany.
Pursuant to our Amended and Restated Certificate of Internet availability,Incorporation and you will be givenBy-Laws and based on our governance needs, the opportunityBoard determines the total number of directors. The Board is authorized to confirm that your instructions have been properly recorded.ten directors following our 2022 Annual Meeting.
Proxy Submission by Telephone. You have the option to submit a proxy for your shares by telephone. The notice of Internet availability of proxy materials will have information about Internet proxy submission, but is not permitted to include a telephone number for submitting a proxy by phone because that would enable a stockholder to submit a proxy without first accessing the proxy materials.
The instructions for telephonic proxy submission are provided on the website where the proxy materials can be viewed. You will be provided with a telephone number for submitting your proxy at this site.
THE NASDAQ OMX GROUP, INC. 6
Alternatively, if you request paper copiesEach of the proxy materials, your proxy cardten nominees identified in this Proxy Statement has been nominated by our Nominating & ESG Committee and Board for election to a one-year term expiring at our 2023 Annual Meeting of Shareholders. Each director will list a toll-free telephone number that you may use to submit a proxy for your shares. Telephone proxy submission is available 24 hours a dayhold office until 11:59 p.m. (EDT) on May 6, 2014. When you submit a proxy by telephone, you will be required to enter your control number. You will then receive easy-to-follow voice prompts allowing you to instruct the proxy holders how to vote your shares and to confirm that your instructions have been properly recorded. If you are located outside the United States or Canada, you should instruct the proxy holders how to vote your shares by Internet or by mail.
Proxy Submission by Mail. If you choose to submit a proxy by mail after requesting and receiving printed proxy materials, simply complete, sign and date your proxy card and return it in the postage-paid envelope provided.
How do I complete the proxy? The proxy provides that each stockholder may vote his or her NASDAQ OMX shares “For”successor has been elected and qualified or “Against”until the director’s earlier death, resignation or “Abstain” for individualremoval. All nominees have consented to be named in this Proxy Statement and for each of the other proposals. Whichever method you select to transmit your instructions, the proxy holders will vote your shares as provided by those instructions.IF YOU PROVIDE A PROXY WITHOUT SPECIFIC VOTING INSTRUCTIONS, YOUR NASDAQ OMX SHARES WILL BE VOTED BY THE PROXY HOLDERS “FOR” THE ELECTION OF THE DIRECTORS NAMED IN THIS PROXY STATEMENT AND “FOR” PROPOSALS II, III, IV and V.
If your NASDAQ OMX shares are held by a broker, bank or other nominee that does not have express authority to vote on a particular matter, you will receive instructions from your nominee, which you must follow to have your NASDAQ OMX shares voted. The broker, bank or other nominee may vote only the NASDAQ OMX shares that it holds for you as provided by your instructions, subject to certain exceptions described below.
What do I need to do to attend the annual meeting or live videoconference?If you wish to attend the annual meeting or live videoconference, you must be a stockholderserve on the record date and requestBoard, if elected.
In an admission ticket in advance by visitingwww.proxyvote.com and following the instructions provided (you will need the 12 digit number included on your proxy card, voter instruction form or notice). Tickets will be issued to registered and beneficial owners and to one guest accompanying each registered or beneficial owner. Requests for admission tickets will be processed in the order in which they are received and must be requested no later than 11:59 p.m. (EDT) on May 6, 2014. Please note that seating is limited and requests for tickets will be accepted on a first-come, first-served basis.
At the meeting and live videoconference, each stockholder will be required to present a valid picture identification such as a driver’s license or passport with their admission ticket. If you are a beneficial owner of NASDAQ OMX shares held by a bank, broker or other nominee, you also will need proof of ownership to be admitted to the meeting or live videoconference. A recent brokerage statement or letter from the bank, broker or other nominee is an example of proof of ownership. If you want to vote in person and your NASDAQ OMX shares are held by a bank, broker or other nominee, you will have to obtain a proxy, executed in your favor, from the holder of record.
Directions to the annual meeting and live videoconference are available athttp://ir.nasdaqomx.com/annuals.cfm. Cameras (including cell phones with photographic capabilities), recording devices and other electronic devices will not be permitted at the meeting or live videoconference. You may be required to enter through a security check point before being granted access to the meeting or live videoconference.
How is the meeting conducted?We intend to conduct the meeting in an orderly and timely manner. Rules of conduct for stockholders who wish to address the meeting will be distributed at the meeting. We cannot assure that every stockholder who wishes to speak on an item of business will have the opportunity to do so. The chair of the meeting may rely upon the rules of conduct, applicable law and his best judgment regarding disruptions or disorderly conduct to ensure that the meeting is conducted in an orderly manner.
THE NASDAQ OMX GROUP, INC. 7
This year, stockholders will have the opportunity to submit questions in advance of the meeting. Please visituncontested election, our stockholder forum located atwww.proxyvote.com to provide your questions in advance of the meeting.
What are the board’s recommendations?The NASDAQ OMX board recommends that you vote “FOR” each of the nominees for director named in Proposal I and “FOR” Proposals II, III, IV and V.
What vote is required to elect each director?Our directors are elected by the holders of a majority of votes cast at any meeting for the election of directors at which a quorum is present and therepresent. This election is an uncontested election. Eachelection, and therefore, each of the 11ten nominees must receive the affirmative vote of the holders of a majority of the votes cast for the election of directors to be duly elected to the board of directors in an uncontested election.Board. Any shares not voted, for example by abstentionincluding as a result of abstentions or if applicable, broker non-vote,non-votes, will not impact the vote.
Our By-Laws and corporate governance guidelinesCorporate Governance Guidelines require that, in an uncontested election, an incumbent director must submit an irrevocable resignation as a condition to his or her nomination for election. If an incumbent director fails to receive the requisite number of votes in an uncontested election, the irrevocable resignation becomes effective and such resignation will be considered by the nominatingNominating & governance committee. This committeeESG Committee, which will recommend to the full boardBoard whether or not to accept the resignation. The board is required toBoard will act on the Committee’s recommendation and to disclose publicly its decision-making process with respect to the resignation. See “Proposal I: Election of Directors” and “NASDAQ OMX’s Corporate Governance” for full details of this policy. The 2014 election of directors is an uncontested election.
What vote is required to approve the other proposals?The following proposals require an affirmative vote of the holders of a majority of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter. Abstentions have the effect of a vote against these proposals. Broker non-votes, if applicable, have no effect on these proposals:
ratification of appointment of Ernst & Young LLP;
approval of the company’s executive compensation on an advisory basis; and
approval of the Equity Plan, as amended and restated.
The stockholder vote to approve executive compensation is an advisory vote only and, therefore, the result of that vote will not be binding on our board of directors or management compensation committee. Our board and management compensation committee will, however, consider the outcome of the vote when evaluating our executive compensation program in the future.
The proposed amendment to NASDAQ OMX’s Charter requires the affirmative vote of a majority of NASDAQ OMX’s outstanding shares of common stock entitled to vote generally in the election of directors, voting together as a single class. Abstentions and broker non-votes have the effect of a vote against this proposal. The proposed amendment to NASDAQ OMX’s Charter will not become effective until it is filed and effective with the SEC and the state of Delaware.
What is a broker non-vote?If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” The ratification of the appointment of Ernst & Young LLP as our registered independent public accounting firm is considered a “routine” matter. Accordingly, brokers may vote shares on this proposal without your instructions, and there will be no broker non-votes with respect to this proposal. The other proposals are considered “non-routine,” and brokers cannot vote shares on these proposals without your instructions.
THE NASDAQ OMX GROUP, INC. 8
If you hold your shares through a broker, it is important that you cast your vote if you want it to count on all of the matters to be considered at the annual meeting other than the ratification of the appointment of our independent registered public accounting firm. Thus, if you hold your shares in street name and you do not instruct your broker how to vote on these matters, no votes will be cast on your behalf.
What if other items come up at the annual meeting and I am not there to vote? We are not now aware of any matters to be presented at the annual meeting other than those described in this proxy statement. When you provide your voting instructions by Internet or telephone, or return a signed and dated proxy card, you give the proxy holders the discretionary authority to vote on your behalf on any other matter that is properly brought before the annual meeting. If the meeting is adjourned or postponed, your NASDAQ OMX shares may be voted by the proxy holders on the new meeting date, unless you have revoked your proxy instructions before that date.
Can I change my vote? You can change your vote by revoking your proxy at any time before it is exercised in one of three ways:
submit a later dated proxy (including a proxy submitted through the Internet, by telephone or by proxy card);
notify NASDAQ OMX’s corporate secretary, Joan C. Conley (corporatesecretary@nasdaqomx.com), that you are revoking your proxy; or
vote in person at the annual meeting or live videoconference.
If you are a beneficial owner of NASDAQ OMX shares held by a bank, broker or other nominee, you will need to contact the bank, broker or other nominee to revoke your proxy.
When will the results of the voting be available?Votes will be tabulated by Broadridge Financial Solutions, Inc., the independent inspector of elections appointed for the meeting. Preliminary results will be announced at the meeting and, thereafter, final results will be reported in a current report on Form 8-K, which is expected to be filed with the SEC within four business days after the meeting.
Who is paying the costs of this proxy solicitation? We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees (who will not receive any additional compensation for these solicitations), in person or by telephone, electronic transmission and facsimile transmission. NASDAQ OMX will, upon request, reimburse brokers, banks and other nominees for their reasonable expenses in sending proxy materials to their beneficial owners/customers and obtaining their proxies. We have hired AST Phoenix Advisors to assist in soliciting proxies at a fee of $7,500 plus costs and expenses for these services. Your cooperation in promptly submitting your proxy through the Internet or by telephone, or, if proxy materials are requested by mail, by completing, signing, dating and returning the enclosed proxy card will help to avoid additional expense.
Does NASDAQ OMX have a practice of householding? In a further effort to reduce printing and postage fees for the meeting notice, NASDAQ OMX has adopted a practice approved by the SEC known as “householding.” Under our practice, stockholders who have the same last name and address will receive one notice of Internet availability of proxy materials, unless one or more of these stockholders notifies us that he or she desires to continue to receive a separate copy of the notice. Beneficial owners can request information about householding from their bank, broker or other nominee of record. If you would like to receive a separate copy of the notice or, if you are a stockholder at a shared address to which we delivered multiple copies of the notice and you desire to receive one copy of the notice in the future, please contact the NASDAQ OMX Investor Relations Department in writing (Attention: Edward Ditmire, One Liberty Plaza, 49th Floor, New York, New York 10006), by email (investor.relations@nasdaqomx.com) or by telephone (+1 212 401 8737).
THE NASDAQ OMX GROUP, INC. 9
ELECTION OF DIRECTORS
The business and affairs of NASDAQ OMX are managed under the direction of our board of directors. Our directors have diverse backgrounds and experience and represent a broad spectrum of viewpoints.
Pursuant to our Charter and By-Laws and based on our governance needs, the board may determine the total number of directors. Currently, the board is authorized to have 11 directors.
Each of the 11 nominees identified in this proxy statementincumbent directors has been nominated by our nominating & governance committee and board of directors for election to a one-year term. All nominees have consented to be named in this proxy statement and to serve on the NASDAQ OMX board, if elected.
In an uncontested election, our directors are elected by a majority of votes cast at any meeting for the election of directors at which a quorum is present. This election is an uncontested election, and therefore, each of the 11 nominees must receive the affirmative vote of a majority of the votes cast to be duly elected to the board of directors. Any shares not voted by abstention and broker non-votes will not impact the vote.
Our corporate governance guidelines require that, in an uncontested election, an incumbent director must submitsubmitted an irrevocable resignation as a condition to his or her nomination for election. If an incumbent director fails to receive the requisite number of votes in an uncontested election, the irrevocable resignation becomes effective and such resignation will be considered by the nominating & governance committee. This committee will recommend to the full board whether or not to accept the resignation. The board is required to act on the recommendation and to disclose publicly its decision-making process with respect to the resignation. All the incumbent directors have submitted the irrevocable resignation.
BOARD RESPONSIBILITIES
In addition to its general oversight of management, the board also performs a number of specific functions, including:
reviewing, approving and overseeing our corporate strategies and corporate actions including long-term strategic plans and evaluating the results;
reviewing, approving and overseeing fundamental financial information and reporting;
assessing major risks and reviewing options for their mitigation;
overseeing management’s efforts to establish and maintain the highest legal, regulatory and ethical conduct of all businesses, including conformity with applicable global laws and regulations;
selecting, evaluating and approving the compensation of the Chief Executive Officer and other senior officers and overseeing succession planning for these executives;
evaluating the overall structure and effectiveness of the board, board members and committees and overseeing effective corporate governance;
providing advice and counsel to senior management; and
evaluating, selecting and recommending an appropriate slate of candidates to stockholders for election as directors.
SEPARATION OF ROLES OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NASDAQ OMX separates the roles of chairman of the board and Chief Executive Officer. NASDAQ OMX believes that this separation of roles promotes more effective communication channels for the board to express its views on management. NASDAQ OMX’s Chief Executive Officer, Robert Greifeld,
THE NASDAQ OMX GROUP, INC. 10
who has over twenty years’ experience in the securities industry, is responsible for the strategic direction, day-to-day leadership and performance of NASDAQ OMX. The chairman of NASDAQ OMX’s board, Börje E. Ekholm, who brings to the board the perspective of a large stockholder, provides guidance to the Chief Executive Officer, presides over meetings and executive sessions of the board of directors and serves as the primary liaison between the Chief Executive Officer and the other directors. We believe that this separation of roles and allocation of distinct responsibilities to each role facilitates communication between senior management and the full board of directors about issues such as corporate governance, management development, succession planning, executive compensation and company performance.
DIRECTOR CLASSIFICATIONS
In accordance with SEC requirements to ensure that balanced viewpoints are represented on our board of directors, NASDAQ OMX’s By-Laws require that all directors be classified as:
Industry Directors;
| Name and Classification1 | Age | Director Since | Title | No. of Other Public Company Boards | Committee Memberships | |||||||
| Melissa M. Arnoldi Non-Industry; Public | 49 | 2017 | EVP and Chief Customer Officer, AT&T Consumer | 0 | Finance
Management Compensation | ||||||
| Charlene T. Begley Non-Industry; Public | 55 | 2014 | Retired SVP & CIO, General Electric Company | 2 | Audit & Risk
Nominating & ESG (Chair) | ||||||
| Steven D. Black Non-Industry; Public | 69 | 2011 | Former Co-CEO, Bregal Investments | 1 | Management Compensation (Chair)
Nominating & ESG | ||||||
| Adena T. Friedman Staff | 52 | 2017 | President and CEO, Nasdaq | 0 | Finance | ||||||
| Essa Kazim Non-Industry | 63 | 2008 | Governor, Dubai International Financial Centre | 1 | Finance | ||||||
| Thomas A. Kloet Non-Industry; Public | 63 | 2015 | Retired CEO & Executive Director, TMX Group Limited | 0 | Audit & Risk (Chair) | ||||||
| John D. Rainey Non-Industry; Issuer | 51 | 2017 | CFO & EVP of Global Customer Operations, PayPal Holdings, Inc. | 0 | Management Compensation
Finance (Chair) | ||||||
| Michael R. Splinter2 Non-Industry; Public | 71 | 2008 | Retired Chairman & CEO, Applied Materials, Inc. | 2 | Management Compensation
Nominating & ESG | ||||||
| Toni Townes-Whitley Non-Industry; Public | 58 | 2021 | Former President, U.S. Regulated Industries, Microsoft | 2 | Audit & Risk | ||||||
| Alfred W. Zollar Non-Industry; Public | 67 | 2019 | Executive Advisor, Siris Capital Group, LLC | 3 | Audit & Risk
Finance | ||||||
Non-Industry Directors, which are further classified as either Issuer Directors or Public Directors; or
Staff Directors.
The number of Non-Industry Directors shall equal or exceed the number of Industry Directors. The board shall include at least two Public Directors and at least one, but no more than two, Issuer Directors. The board shall include no more than one Staff Director, unless the board consists of ten or more directors. In that case, the board shall include no more than two Staff Directors.
We establish the classification of each director based on a questionnaire with specific questions relating to the classifications. NASDAQ OMX’s corporate secretary annually certifies to the nominating & governance committee the classification of each director. The following is a general description of NASDAQ OMX’s director classifications, which are detailed in our By-Laws:
| 1 | To ensure that balanced viewpoints are represented on our Board of Directors, Nasdaq’s By-Laws require that all directors be classified as: Industry |
| 2 |
|
|
The Board values diversity in evaluating new candidates and seeks to incorporate a wide range of attributes across the Board of Directors and on each of our Committees. The following matrix is provided in accordance with applicable Nasdaq listing requirements and includes all directors as of April 28, 2022.
The matrix includes Jacob Wallenberg, who is retiring from the Board effective upon the conclusion of the 2022 Annual Meeting of Shareholders.
Board Diversity Matrix (As of April 28, 2022)
THE NASDAQ OMX GROUP, INC. 11
|
| ||||||||||
| Total Number of Directors | 11 | |||||||||
| Female | Male | Non-Binary | Did not Disclose Gender | |||||||
Part I: Gender Identity | ||||||||||
Directors | 4 | 7 | - | - | ||||||
Part II: Demographic Background | ||||||||||
African American or Black | 1 | 1 | - | - | ||||||
Alaskan Native or Native American | - | - | - | - | ||||||
Asian | - | - | - | - | ||||||
Hispanic or Latinx | - | - | - | - | ||||||
Native Hawaiian or Pacific Islander | - | - | - | - | ||||||
White | 3 | 6 | - | - | ||||||
Two or More Races or Ethnicities | - | - | - | - | ||||||
LGBTQ+ | - | - | - | - | ||||||
Did Not Disclose Demographic Background | - | - | - | - | ||||||
|
DIRECTOR INDEPENDENCE
NASDAQ OMX’s common stock is currently listed on The NASDAQ Stock Market and NASDAQ Dubai Limited (NASDAQ Dubai). The rules of The NASDAQ Stock Market require that a majority of the members of our board of directors be independent. In order to qualify as independent under the listing rules of The NASDAQ Stock Market, a director must satisfy a two-part test. First, the director must not fall into any of several categories that would automatically disqualify the director from being deemed independent. These categories prohibit the finding of independence for:
a director who is, or at any time during the past three years was, employed by the company or by any parent or subsidiary of the company;
a director who accepted, or who has a family member who accepted, certain compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the determination of independence;
a director who is a family member of an individual who is, or at any time during the past three years was, employed by the company as an executive officer;
a director who is, or has a family member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which the company made, or from which the company received, certain payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more;
a director who is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of the company’s executive officers serve on the compensation committee of such other entity; or
a director who is, or has a family member who is, a current partner of the company’s outside auditor, or was a partner or employee of the company’s outside auditor who worked on the company’s audit at any time during any of the past three years.
Second, no director qualifies as independent unless the board affirmatively determines that the director has no direct or indirect relationship with the company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In assessing the independence of its members, the board examined the commercial, industrial, banking, consulting, legal, accounting, charitableDirector Criteria and familial relationships of each member. The board’s inquiry extended to both direct and indirect relationships with the company.
NASDAQ OMX also is listed on NASDAQ Dubai and, as a result, is subject to the NASDAQ Dubai listing rules and the Markets Rules of the Dubai Financial Services Authority. Under these rules, at least two directors must be independent. A director is considered independent if the board determines the director to be independent in character and judgment and to have no relationship or circumstances that are likely to affect, or could appear to affect, the director’s judgment in a manner other than in the best interests of the company.
Based upon detailed written submissions by each individual, the board has determined that all of our current directors are independent, other than Messrs. Greifeld and Kazim. Mr. Greifeld is deemed not to be independent because he is the Chief Executive Officer of NASDAQ OMX. Mr. Kazim is deemed not to be independent because of his affiliations with Borse Dubai Limited (Borse Dubai), Dubai Financial Market PJSC (Dubai Financial Market) and NASDAQ Dubai.
THE NASDAQ OMX GROUP, INC. 12
INFORMATION WITH RESPECT TO DIRECTOR NOMINEESQualifications
In evaluating candidates for nomination to the board, the nominating & governance committee reviews the skills, qualifications, characteristics and experience desired for the board as a whole and for its individual members, with the objective of having a board that reflects diverse backgrounds and senior level experience in the areas of global business, finance, legal and regulatory, technology and marketing. Characteristics of all directors include integrity and values, high personal and professional ethics, sound business judgment, the ability and willingness to commit sufficient time to fulfill their board responsibilities and a commitment to representing the long-term interests of our stockholders and fulfilling their responsibilities related to affiliated self-regulatory organizations.
In evaluating the suitability of individual boardBoard nominees, the nominatingNominating & governance committeeESG Committee takes into account many factors, including general and diverse understanding of the global economy, capital markets, finance and other disciplines relevant to the success of a large publicly-traded financial services company; a general understanding of NASDAQ OMX’s business and technology; the individual’s educational and professional background and personal accomplishments; and factors such as geographic, gender, age and ethnic diversity. including:
| · | a general and diverse understanding of the global economy, capital markets, finance and other disciplines relevant to the success of a large publicly-traded financial technology company, including cybersecurity; |
| · | a general understanding of Nasdaq’s business and technology; |
| · | a client experience orientation; |
| · | the requirements in our By-Laws; |
| · | the individual’s educational and professional background and personal accomplishments; |
| · | diversity, including, but not limited to, factors such as gender, ethnicity, race, sexual orientation, and geography; and |
| · | an independent mindset that constructively challenges the status quo and provides a strong view of the future. |
The committeeNominating & ESG Committee evaluates each individual candidate in the context of the boardBoard as a whole, with the objective of maintaining a group of directors that can further the success of NASDAQ OMX’s business,our businesses, while representing the interests of stockholders,shareholders, employees and the communities in which the companyCompany operates. In determining whether to recommend a boardBoard member for re-election, the nominatingNominating & governance committeeESG Committee also considers the director’s past attendance at meetings, participation in and contributions to the activities of the board andBoard, the results of the most recent board self-assessment. Board and Committee assessment and attendance at meetings.
The nominatingBoard and the Nominating & governance committeeESG Committee believe all director nominees embody our corporate values and exhibit the characteristics below:
| · | a commitment to long-term value creation for our shareholders; |
| · | an appreciation for shareholder feedback; |
| · | high personal and professional ethics; |
| · | a proven record of success; |
| · | a commitment to the integrity of affiliated self-regulatory organizations; |
| · | sound business judgment; |
| · | a strategic vision and leadership experience; |
| · | knowledge of financial services; |
| · | sufficient time to devote to Board service; and |
| · | an appreciation of multiple cultures and perspectives. |
Skills and Expertise Matrix
The skills and expertise included in the matrix below have been identified as most important for effective oversight in light of our business and strategy. We believe each director brings a unique perspective and different set of skills to the boardroom. While each of our directors possesses additional skills and expertise to the ones listed below, this matrix reflects each director’s primary strengths given his or her particular role on our Board. The director biographies that follow describe each director’s qualifications and relevant experience in more detail.
Capital Markets Deep industry knowledge of the capital markets landscape helps us execute on our strategy, expand client relationships, accelerate growth and deliver strong shareholder returns. |
Client Experience Expertise in enhancing and transforming customer service experiences is critical to overseeing our client-first approach. |
Corporate Governance Experience on other public company boards provides insight into developing practices consistent with our commitment to corporate governance excellence. |
Cybersecurity Experience in understanding the impact and increasing importance of the cybersecurity threat landscape on our business and that of our clients is crucial to an effective risk management program. |
Environmental and Social (Including Human Capital Management) Experience in support of environmental and social initiatives and in human capital management strengthens the Board’s oversight and assures that business imperatives and long-term value creation are achieved within a responsible and sustainable business model. |
Financial A deep understanding of financial and accounting metrics is essential to overseeing our performance. |
Global Leadership Experience in a leadership position at a global company provides practical insight into the skills needed to advance the corporate strategy and enhances the ability to recognize those skills in others. |
M&A Experience with assessing and executing on new opportunities is crucial for overseeing tactical and strategic M&A transactions. |
Risk Management Operating in a complex regulatory and risk environment necessitates skillful oversight of the identification, evaluation and prioritization of risks and the development of comprehensive policies and procedures to effectively mitigate risk and manage compliance. |
Technology and Innovation Experience in traditional, new and emerging technologies is core to understanding our business as an innovative technology leader. |
Director Orientation and Continuing Education
Our director orientation program familiarizes new directors with our businesses, strategies and policies, providing experiences to directly engage with our Executive Leadership Team. We also provide year-round in-person or virtual tutorials to educate Board members on emerging and evolving initiatives and strategies. Our directors receive frequent updates on recent developments, press coverage and current events that relate to our strategy and business.
Newly elected directors are matched with an experienced director for ongoing mentorship.
Ongoing director education is essential for the Board to be a strategic asset for the company. Our directors are encouraged to participate in, and are reimbursed for, continuing education programs at external organizations and universities to enhance the skills and knowledge used to perform their duties on the Board and relevant Committees.
Attendance at these programs provides directors with additional insight into our business and industry and gives them valuable perspective on the performance of our Company, the Board, our President and CEO and members of senior management.
We have a three-tiered annual Board assessment process that is coordinated by the Chairman of the Board and the Chair of the Nominating & ESG Committee. The assessment consists of a full Board evaluation, Committee evaluations and individual director assessments and feedback. The Board and all the Board Committees determine action plans for the next year based on input from the annual assessment.
Results and Implemented Changes
In an effort to continuously strengthen our Board’s effectiveness, results from our Board assessment process are used to:
| · | determine the skills and experience desired for future Board nominees; |
| · | facilitate the Board refreshment process; |
| · | monitor Committee roles and inform plans for rotations and new leadership assignments; |
| · | strengthen the relationship between the Board and management; |
| · | enhance governance processes and Board meeting agendas; and |
| · | identify opportunities for Director education. |
Feedback Incorporated
In response to feedback from recent Board evaluations, actions taken and continuous enhancements include:
| ✓ | increased Board diversity and diversity on each Committee; |
| ✓ | included educational videos on key topics in pre-read meeting materials; |
| ✓ | streamlined meeting materials to better highlight important information and focus on key decisions; |
| ✓ | provided opportunities for our Board to interact with more employees throughout the organization; and |
| ✓ | provided education to our Nominating & ESG Committee on ESG topics. |
Board Refreshment and Nominations
The selection of qualified directors is key to ensuring that the Board fulfills its mission. We believe our director nominees—individually and collectively—have the right skills, qualifications, experience, diversity and tenure needed for the successful oversight of Nasdaq’s strategy and enterprise risks.
The Nominating & ESG Committee oversees and plans for director succession and refreshment of the Board to ensure the proper mix continues to promote and support our long-term vision. In doing so, the Committee takes into consideration the corporate strategy and the overall needs, composition and size of the Board, as well as the criteria adopted by the Board regarding director qualifications.
The Nominating & ESG Committee considers possible candidates suggested by Board and Committee members, shareholders and senior management. In addition to submitting suggested nominees to the Nominating & ESG Committee, a Nasdaq shareholder may nominate a person for election as a director, provided the shareholder follows the procedures specified in Nasdaq’s By-Laws. The Nominating & ESG Committee reviews all candidates in the same manner, regardless of the source of the recommendation.
We are obligated by In addition, the terms ofNominating & ESG Committee may engage a stockholders’ agreement dated February 27, 2008 between NASDAQ OMXthird-party search firm from time-to-time to assist in identifying and Borse Dubai, as amended, to nominate and generally use best efforts to cause the electionevaluating qualified candidates. The new Director elected in 2021 was brought to the NASDAQ OMX board of one individual designated by Borse Dubai, subject to certain conditions. Mr. Kazim is the individual designated by Borse Dubai as its nominee.
Finally, we also are obligated by the terms of a stockholders’ agreement dated December 16, 2010 between NASDAQ OMX and Investor AB to nominate and generally use best efforts to cause the election to the NASDAQ OMX board of one individual designated by Investor AB, subject to certain conditions. Mr. Ekholm is the individual designated by Investor AB as its nominee.
Listed below are the nominees for directors. The information for each nominee includes the nominee’s principal occupation, business experience, certain directorships in the past five years, age asattention of the date of this proxy statementNominating & ESG Committee by our President and the year the nominee was first elected a director. Each nominee, if elected, will serve for a one-year term expiring at the 2015 annual meeting and until the election and qualification of his or her successor.CEO.
Director Recruitment Process
Name | Age | Classification | Director Since | |||
Charlene T. Begley | 47 | Non-Industry; Public | — | |||
Steven D. Black | 61 | Non-Industry; Public | 2011 | |||
Börje E. Ekholm | 51 | Non-Industry | 2011 | |||
Robert Greifeld | 56 | Staff | 2003 | |||
Glenn H. Hutchins | 58 | Industry | 2005 | |||
Essa Kazim | 55 | Non-Industry | 2008 | |||
John D. Markese | 68 | Non-Industry; Public | 1996 | |||
Ellyn A. McColgan | 60 | Non-Industry; Public | 2012 | |||
Thomas F. O’Neill | 67 | Non-Industry | 2003 | |||
Michael R. Splinter | 63 | Non-Industry; Issuer | 2008 | |||
Lars R. Wedenborn | 55 | Non-Industry | 2008 |
 | Board composition is continuously analyzed to ensure alignment with strategy. Candidate recommendations are identified with input from directors, management, shareholders, and search firms as needed. Nominating & ESG Committee screens qualifications, considers diversity and skills, interviews potential candidates and makes recommendations to the Board. Board of Directors evaluates candidates, reviews conflicts and independence, discusses impact to the Board, and selects nominees. Shareholders vote on nominees at Nasdaq’s Annual Meeting. Implementation Seven new directors have been nominated to our Board in the last seven years—each bringing afresh perspective and unique skill set. | |||
THE NASDAQ OMX GROUP, INC. 13
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 | Melissa M. Arnoldi EVP and Chief Customer Officer, AT&T Customer Age: 49 Director since: 2017 Independent United States Committee Membership · Finance · Management Compensation Impact on Board · Innovative technology leader with experience in cybersecurity, software development and network operations · Broad expertise in providing a superior customer experience · Strategic thinker with global business and operational capabilities Career Highlights Since August 2021, Ms. Arnoldi has been the Chief Customer Officer for AT&T Consumer, leading field technician and contact center teams that support 180 million annual customer interactions. From September 2018 to July 2021, she served as the CEO of Vrio Corp., a multi-billion-dollar AT&T digital entertainment services company in Latin America with more than 9,000 employees across 11 countries during her tenure. Prior to that, Ms. Arnoldi served in various capacities at AT&T Inc. since 2008. This included President of Technology & Operations where she was responsible for the company’s global technology, software development, supply chain, network and cybersecurity operations, chief data office, as well as AT&T’s Intellectual Property group, Labs and Foundries. Before joining AT&T, Ms. Arnoldi was a senior executive at Accenture from 1996 to 2008. Select Professional and Community Contributions · Former Director of Sky Mexico · Former Director of the Girl Scouts of Northeast Texas · Former Member of the National Action Council for Minorities in Engineering | |||
 | Charlene T. Begley Retired SVP & CIO, General Electric Company Age: 55 Director since: 2014 Independent United States Committee Membership · Audit & Risk · Nominating & ESG (Chair) Impact on Board · Extensive leadership experience of highly complex and global industrial, customer, and technology businesses · Significant risk management experience as a · Broad financial and audit expertise from prior roles at GE and service on the Audit Committees of several public companies Career Highlights Ms. Begley served in various capacities for the General Electric Company, a diversified infrastructure and financial services company, from 1988 Current Public Company Boards
Other Public Company Boards in the · Red Hat, Inc. · WPP plc | |||
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 | Steven D. Black Former Co-CEO, Bregal Investments Age: 69 Director since: 2011 Independent United States Committee Membership · Management Compensation (Chair) · Nominating & ESG Impact on Board · Extensive leadership experience of · Depth of knowledge from over 40 years of experience in · Management development, compensation and succession planning experience Career Highlights Mr. Black Current Public Company Boards
· The Bank of | |||
THE NASDAQ OMX GROUP, INC. 14
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President and CEO, Nasdaq Age: 52 Director since: 2017 United States Committee Membership · Finance Impact on Board · More than 25 years of industry leadership and expertise, including five years as Nasdaq’s President and CEO · Significant contributions that shaped Nasdaq’s strategic transformation to a leading global exchange and technology solutions company with operations on six continents · Deep strategy, financial, M&A and product development experience Career Highlights Ms. Friedman was appointed President and CEO and elected to Select Professional and Community Contributions · Member of the Vanderbilt University Board of Trust · Director of the Federal Reserve Bank of New York · Director of FCLTGlobal, a non-profit organization that researches tools to encourage long-term investing | |||
 | Essa Kazim Governor, Dubai International Financial Centre Age: 63 Director since: 2008 Independent United Arab Emirates Committee Membership · Finance Impact on Board · Extensive leadership of a complex regulated business in the financial services industry · Broad knowledge of international markets with experience in finance, accounting and corporate strategy · Global perspective, as well as a
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THE NASDAQ OMX GROUP, INC. 15
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 | H.E. Essa Kazim Select Professional and Community Contributions
· Member of · Board Member of the Current Public Company Boards · Emirates Telecommunications Group Company PJSC (Etisalat Group): Audit Committee (Chair) | |
THE NASDAQ OMX GROUP, INC. 16
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Independent United States Committee Membership · Audit & Risk (Chair) Impact on Board · Leadership of complex regulated businesses in the financial services industry · Broad knowledge of international markets with experience in finance, accounting and corporate strategy · Significant experience in risk management, clearing house, central depository and broker-dealer operations at executive and board levels in North America and Asia Career Highlights Mr. Kloet was the first CEO and Executive Director of TMX Group Limited, the holding company of the Toronto Stock Exchange; TSX Venture Exchange; Montreal Exchange; Canadian Depository for Select Professional and Community Contributions · Chair of the · Chair of the · Member of the | |||
THE NASDAQ OMX GROUP, INC. 17
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CFO & EVP of Global Customer Operations, PayPal Holdings, Inc.
Director since: 2017 Independent United States Committee Membership · Management Compensation · Finance (Chair) Impact on Board · More than 20 years of financial management experience, including leading PayPal’s financial operations, corporate accounting, treasury, financial planning and · Experience in highly regulated businesses within the financial services industry with responsibility for risk management · Leadership experience at a global technology company Career Highlights
Mr. Select Professional and Community Contributions · Member of · Former Member of the National Board of Trustees for the March of Dimes | |||
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 | Michael R. Splinter Retired Chairman & CEO, Applied Materials, Inc. Age: 71 Director since: 2008 Independent United States Committee Membership · Management Compensation · Nominating & ESG Impact on Board · Leadership of a complex global technology business · Extensive background in international public company governance at a Nasdaq-listed company · Management development, compensation and succession planning experience Career Highlights Mr. Splinter was elected Select Professional and Community Contributions
· Member of · Splinter Current Public Company Boards · Gogoro Inc.: Compensation Committee (Chair) · TSMC, Ltd.: Audit Committee, Compensation Committee (Chair) Other Public Company Boards in the · Meyer Burger Technology Ltd. |
THE NASDAQ OMX GROUP, INC. 18
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RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES NAMED HEREIN FOR ELECTION AS DIRECTORS.
THE NASDAQ OMX GROUP, INC. 19
OVERVIEW OF DIRECTOR COMPENSATION
Annual non-employee director compensation is based upon a compensation year beginning and ending in May. Staff directors do not receive compensation for serving on the board of directors. The following table shows the compensation policy for non-employee directors that is in effect from May 2013 through May 2014.
 | Toni Townes-Whitley Former President, U.S. Regulated Industries, Microsoft Age: 58 Director since: 2021 Independent United States Committee Membership · Audit & Risk Impact on Board · Extensive background in the technology industry and with driving digital transformations · Led a sales organization of almost 5,000 employees, resulting in significant knowledge on human capital management topics · ESG expertise, including by representing Microsoft on the World Business Council for Sustainable Development, participating in the establishment of Microsoft’s framework and plan for social equity, and leading Microsoft’s Artificial Intelligence Ethics Program Career Highlights As president of U.S. Regulated Industries at Microsoft from July 2018 to September 2021, Ms. Townes-Whitley led the company’s U.S. sales strategy for driving digital transformation across customers and partners within the public sector and commercial regulated industries. Previously, Ms. Townes-Whitley was Corporate VP for Global Industry at Microsoft, a role she held since 2015. Before starting with Microsoft, Ms. Townes-Whitley worked for CGI Corporation, an IT and business consulting services firm, from 2010 to 2015. During her tenure at CGI, Ms. Townes-Whitley held the positions of President and Chief Operating Officer from 2011 to 2015 and SVP, Civilian Agency Program from 2010 to 2011. From 2002 to 2010, Ms. Townes-Whitley held various senior leadership positions at Unisys Corporation, a global information technology company that provides a portfolio of IT services, software and technology. Select Professional and Community Contributions · Trustee of Johns Hopkins Medicine · Director of the Thurgood Marshall College Fund · Director of the Partnership for Public Service · Advisory Board Member for the Princeton University Faith & Work Initiative · Trustee of The United Way Worldwide Current Public Company Boards · Empowerment & Inclusion Capital I Corp.: Audit Committee (Chair) · The PNC Financial Services Group, Inc.: Risk Committee, Special Committee on Equity & Inclusion, Technology Subcommittee | |||
 | Alfred W. Zollar Executive Advisor, Siris Capital Group, LLC Age: 67 Director since: 2019 Independent United States Committee Membership · Audit & Risk · Finance Impact on Board · Career technologist with skills in product development, customer satisfaction and strategy · Broad leadership experience, including senior management positions in every IBM software group division · Extensive service on the boards of several large public companies Career Highlights Mr. Zollar has been an Executive Advisor with Siris Capital Group, LLC since March 2021. Previously, he was an Executive Partner since February 2014. Mr. Zollar retired from IBM in January 2011 following a 34-year career. Mr. Zollar was formerly general manager of IBM Tivoli Software from July 2004 until January 2011, where he was responsible for the executive leadership, strategy and P&L of the Tivoli Software. Previously, Mr. Zollar was general manager, IBM iSeries, where he was responsible for the executive leadership, strategy and P&L of the iSeries (formerly AS/400) server product line. Prior to that, he held senior management positions in each of IBM’s diverse software businesses, including general manager of IBM Lotus Software. Select Professional and Community Contributions · Director of EL Education · Director of the Eagle Academy Foundation · Trustee of the UC San Diego Foundation · Lifetime Member of the National Society of Black Engineers Current Public Company Boards · International Business Machines Corporation: Directors and Corporate Governance Committee · Public Service Enterprise Group Incorporated: Audit Committee, Finance Committee (Chair), Industrial Operations Committee · The Bank of New York Mellon Corporation: Risk Committee, Technology Committee (Chair) Other Public Company Boards in the Past Five Years · Red Hat, Inc. · The Chubb Corporation | |||
Our Board has four standing Committees: Audit & Risk, Finance, Management Compensation and Nominating & ESG. Each of these Committees, other than the Finance Committee, consists exclusively of independent directors. The Chair of each Committee reports to the Board in Chairman’s Session or Executive Session on the topics discussed and actions taken at each meeting. Each of these Committees operates under a written charter that includes the Committee’s duties and responsibilities. A description of each standing Committee is included on the following pages. Audit & Risk Committee Key Objectives:
· Appoints, retains, approves the compensation of and oversees the independent registered public accounting firm. · Assists the Board by reviewing and discussing the quality and integrity of accounting, auditing and financial reporting practices at Nasdaq, including assessing the staffing of employees in these functions. · Assists the Board by reviewing the adequacy and effectiveness of internal controls. · Reviews and approves or ratifies all related party transactions, as further described below under “Certain Relationships and Related Transactions.” · Assists the Board in reviewing and discussing Nasdaq’s regulatory and compliance programs, ERM structure and process, Global Employee Ethics Program, SpeakUp! Program and confidential whistleblower process. · Assists the Board in reviewing and discussing the adequacy and effectiveness of Nasdaq’s cyber, privacy and technology controls. · Assists the Board in its oversight of the Internal Audit function, including approval of the Internal Audit Plan. · Reviews and recommends to the Board for approval the Company’s regular dividend payments. 2021 Highlights: · Conducted the annual review of the independent auditor relationship and recommended the retention of Ernst & Young LLP as the Company’s independent auditor. For further information on the Audit & Risk Committee’s review of the independent auditor relationship, see “Audit & Risk – Audit & Risk Committee Responsibilities – Annual Evaluation and 2022 Selection of Independent Auditors.” · Approved Nasdaq’s policy on the use of non-GAAP measures and reviewed non-GAAP disclosures, impairment assessments and the impact or potential impact of changes in various accounting standards. · Approved the revised Supplier Code of Ethics and received an update on third |
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| Reviewed the sanctions and anti-money laundering compliance programs. |
| · | Monitored the progression of the Market Technology business’s clearing projects. |
| · | Discussed Nasdaq’s tax profile and tax planning in connection with the Verafin acquisition. |
| · | Received reports on information security topics, including the software supply chain, the protection of market systems, IT asset management (including end-of-life governance and management) and vulnerability management. |
Risk Oversight Role:
| · | Approves the Risk Appetite and reviews the ERM program, including policy, structure, and process. |
| · | Receives regular updates from the Chief Risk Officer on risk matters. |
Independence:
| · | Each member of the Audit & Risk Committee is independent as defined in Rule 10A-3, adopted pursuant to the Sarbanes-Oxley Act of 2002, and in accordance with the listing rules of The Nasdaq Stock Market. |
| · | The |
Finance Committee Key Objectives: · Reviews and recommends, for approval by the Board, the capital plan of the Company, including the plan for repurchasing shares of the Company’s common stock and the proposed dividend plan. · Reviews and recommends, for approval by the Board, significant mergers, acquisitions and business divestitures. · Reviews and recommends, for approval by the Board, significant capital market transactions and other financing arrangements. · Reviews and recommends, for approval by the Board, significant capital expenditures, lease commitments and asset disposals, excluding those included in 2021 Highlights: · Conducted a comprehensive review of the capital plan for Board approval. · Reviewed and recommended Board approval of Nasdaq’s entry into a multi-year partnership with AWS to build the next generation of cloud-enabled infrastructure for the world’s financial markets. · Reviewed and recommended Board approval of the divestiture of Nasdaq’s U.S. Fixed Income business and an accelerated stock repurchase agreement to offset longer-term dilution related to the · Advised the Board on the 10% increase in Nasdaq’s quarterly dividend payment from $0.49 to $0.54 per share. · Received regular reports on the M&A environment and Nasdaq’s pipeline of potential strategic transactions. · Reviewed and recommended, for Board approval, a debt refinancing transaction which reduced our annual interest expense. · Received an update on Nasdaq’s minority investment activities through the Nasdaq Ventures portfolio. Risk Oversight Role: · Monitors operational and strategic risks related to Nasdaq’s financial affairs, including capital structure and liquidity risks. |
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| Management Compensation Committee Key Objectives: · Establishes and annually reviews the executive compensation · Reviews and approves the executive compensation and benefit programs applicable to Nasdaq’s executive officers, including the base salary, incentive compensation and equity awards. Any executive compensation program changes solely applicable to the President and CEO and CFO are submitted to the Board for final approval. · Reviews and approves the performance goals for executive officers. For the President and CEO and CFO, these items are referred to the Board for final approval. · Reviews and approves the base salary and incentive compensation for those non-executive officers with target total cash compensation in excess of $1,000,000 or an equity award valued in excess of $1,000,000. · Evaluates the performance of the President and CEO, together with the Nominating & ESG Committee. · Reviews the succession and development plans for executive officers and other key talent. · Establishes and annually monitors compliance with the mandatory stock ownership guidelines. · Reviews the results of any shareholder advisory votes on executive compensation and any other feedback that may be garnered through the Company’s ongoing shareholder engagement. 2021 Highlights: · Reviewed, negotiated and recommended Board approval of the new employment agreement with Nasdaq’s President and CEO, Adena T. Friedman. · Provided feedback on Nasdaq’s pay equity analysis. · Considered the effectiveness of the annual · Reviewed the succession and development plans for all EVPs and SVPs. Risk Oversight Role: · Evaluates the effect the compensation structure may have on risk-related decisions. Independence: · Each member of the Management Compensation Committee is independent and meets the additional eligibility requirements set forth in the listing rules of The Nasdaq Stock Market. |
Nominating & ESG Committee Key Objectives: · Determines the skills and qualifications necessary for the · Identifies, reviews, evaluates and nominates candidates for annual elections to · Leads the annual assessment of effectiveness of the Board, Committees and individual directors. · Together with the Management Compensation Committee, leads the annual performance assessment of the President and CEO. · Identifies and considers emerging corporate governance issues and trends. · Reviews feedback from · Monitors Company compliance with corporate governance requirements and policies. · Reviews and recommends the Board and Committee membership and leadership structure. · Reviews and recommends to the Board candidates for election as officers with the rank of EVP or above. · Oversees environmental and social matters as they pertain to the Company’s business and long-term strategy and identifies and brings to the attention of the Board current and emerging environmental and social trends and issues that may affect the business operations, performance and public image of Nasdaq. · Provides oversight for Nasdaq’s environmental and social policies, practices, initiatives and reporting, including those related to environmental sustainability, social and ethical issues, human capital management, responsible sourcing and strengthening community. · Reviews the Annual Sustainability Report. 2021 Highlights: · Received tutorials on ESG topics, including Nasdaq’s ESG materiality assessment, Nasdaq’s Purpose Initiative and Nasdaq’s Supplier Risk Management and Diversity Programs. · Monitored the achievement of Nasdaq’s corporate ESG goals. · Focused on Nasdaq’s ongoing Board refreshment, including recommending and nominating Toni Townes-Whitley to the Board in September 2021. · Considered shareholder feedback from engagement sessions, the 2021 Annual Meeting of Shareholders and publicly available sources. Risk Oversight Role: · Oversees risks related to the Company’s ESG issues, trends and policies. · Monitors the independence of the Board. Independence: · Each member of the Nominating & ESG Committee is independent, as required by the listing rules of The Nasdaq Stock Market. |
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Our Board Compensation Policy establishes the compensation of our non-employee directors. Every two years, the Management Compensation Committee reviews the Director Compensation Policy, considers a competitive market analysis of director compensation data and recommends changes, if any, to the policy to the Board for approval.
The following table reflects the compensation elements for non-employee directors for the current compensation year, which began immediately following the 2021 Annual Meeting of Shareholders and ends with the 2022 Annual Meeting.
Compensation Policy for Non-Employee Directors
| Item | June 2021 - June 2022 | |
Annual Retainer for Board Members (Other than the Chair) | $75,000 | |
Annual Retainer for Board Chair | $240,000 | |
Annual Equity Award for All Board Members (Grant Date Market Value) | $260,000 | |
Annual Audit & Risk Committee Chair Compensation | $40,000 | |
Annual Management Compensation Committee Chair Compensation | $30,000 | |
Annual Finance and Nominating & ESG Committee Chair Compensation | $20,000 | |
Annual Audit & Risk Committee Member Compensation | $20,000 | |
Annual Management Compensation and Nominating & ESG Committee Member Compensation | $10,000 | |
Annual Finance Committee Member Compensation | $5,000 | |
Each non-employee director may elect to receive the annual retainer in cash (payable in equal semi-annual installments), equity or a combination ofequity. Each non-employee director also may elect to receive Committee Chair and/or Committee member fees in cash and(payable in equal semi-annual installments) or equity.
The annual equity award and any equity elected as part of the annual retainer or for Committee Chair and/or Committee member fees are awarded automatically on the date of the annual meetingAnnual Meeting of stockholdersShareholders immediately following election and appointment to the board. TheseBoard.
All equity awardspaid to Board members consists of RSUs that vest in full one year from the date of grant.
Each non-employee director also may elect to receive committee chair, committee member and/or meeting fees in cash or equity. Cash payments for committee service are made in a lump sum near the beginning The number of the compensation year. If a director elects to receive equity for committee service in lieu of cash, the equity will be awarded on the date of the annual meeting of stockholders and will vest in full one year from the date of grant. Cash payments for board and committee meeting fees are made in arrears on a semi-annual basis. If a director elects to receive equity for board and committee meeting fees in lieu of cash, the equity will be awarded on the date of the next annual meeting of stockholders and will vest in full immediately.
All equity paid to board members consists of restricted stock. The amount of equityRSUs to be awarded is calculated based on the closing market price of our common stock on the date of grant.the Annual Meeting. Directors that are appointed to the Board after the annual meeting receive a pro-rata equity award. Unvested equity is forfeited in certain circumstances upon termination of the director’s service on the board of directors.Board.
Directors are reimbursed for business expenses and reasonable travel expenses for attending NASDAQ OMX boardBoard and committeeCommittee meetings. Non-employee directors do not receive our retirement, health or life insurance benefits. NASDAQ OMX providesWe provide each non-employee director with director and officer liability insurance coverage, as well as accidental death and dismemberment andbusiness accident travel insurance for and only when traveling on behalf of NASDAQ OMX.
Stock Ownership Guidelines
THE NASDAQ OMX GROUP, INC. 20
STOCK OWNERSHIP GUIDELINES
Under our stock ownership guidelines, the Chairman of the Board must maintain a minimum ownership level in Nasdaq common stock of six times the annual equity award for Board members. Other non-employee directors must maintain a minimum ownership level in NASDAQ OMX common stock. In 2013, the board approved an increase in the minimum ownership level from threeof two times the annual cash retainer to five times the annual cash retainer. equity award.
Shares owned outright, through shared ownership and in the form of vested and unvested restricted stock, are taken into consideration in determining compliance with these stock ownership guidelines. Exceptions to this policy may be necessary or appropriate in individual situations and the chairmanChairman of the board of directorsBoard may approve such exceptions from time to time. New directors have until four years after their initial election to the boardBoard to obtain the minimum ownership level. All of the directors who were required to be in compliance with the guidelines on December 31, 2013 were in compliance with the guidelines as of that date.December 31, 2021.
DIRECTOR COMPENSATION TABLE
Director Compensation Table
The table below summarizes the compensation paid by NASDAQ OMXNasdaq to our non-employee directors for services rendered during the fiscal year ended December 31, 2013.
2013 Director Compensation Table2021.
Name(1) | Fees Earned ($)(2)(3) | Stock Awards | Option | Non-Equity | Change | All Other | Total | |||||||
Steven D. Black | $ 134,500 | $ 115,029 | — | — | — | — | $ 249,529 | |||||||
Börje E. Ekholm | $ 169,500 | $ 195,050 | — | — | — | — | $ 364,550 | |||||||
Glenn H. Hutchins | $ 39,500 | $ 195,050 | — | — | — | — | $ 234,550 | |||||||
Essa Kazim | $ 110,000 | $ 115,029 | — | — | — | — | $ 225,029 | |||||||
John D. Markese | $ 226,000(7) | $ 115,029 | — | — | — | — | $ 341,029 | |||||||
Ellyn A. McColgan | $ 56,000 | $ 195,050 | — | — | — | — | $ 251,050 | |||||||
Thomas F. O’Neill | $ 110,000 | $ 115,029 | — | — | — | — | $ 225,029 | |||||||
James S. Riepe | $ 127,000 | $ 115,029 | — | — | — | — | $ 242,029 | |||||||
Michael R. Splinter | $ 64,000 | $ 195,050 | — | — | — | — | $ 259,050 | |||||||
Lars R. Wedenborn | $ 119,216(8) | $ 115,029 | — | — | — | — | $ 234,245 | |||||||
| Name1 | Fees Earned or Paid in Cash ($)2 | Stock Awards ($)3,4,5 | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||
Melissa M. Arnoldi | — | $ | 345,669 | — | — | — | — | $345,669 | ||||||||
Charlene T. Begley | $115,000 | $ | 256,812 | — | — | — | — | $371,812 | ||||||||
Steven D. Black | — | $ | 370,235 | — | — | — | — | $370,235 | ||||||||
Essa Kazim | — | $ | 335,738 | — | — | — | — | $335,738 | ||||||||
Thomas A. Kloet6 | $155,000 | $ | 370,235 | — | — | — | $15,000 | $540,235 | ||||||||
John D. Rainey | — | $ | 370,235 | — | — | — | — | $370,235 | ||||||||
Michael R. Splinter | — | $ | 513,625 | — | — | — | — | $513,625 | ||||||||
Toni Townes-Whitley | $19,911 | $ | 183,000 | — | — | — | — | $202,911 | ||||||||
Jacob Wallenberg | — | $ | 340,616 | — | — | — | — | $340,616 | ||||||||
Alfred W. Zollar | — | $ | 355,426 | — | — | — | — | $355,426 | ||||||||
Adena T. Friedman is not included in this table as |
The differences in fees earned or paid in cash reported in this column largely reflect differences in each individual director’s election to receive the annual retainer and Committee service fees in cash |
THE NASDAQ OMX GROUP, INC. 21
| The amounts reported in this column reflect the grant date fair value of the stock awards computed in accordance with |
These stock awards, which were awarded on |
The aggregate |
Director | Number of Unvested | Number of Vested | ||
Steven D. Black | 3,713 | 5,153 | ||
Börje E. Ekholm | 6,296 | 16,737 | ||
Glenn H. Hutchins | 6,296 | 16,737 | ||
Essa Kazim | 3,713 | 18,758 | ||
John D. Markese | 3,713 | 53,068 | ||
Ellyn A. McColgan | 6,296 | 8,738 | ||
Thomas F. O’Neill | 3,713 | 13,831 | ||
James S. Riepe | 3,713 | 28,064 | ||
Michael R. Splinter | 6,296 | 33,232 | ||
Lars R. Wedenborn | 3,713 | 11,116 | ||
| Director | Number of Unvested RSUs | Number of Vested Shares | ||||
Melissa M. Arnoldi | 1,984 | 8,584 | ||||
Charlene T. Begley | 1,474 | 8,987 | ||||
Steven D. Black | 2,125 | 42,258 | ||||
Essa Kazim | 1,927 | 39,111 | ||||
Thomas A. Kloet | 2,125 | 20,778 | ||||
John D. Rainey | 2,125 | 12,765 | ||||
Michael R. Splinter | 2,948 | 62,923 | ||||
Toni Townes-Whitley | 951 | — | ||||
Jacob Wallenberg | 1,955 | 7,241 | ||||
Alfred W. Zollar | 2,040 | 6,551 | ||||
| 6. | Fees Earned or Paid in Cash to Mr. Kloet include fees of |
THE NASDAQ OMX GROUP, INC. 22
NASDAQ OMX’S CORPORATE GOVERNANCE
BOARD AND COMMITTEE MEETINGS
The NASDAQ OMX board held 17 meetings during the year ended December 31, 2013, and the board met in executive session without management present during 15 of those meetings. None of the current directors attended fewer than 75% of the meetings of the board and those committees on which the director served during the 2013 calendar year.
BOARD COMMITTEES
Pursuant to NASDAQ OMX’s By-Laws, the board of directors has established four standing committees. The table below shows the standing committee membership.
Corporate Governance Practice Highlights Board Composition All director nominees are independent, except for our CEO No director may serve on more than four public company boards (including the Nasdaq Board), without specific approval from the Audit & Risk Committee and Nominating & ESG Committee Philosophy of continuous Board refreshment to ensure a mix of skills, experience, tenure and diversity Board Structure and Processes Separation of the roles of Chairman of the Board and President and CEO of Nasdaq Directors have the opportunity to meet in Executive Session without management present at every Board and Committee meeting Three-tiered annual Board assessment, consisting of full Board evaluation, Committee evaluations and individual director assessments Ongoing Board review of strategic planning and capital allocation for long-term value creation Nominating & ESG Committee oversight of environmental, social and human capital management policies, practices, initiatives and reporting |
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Director stock ownership guidelines require equity ownership of Shareholder Rights 15% threshold for shareholders to call a special meeting Proxy access allowing holders of 3% of our stock for three years to include up to two nominees (or nominees representing 25% of the Board) in | ||
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Included below are summary descriptionsLeadership Structure
In accordance with our Corporate Governance Guidelines, we separate the role of Chairman of the current standing committees. Each committee has adopted a charter, whichBoard from the role of President and CEO. Our Board Chairman is available on NASDAQ OMX’s website athttp://ir.nasdaqomx.com/nasdaq-omx-group.cfm. The boardan independent director. We believe that this separation of roles and committees may hire outside expertsallocation of distinct responsibilities to assist them when necessary.
Audit Committee. The audit committee, which is comprised of independent board members, has the primary responsibility for engaging the independent registered public accounting firm and assists the board by reviewing and discussing the quality and integrity of accounting, auditing and financial reporting practices at NASDAQ OMX. In addition, the audit committee assists the board by reviewing
THE NASDAQ OMX GROUP, INC. 23
the effectiveness of controls over NASDAQ OMX’s risk management and regulatory program. The audit committee also assists the board in reviewing and discussing NASDAQ OMX’s global ethics and compliance program and confidential whistleblower process.
The audit committee assists the board in reviewing and discussing our financial reporting process and reports to the board the results of these activities. This includes the systems of internal controls thateach role facilitates communication between senior management and the board of directors have established, our auditfull Board about issues such as corporate governance, management development, succession planning, executive compensation, and compliance processthe Company’s performance.
Nasdaq’s President and financial reporting. The audit committee, among other duties, engagesCEO, Adena T. Friedman, has over 25 years’ experience in the independent registered public accounting firm, annually evaluatessecurities industry. She is responsible for the strategic direction, day-to-day leadership, and performance of that firm, pre-approves all auditNasdaq. The Chairman of Nasdaq’s Board, Michael R. Splinter, brings to the Board leadership experience as a former public company CEO. The Chairman provides guidance to the President and non-audit services provided by that firm, reviews with that firmCEO, presides over Board meetings, including Executive Sessions, and serves as a primary liaison between the plansPresident and results of the audit engagement, considers the compatibility of any non-audit services provided by that firm with the independence of such firm, reviews the independence of that firmCEO and reviews and approves all related party transactions.other directors.
Audit committee members must meet the independence standards applicable to audit committee members of companiesBoard Independence
Nasdaq’s common stock is currently listed on The NASDAQNasdaq Stock Market and our boardNasdaq Dubai. In order to qualify as independent under the listing rules of The Nasdaq Stock Market, a director must satisfy a two-part test. First, the director must not fall into any of several categories that would automatically disqualify the director from being deemed independent. Second, no director qualifies as independent unless the Board affirmatively determines that the director has concludedno direct or indirect relationship with the Company that each memberwould interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Under the Nasdaq Dubai listing rules and the Markets Rules of the audit committee satisfies these independence standards. Dubai Financial Services Authority, a director is considered independent if the Board determines the director to be independent in character and judgment and to have no commercial or other relationships or circumstances that are likely to affect, or could appear to impair, the director’s judgment in a manner other than in the best interests of the Company.
Nine of our ten director nominees are independent under the listing rules of The Nasdaq Stock Market and Nasdaq Dubai. Ms. Friedman is deemed not to be independent because she is Nasdaq’s President and CEO.
None of the director nominees are party to any arrangement with any person or entity other than the Company relating to compensation or other payments in connection with the director’s or nominee’s candidacy or service as a director, other than arrangements that existed prior to the director’s or nominee’s candidacy.
The Board believes that a key element to effective, independent oversight is that the independent directors meet in Executive Session on a regular basis without Company management present. As such, at each Board meeting, independent directors have the opportunity to meet in Executive Session. The independent Chairman of the Board is responsible for chairing the Executive Sessions of the Board and reporting to the President and CEO and Corporate Secretary on any actions taken during Executive Sessions. In 2021, the Board met ten times in Executive Session. Additionally, each Committee has the authority and budget to retain independent advisors, if needed.
Committee Independence and Expertise
All Board Committees, except for the Finance Committee, are comprised exclusively of independent directors, as required by the listing rules of The Nasdaq Stock Market. At each Committee meeting, members of each Board Committee have the opportunity to meet in Executive Session.
Each member of the audit committee meetsAudit & Risk Committee is independent as defined in Rule 10A-3, adopted pursuant to the standard for financial knowledge for audit committeeSarbanes-Oxley Act of 2002, and in the listing rules of The Nasdaq Stock Market. Two members of companies listed on The NASDAQ Stock Market. In addition, the board of directors has determined that Dr. Markese, Ms. McColgan and Mr. WedenbornAudit & Risk Committee are each qualified as an audit“audit committee financial expertexperts” within the meaning of SEC regulations and that each has accounting and related financial management expertise that meetsalso meet the standard for “financial sophistication” set forth in the rulesstandard of The NASDAQNasdaq Stock Market.
Executive Committee. SubjectStrategic Oversight
The Board takes an active role with management to formulate and review our long-term corporate strategy and capital allocation plan for long-term value creation.
The Board and management routinely confer on our execution of our long-term strategic plans, the limitations instatus of key strategic initiatives and the principal strategic opportunities and risks facing us. In addition, the Board periodically devotes meetings to conduct an in-depth long-term strategic review with our By-Laws,senior management team. During these reviews, the executive committee has the general powerBoard and authority of the board of directors to act in the management discuss emerging technological and macroeconomic trends and short and long-term plans and priorities for each of our business units.
Additionally, the Board annually discusses and affairs.approves our budget and capital allocation plan, which are linked to our long-term strategic plans and priorities. Through these processes, the Board brings its collective, independent judgment to bear on the most critical long-term strategic issues facing Nasdaq.
In 2021, the Board received updates on Nasdaq’s corporate strategy at least quarterly, and often more frequently. The Board also held a multi-day strategy session during which it considered the next steps in our strategic pivot, discussed our strategic ambitions and evaluated certain near-term strategic focus areas. The Board also reviewed and approved our acquisitions and divestitures in 2021, including Verafin and the sale of the U.S. portion of our Nasdaq Fixed Income business. For further information on our corporate strategy, see “Item 1. Business—Growth Strategy” in our Form 10-K.
Management Compensation Committee. Among other duties,ESG Oversight
Our Board is committed to overseeing Nasdaq’s integration of ESG principles and practices throughout the management compensation committee establishes a compensation philosophy, reviews annually all executive compensationentire enterprise. Forty percent of our Board members have experience with environmental and executive benefit programs, and recommends to the full board of directors for approval, material changes to such programs applicable to NASDAQ OMX’s Section 16 officers. The management compensation committee reviews and refers to the board for approval the base salary, incentive compensation awards, performance goals and equity awards for the Section 16 officers. The management compensation committee also reviews and approves employment agreements, severance arrangements and change-in-control agreements for Section 16 officers, although such agreements for the CEO are referred to the full board of directors for approval. For non-Section 16 officers, the management compensation committee reviews and approves the base salary and incentive compensation awards for those employees with target total cash compensation in excess of $750,000 or an equity award valued in excess of $600,000.
Together with the nominating & governance committee and full board of directors, the management compensation committee performs the annual performance evaluation of the chief executive officer. The management compensation committee also reviews annually: (i) a succession plan for the development, retention and replacement of Section 16 officers and other selected officers; and (ii) the peer groups used for competitive market analysis. Every two years or when requested, the management compensation committee reviews and refers to the board for approval NASDAQ OMX’s board compensation policy. Finally, the management compensation committee reviews material changes to NASDAQ OMX’s retirement and health care plans.
Each member of the management compensation committee is independent, as required by the rules of The NASDAQ Stock Market, and meets the additional eligibility requirements set forth in NASDAQ Listing Rule 5605(d)(2)(A). In affirmatively determining the independence of each management compensation committee member, the board of directors has considered all factors specifically relevant to determining whether the member has a relationship to NASDAQ OMX that is material to that member’s ability to be independent from management in connection with the duties of a
THE NASDAQ OMX GROUP, INC. 24
management compensation committee member, including, but not limited to: (i) the source of compensation of such member, including any consulting, advisory or other compensatory fee paid by NASDAQ OMX to such member; and (ii) whether such member is affiliated with NASDAQ OMX, any subsidiary or any affiliate of a subsidiary.
The management compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser. The management compensation committee shall be directly responsible for the appointment, compensationsocial matters (including human capital management), which strengthens our Board’s review and oversight of the work of any compensation consultant, legal counsel or other adviser retained by the committee. NASDAQ OMX will provide for appropriate funding, as determined by the management compensation committee, for payment of reasonable compensation to a compensation consultant, legal counsel or other adviser retained by the committee.our sustainability initiatives. The management compensation committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the committee, other than in-house legal counsel, only after taking into consideration the factors listed in NASDAQ Listing Rule 5605(d)(3)(D).
Nominating & Governance Committee. Pursuant to NASDAQ OMX’s By-Laws, this committeeESG Committee has formal responsibility and oversight for ESG policies and programs and receives regular reporting on related key matters.
Our internal Corporate ESG Steering Committee is co-chaired by executive leaders and is comprised of geographically diverse representatives from multiple business units. The Corporate ESG Steering Committee serves as the nominating committee with additional responsibilities relatedcentral oversight body for our environmental and social strategy, and regularly reports that strategy to corporate governance. The nominatingthe Nominating & governance committee has the authority to identify and nominate candidates for vacancies on the NASDAQ OMX board. Additionally, if a director position becomes vacant because of death, disability, disqualification, removal, resignation or increase in the number of directors, the nominating & governance committee will nominate, and the board of directors will elect by majority vote, a person satisfying the classification (Industry, Non-Industry, Issuer or Public Director) of the directorship, if applicable, to fill such vacancy, except that if the remaining term is not more than six months, no replacement is required.ESG Committee.
The nominating & governance committee considers possible candidates suggested by boardCorporate ESG Strategy and committee members, industry groups, stockholders or senior management. In addition to submitting suggested nomineesReporting Team, which ultimately reports to the nominating & governance committee, a NASDAQ OMX stockholder may nominate a person for election as a director at NASDAQ OMX’s annual meeting or at a special meeting, provided the stockholder follows the procedures specified in NASDAQ OMX’s By-Laws.
The nominating & governance committee annually evaluates and makes recommendations to the board on the overall effectiveness of the board through an annual review and evaluation of the structure, size, composition, development, selection and process of the board and its committees. The committee annually reviews and recommends to the board the assignment of board members to each of the board committees, including rotation, reassignment and removal of any committee member.
The nominating & governance committee considers matters of corporate governance and periodically reviews, reassesses and recommends proposed changes for board approval of the following documents: the Board of Directors Duties and Obligations and the NASDAQ OMX Corporate Governance Guidelines (including the criteria used in selecting director nominees). Both documents are available on NASDAQ OMX’s website athttp://ir.nasdaqomx.com/nasdaq-omx-group.cfm.
This committee also monitors NASDAQ OMX’s compliance with the corporate governance requirements in the NASDAQ Listing Rules and best practices, in order to report and make recommendations to the board with respect to such requirements and practices. This committee identifies current and emerging corporate governance trends and issues that may affect the business operations, performance and public image of NASDAQ OMX. Finally, together with the management compensation committee and full board of directors, the nominating & governance committee performs the annual performance evaluation of the chief executive officer.
Each member of the nominating & governance committee is independent, as required by the rules of The NASDAQ Stock Market.
THE NASDAQ OMX GROUP, INC. 25
NASDAQ OMX BOARD’S RISK OVERSIGHT ROLE
NASDAQ OMX’s management has day-to-day responsibility for: (i) identifying risks and assessing them in relation to NASDAQ OMX’s strategies and objectives, (ii) implementing suitable risk mitigation plans, processes and controls and (iii) appropriately managing risks in a manner that serves the best interests of NASDAQ OMX, its stockholders and other stakeholders. NASDAQ OMX has an enterprise risk steering committee, comprised of employees, that regularly reviews risks for materiality and refers significant risks to the board of directors or specific board committees. To support the work of the enterprise risk steering committee, NASDAQ OMX also has a technology risk steering committee, whichCFO, is responsible for monitoring systems risksexecution of the sustainability strategy, communicating our performance, metrics and ambitions through our annual Corporate Sustainability Report and related ESG filings and surveys, and collaborating with various stakeholders across the organization to ensure a timely and accurate data gathering process.
Cybersecurity and Information Security Oversight
Our Audit & Risk Committee receives quarterly reports, as well as additional reports as needed, on cybersecurity and information security matters from our Chief Information Security Officer. A Cybersecurity Dashboard is presented each quarter which contains information on cybersecurity controls; incidents and threats to the Company’s information security; and ongoing prevention and mitigation efforts for such threats.
We routinely perform simulations and tabletop exercises, and incorporate external resources as needed, to help strengthen our cybersecurity protection and information security procedures and safeguards. All employees are required to complete an annual cybersecurity awareness training.
On an annual basis, the Information Security team reviews and updates its governance documents, including the Information Security Charter, the Information Security Policy and the Information Security Program Plan, and then presents the revised documents to the Audit & Risk Committee for review and/or approval. Additionally, during 2021, the Information Security team continued to execute on the Cybersecurity Strategic Plan, which outlines the strategic vision and associated goals for the cybersecurity of Nasdaq’s global operations for the three-year period from 2020 through the end of 2022.
Finally, the Information Security team engaged Ernst & Young LLP in 2020 to perform an analysis of Nasdaq’s information security procedures. During 2022, Ernst & Young LLP will again review program documentation and conduct an assessment of Nasdaq’s information security programs, and the findings will be presented to the Audit & Risk Committee.
Data Privacy
Privacy is integral to our business and Nasdaq is committed to the protection of the personal data which it processes as part of its business and on behalf of customers. We understand the trust our customers, employees and members of the public place in us when they share their personal information and to that end, we have established a robust global compliance council, which monitorsprivacy program with oversight by executive management, an independent Data Protection Officer for our European regulated entities, and, at the Board level, our Audit & Risk Committee. Our governance and accountability measures promote core principles of data privacy, while the collaborative effort between our Information Security Team and Legal and Regulatory Group enables us to meet our regulatory requirements and corporate compliance risks acrossdemonstrate compliance.
The Board’s role in risk oversight is consistent with our leadership structure, with management having day-to-day responsibility for assessing and managing the company.
NASDAQ OMX’s board of directors hasCompany’s risk exposure and the Board having ultimate responsibility for overseeing risk management with a focus on the most significant risks facing the company.Company. The boardBoard is assisted within meeting this responsibility by several Board Committees as described under “Our Board — Board Committees.” The Audit & Risk Committee receives regular reports relating to operational compliance with the Company’s risk appetite and reviews any deviations, ultimately reporting on them to the Board.
The Board, through the Audit & Risk Committee, approves the Company’s risk appetite, which is the boundaries within which our management operates while achieving corporate objectives. In addition, the Board reviews and approves the Company’s ERM Policy, which mandates ERM requirements and defines employees’ risk management roles and responsibilities.
Under our ERM Policy, we employ an ERM approach that manages risk through objective and consistent identification, assessment, monitoring and measurement of significant risks across the Company. We classify risks into the following board committees.five broad categories.
| · | Strategic and Business Risk: Risk to earnings and capital arising from changes in the business environment and from adverse business decisions, improper implementation of decisions or lack of responsiveness to changes in the business environment. |
| · | Financial Risk: Risk to our financial position or ability to operate due to investment decisions and financial risk management practices, in particular, as it relates to market, credit, capital and liquidity risks. |
| · | Operational Risk: Risks arising from our people, processes and systems and external causes, including, among other things, risks related to transaction errors, financial misstatements, technology, information security (including cybersecurity), engagement of third parties and maintaining business continuity. |
| · | Legal and Regulatory Risk: Exposure to civil and criminal consequences — including regulatory penalties, fines, forfeiture and litigation — while conducting our business operations. |
| · | ESG Risk: Risks arising from perceived or actual shortcomings in the management of ESG matters. |
Our management has Audit Committee.The primary functionday-to-day responsibility for: managing risk arising from our activities, including making decisions within stated Board-delegated authority; ensuring employees understand their responsibilities for managing risk through a “three lines of risk management” model; and establishing internal controls as well as guidance and standards to implement the risk management policy. In the “three lines of risk management” model, the first line, consisting of the auditbusiness units and expert teams (i.e., corporate support units), executes core processes and controls. The second line, consisting of the risk, control and oversight teams, sets policies and establishes frameworks to manage risks. The third line, which is the Internal Audit Department, provides an independent review of the first and second lines.
Our Global Risk Management Committee, which includes our President and CEO and other senior executives, assists the Board in its risk oversight role, ensuring that the ERM framework is appropriate and functioning as intended and the level of risk assumed by the Company is consistent with Nasdaq’s strategy and risk appetite.
We also have other limited-scope management risk committees that address specific risks, geographic areas and/ or subsidiaries. These risk management committees, which include representatives from business units and expert teams, monitor current and emerging risks within their purview to ensure an appropriate level of risk. Together, the various management risk committees facilitate timely escalation of issues to the Global Risk Management Committee, which escalates critical issues to the Board. These risk management committees include the following:
| · | The Compliance Council identifies, monitors and addresses regulatory and corporate compliance risks. |
| · | The Global Technology Risk Committee oversees technology risks within our strategic products and applications. |
| · | The Business Continuity and Crisis Management Committee oversees business continuity and resiliency related risks. |
| · | The Regulatory Capital Committee oversees the global regulatory capital framework for our regulated entities and the level of regulatory capital risk. |
Nasdaq’s Group Risk Management Department, which is part of the Legal, Risk and Regulatory Group, oversees the ERM framework, supports its implementation and aggregates and reports risk information.
Human Capital Management and Executive Succession Planning
Our Board believes that human capital management and executive succession planning are some of its most critical duties. The Board regularly receives updates on Nasdaq’s culture and people-related initiatives. In 2021, topics discussed included: our Diversity, Equity and Culture initiatives; our employee engagement survey results; Nasdaq’s return-to-office and future-of-work initiatives; employee retention efforts in light of the tight labor market; and Nasdaq’s employer brand messaging and employee value proposition.
Both formally on an annual basis and informally throughout the year in Executive Session, the Nominating & ESG Committee, the Management Compensation Committee, the Board and the President and CEO review the succession planning and leadership development program. This includes a short-term and long-term succession plan for development, retention and replacement of senior officers. These reviews and succession planning discussions take into account desired leadership skills, key capabilities and experience in light of our current and evolving business and strategic direction. Our directors also have exposure to potential internal succession candidates through Board and Committee presentations and discussions, as well as informal events and interactions throughout the year.
In conjunction with the annual report of the succession plan, the President and CEO also reports on Nasdaq’s program for senior management leadership development.
In addition, the President and CEO prepares, and the Board reviews, a short-term succession plan that delineates a temporary delegation of authority to certain officers of the Company, if some or all of the senior officers should unexpectedly become unable to perform their duties. The Board also has implemented its own short-term succession plan in the event any of the Directors became temporarily incapacitated or unable to act.
Finally, following our annual executive succession planning exercise with our Board, we achieved a 32% year-over-year increase in the diversity of our succession candidates (considering gender, race and LGBTQ+ status) in 2021 due to a focus by our senior executives on identifying and cultivating talent deeper in their organizations.
The Board held 11 meetings during the 2021 fiscal year and the Board met in Executive Session without management present during 10 of those meetings. At each Board or Committee meeting, a quorum consists of a majority of the Board or Committee members. The Board expects its members will meticulously prepare for, join and participate in all Board and applicable committee meetings and each Annual Meeting.
Each of the incumbent directors who served for the full year of 2021 attended at least 92% of the meetings of the Board and those Committees on which the director served.
Ms. Townes-Whitley joined the Board effective September 29, 2021. Following that date, she attended two of three meetings of the Audit & Risk Committee and three of four meetings of the Board, resulting in 71% attendance. Her absences from these meetings were due solely to the illness and sudden death of a close family member.
In addition to participation at Board and committee meetings, our directors have frequent individual meetings and other communications with our Chairman, our CEO, and other members of the leadership team.
Directors are also encouraged to attend our annual meeting of shareholders. All of the current members of the Board who were directors at the time of the Annual Meeting held on June 15, 2021 attended the Annual Meeting.
Nasdaq does not have a classified Board. All directors are elected annually. We also have a majority vote standard for uncontested director elections.
We implemented proxy access by amending our By-Laws to allow a shareholder, or group of shareholders, that owns at least 3% of our outstanding common stock for three years and complies with certain customary requirements, to nominate candidates for service on the Board and have those candidates included in Nasdaq’s proxy materials. Candidates nominated pursuant to this provision may constitute up to the greater of two individuals or 25% of the total number of directors then in office for a particular annual meeting of shareholders.
Shareholders representing 15% or more of outstanding shares for one year can convene a special meeting of Nasdaq’s shareholders.
For more on our proactive outreach efforts with our shareholders, see “Shareholder Engagement” on page 8.
Public Policy Advocacy for Investors, Capital Formation and Inclusive Capitalism
As part of our duty to shareholders, employees and the markets, Nasdaq actively participates in public policy debates in Europe, the United States and elsewhere. Nasdaq maintains a vigorous global employee education program with respect to the Foreign Corrupt Practices Act and other jurisdictional prohibitions on pay-for-play. Nasdaq does not support any political campaigns, or so-called “Super PACs,” directly with Nasdaq funds.
In the United States, Nasdaq has the responsibility to use its voice to educate policymakers and advocate for policies affecting the capital markets. Nasdaq concentrates its efforts on education and outreach and utilizes a modest Political Action Committee, or PAC, program, known as the Nasdaq PAC. The Nasdaq PAC is to assist thefunded entirely through voluntary employee contributions and supports only federal Congressional campaigns. Nasdaq’s PAC is governed by a board of directorsemployees who vote on every disbursement.
With respect to our European operations, we focus our advocacy programs on active education and engagement with elected leaders and key policymakers. Our policies in fulfilling its oversight responsibilitiesEurope follow prevailing jurisdictional law and preclude any monetary contributions to political parties, candidates or their designees.
Nasdaq maintains memberships in a number of associations around the globe that serve as important partners for our industry, clients, and employees including the World Federation of Exchanges, Federation of European Stock Exchanges, Securities Markets Coalition, Equity Markets Association, Partnership for New York City, Business RoundTable, Silicon Valley Leadership Group, U.S. Chamber of Commerce, TechNet and others.
The actions described above constitute a long-standing practice and risk mitigation policy.
 | Shareholders and other interested parties may contact the Board, the Chairman or other individual Directors by writing us at AskBoard@nasdaq.com or c/o Erika Moore, VP, Deputy General Counsel and Corporate Secretary, 805 King Farm Boulevard, Rockville, Maryland 20850. Complaints or Ethical Concerns? We have also established mechanisms for receiving, retaining, and addressing ethics and compliance concerns or allegations of misconduct through our SpeakUp! Program. Employees, contractors and third parties doing business with Nasdaq have multiple channels for raising ethics concerns in a highly confidential and/or anonymous manner. Nasdaq does not tolerate retaliation against anyone who reports potential misconduct regardless of the reporting channel used. For more on our Code of Ethics, see page 57 or visit ir.nasdaq.com. | |
At the epicenter of capital markets and technology, we are uniquely positioned to lead the acceleration of ESG excellence both in how we operate internally and by reviewingempowering our communities with strategic solutions that have measurable and discussinglasting impact.
Nasdaq is committed to environmentally friendly business practices and will continue to pursue activities that underscore our commitment to the financial information,key environmental initiatives described below.
Optimizing Our Real Estate and Facilities Footprint, Improving the systemsAccessibility of internal controls, financial reportingOur Offices and the legalPreservation of Natural Resources
| · | We aspire to achieve a Green Certification for all new office construction. Our new Nasdaq headquarters in New York City achieved a Green Building LEED Platinum Certification in 2021 and we are working to add eight new LEED certified locations to our office portfolio in 2022. |
| · | In 2021, we continued our net carbon neutral program for the fourth consecutive year. The key focuses of the program are to: |
| ¾ | reduce the energy consumption, corresponding greenhouse gas emissions and waste generation of our global operations through thoughtful sustainable initiatives and strategies. |
| ¾ | proactively procure renewable energy for our office space and data center portfolio. |
| ¾ | purchase Renewable Energy Certificates from projects that are less than five years old and feed power into the same energy distribution network as our operations to replace any fossil fuel electricity power consumed (indirectly removing the release of Greenhouse gases from the atmosphere). |
| ¾ | purchase credible Carbon Offsets from projects that focus entirely on carbon removal to neutralize the associated greenhouse gas emissions related to our Scope 1 and Scope 3 categories (indirectly removing the release of Greenhouse gases from the atmosphere). |
| ¾ | engage a third party to verify and certify our carbon footprint data for accuracy and industry best practices. |
| · | We signed the Science Based Targets initiative commitment letter in 2021 and this year we will submit our net zero short-term and long-term targets for our Scope 1, Scope 2 and material Scope 3 emission categories. |
| · | In 2021, we audited and benchmarked our recycling programs in all global offices and implemented a strategy to raise our minimum standard. |
| · | When possible, our offices are located near public transportation or electric car charging stations. |
| · | In many locations, we have a longstanding practice of offering employees pre-tax public transportation passes, allowances or subsidies. |
| · | Our Environmental Practices Statement and Environmental Management System Policy emphasize our commitment to act as a responsible corporate citizen, endeavoring to lessen our environmental impact and make our operations environmentally efficient. |
| · | In 2022, we are developing our Environmental Management System for our real estate and data center portfolios that is based upon the ISO 14001 structure. |
| · | We completed our first Task Force on Climate Related Financial Disclosures report on our key 15 office locations. In 2022, we will expand this report to cover the entire global office portfolio and outline: |
| ¾ | our climate related risks and opportunities, |
| ¾ | associated impact on our business, |
| ¾ | our management strategy to address these risks, and |
| ¾ | related metrics and targets to further address climate risks. |
Empowering and compliance process.Educating Our Employees
| · | One of our employee networks, the Global Green Team, brings together Nasdaq employees who are passionate and knowledgeable about the environment and who want to drive change and sustainable initiatives in their office and community. |
| · | Through online educational webinars, coffee breaks, newsletters and employee engagements, we offer employee awareness trainings on environmental topics, such as supply chain, consumption, waste reduction/recycling, travel and how individuals can impact their communities. |
| · | Nasdaq is proactively addressing its business behaviors to focus on sustainability and employee wellness through the creation of a knowledge-based series of “The Global Green Team recommends” articles and documents. |
Decarbonizing Our Supply Chain
| · | In 2021, we adopted a new Supplier Code of Ethics. Among other things, in 2022 we will request key vendors and suppliers to join us in reporting environmental data through CDP. |
| · | We encourage suppliers to adopt sustainability and environmental practices in line with our published Environmental Practices Statement and our Supplier Code of Ethics. |
| · | To the extent practical and feasible, we expect suppliers to provide us with information to support our reporting and transparency commitments related to sustainability and environmental impacts. |
Producing ESG-Focused Products for Clients and Listed Companies
| · | We manage a number of indexes that integrate ESG criteria into the index methodology. We achieve this in a variety of ways, with some indexes designed purely as ESG and others designed with ESG criteria as an overlay to a broader investment thesis. The index with the largest tracking fund is the ISE Cyber Security UCITS Index. In 2021, we created ESG versions of two of our flagship indexes and now offer the Nasdaq 100 ESG Index and the Nasdaq Next Generation 100 ESG Index. Additionally, our other indexes include the Nasdaq Clean Edge suite and the Nasdaq Future Global Sustainability Leaders Index. |
| · | In addition, through our IR & ESG business, Nasdaq offers technology, expertise, and insights to help companies navigate the complexities of ESG as a measurement of performance and brand-building opportunity. Our products and services can help our clients analyze, assess and establish ESG programs through all stages of their ESG journey, while also helping to manage the various annual ESG disclosures and reporting obligations and improve governance practices. |
| · | Our Data offerings provide investors with performance data on asset managers based on ESG factors and provide information on sustainable bonds for investment due diligence, selection and monitoring. |
| · | In 2021, we acquired a majority stake in Puro.earth, a leading marketplace that offers industrial carbon removal instruments that are verifiable and tradable through an open, online platform. |
Serving as an ESG Thought Leader for the committee reviewsCapital Markets and discusses the Enterprise Risk Management (ERM) structurePublic
| · | The Nasdaq ESG Reporting Guide (now in its second edition) serves as a baseline template for Nasdaq listed companies and reinforces the business case for voluntary disclosure. We voluntarily report many of the metrics outlined in the ESG Guide. |
| · | Through our Green Voices of Nasdaq campaign, investors and issuers talk about leveraging the green bond market to support sustainable development. |
| · | Nasdaq has also been at the forefront of numerous ESG-related projects, working groups and industry initiatives over the last ten years, including: |
| ¾ | the UN Sustainable Stock Exchanges Initiative (founding member); |
| ¾ | the WFE Sustainability Working Group (founder, chair twice); |
| ¾ | the UN Global Compact (former U.S. Network Board Member); |
| ¾ | the Global Sustainability Standards Board (current member); |
| ¾ | the SASB Advisory Board (former member); |
| ¾ | the Bloomberg Gender Equality Index (Advisory Group); and |
| ¾ | the Impact2030 Metrics Council (chair). |
Nasdaq’s commitment to—and investment in—attracting, retaining, developing and motivating its employees strengthened throughout 2021.
We believe that we compete for talent from a position of strength, which is our people-centric culture, based on our core values: Act as an Owner, Play as a Team, Fuel Client Success, Lead with Integrity, Expand Your Expertise, and Drive Innovation. These cultural values energize and align employees around our most important priorities, and encourage and reward high levels of performance, innovation and growth.
Nasdaq also continued to focus on creating a diverse and inclusive work environment of equal opportunity, where employees feel respected and valued for their contributions, and where Nasdaq and its employees have opportunities to make positive contributions to our local communities and to social justice initiatives.
Our engagement scores across the challenging year affirmed to us that our employees enjoyed their experience at Nasdaq and that Nasdaq remained a preferred work destination. Out of the 91% of our employees that participated in our most recent 2021 engagement survey:
| 87% | 85% | 91% | 87% | |||
| believe Nasdaq is advancing diversity, inclusion, and belonging | believe people from all backgrounds have equal opportunities to succeed at Nasdaq | are proud to work for Nasdaq | would recommend Nasdaq as a great place to work | |||
Investing in Our People
Throughout 2021, we continued to increase our efforts in attracting and retaining our employees. Given the challenges posed by COVID-19 restrictions, we continued our virtual internship program for 157 summer interns and continued our virtual onboarding program to welcome over 1,000 new Nasdaq employees in a remote manner. We conducted annual performance management, succession planning and advancement exercises to ensure we are aligning our employees with the right opportunities across the Company. Additionally, our peer-to-peer employee recognition program rewards employees, and highlights awarded employees on our internal social media channels, further amplifying the recognition.
During 2021, we launched a year-long campaign called “Your Career Journey” to engage employees and managers in sustained professional development. We established a “core curriculum” to customize curated professional development opportunities for employees at each level of seniority, and we expanded our overall learning offerings to more than 18,000 development programs, including both live and self-paced learning modules. We provided tuition assistance to employees enrolled in degree-granting academic programs, held internal career fairs and career development programs to help employees explore their options, and we provided one-on-one professional coaching opportunities. In addition, we launched a new self-service mentoring program that features the ability to search and request mentors based on a wide range of criteria to find the best fit, and lastly introduced the “Talent Marketplace,” which allows employees to create a skills profile and then leverage artificial intelligence to be matched to short-term development “gigs” as well as long-term internal job opportunities.
We continued to conduct employee sentiment surveys frequently during 2021, maintaining high scores in engagement, leadership, management, and culture, compared to scores within the past three years. We attribute these results to the way we quickly and positively responded to COVID-19, taking prompt actions to prioritize our employees’ safety and well-being, as well as continuing to demonstrate inclusive leadership, integrity, and an overall positive culture.
Diversity, Equity, and Culture
In 2021, we renamed our Diversity, Inclusion, and Belonging (DIB) team as the Diversity, Equity, and Culture (DEC) team, a modification we felt allows us to drive resources, energy, and commitments to equity in the workplace and ensure that inclusion and belonging are key elements of Nasdaq’s culture for all our employees. Given this shift, we have also implemented performance-based metrics to measure our executives’ DEC goals as it relates to year-end incentive compensation.
Nasdaq’s diversity, equity and culture philosophy is based on three pillars that guide our efforts. Our actions and initiatives under each of these pillars are described below.
Workforce,to ensure our employee population is representative of the communities in which we operate.
Building on our publication of our workforce composition in the previous year, Nasdaq has continued to disclose updated data, including the progress we have made in diversifying Nasdaq at every career level, from entry-level roles to senior executives and board members. We believe transparency around our workforce composition data is important in order to hold ourselves accountable for the progress that we seek. Statistics on the composition of our global workforce by gender, and the composition of our U.S. workforce by gender, race and ethnicity, are available on our corporate website, along with details about certain of our programs and practices to elevate workforce diversity and inclusion.
Nasdaq is committed to equitable pay for all people in our workforce. That commitment is embedded within our multifaceted compensation program. As part of that program:
| · | We have systems in place to establish and review pay upon hire, promotion and role changes within the Company. |
| · | We have an annual process in place to run a regression analysis on gender (globally) and race/ethnicity (in the United States), assessing employee base pay and total compensation (base + bonus + equity). |
| · | When appropriate, we take action based on these systems and annual process. |
We continued to strengthen our diversity recruiting efforts to help us attract talent using innovative new techniques and channels, enabling us to successfully launch partnerships with diverse talent organizations, such as the National Society of Black Engineers, the Society of Women Engineers, Women in Technology, Grace Hopper and the Society of Hispanic Professional Engineers, improving brand awareness of Nasdaq and helping us to attract more diverse candidates in our recruiting campaigns.
We continually monitor our diversity efforts, with each business unit tracking its own data via live dashboards. We have enhanced our human capital analytics capability so that we can continue to deliver on our commitment to the Parity Pledge, which seeks to achieve greater gender diversity in our executive ranks. As a signatory to the Parity Pledge, we fulfilled our commitment to interview female candidates for all externally advertised roles at the VP level and above. We also have established a dedicated diversity recruitment function to accelerate our ability to attract diverse talent. These recruitment marketing campaigns helped drive an increase in our female, Black and Hispanic hiring.
Workplace,to ensure a positive workplace experience for all employees of Nasdaq.
More than 1,900 employees (approximately 39% of our global workforce) are members of one or more of our 11 employee-led internal affinity networks. Some groups advance the professional development and support of our Black, Asian American, Hispanic, LGBTQ+, female, disabled, veteran, and parent/caregiver employees, while other networks represent interests of employees around environmental sustainability as well as professional identities, such as administrative professionals and software engineers. Each employee network is sponsored by one or more senior executives at the SVP and/or EVP level. The networks provide both formal and informal development programs and guidance for their members, and benefit our entire workforce through educational events, guest speakers and volunteering opportunities. For a complete list of our employee networks, see page 123.
During 2021, more than 80% of our global managers, and 100% of our executive team, participated in a “conscious inclusion” leadership development program that offered training and increased awareness on inclusion issues. We also added customized developmental programs for underrepresented talent, including executive mentoring and accelerated leadership development programs.
In 2021, we launched a high-potential leadership program for our Black employees to hone their skills and increase advancement opportunities; 50% of program participants were promoted during 2021, while 100% of the participants remain with Nasdaq.
Marketplace,to positively influence our peers in the capital market space and to invest in the local communities in which we operate.
Nasdaq accelerated efforts to raise awareness and generate action on diversity and inclusion in our external marketplace in 2021.
| · | We attended several professional conferences and career fairs to expand our diverse recruiting outreach, including the Onyx Technation Black Professionals in Tech Career Fair, the Society of Women Engineers conference and the SHPE (Society of Hispanic Professional Engineers) National Convention. |
| · | Although the ongoing pandemic limited our in-person events, we held several virtual conferences, open to our listed company clients and the public, during 2021 highlighting diversity and inclusion, including a program hosted by GLOBE with the founder of a venture capital firm dedicated to minimizing funding disparities in technology by investing in high-potential founders who are people of color, women, and/ or LGBTQ+; a women’s leadership forum on equality during COVID-19; a forum hosted by Nasdaq’s Asian Professional employee network; the annual LGBTQ+ leadership conference hosted by the OPEN employee network; and a conference on expanding access to capital in the Latinx community, hosted by ¡Adelante Nasdaq!. |
| · | We continued our series, Amplifying Black Voices, which we initiated in 2020. In 2021, the program was a multimedia retrospective featuring works of art and photography documenting Black culture and life. These works were displayed on the Nasdaq MarketSite tower in Times Square throughout the year, enabling the entire community to view and celebrate the exhibits. |
Health, Safety, and Well-Being
As the COVID-19 pandemic continued, we remained focused on ensuring the safety and well-being of our employees and stakeholders while complying with local government regulations in each of the areas in which we operate around the world. During 2021, the vast majority of our employees continued to work from home, and for employees conducting critical on-site work and for those who wished to return to the office, we implemented additional safety measures and precautions.
To ensure teams were effectively equipped to operate during these unprecedented times, managers participated in additional training programs to help them lead their teams through the evolving concerns and challenges of COVID-19.
As the effects of the pandemic become more tempered in 2022, we reopened our global offices and are transitioning to a hybrid work environment. In order to do so safely and efficiently, we implemented COVID-related testing protocols and made appropriate modifications to our workspaces.
Our continued commitment to creating a connected, inclusive, engaged, and productive culture has become the centerpiece of our return to office plans—and communication has been a key pillar to our rollout. We created an internal “return to office” hub on our intranet to facilitate the dissemination of critical information to our employees, including with respect to travel and hosting events with clients. Employees receive updates on return to office plans, local protocols and recommended guidance via regular Town Hall meetings, weekly newsletters, and training.
We continue to build on the additional benefits first introduced at the onset of COVID-19 and have added more programs in an effort to help our employees balance their work and personal commitments. Benefits added during the pandemic include:
| · | “flex days” for time away from the office without requiring the usage of vacation or personal leave; |
| · | new family care resources and benefits, including back-up childcare, caregiver support, and subsidized distance-learning enrichment programs; |
| · | free home workout programs through a variety of wellness and fitness providers; and |
| · | programs to help employees coordinate care for chronically ill family members and to support employees whose family experienced the death of a loved one. |
We are committed to the continued investment in our people’s health, safety, and well-being as we redefine the future of work in a post-pandemic world.
Ethics Program
Our commitment to integrity remains at the center of all we do. The Nasdaq Global Employee Ethics Program provides values-based guidance, heightens compliance risk awareness, strengthens decision-making, and drives sound business performance through its five pillars:
| · | Executive & Board Leadership: Our Executive Leadership Team maintains oversight of Nasdaq’s Global Employee Ethics Program through committees, including a Compliance Council co-chaired by the Chief Legal, Risk and Regulatory Officer. Further oversight is provided through the Group Risk Management Committee, which is responsible for overseeing risks across Nasdaq. |
| · | Policies & Controls: Nasdaq’s Code of Ethics and related policies are applicable to all of our directors, employees (including the principal executive officer, the principal financial officer and the controller and principal accounting officer) and other associates. Our Code of Ethics and related policies outline requirements related to our ethical standards, conflicts of interest, employee trading activities, self-regulatory organization responsibilities, regulatory transparency, whistleblowing responsibilities and protections, antitrust laws, anti-bribery and corruption controls, and sanctions and trade control laws. As a condition of employment, our employees are required to annually certify compliance with our Code of Ethics and related policies, as well as attest to the accuracy of required ethics disclosures. We maintain procedures, systems, and controls to support compliance with core policy requirements and detect potential violations. Additionally, the Board is governed by a distinct Code of Conduct containing supplemental provisions applicable to directors. The Code of Ethics and the Code of Conduct for the Board are posted to our website. |
| · | Risk Assessments: We undertake regular compliance testing and monitor for identified risk areas, conduct periodic audits and assessments, and respond to situations where potential non-compliance is detected or reported. |
| · | Outreach & Training: We perform ongoing training and awareness activities to ensure these policies and requirements are well understood, clear and practical across the organization. This includes onboarding sessions held with all new hires. |
| · | Monitoring, Audit, & Response: We undertake regular compliance testing and monitoring, conduct audits to review control design and effectiveness, and respond to situations where potential non-compliance is detected or reported. Corrective action is taken for non-compliance, including disciplinary action and disclosure to regulatory bodies when appropriate. We investigate instances of non-compliance to assess potential patterns of misconduct and incorporate findings into policy enhancements, control improvements, and training and outreach programs. |
Whistleblower Program and Protections
To foster a culture of safety where employees are supported in reporting unethical behavior, Nasdaq provides multiple channels for disclosing misconduct. Our SpeakUp! Line is operated by a third party that is strictly required to protect the anonymity of the reporting individual in accordance with local law. Nasdaq supports employees by allowing the disclosure of trade secrets in confidence to relevant government authorities without fear of retaliation, regardless of the confidentiality or intellectual property agreements the employee has signed with Nasdaq. Employees can contact the appropriate regulator, law enforcement, or other authorities without notifying Nasdaq in advance or first pursuing internal reporting channels. Nasdaq does not tolerate retaliation and provides all legal protections afforded under applicable laws and regulations for individuals reporting alleged misconduct or violations of the law.
Supplier Code of Ethics
Ethical business practices are not only foundational to our own corporate culture, but Nasdaq expects that its suppliers share the same level of commitment to integrity. The Supplier Code of Ethics, or the Supplier Code, sets forth our expectation that all suppliers act ethically and comply with relevant laws and regulations in all Nasdaq-related business dealings.
In 2021, Nasdaq updated its Supplier Code to address certain topics that were not previously covered, including environmental sustainability and supplier diversity. Our Supplier Code addresses the following:
| · | Freedom of Association and Right to Collective Bargaining: Suppliers must respect workers’ rights to freedom of association and collective bargaining in accordance with local legal requirements. |
| · | Environmental Transparency: We ask our suppliers to measure, report, and mitigate any potential negative climate change and biodiversity impacts associated with their operations, products and services including energy and water consumption, greenhouse gas emissions, waste, air and water pollution, nature loss and hazardous materials. Suppliers are asked to provide us with information to support our reporting and transparency commitments related to environmental sustainability and supply chain emissions. |
| · | Diversity, Equity, and Inclusion: We expect our suppliers to promote a diverse and inclusive workforce and encourage them to engage diverse-owned businesses in their supply chain. |
| · | Health and Safety: We expect suppliers to provide a safe and healthy work environment to their employees and contractors and to abide by local laws and regulations that address, where applicable and not limited to: occupational safety, emergency preparedness, occupational injury and illness, industrial hygiene, physically demanding work, sanitation, food, and housing. Suppliers must provide a safe work environment that supports and maintains relevant programs for accident prevention and minimizing exposure to health risks. |
| · | Minimum Living Wages and Maximum Working Hours: We expect compliance with all applicable wage and working hour laws, including but not limited to: compliance with maximum work week hours regulations established by local law, including overtime requirements, except, as allowed by applicable law, in extraordinary business circumstances and with the prior consent of the individual. Employees and contractors must be compensated appropriately in line with prevailing market conditions and at least at the minimum wage required by applicable laws and regulations and with all required benefits. They must be compensated in compliance with local laws for overtime hours worked. Suppliers must comply with all labor laws and employ only workers who meet applicable minimum age and other requirements in the jurisdiction for the services being performed. |
| · | Acceptable Living Conditions: Where the supplier is providing housing for workers, such housing should be clean and safe, and provide reasonable living space. |
| · | Corporal Punishment and Disciplinary Practices: Suppliers must provide a non-violent, safe work environment, free of verbal abuse, sexual or other forms of harassment, threats, intimidation, or physical harm. Suppliers may not use disciplinary procedures to retaliate against individuals or apply disciplinary actions in a discriminatory or otherwise unlawful manner. |
Every day, Nasdaq is driven by our purpose of advancing inclusive growth and prosperity. In 2021, we deepened this commitment, embedding purpose firmly into our business strategy, reimagining our Foundation, engaging global stakeholders, and establishing strategic partnerships to support a more sustainable and prosperous future for all.
2021 Highlights:
| · | GoodWorks is Nasdaq’s signature engagement program, helping to connect employees with the causes, charities, and communities that they support. The Goodworks program empowered our employee volunteers to participate in 100 individual and team events. Nasdaq employee donors generated more than $650,000 in impact for more than 650 charitable and community recipients. |
| · | Nasdaq Purpose Week is a week of celebration and service. Over 1,700 employees participated in 2021 by volunteering, directing philanthropy, and submitting ideas for a purpose-driven business innovation challenge. |
Nasdaq Foundation
The Nasdaq Foundation was relaunched in 2021 with a more focused mission: to advance inclusive growth and prosperity by making markets work for the benefit of more people across society. The Nasdaq Foundation addresses systemic barriers faced by under-represented communities in their efforts to generate and sustain wealth.
In March 2021, the Nasdaq Foundation announced a research collaboration with the Aspen Institute’s Financial Security Program and Commonwealth. The resulting report, A Framework for Inclusive Investing: Driving Stock Market Participation to Close the Wealth Gap for Women of Color, examines the importance of increasing participation in capital markets for all Americans, especially women of color.
The Nasdaq Foundation selected six partnership organizations through the Quarterly Grant Program in 2021, awarding a cumulative $480,000. The services offered through these partnerships provide a wide range of support for Black, Latinx, and Indigenous founders and entrepreneurs, with a strong focus on women, as well as an introduction to financial careers for students of color.
For more information, please see our 2021 Impact Report and our Foundation Report.
Nasdaq Entrepreneurial Center
The Nasdaq Entrepreneurial Center, or the Center, is an independent non-profit building a better path for entrepreneurs worldwide. Established in 2014 with the support of the Nasdaq Foundation, the Center has been improving inclusion, access, and knowledge in entrepreneurship. The Center delivers free education to meet the real time needs of entrepreneurs and then translates those needs to actionable data that is shared with policy makers and academic institutions around the world to build more opportunities for all entrepreneurs.
| To learn more | ||||||||
51,600 Entrepreneurs served | 49% Women | 61% Black or Under- represented Minority Entrepreneur | 140+ Countries | about The Center, please visit thecenter.nasdaq.org. | ||||
Throughout 2021, Nasdaq continued its commitment to advance our sustainability disclosures with key stakeholders in the investment community through annualized ESG reporting. This is reflected in the significant score progress we received across multiple ESG rating agencies.
Additionally, utilizing the Task Force on Climate-Related Financial Disclosures (TCFD), we conducted a climate scenario analysis to evaluate climate-related risks and opportunities and their impact on our business over time (see our 2020 TCFD Report, available on our website). This exercise helps us examine the resiliency of our current ESG strategy towards climate risks, prioritize areas to further develop our mitigation strategies, and enhance our ability to make the most of identified transition opportunities. Our 2021 TCFD Report will broaden our focus beyond direct operations, as we begin to consider our critical suppliers. The 2021 report also will reflect the recently updated TCFD guidance.
Furthermore, we will continue to publish our EEO-1 data and comprehensive diversity statistics regarding gender and ethnicity in our annual Sustainability Report.
 |  |  |  | |||||
| Scoring Scale | 100-0 (Best) | 10-1 (Best) | F-A (Best) | CCC-AAA (Best) | ||||
| 11.9 | 1* | B | BBB | |||||
*Quality score for Environmental, Social, and Governance categories
Sustainalytics, ISS, CDP, and MSCI ESG ratings are as of April 28, 2022. The use by Nasdaq of any MSCI ESG Research LLC or its affiliates (“MSCI”) data, and the use of the MSCI logos, trademarks, service marks, or index names herein, do not constitute a sponsorship, endorsement, recommendation, or promotion of Nasdaq by MSCI. MSCI services and data are the property of MSCI or its information providers, and are provided ‘as-is’ and without warranty. MSCI names and logos are trademarks or service marks of MSCI.
Nasdaq’s environmental and social disclosures, policies, programs and practice statements include the following:
| · | Anti-Discrimination and Anti-Harassment Policy |
| · | The Nasdaq Environment Practices Statement |
| · | The Nasdaq Human Rights Practices Statement |
| · | The Nasdaq Information Protection and Privacy Practices Statement |
| · | Employee Handbooks |
| · | Nasdaq Code of Ethics |
| · | Nasdaq Supplier Code of Ethics |
| · | Nasdaq Sustainability Report |
| · | Task Force on Climate-Related Financial Disclosures Report |
| · | Global Reporting Initiative Index |
| · | Sustainability Accounting Standards Board Index |
| · | World Economic Forum Stakeholder Capitalism Index |
| · | Nasdaq ESG FAQ |
Approval of the Company’s Executive Compensation on an Advisory Basis
| ✓ | The Board unanimously recommends that shareholders vote FOR the approval of the Company’s executive compensation on an advisory basis. |
We are asking shareholders to approve, on an advisory basis, the Company’s executive compensation as reported in this Proxy Statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the executive compensation program and practices described in this Proxy Statement.
We recommend that shareholders read the Compensation Discussion and Analysis below as well as the executive compensation tables and narrative beginning on page 93. The Compensation Discussion and Analysis describes our executive compensation program and the decisions made by our Management Compensation Committee in 2021 in more detail. The compensation tables provide detailed information on the compensation of our NEOs. The Board and the Management Compensation Committee believe that the compensation program for our NEOs has been effective in meeting the core principles described in the Compensation Discussion and Analysis in this Proxy Statement.
In accordance with Section 14A of the Exchange Act and as a matter of good corporate governance, we are asking shareholders to approve the following advisory resolution at the 2022 Annual Meeting of Shareholders.
RESOLVED, that the shareholders of Nasdaq, Inc. approve, on an advisory basis, the compensation of Nasdaq’s NEOs, as disclosed in the Proxy Statement for Nasdaq’s 2022 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the executive compensation tables and other related tables and narrative disclosure.
This advisory vote is not binding on the Board or the Management Compensation Committee. Although non-binding, the Board and the Management Compensation Committee will review and consider the outcome of the vote when making future decisions regarding our executive compensation program.
The Board has adopted a policy providing for annual shareholder advisory votes to approve the Company’s executive compensation. Under the current version of the policy, the next advisory vote to approve executive compensation will occur at the 2023 Annual Meeting of Shareholders.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides a summary of our executive compensation philosophy and programs and describes the compensation decisions we have made under these programs and the factors considered in making those decisions. Our executive compensation program supports Nasdaq’s growth strategy and is aligned to create long-term shareholder value. This Compensation Discussion and Analysis and the Executive Compensation Tables focus on the compensation of our NEOs for 2021.
Our NEOs | ||||
| Adena T. Friedman |
| President and CEO | ||
| Ann M. Dennison |
| EVP and CFO1 | ||
| Lauren B. Dillard |
| Former EVP, Investment Intelligence2 | ||
| P.C. Nelson Griggs |
| EVP, Corporate Platforms | ||
| Bradley J. Peterson |
| EVP and CIO/CTO | ||
| Michael Ptasznik |
| Former EVP, Corporate Strategy and CFO3 | ||
| 1 | Ms. Dennison, who was formerly our SVP, Controller and Principal Accounting Officer, was appointed EVP and CFO effective March 1, 2021. |
| 2 | Ms. Dillard resigned from Nasdaq and her position as EVP, Investment Intelligence, effective as of April 8, 2022. |
| 3 | Mr. Ptasznik retired from Nasdaq and his position as EVP, Corporate Strategy and CFO, effective as of February 28, 2021. Since Mr. Ptasznik served as CFO for a portion of 2021, he is included as an NEO in accordance with SEC rules. |
Business Performance Highlights | 66 | |||
| Decision-Making Framework | Key Governance Features of Executive Compensation Program | 66 | ||
| Total Rewards Philosophy | 67 | |||
| Say on Pay Results | 68 | |||
| How We Determine Compensation | 68 | |||
| Role of Compensation Consultant | 68 | |||
| Competitive Positioning | 68 | |||
Tally Sheets | 70 | |||
| What We Pay and Why: | Pay for Performance | 72 | ||
| Elements of Executive | Compensation Mix | 72 | ||
Compensation | ||||
| 2021 Compensation Decisions | Base Salary | 72 | ||
| Annual Cash Incentive Compensation | 72 | |||
| Long-Term Incentive Compensation | 75 | |||
NEO Compensation Summaries | 78 | |||
| Other Aspects of Our Executive | General Equity Award Grant Practices | 89 | ||
| Compensation Program | Benefits | 89 | ||
| Severance | 89 | |||
Other | 90 | |||
| Risk Mitigation and Other Pay | Risk Assessment of Compensation Program | 90 | ||
| Practices | Stock Ownership Guidelines | 90 | ||
| Stock Holding Guidelines | 91 | |||
| Trading Controls and Hedging and Pledging Policies | 91 | |||
| Incentive Recoupment Policy | 91 | |||
Tax and Accounting Implications of Executive Compensation | 91 | |||
Business Performance Highlights
We achieved strong financial and operational performance across our business segments in 2021, while continuing to diversify our business and invest significantly to drive growth. Our record 2021 results demonstrated our ability to address the needs of our clients in a capital markets environment characterized by elevated trading, strong IPO activity and rising index valuations amidst the COVID-19 pandemic.
| · | Net revenues in 2021 were $3.4 billion, an increase of 18% over 2020. |
| · | This strong revenue performance allowed us to continue to reinvest in our business and our people, increase our quarterly dividend from $0.49 to $0.54 per share and further execute our share repurchase plan. |
| · | We returned $1.3 billion to shareholders through our share repurchase program and quarterly dividends in 2021, in addition to an aggregate of $2.3 billion over the last three years. |
Additional 2021 business highlights are described on page 1 of this Proxy Statement.
Decision-Making Framework
We design our executive compensation program to reward financial performance and operational excellence, effective strategic leadership and achievement of business unit goals and objectives, which are key elements in driving shareholder value and sustainable growth. The program is also designed to enable us to compete successfully for top talent and to build an effective leadership team. Our compensation program is grounded in best practices and ethical and responsible conduct.
Key Governance Features of Executive Compensation Program
The following table summarizes the key governance and design features of our executive compensation program. We believe our executive compensation practices drive performance and serve our shareholders’ long-term interests. We avoid certain practices that do not serve these goals or further our shareholders’ interests.
| What We DO | What We DON’T Do | |||||
 | Pay for performance: 100% of annual incentives and 80% of long-term incentive grants are performance-based |  | Overweight non-performance-based long-term incentives | |||
| | Maintain a long-standing incentive “clawback” policy | | Pay tax gross-ups on severance arrangements and perquisites | |||
| | Provide change in control protection that requires a “double trigger” (i.e., both a change in control of the Company and a qualifying loss of employment) | | Permit re-pricing of underwater stock options without shareholder approval | |||
| | Conduct a comprehensive annual risk assessment of our compensation program | | Accrue or pay dividends on unearned or unvested equity awards | |||
| | Conduct an annual executive talent review and discussion on succession planning | | Allow hedging or pledging of Nasdaq stock | |||
| | Maintain robust stock ownership guidelines | | Provide ongoing supplemental executive retirement plans; all defined benefit pension plans have been frozen | |||
| | Provide only limited perquisites, which provide nominal additional assistance to allow executives to focus on their duties | | Provide uncapped award opportunities | |||
Total Rewards Philosophy
On an annual basis, the Management Compensation Committee reviews our compensation philosophy, programs and practices to ensure that they meet the needs of not only the Company, but also the shareholders. Nasdaq’s total rewards program is designed to attract, retain, and empower employees to successfully execute the Company’s growth strategy. Nasdaq’s balanced total rewards program encourages decisions and behaviors that align with the short and long-term interests of our shareholders.
Designed to promote and support our strategy, the building blocks of our total rewards program are described below.
Compensation Philosophy Guiding Principles
| ||||
1 | 2 | 3 | ||
Pay for Performance | Retention | Competitive Pay Levels | ||
A substantial portion of compensation | Our long-term incentive award vesting periods overlap, continually ensuring that a portion of previously granted equity remains unvested. | Total compensation is sufficiently competitive with industry peers to attract and retain executives with similar levels of experience, skills, education and responsibilities. | ||
4 | 5 | 6 | ||
Internal Equity | Collateral Implications | Shareholder Alignment | ||
Compensation takes into account | Our total compensation mix encourages executives to take appropriate, but not excessive, risks to improve our performance and build long-term shareholder value. | The financial interests of executives
| ||
Say on Pay Results
Each year, we carefully consider the results of our Say on Pay advisory vote from the prior year. At our 2021 Annual Meeting, 94% of the votes cast were in favor of the advisory vote to approve executive compensation. In 2021, we retained the core elements of our executive compensation program, policies and decisions. We believe our programs continue to appropriately motivate and reward our senior management.
In addition to the perspective provided by the Say on Pay results, we also carefully solicit and consider feedback from our shareholders on executive compensation, corporate governance and other issues throughout the year. For further information on our shareholder engagement, see “Shareholder Engagement.”
How We Determine Compensation
We have established a process for evaluating the performance of the Company, the President and CEO and other NEOs for compensation purposes. On an annual basis, the Board, the Management Compensation Committee and the Nominating & ESG Committee review our President and CEO’s performance in Executive Session. As part of their deliberative process, the Management Compensation Committee and Board establish and approve performance goals, and then evaluate our President and CEO’s performance against the pre-established goals and determine appropriate compensation. The factors considered include our President and CEO’s performance against annual strategic objectives, the performance of the Company and employee engagement.
With the support of People@Nasdaq, our President and CEO develops compensation recommendations for the NEOs and other executive officers. Our President and CEO presents the recommendations to the Management Compensation Committee and/or the Board for review and consideration.
However, in accordance with the listing rules of The Nasdaq Stock Market, the President and CEO does not vote on executive compensation matters or attend Executive Sessions of the Management Compensation Committee or Board, and the President and CEO is not present when her own compensation is being discussed or approved.
Role of Compensation Consultant
In 2021, Meridian Compensation Partners, an independent compensation consultant, assisted management in gathering data, reviewing best practices and making recommendations to the Management Compensation Committee about our executive compensation committee monitorsprogram. However, Meridian did not determine or recommend the risks associated withamount or form of executive or director compensation. Meridian did not provide any services to Nasdaq or its Board other than executive compensation consulting. In 2021, we paid Meridian $38,121 in fees for competitive market data for executives and outside directors, and $147,954 in fees for other executive compensation services.
Competitive Positioning
To evaluate the external competitiveness of our executive compensation program, we compare certain elements of the program to similar elements used by peer companies. In setting 2021 compensation levels, the Management Compensation Committee used a comprehensive peer group, consisting of an aggregate of 30 companies (comprised of 23 companies in our primary peer group and seven in our additional peer group), as the basis for a competitive market analysis of the compensation program including organizational structure,for the President and CEO and other NEOs. The 2021 peer group is substantially similar to the 2020 peer group, with the following changes: Invesco Ltd. and Thomson Reuters Corporation, two firms that are no longer relevant business peers were removed; and two business relevant peers, Moody’s and Verisk Analytics, were added. For the additional peer group, salesforce.com was removed and replaced with ServiceNow, a business relevant peer. We believe using and disclosing a peer group provides valuable input into compensation planslevels and goals, succession planning, organizational developmentprogram design.
When forming the peer group, we considered potential peers among both direct industry competitors and selection processes.companies in related industries with similar talent needs. After identifying potential peers on this basis, we used the following seven screening criteria to select appropriate peer companies and talent.
We believe the current peer group includes an accurate representation of similarly sized industry competitors and/or companies with which we generally compete for executive talent.
Screening Criteria Used To Select Peer Companies
| · | Revenue size |
| · | Market capitalization size |
| · | Financial performance |
| · | Direct exchange competitors |
| · | Financial services companies |
| · | Technology companies |
| · | Companies with global complexity |
Executive Compensation Peer Groups Organized by Industry Segment
Primary Peer Group (for Benchmarking President and CEO and other NEOs’ compensation)(1)
| Consumer Finance | Data Processing & Outsourced Services | Financial Exchanges & Data | Investment Banking & Brokerage | Research & Consulting Services | ||||
| Discover Financial Services | Automatic Data Fidelity National Fiserv, Inc. Mastercard PayPal Holdings, Inc. Visa Inc. | Cboe Global CME Group Inc. Deutsche Börse AG FactSet Research Intercontinental London Stock MSCI Inc. Moody’s Corporation S&P Global Inc. TMX Group Limited | BGC Partners, Inc. The Charles Schwab E*TRADE Financial Ameritrade Holding | IHS Markit Ltd. Verisk Analytics, Inc. |
| 1 | This peer group differs from the peer group used for the performance graph included in Item 5 of our Form 10-K, which is for stock-performance comparisons and includes industry-only competitors. |
Additional Peer Group (added to Primary Peer Group for Benchmarking EVP and CIO/CTO’s compensation only; used as a secondary, informational reference for President and CEO and other NEOs’ compensation)1
| Application Software | Internet & Direct Marketing Retail | Systems Software | ||
| Adobe Inc. | eBay Inc. | NortonLifeLock Inc. | ||
| Citrix Systems, Inc. | ServiceNow, Inc. | |||
| Intuit Inc. | ||||
| Workday, Inc. | ||||
| 1 | This peer group differs from the peer group used for the performance graph included in Item 5 of our Form 10-K, which is for stock-performance comparisons and includes industry-only competitors. |
While the peer group represents a broad group of potential competitors for executive talent across various industries, peer group data serves as only one reference point for the Management Compensation Committee in evaluating our executive compensation program. The managementManagement Compensation Committee uses this data to understand how various elements of our executive compensation committee also evaluates and opinesprogram compare to other companies. In addition, the Management Compensation Committee uses multiple categorizations of the aggregate peer group data for each particular NEO role to better understand the competitive landscape for that position. For example, depending on the effectrole of our NEO, the Management Compensation Committee may consider the entire peer group and/or certain subsets of the peer group. For the President and CEO and other NEO roles, with the exception of the EVP and CIO/CTO role, the primary peer group used for compensation comparisons excludes companies in the Application Software, Internet & Direct Marketing Retail and Systems Software sectors, as discussed above. We view these companies as talent competitors for executive roles in our Global Technology Organization, so they are included as primary peers for those roles. While the peer group comparison is applied to ensure our executive compensation is competitive, we do not target executive compensation to a specific percentile of the compensation structure may haveset by our peer group.
Each executive officer is also evaluated individually based on risk-related decisions.
Nominating & Governance Committee. The nominating & governance committee oversees risks relatedskills, knowledge, performance, growth potential and, in the Management Compensation Committee’s business judgment, the value he or she brings to the company’s governance structure, policiesorganization and processes.Nasdaq’s retention risk.
Furthermore, non-management directors meetTally Sheets
When recommending compensation for the President and CEO and other NEOs, the Management Compensation Committee reviews tally sheets that detail the various elements of compensation for each executive officer. These tally sheets are used to evaluate the appropriateness of the total compensation package, to compare each executive officer’s total compensation opportunity with his or her actual aggregate payment and to ensure that the compensation appropriately reflects the compensation program’s focus on pay for performance.
What We Pay and Why:
Elements of Executive Compensation
| Element | Description | Objectives | Where Described in More Detail | |||||
| FIXED | Base Salary | Fixed amount of compensation for | Reward scope of responsibility, | Page 72 | ||||
| Annual Incentive Compensation | At-risk compensation, dependent on Formula-driven annual incentive linked to corporate financial, business unit financial and strategic objectives and other organizational priorities | Promote strong business results by rewarding value drivers, without creating an incentive to take excessive risk Serve as key compensation vehicle for rewarding results and differentiating individual performance each year | Page 72 | |||||
| AT-RISK | Long-Term Incentive Compensation | Award values are granted based on market competitive norms and individual performance �� PSUs are paid in shares of common stock upon vesting based on three-year relative TSR ranking compared to peers and to the broad market, over each cycle. RSUs are paid in shares of common stock, which have time-based vesting over four years from the grant date | Motivate and reward executives for outperforming peers over several years Ensure that executives have a significant stake in the long-term financial success of the Company, aligned with the shareholder experience Promote longer-term retention | Page 75 | ||||
| BENEFITS | Retirement, Health and Welfare | 401(k) plan with Company match Competitive welfare benefits Frozen pension plan and frozen supplemental executive retirement plan | Provide market-competitive benefits to attract and retain top talent Frozen plans reflect legacy arrangements | Page 89 | ||||
| SEVERANCE | Severance Arrangements - Involuntary Termination Without Cause or Voluntary Termination with Good Reason | Specified amounts under employment arrangements with some executive officers Discretionary guidelines, for involuntary terminations without cause | Assist in attracting and retaining top talent Provide transition assistance Promote smooth succession planning upon retirement Allow the Company to obtain release of employment-related claims | Page 89 | ||||
| Severance Arrangements - Termination Due to Change in Control (“Double Trigger”) | Severance and related benefits paid upon termination without cause or resignation for good reason following a change in control Accelerated equity vesting upon qualifying termination post-change in control | Retention of executives through a change in control Preserve executive objectivity when considering transactions in the best interest of shareholders Assist in attracting and retaining top talent | Page 89 | |||||
| OTHER | Limited Perquisites | Limited additional benefits provided to certain executives | Provide nominal additional assistancethat allows executives to focus on their duties | Page 90 |
Pay for Performance
Nasdaq’s executive compensation program is designed to deliver pay in accordance with corporate and business unit financial and strategic objectives as well as individual performance, levels of responsibility, breadth of knowledge and experience.
Our program’s intention is to align the interests of our executives with the interests of our shareholders and to link executive sessioncompensation with the drivers of short-term and long-term value creation. A large percentage of total target compensation is “at-risk” through long-term equity awards and annual cash incentive awards. These awards are linked to actual performance and include a substantial portion of equity.
Compensation Mix
The mix of total target direct compensation for our NEOs in 2021 (excluding Mr. Ptasznik) is shown below. “At-risk” pay is comprised of the target annual cash incentive award and the target equity award. The annual cash incentive award and the PSU portion of the equity award are performance-based.
NEOs - 2021 Total Target Direct Compensation Mix
2021 Compensation Decisions
The sections below provide an overview as to how the Management Compensation Committee and/or Board of Directors determined each NEO’s compensation for 2021. For specific compensation amounts for each NEO, see the “NEO Compensation Summaries” beginning on page 78.
Base Salary
Base salaries are a fixed component of each NEO’s compensation. In setting each NEO’s base salary, the Management Compensation Committee and/or Board considers competitive market data derived from our peer group, annual market surveys and the NEO’s individual contributions, performance, time in role, scope of responsibility, leadership skills and experience. We review base salaries on an annual basis and may adjust base salaries during the year in response to significant changes in an executive’s responsibilities or events that would impact the long-term retention of a key executive. Salaries are established at levels commensurate with each executive’s title, position and experience, recognizing that each executive is managing a component of a complex global company.
Annual Cash Incentive Compensation
We maintain an annual performance-based cash incentive arrangement under which each NEO can earn cash incentive awards through our ECIP based on achievement of performance against pre-determined performance goals. The Management Compensation Committee and/or Board established each NEO’s target annual cash opportunity based on an assessment of each NEO’s position and responsibilities, the competitive market analysis and the Company’s retention objectives.
How We Set Performance Targets
The annual cash incentive award payments for our NEOs are based on the achievement of pre-established, quantifiable performance goals. The President and CEO selects and recommends goals for the other executive officers based on their areas of responsibility and input from each executive. The
Management Compensation Committee and/or the Board review and consider our President and CEO’s recommendations and approve the goals for the coming year after identifying the objectives most critical to our future growth and most likely to hold executives accountable for the operations for which they are responsible. Based on these same factors, the Management Compensation Committee and Board determine and approve the performance goals for the President and CEO.
Nasdaq commences its rigorous goal-setting process during its mid-year strategic off-site with the Board. In the fourth quarter, the Management Compensation Committee and Board review initial goals for the following year. At the beginning of the following year, the Management Compensation Committee and Board review and approve Company goals based on business criteria as well as target performance levels for target annual incentive cash awards. Targets are set based primarily on the Company’s Board-approved budget for the year. The performance goals are intended to be rigorous and are set at levels where the maximum payout for any NEO would be difficult to achieve and that are in excess of budget assumptions.
The Management Compensation Committee and/or the Board reviews the Company’s financial goals and the NEOs’ individual goals throughout the year and determines if any adjustments are warranted based on significant transactions or other extraordinary events.
For 2021, the Management Compensation Committee and Board selected financial and strategic metrics and targets that they believe incentivize our executives to achieve our strategic objectives and drive Nasdaq’s long-term financial performance. The 2021 annual cash incentive awards were tied to results in the following areas:
Corporate Financial Objectives
| · | operating income (on a run rate basis), which measures business efficiency and profitability; |
| · | net revenues, which measure the ability to drive revenue growth; |
Business Unit Financial Objectives
| · | defined business unit-specific goals that contribute to the Company’s revenue growth and profitability; |
Strategic Objectives
| · | defined corporate or business unit-specific goals that contribute to the Company’s long-term strategy execution and performance; and |
Engagement and Diversity & Inclusion
| · | goal that measures the extent to which employees feel passionate about their jobs, are committed to the organization and put discretionary effort into their work, based on their responses to employee surveys. Employee engagement is one important measure of progress toward our social objectives, as part of our broader ESG focus. |
In 2021, we added a new strategic objective for each NEO of “Diversity, Inclusion, Belonging and Engagement.” The sub-components of this goal for achievement purposes were as follows: (i) Business Unit Employee Engagement Index results, as measured by the average of two employee engagement surveys per year and (ii) advance Diversity, Inclusion, & Belonging. |
Potential Payments
Annual cash incentive award payments are determined after the end of the year and are based on actual performance against each goal. Each goal that applied to the NEOs for 2021 had a minimum, target and maximum performance level.
Scoring of each goal is based on actual goal achievement as compared to the target. In 2021, payments on each goal could vary between 0% and 200% of the target. Although our ECIP is highly formulaic by design,
awards are subject to adjustment at the discretion of the Management Compensation Committee, based on a holistic, qualitative assessment of individual performance delivered as well as ethical and responsible conduct. The Management Compensation Committee did not adjust any bonus payments, or apply discretion, to the compensation of any NEOs in 2021.
Award Payouts
In February 2022, the Management Compensation Committee and/or the Board determined the final levels of achievement for each of the goals and approved the cash payout amounts. The table below shows achieved performance against each 2021 corporate objective and the percentage of target incentive opportunity yielded by such performance.
Corporate Objectives Performance vs. Goals
Corporate Objective | Threshold (0% payout) | Target (100% Payout) | Maximum (200% Payout) | Nasdaq’s Results for 2021 as Measured for Compensation Purposes | Payout Percentage of Target Incentive Award Amount | |||||
Operating | $1,326.0M | $1,401.0M - | $1,458.0M | $1,848.6M | 200% | |||||
Income | $1,421.0M | |||||||||
(Run Rate)1 | ||||||||||
Net Revenues2 | $2,723.0M | $2,811.0M - | $2,898.0M | $3,339.5M | 200% | |||||
| $2,843.0M | ||||||||||
| 1. | Operating income (run rate) reflects our non-GAAP operating income adjusted to exclude: Nasdaq Next (i.e., our innovation investment program); the impact of changes in foreign exchange rates; certain intra-year acquisitions and divestitures; severance; and benefits from certain initiatives that were not initially included in the 2021 budget. Non-GAAP operating income differs from U.S. GAAP operating income due to the exclusion of the following items: amortization expense of acquired intangible assets; merger and strategic initiatives expense; restructuring charges; and certain other expenses that are not part of ongoing business expenses. For a discussion of non-GAAP adjustments, see Annex A. |
| 2. | Corporate net revenues exclude Nasdaq Next, the impact of changes in foreign exchange rates and certain intra-year acquisitions and divestitures. |
Our goal setting process encompasses a comprehensive review of expectations of both our performance and levels of external market activity. In 2021, our target goals for our Solutions Segments businesses reflected growth in revenue aligned with our medium-term outlook and operating income growth at the respective business margins, which we believed our teams had the ability to effectively influence. However, part of our revenues result from our exchange business, where results are highly influenced by market volumes in the U.S. equities and equities derivatives markets. When setting 2021 goals, our analyses resulted in an expectation that market volumes in our U.S. Cash Equities and Equity Derivatives businesses were unlikely to persist at the record levels set in 2020. An expectation of lower market volumes, as well as the sale of our U.S. Fixed Income business, resulted in lower revenue and operating margin goals for 2021.
Our actual performance exceeded the 2021 goals, reflecting both higher than expected market volume activity and strong performance across all our Solutions Segment businesses, including the recently acquired Verafin business.
The Management Compensation Committee and/or the Board assessed each NEO’s achievement of the business unit financial objectives and strategic objectives in 2021, as set forth in the NEO Compensation Summaries beginning on page 78. Specific metrics for these goals are not disclosed for competitive reasons. However, 100% of our NEO goals were defined with quantifiable performance metrics and were approved by the Management Compensation Committee and/or the Board. No discretion was applied to any goal scoring our NEOs.
Long-Term Incentive Compensation
PSUs
In 2021, we granted PSUs to each NEO in order to incentivize and reward them for growth in our TSR relative to the TSR of two equally weighted groups over the performance period. One performance group consists of all S&P 500 companies at the start of the performance period and the other performance group consists of the peer companies to the right. The peer companies include other global exchanges with sizable market capitalizations. We measure our TSR performance relative to two different groups in order to align with the varied interests of our shareholders. The PSUs represented 80% of the NEO’s long-term incentive compensation.
The PSUs are subject to a three-year cumulative performance period beginning on January 1, 2021 and ending on December 31, 2023. The shares earned, if any, vest at the end of the performance period and upon the certification by the Management Compensation Committee that the performance metrics have been achieved. The TSR results are measured at the beginning and end of the three-year performance period. Our relative performance ranking against each of these groups at the end of the performance period will determine the number of vested PSUs. For each vested PSU, Nasdaq will distribute one share of common stock to each NEO. The maximum payout will be 200% of the target number of PSUs granted if Nasdaq ranks at the 85th percentile or above of each of the groups. However, if our TSR is negative for the three-year performance period, regardless of TSR ranking, the payout cannot exceed 100% of the target number of PSUs granted.
The table to the right illustrates the percentage of the target number of PSUs granted to each NEO that the NEO may receive based upon different levels of achievement against each of the groups. For each group, the resulting shares earned will be calculated by multiplying the relevant percentage from the table below by one-half of the target award amount. Any payouts earned at performance levels below the 50th percentile rank are designed to serve as a retention vehicle.
Global Exchange Peer Companies Used for Three-Year PSUs1
| 1 | While the peer group used for competitive analysis of compensation includes a broad range of companies that may compete with us for executive talent, the peer group used for the three-year PSUs includes a narrower list of more direct competitors that provide the most relevant comparators for stock price performance. |
Amount of Shares a Grantee May Receive Based Upon Achievement
| Percentile Rank of Nasdaq’s Three-Year | Resulting Shares Earned | |
| TSR Versus the Relevant Group | ||
>= 85th Percentile | 200% | |
67.5th Percentile | 150% | |
50th Percentile | 100% | |
25th Percentile | 50% | |
15th Percentile | 30% | |
0 Percentile | 0% | |
For levels of achievement between points, the resulting shares earned will be calculated based on straight-line interpolation.
RSUs
In 2021, we also granted RSUs to each NEO to promote long-term shareholder alignment and retention. The RSUs represented 20% of the NEO’s long-term incentive compensation. The RSUs are subject to a four-year vesting schedule, vesting 33% on the second anniversary of the grant, 33% on the third anniversary of the grant and the balance on the fourth anniversary of the grant, in each case subject to continued employment with the Company.
Award Determination
In setting Ms. Friedman’s 2021 equity award target, the Management Compensation Committee and Board focused on motivating performance with significant upside and downside based on relative performance. Historical awards and the retention value of Ms. Friedman’s outstanding equity were considered when determining the target amount of her award. Peer group data also was considered in establishing a market-competitive award level.
Ms. Friedman recommended the specific equity award targets for each of the other NEOs, which varied among executives depending upon responsibilities and retention considerations. The Management Compensation Committee and Board evaluated these recommendations and determined that the amount of each award reflected the individual’s contributions, was aligned with competitive market levels and was appropriate for retention purposes.
The equity award targets are established for our NEOs based on an assessment of each officer’s position and responsibilities, the competitive market analysis and the Company’s retention objectives.
Settlement of 2019 PSU Grants Based on Relative TSR
In February 2022, the Management Compensation Committee evaluated and approved the performance results for the PSUs granted to the NEOs in 2019. These PSUs were subject to a three-year cumulative performance period beginning on January 1, 2019 and ending on December 31, 2021, and performance was determined by comparing Nasdaq’s TSR to two groups of companies, each weighted 50%. One group consisted of all S&P 500 companies and the other group consisted of 15 peer companies. Of the peer group, two companies (Bolsas y Mercados Españoles and NEX Group) were acquired during the performance period and were therefore removed from the peer group at the time of the performance measurement. We measure our TSR performance relative to two different groups in order to align with the varied interests of our shareholders.
The following table sets forth the 2019 PSU performance measure results.
PSU Performance Measure Results
Equity | Cumulative | Weighting | Performance | Percentile | Payout | Blended | ||||||
Award | TSR | Factors | Rank | Payout | ||||||||
| Based on Relative | ||||||||||||
| 50% | TSR Against the | 87th | 200% | |||||||||
| 2019 Three- | S&P 500 | |||||||||||
| Year PSU | 149% | 200% | ||||||||||
| Award | Based on Relative | |||||||||||
| 50% | TSR Against | 100th | 200% | |||||||||
| Peers | ||||||||||||
NEO Compensation Summaries
2021 Performance Highlights
2021 Compensation Elements
As shown in the table below, for 2021, the Management Compensation Committee and Board maintained Ms. Friedman’s base salary and target annual cash incentive award. The Management Compensation Committee and Board increased the target grant date value of her equity award by $1,000,000.
In setting Ms. Friedman’s compensation, the Management Compensation Committee and Board considered her performance and a review of the competitive positioning of her overall compensation as compared to the compensation of similar officers at companies in our peer group.
| Type of | 2021 Annualized | 2020 Annualized | ||||
| Compensation | Amounts | Amounts | ||||
Base Salary | Fixed | $1,250,000 | $1,250,000 | |||
Target Annual Cash Incentive | Performance-Based | $3,000,000 | $3,000,000 | |||
Award | ||||||
Target Equity Award | Performance-Based (PSUs) | $8,000,0001 | $7,200,000 | |||
(Grant Date Face Value) | At-Risk (RSUs) | $2,000,0001 | $1,800,000 | |||
Total Target Compensation | $14,250,000 | $13,250,000 | ||||
| 1 | Ms. Friedman was awarded a target amount of 53,032 PSUs, and 13,258 RSUs, on April 1, 2021 with the terms and conditions described in the “Long-Term Incentive Compensation” section above. |
2021 Performance Goals – Annual Cash Incentive Award
Ms. Friedman earned an annual incentive award payment of $5,799,474, or 193% of target, based on the
final achievement of her pre-established, quantifiable performance goals, as described below.
Goal Type | Goal | Goal | Actual | Award Payout | ||||
Weighting | Performance | |||||||
as a Percent | ||||||||
of Target | ||||||||
Corporate | Corporate Operating Income (Run | |||||||
Financial | Rate) | 60% | 200% | $3,600,000 | ||||
Corporate Net Revenue | 20% | 200% | $1,200,000 | |||||
Strategic | Nasdaq NEXT Revenue | 2% | 156% | $93,699 | ||||
Initiatives | ||||||||
Expand Analytics and Workflow to | ||||||||
Service the Investment Community | 2% | 131% | $78,600 | |||||
Market Technology Initiatives | 2% | 150% | $90,000 | |||||
IPO Success Rate | 3% | 192% | $172,800 | |||||
Advance Cloud-Based System | ||||||||
Migrations | 3% | 200% | $180,000 | |||||
Complete Key Strategic Acquisitions | ||||||||
and Divestitures | 3% | 200% | $180,000 | |||||
Employee | Diversity, Inclusion, Belonging and | 5% | 136% | $204,375 | ||||
Engagement | Engagement | |||||||
Total | 100% | 193% | $5,799,474 | |||||
Settlement of 2019 PSU Award Based on Relative TSR
The table below sets forth the number of PSUs that Ms. Friedman earned as of December 31, 2021 due to the performance results of her 2019 PSU award, which was based on relative TSR.
Target PSUs | Actual Performance as a | PSUs | ||
Awarded in 2019 | Percent of Target | Earned | ||
96,153 | 200% | 192,306 | ||
2021 Performance Highlights
| · | Drove Nasdaq’s financial stewardship efforts, which resulted in record performance for 2021, including net revenues of $3.4 billion, an increase of 18% over 2020. In addition, Solutions Segments revenues increased 21%, mostly due to organic growth. |
| · | Executed consistent capital planning, which enabled the Company to return approximately $1.3 billion of cash to shareholders in 2021, including $943 million in share repurchases and $350 million in dividends. Completed the Company’s first accelerated share repurchase program. |
| · | Strengthened the Company’s balance sheet by refinancing and retiring the outstanding 1.75% senior notes due 2023 and issuing €615 million of 0.900% Senior Notes due 2033. |
| · | Navigated the Company’s finances during the second year of the COVID-19 pandemic and market volatility, and led the successful closing of our acquisition of Verafin and the divestiture of our U.S. Fixed Income business. |
| · | Enhanced the Company’s ESG practices and disclosures and expanded reporting to include TCFD and SASB standards, driving material improvement in scores/ratings from leading ESG research providers including Sustainalytics, ISS and CDP. |
2021 Compensation Elements
Following Ms. Dennison’s promotion to EVP and CFO in March 2021, the Management Compensation Committee and Board increased her base salary from $450,000 to $550,000, and target annual cash incentive award from $450,000 to $750,000, effective March 1, 2021. Ms. Dennison’s base salary and target annual cash incentive award were both pro-rated for 2021 since the increases became effective after the beginning of the year. The Management Compensation Committee and Board also increased the target grant date value of Ms. Dennison’s equity award from $700,000 to $1,200,000. In determining these compensation changes, the Management Compensation Committee and Board assessed Ms. Dennison’s performance and the change in her role and responsibilities as the new CFO. Her total compensation was determined to be competitive to the market compensation as compared to other CFOs in our peer group.
| Type of Compensation | 2021 Annualized | |||
| Amounts | ||||
Base Salary | Fixed | $550,000 | ||
Target Annual Cash Incentive Award | Performance-Based | $750,000 | ||
Target Equity Award (Grant Date Face Value) | Performance-Based (PSUs) | $960,0001 | ||
| At-Risk (RSUs) | $240,0001 | |||
Total Target Compensation | $2,500,000 | |||
| 1 | Ms. Dennison was awarded a target amount of 6,363 PSUs, and 1,590 RSUs, on April 1, 2021 with the terms and conditions described in the “Long-Term Incentive Compensation” section above. |
2021 Performance Goals – Annual Cash Incentive Award
Ms. Dennison earned an annual incentive award payment of $1,415,845, or 195% of target, based on the final achievement of her pre-established, quantifiable performance goals, as described below.
Goal Type | Goal | Goal | Actual | Award Payout | ||||
Weighting | Performance | |||||||
as a Percent | ||||||||
of Target | ||||||||
Corporate | Corporate Operating Income | |||||||
Financial | (Run Rate) | 50% | 200% | $727,939 | ||||
Corporate Net Revenue | 20% | 200% | $291,176 | |||||
Business Unit | Finance Budget Expense | 5% | 200% | $72,794 | ||||
Financial | ||||||||
Strategic | �� | Complete Strategic Acquisitions and | ||||||
Initiatives | Divestitures | 7% | 179% | $91,211 | ||||
Enhance Nasdaq’s ESG Initiatives | 7% | 200% | $101,911 | |||||
Advance Data and Analytics Strategy | 6% | 194% | $84,623 | |||||
Employee | Diversity, Inclusion, Belonging and | 5% | 127% | $46,191 | ||||
Engagement | Engagement | |||||||
Total | 100% | 195% | $1,415,845 | |||||
Settlement of 2019 PSU Award Based on Relative TSR
The table below sets forth the number of PSUs that Ms. Dennison earned as of December 31, 2021 due to the performance results of her 2019 PSU award, which was based on relative TSR.
Target PSUs | Actual Performance as a | PSUs | ||
Awarded in 2019 | Percent of Target | Earned | ||
3,393 | 200% | 6,786 | ||
2021 Performance Highlights
| · | Investment Intelligence segment achieved a 20% year-over-year revenue increase, which was almost entirely due to organic growth. |
| · | Delivered a 41% increase in new sales for our Analytics offerings of eVestment and Solovis as compared to 2020, due to strong user adoption across asset owners and asset managers. |
| · | 61 ETPs were launched tracking Nasdaq indexes, comprised of approximately $3 billion of AUM accumulated during 2021. |
| · | Introduced Data Fabric, a managed data solution utilizing the Nasdaq Data Link platform, to help investment management firms scale their data infrastructure. |
2021 Compensation Elements
As shown in the table below, for 2021, the Management Compensation Committee and Board increased Ms. Dillard’s base salary from $525,000 to $550,000, which was effective April 5, 2021, along with salary increases for other eligible Nasdaq employees. Since the target annual cash incentive award is based on a percentage of base salary, the salary increase resulted in a corresponding increase to Ms. Dillard’s target annual incentive award from $787,500 to $825,000. Both Ms. Dillard’s base salary and target annual cash incentive award amounts are pro-rated for 2021 since the increases became effective after the beginning of the year. The Management Compensation Committee and Board also increased the target grant date value of Ms. Dillard’s equity award by $100,000. In determining these compensation changes, the Management Compensation Committee and Board assessed Ms. Dillard’s performance and the overall performance of our Investment Intelligence segment. Her total compensation was determined to be market competitive when compared to similar business unit executives in our peer group.
| Type of | 2021 Annualized | 2020 Annualized | ||||
| Compensation | Amounts | Amounts | ||||
Base Salary | Fixed | $550,000 | $525,000 | |||
Target Annual Cash Incentive Award | Performance-Based | $825,000 | $787,500 | |||
Target Equity Award | Performance-Based (PSUs) | $1,280,0001 | $1,200,000 | |||
(Grant Date Face Value) | At-Risk (RSUs) | $320,0001 | $300,00 | |||
Total Target Compensation | $2,975,000 | $2,812,500 | ||||
| 1 | Ms. Dillard was awarded a target amount of 8,485 PSUs, and 2,121 RSUs, on April 1, 2021 with the terms and conditions described in the “Long-Term Incentive Compensation” section above. |
2021 Performance Goals – Annual Cash Incentive Award
Ms. Dillard earned an annual incentive award payment of $1,470,169, or 180% of target, based on the final achievement of her pre-established, quantifiable performance goals, as described below.
Goal Type | Goal | Goal | Actual | Award Payout | ||||
Weighting | Performance | |||||||
as a Percent | ||||||||
of Target | ||||||||
Corporate | Corporate Operating Income | |||||||
Financial | (Run Rate) | 25% | 200% | $407,672 | ||||
Corporate Net Revenue | 10% | 200% | $163,069 | |||||
Business Unit | Investment Intelligence Operating | |||||||
Financial | Income | 20% | 200% | $326,137 | ||||
Investment Intelligence Nasdaq NEXT | ||||||||
Revenue | 5% | 73% | $29,896 | |||||
Investment Intelligence Revenue | 10% | 200% | $163,069 | |||||
Expand Market Data Growth | 5% | 150% | $61,151 | |||||
Strategic Initiatives | Expand Asset Class and Launch New Index Products | 7% | 186% | $105,986 | ||||
U.S. Public Policy Leadership | 6% | 200% | $97,841 | |||||
Expand Analytics and Workflow to | ||||||||
Service the Investment Community | 7% | 131% | $74,767 | |||||
Employee | Diversity, Inclusion, Belonging | |||||||
Engagement | and Engagement | 5% | 100% | $40,581 | ||||
Total | 100% | 180% | $1,470,169 | |||||
Settlement of 2019 PSU Award Based on Relative TSR
The table below sets forth the number of PSUs that Ms. Dillard earned as of December 31, 2021 due to the performance results of her 2019 PSU award, which was based on relative TSR.
Target PSUs | Actual Performance as a | PSUs | ||
Awarded in 2019 | Percent of Target | Earned | ||
26,268 | 200% | 52,536 | ||
2021 Performance Highlights
Corporate Platforms segment achieved an 18% revenue increase year-over-year.
The Nasdaq Stock Market led U.S. exchanges for IPOs during 2021 and featured nine of the ten largest U.S.-based IPOs by capital raised.
The Nasdaq Stock Market welcomed 1,000 new company listings in 2021, including 752 IPOs representing $181 billion in capital raised, while Nasdaq’s European exchanges welcomed 207 new listings. The Nasdaq Stock Market added 33 new listings, which together with companies that transferred additional securities to Nasdaq, resulted in more than $360 billon in global equity market capitalization switched to Nasdaq.
Expanded the Direct Listings business by increasing our offering and value to prospective clients, resulting in the largest direct listing in history listing on Nasdaq.
Executed on key product initiatives for the ESG product suite, including the launch of OneReport 2.0, and expanded Nasdaq’s suite of ESG products and services.
2021 Compensation Elements
As shown in the table below, for 2021, the Management Compensation Committee maintained Mr. Griggs’ base salary, target annual cash incentive award, and target equity award compared to his 2020 compensation amounts. In determining these amounts, the Management Compensation Committee assessed Mr. Griggs’ individual performance and market competitive positioning to ensure his pay is competitive with the role and peers within his area of expertise.
| Type of Compensation | 2021 Annualized Amounts | 2020 Annualized Amounts | ||||
| Base Salary | Fixed | $575,000 | $575,000 | |||
Target Annual Cash Incentive Award | Performance-Based | $862,500 | $862,500 | |||
| Target Equity Award | Performance-Based (PSUs) | $1,280,0001 | $1,280,000 | |||
| (Grant Date Face Value) | At-Risk (RSUs) | $320,0001 | $320,000 | |||
| Total Target Compensation | $3,037,500 | $3,037,500 | ||||
| 1 | Mr. Griggs was awarded a target amount of 8,485 PSUs, and 2,121 RSUs, on April 1, 2021 with the terms and conditions described in the “Long-Term Incentive Compensation” section above. |
2021 Performance Goals – Annual Cash Incentive Award
Mr. Griggs earned an annual incentive award payment of $1,640,065, or 190% of target, based on the final achievement of his pre-established, quantifiable performance goals, as described below.
Goal Type | Goal | Goal Weighting | Actual Performance as a Percent of Target | Award Payout | ||||
Corporate Financial | Corporate Operating Income (Run Rate) | 25% | 200% | $431,250 | ||||
| Corporate Net Revenue | 10% | 200% | $172,500 | |||||
Business Unit Financial | Corporate Platforms Operating Income | 15% | 200% | $258,750 | ||||
| Corporate Platforms Revenue | 10% | 200% | $172,500 | |||||
Strategic Initiatives | IPO Success Rate | 10% | 192% | $165,600 | ||||
Corporate Platforms Client Retention and Expansion | 5% | 159% | $68,526 | |||||
| Build ESG Business Capability | 5% | 180% | $77,625 | |||||
Expand Nasdaq Private Markets Products and Services | 5% | 200% | $86,250 | |||||
| Expand Direct Listings | 5% | 141% | $60,806 | |||||
| US Public Policy Leadership | 5% | 200% | $86,250 | |||||
Employee Engagement | Diversity, Inclusion, Belonging and Engagement | 5% | 139% | $60,008 | ||||
Total | 100% | 190% | $1,640,065 | |||||
Settlement of 2019 PSU Award Based on Relative TSR
The table below sets forth the number of PSUs that Mr. Griggs earned as of December 31, 2021 due to the performance results of his 2019 PSU award, which was based on relative TSR.
Target PSUs Awarded in 2019 | Actual Performance as a Percent of Target | PSUs Earned | ||
16,968 | 200% | 33,936 | ||
2021 Performance Highlights
Led the negotiation and development of the AWS partnership and development of the technology infrastructure to enable Nasdaq to begin migrating North American exchanges to the cloud, utilizing a new edge computing solution that was co-designed by Nasdaq and AWS for market infrastructure.
Completed the technical launch of Fusion for the Nordic Equity Derivatives Market, our second market on our new Fusion platform.
The surrounding systems technology roadmap advanced significantly in the Nordics, including through the deployment of the Nasdaq Data Warehouse and the standardization of market operations tools.
Developed the trading application services framework for our exchanges and delivered enhanced Nasdaq Financial Framework clearing applications.
Continued to lead the Global Technology team, during the second year of COVID-19, in a completely remote environment with record volumes in trading activity and IPOs.
2021 Compensation Elements
For 2021, the Management Compensation Committee maintained Mr. Peterson’s base salary and target annual cash incentive award. The Management Compensation Committee increased the target grant date face value of his equity award by $100,000. In determining this compensation change, the Management Compensation Committee assessed Mr. Peterson’s individual performance and the overall performance of our Global Technology Organization. His total compensation was determined to be competitive as compared to CIOs and CTOs in our peer group.
| Type of Compensation | 2021 Annualized Amounts | 2020 Annualized Amounts | ||||
| Base Salary | Fixed | $600,000 | $600,000 | |||
Target Annual Cash Incentive Award | Performance-Based | $900,000 | $900,000 | |||
| Target Equity Award | Performance-Based (PSUs) | $1,520,0001 | $1,440,000 | |||
| (Grant Date Face Value) | At-Risk (RSUs) | $380,0001 | $360,000 | |||
| Total Target Compensation | $3,400,000 | $3,300,000 | ||||
| 1 | Mr. Peterson was awarded a target amount of 10,076 PSUs, and 2,519 RSUs, on April 1, 2021 with the terms and conditions described in the “Long-Term Incentive Compensation” section above. |
2021 Performance Goals – Annual Cash Incentive Award
Mr. Peterson earned an annual incentive award payout of $1,746,459, or 194% of target, based on the final achievement of his pre-established, quantifiable performance goals, as described below.
Goal Type | Goal | Goal Weighting | Actual Performance as a Percent of Target | Award Payout | ||||
Corporate Financial | Corporate Operating Income (Run Rate) | 50% | 200% | $900,000 | ||||
| Corporate Net Revenue | 20% | 200% | $360,000 | |||||
Strategic Initiatives | Launch Fusion for the Nordic Equity Derivatives Market | 5% | 200% | $90,000 | ||||
Advance Cloud-Based System Migrations | 5% | 200% | $90,000 | |||||
| Market Technology Initiatives | 5% | 150% | $67,500 | |||||
System Reliability and Operational Excellence | 5% | 196% | $87,978 | |||||
| Maturing Nasdaq Financial Framework | 5% | 199% | $89,757 | |||||
Employee Engagement | Diversity, Inclusion, Belonging and Engagement | 5% | 136% | $61,224 | ||||
Total | 100% | 194% | $1,746,459 | |||||
Settlement of 2019 PSU Award Based on Relative TSR
The table below sets forth the number of PSUs that Mr. Peterson earned as of December 31, 2021 due to the performance results of his 2019 PSU award, which was based on relative TSR.
Target PSUs Awarded in 2019 | Actual Performance as a Percent of Target | PSUs Earned | ||
20,361 | 200% | 40,722 | ||
Other Aspects of Our Executive Compensation Program
General Equity Award Grant Practices
The Management Compensation Committee and the Board approve annual equity awards during regular basisfirst quarter meetings, which are scheduled well in advance and without the presence of managementregard to discuss matters, including matters pertaining to risk. NASDAQ OMX does notany material Company news announcements.
We believe that the board’s rolecurrent and expected expense and share utilization are reasonable and justified in risk oversightlight of the Management Compensation Committee’s goals of aligning the long-term interests of officers and employees with those of shareholders and rewarding officers for long-term relative TSR growth while retaining a strong management team. We actively monitor the expense and share utilization associated with annual grants and are committed to adjusting grant practices if and when appropriate.
Throughout the performance periods for equity awards, the Management Compensation Committee receives updates on the executives’ progress in achieving applicable performance goals and monitors the compensation expense and share run rate that the Company is incurring for outstanding equity awards.
The reference price for calculating the value of equity awards granted is the closing market price of Nasdaq’s common stock on the date of grant. Existing equity ownership levels are not a factor in award determinations as we do not want to discourage senior executives from holding significant amounts of our common stock.
Benefits
We provide a comprehensive benefits program to our executive officers, including the NEOs, which mirrors the program offered to all employees of the Company. These benefits include, among other components, a 401(k) plan with 6% matching contributions, health and welfare benefits and participation in the Company’s ESPP. Under these plans, our NEOs participate on the same terms as other employees.
Prior to 2007, Nasdaq offered a defined benefit pension program, which was frozen in 2007. The plan does not allow any new participants, and for existing participants, future service and salary do not contribute to the benefit accrual under the plan. Employees hired prior to the freeze date continue to receive credit for service required for vesting of the benefit. None of the NEOs, other than Ms. Friedman, participate in the defined benefit pension program.
Severance
Except in employment agreements and other agreements for certain executive officers as described in this Proxy Statement, we are not obligated to pay general severance or other enhanced benefits to any NEO upon termination of his or her employment. However, the Management Compensation Committee and/or the Board has affected its leadership structure.the discretion to pay severance. Severance decisions do not influence other compensation decisions, which are focused on motivating our executives to remain with Nasdaq and contribute to our future success.
Change in control severance is addressed in employment agreements for certain NEOs, as described in this Proxy Statement, and in a change in control severance policy for NEOs without an employment agreement. We believe that the terms for triggering payment under these arrangements are appropriate. For example, these arrangements use what is known as a “double trigger,” meaning that severance resulting from a change in control is paid only upon the occurrence of both a change in control of the Company and a qualifying loss of employment. In addition, a change in control under these arrangements is limited to situations where the acquiror obtains a majority of Nasdaq’s voting securities or the current members of our Board (or their approved successors) cease to constitute a majority of the Board. We do not provide tax RISK ASSESSMENT OF COMPENSATION PROGRAMgross-ups in connection with the change in control excise tax.
For further information on Nasdaq’s limited severance arrangements, see “Employment Agreements” and “Termination Due to Change in Control (“Double Trigger”).
Other
Because our executive compensation program emphasizes pay for performance, it includes few perquisites for our executives. Under her employment agreement, for security reasons, we provide Ms. Friedman with a company car and a security-trained driver for use when conducting Nasdaq business. Any use of the car and driver for personal reasons is reported in the Summary Compensation Table included below under “Executive Compensation.” NEOs are eligible to receive basic financial planning services and executive health exams. In addition, like all employees and contractors, our executives are eligible to receive 100% corporate matching funds (and sometimes more for specific initiatives approved by the Company) for donations to an IRS-registered, 501(c)(3)-compliant organization. Participation in each of these programs is voluntary. We do not provide tax gross-up payments on perquisites.
Risk Mitigation and Other Pay Practices
Risk Assessment of Compensation Program
We monitor the risks associated with our compensation program on an ongoing basis. In March 2014,2022, the management compensation committeeManagement Compensation Committee and audit committeeAudit & Risk Committee were presented with the results of anour annual formal assessment of our employee compensation program in order to evaluate the risks arising from our compensation policies and practices. This risk assessment report reflected a comprehensive review and analysis of the components of our compensation program, including the performance measures established under the 2014 cash performance-based incentive award program. The auditManagement Compensation Committee and management compensation committees of our board of directorsAudit & Risk Committee both concluded, based on the risk assessment report’s findings, that any risks arising from our compensation program are not reasonably likely to have a material adverse effect on the company.Company.
The risk assessment was performed by an internal working group consisting of employees in People@ Nasdaq, Group Risk Management and the human resources, risk management, internal audit and corporate finance departments,Internal Audit Department, as well as the officesOffices of general counselGeneral Counsel and corporate secretary.Corporate Secretary. The findings were presented to the risk steering committee,Global Risk Management Committee, which concurred with the working group’s report. The risk assessment included the following steps:
collection and review of existing NASDAQ OMXour compensation policies and pay structures;
development of a risk assessment scorecard, analysis approach and timeline; and
conduct of a qualitative risk assessment of performance goals to determine overall risk level; and
THE NASDAQ OMX GROUP, INC. 26
review and evaluation of controls that might mitigate risk takingrisk-taking (e.g., equity vesting structure, incentive recoupment policy and stock ownership guidelines).
CORPORATE GOVERNANCE GUIDELINES
The NASDAQ OMX board has adopted corporate governance guidelines that set forth a flexible framework within which the board of directors and its committees operate. These guidelines cover a number of areas including the selection, composition and functions of our board, committee assignments and rotation, executive sessions, director orientation and continuing education, stock ownership guidelines for directors, evaluation of senior management and succession planning.
Additionally, the guidelines set forth procedures in the event one or more nominees to the company’s board do not receive the affirmative vote of a majority of the votes cast in an uncontested election. If an incumbent director desires to become a nominee of the board, the incumbent director must submit an irrevocable resignation contingent on (i) the incumbent not receiving a majority of the votes cast in an uncontested election and (ii) acceptance of that resignation by the board. If the incumbent director does not receive the affirmative vote of a majority of the votes cast, the nominating & governance committee will consider the resignation and recommend acceptance or rejection of the resignation to the board. The board will act on the resignation, taking the nominating & governance committee’s recommendation into account, within 90 days following certification of the stockholder vote.
Thereafter, the board will promptly disclose its decision whether to accept or reject the director’s resignation (and the reasons for rejecting the resignation, if applicable) in a press release to be disseminated in the manner that NASDAQ OMX’s press releases typically are distributed.
Any incumbent director who fails to receive the votes required for re-election in an uncontested election and who tenders his or her resignation will remain active and engaged in board activities while the nominating & governance committee considers his or her resignation. However, the incumbent director is expected to voluntarily recuse himself or herself from participation in any proceedings or consideration by the nominating & governance committee or the board regarding the incumbent director.
CODE OF ETHICS
We also have adopted the NASDAQ OMX Code of Ethics, which is applicable to all of our employees, including the principal executive officer, the principal financial officer and the controller and principal accounting officer (senior executive and financial officers), and contractors. We have a separate NASDAQ OMX Code of Conduct for the Board of Directors, which contains provisions specifically applicable to directors. We post amendments to or waivers from the NASDAQ OMX Code of Ethics (to the extent applicable to the senior executive and financial officers) or to the NASDAQ OMX Code of Conduct for the Board of Directors on our website at the location listed below. We also disclose amendments or waivers to the codes in any manner otherwise required by the standards applicable to companies listed on The NASDAQ Stock Market.
The following materials related to our corporate governance are available publicly on our website athttp://ir.nasdaqomx.com/nasdaq-omx-group.cfm.
Corporate Governance Guidelines
NASDAQ OMX Code of Ethics
NASDAQ OMX Code of Conduct for the Board of Directors
Procedures to Report Concerns
Procedures for Communicating with the Board of Directors
Board of Directors Duties and Obligations
THE NASDAQ OMX GROUP, INC. 27
Our Charter, By-Laws and committee charters also are online at the same web address. Copies may be obtained, free of charge, by writing to our corporate secretary at the address listed below under “Stockholder Communication with Directors.” Please specify the document that you would like to receive.
RECENT AMENDMENTS TO OUR CHARTER AND BY-LAWS
In response to feedback from our stockholders, we implemented certain amendments to our Charter and By-Laws in January 2014, following approval from the SEC.
The amendments to our Charter were approved by our stockholders at our most recent annual meeting, held on May 22, 2013. Among other things, these amendments removed each supermajority voting requirement in the Charter and replaced it with a “majority of outstanding shares” voting requirement. The supermajority voting requirements required the affirmative vote of at least 66 2/3% of the total voting power of NASDAQ OMX’s capital stock entitled to vote generally in the election of directors, voting together as a single class, to take certain actions. These actions included: removal of directors; adoption, alteration, amendment and repeal of By-Laws; and adoption, alteration, amendment and repeal of certain provisions of the Charter.
In addition, we implemented amendments to our By-Laws to, among other things, allow stockholders holding at least 15% of NASDAQ OMX’s voting power to call a special meeting under the following circumstances.
The stockholders calling the special meeting must be record holders and must have held a “net long position” equivalent to 15% of the outstanding common stock entitled to vote continuously for one year prior to the request to call a special meeting.
Upon receipt of a stockholder request to call a special meeting, NASDAQ OMX’s board of directors must set the meeting within 120 days.
A special meeting request will not be valid if it relates to an item of business that is not a proper subject for stockholder action under applicable law.
A special meeting request will not be valid if it is delivered: (i) within 90 days before an annual meeting; (ii) within 120 days after a meeting at which a similar item was considered; or (iii) when a similar item is to be presented at a meeting that has been called by NASDAQ OMX, but not yet held.
To be in proper form, a special meeting request must include certain disclosures about the proposing stockholders, any proposed nominees for director and any proposed items of business to be brought before a meeting.
Consistent with the changes to the Charter described above, the By-Law amendments also removed each supermajority voting requirement in the By-Laws and replaced it with a “majority of outstanding shares” voting requirement. The supermajority voting requirements required the affirmative vote of at least 66 2/3% of the total voting power of NASDAQ OMX’s capital stock entitled to vote generally in the election of directors, voting together as a single class, to remove directors or adopt, alter, amend or repeal any By-Law.
NASDAQ OMX BOARD ATTENDANCE AT MEETINGS OF STOCKHOLDERS
NASDAQ OMX’s policy is to encourage all directors to attend annual and special meetings of our stockholders. Ten of the current members of NASDAQ OMX’s board attended the annual meeting held on May 22, 2013.
THE NASDAQ OMX GROUP, INC. 28
NASDAQ OMX remains committed to smart and sustainable business practices. We demonstrated this commitment throughout 2013 by assisting listed companies with their sustainability programs, undertaking research and collaborative projects with expert stakeholders and integrating sustainability strategies into our own operations.
Efficiency and transparency have always been key virtues within our culture, and they still drive our commitment to innovation in the markets, technology and the development of our products and services. As ESG issues become more prevalent in the capital markets, investors, stakeholders and regulators are using new data to drive their decisions. NASDAQ OMX has actively supported the development and refinement of established and emerging sustainability reporting channels. By doing so, we recognize and promote both the risk and reward side of good ESG practices.
NASDAQ OMX has received support for our sustainability efforts from many parts of the exchange spectrum. Long-term stockholders frequently acknowledge our efforts to promote and support ESG efforts, both internally and externally, and laud our leadership in pushing for better ESG practices at global stock exchanges. In addition, listed companies have signaled their interest in our program by participating in live events, online webinars and outreach programs.
Listed Company Outreach
NASDAQ OMX disseminates information, promotes understanding and engages the listed company audience in many ways. We use our iconic MarketSite location in New York City to host sustainability events for listed company attendees, each one focused on a specific aspect of sustainability. Content from these meetings is frequently converted into educational content, and additional events are offered as webinars. During 2013, NASDAQ OMX participated in 26 speaking opportunities, panel discussions and event sponsorships relating to ESG issues.
By doing so, we expect to:
increase investor engagement with exchanges;
expand issuer understanding of the purpose and value of ESG disclosures; and
clearly define the role that exchanges play in ESG issues.
NASDAQ OMX also hosts a content forum on corporate sustainability on our corporate website, which is available athttp://nasdaqomx.com/sustainability.
Sustainability Research & Collaboration
In addition, NASDAQ OMX is working with fellow exchanges around the world in an attempt to forge reasonable, actionable and material ESG disclosure guidance for listed companies. We continued this effort in 2013 by collaborating with various convening organizations, such as the United Nations Sustainable Stock Exchanges Initiative and the World Federation of Exchanges. If successful, this effort could ultimately improve ESG transparency for most of the world’s public companies.
Furthermore, we accomplished the following in 2013:
continued our leadership of the Sustainable Stock Exchanges initiative;
participated at the board level with the World Federation of Exchanges, a trade association of publicly regulated stock, futures and options exchanges;
actively participated as an Advisory Board member for the Sustainability Accounting Standards Board in the creation and comment period for new financial services accounting standards;
continued support for the International Integrated Reporting Council;
THE NASDAQ OMX GROUP, INC. 29
became an advisory board member for the United Nations Global Compact (UNGC) U.S. network;
reaffirmed our financial commitment to the UNGC; and
expanded our partnership with Harvard Business School and BWise to deliver corporate education on integrated reporting.
Strategic Integration
In terms of our own operations, we have made many strides in the last 12 months. We made significant infrastructure improvements, increasing the number of LEED and other environmental certifications for our global offices. NASDAQ OMX Helsinki again received the WWF Green Office diploma, and continued its groundbreaking work as the first exchange in the world to go carbon neutral. NASDAQ OMX also fostered the creation of a women’s networking support group within the company, which will help us attract, retain and develop a diverse workforce. Other 2013 highlights include:
a continuing and comprehensive energy and water usage audit of all our global locations that enables us to identify, isolate and remedy inefficient resource consumption;
inclusion of ESG disclosures in our annual report and proxy statement and publication of an annual stand-alone corporate sustainability report, with Global Reporting Initiative framework disclosures;
creation of sustainability indexes and related financial products;
implementation of an alternative recycling pilot program;
investigation of clean energy opportunities for our data centers;
expansion of work/life balance benefits and financial planning opportunities for our employees;
preparation and dissemination of an annual Carbon Disclosure Report submission, with carbon and water usage estimates and action plans;
a major corporate project to analyze our supply chain, vendor selection process and fair labor practices; and
continued cultural emphasis and mandatory education on ethics and compliance issues.
THE NASDAQ OMX GROUP, INC. 30
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Under its charter, the audit committee evaluates the performance of our independent registered public accounting firm on an annual basis. Following this review, the audit committee of the board of directors has selected Ernst & Young LLP as our independent registered public accounting firm to audit our financial statements for fiscal year 2014. We are asking the stockholders to ratify the audit committee’s selection of Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year 2014. In the event the stockholders fail to ratify the selection of Ernst & Young LLP, the audit committee will reconsider this selection. Even if the selection of Ernst & Young LLP is ratified, the audit committee, in its discretion, may direct the selection of a different independent registered public accounting firm at any time during the year if the audit committee determines that such a change would be in the company’s and its stockholders’ best interests.
Ernst & Young LLP has audited NASDAQ OMX’s financial statements since fiscal year 1986. Representatives of Ernst & Young LLP are expected to be present at the annual meeting with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
The table below shows the amount of fees NASDAQ OMX paid to Ernst & Young LLP for fiscal years 2013 and 2012 (including expenses), which totaled $7,390,758 and $6,987,765 respectively. Details of the fees are based on the categories provided by the SEC auditor independence rules that became effective in 2003.
| 2013 | 2012 | ||||||
Audit fees(1) | $ | 6,604,363 | $ | 6,408,642 | ||||
Audit-related fees(2) | 595,000 | 389,000 | ||||||
|
|
|
| |||||
Audit and audit-related fees | 7,199,363 | 6,797,642 | ||||||
Tax fees(3) | — | 3,200 | ||||||
All other fees(4) | 191,395 | 186,923 | ||||||
|
|
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| |||||
Total(5) | $ | 7,390,758 | $ | 6,987,765 | ||||
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THE NASDAQ OMX GROUP, INC. 31
Audit fees primarily represent fees for the audit of NASDAQ OMX’s annual financial statements included in our annual report on Form 10-K, the review of NASDAQ OMX’s quarterly reports on Form 10-Q, statutory audits of subsidiaries as required by statutes and regulations, accounting consultations on matters addressed during the audit or interim reviews, comfort letters and consents, and internal control attestation and reporting requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Audit-related fees primarily represent fees for consultations associated with strategic initiatives, including mergers and acquisitions.
Under the Sarbanes-Oxley Act, the audit committee is responsible for the appointment, compensation and oversight of the services provided by NASDAQ OMX’s independent registered public accounting firm. The audit committee is required to pre-approve both audit and non-audit services performed by the independent registered public accounting firm, and NASDAQ OMX’s audit committee pre-approved all such services in 2013 and 2012. See also “Audit Committee Report.”
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS NASDAQ OMX’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDED DECEMBER 31, 2014.
THE NASDAQ OMX GROUP, INC. 32
In accordance with its written charter, the audit committee of the board of directors assists the board in fulfilling its responsibility for oversight of the quality and integrity of NASDAQ OMX’s accounting, auditing, financial reporting practices and risk management. The audit committee also assists the board by reviewing and discussing the effectiveness of controls over NASDAQ OMX’s regulatory and ERM structure and process. The audit committee also assists the board by reviewing and discussing NASDAQ OMX’s global ethics and compliance program and confidential whistleblower process. The audit committee charter complies with the applicable provisions of the Sarbanes-Oxley Act of 2002 and related rules of the SEC and The NASDAQ Stock Market. The complete text of the charter is available on NASDAQ OMX’s website athttp://ir.nasdaqomx.com/nasdaq-omx-group.cfm.
Each of the audit committee members meets the independence criteria prescribed by applicable law and the rules of the SEC and is an “independent director” as defined in the rules of The NASDAQ Stock Market. Each of the audit committee members meets the financial knowledge requirements of The NASDAQ Stock Market, and Dr. Markese, Ms. McColgan and Mr. Wedenborn have been designated by the board of directors as “audit committee financial experts” under SEC rules.
The audit committee obtained from the independent registered public accounting firm a formal written statement describing all relationships between the firm and NASDAQ OMX that might bear on the firm’s independence, consistent with the applicable requirements of the Public Company Accounting Oversight Board. The audit committee discussed with the independent registered public accounting firm any relationships that may impact the firm’s objectivity and independence and satisfied itself as to the firm’s independence. The audit committee discussed and reviewed with the independent registered public accounting firm all communications required by generally accepted auditing standards, including those described in Auditing Standard No. 16, “Communications with Audit Committees” as adopted by the Public Company Accounting Oversight Board, and with and without management present, discussed and reviewed the results of the independent registered public accounting firm’s examination of the financial statements. The audit committee also discussed the results of the internal audit examinations and ERM program results. The audit committee approved all audit and allowable non-audit services.
The audit committee discussed with management, the internal auditors and the independent registered public accounting firm the quality and adequacy of NASDAQ OMX’s internal controls and the internal audit function’s organization, responsibilities, budget and staffing. The audit committee reviewed with both the independent registered public accounting firm and the internal auditors their audit plans, audit scope and identification of audit risks. In addition, the audit committee reviewed and approved all related party transactions.
The audit committee reviewed and discussed NASDAQ OMX’s audited financial statements as of and for the fiscal year ended December 31, 2013, with management and the independent registered public accounting firm. Management has the responsibility for the preparation of NASDAQ OMX’s financial statements and the independent registered public accounting firm has the responsibility for the examination of those statements. Also, the audit committee completed its oversight of the global ethics and compliance program and confidential whistleblower process.
Based on the above-mentioned reviews and discussions, the audit committee recommended to the board of directors that the audited financial statements be included in NASDAQ OMX’s annual report on Form 10-K for the fiscal year ended December 31, 2013 for filing with the SEC.
The Audit Committee
John D. Markese, Chair
Ellyn A. McColgan
James S. Riepe
Lars R. Wedenborn
THE NASDAQ OMX GROUP, INC. 33
APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION ON AN ADVISORY BASIS
We are asking stockholders to approve, on an advisory basis, the company’s executive compensation as reported in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the executive compensation program and practices described in this proxy statement.
We urge stockholders to read the Compensation Discussion and Analysis beginning on page 35 of this proxy statement, as well as the executive compensation tables and narrative beginning on page 57. The Compensation Discussion and Analysis describes our executive compensation program and the decisions made by our management compensation committee in 2013 in more detail. The compensation tables provide detailed information on the compensation of our named executive officers. The board of directors and the management compensation committee believe that the compensation program for our named executive officers has been effective in meeting the core principles described in the Compensation Discussion and Analysis in this proxy statement, and has contributed to the company’s long-term success.
In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (Exchange Act), and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the 2014 annual meeting of stockholders:
RESOLVED, that the stockholders of The NASDAQ OMX Group, Inc. approve, on an advisory basis, the compensation of NASDAQ OMX’s named executive officers, as disclosed in the proxy statement for NASDAQ OMX’s 2014 annual meeting of stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the executive compensation tables and other related tables and narrative disclosure.
This advisory vote is not binding on the board of directors and the management compensation committee. Although non-binding, the board of directors and the management compensation committee will review and consider the outcome of the vote when making future decisions regarding our executive compensation program.
The board of directors has adopted a policy providing for annual advisory votes to approve the company’s executive compensation. The next advisory vote to approve executive compensation will occur at the 2015 annual meeting of stockholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION ON AN ADVISORY BASIS.
THE NASDAQ OMX GROUP, INC. 34
COMPENSATION DISCUSSION AND ANALYSIS
OVERVIEW
This Compensation Discussion and Analysis describes the compensation program for the year ended December 31, 2013 for our named executive officers:
Robert Greifeld, Chief Executive Officer;
Lee Shavel, Chief Financial Officer and Executive Vice President, Corporate Strategy;
Hans-Ole Jochumsen, Executive Vice President, Transaction Services Nordic;
Edward S. Knight, Executive Vice President, General Counsel and Chief Regulatory Officer; and
Bradley J. Peterson, Executive Vice President and Chief Information Officer.
The independent members of NASDAQ OMX’s board of directors are responsible for overseeing our executive compensation program, and the board has delegated to its management compensation committee the primary responsibility for administering the program. Among other things, the management compensation committee is responsible for establishing the principles that underlie our executive compensation program and, in conjunction with the board, evaluating the performance and determining the compensation of our CEO and other executive officers. For additional information on the committee and its members, see “NASDAQ OMX’s Corporate Governance – Board Committees.” The committee’s charter can be found on NASDAQ OMX’s website athttp://ir.nasdaqomx.com/nasdaq-omx-group.cfm.
EXECUTIVE SUMMARY
2013 Business Highlights
In 2013, NASDAQ OMX took a number of significant and deliberate steps to strengthen its business and regulatory commitment and value proposition to clients and stockholders. The company achieved record results while investing significantly in future initiatives and reshaping its business offering through strategic acquisitions. As the business, operational and financial results indicate, 2013 was a transformative year that included the following highlights.
NASDAQ OMX earned a record $1.9 billion in revenues less transaction rebates, brokerage, clearance and exchange fees in 2013, of which 73% were non-transaction based revenues. Our total revenues less transaction rebates, brokerage, clearance and exchange fees increased $221 million, or 13.2%, in 2013, reflecting an operational increase of $206 million and a favorable impact from foreign exchange of $15 million.
Corporate Solutions revenues increased $141 million, reflecting higher revenues resulting from the acquisition of the Thomson Reuters’ Corporate Solutions businesses.
Fixed income trading revenues less brokerage, clearance and exchange fees increased $35 million, reflecting the acquisition of eSpeed.
Market Data Products revenues increased $22 million, primarily from U.S. market data products.
Market Technology revenues increased $20 million, primarily from higher change request and advisory revenues and software as a service revenues.
Index Licensing and Services revenues increased $11 million.
We also achieved many business successes during 2013.
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For the fourth consecutive year, NASDAQ OMX led all exchange operators in consolidated U.S. equity options market share, at 27.9% (18.2% for NASDAQ OMX PHLX, 8.7% for NASDAQ Options Market and 1.0% for NASDAQ OMX BX).
We launched NLX, a new London-based market offering a range of both short-term and long-term interest rate derivative products.
In the listings area, we led all U.S. exchanges with 126 IPOs in 2013, a 75% increase when compared to the prior year, and welcomed a total of 239 new listings. We also won 31 listing venue switches, including VimpelCom, Marriott International and Amdocs Limited.
Our Index Licensing and Services business launched the second phase of the NASDAQ Global Index Family, which includes approximately 21,000 indexes, and continued to push into institutional channels.
Our Market Technology business had its best-ever year for new order intake, announcing new contracts with Boerse Stuttgart and Borsa Istanbul, among others.
As a technology leader, we continued to focus on improving the resiliency of the infrastructure supporting the global financial marketplace, as well as the robustness of our own internal systems and processes.
During 2013, we closed two strategic acquisitions.
In May 2013, we acquired the Investor Relations, Public Relations and Multimedia Solutions businesses of Thomson Reuters, which are part of our Corporate Solutions business.
In June 2013, we expanded our Market Services and Information Services businesses by acquiring eSpeed, an electronic platform for trading U.S. Treasuries.
The acquisition of the Thomson Reuters’ Corporate Solutions businesses was immediately accretive to EPS, the eSpeed acquisition was accretive to EPS by the end of 2013 and progress continues on delivering the synergy potential of both transactions.
We believe that in 2013, investors recognized the compelling strengths of our business, as evidenced by the 59% year-over-year growth in our stock price.
As part of our strategy of delivering strong returns to stockholders, we returned $87 million to our investors through the payment of quarterly cash dividends and repurchased $10 million of our common stock.
We also paid down a net amount of $196 million of indebtedness in the third and fourth quarters of 2013, following an increase in leverage during the first half of the year in connection with the two acquisitions. Our de-leveraging plan is on schedule to return NASDAQ OMX to our long-term leverage target by the end of the second quarter of 2014.
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The table below summarizes key NASDAQ OMX financial results for the fiscal year ended December 31, 2013 when compared with the same period in 2012.
| Year Ended December 31, | ||||||||||||
| 2013 | 2012 | Percentage Change | |||||||||
| (in millions, except per share amounts) | ||||||||||||
| Revenues less transaction rebates, brokerage, clearance and exchange fees | $ | 1,895 | $ | 1,674 | 13.2% | |||||||
| Diluted EPS | $ | 2.25 | $ | 2.04 | 10.3% | |||||||
| Stock price per share(1) | $ | 39.80 | $ | 24.99 | 59.3% | |||||||
For additional information on our 2013 financial results, please refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K.
2013 Executive Compensation Highlights
In line with our executive compensation program’s emphasis on pay for performance, compensation awarded to the named executive officers generally increased in 2013 due to the company’s business, operational and financial results as compared to 2012, which was a year of mixed performance for the company. Listed below are some highlights of our 2013 executive compensation program.
Annual Base Salaries. For 2013, the base salaries of the named executive officers remained at the same levels as for 2012.
Annual Performance-Based Cash Incentive Awards. In 2013, the annual performance-based cash incentive awards for our named executive officers were tied to two corporate performance measures, operating income (run rate) and net revenue, as well as business unit strategic performance objectives and certain development objectives. NASDAQ OMX’s operating income (run rate) exceeded the target range, but fell below the maximum performance level, for this goal. Our 2013 net revenue fell within the target range for this goal. These results influenced final payouts for each of our named executive officers under our annual performance-based cash incentive program. Final payments were higher than 2012 levels based on improved performance in 2013.
Long-Term Stock-Based Compensation. In 2013, each of the named executive officers (other than Mr. Peterson) received an equity award under our performance-based long-term incentive program that focuses on total shareholder return (TSR) over a three-year period. Mr. Peterson did not participate in this program in 2013 because he instead received a new hire equity grant in connection with the start of his employment in February 2013.
Executive Compensation Best Practices
Over the past several years, we have implemented several best practices to align with emerging market practices and stockholder expectations. Our executive compensation program is detailed over the next few pages; however, the following executive compensation practices are key aspects of our program.
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Approval of the Company’s Executive Compensation on an Advisory Basis
At our most recent annual meeting of stockholders, held on May 22, 2013, NASDAQ OMX conducted an advisory vote to approve the company’s executive compensation for the year ended December 31, 2012. Stockholders expressed substantial support for the compensation of our named executive officers, with approximately 96% of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter cast to approve the advisory vote. The committee took into account the results of this advisory vote when making compensation decisions through the remainder of 2013 and into early 2014. The committee also considered many other factors in evaluating our executive compensation programs, including the company’s pay for performance philosophy and a competitive market analysis of peer companies. While each of these factors influenced the committee’s recommendations regarding our named executive officers’ compensation in 2013, the committee did not make any changes to our executive compensation program, policies and decisions as a result of the advisory vote.
Opportunity for Stockholder Feedback
The committee carefully considers feedback from NASDAQ OMX’s regular engagement with our stockholders on executive compensation, corporate governance and other issues. The committee welcomes input from our stockholders on NASDAQ OMX’s compensation program through the communication process discussed in “Stockholder Communication with Directors.”
COMPENSATION PHILOSOPHY
The management compensation committee recognizes its important responsibilities to our stockholders. The committee has endeavored to create a performance-based compensation program that meets the needs of our global company and its stockholders.
On an annual basis, the committee reviews NASDAQ OMX’s compensation philosophy, programs and practices. The following core principles reflect the committee’s current compensation philosophy.
The compensation program creates long-term stockholder value by fostering an ownership culture.
All employees are eligible to participate in NASDAQ OMX’s equity programs.
Programs support an ownership culture that is focused on integrity and the key drivers of stockholder value.
Ownership guidelines applicable to the CEO, CFO, executive vice presidents and senior vice presidents are used to encourage executive stock ownership.
The compensation program focuses on key business objectives.
The program encourages decision-making to align the business strategy with goals set to drive industry-leading performance.
Goal setting at NASDAQ OMX is based on a continuous improvement philosophy.
Employees are rewarded not only for results, but also for behaviors and actions associated with ensuring client satisfaction, quality and resiliency.
Management is rewarded for maintaining a premier regulatory, ethics and compliance program.
The compensation program supports a high-performance environment via performance-based rewards.
Variable pay is emphasized over fixed pay through participation in annual and long-term incentive plans.
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A significant portion of compensation is performance-based and varies based on NASDAQ OMX’s performance, which enables participation in the short- and long-term growth and financial success of the company.
The program reinforces the importance of meeting and/or exceeding performance targets through superior awards for superior performance and through differentiated awards based on performance achieved.
Goal setting and achievement tracking are highly structured and measurable, with few discretionary adjustments.
Select employee benefits are performance-based.
Compensation plans and arrangements do not encourage excessive risk-taking by management.
The compensation program enables NASDAQ OMX to compete effectively for talent.
The program is designed to attract, motivate and retain talented, high-performing individuals who are willing to commit to NASDAQ OMX’s success and to build long-term stockholder value.
The compensation program at NASDAQ OMX is reflective of industry practices and competitive global markets while remaining responsive to local market conditions, offering both competitive programs and compensation opportunities, while balancing the need for talent with the need to maintain reasonable compensation costs.
NASDAQ OMX communicates its compensation objectives and program clearly.
Ongoing employee educational programs ensure that the compensation objectives and program are well understood and serve as an effective motivational tool.
The value of total rewards is emphasized, versus only specific components of pay.
NASDAQ OMX ensures that its compensation program is straightforward and transparent so it is clear how organizational and individual actions translate into NASDAQ OMX performance and rewards.
NASDAQ OMX uses structured goal setting and achievement tracking.
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DETERMINING EXECUTIVE COMPENSATION
Elements of Our Executive Compensation Program
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Role of Our CEO
Mr. Greifeld, our CEO, regularly attends management compensation committee meetings at the invitation of the committee. Mr. Greifeld provides his perspective to the committee regarding executive compensation matters generally and the specific performance of the executives reporting to him, as discussed below.
However, in accordance with the listing rules of The NASDAQ Stock Market, Mr. Greifeld does not vote on executive compensation matters or attend executive sessions of the committee or board, and Mr. Greifeld is not present when his own compensation is being discussed or approved.
Mr. Essa Kazim, NASDAQ OMX’s other director who has been deemed by the board of directors not to be independent, also does not vote on executive compensation matters when such matters are considered by the board.
Role of Compensation Consultants
In early 2013, the management compensation committee engaged Exequity LLP, an outside, independent compensation consultant, to assist the committee, as requested, in fulfilling various aspects of the committee’s charter. Exequity LLP is independent from NASDAQ OMX, has not provided any services to NASDAQ OMX other than to the committee, and receives compensation from NASDAQ OMX, as approved by the committee chair, only for services provided to the committee. Exequity LLP reports directly to the committee, and not to management.
NASDAQ OMX’s human resources department engages Meridian Compensation Partners to assist staff in gathering data, reviewing best practices and making recommendations to the committee about our executive compensation program.
Compensation of Our CEO
On an annual basis, the board of directors, management compensation committee and nominating & governance committee review Mr. Greifeld’s performance in executive session. As part of their deliberative process, the board of directors and management compensation committee evaluate CEO performance against corporate goals and determine appropriate CEO compensation. The factors considered by the board and the committee include Mr. Greifeld’s performance against his annual performance objectives, the performance of the company, the quality and development of the management team and the management of the CEO and executive succession plan.
Compensation of Our Other Named Executive Officers
With the support of NASDAQ OMX’s human resources department, our CEO develops compensation recommendations for each of the executive vice presidents for consideration by the management compensation committee and the board of directors. As part of this process, our CEO meets individually with each executive to discuss his or her performance against pre-established objectives determined during the previous year, as well as performance objectives and development plans for the coming year. This meeting gives each executive an opportunity to present his or her perspective of his or her performance and potential objectives and challenges for the upcoming year. Our CEO presents the results of the meetings with each executive to the management compensation committee for their review and consideration as part of the committee’s deliberation process.
Tally Sheets
When recommending compensation for the CEO and the other named executive officers, the committee reviews tally sheets that detail the various elements of compensation, including equity compensation, for each executive. The committee uses these tally sheets to evaluate the appropriateness of the total compensation package, to compare each executive’s total compensation opportunity with his or her actual payout and to ensure that the compensation appropriately reflects the compensation program’s focus on pay for performance.
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General Principles of the Committee When Recommending Executive Compensation
To determine the recommended amounts and mix of compensation elements, the management compensation committee considers the following general principles.
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The committee considers all of these principles in recommending compensation packages structured to reward the individual executive. Each individual component of compensation is considered independently and is not based on a formula; however, each component is intended to be complementary to the overall compensation package awarded to the executive.
Competitive Market Analysis
To evaluate the external competitiveness of our executive compensation program, the management compensation committee compares certain elements of the program to similar elements used by peer companies. The committee uses a comprehensive peer group, consisting of 20 companies, for competitive market analysis of the compensation program for our named executive officers. The committee believes that the usage and disclosure of a peer group supports good governance and provides valuable input to compensation design and amount decisions.
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In initially selecting the comprehensive peer group in 2011, the committee considered potential peers among both direct industry competitors and companies in related industries with similar talent needs. After identifying potential peers on this basis, the committee used the following seven screening criteria to select appropriate peer companies:
revenue size;
market capitalization size;
financial performance;
direct exchange competitors;
financial services companies;
technology-dependent companies; and
companies with global complexity.
Each of these factors was initially weighted equally to develop a more refined list of companies for consideration. The committee then further reviewed each remaining company to determine its appropriateness for our final peer group with a particular focus on identifying meaningful talent peers. Certain companies were eliminated because of factors such as a significantly different market capitalization, their limited competitive position for executive talent or their limited global complexity relative to NASDAQ OMX.
In 2013, the committee reviewed the comprehensive peer group against the criteria described above but did not modify the group. The committee believes that the peer group includes an accurate representation of NASDAQ OMX’s industry competitors and size-relevant, talent-focused comparators. In addition, the committee believes that year-over-year consistency in peer group usage is desirable for reviewing trends in market pay movement.
The peer group consists of the following 20 companies.
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In addition, the committee takes into account that NASDAQ OMX faces competition for talent from private firms, such as high frequency and other small trading firms and private equity funds, for which public compensation data is not available.
Peer group data serves as only one reference point that the committee considers in evaluating our executive compensation program. The committee uses this data to see how various elements of our executive compensation program compare to other companies. However, the committee does not set the compensation of our executives based on this data or target NASDAQ OMX’s executive compensation to a specific percentile of the compensation set by our competitors. Instead, the comparison is conducted solely to determine if the compensation is competitive to the market, as represented by the peer group. Therefore, each executive is evaluated individually based on skills, knowledge, performance, development potential and, in the committee’s business judgment, the value he or she brings to the organization and NASDAQ OMX’s retention risk.
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ANALYSIS OF 2013 EXECUTIVE COMPENSATION ELEMENTS
Annual Base Salaries
The management compensation committee normally reviews base salaries on an annual basis before the beginning of each year so that any changes will be effective in the first quarter of the following year. Occasionally, the committee may recommend adjustments to base salaries during the year in response to significant changes in an executive’s responsibilities or events that would impact the long-term retention of a key executive. The committee and board establish salaries at levels commensurate with each executive’s title, position and experience, recognizing that each executive is managing a component of a complex global company.
Under the terms of Mr. Greifeld’s employment agreement, his base salary for 2013 was $1 million, which has remained unchanged since 2006. The management compensation committee and board decided that leaving his salary unchanged for 2013 was consistent with the terms of his employment agreement and the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (Code), that limit to $1 million the amount of non-performance-based compensation paid to the CEO that the company may deduct for federal income tax purposes.
Following its compensation review at the end of 2012, the committee and board did not change the base salaries for any of the other named executive officers for 2013. The committee and board believed that each base salary is within a competitive range of the market median for base salary for a comparable position.
The following table shows each named executive officer’s base salary at December 31, 2013 and 2012.
Named Executive Officer | Base Salary at December 31, 2013 | Base Salary at December 31, 2012 | ||||||
Robert Greifeld | $ | 1,000,000 | $ | 1,000,000 | ||||
Lee Shavel | $ | 500,000 | $ | 500,000 | ||||
Hans-Ole Jochumsen(1) | $ | 516,096 | $ | 496,608 | ||||
Edward S. Knight | $ | 500,000 | $ | 500,000 | ||||
Bradley J. Peterson(2) | $ | 475,000 | — | |||||
Annual Performance-Based Cash Incentive Awards
Annual performance-based cash incentives are an integral part of our executive compensation program. Mr. Greifeld and all of NASDAQ OMX’s executive vice presidents receive such awards through our Executive Corporate Incentive Program (ECIP).
Plan-Based Target Award Opportunities
At the beginning of each year, the management compensation committee and board of directors establish the target annual cash incentive award opportunity for our named executive officers. Consistent with his employment agreement, Mr. Greifeld’s target annual cash incentive award opportunity for 2013 was 210% of base salary. For 2013, the committee and board set the target
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annual cash incentive award opportunity for each of the other named executive officers at amounts ranging from 126% to 150% of base salary, based on an assessment of each officer’s position and responsibilities, the competitive market analysis and the company’s retention objectives.
Performance Goals
The annual cash incentive award payments for our executives are based on the achievement of pre-established performance goals. The CEO selects and recommends goals for each executive vice president based on their areas of responsibility and input from each executive. The management compensation committee and the board of directors review and consider our CEO’s recommendations and approve the goals for the coming year after identifying the objectives most critical to our future growth and most likely to hold executives accountable for the operations for which they are responsible.
The annual cash incentive awards are tied to results in the following areas:
two corporate objectives, including:
operating income (run rate), which measures business efficiency and profitability; and
net revenue, which measures the ability to drive revenue growth;
business unit strategic objectives, which are defined business unit-specific goals that contribute to the company’s short and long-term performance; and
development objectives.
Operating income (run rate) and net revenue are the company’s primary measures of short-term business success and the key drivers of long-term stockholder value. Operating income (run rate) and net revenue targets are set at the beginning of each year, as part of the company’s annual budgeting process, and are subject to adjustment for transactions and other extraordinary events.
Business unit strategic objectives also are established at the beginning of the year, and are subject to adjustment for transactions and other extraordinary events. The business unit strategic objectives consist of financial and non-financial strategic objectives specific to the business unit. The committee and board set the business unit strategic objectives to reflect the key responsibilities of each executive and incent focus on particular objectives in 2013.
The business unit strategic objectives are described below.
Mr. Shavel’s strategic objectives related to: acquisition performance; Corporate Strategy initiatives; a price to earnings ratio; and enterprise risk management.
Mr. Jochumsen’s strategic objectives related to: Transaction Services Nordic financial results; and the restructuring of the Nordic clearinghouse.
Mr. Knight’s strategic objectives related to: regulatory leadership and integrity; expense management; public policy initiatives; effective legal/business partnerships; and M&A, litigation, intellectual property and corporate support.
Mr. Peterson’s strategic objectives related to: systems reliability and quality; operational excellence; business service delivery; and expense management.
The development objectives, which are new in 2013, replace an objective from prior years relating to the results of a Business Effectiveness Survey, which compiled feedback from employees. The development objectives are established at the beginning of the year by the committee and board to focus the executive team on certain employee development initiatives. Mr. Greifeld’s development objectives focused on succession planning at the chief executive officer, executive vice president and
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senior vice president levels, as well as the implementation of a new employee career development program. The rest of the named executive officers’ development objectives related to the implementation of the new employee career development program.
The management compensation committee and board of directors set the targets for each of the goals at levels where the maximum payout would be difficult to achieve and beyond budget assumptions. The following table shows each named executive officer’s performance objectives for 2013 and the relative weighting of these objectives.
Named Executive | Target Incentive Compensation Opportunity | Corporate Objectives | Business Unit Strategic Objectives | Development Objective | ||||||||
| Operating Income (Run Rate) | Net Revenue | |||||||||||
Robert Greifeld | $ | 2,100,000 | 55% | 35% | — | 10% | ||||||
Lee Shavel | $ | 750,000 | 40% | 10% | 40% | 10% | ||||||
Hans-Ole Jochumsen | $ | 768,000 | 10% | 10% | 70% | 10% | ||||||
Edward S. Knight | $ | 650,000 | 25% | 10% | 55% | 10% | ||||||
Bradley J. Peterson | $ | 600,000 | 20% | 15% | 55% | 10% | ||||||
In connection with the annual review of the compensation of our executive vice presidents, the committee and board increased Mr. Knight’s target incentive compensation opportunity from $600,000 to $650,000 from 2012 to 2013 to reward his performance and ensure both a market competitive award and internal pay equity among the executive vice presidents. The target incentive compensation opportunity for all of the other named executive officers remained the same from 2012 to 2013.
Potential Payouts
Payouts are determined by the management compensation committee and board of directors after the end of the year and are based on the sum of (i) actual performance under each corporate objective, (ii) where applicable, actual performance against an executive’s business unit strategic objectives and (iii) actual performance under the development objective. Each goal applicable to the named executive officers for 2013 had a minimum, target and maximum performance level.
Scoring of each goal is based on actual goal achievement compared to the target. In 2013, payouts on each goal could vary between 0% and 200% of the target. However, the non-financial goals were subject to a funding modifier aligned with the achievement of the operating income (run rate) goal. This ensured the payout of overachievement against non-financial goals was limited to the overall companywide performance on operating income (run rate).
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Corporate Objectives Performance vs. Goals
The table below shows the following information with respect to the corporate objectives: the minimum, target and maximum payout levels; NASDAQ OMX’s actual performance for 2013; and the resultant payout percentage of the target incentive award amounts.
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For further information about NASDAQ OMX’s financial results in 2013, see “Compensation Discussion and Analysis – 2013 Business Highlights.”
Business Unit Strategic Objectives Performance vs. Goals
The committee and board assessed each officer’s achievement of the business unit strategic objectives in 2013, as described below.
Mr. Shavel
Mr. Shavel’s business unit strategic objectives were scored as follows:
Goal | Goal Weighting | Score as a Percent of Target | ||||||
Acquisition performance | 10 | % | 135 | % | ||||
Corporate Strategy initiatives | 10 | % | 175 | % | ||||
Price to earnings ratio | 10 | % | 200 | % | ||||
Enterprise risk management | 10 | % | 150 | % | ||||
Mr. Jochumsen
Mr. Jochumsen’s business unit strategic objectives were scored as follows:
Goal | Goal Weighting | Score as a Percent of Target | ||||||
Transaction Services Nordic financial results | 50 | % | 200 | % | ||||
Restructuring of the Nordic clearinghouse | 20 | % | 200 | % | ||||
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Mr. Knight
Mr. Knight’s business unit strategic objectives were scored as follows:
Goal | Goal Weighting | Score as a Percent of Target | ||||||
Regulatory leadership and integrity | 10 | % | 200 | % | ||||
Expense management | 10 | % | 200 | % | ||||
Public policy initiatives | 5 | % | 150 | % | ||||
Effective legal/business partnerships | 15 | % | 200 | % | ||||
M&A, litigation, intellectual property and corporate support | 15 | % | 200 | % | ||||
Mr. Peterson
Mr. Peterson’s business unit strategic objectives were scored as follows:
Goal | Goal Weighting | Score as a Percent of Target | ||||
Systems reliability and quality | 10% | 75%(1) | ||||
Operational excellence | 15% | 191% | ||||
Business service delivery | 20% | 181% | ||||
Expense management | 10% | 200% | ||||
Development Objective Performance vs. Goals
With respect to the development objective, each named executive officer received 150% of the target incentive award amount allocated to this goal.
Award Payouts
In early 2014, the committee and board received a final report on the level of achievement on each goal, and on the basis of this report, the committee and board approved payouts for 2014.
The actual annual cash incentive award payouts to the named executive officers for 2013 and 2012 are set forth in the following table.
Named Executive Officer | 2013 ECIP Award Payout | |||
Robert Greifeld | $ | 2,794,050 | ||
Lee Shavel | $ | 1,135,500 | ||
Hans-Ole Jochumsen | $ | 1,383,168 | ||
Edward S. Knight | $ | 1,106,625 | ||
Bradley J. Peterson(1) | $ | 915,300 | ||
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One-Time Cash Payment for Mr. Peterson
In connection with Mr. Peterson’s start of employment in February 2013, the company agreed to pay him a one-time cash amount of $400,000. The committee and board set the amount of the cash payment with reference to Mr. Peterson’s total compensation package and the value of forfeited payments from his prior employer. The total compensation package was designed to induce Mr. Peterson to join NASDAQ OMX.
Long-Term Stock-Based Compensation
Long-term incentive compensation consists entirely of equity awards.
Performance-Based Long-Term Incentive Program. Since 2012, the committee and board have granted equity awards to our CEO and executive vice presidents under a performance-based long-term incentive program that focuses on TSR. The program is designed to motivate and reward executives for outperforming peers over several years, ensure that executives have a significant stake in the long-term financial success of the company aligned with the stockholder experience and promote longer-term retention. Consistent with our pay for performance philosophy, this program represents 100% of our CEO and executive vice presidents’ long-term stock-based compensation.
Under the program, each individual received a grant of PSUs subject to a three-year cumulative performance period beginning on January 1, 2013 and ending on December 31, 2015. Performance is determined by comparing NASDAQ OMX’s TSR to two groups of companies, each weighted 50%. One group consists of all S&P 500 companies, and the other group consists of the following 13 exchange companies.
NASDAQ OMX’s relative performance ranking against each of these groups will determine the final number of shares delivered to each individual under the program. The maximum payout will be 200% of the target number of PSUs granted if NASDAQ OMX ranks at the 85th percentile or above of both groups. However, if NASDAQ OMX’s TSR is negative for the three-year performance period, regardless of TSR ranking, the payout cannot exceed 100% of the target number of PSUs granted.
Below is a table showing the amount of shares a grantee may receive based upon different levels of achievement against each of the groups. For each group, the resulting shares earned will be calculated by multiplying the relevant percentage from the table below by one-half of the target award amount.
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For levels of achievement between points, the resulting shares earned will be calculated based on straight-line interpolation.
In setting Mr. Greifeld’s 2013 equity award target, the management compensation committee and board of directors intended to provide future motivational value to Mr. Greifeld, with significant upside and downside based on performance relative to peers. The committee and board considered historical awards and the retention value of Mr. Greifeld’s outstanding equity when determining the target amount of Mr. Greifeld’s award. The committee and board also considered peer group data to establish a market-competitive award level.
Mr. Greifeld recommended the specific equity award targets for each of the other named executive officers, which varied among executives depending upon responsibilities and retention considerations. The committee and board evaluated these recommendations and determined that the amount of each award reflected the individual’s contributions, was aligned with competitive market levels and was appropriate for retention purposes.
The target amount and target face value of the PSUs awarded to each of the named executive officers under this program is set forth in the table below. The 2013 awards were made on July 25, 2013, which was the date of NASDAQ OMX’s annual employee equity grant, at a stock price of $33.23.
Named Executive Officer | Target PSUs | Target Grant Date Face Value(1) | ||||||
Robert Greifeld | 227,000 | $ | 7,543,210 | |||||
Lee Shavel | 38,303 | $ | 1,272,809 | |||||
Hans-Ole Jochumsen | 32,831 | $ | 1,090,974 | |||||
Edward S. Knight | 32,831 | $ | 1,090,974 | |||||
Bradley J. Peterson(2) | — | — | ||||||
New Hire Grant for Mr. Peterson. Under his employment offer letter, the company awarded an equity grant to Mr. Peterson when he began employment on February 6, 2013. The grant consisted of 68,966 restricted stock units (RSUs), which vest in equal installments on the first, second and third anniversaries of the grant. The committee and board determined the value of this grant as part of the total compensation package designed to recruit Mr. Peterson to join the company. This grant served as Mr. Peterson’s 2014 annual equity award and offset a portion of the equity value Mr. Peterson forfeited when leaving his prior employer.
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Settlement of March 2011 PSU Grant to CEO. In February 2014, the management compensation committee and board determined the number of shares that Mr. Greifeld was entitled to receive upon vesting in connection with his March 2011 PSU grant, which had a target amount of 100,000 shares. These PSUs had a performance period from January 1, 2011 through December 31, 2013 and a performance target of non-GAAP EPS growth compounded annually over the three-year performance period. Non-GAAP EPS growth was determined based upon the amount by which our adjusted non-GAAP EPS for the fiscal year ended December 31, 2013 exceeded our non-GAAP EPS for the fiscal year ended December 31, 2010, which had been determined to be $1.99.
The following table sets forth the number of shares that Mr. Greifeld was entitled to receive at settlement of the March 2011 PSU grant at varying non-GAAP EPS growth performance levels.
| Minimum Performance | Target Performance | Maximum Performance | ||||||||||
Non-GAAP EPS Growth (compounded annual increase over the Performance Period) | 8% growth | 16% growth | 24% growth | |||||||||
Adjusted Non-GAAP EPS Level | $ | 2.51 | $ | 3.11 | $ | 3.79 | ||||||
Number of Shares Deliverable | 50,000 | 100,000 | 150,000 | |||||||||
The committee and board determined that adjusted non-GAAP EPS growth fell between the minimum and target performance levels, and therefore, Mr. Greifeld was entitled to receive a pro-rated amount of 57,500 shares, which was 58% of target.
Non-GAAP EPS was calculated by adjusting our reported GAAP EPS for significant non-recurring charges or gains (and their related income tax effects) that were not related to our core business. The non-GAAP EPS for the fiscal year ended December 31, 2013 also was adjusted for certain stock or asset acquisitions that occurred during the performance period. The committee and board relied on the company’s audited financial statements, non-GAAP reconciliations and related information for purposes of determining the amount of non-GAAP EPS growth.
General Equity Award Grant Practices
The reference price for calculating the value of equity awards is the closing market price of NASDAQ OMX’s common stock on the date of grant. The management compensation committee and board of directors consider whether to make equity awards at a regularly scheduled meeting. Regular board and committee meetings are scheduled well in advance without regard to material news announcements by NASDAQ OMX. Existing equity ownership levels are not a factor in award determinations as we do not want to discourage the named executive officers from holding significant amounts of NASDAQ OMX’s common stock.
Throughout the performance period, the management compensation committee receives updates on the executives’ progress in achieving the applicable performance measures and monitors the compensation expense that the company is incurring for outstanding equity awards. The committee believes that the current and expected expense amounts are reasonable and justified in light of the committee’s goals of aligning the long-term interests of officers and employees with those of stockholders and retaining the current management team.
Stock Ownership Guidelines
We have long recognizedrecognize the importance of stock ownership as an importantessential means of closely aligning the interests of our executives with the interests of our stockholders.shareholders. In addition to using equity awards as a primary long-term incentive compensation tool, we have in place stock ownership guidelines in place for our CEO, CFO, executive vice presidents and senior vice presidents.executives, including our NEOs. Under its charter, the management compensation committeeManagement Compensation Committee is responsible for reviewing annually the stock ownership guidelines annually and verifying compliance thereunder.compliance.
THE NASDAQ OMX GROUP, INC. 52
Under the guidelines, our CEO, CFO, executive vice presidents and senior vice presidentsthe covered executives are expected to own specified dollar amounts of NASDAQ OMXour common stock based on a multiple of their base salary. The multiple is determined by officer level: our CEO must hold shares valued at a 6X multiple of base salary, our CFO must hold a 4X multiple, other executive vice presidents must hold a 3X multiple and senior vice presidents must hold a 1X multiple. as set forth in the table below.
Title | Value of Shares Owned | |
President and CEO | 6x base salary | |
CFO | 4x base salary | |
EVPs | 3x base salary | |
Individual holdings, shares jointly owned with immediate family members or held in trust, shares or units of restricted stock (including vested and unvested), shares underlying PSUs after completion of the performance period and shares purchased or held through NASDAQ OMX’sour plans, such as the NASDAQ OMX Employee Stock Purchase Plan (ESPP),Nasdaq ESPP, count toward satisfying the guidelines. New executives and executives who incur a material change in their responsibilities are expected to meet the applicable level of ownership within fourfive years of their start date or the date of the change in responsibilities. All of the named executive officersNEOs who were required to comply with the guidelines on December 31, 2021 were in compliance with the guidelines as of December 31, 2013.that date.
Stock Holding RequirementGuidelines
We encourage our CEO, CFO, executive vice presidents and senior vice presidentsexecutives to retain equity grants until the applicable stock ownership level discussed above is reached. Under the stock ownership guidelines, these officers must hold the specified dollar amounts of stock through the end of their employment with NASDAQ OMX.Nasdaq. We feel that our guidelines provide proper alignment of the interests of our management and our stockholders,shareholders and therefore, we do not have additional stock holding requirements beyond the stock ownership guidelines.
Prohibition onTrading Controls and Hedging and Pledging Policies
NASDAQ OMX does not allowWe prohibit directors or Section 16and executive officers to engagefrom engaging in securities transactions that allow them either to insulate themselves, or profit, from a decline in NASDAQ OMX’sNasdaq’s stock price (with the exception of selling shares outright)outright in accordance with applicable laws and regulations). Specifically, these individuals may not enter into hedging transactions with respect to NASDAQ OMX’sNasdaq’s common stock, including short sales and transactions in derivative securities. Finally, these individuals may not pledge, hypothecate or otherwise encumber their shares of NASDAQ OMXNasdaq common stock.stock, including by holding such shares in a margin account.
Rule 10b5-1 Plans
NASDAQ OMX permitsWe permit all employees, including the named executive officers,NEOs, to enter into plans established under Rule 10b5-1 of the Exchange Act to enableenabling them to trade in our stock, including stock received through equity grants, during periods in which they might not otherwise be able to trade because material nonpublic information about NASDAQ OMXNasdaq has not been publicly released. These plans include specific instructions to a broker to trade on behalf of the employee if our stock price reaches a specified level or if certain other events occur and therefore, the employee no longer controls the decision to trade. As of December 31, 2013, one of our named executive officers had a Rule 10b5-1 plan in place.
Retirement Savings Plans
NASDAQ OMX’s retirement savings plans are part of our overall compensation and benefits program. The management compensation committee considers appropriate retirement savings options to be a critical componenttrade or the timing of the package to retain employees at all levels. For more information about NASDAQ OMX’s retirement savings plans, see “Executive Compensation – Retirement Benefits.”trade.
Health and Welfare Benefits
We provide a voluntary comprehensive health and welfare benefits program to our executives, including the named executive officers, that mirrors the program offered to our other employees. Named executive officers also are allowed to participate in our ESPP on the same terms as other employees.
THE NASDAQ OMX GROUP, INC. 53
Limited Severance Arrangements
Except in the limited circumstances described in this proxy statement, we are not obligated to pay general severance or other enhanced benefits to any named executive officer upon termination of his or her employment. However, the management compensation committee has the discretion to pay severance plan benefits. Severance plan decisions do not influence the management compensation committee’s other recommendations regarding compensation as these other decisions are focused on motivating our executives to remain with NASDAQ OMX and contribute to our future success.Incentive Recoupment Policy
The management compensation committee believes that the terms for triggering payment under each of the arrangements described in this proxy statement are reasonable. For example, most of the arrangements use what is known as a “double trigger,” meaning that a severance payment as a result of a change in control is activated only upon the occurrence of both a change in control of the companyBoard and a loss of employment. Benefits under these arrangements will be provided only if NASDAQ OMX is the target organization. In addition, a change in control under these arrangements is limited to situations where the acquirer obtains a majority of NASDAQ OMX’s voting securities or the current members of our board of directors (or their approved successors) cease to constitute a majority of the board.
For further information on NASDAQ OMX’s limited severance arrangements, see “ExecutiveManagement Compensation – Potential Payments upon Termination or Change in Control.”
Limited Perquisites
Because our executive compensation program emphasizes pay for performance, it includes very few perquisites for our executives. In view of the demands of his position, we provide Mr. Greifeld with a company car and driver for use when conducting company business. Mr. Greifeld reports his use of the company car and driver for personal reasons in the Summary Compensation Table included below under “Executive Compensation.” In 2013, this amount was $26,554, which was the incremental cost of Mr. Greifeld’s personal use of the car (including commutation) based on an allocation of the cost of the driver, tolls, fuel, maintenance and other related expenses.
Officers at the level of senior vice president and above are eligible to receive basic financial planning services and executive health exams. Participation in each of these programs is voluntary. We also provide extended sickness insurance to certain non-U.S. executives. We do not provide tax gross-up payments on perquisites, other than under employment or hiring arrangements.
During 2013, Mr. Peterson received a one-time payment of $255,189 (or $150,000, net of taxes) for relocation expenses incurred for his move from California to New York in connection with his employment at NASDAQ OMX. This payment covered all costs associated with Mr. Peterson’s move, including travel expenses, short-term housing, transportation of household items and other move-related expenses.
GLOBAL ETHICS AND COMPLIANCE PROGRAM
The NASDAQ OMX board annually reviews the company’s global ethics and compliance program, including the code of ethics and supporting policies. NASDAQ OMX will take action to remedy any fraudulent or intentional misconduct by an employee. Discipline would vary depending on the facts and circumstances, and may include termination of employment or initiation of an action for breach of fiduciary duty under the company’s code of ethics. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.
INCENTIVE RECOUPMENT POLICY
The board and committeeCommittee have adopted an incentive recoupment, or “clawback”“clawback,” policy that is applicable to officers with the named executive officersrank of EVP and other executive vice presidents.above. The policy provides
THE NASDAQ OMX GROUP, INC. 54
that the companyCompany may recoup any cash or equity incentive payments predicated upon the achievement of financial results or operating metrics that are subsequently determined to be incorrect on account of material errors, material omissions, fraud or misconduct.
TAX IMPLICATIONS OF EXECUTIVE COMPENSATIONTax and Accounting Implications of Executive Compensation
The management compensation committeeManagement Compensation Committee considers the income tax and other consequences of individual compensation elements when it is analyzing the overall level of compensation and the mix of compensation among individual elements.
Section 162(m) of the Code provides a limit of $1 million on the remuneration that may be deducted by a public company in any year in respect of the CEO and the three other most highly compensated executive officers (other than the principal financial officer). However, “performance-based compensation” is fully deductible if the plan under which the compensation is paid has been approved by the stockholders and meets other requirements. NASDAQ OMX attempts to structure our compensation arrangements so that amounts paid are tax deductible to the extent feasible and consistent with our overall compensation objectives. Depending upon the relevant circumstances at the time, the committeeManagement Compensation Committee may determine to award compensation that mayis not be deductible. In making this determination, the committeeManagement Compensation Committee balances the purposes and needs of our executive compensation program against the potential tax and other implications.
Generally, under U.S. GAAP, compensation is expensed as earned. We generally recognize compensation expense for equity awards on a straight-line basis over the requisite service period of the award.
THE NASDAQ OMX GROUP, INC. 55
MANAGEMENT COMPENSATION COMMITTEE REPORTManagement Compensation Committee Report
The management compensation committeeManagement Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with our management. After such discussions, the committeeManagement Compensation Committee recommended to NASDAQ OMX’s boardNasdaq’s Board of directorsDirectors that the Compensation Discussion and Analysis be included in this proxy statementProxy Statement and incorporated by reference into NASDAQ OMX’sour Form 10-K.
The Management Compensation Committee
Management Compensation Committee Interlocks
Michael R. Splinter, Chair
Steven D. Black
Börje E. Ekholm
Glenn H. Hutchins
MANAGEMENT COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONand Insider Participation
None of the members of the management compensation committeeManagement Compensation Committee is an executive officer, employee or former officer of NASDAQ OMX.Nasdaq. With the exception of Mr. Greifeld,Ms. Friedman, none of NASDAQ OMX’sNasdaq’s executive officers serves as a current member of the NASDAQ OMX board of directors.Nasdaq Board. None of NASDAQ OMX’sNasdaq’s executive officers serves as a director or a member of the compensation committee of any entity that has one or more executive officers serving on the NASDAQ OMX boardNasdaq Board or management compensation committee. For information on transactions with entities affiliated with our Management Compensation Committee members, see “Certain Relationships and Related Transactions.”
THE NASDAQ OMX GROUP, INC. 56
SUMMARY COMPENSATION TABLEExecutive Compensation Tables
The table below summarizesfollowing tables, narrative and footnotes present the total compensation of each of the named executive officers for services renderedNEOs during 2021 in the fiscal years ended December 31, 2013, 2012 and 2011.format mandated by the SEC.
20132021 Summary Compensation Table
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | |||||||||||||||||||||||||||
Robert Greifeld | 2013 | $ | 1,000,000 | — | $ | 9,944,870 | — | $ | 2,794,050 | — | $ | 101,104 | $ | 13,840,024 | ||||||||||||||||||||||
Chief Executive Officer | 2012 | $ | 1,000,000 | — | $ | 5,567,400 | — | $ | 1,350,000 | $ | 916,164 | $ | 77,742 | $ | 8,911,306 | |||||||||||||||||||||
| 2011 | $ | 1,000,000 | — | $ | 2,528,000 | — | $ | 3,591,000 | $ | 355,729 | $ | 93,067 | $ | 7,567,796 | ||||||||||||||||||||||
Lee Shavel(8) | 2013 | $ | 500,000 | — | $ | 1,678,054 | — | $ | 1,135,500 | — | $ | 24,550 | $ | 3,338,104 | ||||||||||||||||||||||
Chief Financial Officer and Executive Vice President, Corporate Strategy |
| 2012 2011 |
| $ $ | 500,000 300,000 |
|
| — — |
| $ $ | 1,343,857 6,120,027 |
| $ | — 280,003 |
| $ $ | 878,625 1,290,000 |
|
| — — |
| $ $ | 22,450 13,839 |
| $ $ | 2,744,932 8,003,869 |
| |||||||||
Hans-Ole Jochumsen | 2013 | $ | 516,096 | — | $ | 1,438,326 | — | $ | 1,383,168 | — | $ | 132,039 | $ | 3,469,629 | ||||||||||||||||||||||
Executive Vice President, Transaction Services Nordic | 2012 | $ | 496,608 | — | $ | 1,151,887 | — | $ | 889,387 | — | $ | 116,638 | $ | 2,654,520 | ||||||||||||||||||||||
Edward S. Knight | 2013 | $ | 500,000 | — | $ | 1,438,326 | — | $ | 1,106,625 | — | $ | 51,951 | $ | 3,096,902 | ||||||||||||||||||||||
Executive Vice President General Counsel and Chief Regulatory Officer |
| 2012 2011 |
| $ $ | 500,000 500,000 |
|
| — — |
| $ $ | 863,910 1,220,013 |
| $ | — 180,012 |
| $ $ | 900,000 1,155,000 |
| $ $ | 566,658 274,403 |
| $ $ | 40,000 57,725 |
| $ $ | 2,870,568 3,387,153 |
| |||||||||
Bradley J. Peterson(9) | 2013 | $ | 412,885 | $ | 400,000 | $ | 2,000,014 | — | $ | 915,300 | — | $ | 266,962 | $ | 3,995,161 | |||||||||||||||||||||
Executive Vice President and Chief Information Officer | ||||||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($)1 | Stock Awards ($)2 | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)3 | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)4 | All Other Compensation ($)5 | Total ($) | |||||||||
Adena T. Friedman President and CEO |
2021 |
$1,250,000 |
— |
$12,864,768 |
— |
$5,799,474 |
— |
$51,651 |
$19,965,893 | |||||||||
2020 |
$1,176,163 |
— |
$10,397,565 |
— |
$4,081,857 |
$98,334 |
$53,699 |
$15,807,618 | ||||||||||
2019 |
$1,000,000 |
— |
$9,251,842 |
— |
$3,437,372 |
$132,281 |
$47,792 |
$13,869,287 | ||||||||||
Ann M. Dennison6 EVP and CFO | 2021 | $529,630 | — | $1,543,459 | — | $1,415,845 | — | $31,891 | $3,520,825 | |||||||||
Michael Ptasznik7 Former EVP, Corporate Strategy and CFO |
2021 |
$150,637 |
— |
— |
— |
$151,541 |
— |
$6,944 |
$309,122 | |||||||||
2020 |
$617,596 |
— |
$2,195,005 |
— |
$1,438,673 |
— |
$39,950 |
$4,291,224 | ||||||||||
2019 |
$600,000 |
— |
$1,959,135 |
— |
$1,332,971 |
— |
$35,402 |
$3,927,508 | ||||||||||
Lauren B. Dillard Former EVP, Investment Intelligence |
2021 |
$542,593 |
— |
$2,058,297 |
— |
$1,470,169 |
— |
$35,402 |
$4,106,461 | |||||||||
2020 |
$525,000 |
— |
$1,732,894 |
— |
$1,300,481 |
— |
$45,572 |
$3,603,947 | ||||||||||
2019 |
$262,500 |
$1,500,000 |
$5,395,185 |
— |
$1,265,514 |
— |
$21,519 |
$8,444,718 | ||||||||||
P.C. Nelson Griggs EVP, Corporate Platforms |
2021 |
$575,000 |
— |
$2,058,297 |
— |
$1,640,065 |
— |
$18,778 |
$4,292,140 | |||||||||
2020 |
$567,596 |
— |
$1,848,444 |
— |
$1,478,329 |
— |
$23,407 |
$3,917,416 | ||||||||||
2019 |
$535,577 |
— |
$1,632,661 |
— |
$1,151,808 |
— |
$16,800 |
$3,336,846 | ||||||||||
Bradley J. Peterson EVP and CIO/CTO |
2021 |
$600,000 |
— |
$2,444,286 |
— |
$1,746,459 |
— |
$35,925 |
$4,826,670 | |||||||||
2020 |
$600,000 |
— |
$2,079,456 |
— |
$1,346,172 |
— |
$44,950 |
$4,070,578 | ||||||||||
2019 |
$585,577 |
— |
$1,959,135 |
— |
$1,229,270 |
— |
$40,091 |
$3,814,073 | ||||||||||
| The amount reported in this column |
The amounts reported in this column reflect the grant date fair value of the stock awards, including PSUs and |
The Monte Carlo simulation accounting valuation methodologymodel takes into account expected price movement of NASDAQ OMXNasdaq stock as compared to peer companies. As a result of the company’s high stock volatility and pre-grant year-to-date 2013Company’s pre- grant 2021 TSR performance relative to peer companies, the Monte Carlo simulation
THE NASDAQ OMX GROUP, INC. 57
model assigned a significantly higher expense value to each 20132021 three-year PSU ($43.81) than the closing price of NASDAQ OMX’sNasdaq’s stock on the grant date ($33.23).date. Therefore, the expense value reflected in the 2021 Summary Compensation Table does not reflect the target incentivegrant date face value shown in the Long-Term Stock-BasedIncentive Compensation section of the Compensation Discussion and Analysis in this proxy statement, and therestatement. There is no assurance that the target grant date face values or FASB ASC Topic 718 accountingfair values will ever be realized by the Chief Executive Officer or the other named executive officers.realized. The table below summarizes the target grant date face value of PSU grants that the management compensation committeeManagement Compensation Committee and board of directorsthe Board approved for named executive officersthe NEOs compared to the FASB ASC Topic 718 accountingfair value.
Name and Principal Position | Year | Target PSUs | Target Grant Date Face Value | FASB ASC Topic 718 Fair Value | ||||||||
Robert Greifeld | 2013 | 227,000 | $7,543,210 | $9,944,870 | ||||||||
Chief Executive Officer | ||||||||||||
Lee Shavel | 2013 | 38,303 | $1,272,809 | $1,678,054 | ||||||||
Chief Financial Officer and Executive Vice President, Corporate Strategy | ||||||||||||
Hans-Ole Jochumsen | 2013 | 32,831 | $1,090,974 | $1,438,326 | ||||||||
Executive Vice President, Transaction Services Nordic | ||||||||||||
Edward S. Knight | 2013 | 32,831 | $1,090,974 | $1,438,326 | ||||||||
Executive Vice President, General Counsel and Chief Regulatory Officer | ||||||||||||
Name | Year | Target PSUs (#) | Target Grant Date Face Value ($) | FASB ASC Topic 718 Fair Value ($) | ||||
Adena T. Friedman | 2021 | 53,032 | $8,000,000 | $10,933,607 | ||||
Ann M. Dennison | 2021 | 6,363 | $960,000 | $1,311,860 | ||||
Michael Ptasznik | 2021 | — | — | — | ||||
Lauren B. Dillard | 2021 | 8,485 | $1,280,000 | $1,749,352 | ||||
P.C. Nelson Griggs | 2021 | 8,485 | $1,280,000 | $1,749,352 | ||||
Bradley J. Peterson | 2021 | 10,076 | $1,520,000 | $2,077,369 | ||||
| The amounts reported in this column reflect the cash awards made to the |
The amounts reported in this column reflect the actuarial increase in the present value of the |
THE NASDAQ OMX GROUP, INC. 58
The following table sets forth the |
Name and Position | Incremental Cost of Personal Use of Company Car ($)(a) | Cost of Executive Health Exam or Extended Sickness Insurance ($) | Cost of Financial/ Tax Planning Services ($) | Contribution to the 401(k) Plan or Other Defined Contribution Plans ($) | Contribution to the Basic ERC ($) | Contribution to the Supplemental ERC ($) | Vacation Pay ($) | Relocation Expenses ($) | Total All Other Compensation ($) | |||||||||||||||||||||||||||
Robert Greifeld | $ | 26,554 | $ | 4,350 | — | $ | 10,200 | $ | 15,300 | $ | 44,700 | — | — | $ | 101,104 | |||||||||||||||||||||
Chief Executive Officer | ||||||||||||||||||||||||||||||||||||
Lee Shavel | — | $ | 4,350 | — | $ | 10,200 | $ | 5,100 | $ | 4,900 | — | — | $ | 24,550 | ||||||||||||||||||||||
Chief Financial Officer and Executive Vice President, Corporate Strategy | ||||||||||||||||||||||||||||||||||||
Hans-Ole Jochumsen | — | $ | 2,326 | $ | 8,947 | $ | 103,219 | — | — | $ | 17,547 | — | $ | 132,039 | ||||||||||||||||||||||
Executive Vice President, Transaction Services Nordic | ||||||||||||||||||||||||||||||||||||
Edward S. Knight | — | $ | 4,350 | $ | 7,401 | $ | 10,200 | $ | 15,300 | $ | 14,700 | — | — | $ | 51,951 | |||||||||||||||||||||
Executive Vice President, General Counsel and Chief Regulatory Officer | ||||||||||||||||||||||||||||||||||||
Bradley J. Peterson | — | $ | 4,350 | — | $ | 7,423 | — | — | — | $ | 255,189(b) | $ | 266,962 | |||||||||||||||||||||||
Executive Vice President and Chief Information Officer | ||||||||||||||||||||||||||||||||||||
| The incremental cost of Ms. Friedman’s personal use of |
Name | Contribution to the 401(k) Plan ($) | Cost of Executive Health Exam ($) | Cost of Financial/ Tax Planning Services ($) | Incremental Cost of Personal Use of Company Car ($) | Matching Charitable Donations ($)8 | Total All Other Compensation ($) | ||||||
Adena T. Friedman | $17,400 | — | $17,735 | $14,516 | $2,000 | $51,651 | ||||||
Ann M. Dennison | $17,400 | — | $13,055 | — | $1,436 | $31,891 | ||||||
Michael Ptasznik | $6,944 | — | — | — | — | $6,944 | ||||||
Lauren B. Dillard | $16,667 | — | $17,735 | — | $1,000 | $35,402 | ||||||
P.C. Nelson Griggs | $15,778 | — | — | — | $3,000 | $18,778 | ||||||
Bradley J. Peterson | $17,400 | $4,970 | $13,055 | — | $500 | $35,925 | ||||||
| 6. | Ms. Dennison was appointed EVP and CFO effective as of March 1, 2021. |
| 7. | Mr. |
Amounts in this column reflect matching charitable donations for Ms. Friedman, Ms. Dennison and Mr. |
EMPLOYMENT AGREEMENTS
NASDAQ OMX currently has employment agreements with three of its named executive officers, Messrs. Greifeld, Jochumsen and Knight.
Robert Greifeld
On February 22, 2012, NASDAQ OMX entered into a new employment agreement with Robert Greifeld, NASDAQ OMX’s CEO. The new employment agreement replaced NASDAQ OMX’s prior employment agreement with Mr. Greifeld, which was effective January 1, 2007. In addition to the new employment agreement, NASDAQ OMX and Mr. Greifeld entered into a confidentiality, non-solicitation and invention assignment agreement.
The 2012 employment agreement with Mr. Greifeld has a term of five years, with no automatic renewals thereafter. The agreement provides for:
annual base salary of not less than $1,000,000; and
annual incentive compensation that is targeted at not less than 200% of base salary based on the achievement of one or more performance goals established for such year by the management compensation committee of NASDAQ OMX’s board of directors.
THE NASDAQ OMX GROUP, INC. 59
The agreement does not guarantee the grant of any equity awards to Mr. Greifeld. Mr. Greifeld may be granted equity awards under the Equity Plan, based on the management compensation committee’s evaluation of the performance of NASDAQ OMX and Mr. Greifeld, peer group market data and internal equity, and consistent with past practices with respect to the combined aggregate value of prior grants.
The agreement prohibits Mr. Greifeld from rendering services to a competing entity for a period of two years following the date of termination of employment. To receive certain termination payments and benefits under the new employment agreement, Mr. Greifeld must execute a general release of claims against NASDAQ OMX. In addition, such termination payments and benefits are generally subject to discontinuation in the event Mr. Greifeld breaches the restrictive covenants in either the employment agreement or the confidentiality, non-solicitation and invention assignment agreement.
On December 11, 2012, NASDAQ OMX entered into a memorandum of understanding with Mr. Greifeld relating to the calculation of certain severance payments under his employment agreement. The memorandum of understanding clarifies the meanings of certain terms relevant to these calculations.
The employment agreement, as clarified by the memorandum of understanding, sets forth the payments that Mr. Greifeld will receive under various termination scenarios. For further information about these payments and benefits, see “Executive Compensation – Potential Payments upon Termination or Change in Control.”
Hans-Ole Jochumsen
NASDAQ OMX also has an employment agreement with Hans-Ole Jochumsen, our Executive Vice President, Transaction Services Nordic. The employment agreement was entered into on July 1, 2008 and may be terminated by NASDAQ OMX, subject to 12 months’ prior notice, or by Mr. Jochumsen, subject to six months’ prior notice. If not previously terminated, the agreement will automatically terminate at the earlier of the date of Mr. Jochumsen’s retirement or his reaching the age of 65.
The agreement provides for:
an annual base salary of not less than 3,200,000 Swedish krona, to be reviewed each year consistent with NASDAQ OMX’s policies; and
a pension contribution totaling 20% of his monthly base salary during the term of the agreement.
The agreement does not guarantee the grant of any equity awards to Mr. Jochumsen. Mr. Jochumsen may be granted equity awards under the Equity Plan, at the discretion of the board of directors. Mr. Jochumsen is entitled to health and long-term disability coverage and other benefits consistent with NASDAQ OMX’s policies.
Upon termination of employment by Mr. Jochumsen, the agreement prohibits Mr. Jochumsen from rendering services to a competing entity for a period of six months following the date of termination. During this six month period, Mr. Jochumsen will be entitled to his monthly salary. Upon termination of the employment agreement by Mr. Jochumsen or NASDAQ OMX, Mr. Jochumsen is restricted from soliciting NASDAQ OMX employees for a period of 12 months from the termination date.
The agreement sets forth the payments that Mr. Jochumsen will receive under various termination scenarios. For further information about these payments and benefits, see “Executive Compensation – Potential Payments upon Termination or Change in Control.”
Edward S. Knight
NASDAQ OMX also has an employment agreement with Edward S. Knight, our Executive Vice President, General Counsel and Chief Regulatory Officer.
THE NASDAQ OMX GROUP, INC. 60
The agreement provides for:
an annual base salary at a rate not less than the rate of base salary in effect on the date of the initial agreement; and
incentive compensation for each calendar year during the term as the management compensation committee may award in its discretion.
Under the agreement, the management compensation committee may grant Mr. Knight equity awards under the Equity Plan.
The agreement prohibits Mr. Knight from soliciting NASDAQ OMX employees or rendering services to a competing entity for a period of twelve months following the date of termination of employment. The agreement sets forth the severance payments that Mr. Knight will receive under various termination scenarios. For further information about these payments and benefits, see “Executive Compensation – Potential Payments Upon Termination or Change in Control.”
On February 22, 2012, NASDAQ OMX and Mr. Knight entered into the third amendment to this employment agreement, as well as a confidentiality, non-solicitation and invention assignment agreement. Under the third amendment, Mr. Knight’s employment agreement was renewed for a term of five years, commencing February 22, 2012, with no automatic renewals thereafter.
GRANTS OF PLAN-BASED AWARDS
The following table sets forth certain information with respect to the plan-based awards granted to each of the named executive officers during the fiscal year ended December 31, 2013.
20132021 Grants of Plan-Based Awards Table
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | |||||||||||||||||||||||||||||||||||||||||||||||
Name | Committee and/or Board Approval Date | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(3) | ||||||||||||||||||||||||||||||||||||
Robert Greifeld | 3/26/2013 | 3/26/2013 | $ | 0 | $ | 2,100,000 | $ | 4,200,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Chief Executive Officer | 7/22/2013 | 7/25/2013 | — | — | — | 0 | 227,000 | 454,000 | — | — | — | $ | 9,944,870 | |||||||||||||||||||||||||||||||||||
Lee Shavel | 3/26/2013 | 3/26/2013 | $ | 0 | $ | 750,000 | $ | 1,500,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Chief Financial Officer and Executive Vice President, Corporate Strategy | 7/22/2013 | 7/25/2013 | — | — | — | 0 | 38,303 | 76,606 | — | — | — | $ | 1,678,054 | |||||||||||||||||||||||||||||||||||
Hans-Ole Jochumsen | 3/26/2013 | 3/26/2013 | $ | 0 | $ | 768,000 | $ | 1,536,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Executive Vice President, Transaction Services Nordic | 7/22/2013 | 7/25/2013 | — | — | — | 0 | 32,831 | 65,662 | — | — | — | $ | 1,438,326 | |||||||||||||||||||||||||||||||||||
Edward S. Knight | 3/26/2013 | 3/26/2013 | $ | 0 | $ | 650,000 | $ | 1,300,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Executive Vice President, General Counsel and Chief Regulatory Officer | 7/22/2013 | 7/25/2013 | — | — | — | 0 | 32,831 | 65,662 | — | — | — | $ | 1,438,326 | |||||||||||||||||||||||||||||||||||
Bradley J. Peterson | 3/26/2013 | 3/26/2013 | $ | 0 | $ | 600,000 | $ | 1,200,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Executive Vice President and Chief Information Officer | 1/30/2013 | 2/6/2013 | — | — | — | — | — | — | 68,966 | — | — | $ | 2,000,014 | |||||||||||||||||||||||||||||||||||
Name | Commit- tee or Board | Grant Date | All Other Awards: Units (#) | All Other Awards: (#) | Exercise Price of | Grant Date Stock and | ||||||||||||||||||
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards1 | Estimated Future Payouts Under Equity Incentive Plan Awards2 | |||||||||||||||||||||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||
Adena T. Friedman | — | — | — | $3,000,000 | $6,000,000 | — | — | — | — | — | — | — | ||||||||||||
| 03/24/2021 | 04/01/2021 | — | — | — | — | 53,032 | 106,064 | 13,258 | — | — | $12,864,768 | |||||||||||||
Ann M. Dennison | — | — | — | $727,939 | $1,455,878 | — | — | — | — | — | — | — | ||||||||||||
| 03/24/2021 | 04/01/2021 | — | — | — | — | 6,363 | 12,726 | 1,590 | — | — | $1,543,459 | |||||||||||||
Michael Ptasznik4 | — | — | — | $151,541 | — | — | — | — | — | — | — | — | ||||||||||||
| — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||
Lauren B. Dillard | — | — | — | $815,343 | $1,630,686 | — | — | — | — | — | — | — | ||||||||||||
| 03/24/2021 | 04/01/2021 | — | — | — | — | 8,485 | 16,970 | 2,121 | — | — | $2,058,297 | |||||||||||||
P.C. Nelson Griggs | — | — | — | $862,500 | $1,725,000 | — | — | — | — | — | — | — | ||||||||||||
| 03/24/2021 | 04/01/2021 | — | — | — | — | 8,485 | 16,970 | 2,121 | — | — | $2,058,297 | |||||||||||||
Bradley J. Peterson | — | — | — | $900,000 | $1,800,000 | — | — | — | — | — | — | — | ||||||||||||
| 03/24/2021 | 04/01/2021 | — | — | — | — | 10,076 | 20,152 | 2,519 | — | — | $2,444,286 | |||||||||||||
THE NASDAQ OMX GROUP, INC. 61
The amounts reported in these columns represent the possible range of payments under the ECIP or other performance-based incentive compensation programs. Amounts are considered earned in fiscal year 2021 although they were not paid until 2022. For information about the amounts actually earned by each |
The amounts reported in these columns represent the possible range of |
The amounts reported in this column represent the grant date fair value of the |
| 4. | Mr. Ptasznik was paid a pro-rata bonus bonus at target of $151,541 for |
Name and Principal Position | Year | Target PSUs | Target Grant Date Face Value | FASB ASC Topic 718 Fair Value | ||||||||||||
Robert Greifeld | 2013 | 227,000 | $ | 7,543,210 | $ | 9,944,870 | ||||||||||
Chief Executive Officer | ||||||||||||||||
Lee Shavel | 2013 | 38,303 | $ | 1,272,809 | $ | 1,678,054 | ||||||||||
Chief Financial Officer and Executive Vice President, Corporate Strategy | ||||||||||||||||
Hans-Ole Jochumsen | 2013 | 32,831 | $ | 1,090,974 | $ | 1,438,326 | ||||||||||
Executive Vice President, Transaction Services Nordic | ||||||||||||||||
Edward S. Knight | 2013 | 32,831 | $ | 1,090,974 | $ | 1,438,326 | ||||||||||
Executive Vice President, General Counsel and Chief Regulatory Officer | ||||||||||||||||
THE NASDAQ OMX GROUP, INC. 62
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table includes certain information with respect to the value of all outstanding equity awards held by each named executive officer as of December 31, 2013.
20132021 Outstanding Equity Awards at Fiscal Year-End Table
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||||
Robert Greifeld Chief Executive Officer | 960,000 | — | — | $ | 35.92 | 12/13/2016 | — | — | — | — | ||||||||||||||||||||||||||
| 900,000 | — | — | $ | 21.31 | 06/30/2019 | — | — | — | — | |||||||||||||||||||||||||||
| — | — | — | — | — | — | — | 247,440(7) | $ | 9,848,112 | |||||||||||||||||||||||||||
| — | — | — | — | — | — | — | 227,000(8) | $ | 9,034,600 | |||||||||||||||||||||||||||
Lee Shavel Chief Financial Officer and Executive Vice President, Corporate Strategy | — | 41,257(1) | — | $ | 24.94 | 05/23/2021 | — | — | — | — | ||||||||||||||||||||||||||
| — | — | — | — | — | 100,240(4) | $3,989,552 | — | — | ||||||||||||||||||||||||||||
| — | — | — | — | — | 22,454(5) | $893,669 | — | — | ||||||||||||||||||||||||||||
| — | — | — | — | — | — | — | 59,727(7) | $ | 2,377,135 | |||||||||||||||||||||||||||
| — | — | — | — | — | — | — | 38,303(8) | $ | 1,524,459 | |||||||||||||||||||||||||||
Hans-Ole Jochumsen Executive Vice President, Transaction Services Nordic | 15,771 | — | — | $ | 41.36 | 03/24/2018 | — | — | — | — | ||||||||||||||||||||||||||
| — | 22,059(2) | — | $ | 19.75 | 03/04/2020 | — | — | — | — | |||||||||||||||||||||||||||
| — | 33,995(3) | — | $ | 25.28 | 03/28/2021 | — | — | — | — | |||||||||||||||||||||||||||
| — | — | — | — | — | 18,989(5) | $755,762 | — | — | ||||||||||||||||||||||||||||
| — | — | — | — | — | — | — | 51,195(7) | $ | 2,037,561 | |||||||||||||||||||||||||||
| — | — | — | — | — | — | — | 32,831(8) | $ | 1,306,674 | |||||||||||||||||||||||||||
Edward S. Knight Executive Vice President, General Counsel and Chief Regulatory Officer | 28,801 | — | — | $ | 35.92 | 12/13/2016 | — | — | — | — | ||||||||||||||||||||||||||
| 19,555 | — | — | $ | 45.38 | 12/12/2017 | — | — | — | — | |||||||||||||||||||||||||||
| 39,458 | — | — | $ | 25.07 | 12/17/2018 | — | — | — | — | |||||||||||||||||||||||||||
| — | 22,059(2) | — | $ | 19.75 | 03/04/2020 | — | — | — | — | |||||||||||||||||||||||||||
| — | 25,496(3) | — | $ | 25.28 | 03/28/2021 | — | — | — | — | |||||||||||||||||||||||||||
| — | — | — | — | — | 14,241(5) | $566,792 | — | — | ||||||||||||||||||||||||||||
| — | — | — | — | — | — | — | 38,396(7) | $ | 1,528,161 | |||||||||||||||||||||||||||
| — | — | — | — | — | — | — | 32,831(8) | $ | 1,306,674 | |||||||||||||||||||||||||||
Bradley J. Peterson Executive Vice President and Chief Information Officer | — | — | — | — | — | 68,966(6) | $2,744,847 | — | — | |||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercis- able | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)6 | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($)6 | |||||||||
Adena T. Friedman | 268,817 | — | — | $66.68 | 01/03/2027 | — | — | — | — | |||||||||
— |
— |
— |
— |
— |
19,507 1 |
$4,096,665 |
78,031 3 |
$16,387,290 | ||||||||||
— |
— |
— |
— |
— |
13,258 2 |
$2,784,313 |
53,032 4 |
$11,137,250 | ||||||||||
Ann M. Dennison | — | — | — | — | — | 2,275 1 | $477,773 | 5,310 3 | $1,115,153 | |||||||||
— |
— |
— |
— |
— |
1,590 2 |
$333,916 |
6,363 4 |
$1,336,294 | ||||||||||
— |
— |
— |
— |
— |
1,381 5 |
$290,024 |
— |
— | ||||||||||
Michael Ptasznik | — | — | — | — | — | — | — | 16,473 3 | $3,459,495 | |||||||||
Lauren B. Dillard | — | — | — | — | — | 3,251 1 | $682,743 | 13,005 3 | $2,731,180 | |||||||||
— |
— |
— |
— |
— |
2,121 2 |
$445,431 |
8,485 4 |
$1,781,935 | ||||||||||
P.C. Nelson Griggs | — | — | — | — | — | 3,468 1 | $725,315 | 13,872 3 | $2,913,259 | |||||||||
— |
— |
— |
— |
— |
2,121 2 |
$445,431 |
8,485 4 |
$1,781,935 | ||||||||||
Bradley J. Peterson | — | — | — | — | — | 3,901 1 | $819,249 | 15,606 3 | $3,277,416 | |||||||||
— |
— |
— |
— |
— |
2,519 2 |
$529,015 |
10,076 4 |
$2,116,061 | ||||||||||
These |
These RSUs will vest as |
THE NASDAQ OMX GROUP, INC. 63
| This |
This |
| 5. | These PSUs will vest as to 100% on 12/31/2022. Represents the remaining one-third of unvested shares from a one-year PSU award that was deemed earned in 2019 and |
| 6. | Amounts in this column based on a closing price of |
THE NASDAQ OMX GROUP, INC. 64
OPTION EXERCISES AND STOCK VESTED
The following table includes certain information with respect to the options exercised by and restricted stock awards that vested for the named executive officers during the fiscal year ended December 31, 2013.
20132021 Option Exercises and Stock Vested Table
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||||||||||
Robert Greifeld | 700,000 | $ | 17,376,107 | 57,500 | (3) | $ | 2,288,500 | |||||||||
Chief Executive Officer | ||||||||||||||||
Lee Shavel | — | — | 72,575 | (4) | $ | 2,443,410 | ||||||||||
Chief Financial Officer and Executive Vice President, Corporate Strategy | ||||||||||||||||
Hans-Ole Jochumsen | 39,458 | $ | 470,734 | 28,439 | (5) | $ | 1,131,872 | |||||||||
Executive Vice President, Transaction Services Nordic | ||||||||||||||||
Edward S. Knight | 100,000 | $ | 2,377,006 | 35,851 | (6) | $ | 1,352,703 | |||||||||
Executive Vice President, General Counsel and Chief Regulatory Officer | ||||||||||||||||
Bradley J. Peterson | — | — | — | — | ||||||||||||
Executive Vice President and Chief Information Officer | ||||||||||||||||
| Option Awards | Stock Awards | |||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)1 | ||||
Adena T. Friedman2 | — | — | 192,306 | $32,343,946 | ||||
Ann M. Dennison3 | — | — | 9,567 | $1,725,375 | ||||
Michael Ptasznik4 | — | — | 44,840 | $7,470,233 | ||||
Lauren B. Dillard5 | — | — | 60,416 | $10,252,775 | ||||
P.C. Nelson Griggs6 | — | — | 33,936 | $5,707,696 | ||||
Bradley J. Peterson7 | — | — | 40,722 | $6,849,033 | ||||
| The amounts reported in this column are calculated by multiplying the number of shares of stock that vested by the closing market price of our common stock on the vesting date. |
The amount reported includes |
The amount reported |
The amount reported includes |
The amount reported includes |
| 6. | The amount reported includes 16,456 shares that were withheld to pay taxes in connection with the vesting(s). |
THE NASDAQ OMX GROUP, INC. 65
| 7. | The amount reported includes 17,190 shares that were withheld to pay taxes in connection with the vesting(s). |
RETIREMENT BENEFITS
Retirement Plans
We maintain 401(k) Plannon-contributory,
NASDAQ OMX provides the 401(k) Plan defined-benefit pension plans, which have been frozen. Future service and salary for eligible employees. Asall participants do not count toward an accrual of December 31, 2013, allbenefits under these plans. However, participants continue to receive credit for future service for vesting of the named executive officers, except Mr. Jochumsen, participated in the 401(k) Plan. During 2013, NASDAQ OMX matched employee contributions to this plan up to 4% of base salary, not to exceed the Internal Revenue Service (IRS) annual limits. NASDAQ OMX also provided true-up matching to ensure that employees who contributed 4% of base salary to the 401(k) Plan would receive the maximum company match, regardlessbenefits. None of the timing of employee contributions. Effective January 1, 2014, NASDAQ OMX increased the company matching contribution to 6% of an employee’s base salary, not to exceed IRS annual limits.
Frozen Pension Plan and SERP
Effective May 1, 2007, the Pension Plan and SERP were fully frozen for all employees, and new retirement benefits were implemented on July 1, 2007. As a result, the eligible named executive officers have accrued Pension Plan and SERP benefits only through April 30, 2007. As of that date, the plan participants no longer accrue additional benefits from future salary earnings and years of service with NASDAQ OMX.
ERCs
After freezing the Pension Plan and SERP, NASDAQ OMX implemented retirement benefits, called ERCs, that included two parts. The first part is provided through the existing 401(k) Plan and is available to eligible U.S. employees, including the U.S.-based named executive officers hired prior to January 1, 2013. Under this part, NASDAQ OMX may make discretionary tax-qualified contributions, called the Basic ERC, to the 401(k) Plan within specified guidelines based on years of service. NASDAQ OMX also may make additional discretionary tax-qualified contributions, called the Enhanced ERC, to the 401(k) Plan for employees age 45 or older with at least 10 years of service as of December 31, 2006.
NASDAQ OMX determines whether to fund the Basic ERC and Enhanced ERC during a particular year based upon the achievement of a corporate financial objective. In early 2013, the management compensation committee and board of directors determined to fund the Basic ERC and Enhanced ERC for 2013 if NASDAQ OMX’s operating income (run rate) fell within or exceeded the target range used for purposes of the ECIP,NEOs participate in these plans other than Ms. Friedman, as discussed above under “Compensation Discussion and Analysis.” Since our 2013 operating income (run rate) exceeded this range, NASDAQ OMX funded the 2013 Basic ERC and Enhanced ERC payments in early 2014.below.
The second part of NASDAQ OMX’s retirement program is a non-qualified plan called the Supplemental ERC. The Supplemental ERC is available to officers and non-officers whose base salaries exceed the IRS compensation limit of $255,000 (for 2013) or whose total employee and NASDAQ OMX contributions to qualified plans exceed the IRS total annual contribution limit, generally $51,000 (for 2013). For years in which an ERC is contributed to the 401(k) Plan, a Supplemental ERC will be contributed for those employees for whom the ERC must be reduced by operation of these IRS limits. The Supplemental ERC is equal to the difference between the ERC that would have been contributed for the employee had the IRS limits not applied, and the actual ERC contributed to the 401(k) Plan.
Employees may direct investment of Basic ERC and Enhanced ERC contributions among the various mutual funds available through our 401(k) Plan. Supplemental ERC contributions receive interest at a rate set forth in the plan document. Unlike the Pension Plan and SERP, the ERC benefits allow for immediate vesting.
Effective January 1, 2013, NASDAQ OMX discontinued the ERC benefits for new hires. In addition, NASDAQ OMX discontinued contributions to the Supplemental ERC effective with the plan year
THE NASDAQ OMX GROUP, INC. 66
beginning January 1, 2014. The last Supplemental ERC contribution was made in early 2014 for the 2013 plan year. Finally, NASDAQ OMX will discontinue contributions to the Basic ERC and Enhanced ERC effective with the plan year beginning January 1, 2015. The last Basic ERC and Enhanced ERC contributions will be made in early 2015 for the 2014 plan year.
Non-U.S. Retirement Benefits
Most employees outside of the U.S. are covered by local retirement plans or by applicable social laws. Mr. Jochumsen participates in a non-U.S. defined contribution pension plan. Under this type of plan, NASDAQ OMX makes annual contributions equal to a percentage of fixed salary to participants’ personal accounts. Each participant is free to invest such contributions as he or she chooses. Participants are not taxed on the contributions until they are withdrawn upon retirement. Under his employment agreement, Mr. Jochumsen is entitled to receive annual contributions under this plan equal to 20% of his base salary.
PENSION BENEFITS TABLE
The table below shows the actuarial present value of accumulated benefits payable to each of the named executive officers, including the number of years of service credited to each such named executive officer, under the Pension Plan and the SERP as of December 31, 2013. Messrs. Jochumsen, Peterson and Shavel are not participants in the Pension Plan or SERP.
20132021 Pension Benefits Table
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) | ||||||||||
Robert Greifeld | Pension Plan | 10.67 | $ | 128,345 | — | |||||||||
Chief Executive Officer | SERP | 10.67 | $ | 4,255,884 | — | |||||||||
Edward S. Knight | Pension Plan | 14.50 | $ | 331,000 | — | |||||||||
Executive Vice President, General Counsel and Chief Regulatory Officer | SERP | 14.50 | $ | 3,280,827 | — | |||||||||
Name | Plan Name | Number of Years Credited Service (#)1 | Present Value of Accumulated Benefit ($)2 | Payments During Last Fiscal Year ($) | ||||
Adena T. Friedman | Pension Plan | 13.92 | $572,267 | — | ||||
Since the pension plan was frozen in 2007, the number of years of credited service for each participant under the plan differs from such participant’s number of years of actual service with Nasdaq. As of December 31, 2021, Ms. Friedman had 25.42 years of actual service with Nasdaq. Generally, participants in the pension plan became vested in retirement benefits under the plan after five years of service from the participant’s date of hire. As of December 31, 2021, Ms. Friedman was vested in benefits payable under the pension plan. |
| 2. | The amounts reported comprise the actuarial present value of the |
Generally, participantsEmployment Agreements and Potential Payments Upon Termination or Change in Control
We currently have employment agreements with two of our NEOs: Ms. Friedman and Mr. Peterson. In addition to the Pension Plan become vested in retirement benefits underemployment agreements, we have entered into continuing obligations agreements with all of the plan after fiveNEOs related to confidentiality and intellectual property protection.
Ms. Friedman’s and Mr. Peterson’s employment agreements prohibit them from rendering services to a competing entity for a period of two years of service fromfollowing the participant’slast date of hire. Participantsemployment. To receive certain termination payments and benefits, Ms. Friedman and Mr. Peterson must execute a general release of claims against Nasdaq. In addition, termination payments and benefits may be discontinued if the NEO breaches the restrictive covenants in either the SERP generally become vestedemployment agreement or the continuing obligations agreement.
Each employment agreement sets forth the payments and benefits the applicable NEO will receive under various termination scenarios. For further information about these payments and benefits, see “Executive Compensation Tables – Estimated Termination or Change in retirement benefits under the SERP after reaching age 55Control Payments and completing 10 years of service. As of December 31, 2013, Messrs. Greifeld and Knight were vested in benefits payable under the Pension Plan and the SERP.
THE NASDAQ OMX GROUP, INC. 67
NONQUALIFIED DEFINED CONTRIBUTION AND OTHER NONQUALIFIED DEFERRED COMPENSATION PLANS
As of December 31, 2013, the only nonqualified defined contribution plan in which our named executive officers participated was the Supplemental ERC. The table below shows the amounts contributed to this plan by, or on behalfWe currently have employment agreements with two of our named executive officers duringNEOs: Ms. Friedman and Mr. Peterson.
Adena T. Friedman
Prior Employment Agreement
In connection with her promotion to the fiscal year ended December 31, 2013role of President and other information. Messrs. Jochumsen and Peterson are not participantsCEO in 2017, Ms. Friedman entered into an employment agreement on November 14, 2016. The term of the Supplemental ERC.agreement was January 1, 2017 to January 1, 2022.
2013 Nonqualified Deferred Compensation TableThe agreement provided for:
Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(3) | |||||||||||||||
Robert Greifeld | — | $ | 44,700 | $ | 11,163 | — | $ | 201,500 | ||||||||||||
Chief Executive Officer | ||||||||||||||||||||
Lee Shavel | — | $ | 4,900 | $ | 329 | — | $ | 6,446 | ||||||||||||
Chief Financial Officer and Executive Vice President, Corporate Strategy | ||||||||||||||||||||
Edward S. Knight | — | $ | 14,700 | $ | 5,036 | — | $ | 91,078 | ||||||||||||
Executive Vice President, General Counsel and Chief Regulatory Officer | ||||||||||||||||||||
| an annual base salary of no less than $1,000,000; |
| annual incentive compensation that is |
| a 2017 equity grant with a target value of no less than $6,000,000 in |
Under the agreement, no equity award grants were guaranteed after 2017. However, Ms. Friedman was eligible to receive grants of equity awards, based on the Management Compensation Committee’s evaluation of the performance of Nasdaq and Ms. Friedman, peer group market data and internal equity, in a manner consistent with past practices.
Under her agreement, if Ms. Friedman’s employment had been terminated by the Company without cause, or by the executive for good reason, she would have been entitled to the following severance payments and benefits from the Company:
| · | a cash payment equal to the |
| · | a taxable monthly cash payment equal to the employer’s share of the COBRA premium for the highest level of coverage available under the |
| · | Ms. Friedman also would have received continued vesting for 12 months of outstanding PSUs, based on |
Additionally, Ms. Friedman was subject to certain customary post-termination restrictive covenants relating to non-competition, non-solicitation, non-disparagement and confidentiality.
Current Employment Agreement
On November 18, 2021, Ms. Friedman entered into a new employment agreement, effective as of January 1, 2022. The term of the agreement is January 1, 2022 to January 1, 2027. The agreement provides that Ms. Friedman will receive:
| · | an annual base salary of no less than $1,250,000; |
| · | annual incentive compensation that is targeted at not less than $3,000,000 based on the achievement of one or more performance goals established for the year by the Management Compensation Committee; and |
| · | based on the Management Compensation Committee’s evaluation of Nasdaq and Ms. Friedman’s performance, peer group market data and internal equity, and consistent with past practices with respect to the combined aggregate value of grants, equity awards in the form of options, RSUs and/or PSUs. |
Under her agreement, if Ms. Friedman’s employment is terminated by the Company without cause, or by Ms. Friedman for good reason, she will be entitled to the following severance payments and benefits from the Company:
| · | a cash payment equal to the sum of: (i) two times the prior year’s annual base salary, (ii) two times the target bonus and (iii) any pro rata target bonus with respect to the calendar year in which the termination occurs to the extent that |
| · | continued vesting for 12 months of outstanding PSUs, restricted stock units and options, with any performance- based vesting based on actual performance goals during the respective performance periods; and |
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| · | a taxable monthly cash payment equal to the COBRA premium until the earlier of the second anniversary of termination and the date Ms. Friedman is eligible for coverage under the health care plans of a subsequent employer. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Change in Control Agreements
Messrs. Greifeld’s and Knight’s employment agreements provide for limited payments and benefits in the event of termination of employment following a change in control of the company. Mr. Jochumsen’s employment agreement provides for a severance payment in the event of termination of employment by the company for any reason, other than substantial breach of the agreement. In addition, we have entered into letter agreements with the other named executive officers providing limited payments and benefits to them if theirIf Ms. Friedman’s employment is terminated in connection with a change in control ofdue to permanent disability or death, she, or her estate, will be entitled to the company. Paymentsfollowing payments and benefits under these agreements are subject to a “double trigger,” meaning that payments are payable only upon the occurrence of both a change in control of the company and a loss of employment.
Under Mr. Greifeld’s employment agreement and the agreements with the other named executive officers (other than Messrs. Jochumsen and Knight), a change in control generally consists of the first to occur of the following:benefits:
any person becomes the beneficial owner, directly or indirectly, of more than 50% of the company’s voting securities (except in limited circumstances);
| · | a cash payment equal to any pro rata target bonus with respect to the calendar year in which the termination occurs; and |
| · | accelerated vesting of all unvested equity awarded as of December 31st of the year of termination, with any performance-based vesting based on actual performance goals during any complete performance periods, and vesting at target performance for grants vesting prior to the completion of a performance cycle. |
a majority of the directors on the board are replaced by directors not endorsed by at least two-thirds of the members of the board before the date of appointment or election;
the consummation of a merger or consolidation, unless (1) the company’s voting securities prior to the transaction continue to represent more than 50% of the voting securities of the surviving entity (either by remaining outstanding or being converted into voting securities of the surviving entity) or (2) the transaction effectuates a recapitalization of the company in which no person directly or indirectly acquires more than 50% of the company’s then outstanding voting securities (other than acquisitions directly from the company); or
the sale or disposition by the company of all or substantially all of its assets.
We also have provisions in our Equity Plan that provide for the accelerated vesting of outstanding unvested equity awards in the event of a termination due to a change in control of the company.
Robert Greifeld
Under Mr. Greifeld’s employment agreement, if hisIf Ms. Friedman’s employment is terminated within two years after a change in control, eitherwithout cause by Nasdaq or for good reason by Ms. Friedman, she will be entitled to the following payments and benefits:
| · | a cash payment equal to the sum of: (i) two times the prior year’s annual base salary, (ii) two times the target bonus and (iii) any pro rata target bonus with respect to the calendar year in which the termination occurs, to the extent that performance goals are satisfied; |
| · | accelerated vesting of all outstanding unvested equity awards, subject to and in accordance with the terms of the Equity Plan; |
| · | COBRA premiums, until the earlier of the second anniversary of termination and the date Ms. Friedman is eligible for coverage under the health care plans of a subsequent employer; and |
| · | continued life insurance and accidental death and dismemberment insurance benefits for the same period as the continued health coverage payments. |
Additionally, Ms. Friedman is subject to certain customary post-termination restrictive covenants relating to non-competition, non-solicitation, non-disparagement and confidentiality.
Option Award
In addition to the annual equity grant awarded to Ms. Friedman, the Management Compensation Committee and Board of Directors granted her a one-time, performance-based stock option award with a value of $10,000,000 associated with the renewal of her employment agreement for another five years. The grant provides strong motivation to deliver long-term stock price appreciation in alignment with shareholder interests over her future tenure as President and CEO. The entire award will become valuable only to the extent that Nasdaq’s shareholders benefit from future increases in Nasdaq’s share price. Additionally, 50% of the grant vesting is contingent upon achieving a cumulative 5-year EPS target; the remaining 50% will vest after 5 years of additional tenure as President and CEO.
EPS was determined to be the most appropriate financial metric, since it will reflect Nasdaq’s organic and inorganic earnings growth over time and will be a key driver of longer-term total shareholder return.
The performance condition for the vesting of the performance-based component of the award will be satisfied if Nasdaq’s fully diluted compounded annual EPS growth for the period of January 1, 2022 – December 31, 2026 is at least 3.0%. For purposes of the award, “fully diluted EPS” means EPS on a fully diluted basis and shall be determined by the companyManagement Compensation Committee in accordance with the same non-GAAP EPS methodology used by Nasdaq for its external financial reporting. In making this determination, the Management Compensation Committee or Board may include or exclude the effect of any one or more of the applicable extraordinary events described
in our Equity Plan that may occur during the performance period. The Management Compensation Committee may also decide to include or exclude share buybacks or share issuances in making this determination.
Bradley J. Peterson
On October 1, 2020, we entered into a new employment agreement with Mr. Peterson, adding the title of CTO to his previous title of CIO. The term of the employment agreement is October 1, 2020 through December 31, 2023, replacing Mr. Peterson’s prior employment agreement, which was due to expire on July 31, 2021. Mr. Peterson’s compensation terms include:
| · | an annual base salary of no less than $600,000; |
| · | annual incentive compensation that is targeted at no less than $900,000, based on the achievement of performance goals established for such year by the CEO and the Management Compensation Committee; and |
| · | an annual equity award with a target value of no less than $1,800,000, in accordance with the terms of the Equity Plan. |
Under his agreement, if Mr. Peterson’s employment is terminated by the Company without cause, or by Mr. Greifeldthe executive for good reason, or upon Mr. Peterson’s retirement at the end of the agreement term, he will be entitled to the following severance payments and benefits from the company:Company:
a cash payment for unpaid base salary through the date of termination, accrued but unpaid vacation through the date of termination and any earned but unpaid incentive compensation for the calendar year prior to the date of termination (Base Obligations);
| · | a pro-rata target bonus payment with respect to the calendar year in which the date of termination occurs; |
a cash payment equal to the sum of: (i) two times the prior year’s annual base salary, (ii) the target bonus amount for the calendar year preceding the year in which the termination occurs and (iii) any pro rata target bonus with respect to the calendar year in which the termination occurs to the extent that performance goals are satisfied;
| · | continued vesting of all outstanding equity compensation issued prior to the date of termination as though Mr. Peterson was employed through all applicable periods; |
| · | $40,000 to offset the COBRA premiums for Mr. Peterson’s health benefits, payable in a lump sum within sixty (60) days of the date of termination; and |
a taxable monthly cash payment equal to the Consolidated Omnibus Budget Reconciliation Act (COBRA) premium for the highest level of coverage available under the company’s group health plans, reduced by the monthly amount that
| · | 24 months of financial and tax services and executive physical exams. |
Additionally, Mr. Greifeld would pay for such coverage if he was an active employee, until the earlier of 24 months or the date he is eligible for coverage under the health care plans of a subsequent employer; and
continued life insurance and accidental death and dismemberment insurance benefits for the same period as the continued health coverage payments.
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Under a “best net provision,” if any amounts payable to Mr. Greifeld due to a change in control would be characterized as excess parachute payments and due to that characterization, Mr. Greifeld would be subject to an excise tax under the Code, the amounts will be reduced. The reduction will be to an amount so that none of the amounts payable constitute excess parachute payments if this would result, after taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, in Mr. Greifeld’s receipt on an after-tax basis of the greatest amount of termination and other benefits.
Mr. Greifeld’s right to the amounts described abovePeterson is subject to his compliance with several restrictive covenants in his employment agreement and confidentiality, non-solicitation and invention assignment agreement, including covenants that require him to maintain the confidentiality of the company’s proprietary information and to refrain from disparaging the company. Mr. Greifeld also is prohibited from soliciting the company’s employees or rendering services for a competing entity for a period of two years following the date of termination. Further, to receive payments and benefits upon a change in control, Mr. Greifeld must execute a general release of claims against the company. In addition, the change in control payments and benefits generally are subject to discontinuation in the event Mr. Greifeld breaches the restrictive covenants.
In addition to the payments described above, under a change in control, Mr. Greifeld would be entitled to any vested Pension Plan and SERP benefits.
Edward S. Knight
Pursuant to Mr. Knight’s employment agreement, if his employment is terminated by the company without cause or if Mr. Knight terminates his employment for good reason, whether or not associated with a change in control, the company is obligated to make certain payments to him. For detailed information on these payments, see “Payments upon Termination (other than for Cause or Change in Control) – Edward S. Knight” below. “Good reason” includes a reduction in Mr. Knight’s position, duties or authority, the company’s failure to secure agreement of any successor entity that he will continue in his position, any other material breach of the employment agreement not remedied by the company or the company providing a notice of non-renewal.
Mr. Knight also has agreed to be subject to certaincustomary post-termination restrictive covenants relating to non-competition, non-solicitation, non-disparagement and confidentiality.
In addition to the payments described above, under a change in control, Mr. Knight would be entitled to any vested Pension Plan and SERP benefits.
Hans-Ole Jochumsen
Under Mr. Jochumsen’s employment agreement, if his employment is terminated by the company on grounds other than Mr. Jochumsen’s substantial breach of the agreement, the company must give Mr. Jochumsen 12 months’ notice of termination, and Mr. Jochumsen will be entitled to severance pay equal to six months’ salary payable in a lump sum on his last day of employment.
Mr. Jochumsen also has agreed to be subject to certain post-termination restrictive covenants relating to non-competition, non-solicitation and confidentiality.
Other Named Executive Officers
Under the letterExcept in employment agreements with the named executiveand other agreements for certain officers (other than Messrs. Greifeld, Knight and Jochumsen), if the executive’s employment is terminated by the company without causeas described in this Proxy Statement, we are not obligated to pay general severance or by the executive for good reason, either (x) during the 180-day period immediately priorother enhanced benefits to a change in control of the company (if the executive can reasonably demonstrate that theany NEO upon termination or good reason event
THE NASDAQ OMX GROUP, INC. 70
was at the request of a third party that effects the change in control) or (y) during the one year period immediately following the change in control, then he or she will be entitled to the following severance payments and benefits from the company:
cash payments equal to 24 months of annual base salary;
100% of the annual target incentive award for the year in which termination occurs plus any earned but unpaid cash incentive award for a completed plan year;
payment of COBRA premiums for continued medical and dental benefits until the earlier of (1) termination of the executive’s COBRA continuation period; (2) 24 months following termination; or (3) the date the executive secures subsequent employment with comparable medical and dental coverage;
continued life insurance and accidental death and dismemberment insurance benefits for 24 months;
any vested accrued benefits under the Pension Plan or SERP; and
outplacement services for a period of 12 months or, if earlier, until the executive’s first acceptance of an employment offer.
An executive is not entitled to benefits under the letter agreements if his or her termination of employment is on account of his or her death or disability.employment.
Michael Ptasznik Retirement Agreement
On October 20, 2020, Mr. Ptasznik announced his retirement as EVP, Corporate Strategy and CFO of Nasdaq, effective as of February 28, 2021, which is referred to as the Retirement Date. On October 21, 2020, Mr. Ptasznik and the Company entered into a retirement agreement and release of claims, which is referred to as the Retirement Agreement.
Under the terms of the Retirement Agreement, Mr. Ptasznik received a 2021 bonus payment under the ECIP based upon his target bonus opportunity of $937,500, pro-rated for the period of January 1, 2021 through the Retirement Date, which was paid in 2021 in the amount of $151,541.
In addition, Mr. Ptasznik received the letter agreements do not provide for indemnification of any “golden parachute” excise taxes that may be payable by an executivefollowing retirement payments and benefits under Section 4999the terms of the Code in connection with the change in control of the company. Rather, the agreements provide, if any payments or benefits to an executive would be subject to an excise tax under Section 4999, payments and/or benefits to the executive would be reduced to an amount that would not trigger such excise tax.Retirement Agreement:
| · | payment of the Company’s share of medical, dental and vision premiums for 12 months after the Retirement Date; |
| · | the continued vesting and payment of the three-year PSUs previously granted on April 1, 2019 and April 1, 2020, provided that the settlement of such PSUs shall be in accordance with the terms of the applicable award agreement and governing plan document; |
| · | the vesting of the RSUs previously granted on April 1, 2020, with the acceleration of any unvested RSUs within sixty (60) days of the Retirement Date; |
| · | financial and tax services for tax years 2020, 2021, 2022 and 2023 and executive physical exams for one year following the Retirement Date; and |
| · | reimbursement of reasonable and customary expenses to move back to Mr. Ptasznik’s home in Canada of up to $10,000. Mr. Ptasznik received such reimbursement during fiscal year 2020. |
The letter agreements contain restrictive covenants, which, among other things, require the executive to maintain the confidentiality of the company’s proprietary information and to refrain from disparaging the company. The executive isRetirement Agreement also prohibited from soliciting the company’s employees or rendering services toincluded a competing entitynon-competition provision for a period of one year following termination in connectionthe Retirement Date, as well as customary provisions regarding non-solicitation and non-disparagement.
Involuntary Termination Not for Cause or Voluntary Termination with a change in control. Further, to receive theGood Reason
Other Severance for NEOs
Severance payments and benefits the executive must execute a general release of claims against the company. In addition, the change in control payments and benefits generally are subjectpayable to discontinuation in the event an executive breaches the restrictive covenants.
Equity Plan
Under the Equity Plan, if outstanding awards are assumed or substituted by the successor company and an employee, including a named executive officer, is involuntarily terminated by the company other than for cause within a one-year period after a change in control of the company, the vesting of all outstanding unvested equity awards will accelerate to the date of termination subject to the terms of the Equity Plan. For awards not assumed or substituted by the successor company, all unvested awards shall vest immediately prior to the effective time of the change in control.
Payments upon Termination (other than for Cause or Change in Control)
Robert Greifeld
Under Mr. Greifeld’s employment agreement, if his employment is terminated by the company without cause, or by Mr. Greifeld for good reason, he will be entitled to the following severance payments and benefits from the company:
the Base Obligations;
THE NASDAQ OMX GROUP, INC. 71
a cash payment equal to the sum of: (i) two times the prior year’s annual base salary, (ii) the target bonus amount for the calendar year preceding the year in which the termination occurs and (iii) any pro rata target bonus with respect to the calendar year in which the termination occurs to the extent that performance goals are satisfied; and
a taxable monthly cash payment equal to the COBRA premium for the highest level of coverage available under the company’s group health plans, reduced by the monthly amount that Mr. Greifeld would pay for such coverage if he was an active employee, until the earlier of 24 months or the date he is eligible for coverage under the health care plans of a subsequent employer.
In addition, Mr. Greifeld would be entitled to any vested Pension Plan and SERP benefits. Mr. Greifeld’s vested stock options would remain exercisable for 36 months, his unvested options, if any, would continue to vest for 30 months subject to restrictive covenants.
Mr. Greifeld also may terminate his employment by providing the company with at least 270 days prior written notice. If Mr. Greifeld’s employment is terminated due to delivery of such notice, he will be entitled to the following payments and benefits:
the Base Obligations;
a cash payment equal to any pro rata target bonus with respect to the calendar year in which the termination occurs to the extent that performance goals are satisfied; and
continued vesting of all outstanding equity awards, based on actual performance during the relevant performance period.
Lee Shavel
Under the terms of Mr. Shavel’s employment offer letter, in the event of a reduction-in-force or other involuntary termination of employment (other than a termination for “cause” as defined in the Equity Plan or a change in control of the company) during the first three years of employment, Mr. Shavel will be eligible for 15 months of severance pay at his then current base salary and any additional severance benefits provided under the company’s then current in-practice severance policy.
Hans-Ole Jochumsen
Under Mr. Jochumsen’s employment agreement, if his employment is terminated by the company on grounds other than Mr. Jochumsen’s substantial breach of the agreement, the company must provide Mr. Jochumsen 12 months’ notice of termination, and Mr. Jochumsen will be entitled to severance pay equal to six months’ salary payable in a lump sum on his last day of employment.
Edward S. Knight
Under Mr. Knight’s employment agreement, if his employment is terminated by the company without cause or if Mr. Knight terminates his employment for good reason, the company is obligated to pay to Mr. Knight a pro rata portion of the incentive compensation for the year of termination, and a lump sum cash payment equivalent to continuation of base salary and incentive compensation, if any, until the later of (x) the end of the term of the agreement or (y) 24 months following the date of such termination of employment. The company also will continue to provide Mr. Knight with health coverage at its expense for such period.
In the event that Mr. Knight terminates his employment without good reason, he shall be entitled to his salary through the date of termination and shall have no further rights to any compensation or any other benefits under the agreement.
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Other Named Executive Officers
In the event of a reduction-in-force or other involuntary termination of employment (other than a “for cause” termination), any severance payments and benefits to one of the named executive officersNEOs not subject to an employment agreement or other severance arrangement would be made at the sole discretion of the companyCompany and management compensation committee. According tothe Management Compensation Committee. These payments are based on historical practices and predetermined NASDAQ OMX guidelines regarding post-termination payments, inthat have been approved by the event of a reduction-in-force or other involuntary termination of employment (other than a “for cause” termination), executive vice presidents may receive 18 months of base salary plus the target bonus for the year of termination, payments totaling COBRA premiums up to 12 months and up to 12 months of outplacement services.Management Compensation Committee.
ECIP
Under the ECIP, in the event a named executive officer’san NEO’s employment is terminated for any reason other than death, disability or retirement, the executive’s right to a non-equity incentive plan compensation award for the calendar year of termination is forfeited. The management compensation committee,Management Compensation Committee, in its sole discretion, may pay a pro rata incentive compensation award to the executive for the calendar year of termination. However,
Death or Disability
Employment Agreements
Under the employment agreements with Ms. Friedman and Mr. Peterson, in the case of retirement, no such pro-rata award shall be paid unless the performance goals associated with the award have been met.
In addition, upon termination of employment, named executive officers would receive the benefits to which they would be entitled under the company’s Pension Plan and SERP to the extent that they are vested in these plans.
Payments upon Death, Disability or Retirement
Upon termination of employment on accountevent of death or disability, each executive is entitled to a pro rata target bonus for the named executive officers receive payments pursuantyear of termination. Additionally, Ms. Friedman (or her estate) is entitled to life insurance or disability insurance purchased byaccelerated vesting of all unvested equity awarded as of December 31st of the executiveyear of termination, with any performance-based vesting based on actual performance goals during any complete performance periods, and availablevesting at target performance for grants vesting prior to employees generally. the completion of a performance cycle, and Mr. Peterson is entitled to accelerated vesting of all unvested equity that was awarded as of the effective date of his agreement.
ECIP
Under the ECIP, a named executive officeran NEO may, in the discretion of the management compensation committee,Management Compensation Committee, receive a pro rata portion of his or her incentive compensation award in the event of death disability or retirement (provided that, in the case of retirement, the performance goals associated with the award have been met). Under Mr. Greifeld’s employment agreement, in the event of death or disability, he is entitled to a pro rata target bonus with respect to the calendar year in which the date of termination occurs and accelerated vesting of all unvested stock option awards. disability.
Equity Plan
With respect to the other named executive officers,NEOs, under the relevant terms and conditions of the Equity Plan and the individual equity award agreements, all stock optionoptions or restricted stock awardsRSUs that would have vested within one year from the date of death or disability will immediately vest and all vested options may be exercised until the earlier of one year from the date of death or disability or their expiration date. Under the PSU award agreements for all the named executive officers,NEOs, in the event of disability, unvested PSU awards will be forfeited. In the event of death, unvested PSU awards will vest atupon the later of the date of death or the completiondate the performance period for the awards is completed.
Termination Due to Change in Control (“Double Trigger”)
All “change in control” payments and benefits are subject to a “double trigger,” meaning that payments are made only when both a change in control of the performance period(s)Company and a qualifying termination of employment occur.
Employment Agreements
Under their employment agreements, if either Ms. Friedman or Mr. Peterson is terminated within two years after a change in control, either by the Company without cause or by the executive for such awards.
Upon retirement,good reason (as defined in their respective employment agreements), the named executive officers receive the benefits to which they wouldexecutives will each be entitled under the company’s Pension Plan and SERP to the extent that they are vestedseverance payments and benefits from the Company as described below:
| · | a cash payment equal to the sum of (i) two times the prior year’s annual base salary, (ii) the target bonus amount for the year prior to the year termination occurs (two times for Ms. Friedman) and (iii) any pro rata target bonus for the year of termination if performance goals are satisfied; |
| · | for Ms. Friedman, accelerated vesting of all outstanding unvested equity awarded, subject to and in accordance with the terms of the Equity Plan; |
| · | a taxable monthly cash payment equal to the employer’s share of the COBRA premium for the highest level of coverage available under the Company’s group health plans, until the earlier of the second anniversary of termination or the date he or she is eligible for coverage under another employer’s health care plan; and |
| · | continued life insurance and accidental death and dismemberment insurance benefits for the same period as the continued health coverage payments. |
Change in these plans. Control Severance Plan
Under the termCompany’s change in control severance plan, each of Ms. Dennison and conditions of the Equity Plan and the equity award agreements, all stock option and restricted stock awards that would have vested within one year from the date of retirement will immediately vest and all vested options may be exercised until the earlier of one year from the date of retirement or their expiration date. Under the PSU award agreements for the named executive officers,Mr. Griggs are entitled to benefits in the event of retirement,a change in control. If the executive’s employment is terminated by the Company without cause within two years following a change in control or by the executive for good reason within one year after a change in control, then he or she will be entitled to the following severance payments and benefits from the Company:
| · | a cash payment equal to the sum of (i) two times annual base salary, (ii) the target bonus amount as defined by the ECIP, (iii) any pro rata target bonus for the year of termination and (iv) any unpaid bonus which had been earned for a completed plan year; |
| · | payment of the employer’s share of COBRA premiums for continued coverage under health plans until the earlier of the second anniversary of termination, or the date the executive is eligible for coverage under another employer’s health care plan; and |
| · | outplacement services for up to 12 months, with a maximum value of $50,000. |
Under a “best net” provision, if amounts payable due to a change in control would be subject to an excise tax under Section 4999 of the Internal Revenue Code, payments or benefits to the executive would either be reduced to an amount that would not trigger an excise tax or the executive would receive all payments and benefits subject to the excise tax, whichever approach yields the best after-tax outcome for the executive officer.
The change in control severance plan contains restrictive covenants, which, among other things, require the executive to maintain the confidentiality of the Company’s proprietary information and to refrain from disparaging the Company. Each executive also is prohibited from soliciting the Company’s employees or rendering services to a competitor for one year following termination. Further, to receive the benefits, the executive must execute a general release of claims against the Company. In addition, the change in control payments and benefits may be discontinued if the executive breaches the restrictive covenants.
Equity Plan
Under the Equity Plan, if outstanding awards are assumed or substituted by the successor company and an employee, including an NEO, is involuntarily terminated by the Company other than for cause within a one-year period after a change in control, all unvested PSUequity awards will be forfeited.vest on the termination date. For awards not assumed or substituted by the successor Company, unvested awards shall vest immediately prior to the effective time of the change in control.
Estimated Termination or Change in Control or Termination Payments and Benefits at the End of 2013
The tables below reflecttable on the following page reflects the payments and benefits payable to each of the named executive officersNEO in the event of a termination of the executive’s employment under several different circumstances. The amounts shown assume that termination was effective as of December 31, 2013, given2021, use the executive’s compensation and service levels as of that date and are estimates of the amounts that would be payable to the named executive officersNEOs in each situation. The
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actual amounts to be paid can only be determined at the time of an executive’s actual separation from the company.Company, provided that the amounts shown for Mr. Ptasznik are actual amounts that he was paid upon his separation from the Company in connection with his retirement on February 28, 2021. Factors that may affect the nature and amount of payments made on termination of employment, among others, include the timing of the event, compensation level, the market price of the company’sCompany’s common stock and the executive’s age.
The Annual incentive amounts in the tables below for equity award vesting assume that the Equity Plan, as proposed to be amended and restated following stockholder approvalare shown at the annual meeting, would have been in effect at the time of termination.target. The reported value of the accelerated vesting of outstanding equity awards is based on the intrinsic value of these awards (the value based upon the market price of the company’sCompany’s common stock on December 31, 2013, reduced2021). The value of PSUs that continue to vest after termination is reported as if the grants vested at target on the termination date. The amounts shown in the case of stock options, bytable do not include payments and benefits available generally to salaried employees, such as accrued vacation pay, pension benefits and any death, disability or welfare benefits available under broad-based plans. For information on pension plans, see the option exercise price). The amounts reported for“2021 Pension Plan and SERP benefits representBenefits Table” on page 97.
Name | Involuntary Termination Not for Cause or Voluntary Termination with Good Reason ($) | Death ($) | Disability ($) | Resignation through Retirement Notice ($)2 | Termination Due to Change in Control (“Double Trigger”)($) | |||||
Adena T. Friedman |
|
|
|
|
| |||||
Severance | $5,500,000 | — | — | — | $5,500,000 | |||||
Pro-Rata Current Year Annual Incentive | $3,000,000 | $3,000,000 | $3,000,000 | — | $3,000,000 | |||||
Equity Vesting | — | $1,365,695 | $1,365,695 | — | $6,880,768 | |||||
Continued Performance-Based Equity Vesting | $16,387,290 | $27,524,541 | — | — | $27,524,541 | |||||
Health & Welfare Benefits Continuation | $43,017 | — | — | — | $43,017 | |||||
TOTAL | $24,930,307 | $31,890,236 | $4,365,695 | — | $42,948,326 | |||||
Ann M. Dennison |
|
|
|
|
| |||||
Severance | $1,575,000 | — | — | — | $1,850,000 | |||||
Pro-Rata Current Year Annual Incentive1 | $750,000 | $750,000 | $750,000 | — | $750,000 | |||||
Equity Vesting | — | $159,398 | $159,398 | — | $811,689 | |||||
Continued Performance-Based Equity Vesting | — | $2,451,447 | — | — | $2,451,447 | |||||
Health & Welfare Benefits Continuation | $21,509 | — | — | — | $43,017 | |||||
Outplacement Services | $50,000 | — | — | — | $50,000 | |||||
TOTAL | $2,396,509 | $3,360,845 | $909,398 | — | $5,956,153 | |||||
Name | Involuntary Termination Not for Cause or Voluntary Termination with Good Reason ($) | Death ($) | Disability ($) | Resignation through Retirement Notice ($)2 | Termination Due to Change in Control (“Double Trigger”)($) | |||||
Michael Ptasznik |
|
|
|
|
| |||||
Pro-Rata Current Year Annual Incentive | — | — | — | $151,541 | — | |||||
Equity Vesting | — | — | — | $621,200 | — | |||||
Health & Welfare Benefits Continuation | — | — | — | $40,514 | — | |||||
Financial and Tax Services/Exec Physical Exams | — | — | — | $50,751 | — | |||||
TOTAL | — | — | — | $864,006 | — | |||||
Lauren B. Dillard3 |
|
|
|
|
| |||||
Severance | $1,650,000 | — | — | — | $1,925,000 | |||||
Pro-Rata Current Year Annual Incentive1 | $825,000 | $825,000 | $825,000 | — | $825,000 | |||||
Equity Vesting | $455,302 | $227,651 | $227,651 | — | $1,652,569 | |||||
Continued Performance-Based Equity Vesting | $2,731,180 | $4,513,115 | — | — | $4,513,115 | |||||
Health & Welfare Benefits Continuation | $14,256 | — | — | — | $28,512 | |||||
Outplacement Services | $50,000 | — | — | — | $50,000 | |||||
TOTAL | $5,725,738 | $5,565,766 | $1,052,651 | — | $8,994,196 | |||||
P.C. Nelson Griggs |
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|
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| |||||
Severance | $1,725,000 | — | — | — | $2,012,500 | |||||
Pro-Rata Current Year Annual Incentive1 | $862,500 | $862,500 | $862,500 | — | $862,500 | |||||
Equity Vesting | — | $242,772 | $242,772 | — | $1,173,746 | |||||
Continued Performance-Based Equity Vesting | — | $4,695,194 | — | — | $4,695,194 | |||||
Health & Welfare Benefits Continuation | $21,509 | — | — | — | $43,018 | |||||
Outplacement Services | $50,000 | — | — | — | $50,000 | |||||
TOTAL | $2,659,009 | $5,800,466 | $1,105,272 | — | $8,836,958 | |||||
Bradley J. Peterson |
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| |||||
Severance | — | — | — | — | $2,100,000 | |||||
Pro-Rata Current Year Annual Incentive | $900,000 | $900,000 | $900,000 | $900,000 | $900,000 | |||||
Equity Vesting | $1,348,264 | $273,223 | $273,223 | — | $1,348,264 | |||||
Continued Performance-Based Equity Vesting | $5,393,477 | $5,393,477 | — | — | $5,393,477 | |||||
Health & Welfare Benefits Continuation | $40,000 | — | — | $40,000 | $28,512 | |||||
Financial and Tax Services/Exec Physical Exams | $36,050 | — | — | $36,050 | — | |||||
TOTAL | $7,717,791 | $6,566,700 | $1,173,223 | $976,050 | $9,770,253 | |||||
| 1. | Assumes payment at target. |
| 2. | For Mr. Ptasznik, the amounts set forth under “Resignation through Retirement Notice” reflect the amounts paid pursuant to his Retirement Agreement for each such item upon his retirement on February 28 2021, as further described above under “Michael Ptasznik Retirement Agreement”. Mr. Ptasznik is also entitled to continued vesting of his PSU awards under the terms of his Retirement Agreement. |
| 3. | The amounts shown in the table assume a hypothetical termination of Ms. Dillard’s employment, effective as of December 31, 2021, under several different circumstances. As previously disclosed, Ms. Dillard’s employment with the Company terminated on April 8, 2022 through voluntary resignation, which did not entitle Ms. Dillard to the payments and benefits shown in the table. |
Our methodology to identify the actuarial present valuemedian of the named executive officer’s accumulated benefitannual total compensation of all employees in 2021 included the following assumptions, adjustments, and estimates.
| · | We identified the median employee by reviewing the 2021 actual total compensation (which consists of the employee’s base salary, actual bonus paid in 2021 and grant date value of actual equity awards granted in 2021) of all full-time, part-time and hourly employees employed by us as of October 22, 2021. |
| · | Consistent with the applicable rules, in 2021 we excluded certain employees from our total employee population in determining our median employee. |
– As permitted under the Pension Plannon-U.S. de minimis exemption, we excluded 270 employees located in jurisdictions outside of the United States, as follows: (1) three employees in Belgium, (2) five employees in Italy, (3) three employees in South Korea, (4) three employees in the Netherlands, (5) 251 employees in the Philippines, (6) two employees in Saudi Arabia, (7) one employee in Turkey and SERP as(8) two employees in the United Arab Emirates.
– Following the application of December 31, 2013. Assumptionsthese exclusions, the total number of employees used in our median employee analysis was 5,463 (3,041 employees from North America, 1,718 employees from Europe, the Middle East and Africa and 704 employees from Asia Pacific).
| · | We annualized 2021 base cash compensation for full-time and part-time permanent employees who were hired after January 1, 2021. |
| · | All base cash compensation for employees outside the U.S. was converted to U.S. dollars based on a conversion rate published in our internal human resources system that is updated annually. |
| · | We did not make any cost-of-living adjustments or full-time equivalent adjustments in identifying the median employee. |
Using this methodology, we determined that the median employee was an exempt, full time professional employee located in the U.S. Based on those factors, we determined the 2021 CEO Pay Ratio as such:
| · | The 2021 annual total compensation of Ms. Friedman was $19,965,893. |
| · | Based on the same methodology we use for NEOs in the Summary Compensation Table, the 2021 annual total compensation of the median employee was $98,946. |
| · | The ratio of the 2021 annual total compensation of Ms. Friedman to the 2021 annual total compensation of the median employee was 202 to 1. |
Our CEO pay ratio is a reasonable estimate calculated in a manner consistent with the SEC’s rules. The SEC’s rules for identifying the median employee and calculating the amounts includepay ratio based on that employee’s annual total compensation allow companies to adopt a 4.90% discount rate asvariety of December 31, 2013, retirement at age 62 (which ismethodologies to identify the earliest age atmedian employee. The SEC’s rules also allow companies to exclude up to 5% of their workforce and make reasonable estimates and assumptions that may impact their employee populations. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above. Other companies have different employee populations and compensation practices and utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
The Audit & Risk Committee operates under a written charter. The charter, which a participant may retirewas last amended effective February 23, 2022, includes the Audit & Risk Committee’s duties and receive unreduced benefits underresponsibilities.
The Audit & Risk Committee assists the plans)Board in fulfilling its responsibility for oversight of the quality and other assumptions used forintegrity of Nasdaq’s accounting, auditing, and financial reporting purposes underpractices and risk management. As part of this effort, the Audit & Risk Committee reviews the disclosures in annual reports on Form 10-K, quarterly reports on Form 10-Q and quarterly earnings releases. In addition, the Audit & Risk Committee assists the Board by reviewing and discussing Nasdaq’s regulatory and compliance programs, ERM structure and process, Global Employee Ethics Program, SpeakUp! Program and confidential whistleblower process. The Audit & Risk Committee charter complies with the applicable provisions of the Sarbanes-Oxley Act of 2002 and related rules of the SEC and The Nasdaq Stock Market.
For a description of the Audit & Risk Committee’s key accomplishments in 2021, please refer to page 32.
Review of Audited Financial Statements
The Audit & Risk Committee:
| · | reviewed and discussed the audited financial statements with management; |
| · | discussed with the independent registered public accounting firm all communications required by generally accepted auditing standards, including those described in Auditing Standard No. 1301, “Communications with Audit & Risk Committees,” as adopted by the PCAOB; and |
| · | received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the firm’s communications with the Audit & Risk Committee concerning independence and discussed with the independent registered public accounting firm the firm’s independence. |
Based on the review and discussions discussed above, the Audit & Risk Committee recommended to the Board of Directors that the audited financial statements be included in the Form 10-K.
The Audit & Risk Committee
Annual Evaluation and 2022 Selection of Independent Auditors
The Audit & Risk Committee annually evaluates the performance of the Company’s independent auditors, including the senior audit engagement team, and determines whether to reengage the current independent auditors or consider other audit firms.
The Audit & Risk Committee assessed Ernst & Young LLP’s performance as independent auditor during fiscal year 2021, including the performance of the Ernst & Young LLP lead audit partner and the audit team. As part of its assessment, the Audit & Risk Committee considered several factors, including:
| · | relevant industry expertise and geographical reach; |
| · | an annual report from Ernst & Young LLP describing the independent auditors’ internal quality control procedures; |
| · | the firm’s independence and integrity; |
| · | the quality of communication with the Audit & Risk Committee; |
| · | the appropriateness of fees; |
| · | any material issues raised by the most recent internal quality control review or peer review or other external data on audit quality and performance; and |
| · | the quality and efficiency of the services provided, including performance of the Ernst & Young LLP lead audit partner and the audit team. |
The Audit & Risk Committee also considered the impact of changing auditors when assessing whether to retain the current independent auditor. The Audit & Risk Committee determined that Ernst & Young LLP’s longer tenure is a benefit to Nasdaq as it brings their institutional expertise and knowledge of Nasdaq’s complex operations, accounting principles as describedpolicies and practices, and internal controls over financial reporting. The Audit & Risk Committee most recently conducted a request for proposal for the independent auditor relationship in footnote 112019.
According to applicable SEC rules, the lead audit partner at Ernst & Young LLP, our auditedexternal auditor, may provide a maximum of five consecutive years of service to us. The current Ernst & Young LLP lead audit partner was assigned to us commencing with the audit of our financial statements for the fiscal year ended December 31, 2013 included in our Form 10-K. Under2019.
Based on the Pension Plan and SERP, Mr. Knight wasassessment of Ernst & Young LLP’s performance, the only named executive officer eligible to retire and receive unreduced benefits as ofAudit & Risk Committee believes that retaining Ernst & Young LLP for the fiscal year ending December 31, 2013.
Robert Greifeld | Involuntary For Cause or Voluntary Without Good Reason | Involuntary Not For Cause or Voluntary With Good Reason | Death/Disability | Non- Continuation Notice | Termination Due To Change in Control (“Double Trigger”) | |||||||||||||||
Severance and Other | $ | 0 | $ | 6,200,000 | $ | 2,100,000 | $ | 2,100,000 | $ | 6,200,000 | ||||||||||
Non-Equity Incentive Compensation | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Stock Option Vesting | $ | 0 |
| Vested options exercisable for 36 months |
| $ | 0 | $ | 0 | $ | 0 | |||||||||
Restricted Stock Vesting | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Performance Share Unit Vesting | $ | 0 | $ | 0 | | Vesting continues until performance period end in the event of death | | | Vesting continues until performance period end | | $ | 9,576,955 | ||||||||
Retirement Plan Benefits | $ | 4,384,229 | $ | 4,384,229 | $ | 4,384,229 | $ | 4,384,229 | $ | 4,384,229 | ||||||||||
Health & Welfare Benefits | $ | 0 | $ | 47,458 | $ | 0 | $ | 0 | $ | 52,354 | ||||||||||
Outplacement Services | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 4,384,229 | $ | 10,631,687 | $ | 6,484,229 | $ | 6,484,229 | $ | 20,213,538 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Lee Shavel | Involuntary For Cause or Voluntary | Involuntary Not For Cause | Death | Disability | Termination Due To Change in Control (“Double Trigger”) | |||||||||||||||
Severance | $ | 0 | $ | 1,500,000 | $ | 0 | $ | 0 | $ | 1,000,000 | ||||||||||
Non-Equity Incentive Compensation | $ | 0 | $ | 1,135,500 | $ | 1,135,500 | $ | 1,135,500 | $ | 1,885,500 | ||||||||||
Stock Option Vesting | $ | 0 | $ | 0 | $ | 613,079 | $ | 613,079 | $ | 613,079 | ||||||||||
Restricted Stock Vesting | $ | 0 | $ | 0 | $ | 1,994,776 | $ | 1,994,776 | $ | 3,989,552 | ||||||||||
Performance Share Unit Vesting | $ | 0 | $ | 0 | $ | 893,669(1) | $ | 0 | $ | 2,986,592 | ||||||||||
Retirement Plan Benefits | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Health & Welfare Benefits | $ | 0 | $ | 23,729 | $ | 0 | $ | 0 | $ | 50,410 | ||||||||||
Outplacement Services | $ | 0 | $ | 20,004 | $ | 0 | $ | 0 | $ | 20,004 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 0 | $ | 2,679,233 | $ | 4,637,024 | $ | 3,743,355 | $ | 10,545,137 | ||||||||||
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|
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THE NASDAQ OMX GROUP, INC. 74
Hans-Ole Jochumsen(1) | Involuntary For Cause or Voluntary | Involuntary Not For Cause | Death | Disability | Termination Due To Change in Control (“Double Trigger”) | |||||||||||||||
Severance | $ | 0 | $ | 258,048 | $ | 0 | $ | 0 | $ | 258,048 | ||||||||||
Non-Equity Incentive Compensation | $ | 0 | $ | 1,383,168 | $ | 1,383,168 | $ | 1,383,168 | $ | 1,383,168 | ||||||||||
Stock Option Vesting | $ | 0 | $ | 0 | $ | 935,890 | $ | 935,890 | $ | 935,890 | ||||||||||
Restricted Stock Vesting | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Performance Share Unit Vesting | $ | 0 | $ | 0 | $ | 755,762 | (2) | $ | 0 | $ | 2,549,707 | |||||||||
Retirement Plan Benefits | $ | 0 | $ | 51,610 | $ | 0 | $ | 0 | $ | 51,610 | ||||||||||
Health & Welfare Benefits | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Outplacement Services | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 0 | $ | 1,692,826 | $ | 3,074,820 | $ | 2,319,058 | $ | 5,178,423 | ||||||||||
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|
|
|
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Edward S. Knight | Involuntary For Cause or Voluntary | Involuntary Not For Cause | Death | Disability | Termination Due To Change in Control (“Double Trigger”) | |||||||||||||||
Severance | $ | 0 | $ | 2,300,000 | $ | 0 | $ | 0 | $ | 2,300,000 | ||||||||||
Non-Equity Incentive Compensation | $ | 0 | $ | 1,106,625 | $ | 1,106,625 | $ | 1,106,625 | $ | 1,106,625 | ||||||||||
Stock Option Vesting | $ | 0 | $ | 0 | $ | 812,485 | $ | 812,485 | $ | 812,485 | ||||||||||
Restricted Stock Vesting | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Performance Share Unit Vesting | $ | 0 | $ | 0 | $ | 566,792 | (1) | $ | 0 | $ | 2,021,124 | |||||||||
Retirement Plan Benefits | $ | 3,611,827 | $ | 3,611,827 | $ | 3,611,827 | $ | 3,611,827 | $ | 3,611,827 | ||||||||||
Health & Welfare Benefits | $ | 0 | $ | 32,632 | $ | 0 | $ | 0 | $ | 32,632 | ||||||||||
Outplacement Services | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 3,611,827 | $ | 7,051,084 | $ | 6,097,729 | $ | 5,530,937 | $ | 9,884,693 | ||||||||||
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THE NASDAQ OMX GROUP, INC. 75
Bradley J. Peterson | Involuntary For Cause or Voluntary | Involuntary Not For Cause | Death | Disability | Termination Due To Change in Control (“Double Trigger”) | |||||||||||||||
Severance | $ | 0 | $ | 1,312,500 | $ | 0 | $ | 0 | $ | 950,000 | ||||||||||
Non-Equity Incentive Compensation | $ | 0 | $ | 915,300 | $ | 915,300 | $ | 915,300 | $ | 1,515,300 | ||||||||||
Stock Option Vesting | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Restricted Stock Vesting | $ | 0 | $ | 0 | $ | 914,962 | $ | 914,962 | $ | 2,744,847 | ||||||||||
Performance Share Unit Vesting | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Retirement Plan Benefits | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Health & Welfare Benefits | $ | 0 | $ | 23,729 | $ | 0 | $ | 0 | $ | 50,410 | ||||||||||
Outplacement Services | $ | 0 | $ | 20,004 | $ | 0 | $ | 0 | $ | 20,004 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 0 | $ | 2,271,533 | $ | 1,830,262 | $ | 1,830,262 | $ | 5,280,561 | ||||||||||
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THE NASDAQ OMX GROUP, INC. 76
APPROVAL OF THE EQUITY PLAN, AS AMENDED AND RESTATED
We are requesting that stockholders approve the Equity Plan, as amended and restated to, among other things, (i) increase by 6,000,000 the number of shares of our common stock authorized for issuance pursuant to awards under the Equity Plan; and (ii) make other technical and administrative revisions to the Equity Plan. A vote FOR this proposal will also constitute approval of the material terms of the performance goals set forth in the Equity Plan for purposes of Section 162(m) of the Code.
If this Proposal IV is not approved by stockholders at the 2014 annual meeting, the company can continue to grant awards under the current Equity Plan as approved by stockholders at the 2010 annual meeting, subject to existing authorized share limits under such plan, provided that the company will not be able to continue to grant qualified performance-based compensation under Section 162(m) of the Code after May 27, 2015. If this Proposal IV is approved, the Equity Plan (including the performance criteria approved in this Proposal IV) will continue until May 27, 2020, after which no further awards may be made under the Equity Plan unless stockholders subsequently approve amendments to the Equity Plan. In no event does this proposal limit the company’s right to pay compensation under the Equity Plan (subject to applicable Equity Plan share limits) or under other plans or programs that does not qualify as performance-based compensation for purposes of Section 162(m) of the Code.
SUMMARY OF KEY CHANGES TO THE EQUITY PLAN
Below is a summary of key changes to the Equity Plan:
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THE NASDAQ OMX GROUP, INC. 77
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BACKGROUND
Increase in the Number of Shares.We believe that our long-term success and the continued growth of stockholder value depend on our ability to attract, retain and motivate qualified employees, officers and directors of the company. As a result, in recent years a significant component of our compensation program has consisted of grants of restricted stock units and performance share units. In the recent past, we have granted annual equity awards to all qualified NASDAQ OMX employees, and we consider those equity grants to be a key part of our overall compensation program. Additionally, the number of employees of the company and its affiliates has also grown significantly due to recent acquisitions, including the acquisition of the Thomson Reuters’ Corporate Solutions businesses which added over 1,000 employees. The Equity Plan is the only equity-based incentive plan used by the company to provide equity-based awards to employees, officers, consultants, advisors and non-employee directors.
As of March 4, 2014, there were approximately 3,000,000 shares available for future awards under the Equity Plan. The company anticipates using approximately 1.6 million of these shares in connection with the 2014 employee equity grant. In light of the limited number of shares available for future awards, the increase in eligible participants, and the continuing need for the company to be able to
THE NASDAQ OMX GROUP, INC. 78
make equity-based awards to motivate and retain employees, officers, consultants, advisors and non-employee directors and to align their interests with the interests of stockholders generally, the company is proposing to increase the number of shares available for awards under the Equity Plan. The company is seeking approval by the stockholders of an increase in the number of shares of common stock available for future awards under the Equity Plan by 6,000,000 shares, bringing the total number of shares available for awards under the Equity Plan since the Equity Plan’s inception to 41,700,000 shares. The number of shares authorized for issuance under the plan was last increased in 2010, when 6,200,000 shares were added to the Equity Plan. The company also is seeking approval of the other modifications to the Equity Plan described above.
Material Terms of the Performance Goals Under Section 162(m).The stockholders last approved the material terms of the performance goals in the Equity Plan for purposes of complying with Section 162(m) of the Code when the Equity Plan was amended and restated in 2010.
As discussed more fully in the Compensation Discussion and Analysis, a principal aspect of the company’s executive compensation program is to emphasize pay-for-performance and to create incentives that reward long-term performance. The committee and the board of directors believe that the use of stock-based incentive compensation2022 is in the best interests of the companyNasdaq and its stockholders because it alignsshareholders.
Audit Fees and All Other Fees
The table below shows the long-term interestsamount of executives and employees with those of stockholders. Stockholder approval of the performance goals will enable the company to seek to maximize the tax-deductibility of performance-based compensation under Section 162(m) of the Code, which is beneficial to the company and its stockholders. NASDAQ OMX attempts to structure our compensation arrangements so that amounts paid are tax deductible to the extent feasible and consistent with our overall compensation objectives. Depending upon the relevant circumstances at the time, the committee may determine to award compensation that may not be deductible. In making this determination, the committee balances the purposes and needs of our executive compensation program against potential tax cost.
Section 162(m) of the Code generally limits to $1 million per year the tax deduction for compensationfees we paid to the CEOErnst & Young LLP for fiscal years 2021 and the three other most highly compensated executive officers (other than the chief financial officer). However, qualified performance-based compensation is not subject to this deduction limitation. Compensation qualifies as performance-based compensation only if it is payable conditioned on satisfaction of pre-established, objective performance goals and satisfies certain other requirements, one of which is that certain material terms of the plan under which the compensation is payable be approved by stockholders at least every five years.
For purposes of Section 162(m) of the Code, the material terms requiring stockholder approval are: (i) the employees eligible to receive awards under the plan, (ii) a description of the business criteria on which performance is based in order to earn awards, and (iii) the maximum compensation that can be paid to an individual employee for any specific period (individual award limits). In order to satisfy this requirement, stockholders must approve these terms every five years. Approval of this Proposal IV will constitute the required re-approval for purposes of Section 162(m) of the Code.
HISTORICAL AWARD INFORMATION
Common measures of a stock plan’s cost include burn rate, dilution and overhang. The burn rate, or equity run rate, refers to how fast a company uses the supply of shares authorized for issuance under its stock plan. Over the last two years, the company has maintained an average equity run rate of less than 2% of shares of common stock outstanding per year. Dilution measures the degree to which our stockholders’ ownership has been diluted by stock-based compensation awarded under our Equity Plan and also includes shares that may be awarded under our Equity Plan in the future (“overhang”).
| 2021 | 2020 | |||
Audit fees1 | $5,354,450 | $5,024,454 | ||
Audit-related fees2 | $1,266,350 | $1,072,720 | ||
Audit and audit-related fees | $6,620,800 | $6,097,174 | ||
Tax fees3 | $445,507 | $167,702 | ||
All other fees4 | $2,098,306 | $1,277,870 | ||
Total5 | $9,164,613 | $7,542,746 | ||
THE NASDAQ OMX GROUP, INC. 79
The following table shows how our key equity metrics have changed over the past two years:
| 2013 | 2012 | |||||||
Key Equity Metrics | ||||||||
Equity Run Rate(1) | 1.21% | 1.56% | ||||||
Overhang(2) | 8.02% | 10.09% | ||||||
Dilution(3) | 6.30% | 7.63% | ||||||
NUMBER OF SHARES REQUESTED
When determining the number of shares to add to the Equity Plan, the committee and board of directors reviewed and considered, among other things, the potential impact on stockholders as measured by run rate, overhang and dilution, projected future share usage and projected forfeitures of awards, including the following information:
Assuming stockholder approval of the Equity Plan, approximately 9,000,000 shares (approximately 3,000,000 of which were available as of March 4, 2014) will be available for future award grants. We expect this amount to last for approximately 3-5 years of awards. This estimate is based on a run rate of between 0.7% and 1.2%. While we believe this modeling provides a reasonable estimate of how long such a share reserve would last, there are a number of factors that could impact our future share usage.
The total overhang resulting from the share request, including awards outstanding under our Equity Plan, represents approximately 10.8% of the shares of common stock outstanding as of the record date.
CONTINUED PROMOTION OF GOOD COMPENSATION PRACTICES
The Equity Plan contains a number of provisions that the company believes are consistent with the interests of stockholders and sound corporate governance practices. After the amendment and restatement, the Equity Plan will continue to contain such provisions. For example, the Equity Plan will continue to provide for:
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THE NASDAQ OMX GROUP, INC. 80
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| 4. |
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| 5. | Fees exclude services provided to Nasdaq’s non-profit entities and services provided in relation to Nasdaq’s role as administrator for the Unlisted Trading Privileges Plan. |
The Audit & Risk Committee pre-approves both audit and non-audit services performed by the independent registered public accounting firm, and our Audit & Risk Committee pre-approved all such services in 2021 and 2020.
Ratification of the Appointment of Ernst & Young LLP as Our Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2022
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AUTHORIZED SHARES AND STOCK PRICE
The Charter authorizesAs outlined in the issuance of 300,000,000 shares of common stock. There were 169,991,248 shares of common stock issuedAudit & Risk Committee charter, the Audit & Risk Committee is directly responsible for the appointment, compensation, retention, and outstanding as of March 4, 2014 and the closing price per share of common stock as of that date was $39.82.
SUMMARY OF THE EQUITY PLAN, AS AMENDED AND RESTATED
The following is a summaryoversight of the material termsindependent registered public accounting firm retained to audit Nasdaq’s financial statements. Following the process described under “Audit & Risk — Annual Evaluation and 2022 Selection of Independent Auditors,” the Equity Plan,Audit & Risk Committee has appointed Ernst & Young LLP as amended and restated, and as suchthe Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022.
If the shareholders do not ratify the selection, the Audit & Risk Committee will reconsider whether to retain Ernst & Young LLP. Even if the selection is qualified byratified, the actual terms of the Equity Plan. The following summary does not purport to be complete and is qualifiedAudit & Risk Committee, in its entirety by reference todiscretion, may change the full text of the Equity Plan, which is attached as Annex A and incorporated herein by reference. Stockholders are encouraged to read the text of the Equity Plan in its entirety.
Purpose
The Equity Plan is a broad-based plan intended to provide equity-based incentives to the company’s employees and other eligible participants. The company believes the Equity Plan is an important vehicle to motivate and retain talented employees, and to align the interests of employees generally with those of stockholders.
Administration
The Equity Plan is administered by the management compensation committee of the company’s board of directors. The committee selects participants and, in a manner consistent with the terms of the Equity Plan, has the exclusive power to, among other things, determine the form and terms of the awards, including any vesting, exercisability, payment or other restrictions. Subject to certain limitations (including Section 162(m) of the Code and other applicable law), the committee may also delegate some or all of its authority to one or more administrators.
Eligibility
In general, persons eligible to be a participant under the Equity Plan include officers, employees, consultants, advisors and non-employee directors of the company or any subsidiary or affiliate of the company. It is expected that performance compensation awards that are intended to be treated as qualified performance-based compensation as defined in Section 162(m) of the Code will be granted to covered employees. As of March 4, 2014, nine executive officers, 10 non-employee directors and approximately 3,500 employees were eligible to receive awards under the Equity Plan.
Term
The Equity Plan will expire on May 27, 2020.
THE NASDAQ OMX GROUP, INC. 81
Shares Available Under the Equity Plan and Individual Award Limit
The total number of shares authorized for awards under the Equity Plan since its inception is 41,700,000 shares of company common stock (which takes into account the proposed 6,000,000 share increase). In addition to the overall limit, the Equity Plan limits the number of shares of common stock that may be subject to incentive stock options and also provides that no participant may receive awards under the Equity Plan in any calendar year that relate to more than 2,000,000 shares.
Share Counting Rules
When awards are granted under the Equity Plan, the full number of shares subject to the award is charged against the number of shares that remain available for delivery pursuant to awards. After grant, any shares covered by an award that is forfeited, or an award that is settled for cash or otherwise expires, terminates or is cancelled without the delivery of shares, or otherwise without the participant having received any benefit therefrom, or shares withheld from such an award (other than options and stock appreciation rights) to satisfy any tax withholding obligations, shall, to the extent of any such forfeiture, expiration, termination, withholding or cancellation, be returned to the pool of shares again available for issuance under the Equity Plan. The following shares of common stock may not again be made available for issuance as awards under the Equity Plan: (i) shares of common stock not issued or delivered as a result of the net settlement of an outstanding option or stock appreciation right; (ii) shares of common stock used to pay the exercise price related to an outstanding option or used to pay withholding taxes related to an outstanding option or stock appreciation right; and (iii) shares repurchased by the company with the proceeds from the exercise of any option. In addition, with respect to stock appreciation rights, the number of shares counted against the share limits under the Equity Plan shall be the full number of shares subject to the stock appreciation right if the stock appreciation right is settled in shares.
Determination of Fair Market Value Under the Equity Plan
Fair market value with respect to shares, as of any date, is determined in accordance with a valuation methodology approved by the committee in good faith and in accordance with Section 409A of the Internal Revenue Code and other laws to the extent applicable. However, if the committee does not specify otherwise, fair market value will mean the closing sale price on The NASDAQ Stock Market on the relevant date, or, if no closing price is reported, the closing sale price on the next succeeding date a price is reported.
Types of Awards
The Equity Plan provides a variety of equity and equity-based awards to preserve flexibility. The types of awards that may be issued under the Equity Plan are described below.
Stock Options. The committee is authorized to grant “incentive stock options” under Section 422 of the Code and non-qualified stock options to participants under the Equity Plan. The exercise price of any stock option granted may not be less than the fair market value of the Company’s common stock on the date the option is granted. The terms and conditions of each stock option grant will be determined by the committee and set forth in the applicable award agreement or certificate, but a stock option may not have a term longer than ten years. A stock option may, as determined by the committee, be subject to a performance requirement based on the achievement of individual or corporate performance goals, and may also be subject to a service-based vesting requirement. Pursuant to the terms of the Equity Plan, the committee may accelerate the vesting of stock options.
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A participant may exercise his or her option for all or part of the number of shares or rights which he or she is eligible to exercise under terms of the applicable award agreement. The committee has the discretion to determine the form(s) and method(s) by which payment of the exercise price will be made by the participant, including, without limitation, by use of cash, by exchanging shares owned by the participant (which are not the subject of any pledge or other security interest), by “net settling” the option to have the company retain the number of shares with a fair market value on the date of exercise to satisfy the exercise price, through any broker’s cashless exercise procedure approved by the committee, or any combination of the foregoing.
Unless the applicable award agreement provides otherwise, the Equity Plan provides for certain rules with respect to outstanding options at the time of separation from service or entitlement to long term disability benefits. In general, unless the committee otherwise specifies in the award agreement, a stock option expires upon the earlier of (i) its stated expiration date or (ii) 90 days after separation from service (unless separation is due to death, retirement, or cause — as such terms are defined in the Equity Plan). Generally, unless the committee otherwise specifies in the award agreement, on a participant’s (i) separation from service due to death or retirement, all unvested options that would have been vested on or before the first anniversary of such separation from service will vest and continue to be exercisable for a period ending one year following the separation from service (or until the option’s expiration date, if sooner); and (ii) separation from service for cause, all unvested options will be forfeited and any vested options will continue to be exercisable for a period ending 10 days following the separation from service (or until the option’s expiration date, if sooner). The Equity Plan contains certain rules with respect to long term disability that are similar to death and retirement. Any unvested options will immediately be deemed cancelled and forfeited upon any other separation from service. Stock options will not contain reload rights or be subject to repricing.
Stock Appreciation Rights. The committee is authorized to grant stock appreciation rights (SARs) to participants under the Equity Plan. The exercise price of any SAR granted may not be less than the fair market value of the company’s common stock on the date the SAR is granted. The terms and conditions of each SAR grant will be determined by the committee and set forth in the applicable award agreement or certificate, but a SAR may not have a term longer than ten years. A SAR may, as determined by the committee, be subject to a performance requirement based on the achievement of individual or corporate performance goals, and may also be subject to a service-based vesting requirement. Pursuant to the terms of the Equity Plan, the committee may accelerate the vesting of SARs.
A participant may exercise his or her SAR for all or part of the number of shares or rights which he or she is eligible to exercise under terms of the applicable award agreement. SARs may be settled in cash or shares, as set forth in the applicable award agreement.
Unless the applicable award agreement provides otherwise, the Equity Plan provides for certain rules with respect to outstanding SARs at time of separation from service or entitlement to long term disability benefits. In general, unless the committee otherwise specifies in the award agreement, a SAR expires upon the earlier of (i) its stated expiration date or (ii) 90 days after separation from service (unless separation is due to death, retirement, or cause — as such terms are defined in the Equity Plan). Generally, unless the committee otherwise specifies in the award agreement, on a participant’s (i) separation from service due to death or retirement, all unvested SARs that would have been vested on or before the first anniversary of such separation from service will vest and continue to be exercisable for a period ending one year following the separation from service (or until the SAR’s expiration date, if sooner); and (ii) separation from service for cause, all unvested SARs will be forfeited and any vested SARs will continue to be exercisable for a period ending 10 days following the separation from service (or until the SAR’s expiration date, if sooner). The Equity Plan contains certain rules with respect to long term disability that are similar to death and retirement. Any unvested SARs
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will immediately be deemed cancelled and forfeited upon any other separation from service. SARs will not contain reload rights or be subject to repricing.
Restricted Stock and Restricted Stock Unit Awards. The committee may grant restricted stock or RSUs to participants under the Equity Plan. Each RSU shall have a value equal to the fair market value of a share of company common stock, and may be paid in cash, shares, other securities or other property, in the sole discretion of the committee. The terms and conditions of each such award are established by the committee and set forth in an associated award agreement. Restricted stock or RSUs, as determined by the committee, may be subject to a performance requirement based on the achievement of individual or corporate performance goals, and may also be subject to a service-based vesting requirement. Pursuant to the terms of the Equity Plan, the committee may accelerate the vesting of restricted stock or RSUs. Subject to the terms of the Equity Plan and award agreement, a participant granted restricted stock will generally have the same rights as one of the company’s stockholders during the restriction period. A participant granted RSUs will only have the rights of a general unsecured creditor of the company and will not be a stockholder with respect to the shares underlying RSUs unless and until the RSUs convert to shares of common stock.
Unless the applicable award agreement provides otherwise, the Equity Plan provides for certain rules with respect to the vesting of restricted stock and RSU awards at the time of separation from services or entitlement to long term disability benefits. In general, unless the committee otherwise specifies in the award agreement, in the event of separation from service due to death or retirement (as defined in the Equity Plan), then all restricted stock or RSU awards that would have become vested on or before the first anniversary of such death or retirement (had the individual remained in employment) shall vest on the date of death or retirement. The Equity Plan contains certain rules with respect to long term disability that are similar to death and retirement. In all other events of separation from service (including separation from service for cause), the participant’s unvested restricted stock and RSU awards shall be deemed cancelled and forfeited on the date of the participant’s separation from service.
Other Stock-Based Awards. Subject to the terms of the Equity Plan, the committee may grant participants other awards (which may include rights to dividends and dividend equivalents) that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of the company’s common stock. The committee will determine the terms and conditions of such awards and set forth such terms and conditions in an award agreement. Other stock-based awards may, as determined by the committee, be subject to a performance requirement based on the achievement of individual or corporate performance goals, and may also be subject to a service-based vesting requirement. Pursuant to the terms of the Equity Plan, the committee may accelerate the vesting of other stock-based awards.
Performance Compensation Awards. The committee may provide in the terms and conditions of any award that receipt of the award is contingent on satisfaction of an individual or corporate performance requirement and/or a vesting requirement. In addition, the committee may designate any awards under the Equity Plan as performance compensation awards in order to qualify those awards as performance based compensation under Section 162(m) of the Code.
For awards intended to qualify as performance-based compensation under Section 162(m) of the Code, performance awards will be conditioned upon the achievement of pre-established performance goals relating to one or more of the following performance criteria as established by the committee: earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, EPS, operating income, net income, net income from operations, revenues, net revenues, net exchange revenues, net profit, operating or profit margin, revenue growth, share price, TSR, market share, return measures, cash flow, adherence to budget or expense targets, planning accuracy, objectively determinable effectiveness, efficiency, business retentions/expansion, business support or
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other operational or support goals and business effectiveness survey results or objectively determinable employee engagement or development goals.
Performance criteria may be used to measure the performance of the company, any business unit, division, department, or function, calculated on a GAAP or non-GAAP basis, on an absolute or relative basis, and measured over a period determined by the committee. Adjustments may be made to reflect significant identified events, such as asset write-downs, changes in tax laws and accounting standards, and extraordinary nonrecurring items. The committee may exercise discretion to not pay an award or to pay less than the award otherwise earned based on performance against the performance criteria set.
Dividends and Distributions. In the sole discretion of the committee, an award may provide the participant with dividends or dividend equivalents, payable in cash, shares of common stock, other securities or other property on a current or deferred basis. However, any dividends or dividendequivalents with respect to performance compensation awards will be paid only to the extent such performance compensation award has been earned.
Adjustments for Corporate Changes
In the event of dividends or other distributions, recapitalizations, reorganizations or other specified events affecting the company or its shares of common stock as described under the Equity Plan, appropriate and equitable adjustments shall be made by the committee to the number of shares of common stock of the company available for grant, as well as to other maximum limitations under the Equity Plan (e.g., exercise prices and number of awards), and the number of shares of common stock of the company or other rights and prices under outstanding awards in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Equity Plan.
Transferability
Generally, except as otherwise determined by the committee, no award and no right under any award may be assigned, sold or transferred by a participant other than by will or by the laws of descent and distribution.
Amendment and Termination
The board of directors may amend, alter, suspend, discontinue or terminate the Equity Plan or any portion thereof at any time. However, no such change will be made without: (i) stockholder approval if such approval is necessary to comply with tax or regulatory requirements for which or with which our board of directors deems it desirable or necessary to comply or (ii) the consent of the affected participant, if such action would adversely affect any material rights of the participant under any outstanding award. In addition, the committee may amend the Equity Plan or any portion thereofappointment at any time to cure any ambiguities, correct defective or inconsistent provisions or make other immaterial changes. Notwithstandingduring the foregoing, the committee may not accelerate the payment or settlement of any awardyear if it determines that constitutes a deferral of compensation for purposes of Section 409A of the Code unless such acceleration is permitted under such rules and regulations.
The committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any awards granted under the Equity Plan, but cannot take any such action that would adversely affect the right of any participant without the consent of the affected participant.
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Effect of Change in Control
Unless otherwise provided in an award agreement or otherwise determined by the committee, awards under the Equity Plan are subject to special provisions upon the occurrence of a change in control (as definedwould be in the Equity Plan) transaction with respect to the company.
The awardsbest interests of Nasdaq and its shareholders. Representatives of Ernst & Young LLP will be assumed or substituted bypresent during the successor company in connection with a change in control according to the following terms:
Assumed or substituted performance compensation awards will no longer be subject to any performance goals and such awards will be converted into a number of units equal in value to the target number of units of the awardAnnual Meeting and will have the opportunity to make a statement and be contingent onavailable to respond to appropriate questions by shareholders. The Audit & Risk Committee and the participant’s continued performance of service for the successor company through the original vesting date of the award.
Assumed or substituted awards other than performance compensation awards should preserve the rights and benefits of the award as in effect prior to such assumption or substitution and will be subject to substantially similar terms and conditions (e.g., vesting) as in effect prior to such assumption or substitution.
In the eventBoard believe that the participant’s employmentcontinued retention of Ernst & Young LLP as the independent registered public accounting firm is involuntarily terminated by the company or its successor other than for cause (as defined in the Equity Plan), all unvested awards grantedbest interests of Nasdaq and its shareholders.
Approve an Amendment to Nasdaq’s Charter to Increase the participant shall vest immediately upon such termination and will be settled (or become exercisable in the caseTotal Number of options or stock appreciation rights), in accordance with their terms. In the caseAuthorized Shares of performance compensation awards that were convertedCommon Stock to successor company awards, the accelerated award will be prorated based on the number of days employed during the original performance period.
For awards not assumed or substituted, unless otherwise provided in the award agreement, upon the change in control all unvested awards shall vest immediately and will be settled (or become exercisable in the case of options or SARs), in accordance with their terms. Upon vesting, performance compensation awards shall be fixed at the number of target units prorated based on the number of days employed prior to the change in control during the original performance period.
Effect a Proposed Recoupment Policy3-for-1 Stock Split
Awards under the Equity Plan are subject to the company’s incentive recoupment policy.
Stock Options Awarded to Date
The following table shows the number of stock options, including any awards that were subsequently cancelled or surrendered for taxes, which NASDAQ OMX has awarded, to date, to the following individuals or groups:
our principal executive officer, principal financial officer and, in alphabetical order, each of our three most highly compensated executive officers, other than the principal executive officer and principal financial officer, for the year ended December 31, 2013 (the named executive officers);
one other individual, Mr. Hardwick Simmons, who has received over five percent of the total number of stock options, including any options that were subsequently cancelled or surrendered for taxes, awarded under the Equity Plan;
all nine of the current executive officers as a group (for information about the current executive officers, see “Executive Officers of NASDAQ OMX”);
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all ten of the current non-employee directors as a group (for information about the current non-employee directors, see “Proposal I: Election of Directors”);
one director nominee, Charlene T. Begley; and
all employees, excluding the current executive officers, as a group.
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New Equity Plan Benefits
The committee has discretionary authority to grant awards pursuant to the Equity Plan and there is no provision for automatic grants. Therefore, future benefits that would be received under the Equity Plan by executive officers and other employees under the Equity Plan currently are not determinable.
Shares Available for Issuance Under Equity Plans
The following table sets forth information regarding outstanding options and shares reserved for future issuance under all of NASDAQ OMX’s compensation plans as of December 31, 2013.
Plan Category | Number of shares to be issued upon exercise of outstanding options, warrants and rights (a)(1) | Weighted-average exercise price of outstanding options, warrants and rights(b) | Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column(a))(c) | |||||||||
| Equity compensation plans approved by stockholders | 4,926,522 | $ | 25.21 | 5,970,003 | (2) | |||||||
| Equity compensation plans not approved by stockholders | — | $ | — | |||||||||
| Total | 4,926,522 | $ | 25.21 | 5,970,003 | (2) | |||||||
The |
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Tax Treatment of Awards
The following is a general summary as of the date of this proxy statement of the U.S. federal income tax consequences associated with awards under the Equity Plan. The federal tax laws are complex and subject to change and the tax consequences for any participant will depend on his or her individual circumstances.
Non-Qualified Stock Options. A non-qualified stock option results in no taxable income to the optionee or deduction to the company at the time it is granted. An optionee exercising an option will generally realize taxable compensation at that time in the amount of the difference between the option price and the then market value of the shares, and income tax withholding requirements apply upon exercise. A deduction for federal income tax purposes will generally be allowable to the company in the year of exercise in an amount equal to the taxable compensation realized by the optionee. The optionee’s tax basis in the option shares is equal to the option price paid for such shares plus the amount includable in income upon exercise. At sale, appreciation (or depreciation) after the date of exercise is treated as either short-term or long-term capital gain (or loss) depending upon how long the shares have been held.
Incentive Stock Options. An incentive stock option within the meaning of Section 422 of the Code (“ISO”) results in no taxable income to the optionee or deduction to the company at the time it is granted. However, the excess of the fair market value of the shares of common stock acquired over the stock option exercise price is an item of adjustment in computing the alternative minimum taxable income of the optionee. If the optionee holds the shares of common stock received as a result of an exercise of an ISO for at least two years from the date of the grant and one year from the date of exercise, then the gain realized on disposition of the shares of common stock is treated as a long-term capital gain. If the shares of common stock are disposed of during this period, however, (i.e., a “disqualifying disposition”), then the optionee will include in income, as compensation for the year of the disposition, an amount equal to the excess, if any, of the fair market value of the shares of common stock received upon exercise of the stock option over the stock option price (or, if less, the excess of the amount realized upon disposition over the stock option price). The excess, if any, of the sale price over the fair market value on the date of exercise will be a short-term capital gain. In such case, the company will be entitled to a deduction, generally in the year of such a disposition, for the amount includible in the optionee’s income as compensation. The optionee’s basis in the shares of common stock acquired upon exercise of an ISO is equal to the stock option price paid, plus any amount includable in his or her income as a result of a disqualifying disposition.
Stock Appreciation Rights. Generally, the recipient of a SAR will not recognize taxable income at the time the SAR is granted. A participant that exercises a SAR will realize taxable compensation at the time of exercise equal to the amount received, whether in cash or stock. The amount recognized by the participant is subject to income tax withholding requirements if the participant is an employee or former employee. In general, there will be no federal income tax deduction allowed to the company upon the grant or termination of a SAR. However, upon the settlement of the SAR amount, the company will be entitled to a deduction equal to the amount of ordinary income the recipient is required to recognize as a result of the settlement.
Restricted Stock. Upon the grant of restricted stock, a participant will not recognize taxable income and the company will not be allowed a tax deduction. Rather, on the date when the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the shares on that date (less the price paid, if any, for such shares). Alternatively, a participant may file with the IRS a “section 83(b) election” no later than 30 days after the date of grant of restricted stock, as a result of which he
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will recognize taxable ordinary income at the time of the grant, generally in an amount equal to the fair market value of the shares on the date of grant, less any amount paid for the grant. The amount recognized by the participant is subject to income tax withholding requirements if the participant is an employee or former employee. At the time the participant recognizes income with respect to the restricted stock, the company is generally entitled to a deduction in an equal amount. Upon the sale of any shares that are delivered to the participant pursuant to an award, the participant will realize capital gain (or loss) measured by the difference between the amount realized and the fair market value of the shares on the date the shares were vested/delivered to the participant pursuant to the award.
Stock Units. A participant who receives stock units (whether RSUs or PSUs) will be taxed at ordinary income tax rates on the then fair market value of the shares of common stock distributed at the time of settlement of the stock units and a corresponding deduction will be allowable to the company at that time (subject to Section 162(m) of the Code). The participant’s tax basis in the shares will equal the amount taxed as ordinary income, and on subsequent disposition the participant will realize long-term or short-term capital gain or loss.
Impact of Section 409A. The Equity Plan has been designed so that awards thereunder either are not subject to the deferred compensation rules of Section 409A or, if subject to Section 409A, are intended to be compliant with Section 409A. Awards subject to Section 409A, but not compliant with Section 409A, could result in accelerated taxation of the awards and an additional 20 percent tax and interest charge tax to the participant. These potential penalties on the participant could reduce the value of grants subject to Section 409A and adversely affect the company’s ability to achieve the Equity Plan’s purposes.
Section 162(m). With certain exceptions, Section 162(m) of the Code limits the company’s deduction for compensation in excess of $1,000,000 paid to the company’s CEO and its three other highest-paid executive officers (other than the principal financial officer). Compensation paid to “covered employees” is not subject to the deduction limitation if it is considered “qualified performance-based compensation” within the meaning of Section 162(m) of the Code.
By approving the Equity Plan, stockholders also will be approving the eligibility of executive officers and others to participate in the Equity Plan, the per-person limitations, and the general business criteria on which performance objectives for performance-based awards under the Equity Plan may be based. The Equity Plan imposes per-person limitations, as described above.
If the company’s stockholders approve the Equity Plan, the company intends that performance compensation awards (intended to be treated as qualified performance-based compensation as defined in Section 162(m) of the Code) granted to covered employees under the Equity Plan will satisfy the requirements of qualified performance-based compensation under Section 162(m) of the Code in which case the company will be entitled to a deduction with respect to the payment of these awards. However, with respect to awards that are not intended to be treated as qualified performance-based compensation as defined in the Code, the deduction that the company might otherwise receive with respect to awards to covered employees may be disallowed.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE EQUITY PLAN, AS AMENDED AND RESTATED.
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APPROVAL OF AN AMENDMENT OF NASDAQ OMX’S CHARTER TO CONFORM A PROVISION TO AN ANALOGOUS PROVISION IN NASDAQ OMX’S BY-LAWS
After due consideration, and upon the recommendation of our nominating & governance committee,Finance Committee, our boardBoard of directorsDirectors has determined that it is advisable and in the best interests of NASDAQ OMXNasdaq and its stockholdersshareholders to amend NASDAQ OMX’s CharterNasdaq’s Amended and Restated Certificate of Incorporation to conformincrease the total number of authorized shares of common stock from three hundred million (300,000,000) to nine hundred million (900,000,000), and correspondingly increase the total number of shares of capital stock that Nasdaq is authorized to issue from three hundred thirty million (330,000,000) to nine hundred thirty million (930,000,000) in order to provide us with sufficient authorized but unissued shares to effect a provisionproposed 3-for-1 stock split. Thus, our Board of Directors has approved, adopted and authorized an amendment to an analogous provisionour Amended and Restated Certificate of Incorporation, the text of which is set forth in NASDAQ OMX’s By-Laws.Annex B to this Proxy Statement.
RationaleGeneral
Article Fourth, Paragraph CA of NASDAQ OMX’sour Amended and Restated Certificate of Incorporation provides that the total number of shares of stock that we have the authority to issue is three hundred thirty million (330,000,000), consisting of thirty million (30,000,000) shares of Preferred Stock, and three hundred million (300,000,000) shares of common stock. The proposed amendment (the “Proposed Charter includes a voting limitation that generally prohibits a stockholderAmendment”) to our Amended and Restated Certificate of Incorporation would:
increase the total number of authorized shares of common stock from voting shares beneficially owned, directly or indirectly, by such stockholder in excessthree hundred million (300,000,000) to nine hundred million (900,000,000); and
increase the total number of 5% of the then-outstanding shares of capital stock from three hundred thirty million (330,000,000) to nine hundred thirty million (930,000,000).
The Proposed Charter Amendment would not change the total number of NASDAQ OMX entitled to vote as of the record date in respect of any matter. Pursuant to Article Fourth, Paragraph C(6) of the Charter, NASDAQ OMX’s board of directors may grant exemptions to this limitation prior to the time a stockholder beneficially owns more than 5% of the outstandingauthorized shares of stock entitled to vote on the election of a majority of directors at such time. NASDAQ OMX’s board has never granted an exemption to the 5% voting limitation and has no current plans to do so.
However, in the event the board decides to grant such an exemption in the future, Article Fourth, Paragraph C(6) of the Charter and Section 12.5 of the By-Laws limit the board’s authority to grant the exemption. These provisions, which are intended to be substantively identical, currently contain some language differences. Following discussions with the SEC staff, the nominating & governance committee recommended, and our board of directors approved and declared advisable, the amendments described below to Article Fourth, Paragraph C(6) of the Charter to remove any ambiguity that may exist because of these differences.
Unlike the Charter, the By-Laws state that for so long as NASDAQ OMX shall control, directly or indirectly, any self-regulatory subsidiary, a resolution of the board to approve an exemption for any person under Article Fourth, Paragraph C(6) of the Charter shall not be permitted to become effective until such resolution has been filed with and approved by the SEC under Section 19 of the Exchange Act. The board recommends that this requirement be added to the Charter and that “self-regulatory subsidiary” be defined as “any subsidiary of Nasdaq that is a self-regulatory organization as defined under Section 3(a)(26) of the Exchange Act.” At present, this defined term would include The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., and NASDAQ OMX PHLX LLC, which are national securities exchanges, and Boston Stock Exchange Clearing Corporation and Stock Clearing Corporation of Philadelphia, which are clearing agencies that are both currently dormant.
Both the Charter and the By-Laws state that the board may not approve an exemption to the 5% voting limitation for: (i) a registered broker or dealer or an affiliate thereof or (ii) an individual or entity that is subject to a statutory disqualification under Section 3(a)(39) of the Exchange Act. The By-Laws include a further proviso stating that, for these purposes, an “affiliate” shall not be deemed to include an entity that either owns 10% or less of the equity of a broker or dealer, or receives 1% or less of its consolidated gross revenues from a broker or dealer. This proviso, which is not currently included in the Charter, would allow NASDAQ OMX’s board to grant exemptions to the 5% voting limitation for entities that either own 10% or less of the equity of a broker or dealer, or receive 1% or less of their consolidated gross revenues from a broker or dealer. The board recommends that this proviso be added to the Charter.
Both the Charter and By-Laws require the board to make certain determinations prior to granting an exemption to the 5% voting limitation. Regarding the first of these
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Unlike the Charter, the By-Laws further provide that prior to granting an exemption from the 5% voting limitation, the board must also determine that granting the exemption would promote the prompt and accurate clearance and settlement of securities transactions (and to the extent applicable, derivative agreements, contracts and transactions), assure the safeguarding of securities and funds in the custody or control of the self-regulatory subsidiaries that are clearing agencies or securities and funds for which they are responsible, foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions, and remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions. The board recommends that this language be added to the Charter.
Finally, the board recommends that Article Fourth, Paragraph C(6) of the Charter be amended to correct a cross-reference to subparagraph 6(b), which no longer exists.
Review and Approval by the SECpreferred stock.
In connection with our operation of self-regulatory organizations in the United States, NASDAQ OMXNasdaq is subject to SEC oversight, as prescribed by the Exchange Act. Under the Exchange Act, these self-regulatory organizations must submit to the SEC proposed changes to any of their rules, practices and procedures, including amendments to provisions of our CharterAmended and By-LawsRestated Certificate of Incorporation that are deemed to constitute rules. IfWe expect to begin the process of obtaining approval from the SEC on or about the date of the filing of our stockholders approve this proposal, we will file the proposed amendment to our Charter with the SEC.Definitive Proxy Statement. We cannot guarantee that the SEC will allowapprove of the proposed changes to become effective. In any event,changes. If the proposed changesProposed Charter Amendment is adopted by our shareholders at the 2022 Annual Meeting and approved by the SEC, the Proposed Charter Amendment will notbe filed with the Secretary of State of the State of Delaware and become effective until they are filed and effectivein connection with such filing. We expect to make such filing as soon as practicable after receiving the approval of both the SEC and our shareholders.
The additional shares of common stock authorized by the stateProposed Charter Amendment, if and when issued, would have the same rights and privileges as the shares of Delaware.common stock currently authorized under our Amended and Restated Certificate of Incorporation. The par value per share of our common stock will not be affected by the Proposed Charter Amendment.
Complete TextAs of the record date, we had three hundred million (300,000,000) shares of our common stock authorized, of which [●] shares were issued and outstanding and approximately [●] shares have been granted or remain available for grant under our Equity Plan and ESPP. In addition, we have 30,000,000 shares of preferred stock authorized, of which no shares were issued and outstanding. Therefore, as of the record date, we had only approximately [●] shares of common stock available for issuance, which is not enough to effect the proposed stock split without effecting the Proposed Charter Amendment.
Purpose of the Proposed Charter Amendment
On March 23, 2022, the Board of Directors approved pursuing an effective 3-for-1 forward stock split by way of a stock dividend contingent upon the approval of the adoption of the Proposed Charter Amendment by both our shareholders and the SEC, pursuant to which the holders of record of shares of common stock would receive by way of a dividend, two shares of common stock for each share of common stock held by such holder (the “Stock Dividend”). In the event the Stock Dividend is declared and paid, we will also make appropriate adjustments to our Equity Plan, ESPP and outstanding equity-based awards, including adjustments to the number of shares of common stock authorized for issuance under such plans and to the terms of such awards, in accordance with the parameters of the Stock Dividend and the terms of such plans. As a result, the Stock Dividend would significantly increase the number of shares of common stock issued and outstanding and the number of shares of common stock authorized for issuance under our Equity Plan and ESPP, thus necessitating an increase in the number of authorized shares under our Amended and Restated Certificate of Incorporation.
If the Proposed Charter Amendment is filed with the Secretary of State of the State of Delaware and becomes effective, the shares of common stock authorized by our Amended and Restated Certificate of Incorporation (as amended by the Proposed Charter Amendment) that are in excess of those distributed pursuant to the Stock Dividend will be available for issuance at such times and for such corporate purposes as our Board of Directors (or an authorized committee thereof) may deem advisable, including, without limitation, potential acquisitions, strategic partnerships, equity financings, equity incentives to employees, payments of future stock dividends and other forms of recapitalizations, without further shareholder approval (except as may be required by applicable law or the rules of any stock exchange or stock market on which the common stock may be listed or traded).
Stock Dividend
The general descriptiontrading price of our common stock has risen significantly over the past several years, reflecting the consistently strong performance of our Company. Since we first became a publicly traded company, the total number of authorized shares of our common stock has remained constant at three hundred million (300,000,000). However, over the last five years, the trading price of our common stock has increased by approximately [●]. As the trading price of our common stock has risen, we have carefully evaluated the effect of the trading price of our common stock on the liquidity and marketability of our common stock. We believe that this considerable price appreciation may be affecting the liquidity of our common stock, making it more difficult to efficiently trade and less affordable to certain classes of investors and, therefore, potentially less attractive to certain investors. The price of one share of our common stock on March 31, 2017 was $69.45 and the closing market price of one share our common stock on April 1, 2022 was $181.92 as reported on the Nasdaq Stock Market. Our Board believes that declaring and paying the Stock Dividend may support liquidity in the trading of our common stock and make the common stock more attractive to a broader range of investors. The Board believes it is in our and our shareholders’ best interests to increase the number of authorized shares of common stock for the purpose of, among other things, providing Nasdaq with sufficient authorized but unissued shares of common stock to declare and pay the proposed amendmentStock Dividend.
If our shareholders adopt and the SEC approves the Proposed Charter Amendment, it is expected that the Board of NASDAQ OMX’sDirectors (or an authorized committee thereof) will declare the Stock Dividend and fix a record date and distribution date for such Stock Dividend soon thereafter. While the Board of Directors currently intends that the Board of Directors (or an authorized committee thereof) will declare the Stock Dividend and fix a distribution date that is shortly after the Proposed Charter described aboveAmendment is qualified in its entirety by reference tofiled with the textSecretary of State of the proposed amendment,State of Delaware and becomes effective, the decision of the Board of Directors (or an authorized committee thereof) as to whether and when to declare and pay the Stock Dividend will be based on a number of factors, including market conditions and existing and expected trading prices for the common stock.
Effect of the Proposed Charter Amendment
If the Proposed Charter Amendment is adopted and becomes effective and, if the Stock Dividend is declared and paid, the aggregate number of shares of common stock either issued and outstanding or that may be issued pursuant to equity awards or otherwise reserved for issuance under Nasdaq’s Equity Plan and ESPP would total approximately [●], which is attached as Annex Bin excess of the three hundred million (300,000,000) shares of common stock currently authorized under our Amended and Restated Certificate of Incorporation. Having an additional [●] shares of common stock available for issuance after the payment of the Stock Dividend would provide Nasdaq with similar flexibility to this proxy statement.what we currently have to issue shares of common stock without the expense and delay of a shareholders’ meeting.
Future issuances of shares of common stock could have a dilutive effect on the EPS, voting power and percentage shareholdings of current shareholders. In addition, the availability of additional shares of common stock for issuance could, under certain circumstances, discourage or make more difficult any efforts to obtain control of Nasdaq. We do not believe, however, that the Proposed additionsCharter Amendment would have an anti-takeover effect, and we have not proposed the increase in the authorized number of shares of common stock with the intention of using the additional shares for anti-takeover purposes.
Right to Abandon the Proposed Charter Amendment and Stock Dividend
We may abandon the Proposed Charter Amendment at any time before the effectiveness of the filing of the Proposed Charter Amendment with the Secretary of State of the State of Delaware and may also abandon the Stock Dividend, in each case without further action by our shareholders, notwithstanding the authorization of the Proposed Charter Amendment by our shareholders and the SEC.
No Appraisal Rights
Under the General Corporation Law of the State of Delaware, our shareholders are double-underlined, and proposed deletions are stricken through.not entitled to appraisal rights in connection with the Proposed Charter Amendment or the Stock Dividend.
Vote Required
TheApproval of the adoption of this proposalthe Proposed Charter Amendment requires the affirmative vote of the holders of a majority of NASDAQ OMX’sthe outstanding shares of common stock entitled to vote generallythereon.
If you abstain from voting on this matter, your abstention will have the same effect as a vote “against” the approval of the adoption of the Proposed Charter Amendment. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal within a specified period of time prior to the meeting, your broker has the authority to vote your shares. Abstentions and broker non-votes will be counted as present for purposes of determining the presence of a quorum.
Shareholder Proposal – Special Shareholder Meeting Improvement
| X | The Board unanimously recommends that shareholders vote AGAINST Proposal 5. |
Mr. Kenneth Steiner, 14 Stoner Ave., 2M, Great Neck, NY 11021-2100, owner of no less than 100 shares of Nasdaq common stock, has informed Nasdaq that he plans to introduce the following proposal at the Annual Meeting. We are not responsible for the accuracy or content of the proposal and supporting statement, which are presented below as received from the proponent. The proposal and supporting statement are quoted verbatim in italics below.
SHAREHOLDER PROPOSAL
Proposal 5 - Special Shareholder Meeting Improvement
Shareholders ask our board to take the steps necessary to amend the appropriate company governing documents to give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting.
One of the main purposes of this proposal is to give shareholders the right to formally participate in calling for a special shareholder meeting regardless of their length of stock ownership to the fullest extent possible.
Currently it takes a theoretical 15% of all shares outstanding to call for a special shareholder meeting. This theoretical 15% of all shares outstanding translates into 24% of the shares that vote at our annual meeting.
It would be hopeless to think that shares that do not have time to vote would have time to go through the special procedural steps to call for a special shareholder meeting.
And it goes downhill from here. All shares held for less than one full year are 100% disqualified from formal participation in calling for a special shareholder meeting. Thus the shareholders who own 24% of the shares that vote at the annual meeting could determine that they own 33% of NDAQ stock when length of stock ownership is factored out.
And then all NDAQ shares not held long are 100% disqualified. Thus the shareholders who own 33% of NDAQ stock could determine that they own close to 40% of NDAQ stock when their shares not held long are included.
A 15% stock ownership requirement that can in practice be close to a 40% stock ownership requirement is nothing for management to brag about. And NDAQ management likes to brag about its shareholder engagement even when management disingenuously distributes voter guides for dummies shortly before the voting at the annual meeting that tell shareholders how to vote in lockstep with the management party line.
It is also important to vote for this proposal because we gave 46% support to a 2018 proposal for a shareholder right to act by written consent and we still do not have a right to act by written consent. This 46% support may have represented 51% support from the NDAQ shares that have access to independent proxy voting advice and are not forced to rely on the conflicted opinions of management.
Many companies provide for both a shareholder right to call a special shareholder meeting and a shareholder right to act by written consent. Southwest Airlines and Target are companies that do not provide for shareholder written consent and yet provide for 10% of shares to call for a special shareholder meeting.
Please vote yes:
Special Shareholder Meeting Improvement, Proposal 5
Board Of Directors’ Statement In Opposition
The Board has carefully considered this proposal and concluded that its adoption is unnecessary and not in the best interests of the Company or our shareholders. The Board unanimously recommends that shareholders vote AGAINST this proposal, as further explained below.
Reasons to vote against this proposal | ||
| ✓ | Shareholders already have a meaningful right to call a special meeting with a 15% threshold | |
| ✓ | The proposed 10% threshold is lower than the threshold at a majority of S&P 500 companies that offer shareholders the right to call a special meeting | |
| ✓ | Special meetings require significant resources, and the lower threshold could be abused or lead to an unnecessary disruption of management’s time and energy in leading Nasdaq and driving value for all shareholders | |
| ✓ | Nasdaq’s existing strong corporate governance practices emphasize Board accountability and provide shareholders with numerous opportunities for shareholder action | |
Nasdaq shareholders already have the ability to call special meetings.
The Board acknowledges the importance of allowing shareholders a meaningful right to call special meetings in appropriate circumstances. Currently, shareholders holding at least 15% of Nasdaq’s outstanding capital stock for at least one year may call a special meeting of shareholders. This right, which was adopted in response to feedback from our shareholders, permits Nasdaq’s shareholders to bring important matters before all shareholders for consideration in a fully transparent and equitable manner.
The Board believes that our current 15% ownership threshold achieves a reasonable and appropriate balance between providing shareholders with the ability to call a special meeting, while protecting shareholders against a small minority of shareholders who may utilize the special meeting right to advance their own self-interests. Given our shareholder base, reducing the ownership threshold to 10% could enable a small minority of shareholders (or even a single shareholder) to trigger the expense and distraction of a special meeting to pursue narrow short-term interests that are not widely viewed among our shareholder base as requiring immediate attention or that are not aligned with the long-term interests of the Company or our shareholders generally.
The Board believes maintaining the 15% ownership threshold preserves a reasonable and appropriate balance between providing shareholders with a right to call a special meeting and protecting against the unnecessary waste of corporate resources and disruption associated with convening a special meeting that may be inappropriate.
Statements in the shareholder proposal are incorrect and misleading.
We believe that certain assertions made in the shareholder proposal and supporting statement are incorrect and misleading. While we will not address each such statement, the proposal includes various percentages that the proponent claims are required to call a special meeting, from the current 15% as set forth in the Company’s By-Laws up to a 40% requirement. These references to various thresholds are particularly misleading given the purpose of this proposal is to reduce the relevant threshold from 15% to 10%. The proponent repeatedly overstates the current 15% ownership threshold with references to higher numbers that are not included in the Company’s By-Laws.
Additionally, the Company did not “disingenuously distribute[s] voter guidelines for dummies shortly before the voting at the annual meeting.” The only materials provided by the Company to our shareholders in 2021 were publicly filed with the SEC. The Company has no plans to distribute any materials, other than those that are or will be publicly filed, prior to the 2022 Annual Meeting.
Our existing 15% special shareholder meeting threshold is more favorable to shareholders than thresholds of other large public companies.
Among S&P 500 companies, approximately 70% provide shareholders with a right to call special meetings. Of those, approximately 62% set the threshold above 15%, and approximately 14% set the threshold at 15%, as does Nasdaq. Among our exchange peers, our threshold of 15% to call a special meeting is the lowest, and several peers do not afford shareholders the right to call a special shareholder meeting at all.
Together with our strong corporate governance policies and practices, our annual shareholder engagement program and the various shareholder-friendly governance provisions that we have adopted (as described below and elsewhere in this Proxy Statement), the Board believes that our current 15% special meeting threshold remains appropriate and enhances shareholder rights, yet still reasonably allows shareholders to call a special meeting.
Special shareholder meetings require significant resources and management time.
A special shareholder meeting requires a substantial commitment of time, effort and resources by the Company, regardless of whether the meeting is held in person or virtually. The Company must pay to prepare, print and distribute to shareholders the required SEC disclosure documents related to the meeting, solicit proxies, hold the meeting, tabulate votes, file the voting results with the SEC and, for a virtual meeting, engage a service provider to host the meeting online. A threshold of just 10% risks that a group of shareholders whose interests do not align with shareholders generally will call a meeting, thus spending Company time and resources and risking distraction of our Board and management from their primary focus of growing our business and enhancing shareholder value.
Nasdaq’s corporate governance practices emphasize Board accountability and provide numerous opportunities for shareholder action.
In addition to providing for extensive shareholder engagement throughout the year and our current shareholder right to call special meetings, Nasdaq’s existing corporate governance practices and policies emphasize Board accountability and give shareholders ample opportunity to take action. Significant examples include the following:
Proxy Access. In response to feedback from shareholders, Nasdaq adopted a proxy access provision that allows a shareholder (or group of shareholders) that complies with certain customary requirements to nominate candidates for service on the Board and have those candidates included in Nasdaq’s proxy materials.
Elimination of Supermajority Voting. In response to feedback from shareholders, Nasdaq eliminated supermajority voting requirements from its governance documents.
Majority Voting in Director Elections. In response to feedback from shareholders, Nasdaq amended its governance documents to provide that, in an uncontested election of directors, voting togetherdirector nominees are elected by a majority of the votes cast. Moreover, our Corporate Governance Guidelines require that, in an uncontested election, an incumbent director must submit an irrevocable resignation as a single class. Abstentionscondition to his or her nomination for election. If an incumbent director fails to receive the requisite number of votes in an uncontested election, the irrevocable resignation becomes effective and broker non-votesthe resignation will be considered by the Nominating & ESG Committee, which will recommend to the full Board whether or not to accept the resignation.
Annual Elections of Directors. All of Nasdaq’s directors are elected annually by our shareholders.
Director Nominations. Nasdaq’s By-Laws permit shareholders to nominate persons for election to the Board or propose other business to be considered at an annual or special meeting called by the Board.
Independent Board Leadership. Nasdaq has separated the roles of Chairman of the Board and President and CEO. The Chairman of the Board is an independent director, as are all of the Chairs of the Board Committees.
No “Poison Pill.” We do not have a “poison pill,” which is a defensive tactic used by a corporation’s board of directors against a takeover. Such plans are generally viewed negatively by shareholder rights advocates.
Annual Advisory Vote to Approve Executive Compensation. On an annual basis, shareholders have the effectopportunity to provide feedback on the compensation of our NEOs through an advisory vote.
Advance Notice Provisions. Nasdaq’s By-Laws establish an advance notice procedure for director nominations or other proposals that are not submitted for inclusion in the Proxy Statement, but that a vote against this proposal.shareholder instead wishes to present directly at an Annual Meeting.
Nasdaq has consistently demonstrated that when it believes a particular action requested by a shareholder is in the best interests of all shareholders, the Board will support that action. Many of the practices described above were adopted in response to shareholder feedback.
RECOMMENDATION OF THE BOARD OF DIRECTORSNasdaq believes that its corporate governance practices and policies enable shareholders to act in support of their interests while avoiding the risks associated with a lower threshold to call a special meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDMENT OF NASDAQ OMX’S CHARTER TO CONFORM A PROVISION TO AN ANALOGOUS PROVISION IN NASDAQ OMX’S BY-LAWS.Summary
The Company is proud of its consistent engagement with, and responsiveness to, its shareholders, as shown by its adoption of corporate governance policies that seek to serve the interests of all of our shareholders. Nasdaq’s existing 15% threshold to call a special shareholder meeting is strongly supportive of shareholder rights and is lower than the threshold at most S&P 500 companies. Accordingly, the adoption of the proposal to lower such percentage is unnecessary, inappropriate and not in the best interests of Nasdaq and its shareholders.
THE NASDAQ OMX GROUP, INC. 91
The NASDAQ OMX boardNasdaq Board knows of no business other than the matters described in this proxy statementProxy Statement that will be presented at the annual meeting.Annual Meeting. To the extent that matters not known at this time may properly come before the annual meeting,Annual Meeting, absent instructions thereon to the contrary, the enclosed proxy will confer discretionary authority with respect to such other matters as may properly come before the meeting, and it is the intention of the persons named in the proxy to vote in accordance with their judgment on such other matters.
THE NASDAQ OMX GROUP, INC. 92
EXECUTIVE OFFICERS OF NASDAQ OMX
The executive officersSecurity Ownership of NASDAQ OMX are listed below.
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Robert Greifeld, a member of our board of directors, has served as Chief Executive Officer since May 2003. Prior to joining NASDAQ OMX, Mr. Greifeld was an Executive Vice President at SunGard Data Systems, Inc., a global provider of integrated softwareCertain Beneficial Owners and processing solutions for financial services and a provider of information availability services. Mr. Greifeld joined SunGard in 1999 through SunGard’s acquisition of Automated Securities Clearance, Inc., where from 1991 to 1999, Mr. Greifeld was the President and Chief Operating Officer.
Bruce E. Aust has served as Executive Vice President of the Global Corporate Client Group since July 2003. Previously, Mr. Aust served as Executive Director and Vice President of the Corporate Client Group. Prior to joining NASDAQ OMX in 1998, Mr. Aust spent 12 years at Fidelity Investments in a variety of sales, trading and management positions in Dallas, Boston, Los Angeles and San Francisco.
Anna M. Ewing has served as Executive Vice President, Global Technology Solutions since January 2013. Previously, she was Executive Vice President and Chief Information Officer since December 2005. She served as Senior Vice President of Technology Services in our Operations & Technology Group since October 2000. Before joining NASDAQ OMX, Ms. Ewing was Managing Director, Electronic Commerce at CIBC World Markets in New York and Toronto, where she served as Managing Director of Global Applications Services and as a founding member of CIBC.com. Before that, Ms. Ewing served as Vice President at Merrill Lynch, where she held various leadership positions within the Corporate and Institutional Client Group Technology Division, including Global Head of Institutional Client Technology, Global Head of Financial Futures and Options Technology, Global Head of Prime Brokerage Technology and Regional Head of Technology at Merrill Lynch Canada.
Ronald Hassen has served as Senior Vice President and Controller since March 2002 and Principal Accounting Officer since May 2002. Previously, Mr. Hassen served as Treasurer from November 2002 through January 2007. Prior to joining NASDAQ OMX, Mr. Hassen served as Controller of Deutsche Bank North America from June 1999, after its acquisition of Bankers Trust Company. Mr. Hassen joined Bankers Trust in 1989, serving as Principal Accounting Officer from 1997 until the company’s acquisition by Deutsche Bank.
THE NASDAQ OMX GROUP, INC. 93
John L. Jacobs has served as Executive Vice President of the Global Information Services Group since January 2013. He served as Executive Vice President of the Global Marketing Group and Chief Marketing Officer from July 2003 until January 2013 and Executive Vice President of the Global Index Group from July 2002 until January 2013. Previously, Mr. Jacobs served as Senior Vice President of Worldwide Marketing and Financial Products from January 2000 until July 2002 and as Vice President of Investor Services and Worldwide Marketing from January 1997 until January 2000. Mr. Jacobs joined NASDAQ OMX in 1983.
Hans-Ole Jochumsen has served as Executive Vice President of Transaction Services Nordic since February 2008. Previously, Mr. Jochumsen was the President of Information Services & New Markets for OMX. Prior to that, he served as President and CEO of the Copenhagen Stock Exchange (now called NASDAQ OMX Copenhagen A/S) and FUTOP Clearingcentralen Ltd. Prior to joining OMX in 1998, Mr. Jochumsen served as President and member of the Executive Management of BG Bank from 1996 to 1998 and as President and member of the Executive Management of Girobank from 1994 to 1996. From 1990 to 1994, he was a President and member of the Executive Management of BRFkredit.
Edward S. Knight has served as Executive Vice President and General Counsel since October 2000 and Chief Regulatory Officer since January 2006. Previously, Mr. Knight served as Executive Vice President and Chief Legal Officer of FINRA from July 1999 to October 2000. Prior to joining FINRA, Mr. Knight served as General Counsel of the U.S. Department of the Treasury from September 1994 to June 1999. Mr. Knight also serves as a director of NASDAQ Dubai.
Bradley J. Petersonhas served as Executive Vice President and Chief Information Officer since February 2013. Previously, Mr. Peterson served as Executive Vice President and Chief Information Officer at Charles Schwab, Inc. since May 2008. Mr. Peterson was Chief Information Officer at eBay from April 2003 through May 2008. From July 2001 through March 2003, Mr. Peterson was the Managing Director and Chief Operating Officer at Epoch Securities after its merger with Goldman Sachs Group, Inc. He also has held senior executive positions at Epoch Partners, Inc., Charles Schwab & Company and Pacific Bell Wireless (now part of AT&T).
Lee Shavel has served as Chief Financial Officer and Executive Vice President, Corporate Strategy since May 2011. Before joining NASDAQ OMX, Mr. Shavel was Americas Head of Financial Institutions Investment Banking at Bank of America Merrill Lynch. Previously, he was Head of Finance, Securities and Technology and Global Chief Operating Officer for the Financial Institutions Group at Merrill Lynch. Mr. Shavel joined Merrill Lynch in 1993 as an Associate, coming from Citicorp where he worked as an Associate in the Financial Institutions Group.
THE NASDAQ OMX GROUP, INC. 94
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and accompanying footnotes show information regarding the beneficial ownership of our common stock as of the the record date by:
•each person who is known by us to own beneficially more than 5% of our common stock;
•each current director and nominee for director;
•each named executive officer;NEO; and
•all directors and executive officers as a group.
Except as otherwise indicated, we believe that the beneficial owners listed below, based on information furnished by such owners, will have sole investment and voting power with respect to such shares, subject to community property laws where applicable. All vested options, vested shares of restricted stock and vested shares underlying PSUs referred to in the table were granted under the Equity Plan. Shares of common stock underlying options that are currently exercisable, or exercisableshares of restricted stock units that will vest within 60 days of the record date, are considered outstanding and beneficially owned by the person holding the options or restricted stock units for the purposes of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Holders of restricted stock unitsRSUs and PSUs granted under the Equity Plan have the right to direct the voting of the shares underlying those unitsRSUs and PSUs only to the extent the shares are vested.
As of March 4, 2014, 169,991,248the record date, [●] shares of common stock were outstanding. Except as noted below, each shareholder is entitled to the number of votes equal to the number of shares of common stock held by such shareholder, subject to the 5% voting limitation contained in our Amended and Restated Certificate of Incorporation that generally prohibits a shareholder from voting in excess of 5% of the total voting power of Nasdaq.
Name of Beneficial Owner | Common Stock Beneficially Owned | Percent of Class | ||||||
Borse Dubai Limited(1) Level 7, Precinct Building 5, Gate District DIFC, Dubai UAE | 29,780,515 | 17.5% | ||||||
Investor AB(2) Patricia Holding AB, Arsenalsgatan 8C, S-103 32, Stockholm, Sweden V7 | 19,394,142 | 11.4% | ||||||
Blackrock, Inc.(3) 40 East 52nd Street, New York, NY 10022 | 13,933,515 | 8.2% | ||||||
FMR LLC(4) 245 Summer Street, Boston, MA 02210 | 10,836,122 | 6.4% | ||||||
Charlene T. Begley | — | — | ||||||
Steven D. Black(5) | 5,153 | * | ||||||
Börje E. Ekholm(6) | 26,737 | * | ||||||
Glenn H. Hutchins(7) | 258,037 | * | ||||||
Essa Kazim(8) | 18,758 | * | ||||||
John D. Markese(9) | 54,492 | * | ||||||
Ellyn A. McColgan(10) | 8,738 | * | ||||||
Thomas F. O’Neill(11) | 13,831 | * | ||||||
James S. Riepe(12) | 28,064 | * | ||||||
Michael R. Splinter(13) | 33,232 | * | ||||||
Lars R. Wedenborn(14) | 51,116 | * | ||||||
Robert Greifeld(15) | 2,805,113 | 1.6% | ||||||
Hans-Ole Jochumsen(16) | 115,644 | * | ||||||
Edward S. Knight(17) | 238,518 | * | ||||||
Bradley J. Peterson | — | — | ||||||
Lee Shavel(18) | 37,053 | * | ||||||
All directors and executive officers of NASDAQ OMX as a group (19 persons) | 4,573,077 | 2.6% | ||||||
THE NASDAQ OMX GROUP, INC. 95
| Name of Beneficial Owner | Common Stock Beneficially Owned | Percent of Class | ||
Borse Dubai Limited1 | ||||
Level 7, Precinct Building 5, Gate District | 29,780,515 | [●]% | ||
DIFC, Dubai UAE | ||||
Investor AB2 | ||||
Innax AB, Arsenalsgatan 8C, S-103 32 | 19,394,142 | [●]% | ||
Stockholm, Sweden V7 | ||||
The Vanguard Group, Inc.3 | 12,629,907 | [●]% | ||
100 Vanguard Blvd. Malvern, PA 19355 | ||||
Massachusetts Financial Services Company4 | 11,150,926 | [●]% | ||
111 Huntington Avenue, Boston, MA 02199 | ||||
Capital World Investors5 | ||||
333 South Hope Street, 55th Fl | 9,272,130 | [●]% | ||
Los Angeles, CA 90071 | ||||
BlackRock, Inc.6 | 8,546,784 | [●]% | ||
55 East 52nd Street, New York, NY 10055 | ||||
Melissa M. Arnoldi7 | 10,568 | * | ||
Charlene T. Begley8 | 10,461 | * | ||
Steven D. Black9 | 44,383 | * | ||
Adena T. Friedman10 | 744,178 | * | ||
Essa Kazim11 | 41,038 | * | ||
Thomas A. Kloet12 | 24,903 | * | ||
John D. Rainey13 | 14,890 | * | ||
Michael R. Splinter14 | 65,871 | * | ||
Toni Townes-Whitley15 | 951 | * | ||
Jacob Wallenberg16 | 9,196 | * | ||
Alfred W. Zollar17 | 8,591 | * | ||
Ann M. Dennison18 | 12,689 | * | ||
Lauren B. Dillard19 | 44,633 | * | ||
P.C. Nelson Griggs20 | 28,955 | * | ||
Bradley J. Peterson21 | 19,320 | * | ||
Michael Ptasznik22 | 22,300 | * | ||
All Directors and Executive Officers of Nasdaq as a Group (23 Persons) | [●] | * | ||
* Represents less than 1%.
As of |
As of |
As of |
| 4. | As of the record date, based solely on information included in a Schedule 13G/A, filed February 2, 2022, Massachusetts Financial Services Company indicated that it has beneficial ownership of and sole dispositive power with respect to |
THE NASDAQ OMX GROUP, INC. 96
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As of the record date, based solely on information included in a Schedule 13G/A, filed February 11, 2022, Capital World Investors indicated that it has beneficial ownership of and sole voting and dispositive power with respect to 9,272,130 shares. |
| 6. | As of the record date, based solely on information included in a Schedule 13G, filed February 4, 2022, BlackRock, Inc. indicated that it has beneficial ownership of and sole dispositive power with respect to 8,546,784 shares and sole voting power with respect to 7,377,651 shares. The Schedule 13G includes shares beneficially held by the following subsidiaries of BlackRock, Inc.: BlackRock Life Limited; BlackRock International Limited; BlackRock Advisors, LLC; Aperio Group, LLC; BlackRock (Netherlands) B.V.; BlackRock Institutional Trust Company, National Association; BlackRock Asset Management Ireland Limited; BlackRock Financial Management, Inc.; BlackRock Japan Co., Ltd.; BlackRock Asset Management Schweiz AG; BlackRock Investment Management, LLC; BlackRock Investment Management (UK) Limited; BlackRock Asset Management Canada Limited; BlackRock (Luxembourg) S.A.; BlackRock Investment Management (Australia) Limited; BlackRock Advisors (UK) Limited; BlackRock Fund Advisors; BlackRock Asset Management North Asia Limited; BlackRock (Singapore) Limited; and BlackRock Fund Managers Ltd. |
| 7. | Represents |
Represents |
| 9. | Represents 42,258 vested shares of restricted stock and 2,125 shares of restricted stock vesting within 60 days. |
| 10. | Represents (i) 268,817 vested options, (ii) 84,827 vested shares of restricted stock, (iii) 307,083 vested shares underlying PSUs and (iv) 34,451 shares granted under the Equity Plan |
Represents |
Represents (i) |
Represents |
THE NASDAQ OMX GROUP, INC. 97
Represents |
| 15. | Represents 951 shares of restricted stock vesting within 60 days. |
| 16. | Represents 7,241 vested shares of restricted stock and 1,955 shares of restricted stock vesting within 60 days. Excludes shares of Nasdaq common stock held by Investor AB. Mr. Wallenberg, who is Chairman of Investor AB, disclaims beneficial ownership of such shares. |
| 17. | Represents 6,551 vested shares of restricted stock and 2,040 shares of restricted stock vesting within 60 days. |
| 18. | Represents (i) 371 vested shares of restricted stock, (ii) |
| 19. | Represents (i) 13,519 vested shares of restricted stock, (ii) 30,436 vested shares underlying PSUs and (iii) 678 shares purchased pursuant to the ESPP. Reflects holdings on April 8, 2022, the date of Ms. Dillard’s resignation. |
THE NASDAQ OMX GROUP, INC. 98
| 20. | Represents (i) 565 vested shares of restricted stock and (ii) 28,390 vested shares underlying PSUs. |
| 21. | Represents (i) 5,891 vested shares of restricted stock, (ii) 12,241 vested shares underlying PSUs and (iii) 1,188 shares purchased pursuant to the ESPP. |
| 22. | Reflects holdings as of April 8, 2022. Mr. Ptasznik retired from Nasdaq on February 28, 2021. |
SECTIONDelinquent Section 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEReports
Section 16(a) of the Exchange Act requires our directors and regulations of the SEC thereunder, require our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports of initial ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC. Based solely on our review of copies of such forms received by NASDAQ OMX, or on written representations from reporting persons that no other reports were required for such persons, we believe that during 2013, ourSuch executive officers, directors and 10% stockholdersshareholders also are required by SEC rules to furnish us with copies of all Section 16(a) forms that they file.
We believe that during fiscal year 2021 all of our directors and executive officers complied with these requirements with the following exceptions: due to ministerial errors, (i) a filing by Ms. Michelle L. Daly on Form 4 regarding an award of restricted stock units was filed one day late and (ii) a filing by Mr. Jeremy Skule on Form 4 regarding the sale of shares was filed one day late.
Nasdaq’s Employee Networks Nasdaq’s employee-led affinity networks enable employees to support each other and come together on shared topics and interests. Our Employee Networks celebrate our diversity and provide a sense of inclusion and belonging. The networks aim to empower success of employees with initiatives that promote professional advancement; provide networking opportunities; and build mentorship, advocacy and community outreach efforts. Our employee networks are supported by the executive leadership team and each employee network has an executive sponsor. | ¡Adelante Nasdaq! ¡Adelante Nasdaq! is our global employee network dedicated to employees who have an interest in Hispanic/ Latino culture and heritage. Asian Professionals at Nasdaq (APAN) APAN is a platform for professional and social activities for employees that have an affinity or interest in Asian culture. Global Green Team Global Green Team brings together Nasdaq employees who are passionate about sustainability and making a positive impact on the environment and planet. Global Link of Black Employees (GLOBE) GLOBE provides a platform for connection and collaboration for employees that have an affinity or interest in Black, African, African American, and West Indian culture at Nasdaq. Nasdaq Accessibility Network Nasdaq Accessibility Network is for Nasdaq employees with disabilities, their families and supporters. Nasdaq Administrative Professionals Network This network enables administrative professionals across all geographies and demographics to collaborate with each other on shared topics, best practices and interests. The Out Proud Employees of Nasdaq (The OPEN) The OPEN represents the LGBTQ+ employees, their families and allies. Parents and Caregivers This network, which is for Nasdaq employees who identify themselves as parents or caregivers, aims to foster a workplace where employees feel confident that they can have a rewarding career while being fully committed to their family. Software Engineer Employee Network (SEEN) This network is for Nasdaq colleagues who are enthusiastic about Software Engineering. The group seeks to bring like-minded individuals together by fostering a sense of community for software professionals in a fast- paced technology environment. Veterans@Nasdaq This network brings together those employees who have served or are currently serving in the military, military families and their supporters. Women in Nasdaq (WIN) WIN brings women and their allies at Nasdaq together and provides community, growth and learning opportunities, and networking and visibility that supports the advancement of women at Nasdaq personally and professionally. |
Nasdaq’s executive officers, as of April 28, 2022, are listed below.
| Adena T. Friedman Age: 52 Title: President and CEO | |
Ms. Friedman was appointed President and CEO and elected to the Board effective January 1, 2017. Previously, Ms. Friedman served as President and Chief Operating Officer from December 2015 to December 2016 and President from June 2014 to December 2015. Ms. Friedman served as CFO and Managing Director at The Carlyle Group, a global alternative asset manager, from March 2011 to June 2014. Prior to joining Carlyle, Ms. Friedman was a key member of Nasdaq’s management team for over a decade including as head of data products, head of corporate strategy and CFO. | ||
| Oliver Albers Age: 43 Title: EVP, Investment Intelligence | |
Mr. Albers was appointed EVP, Investment Intelligence, in April 2022. Prior to that, Mr. Albers served as SVP and Head of Data for Investment Intelligence from January 2020 through April 2022, and was previously SVP and Head of Sales from 2018 through January 2020. He has served at Nasdaq since 2000 in various leadership roles across research, product development, sales, and operations. | ||
| Roland Chai Age: 49 Title: EVP, Market Infrastructure Technology Executive Sponsor: Asian Professionals at Nasdaq (APAN) | |
Mr. Chai has served as EVP since April 2022 and leads our Market Infrastructure Technology business, which comprises purpose-built products to meet the technology needs of marketplace infrastructure clients. Prior to that, Mr. Chai served as Nasdaq’s Chief Risk Officer since June 2020. Before joining Nasdaq, Mr. Chai served in various senior roles at Hong Kong Exchange since June 2017, most recently as Head of Post-Trade and Group Risk Officer. Prior to joining Hong Kong Exchange, Mr. Chai served as Head of Equities at LCH.Clearnet since 2009. | ||
| Tal Cohen Age: 49 Title: EVP, North American Markets Employee Network Executive Sponsor: Asian Professionals at Nasdaq (APAN) | |
| Mr. Cohen has served as EVP, North American Markets since July 2019. Prior to that, he was SVP, North American Market Services since April 2016. He joined Nasdaq following the acquisition of Chi-X Canada. Previously, Mr. Cohen was the CEO of Chi-X Global, a global operator of trading venues, for six years. Prior to Chi-X, he held senior positions at Instinet, American Express and Arthur Andersen. | ||
| Michelle L. Daly Age: 46 Title: SVP, Controller and Principal Accounting Officer | |
Ms. Daly has served as SVP, Controller and Principal Accounting Officer since May 2021. Prior to joining Nasdaq, Ms. Daly was Managing Director and Deputy Controller at BlackRock from April 2018 through April 2021. Previously, Ms. Daly held various senior leadership positions at Goldman Sachs from 2008 through 2018, including as head of SEC reporting, and in the corporate treasury department. Prior to joining Goldman Sachs in 2008, Ms. Daly served in the audit practice at Ernst & Young LLP. | ||
| Ann M. Dennison Age: 51 Title: EVP and CFO Employee Network Executive Sponsor: Women in Nasdaq (WIN) | |
Ms. Dennison has served as EVP and CFO since March 2021. Prior to that, she was SVP, Controller and Principal Accounting Officer since April 2016. Prior to joining Nasdaq, Ms. Dennison was employed by Goldman Sachs for 19 years, where she was Managing Director. Ms. Dennison joined Goldman Sachs from Price Waterhouse. | ||
| P.C. Nelson Griggs Age: 51 Title: EVP, Corporate Platforms Employee Network Executive Sponsor: The Out Proud Employees of Nasdaq (The OPEN) | |
| Mr. Griggs has served as EVP, Corporate Platforms since April 2018. Mr. Griggs is also President of The Nasdaq Stock Market. Previously, Mr. Griggs was EVP, Listing Services from October 2014 through April 2018 and SVP, New Listings from July 2012 through October 2014. Since joining Nasdaq in 2001, Mr. Griggs has served in a myriad of other roles including SVP, Listings Asia Sales and VP, Listings. Prior to joining Nasdaq, Mr. Griggs worked at Fidelity Investments and a San Francisco based startup company. | ||
| Jamie King Age: 48 Title: EVP, Anti-Financial Crime Technology | |
Jamie King has served as EVP since April 2022 and leads our Anti-Financial Crime Technology business. Mr. King is the President and CEO of Verafin, which Nasdaq acquired in February 2021. Mr. King co-founded Verafin, a provider of anti-financial crime management solutions used by thousands of banks and other financial institutions. | ||
| Bradley J. Peterson Age: 62 Title: EVP and CIO/CTO Employee Network Executive Sponsor: Software Engineer Employee Network (SEEN); Women in Nasdaq (WIN) | |
| Mr. Peterson has served as EVP and CIO/CTO since February 2013. Previously, Mr. Peterson served as EVP and CIO at Charles Schwab, Inc. from May 2008 to February 2013. Mr. Peterson was CIO at eBay from April 2003 through May 2008. From July 2001 through March 2003, Mr. Peterson was the Managing Director and Chief Operating Officer at Epoch Securities after its merger with Goldman Sachs Group, Inc. He also has held senior executive positions at Epoch Partners, Inc., Charles Schwab & Company and Pacific Bell Wireless (now part of AT&T). | ||
| Bjørn Sibbern Age: 48 Title: EVP, Nasdaq Europe Employee Network Executive Sponsor: Parents and Caregivers | |
| Mr. Sibbern has served as EVP, Nasdaq Europe since June 2019. He also is President of Nasdaq Nordic Ltd. Previously, Mr. Sibbern served as EVP, Investment Intelligence from October 2016 to May 2019, SVP, Nasdaq Global Commodities from February 2013 to October 2016 and SVP, Nasdaq Nordic Equities & Equities Derivatives from 2009 to February 2013. Mr. Sibbern also served as President of the Nasdaq Copenhagen Stock Exchange from 2008 to 2016. | ||
| Jeremy Skule Age: 48 Title: EVP and Chief Strategy Officer Employee Network Executive Sponsor: Global Green Team; Veterans@Nasdaq | |
Mr. Skule has served as EVP and Chief Strategy Officer since January 2021. Previously, Mr. Skule was EVP and Chief Marketing Officer since April 2018, after previously serving as SVP and Chief Marketing Officer since 2012. Mr. Skule joined Nasdaq in 2012 from UBS, where he led Marketing and Communications for the Wealth Management business. Prior to UBS, Mr. Skule was the Chief Communications Officer at MF Global. Previously, he led the financial services practice at FleishmanHillard, a division of Omnicom Group, one of the largest global public relations and marketing agencies. Mr. Skule’s career has spanned senior communications positions and marketing leadership roles in Washington, DC, and New York. | ||
| Bryan E. Smith Age: 49 Title: EVP and Chief People Officer Employee Network Executive Sponsor: ¡Adelante Nasdaq! | |
Mr. Smith has served as EVP and Chief People Officer since January 2020, after previously serving as SVP and Chief People Officer since 2012. Prior to joining Nasdaq in 2012, he was a founding partner with Meridian Compensation Partners LLC, an independent executive compensation advisory firm, where he provided advice to boards of directors and senior management teams on the full range of executive and board compensation issues. Prior to Meridian Compensation Partners, Mr. Smith was a Principal at Hewitt Associates LLC (now Aon Hewitt), a global human resource consulting and outsourcing firm, where he held various senior HR outsourcing and consulting roles. | ||
| John A. Zecca Age: 54 Title: EVP and Chief Legal, Risk and Regulatory Officer Employee Network Executive Sponsor: Parents and Caregivers | |
| Mr. Zecca has served as EVP and Chief Legal and Regulatory Officer since October 2019. In April 2022, Mr. Zecca also became the Chief Risk Officer. Previously, Mr. Zecca was SVP, General Counsel North America, and Chief Regulatory Officer from April 2018 to September 2019, after serving as SVP, Senior Deputy General Counsel from July 2017 to April 2018. Mr. Zecca was SVP, MarketWatch, Nasdaq’s market surveillance group, from January 2010 to July 2017 and before that, he held a variety of other legal and regulatory roles at Nasdaq. Prior to joining Nasdaq in 2001, Mr. Zecca served as legal counsel to an SEC Commissioner and practiced corporate and securities law at both Hogan Lovells and Kaye Scholer. |
Certain Relationships and Related Transactions
The Audit & Risk Committee of the Section 16(a) filing requirements.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The audit committee of our board of directorsBoard has adopted a written policy regardingrequiring notification, review, and approval of related partyperson transactions. For purposes ofEvery two years, the Audit & Risk Committee reviews and approves the policy a “related party” generally includes directors, director nominees, executive officers, greater than 5% stockholders, immediate family members of any of the foregoing, entities that are affiliated with any of the foregoing and our independent auditing firm. on related person transactions.
Under the policy, all transactions with related partiesperson transactions are subject to ongoing review and approval or ratification by the audit committee.
In determining whether to approve or ratify a related party transaction, the audit committee considers, among other things, the following factors:
whether the termsAudit & Risk Committee. For purposes of the related party transaction are fair to NASDAQ OMX and whether such terms would be on the same basis if the transaction did not involvepolicy, a related party;
whether there are business reasons for NASDAQ OMX to enter into the related party transaction;
whether the related party transaction would impair the independence“related person” generally includes directors, director nominees, executive officers, greater than 5% shareholders, immediate family members of an outside director;
whether the related party transaction would present a conflict of interest for any director or executive officer of NASDAQ OMX, taking into account:
the size of the transaction;
the overall financial positionforegoing and entities that are affiliated with any of the director or executive officer;foregoing.
the direct or indirect nature of the director’s or executive officer’s interest in the transaction;
the ongoing nature of any proposed relationship; and
any other factors deemed relevant;
whether the related party transaction is material, taking into account:
the importance of the interest to the related party;
the relationship of the related party to the transaction and of related parties to each other;
the dollar amount involved; and
the significance of the transaction to NASDAQ OMX investors in light of all the circumstances.
Under the policy, related partyperson transactions that are conducted in the ordinary course of NASDAQ OMX’sNasdaq’s business and on substantially the same terms as those prevailing at the time for comparable services provided to unrelated third parties or to NASDAQ OMX’s employees on a broad basis are considered pre-approved by the audit committee.Audit & Risk Committee. The Transaction Review Committee (consisting of employees in Finance, Internal Audit, and the Legal, Risk and Regulatory Group) is responsible for determining if a transaction meets the pre-approval requirements. If the pre-approval requirements are not met, the transaction is referred to the Audit & Risk Committee for review and approval or ratification.
In determining whether to approve or ratify a related person transaction, the Audit & Risk Committee considers, among other things, the following factors:
whether the terms of the related person transaction are fair to Nasdaq and whether such terms would be on the same basis if the transaction did not involve a related person;
whether there are business reasons for Nasdaq to enter into the related person transaction;
whether the related person transaction would impair the independence of an outside director;
whether the related person transaction would present a conflict of interest for any director or executive officer of Nasdaq, taking into account:
| - | the size of the transaction; |
| - | the overall financial position of the director or executive officer; |
| - | the direct or indirect nature of the director’s or executive officer’s interest in the transaction; and |
| - | the ongoing nature of any proposed relationship; |
whether the related person transaction is material, taking into account:
| - | the importance of the interest to the related person; |
| - | the relationship of the related person to the transaction and of related persons to each other; |
| - | the dollar amount involved; and |
| - | the significance of the transaction to Nasdaq investors in light of all the circumstances; and |
whether the related person transaction aligns with Nasdaq’s culture of integrity and potential reputational risk implications.
The following section describes certain transactions since the beginning of the fiscal year ended December 31, 2013,2021, in which NASDAQ OMXNasdaq or any of its subsidiaries was a party, in which the amount involved exceeded $120,000 and in which a director, a director nominee, an executive officer, a security holder known to own more than five percent of our common stock or an immediate family member of any of the foregoingrelated person may have had, or willmay have, a direct or indirect material interest. In accordance with our policy on related party transactions, all ofaddition to the transactions discusseddescribed below, other than those that received pre-approval as discussed above, have been approved or ratified by the audit committeecertain of our boarddirectors or director nominees are officers or partners of directors.
BORSE DUBAI
As of March 4, 2014, Borse Dubai owned approximately 17.5% of NASDAQ OMX’s common stock. NASDAQ OMX is obligated by the terms of a stockholders’ agreementcompanies or private equity firms which, directly or through their controlled portfolio companies, enter into commercial transactions with Borse DubaiNasdaq or its subsidiaries from time to nominate and generally use best efforts to cause the election to the NASDAQ OMX board one director designated by Borse Dubai, subject to certain conditions. Essa Kazim, the Chairman of Borse Dubai,
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has been designated by Borse Dubai as its nominee with respect to the 2014 annual meeting. During the fiscal year ended December 31, 2013, Borse Dubai paid NASDAQ OMX approximately $1.8 million for technology services in the ordinary course of business.
INVESTOR AB
As of March 4, 2014, Investor AB owned approximately 11.4% of NASDAQ OMX’s common stock. NASDAQ OMX is obligated by the terms of a stockholders’ agreement with Investor AB to nominate and generally use best efforts to cause the election to the NASDAQ OMX board one director designated by Investor AB, subject to certain conditions. Börje E. Ekholm, the President and Chief Executive Officer of Investor AB, has been designated by Investor AB as its nominee with respect to the 2014 annual meeting. During the fiscal year ended December 31, 2013, Investor AB paid NASDAQ OMX approximately $0.7 million for market data, issuer and other services in the ordinary course of business.
Investor AB is an industrial holding company that invests in other companiestime in the ordinary course of business. OneWe do not believe that such directors or director nominees have a direct or indirect material interest in such transactions. In accordance with our policy, all such transactions, and the transactions discussed below, have been reviewed and approved or ratified by the Audit & Risk Committee of Investor AB’s portfolio companiesour Board or received pre-approval, as discussed above.
Borse Dubai
As of the record date, Borse Dubai owned approximately 18.1% of Nasdaq’s common stock. Nasdaq is Skandinaviska Enskilda Banken AB (SEB), a financial services company, which is a lender under NASDAQ OMX’s credit facilitiesparty to several commercial agreements with Borse Dubai and/or its affiliates that were negotiated on an arms-length basis and a customer of NASDAQ OMX. During the fiscal year ended December 31, 2013, NASDAQ OMX paid SEB approximately $23.1 million in principal payments, interest payments and other fees under its credit facilities and approximately $2.2 million in fees relating to other financing related transactions. During the fiscal year ended December 31, 2013, SEB paid NASDAQ OMX approximately $24.6 million for transaction, market data, issuer and index servicesentered into in the ordinary course of business.
Investor AB’s portfolio companies also include certain companies that are listed on one Under these agreements, Borse Dubai or more of the exchanges that we operate. During the fiscal year ended December 31, 2013, these entities or theirits affiliates made the following approximate payments to NASDAQ OMXpaid Nasdaq approximately $2.7 million, primarily for issuer feesmarket technology products and services, in the ordinary course of business: ABB Ltd. ($0.5 million), Astra Zeneca ($0.6 million), Atlas Copco AB ($0.9 million), Electrolux AB ($0.5 million), EQT Corporation ($0.1 million), Ericsson ($0.4 million), Husqvarna AB ($0.3 million), Raptor Pharmaceutical Corp. ($0.2 million), Saab AB($0.3 million) and Wärtsilä ($0.2 million). In addition, during the fiscal year ended December 31, 2013, we paid WhiteHat Security or its affiliates approximately $0.2 million for training services and Projectplace International AB or its affiliates approximately $0.2 million for technology services in the ordinary course of business.
FMR LLC
As of March 4, 2014, FMR LLC owned approximately 6.4% of NASDAQ OMX’s common stock. During the fiscal year ended December 31, 2013, FMR LLC or its affiliates paid NASDAQ OMX approximately $0.4 million for financial products in the ordinary course of business.
SILVER LAKE
Glenn H. Hutchins, one of our directors, is a Co-Founder of Silver Lake. Silver Lake is a private investment firm that invests in other companies in the ordinary course of business. Silver Lake’s portfolio companies include, among others, Blackline Systems, Dell Inc., Groupon, Inc., Interactive Data Corporation, IPC, SunGard Data Systems Inc., Virtu Financial and Zynga Inc. During the fiscal year ended December 31, 2013:2021.
we paid BlackLine Systems approximately $0.2 million for financial software in the ordinary course of business;
Groupon paid us approximately $0.2 million for issuer feesQuestions and services, and we paid Groupon approximately $2.3 million for advertising services, in the ordinary course of business.
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Interactive Data Corporation or its affiliates paid us approximately $3.2 million for market data, transaction, issuer and other services, and we paid Interactive Data Corporation or its affiliates approximately $0.5 million for data services, in the ordinary course of business.
IPC or its affiliates paid us approximately $0.2 million for transaction and issuer services in the ordinary course of business.
SunGard or its affiliates paid us approximately $5.9 million for transaction services and market data, and we paid SunGard or its affiliates approximately $1.8 million for license fees and professional services, in the ordinary course of business.
Virtu Financial or its affiliates paid us approximately $25.8 million for transaction and market data services, and we paid an affiliate of Virtu Financial $3.5 million in connection with rebates relating to transaction services, in the ordinary course of business.
Zynga paid us approximately $0.2 million for issuer fees and services in the ordinary course of business.
OTHER TRANSACTIONS WITH ENTITIES AFFILIATED WITH OUR DIRECTORS
James S. Riepe, one of our directors, is a Senior Advisor at T. Rowe Price Group, Inc., which engages in trading and other commercial activities with us. During the fiscal year ended December 31, 2013, T. Rowe Price or its affiliates paid us approximately $0.5 million for transaction, market data, mutual fund and issuer fees and services in the ordinary course of business.
Michael Splinter, one of our directors, is the Executive Chairman of the board of directors of Applied Materials, which engages in commercial activities with us. During the fiscal year ended December 31, 2013, Applied Materials or its affiliates paid us approximately $0.3 million for issuer fees and services.
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STOCKHOLDER COMMUNICATION WITH DIRECTORS
We regularly engage with our stockholders to discuss executive compensation, corporate governance and other issues. Stockholders and other parties interested in communicating directly with the board of directors, the chairman of the board, other individual directors or particular NASDAQ OMX board committees may do so by addressing correspondence to the intended recipient at the following address.
Joan C. Conley
Senior Vice President and Corporate Secretary
The NASDAQ OMX Group, Inc.
805 King Farm Boulevard
Rockville, MD 20850
Email: corporatesecretary@nasdaqomx.com
NASDAQ OMX’s corporate secretary regularly forwards all correspondence to the board, board members or committees. In addition, concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of NASDAQ OMX’s internal audit department and office of general counsel and handled in accordance with procedures established by the audit committee with respect to such matters.
ONLINE ANNUAL REPORT TO STOCKHOLDERS AND FORM 10-K
Answers About Our online annual report to stockholders is available athttp://ir.nasdaqomx.com/annuals.cfm. Our Form 10-K is available athttp://ir.nasdaqomx.com/annuals.cfmandwww.proxyvote.com.We will furnish, without charge, a copy of the Form 10-K, including the financial statements and financial statement schedule, to any stockholder upon request to the NASDAQ OMX Investor Relations Department, Attention: Edward Ditmire, One Liberty Plaza, 49th Floor, New York, New York 10006, in writing or by email (investor.relations@nasdaqomx.com).
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STOCKHOLDER PROPOSALS AND NOMINATIONS OF DIRECTORS
NASDAQ OMX stockholders who wish to submit proposals pursuant to Rule 14a-8 of the Exchange Act for inclusion in the proxy statement for NASDAQ OMX’s 2015 annual meeting must submit them on or before November •, 2014 to NASDAQ OMX’s corporate secretary, Joan C. Conley (corporatesecretary@nasdaqomx.com), and must otherwise comply with the requirements ofRule 14a-8.
A stockholder who wishes to nominate a person for election as director at an annual or special meeting, or to introduce an item of business at an annual meeting, must also comply with the procedures specified in NASDAQ OMX’s By-Laws. Under these procedures, a stockholder must submit the proposed nominee or proposed item of business by delivering a notice containing certain information, as set forth in the By-Laws, to be received by NASDAQ OMX’s corporate secretary in accordance with the following time frames.
In the case of a nomination or proposed item of business for an annual meeting, the notice must normally be delivered not more than 120 nor less than 90 days prior to the first anniversary of the prior year’s meeting. Assuming the 2015 annual meeting is held according to this year’s schedule, the notice must be delivered on or prior to the close of business on February 6, 2015, but no earlier than January 7, 2015.
However, if NASDAQ OMX holds its annual meeting on a date that is more than 30 days before or 70 days after such anniversary date, the notice must be delivered no earlier than 120 days prior to the date of the annual meeting nor later than the later of (i) the ninetieth day prior to the date of the annual meeting or (ii) the tenth day following the day on which public announcement of the date of such meeting is first made by NASDAQ OMX.
If NASDAQ OMX holds a special meeting to elect directors, the notice with respect to the nomination of a person for election as director must be delivered no earlier than 120 days prior to the date of the special meeting nor later than the later of (i) the ninetieth day prior to the date of the special meeting or (ii) the tenth day following the day on which public announcement of the date of such meeting and the nominees proposed by the NASDAQ OMX board is first made by NASDAQ OMX.
In addition, NASDAQ OMX stockholders may recommend individuals for consideration by the nominating & governance committee for nomination to the NASDAQ OMX board. Holders should submit such recommendations in writing, together with any supporting documentation the holder deems appropriate, to NASDAQ OMX’s corporate secretary prior to December 31, 2014.
THE NASDAQ OMX GROUP, INC.
March •, 2014
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Proposed Amended and Restated Equity Plan
THE NASDAQ OMX GROUP, INC. EQUITY INCENTIVE PLAN
(as amended and restated May 7, 2014)
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THE NASDAQ OMX GROUP, INC. EQUITY INCENTIVE PLAN
(AS AMENDED AND RESTATED MAY 7, 2014)
TABLE OF CONTENTSAnnual Meeting
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The NASDAQ OMX Group, Inc. Equity Incentive Plan
(as amended and restated as of May 7, 2014)
SECTION 1. Introduction and Purpose
The purposes of The NASDAQ OMX Group, Inc. Equity Incentive Plan (the “Plan”) are to promote the interests of The NASDAQ OMX Group, Inc. (the “Company”) and its stockholders by (i) attracting and retaining key employees, consultants and non-employee directors of the Company and its Affiliates; (ii) motivating such individuals by means of performance-related incentives to achieve long-range performance goals, (iii) enabling such individuals to participate in the long-term growth and financial success of the Company and (iv) linking compensation to the long-term interests of stockholders.
The Plan was originally established effective as of December 5, 2000 as the Nasdaq Stock Market, Inc. Equity Incentive Plan with an initial term of ten years. The Plan has been subsequently amended on several occasions, including to rename the Plan as “The NASDAQ OMX Group, Inc. Equity Incentive Plan.” As of May 27, 2010, the Plan was amended and restated and approved by the stockholders of the Company at the annual meeting on such date with the most recent amendment being Amendment No. 2013-1. The Plan is hereby amended and restated, effective as of the Amendment Effective Date.
As used in the Plan, the following terms shall have the meanings set forth below:
(a) “Affiliate” shall mean (i) a Subsidiary of the Company as determined by the Committee, (ii) any other entity or Person or group of Persons that, in the determination of the Committee, is controlled by the Company, (ii) any entity in which the Company has a significant equity interest as determined by the Committee, and (iii) an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act, as determined by the Committee.
(b) “Amendment Effective Date” shall mean May 7, 2014 subject to approval of the Plan at the annual meeting of stockholders of the Company held on such date.
(c) “Award” shall mean any Option, Stock Appreciation Right (SAR), Restricted Stock, Restricted Stock Unit, Other Stock-Based Award or Performance Compensation Award granted under the Plan.
(d) “Award Agreement” shall mean any written agreement, contract, certificate or other instrument or document evidencing any Award, which may, in the discretion of the Company, be transmitted electronically to any Participant, but need not be executed or acknowledged by a Participant.
(e) “Board” shall mean the Board of Directors of the Company.
(f) “Cause” shall mean, unless otherwise defined in the applicable Award Agreement or an employment agreement between the Participant and the Company, (i) the engaging by the Participant in willful misconduct that is injurious to the Company or its Affiliates, (ii) the embezzlement or misappropriation of funds or property of the Company or its Affiliates by the Participant, (iii) the conviction of the Participant of a felony or the entrance of a plea of guilty or nolo contendere by the Participant to a felony, (iv) the willful failure or refusal by the Participant to substantially perform his
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or her duties or responsibilities that continues after being brought to the attention of the Participant (other than any such failure resulting from the Participant’s incapacity due to Disability), (v) the violation by the Participant of any restrictive covenants entered into between the Participant and the Company, (vi) the violation by the Participant of the Company’s Guidelines for Appropriate Conduct as described in the Company’s Employee Handbook, or the Company’s Code of Conduct or (vii) the engaging by the Participant in any crime involving a material element of fraud or dishonesty. Any determination of Cause shall be made by the Committee in its sole discretion. Any such determination shall be final and binding on a Participant.
(g) “Change in Control” means the first to occur of any one of the events set forth in the following paragraphs:
(i) any “Person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company, (B) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, (C) any entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Shares, and (D) the Financial Industry Regulatory Authority), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly (not including any securities acquired directly (or through an underwriter) from the Company or its Affiliates), of 25% or more of the Company’s then outstanding Shares;
(ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, on the effective date (as provided in Section 16(a) of the Plan), were members of the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the effective date of the Plan or whose appointment, election or nomination for election was previously so approved or recommended;
(iii) there is consummated a merger or consolidation of the Company with any other entity or the Company issues Shares in connection with a merger or consolidation of any direct or indirect subsidiary of the Company with any other entity, other than (A) a merger or consolidation that would result in the Shares of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than 50% of the Company’s then outstanding Shares or 50% of the combined voting power of such surviving or parent entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “Person” (as defined below), directly or indirectly, acquired 25% or more of the Company’s then outstanding Shares (not including any securities acquired directly (or through an underwriter) from the Company or its Affiliates); or
(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction having a similar effect), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned directly or indirectly by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.
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(h) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(i) “Committee” shall mean a committee of the Board designated by the Board to administer the Plan. From and after the time that the Shares are registered pursuant to Section 12 under the Exchange Act, unless otherwise determined by the Board, the Committee shall be composed of not less than the minimum number of persons from time to time required by Section 16 and Section 162(m), each of whom, to the extent necessary to comply with Section 16 and Section 162(m) only, is a “Non-Employee Director” and an “Outside Director” within the meaning of Section 16 and Section 162(m), respectively, and the minimum number, if any, required by listing standards of The NASDAQ Stock Market.
(j) “Disability” shall mean, unless otherwise defined in the applicable Award Agreement or an employment agreement between the Participant and the Company, a disability that would qualify as such under the Company’s then current long-term disability plan.
(k) “Eligible Recipient” shall mean an officer, employee, consultant, advisor or non-employee director of the Company or of any Affiliate.
(l) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
(m) “Fair Market Value” with respect to the Shares, as of any date, shall mean the fair market value thereof as of the relevant date of determination, as determined in accordance with a valuation methodology approved by the Committee in good faith and in accordance with Code Section 409A and other laws to the extent applicable; provided however, that if the Committee has not specified otherwise, Fair Market Value with respect to Shares, as of any date, shall mean the closing sale price at the regular trading session reported for such Shares on The NASDAQ Stock Market on such date or, if no closing sale price is reported on such date, the closing sale price reported on the next succeeding date on which a closing sale price is reported.
(n) “Incentive Stock Option” shall mean an option to purchase Shares from the Company that is granted under Section 6 of the Plan and that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.
(o) “Negative Discretion” shall mean the discretion authorized by the Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award in accordance with Section 10(d)(iv) of the Plan; provided, that the exercise of such discretion would not cause the Performance Compensation Award to fail to qualify as “performance-based compensation” under Section 162(m) of the Code.
(p) “Non-Qualified Stock Option” shall mean an option to purchase Shares from the Company that is granted under Section 6 of the Plan and that is not intended to be an Incentive Stock Option.
(q) “Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option.
(r) “Other Stock-Based Award” shall mean any award granted under Section 9 of the Plan.
(s) “Parent” shall have the meaning set forth in Section 424(e) of the Code.
(t) “Participant” shall mean any Eligible Recipient who receives an Award under the Plan.
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(u) “Person” shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.
(v) “Performance Compensation Award” shall mean any Award designated by the Committee as a Performance Compensation Award pursuant to Section 10 of the Plan.
(w) “Performance Criteria” shall be measured in terms of one or more of the following performance measures:
The proxy materials for our 2022 Annual Meeting of Shareholders include the notice of annual meeting, this Proxy Statement, and the Form 10-K. If you received a paper copy of these materials, the proxy materials also include a proxy card or voting instruction form. |
A proxy statement is a document that SEC regulations require us to give you when we ask you to sign a proxy designating individuals to vote on your behalf. A proxy involves your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. We have designated two of our officers as proxies for the 2022 Annual Meeting of Shareholders. These two officers are John A. Zecca and Erika Moore. The form of proxy and this Proxy Statement have been approved by the Board and are being provided to shareholders by its authority. |
The Notice of Internet Availability contains instructions for accessing and reviewing our proxy materials and submitting a proxy over the internet. Our proxy materials were made available at www.proxyvote.com on the date that we first mailed or delivered the Notice of Internet Availability. The Notice also will tell you how to request our proxy materials in printed form or by e-mail, at no charge. The Notice contains a 16-digit control number that you will need to submit a proxy to vote your shares. We encourage shareholders to access our Proxy Statement electronically to reduce our impact on the environment. |
| 2. | What different methods can I use to vote? |
You can vote by any of the following methods. |
By Internet. The Notice of Internet Availability of Proxy Materials contains the website address (www.proxyvote.com) for internet proxy submission. Internet proxy submission is available 24 hours a day until 11:59 p.m. (Eastern Time) on June 21, 2022. You must enter your 16-digit control number, which is printed in the lower right-hand corner of the Notice of Internet Availability, and you will be given the opportunity to confirm that your instructions have been properly recorded. |
By Phone. In the U.S. and Canada, you can vote your shares by calling +1 800 690 6903. Telephone proxy submission is available 24 hours a day until 11:59 p.m. (Eastern Time) on June 21, 2022. When you submit a proxy by telephone, you will be required to enter your 16-digit control number. You will then receive easy-to-follow voice prompts allowing you to instruct the proxy holders how to vote your shares and to confirm that your instructions have been properly recorded. If you are located outside the U.S. or Canada, you should instruct the proxy holders how to vote your shares by internet or by mail. |
Any Performance Criterion or Criteria may be used to measure the performance of the Company as a whole or any business unit, division, department or function of the Company or any Affiliate, either individually, alternatively or in any combination and measured over a period of time including any portion of a year, annually or cumulatively over a period of years, calculated based on U.S. generally accepted accounting principles (GAAP) or on a non-GAAP basis, and on an absolute basis or relative to a previous year’s or period’s results or a designated comparison group on company or stock market index.
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(x) “Performance Formula” shall mean, for a Performance Period, the one or more objective formulas applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.
(y) “Performance Goals” shall mean, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria. For the avoidance of doubt, such one or more goals so established by the Committee may, as determined by the Committee, and with respect to such Performance Criteria, be measured (A) with respect to the Company itself (including the growth or improvement in such Performance Criteria) or (B) relative to other companies or to an index. The Committee is authorized, in its sole and absolute discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period to the extent permitted under Section 162(m) of the Code to include or exclude the effect of any one or more of the following events or occurrences that occur during a Performance Period:
(z) “Performance Period” shall mean the one or more periods of time, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Compensation Award.
(aa) “Restatement Effective Date” shall mean May 27, 2010.
(bb) “Restricted Stock” shall mean any Share granted under Section 8 of the Plan.
(cc) “Restricted Stock Unit” shall mean any unit granted under Section 8 of the Plan.
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(dd) “Retirement” shall mean, unless otherwise defined in the applicable Award Agreement or an employment agreement between the Participant and the Company, the Participant’s Separation from Service due to retirement on or after such date as the Participant has both attained the age of 55 years and has 10 years of employment with the Company. For the avoidance of doubt, Separation from Service “due to retirement” does not include an involuntary Separation from Service, whether for Cause or otherwise.
(ee) “Stock Appreciation Unit” shall mean any unit granted under Section 7 of the Plan.
(ff) “SEC” shall mean the Securities and Exchange Commission or any successor thereto and shall include the staff thereof.
(gg) “Section 16” shall mean Section 16 of the Exchange Act and the rules promulgated thereunder and any successor provision thereto as in effect from time to time.
(hh) “Section 162(m)” shall mean Section 162(m) of the Code and the rules promulgated thereunder or any successor provision thereto as in effect from time to time.
(ii) “Separation from Service” shall mean (i) with respect to an Eligible Recipient who is an employee of the Company or an Affiliate, the termination of his employment with the Company or Affiliate and all Affiliates that constitutes a “separation from service” within the meaning of Treas. Reg. Section 1.409A-1(h)(1), or (ii) with respect to an Eligible Recipient who is a consultant or advisor to the Company or an Affiliate, the date on which expires such consultant’s or advisor’s contract under which services are performed for the Company or Affiliate, or (iii) with respect to an Eligible Recipient who is a non-employee director of the Company or an Affiliate, the date on which such non-employee director ceases to be a member of the Board (or other applicable board of directors) for any reason. With respect to application of Sections 8(e)(iii) to a Participant who is determined by the insurance carrier under the Company’s then current long-term disability plan to be entitled to receive benefits under such plan, the Participant shall be deemed to have a Separation from Service if (i) the Participant is disabled within the meaning of Section 409A(a)(2)(C) of the Code and the regulations thereunder, or (ii) by reason of such disability, the facts and circumstances indicate that the Company and Participant reasonably anticipate that no future substantial services by the Participant will be performed (thereby satisfying the conditions of a “termination of employment” within the meaning of Treas. Reg. Section 1.409A-1(h)(1)).
(jj) “Shares” shall mean shares of the common stock, $.01 par value, of the Company, or such other securities of the Company as may be designated by the Committee from time to time in substitution thereof.
(kk) “Subsidiary” shall have the meaning set forth in Section 424(f) of the Code.
(ll) “Substitute Awards” shall mean Awards solely granted in assumption of, or in substitution for, outstanding awards previously granted by a company acquired by the Company or with which the Company combines. The terms and conditions of any Substitute Awards shall be set forth in an Award Agreement and shall, except as may be inconsistent with any provision of the Plan, to the extent practicable provide the recipient with benefits (including economic value) substantially similar to those provided to the recipient under the existing award which such Substitute Award is intended to replace.
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(a) Authority of Committee. The Plan shall be administered by the Committee or, in the Board’s sole discretion, by the Board. Subject to the terms of the Plan, the Committee’s charter and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award (including any dividends and other distributions or dividend equivalents paid on or in respect of any Award); (v) determine whether, to what extent, and under what circumstances Awards may be settled, or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret, construe and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan, including without limitation to correct any defect, supply any omission or reconcile any inconsistency or conflict in the Plan or any Award under the Plan; (viii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (ix) amend existing Awards in accordance with Section 13(b) of the Plan; (x) condition Awards or any payments or benefits thereunder on non-compete, non-solicitation or similar agreements; (xi) accelerate the vesting of any Award (or portion thereof); and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.
(b) Committee Discretion Binding. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including any Eligible Recipient, Participant or any holder or beneficiary of any Award.
(c) Delegation. Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers or managers of the Company or any Affiliate, or to a committee of such officers or managers, the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to, or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards held by, Participants who are not (i) “covered employees” under Section 162(m) of the Code or (ii) officers or directors of the Company for purposes of Section 16 or who are otherwise not subject to Section 16.
(d) No Liability. No member of the Board or Committee or any authorized delegate of the Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award granted hereunder.
SECTION 4. Shares Available for Awards
(a) Shares Available.Subject to adjustment pursuant to Section 4(b), the maximum aggregate number of Shares available for grant pursuant to Awards under the Plan are 41,700,000. From that aggregate limit no more than 6,000,000 Shares may be granted in the form of Incentive Stock Options.
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If, after the Amendment Effective Date, any Shares covered by an Award granted under the Plan, or to which such an Award relates, are forfeited, or if such an Award is settled for cash or otherwise expires, terminates or is canceled without the delivery of Shares, or otherwise without the Participant having received any benefit therefrom, or Shares are withheld from such an Award (other than Options or SARs) to satisfy any tax withholding obligations, then the Shares covered by such Award, or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Awards may be granted, to the extent of any such settlement, forfeiture, expiration, termination, withholding or cancellation, shall again become Shares with respect to which Awards may be granted. Notwithstanding anything to the contrary in the Plan or Award Agreement, the following Shares shall not again become Shares with respect to which Awards may be granted: (i) any Shares which are withheld upon the exercise of an Option or SAR to satisfy any tax liability or withholding obligations; (ii) any Shares tendered or withheld to pay the exercise price of any Option or other exercise price of an Award; (iii) any Shares repurchased by the Company from the Participant with the proceeds from the exercise of any Option; and (iv) with respect to a SAR granted hereunder, the number of Shares counted against the Share limits set forth in Section 4(a) shall be the full number of Shares subject to the SAR if the SAR is settled in Shares. (For purposes of the foregoing sentence, a Participant shall not be deemed to have received any “benefit” in the case of forfeited Restricted Stock Awards by reason of having enjoyed voting rights and dividend rights prior to the date of forfeiture.) Notwithstanding the foregoing and subject to adjustment as provided in Section 4(b), no Participant may receive Awards under the Plan in any calendar year that relate to more than 2,000,000 Shares (the “Individual Annual Share Limit”).
(b) Adjustments. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event that constitutes an equity restructuring transaction, as that term is defined in Accounting Standards Codification Topic 718 (formerly known as Statement of Financial Accounting Standards No. 123(R)) or otherwise affects the Shares then the Committee shall adjust the following in a manner that is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan: (A) the number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted; (B) the maximum number of Shares subject to an Award granted to a Participant pursuant to Section 4(a), (C) the number of Shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards, and (D) the grant, purchase or exercise price with respect to any Award, or if deemed appropriate, make provisions for a cash payment to the holder of an outstanding Award or make provision for an equivalent award in respect of securities of the surviving entity of any merger, consolidation or other transaction or event having a similar effect. The Committee’s adjustment shall be effective and binding for all purposes of this Plan, provided that no adjustment shall be made, (A) with respect to Awards of Incentive Stock Options to the extent that such adjustment would cause the Plan to violate Section 422(b)(1) of Code, as from time to time amended, (B) with respect to any Award to the extent that such adjustment would be inconsistent with the Plan or the Award meeting the requirements of Section 162(m), and (C) with respect to any Award to the extent such adjustment shall constitute (i) a modification of a stock right within the meaning of Treas. Reg. Section 1.409A-1(b)(5)(v)(B) so as to constitute the grant of a new stock right (unless such new stock right does not constitute a deferral of compensation within the meaning of Code Section 409A and the regulations thereunder), (ii) an
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extension of a stock right, including the addition of any feature for the deferral of compensation within the meaning of Treas. Reg. Section 1.409A-1(b)(5)(v)(C), or (iii) an impermissible acceleration of a payment date or a subsequent deferral of a stock right subject to Code Section 409A within the meaning of Treas. Reg. Section 1.409A-1(b)(5)(v)(E). Furthermore, no adjustment as the result of a change in capitalization shall cause the exercise price to be less than the Fair Market Value of such Shares (as adjusted to reflect the change in capitalization) on the date of grant, and any adjustment as the result of the substitution of a new stock right or the assumption of an outstanding stock right pursuant to a corporate transaction shall satisfy the conditions described in Treas. Reg. Section 1.409A-1(b)(5)(v)(D).
(c) Substitute Awards. Any Shares underlying Substitute Awards shall not be counted against the Shares available for Awards under the Plan.
(d) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares.
Any Eligible Recipient shall be eligible to be designated a Participant.
(a) Grant.Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Options shall be granted, the number of Shares to be covered by each Option, the exercise price and the conditions and limitations applicable to the exercise of the Option. The Committee shall have the authority to grant Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant both types of Options; provided that only employees of the Company or any Parent or Subsidiary may be granted Incentive Stock Options. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code, as from time to time amended, and any regulations implementing such statute.
(b) Exercise Price. The Committee in its sole discretion shall establish the exercise price at the time each Option is granted. Except in the case of Substitute Awards, the exercise price of an Option may not be less than the Fair Market Value on the date of grant of such Option.
(c) Exercise. Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter. The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any relating to the application of federal, state or foreign securities laws or the Code, as it may deem necessary or advisable. Notwithstanding the foregoing, an Option shall not be exercisable after the expiration of 10 years after the date such Option was granted.
(d) Payment.No Shares shall be delivered pursuant to any exercise of an Option until payment in full of the exercise price is received by the Company. Such payment may be made (i) in cash, or its equivalent, (ii) by exchanging Shares owned by the Participant (which are not the subject of any pledge or other security interest), (iii) by having the Company “net settle” the Shares by withholding from the Shares which would otherwise be delivered to the Participant such Shares with a Fair Market Value sufficient to satisfy the exercise price, (iv) through any broker’s cashless exercise
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procedure approvedby the Committee, or (v) by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date of such tender is at least equal to such exercise price.
(e) Investment Representations. At the time of any exercise of an Option, the Committee may, in its sole discretion, require a Participant to deliver to the Committee a written representation that the Shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof and any other representation deemed necessary by the Committee to ensure compliance with all applicable federal and state securities laws. Upon such a request by the Committee, delivery of such representation prior to the delivery of any Shares issued upon exercise of an Option shall be a condition precedent to the right of the Participant or such other person to purchase any Shares. In the event certificates for Shares are delivered under the Plan with respect to which such investment representation has been obtained, the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such representation and to restrict transfer in the absence of compliance with applicable federal or state securities laws.
(f) Disqualifying Disposition Notice. Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date he or she makes a disqualifying disposition of any Shares acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including any sale) of such Shares before the later of (i) two years after the date of grant of the Incentive Stock Option or (ii) one year after the date the Participant acquired the Shares by exercising the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by it, retain possession of any Shares acquired pursuant to the exercise of an Incentive Stock Option as agent for the applicable Participant until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Shares.
(g) Incentive Stock Option Grants to 10% Stockholders. Notwithstanding anything to the contrary in this Section 6, if an Incentive Stock Option is granted to a Participant who owns stock representing more than ten percent of the voting power of all classes of stock of the Company or of a Subsidiary or Parent, the option period shall not exceed five years from the date of grant of such Option and the exercise price shall be at least 110 percent of the Fair Market Value (on the date of grant of such Option) of the Shares subject to the Option.
(h) $100,000 Per Year Limitation for Incentive Stock Options. To the extent the aggregate Fair Market Value (determined as of the date of grant of such Option) of Shares for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company) exceeds $100,000, such excess Incentive Stock Options shall be treated as Non-Qualified Stock Options.
(i) Voluntary Surrender. The Committee may permit the voluntary surrender of all or any portion of any Non-Qualified Stock Option, if any, granted under the Plan to be conditioned upon the granting to the Participant of a new Option for the same or a different number of Shares as the option surrendered or require such voluntary surrender as a condition precedent to a grant of a new Option to such Participant. Such new Option shall be exercisable at an exercise price, during an option period, and in accordance with any other terms or conditions specified by the Committee at the time the new Option is granted, all determined in accordance with the provisions of the Plan without regard to the exercise price, option period, or any other terms and conditions of the Non-Qualified Stock Option surrendered. For the avoidance of doubt, the foregoing authority of the Committee is in all events subject to the stockholder approval requirements of Section 13(b) hereof.
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(j) Separation from Service. Unless otherwise provided in the Award Agreement documenting an Option Award, the following general rules will apply to outstanding Option Awards at the time of a Participant’s Separation from Service:
(i) In the event of a Participant’s Separation from Service for Cause, then all the Participant’s unvested Options shall be deemed canceled and forfeited on the date of such Separation from Service and the Participant’s vested Options, if any, shall remain exercisable for a period ending on the earlier of: (A) ten days following such Separation from Service or (B) the expiration date with respect to the Option, and shall thereafter be deemed canceled and forfeited without further consideration to the Participant.
(ii) In the event of a Participant’s Separation from Service by reason of death or Retirement, all unvested Options that would have been vested on or before the first anniversary of such Separation from Service (had the Participant remained in the employ of the Company or Affiliate) shall vest on the date of such Separation from Service, and the remaining unvested Options shall be deemed cancelled and forfeited without further consideration to the Participant or his estate, as the case may be. The vested Options (including those Options which vest in accordance with the provisions of this Section 6(j)(ii)) shall remain exercisable for a period ending on the earlier of: (A) one year following such Separation from Service or (B) the expiration date with respect to the Option, and shall thereafter be deemed canceled and forfeited without further consideration to the Participant or his estate, as the case may be.
(iii) This Section 6(j)(iii) applies if the Participant is determined by the insurance carrier under the Company’s then current long-term disability plan to be entitled to receive benefits under such plan and, by reason of such disability, is deemed to have a Separation from Service. For purposes of this Section 6(j)(iii), the “Vesting Acceleration Date” is the latest of (A) the first day of the period for which the Participant is paid such benefits, (B) the date on which the insurance carrier notifies the Company of such determination, or (C) the date of the Participant’s Separation from Service; and the “First Anniversary” is the date which is the one year anniversary of the Vesting Acceleration Date. If the Participant is determined by such insurance carrier to be entitled to receive such long-term disability benefits, (A) all Options which would have become vested on or before the First Anniversary shall become vested on the Vesting Acceleration Date, and (B) the remaining unvested Options shall, except as provided in the second following sentence, be deemed canceled and forfeited without further consideration to the Participant on the Vesting Acceleration Date. The vested Options (including those Options which vest in accordance with the provisions of this Section 6(j)(iii)) shall remain exercisable for a period ending on the earlier of: (A) the First Anniversary or (B) the expiration date with respect to the Option, and shall thereafter, except as otherwise provided in the following sentence, be deemed canceled and forfeited without further consideration to the Participant, or his estate, as the case may be. Notwithstanding the foregoing provisions of this Section 6(j)(iii), if the Participant ceases to be entitled to receive future benefits under such long-term disability plan prior to the First Anniversary and returns to active employment with the Company (or Affiliate) no later than the work day next following the last day of the period for which such benefits are paid (and in all events prior to the expiration date of the Option), then (A) no Options will be deemed cancelled or forfeited pursuant to this Section 6(j)(iii) on account of such prior absence from employment, (B) the determination of the day on which the Options shall cease to be exercisable shall instead be determined as if the Participant had not previously received long-term disability benefits, and had instead remained continuously employed by the Company (or any Affiliate) during such period and (C) the other provisions of this Section 6(j) shall nevertheless continue to apply.
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(iv) If the Participant has a Separation from Service for any reason other than those set forth in paragraphs (i) through (iii) of this Section 6(j), the Participant’s unvested Options shall be deemed canceled and forfeited on the date of the Participant’s Separation from Service without further consideration to the Participant. Vested Options, if any, shall remain exercisable for a period ending on the earlier of: (A) 90 days following such Separation from Service or (B) the expiration date with respect to the Options, and shall thereafter be deemed canceled and forfeited without further consideration to the Participant.
SECTION 7. Stock Appreciation Rights
(a) Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom SARs shall be granted, the number of Shares to be covered by each SAR, the exercise price and the conditions and limitations applicable to the exercise of the SAR. A SAR is the right of the Participant to receive upon exercise of such SAR, subject to the Participant’s satisfaction in full of any conditions, restriction, or limitations imposed in accordance with the Plan or any Award Agreement an amount in cash or Shares described under Section 7(c) below.
(b) Exercise Price. The Committee in its sole discretion shall establish the exercise price at the time each SAR is granted. Except in the case of Substitute Awards, the exercise price of a SAR may not be less than the Fair Market Value on the date of grant of such SAR.
(c) Exercise.Each SAR shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter. The Committee may impose such conditions with respect to the exercise of SARs, including without limitation, any relating to the application of federal, state or foreign securities laws or the Code, as it may deem necessary or advisable. Notwithstanding the foregoing, a SAR shall not be exercisable after the expiration of 10 years after the date such SAR was granted.
(d) Payment.Upon the exercise of a SAR, a Participant shall be entitled to receive an amount in cash or Shares equal in value to the excess of the Fair Market Value (determined as of the date of exercise) per Share over the Exercise Price per Share specified in the related Award Agreement, multiplied by the number of Shares in respect of which the SAR is exercised, less any amount retained or not issued to cover any tax liability or withholding obligations, if necessary.
(e) Separation from Service. Unless otherwise provided in the Award Agreement documenting a SAR Award, the following general rules will apply to outstanding SAR Awards at the time of a Participant’s Separation from Service:
(i) In the event of a Participant’s Separation from Service for Cause, then all the Participant’s unvested SARs shall be deemed canceled and forfeited on the date of such Separation from Service and the Participant’s vested SARs, if any, shall remain exercisable for a period ending on the earlier of: (A) ten days following such Separation from Service or (B) the expiration date with respect to the SAR, and shall thereafter be deemed canceled and forfeited without further consideration to the Participant.
(ii) In the event of a Participant’s Separation from Service by reason of death or Retirement, all unvested SARs that would have been vested on or before the first anniversary of such Separation from Service (had the Participant remained in the employ of the Company or Affiliate) shall vest on the date of such Separation from Service, and the remaining unvested SARs shall be deemed cancelled and forfeited without further consideration to the Participant or his estate, as the case may be.
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The vested SARs (including those SARs which vest in accordance with the provisions of this Section 7(e)(ii)) shall remain exercisable for a period ending on the earlier of: (A) one year following such Separation from Service or (B) the expiration date with respect to the SAR, and shall thereafter be deemed canceled and forfeited without further consideration to the Participant or his estate, as the case may be.
(iii) This Section 7(e)(iii) applies if the Participant is determined by the insurance carrier under the Company’s then current long-term disability plan to be entitled to receive benefits under such plan and, by reason of such disability, is deemed to have a Separation from Service. For purposes of this Section 7(e)(iii), the “Vesting Acceleration Date” is the latest of (A) the first day of the period for which the Participant is paid such benefits, (B) the date on which the insurance carrier notifies the Company of such determination, or (C) the date of the Participant’s Separation from Service; and the “First Anniversary” is the date which is the one year anniversary of the Vesting Acceleration Date. If the Participant is determined by such insurance carrier to be entitled to receive such long-term disability benefits, (A) all SARs which would have become vested on or before the First Anniversary shall become vested on the Vesting Acceleration Date, and (B) the remaining unvested SARs shall, except as provided in the second following sentence, be deemed canceled and forfeited without further consideration to the Participant on the Vesting Acceleration Date. The vested SARs (including those SARs which vest in accordance with the provisions of this Section 7(e)(iii)) shall remain exercisable for a period ending on the earlier of: (A) the First Anniversary or (B) the expiration date with respect to the SAR, and shall thereafter, except as otherwise provided in the following sentence, be deemed canceled and forfeited without further consideration to the Participant, or his estate, as the case may be. Notwithstanding the foregoing provisions of this Section 7(e)(iii), if the Participant ceases to be entitled to receive future benefits under such long-term disability plan prior to the First Anniversary and returns to active employment with the Company (or Affiliate) no later than the work day next following the last day of the period for which such benefits are paid (and in all events prior to the expiration date of the SAR), then (A) no SARs will be deemed cancelled or forfeited pursuant to this Section 7(e)(iii) on account of such prior absence from employment, (B) the determination of the day on which the SARs shall cease to be exercisable shall instead be determined as if the Participant had not previously received long-term disability benefits, and had instead remained continuously employed by the Company (or any Affiliate) during such period and (C) the other provisions of this Section 7(e) shall nevertheless continue to apply.
(iv) If the Participant has a Separation from Service for any reason other than those set forth in paragraphs (i) through (iii) of this Section 7(e), the Participant’s unvested SARs shall be deemed canceled and forfeited on the date of the Participant’s Separation from Service without further consideration to the Participant. Vested SARs, if any, shall remain exercisable for a period ending on the earlier of: (A) 90 days following such Separation from Service or (B) the expiration date with respect to the SARs, and shall thereafter be deemed canceled and forfeited without further consideration to the Participant.
SECTION 8. Restricted Stock And Restricted Stock Units
(a) Grant.Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Shares of Restricted Stock and Restricted Stock Units shall be granted, the number of Shares of Restricted Stock and/or the number of Restricted Stock Units to be granted to each Participant, the performance criteria, if any, and level of achievement in relation to the criteria that shall determine the number of Shares of Restricted Stock or Restricted Stock Units granted, issued, and/or vested (provided, however, that any such performance criteria shall conform to
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the criteria set forth in Section 10 to the extent the Committee determines that the Award needs to comply with Section 162(m) of the Code), the terms and conditions with respect to the vesting and/or forfeiture of the Restricted Stock or Restricted Stock Units (which vesting and/or forfeiture conditions may be in addition to any performance criteria and which may extend beyond the Performance Period, if any, applicable to the Award), and such further terms and conditions, in each case not inconsistent with the Plan, as may be determined from time to time by the Committee.
(b) Restrictions. The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock and Restricted Stock Units whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Restricted Stock or Restricted Stock Units are granted, such action is appropriate, subject in each case to restrictions imposed by applicable law.
(c) Transfer Restrictions. Shares of Restricted Stock and Restricted Stock Units may not be sold, assigned, transferred, pledged or otherwise encumbered, except, in the case of Restricted Stock, as provided in the Plan or the applicable Award Agreements. Shares, when issued may be represented by a certificate or a book or electronic entry. Where applicable, certificates issued in respect of Shares of Restricted Stock shall be registered in the name of the Participant and deposited by such Participant, together with a stock power endorsed in blank, with the Company. Upon the lapse of the restrictions applicable to such Shares of Restricted Stock, the Company shall deliver such Shares to the Participant or the Participant’s legal representative by a certificate or a book or electronic entry.
(d) Dividends and Distributions. Dividends and other distributions paid on or in respect of Restricted Stock or dividend equivalents paid on or in respect of Restricted Stock Units may be paid directly to the Participant, or may be reinvested in additional Shares of Restricted Stock or in additional Restricted Stock Units, as determined by the Committee in its sole discretion, at the time the Award is made.
(e) Separation from Service. Unless otherwise provided in the Award Agreement documenting a Restricted Stock or Restricted Stock Unit Award, the following general rules will apply to outstanding Restricted Stock and Restricted Stock Unit Awards at the time of a Participant’s Separation from Service:
(i) In the event of a Participant’s Separation from Service for Cause, all Restricted Stock or Restricted Stock Units which have not as of the date of such Separation from Service become vested shall be canceled and forfeited effective as of the date of such Separation from Service without further consideration to the Participant.
(ii) In the event of a Participant’s Separation from Service by reason of death or Retirement, all unvested Restricted Stock or Restricted Stock Units that would have become vested on or before the first anniversary of such Separation from Service (had the Participant continued in the employ of the Company or Affiliate) shall vest on the date of such Separation from Service and the remaining unvested Restricted Stock or Restricted Stock Units shall be cancelled and forfeited effective on the date of such Separation from Service without further consideration to the Participant.
(iii) This Section 8(e)(iii) applies if the Participant is determined by the insurance carrier under the Company’s then current long-term disability plan to be entitled to receive benefits under such plan and, by reason of such disability, is deemed to have a Separation from Service. For purposes of this Section 8(e)(iii), the “Vesting Acceleration Date” is the latest of (A) the first day of the period for which the Participant is paid such benefits, (B) the date on which the insurance carrier
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notifies the Company of such determination, or (C) the date of the Participant’s Separation from Service; and the “First Anniversary” is the date which is the one year anniversary of the Vesting Acceleration Date. If the Participant is determined by such insurance carrier to be entitled to receive such long-term disability benefits, (A) all Restricted Stock or Restricted Stock Units that would have become vested on or before the First Anniversary shall vest on the Vesting Acceleration Date and (B) the remaining unvested Restricted Stock or Restricted Stock Units shall, except as provided in the following sentence, be canceled and forfeited without further consideration to the Participant on the Vesting Acceleration Date. Notwithstanding the foregoing provisions of this Section 8(e)(iii), if the Participant ceases to be entitled to receive future benefits under such long-term disability plan prior to the First Anniversary and returns to active employment with the Company (or Affiliate) no later than the work day next following the last day of the period for which such benefits are paid, then (A) no unvested Restricted Stock or Restricted Stock Units shall be cancelled or forfeited pursuant to this Section 8(e)(iii) on account of such prior absence from employment, (B) the determination of the day on which the unvested Restricted Stock or Restricted Stock Units shall vest shall instead be determined as if the Participant had not previously received long-term disability benefits and had instead remained continuously employed by the Company (or Affiliate) during such period and (C) the other provisions of this Section 8(e) shall nevertheless continue to apply.
(iv) If the Participant has a Separation from Service for any reason other than those set forth in paragraphs (i) through (iii) of this Section 8(e), unvested Restricted Stock and Restricted Stock Units shall be cancelled and forfeited as of the date of such Separation from Service without further consideration to the Participants.
(f) Payment. Each Restricted Stock Unit shall have a value equal to the Fair Market Value of a Share. Restricted Stock Units shall be paid in cash, Shares, other securities or other property, as determined in the sole discretion of the Committee at the time the Award is made. Unless otherwise provided in the Award Agreement, such payment of Restricted Stock Units as aforesaid shall be made as soon as practicable following the satisfaction of any and all vesting or other conditions or restrictions applicable to such Restricted Stock Unit but in no event later than March 15 of the calendar year following the calendar year in which such vesting or other condition or restriction, as applicable, is satisfied.
SECTION 9. Other Stock-Based Awards
(a) Grant.The Committee shall have authority to grant to Participants an Other Stock-Based Award, which shall consist of any right that is (i) not an Award described in Sections 6, 7 or 8 above and (ii) an Award of Shares or an Award denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as deemed by the Committee to be consistent with the purposes of the Plan. Any such Other Stock-Based Award which is valued in whole or in party by reference to Shares shall be valued based on the Fair Market Value of a Share, on a non-discounted basis. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of any such Other Stock- Based Award, which may include without limitation performance criteria with respect to the granting, issuance and/or vesting of the Other Stock-Based Award (provided, however, that any such performance criteria shall conform to the criteria set forth in Section 10 to the extent the Committee determines that the Award needs to comply with Section 162(m) of the Code), and/or terms and conditions under which the Other Stock-Based Award shall vest or be subject to forfeiture (which vesting and/or forfeiture conditions may be in addition to any performance criteria and which may extend beyond the performance period, if any, applicable to the Award).
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(b) Payment. Unless otherwise provided in the Award Agreement, such payment of Other Stock-Based Awards shall be made as soon as practicable following the satisfaction of any and all vesting or other conditions or restrictions applicable to such Awards but in no event later than March 15 of the calendar year following the calendar year in which such vesting or other condition or restriction, as applicable, is satisfied.
SECTION 10. Performance Compensation Awards
(a) General.The Committee shall have the authority, at the time of grant of any Award described in Sections 6 through 9 to designate such Award as a Performance Compensation Award in accordance with the requirements of this Section 10. In addition, the Committee shall have the authority to provide that any Award described in Section 8 or 9 (including an Award described in Section 7, 8, or 9 which is also a Performance Compensation Award) may be paid in the form of cash rather than Shares.
(b) Eligibility. The Committee shall have full discretion to designate which Participants or classes of Participants will be eligible to receive Performance Compensation Awards with respect to a designated Performance Period. The Committee shall exercise such discretion (i) within the first 90 days of the Performance Period (or, with respect to a Performance period of less than one year, prior to the lapse of 25 percent of such Performance Period), in the case of any Participant, or class of Participants, for whom the Performance Compensation Award is intended to be “performance based compensation” within the meaning of Section 162(m) of the Code, and (ii) by such date as the Committee shall determine with respect to any other Participant or class of Participants, provided that at such time the outcome of the Performance Goal(s) for the Performance Period remain substantially uncertain. However, designation of a Participant eligible to receive an Award hereunder for a Performance Period shall not in any manner entitle the Participant to receive payment in respect of any Performance Compensation Award for such Performance Period. The determination as to whether or not such Participant becomes entitled to payment in respect of any Performance Compensation Award shall be decided solely in accordance with the provisions of this Section 10. Moreover, designation of a Participant as eligible to receive an Award hereunder for a particular Performance Period shall not require designation of such Participant as eligible to receive an Award hereunder in any subsequent Performance Period and designation of one person as a Participant eligible to receive an Award hereunder shall not require designation of any other person as a Participant eligible to receive an Award hereunder in such period or in any other period.
(c) Discretion of Committee with Respect to Performance Compensation Awards. With regard to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that is (are) to apply to the Company and the Performance Formula. The Committee shall exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence, and record the same in writing (i) within the first 90 days of the Performance Period (or, with respect to a Performance Period of less than one year, prior to the lapse of 25 percent of such Performance Period) in the case of any Participant, or class of Participants, for whom the Performance Compensation Award is intended to be “performance-based compensation” within the meaning of Section 162(m) of the Code, and (ii) by such date as the Committee shall determine with respect to any other Participant or class of Participants provided that at such time the outcome of the Performance Goal(s) for the Performance Period remain substantially uncertain. With respect to any Performance Compensation Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee (A) shall not provide, in the terms of
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the Award or otherwise by the exercise of discretion, for any payment of the Award, in whole or in part, under circumstances where the Performance Goals may not be achieved (e.g., in the event of retirement or involuntary termination), except that the terms of the Award may provide for payment, without regard to whether the Performance Goals have been achieved, in the event of death, disability or a Change in Control, and (B) shall not establish such other terms and conditions, or exercise its discretion, or otherwise grant such Performance Compensation Award in such amount or manner, as to cause such Award to violate the conditions necessary to qualify as performance-based compensation within the meaning of Section 162(m) of the Code and the regulations thereunder.
(d) Payment of Performance Compensation Awards.
(i) Condition to Receipt of Payment. Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.
(ii) Limitation. A Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved; and (B) the Performance Formula as applied against such Performance Goals determines that all or some portion of such Participant’s Performance Compensation Award has been earned for the Performance Period.
(iii) Certification. Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the actual size of each Participant’s Performance Compensation Award for the Performance Period and, in so doing, may apply Negative Discretion in accordance with Section 10(d)(iv) hereof, if and when it deems appropriate.
(iv) Use of Discretion. In determining the actual size of an individual Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion if, in its sole judgment, such reduction or elimination is appropriate. The Committee shall not have the discretion to (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the applicable Performance Goal for such Performance Period has not been attained (except that the terms of the Award may provide for full or partial payment, without regard to whether the Performance Goal has been achieved, in the event of a Change in Control or the Participant’s death or disability); or (B) increase any Performance Compensation Award beyond what was earned in accordance with the terms of the Award and the Plan.
(v) Timing of Award Payments. Performance Compensation Awards granted for a Performance Period shall be paid to participants as soon as administratively practicable following the last to occur of (A) the date of completion of the certifications required by this Section 10, or (B) if payment for Performance Compensation Award is subject to a vesting or other condition or restriction, the date such vesting or other condition or restriction is satisfied. Notwithstanding the foregoing, unless otherwise provided in the Award Agreement, payment shall in no event take place later than March 15
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of the calendar year following the year in which ends the Performance Period (in the case of a Performance Compensation Award not subject to a vesting or other condition or restriction on payment), or March 15 of the calendar year following the calendar year in which such vesting or other condition or restriction, as applicable, is satisfied.
(vi) Maximum Award Payable. Notwithstanding any provision contained in this Plan to the contrary, no Participant may receive a Performance Compensation Award for a Performance Period that relates to Shares which are more than the Individual Share Limit set forth in Section 4(a), less the amount of Shares relating to all other Awards under the Plan received by the Participant for the calendar year in which the Performance Period ends.
SECTION 11. Termination of Employment/Service
The Committee shall have the full power and authority to determine the terms and conditions that shall apply to any Award upon a termination of employment/service, including a termination by the Company without Cause, by a Participant voluntarily, or by reason of death, Disability or Retirement.
(a) In General. In the event of a Change in Control, unless otherwise provided in the Award Agreement, or otherwise determined by the Committee, each outstanding Award shall be assumed or substituted by the successor company (or a subsidiary or affiliate of such successor company, as applicable) according to the following terms:
(i) In the case of Performance Compensation Awards, following the Change in Control the assumed or substituted Awards shall be: (1) no longer subject to any Performance Goals; (2) converted to a number of units in the successor company (or a subsidiary or affiliate of such successor company, as applicable) that is equal in value to the target number of units that were granted under the Plan; and (3) contingent on the Participant’s continued performance of services for the successor company (or a subsidiary or affiliate of such successor company, as applicable) through the original vesting date(s) applicable to such Awards.
(ii) In the case of Awards other than Performance Compensation Awards, following the Change in Control the assumed or substituted Awards shall (1) preserve the rights and benefits of such Awards as in effect prior to such assumption or substitution and in the case of Options and SARs, be assumed and substituted with the same intrinsic value, and (2) be subject to substantially similar terms and conditions, such as vesting conditions, of such Award as in effect prior to such assumption or substitution.
Notwithstanding anything to the contrary in the Plan or Award Agreement, and subject to the Committee’s discretion, the assumption or substitution of any Award shall comply in all material respects with the applicable requirements of the Code and the regulations issued thereunder such that the Award continues to be exempt from the application of Section 409A of the Code and the regulations thereunder, and to the extent applicable, continues to qualify as compliant with Section 409A of the Code or, as an incentive stock option under Section 422 of the Code. The Committee, in its sole discretion, shall determine whether an Award has been assumed or substituted in accordance with this Section 12(a).
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For Awards subject to this Section 12(a), unless otherwise provided in the Award Agreement, in the event that the employment of the Participant is involuntarily terminated by the Company (or its successor) other than for Cause within the one-year period following a Change in Control, all unvested Awards described in Sections 6 through 9 (including without limitation any Awards that have not vested in accordance with Section 12) granted to such Participant shall vest immediately upon such a termination. In the case of such vested Awards that are Options or SARs, such Awards shall become immediately exercisable in accordance with their terms and shall remain exercisable for the remainder of their stated term. In the case of such vested Awards other than Options and SARs, such Awards shall be distributed in accordance with Section 8(f) or Section 9(b). With respect to a Performance Compensation Award described in Section 10 and converted to successor company units under Section 12(a)(i), the number of successor company units that vest shall be based on the number of units converted pursuant to Section 12(a)(i) multiplied by a fraction, the numerator of which is the number of days of active employment in the original Performance Period and the denominator of which is the total number of days in the Performance Period. Such vested Awards shall be distributed in accordance with Section 10(d)(v).
(b) AcceleratedVesting.For Awards not assumed or substituted in accordance with Section 12(a), unless otherwise provided in the Award Agreement, upon the occurrence of a Change in Control all unvested Awards described in Sections 6 through 9 shall vest immediately prior to the effective time of such Change in Control. With respect to a Performance Compensation Award described in Section 10 that is not assumed or substituted, in the event the Change in Control takes place before the end of the Performance Period, the amount of the Award shall be fixed as the target amount of the Award multiplied by a fraction, the numerator of which is the number of days in the Performance Period prior to the date of the Change in Control and the denominator of which is the total number of days in the Performance Period. Any Awards, other than Options or SARs, that vest in accordance with this Section 12(b), shall be settled in cash or shares, as determined by the Committee in its sole discretion in accordance with Code Section 409A to the extent applicable, within 75 calendar days of the Change in Control. With respect to any outstanding Options or SARs, the Committee may notify the Participant in writing or electronically that such Options or SARs will be exercisable for a period of time (determined by the Committee in its sole discretion) prior to the Change in Control and such Options or SARs will terminate upon the expiration of such period. Notwithstanding anything to the contrary in the Plan or Award Agreement, to the extent there is a Change in Control which constitutes a change in control for purposes of Code Section 409A and the regulations thereunder (“409A Change in Control”), any Award granted on or after August 6, 2013 that is subject to Code Section 409A shall be settled in cash or shares, as determined by the Committee in its sole discretion, within 75 calendar days of the 409A Change in Control.
(c) To the extent the effect of a Change in Control on any Award granted under the Plan is not otherwise addressed in this Section 12 or the applicable Award Agreement, in order to maintain the Participants’ rights in the event of any Change in Control, the Committee may, in its sole discretion, as to any such Award, take any one or more of the following actions: (i) provide for the acceleration of any time periods relating to the vesting, exercise or realization of any such Award so that such Award may be exercised or realized in full on or before a date fixed by the Committee; (ii) provide for the purchase of any such Award; (iii) make such adjustment to any such Award then outstanding as the Committee deems appropriate to reflect such Change in Control; or (iv) cause any such Award then outstanding to be assumed, or new rights substituted therefor, by the successor company (or a subsidiary or affiliate of such successor company, as applicable) after such Change in Control.
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Notwithstanding anything to the contrary in the Plan or Award Agreement, the Committee will not be required to treat all Awards similarly in the event of a Change in Control.
SECTION 13. Amendment and Termination
(a) Amendments to the Plan. The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided that (i) no such amendment, alteration, suspension, discontinuation or termination shall be made without requisite stockholder approval if suchapproval is necessary to comply with any tax or regulatory requirement for which or with which the Board deems it necessary or desirable to comply and (ii) any such amendment, alteration, suspension, discontinuance or termination that would adversely affect the material rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without theconsent of the affected Participant, holder, or beneficiary. In addition, the Committee may amend the Plan or any portion thereof at any time to (1) cure any ambiguity or to correct or supplement any provision of the Plan which may be defective or inconsistent with any other provision of the Plan or (2) make any other provisions in regard to matters or questions arising under the Plan which the Committee may deem necessary or desirable and which, in the judgment of the Committee, is not material; provided that no such amendment shall be made without requisite stockholder approval if such approval is necessary to comply with any tax or regulatory requirement for which or with which the Board or the Committee deems it necessary or desirable to comply.
(b) Amendments to Awards. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder, or beneficiary; and provided further that the Committee shall not have the power to amend the terms of previously granted Awards to reduce, or cancel such Awards and grant substitute Awards which would have the effect of reducing the exercise price except pursuant to paragraph (c) or (d) below. Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not, without stockholder approval, be amended to reduce the exercise price of outstanding Options or SARs or cancel outstanding Options or SARs in exchange for cash, other Awards or Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs, nor may the Committee take any action, without stockholder approval, which is considered a “repricing” for purposes of the stockholder approval rules of The NASDAQ Stock Market.
(c) Adjustment of Awards upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4(b) hereof) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan; providedthat, unless otherwise determined by the Committee, no such adjustment shall be authorized to the extent that such authority would be inconsistent with the Plan’s meeting the requirements of Section 162(m) to the extent Section 162(m) applies to an Award.
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(d) Compliance with Code Section 409A. Notwithstanding anything herein to the contrary, unless otherwise provided in the Award Agreement, in the event of any action taken by the Committee to vest part or all of a Participant’s Restricted Stock Unit Award or Performance Compensation Award that would otherwise be forfeited, distribution thereof to the Participant shall be made no later than March 15 of the calendar year following the calendar year in which such vesting occurs.
Notwithstanding anything herein to be contrary, no waiver, amendment, alteration, suspension, discontinuation or termination of an Award by the Committee shall constitute (i) a modification of a stock right within the meaning of Treas. Reg. Section 1.409A-1(b)(5)(v)(B) so as to constitute the grant of a new stock right (unless such new stock right does not constitute a deferral of compensation within the meaning of Code Section 409A and the regulations thereunder), (ii) an extension of a stock right, including the addition of any feature for the deferral of compensation, within the meaning of Treas. Reg. Section 1.409A-1(b)(5)(v)(C), or an impermissible acceleration of a payment date or a subsequent deferral of a stock right subject to Code Section 409A within the meaning of Treas. Reg. Section 1.409A-1(b)(5)(v)(E).
Notwithstanding the foregoing or any provision of the Plan to the contrary, the Committee may at any time (without the consent of Participants) modify, amend or terminate any or all provisions of this Plan and Awards thereunder to the extent necessary to ensure that payments and/or Awards under the Plan are not “deferred compensation” subject to Section 409A of the Code (or, alternatively, conform to the requirements of Section 409A of the Code).
Notwithstanding anything herein to the contrary, in the event (i) the Committee determines that any payment hereunder to a Participant who is a “specified employee” within the meaning of Treas. Reg.§ 1.409A-(1)(i) constitutes “deferred compensation” within the meaning of Section 409A of the Code and the regulations thereunder and does not qualify for an exception from the requirements of Section 409A of the Code, and (ii) such payment is pursuant to the Participant’s Separation from Service, then no such payment shall be made to such Participant during the first six months following such Participant’s Separation from Service and any amount payment of which is delayed by reason of the foregoing shall be paid in a single lump sum on the first business day of the seventh month following the Participant’s Separation from Service.
To the extent applicable, it is intended that the Plan and Awards granted hereunder comply with or be exempt from the requirements of Section 409A of the Code and any related regulations or other guidance promulgated thereunder. Accordingly, to the maximum extent permitted, the Plan and the Awards granted hereunder shall be interpreted and administered to be in compliance therewith, to the extent applicable, and if any provision of this Plan or any term or condition of any Award would otherwise frustrate or conflict with this intent, the provision, term or condition will be interpreted and deemed amended so as to avoid this conflict. Any reservation of rights or discretion by the Company or the Committee hereunder affecting the timing of payment of any Award subject to Section 409A of the Code will only be as broad as is permitted by Section 409A of the Code and any regulations thereunder. While the Company intends that the Plan and Awards granted hereunder comply with or be exempt from the requirements of Section 409A of the Code and any related regulations or other guidance promulgated thereunder, neither the Company or the Committee nor any of their respective affiliates shall be liable to any person for the tax consequences of any failure to comply with the requirements of Section 409A of the Code or any other tax consequences relating to Awards under the Plan.
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SECTION 14. General Provisions
(a) Dividend Equivalents. In the sole and complete discretion of the Committee, an Award may provide the Participant with dividends or dividend equivalents, payable in cash, Shares, other securities or other property on a current or deferred basis, provided however, that any such dividends or dividend equivalents shall be paid with respect to a Performance Compensation Award only to the extent such Performance Compensation Award has been earned and vested.
(b) Transferability. Except as provided below, no Award shall be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant, except by will or the laws of descent and distribution. Notwithstanding the foregoing, a Participant may transfer any vested Award, other than an Incentive Stock Option, to any person who is a “family member” of the Participant as such term is used in the instructions to Form S-8 (collectively, the “Immediate FamilyMembers”) or toone or more trusts for the exclusive benefit of such Immediate Family Members or partnerships in which such Immediate Family Members are the only partners if the Award Agreement so provides, the transfer is approved by the Committee and the Participant does not receive any consideration for the transfer. Any such transferred Award shall continue to be subject to the same terms and conditions that were applicable to such Award immediately prior to its transfer (except that such transferred Award shall not be further transferable by the transferee).
(c) No Rights to Awards. No Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of employees, non-employee directors, consultants, Participants, or holders or beneficiaries of Awards. The terms and conditions of Awards need not be the same with respect to each recipient.
(d) Share Certificates. All certificates for Shares or other securities of the Company or any Affiliate delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange or interdealer market system upon which such Shares or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
(e) Withholding. A Participant may be required to pay to the Company or any Affiliate and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding or other taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. The Committee may provide in an Award Agreement that a Participant can satisfy the foregoing requirement by electing to have the Company withhold Shares having a Fair Market Value sufficient to satisfy the minimum statutory amount of tax required to be withheld, as determined by the Committee. Such “net settlement” of Shares with respect to an Award is hereby specifically authorized as an alternative for the satisfaction of withholding obligations.
(f) Award Agreements. Each Award hereunder shall be evidenced by an Award Agreement that shall be delivered to the Participant and shall specify the terms and conditions of the Award and
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any rules applicable thereto. In the event of a conflict between the terms of the Plan and any Award Agreement, the terms of the Award Agreement shall prevail.
(g) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, restricted stock, Shares and other types of Awards provided for hereunder (subject to stockholder approval if such approval is required), and such arrangements may be either generally applicable or applicable only in specific cases.
(h) No Right to Employment or Continued Service. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate, or if a non-employee director or consultant, to continue to provide services to the Company. Further, the Company or an Affiliate may at any time dismiss a Participant from employment, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.
(i) No Rights as Stockholder. Subject to the provisions of the applicable Award, no Participant or holder or beneficiary of any Award shall have any rights as a stockholder with respect to any Shares to be distributed under the Plan until he or she has become the holder of such Shares. Notwithstanding the foregoing, in connection with each grant of Restricted Stock hereunder, the applicable Award Agreement shall specify if and to what extent the Participant shall not be entitled to the rights of a stockholder in respect of such Restricted Stock.
(j) Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware without giving effect to the conflict of law principles thereof.
(k) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
(l) Other Laws. The Committee may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of such Shares or such other consideration might violate any applicable law or regulation or entitle the Company to recover the same under Section 16(b) of the Exchange Act, and any payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder, or beneficiary. Without limiting the generality of the foregoing, no Award granted hereunder shall be construed as an offer to sell securities of the Company, and no such offer shall be outstanding, unless and until the Committee in its sole discretion has determined that any such offer, if made, would be in compliance with all applicable requirements of the U.S. federal or non-U.S. securities laws and any other laws to which such offer, if made, would be subject.
(m) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any
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Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receivepayments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate.
(n) No Liability of Committee Members.No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his behalf in his capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration orinterpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud or willful bad faith; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
(o) Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of the Company and its Affiliates and/or any other information furnished in connection with the Plan by any person or persons other than himself or herself.
(p) Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company or of any Affiliate, except as otherwise specifically provided in such other plan.
(q) Compliance with Applicable Law. Notwithstanding any provision in the Plan to the contrary, and without the need to obtain the consent of any Participant or of any holder or beneficiary of any Award, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.
(r) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.
(s) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
(t) Information Provided to Participants. The Company shall provide financial statements to Participants at least annually and such other information as may be required by law.
(u) Participants in Foreign Countries. The Committee shall have the authority to adopt such modifications, additional terms and conditions, procedures, and subplans, in each case which may differ from the terms specified in the Plan, as may be necessary or desirable for the Awards to comply
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with provisions of the laws or policies of foreign countries in which the Company or its Subsidiaries or Affiliates may operate to assure viability of the benefits from Awards granted to Participants performing services in such countries and to facilitate administration of the Plan.
(v) Clawback Policy. Participants and Awards granted hereunder may be subject to the Company’s incentive recoupment policy.
SECTION 15. Company Right to Cancel Awards
In the event of any of the following:
(a) the Company is merged or consolidated with another corporation or entity and, in connection therewith, consideration is received by shareholders of the Company in a form other than stock or other equity interests of the surviving entity;
(b) all or substantially all of the assets of the Company are acquired by another Person;
(c) the reorganization or liquidation of the Company; or
(d) the Company consummates a written agreement to undergo an event described in clauses (a), (b) or (c) above, then the Committee may, in its sole discretion and upon at least 10 days advance notice to the affected persons, cancel any outstanding Awards and cause the holders thereof to be paid, in cash or stock, or any combination thereof, the value of such Awards based upon the price per Share received or to be received by other shareholders of the Company in the event. The terms of this Section 15 may be varied by the Committee in any particular Award Agreement. The terms of this Section 15 may be varied in appropriate cases to reflect the requirements of Code Section 409A, or to satisfy an exception to Code Section 409A.
(a) Expiration Date. No new Awards shall be granted under the Plan after the tenth anniversary of the Restatement Effective Date. Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award granted hereunder may, and the authority of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under any such Award shall, continue after the authority for grant of new Awards hereunder has been exhausted.
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Proposed Amendment of NASDAQ OMX’s Charter
Article Fourth, Paragraph C(6) shall be amended to read as follows. Proposed additions aredouble-underlined; proposed deletions arestricken through.
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| 3. | Why is the Annual Meeting a virtual meeting? How do I attend? |
Our Annual Meeting of Shareholders is conducted virtually through a live webcast and online shareholder tools. This promotes shareholder attendance and participation, enabling shareholders to participate fully, and equally, from any location around the world, free of charge. Given our global footprint, we believe this is the right choice. The virtual format results in cost savings to the Company and shareholders and is designed to enhance shareholder access, participation, and communication. |
Shareholders as of the record date may attend the Annual Meeting by logging in at www.virtualshareholdermeeting.com/NDAQ2022. To log in, shareholders (or their authorized representatives) will need the 16-digit control number provided on their proxy card, voting instruction form or Notice of Internet Availability of Proxy Materials. If you are not a shareholder or do not have a 16-digit control number, you still may access the meeting as a guest, but you will not be able to participate. |
We encourage you to access the Annual Meeting before it begins. Online check-in will start shortly before the meeting on June 22, 2022. We will have technicians ready to assist you with any technical difficulties that you may have accessing our virtual Annual Meeting. If you encounter any problems accessing the virtual Annual Meeting during check-in or during the Annual Meeting, please call the technical support number that will be posted on our Annual Meeting platform log-in page, at www.virtualshareholdermeeting.com/NDAQ2022. |
You do not need to access the Annual Meeting webcast to vote if you submitted your vote via proxy in advance of the meeting. An audio replay of the Annual Meeting, including the questions answered during the meeting, will be available on http://ir.nasdaq.com/investors/annual-meeting until the 2023 Annual Meeting of Shareholders. |
| 4. | Can I ask questions at the Annual Meeting? |
The Annual Meeting will include a question and answer session that will include questions submitted in advance of, and questions submitted during, the meeting. You may submit a question in advance of the meeting at www.proxyvote.com. You may submit a question during the meeting through www.virtualshareholdermeeting.com/NDAQ2022. In both cases, you must provide your 16-digit control number. |
As part of the Annual Meeting, we will hold a Q&A session, during which we intend to answer all questions submitted before or during the Annual Meeting in accordance with the Meeting Rules (which will be made available on the Annual Meeting website) and which are pertinent to the Company and the Annual Meeting matters, as time permits. We will limit each shareholder to one question in order to allow us to answer questions from as many shareholders as possible. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once. Answers to questions that are not addressed during the Annual Meeting will be published following the meeting at ir.nasdaq.com. |
Questions regarding personal matters, including general economic, political, or other views that are not directly related to the business of Nasdaq, are not pertinent to Annual Meeting matters and therefore will not be answered. |
We want to be sure that our shareholders are afforded the same rights and opportunities to participate as at an in-person meeting, so our Board and Committee Chairs, members of the Executive Leadership Team and representatives of Ernst & Young LLP will join the virtual Annual Meeting and be available for questions. |
| 5. | What is the difference between holding shares as a shareholder of record and as a beneficial owner? |
If your shares are registered directly in your name with our registrar and transfer agent, Computershare, you are considered a “shareholder of record” with respect to those shares. If your shares are held in a bank or brokerage account, you are considered the “beneficial owner” of those shares. |
| 6. | What if I am a beneficial owner and do not give voting instructions to my broker? What is a broker non-vote? |
As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in the materials you receive from your bank, broker or |
Discretionary Items. The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm is a discretionary item. Banks, brokers and other nominees that do not receive voting instructions from beneficial owners may vote on this proposal at their discretion. |
Non-Discretionary Items. All the other proposals in this Proxy Statement are non-discretionary items. Banks, brokers and other nominees that do not receive voting instructions from beneficial owners may not vote on these proposals, resulting in a “broker non-vote.” |
If you hold your shares through a bank, broker or other nominee, it is important that you cast your vote if you want it to |
| 7. | What proposals are to be voted on at the 2022 Annual Meeting of Shareholders, and what are the voting standards? |
Proposal | Nasdaq Board’s Recommendation | Voting Standard | Effect of Abstentions and Broker Non-Votes | |||
1. Election of ten directors (Non-Discretionary Item) | FOR EACH NOMINEE | Majority of votes cast | Not counted as votes cast and therefore have no effect | |||
2. Advisory vote to approve the Company’s executive compensation (Non-Discretionary Item) | FOR | Majority of the votes present in person or represented by proxy | Abstentions have the effect of a vote against the proposal; broker non-votes have no effect | |||
3. Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 (Discretionary Item) | FOR | Majority of the votes present in person or represented by proxy | Abstentions have the effect of a vote against the proposal; there will not be broker non-votes | |||
4. To approve an amendment to Nasdaq’s charter to increase the total number of authorized shares of common stock to effect a proposed 3-for-1 stock split (Non-Discretionary Item) | FOR | Majority of the outstanding shares of common stock | Abstentions have the effect of a vote against the proposal; broker non-votes have no effect | |||
5. Shareholder proposal – Special Shareholder Meeting Improvement (Non-Discretionary Item) | AGAINST | Majority of the votes present in person or represented by proxy | Abstentions have the effect of a vote against the proposal; broker non-votes have no effect | |||
The proxy provides that each shareholder may vote his or her Nasdaq shares “For,” “Against” or “Abstain” on individual nominees and each of the other proposals. Whichever method you select to transmit your instructions, the proxy holders will vote your shares as provided by those instructions. If you provide a proxy without specific voting instructions, the proxy holders will vote your Nasdaq shares in accordance with the Board recommendations noted above. |
The vote to approve executive compensation is advisory only and, therefore, the result of this vote will not be binding on our Board or Management Compensation Committee. Our Board and Management Compensation Committee will, however, consider the outcome of this vote when evaluating our executive compensation program in the future. |
The shareholder proposal is precatory, meaning that it requests that the Board take a specific action, and therefore, the results of the vote on that proposal will not be binding on the Board. The Board will consider the outcome of the shareholder vote in considering next steps on this matter for the upcoming year. If the shareholder proposal is not properly presented by the proponent at the Annual Meeting, it will not be voted upon. |
| 8. | What can I do if I change my mind after I vote my shares? |
You can change your vote by revoking your proxy at any time before it is exercised in one of two ways: submit a later dated proxy (including a proxy submitted through the internet at www.proxyvote.com, by telephone or by proxy card); or notify Nasdaq’s Corporate Secretary by email at corporatesecretary@nasdaq.com that you are revoking your proxy. |
If you are a beneficial owner of Nasdaq shares held by a bank, broker or other nominee, you will need to contact the bank, broker or other nominee to revoke your proxy. |
| 9. | How many votes do I have? |
Each share of common stock has one vote, subject to the voting limitation in our Amended and Restated Certificate of Incorporation that generally prohibits a shareholder from voting in excess of 5% of the total voting power of Nasdaq. |
| 10. | Are votes confidential? |
Proxies, ballots and voting instruction forms are handled on a confidential basis to protect your voting privacy. This information will be disclosed only to those recording the vote, except if there is a proxy contest, if the shareholder authorizes disclosure, to defend legal claims or as otherwise required by law. Comments written on your proxy, ballot or voting instruction form are not confidential. |
| 11. | What constitutes a quorum for the Annual Meeting? |
The presence of the holders of a majority (greater than 50%) of the votes entitled to be cast at the meeting constitutes a quorum. Presence may be in person or by proxy. Abstentions and broker non-votes are counted as present and entitled to vote at the meeting for purposes of determining a quorum. Virtual attendance at our Annual Meeting constitutes presence in person for purposes of a quorum at the meeting. |
| 12. | Who counts and tabulates the votes? |
Broadridge |
| 13. | When will the Company announce the voting results? |
Preliminary results will be announced at the meeting and, thereafter, final results will be reported in a current report on Form 8-K, which is expected to be filed with the SEC within four business days after the meeting, and will be posted on http://ir.nasdaq.com. |
| 14. | How are proxies solicited, and what is the cost? |
Soliciting a proxy is the outreach to obtain the authorization of shareholders to vote on their behalf at a shareholder meeting. We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees (who will not receive any additional compensation for these solicitations), in person or by telephone, electronic transmission or facsimile transmission. Upon request, Nasdaq will reimburse banks, brokers and other nominees for their reasonable expenses in sending proxy materials to their customers and obtaining their proxies. Nasdaq has engaged D.F. King & Co., Inc. to assist in soliciting proxies at a fee of $9,500, plus costs and expenses. |
| 15. | What is “householding,” and how does it affect me? |
Nasdaq has adopted a practice approved by the SEC known as “householding” to reduce printing and postage fees for the meeting notice. “Householding” means that shareholders who share the same last name and address will receive only one copy of the proxy materials unless we receive instructions to the contrary from any shareholder at that address. We will promptly deliver a separate copy of the proxy materials to you if you contact us with your request via phone (+1 212 401 8737) or email (investor.relations@nasdaq.com). If you wish to receive separate copies of the proxy materials in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker or other nominee, or you may contact us at the above telephone number or email address. |
| 16. | Will you make a list of shareholders entitled to vote at the 2022 Annual Meeting of Shareholders available? |
A list of record holders entitled to vote at the Annual Meeting will be available from June 8, 2022 through the Annual Meeting, between the hours of 9:00 a.m. and 5:00 p.m. (Eastern Time), at our principal executive offices (151 W. 42nd Street, New York, New York 10036). To make arrangements to view the list, please contact our Corporate Secretary by email at corporatesecretary@nasdaq.com. To access the list during the Annual Meeting, please visit www.virtualshareholdermeeting.com/ NDAQ2022 and enter your 16-digit control number. |
| 17. | How can I view or request copies of the Company’s SEC filings? |
The Form 10-K, our Quarterly Reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports are available free of charge on the “Financials—SEC Filings” page of our Investor Relations website, which can be found at http://ir.nasdaq.com/financials/sec-filings. We will furnish, without charge, a copy of the Form 10-K, including the financial statements, to any shareholder upon request to the Nasdaq Investor Relations Department, Attention: Edward Ditmire, 151 W. 42nd Street, New York, New York 10036, in writing, or by email at investor.relations@nasdaq.com. |
| 18. | How do I submit a proposal or director nomination for inclusion in the 2023 Proxy Statement? |
Nasdaq shareholders who wish to submit proposals pursuant to Rule 14a-8 of the Exchange Act for inclusion in the Proxy Statement for Nasdaq’s 2023 Annual Meeting must submit them on or before December 29, 2022 to the Corporate Secretary and must otherwise comply with the requirements of Rule 14a-8. |
Our By-Laws include a proxy access provision that permits a shareholder, or a group of shareholders, owning at least 3% of our outstanding shares of common stock continuously for at least three years, to nominate and include in the proxy materials for an Annual Meeting director nominees constituting up to the greater of two individuals and 25% of the total number of directors then in office, provided that the shareholder(s) and nominee(s) satisfy the requirements specified in the By-Laws. Notice of director nominations submitted under these requirements must be received no earlier than November 29, 2022 and no later than December 29, 2022. |
In addition, Nasdaq shareholders may recommend individuals for consideration by the Nominating & ESG Committee for nomination to the Nasdaq Board. Holders should submit such recommendations in writing, together with any supporting documentation the holder deems appropriate, to Nasdaq’s Corporate Secretary prior to January 31, 2023. |
| 19. | How do I submit other proposals or director nominations for presentation at the 2023 Annual Meeting? |
Our By-Laws also establish an advance notice procedure for other proposals or director nominations that are not submitted for inclusion in the Proxy Statement, but that a shareholder instead wishes to present directly at an Annual Meeting. Under these procedures, a shareholder must deliver a notice containing certain information, as set forth in the By-Laws, to Nasdaq’s Corporate Secretary not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the prior year’s meeting. Assuming the 2023 Annual Meeting is held according to this year’s schedule, the notice must be delivered on or prior to the close of business on February 22, 2023, but no earlier than the close of business on March 24, 2023. However, if Nasdaq holds its Annual Meeting on a date that is more than 30 days before or 70 days after such anniversary date, the notice must be delivered no earlier than the close of business on the 120th day prior to the date of the Annual Meeting nor later than the close of business on the later of (i) the 90th day prior to the date of the Annual Meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made by Nasdaq. |
| How to Vote | ||||
Use any of the following methods and your 16-digit control number: | ||||
 | By Internet Using Your Computer | |||
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Visit 24/7 | ||||
 | By Phone
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Call +1 800 690 6903 in the U.S. or | ||||
Canada to vote | ||||
 | By mail | |||
Cast your ballot, sign your proxy card, and return by postage-paid envelope | ||||
 | Attend the Annual Meeting | |||
Vote during the meeting instructions on the website | ||||
Non-GAAP Financial Measures
We recommend investors review the U.S. GAAP financial measures included in this Proxy Statement, as well as the Form 10-K, including our consolidated financial statements and the notes thereto.
In addition to disclosing results determined in accordance with U.S. GAAP, we have also provided non-GAAP net income attributable to Nasdaq and non-GAAP diluted EPS. Management uses this non-GAAP information internally, along with U.S. GAAP information, in evaluating our performance and in making financial and operational decisions. We believe our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparisons of our ongoing operating performance.
These measures are not in accordance with, or an alternative to, U.S. GAAP, and may be different from non-GAAP measures used by other companies. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces their usefulness as comparative measures. Investors should not rely on any single financial measure when evaluating our business. This non-GAAP information should be considered as supplemental in nature and is not meant as a substitute for our operating results in accordance with U.S. GAAP. We recommend investors review the U.S. GAAP financial measures included in this Proxy Statement, as well as the Form 10-K, including our consolidated financial statements and the notes thereto. When viewed in conjunction with our U.S. GAAP results and the accompanying reconciliation, we believe these non-GAAP measures provide greater transparency and a more complete understanding of factors affecting our business than U.S. GAAP measures alone.
We understand that analysts and investors regularly rely on non-GAAP financial measures, such as non-GAAP net income attributable to Nasdaq and non-GAAP diluted EPS, to assess operating performance. We use non-GAAP net income attributable to Nasdaq and non-GAAP diluted EPS because they highlight trends more clearly in our business that may not otherwise be apparent when relying solely on U.S. GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our ongoing operating performance. Non-GAAP net income attributable to Nasdaq for the periods presented below is calculated by adjusting for the following items:
Amortization expense of acquired intangible assets: We amortize intangible assets acquired in connection with various acquisitions. Intangible asset amortization expense can vary from period to period due to episodic acquisitions completed, rather than from our ongoing business operations. As such, if intangible asset amortization is included in performance measures, it is more difficult to assess the day-to-day operating performance of the businesses, the relative operating performance of the businesses between periods, and the earnings power of Nasdaq. Performance measures excluding intangible asset amortization expense therefore provide investors with a useful representation of our businesses’ ongoing activity in each period.
Merger and strategic initiatives expense: We have pursued various strategic initiatives and completed acquisitions and divestitures in recent years that have resulted in expenses which would not have otherwise been incurred. These expenses generally include integration costs, as well as legal, due diligence and other third party transaction costs. The frequency and the amount of such expenses vary significantly based on the size, timing and complexity of the transaction. Accordingly, we exclude these costs for purposes of calculating non-GAAP measures, which provide a more meaningful analysis of Nasdaq’s ongoing operating performance or comparisons in Nasdaq’s performance between periods.
Restructuring charges: We initiated the transition of certain technology platforms to advance our strategic opportunities as a technology and analytics provider and continue the re-alignment of certain business areas. See Note 20, “Restructuring Charges,” to the consolidated financial statements in the Form 10-K for further discussion of our 2019 restructuring plan, which was completed in June 2021. Charges associated with
this plan represented a fundamental shift in our strategy and technology as well as executive re-alignment and were excluded for purposes of calculating non-GAAP measures as they are not reflective of ongoing operating performance or comparisons in Nasdaq’s performance between periods.
Net income from unconsolidated investee: See “Equity Method Investments,” of Note 6, “Investments,” to the consolidated financial statements in the Form 10-K for further discussion. Our income on our investment in The Options Clearing Corporation, or OCC, may vary significantly compared to prior periods due to the changes in OCC’s capital management policy. Accordingly, we will exclude this income from current and prior periods for purposes of calculating non-GAAP measures which provide a more meaningful analysis of Nasdaq’s ongoing operating performance or comparisons in Nasdaq’s performance between periods.
Other significant items: We have excluded certain other charges or gains, including certain tax items, that are the result of other non-comparable events to measure operating performance. We believe the exclusion of such amounts allows management and investors to better understand the ongoing financial results of Nasdaq.
For 2021, other significant items primarily included:
a charge related to an administrative fine imposed by the Swedish Financial Supervisory Authority, or SFSA, associated with the default that occurred in 2018. See “Nasdaq Commodities Clearing Default,” of Note 15, “Clearing Operations,” to the consolidated financial statements in the Form 10-K for further discussion;
a loss on extinguishment of debt;
a net gain on a divestiture of a business, which represents our pre-tax net gain of $84 million on the sale of our U.S. Fixed Income business; and
gains from strategic investments entered into through our corporate venture program included in other income in our Consolidated Statements of Income in the Form 10-K.
For 2020, other significant items primarily included:
a provision for notes receivable associated with the funding of technology development for the Consolidated Audit Trail;
a loss on extinguishment of debt;
charges associated with duplicative rent and impairment of leasehold assets related to our global headquarters move;
charitable donations made to the Nasdaq Foundation, COVID-19 response and relief efforts, and social justice charities; and
the reversal of a $6 million regulatory fine issued by the SFSA, which is recorded in regulatory expense in the Consolidated Statements of Income in the Form 10-K.
For 2019, other significant items primarily included:
a provision for notes receivable associated with the funding of technology development for the Consolidated Audit Trail;
a loss on extinguishment of debt;
a net gain on a divestiture of a business, which represents our pre-tax net gain of $27 million on the sale of BWise; and
other items:
| - | a tax reserve for certain prior year examinations; and |
| - | certain litigation costs which are recorded in professional and contract services expense in the Consolidated Statements of Income in the Form 10-K. |
The above charges, with the exception of those noted differently above, are recorded in general, administrative, and other expense in our Consolidated Statements of Income in the Form 10-K.
Significant tax items:
The non-GAAP adjustment to the income tax provision included the tax impact of each non-GAAP adjustment and:
for 2021, return-to-provision adjustments and prior period tax benefits.
for 2020, a tax benefit on compensation-related deductions determined to be allowable.
for 2020 and 2019, excess tax benefits related to employee share-based compensation to reflect the recognition of the income tax effects of share-based awards when awards vest or are settled. This item is subject to volatility and will vary based on the timing of the vesting of employee share-based compensation arrangements and fluctuation in our stock price. Beginning with the quarter ended March 31, 2021, such excess tax benefits are no longer included as a non-GAAP adjustment as they do not have a material impact on period-over-period comparison.
for 2019, a tax benefit primarily related to an adjustment to the 2018 federal and state tax returns and a tax benefit related to capital distributions from the OCC. See “Equity Method Investments,” of Note 6, “Investments,” to the consolidated financial statements in the Form 10-K for further discussion of our OCC investment.
Non-GAAP Financial Measures
Year Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| (in millions, except per share amounts) | ||||||||||||
U.S. GAAP net income attributable to Nasdaq | $1,187 | $933 | $774 | |||||||||
Amortization expense of acquired intangible assets | 170 | 103 | 101 | |||||||||
Merger and strategic initiatives expense | 87 | 33 | 30 | |||||||||
Restructuring charges | 31 | 48 | 39 | |||||||||
Net income from unconsolidated investee | (52 | ) | (70 | ) | (82 | ) | ||||||
Regulatory matters | 33 | (6 | ) | - | ||||||||
Provision for notes receivable | - | 6 | 20 | |||||||||
Extinguishment of debt | 33 | 36 | 11 | |||||||||
Net gain on divestiture of businesses | (84 | ) | - | (27 | ) | |||||||
Charitable donations | - | 17 | - | |||||||||
Other | (71 | ) | 14 | 17 | ||||||||
Total non-GAAP adjustments | 147 | 181 | 109 | |||||||||
Adjustment to the income tax provision to reflect non-GAAP adjustments and other tax items | (61 | ) | (77 | ) | (43 | ) | ||||||
Excess tax benefits related to employee share-based compensation | - | (6 | ) | (5 | ) | |||||||
Total non-GAAP tax adjustments | (61 | ) | (83 | ) | (48 | ) | ||||||
Total non-GAAP adjustments, net of tax | 86 | 98 | 61 | |||||||||
Non-GAAP net income attributable to Nasdaq | $1,273 | $1,031 | $835 | |||||||||
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U.S. GAAP effective tax rate | 22.6% | 23.0% | 24.0% | |||||||||
Total adjustments from non-GAAP tax rate | 1.7% | 3.0% | 2.0% | |||||||||
Non-GAAP effective tax rate | 24.3% | 26.0% | 26.0% | |||||||||
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Weighted-average common shares outstanding for diluted EPS | 168.4 | 166.9 | 167.0 | |||||||||
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U.S. GAAP diluted EPS | $7.05 | $5.59 | $4.63 | |||||||||
Total adjustments from non-GAAP net income | 0.51 | 0.59 | 0.37 | |||||||||
Non-GAAP diluted EPS | $7.56 | $6.18 | $5.00 | |||||||||
Form of Amendment to Amended and Restated Certificate of Incorporation
Article First, Paragraph A of Nasdaq’s Amended and Restated Certificate of Incorporation shall be amended to read as follows. Proposed additions are underlined; proposed deletions are stricken through.
A. The total number of shares of Stock which Nasdaq shall have the authority to issue isThreeNine Hundred Thirty Million (330930,000,000), consisting of Thirty Million (30,000,000) shares of Preferred Stock, par value $.01 per share (hereinafter referred to as “Preferred Stock”), andThreeNine Hundred Million (300900,000,000) shares of Common Stock, par value $.01 per share (hereinafter referred to as “Common Stock”).
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information set forth in this Proxy Statement contains forward-looking statements that involve a number of risks and uncertainties. Words such as “may,” “will,” “could,” “should,” “anticipates,” “envisions,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words or terms of similar substance used in connection with any discussion of future expectations as to industry and regulatory developments or business initiatives and strategies, future operating results or financial performance, and other future developments are intended to identify forward-looking statements. Nasdaq cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information. These include, among others, statements relating to:
our strategic direction;
the integration of acquired businesses, including accounting decisions relating thereto;
the scope, nature or impact of acquisitions, divestitures, investments, joint ventures or other transactional activities;
the effective dates for, and expected benefits of, ongoing initiatives, including transactional activities and other strategic, restructuring, technology, de-leveraging and capital return initiatives;
the ongoing impact of the COVID-19 pandemic on our business, operations, results of operations, financial condition and workforce;
our products and services;
our corporate governance;
our shareholder engagement;
our corporate culture and human capital management policies, practices and initiatives;
our executive compensation program; and
our ESG programs and initiatives.
Forward-looking statements involve a number of risks, uncertainties, or other factors beyond Nasdaq’s control. These factors include, but are not limited to: Nasdaq’s ability to implement its strategic initiatives; economic, political and market conditions and fluctuations; geopolitical instability arising from the Russian invasion of Ukraine; government and industry regulation; and other factors detailed in Nasdaq’s filings with the SEC, including its annual reports on Form 10-K and quarterly reports on Form 10-Q, which are available on Nasdaq’s investor relations website at ir.nasdaq.com and the SEC’s website at www.sec.gov. Nasdaq undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.
REFERENCES TO WEBSITES
Information contained on our website, or any website that is linked to or otherwise referenced herein, is not incorporated into, or a part of, this Proxy Statement.
NASDAQ, INC.
151 W. 42ND ST.
NEW YORK, NY 10036
ATTN: ERIKA MOORE
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/NDAQ2022
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
D79367-P66952 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| NASDAQ, INC. |
The Board of Directors recommends you vote FOR |
| each of the nominees listed in Proposal 1. |
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| Election of 10 Directors | For | Against | Abstain | |||||||||||||||||||||||||||||||
| 1a. | Melissa M. Arnoldi | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
| 1b. | Charlene T. Begley | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
| 1c. | ||||||||||||||||||||||||||||||||||||
| Steven D. Black | ☐ | ☐ | ||||||||||||||||||||||||||||||||||
| 1d. | Adena T. Friedman | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
| 1e. | Essa Kazim | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
| 1f. | Thomas A. Kloet | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
| 1g. | John D. Rainey | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
1h.
| Michael R. Splinter
| ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
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| 1j. | Alfred W. Zollar | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
| The Board of Directors recommends you vote FOR Proposal 2. | For | Against | Abstain | |||||||||||||||||||||||||||||||||
| 2. | Advisory vote to approve the Company’s executive compensation as presented in the Proxy Statement | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
| The Board of Directors recommends you vote FOR Proposal 3. | For | Against | Abstain | |||||||||||||||||||||||||||||||||
| 3. | Ratification of the appointment of Ernst & Young LLP as | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
| The Board of Directors recommends you vote FOR Proposal 4. | For | Against | Abstain | |||||||||||||||||||||||||||||||||
| 4. |
| ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
| The Board of Directors recommends you vote AGAINST Proposal 5. | For | Against | Abstain | |||||||||||||||||||||||||||||||||
| 5. | A Shareholder Proposal entitled “Special Shareholder Meeting Improvement” | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||
NOTE:To transact such other business as may properly come before the annual meeting or any adjournment or postponement of the meeting. |
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement, Annual Report and Form 10-K are available at www.proxyvote.com.
M69452-P45970
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| Signature [PLEASE SIGN WITHIN BOX] Date | ||
| Signature (Joint Owners) Date |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING:
The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com.
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D79368-P66952
NASDAQ, INC.
Annual Meeting of Shareholders
June 22, 2022 at 8:00 AM, Eastern Time
This proxy is solicited by the Board of Directors
The shareholder(s) hereby appoint(s) John A. Zecca and Erika Moore, or either of them, as proxies, each with the power to appoint his or her substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of Nasdaq, Inc. that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held virtually at www.virtualshareholdermeeting.com/NDAQ2022, at 8:00 AM, Eastern Time on June 22, 2022, and any adjournment or postponement thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
